-----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, VI9Awb+bcj2znKQ9pke07Rg2BgnTsrWCItp9H3ICVzkSVd4ZC+QqqC398J0oVJdO 1EQphWvhUJ7sgkt/1Zzniw== 0001047469-98-014717.txt : 19980414 0001047469-98-014717.hdr.sgml : 19980414 ACCESSION NUMBER: 0001047469-98-014717 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980413 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FAIRCHILD SEMICONDUCTOR CORP CENTRAL INDEX KEY: 0001038272 STANDARD INDUSTRIAL CLASSIFICATION: SEMICONDUCTORS & RELATED DEVICES [3674] IRS NUMBER: 770449095 STATE OF INCORPORATION: DE FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-26897 FILM NUMBER: 98592433 BUSINESS ADDRESS: STREET 1: 333 WESTERN AVENUE STREET 2: MAIL STOP 01 00 CITY: SOUTH PORTLAND STATE: ME ZIP: 04106 BUSINESS PHONE: 2077758100 MAIL ADDRESS: STREET 1: 333 WESTERN AVENUE STREET 2: MAIL STOP 01 00 CITY: SOUTH PORTLAND STATE: ME ZIP: 04106 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 1, 1998 [] 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: 333-26897 FAIRCHILD SEMICONDUCTOR CORPORATION (Exact name of registrant as specified in its charter) Delaware 77-0449095 (State or other jurisdiction of (I.R.S.Employer incorporation or organization) Identification No.) 333 Western Avenue, Mail Stop 01-00 South Portland, Maine 04106 (Address of principal executive offices, including zip code) Registrant's telephone number, including area code: (207) 775-8100 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]. The number of shares outstanding of the issuer's classes of common stock as of the close of business on March 31, 1998: Title of Each Class Number of Shares ------------------- ---------------- Common Stock; $0.01 par value 100
FAIRCHILD SEMICONDUCTOR CORPORATION AND SUBSIDIARIES INDEX
Part I. Financial Information Page Item 1 Financial Statements Condensed Consolidated Statements of Operations (Unaudited) for the Three and Nine Months Ended March 1, 1998 and February 23, 1997 3 Condensed Consolidated Balance Sheets as of March 1, 1998 (Unaudited) and May 25, 1997 4 Condensed Consolidated Statements of Cash Flows (Unaudited) for the Three and Nine Months Ended March 1, 1998 5 Notes to Condensed Consolidated Financial Statements (Unaudited) 6 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 9 Part II. Other Information Item 1 Legal Proceedings 16 Item 6 Exhibits and Reports on Form 8-K 16 Signature 17
2 PART I. FINANCIAL INFORMATION Item 1. Financial Statements FAIRCHILD SEMICONDUCTOR CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In millions) (Unaudited)
Three Months Ended Nine Months Ended March 1, February 23, March 1, February 23, 1998 1997 1998 1997 -------- ------------ -------- ------------- Revenue: Net sales - trade $165.1 $147.5 $479.1 $434.4 Contract manufacturing - National Semiconductor 41.5 25.7 122.8 75.8 ----- ----- ----- ---- Total revenue 206.6 173.2 601.9 510.2 Direct costs and allocated expenses: Cost of sales - trade 116.0 111.6 329.4 332.0 Cost of contract manufacturing - National Semiconductor 30.9 25.7 92.3 75.8 Research and development 9.8 5.1 24.7 13.6 Selling, general and administrative 24.6 30.6 66.6 72.5 Purchased in-process research and development 15.5 -- 15.5 -- Restructuring of operations -- -- -- 5.3 ----- ----- ----- ----- Total operating costs and expenses 196.8 173.0 528.5 499.2 ----- ----- ----- ----- Operating income 9.8 73.4 Interest, net 12.1 -- 33.8 -- Other expense -- 0.5 -- 1.4 ----- ----- ----- ----- Income (loss) before income taxes and cumulative effect of change in accounting principle (2.3) 39.6 Revenues less direct and allocated expenses before income taxes $(0.3) $9.6 ===== ===== Income tax expense (benefit) (1.7) 13.0 ----- ----- Income (loss) before cumulative effect of change in accounting principle (0.6) 26.6 Cumulative effect of change in accounting principle, net of tax effect of $0.8 million (1.5) (1.5) ----- ----- Net income (loss) $(2.1) $25.1 ===== =====
See accompanying Notes to Condensed Consolidated Financial Statements. 3 FAIRCHILD SEMICONDUCTOR CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In millions)
(Unaudited) March 1, May 25, 1998 1997 --------- ------- ASSETS Current assets: Cash $ 12.4 $ 40.7 Receivables, net 86.6 79.6 Inventories 99.6 73.1 Prepaid expenses and other current assets 14.4 16.6 Deferred income taxes 2.1 2.1 ----- ----- Total current assets 215.1 212.1 Property, plant and equipment, net 334.2 295.0 Deferred income taxes 16.8 17.8 Intangibles, net 32.3 -- Other assets 30.7 29.4 ----- ----- Total assets $629.1 $554.3 ===== ===== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 12.4 11.0 Accounts payable 65.0 77.1 Accrued expenses and other current liabilities 65.1 40.1 ----- ----- Total current liabilities 142.5 128.2 Long-term debt, less current portion 442.0 409.0 Other liabilities 0.4 0.4 ----- ----- Total liabilities 584.9 537.6 Commitments and contingencies Stockholders' Equity: Common stock -- -- Additional paid-in capital 12.0 9.6 Retained earnings 32.2 7.1 ----- ----- Total stockholders' equity 44.2 16.7 ----- ----- Total liabilities and stockholders' equity $629.1 $554.3 ===== =====
See accompanying Notes to Condensed Consolidated Financial Statements. 4 FAIRCHILD SEMICONDUCTOR CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) (Unaudited)
Three Months Nine Months Ended Ended March 1, March 1, 1998 1998 ------ ----- Operating activities: Net income (loss) $(2.1) $25.1 Addback non-cash adjustments to net income (loss): Cumulative effect of change in accounting principle 1.5 1.5 Depreciation and amortization 22.2 62.5 Loss on disposal of fixed assets 0.2 0.7 In-process research and development 15.5 15.5 Deferred income taxes (2.8) 1.8 Changes in certain assets and liabilities, net: Accounts receivable 5.7 6.9 Inventories (7.8) (12.9) Prepaid expenses and other current assets (2.4) 2.5 Other assets -- 0.1 Current liabilities 4.4 5.0 ----- ----- Cash provided by operating activities 34.4 108.7 Investing activities: Capital expenditures (21.8) (49.3) Purchase of molds and tooling (1.3) (4.2) Purchase of Raytheon Semiconductor, Inc., net of cash acquired (116.8) (116.8) ----- ----- Cash used by investing activities (139.9) (170.3) Financing activities: Repayment of long-term debt (50.1) (55.6) Issuance of long-term debt 90.0 90.0 Debt issuance costs (1.1) (1.1) ----- ----- Cash provided by financing activities 38.8 33.3 ----- ----- Net change in cash and cash equivalents (66.7) (28.3) Cash and cash equivalents at beginning of period 79.1 40.7 ----- ----- Cash and cash equivalents at end of period $12.4 $12.4 ===== =====
Cash paid for interest and taxes was $1.9 million and $5.0 million, respectively, for the three-month period ended March 1, 1998, and $24.5 million and $8.3 million, respectively, for the nine-month period ended March 1, 1998. See accompanying Notes to Condensed Consolidated Financial Statements. 5 FAIRCHILD SEMICONDUCTOR CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 1 - Basis of Presentation The Condensed Consolidated Balance Sheets of Fairchild Semiconductor Corporation (the "Company") as of March 1, 1998 and May 25, 1997 and the Condensed Consolidated Statements of Operations and Cash Flows for the three-and nine-month periods ended March 1, 1998 were prepared by the Company. The Combined Condensed Statements of Operations of the Fairchild Semiconductor Business (the "Business") for the three- and nine-month periods ending February 23, 1997 include all revenues and costs attributable to the Business as it was operated within National Semiconductor Corporation ("National"), including allocations for shared facilities and overhead. In addition, National performed cash management on a centralized basis. As a result, receivables, liabilities and cash receipts and payments were not identifiable on a business specific basis. Given these constraints, certain supplemental cash flow information is presented in lieu of statements of cash flows (Note 3). In the opinion of management, the accompanying condensed consolidated financial statements as of and for the three- and nine-month periods ended February 23, 1997 contain all adjustments (consisting of only normal recurring items) necessary to present fairly the financial position and results of operations of the Company. The allocations and estimates in the Combined Condensed Statements of Operations as of and for the three- and nine-month periods ended February 23, 1997 were based on assumptions that management believes were reasonable under the circumstances. Interim results of operations are not necessarily indicative of the results to be expected for the full year. This report should be read in conjunction with the financial statements and notes thereto included in the special financial report on Form 10-K for the fiscal year ended May 25, 1997 and the Company's Registration Statement filed on Form S-4 dated July 9, 1997. Note 2 - Inventories The components of inventories are as follows:
March 1, May 25, 1998 1997 ------- ------- (In millions) Raw materials $12.7 $8.8 Work in process 62.6 43.4 Finished goods 24.3 20.9 ----- ----- Total inventories $99.6 $73.1 ===== =====
6 Note 3 - Supplemental Cash Flow Information As described in Note 1, National's cash management system was not designed to trace centralized cash and related financing transactions to the specific cash requirements of the Business. In addition, National's corporate transaction systems were not designed to track receivables and certain liabilities and cash receipts and payments on a business specific basis. Given these constraints, the following unaudited data are presented to facilitate analysis of key components of cash flow activity:
Three Months Nine Months Ended Ended February 23, February 23, 1997 1997 ------------ ------------ (In millions) Operating activities: Revenues less expenses $(0.3) $9.6 Depreciation and amortization 19.1 56.7 Loss on disposal of fixed assets, molds and tooling 0.3 0.5 Decrease in inventories 5.9 25.8 Decrease (increase) in prepaid expenses and other current assets 0.7 (0.1) Decrease in other assets 0.4 1.1 Decrease in accounts payable (7.0) (23.3) Increase in accrued expenses and other liabilities 6.9 16.0 ----- ----- Cash provided by operating activities 26.0 86.3 Investing activities: Capital expenditures (2.8) (33.4) Purchase of molds and tooling (2.0) (4.8) Transfers of capital equipment from National Semiconductor (3.3) (3.3) ----- ------ Cash used by investing activities (8.1) (41.5) ----- ------ Net financing provided to National Semiconductor * $ 17.9 $ 44.8 ===== ======
* Net financing provided to National Semiconductor does not necessarily represent the cash flows of the Business, or the timing of such cash flows, had it operated on a stand-alone basis. Note 4 - Long-term Debt On December 31, 1997, the Company entered into an amended and restated Credit Agreement with a syndicate of financial institutions. Specifically, the amount available under the Revolving Credit Facility was increased from $75 million to $130 million. In addition, certain restrictive covenants were amended in order to permit the acquisition of Raytheon Semiconductor, Inc. (Note 5). As of March 1, 1998, no amounts were outstanding under the Revolving Credit Facility. 7 Note 5 - Acquisitions On December 31, 1997, the Company acquired all of the outstanding common stock of Raytheon Semiconductor, Inc. ("Raytheon") for approximately $117 million in cash plus transaction expenses. Raytheon, based in Mountain View, California, designs, manufactures and markets high-performance analog and mixed signal integrated circuits for the personal computer, communications, broadcast video and industrial markets. The purchase price was financed through a combination of existing cash and borrowings under a new $90 million Tranche C term loan within the Company's Senior Term Facility. In conjunction with the acquisition, the Company also refinanced its Tranche B term loan with the remaining proceeds from the new Tranche C term loan. The Tranche C term loan matures on March 11, 2003, and bears interest based on either the bank's base rate or the Eurodollar rate at the option of the Company. The acquisition was accounted for as a purchase as of December 31, 1997, and the results of operations of Raytheon have been included since that date. The purchase price was allocated to all identifiable tangible and intangible assets and assumed liabilities based on their fair values, including $32.9 million allocated to various intangible assets and $15.5 million to in-process research and development. The in-process research and development was expensed to operations during the third quarter. The intangible assets are being amortized over periods ranging from 3 to 15 years. Note 6 - Change in Accounting Principle Effective in the third quarter of fiscal 1998, Fairchild adopted the provisions of EITF Issue 97-13 "Accounting for Business Process Reengineering Costs." This Issue requires companies to write-off business process reengineering costs that had been previously capitalized. The Company had been capitalizing such costs in conjunction with its enterprise software implementation project. The Issue requires companies to write-off these costs in the quarter that contains November 20, 1997. As the guideline for adoption was issued late in the Company's quarter ended November 23, 1997, the Company is applying the change for the first time in this quarter. The majority of the amount to be written off was capitalized prior to the second quarter of fiscal 1998. The amount incurred in the second quarter of fiscal 1998 which would have been charged to expense as a result of this Issue is immaterial to net income. The cumulative effect of adoption of this Issue resulted in a charge of $1.5 million, net of taxes of $0.8 million. Of the pre-tax write-off, $1.6 million applies to costs incurred in fiscal 1998, while $0.7 million applies to costs incurred in fiscal 1997. Note 7 - Reclassifications Certain amounts in the unaudited financial statements for the three and nine-month periods ended February 23, 1997 have been reclassified to conform to the presentation in the unaudited financial statements for the three and nine-month periods ended March 1, 1998. 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Overview Fairchild Semiconductor Corporation (the "Company") is a leading designer, manufacturer and supplier of high-performance logic, non-volatile memory, discrete power and signal technology and analog and mixed signal semiconductors, serving the telecommunications, consumer, industrial, personal systems and automotive markets. The results of operations for the third quarter and first nine months of fiscal 1997 (three- and nine-month periods ended February 23, 1997) reflect the operating results of the Fairchild Semiconductor Business (the "Business") of National Semiconductor Corporation ("National"), and are not necessarily indicative of the results that would have been obtained as a stand-alone company. This is due in part to the fact that National allocated to the Business certain corporate and other overhead costs at levels higher than those experienced as a stand-alone company. In addition, the Business, prior to the establishment of the Company, provided manufacturing services to National at cost and now provides such services at higher prices. The Company's results for the three and nine months ended March 1, 1998 consist of 14 and 40 weeks of activity, respectively, compared to 13 and 39 weeks, respectively, for the three and nine months ended February 23, 1997. Results of Operations Net income (loss) was $(2.1) million and $25.1 million for the third quarter and first nine months of fiscal 1998, respectively. As a stand-alone operation in fiscal 1998, the Company incurred interest expense and income tax expense (benefit) of $12.1 million and $(1.7) million, respectively, in the third quarter of fiscal 1998 and $33.8 million and $13.0 million, respectively, in the first nine months of fiscal 1998, that the Business did not incur in the comparable periods of fiscal 1997. Net income for the three and nine months ended March 1, 1998 includes one-time non-recurring charges for the write-off of purchased in-process research and development associated with the acquisition of Raytheon Semiconductor, Inc. ("Raytheon") ($15.5 million) and an after-tax charge for the cumulative effect of a change in accounting principle pertaining to certain business process reengineering costs associated with the Company's enterprise software system implementation ($1.5 million) which had been previously capitalized. Excluding these one-time non-recurring charges, net income was $14.9 million and $42.1 million, respectively, for the three and nine months ended March 1, 1998. Operating income was $9.8 million and $73.4 million in the third quarter and first nine months of fiscal 1998, respectively, compared to revenues less direct and allocated expenses before income taxes of $(0.3) million and $9.6 million in the comparable periods of fiscal 1997. Excluding one-time charges for in-process research and development for the three and nine months ended March 1, 1998 and for restructuring of operations for the nine months ended February 23, 1997 ($5.3 million), operating income was $25.3 million and $88.9 million, respectively, for the three and nine months ended March 1, 1998, compared to revenues less direct and allocated expenses before income taxes of $(0.3) million and $14.9 million, respectively, for the three and nine months ended February 23, 1997. This increase is primarily attributable to gross profit on contract manufacturing services of $10.6 million and $30.5 million, respectively, in the third quarter and first nine months of fiscal 1998. In the comparable periods of fiscal 1997, these revenues were recorded at cost. In addition, the Company experienced higher trade revenues as a result of 9 the acquisition of Raytheon and improved market conditions, higher trade gross profit due to improved factory utilization, improved pricing and the favorable effect of currency devaluations in Southeast Asia on manufacturing costs. Excluding one-time non-recurring charges, depreciation and amortization of $22.2 million and $62.5 million in the third quarter and first nine months of fiscal 1998, respectively, and $19.1 million and $56.7 million in the comparable periods of fiscal 1997, and other expense of $0.5 million and $1.4 million in the third quarter and first nine months of fiscal 1997, respectively, earnings before interest, taxes and depreciation and amortization ("EBITDA") were $47.5 million and $151.4 million in the third quarter and first nine months of fiscal 1998, respectively, compared to $19.3 million and $73.0 million in the comparable periods of fiscal 1997. EBITDA is presented because the Company believes that it is a widely accepted financial indicator of an entity's ability to incur and service debt. EBITDA should not be considered as an alternative to net income, operating income, or other consolidated operations and cash flow data prepared in accordance with generally accepted accounting principles, as an indicator of the operating performance of the Company, or as an alternative to cash flows as a measure of liquidity. Revenues The Company's revenues consist of trade sales to unaffiliated customers (79.9% and 79.6% of total revenues in the third quarter and first nine months of fiscal 1998, respectively, and 85.2% and 85.1% in the comparable periods of fiscal 1997) and revenues from contract manufacturing services provided to National (20.1% and 20.4% of total revenues in the third quarter and first nine months of fiscal 1998, respectively, and 14.8% and 14.9% in the comparable periods of fiscal 1997). Trade sales increased 11.9% to $165.1 million in the third quarter of fiscal 1998 compared to $147.5 million in the third quarter of fiscal 1997. On a year-to-date basis, trade sales increased 10.3% to $479.1 million compared to $434.4 million for the comparable period of fiscal 1997. Trade sales for the three and nine months ended March 1, 1998 include those of Raytheon since the acquisition. Excluding Raytheon, trade sales increased 3.9% and 7.6% for the three and nine months ended March 1, 1998, respectively, over the comparable periods of fiscal 1997. Logic trade sales increased 9.3% and 11.3% in the third quarter and first nine months of fiscal 1998, respectively, over the comparable periods of fiscal 1997. The increase was driven by a significant increase in unit volume, reflecting strong market demand, which offset a decrease in average selling prices. In the third quarter of fiscal 1998, CMOS trade sales increased 19.3% over the third quarter of fiscal 1997, offsetting a decrease of 2.5% in Bipolar trade sales, reflective of the general market trend favoring CMOS. On a year-to-date basis, CMOS and Bipolar trade sales increased 16.7% and 5.2%, respectively, over the comparable periods of fiscal 1997. Discrete trade sales increased 16.3% and 22.4% in the third quarter and first nine months of fiscal 1998, respectively, over the comparable periods of fiscal 1997. The increase was due almost entirely to higher average selling prices, driven by new product introductions and a favorable sales mix, as unit volume was down slightly. Small Signal trade sales increased 31.5% in the third quarter of fiscal 1998 over the third quarter of fiscal 1997 due to sales of new DMOS products targeted at battery management applications. Power sales were flat quarter over quarter, as new DMOS product revenues offset declining revenues in certain mature products. On a year-to-date basis, Small Signal and Power trade sales increased 36.6% and 5.5%, respectively, over the comparable period of fiscal 1997. 10 Memory trade sales decreased 21.4% and 16.5% in the third quarter and first nine months of fiscal 1998, respectively, from the comparable periods of fiscal 1997. The decrease was driven by lower prices impacting all product lines due to competitive pressures, partially offset by higher volume, particularly in E2PROM. E2PROM trade sales decreased 2.0% in the third quarter of fiscal 1998 from the third quarter of fiscal 1997, but have increased 10.4% in the first nine months of fiscal 1998 over the first nine months of fiscal 1997. In a declining market, EPROM trade sales decreased 45.5% and 47.2% in the third quarter and first nine months of fiscal 1998, respectively, from the comparable periods of fiscal 1997. Geographically, 35%, 23% and 42% of trade sales were derived in North America, Europe and Asia/Pacific, respectively, in the third quarter of fiscal 1998, compared to 38%, 20% and 42% in the third quarter of fiscal 1997. Trade sales in Europe increased 29.5% over a year ago, Asia/Pacific increased 11.5%, despite deteriorating economic conditions in the region, and North America increased 3.2%. Excluding Raytheon, North America trade sales were down 8.5% due primarily to softer sales into the distribution channel and lower prices. On a year-to-date basis, 36%, 21% and 43% of trade sales were derived in North America, Europe and Asia/Pacific, respectively, compared to 39%, 20% and 41% in the first nine months of fiscal 1997. Trade sales in all regions were higher in the first nine months of fiscal 1998 compared to a year ago. Trade sales increased 3.8% and 19.6% in North America and Europe, respectively, the result of improved market conditions and the acquisition of Raytheon. Despite soft economic conditions over the last several months in Asia/Pacific, trade sales in the region have increased 11.9% in the first nine months of 1998 over a year ago. Contract manufacturing revenues increased 61.5% to $41.5 million in the third quarter of fiscal 1998 compared to $25.7 million in the third quarter of fiscal 1997. On a year-to-date basis, contract manufacturing revenues increased 62.0% to $122.8 million, compared to $75.8 million for the comparable period in fiscal 1997. This increase, when normalized for higher prices which include a markup in fiscal 1998, reflects greater demand from National during these periods as compared to the comparable periods of fiscal 1997. Gross Profit Gross profit increased 66.3% to $59.7 million in the third quarter of fiscal 1998, compared to $35.9 million in the third quarter of fiscal 1997. On a year-to-date basis, gross profit increased 76.0% to $180.2 million from $102.4 million for the comparable period of fiscal 1997. Included in gross profit in the third quarter and first nine months of fiscal 1998 is $10.6 million and $30.5 million, respectively, attributable to contract manufacturing services provided to National. In the comparable periods of fiscal 1997, these revenues were recorded at cost. Gross trade profit (excluding contract manufacturing) increased 36.8% and 46.2% in the third quarter and first nine months of fiscal 1998, respectively, over the comparable periods of fiscal 1997. As a percentage of trade sales, gross trade profits were 29.7% and 31.2% in the third quarter and first nine months of fiscal 1998, respectively, compared to 24.3% and 23.6% in the comparable periods of fiscal 1997. The increase in gross trade profit as a percentage of trade sales was due to higher average selling prices, increased factory utilization due to improved market conditions and the favorable effects of currency devaluations in Southeast Asia on the Company's manufacturing costs. 11 Research and Development Research and development expenses ("R&D") were $9.8 million, or 5.9% of trade sales in the third quarter of fiscal 1998, compared to $5.1 million, or 3.5% of trade sales in the third quarter of fiscal 1997. On a year-to-date basis, R&D was $24.7 million, or 5.2% of trade sales, compared to $13.6 million, or 3.1% of trade sales, for the comparable period of fiscal 1997. The increase in R&D is driven by higher spending to support new product development, reflecting renewed emphasis on R&D efforts as a stand-alone company. R&D efforts are focused on the Company's growth products: CMOS Logic, Power, E2PROM and Analog. In the third quarter and first nine months of fiscal 1998, R&D expenditures were 9.5% and 8.8% of trade sales, respectively, for these growth products, and 1.0% and 0.8% of trade sales, respectively, for the Company's mature products (Bipolar Logic, Small Signal Discretes and EPROM). In the comparable periods of fiscal 1997, R&D expenditures of the Business primarily consisted of allocations from National. Selling, General and Administrative Selling, general and administrative expenses ("SG&A") were $24.6 million, or 14.9% of trade sales, in the third quarter of fiscal 1998, compared to $30.6 million, or 20.7% of trade sales, in the third quarter of fiscal 1997. On a year-to-date basis, SG&A was $66.6 million, or 13.9% of trade sales, compared to $72.5 million, or 16.7% of trade sales for the comparable period of fiscal 1997. Excluding one-time retention bonuses of $10.8 million and $14.1 million charged in the three and nine months ended February 23, 1997, respectively, SG&A was $19.8 million, or 13.4% of trade sales in the third quarter of fiscal 1997 and $58.4 million, or 13.4% of trade sales, for the nine months ended February 23, 1997. The increase in SG&A as a percentage of trade sales for the quarter and year-to-date after elimination of retention bonuses is primarily related to inefficiencies experienced while operating under transition service agreements with National. Restructuring The first nine months of fiscal 1997 included a one-time restructuring charge of $5.3 million for severance and other costs directly attributable to a workforce reduction. Interest, Net Interest, net was $12.1 million and $33.8 million in the third quarter and first nine months of fiscal 1998, respectively, as a result of indebtedness incurred concurrent with the establishment of the Company as an independent entity, which occurred in the fourth quarter of fiscal 1997, and the purchase of Raytheon in the third quarter of fiscal 1998. In the comparable periods of fiscal 1997, the Business was allocated net interest expense from National. This amount is included in other expense. Other Expenses Other expense was $0.5 million and $1.4 million in the third quarter and first nine months of fiscal 1997, respectively, consisting primarily of net interest expense allocated to the Business by National. There were no comparable amounts incurred in the comparable periods of fiscal 1998. 12 In the third quarter of fiscal 1998, the Company took a pre-tax charge of $15.5 million for purchased in-process research and development in conjunction with the acquisition of Raytheon and an after-tax charge of $1.5 million for the cumulative effect of an accounting change pertaining to treatment of certain costs associated with the Company's enterprise software system implementation. The costs, relating to activities to assess the new system's capabilities in light of the Company's current business processes, were previously capitalized with the cost of the software. EITF Issue 97-13, dated November 20, 1997, requires companies to expense such costs as incurred. Income Taxes Income tax expense (benefit) was $(1.7) million and $13.0 million in the third quarter and first nine months of fiscal 1998, respectively. Including the tax benefit from the cumulative effect of change in accounting principle, income taxes are recorded at an effective tax rate of 32% for the nine months ended March 1, 1998. During the third quarter, the Company reduced its effective tax rate from 35% to 32%, the impact of which was recorded in the third quarter. In the comparable periods of fiscal 1997, the Business did not record a tax provision or pay income taxes as it operated as a division of National. Liquidity and Capital Resources As of March 1, 1998, the Company's cash balance was $12.4 million, a decrease of $28.3 million from May 25, 1997. In addition, the Company had available a Revolving Credit Facility of $130 million on March 1, 1998, under which no amounts were outstanding. The Business had no cash as of February 23, 1997, as cash management was centralized by National and amounts were not identifiable on a business specific basis. In the third quarter and first nine months of fiscal 1998, the Company generated sufficient cash from operations to fund its research and development, capital expenditure and debt service requirements. Additionally, the Company used $75 million of its existing cash to fund in part the acquisition of Raytheon. Research and development expenditures are made primarily to fund new product development. Capital expenditures in the third quarter and first nine months of fiscal 1998 and for the remainder of the fiscal year are being made primarily to increase capacity in the Company's manufacturing facilities and to purchase and install an enterprise-wide information system. The Company expects that its existing cash together with available funds from its amended Senior Credit Facilities, and funds generated from operations, will be sufficient to meet its investing and financing requirements for the next twelve months. The Company utilizes financial instruments to hedge its overall exposure to the effects of foreign currency and interest rate fluctuations. The Company utilizes short-term forward contracts to hedge currency exposure when deemed necessary for expenses denominated in Malaysian ringgit and Philippine pesos, as well as revenues denominated in Japanese yen and the major European currencies. The recent devaluation of several currencies in Southeast Asia against the U.S. dollar has not had, nor does the Company presently expect it to have, a direct material adverse effect on the Company's results of operations or financial condition. However, the economic conditions that have led to or are reflected by such devaluations are expected to negatively impact the Company's operating results. See "Outlook and Business Risks." The Company currently benefits from lower dollar-denominated expenses incurred by its manufacturing operations in Southeast Asia. Deferred gains from hedging transactions were immaterial to the financial statements in the third quarter and first nine months of fiscal 1998. The Company does not speculate in these financial instruments. 13 Outlook and Business Risks The statements contained under this heading and in the Liquidity and Capital Resources section of Management's Discussion and Analysis, other than statements of historical facts, are forward looking statements based on current expectations and management's estimates, which involve risks and uncertainties. Actual results may differ materially from those set forth in such forward looking statements. The following factors may affect the Company's operating results for fiscal 1998: (i) the potential effect of the Company's substantially leveraged financial condition on its liquidity, its ability to fund capital expenditures, working capital and research and development and its ability to withstand adverse general economic, market or competitive conditions and developments; (ii) restrictive covenants contained in the Company's debt instruments that could limit its ability to borrow additional funds, dispose of or acquire assets or fund capital expenditures; (iii) the highly cyclical and competitive nature of the semiconductor industry; (iv) the Company's dependence on continued demand for the end-products such as personal computers, telecommunications, automotive, and consumer and industrial electronic goods that incorporate the Company's products; (v) the need to design, develop, manufacture, market and support new products in order to remain competitive in the Company's markets; (vi) the Company's dependence on sales to National Semiconductor; (vii) the Company's dependence on the availability and cost of new materials used in its products and upon key subcontractors providing it with wafer fabrication, assembly and test services; (viii) the Company's reliance on complex manufacturing processes and its sensitivity to maintaining yields, efficiencies and continuous operations; (ix) uncertainties and legal risks associated with the dependence on, and potential disputes concerning, patents and other intellectual property rights; and (x) foreign currency and other risks associated with operating a business internationally. Soft market conditions in the semiconductor industry, which have emerged over the last several months, resulting in decreased demand and increased price pressures, will negatively impact the Company's trade revenues and gross profit in the fourth quarter. The Company expects its trade revenues in the fourth quarter to be below its third quarter results. In addition, National has informed the Company that their demand will be significantly lower in the Company's fourth quarter. This will result in lower contract manufacturing revenues in the fourth quarter as compared to the third quarter, and will negatively impact factory utilization, particularly in the 6-inch fab in South Portland, Maine. The Company does not expect contract manufacturing revenues to return to levels generated to date in fiscal 1998 for the foreseeable future. The Company's plan in the coming year is to utilize this capacity to manufacture its own products. National, under terms of the Asset Purchase Agreement, is obligated to purchase an aggregate of $330 million of contract manufacturing services during the 39 month period which began March 11, 1997. Despite the reduction in demand for the fourth quarter, National remains fully compliant with the revenue targets mandated by the Agreement. The Company relies on certain subcontractors for wafer fabrication and assembly and test services. In particular, the Company utilizes NS Electronics (Bangkok) Ltd. ("NS Electronics") as a subcontractor for a significant portion of assembly and test services for its non-volatile memory products. NS Electronics has common ownership and business and management relationships with Alphatec Electronics Public Company Ltd. ("Alphatec"). Alphatec has recently reported financial difficulties, and its ability to continue its current operations and the impact of such on the operations of NS Electronics are uncertain. The Company's contract with NS Electronics expired on November 23, 1997 and negotiations to renew the contract are in progress. While negotiations continue, 14 the parties have agreed to operate under the pricing arrangements of the proposed contract, which are generally favorable to the Company. The Company continues to explore sourcing alternatives, including other subcontractors and expansion of internal capacity. There can be no assurance that the Company would be able to replace any loss of assembly or test services as a result of adverse developments affecting Alphatec and NS Electronics, nor any assurance that such services could be replaced on terms equally favorable to the Company. Accordingly, should NS Electronics cease or sharply curtail its operations in the near future, there could be a material adverse effect on the Company's results of operations in fiscal 1998. In the fourth quarter of fiscal 1997, the Company commenced its enterprise software system implementation project for the purpose of separating from National's business systems. The software, which will be fully operational by the end of the first quarter of fiscal 1999, is year 2000 compliant. In addition, internal resources have been redeployed to identify, test and correct year 2000 problems in other systems throughout the Company. For the three and nine months ended March 1, 1998, incremental amounts incurred and charged to expense to identify, test and correct such other year 2000 problems are immaterial to the financial statements. Management has not yet assessed the future impact of year 2000 compliance expenses on its financial position or results of operations. 15 PART II. OTHER INFORMATION Item 1. Legal Proceedings From time to time the Company is involved in legal proceedings arising in the ordinary course of its business. Management believes there is no litigation pending that could have a material adverse effect on its results of operations or its financial condition. Item 6. Exhibits and Reports on Form 8-K a) Exhibits 10.1 Credit Agreement - Amended and Restated as of December 31, 1997 10.2 Employee Stock Purchase Savings Plan Effective February 26, 1998 27 Financial Data Schedule b) Reports on Form 8-K 1. On November 26, 1997, Fairchild Semiconductor Corporation filed a Form 8-K to disclose the Registrant's agreement to purchase all of the outstanding common stock of Raytheon Semiconductor, Inc. 2. On January 13, 1998, Fairchild Semiconductor Corporation filed a Form 8-K to disclose that it had completed the acquisition of all of the outstanding common stock of Raytheon Semiconductor, Inc. No financial statements were filed under this Form 8-K. An amendment was filed on March 16, 1998. Items 2, 3, 4 and 5 are not applicable and have been omitted. 16 Signature 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. Fairchild Semiconductor Corporation Date: April 13, 1998 By:/s/ Joseph R. Martin ------------------------------ Executive Vice President, Finance Chief Financial Officer (Principal Financial and Accounting Officer and Duly Authorized Officer) 17 EX-10.1 2 EX-10.1 Exhibit 10.1 - ---------------------------------------------------------------------------- - ---------------------------------------------------------------------------- CREDIT AGREEMENT among FSC SEMICONDUCTOR CORPORATION, FAIRCHILD SEMICONDUCTOR CORPORATION, VARIOUS BANKS, BANKERS TRUST COMPANY, as ADMINISTRATIVE AGENT, CREDIT SUISSE FIRST BOSTON, as SYNDICATION AGENT, and CANADIAN IMPERIAL BANK OF COMMERCE, as DOCUMENTATION AGENT --------------------------------------------- Dated as of March 11, 1997 and Amended and Restated as of December 31, 1997 --------------------------------------------- $295,000,000 - ---------------------------------------------------------------------------- - ---------------------------------------------------------------------------- TABLE OF CONTENTS
Page ---- SECTION 1. Amount and Terms of Credit. . . . . . . . . . . . . . . . . . . 1 1.01 The Commitments . . . . . . . . . . . . . . . . . . . . . . . . 1 1.02 Minimum Amount of Each Borrowing. . . . . . . . . . . . . . . . 5 1.03 Notice of Borrowing . . . . . . . . . . . . . . . . . . . . . . 5 1.04 Disbursement of Funds . . . . . . . . . . . . . . . . . . . . . 6 1.05 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 1.06 Conversions . . . . . . . . . . . . . . . . . . . . . . . . . . 9 1.07 Pro Rata Borrowings . . . . . . . . . . . . . . . . . . . . . . 9 1.08 Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 1.09 Interest Periods. . . . . . . . . . . . . . . . . . . . . . . . 11 1.10 Increased Costs, Illegality, etc. . . . . . . . . . . . . . . . 12 1.11 Compensation. . . . . . . . . . . . . . . . . . . . . . . . . . 14 1.12 Change of Lending Office. . . . . . . . . . . . . . . . . . . . 15 1.13 Replacement of Banks. . . . . . . . . . . . . . . . . . . . . . 15 SECTION 2. Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . 17 2.01 Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . 17 2.02 Letter of Credit Requests . . . . . . . . . . . . . . . . . . . 18 2.03 Letter of Credit Participations . . . . . . . . . . . . . . . . 19 2.04 Agreement to Repay Letter of Credit Drawings. . . . . . . . . . 21 2.05 Increased Costs . . . . . . . . . . . . . . . . . . . . . . . . 22 SECTION 3. Commitment Commission; Fees; Reductions of Commitment . . . . . 23 3.01 Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 3.02 Voluntary Termination of Unutilized Commitments . . . . . . . . 24 3.03 Mandatory Reduction of Commitments. . . . . . . . . . . . . . . 25 SECTION 4. Prepayments; Payments; Taxes. . . . . . . . . . . . . . . . . . 26 4.01 Voluntary Prepayments . . . . . . . . . . . . . . . . . . . . . 26 4.02 Mandatory Repayments and Commitment Reductions. . . . . . . . . 27 4.03 Method and Place of Payment . . . . . . . . . . . . . . . . . . 35 4.04 Net Payments; Taxes . . . . . . . . . . . . . . . . . . . . . . 35
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Page ---- SECTION 5. Conditions Precedent to Restatement Effective Date. . . . . . . 38 5.01 Execution of Agreement; Notes . . . . . . . . . . . . . . . . . 38 5.02 Fees, etc.. . . . . . . . . . . . . . . . . . . . . . . . . . . 38 5.03 Opinion of Counsel. . . . . . . . . . . . . . . . . . . . . . . 38 5.04 Corporate Documents; Proceedings; etc.. . . . . . . . . . . . . 38 5.05 Employee Benefit Plans; Shareholders' Agreements; Management Agreements; Debt Agreements; Tax Sharing Agreements . . . . . 39 5.06 Consummation of Acquisition . . . . . . . . . . . . . . . . . . 41 5.07 Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . . 41 5.08 Subsidiary Credit Parties; etc. . . . . . . . . . . . . . . . . 42 5.09 Pledge Agreement. . . . . . . . . . . . . . . . . . . . . . . . 42 5.10 Security Agreement. . . . . . . . . . . . . . . . . . . . . . . 42 5.11 Mortgage Amendments . . . . . . . . . . . . . . . . . . . . . . 43 5.12 Consent Letter. . . . . . . . . . . . . . . . . . . . . . . . . 43 5.13 Adverse Change; Governmental Approvals; etc.. . . . . . . . . . 44 5.14 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . 44 5.15 Solvency Certificate; Environmental Analyses; Insurance . . . . 45 5.16 Pro Forma Balance Sheet; Financial Statements; Projections. . . 45 5.17 Senior Indebtedness . . . . . . . . . . . . . . . . . . . . . . 45 5.18 Refinancing; Original Credit Agreement; etc . . . . . . . . . . 46 5.19 Officer's Certificate . . . . . . . . . . . . . . . . . . . . . 46 SECTION 6. Conditions Precedent to All Credit Events . . . . . . . . . . . 47 6.01 No Default; Representations and Warranties. . . . . . . . . . . 47 6.02 Notice of Borrowing; Letter of Credit Request . . . . . . . . . 47 6.03 Officers' Certificate for Certain Credit Events . . . . . . . . 47 SECTION 7. Representations, Warranties and Agreements . . . . . . . . . . . 48 7.01 Corporate Status . . . . . . . . . . . . . . . . . . . . . . . . 48 7.02 Corporate Power and Authority. . . . . . . . . . . . . . . . . . 48 7.03 No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . 49 7.04 Governmental Approvals . . . . . . . . . . . . . . . . . . . . . 49 7.05 Financial Statements; Financial Condi; Undisclosed Liabilities; Projections; etc. . . . . . . . . . . . . . . . . 49
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Page ---- 7.06 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . 52 7.07 True and Complete Disclosure. . . . . . . . . . . . . . . . . . 52 7.08 Use of Proceeds; Margin Regulations . . . . . . . . . . . . . . 52 7.09 Tax Returns and Payments. . . . . . . . . . . . . . . . . . . . 52 7.10 Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . 53 7.11 The Security Documents. . . . . . . . . . . . . . . . . . . . . 54 7.12 Representations and Warranties in Documents . . . . . . . . . . 56 7.13 Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . 56 7.14 Capitalization. . . . . . . . . . . . . . . . . . . . . . . . . 56 7.15 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . 57 7.16 Compliance with Statutes, etc.. . . . . . . . . . . . . . . . . 57 7.17 Investment Company Act. . . . . . . . . . . . . . . . . . . . . 57 7.18 Public Utility Holding Company Act. . . . . . . . . . . . . . . 57 7.19 Environmental Matters . . . . . . . . . . . . . . . . . . . . . 57 7.20 Labor Relations . . . . . . . . . . . . . . . . . . . . . . . . 58 7.21 Patents, Licenses, Franchises and Formulas. . . . . . . . . . . 59 7.22 Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . . 59 7.23 Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . 59 7.24 Special Purpose Corporations. . . . . . . . . . . . . . . . . . 59 7.25 Updated Security Agreement and Pledge Agreement Schedules . . . 59 SECTION 8. Affirmative Covenants. . . . . . . . . . . . . . . . . . . . . 60 8.01 Information Covenants . . . . . . . . . . . . . . . . . . . . . 60 8.02 Books, Records and Inspections. . . . . . . . . . . . . . . . . 64 8.03 Maintenance of Property; Insurance. . . . . . . . . . . . . . . 64 8.04 Corporate Franchises. . . . . . . . . . . . . . . . . . . . . . 66 8.05 Compliance with Statutes, etc.. . . . . . . . . . . . . . . . . 66 8.06 Compliance with Environmental Laws. . . . . . . . . . . . . . . 66 8.07 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 8.08 End of Fiscal Years; Fiscal Quarters. . . . . . . . . . . . . . 68 8.09 Performance of Obligations. . . . . . . . . . . . . . . . . . . 68 8.10 Payment of Taxes. . . . . . . . . . . . . . . . . . . . . . . . 69 8.11 Ownership of Subsidiaries . . . . . . . . . . . . . . . . . . . 69 8.12 Additional Security; Further Assurances; Surveys. . . . . . . . 69 8.13 Interest Rate Protection. . . . . . . . . . . . . . . . . . . . 71 8.14 Foreign Subsidiaries Security . . . . . . . . . . . . . . . . . 72 8.15 Maintenance of Corporate Separateness . . . . . . . . . . . . . 72
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Page ---- SECTION 9. Negative Covenants . . . . . . . . . . . . . . . . . . . . . . 72 9.01 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 9.02 Consolidation, Merger, Purchase or Sale of Assets, etc. . . . . 76 9.03 Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 9.04 Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . . 79 9.05 Advances, Investments and Loans . . . . . . . . . . . . . . . . 81 9.06 Transactions with Affiliates. . . . . . . . . . . . . . . . . . 82 9.07 Capital Expenditures. . . . . . . . . . . . . . . . . . . . . . 83 9.08 Consolidated Interest Coverage Ratio. . . . . . . . . . . . . . 84 9.09 Consolidated Fixed Charge Coverage Ratio. . . . . . . . . . . . 84 9.10 Maximum Leverage Ratio. . . . . . . . . . . . . . . . . . . . . 85 9.11 Limitation on Modifications of Indebtedness; Modifications of Certificate of Incorporation, By-Laws and Certain Other Agreements; etc.. . . . . . . . . . . . . . . . . . . . 85 9.12 Limitation on Certain Restrictions on Subsidiaries. . . . . . . 86 9.13 Limitation on Issuance of Capital Stock . . . . . . . . . . . . 87 9.14 Limitation on Creation of Subsidiaries. . . . . . . . . . . . . 87 9.15 Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 9.16 Designated Senior Indebtedness. . . . . . . . . . . . . . . . . 88 9.17 Allocation of Senior Subordinated Note Indenture Basket Amount. 88 SECTION 10. Events of Default . . . . . . . . . . . . . . . . . . . . . . 88 10.01 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . 88 10.02 Representations, etc.. . . . . . . . . . . . . . . . . . . . . 88 10.03 Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . 89 10.04 Default Under Other Agreements . . . . . . . . . . . . . . . . 89 10.05 Bankruptcy, etc. . . . . . . . . . . . . . . . . . . . . . . . 89 10.06 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 10.07 Security Documents . . . . . . . . . . . . . . . . . . . . . . 91 10.08 Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 10.09 Judgments. . . . . . . . . . . . . . . . . . . . . . . . . . . 91 10.10 Change of Control. . . . . . . . . . . . . . . . . . . . . . . 92 SECTION 11. Definitions and Accounting Terms. . . . . . . . . . . . . . . 92 11.01 Defined Terms. . . . . . . . . . . . . . . . . . . . . . . . . 92
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Page ---- SECTION 12. The Agents. . . . . . . . . . . . . . . . . . . . . . . . . . 128 12.01 Appointment. . . . . . . . . . . . . . . . . . . . . . . . . . 128 12.02 Nature of Duties . . . . . . . . . . . . . . . . . . . . . . . 128 12.03 Lack of Reliance on the Agents . . . . . . . . . . . . . . . . 128 12.04 Certain Rights of the Agents . . . . . . . . . . . . . . . . . 129 12.05 Reliance . . . . . . . . . . . . . . . . . . . . . . . . . . . 129 12.06 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . 129 12.07 Each Agent in its Individual Capacity. . . . . . . . . . . . . 130 12.08 Holders. . . . . . . . . . . . . . . . . . . . . . . . . . . . 130 12.09 Resignation by the Agents. . . . . . . . . . . . . . . . . . . 130 SECTION 13. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . 131 13.01 Payment of Expenses, etc.. . . . . . . . . . . . . . . . . . . 131 13.02 Right of Setoff. . . . . . . . . . . . . . . . . . . . . . . . 132 13.03 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . 133 13.04 Benefit of Agreement . . . . . . . . . . . . . . . . . . . . . 133 13.05 No Waiver; Remedies Cumulative . . . . . . . . . . . . . . . . 135 13.06 Payments Pro Rata. . . . . . . . . . . . . . . . . . . . . . . 136 13.07 Calculations; Computations . . . . . . . . . . . . . . . . . . 136 13.08 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . 137 13.09 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 138 13.10 Effectiveness. . . . . . . . . . . . . . . . . . . . . . . . . 138 13.11 Headings Descriptive . . . . . . . . . . . . . . . . . . . . . 139 13.12 Amendment or Waiver; etc.. . . . . . . . . . . . . . . . . . . 139 13.13 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . 141 13.14 Domicile of Loans. . . . . . . . . . . . . . . . . . . . . . . 141 13.15 Limitation on Additional Amounts, etc. . . . . . . . . . . . . 142 13.16 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . 142 13.17 Register . . . . . . . . . . . . . . . . . . . . . . . . . . . 143 13.18 Certain Prior Documents. . . . . . . . . . . . . . . . . . . . 143 13.19 Certain Provisions Regarding Original Banks, Including As Holders of Tranche B Term Loans . . . . . . . . . . . . . 143 13.20 Addition of New Banks; Obligation to Pay Certain Amounts Owing Pursuant to the Original Credit Agreement; Termination of Commitments of Non-Continuing Banks; etc. . . 144 13.21 Acknowledgement and Agreement of Credit Parties. . . . . . . . 144
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Page ---- 13.22 Post-Closing Actions.. . . . . . . . . . . . . . . . . . . . . 145
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Page ---- SECTION 14. Holdings Guaranty . . . . . . . . . . . . . . . . . . . . . . 147 14.01 The Holdings Guaranty. . . . . . . . . . . . . . . . . . . . . 147 14.02 Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . 148 14.03 Nature of Liability. . . . . . . . . . . . . . . . . . . . . . 148 14.04 Independent Obligation . . . . . . . . . . . . . . . . . . . . 149 14.05 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . 149 14.06 Reliance . . . . . . . . . . . . . . . . . . . . . . . . . . . 150 14.07 Subordination. . . . . . . . . . . . . . . . . . . . . . . . . 150 14.08 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151 14.09 Maximum Liability. . . . . . . . . . . . . . . . . . . . . . . 151
(vii) Page ---- SCHEDULE I Commitments (Sections 3.02, 4.01, 11.01 ["Bank"; "Revolving Loan Commitment"; "Tranche A Term Loan Commitment"; "Tranche C Term Loan Commitment"], 13.04(b)) SCHEDULE II Bank Addresses (Section 13.03) SCHEDULE III Real Property (Sections 5.11(a), 7.11(c), 7.13) SCHEDULE IV Existing Liens (Section 9.01(iii)) SCHEDULE V Existing Indebtedness (Sections 5.07, 7.22, 9.04(iii)) SCHEDULE VI Insurance (Section 8.03(a)) SCHEDULE VII ERISA (Section 7.10) SCHEDULE VIII Subsidiaries (Sections 7.15, 11.01 ["Subsidiary Assignor"; "Subsidiary Guarantor"]) SCHEDULE IX Labor Relations (Section 7.20) SCHEDULE X Projections (Sections 7.05(g), 7.22) SCHEDULE XI Securities (Section 7.14) SCHEDULE XII Organization Chart (Section 7.15) SCHEDULE XIII Original Letters of Credit (["Original Letters of Credit"]) EXHIBIT A Notice of Borrowing (Section 1.03(a)) EXHIBIT B-1 Tranche A Term Note (Section 1.05(a)) EXHIBIT B-2 Tranche C Term Note (Section 1.05(a)) EXHIBIT B-3 Revolving Note (Section 1.05(a)) EXHIBIT B-4 Swingline Note (Section 1.05(a)) EXHIBIT C Letter of Credit Request (Section 2.02(a)) EXHIBIT D Section 4.04(b)(ii) Certificate (Section 4.04(b)(ii)) EXHIBIT E Opinion of Dechert Price & Rhoads (Section 5.03) EXHIBIT F Officers' Certificate (Section 5.04(a)) EXHIBIT G Subsidiaries Guaranty (Section 5.08) EXHIBIT H Consent Letter (Section 5.12) EXHIBIT I Solvency Certificate (Section 5.15) EXHIBIT J Assignment and Assumption Agreement (Sections 1.13, 13.04(b), 13.17 ["Assignment and Assumption Agreement"]) EXHIBIT K Subordination Provisions (viii) CREDIT AGREEMENT, dated as of March 11, 1997 and amended and restated as of December 31, 1997, among FSC SEMICONDUCTOR CORPORATION, a Delaware corporation ("Holdings"), FAIRCHILD SEMICONDUCTOR CORPORATION, a Delaware corporation (the "Borrower"), the Banks party hereto from time to time, BANKERS TRUST COMPANY, as Administrative Agent (in such capacity, the "Administrative Agent"), CREDIT SUISSE FIRST BOSTON, as Syndication Agent (in such capacity, the "Syndication Agent"), and CANADIAN IMPERIAL BANK OF COMMERCE, as Documentation Agent (in such capacity, the "Documentation Agent" and, together with the Syndication Agent and the Administrative Agent, each an "Agent" and collectively the "Agents") (all capitalized terms used herein and defined in Section 11 are used herein as therein defined). W I T N E S S E T H : WHEREAS, Holdings, the Borrower, the Original Banks, Bankers Trust Company, as Administrative Agent, Credit Suisse First Boston, as Syndication Agent, and Canadian Imperial Bank of Commerce, as Documentation Agent, are parties to a Credit Agreement, dated as of March 11, 1997 (as the same has been amended, modified or supplemented to, but not including, the Restatement Effective Date, the "Original Credit Agreement"); and WHEREAS, the parties hereto wish to amend and restate the Original Credit Agreement in the form of this Agreement to, inter alia, permit the Acquisition (as hereinafter defined) and the financing therefor on the terms and subject to the conditions provided herein and make available to the Borrower the respective credit facilities provided for herein; NOW, THEREFORE, the parties hereto agree that the Original Credit Agreement shall be and hereby is amended and restated in its entirety as follows: SECTION 1. Amount and Terms of Credit. 1.01 The Commitments. (a) Subject to and upon the terms and conditions set forth in the Original Credit Agreement, each Original Bank with a Tranche A Term Loan Commitment severally agreed to make, on the Initial Borrowing Date, a term loan (each, a "Tranche A Term Loan" and, collectively, the "Tranche A Term Loans") to the Borrower, which Tranche A Term Loans (i) were made and initially maintained as a single Borrowing of Base Rate Loans (subject to the option to convert such Tranche A Term Loans pursuant to Section 1.06) and (ii) were made by each Original Bank in that initial aggregate principal amount as was equal to the Tranche A Term Loan Commitment of such Bank on such date (before giving effect to any reductions thereto on such date pursuant to Section 3.03(b)(i) of the Original Credit Agreement but after giving effect to any reductions thereto on or prior to such date pursuant to Section 3.03(b)(ii) of the Original Credit Agreement). The aggregate outstanding principal amount of the Tranche A Term Loans of each Bank, as at the date provided in Schedule I, is accurately set forth in Schedule I. The Tranche A Term Loans of each Bank outstanding immediately prior to the Restatement Effective Date shall remain outstanding after giving effect to the occurrence of the Restatement Effective Date, and shall in no way be affected as a result of the occurrence of the Restatement Effective Date. Once repaid, Tranche A Term Loans incurred hereunder may not be reborrowed. (b) Subject to and upon the terms and conditions set forth herein, each Bank with a Tranche C Term Loan Commitment severally agrees (A) in the case of each Continuing Bank, to convert into Tranche C Term Loans (as hereinafter defined), on the Restatement Effective Date, Original Tranche B Term Loans made by such Continuing Bank pursuant to the Original Credit Agreement and outstanding on the Restatement Effective Date in an aggregate principal amount equal to the lesser of (x) the aggregate principal amount of such Original Tranche B Term Loans made by such Continuing Bank and so outstanding or (y) such Continuing Bank's Tranche C Term Loan Commitment as in effect on the Restatement Effective Date (before giving effect to any reductions thereto on such date pursuant to Section 3.03(c)), and/or (B) to make, on the Restatement Effective Date, a term loan (each, a "Tranche C Term Loan" and, collectively, the "Tranche C Term Loans") to the Borrower, which Tranche C Term Loans (i) shall be made and initially maintained as a single Borrowing of Base Rate Loans (subject to the option to convert such Tranche C Term Loans pursuant to Section 1.06) and (ii) shall be made by each Bank in that initial aggregate principal amount (which, in the case of each Continuing Bank, shall include the principal amount of Tranche C Term Loans converted pursuant to clause (A) above) as is equal to the Tranche C Term Loan Commitment of such Bank on such date (before giving effect to any reductions thereto on such date pursuant to Section 3.03(c)). Once repaid, Tranche C Term Loans incurred hereunder may not be reborrowed. 2 (c) Subject to and upon the terms and conditions set forth herein, each Bank with a Revolving Loan Commitment severally agrees, at any time and from time to time after the Initial Borrowing Date and prior to the Revolving Loan Maturity Date, to make a revolving loan or revolving loans (each, a "Revolving Loan" and, collectively, the "Revolving Loans") to the Borrower, which Revolving Loans (i) shall, at the option of the Borrower, be Base Rate Loans or Eurodollar Loans, provided that, except as otherwise specifically provided in Section 1.10(b), all Revolving Loans comprising the same Borrowing shall at all times be of the same Type, (ii) may be repaid and reborrowed in accordance with the provisions hereof, (iii) shall not exceed for any Bank at any time outstanding that aggregate principal amount which, when added to the product of (x) such Bank's Adjusted Percentage and (y) the sum of (I) the aggregate amount of all Letter of Credit Outstandings (exclusive of Unpaid Drawings which are repaid with the proceeds of, and simultaneously with the incurrence of, the respective incurrence of Revolving Loans) at such time and (II) the aggregate principal amount of all Swingline Loans (exclusive of Swingline Loans which are repaid with the proceeds of, and simultaneously with the incurrence of, the respective incurrence of Revolving Loans) then outstanding, equals the Revolving Loan Commitment of such Bank at such time and (iv) shall not exceed for all Banks at any time outstanding that aggregate principal amount which, when added to (x) the amount of all Letter of Credit Outstandings (exclusive of Unpaid Drawings which are repaid with the proceeds of, and simultaneously with the incurrence of, the respective incurrence of Revolving Loans) at such time and (y) the aggregate principal amount of all Swingline Loans (exclusive of Swingline Loans which are repaid with the proceeds of, and simultaneously with the incurrence of, the respective incurrence of Revolving Loans) then outstanding, equals the Total Revolving Loan Commitment at such time. On and immediately after the occurrence of the Restatement Effective Date, the Revolving Loan Commitment for each Bank shall be the amount set forth opposite such Bank's name in Schedule I hereto directly below the column entitled "Revolving Loan Commitment" (as same may be (x) reduced from time to time pursuant to Sections 3.02, 3.03, 4.02 and/or 10 or (y) adjusted from time to time as a result of assignments to or from such Bank pursuant to Section 1.13 or 13.04(b)), such that the Total Revolving Loan Commitment (as of the Restatement Effective Date) shall represent an increase of $55,000,000 over the Total Revolving Loan Commitment as in effect immediately before the occurrence of the Restatement Effective Date. In connection with such increase, the Borrower shall repay in full all Revolving Loans outstanding immediately prior to the Restatement Effective Date (although Revolving Loans may be incurred hereunder on the Restatement Effective Date in accordance with the provisions hereof, so that the Banks participate in each Borrowing of outstanding Revolving Loans pro rata on the basis of their Revolving Loan Commitments (as in effect on the Restatement Effective Date) as provided herein), it being understood and agreed that the Borrower shall pay all breakage or similar costs of the type described in Section 1.11 incurred by the Banks in connection with any repayment or reborrowing of Revolving Loans. (d) Subject to and upon the terms and conditions herein set forth, the Swingline Bank in its individual capacity agrees to make at any time and from time to time on 3 and after the Initial Borrowing Date and prior to the Swingline Expiry Date, a revolving loan or revolving loans (each, a "Swingline Loan" and, collectively, the "Swingline Loans") to the Borrower, which Swingline Loans (i) shall be made and maintained as Base Rate Loans, (ii) may be repaid and reborrowed in accordance with the provisions hereof, (iii) shall not exceed in aggregate principal amount at any time outstanding, when combined with the aggregate principal amount of all Revolving Loans made by Non-Defaulting Banks then outstanding and the Letter of Credit Outstandings at such time, an amount equal to the Adjusted Total Revolving Loan Commitment at such time (after giving effect to any reductions to the Adjusted Total Revolving Loan Commitment on such date), (iv) shall not exceed at any time outstanding the Maximum Swingline Amount and (v) shall not be extended if the Swingline Bank receives a written notice from any Agent or the Required Banks that has not been rescinded that there is a Default or an Event of Default in existence hereunder. (e) On any Business Day, the Swingline Bank may, in its sole discretion, give notice to the other Banks that its outstanding Swingline Loans shall be funded with a Borrowing of Revolving Loans (provided that such notice shall be deemed to have been automatically given upon the occurrence of a Default or an Event of Default under Section 10.05 or upon the exercise of any of the remedies provided in the last paragraph of Section 10), in which case a Borrowing of Revolving Loans constituting Base Rate Loans (each such Borrowing, a "Mandatory Borrowing") shall be made on the immediately succeeding Business Day by all Banks with a Revolving Loan Commitment (without giving effect to any reductions thereto pursuant to the last paragraph of Section 10) pro rata based on each Bank's Adjusted Percentage (determined before giving effect to any termination of the Revolving Loan Commitments pursuant to the last paragraph of Section 10) and the proceeds thereof shall be applied directly to the Swingline Bank to repay the Swingline Bank for such outstanding Swingline Loans. Each such Bank hereby irrevocably agrees to make Revolving Loans upon one Business Day's notice pursuant to each Mandatory Borrowing in the amount and in the manner specified in the preceding sentence and on the date specified in writing by the Swingline Bank notwithstanding (i) the amount of the Mandatory Borrowing may not comply with the minimum amount for Borrowings otherwise required hereunder, (ii) whether any conditions specified in Section 6 are then satisfied, (iii) whether a Default or an Event of Default then exists, (iv) the date of such Mandatory Borrowing and (v) the amount of the Total Revolving Loan Commitment or the Adjusted Total Revolving Loan Commitment at such time. In the event that any Mandatory Borrowing cannot for any reason be made on the date otherwise required above (including, without limitation, as a result of the commencement of a proceeding under the Bankruptcy Code with respect to the Borrower), then each such Bank hereby agrees that it shall forthwith purchase (as of the date the Mandatory Borrowing would otherwise have occurred, but adjusted for any payments received from the Borrower on or after such date and prior to such purchase) from the Swingline Bank such participations in the outstanding Swingline Loans as shall be necessary to cause such Banks to share in such Swingline Loans ratably based upon their respective Adjusted Percentages (determined before giving effect to any termination of the Revolving Loan Commitments pursuant to the last paragraph of Section 10), provided that (x) all interest payable on the Swingline Loans shall 4 be for the account of the Swingline Bank until the date as of which the respective participation is required to be purchased and, to the extent attributable to the purchased participation, shall be payable to the participant from and after such date and (y) at the time any purchase of participations pursuant to this sentence is actually made, the purchasing Bank shall be required to pay the Swingline Bank interest on the principal amount of participation purchased for each day from and including the day upon which the Mandatory Borrowing would otherwise have occurred to but excluding the date of payment for such participation, at the overnight Federal Funds Rate for the first three days and at the rate otherwise applicable to Revolving Loans maintained as Base Rate Loans hereunder for each day thereafter. 1.02 Minimum Amount of Each Borrowing. The aggregate principal amount of each Borrowing of any Tranche of Term Loans shall not be less than $5,000,000. The aggregate principal amount of each Borrowing of Revolving Loans shall be not less than (x) in the case of a Borrowing of Eurodollar Loans, $5,000,000 and (y) in the case of a Borrowing of Base Rate Loans, $1,000,000, provided that Mandatory Borrowings shall be made in the amounts required by Section 1.01(e). The aggregate principal amount of each Borrowing of Swingline Loans shall not be less than $250,000 and, if greater, shall be in an integral multiple of $100,000. More than one Borrowing may occur on the same date, but at no time shall there be outstanding more than twelve Borrowings of Eurodollar Loans. 1.03 Notice of Borrowing. (a) Whenever the Borrower desires to make a Borrowing hereunder (excluding Borrowings of Swingline Loans and Mandatory Borrowings), it shall give the Administrative Agent at its Notice Office at least one Business Day's prior written notice (or telephonic notice promptly confirmed in writing) of each Base Rate Loan and at least three Business Days' prior written notice (or telephonic notice promptly confirmed in writing) of each Eurodollar Loan to be made hereunder, provided that any such notice shall be deemed to have been given on a certain day only if given before 11:00 A.M. (New York time) in the case of a Borrowing of Eurodollar Loans and 12:00 Noon (New York time) in the case of a Borrowing of Base Rate Loans on such day. Each such written notice or written confirmation of telephonic notice (each a "Notice of Borrowing"), except as otherwise expressly provided in Section 1.10, shall be irrevocable and shall be given by the Borrower in the form of Exhibit A, appropriately completed to specify the aggregate principal amount of the Loans to be made pursuant to such Borrowing, the date of such Borrowing (which shall be a Business Day), whether the Loans being made pursuant to such Borrowing shall constitute Tranche A Term Loans, Tranche C Term Loans or Revolving Loans and whether the Loans being made pursuant to such Borrowing are to be initially maintained as Base Rate Loans or Eurodollar Loans and, if Eurodollar Loans, the initial Interest Period to be applicable thereto. The Administrative Agent shall promptly give each Bank which is required to make Loans of the Tranche specified in the respective Notice of Borrowing, notice of such proposed Borrowing, of such Bank's proportionate share thereof and of the other matters required by the immediately preceding sentence to be specified in the Notice of Borrowing. 5 (b)(i) Whenever the Borrower desires to make a Borrowing of Swingline Loans hereunder, it shall give the Swingline Bank not later than 12:00 Noon (New York time) on the date that a Swingline Loan is to be made, written notice or telephonic notice promptly confirmed in writing of each Swingline Loan to be made hereunder. Each such notice shall be irrevocable and specify in each case (A) the date of Borrowing (which shall be a Business Day) and (B) the aggregate principal amount of the Swingline Loans to be made pursuant to such Borrowing. (ii) Mandatory Borrowings shall be made upon the notice specified in Section 1.01(e), with the Borrower irrevocably agreeing, by its incurrence of any Swingline Loan, to the making of the Mandatory Borrowings as set forth in Section 1.01(e). (c) Without in any way limiting the obligation of the Borrower to confirm in writing any telephonic notice of any Borrowing of Loans, the Administrative Agent or the Swingline Bank, as the case may be, may act without liability upon the basis of telephonic notice of such Borrowing, believed by the Administrative Agent or the Swingline Bank, as the case may be, in good faith to be from the chairman of the board, the president, the treasurer, any assistant treasurer or any controller of the Borrower (or any other officer of the Borrower designated in writing to the Administrative Agent and the Swingline Bank by the chairman of the board, the president or the treasurer as being authorized to give such notices under this Agreement) prior to receipt of written confirmation. In each such case, the Borrower hereby waives the right to dispute the Administrative Agent's and the Swingline Bank's record of the terms of such telephonic notice of such Borrowing of Loans. 1.04 Disbursement of Funds. Except as otherwise specifically provided in the immediately succeeding sentence, no later than 12:00 Noon (New York time) on the date specified in each Notice of Borrowing (or (x) in the case of Swingline Loans, not later than 2:00 P.M. (New York time) on the date specified pursuant to Section 1.03(b)(i) or (y) in the case of Mandatory Borrowings, not later than 12:00 Noon (New York time) on the date specified in Section 1.01(e)), each Bank with a Commitment of the respective Tranche will make available its pro rata portion of each such Borrowing requested to be made on such date (or in the case of Swingline Loans, the Swingline Bank shall make available the full amount thereof). All such amounts shall be made available in Dollars and in immediately available funds at the Payment Office of the Administrative Agent, and the Administrative Agent will make available to the Borrower at the Payment Office the aggregate of the amounts so made available by the Banks (for Loans other than Swingline Loans, prior to 1:00 P.M. (New York time) on such day, to the extent of funds actually received by the Administrative Agent prior to 12:00 Noon (New York time) on such day). Unless the Administrative Agent shall have been notified by any Bank prior to the date of Borrowing that such Bank does not intend to make available to the Administrative Agent such Bank's portion of any Borrowing to be made on such date, the Administrative Agent may assume that such Bank has made such amount available to the Administrative 6 Agent on such date of Borrowing and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower a corresponding amount. If such corresponding amount is not in fact made available to the Administrative Agent by such Bank, the Administrative Agent shall be entitled to recover such corresponding amount on demand from such Bank. If such Bank does not pay such corresponding amount forthwith upon the Administrative Agent's demand therefor, the Administrative Agent shall promptly notify the Borrower and the Borrower shall immediately pay such corresponding amount to the Administrative Agent. The Administrative Agent shall also be entitled to recover on demand from such Bank or the Borrower, as the case may be, interest on such corresponding amount in respect of each day from the date such corresponding amount was made available by the Administrative Agent to the Borrower until the date such corresponding amount is recovered by the Administrative Agent, at a rate per annum equal to (i) if recovered from such Bank, at the overnight Federal Funds Rate and (ii) if recovered from the Borrower, the rate of interest applicable to the respective Borrowing, as determined pursuant to Section 1.08. Nothing in this Section 1.04 shall be deemed to relieve any Bank from its obligation to make Loans hereunder or to prejudice any rights which the Borrower may have against any Bank as a result of any failure by such Bank to make Loans hereunder. 1.05 Notes. (a) The Borrower's obligation to pay the principal of, and interest on, the Loans made by each Bank shall be evidenced (i) if Tranche A Term Loans, by a promissory note duly executed and delivered by the Borrower substantially in the form of Exhibit B-1 with blanks appropriately completed in conformity herewith (each, a "Tranche A Term Note" and, collectively, the "Tranche A Term Notes"), (ii) if Tranche C Term Loans, by a promissory note duly executed and delivered by the Borrower substantially in the form of Exhibit B-2 with blanks appropriately completed in conformity herewith (each, a "Tranche C Term Note" and, collectively, the "Tranche C Term Notes"), (iii) if Revolving Loans, by a promissory note duly executed and delivered by the Borrower substantially in the form of Exhibit B-3, with blanks appropriately completed in conformity herewith (each, a "Revolving Note" and, collectively, the "Revolving Notes") and (iv) if Swingline Loans, by a promissory note duly executed and delivered by the Borrower substantially in the form of Exhibit B-4, with blanks appropriately completed in conformity herewith (the "Swingline Note"). (b) The Tranche A Term Note issued to each Bank shall (i) be executed by the Borrower, (ii) be payable to the order of such Bank and be dated the Initial Borrowing Date (or, in the case of Tranche A Term Notes issued after the Initial Borrowing Date, be dated the date of the issuance thereof), (iii) be in a stated principal amount equal to the Tranche A Term Loan made by such Bank on the Initial Borrowing Date (or, in the case of Tranche A Term Notes issued after the Initial Borrowing Date, be in a stated principal amount equal to the outstanding principal amount of the Tranche A Term Loan of such Bank on the date of the issuance thereof) and be payable in the principal amount of Tranche A Term Loans evidenced thereby, (iv) mature on the Tranche A Term Loan Maturity Date, (v) bear interest as provided in the appropriate clause of Section 1.08 in respect of the Base Rate 7 Loans and Eurodollar Loans, as the case may be, evidenced thereby, (vi) be subject to voluntary prepayment and mandatory repayment as provided in Sections 4.01 and 4.02 and (vii) be entitled to the benefits of this Agreement and the other Credit Documents. (c) The Tranche C Term Note issued to each Bank shall (i) be executed by the Borrower, (ii) be payable to the order of such Bank and be dated the Restatement Effective Date (or, in the case of Tranche C Term Notes issued after the Restatement Effective Date, be dated the date of the issuance thereof), (iii) be in a stated principal amount equal to the Tranche C Term Loan made by such Bank on the Restatement Effective Date (or, in the case of Tranche C Term Notes issued after the Restatement Effective Date, be in a stated principal amount equal to the outstanding principal amount of the Tranche C Term Loan of such Bank on the date of the issuance thereof) and be payable in the principal amount of Tranche C Term Loans evidenced thereby, (iv) mature on the Tranche C Term Loan Maturity Date, (v) bear interest as provided in the appropriate clause of Section 1.08 in respect of the Base Rate Loans and Eurodollar Loans, as the case may be, evidenced thereby, (vi) be subject to voluntary prepayment and mandatory repayment as provided in Sections 4.01 and 4.02 and (vii) be entitled to the benefits of this Agreement and the other Credit Documents. (d) The Revolving Note issued to each Bank shall (i) be executed by the Borrower, (ii) be payable to the order of such Bank and be dated the Initial Borrowing Date (or, in the case of Revolving Notes issued after the Initial Borrowing Date, be dated the date of the issuance thereof), (iii) be in a stated principal amount equal to the Revolving Loan Commitment of such Bank and be payable in the principal amount of the Revolving Loans evidenced thereby, (iv) mature on the Revolving Loan Maturity Date, (v) bear interest as provided in the appropriate clause of Section 1.08 in respect of the Base Rate Loans and Eurodollar Loans, as the case may be, evidenced thereby, (vi) be subject to voluntary prepayment and mandatory repayment as provided in Sections 4.01 and 4.02 and (vii) be entitled to the benefits of this Agreement and the other Credit Documents. (e) The Swingline Note issued to the Swingline Bank shall (i) be executed by the Borrower, (ii) be payable to the order of the Swingline Bank and be dated the Initial Borrowing Date (or, in the case of any Swingline Note issued after the Initial Borrowing Date, be dated the date of the issuance thereof), (iii) be in a stated principal amount equal to the Maximum Swingline Amount and be payable in the principal amount of the outstanding Swingline Loans evidenced thereby from time to time, (iv) mature on the Swingline Expiry Date, (v) bear interest as provided in the appropriate clause of Section 1.08 in respect of the Base Rate Loans evidenced thereby and (vi) be entitled to the benefits of this Agreement and the other Credit Documents. (f) Each Bank will note on its internal records the amount of each Loan made by it and each payment in respect thereof and will prior to any transfer of any of its Notes endorse on the reverse side thereof the outstanding principal amount of Loans evidenced 8 thereby. Failure to make any such notation or any error in any such notation or endorsement shall not affect the Borrower's obligations in respect of such Loans. 1.06 Conversions. The Borrower shall have the option to convert, on any Business Day occurring after the Restatement Effective Date (or, in the case of the Tranche C Term Loans, on or after the earlier of (1) the 14th day after the Restatement Effective Date and (2) the Syndication Date), all or a portion equal to at least (x) in the case of a conversion of Term Loans, $5,000,000 and (y) in the case of a conversion of Revolving Loans, $5,000,000 (or $1,000,000 if in the case of a conversion into Base Rate Loans), of the outstanding principal amount of Loans made pursuant to one or more Borrowings (so long as of the same Tranche) of one or more Types of Loans into a Borrowing (of the same Tranche) of another Type of Loan, provided that (i) if for any reason whatsoever any Eurodollar Loans are converted into Base Rate Loans on a day which is not the last day of an Interest Period applicable to the Loans being converted, the Borrower shall pay all amounts owing in connection therewith as required by Section 1.11, (ii) no partial conversion of Eurodollar Loans shall reduce the outstanding principal amount of such Eurodollar Loans made pursuant to a single Borrowing to less than $5,000,000, (iii) unless the Required Banks otherwise specifically agree in writing, Base Rate Loans may only be converted into Eurodollar Loans if no Default or Event of Default is in existence on the date of the conversion, (iv) no conversion pursuant to this Section 1.06 shall result in a greater number of Eurodollar Borrowings than is permitted under Section 1.02 and (v) Swingline Loans may not be converted pursuant to this Section 1.06. Each such conversion shall be effected by the Borrower by giving the Administrative Agent at its Notice Office prior to 12:00 Noon (New York time) at least (x) in the case of a conversion to Eurodollar Loans, three Business Days' prior notice and (y) in the case of a conversion to Base Rate Loans, one Business Day's prior notice (each a "Notice of Conversion") specifying the Loans to be so converted, the Borrowing(s) pursuant to which such Loans were made and, if to be converted into Eurodollar Loans, the Interest Period to be initially applicable thereto. The Administrative Agent shall give each Bank prompt notice of any such proposed conversion affecting any of its Loans. 1.07 Pro Rata Borrowings. All Borrowings of Tranche A Term Loans, Tranche C Term Loans and Revolving Loans under this Agreement shall be incurred from the Banks pro rata on the basis of their Tranche A Term Loan Commitments, Tranche C Term Loan Commitments or Revolving Loan Commitments, as the case may be, provided that all Borrowings of Revolving Loans made pursuant to a Mandatory Borrowing shall be incurred from the Banks pro rata on the basis of their Adjusted Percentages. It is understood that no Bank shall be responsible for any default by any other Bank of its obligation to make Loans hereunder and that each Bank shall be obligated to make the Loans provided to be made by it hereunder, regardless of the failure of any other Bank to make its Loans hereunder. 1.08 Interest. (a) The Borrower agrees to pay 9 interest in respect of the unpaid principal amount of each Base Rate Loan from the date the proceeds thereof are made available to the Borrower until the earlier of (i) the maturity (whether by acceleration or otherwise) of such Base Rate Loan and (ii) the conversion of such Base Rate Loan to a Eurodollar Loan pursuant to Section 1.06, at a rate per annum which shall be equal to the sum of the Base Rate in effect from time to time plus the relevant Applicable Margin. (b) The Borrower agrees to pay interest in respect of the unpaid principal amount of each Eurodollar Loan from the date the proceeds thereof are made available to the Borrower until the earlier of (i) the maturity (whether by acceleration or otherwise) of such Eurodollar Loan and (ii) the conversion of such Eurodollar Loan to a Base Rate Loan pursuant to Section 1.06 or 1.09, as applicable, at a rate per annum which shall, during each Interest Period applicable thereto, be equal to the sum of the Eurodollar Rate for such Interest Period plus the relevant Applicable Margin. (c) Overdue principal and, to the extent permitted by law, overdue interest in respect of each Loan and any other overdue amount payable hereunder shall, in each case, bear interest at a rate per annum equal to the greater of (x) 2% per annum in excess of the rate otherwise applicable to Base Rate Loans of the respective Tranche of Loans from time to time and (y) the rate which is 2% in excess of the rate then borne by such Loans, in each case with such interest to be payable on demand. (d) Accrued (and theretofore unpaid) interest shall be payable (i) in respect of each Base Rate Loan, quarterly in arrears on each Quarterly Payment Date, (ii) in respect of each Eurodollar Loan, on the last day of each Interest Period applicable thereto and, in the case of an Interest Period in excess of three months, on each date occurring at three month intervals after the first day of such Interest Period and (iii) in respect of each Loan, on any repayment or prepayment (on the amount repaid or prepaid), at maturity (whether by acceleration or otherwise) and, after such maturity, on demand. (e) Upon each Interest Determination Date, the Administrative Agent shall determine the Eurodollar Rate for each Interest Period applicable to Eurodollar Loans and shall promptly notify the Borrower and the Banks thereof. Each such determination shall, absent manifest error, be final and conclusive and binding on all parties hereto. 1.09 Interest Periods. At the time it gives any Notice of Borrowing or Notice of Conversion in respect of the making of, or conversion into, any Eurodollar Loan (in the case of the initial Interest Period applicable thereto) or on the third Business Day prior to the expiration of an Interest Period applicable to such Eurodollar Loan (in the case of any subsequent Interest Period), the Borrower shall have the right to elect, by giving the Administrative Agent notice thereof, the interest period (each an "Interest Period") applicable to such Eurodollar Loan, which Interest Period shall, at the option of the Borrower, be a one, two, three or six month period, provided that: 10 (i) all Eurodollar Loans comprising a Borrowing shall at all times have the same Interest Period; (ii) the initial Interest Period for any Eurodollar Loan shall commence on the date of Borrowing of such Eurodollar Loan (including the date of any conversion thereto from a Loan of a different Type) and each Interest Period occurring thereafter in respect of such Eurodollar Loan shall commence on the day on which the next preceding Interest Period applicable thereto expires; (iii) if any Interest Period relating to a Eurodollar Loan begins on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period, such Interest Period shall end on the last Business Day of such calendar month; (iv) if any Interest Period would otherwise expire on a day which is not a Business Day, such Interest Period shall expire on the next succeeding Business Day; provided, however, that if any Interest Period for a Eurodollar Loan would otherwise expire on a day which is not a Business Day but is a day of the month after which no further Business Day occurs in such month, such Interest Period shall expire on the next preceding Business Day; (v) unless the Required Banks otherwise specifically agree in writing, no Interest Period may be selected at any time when a Default or Event of Default is then in existence; (vi) no Interest Period in respect of any Borrowing of any Tranche of Loans shall be selected which extends beyond the respective Maturity Date for such Tranche of Loans; and (vii) no Interest Period in respect of any Borrowing of Tranche A Term Loans or Tranche C Term Loans, as the case may be, shall be selected which extends beyond any date upon which a mandatory repayment of such Tranche of Term Loans will be required to be made under Section 4.02(b) or (c), as the case may be, if the aggregate principal amount of Tranche A Term Loans or Tranche C Term Loans, as the case may be, which have Interest Periods which will expire after such date will be in excess of the aggregate principal amount of Tranche A Term Loans or Tranche C Term Loans, as the case may be, then outstanding less the aggregate amount of such required prepayment. If upon the expiration of any Interest Period applicable to a Borrowing of Eurodollar Loans, the Borrower has failed to elect, or is not permitted to elect, a new Interest Period to be applicable to such Eurodollar Loans as provided above, the Borrower shall be 11 deemed to have elected to convert such Eurodollar Loans into Base Rate Loans effective as of the expiration date of such current Interest Period. 1.10 Increased Costs, Illegality, etc. (a) In the event that any Bank shall have determined (which determination shall, absent manifest error, be final and conclusive and binding upon all parties hereto but, with respect to clause (i) below, may be made only by the Administrative Agent): (i) on any Interest Determination Date that, by reason of any changes arising after the Restatement Effective Date affecting the interbank Eurodollar market, adequate and fair means do not exist for ascertaining the applicable interest rate on the basis provided for in the definition of Eurodollar Rate; or (ii) at any time, that such Bank shall incur increased costs or reductions in the amounts received or receivable hereunder with respect to any Eurodollar Loan because of (x) any change since the Restatement Effective Date in any applicable law or governmental rule, regulation, order, guideline or request (whether or not having the force of law) or in the interpretation or administration thereof and including the introduction of any new law or governmental rule, regulation, order, guideline or request, such as, for example, but not limited to: (A) a change in the basis of taxation of payment to any Bank of the principal of or interest on such Eurodollar Loan or any other amounts payable hereunder (except for changes in the rate of tax on, or determined by reference to, the net income or profits of such Bank, or any franchise tax based on the net income or profits of such Bank, in either case pursuant to the laws of the United States of America, the jurisdiction in which it is organized or in which its principal office or applicable lending office is located or any subdivision thereof or therein), but without duplication of any amounts payable in respect of Taxes pursuant to Section 4.04(a), or (B) a change in official reserve requirements, but, in all events, excluding reserves required under Regulation D to the extent included in the computation of the Eurodollar Rate and/or (y) other circumstances since the Restatement Effective Date affecting such Bank or the interbank Eurodollar market or the position of such Bank in such market; or (iii) at any time, that the making or continuance of any Eurodollar Loan has been made (x) unlawful by any law or governmental rule, regulation or order, and/or (y) impossible by compliance by any Bank in good faith with any governmental request (whether or not having force of law) or (z) impracticable as a result of a contingency occurring after the Restatement Effective Date which materially and adversely affects the interbank Eurodollar market; then, and in any such event, such Bank (or the Administrative Agent, in the case of clause (i) above) shall promptly give notice (by telephone confirmed in writing) to the Borrower and, 12 except in the case of clause (i) above, to the Administrative Agent of such determination (which notice the Administrative Agent shall promptly transmit to each of the other Banks). Thereafter (x) in the case of clause (i) above, Eurodollar Loans shall no longer be available until such time as the Administrative Agent notifies the Borrower and the Banks that the circumstances giving rise to such notice by the Administrative Agent no longer exist, and any Notice of Borrowing or Notice of Conversion given by the Borrower with respect to Eurodollar Loans which have not yet been incurred (including by way of conversion) shall be deemed rescinded by the Borrower, (y) in the case of clause (ii) above, the Borrower shall, subject to the provisions of Section 13.15 (to the extent applicable) pay to such Bank, upon written demand therefor, such additional amounts (in the form of an increased rate of, or a different method of calculating, interest or otherwise as such Bank in its reasonable discretion shall determine) as shall be required to compensate such Bank for such increased costs or reductions in amounts received or receivable hereunder (a written notice as to the additional amounts owed to such Bank, showing in reasonable detail the basis for and the calculation thereof, submitted to the Borrower by such Bank in good faith shall, absent manifest error, be final and conclusive and binding on all the parties hereto) and (z) in the case of clause (iii) above, the Borrower shall take one of the actions specified in Section 1.10(b) as promptly as possible and, in any event, within the time period required by law. Each of the Administrative Agent and each Bank agrees that if it gives notice to the Borrower of any of the events described in clause (i) or (iii) above, it shall promptly notify the Borrower and, in the case of any such Bank, the Administrative Agent, if such event ceases to exist. If any such event described in clause (iii) above ceases to exist as to a Bank, the obligations of such Bank to make Eurodollar Loans and to convert Base Rate Loans into Eurodollar Loans on the terms and conditions contained herein shall be reinstated. (b) At any time that any Eurodollar Loan is affected by the circumstances described in Section 1.10(a)(ii) or (iii), the Borrower may (and in the case of a Eurodollar Loan affected by the circumstances described in Section 1.10(a)(iii) shall) either (x) if the affected Eurodollar Loan is then being made initially or pursuant to a conversion, cancel the respective Borrowing by giving the Administrative Agent telephonic notice (confirmed in writing) on the same date that the Borrower was notified by the affected Bank or the Administrative Agent pursuant to Section 1.10(a)(ii) or (iii) or (y) if the affected Eurodollar Loan is then outstanding, upon at least one Business Day's written notice to the Administrative Agent, require the affected Bank to convert such Eurodollar Loan into a Base Rate Loan, provided that, if more than one Bank is affected at any time, then all affected Banks must be treated the same pursuant to this Section 1.10(b). (c) If at any time after the Restatement Effective Date any Bank determines that the introduction of or any change in any applicable law or governmental rule, regulation, order, guideline, directive or request (whether or not having the force of law) concerning capital adequacy, or any change in interpretation or administration thereof by any governmental authority, central bank or comparable agency, in each case introduced or changed after the date hereof, will have the effect of increasing the amount of capital required 13 or expected to be maintained by such Bank or any corporation controlling such Bank based on the existence of such Bank's Commitments hereunder or its obligations hereunder, then the Borrower shall, subject to the provisions of Section 13.15 (to the extent applicable), pay to such Bank, upon its written demand therefor, such additional amounts as shall be required to compensate such Bank or such other corporation for the increased cost to such Bank or such other corporation or the reduction in the rate of return to such Bank or such other corporation as a result of such increase of capital. In determining such additional amounts, each Bank will act reasonably and in good faith and will use averaging and attribution methods which are reasonable, provided that such Bank's determination of compensation owing under this Section 1.10(c) shall, absent manifest error, be final and conclusive and binding on all the parties hereto. Each Bank, upon determining that any additional amounts will be payable pursuant to this Section 1.10(c), will give prompt written notice thereof to the Borrower, which notice shall show in reasonable detail the basis for and calculation of such additional amounts. 1.11 Compensation. The Borrower shall, subject to the provisions of Section 13.15 (to the extent applicable), compensate each Bank, upon its written request (which request shall set forth in reasonable detail the basis for requesting and the calculation of such compensation), for all reasonable losses, expenses and liabilities (including, without limitation, any loss, expense or liability incurred by reason of the liquidation or reemployment of deposits or other funds required by such Bank to fund its Eurodollar Loans but excluding any loss of anticipated profit) which such Bank may sustain: (i) if for any reason (other than a default by such Bank or the Administrative Agent) a Borrowing of, or conversion from or into, Eurodollar Loans does not occur on a date specified therefor in a Notice of Borrowing or Notice of Conversion (whether or not withdrawn by the Borrower or deemed withdrawn pursuant to Section 1.10(a)); (ii) if any repayment (including any repayment made pursuant to Section 4.02 or a result of an acceleration of the Loans pursuant to Section 10) or conversion of any of its Eurodollar Loans occurs on a date which is not the last day of an Interest Period with respect thereto; (iii) if any prepayment of any of its Eurodollar Loans is not made on any date specified in a notice of prepayment given by the Borrower; or (iv) as a consequence of (x) any other default by the Borrower to repay its Loans when required by the terms of this Agreement or any Note held by such Bank or (y) any election made pursuant to Section 1.10(b). 1.12 Change of Lending Office. Each Bank agrees that on the occurrence of any event giving rise to the operation of Section 1.10(a)(ii) or (iii), Section 1.10(c), Section 2.05 or Section 4.04 with respect to such Bank, it will, if requested by the Borrower, use reasonable efforts (subject to overall policy considerations of such Bank) to designate another lending office for any Loans or Letters of Credit affected by such event, provided that such designation is made on such terms that such Bank and its lending office suffer no economic, legal or regulatory disadvantage, with the object of avoiding the consequence of the event giving rise to the operation of such Section. Nothing in this Section 1.12 shall affect or postpone any of the obligations of the Borrower or the right of any Bank provided in Sections 1.10, 2.05 and 4.04. 14 1.13 Replacement of Banks. (x) If any Bank becomes a Defaulting Bank or otherwise defaults in its obligations to make Loans or fund Unpaid Drawings, (y) upon the occurrence of any event giving rise to the operation of Section 1.10(a)(ii) or (iii), Section 1.10(c), Section 2.05 or Section 4.04 with respect to any Bank which results in such Bank charging to the Borrower increased costs in excess of those being generally charged by the other Banks, or (z) as provided in Section 13.12(b) in the case of certain refusals by a Bank to consent to certain proposed changes, waivers, discharges or terminations with respect to this Agreement which have been approved by the Required Banks, the Borrower shall have the right, if no Default or Event of Default will exist immediately after giving effect to the respective replacement, to either replace such Bank (the "Replaced Bank") with one or more other Eligible Transferee or Transferees, none of whom shall constitute a Defaulting Bank at the time of such replacement (collectively, the "Replacement Bank") reasonably acceptable to the Administrative Agent or, at the option of the Borrower, to replace only (a) the Revolving Loan Commitment (and outstandings pursuant thereto) of the Replaced Bank with an identical Revolving Loan Commitment provided by the Replacement Bank or (b) in the case of a replacement as provided in Section 13.12(b) where the consent of the respective Bank is required with respect to less than all Tranches of its Loans or Commitments, the Commitments and/or outstanding Term Loans of such Bank in respect of each Tranche where the consent of such Bank would otherwise be individually required, with identical Commitments and/or Loans of the respective Tranche provided by the Replacement Bank, provided that (i) at the time of any replacement pursuant to this Section 1.13, the Replacement Bank shall enter into one or more Assignment and Assumption Agreements pursuant to Section 13.04(b) (and with all fees payable pursuant to said Section 13.04(b) to be paid by the Replacement Bank) pursuant to which the Replacement Bank shall acquire all of the Commitments and outstanding Loans (or, in the case of the replacement of only (a) the Revolving Loan Commitment, the Revolving Loan Commitment and outstanding Revolving Loans or (b) the outstanding Term Loans of one or more Tranches, the outstanding Term Loans of the respective Tranche or Tranches) of, and in each case (except for the replacement of only the outstanding Term Loans of one or more Tranches of the respective Bank) participations in Letters of Credit by, the Replaced Bank and, in connection therewith, shall pay to (x) the Replaced Bank in respect thereof an amount equal to the sum (without duplication) of (A) an amount equal to the principal of, and all accrued interest on, all outstanding Loans (or, in the case of the replacement of only (I) the Revolving Loan Commitment, the outstanding Revolving Loans or (II) the Term Loans of one or more Tranches, the outstanding Term Loans of such Tranche or Tranches) of the Replaced Bank, (B) except in the case of the replacement of only the outstanding Term Loans of one or more Tranches of a Replaced Bank, an amount equal to all Unpaid Drawings that have been funded by (and not reimbursed to) such Replaced Bank, together with all then unpaid interest with respect thereto at such time and (C) an amount equal to all accrued, but theretofore unpaid, Fees owing to the Replaced Bank (but only with respect to the relevant Tranche, in the case of the replacement of less than all Tranches of Loans then held by the respective Replaced Bank) pursuant to Section 3.01 and (y) except in the 15 case of the replacement of only the outstanding Term Loans of one or more Tranches of a Replaced Bank, the respective Issuing Bank an amount equal to such Replaced Bank's Adjusted Percentage (for this purpose, determined as if the adjustment described in clause (y) of the immediately succeeding sentence had been made with respect to such Replaced Bank) of any Unpaid Drawing (which at such time remains an Unpaid Drawing) to the extent such amount was not theretofore funded by such Replaced Bank, and (ii) all obligations of the Borrower owing to the Replaced Bank (other than those (a) specifically described in clause (i) above in respect of which the assignment purchase price has been, or is concurrently being, paid or (b) relating to any Tranche of Loans and/or Commitments of the respective Replaced Bank which will remain outstanding after giving effect to the respective replacement) shall be paid in full to such Replaced Bank concurrently with such replacement. Upon the execution of the respective Assignment and Assumption Agreements, the payment of amounts referred to in clauses (i) and (ii) above and, if so requested by the Replacement Bank, delivery to the Replacement Bank of the appropriate Note or Notes executed by the Borrower, (x) the Replacement Bank shall become a Bank hereunder and, unless the respective Replaced Bank continues to have outstanding Term Loans or a Revolving Loan Commitment hereunder, the Replaced Bank shall cease to constitute a Bank hereunder, except with respect to indemnification provisions under this Agreement (including, without limitation, Sections 1.10, 1.11, 2.05, 4.04, 13.01 and 13.06), which shall survive as to such Replaced Bank and (y) in the case of a replacement of a Defaulting Bank with a Non-Defaulting Bank, the Adjusted Percentages of the Banks shall be automatically adjusted at such time to give effect to such replacement (and to give effect to the replacement of a Defaulting Bank with one or more Non-Defaulting Banks). 16 SECTION 2. Letters of Credit. 2.01 Letters of Credit. (a) Subject to and upon the terms and conditions herein set forth, the Borrower may request that any Issuing Bank issue, at any time and from time to time on and after the Initial Borrowing Date and prior to the Revolving Loan Maturity Date, (x) for the account of the Borrower and for the benefit of any holder (or any trustee, agent or other similar representative for any such holders) of L/C Supportable Indebtedness of the Borrower or any of its Subsidiaries, an irrevocable sight standby letter of credit, in a form customarily used by such Issuing Bank or in such other form as has been approved by such Issuing Bank (each such standby letter of credit, a "Standby Letter of Credit") in support of such L/C Supportable Indebtedness and (y) for the account of the Borrower and for the benefit of sellers of goods or materials to the Borrower or any of its Subsidiaries, an irrevocable sight commercial letter of credit in a form customarily used by such Issuing Bank or in such other form as has been approved by such Issuing Bank (each such commercial letter of credit, a "Trade Letter of Credit", and each such Trade Letter of Credit and each Standby Letter of Credit, a "Letter of Credit") in support of commercial transactions of the Borrower and its Subsidiaries. On the Restatement Effective Date, all Original Letters of Credit and the Existing Letter of Credit shall be deemed to have been issued under this Agreement and shall for all purposes constitute "Letters of Credit" hereunder. (b) Subject to the terms and conditions contained herein, the Administrative Agent hereby agrees that it will (and at the Borrower's request each other Issuing Bank may, at its option, agree that it will), at any time and from time to time on or after the Initial Borrowing Date and prior to the Revolving Loan Maturity Date, following its receipt of the respective Letter of Credit Request, issue for the account of the Borrower one or more Letters of Credit (x) in the case of Standby Letters of Credit, in support of such L/C Supportable Indebtedness of the Borrower or any of its Subsidiaries as is permitted to remain outstanding without giving rise to a Default or Event of Default hereunder and (y) in the case of Trade Letters of Credit, in support of sellers of goods or materials as referenced in Section 2.01(a), provided that the respective Issuing Bank shall be under no obligation to issue any Letter of Credit of the types described above if at the time of such issuance: (i) any order, judgment or decree of any governmental authority or arbitrator shall purport by its terms to enjoin or restrain such Issuing Bank from issuing such Letter of Credit or any requirement of law applicable to such Issuing Bank or any request or directive (whether or not having the force of law) from any governmental authority with jurisdiction over such Issuing Bank shall prohibit, or request that such Issuing Bank refrain from, the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon such Issuing Bank with respect to such Letter of Credit any restriction or reserve or capital requirement (for which such Issuing Bank is not otherwise compensated) not in effect on the date 17 hereof, or any unreimbursed loss, cost or expense which was not applicable, in effect or known to such Issuing Bank as of the date hereof and which such Issuing Bank in good faith deems material to it; or (ii) such Issuing Bank shall have received notice from any Bank prior to the issuance of such Letter of Credit of the type described in the second sentence of Section 2.02(b). (c) Notwithstanding the foregoing, (i) no Letter of Credit shall be issued the Stated Amount of which, when added to the Letter of Credit Outstandings (exclusive of Unpaid Drawings which are repaid on the date of, and prior to the issuance of, the respective Letter of Credit) at such time would exceed either (x) $25,000,000 or (y) when added to the aggregate principal amount of all Revolving Loans made by Non-Defaulting Banks and then outstanding and Swingline Loans then outstanding, an amount equal to the Adjusted Total Revolving Loan Commitment at such time, (ii) each Letter of Credit shall be denominated in Dollars, (iii) each Letter of Credit shall by its terms terminate (x) in the case of Standby Letters of Credit, on or before the earlier of (A) the date which occurs 12 months after the date of the issuance thereof (although any such Standby Letter of Credit may be automatically extendable for successive periods of up to 12 months, but not beyond the tenth Business Day prior to the Revolving Loan Maturity Date, on terms acceptable to the Issuing Bank thereof) and (B) the tenth Business Day prior to the Revolving Loan Maturity Date, and (y) in the case of Trade Letters of Credit, on or before the earlier of (A) the date which occurs 180 days after the date of issuance thereof and (B) the date which is 30 days prior to the Revolving Loan Maturity Date and (iv) the Stated Amount of each Letter of Credit upon issuance shall be not less than $100,000 or such lesser amount as is acceptable to the respective Issuing Bank. 2.02 Letter of Credit Requests. (a) Whenever the Borrower desires that a Letter of Credit be issued for its account, the Borrower shall give the Administrative Agent and the respective Issuing Bank at least five Business Days' (or such shorter period as is acceptable to the respective Issuing Bank) written notice thereof. Each notice shall be in the form of Exhibit C (each, a "Letter of Credit Request"). (b) The making of each Letter of Credit Request shall be deemed to be a representation and warranty by the Borrower that such Letter of Credit may be issued in accordance with, and will not violate the requirements of, Section 2.01(c). Unless the respective Issuing Bank has received notice from any Bank before it issues a Letter of Credit that one or more of the conditions specified in Section 5 or Section 6, as applicable, are not then satisfied, or that the issuance of such Letter of Credit would violate Section 2.01(c), then such Issuing Bank shall issue the requested Letter of Credit for the account of the Borrower in accordance with such Issuing Bank's usual and customary practices. Upon the issuance of or amendment to any Standby Letter of Credit, such Issuing Bank shall promptly notify each Bank of such issuance or amendment and such notice shall be accompanied by a copy of the 18 issued Standby Letter of Credit or amendment, as the case may be. For Trade Letters of Credit on which the Issuing Bank is other than the Administrative Agent, the Issuing Bank will send to the Administrative Agent by facsimile transmission, promptly on the first Business Day of each week, the daily aggregate Stated Amount of Trade Letters of Credit issued by such Issuing Bank and outstanding during the preceding week. The Administrative Agent shall deliver to each Bank, after each calendar month end and upon each payment of the Letter of Credit Fee, a report setting forth for the relevant period the daily aggregate Stated Amount of all outstanding Trade Letters of Credit during such period. 2.03 Letter of Credit Participations. (a) Immediately upon the issuance by any Issuing Bank of any Letter of Credit, such Issuing Bank shall be deemed to have sold and transferred to each Bank with a Revolving Loan Commitment, other than such Issuing Bank (each such Bank, in its capacity under this Section 2.03, a "Participant"), and each such Participant shall be deemed irrevocably and unconditionally to have purchased and received from such Issuing Bank, without recourse or warranty, an undivided interest and participation, to the extent of such Participant's Adjusted Percentage, in such Letter of Credit, each drawing made thereunder and the obligations of the Borrower under this Agreement with respect thereto, and any security therefor or guaranty pertaining thereto. Upon any change in the Revolving Loan Commitments or Adjusted Percentages of the Banks pursuant to Section 1.13 or 13.04 or as a result of a Bank Default, it is hereby agreed that, with respect to all outstanding Letters of Credit and Unpaid Drawings, there shall be an automatic adjustment to the participations pursuant to this Section 2.03 to reflect the new Adjusted Percentages of the assignor and assignee Bank or of all Banks with Revolving Loan Commitments, as the case may be. (b) In determining whether to pay under any Letter of Credit, such Issuing Bank shall have no obligation relative to the other Banks other than to confirm that any documents required to be delivered under such Letter of Credit appear to have been delivered and that they appear to comply on their face with the requirements of such Letter of Credit. Any action taken or omitted to be taken by any Issuing Bank under or in connection with any Letter of Credit if taken or omitted in the absence of gross negligence or willful misconduct, shall not create for such Issuing Bank any resulting liability to the Borrower or any Bank. (c) In the event that any Issuing Bank makes any payment under any Letter of Credit and the Borrower shall not have reimbursed such amount in full to such Issuing Bank pursuant to Section 2.04(a), such Issuing Bank shall promptly notify the Administrative Agent, which shall promptly notify each Participant, of such failure, and each Participant shall promptly and unconditionally pay to such Issuing Bank the amount of such Participant's Adjusted Percentage of such unreimbursed payment in Dollars and in same day funds. If the Administrative Agent so notifies, prior to 11:00 A.M. (New York time) on any Business Day, any Participant required to fund a payment under a Letter of Credit, such Participant shall make available to such Issuing Bank in Dollars such Participant's Adjusted Percentage of the 19 amount of such payment on such Business Day in same day funds. If and to the extent such Participant shall not have so made its Adjusted Percentage of the amount of such payment available to such Issuing Bank, such Participant agrees to pay to such Issuing Bank, forthwith on demand such amount, together with interest thereon, for each day from such date until the date such amount is paid to such Issuing Bank at the overnight Federal Funds Rate. The failure of any Participant to make available to such Issuing Bank its Adjusted Percentage of any payment under any Letter of Credit shall not relieve any other Participant of its obligation hereunder to make available to such Issuing Bank its Adjusted Percentage of any Letter of Credit on the date required, as specified above, but no Participant shall be responsible for the failure of any other Participant to make available to such Issuing Bank such other Participant's Adjusted Percentage of any such payment. (d) Whenever any Issuing Bank receives a payment of a reimbursement obligation as to which it has received any payments from the Participants pursuant to clause (c) above, such Issuing Bank shall forward such payment to the Administrative Agent, which in turn shall distribute to each Participant which has paid its Adjusted Percentage thereof, in Dollars and in same day funds, an amount equal to such Participant's share (based upon the proportionate aggregate amount originally funded by such Participant to the aggregate amount funded by all Participants) of the principal amount of such reimbursement obligation and interest thereon accruing after the purchase of the respective participations. (e) Upon the request of any Participant, each Issuing Bank shall furnish to such Participant copies of any Letter of Credit issued by it and such other documentation as may reasonably be requested by such Participant. (f) The obligations of the Participants to make payments to each Issuing Bank with respect to Letters of Credit issued by it shall be irrevocable and not subject to any qualification or exception whatsoever and shall be made in accordance with the terms and conditions of this Agreement under all circumstances, including, without limitation, any of the following circumstances: (i) any lack of validity or enforceability of this Agreement or any of the other Credit Documents; (ii) the existence of any claim, setoff, defense or other right which the Borrower or any of its Subsidiaries may have at any time against a beneficiary named in a Letter of Credit, any transferee of any Letter of Credit (or any Person for whom any such transferee may be acting), the Administrative Agent, any Issuing Bank, any Participant, or any other Person, whether in connection with this Agreement, any Letter of Credit, the transactions contemplated herein or any unrelated transactions (including any underlying transaction between the Borrower and the beneficiary named in any such Letter of Credit); 20 (iii) any draft, certificate or any other document presented under any Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; (iv) the surrender or impairment of any security for the performance or observance of any of the terms of any of the Credit Documents; or (v) the occurrence of any Default or Event of Default. 2.04 Agreement to Repay Letter of Credit Drawings. (a) The Borrower hereby agrees to reimburse the respective Issuing Bank, by making payment to the Administrative Agent in immediately available funds at the Payment Office, for any payment or disbursement made by it under any Letter of Credit (each such amount, so paid until reimbursed, an "Unpaid Drawing"), no later than three Business Days after the date of such payment or disbursement, with interest on the amount so paid or disbursed by such Issuing Bank, to the extent not reimbursed prior to 12:00 Noon (New York time) on the date of such payment or disbursement, from and including the date paid or disbursed to but excluding the date such Issuing Bank was reimbursed by the fBorrower therefor at a rate per annum which shall be the Base Rate in effect from time to time plus the Applicable Margin for Revolving Loans maintained as Base Rate Loans, provided, however, to the extent such amounts are not reimbursed prior to 12:00 Noon (New York time) on the fifth Business Day following such payment or disbursement, interest shall thereafter accrue on the amounts so paid or disbursed by such Issuing Bank (and until reimbursed by the Borrower) at a rate per annum which shall be the Base Rate in effect from time to time plus the Applicable Margin for Revolving Loans maintained as Base Rate Loans plus 2%, in each such case, with interest to be payable on demand. The respective Issuing Bank shall give the Borrower prompt notice of each Drawing under any Letter of Credit, provided that the failure to give any such notice shall in no way affect, impair or diminish the Borrower's obligations hereunder. (b) The obligations of the Borrower under this Section 2.04 to reimburse the respective Issuing Bank with respect to drawings on Letters of Credit (each, a "Drawing") (including, in each case, interest thereon) shall be absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment which the Borrower may have or have had against any Bank (including in its capacity as issuer of the Letter of Credit or as Participant), or any nonapplication or misapplication by the beneficiary of the proceeds of such Drawing, the respective Issuing Bank's only obligation to the Borrower being to confirm that any documents required to be delivered under such Letter of Credit appear to have been delivered and that they appear to comply on their face with the requirements of such Letter of Credit. Any action taken or omitted to be taken by any Issuing Bank under or in connection with any Letter of Credit if taken or omitted in the absence of gross negligence or willful misconduct, shall not create for such Issuing Bank any resulting liability to the Borrower. 21 2.05 Increased Costs. If at any time after the date of this Agreement, the introduction of or any change in any applicable law, rule, regulation, order, guideline or request or in the interpretation or administration thereof by any governmental authority charged with the interpretation or administration thereof, or compliance by any Issuing Bank or any Participant with any request or directive by any such authority (whether or not having the force of law), or any change in generally accepted accounting principles, shall either (i) impose, modify or make applicable any reserve, deposit, capital adequacy or similar requirement against letters of credit issued by any Issuing Bank or participated in by any Participant, or (ii) impose on any Issuing Bank or any Participant any other conditions relating, directly or indirectly, to this Agreement or any Letter of Credit; and the result of any of the foregoing is to increase the cost to any Issuing Bank or any Participant of issuing, maintaining or participating in any Letter of Credit, or reduce the amount of any sum received or receivable by any Issuing Bank or any Participant hereunder or reduce the rate of return on its capital with respect to Letters of Credit (except for changes in the rate of tax on, or determined by reference to, the net income or profits of such Issuing Bank or such Participant, or any franchise tax based on the net income or profits of such Bank or Participant, in either case pursuant to the laws of the United States of America, the jurisdiction in which it is organized or in which its principal office or applicable lending office is located or any subdivision thereof or therein), but without duplication of any amounts payable in respect of Taxes pursuant to Section 4.04(a), then, upon demand to the Borrower by such Issuing Bank or any Participant (a copy of which demand shall be sent by such Issuing Bank or such Participant to the Administrative Agent) and subject to the provisions of Section 13.15 (to the extent applicable), the Borrower shall pay to such Issuing Bank or such Participant such additional amount or amounts as will compensate such Bank for such increased cost or reduction in the amount receivable or reduction on the rate of return on its capital. Any Issuing Bank or any Participant, upon determining that any additional amounts will be payable pursuant to this Section 2.05, will give prompt written notice thereof to the Borrower, which notice shall include a certificate submitted to the Borrower by such Issuing Bank or such Participant (a copy of which certificate shall be sent by such Issuing Bank or such Participant to the Administrative Agent), setting forth in reasonable detail the basis for and the calculation of such additional amount or amounts necessary to compensate such Issuing Bank or such Participant. The certificate required to be delivered pursuant to this Section 2.05 shall, if delivered in good faith and absent manifest error, be final and conclusive and binding on the Borrower. 22 SECTION 3. Commitment Commission; Fees; Reductions of Commitment. 3.01 Fees. (a) The Borrower agrees to pay the Administrative Agent for distribution to each Non-Defaulting Bank with a Revolving Loan Commitment a commitment commission (the "Commitment Commission") for the period from the Original Effective Date to and including the Revolving Loan Maturity Date (or such earlier date as the Total Revolving Loan Commitment shall have been terminated), computed at a rate for each day equal to 1/2 of 1% per annum on the daily average Unutilized Revolving Loan Commitment of such Non-Defaulting Bank. Accrued Commitment Commission shall be due and payable quarterly in arrears on each Quarterly Payment Date and on the Revolving Loan Maturity Date or such earlier date upon which the Total Revolving Loan Commitment is terminated. (b) The Borrower agrees to pay to the Administrative Agent for distribution to each Non-Defaulting Bank with a Revolving Loan Commitment (based on their respective Adjusted Percentages) a fee in respect of each Letter of Credit issued hereunder (the "Letter of Credit Fee"), for the period from and including the date of issuance of such Letter of Credit to and including the termination of such Letter of Credit, computed at a rate per annum equal to the Applicable Margin then in effect for Revolving Loans maintained as Eurodollar Loans on the daily average Stated Amount of such Letter of Credit. Accrued Letter of Credit Fees shall be due and payable quarterly in arrears on each Quarterly Payment Date and upon the first day on or after the termination of the Total Revolving Loan Commitment upon which no Letters of Credit remain outstanding. (c) The Borrower agrees to pay to the respective Issuing Bank, for its own account, a facing fee in respect of each Letter of Credit issued for its account hereunder (the "Facing Fee") for the period from and including the date of issuance of such Letter of Credit to and including the termination of such Letter of Credit, computed at a rate equal to 1/4 of 1% per annum of the daily average Stated Amount of such Letter of Credit; provided that in no event shall the annual Facing Fee with respect to any Letter of Credit be less than $500, it being agreed that, on the date of issuance of any Letter of Credit and on each anniversary thereof prior to the termination of such Letter of Credit, $500 will be paid toward the next year's Facing Fees for such Letter of Credit, which amount shall be credited in direct order to the Facing Fees which would otherwise be payable with respect to such Letter of Credit in the succeeding annual period. Accrued Facing Fees shall be due and payable quarterly in arrears on each Quarterly Payment Date and on the date upon which the Total Revolving Loan Commitment has been terminated and such Letter of Credit has been terminated in accordance with its terms. (d) The Borrower shall pay, upon each drawing under, issuance of, or 23 amendment to, any Letter of Credit, such amount as shall at the time of such event be the administrative charge which the respective Issuing Bank is generally imposing in connection with such occurrence with respect to letters of credit. (e) The Borrower shall pay to each of the Agents, for their own account, such other fees as have been agreed to in writing by the Borrower and the Agents. 3.02 Voluntary Termination of Unutilized Commitments. (a) Upon at least one Business Day's prior notice to the Administrative Agent at its Notice Office (which notice the Administrative Agent shall promptly transmit to each of the Banks), the Borrower shall have the right, at any time or from time to time, without premium or penalty, to terminate the Total Unutilized Revolving Loan Commitment, in whole or in part, in integral multiples of $1,000,000 in the case of partial reductions to the Total Revolving Loan Commitment, provided that (i) each such reduction shall apply proportionately to permanently reduce the Revolving Loan Commitment of each Bank with such a Commitment and (ii) the reduction to the Total Unutilized Revolving Loan Commitment shall in no case be in an amount which would cause the Revolving Loan Commitment of any Bank to be reduced (as required by preceding clause (i)) by an amount which exceeds the remainder of (x) the Unutilized Revolving Loan Commitment of such Bank as in effect immediately before giving effect to such reduction minus (y) such Bank's Adjusted Percentage of the aggregate principal amount of Swingline Loans then outstanding. (b) In the event of certain refusals by a Bank as provided in Section 13.12(b) to consent to certain proposed changes, waivers, discharges or terminations with respect to this Agreement which have been approved by the Required Banks, the Borrower may, subject to the requirements of said Section 13.12(b) and upon five Business Days' written notice to the Administrative Agent at its Notice Office (which notice the Administrative Agent shall promptly transmit to each of the Banks), terminate all of the Revolving Loan Commitment of such Bank so long as all Loans, together with accrued and unpaid interest, fees and all other amounts, owing to such Bank (other than amounts owing in respect of any Tranche of Term Loans maintained by such Bank, if such Term Loans are not being repaid pursuant to Section 13.12(b)) are repaid concurrently with the effectiveness of such termination (at which time Schedule I shall be deemed modified to reflect such changed amounts), and at such time, unless the respective Bank continues to have outstanding Term Loans hereunder, such Bank shall no longer constitute a "Bank" for purposes of this Agreement, except with respect to indemnification provisions under this Agreement (including, without limitation, Sections 1.10, 1.11, 2.05, 4.04, 13.01 and 13.06), which shall survive as to such repaid Bank. 3.03 Mandatory Reduction of Commitments. (a) The Total Commitments (and the Tranche A Term Loan Commitment, the Tranche C Term Loan Commitment and the Revolving Loan Commitment of each Bank) shall terminate in its entirety on January 15, 24 1998 and the Original Credit Agreement shall continue in effect unless the Restatement Effective Date shall have occurred on or prior to such date. (b) In addition to any other mandatory commitment reductions pursuant to this Section 3.03, each of the Total Tranche A Term Loan Commitment (and the Tranche A Term Loan Commitment of each Bank) and the Total Tranche B Term Loan Commitment (and the Tranche B Term Loan Commitment of each Bank) terminated in full on the Initial Borrowing Date (after having given effect to the making of the Original Loans on such date). (c) In addition to any other mandatory commitment reductions pursuant to this Section 3.03, the Total Tranche C Term Loan Commitment (and the Tranche C Term Loan Commitment of each Bank) shall terminate in its entirety on the Restatement Effective Date (after giving effect to the making of the Tranche C Term Loans on such date). (d) In addition to any other mandatory commitment reductions pursuant to this Section 3.03, the Total Revolving Loan Commitment (and the Revolving Loan Commitment of each Bank) shall terminate in its entirety on the Revolving Loan Maturity Date. (e) In addition to any other mandatory commitment reductions pursuant to this Section 3.03, on each date after the Restatement Effective Date upon which a mandatory prepayment of Term Loans pursuant to Section 4.02(d) through (h), inclusive, is required (and exceeds in amount the aggregate principal amount of Term Loans then outstanding) or would be required if Term Loans were then outstanding, the Total Revolving Loan Commitment shall be permanently reduced by the amount, if any, by which the amount required to be applied pursuant to said Section (determined as if an unlimited amount of Term Loans were actually outstanding) exceeds the aggregate principal amount of Term Loans then outstanding. (f) Each reduction to the Total Tranche A Term Loan Commitment, the Total Tranche C Term Loan Commitment and the Total Revolving Loan Commitment pursuant to this Section 3.03 (or pursuant to Section 4.02) shall be applied proportionately to reduce the Tranche A Term Loan Commitment, the Tranche C Term Loan Commitment or the Revolving Loan Commitment, as the case may be, of each Bank with such a Commitment. 25 SECTION 4. Prepayments; Payments; Taxes. 26 4.01 Voluntary Prepayments. The Borrower shall have the right to prepay the Loans, without premium or penalty, in whole or in part at any time and from time to time on the following terms and conditions: (i) the Borrower shall give the Administrative Agent prior to 1:00 P.M. (New York time) at its Notice Office (x) at least one Business Day's prior written notice (or telephonic notice promptly confirmed in writing) of its intent to prepay Base Rate Loans (or same day notice in the case of Swingline Loans provided such notice is given prior to 12:00 Noon (New York time)) and (y) at least three Business Days' prior written notice (or telephonic notice promptly confirmed in writing) of its intent to prepay Eurodollar Loans, whether Tranche A Term Loans, Tranche C Term Loans, Revolving Loans or Swingline Loans shall be prepaid, the amount of such prepayment and the Types of Loans to be prepaid and, in the case of Eurodollar Loans, the specific Borrowing or Borrowings pursuant to which made, which notice the Administrative Agent shall promptly transmit to each of the Banks; (ii) each prepayment shall be in an aggregate principal amount of at least $1,000,000 (or $250,000 in the case of Swingline Loans) or such lesser amount of a Borrowing which is outstanding, provided that if any partial prepayment of Eurodollar Loans made pursuant to any Borrowing shall reduce the outstanding Eurodollar Loans made pursuant to such Borrowing to an amount less than $5,000,000, then such Borrowing may not be continued as a Borrowing of Eurodollar Loans and any election of an Interest Period with respect thereto given by the Borrower shall have no force or effect; (iii) at the time of any prepayment of Eurodollar Loans pursuant to this Section 4.01 on any date other than the last day of the Interest Period applicable thereto, the Borrower shall pay the amounts required pursuant to Section 1.11; (iv) in the event of certain refusals by a Bank as provided in Section 13.12(b) to consent to certain proposed changes, waivers, discharges or terminations with respect to this Agreement which have been approved by the Required Banks, the Borrower may, upon 5 Business Days' written notice to the Administrative Agent at its Notice Office (which notice the Administrative Agent shall promptly transmit to each of the Banks) repay all Loans, together with accrued and unpaid interest, Fees, and other amounts owing to such Bank (or owing to such Bank with respect to each Tranche which gave rise to the need to obtain such Bank's individual consent) in accordance with said Section 13.12(b) so long as (A) in the case of the repayment of Revolving Loans of any Bank pursuant to this clause (iv) the Revolving Loan Commitment, if any, of such Bank is terminated concurrently with such repayment (at which time Schedule I shall be deemed modified to reflect the changed Revolving Loan Commitments) and (B) the consents required by Section 13.12(b) in connection with the repayment pursuant to this clause (iv) have been obtained; (v) each voluntary prepayment of Term Loans pursuant to this Section 4.01 (except pursuant to preceding clause (iv)) shall be applied to the Tranche A Term Loans and the Tranche C Term Loans on a pro rata basis (based upon the then outstanding principal amount of Tranche A Term Loans and Tranche C Term Loans); and (vi) except as provided in preceding clause (iv), each prepayment in respect of any Loans made pursuant to a Borrowing shall be applied pro rata among the Loans comprising such Borrowing; provided that at the Borrower's election in connection with any prepayment of Revolving Loans pursuant to this Section 4.01, such prepayment shall not be applied to any Revolving Loan of a Defaulting Bank. Each prepayment of principal of any 27 Tranche of Term Loans pursuant to this Section 4.01 shall be applied to reduce the then remaining Scheduled Repayments of the respective Tranche of Term Loans pro rata based upon the then remaining principal amounts of the Scheduled Repayments of the respective Tranche after giving effect to all prior reductions thereto. 4.02 Mandatory Repayments and Commitment Reductions. (a)(i) On any day on which the sum of the aggregate outstanding principal amount of the Revolving Loans made by Non-Defaulting Banks, Swingline Loans and the Letter of Credit Outstandings exceeds the Adjusted Total Revolving Loan Commitment as then in effect, the Borrower shall prepay principal of Swingline Loans and, after the Swingline Loans have been repaid in full, Revolving Loans of Non-Defaulting Banks in an amount equal to such excess. If, after giving effect to the prepayment of all outstanding Swingline Loans and Revolving Loans of Non-Defaulting Banks, the aggregate amount of the Letter of Credit Outstandings exceeds the Adjusted Total Revolving Loan Commitment as then in effect, the Borrower shall pay to the Administrative Agent at the Payment Office on such date an amount of cash or Cash Equivalents equal to the amount of such excess (up to a maximum amount equal to the Letter of Credit Outstandings at such time), such cash or Cash Equivalents to be held as security for all obligations of the Borrower to Non-Defaulting Banks hereunder in a cash collateral account to be established by the Administrative Agent. (ii) On any day on which the aggregate outstanding principal amount of the Revolving Loans made by any Defaulting Bank exceeds the Revolving Loan Commitment of such Defaulting Bank, the Borrower shall prepay principal of Revolving Loans of such Defaulting Bank in an amount equal to such excess. (b) In addition to any other mandatory repayments or commitment reductions pursuant to this Section 4.02, on each date set forth below, the Borrower shall be required to repay that principal amount of Tranche A Term Loans, to the extent then outstanding, as is set forth opposite such date (each such repayment, as the same may be reduced as provided in Sections 4.01 and 4.02(i), a "Tranche A Scheduled Repayment", and each such date, a "Tranche A Scheduled Repayment Date"): 28
Tranche A Scheduled Repayment Date Amount ------------------------ ------ The last Business Day of May, 1997 $2,500,000 The last Business Day of August, 1997 $2,500,000 The last Business Day of November, 1997 $2,500,000 The last Business Day of February, 1998 $2,500,000 The last Business Day of May, 1998 $2,500,000 The last Business Day of August, 1998 $2,500,000 The last Business Day of November, 1998 $2,500,000 The last Business Day of February, 1999 $2,500,000 The last Business Day of May, 1999 $3,250,000 The last Business Day of August, 1999 $3,250,000 The last Business Day of November, 1999 $3,250,000 The last Business Day of February, 2000 $3,250,000 The last Business Day of May, 2000 $4,000,000
29 The last Business Day of August, 2000 $4,000,000 The last Business Day of November, 2000 $4,000,000 The last Business Day of February, 2001 $4,000,000 The last Business Day of May, 2001 $6,500,000 The last Business Day of August, 2001 $6,500,000 The last Business Day of November, 2001 $6,500,000 Tranche A Term Loan Maturity Date $6,500,000
(c) In addition to any other mandatory repayments or commitment reductions pursuant to this Section 4.02, on each date set forth below, the Borrower shall be required to repay that principal amount of Tranche C Term Loans, to the extent then outstanding, as is set forth opposite such date (each such repayment, as the same may be reduced as provided in Sections 4.01 and 4.02(i), a "Tranche C Scheduled Repayment", and each such date, a "Tranche C Scheduled Repayment Date"):
Tranche C Scheduled Repayment Date Amount ------------------------ ------ The last Business Day of February, 1998 $600,000 The last Business Day of May, 1998 $600,000 The last Business Day of August, 1998 $600,000 The last Business Day of November, 1998 $600,000
30 The last Business Day of February, 1999 $600,000 The last Business Day of May, 1999 $600,000 The last Business Day of August, 1999 $600,000 The last Business Day of November, 1999 $600,000 The last Business Day of February, 2000 $600,000 The last Business Day of May, 2000 $600,000 The last Business Day of August, 2000 $600,000 The last Business Day of November, 2000 $600,000 The last Business Day of February, 2001 $600,000 The last Business Day of May, 2001 $600,000 The last Business Day of August, 2001 $600,000 The last Business Day of November, 2001 $600,000 The last Business Day of February, 2002 $600,000 The last Business Day of May, 2002 $19,950,000 The last Business Day of
31 August, 2002 $19,950,000 The last Business Day of November, 2002 $19,950,000 Tranche C Term Loan Maturity Date $19,950,000
(d) In addition to any other mandatory repayments or commitment reductions pursuant to this Section 4.02, on each date after the Original Effective Date upon which Holdings or any of its Subsidiaries receives any proceeds from any sale or issuance of its equity (other than cash proceeds received from sales or issuances of equity to employees, officers or directors of Holdings or any of its Subsidiaries so long as all such cash proceeds are, substantially concurrently with the receipt of such cash proceeds, used to repurchase outstanding shares of common stock (or options to purchase common stock) of Holdings pursuant to clause (x) of the proviso to Section 9.03(ii) or, to the extent the cash proceeds are not so utilized, so long as the aggregate amount of such cash proceeds excluded pursuant to this parenthetical does not exceed $10,000,000) an amount equal to 100% of the cash proceeds of the respective sale or issuance (net of underwriting discounts and commissions and other direct costs associated therewith, including, without limitation, legal fees and expenses) shall be applied as a mandatory repayment of principal of outstanding Term Loans in accordance with the requirements of Section 4.02(i) and (j), provided that (i) in the case of an Initial Public Offering, only 50% of the net cash proceeds thereof, if any, in excess of $50,000,000 shall be applied as a mandatory repayment as set forth under this Section 4.02(d) and (ii) the proceeds of any issuance of options, warrants or other equity as part of a unit in connection with any issuance of Indebtedness shall be treated as cash proceeds from the issuance of Indebtedness and applied as a mandatory repayment as set forth under Section 4.02(e). (e) In addition to any other mandatory repayments or commitment reductions pursuant to this Section 4.02, on each date after the Original Effective Date upon which Holdings or any of its Subsidiaries receives any proceeds from any incurrence by Holdings or any of its Subsidiaries of Indebtedness for borrowed money (other than Indebtedness for borrowed money permitted to be incurred pursuant to Section 9.04 as such Section is in effect on the Restatement Effective Date), an amount equal to the cash proceeds (net of underwriting discounts and commissions and other costs associated therewith including, without limitation, legal fees and expenses) of the respective incurrence of Indebtedness shall be applied as a mandatory repayment of principal of outstanding Term Loans in accordance with the requirements of Sections 4.02(i) and (j). (f) In addition to any other mandatory repayments or commitment reductions pursuant to this Section 4.02, on each date after the Original Effective Date upon which Holdings or any of its Subsidiaries receives proceeds from any sale of assets (including 32 capital stock and securities held thereby, but excluding (i) sales or transfers of inventory in the ordinary course of business, (ii) sales or transfers of assets in accordance with Sections 9.02(v) and (vi) as in effect on the Restatement Effective Date, (iii) sales of assets between the Borrower and its Wholly-Owned Subsidiaries and/or sales of assets between Wholly-Owned Subsidiaries of the Borrower, in each case to the extent permitted by Section 9.02, (iv) the sale or other disposition of equipment in the ordinary course of business to the extent that the Borrower has delivered a certificate to the Administrative Agent on or prior to such date stating that it intends to reinvest such Net Sale Proceeds in replacement equipment within 270 days after the respective date of sale or disposition and (v) any other sale of assets so long as, and to the extent that, the aggregate amount of Net Sale Proceeds from all sales of assets excluded pursuant to this clause (v) during the respective fiscal year of the Borrower in which the Net Sale Proceeds are received does not exceed $5,000,000), an amount equal to 100% of the Net Sale Proceeds therefrom shall be applied as a mandatory repayment of principal of outstanding Term Loans in accordance with the requirements of Sections 4.02(i) and (j). To the extent any Net Sale Proceeds are not required to be applied pursuant to this Section 4.02(f) as a result of clause (iv) contained in the parenthetical appearing in the first sentence of this Section 4.02(f), then on the 270th day after the date of the respective sale or disposition, the Net Sale Proceeds of the respective sale or disposition shall be applied as otherwise required by this Section 4.02(f) (determined without regard to clause (iv) contained in the parenthetical appearing in this first sentence of this Section 4.02(f)) to the extent not actually used as contemplated by said clause (iv) by said 270th day. (g) In addition to any other mandatory repayments pursuant to this Section 4.02, on each Excess Cash Payment Date, an amount equal to 75% of the Excess Cash Flow for the relevant Excess Cash Payment Period shall be applied as a mandatory repayment of principal of outstanding Term Loans in accordance with the requirements of Sections 4.02(i) and (j); provided, however, that after the time (the "Excess Cash Flow Conversion Time") that the principal of Term Loans have been repaid, and/or the Total Revolving Loan Commitment has been permanently reduced, after the Restatement Effective Date in the aggregate amount of $25,000,000 solely as a result of this Section 4.02(g) (or pursuant to Section 3.03(e) as a result of this Section 4.02(g)), an amount equal to 50% (rather than 75%) of such Excess Cash Flow shall be applied pursuant to this clause (g). (h) In addition to any other mandatory repayments or commitment reductions pursuant to this Section 4.02, within 10 days following each date after the Original Effective Date on which Holdings or any of its Subsidiaries receives any proceeds from any Recovery Event, an amount equal to 100% of the proceeds of such Recovery Event (net of reasonable costs including without limitation legal costs and expenses, and taxes incurred in connection with such Recovery Event) shall be applied as a mandatory repayment of principal of outstanding Term Loans (or, if the Initial Borrowing Date has not yet occurred, such amounts shall be applied as a mandatory reduction to the Total Term Loan Commitment) in accordance with the requirements of Sections 4.02(i) and (j), provided that (x) so long as no Default or Event of Default then exists and such proceeds do not exceed $2,500,000, such proceeds 33 shall not be required to be so applied on such date to the extent that the Borrower has delivered a certificate to the Administrative Agent on or prior to such date stating that such proceeds shall be used or shall be committed to be used to replace or restore any properties or assets in respect of which such proceeds were paid within one year following the date of such Recovery Event (which certificate shall set forth the estimates of the proceeds to be so expended) and (y) so long as no Default or Event of Default then exists and to the extent that (a) the amount of such proceeds exceeds $2,500,000, (b) the amount of such proceeds, together with other cash available to the Borrower and permitted to be spent by it on Capital Expenditures during the relevant period pursuant to Section 9.07 (without regard to Section 9.07(c) in the case of such other cash), equals 100% of the cost of replacement or restoration of the properties or assets in respect of which such proceeds were paid as determined by the Borrower and as supported by such estimates or bids from contractors or subcontractors or such other supporting information as the Administrative Agent may reasonably request and (c) the Borrower has delivered to the Administrative Agent a certificate on or prior to the date the application would otherwise be required pursuant to this Section 4.02(h) in the form described in clause (x) above and also certifying (I) its determination as required by preceding clause (b) and (II) that, for the period from the date of the respective casualty, condemnation or other event giving rise to the Recovery Event and continuing through the completion of the replacement or restoration of respective properties or assets, the Borrower has (and will continue to maintain) business interruption insurance at levels, and in scope of coverage, which are at least as great as the amount for such insurance as is set forth in Schedule VI, then the entire amount of the proceeds of such Recovery Event and not just the portion in excess of $2,500,000 shall be deposited with the Administrative Agent pursuant to a cash collateral arrangement reasonably satisfactory to the Administrative Agent and the Borrower (or, in the case of a Foreign Subsidiary, with any other lending institution reasonably satisfactory to the Administrative Agent and the Borrower and located in the jurisdiction of such Foreign Subsidiary, it being understood and agreed that the Secured Creditors shall have no security interest in the funds so deposited by a Foreign Subsidiary) whereby such proceeds shall be disbursed to the Borrower or its respective Subsidiary from time to time as needed to pay actual costs incurred by it or required to be advanced by it in connection with the replacement or restoration of the respective properties or assets (pursuant to such reasonable certification requirements as may be established by the Administrative Agent), provided further that (except in the case of funds deposited by a Foreign Subsidiary as described above) at any time while an Event of Default has occurred and is continuing, the Required Banks may direct the Administrative Agent (in which case the Administrative Agent shall, and is hereby authorized by the Borrower to, follow said directions) to apply any or all proceeds then on deposit in such collateral account to the repayment of Obligations hereunder in the same manner as proceeds would be applied pursuant to the Security Agreement, and provided further, that if all or any portion of such proceeds not required to be applied to the repayment of Term Loans pursuant to the second preceding proviso (whether pursuant to clause (x) or (y) thereof) are either (A) not so used or committed to be so used within one year after the date of the respective Recovery Event or (B) if committed to be used within one year after the date of receipt of such proceeds of such Recovery Event and not so 34 used within two years after the date of the respective Recovery Event then, in either such case, such remaining portion not used or committed to be used in the case of preceding clause (A) and not used in the case of preceding clause (B) shall be applied on the date which is the first anniversary of the date of the respective Recovery Event in the case of clause (A) above or the date occurring two years after the date of the respective Recovery Event in the case of clause (B) above as a mandatory repayment of principal of outstanding Term Loans in accordance with the requirements of Section 4.02(i) and (j). (i) Each amount required to be applied to Term Loans (or to the Total Term Loan Commitment) pursuant to Sections 4.02(d), (e), (f), (g) and (h) shall be applied pro rata to each Tranche of Term Loans based upon the then remaining principal amounts of the respective Tranches (with each Tranche of Term Loans to be allocated that percentage of the amount to be applied as is equal to a fraction (expressed as a percentage) the numerator of which is the then outstanding principal amount of such Tranche of Term Loans and the denominator of which is equal to the then outstanding principal amount of all Term Loans). Any amount required to be applied to any Tranche of Term Loans pursuant to Sections 4.02(d), (e), (f), (g) and (h) shall be applied to repay the outstanding principal amount of Term Loans of the respective Tranche then outstanding. The amount of each principal repayment of Term Loans made as required by Sections 4.02(d), (e), (f), (g) and (h) shall be applied to reduce the then remaining Scheduled Repayments of the respective Tranche pro rata based upon the then remaining principal amounts of the Scheduled Repayments of the respective Tranche after giving effect to all prior reductions thereto. (j) With respect to each repayment of Loans required by this Section 4.02, the Borrower may designate the Types of Loans of the respective Tranche which are to be repaid and, in the case of Eurodollar Loans, the specific Borrowing or Borrowings of the respective Tranche pursuant to which made, provided that: (i) repayments of Eurodollar Loans pursuant to this Section 4.02 may only be made on the last day of an Interest Period applicable thereto unless all Eurodollar Loans of the respective Tranche with Interest Periods ending on such date of required repayment and all Base Rate Loans of the respective Tranche have been paid in full; (ii) if any repayment of Eurodollar Loans made pursuant to a single Borrowing shall reduce the outstanding Eurodollar Loans made pursuant to such Borrowing to an amount less than $5,000,000, such Borrowing shall be converted at the end of the then current Interest Period into a Borrowing of Base Rate Loans; and (iii) each repayment of any Loans comprising a Borrowing shall be applied pro rata among such Loans. In the absence of a designation by the Borrower as described in the preceding sentence, the Administrative Agent shall, subject to the above, make such designation in its sole discretion with a view, but no obligation, to minimize breakage costs owing under Section 1.11. (k) Notwithstanding anything to the contrary contained elsewhere in this Agreement, (i) all then outstanding Swingline Loans shall be repaid in full on the Swingline Expiry Date and (ii) all other then outstanding Loans shall be repaid in full on the respective Maturity Date for such Loans. 35 4.03 Method and Place of Payment. Except as otherwise specifically provided herein, all payments under this Agreement or any Note shall be made to the Administrative Agent for the account of the Bank or Banks entitled thereto not later than 12:00 Noon (New York time) on the date when due and shall be made in Dollars in immediately available funds at the Payment Office of the Administrative Agent. Whenever any payment to be made hereunder or under any Note shall be stated to be due on a day which is not a Business Day, the due date thereof shall be extended to the next succeeding Business Day and, with respect to payments of principal, interest shall be payable at the applicable rate during such extension. 4.04 Net Payments; Taxes. (a) All payments made by any Credit Party hereunder or under any Note will be made without setoff, counterclaim or other defense. Except as provided in Section 4.04(b), all such payments will be made free and clear of, and without deduction or withholding for, any present or future taxes, levies, imposts, duties, fees, assessments or other charges of whatever nature now or hereafter imposed by any jurisdiction or by any political subdivision or taxing authority thereof or therein with respect to such payments (but excluding, except as provided in the second succeeding sentence, any tax imposed on or measured by the net income or net profits of a Bank pursuant to the laws of the United States of America, the jurisdiction in which it is organized or the jurisdiction in which the principal office or applicable lending office of such Bank is located or any subdivision thereof or therein) and all interest, penalties or similar liabilities with respect to such non-excluded taxes, levies, imposts, duties, fees, assessments or other charges (all such non-excluded taxes, levies, imposts, duties, fees, assessments or other charges being referred to collectively as "Taxes"). If any Taxes are so levied or imposed, the Borrower agrees to pay the full amount of such Taxes, and such additional amounts as may be necessary so that every payment of all amounts due under this Agreement or under any Note, after withholding or deduction for or on account of any Taxes, will not be less than the amount provided for herein or in such Note. If any amounts are payable in respect of Taxes pursuant to the preceding sentence, the Borrower agrees to reimburse each Bank, upon the written request of such Bank, for taxes imposed on or measured by the net income or net profits of such Bank pursuant to the laws of the jurisdiction in which such Bank is organized or in which the principal office or applicable lending office of such Bank is located or under the laws of any political subdivision or taxing authority of any such jurisdiction in which such Bank is organized or in which the principal office or applicable lending office of such Bank is located and for any withholding of taxes as such Bank shall determine are payable by, or withheld from, such Bank, in respect of such amounts so paid to or on behalf of such Bank pursuant to the preceding sentence and in respect of any amounts paid to or on behalf of such Bank pursuant to this sentence. The Borrower will furnish to the Administrative Agent within 45 days after the date the payment of any Taxes is due pursuant to applicable law certified copies of tax receipts evidencing such payment by the Borrower. The Borrower agrees to indemnify and hold harmless each Bank, and reimburse such Bank upon its written request, for the amount of any Taxes so levied or 36 imposed and paid by such Bank. (b) Each Bank that is not a United States person (as such term is defined in Section 7701(a)(30) of the Code) for U.S. Federal income tax purposes agrees to deliver to the Borrower and the Administrative Agent on or prior to the Original Effective Date (or the Restatement Effective Date in the case of such Banks that first become party hereto on the Restatement Effective Date), or in the case of a Bank that is an assignee or transferee of an interest under this Agreement pursuant to Section 1.13 or 13.04 (unless the respective Bank was already a Bank hereunder immediately prior to such assignment or transfer), on the date of such assignment or transfer to such Bank, (i) two accurate and complete original signed copies of Internal Revenue Service Form 4224 or 1001 (or successor forms) certifying to such Bank's entitlement to a complete exemption from United States withholding tax with respect to payments to be made under this Agreement and under any Note, or (ii) if the Bank is not a "bank" within the meaning of Section 881(c)(3)(A) of the Code and cannot deliver either Internal Revenue Service Form 1001 or 4224 pursuant to clause (i) above, (x) a certificate substantially in the form of Exhibit D (any such certificate, a "Section 4.04(b)(ii) Certificate") and (y) two accurate and complete original signed copies of Internal Revenue Service Form W-8 (or successor form) certifying to such Bank's entitlement to a complete exemption from United States withholding tax with respect to payments of interest to be made under this Agreement and under any Note. In addition, each Bank agrees that from time to time after the Restatement Effective Date, when a lapse in time or change in circumstances renders the previous certification obsolete or inaccurate in any material respect, it will deliver to the Borrower and the Administrative Agent two new accurate and complete original signed copies of Internal Revenue Service Form 4224 or 1001, or Form W-8 and a Section 4.04(b)(ii) Certificate, as the case may be, and such other forms as may be required in order to confirm or establish the entitlement of such Bank to a continued exemption from or reduction in United States withholding tax with respect to payments under this Agreement and any Note, or it shall immediately notify the Borrower and the Administrative Agent of its inability to deliver any such Form or Certificate, in which case such Bank shall not be required to deliver any such Form or Certificate pursuant to this Section 4.04(b). Notwithstanding anything to the contrary contained in Section 4.04(a), but subject to Section 13.04(b) and the immediately succeeding sentence, (x) the Borrower shall be entitled, to the extent it is required to do so by law, to deduct or withhold income or similar taxes imposed by the United States (or any political subdivision or taxing authority thereof or therein) from interest, Fees or other amounts payable hereunder for the account of any Bank which is not a United States person (as such term is defined in Section 7701(a)(30) of the Code) for U.S. Federal income tax purposes to the extent that such Bank has not provided to the Borrower U.S. Internal Revenue Service Forms that establish a complete exemption from such deduction or withholding and (y) the Borrower shall not be obligated pursuant to Section 4.04(a) hereof to gross-up payments to be made to a Bank in respect of income or similar taxes imposed by the United States if (I) such Bank has not provided to the Borrower the Internal Revenue Service Forms required to be provided to the Borrower pursuant to this Section 4.04(b) or (II) in the case of a payment, other than interest, to a Bank described in clause (ii) above, to the extent 37 that such Forms do not establish a complete exemption from withholding of such taxes. Notwithstanding anything to the contrary contained in the preceding sentence or elsewhere in this Section 4.04 and except as set forth in Section 13.04(b), the Borrower agrees to pay any additional amounts and to indemnify each Bank in the manner set forth in Section 4.04(a) (without regard to the identity of the jurisdiction requiring the deduction or withholding) in respect of any Taxes deducted or withheld by it as described in the immediately preceding sentence as a result of any changes after the Restatement Effective Date in any applicable law, treaty, governmental rule, regulation, guideline or order, or in the interpretation thereof, relating to the deducting or withholding of such Taxes. (c) If the Borrower pays any additional amount under this Section 4.04 to a Bank and such Bank determines in its sole discretion that it has actually received or realized in connection therewith any refund or any reduction of, or credit against, its Tax liabilities in or with respect to the taxable year in which the additional amount is paid (a "Tax Benefit"), such Bank shall pay to the Borrower an amount that the Bank shall, in its sole discretion, determine is equal to the net benefit, after tax, which was obtained by the Bank in such year as a consequence of such Tax Benefit; provided, however, that (i) such Bank shall not be required to make any payment under this Section 4.04(c) if an Event of Default shall have occurred and be continuing; (ii) any Taxes that are imposed on a Bank as a result of a disallowance or reduction (including through the expiration of any tax credit carryover or carryback of such Bank that otherwise would not have expired) of any Tax Benefit with respect to which such Bank has made a payment to the Borrower pursuant to this Section 4.04(c) shall be treated as a Tax for which the Borrower is obligated to indemnify such Bank pursuant to this Section 4.04 without any exclusions or defenses; and (iii) nothing in this Section 4.04(c) shall require the Bank to disclose any confidential information to the Borrower (including, without limitation, its tax returns). SECTION 5. Conditions Precedent to Restatement Effective Date. The occurrence of the Restatement Effective Date, and the obligation of each Bank to continue, convert and/or make Loans, and the obligation of each Issuing Bank to issue Letters of Credit, on the Restatement Effective Date, is subject at the time of the occurrence of the Restatement Effective Date to the satisfaction of the following conditions: 5.01 Execution of Agreement; Notes. On or prior to the Restatement Effective Date (i) this Agreement shall have been executed and delivered as provided in Section 13.10 and (ii) there shall have been delivered to the Administrative Agent for the account of each of the Banks the appropriate Tranche C Term Note and/or Revolving Note executed by the Borrower, in each case in the amount, maturity and as otherwise provided herein. 5.02 Fees, etc. On the Restatement Effective 38 Date, the Borrower shall have paid to the Agents and the Banks all costs, fees and expenses (including, without limitation, legal fees and expenses) payable to the respective Agents and the Banks to the extent then due. 5.03 Opinion of Counsel. On the Restatement Effective Date, the Administrative Agent shall have received an opinion from Dechert Price & Rhoads, special counsel to Holdings and its Subsidiaries, addressed to each of the Agents and each of the Banks and dated the Restatement Effective Date covering the matters set forth in Exhibit E (including the matters set forth in Section 5.17), and otherwise in form and substance satisfactory to the Agents. 5.04 Corporate Documents; Proceedings; etc. (a) On the Restatement Effective Date, the Administrative Agent shall have received a certificate, dated the Restatement Effective Date, signed by the chairman of the board, the president, any vice president or the treasurer of Holdings, the Borrower and each Subsidiary of the Borrower which is to become a Credit Party on the Restatement Effective Date (excluding any such Person which was a Credit Party on the Original Effective Date), and attested to by the secretary or any assistant secretary of the respective such Person, in the form of Exhibit F with appropriate insertions, together with copies of the certificate of incorporation and by-laws of the respective such Person, and the resolutions of the respective such Person referred to in such certificate, and the foregoing shall be reasonably acceptable to the Agents. (b) On the Restatement Effective Date, the Administrative Agent shall have received certificates of all Credit Parties (other than the Credit Parties delivering certificates pursuant to preceding clause (a)) (x) certifying that there were no changes, or providing the text of any changes, to the certificate of incorporation and by-laws of such Credit Parties as delivered pursuant to Section 5.04 of the Original Credit Agreement, (y) to the effect that each such Credit Party is in good standing in its respective state of incorporation and in those states where each such Credit Party conducts business and (z) providing the resolutions adopted by each such Credit Party with respect to the actions contemplated in this Agreement (including without limitation with respect to the Acquisition and the amendment and restatement of this Agreement, and the obligations of such Credit Party with respect to the increased extensions of credit pursuant hereto), and the foregoing shall be reasonably acceptable to the Agents in their reasonable discretion. (c) All corporate and legal proceedings and all material instruments and agreements in connection with the transactions contemplated by this Agreement and the other Documents shall be reasonably satisfactory in form and substance to the Agents and the Required Banks, and the Administrative Agent shall have received all information and copies of all documents and papers, including records of corporate proceedings, governmental approvals, good standing certificates and bring-down telegrams or facsimiles, if any, which any Agent reasonably may have requested in connection therewith, such documents and 39 papers where appropriate to be certified by proper corporate or governmental authorities. 5.05 Employee Benefit Plans; Shareholders' Agreements; Management Agreements; Debt Agreements; Tax Sharing Agreements. (a) On the Restatement Effective Date, there shall have been made available for review by the Agents and the Banks true and correct copies of the following documents (in each case except to the extent already delivered or made available for review by the Agents and the Banks on or prior to the Original Effective Date), in each case as same will be in effect on the Restatement Effective Date after the consummation of the Acquisition: (i) all Plans (and for each Plan that is required to file an annual report on Internal Revenue Service Form 5500-series, a copy of the most recent such report (including, to the extent required, the related financial and actuarial statements and opinions and other supporting statements, certifications, schedules and information), and for each Plan that is a "single-employer plan," as defined in Section 4001(a)(15) of ERISA, if any, the most recently prepared actuarial valuation therefor) and any other "employee benefit plans," as defined in Section 3(3) of ERISA, and any other material agreements, plans or arrangements, with or for the benefit of current or former employees of Holdings or any of its Subsidiaries or any ERISA Affiliate (provided that the foregoing shall apply in the case of any multiemployer plan, if any, as defined in 4001(a)(3) of ERISA, only to the extent that any document described therein is in the possession of Holdings or any Subsidiary of Holdings or any ERISA Affiliate or reasonably available thereto from the sponsor or trustee of any such plan) (collectively, together with any agreements, plans or arrangements referred to in Section 5.05(i) of the Original Credit Agreement, and any amendments thereto referred in Section 5.05(b), the "Employee Benefit Plans"); (ii) all agreements entered into by Holdings or any of its Subsidiaries governing the terms and relative rights of its capital stock and any agreements entered into by shareholders relating to any such entity with respect to its capital stock (collectively, together with any agreements referred to in Section 5.05(ii) of the Original Credit Agreement, and any amendments thereto referred in Section 5.05(b), the "Shareholders' Agreements"); (iii) all agreements with members of, or with respect to, the management of Holdings or any of its Subsidiaries (collectively, together with any agreements referred to in Section 5.05(iii) of the Original Credit Agreement, and any amendments thereto referred in Section 5.05(b), the "Management Agreements"); (iv) all agreements evidencing or relating to Indebtedness of Holdings or any 40 of its Subsidiaries which is to remain outstanding after giving effect to the incurrence of Loans on the Initial Borrowing Date (collectively, together with any agreements referred to in Section 5.05(iv) of the Original Credit Agreement, and any amendments thereto referred in Section 5.05(b), the "Debt Agreements"); and (v) all tax sharing, tax allocation and other similar agreements entered into by Holdings or any of its Subsidiaries (collectively, together with any agreements referred to in Section 5.05(v) of the Original Credit Agreement, and any amendments thereto referred in Section 5.05(b), the "Tax Sharing Agreements"); all of which Employee Benefit Plans, Shareholders' Agreements, Management Agreements, Debt Agreements and Tax Sharing Agreements shall, except to the extent such agreements are of no force and effect on the Restatement Effective Date, be in form and substance reasonably satisfactory to the Agents. (b) On or prior to the Restatement Effective Date, the Administrative Agent shall have received (i) a certification from the chairman of the board, the president, any vice president or the treasurer of the Borrower that all agreements and plans referenced in Section 5.05 of the Original Credit Agreement, previously delivered (or made available) to the Administrative Agent by each Credit Party, remain in full force and effect (or specifying which of such agreements and plans do not remain in full force and effect) and (ii) any amendments thereto or additional such agreements. 5.06 Consummation of Acquisition. On or prior to the Restatement Effective Date, (i) there shall have been delivered to the Administrative Agent and the Banks true and correct copies of all Acquisition Documents, certified as such by an officer of Holdings, all of which shall be in form and substance reasonably satisfactory to the Agents and the Required Banks, (ii) the Acquisition, including all of the terms and conditions thereof, shall have been duly approved by the requisite boards of directors and (if required by applicable law) the requisite shareholders and all Acquisition Documents shall have been duly executed and delivered by the parties thereto and shall be in full force and effect, (iii) the representations and warranties set forth in the Acquisition Documents shall be true and correct in all material respects as if made on and as of the Restatement Effective Date, (iv) each of the conditions precedent to the consummation of the Acquisition as set forth in the Acquisition Documents shall have been satisfied, and not waived except with the consent (which will not be unreasonably withheld) of each Agent and the Required Banks, to the satisfaction of each Agent and the Required Banks, (v) all Liens or Indebtedness to be incurred or assumed in connection with the Acquisition shall be otherwise permitted under this Agreement (including without limitation Sections 9.01 and 9.04), (vi) the Acquisition shall have been, or shall substantially contemporaneously (and in any event on the Restatement Effective Date) be, consummated in accordance with the Acquisition Documents and all applicable law (excluding immaterial violations of law which could not reasonably be expected to have, in 41 the aggregate for all such violations, a material adverse effect on the Acquisition or on the operations, financial condition or prospects of Holdings and its Subsidiaries taken as a whole). 5.07 Indebtedness. Each element of the Transaction shall have been consummated to the reasonable satisfaction of the Agents. After giving effect to the consummation of the Transaction, Holdings, the Borrower and their respective Subsidiaries shall have no outstanding Indebtedness except (i) the Senior Subordinated Notes, (ii) the Seller Note, (iii) the Loans, and (iv) such other Indebtedness, if any, as shall be permitted to remain outstanding by the Agents and the Required Banks and which is listed on Schedule V hereto. 5.08 Subsidiary Credit Parties; etc. (a) Each Subsidiary Guarantor shall have executed and delivered a counterpart of this Agreement, pursuant to which it makes the acknowledgements and agreements in the form appearing before the signature pages of the Subsidiary Guarantors at the end of this Agreement. (b) In addition to the actions required pursuant to preceding clause (a), each Subsidiary Guarantor which was not a Subsidiary Guarantor immediately before giving effect to the Restatement Effective Date, shall have duly authorized, executed and delivered counterparts of the Subsidiaries Guaranty, the Security Agreement and the Pledge Agreement, thereby becoming parties thereto. 5.09 Pledge Agreement. On the Restatement Effective Date, the Credit Parties shall furnish to the Administrative Agent updates, as necessary, to the schedules to the Pledge Agreement (as prepared as of the Restatement Effective Date and after giving effect thereto) and each Credit Party shall deliver to the Collateral Agent, as Pledgee, all of the Pledged Securities, if any, referred to therein that are owned by such Credit Party (to the extent not already delivered pursuant to the Pledge Agreement) (x) endorsed in blank in the case of promissory notes constituting Pledged Securities and (y) together with executed and undated stock powers, in the case of capital stock constituting Pledged Securities. 5.10 Security Agreement. On the Restatement Effective Date, the Credit Parties shall cause to be delivered to the Administrative Agent updated schedules to the Security Agreement, prepared as of the Restatement Effective Date (and after giving effect thereto), which schedules shall be true and correct in all material respects. In addition, each Subsidiary of the Borrower which becomes party to the Security Agreement on the Restatement Effective Date shall, in addition to executing counterparts of the Security Agreement as required above, deliver the following: (a) proper Financing Statements (Form UCC-1) fully executed for filing 42 under the UCC or other appropriate filing offices of each jurisdiction as may be necessary or, in the reasonable opinion of the Collateral Agent, desirable to perfect the security interests purported to be created by the Security Agreement; (b) certified copies of Requests for Information or Copies (Form UCC-11), or equivalent reports, listing all effective financing statements that name such Credit Party as debtor and that are filed in the jurisdictions referred to in clause (a) above, together with copies of such other financing statements (none of which shall cover the Collateral except to the extent evidencing Permitted Liens or in respect of which the Collateral Agent shall have received termination statements (Form UCC-3) or such other termination statements as shall be required by local law) fully executed for filing; (c) evidence of execution for post-closing filing and recordation of all other recordings and filings of, or with respect to, the Security Agreement as may be necessary or, in the reasonable opinion of the Collateral Agent, desirable to perfect and protect (or maintain the perfection of) the security interests intended to be created by such Security Agreement; and (d) all other actions necessary (including the amending of any existing financing statements) or, in the reasonable opinion of the Collateral Agent, desirable to perfect and protect (or maintain the perfection of) the security interests purported to be created (or maintained) by the Security Agreement have been taken. 5.11 Mortgage Amendments. On the Restatement Effective Date, the Collateral Agent shall have received: (a) fully executed counterparts of amendments (the "Mortgage Amendments"), in form and substance satisfactory to the Agents, to each of the Original Mortgages, together with evidence that counterparts of each of the Mortgage Amendments have been delivered to the title insurance company insuring the Lien of the Original Mortgages for recording in all places to the extent necessary or, in the reasonable opinion of the Collateral Agent, desirable to effectively maintain a valid and enforceable first priority (subject to Permitted Liens) mortgage lien on each Original Mortgaged Property in favor of the Collateral Agent (or such other trustee as may be required or desired under local law) for the benefit of the Secured Creditors; and (b) endorsements of the authorized issuing agent for title insurers reasonably satisfactory to the Collateral Agent to each Original Mortgage Policy assuring the Collateral Agent that each Original Mortgage is a valid and enforceable first priority mortgage lien on the respective Original Mortgaged Properties, free and clear of all defects and encumbrances except Permitted Liens. 43 5.12 Consent Letter. On the Restatement Effective Date, the Administrative Agent shall have received a letter from Corporation Service Company, presently located at 500 Central Avenue, Albany, New York 12206, substantially in the form of Exhibit H, indicating its consent to its appointment by each Credit Party as its agent to receive service of process as specified in Section 13.08. 5.13 Adverse Change; Governmental Approvals; etc. (a) On the Restatement Effective Date, nothing shall have occurred or been threatened (and neither the Banks nor the Agents shall have become aware of any facts, conditions or other information not previously known) since November 23, 1997 which either the Agents or the Required Banks shall determine has, or is reasonably likely to have, a material adverse effect on (i) the Transaction, (ii) the rights or remedies of the Banks or the Agents, or the ability of the Credit Parties to perform their respective obligations to the Banks or the Agents or (iii) the performance, business, operations, property, assets, liabilities, condition (financial or otherwise) or prospects of the Acquired Business or Holdings and its Subsidiaries taken as a whole. (b) On or prior to the Restatement Effective Date, all necessary material governmental (domestic and foreign) and third party approvals and/or consents in connection with the Transaction, the transactions contemplated by the Credit Documents and otherwise referred to herein or therein shall have been obtained and remain in effect, and all applicable waiting periods shall have expired without any action being taken by any competent authority which restrains, prevents or imposes materially adverse conditions upon the consummation of the Transaction or the transactions contemplated by this Agreement. Additionally, there shall not exist any judgment, order, injunction or other restraint prohibiting or imposing materially adverse conditions upon the Transaction or the transactions contemplated by this Agreement. (c) There shall not have occurred and be continuing a "market disruption event" since November 15, 1997. As used in this clause (c), "market disruption event" shall mean (w) any suspension or limitation of trading in securities generally on the New York Stock Exchange (not including any suspension or limitation of trading in any particular security as a result of computerized trading limits), or any setting of minimum prices for trading on such exchange, (x) any banking moratorium declared by U.S. Federal or New York authorities, (y) any outbreak or escalation of major hostilities in which the United States is involved, any declaration of war by Congress or any other substantial national or international calamity or emergency or (z) any other material adverse change in bank or capital market conditions that has had a material adverse effect on the syndication of bank credit facilities or the consummation of high yield offerings. The Borrower shall have fully cooperated in the syndication efforts, including, without limitation, by promptly providing the Agents with all information deemed necessary by them to successfully complete the syndication. 44 5.14 Litigation. On the Restatement Effective Date, no litigation by any entity (private or governmental) shall be pending or threatened with respect to the Transaction or this Agreement or any documentation executed in connection therewith, or which could reasonably be expected to have a materially adverse effect on the Transaction or the business, property, assets, condition (financial or otherwise) or prospects of the Acquired Business, the Borrower, or the Borrower and its Subsidiaries taken as a whole (after giving effect to the Transaction). 5.15 Solvency Certificate; Environmental Analyses; Insurance. On or before the Restatement Effective Date, the Borrower shall cause to be delivered to the Administrative Agent (i) a solvency certificate from the chief financial officer or treasurer of each of Holdings and the Borrower in the form of Exhibit I hereto, which shall be addressed to each Agent and each of the Banks and dated the Restatement Effective Date, setting forth the conclusion that, after giving effect to the Transaction and the incurrence of all the financings contemplated herein, each of Holdings and its Subsidiaries taken as a whole and the Borrower, are not insolvent and will not be rendered insolvent by the indebtedness incurred in connection therewith, and will not be left with unreasonably small capital with which to engage in their businesses and will not have incurred debts beyond their ability to pay debts as they mature, (ii) environmental and hazardous substance analyses with respect to the business and properties being acquired pursuant to the Acquisition, the results of which shall be in scope, and in form and substance, satisfactory to the Agents and the Required Banks and, with respect to the Borrower and its Subsidiaries, such environmental updates as may have been reasonably requested by the Agents and (iii) certificates of insurance complying with the requirements of Section 8.03 for the business and properties of Holdings and its Subsidiaries (including without limitation the Acquired Business), in scope, form and substance reasonably satisfactory to the Agents and the Required Banks and naming the Collateral Agent as an additional insured and/or loss payee, and stating that such insurance shall not be cancelled or revised without 30 days prior written notice by the insurer to the Collateral Agent. 5.16 Pro Forma Balance Sheet; Financial Statements; Projections. On or prior to the Restatement Effective Date, the Agents shall have received copies of the financial statements (including the pro forma financial statements) and Projections referred to in Sections 7.05(a), (b), (c) and (f), which Projections shall be satisfactory in form and substance to the Agents. 5.17 Senior Indebtedness. On or prior to the Restatement Effective Date, the Borrower shall have delivered to the Administrative Agent an officers' certificate (signed by an officer or officers satisfactory to the Administrative Agent), and in form and substance satisfactory to the Agents and the Required Banks, meeting the requirements of clause (5) of the proviso to the definition of 45 "Senior Indebtedness" contained in the Senior Subordinated Note Indenture to the effect that the issuance of the Indebtedness pursuant to this Agreement (including all Loans to be extended on the Restatement Effective Date, as well as all extensions of credit to be made thereafter pursuant to the Total Revolving Loan Commitment, except to the extent the sum of (x) the aggregate principal amount of outstanding Revolving Loans and Swingline Loans and (y) the Letter of Credit Outstandings, exceeds $125,000,000) does not, and will not, violate the "Limitation on Indebtedness" covenant and other applicable covenants of the Senior Subordinated Note Indenture and setting forth in reasonable detail the reasons therefor. Such certificate shall be accompanied by financial calculations in form and substance reasonably satisfactory to the Agents and the Required Banks. 5.18 Refinancing; Original Credit Agreement; etc. On the Restatement Effective Date, (i) each Continuing Bank shall have converted its Original Tranche B Term Loan as contemplated by Section 1.01(b), (ii) all Original Tranche B Term Loans being converted as described in preceding clause (i) which were outstanding as Eurodollar Loans shall, at the time of such conversion, be converted into Base Rate Loans or borrowed as Eurodollar Loans in accordance with Section 1.01(b) and the Borrower shall pay breakage or similar costs in accordance with the provisions of Section 1.11 of the Original Credit Agreement in connection therewith, (iii) all Original Tranche B Term Loans (except to the extent converted pursuant to preceding clause (i)) and all outstanding Revolving Loans (as contemplated by the last sentence of Section 1.01(c)) shall be repaid in full on the Restatement Effective Date (although Loans may be incurred hereunder on the Restatement Effective Date in accordance with the provisions hereof) and, if any Original Loans (including without limitation Original Tranche B Term Loans converted into Tranche C Term Loans hereunder) were at such time maintained as Eurodollar Loans, all breakage or similar costs owing in connection therewith shall have been paid as contemplated by Section 1.11 of the Original Credit Agreement, (iv) each Original Bank shall have received payment in full of all amounts (including any accrued and unpaid interest and fees) then due and owing to it under the Original Credit Agreement in respect of its Original Tranche B Term Loans and those Revolving Loans being repaid as contemplated by the last sentence of Section 1.01(c), (v) all accrued interest on all outstanding extensions of credit pursuant to the Original Credit Agreement, and all regularly accruing fees pursuant to the Original Credit Agreement, shall be repaid in full on, and through, the Restatement Effective Date (whether or not same would otherwise be then due and payable pursuant to the Original Credit Agreement) and (vi) the Administrative Agent shall have received evidence in form, scope and substance satisfactory to it that the matters set forth in this Section 5.18 have been satisfied on such date. 5.19 Officer's Certificate. On the Restatement Effective Date, the Administrative Agent shall have received a certificate, dated the Restatement Effective Date and signed on behalf of the Borrower by the president, any vice president or the treasurer of the Borrower, stating all of the conditions in Sections 5.04, 5.06, 5.07, 5.18 and 6.01 have been satisfied on such date. 46 SECTION 6. Conditions Precedent to All Credit Events. The obligation of each Bank to make Loans (including Loans made on the Restatement Effective Date but excluding Mandatory Borrowings made thereafter, which shall be made as provided in Section 1.01(e)), and the obligation of an Issuing Bank to issue any Letter of Credit, is subject, at the time of each such Credit Event (except as hereinafter indicated), to the satisfaction of the following conditions: 6.01 No Default; Representations and Warranties. At the time of each such Credit Event and also after giving effect thereto (i) there shall exist no Default or Event of Default and (ii) all representations and warranties contained herein or in any other Credit Document shall be true and correct in all material respects with the same effect as though such representations and warranties had been made on the date of the making of such Credit Event (it being understood and agreed that any representation or warranty which by its terms is made as of a specified date shall be required to be true and correct in all material respects only as of such specified date). 6.02 Notice of Borrowing; Letter of Credit Request. (a) Prior to the making of each Loan (excluding Swingline Loans), the Administrative Agent shall have received the notice required by Section 1.03(a). Prior to the making of any Swingline Loan, the Swingline Bank shall have received the notice required by Section 1.03(b)(i). (b) Prior to the issuance of each Letter of Credit, the Administrative Agent and the respective Issuing Bank shall have received a Letter of Credit Request meeting the requirements of Section 2.02. 47 6.03 Officers' Certificate for Certain Credit Events. Prior to incurring any Loan or having a Letter of Credit issued which would cause the sum of (x) the then outstanding principal amount of the Revolving Loans and Swingline Loans and (y) the Letter of Credit Outstandings, to exceed $125,000,000 (or, if less, the sum of $75,000,000 plus the Dedicated Basket Amount at such time), the Borrower shall deliver to the Administrative Agent an officers' certificate (signed by an officer or officers satisfactory to the Administrative Agent), and in form and substance to the Administrative Agent, meeting the requirements of clause (5) of the proviso to the definition of "Senior Indebtedness" contained in the Senior Subordinated Note Indenture to the effect that the respective extension of credit pursuant to this Agreement does not, and will not, violate the "Limitation on Indebtedness" covenant and other applicable covenants of the Senior Subordinated Note Indenture and setting forth in reasonable detail the reasons therefor. Such certificates shall be accompanied by any relevant financial or other calculations in form and substance reasonably satisfactory to the Administrative Agent. The acceptance of the proceeds of each Credit Event shall constitute a representation and warranty by the Borrower to each of the Agents and each of the Banks that all the conditions specified in Section 5 and in this Section 6 and applicable to such Credit Event exist as of that time. All of the Notes, certificates, legal opinions and other documents and papers referred to in Section 5 and in this Section 6, unless otherwise specified, shall be delivered to the Administrative Agent at the Notice Office for the account of each of the Banks and, except for the Notes, in sufficient counterparts for each of the Banks and shall be in form and substance reasonably satisfactory to the Agents. SECTION 7. Representations, Warranties and Agreements. In order to induce the Banks to enter into this Agreement and to make the Loans, and issue (or participate in) the Letters of Credit as provided herein, each of Holdings and the Borrower makes the following representations, warranties and agreements, in each case after giving effect to the Transaction as consummated on the Restatement Effective Date, all of which shall survive the execution and delivery of this Agreement and the Notes and the making of the Loans and issuance of the Letters of Credit, with the occurrence of the Restatement Effective Date and each Credit Event on or after the Restatement Effective Date being deemed to constitute a representation and warranty that the matters specified in this Section 7 are true and correct in all material respects on and as of the Restatement Effective Date and on the date of each such Credit Event (it being understood and agreed that any representation or warranty which by its terms is made as of a specified date shall be required to be true and correct in all material respects only as of such specified date). 7.01 Corporate Status. Holdings, the Borrower and each of their respective Subsidiaries (i) is a duly organized and validly 48 existing corporation in good standing under the laws of the jurisdiction of its incorporation, (ii) has the corporate power and authority to own its property and assets and to transact the business in which it is engaged and presently proposes to engage and (iii) is duly qualified and is authorized to do business and is in good standing in each jurisdiction where the conduct of its business requires such qualifications except for failures to be so qualified which, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. 7.02 Corporate Power and Authority. Each Credit Party has the corporate power and authority to execute, deliver and perform the terms and provisions of each of the Documents to which it is party and has taken all necessary corporate action to authorize the execution, delivery and performance by it of each of such Documents. Each Credit Party has duly executed and delivered each of the Documents to which it is party, and each of such Documents constitutes the legal, valid and binding obligation of such Credit Party enforceable in accordance with its terms, except to the extent that the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws generally affecting creditors' rights and by equitable principles (regardless of whether enforcement is sought in equity or at law). 7.03 No Violation. Neither the execution, delivery or performance by any Credit Party of the Documents to which it is a party, nor compliance by it with the terms and provisions thereof, (i) will contravene any provision of any applicable law, statute, rule or regulation or any applicable order, writ, injunction or decree of any court or governmental instrumentality, (ii) will conflict with or result in any breach of any of the terms, covenants, conditions or provisions of, or constitute a default under, or result in the creation or imposition of (or the obligation to create or impose) any Lien (except pursuant to the Security Documents) upon any of the properties or assets of Holdings, the Borrower or any of their respective Subsidiaries pursuant to the terms of any indenture, mortgage, deed of trust, credit agreement or loan agreement, or any other material agreement, contract or instrument, to which Holdings, the Borrower or any of their respective Subsidiaries is a party or by which it or any of its property or assets is bound or to which it may be subject (excluding, in the case of the Acquisition Documents, from the foregoing clauses (i) and (ii) such immaterial violations, which in no event shall violate the provisions of this Agreement or otherwise be reasonably expected to have (x) a material adverse effect on (I) the Transaction or (II) the rights or remedies of the Agents or the Banks, or on the ability of any Credit Party to perform their respective obligations to the Agents and the Banks or (y) a Material Adverse Effect) or (iii) will violate any provision of the certificate of incorporation or by-laws of Holdings, the Borrower or any of their respective Subsidiaries. 7.04 Governmental Approvals. No order, consent, approval, license, authorization or validation of, or filing, recording or registration with (except (x) as have been obtained or 49 made and (y) if this representation is being made at any time prior to the tenth day following the Restatement Effective Date, filings or recordations of financing statements, Mortgage Amendments and other documents pursuant to the terms of the Security Documents with respect to additional collateral or Credit Parties acquired pursuant to the Acquisition (all of which filings and recordations shall be completed within 10 days after the Restatement Effective Date)), or exemption by, any governmental or public body or authority, or any subdivision thereof, is required to authorize, or is required in connection with, (i) the execution, delivery and performance of (x) any Acquisition Document by any Credit Party or (y) any Credit Document or (ii) the legality, validity, binding effect or enforceability of (x) any Acquisition Document with respect to any Credit Party or (y) any Credit Document. 7.05 Financial Statements; Financial Condition; Undisclosed Liabilities; Projections; etc. (a) The audited combined balance sheets of the Business as of May 28, 1995 and May 26, 1996, and the related combined statements of operations for each of the years in the three year period ended May 26, 1996 and the unaudited combined balance sheets of the Business as of November 24, 1996, and the related combined statements of operations for the six month period ended November 24, 1996, in each case furnished to the Banks prior to the Original Effective Date pursuant to Section 5.18 of the Original Credit Agreement, present fairly the combined assets, liabilities and business equity of the Business at the respective dates of such balance sheets and its combined revenues less direct expenses before taxes for each of the years in the three year period ended May 26, 1996 or the six month period ended November 24, 1996, as the case may be, on the basis described in Note 1 to the financial statements audited by KPMG Peat Marwick, LLP, in conformity with generally accepted accounting principles. (b) The consolidated balance sheets of Holdings and its Consolidated Subsidiaries as of May 25, 1997 and November 23, 1997, and the related consolidated and consolidating statements of income for the fiscal year or six-month period then ended, as the case may be, in each case furnished to the Banks prior to the Restatement Effective Date pursuant to Section 8.01(b) or (c), as the case may be, of the Original Credit Agreement, present fairly the financial condition at the respective dates of such balance sheets and results of operations for the fiscal year or six-month period, as the case may be, ended on such dates, in each case prepared in accordance with the requirements of said Sections 8.01(b) and (c) of the Original Credit Agreement. (c) The audited balance sheets of the Acquired Business as of December 31, 1995 and December 31, 1996, and the related statements of income, parent company investment and cash flows for each of the years in the three year period ended December 31, 1996 and the unaudited balance sheet of the Acquired Business as of August 31, 1997, and the statements of income for each of the quarterly accounting periods in the fiscal year ended December 31, 1997, in each case furnished to the Agents prior to the Restatement Effective 50 Date pursuant to Section 5.16, present fairly the assets, liabilities and business equity of the Acquired Business at the respective dates of such balance sheets and its revenues less direct expenses before taxes for each of the years in the three year period ended December 31, 1996, on the basis described in Note 2 to the financial statements audited by Coopers & Lybrand LLP, in conformity with generally accepted accounting principles. Furthermore, all pro forma financial statements or information contained in the Confidential Memoranda have been prepared by management of the Borrower from the historical financial statements referenced above, to reflect adjustments as if the Transaction had occurred on the dates provided in the Confidential Memoranda, based on assumptions that management of the Borrower, on the Restatement Effective Date, believes are reasonable in the circumstances. (d) (i) On and as of the Restatement Effective Date, on a pro forma basis after giving effect to the Transaction and all other transactions contemplated by the Documents and to all Indebtedness (including the Loans) being incurred or assumed, and Liens created by each Credit Party in connection therewith, with respect to Holdings and the Borrower, individually, and each such Person and its Subsidiaries taken as a whole, (x) the sum of the assets, at a fair valuation, of each such Person, individually, and each such Person and its Subsidiaries taken as a whole, will exceed its or their debts; (y) it has not incurred and does not intend to incur, nor believes that it will incur, debts beyond its ability to pay such debts as such debts mature; and (z) it will have sufficient capital with which to conduct its business. For purposes of this Section 7.05(d), "debt" means any liability on a claim and "claim" means (i) right to payment, whether or not such a right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured or (ii) right to an equitable remedy for breach of performance if such breach gives rise to a payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured or unsecured. (e) Except as fully disclosed in the financial statements delivered pursuant to Section 7.05(a), (b) and (c), there are as of the Restatement Effective Date no liabilities or obligations with respect to Holdings or any of its Subsidiaries of any nature whatsoever (whether absolute, accrued, contingent or otherwise and whether or not due) which, either individually or in the aggregate, would be adversely material to the Business or Holdings and its Subsidiaries taken as a whole or the Borrower. As of the Restatement Effective Date, none of the Credit Parties knows of any basis for the assertion against it of any liability or obligation of any nature that is not fully disclosed in the financial statements delivered pursuant to Section 7.05(a), (b) and (c) which, either individually or in the aggregate, could be materially adverse to Holdings and its Subsidiaries taken as a whole or the Borrower. (f) On and as of the Restatement Effective Date, the Projections set forth on Schedule X, which reflect the forecasted consolidated financial conditions and income and expenses of Holdings and its Subsidiaries after giving effect to the Transaction (including the 51 projected results of the Acquired Business) and the related financing thereof and the other transactions contemplated hereby and which have been delivered to the Administrative Agent and the Banks on or prior to the Restatement Effective Date, have been prepared on a basis consistent with the financial statements referred to in Section 7.05(b), and are based on good faith estimates and assumptions believed by management of Holdings to be reasonable and attainable as of the date of such Projections, and there are no statements or conclusions in any of the Projections which are based upon or include information known to Holdings or any of its Subsidiaries to be misleading or which fail to take into account material information regarding the matters reported therein. On the Restatement Effective Date, Holdings believes that the Projections were reasonable and attainable. (g) After giving effect to the Transaction (but for this purpose assuming that the Transaction had occurred prior to May 25, 1997), since May 25, 1997 there has been (x) if this representation is being made (or deemed made) on or prior to the Restatement Effective Date, no material adverse change in the operations, properties, financial condition or prospects of the Business, Holdings and its Subsidiaries taken as a whole or the Borrower and (y) if this representation is being made (or deemed made) at any time after the Restatement Effective Date, no Material Adverse Effect. 7.06 Litigation. There are no actions, suits or proceedings pending or, to the best knowledge of Holdings and the Borrower, threatened (i) with respect to any Credit Document or (ii) that could reasonably be expected to have a Material Adverse Effect. 7.07 True and Complete Disclosure. All factual information (taken as a whole) furnished by or on behalf of Holdings or the Borrower in writing to any of the Agents or any Bank (including, without limitation, all information contained in the Documents or in the Offering Circular) for purposes of or in connection with this Agreement, the other Credit Documents or any transaction contemplated herein or therein is, and all other such factual information (taken as a whole) hereafter furnished by or on behalf of Holdings or the Borrower in writing to any of the Agents or any Bank will be, true and accurate in all material respects on the date as of which such information is dated or certified and not incomplete by omitting to state any fact necessary to make such information (taken as a whole) not misleading in any material respect at such time in light of the circumstances under which such information was provided. 7.08 Use of Proceeds; Margin Regulations. (a) All proceeds of the Loans shall be used by the Borrower to (x) effect the Acquisition, (y) pay fees and expenses related to the Acquisition, and (z) provide for the Borrower's general corporate and working capital purposes. 52 (b) No part of the proceeds of any Loan will be used to purchase or carry any Margin Stock or to extend credit for the purpose of purchasing or carrying any Margin Stock. Neither the making of any Loan nor the use of the proceeds thereof nor the occurrence of any other Credit Event will violate or be inconsistent with the provisions of Regulation G, T, U or X of the Board of Governors of the Federal Reserve System. 7.09 Tax Returns and Payments. Each of Holdings and each of its Subsidiaries has filed all federal income tax returns and all other material tax returns, domestic and foreign, required to be filed by it and has paid all material taxes and assessments payable by it which have become due, except for those contested in good faith and adequately disclosed and fully provided for on the financial statements of Holdings and its Subsidiaries in accordance with generally accepted accounting principles. Holdings and each of its Subsidiaries have at all times paid, or have provided adequate reserves (in the good faith judgment of the management of Holdings) for the payment of, all federal, state and foreign income taxes applicable for all prior fiscal years and for the current fiscal year to date. There is no action, suit, proceeding, investigation, audit, or claim now pending or, to the knowledge of Holdings or any of its Subsidiaries, threatened by any authority regarding any taxes relating to Holdings or any of its Subsidiaries which could be reasonably expected to have a Material Adverse Effect. As of the Restatement Effective Date, neither Holdings nor any of its Subsidiaries has entered into an agreement or waiver or been requested to enter into an agreement or waiver extending any statute of limitations relating to the payment or collection of taxes of Holdings or any of its Subsidiaries, or is aware of any circumstances that would cause the taxable years or other taxable periods of Holdings or any of its Subsidiaries not to be subject to the normally applicable statute of limitations. 7.10 Compliance with ERISA. (i) Schedule VII sets forth, as of the Restatement Effective Date, each Plan; each Plan (and each related trust, insurance contract or fund) is in substantial compliance with its terms and with all applicable laws, including without limitation ERISA and the Code; each Plan (and each related trust, if any) which is intended to be qualified under Section 401(a) of the Code has received a determination letter from the Internal Revenue Service to the effect that it meets the requirements of Sections 401(a) and 501(a) of the Code; no Reportable Event has occurred; no Plan which is a multiemployer plan (as defined in Section 4001(a)(3) of ERISA) is insolvent or in reorganization; no Plan has an Unfunded Current Liability; no Plan which is subject to Section 412 of the Code or Section 302 of ERISA has an accumulated funding deficiency, within the meaning of such sections of the Code or ERISA, or has applied for or received a waiver of an accumulated funding deficiency or an extension of any amortization period, within the meaning of Section 412 of the Code or Section 303 or 304 of ERISA; to the best knowledge of Holdings or any Subsidiary of Holdings, all contributions required to be made with respect to a Plan have been or will be timely made; neither Holdings nor any Subsidiary of Holdings nor any ERISA Affiliate has incurred any material liability (including any indirect, contingent or secondary liability) to or on account of a Plan pursuant 53 to Section 409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 401(a)(29), 4971 or 4975 of the Code or expects to incur any such liability under any of the foregoing sections with respect to any Plan; to the best knowledge of Holdings or any Subsidiary of Holdings, no condition exists which presents a material risk to Holdings or any Subsidiary of Holdings or any ERISA Affiliate of incurring a liability to or on account of a Plan pursuant to the foregoing provisions of ERISA and the Code; no proceedings have been instituted to terminate or appoint a trustee to administer any Plan which is subject to Title IV of ERISA; to the best knowledge of Holdings or any Subsidiary of Holdings, no action, suit, proceeding, hearing, audit or investigation with respect to the administration, operation or the investment of assets of any Plan (other than routine claims for benefits) is pending, or, to the best knowledge of Holdings or any Subsidiary of Holdings, expected or threatened; using actuarial assumptions and computation methods consistent with Part 1 of subtitle E of Title IV of ERISA, the aggregate liabilities of Holdings and its Subsidiaries and its ERISA Affiliates to all Plans which are multiemployer plans (as defined in Section 4001(a)(3) of ERISA) in the event of a complete withdrawal therefrom, as of the close of the most recent fiscal year of each such Plan ended prior to the date of the most recent Credit Event, would not exceed $200,000; each group health plan (as defined in Section 607(1) of ERISA or Section 4980B(g)(2) of the Code) which covers or has covered employees or former employees of Holdings, any Subsidiary of Holdings, or any ERISA Affiliate has at all times been operated in material compliance with the provisions of Part 6 of subtitle B of Title I of ERISA and Section 4980B of the Code; no lien imposed under the Code or ERISA on the assets of Holdings or any Subsidiary of Holdings or any ERISA Affiliate exists or is likely to arise on account of any Plan; and Holdings and its Subsidiaries may cease contributions to or terminate any employee benefit plan maintained by any of them without incurring any material liability. (ii) Each Foreign Pension Plan has been maintained in substantial compliance with its terms and with the requirements of any and all applicable laws, statutes, rules, regulations and orders and has been maintained, where required, in good standing with applicable regulatory authorities. All contributions required to be made with respect to a Foreign Pension Plan have been or will be timely made. Neither Holdings nor any of its Subsidiaries has incurred any obligation in connection with the termination of or withdrawal from any Foreign Pension Plan. Except as otherwise disclosed in Note 4 to the financial statements audited by KPMG Peat Marwick, LLP, as described in Section 7.05(a), the excess of the present value of the accrued benefit liabilities (whether or not vested) under each Foreign Pension Plan, determined as of the end of Holdings' most recently ended fiscal year on the basis of actuarial assumptions, each of which is reasonable, over the current value of the assets of each such Foreign Pension Plan allocable to such benefit liabilities does not, in the aggregate, have a Material Adverse Effect. 7.11 The Security Documents. (a) The provisions of the Security Agreement are effective to create in favor of the Collateral Agent for the benefit of the Secured Creditors a legal, valid and enforceable 54 security interest in all right, title and interest of the Credit Parties in the Security Agreement Collateral described therein, and the Security Agreement, upon the filing of Form UCC-1 financing statements or the appropriate equivalent (which filings have been made), create a fully perfected first lien on, and security interest in, all right, title and interest in all of the Security Agreement Collateral described therein, subject to no other Liens other than Permitted Liens, to the extent a security interest in such collateral can be perfected by the filing of a financing statement. The recordation of the Assignment of Security Interest in U.S. Patents and Trademarks in the form attached to the Security Agreement in the United States Patent and Trademark Office together with filings on Form UCC-1 made pursuant to the Security Agreement will be effective when recorded or filed (which recordings or filings have been made), under applicable law, to perfect the security interest granted to the Collateral Agent in the trademarks and patents covered by the Security Agreement and the recordation of the Assignment of Security Interest in U.S. Copyrights in the form attached to the Security Agreement with the United States Copyright Office together with filings on Form UCC-1 made pursuant to the Security Agreement will be effective when recorded or filed (which recordings or filings have been made) under federal law to perfect the security interest granted to the Collateral Agent in the copyrights covered by the Security Agreement. Each of the Credit Parties party to the Security Agreement has good and valid title to all Security Agreement Collateral described therein, free and clear of all Liens except those described above in this clause (a). Except for filings made pursuant to Section 5.10 on or prior to the Restatement Effective Date, no additional filings with respect to the Security Agreement are required at the time of, or in connection with the occurrence of, the Restatement Effective Date. (b) The security interests created in favor of the Collateral Agent, as pledgee, for the benefit of the Secured Creditors under the Pledge Agreement constitute first priority perfected security interests in the Pledged Securities described in the Pledge Agreement, subject to no security interests of any other Person. No filings or recordings are required in order to perfect (or maintain the perfection or priority of) the security interests created in the Pledged Securities and the proceeds thereof under the Pledge Agreement. (c) The Mortgages (as amended by the Mortgage Amendments in the case of the Original Mortgages) create, as security for the obligations purported to be secured thereby, a valid and enforceable perfected security interest in and mortgage lien on all of the Mortgaged Properties in favor of the Collateral Agent (or such other trustee as may be required or desired under local law) for the benefit of the Secured Creditors, superior to and prior to the rights of all third persons (except that the security interest and mortgage lien created in the Mortgaged Properties may be subject to the Permitted Encumbrances related thereto) and subject to no other Liens (other than Permitted Liens). Schedule III contains a true and complete list of each parcel of Real Property owned or leased by the Borrower and its Subsidiaries on the Restatement Effective Date, and the type of interest therein held by the Borrower or such Subsidiary. The Borrower and each of its Subsidiaries have good and indefeasible title to all fee-owned Mortgaged Properties and valid leasehold title to all 55 Leaseholds, in each case free and clear of all Liens except those described in the first sentence of this subsection (c). 7.12 Representations and Warranties in Documents. All representations and warranties set forth in the other Documents were true and correct in all material respects at the time as of which such representations and warranties were made (or deemed made), provided that to the extent the representations and warranties in the Acquisition Documents are made by Persons other than the Credit Parties, then the representations and warranties so made by such Persons shall be deemed to be true and correct in all material respects for purposes of this Section 7.12 unless the aggregate effect of all misrepresentations made by such Persons in the Acquisition Documents are such as would evidence a material adverse change in the operations, properties, condition (financial or otherwise) or prospects of the Acquired Business from that which would have applied if all representations made by such Persons in the Acquisition Documents had been true and correct in all respects. 7.13 Properties. Holdings, the Borrower and each of their respective Subsidiaries have good and valid title to all properties owned by them, including all property reflected in the most recent balance sheets referred to in Sections 7.05(b) and (c) and in the pro forma balance sheet referred to in Section 5.16 (except as sold or otherwise disposed of since the date of such balance sheet in the ordinary course of business), free and clear of all Liens, other than (i) as referred to in the balance sheet or in the notes thereto or in the pro forma balance sheet or (ii) Permitted Liens otherwise permitted by Section 9.01. On the Restatement Effective Date (after giving effect to the Acquisition), Schedule III sets forth a true and complete description of all Real Property owned or leased by the Borrower and/or its Subsidiaries and sets forth the direct owner or lessee thereof. 7.14 Capitalization. (a) On the Restatement Effective Date and after giving effect to the Transaction, the authorized capital stock of Holdings shall consist of 30,000,000 shares of Class A Holdings Common Stock, 7,300,000 of which shall be issued and outstanding, 30,000,000 shares of Class B Holdings Common Stock, 8,300,000 of which shall be issued and outstanding, and 70,000 shares of Holdings Series A Preferred Stock, all of which shall be issued and outstanding. All such outstanding shares have been duly and validly issued, are fully paid and non-assessable and have been issued free of preemptive rights, except for the preemptive rights set forth in the Securities Purchase and Holders Agreement. Except as set forth on Schedule XI, on the Restatement Effective Date, Holdings does not have outstanding any securities convertible into or exchangeable for its capital stock or outstanding any rights to subscribe for or to purchase, or any options for the purchase of, or any agreement providing for the issuance (contingent or otherwise) of, or any calls, commitments or claims of any character relating to, its capital stock. 56 (b) On the Restatement Effective Date and after giving effect to the Transaction, the authorized capital stock of the Borrower shall consist of 1,000 shares of Borrower Common Stock, 100 of which shall be issued and outstanding and delivered for pledge pursuant to the Pledge Agreement. All such outstanding shares of common stock have been duly and validly issued, are fully paid and nonassessable and are free of preemptive rights. As of the Restatement Effective Date, the Borrower does not have outstanding any securities convertible into or exchangeable for its capital stock or outstanding any rights to subscribe for or to purchase, or any options for the purchase of, or any agreements providing for the issuance (contingent or otherwise) of, or any calls, commitments or claims of any character relating to, its capital stock. 7.15 Subsidiaries. After giving effect to the Transaction, Holdings will have no Subsidiaries other than the Borrower and its Subsidiaries. After giving effect to the Transaction, the Borrower will have no Subsidiaries other than (i) those Subsidiaries listed on Schedule VIII and (ii) new Subsidiaries created in compliance with Section 9.14. An accurate organization chart, showing the ownership structure of Holdings and each of its Subsidiaries on the Restatement Effective Date, and after giving effect to the Transaction, is set forth on Schedule XII. 7.16 Compliance with Statutes, etc. Each of Holdings, the Borrower and its Subsidiaries is in compliance with all applicable statutes, regulations and orders of, and all applicable restrictions imposed by, all governmental bodies, domestic or foreign, in respect of the conduct of its business and the ownership of its property (including applicable statutes, regulations, orders and restrictions relating to environmental standards and controls), except such noncompliances as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. 7.17 Investment Company Act. None of Holdings, the Borrower or any of their respective Subsidiaries is an "investment company" or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. 7.18 Public Utility Holding Company Act. None of Holdings, the Borrower or any of their respective Subsidiaries is a "holding company", or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company" within the meaning of the Public Utility Holding Company Act of 1935, as amended. 7.19 Environmental Matters. (a) Holdings, the Borrower and each of their respective Subsidiaries have complied with, and on the date of each Credit Event will be in compliance with, all applicable Environ- 57 mental Laws and the requirements of any permits issued under such Environmental Laws. There are no pending or, to the best knowledge of Holdings and the Borrower after due inquiry, past or threatened Environmental Claims against Holdings, the Borrower or any of their respective Subsidiaries or any Real Property owned or operated by Holdings, the Borrower or any of their respective Subsidiaries. There are no facts, circumstances, conditions or occurrences in respect of any Real Property owned or operated by Holdings, the Borrower or any of their respective Subsidiaries that, to the best knowledge of Holdings or the Borrower after due inquiry, could reasonably be expected (i) to form the basis of an Environmental Claim against Holdings, the Borrower or any of their respective Subsidiaries or any such Real Property, or (ii) to cause any such Real Property to be subject to any restrictions on the ownership, occupancy, use or transferability of such Real Property by Holdings, the Borrower or any of their respective Subsidiaries under any applicable Environmental Law. (b) Hazardous Materials have not at any time been generated, used, treated or stored on, or transported to or from, any Real Property owned or operated by Holdings, the Borrower or any of their respective Subsidiaries where such generation, use, treatment or storage has violated or could reasonably be expected to violate any Environmental Law. Hazardous Materials, to the best knowledge of Holdings and the Borrower, have not been Released on or from any Real Property owned or operated by Holdings, the Borrower or any of their respective Subsidiaries where such Release has violated or could reasonably be expected to violate any applicable Environmental Law. (c) Notwithstanding anything to the contrary in this Section 7.19, the representations made in this Section 7.19 shall only be untrue if the aggregate effect of all failures and noncompliances of the types described above could reasonably be expected to have a Material Adverse Effect. 7.20 Labor Relations. Except as set forth on Schedule IX, none of Holdings, the Borrower nor any of their respective Subsidiaries is engaged in any unfair labor practice that could reasonably be expected to have a material adverse effect on Holdings and its Subsidiaries taken as a whole or the Borrower and there is (i) no unfair labor practice complaint pending against Holdings, the Borrower or any of their respective Subsidiaries or, to the best knowledge of Holdings or the Borrower, threatened against any of them, before the National Labor Relations Board, and no material grievance or arbitration proceeding arising out of or under any collective bargaining agreement is so pending against Holdings, the Borrower or any of their respective Subsidiaries or, to the best knowledge of Holdings or the Borrower, threatened against any of them, (ii) no strike, labor dispute, slowdown or stoppage pending against Holdings, the Borrower or any of their respective Subsidiaries or, to the best knowledge of Holdings or the Borrower, threatened against Holdings, the Borrower or any of their respective Subsidiaries and (iii) to the best knowledge of Holdings and the Borrower, no union representation proceeding is pending with respect to the employees of Holdings or the Borrower or any of their respective Subsidiaries, 58 except (with respect to any matter specified in clause (i), (ii) or (iii) above, either individually or in the aggregate) such as could not reasonably be expected to have a Material Adverse Effect. 7.21 Patents, Licenses, Franchises and Formulas. Each of Holdings, the Borrower and their respective Subsidiaries owns all material patents, trademarks, permits, service marks, trade names, copyrights, licenses, franchises and formulas, or rights with respect to the foregoing, and has obtained assignments of all leases and other rights of whatever nature, necessary for the present conduct of its business, without any known conflict with the rights of others which, or the failure to own or obtain which, as the case may be, would be reasonably likely to result in a Material Adverse Effect. 7.22 Indebtedness. Schedule V sets forth a true and complete list of all Indebtedness (excluding (i) the Senior Subordinated Notes, (ii) the Seller Note and (iii) the Loans and Letters of Credit) of Holdings, the Borrower and their respective Subsidiaries as of the Restatement Effective Date and which is to remain outstanding after giving effect to the Transaction (the "Existing Indebtedness"), in each case showing the aggregate principal amount thereof and the name of the respective borrower and any other entity which directly or indirectly guaranteed such debt. 7.23 Transaction. At the time of consummation thereof, the Transaction shall have been consummated in all material respects in accordance with the terms of the respective Documents and all applicable laws. At the time of consummation of the Transaction, all necessary material consents and approvals of, and filings and registrations with, and all other actions in respect of, all governmental agencies, authorities or instrumentalities required in order to make or consummate the Transaction will have been obtained, given, filed or taken and are or will be in full force and effect (or effective judicial relief with respect thereto has been obtained). All applicable waiting periods with respect thereto have or, prior to the time when required, will have, expired without, in all such cases, any action being taken by any competent authority which restrains, prevents, or imposes material adverse conditions upon the Transaction. Additionally, there does not exist any judgment, order or injunction prohibiting or imposing material adverse conditions upon the Transaction, or the occurrence of any Credit Event or the performance by Holdings or the Borrower of its obligations under the respective Credit Documents. All actions taken by Holdings and the Borrower pursuant to or in furtherance of the Transaction have been taken in all material respects in compliance with the respective Documents and all applicable laws. 7.24 Special Purpose Corporations. Holdings engages in no business activities other than the employment of management of the Borrower, except in connection with its ownership of the capital stock of the Borrower and liabilities incident thereto. 59 7.25 Updated Security Agreement and Pledge Agreement Schedules. The updated schedules to the Pledge Agreement and Security Agreement furnished pursuant to Sections 5.09 and 5.10 are true and correct, in all material respects, as of the Restatement Effective Date, and accurately present all information which was originally required to be scheduled pursuant to the Pledge Agreement and Security Agreement on the Original Effective Date, but modified to reflect the additional Credit Parties on the Restatement Effective Date and any changes which occurred between the Original Effective Date and the Restatement Effective Date. SECTION 8. Affirmative Covenants. Holdings and the Borrower hereby covenant and agree that on and after the Restatement Effective Date and until the Total Commitments and all Letters of Credit have terminated and the Loans, Notes and Unpaid Drawings, together with interest, Fees and all other obligations incurred hereunder and thereunder, are paid in full: 8.01 Information Covenants. Holdings and/or the Borrower will furnish to the Administrative Agent (with sufficient copies for each of the Banks) and the Administrative Agent will promptly thereafter furnish to each Bank: (a) Monthly Reports. Within 30 days after the end of each fiscal month of Holdings, the consolidated balance sheets of Holdings and its consolidated Subsidiaries (and Unrestricted Subsidiaries to the extent required to be consolidated with Holdings for financial reporting purposes in accordance with GAAP) as at the end of such month and the related consolidated statements of income (including consolidating income statements by each of the Borrower's Logic, Memory and Discrete Power and Signal Technologies Business Units (and, on and after the Restatement Effective Date, the Borrower's Analog and Mixed Signal Technologies Business Units), as well as booking, billing and backlog information related to such Business Units) and retained earnings and statement of cash flows for such month and for the elapsed portion of the fiscal year ended with the last day of such month, in each case setting forth comparative figures for the corresponding month in the prior fiscal year. (b) Quarterly Financial Statements. Within 45 days after the close of each of the first three quarterly accounting periods in each fiscal year of Holdings, (i) the consolidated and consolidating balance sheets of Holdings and its Consolidated Subsidiaries as at the end of such quarterly accounting period and the related consolidated and consolidating statements of income (including consolidating income statements by each of the Borrower's Logic, Memory and Discrete Power and Signal Technologies Business Units (and, on and after the Restatement Effective Date, the Borrower's Analog and Mixed Signal Technologies Business Units), as well as 60 booking, billing and backlog information related to such Business Units) and cash flows, in each case for such quarterly accounting period and for the elapsed portion of the fiscal year ended with the last day of such quarterly accounting period, and in each case, setting forth comparative figures for the related periods in the prior fiscal year, after the delivery of the first budget pursuant to Section 8.01(e), and the budgeted figures for such quarterly periods as set forth in the respective budget delivered pursuant to Section 8.01(e), all of which shall be certified by the chief financial officer or treasurer of Holdings, subject to normal year-end audit adjustments and (ii) management's discussion and analysis of the important operational and financial developments during the fiscal quarter and year-to-date periods. (c) Annual Financial Statements. Within 90 days after the close of each fiscal year of Holdings, (i) the consolidated and consolidating balance sheets of Holdings and its consolidated Subsidiaries (and Unrestricted Subsidiaries to the extent required to be consolidated with Holdings for financial reporting purposes in accordance with GAAP) as at the end of such fiscal year and the related consolidated and consolidating statements of income (including consolidating income statements by each of the Borrower's Logic, Memory and Discrete Power and Signal Technologies Business Units (and, on and after the Restatement Effective Date, the Borrower's Analog and Mixed Signal Technologies Business Units), as well as booking, billing and backlog information related to such Business Units) and retained earnings and of cash flows for such fiscal year setting forth comparative figures for the preceding fiscal year and certified (x) in the case of such consolidated financial statements, by KPMG Peat Marwick, LLP, or such other independent certified public accountants of recognized national standing reasonably acceptable to the Administrative Agent, together with a report of such accounting firm stating that in the course of its regular audit of the financial statements of Holdings and its Subsidiaries, which audit was conducted in accordance with generally accepted auditing standards, such accounting firm obtained no knowledge of any Default or Event of Default which has occurred and is continuing or, if in the opinion of such accounting firm such a Default or Event of Default has occurred and is continuing, a statement as to the nature thereof, and (y) in the case of such consolidating financial statements, by the chief financial officer or treasurer of Holdings, and (ii) management's discussion and analysis of the important operational and financial developments during such fiscal year. (d) Management Letters. Promptly after the receipt thereof by Holdings, the Borrower or any of their respective Subsidiaries, a copy of any "management letter" received by any such Person from its certified public accountants and the management's responses thereto. (e) Budgets. No later than 30 days following the commencement of the first day of each fiscal year of Holdings, a budget in form satisfactory to the 61 Agents (including budgeted statements of income by each of the Borrower's Logic, Memory and Discrete Power and Signal Technologies Business Units (as well as, on and after the Restatement Effective Date, the Borrower's Analog and Mixed Signal Technologies Business Units) and sources and uses of cash and balance sheets) prepared by Holdings for (x) each of the twelve months of such fiscal year prepared in detail and (y) each of the five years immediately following such fiscal year prepared in summary form, in each case, of Holdings and its Subsidiaries, accompanied by the statement of the chief financial officer or treasurer of Holdings to the effect that, to the best of his knowledge, the budget is a reasonable estimate for the period covered thereby. (f) Officer's Certificates. At the time of the delivery of the financial statements provided for in Section 8.01(a), (b) and (c), a certificate of the chairman of the board, the president, the chief financial officer or the treasurer of the Borrower to the effect that, to the best of such officer's knowledge, no Default or Event of Default has occurred and is continuing or, if any Default or Event of Default has occurred and is continuing, specifying the nature and extent thereof, which certificate shall, in the case of any such financial statements delivered in respect of a period ending on the last day of a fiscal quarter or year of Holdings, (x) set forth the calculations required to establish whether the Borrower was in compliance with the provisions of Sections 4.02(f), (g) and (h) (but with respect to Section 4.02(g) only to the extent delivered with the financial statements required by Sections 8.01(c)), 9.05, 9.07 and 9.08 through 9.10, inclusive, at the end of such fiscal quarter or year, as the case may be and (y) if delivered with the financial statements required by Section 8.01(c), set forth the amount of Excess Cash Flow for the respective Excess Cash Payment Period, if applicable. (g) Notice of Default or Litigation. Promptly, and in any event within three Business Days in the case of item (i) below or five Business Days in the case of item (ii) below after an officer of Holdings or the Borrower obtains knowledge thereof, notice of (i) the occurrence of any event which constitutes a Default or Event of Default and (ii) any litigation or governmental investigation or proceeding pending or threatened (x) against Holdings, the Borrower or any of their respective Subsidiaries which could reasonably be expected to have a Material Adverse Effect, (y) with respect to any Indebtedness in excess of $2,500,000 of Holdings, the Borrower or any of their respective Subsidiaries or (z) with respect to any Document. (h) Other Reports and Filings. Promptly, copies of all other financial information, reports, proxy materials and other information, if any, which Holdings, the Borrower or any of their respective Subsidiaries shall file with the Securities and Exchange Commission or any successor thereto (the "SEC") or deliver to holders of its Indebtedness pursuant to the terms of the documentation governing such 62 Indebtedness (or any trustee, agent or other representative therefor). (i) Environmental Matters. Promptly upon, and in any event within ten Business Days after, an officer of Holdings, the Borrower or any of their respective Subsidiaries obtains knowledge thereof, notice of one or more of the following environmental matters which occurs after the Restatement Effective Date, unless such environmental matters could not, individually or when aggregated with all other such environmental matters, be reasonably expected to have a Material Adverse Effect: (i) any Environmental Claim pending or threatened in writing against Holdings, the Borrower or any of their respective Subsidiaries or any Real Property owned or operated by Holdings, the Borrower or any of their respective Subsidiaries; (ii) any condition or occurrence on or arising from any Real Property owned or operated by Holdings, the Borrower or any of their respective Subsidiaries that (a) results in noncompliance by Holdings, the Borrower or any of their respective Subsidiaries with any applicable Environmental Law or (b) could reasonably be expected to form the basis of an Environmental Claim against Holdings, the Borrower or any of their respective Subsidiaries or any such Real Property; (iii) any condition or occurrence on any Real Property owned or operated by Holdings, the Borrower or any of their respective Subsidiaries that could reasonably be expected to cause such Real Property to be subject to any restrictions on the ownership, occupancy, use or transferability by Holdings, the Borrower or any of their respective Subsidiaries of such Real Property under any Environmental Law; and (iv) the taking of any removal or remedial action in response to the actual or alleged presence of any Hazardous Material on any Real Property owned or operated by Holdings, the Borrower or any of their respective Subsidiaries as required by any Environmental Law or any governmental or other administrative agency; provided that in any event Holdings and/or the Borrower shall deliver to the Administrative Agent all material notices received by it or any of their respective Subsidiaries from any government or governmental agency under, or pursuant to, CERCLA. All such notices shall describe in reasonable detail the nature of the claim, investigation, condition, occurrence or removal or remedial action and Holdings', the Borrower's or such Subsidiary's response thereto. In addition, the Borrower will provide the Banks with copies of all material communications with any government or governmental agency and all material communications with any Person (other than 63 Holdings', the Borrower's or any Subsidiary's attorneys) relating to any Environmental Claim of which notice is required to be given pursuant to this Section 8.01(i), and such detailed reports of any such Environmental Claim as may reasonably be requested by the Banks. (j) Annual Meetings with Banks. At the request of Administrative Agent, Holdings shall within 120 days after the close of each fiscal year of Holdings hold a meeting at a time and place selected by Holdings and acceptable to the Agents with all of the Banks at which meeting shall be reviewed the financial results of the previous fiscal year and the financial condition of Holdings and its Subsidiaries and the budgets presented for the current fiscal year of Holdings and its Subsidiaries. (k) Other Information. From time to time, such other information or documents (financial or otherwise) with respect to Holdings, the Borrower or their respective Subsidiaries as any Agent (whether acting on its own or at the request of any Bank) may reasonably request in writing. 8.02 Books, Records and Inspections. Holdings and the Borrower will, and will cause each of their respective Subsidiaries to, keep proper books of record and account in which full, true and correct entries in conformity with generally accepted accounting principles and all requirements of law shall be made of all dealings and transactions in relation to its business and activities. Holdings and the Borrower will, and will cause each of their respective Subsidiaries to, permit officers and designated representatives of any of the Agents or any Bank to visit and inspect, during regular business hours and under guidance of officers of Holdings, the Borrower or such Subsidiary, any of the properties of Holdings and the Borrower or such Subsidiary, and to examine the books of account of Holdings and the Borrower or such Subsidiary and discuss the affairs, finances and accounts of Holdings, the Borrower or such Subsidiary with, and be advised as to the same by, its and their officers and independent accountants, all upon reasonable advance notice and at such reasonable times and intervals and to such reasonable extent as such Agent or such Bank may request. 8.03 Maintenance of Property; Insurance. (a) Schedule VI sets forth a true and complete listing of all insurance maintained by Holdings, the Borrower and their respective Subsidiaries as of the Restatement Effective Date. Holdings and the Borrower will, and will cause each of their respective Subsidiaries to, (i) keep all property necessary in its business in good working order and condition (ordinary wear and tear and loss or damage by casualty or condemnation excepted), (ii) maintain insurance on all its property in at least such amounts and against at least such risks as is consistent and in accordance with industry practice and (iii) furnish to each Bank, upon written request, full information as to the insurance carried. In addition to the requirements of the immediately preceding sentence, Holdings and the Borrower will at all times cause insurance of the types described in Schedule VI to be 64 maintained (with the same scope of coverage as that described in Schedule VI) at levels which are at least as great as the respective amount described opposite the respective type of insurance on Schedule VI under the column headed "Minimum Amount Required to be Maintained". (b) Holdings and the Borrower will, and will cause their respective Subsidiaries to, at all times keep their respective property insured in favor of the Collateral Agent, and all policies or certificates (or certified copies thereof) with respect to such insurance (and any other insurance maintained by Holdings, the Borrower or any of their respective Subsidiaries) (i) shall be endorsed to the Collateral Agent's satisfaction for the benefit of the Collateral Agent (including, without limitation, by naming the Collateral Agent as loss payee or as an additional insured), (ii) shall state that such insurance policies shall not be cancelled without 30 days' prior written notice thereof by the respective insurer to the Collateral Agent, (iii) shall provide that the respective insurers irrevocably waive any and all rights of subrogation with respect to the Collateral Agent and the Secured Creditors, (iv) shall contain the standard non-contributing mortgage clause endorsement in favor of the Collateral Agent with respect to hazard liability insurance, (v) shall, except in the case of public liability insurance, provide that any losses shall be payable notwithstanding (A) any act or neglect of Holdings, the Borrower or any of their respective Subsidiaries, (B) the occupation or use of the properties for purposes more hazardous than those permitted by the terms of the respective policy if such coverage is obtainable at commercially reasonable rates and is of the kind from time to time customarily insured against by Persons owning or using similar property and in such amounts as are customary, (C) any foreclosure or other proceeding relating to the insured properties or (D) any change in the title to or ownership or possession of the insured properties and (vi) shall be deposited with the Collateral Agent. (c) If Holdings, the Borrower or any of their respective Subsidiaries shall fail to maintain all insurance in accordance with this Section 8.03, or if Holdings, the Borrower or any of their respective Subsidiaries shall fail to so endorse and deposit all policies or certificates with respect thereto, the Administrative Agent and/or the Collateral Agent shall have the right (but shall be under no obligation), upon thirty days advance notice to Holdings, the Borrower or any of their respective Subsidiaries, as the case may be, to procure such insurance and the Borrower agrees to reimburse the Administrative Agent or the Collateral Agent as the case may be, for all costs and expenses of procuring such insurance. 8.04 Corporate Franchises. Holdings and the Borrower will, and will cause each of their respective Subsidiaries to, do or cause to be done, all things necessary to preserve and keep in full force and effect its existence and its material rights, franchises, licenses and patents used in its business; provided, however, that nothing in this Section 8.04 shall prevent (i) sales of assets, consolidations or mergers by or involving Holdings, the Borrower or any of their respective Subsidiaries in accordance with Section 9.02, (ii) the withdrawal by Holdings, the Borrower or any of their respective Subsidiaries of their qualification as a foreign corporation in any 65 jurisdiction where such withdrawal could not reasonably be expected to have a Material Adverse Effect or (iii) the abandonment by Holdings, the Borrower or any of their respective Subsidiaries of any rights, franchises, licenses and patents that the Borrower reasonably determines are not useful to its business. 8.05 Compliance with Statutes, etc. Holdings and the Borrower will, and will cause each of their respective Subsidiaries to, comply with all applicable statutes, regulations and orders of, and all applicable restrictions imposed by, all governmental bodies, domestic or foreign, in respect of the conduct of its business and the ownership of its property, except such noncompliances as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. 8.06 Compliance with Environmental Laws. (a) Holdings and the Borrower will comply, and will cause each of their respective Subsidiaries to comply, in all material respects with all Environmental Laws applicable to the ownership or use of its Real Property now or hereafter owned or operated by Holdings, the Borrower or any of their respective Subsidiaries, will within a reasonable time-period pay or cause to be paid all costs and expenses incurred in connection with such compliance (except to the extent being contested in good faith), and will keep or cause to be kept all such Real Property free and clear of any Liens imposed pursuant to such Environmental Laws. None of Holdings, the Borrower nor any of their respective Subsidiaries will generate, use, treat, store, release or dispose of, or permit the generation, use, treatment, storage, release or disposal of Hazardous Materials on any Real Property now or hereafter owned or operated by Holdings, the Borrower or any of their respective Subsidiaries, or transport or permit the transportation of Hazardous Materials to or from any such Real Property except in material compliance with all applicable Environmental Laws and reasonably required in connection with the operation, use and maintenance of any such Real Property or otherwise in connection with their businesses. (b) At the written request of the Administrative Agent or the Required Banks, which request shall specify in reasonable detail the basis therefor, at any time and from time to time, the Borrower will provide, at the Borrower's sole cost and expense, an environmental site assessment report concerning any Real Property now or hereafter owned or operated by Holdings, the Borrower or any of their respective Subsidiaries, prepared by an environmental consulting firm reasonably acceptable to the Administrative Agent, indicating the presence or absence of Hazardous Materials and the potential cost of any removal or remedial action in connection with any Hazardous Materials on such Real Property; provided, that such request may be made only if (i) there has occurred and is continuing an Event of Default, (ii) the Administrative Agent or the Required Banks reasonably believe that Holdings, the Borrower or any such Real Property is not in compliance with Environmental Law and such circumstances could reasonably be expected to have a Material Adverse Effect, or (iii) circumstances exist that reasonably could be expected to form the basis of a material Environ- 66 mental Claim against Holdings, the Borrower or any such Real Property. If the Borrower fails to provide the same within 90 days after such request was made, the Administrative Agent may order the same, and the Borrower shall grant and hereby grants to the Administrative Agent and the Banks and their agents access to such Real Property and specifically grants the Administrative Agent and the Banks an irrevocable non-exclusive license, subject to the rights of tenants, to undertake such an assessment, all at the Borrower's expense. 8.07 ERISA. As soon as reasonably possible and, in any event, within 10 days after Holdings, the Borrower or any of their respective Subsidiaries or any ERISA Affiliate knows or has reason to know of the occurrence of any of the following, Holdings or the Borrower will deliver to each of the Banks a certificate of the chief financial officer of Holdings or the Borrower setting forth the full details as to such occurrence and the action, if any, that Holdings, the Borrower, such Subsidiary or such ERISA Affiliate is required or proposes to take, together with any notices required or proposed to be given to or filed with or by Holdings, the Borrower, the Subsidiary, the ERISA Affiliate, the PBGC, a Plan participant or the Plan administrator with respect thereto: that a Reportable Event has occurred (except to the extent that Holdings or the Borrower has previously delivered to the Banks a certificate and notices (if any) concerning such event pursuant to the next clause hereof); that a contributing sponsor (as defined in Section 4001(a)(13) of ERISA) of a Plan subject to Title IV of ERISA is subject to the advance reporting requirement of PBGC Regulation Section 4043.61 (without regard to subparagraph (b)(1) thereof), and an event described in subsection .62, .63, .64, .65, .66, .67 or .68 of PBGC Regulation Section 4043 is reasonably expected to occur with respect to such Plan within the following 30 days; that an accumulated funding deficiency, within the meaning of Section 412 of the Code or Section 302 of ERISA, has been incurred or an application may be or has been made for a waiver or modification of the minimum funding standard (including any required installment payments) or an extension of any amortization period under Section 412 of the Code or Section 303 or 304 of ERISA with respect to a Plan; that any contribution required to be made with respect to a Plan or Foreign Pension Plan has not been timely made; that a Plan has been or may be reasonably expected to be terminated, reorganized, partitioned or declared insolvent under Title IV of ERISA; that a Plan has an Unfunded Current Liability; that proceedings may be reasonably expected to be or have been instituted to terminate or appoint a trustee to administer a Plan which is subject to Title IV of ERISA; that a proceeding has been instituted pursuant to Section 515 of ERISA to collect a delinquent contribution to a Plan; that Holdings, the Borrower, any of their respective Subsidiaries or any ERISA Affiliate will or may reasonably expect to incur any liability (including any indirect, contingent, or secondary liability) to or on account of the termination of or withdrawal from a Plan under Section 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or with respect to a Plan under Section 401(a)(29), 4971, 4975 or 4980 of the Code or Section 409 or 502(i) or 502(l) of ERISA or with respect to a group health plan (as defined in Section 607(1) of ERISA or Section 4980B(g)(2) of the Code) under Section 4980B of the Code; or that Holdings, the Borrower, or any of their respective Subsidiaries may incur any material liability pursuant to any employee welfare benefit plan (as defined in Section 3(1) of ERISA) that provides 67 benefits to retired employees or other former employees (other than as required by Section 601 of ERISA) or any Plan or any Foreign Pension Plan. Upon request, the Borrower will deliver to any of the Banks (i) a complete copy of the annual report (on Internal Revenue Service Form 5500-series) of each Plan (including, to the extent required, the related financial and actuarial statements and opinions and other supporting statements, certifications, schedules and information) required to be filed with the Internal Revenue Service and (ii) copies of any records, documents or other information that must be furnished to the PBGC with respect to any Plan pursuant to Section 4010 of ERISA. In addition to any certificates or notices delivered to the Banks pursuant to the first sentence hereof, copies of annual reports and any records, documents or other information required to be furnished to the PBGC, and any material notices received by Holdings, the Borrower, any of their respective Subsidiaries or any ERISA Affiliate with respect to any Plan or Foreign Pension Plan shall be delivered to the Banks no later than 10 days after the date such annual report has been filed with the Internal Revenue Service or such records, documents and/or information has been furnished to the PBGC or such notice has been received by Holdings, the Borrower, the Subsidiary or the ERISA Affiliate, as applicable. 8.08 End of Fiscal Years; Fiscal Quarters. Holdings shall cause (i) each of its, and each of its Subsidiaries', fiscal years to end on the Sunday closest to the last day in May of each year and (ii) its fiscal quarters to end in a manner consistent therewith. 8.09 Performance of Obligations. Each of Holdings and the Borrower will, and will cause each of its Subsidiaries to, perform all of its obligations under the terms of each mortgage, indenture, security agreement and other debt instrument by which it is bound, except such non-performances as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. 8.10 Payment of Taxes. Each of Holdings and the Borrower will pay and discharge, and will cause each of their respective Subsidiaries to pay and discharge, all taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits, or upon any properties belonging to it, prior to the date on which penalties attach thereto, and all lawful claims for sums that have become due and payable which, if unpaid, might become a Lien not otherwise permitted under Section 9.01(i), provided, that none of Holdings, the Borrower nor any of their respective Subsidiaries shall be required to pay any such tax, assessment, charge, levy or claim which is being contested in good faith and by proper proceedings if it has maintained adequate reserves with respect thereto in accordance with GAAP. 8.11 Ownership of Subsidiaries. Holdings shall at all times own 100% of the outstanding capital stock of the Borrower. The Borrower shall directly or indirectly own 68 (except to the extent permitted by Section 9.13(b)(iii)) 100% of the capital stock of each Subsidiary of Holdings other than the Borrower. 8.12 Additional Security; Further Assurances; Surveys. (a) Holdings and the Borrower will, and will cause each of their respective Domestic Wholly-Owned Subsidiaries to, grant to the Collateral Agent security interests and mortgages (an "Additional Mortgage") in such Real Property (excluding leaseholds of Real Property where the fair market value of the respective leasehold interest is less than $1,000,000) of Holdings, the Borrower or any of their respective Domestic Wholly-Owned Subsidiaries as are not covered by the Original Mortgages or New Mortgages, to the extent acquired after the Original Effective Date, and as may be requested from time to time by the Administrative Agent or the Required Banks (each such Real Property, an "Additional Mortgaged Property"). All such Additional Mortgages shall be granted pursuant to documentation substantially in the form of the Original Mortgages delivered to the Administrative Agent on the Original Effective Date or in such other form as is reasonably satisfactory to the Administrative Agent and shall constitute valid and enforceable perfected Liens superior to and prior to the rights of all third Persons and subject to no other Liens except as are permitted by Section 9.01 at the time of perfection thereof. The Additional Mortgages or 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 Additional Mortgages and all taxes, fees and other charges payable in connection therewith shall be paid in full. (b) Holdings and the Borrower will, and will cause each of their respective Domestic Wholly-Owned Subsidiaries to, at the expense of the Borrower, make, execute, endorse, acknowledge, file and/or deliver to the Collateral Agent from time to time such vouchers, invoices, schedules, confirmatory assignments, conveyances, financing statements, transfer endorsements, powers of attorney, certificates, real property surveys, reports and other assurances or instruments and take such further steps relating to the Collateral covered by any of the Security Documents as the Collateral Agent may reasonably require pursuant to this Section 8.12. Additionally, upon the request of the Collateral Agent or the Required Banks, Holdings and the Borrower shall take, or cause to be taken, action as may be requested in order to perfect (or maintain the perfection of) the security interests (or take any analogous actions under the applicable provisions of local law in order to protect such security interests) in any Collateral located outside the U.S., in each case to the extent such actions are permitted to be taken under the laws of the applicable jurisdictions and so long as no Default or Event of Default exists, the requested actions will not result in any material costs (including additional taxes) or material burdens in the conduct of the Borrower's business, in each case in relation to the benefit to be received. Furthermore, Holdings and the Borrower shall cause to be delivered to the Collateral Agent such opinions of counsel, title insurance and other related documents as may be reasonably requested by the Collateral Agent to assure itself that this Section 8.12 has been complied with. 69 (c) Holdings and the Borrower agree to cause each Domestic Wholly-Owned Subsidiary established or created in accordance with Section 9.14 to execute and deliver, (i) in the case of the first such Subsidiary so established or created (unless a Subsidiaries Guaranty has been executed and delivered prior to such date pursuant to Section 5.10), the Subsidiaries Guaranty and (ii) otherwise, a guaranty of all Obligations and all obligations under Interest Rate Protection or Other Hedging Agreements in substantially the form of the Subsidiaries Guaranty. (d) The Borrower agrees to pledge and deliver, or cause to be pledged and delivered, all of the capital stock of each new Subsidiary (excluding that portion of the voting stock of any Foreign Subsidiary which would be in excess of 65% of the total outstanding voting stock of such Foreign Subsidiary) established or created after the Original Effective Date, to the extent owned by Holdings, the Borrower or any Domestic Wholly-Owned Subsidiary, to the Collateral Agent for the benefit of the Secured Creditors pursuant to the Pledge Agreement. (e) Holdings and the Borrower will cause each Domestic Wholly-Owned Subsidiary established or created in accordance with Section 9.14 to grant to the Collateral Agent a first priority (subject to Permitted Liens) Lien on property (tangible and intangible) of such Subsidiary upon terms and with exceptions similar to those set forth in the Security Documents as appropriate, and satisfactory in form and substance to the Borrower, the Administrative Agent and Required Banks. Holdings and the Borrower shall cause each such Domestic Wholly-Owned Subsidiary, at its own expense, to execute, acknowledge and deliver, or cause the execution, acknowledgement and delivery of, and thereafter register, file or record in any appropriate governmental office, any document or instrument reasonably deemed by the Collateral Agent to be necessary or desirable for the creation and perfection of the foregoing Liens. Holdings and the Borrower will cause each of such Domestic Wholly-Owned Subsidiaries to take all actions reasonably requested by the Administrative Agent (including, without limitation, the filing of UCC-1's) in connection with the granting of such security interests. (f) The security interests required to be granted pursuant to this Section 8.12 shall be granted pursuant to security documentation (which shall be substantially similar to the Security Documents already executed and delivered by the Borrower or its Subsidiaries, as applicable) or otherwise satisfactory in form and substance to the Collateral Agent and the Borrower and shall constitute valid and enforceable perfected security interests prior to the rights of all third Persons and subject to no other Liens except such Liens as are permitted by Section 9.01. The Additional Security Documents and other instruments related thereto shall be duly recorded or filed in such manner and in such places and at such times as are required by law to establish, perfect, preserve and protect the Liens, in favor of the Collateral Agent for the benefit of the respective Secured Creditors, required to be granted pursuant to the Additional Security Documents and all taxes, fees and other charges payable in connection 70 therewith shall be paid in full by the Borrower. At the time of the execution and delivery of the Additional Security Documents, the Borrower shall cause to be delivered to the Collateral Agent such opinions of counsel, Mortgage Policies, title surveys, real estate appraisals and other related documents as may be reasonably requested by the Agents or the Required Banks to assure themselves that this Section 8.12 has been complied with. (g) Each of Holdings and the Borrower agrees that each action required above by Section 8.12 (a) or (b) shall be completed as soon as possible, but in no event later than 90 days after such action is requested to be taken by the Administrative Agent or the Required Banks. Each of Holdings and the Borrower further agrees that each action required by Sections 8.12(c), (d), (e) and (f) with respect to the creation or acquisition of a new Subsidiary shall be completed contemporaneously with (or, in the case of any documents or instruments to be registered, filed or recorded, within 10 days of) the creation of such new Subsidiary. 8.13 Interest Rate Protection. From the Restatement Effective Date through March 11, 2000, the Borrower shall maintain non-speculative Interest Rate Protection Agreements acceptable to the Agents establishing a fixed or maximum interest rate acceptable to the Agents for an aggregate amount with respect to the Term Loans outstanding from time to time as is equal to at least 30% of the aggregate principal amount of Term Loans then outstanding. 8.14 Foreign Subsidiaries Security. If following a change in the relevant sections of the Code or the regulations, rules, rulings, notices or other official pronouncements issued or promulgated thereunder, counsel for the Borrower acceptable to the Administrative Agent and the Required Banks does not within 30 days after a request from the Administrative Agent or the Required Banks deliver to the Administrative Agent evidence, in form and substance satisfactory to the Administrative Agent and the Required Banks, with respect to any Foreign Subsidiary which has not already had all of its stock pledged pursuant to the Pledge Agreement that a pledge of 66-2/3% or more of the total combined voting power of all classes of capital stock of such Foreign Subsidiary entitled to vote, would cause the undistributed earnings of such Foreign Subsidiary as determined for Federal income tax purposes to be treated as a deemed dividend to such Foreign Subsidiary's United States parent for Federal income tax purposes, then that portion of such Foreign Subsidiary's outstanding capital stock not theretofore pledged pursuant to the Pledge Agreement shall be pledged to the Collateral Agent for the benefit of the Secured Creditors pursuant to the Pledge Agreement (or another pledge agreement in substantially similar form, if needed), to the extent that the entering into such Pledge Agreement is permitted by the laws of the respective foreign jurisdiction and with all documents delivered pursuant to this Section 8.14 to be in form and substance reasonably satisfactory to the Administrative Agent and the Required Banks. 8.15 Maintenance of Corporate Separateness. 71 Holdings will, and will cause each of its Subsidiaries and Unrestricted Subsidiaries to, satisfy customary corporate formalities, including the holding of regular board of directors' and shareholders' meetings or action by directors or shareholders without a meeting and the maintenance of corporate offices and records. Neither Holdings nor any of its Subsidiaries shall make any payment to a creditor of any Unrestricted Subsidiaries in respect of any liability of any Unrestricted Subsidiaries, and no bank account of any Unrestricted Subsidiary shall be commingled with any bank account of Holdings or any of its Subsidiaries. Any financial statements distributed to any creditors of any Unrestricted Subsidiaries shall clearly establish or indicate the corporate separateness of such Unrestricted Subsidiary from Holdings and its Subsidiaries. Finally, neither Holdings nor any of its Subsidiaries shall take any action, or conduct its affairs in a manner, which is likely to result in the corporate existence of Holdings or any of its Subsidiaries or Unrestricted Subsidiaries being ignored, or in the assets and liabilities of Holdings or any of its Subsidiaries being substantively consolidated with those of any other such Person or any Unrestricted Subsidiary in a bankruptcy, reorganization or other insolvency proceeding. SECTION 9. Negative Covenants. Holdings and the Borrower covenant and agree that on and after the Restatement Effective Date and until the Total Commitments and all Letters of Credit have terminated and the Loans, Notes and Unpaid Drawings, together with interest, Fees and all other Obligations incurred hereunder and thereunder, are paid in full: 9.01 Liens. Holdings will not, and will not permit any of its Subsidiaries to, create, incur, assume or suffer to exist any Lien upon or with respect to any property or assets (real or personal, tangible or intangible) of Holdings or any of its Subsidiaries, whether now owned or hereafter acquired, or sell any such property or assets subject to an understanding or agreement, contingent or otherwise, to repurchase such property or assets (including sales of accounts receivable with recourse to Holdings or any of its Subsidiaries), or assign any right to receive income or permit the filing of any financing statement under the UCC or any other similar notice of Lien under any similar recording or notice statute; provided that the provisions of this Section 9.01 shall not prevent the creation, incurrence, assumption or existence of the following (Liens described below are herein referred to as "Permitted Liens"): (i) inchoate Liens for taxes, assessments or governmental charges or levies not yet due and payable or Liens for taxes, assessments or governmental charges or levies being contested in good faith and by appropriate proceedings for which adequate reserves have been established in accordance with generally accepted accounting principles in the United States (or the equivalent thereof in any country in which a Foreign Subsidiary is doing business, as applicable); (ii) Liens in respect of property or assets of the Borrower or any of its Subsidiaries imposed by law, which were incurred in the ordinary course of business 72 and do not secure Indebtedness for borrowed money, such as carriers', warehousemen's, materialmen's and mechanics' liens and other similar Liens arising in the ordinary course of business, and (x) which do not in the aggregate materially detract from the value of the property or assets of Holdings and its Subsidiaries taken as a whole or the Borrower and do not materially impair the use thereof in the operation of the business of Holdings and its Subsidiaries taken as a whole or the Borrower or (y) which are being contested in good faith by appropriate proceedings, 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; (iii) Liens in existence on the Restatement Effective Date which are listed, and the property subject thereto described, in Schedule IV, but only to the respective date, if any, set forth in such Schedule IV for the removal and termination of any such Liens, plus renewals and extensions of such Liens to the extent set forth on Schedule IV, provided that (x) the aggregate principal amount of the Indebtedness, if any, secured by such Liens does not increase from that amount outstanding at the time of any such renewal or extension and (y) any such renewal or extension does not encumber any additional assets or properties of Holdings or any of its Subsidiaries; (iv) Permitted Encumbrances; (v) Liens created pursuant to the Security Documents; (vi) licenses, leases or subleases granted to other Persons in the ordinary course of business not materially interfering with the conduct of the business of Holdings and its Subsidiaries taken as a whole; (vii) Liens upon assets of the Borrower and its Subsidiaries subject to Capitalized Lease Obligations to the extent permitted by Section 9.04, provided that (x) such Liens only serve to secure the payment of Indebtedness arising under such Capitalized Lease Obligation and (y) the Lien encumbering the asset giving rise to the Capitalized Lease Obligation does not encumber any other asset (other than proceeds thereof) of the Borrower or any Subsidiary of the Borrower; (viii) Liens placed upon assets used in the ordinary course of business of the Borrower or any of its Subsidiaries at the time of acquisition thereof by the Borrower or any such Subsidiary or within 90 days thereafter to secure Indebtedness incurred to pay all or a portion of the purchase price thereof, provided that (x) the aggregate outstanding principal amount of all Indebtedness secured by Liens permitted by this clause (viii) shall not at any time exceed $2,500,000 and (y) in all events, the Lien encumbering the assets so acquired does not encumber any other asset (other than proceeds thereof) of the Borrower or such Subsidiary; 73 (ix) easements, rights-of-way, restrictions (including zoning restrictions), covenants, encroachments, protrusions and other similar charges or encumbrances, and minor title deficiencies, in each case whether now or hereafter in existence, not securing Indebtedness and not materially interfering with the conduct of the business of the Holdings and its Subsidiaries taken as a whole or the Borrower; (x) Liens arising from precautionary UCC financing statement filings regarding operating leases entered into by the Borrower or any of its Subsidiaries in the ordinary course of business; (xi) Liens arising out of judgments or awards in respect of which the Borrower or any of its Subsidiaries shall in good faith be prosecuting an appeal or proceedings for review in respect of which there shall have been secured a subsisting stay of execution pending such appeal or proceedings, provided that the aggregate amount of all such judgments or awards (and any cash and the fair market value of any property subject to such Liens) does not exceed $1,000,000 at any time outstanding; (xii) statutory and common law landlords' liens under leases or subleases to which the Borrower or any of its Subsidiaries is a party; (xiii) Liens (other than any Lien imposed by ERISA) (x) incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security, (y) to secure the performance of tenders, statutory obligations (other than excise taxes), surety, stay, customs and appeal bonds, statutory bonds, bids, leases, government contracts, trade contracts, performance and return of money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money) or (z) arising by virtue of deposits made in the ordinary course of business to secure liability for premiums to insurance carriers, provided that the aggregate amount of deposits at any time pursuant to sub-clause (y) and sub-clause (z) shall not exceed $500,000 in the aggregate; (xiv) any interest or title of a lessor, sublessor, licensee or licensor under any lease or license agreement permitted by this Agreement; (xv) Liens in favor of customs and revenue authorities arising as a matter of law to secure the payment of customs duties in connection with the importation of goods; (xvi) Liens arising out of conditional sale, title retention, consignment or similar arrangements for the sale of goods entered into by the Borrower or any of its 74 Subsidiaries in the ordinary course of business in accordance with the past practices of the Borrower and its Subsidiaries; (xvii) Liens on assets of Foreign Subsidiaries, provided that (x) such Liens do not extend to, or encumber, assets which constitute Collateral or the capital stock of the Borrower or any of its Subsidiaries and (y) such Liens extending to the assets of any Foreign Subsidiary secure only Indebtedness incurred by such Foreign Subsidiary pursuant to Section 9.04(xiv); and (xviii) Liens not otherwise permitted by the foregoing clauses (i) through (xvii) to the extent attaching to properties and assets with an aggregate fair value not in excess of, and securing liabilities not in excess of, $10,000,000 in the aggregate at any time outstanding. 9.02 Consolidation, Merger, Purchase or Sale of Assets, etc. Holdings will not, and will not permit any of its Subsidiaries to, wind up, liquidate or dissolve its affairs or enter into any transaction of merger or consolidation, or convey, sell, lease or otherwise dispose of (or agree to do any of the foregoing at any future time) all or any part of its property or assets, or enter into any sale-leaseback transactions, or purchase or otherwise acquire (in one or a series of related transactions) any part of the property or assets (other than purchases or other acquisitions of inventory, materials, equipment and intangible assets in the ordinary course of business) of any Person (or agree to do any of the foregoing at any future time), except that: (i) Capital Expenditures by the Borrower and its Subsidiaries shall be permitted to the extent not in violation of Section 9.07; (ii) each of the Borrower and its Subsidiaries may (x) in the ordinary course of business, sell, lease or otherwise dispose of any assets which, in the reasonable judgment of such Person, are obsolete, worn out or otherwise no longer useful in the conduct of such Person's business and (y) sell, lease or otherwise dispose of any other assets, provided that the aggregate Net Sale Proceeds of all assets subject to sales or other dispositions pursuant to this clause (ii) shall not exceed $5,000,000 in any four fiscal quarters of the Borrower; (iii) investments may be made to the extent permitted by Section 9.05; (iv) each of the Borrower and its Subsidiaries may lease (as lessee) real or personal property in the ordinary course of business (so long as any such lease does not create a Capitalized Lease Obligation except to the extent permitted by Section 9.04); 75 (v) each of the Borrower and its Subsidiaries may make sales or transfers of inventory in the ordinary course of business and consistent with past practices (including without limitation sales or transfers of inventory by the Borrower to its Subsidiaries); (vi) the Borrower and its Subsidiaries may sell or discount, in each case without recourse and in the ordinary course of business, overdue accounts receivable arising in the ordinary course of business, but only in connection with the compromise or collection thereof consistent with customary industry practice (and not as part of any bulk sale); (vii) licenses or sublicenses by the Borrower and its Subsidiaries of software, trademarks and other intellectual property in the ordinary course of business and which do not materially interfere with the business of Holdings and its Subsidiaries taken as a whole or the Borrower shall be permitted; (viii) the Acquisition shall be permitted in accordance with the requirements of Section 5.06; (ix) the Borrower or any Domestic Wholly-Owned Subsidiary of the Borrower may transfer assets or lease to or acquire or lease assets from the Borrower or any other Domestic Wholly-Owned Subsidiary, or any Domestic Wholly-Owned Subsidiary may be merged into the Borrower (as long as the Borrower is the surviving corporation of such merger as a Wholly-Owned Subsidiary of) or any other Domestic Wholly-Owned Subsidiary of the Borrower; and (x) the Borrower and its Subsidiaries, taken as a whole, may incur Tools and Molding Expenditures in aggregate amounts not to exceed $10,000,000 during any fiscal year. To the extent the Required Banks waive the provisions of this Section 9.02 with respect to the sale of any Collateral, or any Collateral is sold as permitted by this Section 9.02, such Collateral (unless sold to Holdings or a Subsidiary of Holdings) shall be sold free and clear of the Liens created by the Security Documents, and the Administrative Agent and Collateral Agent shall be authorized to take any actions deemed appropriate in order to effect the foregoing. 9.03 Dividends. Holdings shall not, and shall not permit any of its Subsidiaries to, authorize, declare or pay any Dividends with respect to Holdings or any of its Subsidiaries, except that: (i) any Subsidiary of the Borrower (x) may pay cash Dividends to the Borrower or any Wholly-Owned Subsidiary of the Borrower and (y) if such 76 Subsidiary is not a Wholly-Owned Subsidiary, may pay cash Dividends to its shareholders generally so long as the Borrower or its respective 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); (ii) so long as there shall exist no Default or Event of Default (both before and after giving effect to the payment thereof), Holdings may repurchase outstanding shares of its common stock (or options to purchase such common stock) following the death, disability, retirement or termination of employment of employees, officers or directors of Holdings or any of its Subsidiaries, provided that (x) all amounts used to effect such repurchases are obtained by Holdings from a substantially concurrent issuance of its common stock (or options to purchase such common stock) to other employees, members of management, executive officers or directors of Holdings or any of its Subsidiaries or (y) to the extent the proceeds used to effect any repurchase pursuant to this clause (y) are not obtained as described in preceding clause (x), the aggregate amount of Dividends paid by Holdings pursuant to this clause (ii) (exclusive of amounts paid as described pursuant to preceding clause (x)) shall not exceed $1,000,000 in any fiscal year of Holdings, provided that, in the event that the maximum amount which is permitted to be expended in respect of Dividends during any fiscal year pursuant to this clause (ii)(y) is not fully expended during such fiscal year, the maximum amount which may be expended during the immediately succeeding fiscal year pursuant to this clause (ii)(y) shall be increased by such unutilized amount; (iii) the Borrower may pay cash Dividends to Holdings for the purpose of paying, so long as all proceeds thereof are promptly used by Holdings to pay, its operating expenses incurred in the ordinary course of business and other corporate overhead costs and expenses (including, without limitation, legal and accounting expenses and similar expenses), provided that the aggregate amount of Dividends paid by Holdings pursuant to this clause (iii) shall not exceed $500,000 in any fiscal year of Holdings; (iv) the Borrower may pay cash Dividends to Holdings for the purpose of paying, so long as all proceeds thereof are promptly used by Holdings to pay, franchise taxes and federal, state and local income taxes and interest and penalties with respect thereto, if any, payable by Holdings, provided that any refund shall be promptly returned by Holdings to the Borrower; (v) the Borrower may pay cash Dividends to Holdings for the purpose of enabling Holdings to pay the Dividends referred to in clause (ii) above, so long as all proceeds thereof are promptly used by Holdings to pay such Dividends; and 77 (vi) the exchange of Holdings Junior Subordinated Debentures for Holdings Series A Preferred Stock, to the extent permitted as provided in Section 9.04(xv), shall be permitted. 9.04 Indebtedness. Holdings will not, and will not permit any of its Subsidiaries to, contract, create, incur, assume or suffer to exist any Indebtedness, except: (i) Indebtedness incurred pursuant to this Agreement and the other Credit Documents; (ii) Indebtedness of the Borrower pursuant to the Senior Subordinated Notes in an aggregate principal amount not to exceed $300,000,000 less the aggregate amount of all repayments of Senior Subordinated Notes effected after the Original Effective Date; (iii) Existing Indebtedness shall be permitted to the extent actually outstanding on the Restatement Effective Date and as the same is listed on Schedule V, but no refinancings or renewals thereof; (iv) accrued expenses and trade accounts payable incurred in the ordinary course; (v) Indebtedness under non-speculative Interest Rate Protection Agreements entered into in compliance with Section 8.13, and such other non-speculative Interest Rate Protection Agreements which may be entered into from time to time by the Borrower and which the Borrower in good faith believes will provide protection against fluctuations in interest rates with respect to outstanding floating rate Indebtedness then outstanding, and permitted to remain outstanding, pursuant to the other provisions of this Section 9.04; (vi) Indebtedness evidenced by Capitalized Lease Obligations to the extent permitted pursuant to Section 9.07, provided that in no event shall the aggregate principal amount of Capitalized Lease Obligations permitted by this clause (vi) exceed $5,000,000 at any time outstanding; (vii) Indebtedness subject to Liens permitted under Section 9.01(viii), so long as the outstanding amount of such Indebtedness does not exceed the amount provided in said Section 9.01(viii); (viii) intercompany Indebtedness of the Borrower and its Subsidiaries outstanding to the extent permitted by Section 9.05(vii) and/or (x); 78 (ix) in addition to any Indebtedness permitted by the preceding clause (viii), Indebtedness of any Wholly-Owned Subsidiary to the Borrower or another Wholly-Owned Subsidiary constituting the purchase price in respect of intercompany transfers of goods made in the ordinary course of business to the extent not constituting Indebtedness for borrowed money; (x) Indebtedness evidenced by Other Hedging Agreements entered into pursuant to Section 9.05(vi); (xi) Indebtedness of Holdings pursuant to the Seller Note in an aggregate principal amount not to exceed $77,000,000 plus any accrued and unpaid interest thereon, less the aggregate amount of all repayments of principal thereon effected after the Original Effective Date; (xii) Indebtedness under performance bonds, letter of credit obligations to provide security for worker's compensation claims and bank overdrafts, in each case incurred in the ordinary course of business, provided that any obligations arising in connection with such bank overdraft Indebtedness is extinguished within five Business Days; (xiii) the Assumed Liabilities; (xiv) Indebtedness incurred by Foreign Subsidiaries (which shall not be directly or indirectly guaranteed by Holdings, the Borrower or any Domestic Subsidiaries of Holdings or the Borrower) incurred from time to time after the Initial Borrowing Date so long as the aggregate principal amount of all indebtedness incurred pursuant to this clause (xiv) at any time outstanding does not exceed the remainder of (x) $25,000,000 less (y) the aggregate principal amount of all Indebtedness of Foreign Subsidiaries then outstanding pursuant to clause (iii) of this Section 9.04; (xv) Indebtedness of Holdings constituting junior subordinated debentures issued in exchange for the Holdings Series A Preferred Stock pursuant to the terms of such Holdings Series A Preferred Stock ("Holdings Junior Subordinated Debentures"), so long as (x) Level 1 pricing shall be in effect both before and after giving effect to the incurrence of such Indebtedness, (y) such Indebtedness shall in no event be incurred to exchange in the aggregate more than 50% of the Holdings Series A Preferred Stock issued on or prior to the Initial Borrowing Date and (z) the Holdings Junior Subordinated Debentures shall be in the form provided in the certificate of incorporation of Holdings as in effect on the Initial Borrowing Date; and (xvi) additional Indebtedness of the Borrower and its Subsidiaries to the 79 extent not permitted by the foregoing clauses of this Section 9.04 not to exceed $10,000,000 in aggregate principal amount at any time outstanding. Notwithstanding anything to the contrary contained above, no Indebtedness may be incurred pursuant to this Section 9.04 if the incurrence thereof would be in violation of Section 9.17 at the time of the incurrence of such Indebtedness. 9.05 Advances, Investments and Loans. Holdings will not, and will not permit any of its Subsidiaries to, directly or indirectly, lend money or credit or make advances to any Person, or purchase or acquire any stock, obligations or securities of, or any other interest in, or make any capital contribution to, any other Person, or purchase or own a futures contract or otherwise become liable for the purchase or sale of currency or other commodities at a future date in the nature of a futures contract, or hold any cash or Cash Equivalents, except that the following shall be permitted: (i) the Borrower and its Subsidiaries may acquire and hold accounts receivables owing to any of them; (ii) the Borrower and its Subsidiaries may acquire and hold cash and Cash Equivalents, provided that during any time that Revolving Loans of Non-Defaulting Banks or Swingline Loans are outstanding, the aggregate amount of cash and Cash Equivalents permitted to be held by the Borrower and its Domestic Subsidiaries shall not exceed $75,000,000 for any period of ten consecutive days; (iii) the Borrower and its Subsidiaries may make loans and 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 $3,000,000; (iv) the Borrower may enter into Interest Rate Protection Agreements to the extent permitted in Section 9.04(v); (v) the Acquisition may be effected on or prior to the Restatement Effective Date; (vi) the Borrower may enter into and perform its obligations under Other Hedging Agreements entered into in the ordinary course of business and so long as any such Other Hedging Agreement is not speculative in nature and is (x) related to income derived from foreign operations of the Borrower or any Subsidiary or otherwise related to purchases permitted hereunder from foreign suppliers or (y) entered into to protect the Borrower and/or its Subsidiaries against fluctuations in the prices of raw materials used in their businesses; 80 (vii) any Wholly-Owned Subsidiary may make intercompany loans to the Borrower or any Wholly-Owned Subsidiary and the Borrower may make intercompany loans and advances to any Wholly-Owned Subsidiary, provided that any promissory notes evidencing such intercompany loans shall be pledged (and delivered) by the Borrower or the respective Domestic Wholly- Owned Subsidiary that is the lender of such intercompany loan as Collateral pursuant to the applicable Pledge Agreement, further provided, that (x) neither the Borrower nor any Domestic Subsidiaries of the Borrower may make loans to any Foreign Subsidiaries of the Borrower pursuant to this clause (vii) and (y) any loans made by any Foreign Subsidiaries to the Borrower or any of its Domestic Subsidiaries pursuant to this clause (vii) shall be subordinated to the obligations of the Credit Parties pursuant to subordination provisions in substantially the form of Exhibit K hereto; (viii) the Borrower and it Subsidiaries may sell or transfer assets to the extent permitted by Section 9.02; (ix) the Borrower may establish Subsidiaries to the extent permitted by Section 9.14; (x) the Borrower and its Domestic Wholly-Owned Subsidiaries may make loans and advances to, or other investments in, Foreign Subsidiaries of the Borrower so long as the aggregate amount of any loans, advances or other investments at any time outstanding (determined without regard to any write-downs or write-offs thereof) pursuant to this clause (x) shall not exceed $20,000,000; (xi) in addition to investments permitted by clauses (i) through (x) above, the Borrower and its Wholly-Owned Subsidiaries may make investments in Unrestricted Subsidiaries and/or Joint Ventures, so long as the aggregate amount invested pursuant to this clause (xi) after the Restatement Effective Date does not exceed $50,000,000 in the aggregate. 9.06 Transactions with Affiliates. Holdings will not, and will not permit any of its Subsidiaries to, enter into any transaction or series of related transactions, whether or not in the ordinary course of business, with any Affiliate of Holdings or any of its Subsidiaries, other than in the ordinary course of business and on terms and conditions substantially as favorable to Holdings or such Subsidiary as would reasonably be obtained by Holdings or such Subsidiary at that time in a comparable arm's-length transaction with a Person other than an Affiliate, except that: (i) Dividends may be paid to the extent provided in Section 9.03; 81 (ii) loans may be made and other transactions may be entered into between the Borrower and its Subsidiaries to the extent permitted by Sections 9.04 and 9.05; (iii) customary fees may be paid to non-officer directors of Holdings; (iv) the Borrower may pay management fees to Holdings from time to time in an amount not in excess of Holdings' compensation expenses for its employees; and (v) Holdings and its Subsidiaries may enter into the Operating Agreements. 9.07 Capital Expenditures. (a) Holdings will not, and will not permit any of its Subsidiaries to, make any Capital Expenditures, except that (x) during the fiscal year ended May 31, 1998 (taken as one accounting period), the Borrower and its Subsidiaries may make Capital Expenditures in an aggregate amount not to exceed $85,000,000, (y) during the fiscal year ended May 30, 1999 (taken as one accounting period), the Borrower and its Subsidiaries may make Capital Expenditures in an aggregate amount not to exceed $95,000,000 and (z) during each fiscal year thereafter (taken as one accounting period), the Borrower and its Subsidiaries may make Capital Expenditures in an aggregate amount not to exceed $105,000,000. (b) Notwithstanding anything to the contrary contained in clause (a) above, to the extent that the aggregate amount of Capital Expenditures made by the Borrower and its Subsidiaries pursuant to Section 9.07(a) in any fiscal year of the Borrower is less than $85,000,000 (or, in the case of the fiscal year ended May 30, 1999, $95,000,000, or, in the case of a fiscal year beginning after May 30, 1999, $105,000,000), the amount of such difference, but in no case more than $25,000,000, may be carried forward and used to make Capital Expenditures in the immediately succeeding fiscal year, provided that amounts once carried forward to such succeeding fiscal year shall lapse and terminate at the end of such fiscal year. (c) In addition to the Capital Expenditures permitted pursuant to preceding clauses (a) and (b) of this Section 9.07 the Borrower and its Subsidiaries may make additional Capital Expenditures consisting of the reinvestment of proceeds of Recovery Events not required to be applied to prepay the Loans pursuant to Section 4.02(h). 82 9.08 Consolidated Interest Coverage Ratio. Holdings will not permit the Consolidated Interest Coverage Ratio for any period of four consecutive fiscal quarters (or, if shorter, the period beginning on the first day of the fiscal year beginning on, or closest to, May 26, 1997 and ended on the last day of a fiscal quarter ended thereafter), in each case taken as one accounting period, ended on the last day of a fiscal quarter described below to be less than the amount set forth opposite such fiscal quarter below:
Fiscal Quarter Ended In, or Closest to Ratio -------------------- ------- August, 1997 2.6:1.0 November, 1997 2.6:1.0 February, 1998 2.6:1.0 May, 1998 3.0:1.0 August, 1998 3.0:1.0 November, 1998 3.0:1.0 February, 1999 3.0:1.0 May, 1999 and thereafter 3.5:1.0
9.09 Consolidated Fixed Charge Coverage Ratio. Holdings will not permit the Consolidated Fixed Charge Coverage Ratio for any period of four consecutive fiscal quarters (or, if shorter, the period beginning on the first day of the fiscal year beginning on, or closest to, May 26, 1997 and ending on the last day of a fiscal quarter ended thereafter), in each case taken as one accounting period, ended on the last day of any fiscal quarter set forth below to be less than the amount set forth opposite such fiscal quarter below:
Fiscal Quarter Ended In, or Closest to Ratio --------------------- ------- August, 1997 1.1:1.0 November, 1997 1.1:1.0 February, 1998 1.1:1.0 May, 1998 and thereafter 1.2:1.0
83 9.10 Maximum Leverage Ratio. Holdings will not permit the Leverage Ratio at any time during a fiscal quarter set forth below to be greater than the ratio set forth opposite such fiscal quarter below:
Fiscal Quarter Ended In Ratio --------------- ------- August, 1997 3.5:1.0 November, 1997 3.5:1.0 February, 1998 3.5:1.0 May, 1998 3.0:1.0 August, 1998 3.0:1.0 November, 1998 3.0:1.0 February, 1999 3.0:1.0 May, 1999 3.0:1.0 August, 1999 3.0:1.0 November, 1999 3.0:1.0 February, 2000 3.0:1.0 May, 2000 and thereafter 2.5:1.0
9.11 Limitation on Modifications of Indebtedness; Modifications of Certificate of Incorporation, By-Laws and Certain Other Agreements; etc. Holdings will not, and will not permit any of its Subsidiaries to, (i) amend or modify, or permit the amendment or modification of, any provision of the Existing Indebtedness or of any agreement (including, without limitation, any purchase agreement, indenture, loan agreement or security agreement) relating thereto other than any amendments or modifications to the Existing Indebtedness which do not in any way adversely affect the interests of the Banks and are otherwise permitted under Section 9.04(iii), (ii) make (or give any notice in respect of) any payment of any nature whatsoever (whether principal, interest or otherwise) with respect to, or any payment (including without limitation any prepayment) on or redemption or acquisition for value of, the Seller Note (except that a redemption required by the first sentence of Section 4(c) of the Seller Note shall be permitted to the extent required in accordance with the terms of such first sentence as in effect on the Original Effective Date and so long as all proceeds used to make such payment are received from an initial Public Equity Offering (as such term is defined in the Seller Note) by Holdings) or any Holdings Junior Subordinated Debentures, (iii) 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 Senior Subordinated Notes, (iv) amend or modify, or permit the amendment or modification of, any provision of 84 any Senior Subordinated Notes, the Seller Note or (after the issuance thereof) any Holdings Junior Subordinated Debentures or any agreement (including, without limitation, any Senior Subordinated Note Document) relating thereto other than amendments or modifications which do not in any way adversely affect the interests of the Banks and which are effected to make technical corrections to the respective documentation, (v) amend or modify, or permit the amendment or modification of, the Recapitalization Agreement, the Asset Purchase Agreement, any Operating Agreement or any other Recapitalization Document, the Acquisition Agreement or any other Acquisition Document, except for amendments or modifications which are not in any way adverse in any material respect to the interests of the Banks or (vi) amend, modify or change its certificate of incorporation (including, without limitation, by the filing or modification of any certificate of designation) or by-laws, or any agreement entered into by it, with respect to its capital stock (including any Shareholders' Agreement), or enter into any new agreement with respect to its capital stock, other than any amendments, modifications or changes pursuant to this clause (vi) or any such new agreements pursuant to this clause (vi) which do not in any way adversely affect in any material respect the interests of the Banks, provided that nothing in this clause (vi) shall prevent Holdings or any of its Subsidiaries from amending its certificate of incorporation or by-laws to provide indemnification to any officer or director of Holdings or any such Subsidiary to the maximum extent permitted by the law of its jurisdiction of incorporation and provided further, that Holdings may issue such capital stock as is not prohibited by Section 9.13 and may amend its certificate of incorporation to authorize any such capital stock. Without limiting the foregoing provisions, it is understood and agreed by all parties hereto that (i) for purposes of Section 1 of the Seller Note, the provisions of clause (ii) of the immediately preceding sentence prohibit the payment of interest on the Seller Note in cash and (ii) for purposes of Section 4(f) of the Seller Note, the provisions of clause (ii) of the immediately preceding sentence prohibit all partial or total redemptions of the Seller Note, except to the extent expressly otherwise provided in said clause (ii). 85 9.12 Limitation on Certain Restrictions on Subsidiaries. The Borrower will not, and will not permit any of its Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any such Subsidiary to (a) pay dividends or make any other distributions on its capital stock or any other interest or participation in its profits owned by the Borrower or any Subsidiary of the Borrower, or pay any Indebtedness owed to the Borrower or a Subsidiary of the Borrower, (b) make loans or advances to the Borrower or any of the Borrower's Subsidiaries or (c) transfer any of its properties or assets to the Borrower or any of the Borrower's Subsidiaries, except for such encumbrances or restrictions existing under or by reason of (i) applicable law, (ii) this Agreement and the other Credit Documents, (iii) the Senior Subordinated Note Documents, (iv) customary provisions restricting subletting or assignment of any lease governing a leasehold interest of the Borrower or a Subsidiary of the Borrower, (v) customary provisions restricting assignment of any agreement entered into by the Borrower or a Subsidiary of the Borrower in the ordinary course of business, (vi) any holder of a Permitted Lien may restrict the transfer of the asset or assets subject thereto and (vii) restrictions which are not more restrictive than those contained in this Agreement contained in any documents governing any Indebtedness incurred after the Restatement Effective Date in accordance with the provisions of this Agreement. 9.13 Limitation on Issuance of Capital Stock. (a) Holdings will not issue any capital stock which is not Qualified Capital Stock. (b) Holdings will not permit any of its Subsidiaries to issue any capital stock (including by way of sales of treasury stock) or any options or warrants to purchase, or securities convertible into, capital stock, except (i) for transfers and replacements of then outstanding shares of capital stock, (ii) for stock splits, stock dividends and additional issuances which do not decrease the percentage ownership of Holdings or any of its Subsidiaries in any class of the capital stock of such Subsidiary, (iii) in the case of Foreign Subsidiaries of the Borrower, to qualify directors to the extent required by applicable law, and (iv) Subsidiaries of the Borrower formed after the Original Effective Date pursuant to Section 9.14 may issue capital stock to the Borrower or the respective Subsidiary of the Borrower which is to own such stock in accordance with the requirements of Section 8.11. All capital stock issued in accordance with this Section 9.13(b) shall, to the extent required by the Pledge Agreement, be delivered to the Collateral Agent for pledge pursuant to the Pledge Agreement. 9.14 Limitation on Creation of Subsidiaries. Neither Holdings nor the Borrower shall establish, create or acquire any additional Subsidiaries without the prior written consent of the Required Banks; provided that the Borrower may establish or create one or more Wholly-Owned Subsidiaries of the Borrower without such consent so long as (i) 100% of the 86 capital stock of any new Domestic Subsidiary (or all capital stock of any new Foreign Subsidiary which is owned by any Credit Party, except that not more than 65% of the voting stock of any such Foreign Subsidiary shall be required to be so pledged) is upon the creation or establishment of any such new Subsidiary pledged and delivered to the Collateral Agent for the benefit of the Secured Creditors under the Pledge Agreement and (ii) upon the creation or establishment of any such new Domestic Subsidiary such Domestic Subsidiary executes the Additional Security Documents and guaranty required to be executed by it in accordance with Section 8.12. 9.15 Business. (a) Holdings shall engage in no business activities and shall have no assets or liabilities, other than (x) its ownership of the capital stock of the Borrower and liabilities incident thereto, including its liabilities pursuant to the Pledge Agreement and its guaranty pursuant to Section 14.01 and its guarantee of the Senior Subordinated Notes, (y) its obligations pursuant to the Seller Note and the Holdings Series A Preferred Stock and (z) its employment of members of management of the Borrower. (b) The Borrower will not, and will not permit any of its Subsidiaries to, engage (directly or indirectly) in any business other than the business in which the Borrower and its Subsidiaries are engaged on the Restatement Effective Date and other businesses reasonably related thereto. 9.16 Designated Senior Indebtedness. In no event shall the Borrower designate any indebtedness as "Designated Senior Indebtedness" for purposes of the Senior Subordinated Note Indenture unless the Required Banks specifically consent thereto in writing. 9.17 Allocation of Senior Subordinated Note Indenture Basket Amount. Notwithstanding anything to the contrary set forth herein (including without limitation Section 9.04), except for extensions of credit from time to time made pursuant to the Total Revolving Loan Commitment, in each case to the extent the sum of (x) the aggregate principal amount of outstanding Revolving Loans and Swingline Loans and (y) the Letter of Credit Outstandings, exceeds $75,000,000, no Indebtedness may at any time be outstanding pursuant to Section 4.03(b)(14) of the Senior Subordinated Note Indenture, except that at any time when the Dedicated Basket Amount has been reduced to an amount which is less than $50,000,000, Indebtedness (other than pursuant to the Total Revolving Loan Commitment) may be outstanding pursuant to Section 4.03(b)(14) of the Senior Subordinated Note Indenture (so long as such Indebtedness is also permitted to be outstanding pursuant to Section 9.04) in an aggregate amount not to exceed at any time an amount equal to $50,000,000 less the Dedicated Basket Amount as then in effect. The Dedicated Basket Amount will at all times remain available solely for extensions of credit pursuant to the Total Revolving Loan Commitment. 87 SECTION 10. Events of Default. Upon the occurrence of any of the following specified events (each an "Event of Default"): 10.01 Payments. The Borrower shall (i) default in the payment when due of any principal of any Loan or any Note or (ii) default, and such default shall continue unremedied for three or more Business Days, in the payment when due of any Unpaid Drawings or interest on any Loan or Note, or any Fees or any other amounts owing hereunder or thereunder; or 10.02 Representations, etc. Any representation, warranty or statement made by any Credit Party herein or in any other Credit Document or in any certificate delivered pursuant hereto or thereto shall prove to be untrue in any material respect on the date as of which made or deemed made; or 10.03 Covenants. Holdings or the Borrower shall (i) default in the due performance or observance by it of any term, covenant or agreement contained in Section 8.01(g)(i), 8.08, 8.11, or Section 9 or (ii) default in the due performance or observance by it of any other term, covenant or agreement contained in this Agreement and in the case of any default specified in this clause (ii) such default shall continue unremedied for a period of 30 days after written notice to the Borrower by any Agent or any of the Banks; or 10.04 Default Under Other Agreements. Holdings, the Borrower or any of their respective Subsidiaries shall (i) default in any payment of any Indebtedness (other than the Obligations) beyond the period of grace, if any, provided in the instrument or agreement under which such Indebtedness was created or (ii) default in the observance or performance of any agreement or condition relating to any Indebtedness (other than the Obligations) or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders of such Indebtedness (or a trustee or agent on behalf of such holder or holders) to cause (determined without regard to whether any notice is required), any such Indebtedness to become due prior to its stated maturity (other than, in the case of the Seller Note, as a result of a redemption required by the first sentence of Section 4(c) of the Seller Note and permitted to be paid pursuant to Section 9.11(ii)), or (iii) any Indebtedness (other than the Obligations) of Holdings, the Borrower or any of their respective Subsidiaries shall be declared to be due and payable, or required to be prepaid other than by a regularly scheduled required prepayment, prior to the stated maturity thereof, (other than, in the case of the Seller Note, as a result of a redemption required by the first sentence of Section 4(c) of the Seller Note and permitted to be paid pursuant to Section 9.11(ii)), provided that (x) it shall not be a Default or Event of Default under this Section 10.04 unless the aggregate principal amount of all Indebtedness as described in preceding 88 clauses (i) through (iii), inclusive, is at least $5,000,000; or 10.05 Bankruptcy, etc. Holdings, the Borrower or any of their respective Subsidiaries shall commence a voluntary case concerning itself under Title 11 of the United States Code entitled "Bankruptcy", as now or hereafter in effect, or any successor thereto (the "Bankruptcy Code"); or an involuntary case is commenced against Holdings, the Borrower or any of their respective Subsidiaries and the petition is not controverted within 15 days, or is not dismissed within 60 days, after commencement of the case; or a custodian (as defined in the Bankruptcy Code) is appointed for, or takes charge of, all or substantially all of the property of Holdings, the Borrower or any of their respective Subsidiaries or Holdings, the Borrower or any of their respective Subsidiaries commences any other proceeding under any reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction whether now or hereafter in effect relating to Holdings, the Borrower or any of their respective Subsidiaries or there is commenced against Holdings, the Borrower or any of their respective Subsidiaries any such proceeding which remains undismissed for a period of 60 days, or Holdings, the Borrower or any of their respective Subsidiaries is adjudicated insolvent or bankrupt; or any order of relief or other order approving any such case or proceeding is entered; or Holdings, the Borrower or any of their respective Subsidiaries suffers any appointment of any custodian or the like for it or any substantial part of its property to continue undischarged or unstayed for a period of 60 days; or Holdings, the Borrower or any of their respective Subsidiaries makes a general assignment for the benefit of creditors; or any corporate action is taken by Holdings, the Borrower or any of their respective Subsidiaries for the purpose of effecting any of the foregoing; or 10.06 ERISA. (a) Any Plan shall fail to satisfy the minimum funding standard required for any plan year or part thereof under Section 412 of the Code or Section 302 of ERISA or a waiver of such standard or extension of any amortization period is sought or granted under Section 412 of the Code or Section 303 or 304 of ERISA, a Reportable Event shall have occurred, a contributing sponsor (as defined in Section 4001(a)(13) of ERISA) of a Plan subject to Title IV of ERISA shall be subject to the advance reporting requirement of PBGC Regulation Section 4043.61 (without regard to subparagraph (b)(1) thereof) and an event described in subsection .62, .63, .64, .65, .66, .67 or .68 of PBGC Regulation Section 4043 shall be reasonably expected to occur with respect to such Plan within the following 30 days, any Plan which is subject to Title IV of ERISA shall have had or is reasonably likely to have a trustee appointed to administer such Plan, any Plan which is subject to Title IV of ERISA is, shall have been or is reasonably likely to be terminated or to be the subject of termination proceedings under ERISA, any Plan shall have an Unfunded Current Liability, a contribution required to be made with respect to a Plan or a Foreign Pension Plan has not been timely made, Holdings or any Subsidiary of Holdings or any ERISA Affiliate has incurred or is reasonably likely to incur any liability to or on account of a Plan under Section 409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 401(a)(29), 4971 or 4975 of the Code or on account of a group health plan 89 (as defined in Section 607(1) of ERISA or Section 4980B(g)(2) of the Code) under Section 4980B of the Code, or Holdings, or any of its Subsidiaries has incurred or is reasonably likely to incur liabilities pursuant to one or more employee welfare benefit plans (as defined in Section 3(1) of ERISA) that provide benefits to retired employees or other former employees (other than as required by Section 601 of ERISA) or Plans or Foreign Pension Plans; (b) there shall result from any such event or events the imposition of a lien, the granting of a security interest, or a liability or a material risk of incurring a liability; and (c) such lien, security interest or liability, individually, and/or in the aggregate, in the opinion of the Required Banks, has had, or could reasonably be expected to have, a Material Adverse Effect; or 10.07 Security Documents. At any time after the execution and delivery thereof, any of the Security Documents shall cease to be in full force and effect, or shall cease in any material respect to give the Collateral Agent for the benefit of the Secured Creditors the Liens, rights, powers and privileges purported to be created thereby (including, without limitation, a perfected security interest in, and Lien on, all of the Collateral (excluding (i) assets valued at up to $250,000 in the aggregate, (ii) cash proceeds of any such Collateral to the extent same are not required to be paid to, or deposited with, the Collateral Agent pursuant to the respective Security Document and (iii) inventory (including work-in-process), which, in the ordinary course of business, is located outside of the U.S. or any territories thereof and is temporarily in transit or held pending the completion or sale thereof (except to the extent Holdings and the Borrower have failed to comply, following the request of the Collateral Agent or the Required Banks, with the requirements of the second sentence of Section 8.12(b)); provided that if the Borrower is notified by the Administrative Agent of a lack of perfection with respect to any of the Collateral, the Borrower will take such steps as are necessary or advisable to perfect the Collateral Agent's security interest in such Collateral)), in favor of the Collateral Agent, superior to and prior to the rights of all third Persons (except as permitted by Section 9.01), and subject to no other Liens (except as permitted by Section 9.01), or any Credit Party shall default in the due performance or observance of any term, covenant or agreement on its part to be performed or observed pursuant to any of the Security Documents and such default shall continue beyond any grace period specifically applicable thereto pursuant to the terms of such Security Document; or 10.08 Guaranty. Any Guaranty or any provision thereof shall cease to be in full force or effect as to the relevant Guarantor (unless such Guarantor is no longer a Subsidiary by virtue of a liquidation, sale, merger or consolidation permitted by Section 9.02), or any Guarantor or Person acting by or on behalf of such Guarantor shall deny or disaffirm such Guarantor's obligations under the relevant Guaranty, or any Guarantor shall default in the due performance or observance of any term, covenant or agreement on its part to be performed or observed pursuant to its Guaranty; or 90 10.09 Judgments. One or more judgments or decrees shall be entered against Holdings, the Borrower or any of their respective Subsidiaries involving in the aggregate for Holdings, the Borrower and their respective Subsidiaries a liability (not paid or fully covered by a reputable and solvent insurance company) and such judgments and decrees either shall be final and non-appealable or shall not be vacated, discharged or stayed or bonded pending appeal for any period of 60 consecutive days, and the aggregate amount of all such judgments to the extent not covered by insurance exceeds $1,000,000; or 10.10 Change of Control. A Change of Control shall occur; then, and in any such event, and at any time thereafter, if any Event of Default shall then be continuing, the Administrative Agent, upon the written request of the Required Banks, shall by written notice to the Borrower, take any or all of the following actions, without prejudice to the rights of any Agent, any Bank or the holder of any Note to enforce its claims against any Credit Party (provided that, if an Event of Default specified in Section 10.05 shall occur with respect to the Borrower, the result which would occur upon the giving of written notice by the Administrative Agent to the Borrower as specified in clauses (i) and (ii) below shall occur automatically without the giving of any such notice): (i) declare the Total Commitments terminated, whereupon all Commitments of each Bank shall forthwith terminate immediately and any Commitment Commission shall forthwith become due and payable without any other notice of any kind; (ii) declare the principal of and any accrued interest in respect of all Loans and the Notes and all Obligations owing hereunder and thereunder to be, whereupon the same shall become, forthwith due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by each Credit Party; (iii) terminate any Letter of Credit, which may be terminated, in accordance with its terms; (iv) direct the Borrower to pay (and the Borrower agrees that upon receipt of such notice, or upon the occurrence of an Event of Default specified in Section 10.05 with respect to the Borrower, it will pay) to the Collateral Agent at the Payment Office such additional amount of cash, to be held as security by the Collateral Agent, as is equal to the aggregate Stated Amount of all Letters of Credit issued for the account of the Borrower and then outstanding; (v) enforce, as Collateral Agent, all of the Liens and security interests created pursuant to the Security Documents; and (vi) apply any cash collateral as provided in Section 4.02. SECTION 11. Definitions and Accounting Terms. 11.01 Defined Terms. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "Acquired Business" shall mean the businesses (including without limitation the 91 Analog and Mixed Signal Technologies Business Units) to be acquired by the Borrower pursuant to the Acquisition. "Acquisition" shall mean the acquisition by the Borrower of 100% of the capital stock of Fairchild Semiconductor Corporation of California (f/k/a/ Raytheon Semiconductor, Inc.), a Delaware corporation, for a purchase price not to exceed $120,000,000 (as such amount may be increased (or decreased, as the case may be) dollar for dollar to the extent the Net Worth of Fairchild Semiconductor Corporation of California reflected in the Adjusted Closing Balance Sheet exceeds (or is less than, as the case may be) its Net Worth as reflected in the Target Balance Sheet) pursuant to the Acquisition Agreement. For purposes of this definition, the terms "Net Worth", "Adjusted Closing Balance Sheet" and "Target Balance Sheet" have the respective meanings ascribed thereto in the Acquisition Agreement. "Acquisition Agreement" shall mean the Acquisition Agreement, dated November 25, 1997, by and among the Borrower, Raytheon Company, a Delaware corporation, and Thornwood Trust, a Massachusetts Business Trust and wholly owned unit of Raytheon Company, as in effect on the Restatement Effective Date and as the same may be amended, modified or supplemented from time to time pursuant to the terms hereof and thereof. "Acquisition Documents" shall mean the Acquisition Agreement and all other agreements, instruments and documents entered into or delivered in connection with the Acquisition. "Additional Collateral" shall mean all property (whether real or personal) in which security interests are granted (or have been purported to be granted) (and continue to be in effect at the time of determination) pursuant to Section 8.12. "Additional Mortgage" shall have the meaning provided in Section 8.12(a). "Additional Mortgaged Property" shall have the meaning provided in Section 8.12(a). "Additional Security Documents" shall mean all mortgages, pledge agreements, security agreements and other security documents entered into pursuant to Section 8.12 with respect to Additional Collateral. "Adjusted Certificate of Deposit Rate" shall mean, on any day, the sum (rounded to the nearest 1/100 of 1%) of (1) the rate obtained by dividing (x) the most recent weekly average dealer offering rate for negotiable certificates of deposit with a three-month maturity in the secondary market as published in the most recent Federal Reserve System publication entitled "Select Interest Rates", published weekly on Form H.15 as of the date hereof, or if such publication or a substitute containing the foregoing rate information shall not be 92 published by the Federal Reserve System for any week, the weekly average offering rate determined by the Administrative Agent on the basis of quotations for such certificates received by it from three certificate of deposit dealers in New York of recognized standing or, if such quotations are unavailable, then on the basis of other sources reasonably selected by the Administrative Agent, by (y) a percentage equal to 100% minus the stated maximum rate of all reserve requirements as specified in Regulation D applicable on such day to a three-month certificate of deposit of a member bank of the Federal Reserve System in excess of $100,000 (including, without limitation, any marginal, emergency, supplemental, special or other reserves), plus (2) the then daily net annual assessment rate as estimated by the Administrative Agent for determining the current annual assessment payable by the Administrative Agent to the Federal Deposit Insurance Corporation for insuring three-month certificates of deposit. "Adjusted Consolidated Net Income" for any period shall mean Consolidated Net Income for such period plus, without duplication, the sum of the amount of all net non-cash charges (including, without limitation, depreciation, amortization, deferred tax expense and non-cash interest expense, but excluding any net non-cash charges reflected in Adjusted Consolidated Working Capital) and net non-cash losses which were included in arriving at Consolidated Net Income for such period less the sum of the amount of all net non-cash gains (exclusive of items reflected in Adjusted Consolidated Working Capital) included in arriving at Consolidated Net Income for such period. "Adjusted Consolidated Working Capital" at any time shall mean Consolidated Current Assets (but excluding therefrom all cash and Cash Equivalents) less Consolidated Current Liabilities. "Adjusted Percentage" shall mean (x) at a time when no Bank Default exists, for each Bank, such Bank's Percentage and (y) at a time when a Bank Default exists (i) for each Bank that is a Defaulting Bank, zero and (ii) for each Bank that is a Non-Defaulting Bank, the percentage determined by dividing such Bank's Revolving Loan Commitment at such time by the Adjusted Total Revolving Loan Commitment at such time, it being understood that all references herein to Revolving Loan Commitments and the Adjusted Total Revolving Loan Commitment at a time when the Total Revolving Loan Commitment or Adjusted Total Revolving Loan Commitment, as the case may be, has been terminated shall be references to the Revolving Loan Commitments or Adjusted Total Revolving Loan Commitment, as the case may be, in effect immediately prior to such termination, provided that (A) no Bank's Adjusted Percentage shall change upon the occurrence of a Bank Default from that in effect immediately prior to such Bank Default if after giving effect to such Bank Default, and any repayment of Revolving Loans and Swingline Loans at such time pursuant to Section 4.02(a) or otherwise, the sum of (i) the aggregate outstanding principal amount of Revolving Loans of all Non-Defaulting Banks plus (ii) the aggregate outstanding principal amount of Swingline Loans plus (iii) the Letter of Credit Outstandings, exceed the Adjusted Total Revolving Loan Commitment; (B) the changes to the Adjusted Percentage that would have 93 become effective upon the occurrence of a Bank Default but that did not become effective as a result of the preceding clause (A) shall become effective on the first date after the occurrence of the relevant Bank Default on which the sum of (i) the aggregate outstanding principal amount of the Revolving Loans of all Non-Defaulting Banks plus (ii) the aggregate outstanding principal amount of Swingline Loans plus (iii) the Letter of Credit Outstandings is equal to or less than the Adjusted Total Revolving Loan Commitment; and (C) if (i) a Non-Defaulting Bank's Adjusted Percentage is changed pursuant to the preceding clause (B) and (ii) any repayment of such Bank's Revolving Loans, or of Unpaid Drawings with respect to Letters of Credit or of Swingline Loans, that were made during the period commencing after the date of the relevant Bank Default and ending on the date of such change to its Adjusted Percentage must be returned to the Borrower as a preferential or similar payment in any bankruptcy or similar proceeding of the Borrower, then the change to such Non-Defaulting Bank's Adjusted Percentage effected pursuant to said clause (B) shall be reduced to that positive change, if any, as would have been made to its Adjusted Percentage if (x) such repayments had not been made and (y) the maximum change to its Adjusted Percentage would have resulted in the sum of the outstanding principal of Revolving Loans made by such Bank plus such Bank's new Adjusted Percentage of the outstanding principal amount of Swingline Loans and of Letter of Credit Outstandings equalling such Bank's Revolving Loan Commitment at such time. "Adjusted Total Revolving Loan Commitment" shall mean at any time the Total Revolving Loan Commitment less the aggregate Revolving Loan Commitments of all Defaulting Banks. "Administrative Agent" shall have the meaning provided in the first paragraph of this Agreement, and shall include any successor thereto. "Affiliate" shall mean, with respect to any Person, any other Person (including, for purposes of Section 9.06 only, all directors, officers and partners of such Person) directly or indirectly controlling, controlled by, or under direct or indirect common control with, such Person; provided, however, that for purposes of Section 9.06, an Affiliate of Holdings shall include any Person that directly or indirectly owns more than 5% of any class of the capital stock of Holdings and any officer or director of Holdings or any of its Subsidiaries. A Person shall be deemed to control another Person if such Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of such other Person, whether through the ownership of voting securities, by contract or otherwise. "Agent" shall have the meaning set forth in the first paragraph of this Agreement. "Agreement" shall mean this Credit Agreement, as modified, supplemented, amended, restated, extended, renewed or replaced from time to time. "Applicable Margin" shall mean (i) in the case of Tranche C Term Loans 94 maintained as (x) Base Rate Loans, 1.50% and (y) Eurodollar Loans, 2.50% and (ii) in the case of Revolving Loans and Tranche A Term Loans, during each Margin Adjustment Period beginning after the Initial Borrowing Date, the percentage per annum set forth below opposite the respective Level indicated to have been achieved on the applicable Start Date for such Margin Adjustment Period (as shown on the respective officer's certificate delivered pursuant to Section 8.01(f)) in accordance with the Requirements for the various Levels specified in the table below:
Applicable Applicable Margin Margin for for Base Eurodollar Level Requirements Rate Loans Loans - ----- -------------------------------------------- ---------- ---------- 1 For the Margin Adjustment Test Period last 0% 1.00% ended, the Leverage Ratio was less than or equal to 1.50:1.00 on the last day of such Margin Adjustment Test Period and the Consolidated Interest Coverage Ratio for such Margin Adjustment Test Period was greater than or equal to 5.00:1.00. 2 For the Margin Adjustment Test Period last 0.50% 1.50% ended, the Requirements for Level 1, as set forth above, were not met, and the Leverage Ratio was less than or equal to 2.00:1.00 on the last day of such Margin Adjustment Test Period and the Consolidated Interest Coverage Ratio for such Margin Adjustment Test Period was greater than or equal to 4.00:1.00 3 For the Margin Adjustment Test Period last 1.00% 2.00% ended, the Requirements for Levels 1 and 2, as set forth above, were not met, and the Leverage Ratio was less than 2.25:1.00 on the last day of such Margin Adjustment Test Period and the Consolidated Interest Coverage Ratio for such Margin Adjustment Test Period was greater than or equal to 3.50:1.00 4 Level 4 pricing shall apply at all times when 1.50% 2.50% the Requirements set forth above for Levels 1 through 3 are not met
95 ; provided, however, that Level 4 pricing shall also apply (x) from the period from the Initial Borrowing Date to but excluding the first day of the first Margin Adjustment Period occurring after the Initial Borrowing Date and (y) at any time when any Default or Event of Default is in existence. "Asset Purchase Agreement" shall mean the Asset Purchase Agreement, dated as of March 11, 1997, between the Borrower and NSC. "Assignment and Assumption Agreement" shall mean the Assignment and Assumption Agreement substantially in the form of Exhibit J (appropriately completed). "Assumed Liabilities" shall mean those liabilities in respect of the Business which are being assumed by the Borrower pursuant to Section 2.3 of the Asset Purchase Agreement. "Bank" shall mean each financial institution listed on Schedule I, as well as any Person which becomes a "Bank" hereunder pursuant to 13.04(b). "Bank Default" shall mean (i) the refusal (which has not been retracted) of a Bank to make available its portion of any Borrowing (including any Mandatory Borrowing) or to fund its portion of any unreimbursed payment under Section 2.03(c) or (ii) a Bank having notified in writing the Borrower and/or the Administrative Agent that it does not intend to comply with its obligations under Section 1.01(c) or Section 2. "Bankruptcy Code" shall have the meaning provided in Section 10.05. "Base Rate" shall mean for any day, a rate of interest per annum equal to the higher of (i) the Prime Lending Rate for such day and (ii) the sum of the Adjusted Certificate of Deposit Rate for such day plus 1/2 of 1% per annum. "Base Rate Loan" shall mean (i) each Swingline Loan and (ii) each Loan designated or deemed designated as such by the Borrower at the time of the incurrence thereof or conversion thereto. "Borrower" shall have the meaning set forth in the first paragraph of this Agreement. "Borrower Common Stock" shall mean the common stock of the Borrower. 96 "Borrowing" shall mean the borrowing of one Type of Loan of a single Tranche from all the Banks (other than any Bank which has not funded its share of a Borrowing in accordance with this Agreement) having Commitments of the respective Tranche (or from the Swingline Bank in the case of Swingline Loans) on a given date (or resulting from a conversion or conversions on such date) having in the case of Eurodollar Loans the same Interest Period, provided that Base Rate Loans incurred pursuant to Section 1.10(b) shall be considered part of the related Borrowing of Eurodollar Loans. It is understood that there may be more than one Borrowing outstanding pursuant to a given Tranche. "BTCo" shall mean Bankers Trust Company in its individual capacity. "Business" shall mean the Logic, Memory and Discrete Power and Signal Technologies Business Units as historically conducted and accounted for (including Flash Memory, but excluding Public Networks, Programmable Products and Mil Logic Products), and shall, on and after the Restatement Effective Date, include the Acquired Business. "Business Day" shall mean (i) with respect to any borrowing, payment or rate selection of Eurodollar Loans, a day (other than a Saturday or Sunday) on which banks generally are open in New York for the conduct of substantially all of their commercial lending activities and on which dealings in United States dollars are carried on in the London interbank market and (ii) for all other purposes, a day (other than a Saturday or Sunday) on which banks generally are open in New York for the conduct of substantially all of their commercial lending activities. "Capital Expenditures" shall mean, with respect to any Person, all expenditures by such Person which should be capitalized in accordance with generally accepted accounting principles, including all such expenditures with respect to fixed or capital assets (including, without limitation, expenditures for maintenance and repairs which should be capitalized in accordance with generally accepted accounting principles) and the amount of Capitalized Lease Obligations incurred by such Person. "Capitalized Lease Obligations" of any Person shall mean all rental obligations which, under generally accepted accounting principles, are or will be required to be capitalized on the books of such Person, in each case taken at the amount thereof accounted for as indebtedness in accordance with such principles. 97 "Cash Equivalents" shall mean, as to any Person, (i) securities issued or directly and fully guaranteed or insured by the United States or any agency or instrumentality thereof (provided that the full faith and credit of the United States is pledged in support thereof) having maturities of not more than one year from the date of acquisition, (ii) time deposits and certificates of deposit of 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, the District of Columbia or any foreign jurisdiction having capital, surplus and undivided profits aggregating in excess of $200,000,000, with maturities of not more than one year from the date of acquisition by such Person, (iii) repurchase obligations with a term of not more than 90 days for underlying securities of the types described in clause (i) above entered into with any bank meeting the qualifications specified in clause (ii) above, (iv) commercial paper issued by any Person incorporated in the United States rated at least A-1 or the equivalent thereof by Standard & Poor's Corporation 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, (v) investments in money market funds substantially all of whose assets are comprised of securities of the types described in clauses (i) through (iv) above and (vi) demand deposit accounts maintained in the ordinary course of business. "CERCLA" shall mean the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as the same may be amended from time to time, 42 U.S.C. Section 9601 et seq. "Change of Control" shall mean (i) Holdings shall at any time cease to own 100% of the capital stock of the Borrower; (ii) at any time a "Change of Control" under and as defined in the Senior Subordinated Note Indenture, the Seller Note or in any documentation relating to any Indebtedness refinancing all or any part thereof shall have occurred; (iii) at any time prior to the consummation of a Qualified Public Offering, and for any reason whatsoever, (x) the CVC Permitted Holders shall own less than 40% of the then outstanding Voting Stock at such time or (y) the CVC Permitted Holders and the Management Investors, taken together, shall own less than a majority or the outstanding Voting Stock of Holdings; (iv) at any time after the consummation of a Qualified Public Offering, and for any reason whatsoever, (x) the CVC Permitted Holders shall own less than 20% of the outstanding Voting Stock of Holdings or (y) any "Person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), excluding the CVC Permitted Holders, is or shall become the "beneficial owner" (as defined in Rules 13(d)-3 and 13(d)-5 under the Exchange Act), directly or indirectly, of a greater percentage of the Voting Stock of Holdings than is owned by the CVC Permitted Holders at such time; or (v) at any time the board of directors of Holdings shall cease to consist of a majority of Continuing Directors. 98 "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated and rulings issued thereunder. Section references to the Code are to the Code, as in effect at the date of this Agreement and any subsequent provisions of the Code, amendatory thereof, supplemental thereto or substituted therefor. "Collateral" shall mean all property (whether real or personal) with respect to which any security interests have been granted (or purported to be granted) pursuant to any Security Document, including, without limitation, all Pledge Agreement Collateral, all Security Agreement Collateral, all Mortgaged Properties, all cash and Cash Equivalents delivered as collateral pursuant to Section 4.02 or 10 hereof and all Additional Collateral, if any. "Collateral Agent" shall mean the Administrative Agent acting as collateral agent for the Secured Creditors pursuant to the Security Documents. "Commitment" shall mean any of the commitments of any Bank, i.e., whether the Tranche A Term Loan Commitment, Tranche C Term Loan Commitment or Revolving Loan Commitment. "Commitment Commission" shall have the meaning provided in Section 3.01(a). "Common Management Fund" shall mean with respect to any Person, a fund under common control with such Person. "Confidential Memoranda" shall mean (i) the Confidential Memorandum, entitled "Request for Amendments in Conjunction with Acquisition of Raytheon Semiconductor, Inc." and dated November, 1997 (as updated through the date hereof), and (ii) the Confidential Memorandum, entitled "Presentation to Lenders - - $145,000,000 Senior Secured Credit Facility in Connection with the Acquisition of Raytheon Semiconductor, Inc." and dated December, 1997, collectively, prepared in connection with the Acquisition and the financing thereof. "Consolidated Current Assets" shall mean, at any time, the consolidated current assets of Holdings and its Consolidated Subsidiaries. "Consolidated Current Liabilities" shall mean, at any time, the consolidated current liabilities of Holdings and its Consolidated Subsidiaries at such time, but excluding (i) the current portion of any Indebtedness under this Agreement and any other long-term Indebtedness which would otherwise be included therein, (ii) accrued but unpaid interest with respect to the Indebtedness described in clause (i), and (iii) the current portion of Indebtedness constituting Capitalized Lease Obligations. 99 "Consolidated EBIT" shall mean, for any period, the Consolidated Net Income for such period, before interest expense and provision for taxes based on income and without giving effect to any extraordinary gains or losses or gains or losses from sales of assets other than inventory sold in the ordinary course of business. "Consolidated EBITDA" shall mean, for any period, Consolidated EBIT, adjusted by adding thereto the amount of all amortization of intangibles and depreciation, in each case that were deducted in arriving at Consolidated EBIT for such period. "Consolidated Fixed Charge Coverage Ratio" for any period shall mean the ratio of Consolidated EBITDA to Consolidated Fixed Charges for such period. "Consolidated Fixed Charges" for any period shall mean the sum, without duplication, of (i) Consolidated Interest Expense for such period, (ii) the amount of all Capital Expenditures made by Holdings and its Subsidiaries during such period (other than Capital Expenditures to the extent made pursuant to Section 9.07(c)), (iii) all cash payments in respect of taxes made during such period (net of any cash refunds actually received during such period) and (iv) the scheduled principal amount of all amortization payments on all Indebtedness (including without limitation the principal component of all Capitalized Lease Obligations) of Holdings and its Subsidiaries for such period (as determined on the first day of the respective period). "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 Senior Subordinated Notes, all Capitalized Lease Obligations and all Letter of Credit Outstandings) of Holdings and its Subsidiaries on a consolidated basis as determined in accordance with GAAP; provided that Indebtedness outstanding pursuant to (x) the Seller Note, (y) the Holdings Junior Subordinated Debentures and (z) trade payables incurred in the ordinary course of business shall be excluded in determining Consolidated Indebtedness. "Consolidated Interest Coverage Ratio" shall mean, for any period, the ratio of (i) Consolidated EBITDA for such period to (ii) Consolidated Interest Expense for such period. "Consolidated Interest Expense" shall mean, for any period, the total consolidated interest expense of Holdings and its Consolidated Subsidiaries for such period (calculated without regard to any limitations on the payment thereof) plus, without duplication, that portion of Capitalized Lease Obligations of Holdings and its Consolidated Subsidiaries representing the interest factor for such period, but excluding (i) the amortization of any deferred financing costs incurred in connection with this Agreement or the issuance of the Senior Subordinated Notes and (ii) any interest expense in respect of (x) the Seller Note and (y) the Holdings Junior Subordinated Debentures. 100 "Consolidated Net Income" shall mean, for any period, the consolidated net after tax income of Holdings and its Consolidated Subsidiaries determined in accordance with GAAP. "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. Notwithstanding anything to the contrary contained in this Agreement (and except for purposes of the definition of Unrestricted Subsidiary), an Unrestricted Subsidiary shall be deemed not to be a Subsidiary of the Borrower or any of its other Subsidiaries for purposes of this Agreement. "Contingent Obligation" shall mean, as to any Person, any obligation of such Person guaranteeing or intended to guarantee any Indebtedness, leases, dividends or other obligations ("primary obligations") of any other Person (the "primary obligor") in any manner, whether directly or indirectly, including, without limitation, any obligation of such Person, whether or not contingent, (i) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (ii) to advance or supply funds (x) for the purchase or payment of any such primary obligation or (y) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (iv) otherwise to assure or hold harmless the holder of such primary obligation against loss in respect thereof; provided, however, that the term Contingent Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business and any products warranties extended 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 the 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. "Continuing Bank" shall mean each Original Bank with a Commitment under this Agreement (immediately upon giving effect to the Restatement Effective Date). 101 "Continuing Directors" shall mean the (i) directors of Holdings on the Initial Borrowing Date and (ii) each other director, if (x) such director's nomination for election to the board of directors of Holdings is recommended by a majority of the then Continuing Directors or (y) such director became a member of the board of directors pursuant to, and in accordance with, Article V of the Securities Purchase and Holders Agreement prior to the termination of the voting agreements pursuant to Section 5.7 of the Securities Purchase and Holders Agreement. "Credit Documents" shall mean this Agreement and, after the execution and delivery thereof pursuant to the terms of this Agreement, each Note, each Security Document and the Subsidiaries Guaranty and, after the execution and delivery thereof, each additional guaranty or security document executed pursuant to Section 8.12. "Credit Event" shall mean the making of any Loan or the issuance of any Letter of Credit. "Credit Party" shall mean Holdings, the Borrower, each Subsidiary Guarantor and any other Subsidiary which at any time executes and delivers any Credit Document as required by this Agreement. "CVC" shall mean Citicorp Venture Capital, Ltd. "CVC Permitted Holders" shall mean (i) CVC, (ii) any officer, employee or director of CVC or any trust, partnership or other entity established solely for the benefit of such officers, employees or directors and (iii) Sterling (or any successor) so long as CVC, employees, officers and directors of CVC and corporations, partnerships and other entities at least a majority of the equity in which is held in the aggregate by CVC and its employees, officers and directors, hold no less than a majority of the aggregate economic interests in Sterling or such successor. "Debt Agreements" shall have the meaning provided in Section 5.05. 102 "Dedicated Basket Amount" shall mean $50,000,000; provided that, at the option of the Borrower, at any time after the Restatement Effective Date such amount may be (x) decreased to an amount not less than $25,000,000 so long as the Borrower delivers to the Administrative Agent an officer's certificate (1) setting forth such new Dedicated Basket Amount, and (2) certifying that such new Dedicated Basket Amount is not less than (A) the sum of (I) the aggregate principal amount of then outstanding Revolving Loans and Swingline Loans and (II) the Letter of Credit Outstandings at such time minus (B) $75,000,000, or (y) thereafter increased to an amount not greater than $50,000,000 so long as the Borrower delivers to the Administrative Agent an officer's certificate (1) setting forth such new Dedicated Basket Amount, (2) certifying that Indebtedness is not then outstanding pursuant to Section 4.03(b)(14) of the Senior Subordinated Note Indenture (excluding Indebtedness representing extensions of credit pursuant to the Total Revolving Loan Commitment) in an amount in excess of $50,000,000 less the new Dedicated Basket Amount, and (3) certifying that such new Dedicated Basket Amount will thereafter remain available solely for extensions of credit pursuant to the Total Revolving Loan Commitment. "Default" shall mean any event, act or condition which with notice or lapse of time, or both, would constitute an Event of Default. "Defaulting Bank" shall mean any Bank with respect to which a Bank Default is in effect. "Disqualified Stock" shall mean any capital stock which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, (i) 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 the first anniversary of the Tranche C Term Loan Maturity Date, or (ii) is convertible into or exchangeable (unless at the sole option of the issuer thereof) for (a) debt securities or (b) any capital stock referred to in (i) above, in each case at any time prior to the first anniversary of the Tranche C Term Loan Maturity Date, or (iii) otherwise contains terms which are materially more restrictive (or provide the holders thereof materially greater rights) than the Holdings Series A Preferred Stock in the form issued on or prior to the Initial Borrowing Date. 103 "Dividend" with respect to any Person shall mean that such Person has declared or paid a dividend or returned any equity capital to its stockholders or authorized or made any other distribution, payment or delivery of property (other than common stock of such Person) or cash to its stockholders as such, or redeemed, retired, purchased or otherwise acquired, directly or indirectly, for a consideration any shares of any class of its capital stock outstanding on or after the Restatement Effective Date (or any options or warrants issued by such Person with respect to its capital stock), or set aside any funds for any of the foregoing purposes, or shall have permitted any of its Subsidiaries to purchase or otherwise acquire for a consideration any shares of any class of the capital stock of such Person outstanding on or after the Restatement Effective Date (or any options or warrants issued by such Person with respect to its capital stock). Without limiting the foregoing, "Dividends" with respect to any Person shall also include all payments made or required to be made by such Person with respect to any stock appreciation rights, plans, equity incentive or achievement plans or any similar plans or setting aside of any funds for the foregoing purposes. "Documentation Agent" shall have the meaning provided in the first paragraph of this Agreement. "Documents" shall mean the Credit Documents, the Acquisition Documents and the Recapitalization Documents. "Dollars" and the sign "$" shall each mean lawful money of the United States. "Domestic Subsidiary" shall mean each Subsidiary of the Borrower that is incorporated or organized in the United States of America, any State thereof, the United States Virgin Islands or Puerto Rico. "Domestic Wholly-Owned Subsidiary" shall mean each Domestic Subsidiary which is a Wholly-Owned Subsidiary of the Borrower. "Drawing" shall have the meaning provided in Section 2.04(b). "Effective Date" shall mean the Original Effective Date. "Eligible Transferee" shall mean and include a commercial bank, insurance company, financial institution, fund or other Person which regularly purchases interests in loans or extensions of credit of the types made pursuant to this Agreement, any other Person which would constitute a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act as in effect on the Restatement Effective Date or other "accredited investor" (as defined in Regulation D of the Securities Act). "Employee Benefit Plans" shall have the meaning provided in Section 5.05. 104 "Environmental Claims" means any and all administrative, regulatory or judicial actions, suits, demands, demand letters, directives, claims, liens, notices of noncompliance or violation, investigations or proceedings relating in any way to any Environmental Law or any permit issued, or any approval given, under any such Environmental Law (hereafter, "Claims"), including, without limitation, (a) any and all Claims by governmental or regulatory authorities for enforcement, cleanup, removal, response, remedial or other actions or damages pursuant to any applicable Environmental Law, and (b) any and all Claims by any third party seeking damages, contribution, indemnification, cost recovery, compensation or injunctive relief in connection with alleged injury or threat of injury to health, safety or the environment due to the presence of Hazardous Materials. "Environmental Law" means any applicable Federal, state, foreign or local statute, law, rule, regulation, ordinance, code, binding and enforceable guideline, binding and enforceable written policy and rule of common law now or hereafter in effect and in each case as amended, and any judicial or administrative interpretation thereof, including any judicial or administrative order, consent decree or judgment, to the extent binding on Holdings, the Borrower or any of their respective Subsidiaries, relating to the environment, employee health and safety or Hazardous Materials, including, without limitation, CERCLA; RCRA; the Federal Water Pollution Control Act, 33 U.S.C. Section 1251 et seq.; the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq.; the Clean Air Act, 42 U.S.C. Section 7401 et seq.; the Safe Drinking Water Act, 42 U.S.C. Section 3803 et seq.; the Oil Pollution Act of 1990, 33 U.S.C. Section 2701 et seq.; the Emergency Planning and the Community Right-to-Know Act of 1986, 42 U.S.C. Section 11001 et seq., the Hazardous Material Transportation Act, 49 U.S.C. Section 1801 et seq. and the Occupational Safety and Health Act, 29 U.S.C. Section 651 et seq. (to the extent it regulates occupational exposure to Hazardous Materials); and any state and local or foreign counterparts or equivalents, in each case as amended from time to time. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder. Section references to ERISA are to ERISA, as in effect at the date of this Agreement and any subsequent provisions of ERISA, amendatory thereof, supplemental thereto or substituted therefor. "ERISA Affiliate" shall mean each person (as defined in Section 3(9) of ERISA) which together with Holdings or a Subsidiary of Holdings would be deemed to be a "single employer" within the meaning of Section 414(b), (c), (m) or (o) of the Code. "Eurodollar Loan" shall mean each Loan (excluding Swingline Loans) designated as such by the Borrower at the time of the incurrence thereof or conversion thereto. 105 "Eurodollar Rate" shall mean the sum of (i) the quotient of (a) the rate determined by the Administrative Agent to be the rate at which deposits in U.S. dollars are offered by BTCo to first-class banks in the London interbank market at approximately 11:00 A.M. (London time) two Business Days prior to the first day of the Interest Period applicable to such Eurodollar Loan, in the approximate amount of BTCo's relevant Eurodollar Loan and having a maturity approximately equal to the Interest Period applicable to such Eurodollar Loan divided by (b) a percentage equal to 100% minus the then stated maximum rate of all reserve requirements (including, without limitation, any marginal, emergency, supplemental, special or other reserves required by applicable law) applicable to any member bank of the Federal Reserve System in respect of Eurocurrency funding or liabilities as defined in Regulation D (or any successor category of liabilities under Regulation D). The Eurodollar Rate shall be rounded to the next higher multiple of 1/100 of 1% if the rate is not such a multiple. "Event of Default" shall have the meaning provided in Section 10. 106 "Excess Cash Flow" shall mean, for any period, the remainder of (a) the sum of (i) Adjusted Consolidated Net Income for such period, (ii) the decrease, if any, in Adjusted Consolidated Working Capital from the first day to the last day of such period, (iii) the Net Sale Proceeds of asset sales to the extent such proceeds are excluded under Section 4.02(f) by the operation of clause (v) thereof and (iv) any amount of permitted Capital Expenditures carried forward into the respective period pursuant to the provisions of Section 9.07(b), to the extent such amount has lapsed and terminated during (or at the end of) such period pursuant to the proviso to Section 9.07(b), minus (b) the sum of (i) the amount of Capital Expenditures made by the Borrower and its Subsidiaries on a consolidated basis during such period pursuant to and in accordance with Section 9.07(a) (but without giving effect to any Capital Expenditures made during such period as a result of, or pursuant to, Section 9.07(b) or to Capital Expenditures made pursuant to Section 9.07(c)), in each case except to the extent financed with the proceeds of Indebtedness or pursuant to Capitalized Lease Obligations or to the extent constituting a reinvestment of Net Sale Proceeds of asset sales under Section 4.02(f)(iv), (ii) the aggregate amount of permanent principal payments of Indebtedness for borrowed money of the Borrower and its Subsidiaries and the permanent repayment of the principal component of Capitalized Lease Obligations of the Borrower and its Subsidiaries (excluding (1) payments with proceeds of asset sales, (2) payments with the proceeds of other Indebtedness or equity and (3) payments of Loans or other Obligations, provided that repayments of Loans shall be deducted in determining Excess Cash Flow if such repayments were (x) required as a result of a Scheduled Repayment under Section 4.02(b) or (c) (but not as a reduction to the amount of Scheduled Repayments pursuant to another provision of this Agreement) or (y) made as a voluntary prepayment pursuant to Section 4.01 with internally generated funds (but in the case of a voluntary prepayment of Revolving Loans or Swingline Loans, only to the extent accompanied by a voluntary reduction to the Total Revolving Loan Commitment)) during such period; (iii) the increase, if any, in Adjusted Consolidated Working Capital from the first day to the last day of such period and (iv) if any amount representing permitted Capital Expenditures is being carried forward from such period into a subsequent period pursuant to the provisions of Section 9.07(b), the amount being so carried forward to a subsequent period. "Excess Cash Flow Conversion Time" shall have the meaning provided in Section 4.02(g). "Excess Cash Payment Date" shall mean the date occurring 90 days after the last day of each fiscal year of Holdings (beginning with its fiscal year ending in May 1999). "Excess Cash Payment Period" shall mean, with respect to the repayment required on each Excess Cash Payment Date, the immediately preceding fiscal year of Holdings. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. 107 "Existing Indebtedness" shall have the meaning provided in Section 7.22. "Existing Letter of Credit" shall mean the letter of credit issued by Fleet Bank, N.A. in favor of Standard Charter Bank, SG in the amount of $2,704,000. "Facing Fee" shall have the meaning provided in Section 3.01(c). "Federal Funds Rate" shall mean, for any day, an interest rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published for such day (or, if such day is not a Business Day, for the immediately preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations at approximately 11:00 A.M. (New York time) on such day on such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by the Administrative Agent in its sole discretion. "Fees" shall mean all amounts payable pursuant to or referred to in Section 3.01. "Foreign Pension Plan" shall mean any plan, fund (including, without limitation, any superannuation fund) or other similar program established or maintained outside the United States of America by Holdings or any one or more of its Subsidiaries primarily for the benefit of employees of Holdings or such Subsidiaries residing outside the United States of America, which plan, fund or other similar program provides, or results in, retirement income, a deferral of income in contemplation of retirement or payments to be made upon termination of employment, and which plan is not subject to ERISA or the Code. "Foreign Subsidiary" shall mean each Subsidiary of the Borrower that is incorporated or organized under the laws of any jurisdiction other than the United States of America, any State thereof, the United States Virgin Islands or Puerto Rico. "GAAP" shall have the meaning provided in Section 13.07(a). "Guaranteed Creditors" shall mean and include each of the Agents, the Collateral Agent, the Banks and each party (other than any Credit Party) party to an Interest Rate Protection Agreement or Other Hedging Agreement to the extent such party constitutes a Secured Creditor under the Security Documents. 108 "Guaranteed Obligations" shall mean all obligations of the Borrower (i) to each Bank for the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of the principal and interest on each Note issued by the Borrower to such Bank, and Loans made, under the Credit Agreement and all reimbursement obligations and Unpaid Drawings with respect to Letters of Credit, together with all the other obligations and liabilities (including, without limitation, indemnities, fees and interest thereon) of the Borrower to such Bank now existing or hereafter incurred under, arising out of or in connection with the Credit Agreement or any other Credit Document and the due performance and compliance with all the terms, conditions and agreements contained in the Credit Documents by the Borrower and (ii) to each Bank and each Affiliate of a Bank which enters into an Interest Rate Protection or Other Hedging Agreement with the Borrower, which by its express terms are entitled to the benefit of the Guaranty pursuant to Section 14 with the written consent of Holdings, the full and prompt payment when due (whether by acceleration or otherwise) of all obligations of the Borrower owing under any such Interest Rate Protection or Other Hedging Agreement, whether now in existence or hereafter arising, and the due performance and compliance with all terms, conditions and agreements contained therein. "Guarantor" shall mean Holdings and each Subsidiary Guarantor. "Guaranty" shall mean the guaranty issued by Holdings pursuant to Section 14 hereof, the Subsidiaries Guaranty and any other guarantee executed and delivered by a Subsidiary of the Borrower pursuant to Section 8.12. "Hazardous Materials" means (a) any petroleum or petroleum products, radioactive materials, asbestos in any form that is or could become friable, urea formaldehyde foam insulation, transformers or other equipment that contain dielectric fluid containing levels of polychlorinated biphenyls, and radon gas; (b) any chemicals, materials or substances defined as or included in the definition of "hazardous substances", "hazardous waste", "hazardous materials", "extremely hazardous substances", "restricted hazardous waste", "toxic substances", "toxic pollutants", "contaminants", or "pollutants", or words of similar import, under any applicable Environmental Law; and (c) any other chemical, material or substance, exposure to which is prohibited, limited or regulated by any governmental authority under Environmental Laws. "Holdings" shall have the meaning provided in the first paragraph of this Agreement. "Holdings Common Stock" shall mean common stock of Holdings. "Holdings Junior Subordinated Debentures" shall have the meaning provided in Section 9.04(xv). 109 "Holdings Series A Preferred Stock" shall mean shares of Holding's 12% Series A Cumulative Compounding Preferred Stock. "Indebtedness" shall mean, as to any Person, without duplication, (i) all indebtedness (including principal, interest, fees and charges) of such Person for borrowed money or for the deferred purchase price of property or services, (ii) the maximum amount available to be drawn under all letters of credit issued for the account of such Person and all unpaid drawings in respect of such letters of credit, (iii) all Indebtedness of the types described in clause (i), (ii), (iv), (v), (vi) or (vii) of this definition secured by any Lien on any property owned by such Person, whether or not such Indebtedness has been assumed by such Person (to the extent of the value of the respective property), (iv) the aggregate amount required to be capitalized under leases under which such Person is the lessee, (v) all obligations of such person to pay a specified purchase price for goods or services, whether or not delivered or accepted, i.e., take-or-pay and similar obligations, (vi) all Contingent Obligations of such Person and (vii) all obligations under any Interest Rate Protection Agreement or Other Hedging Agreement or under any similar type of agreement. "Initial Borrowing Date" shall mean the date occurring on or after the Original Effective Date on which the initial Borrowing of Term Loans under the Original Credit Agreement occurred. "Initial Public Offering" shall mean an underwritten initial public offering of common stock of, and by, Holdings pursuant to a registration statement filed with the SEC in accordance with the Securities Act. "Interest Determination Date" shall mean, with respect to any Eurodollar Loan, the second Business Day prior to the commencement of any Interest Period relating to such Eurodollar Loan. "Interest Period" shall have the meaning provided in Section 1.09. "Interest Rate Protection Agreement" shall mean any interest rate swap agreement, interest rate cap agreement, interest collar agreement, interest rate hedging agreement, interest rate floor agreement or other similar agreement or arrangement. "Issuing Bank" shall mean the Administrative Agent and any Bank which at the request of the Borrower and with the consent of the Administrative Agent (which shall not be unreasonably withheld) agrees, in such Bank's sole discretion, to become an Issuing Bank for the purpose of issuing Letters of Credit pursuant to Section 2 (it being understood and agreed that the Issuing Bank with respect to the Existing Letter of Credit shall be Fleet Bank, N.A.). 110 "Joint Venture" shall mean any Person in which Holdings, the Borrower and its Subsidiaries own, directly or indirectly, more than 5% but 50% or less of the equity interests. "L/C Supportable Indebtedness" shall mean (i) obligations of the Borrower or its Subsidiaries incurred in the ordinary course of business with respect to insurance obligations and workers' compensation, surety bonds and other similar statutory obligations and (ii) such other obligations of the Borrower or any of its Subsidiaries as are permitted to exist pursuant to the terms of this Agreement. "Leaseholds" of any Person means all the right, title and interest of such Person as lessee or licensee in, to and under leases or licenses of land, improvements and/or fixtures. "Letter of Credit" shall have the meaning provided in Section 2.01(a). "Letter of Credit Fee" shall have the meaning provided in Section 3.01(b). "Letter of Credit Outstandings" shall mean, at any time, the sum of (i) the aggregate Stated Amount of all outstanding Letters of Credit and (ii) the amount of all Unpaid Drawings. "Letter of Credit Request" shall have the meaning provided in Section 2.02(a). "Level 1" shall have the meaning provided in the definition of Applicable Margin. "Level 4" shall have the meaning provided in the definition of Applicable Margin. 116 "Leverage Ratio" shall mean, at any date of determination, the ratio of Consolidated Indebtedness on such date to Consolidated EBITDA for the Test Period last ended; provided that in the case of a Test Period ended before the last day of the fiscal year ended in 1998, for purposes of the Leverage Ratio only, Consolidated EBITDA for such Test Period shall be multiplied by a fraction the numerator of which is 365 and the denominator of which is the number of days actually elapsed during the respective Test Period. "Lien" shall mean any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), preference, priority or other security agreement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement, any financing or similar statement or notice filed under the UCC or any other similar recording or notice statute, and any lease having substantially the same effect as any of the foregoing). "Loan" shall mean each Tranche A Term Loan, each Tranche C Term Loan, each Revolving Loan and each Swingline Loan. "Majority Banks" of any Tranche shall mean those Non-Defaulting Banks which would constitute the Required Banks under, and as defined in, this Agreement if all outstanding Obligations of the other Tranches under this Agreement were repaid in full and all Commitments with respect thereto were terminated. "Management Agreements" shall have the meaning provided in Section 5.05. "Management Investors" shall mean Kirk P. Pond, Joseph R. Martin and certain other key employees of the Borrower who purchase Holdings Common Stock and/or Holdings Preferred Stock pursuant to the Securities Purchase and Holders Agreement. "Mandatory Borrowing" shall have the meaning provided in Section 1.01(e). "Margin Adjustment Period" shall mean each period which shall commence on a date occurring after the first anniversary of the Initial Borrowing Date on which the financial statements are delivered pursuant to Section 8.01(b) or (c) for a fiscal quarter or year, as the case may be, which ends at least one year after the Initial Borrowing Date and which Margin Adjustment Period shall end on the earlier of (i) the date of actual delivery of the next financial statements pursuant to Section 8.01(b) or (c) and (ii) the latest date on which the next financial statements are required to be delivered pursuant to Section 8.01(b) or (c). "Margin Adjustment Test Period" shall mean, with respect to each Margin Adjustment Period, the Test Period ended on the last day of the fiscal quarter or year, as the case may be, for which financial statements were last delivered or required to be delivered pursuant to Section 8.01(b) or (c). 117 "Margin Stock" shall have the meaning provided in Regulation U. "Material Adverse Effect" shall mean a material adverse effect on the business, operations, property, assets, liabilities, condition (financial or otherwise) or prospects of Holdings and its Subsidiaries taken as a whole or the Borrower. "Maturity Date" shall mean, with respect to any Tranche of Loans, the Tranche A Term Loan Maturity Date, the Tranche C Term Loan Maturity Date, the Revolving Loan Maturity Date or the Swingline Expiry Date, as the case may be. "Maximum Swingline Amount" shall mean $5,000,000. "Mortgage" shall mean and include each Original Mortgage, as amended pursuant to the respective Mortgage Amendment, each New Mortgage, and, after the execution and delivery thereof, each Additional Mortgage, in each case as same may be amended, modified or supplemented from time to time. "Mortgage Amendments" shall have the meaning provided in Section 5.11. "Mortgage Policies" shall mean and include each Original Mortgage Policy, each New Mortgage Policy, and, after the execution and delivery thereof, each mortgage insurance policy issued with respect to an Additional Mortgaged Property. "Mortgaged Property" shall mean and include each Original Mortgaged Property, each New Mortgaged Property, and, after the execution and delivery of any Additional Mortgage, shall include the respective Additional Mortgaged Property. "NSC" shall mean National Semiconductor Corporation, a Delaware corporation. 118 "Net Sale Proceeds" shall mean for any sale of assets, the gross cash proceeds (including any cash received by way of deferred payment pursuant to a promissory note, receivable or otherwise, but only as and when received) received from any sale of assets, net of (i) reasonable transaction costs (including, without limitation, any underwriting, brokerage or other customary selling commissions and reasonable legal, advisory and other fees and expenses, including title and recording expenses, associated therewith), (ii) payments of unassumed liabilities relating to the assets sold at the time of, or within 90 days after, the date of such sale, (iii) the amount of such gross cash proceeds required to be used to repay any Indebtedness (other than Indebtedness of the Banks pursuant to this Agreement) which is secured by the respective assets which were sold, and (iv) the estimated marginal increase in income taxes which will be payable by Holdings' consolidated group with respect to the fiscal year in which the sale occurs as a result of such sale. "New Bank" shall mean each of the Persons listed on Schedule I that is not a Continuing Bank. "New Mortgage Policies" shall have the meaning provided in Section 5.11(a). "New Mortgaged Properties" shall mean all Real Property of the Credit Parties designated as such on Schedule III. "New Mortgages" shall have the meaning provided in Section 5.11(a). "Non-Continuing Bank" shall mean any Original Bank party to this Agreement immediately prior to the Restatement Effective Date which, as a result of the repayment in full of its outstanding Tranche B Term Loans and the fact that such Bank does not become a Continuing Bank, ceases to be a Bank pursuant to this Agreement immediately after the occurrence of the Restatement Effective Date. "Non-Defaulting Bank" shall mean and include each Bank other than a Defaulting Bank. "Note" shall mean each Tranche A Term Note, each Tranche C Term Note, each Revolving Note and the Swingline Note. "Notice of Borrowing" shall have the meaning provided in Section 1.03. "Notice of Conversion" shall have the meaning provided in Section 1.06. 119 "Notice Office" shall mean the office of the Administrative Agent located at 130 Liberty Street, New York, NY 10006, Attention: Anthony LoGrippo, or such other office as the Administrative Agent may hereafter designate in writing as such to the other parties hereto. "Obligations" shall mean all amounts owing to any of the Agents, the Collateral Agent or any Bank pursuant to the terms of this Agreement or any other Credit Document. "Offering Circular" shall mean the Offering Circular, dated March 6, 1997, prepared in connection with the Senior Subordinated Notes. "Operating Agreements" shall mean the Technology Licensing and Transfer Agreement, Transition Services Agreement, Fairchild Foundry Services Agreement, Revenue Side Letter, Fairchild Assembly Services Agreement, National Foundry Services Agreement, National Assembly Services Agreement, Mil/Aero Wafer Services Agreement, Shared Facilities Agreement, Shared Services Agreement and Shared Services and Occupancy Agreement, all of which as defined in the Recapitalization Agreement. "Original Banks" shall mean each Person which was a Bank under, and as defined in, the Original Credit Agreement. "Original Credit Agreement" shall have the meaning provided in the first WHEREAS clause to this Agreement. "Original Effective Date" shall mean the Effective Date under, and as defined in, the Original Credit Agreement. "Original Letters of Credit" shall mean the letters of credit listed on Schedule XIII and previously issued under the Original Credit Agreement. "Original Loans" shall mean the Original Term Loans, the Original Revolving Loans and the Original Swingline Loans. "Original Mortgage Policies" shall mean each mortgage insurance policy issued with respect to an Original Mortgage under the Original Credit Agreement. "Original Mortgaged Properties" shall mean all Real Property of the Credit Parties designated as such on Schedule III. 120 "Original Mortgages" shall mean all Mortgages granted by the Credit Parties pursuant to the Original Credit Agreement and which have not been released by the lenders thereunder prior to the Restatement Effective Date. "Original Revolving Loans" shall mean the "Revolving Loans" under, and as defined in, the Original Credit Agreement. "Original Swingline Loans" shall mean the "Swingline Loans" under, and as defined in, the Original Credit Agreement. "Original Term Loans" shall mean the "Term Loans" under, and as defined in, the Original Credit Agreement. "Original Total Revolving Loan Commitment" shall mean the "Total Revolving Loan Commitment" under, and as defined in, the Original Credit Agreement. "Original Tranche A Term Loans" shall mean the "Tranche A Term Loans" under, and as defined in, the Original Credit Agreement. "Original Tranche B Term Loans" shall mean the "Tranche B Term Loans" under, and as defined in, the Original Credit Agreement. "Other Hedging Agreement" shall mean any foreign exchange contracts, currency swap agreements, commodity agreements or other similar agreements or arrangements designed to protect against the fluctuations in currency or commodity values. "Participant" shall have the meaning provided in Section 2.03(a). "Payment Office" shall mean the office of the Administrative Agent located at 130 Liberty Street, New York, New York 10006, or such other office as the Administrative Agent may hereafter designate in writing as such to the other parties hereto. "PBGC" shall mean the Pension Benefit Guaranty Corporation established pursuant to Section 4002 of ERISA, or any successor thereto. 121 "Percentage" of any Bank at any time shall mean a fraction (expressed as a percentage) the numerator of which is the Revolving Loan Commitment of such Bank at such time and the denominator of which is the Total Revolving Loan Commitment at such time, provided that if the Percentage of any Bank is to be determined after the Total Revolving Loan Commitment has been terminated, then the Percentages of the Banks shall be determined immediately prior (and without giving effect) to such termination. "Permitted Encumbrance" shall mean, with respect to any Mortgaged Property, such exceptions to title as are set forth in the title insurance policy or title commitment delivered with respect thereto, provided that in the case of any Additional Mortgaged Property, all such exceptions shall also be acceptable to the Administrative Agent in its reasonable discretion. "Permitted Liens" shall have the meaning provided in Section 9.01. "Person" shall mean any individual, partnership, joint venture, firm, corporation, association, trust or other enterprise or any government or political subdivision or any agency, department or instrumentality thereof. "Plan" shall mean any pension plan as defined in Section 3(2) of ERISA, which is maintained or contributed to by (or to which there is an obligation to contribute of) Holdings or a Subsidiary of Holdings or an ERISA Affiliate, and each such plan for the five year period immediately following the latest date on which Holdings, or a Subsidiary of Holdings or an ERISA Affiliate maintained, contributed to or had an obligation to contribute to such plan. "Pledge Agreement" shall mean the Pledge Agreement, dated as of March 11, 1997, executed and delivered pursuant to Section 5.11 of the Original Credit Agreement, as same may from time to time be amended, modified or supplemented (including by the addition of certain additional Credit Parties as parties thereto as required by Section 5.08 hereof) in accordance with the terms thereof. "Pledge Agreement Collateral" shall mean all "Collateral" as defined in each of the Pledge Agreements. "Pledged Securities" shall mean "Pledged Securities" as defined in the Pledge Agreement. 122 "Prime Lending Rate" shall mean the rate which BTCo announces from time to time as its prime lending rate, the Prime Lending Rate to change when and as such prime lending rate changes. The Prime Lending Rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer. BTCo may make commercial loans or other loans at rates of interest at, above or below the Prime Lending Rate. "Projections" shall mean the projections set forth on Schedule X hereto. "Purchase Price Note" shall mean, collectively, demand promissory notes in the aggregate principal amount of approximately $400,960,000 issued by the Borrower and its Subsidiaries to NSC and its Subsidiaries. "Purchased Assets" shall mean all of the assets, properties and rights which are primarily used in the conduct of the Business and which are being transferred to the Borrower pursuant to Section 2.1 of the Asset Purchase Agreement. "Qualified Capital Stock" of any Person shall mean any capital stock of such Person which is not Disqualified Stock; provided that in any event the Holdings Series A Preferred Stock in the form issued on or prior to the Initial Borrowing Date shall constitute Qualified Capital Stock. "Qualified Public Offering" shall mean an underwritten public offering of common stock of, and by, Holdings pursuant to a registration statement filed with the SEC in accordance with the Securities Act, which public equity offering results in gross proceeds to Holdings of not less than $50,000,000; provided, however, that Holdings contributes to the common equity of the Company the net cash proceeds from such underwritten public offering. "Quarterly Payment Date" shall mean the last Business Day of February, May, August and November occurring after the Initial Borrowing Date. "RCRA" shall mean the Resource Conservation and Recovery Act, as the same may be amended from time to time, 42 U.S.C. Section 6901 et seq. "Real Property" of any Person shall mean all the right, title and interest of such Person in and to land, improvements and fixtures, including Leaseholds. 123 "Recapitalization Agreement" shall mean the Agreement and Plan of Recapitalization, dated as of January 24, 1997, between Sterling and NSC, as in effect on the Initial Borrowing Date and as the same may be amended, modified or supplemented from time to time pursuant to the terms hereof and thereof. "Recapitalization Documents" shall mean the Recapitalization Agreement and all other documents entered into or delivered in connection with the Recapitalization Agreement (including, without limitation, the Asset Purchase Agreement and the Operating Agreements. "Recapitalization Transaction" shall mean, collectively, the transactions to occur on or prior to the Closing (as defined in the Recapitalization Agreement) pursuant to the Recapitalization Documents, including without limitation (x) the consummation of (i) the Asset Transfer (as defined in the Original Credit Agreement), (ii) the Equity Contribution (as defined in the Original Credit Agreement), (iii) the Holdings Contribution (as defined in the Original Credit Agreement), and (iv) the repayment in full of the Purchase Price Note and (y) the payment of all fees and expenses to be paid on or prior to such Closing or the Initial Borrowing Date and owing in connection with the foregoing. "Recovery Event" shall mean the receipt by the Holdings or any of its Subsidiaries of any cash insurance proceeds or condemnation award payable (i) by reason of theft, loss, physical destruction or damage, condemnation action or conveyance in lieu thereof or any other similar event with respect to any property or assets of the Borrower or any of its Subsidiaries, (ii) under any policy of insurance required to be maintained under Section 8.03 or (iii) by any condemning authority (or any authority receiving a conveyance in lieu of condemning the subject property). "Refinancing" shall mean all repayments and refinancings of Indebtedness under the Original Credit Agreement in connection with the Transaction. "Register" shall have the meaning provided in Section 13.17. "Regulation D" shall mean Regulation D of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof establishing reserve requirements. "Regulation G" shall mean Regulation G of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof. 124 "Regulation T" shall mean Regulation T of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof. "Regulation U" shall mean Regulation U of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof. "Regulation X" shall mean Regulation X of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof. "Related Business" shall mean the business of designing, developing and manufacturing of logic, discrete and memory semiconductors conducted by the Borrower and its Subsidiaries (or, if the reference is to an Unrestricted Subsidiary, by such Unrestricted Subsidiary) and any and all related businesses in support of and ancillary to or reasonably related to such business of designing, developing and manufacturing of logic, discrete and memory semiconductors. "Release" means any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, disposing or migration into the environment. "Replaced Bank" shall have the meaning provided in Section 1.13. "Replacement Bank" shall have the meaning provided in Section 1.13. "Reportable Event" shall mean an event described in Section 4043(c) of ERISA with respect to a Plan that is subject to Title IV of ERISA other than those events as to which the 30-day notice period is waived under subsection .22, .23, .25, .27 or .28 of PBGC Regulation Section 4043. 125 "Required Banks" shall mean Non-Defaulting Banks, the sum of whose outstanding Term Loans (or, if prior to the Initial Borrowing Date, Term Loan Commitments) and Revolving Loan Commitments (or after the termination thereof, outstanding Revolving Loans and Adjusted Percentage of Swingline Loans and Letter of Credit Outstandings) represent an amount greater than 50% of the sum of all outstanding Term Loans (or, if prior to the Initial Borrowing Date, Term Loan Commitments) of Non-Defaulting Banks and the Adjusted Total Revolving Loan Commitment (or after the termination thereof, the sum of the then total outstanding Revolving Loans of Non-Defaulting Banks and the aggregate Adjusted Percentages of all Non-Defaulting Banks of the total outstanding Swingline Loans and Letter of Credit Outstandings at such time). "Restatement Effective Date" shall have the meaning provided in Section 13.10. "Returns" shall have the meaning provided in Section 7.09. "Revolving Loan" shall have the meaning provided in Section 1.01(c). "Revolving Loan Commitment" shall mean, for each Bank, the amount set forth opposite such Bank's name in Schedule I hereto directly below the column entitled "Revolving Loan Commitment", as same may be (x) reduced from time to time pursuant to Sections 3.02, 3.03, 4.02 and/or 10 or (y) adjusted from time to time as a result of assignments to or from such Bank pursuant to Section 1.13 or 13.04(b). "Revolving Loan Maturity Date" shall mean March 11, 2002. "Revolving Note" shall have the meaning provided in Section 1.05(a). "Scheduled Repayments" shall mean Tranche A Scheduled Repayments and Tranche C Scheduled Repayments. "SEC" shall have the meaning provided in Section 8.01(h). "Section 4.04(b)(ii) Certificate" shall have the meaning provided in Section 4.04(b). "Secured Creditors" shall have the meaning assigned that term in the Security Documents. "Securities Act" shall mean the Securities Act of 1933, as amended. 126 "Securities Purchase and Holders Agreement" shall mean the Securities Purchase and Holders Agreement, dated as of March 11, 1997, among Holdings, Sterling, NSC and the Management Investors. "Security Agreement" shall mean the Security Agreement, dated as of March 11, 1997, executed and delivered pursuant to Section 5.12 of the Original Credit Agreement, as same may from time to time be amended, modified or supplemented (including by the addition of certain additional Credit Parties as parties thereto as required by Section 5.08 hereof) in accordance with the terms thereof. "Security Agreement Collateral" shall mean all "Collateral" as defined in the Security Agreement. "Security Document" shall mean the Pledge Agreement, the Security Agreement, each Mortgage (as amended by the Mortgage Amendments in the case of the Original Mortgages) and, after the execution and delivery thereof, each Additional Mortgage and each Additional Security Document. "Seller Note" shall mean the promissory note issued by Holdings to NSC in the principal amount of $77,000,000 pursuant to the Recapitalization Agreement, which promissory note shall be in the form delivered to the Agents on or prior to the Initial Borrowing Date (which promissory note shall be in the form of Exhibit 1-A to the Recapitalization Agreement, with any insertions or modifications thereto to be identified to the Agents and to be satisfactory to them (which, in any event, shall not adversely affect the interests of the Banks)). "Senior Subordinated Note Documents" shall mean the Senior Subordinated Notes, the Senior Subordinated Note Indenture and all other documents executed and delivered with respect to the Senior Subordinated Notes or Senior Subordinated Note Indenture. "Senior Subordinated Note Indenture" shall mean the indenture dated as of March 11, 1997, between the Borrower and the Senior Subordinated Note Indenture Trustee, as in effect on the Original Effective Date and as thereafter amended from time to time in accordance with the requirements thereof and of this Agreement. "Senior Subordinated Note Indenture Trustee" shall mean United States Trust Company of New York. 127 "Senior Subordinated Notes" shall mean the Borrower's 10-1/8% Senior Subordinated Notes due 2007 issued pursuant to the Senior Subordinated Note Indenture and any notes issued by the Borrower in exchange for, and as contemplated by, the Senior Subordinated Notes with substantially identical terms as the Senior Subordinated Notes. "Shareholders' Agreements" shall have the meaning provided in Section 5.05. "Standby Letter of Credit" shall have the meaning provided in Section 2.01(a). "Start Date" shall mean, with respect to any Margin Adjustment Period, the first day of such Margin Adjustment Period. "Stated Amount" of each Letter of Credit shall, at any time, mean the maximum amount available to be drawn thereunder (in each case determined without regard to whether any conditions to drawing could then be met). "Sterling" shall mean Sterling Holding Company, LLC, a Delaware limited liability company. "Subsidiaries Guaranty" shall mean the Subsidiaries Guaranty in the form of Exhibit G (appropriately completed), and, after the execution and delivery thereof, as modified, supplemented or amended from time to time. "Subsidiary" shall mean, as to any Person, (i) any corporation more than 50% of whose stock of any class or classes having by the terms thereof ordinary voting power to elect a majority of the directors of such corporation (irrespective of whether or not at the time stock of any class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time owned by such Person and/or one or more Subsidiaries of such Person and (ii) any partnership, association, joint venture or other entity in which such Person and/or one or more Subsidiaries of such Person has more than a 50% equity interest at the time. Notwithstanding the foregoing (and except for purposes of the definition of Unrestricted Subsidiary contained herein) an Unrestricted Subsidiary shall be deemed not to be a Subsidiary of the Borrower or any of its other Subsidiaries for purposes of this Agreement. "Subsidiary Guarantor" shall mean each Subsidiary of the Borrower designated as a "Subsidiary Guarantor" on Schedule VIII hereto or which executes a guarantee after the Restatement Effective Date pursuant to Section 8.12. 128 "Supermajority Banks" of any Tranche shall mean those Non-Defaulting Banks which would constitute the Required Banks under, and as defined in, this Agreement if (x) all outstanding Obligations of the other Tranches under this Agreement were repaid in full and all Commitments with respect thereto were terminated and (y) the percentage "50%" contained therein were changed to "66-2/3%". "Swingline Bank" shall mean BTCo. "Swingline Expiry Date" shall mean the date which is two Business Days prior to the Revolving Loan Maturity Date. "Swingline Loan" shall have the meaning provided in Section 1.01(d). "Swingline Note" shall have the meaning provided in Section 1.05(a). "Syndication Agent" shall have the meaning provided in the first paragraph of this Agreement. "Syndication Date" shall mean that date upon which the Administrative Agent determines in its sole discretion (and notifies the Borrower) that the primary syndication (and resultant addition of institutions as Banks pursuant to Section 13.04) has been completed. "Tax Sharing Agreement" shall have the meaning provided in Section 5.05. "Taxes" shall have the meaning provided in Section 4.04(a). "Term Loan" shall mean each Tranche A Term Loan and the Tranche C Term Loan. "Term Loan Commitment" shall mean each Tranche A Term Loan Commitment and each Tranche C Term Loan Commitment, with the Term Loan Commitment of any Bank at any time to equal the sum of its Tranche A Term Loan Commitment and Tranche C Term Loan Commitment as then in effect. "Test Period" shall mean each period of four consecutive fiscal quarters of the Borrower (or, if shorter, the period beginning on the first day of the fiscal year beginning on, or closest to, May 26, 1997 and ending on the last day of a fiscal quarter of the Borrower ended thereafter), in each case taken as one accounting period, ended after the first day of the fiscal year beginning on, or closest to, May 26, 1997. 129 "Tools and Molding Expenditures" of any Person shall mean all expenditures, other than Capital Expenditures, by such Person related to assembly equipment components necessary for the operation of the Business (including the Acquired Business) which, under generally accepted accounting principles, are or will be required to be accounted for on the books of such Person as other assets with useful lives of 1-2 years. "Total Commitments" shall mean, at any time, the sum of the Commitments of each of the Banks. "Total Revolving Loan Commitment" shall mean, at any time, the sum of the Revolving Loan Commitments of each of the Banks. "Total Term Loan Commitment" shall mean, at any time, the sum of the Total Tranche A Term Loan Commitment and Total Tranche C Term Loan Commitment. "Total Tranche A Term Loan Commitment" shall mean, at any time, the sum of the Tranche A Term Loan Commitments of each of the Banks. "Total Tranche B Term Loan Commitment" shall mean the "Total Tranche B Term Loan Commitment" under, and as defined in, the Original Credit Agreement. "Total Tranche C Term Loan Commitment" shall mean, at any time, the sum of the Tranche C Term Loan Commitments of each of the Banks. "Total Unutilized Revolving Loan Commitment" shall mean, at any time, an amount equal to the remainder of (x) the then Total Revolving Loan Commitment, less (y) the sum of the aggregate principal amount of Revolving Loans and Swingline Loans then outstanding plus the then aggregate amount of Letter of Credit Outstandings. "Trade Letter of Credit" shall have the meaning provided in Section 2.01(a). "Tranche" shall mean the respective facility and commitments utilized in making Loans hereunder, with there being four separate Tranches, i.e., Tranche A Term Loans, Tranche C Term Loans, Revolving Loans and Swingline Loans. "Tranche A Scheduled Repayment" shall have the meaning provided in Section 4.02(b). "Tranche A Scheduled Repayment Date" shall have the meaning provided in Section 4.02(b). 130 "Tranche A Term Loan" shall have the meaning provided in Section 1.01(a). "Tranche A Term Loan Commitment" shall mean, for each Bank, the amount set forth opposite such Bank's name in Schedule I hereto directly below the column entitled "Tranche A Term Loan Commitment", as same may be (x) reduced from time to time pursuant to Sections 3.03 and/or 10 or (y) adjusted from time to time as a result of assignments to or from such Bank pursuant to Section 1.13 or 13.04. "Tranche A Term Loan Maturity Date" shall mean March 11, 2002. "Tranche A Term Note" shall have the meaning provided in Section 1.05(a). "Tranche B Term Loan Commitment" shall mean the "Tranche B Term Loan Commitment" under, and as defined in, the Original Credit Agreement. "Tranche B Term Loans" shall mean Original Tranche B Term Loans. "Tranche C Scheduled Repayment" shall have the meaning provided in Section 4.02(c). "Tranche C Scheduled Repayment Date" shall have the meaning provided in Section 4.02(c). "Tranche C Term Loan" shall have the meaning provided in Section 1.01(b). "Tranche C Term Loan Commitment" shall mean, for each Bank, the amount set forth opposite such Bank's name in Schedule I hereto directly below the column entitled "Tranche C Term Loan Commitment", as same may be (x) reduced from time to time pursuant to Sections 3.03 and/or 10 or (y) adjusted from time to time as a result of assignments to or from such Bank pursuant to Section 1.13 or 13.04(b). "Tranche C Term Loan Maturity Date" shall mean March 11, 2003. "Tranche C Term Note" shall have the meaning provided in Section 1.05(a). "Transaction" shall mean, collectively, (i) the Acquisition, (ii) the amendment and restatement of the Original Credit Agreement in the form of this Agreement as provided herein, (iii) the incurrence of Loans hereunder on the Restatement Effective Date and (iv) the consummation of the Refinancing. 131 "Type" shall mean the type of Loan determined with regard to the interest option applicable thereto, i.e., whether a Base Rate Loan or a Eurodollar Loan. "UCC" shall mean the Uniform Commercial Code as from time to time in effect in the relevant jurisdiction. "Unfunded Current Liability" of any Plan shall mean the amount, if any, by which the actuarial present value of the accumulated plan benefits under the Plan as of the close of its most recent plan year, determined in accordance with actuarial assumptions at such time consistent with Statement of Financial Accounting Standards No. 87, exceeds the market value of the assets allocable thereto. "United States" and "U.S." shall each mean the United States of America. "Unpaid Drawing" shall have the meaning provided for in Section 2.04(a). 132 "Unrestricted Subsidiary" shall mean any Subsidiary of the Borrower that, at the time of determination, shall be an Unrestricted Subsidiary (as designated by the Borrower, as provided below) provided that such Subsidiary does not and shall not engage, to any substantial extent, in any line or lines of business activity other than a Related Business. The Borrower may designate any Person to be an Unrestricted Subsidiary if (a) no Default or Event of Default is existing or will occur as a consequence thereof, (b) either (x) such Subsidiary, at the time of designation thereof, has no assets (except assets which could be invested in such Unrestricted Subsidiary at the time of designation as described in the immediately succeeding sentence) or (y) such Subsidiary is designated an "Unrestricted Subsidiary" at the time of the acquisition thereof by the Borrower, in the case of Subsidiaries acquired after the Restatement Effective Date and (c) such Subsidiary does not own any equity interests in, or hold any Lien on any property of, the Borrower or any other Subsidiary (excluding other Unrestricted Subsidiaries). Any such designation shall also be deemed to constitute an investment pursuant to Section 9.05(xi) in an amount equal to a percentage equal to the Borrower's and its Subsidiaries' percentage ownership interest of such Subsidiary of the sum of the net assets (with assets other than cash and Cash Equivalents valued at fair market value) of such Subsidiary at the time of the designation (which investment must be permitted to be made in accordance with the requirements of Section 9.05(xi)), unless the designation is made pursuant to clause (b)(y) of the first sentence of this definition, in which case the amount of consideration paid by the Borrower and its Subsidiaries to effect such acquisition shall be included as such an investment. The Borrower may designate any Unrestricted Subsidiary to be a Subsidiary, provided that no Default or Event of Default is existing or will occur as a consequence thereof. Each such designation shall be evidenced by filing with the Administrative Agent a certified copy of the resolution giving effect to such designation and an officers' certificate of the chairman of the board, the president, any vice president or the treasurer of the Borrower certifying that such designation complied with the foregoing conditions. "Unutilized Revolving Loan Commitment" with respect to any Bank, at any time, shall mean such Bank's Revolving Loan Commitment at such time less the sum of (i) the aggregate outstanding principal amount of Revolving Loans made by such Bank and (ii) such Bank's Adjusted Percentage of the Letter of Credit Outstandings in respect of Letters of Credit issued under this Agreement. "Voting Stock" shall mean any class or classes of capital stock of Holdings 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 Holdings. 133 "Wholly-Owned Subsidiary" shall mean, as to any Person, (i) any corporation 100% of whose capital stock (other than director's qualifying shares) is at the time owned by such Person and/or one or more Wholly-Owned Subsidiaries of such Person and (ii) any partnership, association, joint venture or other entity in which such Person and/or one or more Wholly-Owned Subsidiaries of such Person has a 100% equity interest at such time. SECTION 12. The Agents 12.01 Appointment. The Banks hereby designate Bankers Trust Company as Administrative Agent (for purposes of this Section 12, the term "Administrative Agent" shall include Bankers Trust Company (and/or any of its affiliates) in its capacity as Collateral Agent pursuant to the Security Documents) to act as specified herein and in the other Credit Documents. The Banks hereby designate Credit Suisse First Boston as Syndication Agent and Canadian Imperial Bank of Commerce as Documentation Agent to act as specified herein and in the other Credit Documents. Each Bank hereby irrevocably authorizes, and each holder of any Note by the acceptance of such Note shall be deemed irrevocably to authorize, the Agents to take such action on its behalf under the provisions of this Agreement, the other Credit Documents and any other instruments and agreements referred to herein or therein and to exercise such powers and to perform such duties hereunder and thereunder as are specifically delegated to or required of the respective Agent by the terms hereof and thereof and such other powers as are reasonably incidental thereto. Each of the Agents may perform any of its duties hereunder by or through its respective officers, directors, agents, employees or affiliates. 12.02 Nature of Duties. No Agent shall have any duties or responsibilities except those expressly set forth in this Agreement and the Security Documents. None of the Agents nor any of their respective officers, directors, agents, employees or affiliates shall be liable for any action taken or omitted by it or them hereunder or under any other Credit Document or in connection herewith or therewith, unless caused by such Person's gross negligence or willful misconduct. The duties of each Agent shall be mechanical and administrative in nature; no Agent shall have by reason of this Agreement or any other Credit Document a fiduciary relationship in respect of any Bank or the holder of any Note; and nothing in this Agreement or any other Credit Document, expressed or implied, is intended to or shall be so construed as to impose upon any Agent any obligations in respect of this Agreement or any other Credit Document except as expressly set forth herein or therein. 134 12.03 Lack of Reliance on the Agents. Independently and without reliance upon any Agent, each Bank and the holder of each Note, to the extent it deems appropriate, has made and shall continue to make (i) its own independent investigation of the financial condition and affairs of Holdings and its Subsidiaries in connection with the making and the continuance of the Loans and the taking or not taking of any action in connection herewith and (ii) its own appraisal of the creditworthiness of Holdings and its Subsidiaries and, except as expressly provided in this Agreement, no Agent shall have any duty or responsibility, either initially or on a continuing basis, to provide any Bank or the holder of any Note with any credit or other information with respect thereto, whether coming into its possession before the making of the Loans or at any time or times thereafter. No Agent shall be responsible to any Bank or the holder of any Note for any recitals, statements, information, representations or warranties herein or in any document, certificate or other writing delivered in connection herewith or for the execution, effectiveness, genuineness, validity, enforceability, perfection, collectability, priority or sufficiency of this Agreement or any other Credit Document or the financial condition of Holdings and its Subsidiaries or be required to make any inquiry concerning either the performance or observance of any of the terms, provisions or conditions of this Agreement or any other Credit Document, or the financial condition of Holdings and its Subsidiaries or the existence or possible existence of any Default or Event of Default. 12.04 Certain Rights of the Agents. If any Agent shall request instructions from the Required Banks with respect to any act or action (including failure to act) in connection with this Agreement or any other Credit Document, such Agent shall be entitled to refrain from such act or taking such action unless and until such Agent shall have received instructions from the Required Banks; and such Agent shall not incur liability to any Person by reason of so refraining. Without limiting the foregoing, no Bank or the holder of any Note shall have any right of action whatsoever against any Agent as a result of such Agent acting or refraining from acting hereunder or under any other Credit Document in accordance with the instructions of the Required Banks. 12.05 Reliance. Each Agent shall be entitled to rely, and shall be fully protected in relying, upon any note, writing, resolution, notice, statement, certificate, telex, teletype or telecopier message, cablegram, radiogram, order or other document or telephone message signed, sent or made by any Person that such Agent believed to be the proper Person, and, with respect to all legal matters pertaining to this Agreement and any other Credit Document and its duties hereunder and thereunder, upon advice of counsel selected by such Agent. 135 12.06 Indemnification. To the extent any Agent is not reimbursed and indemnified by the Borrower the Banks will reimburse and indemnify such Agent, in proportion to their respective "percentages" as used in determining the Required Banks (without regard to the existence of any Defaulting Banks), for and against any and all liabilities, obligations, losses, damages, penalties, claims, actions, judgments, costs, expenses or disbursements of whatsoever kind or nature which may be imposed on, asserted against or incurred by such Agent in performing its respective duties hereunder or under any other Credit Document, in any way relating to or arising out of this Agreement or any other Credit Document; provided that no Bank shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from such Agent's gross negligence or willful misconduct. 12.07 Each Agent in its Individual Capacity. With respect to its obligation to make Loans under this Agreement, each Agent shall have the rights and powers specified herein for a "Bank" and may exercise the same rights and powers as though it were not performing the duties specified herein; and the term "Banks", "Required Banks", "holders of Notes" or any similar terms shall, unless the context clearly otherwise indicates, include each Agent in its individual capacity. Each Agent may accept deposits from, lend money to, and generally engage in any kind of banking, trust or other business with any Credit Party or any Affiliate of any Credit Party as if they were not performing the duties specified herein, and may accept fees and other consideration from the Borrower or any other Credit Party for services in connection with this Agreement and otherwise without having to account for the same to the Banks. 12.08 Holders. The Administrative Agent may deem and treat the payee of any Note as the owner thereof for all purposes hereof unless and until a written notice of the assignment, transfer or endorsement thereof, as the case may be, shall have been filed with the Administrative Agent. Any request, authority or consent of any Person who, at the time of making such request or giving such authority or consent, is the holder of any Note shall be conclusive and binding on any subsequent holder, transferee, assignee or indorsee, as the case may be, of such Note or of any Note or Notes issued in exchange therefor. 136 12.09 Resignation by the Agents. (a) The Administrative Agent may resign from the performance of all its functions and duties hereunder and/or under the other Credit Documents at any time by giving 15 Business Days' prior written notice to the Borrower and the Banks. Such resignation shall take effect upon the appointment of a successor Administrative Agent pursuant to clauses (b) and (c) below or as otherwise provided below. Each other Agent may resign from the performance of all of its functions and duties hereunder and/or under the other Credit Documents at any time by giving notice to the Borrower, the Administrative Agent and the Banks. Such resignation shall take effect upon delivery of such notice. (b) Upon any such notice of resignation by the Administrative Agent, the Banks shall appoint a successor Administrative Agent hereunder or thereunder which shall be a commercial bank or trust company reasonably acceptable to the Borrower. (c) If a successor Administrative Agent shall not have been so appointed within such 15 Business Day period, the Administrative Agent, with the consent of the Borrower (which shall not be unreasonably withheld or delayed), shall then appoint a commercial bank or trust company with capital and surplus of not less than $500,000,000 as successor Administrative Agent which shall serve as Administrative Agent hereunder or thereunder until such time, if any, as the Banks appoint a successor Administrative Agent as provided above. (d) If no successor Administrative Agent has been appointed pursuant to clause (b) or (c) above by the 25th Business Day after the date such notice of resignation was given by the Administrative Agent, the Administrative Agent's resignation shall become effective and the Agents (if one or more so agrees), or if there are no Agents or no Agent so agrees, then the Required Banks, shall thereafter perform all the duties of the Administrative Agent hereunder and/or under any other Credit Document until such time, if any, as the Required Banks appoint a successor Administrative Agent as provided above. SECTION 13. Miscellaneous 137 13.01 Payment of Expenses, etc. The Borrower shall: (i) whether or not the transactions herein contemplated are consummated, pay all reasonable out-of-pocket costs and expenses of the Agents (including, without limitation, the reasonable fees and disbursements of White & Case and local counsel) in connection with the preparation, execution and delivery of this Agreement and the other Credit Documents and the documents and instruments referred to herein and therein and any amendment, waiver or consent relating hereto or thereto, of the Agents in connection with their syndication efforts with respect to this Agreement and of the Agents and, following and during the continuation of an Event of Default, each of the Banks in connection with the enforcement of this Agreement and the other Credit Documents and the documents and instruments referred to herein and therein (including, without limitation, the reasonable fees and disbursements of counsel (including in-house counsel) for the Agents and, following and during the continuation of an Event of Default, for each of the Banks); (ii) pay and hold each of the Banks harmless from and against any and all present and future stamp, excise and other similar taxes with respect to the foregoing matters and save each of the Banks harmless from and against any and all liabilities with respect to or resulting from any delay or omission (other than to the extent attributable to such Bank) to pay such taxes; and (iii) indemnify the Agents and each Bank, and each of their respective officers, directors, trustees, employees, representatives and agents from and hold each of them harmless against any and all liabilities, obligations (including removal or remedial actions), losses, damages, penalties, claims, actions, judgments, suits, costs, expenses and disbursements (including reasonable attorneys' and consultants' fees and disbursements) incurred by, imposed on or assessed against any of them as a result of, or arising out of, or in any way related to, or by reason of, (a) any investigation, litigation or other proceeding (whether or not the Agents or any Bank is a party thereto) related to the entering into and/or performance of this Agreement or any other Credit Document or the use of any Letter of Credit or the proceeds of any Loans hereunder or the consummation of any transactions contemplated herein (including, without limitation, the Transaction), or in any other Credit Document or the exercise of any of their rights or remedies provided herein or in the other Credit Documents, or (b) the actual or alleged presence of Hazardous Materials in the air, surface water or groundwater or on the surface or subsurface of any Real Property owned or at any time operated by Holdings or any of its Subsidiaries, the generation, storage, transportation, handling or disposal of Hazardous Materials at any location, whether or not owned or operated by Holdings or any of its Subsidiaries, the non-compliance of any Real Property with foreign, federal, state and local laws, regulations, and ordinances (including applicable permits thereunder) applicable to any Real Property, or any Environmental Claim asserted against Holdings, any of its Subsidiaries or any Real Property owned or at any time operated by Holdings or any of its Subsidiaries, including, in each case, without limitation, the reasonable fees and disbursements of counsel and other consultants incurred in connection with any such investigation, litigation or other proceeding (but excluding any losses, liabilities, claims, 138 damages or expenses to the extent incurred by reason of the gross negligence or willful misconduct of the Person to be indemnified). To the extent that the undertaking to indemnify, pay or hold harmless the Agents or any Bank set forth in the preceding sentence may be unenforceable because it is violative of any law or public policy, the Borrower shall make the maximum contribution to the payment and satisfaction of each of the indemnified liabilities which is permissible under applicable law. 13.02 Right of Setoff. (a) In addition to any rights now or hereafter granted under applicable law or otherwise, and not by way of limitation of any such rights, upon the occurrence of an Event of Default, each Bank is hereby authorized at any time or from time to time, without presentment, demand, protest or other notice of any kind to Holdings or the Borrower or to any other Person, any such notice being hereby expressly waived, to set off and to appropriate and apply any and all deposits (general or special) and any other Indebtedness at any time held or owing by such Bank (including, without limitation, by branches and agencies of such Bank wherever located) to or for the credit or the account of Holdings, the Borrower or any Subsidiary Guarantor but in any event excluding assets held in trust for any such Person against and on account of the Obligations and liabilities of Holdings, the Borrower or such Subsidiary Guarantor, as applicable, to such Bank under this Agreement or under any of the other Credit Documents, including, without limitation, all interests in Obligations purchased by such Bank pursuant to Section 13.06(b), and all other claims of any nature or description arising out of or connected with this Agreement or any other Credit Document, irrespective of whether or not such Bank shall have made any demand hereunder and although said Obligations, liabilities or claims, or any of them, shall be contingent or unmatured. 139 (b) NOTWITHSTANDING SECTION 13.02(a), AT ANY TIME THAT THE LOANS OR ANY OTHER OBLIGATION SHALL BE SECURED BY REAL PROPERTY LOCATED IN CALIFORNIA, NO BANK SHALL EXERCISE A RIGHT OF SETOFF, BANKER'S LIEN OR COUNTERCLAIM OR TAKE ANY COURT OR ADMINISTRATIVE ACTION OR INSTITUTE ANY PROCEEDING TO ENFORCE ANY PROVISIONS OF THIS AGREEMENT OR ANY NOTE THAT IS NOT TAKEN BY THE REQUIRED BANKS OR APPROVED IN WRITING BY THE REQUIRED BANKS IF SUCH SETOFF OR ACTION OR PROCEEDING WOULD OR MIGHT (PURSUANT TO SECTIONS 580a, 580b, 580d AND 726 OF THE CALIFORNIA CODE OF CIVIL PROCEDURE OR SECTION 2924 OF THE CALIFORNIA CIVIL CODE, IF APPLICABLE, OR OTHERWISE) AFFECT OR IMPAIR THE VALIDITY, PRIORITY, OR ENFORCEABILITY OF THE LIENS GRANTED TO THE COLLATERAL AGENT PURSUANT TO THE SECURITY DOCUMENTS OR THE ENFORCEABILITY OF THE NOTES AND OTHER OBLIGATIONS HEREUNDER, AND ANY ATTEMPTED EXERCISE BY ANY BANK OF ANY SUCH RIGHT WITHOUT OBTAINING SUCH CONSENT OF THE REQUIRED BANKS SHALL BE NULL AND VOID. THIS SECTION 13.02(b) SHALL BE SOLELY FOR THE BENEFIT OF EACH OF THE BANKS HEREUNDER. 13.03 Notices. Except as otherwise expressly provided herein, all notices and other communications provided for hereunder shall be in writing (including telex or telecopier communication) and mailed, telexed, telecopied or delivered: if to Holdings, at Holdings' address specified opposite its signature below; if to the Borrower, at the Borrower's address specified opposite its signature below; if to any Bank, at its address specified opposite its name on Schedule II below; and if to the Administrative Agent, at its Notice Office; or, as to any Credit Party or any of the Agents, at such other address as shall be designated by such party in a written notice to the other parties hereto and, as to each Bank, at such other address as shall be designated by such Bank in a written notice to the Borrower and the Agents. All such notices and communications shall, when mailed, telexed, telecopied or sent by overnight courier, be effective when deposited in the mails or delivered to the overnight courier, prepaid and properly addressed for delivery on such or the next Business Day, or sent by telex or telecopier, except that notices and communications to the Agents and the Borrower shall not be effective until received by the Agents or the Borrower, as the case may be. 140 13.04 Benefit of Agreement. (a) This Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective successors and assigns of the parties hereto; provided, however, no Credit Party may assign or transfer any of its rights, obligations or interest hereunder or under any other Credit Document without the prior written consent of the Banks and, provided further, that, although any Bank may transfer, assign or grant participations in its rights hereunder, such Bank shall remain a "Bank" for all purposes hereunder (and may not transfer or assign all or any portion of its Commitments hereunder except as provided in Section 13.04(b)) and the transferee, assignee or participant, as the case may be, shall not constitute a "Bank" hereunder and, provided further, that no Bank shall transfer or grant any participation under which the participant shall have rights to approve any amendment to or waiver of this Agreement or any other Credit Document except to the extent such amendment or waiver would (i) extend the final scheduled maturity of any Loan, Note or Letter of Credit (unless such Letter of Credit is not extended beyond the Revolving Loan Maturity Date) in which such participant is participating, or reduce the rate or extend the time of payment of interest or Fees thereon (except (x) in connection with a waiver of applicability of any post-default increase in interest rates and (y) that any amendment or modification to the financial definitions in this Agreement shall not constitute a reduction in the rate of interest for purposes of this clause (i)) or reduce the principal amount thereof, or increase the amount of the participant's participation over the amount thereof then in effect (it being understood that a waiver of any Default or Event of Default or of a mandatory reduction in the Total Commitments shall not constitute a change in the terms of such participation, and that an increase in any Commitment or Loan shall be permitted without the consent of any participant if the participant's participation is not increased as a result thereof), (ii) consent to the assignment or transfer by the Borrower of any of its rights and obligations under this Agreement or (iii) release all or substantially all of the Collateral under all of the Security Documents (except as expressly provided in the Credit Documents) supporting the Loans hereunder in which such participant is participating. In the case of any such participation, the participant shall not have any rights under this Agreement or any of the other Credit Documents (the participant's rights against such Bank in respect of such participation to be those set forth in the agreement executed by such Bank in favor of the participant relating thereto) and all amounts payable by the Borrower hereunder shall be determined as if such Bank had not sold such participation. 141 (b) Notwithstanding the foregoing, any Bank (or any Bank together with one or more other Banks) may (x) assign all or a portion of its Revolving Loan Commitment (and related outstanding Obligations hereunder) and/or its outstanding Term Loans (or, if prior to the Restatement Effective Date, Term Loan Commitment) to its (i) parent company and/or any affiliate of such Bank which is at least 50% owned by such Bank or its parent company or (ii) with the consent of the Administrative Agent, a Common Management Fund or (iii) to one or more Banks or (y) assign all, or if less than all, a portion equal to at least $5,000,000 in the aggregate for the assigning Bank or assigning Banks, of such Revolving Loan Commitments and outstanding principal amount of Term Loans (or, if prior to the Restatement Effective Date, Term Loan Commitment) hereunder to one or more Eligible Transferees, each of which assignees shall become a party to this Agreement as a Bank by execution of an Assignment and Assumption Agreement, provided that, (i) at such time Schedule I shall be deemed modified to reflect the Commitments (and/or outstanding Term Loans, as the case may be) of such new Bank and of the existing Banks, (ii) new Notes will be issued, at the Borrower's expense, to such new Bank and to the assigning Bank upon the request of such new Bank or assigning Bank, such new Notes to be in conformity with the requirements of Section 1.05 (with appropriate modifications) to the extent needed to reflect the revised Commitments (and/or outstanding Term Loans, as the case may be), (iii) the consent of the Administrative Agent shall be required in connection with any such assignment (which consent shall not be unreasonably withheld) and (iv) the Administrative Agent shall receive at the time of each such assignment, from the assigning or assignee Bank, the payment of a non-refundable assignment fee of $3,500. To the extent of any assignment pursuant to this Section 13.04(b), the assigning Bank shall be relieved of its obligations hereunder with respect to its assigned Commitments (it being understood that the indemnification provisions under this Agreement (including, without limitation, Sections 1.10, 1.11, 2.05, 4.04, 13.01 and 13.06) shall survive as to such assigning Bank). At the time of each assignment pursuant to this Section 13.04(b) to a Person which is not already a Bank hereunder and which is not a United States person (as such term is defined in Section 7701(a)(30) of the Code) for Federal income tax purposes, the respective assignee Bank shall provide to the Borrower and the Administrative Agent the appropriate Internal Revenue Service Forms (and, if applicable, a Section 4.04(b)(ii) Certificate) described in Section 4.04(b). To the extent that an assignment of all or any portion of a Bank's Commitments and related outstanding Obligations pursuant to Section 1.13 or this Section 13.04(b) would, at the time of such assignment, result in increased costs under Section 1.10, 1.11 or 4.04 from those being charged by the respective assigning Bank prior to such assignment, then the Borrower shall not be obligated to pay such increased costs (although the Borrower shall be obligated to pay any other increased costs of the type described above resulting from changes after the date of the respective assignment). At the time of any assignment pursuant to this Section 13.04(b), the assigning Bank shall furnish notice thereof to the Administrative Agent. 142 (c) Nothing in this Agreement shall prevent or prohibit any Bank from pledging its Loans and Notes hereunder to a Federal Reserve Bank in support of borrowings made by such Bank from such Federal Reserve Bank and, with the consent of the Borrower and the Administrative Agent, any Bank which is a fund may pledge all or any portion of its Notes or Loans to a trustee for the benefit of investors and in support of its obligation to such investors. 13.05 No Waiver; Remedies Cumulative. No failure or delay on the part of any Agent or any Bank or any holder of any Note in exercising any right, power or privilege hereunder or under any other Credit Document and no course of dealing between the Borrower or any other Credit Party and any Agent or any Bank or the holder of any Note shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder or under any other Credit Document preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder or thereunder. The rights, powers and remedies herein or in any other Credit Document expressly provided are cumulative and not exclusive of any rights, powers or remedies which any Agent or any Bank or the holder of any Note would otherwise have. No notice to or demand on any Credit Party in any case shall entitle any Credit Party to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of any Agent or any Bank or the holder of any Note to any other or further action in any circumstances without notice or demand. 13.06 Payments Pro Rata. (a) Except as otherwise provided in this Agreement, the Administrative Agent agrees that promptly after its receipt of each payment from or on behalf of the Borrower in respect of any Obligations hereunder, it shall distribute such payment to the Banks (other than any Bank that has consented in writing to waive its pro rata share of any such payment) pro rata based upon their respective shares, if any, of the Obligations with respect to which such payment was received. 143 (b) Each of the Banks agrees that, if it should receive any amount hereunder (whether by voluntary payment, by realization upon security, by the exercise of the right of setoff or banker's lien, by counterclaim or cross action, by the enforcement of any right under the Credit Documents, or otherwise), which is applicable to the payment of the principal of, or interest on, the Loans, Unpaid Drawings, Commitment Commission or Letter of Credit Fees, of a sum which with respect to the related sum or sums received by other Banks is in a greater proportion than the total of such Obligation then owed and due to such Bank bears to the total of such Obligation then owed and due to all of the Banks immediately prior to such receipt, then such Bank receiving such excess payment shall purchase for cash without recourse or warranty from the other Banks an interest in the Obligations of the respective Credit Party to such Banks in such amount as shall result in a proportional participation by all the Banks in such amount; provided that if all or any portion of such excess amount is thereafter recovered from such Bank, such purchase shall be rescinded and the purchase price restored to the extent of such recovery, but without interest. (c) Notwithstanding anything to the contrary contained herein, the provisions of the preceding Sections 13.06(a) and (b) shall be subject to the express provisions of this Agreement which require, or permit, differing payments to be made to Non-Defaulting Banks as opposed to Defaulting Banks. 13.07 Calculations; Computations. (a) The financial statements to be furnished to the Banks pursuant hereto shall be made and prepared in accordance with generally accepted accounting principles in the United States (or the equivalent thereof in any country in which a Foreign Subsidiary is doing business, as applicable) consistently applied throughout the periods involved (except as set forth in the notes thereto or as otherwise disclosed in writing by the Borrower to the Banks); provided that, except as otherwise specifically provided herein, all computations of Excess Cash Flow and all computations determining compliance with Sections 9.08 through 9.10, inclusive, shall utilize accounting principles and policies in conformity with those used to prepare the historical financial statements delivered to the Banks for the first fiscal year of the Borrower ended after the Initial Borrowing Date pursuant to Section 8.01(c) of the Original Credit Agreement (which annual financial statements shall be generally consistent with the historical financial statements delivered to the Banks pursuant to Section 7.05(a), except as regards to inter-company transactions between the Borrower and NSC) (with the foregoing generally accepted accounting principles, subject to the preceding proviso, herein called "GAAP"). Notwithstanding anything to the contrary contained herein, all computations determining compliance with Sections 9.08 through 9.10, inclusive, including definitions used therein, shall treat Unrestricted Subsidiaries as if the same did not exist. 144 (b) All computations of interest, Commitment Commission and Fees hereunder shall be made on the basis of a year of 360 days for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest, Commitment Commission or Fees are payable. 145 13.08 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF JURY TRIAL. (a) THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL, EXCEPT AS OTHERWISE PROVIDED IN CERTAIN OF THE MORTGAGES, BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF HOLDINGS AND THE BORROWER HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. EACH OF HOLDINGS AND THE BORROWER HEREBY IRREVOCABLY DESIGNATES, APPOINTS AND EMPOWERS CORPORATION SERVICE COMPANY, WITH OFFICES ON THE DATE HEREOF AT 500 CENTRAL AVENUE, ALBANY, NEW YORK 12206 AS ITS DESIGNEE, APPOINTEE AND AGENT TO RECEIVE, ACCEPT AND ACKNOWLEDGE FOR AND ON ITS BEHALF, AND IN RESPECT OF ITS PROPERTY, SERVICE OF ANY AND ALL LEGAL PROCESS, SUMMONS, NOTICES AND DOCUMENTS WHICH MAY BE SERVED IN ANY SUCH ACTION OR PROCEEDING. IF FOR ANY REASON SUCH DESIGNEE, APPOINTEE AND AGENT SHALL CEASE TO BE AVAILABLE TO ACT AS SUCH, EACH CREDIT PARTY AGREES TO DESIGNATE A NEW DESIGNEE, APPOINTEE AND AGENT IN THE STATE OF NEW YORK ON THE TERMS AND FOR THE PURPOSES OF THIS PROVISION SATISFACTORY TO THE ADMINISTRATIVE AGENT UNDER THIS AGREEMENT. EACH OF HOLDINGS AND THE BORROWER FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO ANY CREDIT PARTY AT ITS ADDRESS SET FORTH OPPOSITE ITS SIGNATURE BELOW, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE AGENTS UNDER THIS AGREEMENT, ANY BANK OR THE HOLDER OF ANY NOTE TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY CREDIT PARTY IN ANY OTHER JURISDICTION. 146 (b) EACH OF HOLDINGS AND THE BORROWER HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT BROUGHT IN THE COURTS REFERRED TO IN CLAUSE (a) ABOVE AND HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. (c) EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. 13.09 Counterparts. This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. A set of counterparts executed by all the parties hereto shall be lodged with the Borrower and the Administrative Agent. 147 13.10 Effectiveness. This Agreement shall become effective on the date (the "Restatement Effective Date") on which (i) each of Holdings, the Borrower, each Subsidiary Guarantor, each Continuing Bank, each New Bank, the Required Banks (determined immediately before the occurrence of the Restatement Effective Date), the Majority Banks holding outstanding Tranche A Term Loans (determined immediately before the occurrence of the Restatement Effective Date) and each Agent shall have signed a counterpart hereof (whether the same or different counterparts) and shall have delivered the same to the Administrative Agent or, in the case of the Banks, shall have given to the Administrative Agent telephonic (confirmed in writing), written or telex notice (actually received) at such office that the same has been signed and mailed to it and (ii) the conditions contained in Sections 5 and 6 are met to the satisfaction of the Administrative Agent and the Required Banks (determined immediately after the occurrence of the Restatement Effective Date). Unless the Administrative Agent has received actual notice from any Bank that the conditions contained in Sections 5 and 6 have not been met to its satisfaction, upon the satisfaction of the condition described in clause (i) of the immediately preceding sentence and upon the Administrative Agent's good faith determination that the conditions described in clause (ii) of the immediately preceding sentence have been met, then the Restatement Effective Date shall have been deemed to have occurred, regardless of any subsequent determination that one or more of the conditions thereto had not been met (although the occurrence of the Restatement Effective Date shall not release the Borrower from any liability for failure to satisfy one or more of the applicable conditions contained in Section 5 or 6). The Administrative Agent will give the Borrower and each Bank prompt written notice of the occurrence of the Restatement Effective Date. 13.11 Headings Descriptive. The headings of the several sections and subsections of this Agreement are inserted for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement. 148 13.12 Amendment or Waiver; etc. (a) Neither this Agreement nor any other Credit Document nor any terms hereof or thereof may be changed, waived, discharged or terminated unless such change, waiver, discharge or termination is in writing signed by the respective Credit Parties party thereto and the Required Banks, provided that no such change, waiver, discharge or termination shall, without the consent of each Bank (other than a Defaulting Bank) (with Obligations being directly affected in the case of following clause (i)), (i) extend the final scheduled maturity of any Loan or Note or extend the stated maturity of any Letter of Credit beyond the Revolving Loan Maturity Date, or reduce the rate or extend the time of payment of interest or Fees thereon (except (x) in connection with the waiver of applicability of any post-default increase in interest rates and (y) that any amendment or modification to the financial definitions in this Agreement shall not constitute a reduction in the rate of interest for purposes of this clause (i)), or reduce the principal amount thereof (except to the extent repaid in cash), (ii) release all or substantially all of the Collateral (except as expressly provided in the Credit Documents) under all the Security Documents, (iii) amend, modify or waive any provision of this Section 13.12, (iv) reduce the percentage specified in the definition of Required Banks (it being understood that, with the consent of the Required Banks, additional extensions of credit pursuant to this Agreement may be included in the determination of the Required Banks on substantially the same basis as the extensions of Term Loans and Revolving Loan Commitments are included on the Effective Date) or (v) consent to the assignment or transfer by the Borrower of any of its rights and obligations under this Agreement; provided further, that no such change, waiver, discharge or termination shall (u) increase the Commitments of any Bank over the amount thereof then in effect without the consent of such Bank (it being understood that waivers or modifications of conditions precedent, covenants, Defaults or Events of Default or of a mandatory reduction in the Total Commitments shall not constitute an increase of the Commitment of any Bank, and that an increase in the available portion of any Commitment of any Bank shall not constitute an increase in the Commitment of such Bank), (v) without the consent of BTCo or, in the case of Letters of Credit, the respective Issuing Bank, amend, modify or waive any provision of Section 2 or alter its rights or obligations with respect to Letters of Credit or Swingline Loans, (w) without the consent of each Agent affected thereby, amend, modify or waive any provision of Section 12 as same applies to such Agent or any other provision as same relates to the rights or obligations of such Agent, (x) without the consent of the Collateral Agent, amend, modify or waive any provision relating to the rights or obligations of the Collateral Agent, (y) without the consent of the Majority Banks of each Tranche which is being allocated a lesser prepayment, repayment or commitment reduction as a result of the actions described below (or without the consent of the Majority Banks of each Tranche in the case of an amendment to the definition of Majority Banks), amend the definition of Majority Banks (it being understood that, with the consent of the Required Banks, additional extensions of credit pursuant to this Agreement may be included in the determination of the Majority Banks on substantially the same basis as the 149 extensions of Term Loans and Revolving Loan Commitments are included on the Effective Date) or alter the required application of any prepayments or repayments (or commitment reductions), as between the various Tranches, pursuant to Section 4.01 or 4.02 (excluding Sections 4.02(b) and (c)) (although (x) the Required Banks may waive, in whole or in part, any such prepayment, repayment or commitment reduction, so long as the application, as amongst the various Tranches, of any such prepayment, repayment or commitment reduction which is still required to be made is not altered and (y) if additional Tranches of Term Loans are extended after the Initial Borrowing Date with the consent of the Required Banks as required above, such Tranches may be included on a pro rata basis (as is originally done with the Tranche A Term Loans and Tranche B Term Loans) in the various prepayments or repayments required pursuant to Sections 4.01 and 4.02 (excluding Sections 4.02(b) and (c) and any section providing Scheduled Repayments for any new Tranche of Term Loans) or (z) without the consent of the Supermajority Banks of the respective Tranche, reduce the amount of, or extend the date of, any Scheduled Repayment applicable to such Tranche or, without the consent of the Supermajority Banks of each Tranche, amend the definition of Supermajority Banks (it being understood that, with the consent of the Required Banks, additional extensions of credit pursuant to this Agreement may be included in the determination of the Supermajority Banks on substantially the same basis as the extensions of Term Loans and Revolving Loan Commitments are included on the Effective Date). 150 (b) If, in connection with any proposed change, waiver, discharge or termination to any of the provisions of this Agreement as contemplated by clauses (i) through (v), inclusive, of the first proviso to Section 13.12(a), the consent of the Required Banks is obtained but the consent of one or more of such other Banks whose consent is required is not obtained, then the Borrower shall have the right, so long as all non-consenting Banks whose individual consent is required are treated as described in either clauses (A) or (B) below, to either (A) replace each such non-consenting Bank or Banks (or, at the option of the Borrower if the respective Bank's consent is required with respect to less than all Tranches of Loans (or related Commitments), to replace only the respective Tranche or Tranches of Commitments and/or Loans of the respective non-consenting Bank which gave rise to the need to obtain such Bank's individual consent) with one or more Replacement Banks pursuant to Section 1.13 so long as at the time of such replacement, each such Replacement Bank consents to the proposed change, waiver, discharge or termination or (B) terminate such non-consenting Bank's Revolving Loan Commitment (if such Bank's consent is required as a result of its Revolving Loan Commitment) and/or repay each Tranche of outstanding Term Loans of such Bank which gave rise to the need to obtain such Bank's consent, in accordance with Sections 3.02(b) and/or 4.01(iv), provided that, unless the Commitments are terminated, and Loans repaid, pursuant to preceding clause (B) are immediately replaced in full at such time through the addition of new Banks or the increase of the Commitments and/or outstanding Loans of existing Banks (who in each case must specifically consent thereto), then in the case of any action pursuant to preceding clause (B) the Required Banks (determined before giving effect to the proposed action) shall specifically consent thereto, provided further, that in any event the Borrower shall not have the right to replace a Bank, terminate its Revolving Loan Commitment or repay its Loans solely as a result of the exercise of such Bank's rights (and the withholding of any required consent by such Bank) pursuant to the second proviso to Section 13.12(a). 13.13 Survival. All indemnities set forth herein including, without limitation, in Sections 1.10, 1.11, 2.05, 4.04, 13.01 and 13.06 shall, subject to Section 13.15 (to the extent applicable), survive the execution, delivery and termination of this Agreement and the Notes and the making and repayment of the Loans. 13.14 Domicile of Loans. Each Bank may transfer and carry its Loans at, to or for the account of any office, Subsidiary or Affiliate of such Bank. Notwithstanding anything to the contrary contained herein, to the extent that a transfer of Loans pursuant to this Section 13.14 would, at the time of such transfer, result in increased costs under Section 1.10, 1.11, 2.05 or 4.04 from those being charged by the respective Bank prior to such transfer, then the Borrower shall not be obligated to pay such increased costs (although the Borrower shall be obligated to pay any other increased costs of the type described above resulting from changes after the date of the respective transfer). 151 13.15 Limitation on Additional Amounts, etc. Notwithstanding anything to the contrary contained in Sections 1.10, 1.11, 2.05 or 4.04 of this Agreement, unless a Bank gives notice to the Borrower that it is obligated to pay an amount under any such Section within one year after the later of (x) the date the Bank incurs the respective increased costs, Taxes, loss, expense or liability, reduction in amounts received or receivable or reduction in return on capital or (y) the date such Bank has actual knowledge of its incurrence of the respective increased costs, Taxes, loss, expense or liability, reductions in amounts received or receivable or reduction in return on capital, then such Bank shall only be entitled to be compensated for such amount by the Borrower pursuant to said Section 1.10, 1.11, 2.05 or 4.04, as the case may be, to the extent the costs, Taxes, loss, expense or liability, reduction in amounts received or receivable or reduction in return on capital are incurred or suffered on or after the date which occurs one year prior to such Bank giving notice to the Borrower that it is obligated to pay the respective amounts pursuant to said Section 1.10, 1.11, 2.05 or 4.04, as the case may be. This Section 13.15 shall have no applicability to any Section of this Agreement other than said Sections 1.10, 1.11, 2.05 and 4.04. 13.16 Confidentiality. (a) Subject to the provisions of clause (b) of this Section 13.16, each Bank agrees that it will use its best efforts not to disclose without the prior consent of Holdings or the Borrower (other than to its Affiliates, employees, auditors, advisors or counsel or to another Bank if the Bank or such Bank's holding or parent company or board of trustees in its sole discretion determines that any such party should have access to such information, provided such Persons shall be subject to the provisions of this Section 13.16 to the same extent as such Bank) any information with respect to Holdings or any of its Subsidiaries which is now or in the future furnished pursuant to this Agreement or any other Credit Document and which is designated by Holdings to the Banks in writing as confidential, provided that any Bank may disclose any such information (a) as has become generally available to the public other than by virtue of a breach of this Section 13.16(a) by the respective Bank, (b) as may be required or appropriate in any report, statement or testimony submitted to any municipal, state or Federal regulatory body having or claiming to have jurisdiction over such Bank or to the Federal Reserve Board or the Federal Deposit Insurance Corporation or similar organizations (whether in the United States or elsewhere) or their successors, (c) as may be required or appropriate in respect to any summons or subpoena or in connection with any litigation, (d) in order to comply with any law, order, regulation or ruling applicable to such Bank, (e) to the Agents or the Collateral Agent and (f) to any prospective or actual transferee or participant in connection with any contemplated transfer or participation of any of the Notes or Commitments or any interest therein by such Bank, provided that such prospective transferee agrees to be bound by the confidentiality provisions contained in this Section 13.16. 152 (b) Each of Holdings and the Borrower hereby acknowledges and agrees that each Bank may share with any of its affiliates any information related to Holdings or any of its Subsidiaries (including, without limitation, any nonpublic customer information regarding the creditworthiness of Holdings and its Subsidiaries, provided such Persons shall be subject to the provisions of this Section 13.16 to the same extent as such Bank). 13.17 Register. The Borrower hereby designates the Administrative Agent to serve as the Borrower's agent, solely for purposes of this Section 13.17, to maintain a register (the "Register") on which it will record the name and address of each of the Banks, the Commitments from time to time of each of the Banks, the Loans made by each of the Banks and each repayment in respect of the principal amount of the Loans of each Bank. Failure to make any such recordation, or any error in such recordation shall not affect the Borrower's obligations in respect of such Loans. With respect to any Bank, the transfer of the Commitments of such Bank and the rights to the principal of, and interest on, any Loan made pursuant to such Commitments shall not be effective until such transfer is recorded on the Register maintained by the Administrative Agent with respect to ownership of such Commitments and Loans and prior to such recordation all amounts owing to the transferor with respect to such Commitments and Loans shall remain owing to the transferor. The registration of assignment or transfer of all or part of any Commitments and Loans shall be recorded by the Administrative Agent on the Register only upon the acceptance by the Administrative Agent of a properly executed and delivered Assignment and Assumption Agreement pursuant to Section 13.04(b). Coincident with the delivery of such an Assignment and Assumption Agreement to the Administrative Agent for acceptance and registration of assignment or transfer of all or part of a Loan, or as soon thereafter as practicable, the assigning or transferor Bank shall surrender the Note evidencing such Loan, and thereupon one or more new Notes in the same aggregate principal amount shall be issued to the assigning or transferor Bank and/or the new Bank. The Borrower agrees to indemnify the Administrative Agent from and against any and all losses, claims, damages and liabilities of whatsoever nature which may be imposed on, asserted against or incurred by the Administrative Agent in performing its duties under this Section 13.17. 13.18 Certain Prior Documents. Upon execution of this Agreement, all rights and obligations of the Agents and Citicorp Venture Capital Ltd. under the commitment letter and related documents attached as Exhibit 4.7B to the Recapitalization Agreement are terminated; provided that all obligations set forth in the fee letter related thereto are hereby expressly assumed by the Borrower, and, as so assumed, shall continue in full force and effect. 153 13.19 Certain Provisions Regarding Original Banks, Including As Holders of Tranche B Term Loans. Notwithstanding anything to the contrary contained in this Agreement, it is understood and agreed that, with respect to each Non-Continuing Bank, although such Non-Continuing Bank shall cease to constitute a Bank pursuant to this Agreement (on a prospective basis) on the Restatement Effective Date, all indemnities contained in the Original Credit Agreement shall continue to apply to such Non-Continuing Bank, and shall be deemed incorporated herein by reference. Furthermore, upon the repayment of the amounts owing in respect of the Tranche B Term Loans on the Restatement Effective Date as required by this Agreement, if any amount so paid is subsequently required to be disgorged or returned by the respective Original Bank (or its successors and assigns), then the respective Person shall be deemed to have a claim pursuant to this Agreement against the Borrower for any such amounts. Furthermore, each Original Bank holding Tranche B Term Loans immediately prior to the occurrence of the Restatement Effective Date shall retain a claim against the Borrower pursuant to this Agreement for all amounts which should have been paid to it in respect of its Tranche B Term Loans on the Restatement Effective Date (including breakage and other similar costs, and any amounts owing pursuant to indemnity provisions), except to the extent such amounts are actually paid on the Restatement Effective Date (and to the extent so paid, same shall remain subject to the provisions of the immediately preceding sentence). To the extent any amounts are owing by the Borrower to any Original Bank as contemplated by this Section 13.19, such amounts shall be deemed to constitute Obligations pursuant to this Agreement, which shall be fully entitled to the benefits of (and shall be fully guaranteed and secured pursuant to) the Guaranties and Security Documents. 13.20 Addition of New Banks; Obligation to Pay Certain Amounts Owing Pursuant to the Original Credit Agreement; Termination of Commitments of Non-Continuing Banks: etc. (a) On and as of the occurrence of the Restatement Effective Date in accordance with Section 13.10, each New Bank shall become a "Bank" under, and for all purposes of, this Agreement and the other Credit Documents. (b) By their execution and delivery hereof, the Borrower, the Required Banks (determined immediately before the occurrence of the Restatement Effective Date) and the Majority Banks holding outstanding Tranche A Term Loans (determined immediately before the occurrence of the Restatement Effective Date) consent to the voluntary repayment by the Borrower of all outstanding Original Tranche B Term Loans, certain Revolving Loans (as contemplated by the last sentence of Section 1.01(c)) and certain other Obligations owing to the Original Banks as required by Section 5.18. 154 13.21 Acknoledgement and Agreement of Credit Parties. Each of the Credit Parties, by executing and delivering a counterpart of this Agreement, hereby consents to the increased extensions of credit pursuant to this Agreement which will be made available as a result of the amendment and restatement hereof on the Restatement Effective Date. All such extensions of credit, as well as the extensions of credit pursuant to the Original Credit Agreement (and also as contemplated by preceding Section 13.19) shall be entitled to all benefits of (and shall be fully guaranteed pursuant to) each of the Guaranties and shall be fully secured pursuant to, and in accordance with the terms of, the various Security Documents. 13.22 Post-Closing Actions. Notwithstanding anything to the contrary contained in this Agreement or the other Credit Documents, the parties hereto acknowledge and agree that: (a) New Mortgages; Title Insurance; Surveys; Opinions; etc. The Borrower shall, within 30 days after the Restatement Effective Date, deliver to the Collateral Agent: (i) fully executed counterparts of mortgages or deeds to secure debt in each case substantially in the form of the Original Mortgages delivered to the Administrative Agent on the Original Effective Date or in such other form and substance as is reasonably satisfactory to the Agents (each, a "New Mortgage" and, collectively,the "New Mortgages"), which New Mortgages shall cover such of the Real Property owned or leased by the Borrower or any Domestic Subsidiary (after giving effect to the occurrence of the Restatement Effective Date) as shall be designated as such on Schedule III and is not subject to any Original Mortgage (each, a "New Mortgaged Property" and, collectively, the "New Mortgaged Properties"), together with evidence that counterparts of the New Mortgages have been delivered to the title insurance company insuring the Lien of the New Mortgages for recording in all places to the extent necessary or, in the reasonable opinion of the Collateral Agent, desirable to effectively create a valid and enforceable first priority mortgage lien, subject only to Permitted Encumbrances, on each New Mortgaged Property in favor of the Collateral Agent (or such other trustee as may be required or desired under local law) for the benefit of the Secured Creditors; 155 (ii) mortgagee title insurance policies on each New Mortgaged Property issued by, with respect to the Borrower's Real Property located in Mountain View, California, Stewart Title of California, Inc., or such other title insurers reasonably satisfactory to the Collateral Agent (each, a "New Mortgage Policy" and, collectively, the "New Mortgage Policies") in amounts satisfactory to the Agent and the Required Banks assuring the Collateral Agent that the New Mortgages on such New Mortgaged Properties are valid and enforceable first priority mortgage liens on the respective New Mortgaged Properties, free and clear of all defects and encumbrances except Permitted Encumbrances and such New Mortgage Policies shall otherwise be in form and substance reasonably satisfactory to the Agents and the Required Banks and shall include, as appropriate, an endorsement for future advances under this Agreement and the Notes and for any other matter that the Collateral Agent in its reasonable discretion may reasonably request, shall not include an exception for mechanics' liens, and shall provide for affirmative insurance and such reinsurance as the Collateral Agent in its discretion may reasonably request; (iii) copies of appraisals prepared for tax allocation purposes for each New Mortgaged Property, which appraisals shall be prepared by appraisers reasonably satisfactory to the Collateral Agent, shall value the buildings on a depreciated cost basis and on a continuing use basis and shall otherwise be in form and substance reasonably satisfactory to each Agent and the Required Banks; and (iv) opinions from local counsel satisfactory to the Agents, each of which (x) shall be addressed to each of the Agents and each of the Banks, (y) shall be in form and substance satisfactory to the Agents and the Required Banks, and (z) shall cover the perfection of the security interests granted pursuant to the Security Agreement and the New Mortgages and such other matters incident to the transactions contemplated herein as the Agents may reasonably request. (b) Landlord Consents. The Borrower agrees to use reasonable good faith efforts to obtain any necessary landlord consents with respect to any Leasehold, provided, however, the Borrower shall not be required to comply with the provisions of Section 13.22(a) to the extent the Borrower, after using reasonable good faith efforts, shall fail to so obtain any such landlord consent. 156 All conditions precedent and representations contained in this Agreement and the other Credit Documents shall be deemed modified to the extent necessary to effect the foregoing (and to permit the taking of the actions described above within the time period required above, rather than as elsewhere provided in the Credit Documents); provided, that (x) to the extent any representation and warranty would not be true because the foregoing actions were not taken on the Restatement Effective Date, the respective representation and warranty shall be required to be true and correct in all material respects at the time the respective action is taken (or was required to be taken) in accordance with the foregoing provisions of Section 13.22 and (y) all representations and warranties relating to the Security Documents shall be required to be true immediately after the actions required to be taken by Section 13.22 have been taken (or were required to be taken). The acceptance of the benefits of each Credit Event shall constitute a representation, warranty and covenant by the Borrower to each of the Banks that the actions required pursuant to this Section 13.22 will be taken within the relevant time period referred to in this Section 13.22 and that, at such time, all representations and warranties contained in this Agreement and the other Credit Documents shall then be true and correct without any modification pursuant to this Section 13.22. SECTION 14. Holdings Guaranty 14.01 The Holdings Guaranty. In order to induce the Agents and the Banks to enter into this Agreement and to extend credit hereunder, to induce Banks or any of their respective Affiliates to enter into the Interest Rate Protection Agreements or other Hedging Agreements, and in recognition of the direct benefits to be received by Holdings from the proceeds of the Loans, the issuance of the Letters of Credit, and the entering into of Interest Rate Protection Agreements or Other Hedging Agreements, Holdings hereby agrees with the Guaranteed Creditors as follows: 157 (a) Holdings hereby unconditionally and irrevocably guarantees as primary obligor and not merely as surety the full and prompt payment when due, whether upon maturity, acceleration or otherwise, of any and all of the Guaranteed Obligations of the Borrower to the Guaranteed Creditors. If any or all of the Guaranteed Obligations of the Borrower to the Guaranteed Creditors becomes due and payable hereunder, Holdings irrevocably and unconditionally promises to pay such indebtedness to the Guaranteed Creditors, or order, on demand, together with any and all expenses which may be incurred by the Guaranteed Creditors in collecting any of the Guaranteed Obligations. If claim is ever made upon any Guaranteed Creditor for repayment or recovery of any amount or amounts received in payment or on account of any of the Guaranteed Obligations and any of the aforesaid payees repays all or part of said amount by reason of (i) any judgment, decree or order of any court or administrative body having jurisdiction over such payee or any of its property or (ii) any settlement or compromise of any such claim effected by such payee with any such claimant (including the Borrower), then and in such event Holdings agrees that any such judgment, decree, order, settlement or compromise shall be binding upon Holdings, notwithstanding any revocation of this Holdings Guaranty or other instrument evidencing any liability of the Borrower, and Holdings shall be and remain liable to the aforesaid payees hereunder for the amount so repaid or recovered to the same extent as if such amount had never originally been received by any such payee. (b) Holdings hereby acknowledges and affirms that it understands that to the extent the Guaranteed Obligations are secured by real property located in the State of California, Holdings shall be liable for the full amount of the liability hereunder notwithstanding foreclosure on such real property by trustee sale or any other reason impairing Holdings' or any secured creditor's right to proceed against the Borrower or any other guarantor of the Guaranteed Obligations. (c) Holdings hereby waives, to the fullest extent permitted by applicable law, all rights and benefits under Sections 580a, 580b, 580d and 726 of the California Code of Civil Procedure. Holdings hereby further waives, to the fullest extent permitted by applicable law, without limiting the generality of the foregoing or any other provision hereof, all rights and benefits which might otherwise be available to Holdings under Sections 2809, 2810, 2815, 2819, 2821, 2839, 2845, 2848, 2849, 2850, 2899 and 3433 of the California Civil Code. 158 (d) Holdings waives its rights of subrogation and reimbursement and any other rights and defenses available to Holdings by reason of Sections 2787 to 2855, inclusive, of the California Civil Code, including, without limitation, (1) any defenses Holdings may have to this guaranty being issued pursuant to this Section 14 by reason of an election of remedies by the Guaranteed Creditors and (2) any rights or defenses Holdings may have by reason of protection afforded to the Borrower pursuant to the antideficiency or other laws of California limiting or discharging the Borrower's indebtedness, including, without limitation, Section 580a, 580b, 580d or 726 of the California Code of Civil Procedure. In furtherance of such provisions, Holdings hereby waives all rights and defenses arising out of an election of remedies by the Guaranteed Creditors, even though such election of remedies (such as a nonjudicial foreclosure) destroys Holdings' rights of subrogation and reimbursement against the Borrower by the operation of Section 580d of the California Code of Civil Procedure or otherwise. Holdings warrants and agrees that each of the waivers set forth above is made with full knowledge of its significance and consequences and that if any of such waivers are determined to be contrary to any applicable law or public policy, such waivers shall be effective only to the maximum extent permitted by law. 14.02 Bankruptcy. Additionally, Holdings unconditionally and irrevocably guarantees the payment of any and all of the Guaranteed Obligations of the Borrower to the Guaranteed Creditors whether or not due or payable by the Borrower upon the occurrence of an Event of Default under any of the events specified in Section 10.05, and unconditionally promises to pay such indebtedness to the Guaranteed Creditors, or order, on demand, in lawful money of the United States. 159 14.03 Nature of Liability. The liability of Holdings hereunder is exclusive and independent of any security for or other guaranty of the Guaranteed Obligations of the Borrower whether executed by Holdings, any other guarantor or by any other party, and the liability of Holdings hereunder is not affected or impaired by (a) any direction as to application of payment by the Borrower or by any other party, or (b) any other continuing or other guaranty, undertaking or maximum liability of a guarantor or of any other party as to the Guaranteed Obligations of the Borrower, or (c) any payment on or in reduction of any such other guaranty or undertaking, or (d) any dissolution, termination or increase, decrease or change in personnel by the Borrower, or (e) any payment made to any Guaranteed Creditor on the Guaranteed Obligations which any such Guaranteed Creditor repays to the Borrower pursuant to court order in any bankruptcy, reorganization, arrangement, moratorium or other debtor relief proceeding, and Holdings waives any right to the deferral or modification of its obligations hereunder by reason of any such proceeding. 14.04 Independent Obligation. The obligations of Holdings hereunder are independent of the obligations of any other guarantor, any other party or the Borrower, and a separate action or actions may be brought and prosecuted against Holdings whether or not action is brought against any other guarantor, any other party or the Borrower and whether or not any other guarantor, any other party or the Borrower be joined in any such action or actions. Holdings waives, to the full extent permitted by law, the benefit of any statute of limitations affecting its liability hereunder or the enforcement thereof. Any payment by the Borrower or other circumstance which operates to toll any statute of limitations as to the Borrower shall operate to toll the statute of limitations as to Holdings. 14.05 Authorization. Holdings authorizes the Guaranteed Creditors without notice or demand (except as shall be required by applicable statute and cannot be waived), and without affecting or impairing its liability hereunder, from time to time to: (a) change the manner, place or terms of payment of, and/or change or extend the time of payment of, renew, increase, accelerate or alter, any of the Guaranteed Obligations (including any increase or decrease in the rate of interest thereon), any security therefor, or any liability incurred directly or indirectly in respect thereof, and the Holdings Guaranty herein made shall apply to the Guaranteed Obligations as so changed, extended, renewed or altered; 160 (b) take and hold security for the payment of the Guaranteed Obligations and sell, exchange, release, surrender, realize upon or otherwise deal with in any manner and in any order any property by whomsoever at any time pledged or mortgaged to secure, or howsoever securing, the Guaranteed Obligations or any liabilities (including any of those hereunder) incurred directly or indirectly in respect thereof or hereof, and/or any offset thereagainst; (c) exercise or refrain from exercising any rights against the Borrower, any other Credit Party or others or otherwise act or refrain from acting; (d) release or substitute any one or more endorsers, guarantors, the Borrower or other obligors; (e) settle or compromise any of the Guaranteed Obligations, any security therefor or any liability (including any of those hereunder) incurred directly or indirectly in respect thereof or hereof, and may subordinate the payment of all or any part thereof to the payment of any liability (whether due or not) of the Borrower to its creditors other than the Guaranteed Creditors; (f) apply any sums by whomsoever paid or howsoever realized to any liability or liabilities of the Borrower to the Guaranteed Creditors regardless of what liability or liabilities of Holdings or the Borrower remain unpaid; (g) consent to or waive any breach of, or any act, omission or default under, this Agreement or any of the instruments or agreements referred to herein, or otherwise amend, modify or supplement this Agreement or any of such other instruments or agreements; and/or (h) take any other action which would, under otherwise applicable principles of common law, give rise to a legal or equitable discharge of Holdings from its liabilities under this Holdings Guaranty. 14.06 Reliance. It is not necessary for any Guaranteed Creditor to inquire into the capacity or powers of the Borrower or the officers, directors, partners or agents acting or purporting to act on their behalf, and any Guaranteed Obligations made or created in reliance upon the professed exercise of such powers shall be guaranteed hereunder. 161 14.07 Subordination. Any of the indebtedness of the Borrower now or hereafter owing to Holdings is hereby subordinated to the Guaranteed Obligations of the Borrower owing to the Guaranteed Creditors; and if the Administrative Agent so requests at a time when an Event of Default exists, all such indebtedness of the Borrower to Holdings shall be collected, enforced and received by Holdings for the benefit of the Guaranteed Creditors and be paid over to the Administrative Agent on behalf of the Guaranteed Creditors on account of the Guaranteed Obligations of the Borrower to the Guaranteed Creditors, but without affecting or impairing in any manner the liability of Holdings under the other provisions of this Holdings Guaranty. Prior to the transfer by Holdings of any note or negotiable instrument evidencing any of the indebtedness of the Borrower to Holdings, Holdings shall mark such note or negotiable instrument with a legend that the same is subject to this subordination. Without limiting the generality of the foregoing, Holdings hereby agrees with the Guaranteed Creditors that it will not exercise any right of subrogation which it may at any time otherwise have as a result of this Holdings Guaranty (whether contractual, under Section 509 of the Bankruptcy Code or otherwise) until all Guaranteed Obligations have been irrevocably paid in full in cash. 14.08 Waiver. (a) Holdings waives any right (except as shall be required by applicable statute and cannot be waived) to require any Guaranteed Creditor to (i) proceed against the Borrower, any other guarantor or any other party, (ii) proceed against or exhaust any security held from the Borrower, any other guarantor or any other party or (iii) pursue any other remedy in any Guaranteed Creditor's power whatsoever. Holdings waives any defense based on or arising out of any defense of the Borrower, any other guarantor or any other party, other than payment in full of the Guaranteed Obligations, based on or arising out of the disability of the Borrower, any other guarantor or any other party, or the validity, legality or unenforceability of the Guaranteed Obligations or any part thereof from any cause, or the cessation from any cause of the liability of the Borrower other than payment in full of the Guaranteed Obligations. The Guaranteed Creditors may, at their election, foreclose on any security held by any Agent, the Collateral Agent or any other Guaranteed Creditor by one or more judicial or nonjudicial sales, whether or not every aspect of any such sale is commercially reasonable (to the extent such sale is permitted by applicable law), or exercise any other right or remedy the Guaranteed Creditors may have against the Borrower or any other party, or any security, without affecting or impairing in any way the liability of Holdings hereunder except to the extent the Guaranteed Obligations have been paid. Holdings waives any defense arising out of any such election by the Guaranteed Creditors, even though such election operates to impair or extinguish any right of reimbursement or subrogation or other right or remedy of Holdings against the Borrower or any other party or any security. 162 (b) Holdings waives all presentments, demands for performance, protests and notices, including, without limitation, notices of nonperformance, notices of protest, notices of dishonor, notices of acceptance of this Holdings Guaranty, and notices of the existence, creation or incurring of new or additional Guaranteed Obligations. Holdings assumes all responsibility for being and keeping itself informed of the Borrower's financial condition and assets, and of all other circumstances bearing upon the risk of nonpayment of the Guaranteed Obligations and the nature, scope and extent of the risks which Holdings assumes and incurs hereunder, and agrees that neither the Agents nor any Bank shall have any duty to advise Holdings of information known to them regarding such circumstances or risks. 14.09 Maximum Liability. It is the desire and intent of Holdings and the Guaranteed Creditors that this Holdings Guaranty shall be enforced against Holdings to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. If, however, and to the extent that, the obligations of Holdings under this Holdings Guaranty shall be adjudicated to be invalid or unenforceable for any reason (including, without limitation, because of any applicable state or federal law relating to fraudulent conveyances or transfers), then the amount of the Guaranteed Obligations of Holdings shall be deemed to be reduced and Holdings shall pay the maximum amount of the Guaranteed Obligations which would be permissible under applicable law. * * * 163 IN WITNESS WHEREOF, the parties hereto have caused their duly authorized officers to execute and deliver this Agreement as of the date first above written. Addresses: 333 Western Avenue FSC SEMICONDUCTOR CORPORATION South Portland, ME 04106 Tel: (207) 775-8755 Fax: (207) 761-6020 Attention: Dan Boxer By ----------------------- Name: Title: 333 Western Avenue FAIRCHILD SEMICONDUCTOR South Portland, ME 04106 CORPORATION Tel: (207) 775-8755 Fax: (207) 761-6020 Attention: Dan Boxer By -------------------------- Name: Title: BANKERS TRUST COMPANY, Individually and as Administrative Agent By ------------------------------------ Name: Title: CREDIT SUISSE FIRST BOSTON, Individually and as Syndication Agent By ------------------------------------ Name: Title: By ------------------------------------ Name: Title: CANADIAN IMPERIAL BANK OF COMMERCE, Individually and as Documentation Agent By ------------------------------------ Name: Title: ABN AMRO BANK, N.V. By ------------------------------------ Name: Title: By ------------------------------------ Name: Title: BANKBOSTON, N.A. By ------------------------------------ Name: Title: THE BANK OF NOVA SCOTIA By ------------------------------------ Name: Title: BANK OF SCOTLAND By ------------------------------------ Name: Title: BANK OF TOKYO-MITSUBISHI By ------------------------------------ Name: Title: AMARA-1 FINANCE LTD. By ------------------------------------ Name: Title: CORESTATES BANK, N.A. By --------------------------- Name: Title: DRESDNER BANK AG, New York Branch and Grand Cayman Branch By --------------------------- Name: Title: By --------------------------- Name: Title: DRESDNER BANK AG, New York Branch and Grand Cayman Branch By --------------------------- Name: Title: By --------------------------- Name: Title: FIRST SOURCE FINANCIAL LLP By First Source Financial, Inc., its Agent/Manager By --------------------------- Name: Title: FLEET NATIONAL BANK By --------------------------- Name: Title: THE FUJI BANK, LIMITED NEW YORK BRANCH By --------------------------- Name: Title: GENERAL ELECTRIC CAPITAL CORPORATION By --------------------------- Name: Title: MERRILL LYNCH SENIOR FLOATING RATE FUND, INC. By --------------------------- Name: Title: THE MITSUBISHI TRUST & BANKING CORPORATION, LOS ANGELES AGENCY By --------------------------- Name: Title: NATEXIS BANQUE BFCE By --------------------------- Name: Title: By --------------------------- Name: Title: PILGRIM AMERICA PRIME RATE TRUST By --------------------------- Name: Title: PNC BANK, NATIONAL ASSOCIATION By --------------------------- Name: Title: PRIME INCOME TRUST By --------------------------- Name: Title: VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST By --------------------------- Name: Title: ACKNOWLEDGEMENT AND AGREEMENT Each of the undersigned, each being a Subsidiary Guarantor on the Restatement Effective Date (including each Subsidiary of the Borrower which was a Subsidiary Guarantor immediately before the Restatement Effective Date and each Subsidiary of the Borrower which becomes a Subsidiary Guarantor on the Restatement Effective Date) hereby acknowledges and agrees to the provisions of the foregoing Amended and Restated Credit Agreement (including, without limitation, Sections 13.19 and 13.21 thereof), and hereby agrees for the benefit of the Banks that all extensions of credit pursuant thereto (including the increased extensions of credit made as a result of the occurrence of the Restatement Effective Date and all other obligations pursuant to the Amended and Restated Credit Agreement), shall be fully entitled to the benefits of (and shall be fully guaranteed and secured pursuant to the provisions of) all Guaranties and Security Documents. FAIRCHILD SEMICONDUCTOR CORPORATION OF CALIFORNIA By --------------------------- Name: Title: SCHEDULE I COMMITMENTS AND OUTSTANDING PRINCIPAL AMOUNT OF TRANCHE A TERM LOANS, AS AT DECEMBER 31, 1997
Outstanding Tranche C Term Revolving Bank Principal Amount Loan Commitment Loan Commitment of Tranche A --------------- --------------- Term Loans ---------- Bankers Trust Company $4,800,000 $37,875,000 $10,699,999.34 Credit Suisse First Boston $4,800,000 -- $10,700,000.33 Canadian Imperial Bank of $4,800,000 -- $10,700,000.33 Commerce PNC Bank, National Association $4,500,000 -- $7,000,000 Fleet National Bank $4,500,000 -- $10,400,000 The Fuji Bank, Limited $4,500,000 -- $10,000,000 New York Branch Bank of Scotland $3,600,000 -- $7,200,000 ABN AMRO Bank, N.V. $3,600,000 -- $7,200,000 First Source Financial LLP $3,600,000 -- $4,000,000 Corestates Bank, N.A. $3,600,000 -- $8,300,000 Bank of Tokyo-Mitsubishi $3,600,000 -- $6,000,000 The Bank of Nova Scotia $3,600,000 -- $6,000,000 BankBoston, N.A. $3,600,000 -- $8,300,000 General Electric Capital $3,600,000 -- $4,000,000 Corporation Natexis Banque BFCE $3,600,000 -- $4,000,000 The Mitsubishi Trust & Banking $3,600,000 -- $7,200,000 Corporation, Los Angeles Agency Dresdner Bank AG, New York $3,600,000 -- $8,300,000 Branch and Grand Cayman Branch Van Kampen American Capital Prim -- $17,375,000 -- Rate Income Trust
SCHEDULE I Page 2
Outstanding Tranche C Term Revolving Bank Principal Amount Loan Commitment Loan Commitment - ---- of Tranche A --------------- --------------- Term Loans ---------- Prime Income Trust -- $17,375,000 -- Merrill Lynch Senior Floating Rate -- $17,375,000 -- Fund, Inc. Totals $67,500,000 $90,000,000 $130,000,000
SCHEDULE II BANK ADDRESSES Bankers Trust Company 130 Liberty Street New York, NY 10006 Telephone No.: (212) 250-4886 Telecopier No.: (212) 250-7218 Attention: Anthony LoGrippo Credit Suisse First Boston 11 Madison Avenue New York, NY 10010 Telephone No.: (212) 325-9157 Telecopier No.: (212) 325-8309 Attention: Chris T. Horgan Canadian Imperial 425 Lexington Avenue Bank of Commerce New York, NY 10017 Telephone No.: (212) 856-4133 Telecopier No.: (212) 856-3991 Attention: Michael Nelson ABN AMRO Bank, N.V. One Post Office Square 39th Floor Boston, MA 02109 Telephone No.: (617) 988-7934 Telecopier No.: (617) 988-7910 Attention: Brian Horgan Amara-1 Finance Ltd. c/o Chancellor Senior Secured Management 1166 Avenue of the Americas 27th Floor New York, NY 10036 Telephone No.: (212) 278-9403 Telecopier No.: (212) 278-9619 Attention: Reg Woodard SCHEDULE II Page 2 BankBoston, N.A. 100 Federal Street High Technology Division Mail Stop: 01-08-06 Boston, MA 02106 Telephone No.: (617) 434-7524 Telecopier No.: (617) 434-0819 Attention: Daniel Head The Bank of Nova Scotia 101 Federal Street 16th Floor Boston, MA 02110 Telephone No.: (617) 737-6318 Telecopier No.: (617) 951-2177 Attention: Steve Foley Bank of Scotland 1 Post Office Square Ste. 3750 Boston, MA 02109 Telephone No.: (617) 426-0033 Telecopier No.: (617) 426-1353 Attention: Bill Boland with a copy to: 565 Fifth Avenue New York, NY 10017 Telephone No.: (212) 450-0870 Telecopier No.: (212) 557-9460 Attention: Annie Chin-Tat Bank of Tokyo-Mitsubishi 1251 Avenue of the Americas New York, NY 10020 Telephone No.: (212) 782-4268 Telecopier No.: (212) 782-4981 Attention: Nick Campbell SCHEDULE II Page 3 Corestates Bank, N.A. 1339 Chestnut Street Philadelphia, PA 19107 Telephone No.: (215) 973-2562 Telecopier No.: (215) 973-6680 Attention: Mark S. Supple Dresdner Bank AG, New York 333 South Grand Avenue Branch and Grand Cayman Suite 1700 Branch Los Angeles, CA 90071 Telephone No.: (213) 473-5420 Telecopier No.: (213) 473-5450 Attention: Sid Jordan First Source Financial LLP 2850 West Golf Road 5th Floor Rolling Meadows, IL 60008 Telephone No.: (847) 734-2080 Telecopier No.: (847) 734-7911 Attention: Craig Petrusha Fleet National Bank Two Portland Square MAILSTOP: ME-PM-P05B P.O. Box 1280 Portland, ME 04101 Telephone No.: (207) 874-5114 Telecopier No.: (207) 874-5167 Attention: Bill Williamson The Fuji Bank, Limited Two World Trade Center New York Branch New York, NY 10048 Telephone No.: (212) 898-2073 Telecopier No.: (212) 898-2399 Attention: Mark Hanslin General Electric 201 High Ridge Road Capital Corporation Stamford, CT 06927 Telephone No.: (203) 708-1125 Telecopier No.: (203) 316-7978 Attention: Joseph Badini SCHEDULE II Page 4 Merrill Lynch Senior Floating 800 Scudders Mill Road Rate Fund, Inc. Plainsboro, NJ 08536 Telephone No.: (609) 282-2092 Telecopier No.: (609) 282-2756 Attention: Anthony Clemente The Mitsubishi Trust & Banking 800 South Figueroa Street Corporation, Los Angeles Suite 2400 Agency Los Angeles, CA 90017 Telephone No.: (213) 896-4658 Telecopier No.: (213) 687-4631 Attention: Rex Olson Natexis Banque BFCE 645 Fifth Avenue 20th Floor New York, NY 10022 Telephone No.: (212) 872-5180 Telecopier No.: (212) 872-5045 Attention: Frank Madden Pilgrim America Prime Rate Trust 40 North Central Avenue Two Renaissance Square Phoenix, AZ 85004 Telephone No.: (602) 417-8257 Telecopier No.: (602) 417-8327 Attention: Tim Hunt PNC Bank, National Association 345 Park Avenue New York, NY 10154 Telephone No.: (212) 409-3725 Telecopier No.: (212) 409-3737 Attention: Tom Colwell with a copy to: P1-POPP-1-21 249 Fifth Avenue Pittsburgh, PA 15222 Attention: Mark Heleen SCHEDULE II Page 5 Prime Income Trust c/o Dean Witter Intercapital Two World Trade Center New York, NY 10048 Telephone No.: (212) 392-9034 Telecopier No.: (212) 392-5345 Attention: Peter Gewirtz Van Kampen American Capital One Parkview Plaza Prime Rate Income Trust Oakbrook Terrace, IL 60181 Telephone No.: (630) 684-6438 Telecopier No.: (630) 684-6740 Attention: Jeffrey Maillet EX-10.2 3 EX-10.2 Exhibit 10.2 FAIRCHILD SEMICONDUCTOR CORPORATION EMPLOYEE STOCK PURCHASE SAVINGS PLAN Effective February 26, 1998 FAIRCHILD SEMICONDUCTOR CORPORATION EMPLOYEE STOCK PURCHASE SAVINGS PLAN PARTICIPATION IN THIS PLAN DOES NOT OBLIGATE A PARTICIPANT TO PURCHASE ANY STOCK. THIS PLAN IS INTENDED ONLY TO PROVIDE A CONVENIENT MEANS BY WHICH ELIGIBLE PERSONS MAY, AT THEIR SOLE OPTION, SET ASIDE FUNDS FOR THE POSSIBLE FUTURE PURCHASE OF STOCK. THIS PLAN DOES NOT CONSTITUTE, NOR SHOULD IT BE CONSTRUED AS, AN OFFER TO SELL, OR A SOLICITATION OF OFFERS TO PURCHASE (OR OF INDICATIONS OF INTEREST WITH RESPECT TO THE POSSIBLE PURCHASE OF) ANY SECURITY. ANY SUCH OFFER OR SOLICITATION WILL BE MADE ONLY BY MEANS OF DELIVERY TO PLAN PARTICIPANTS OF A PROSPECTUS IN COMPLIANCE WITH THE APPLICABLE LAWS AND REGULATIONS OF THE JURISDICTIONS IN WHICH SUCH PROSPECTUS IS BEING UTILIZED. THE ESTABLISHMENT OF THIS PLAN DOES NOT OBLIGATE THE COMPANY OR FSC SEMICONDUCTOR CORPORATION TO EFFECTUATE A PUBLIC OFFERING OF STOCK. THERE CAN BE NO ASSURANCE AS TO WHEN, WHETHER, OR ON WHAT TERMS ANY SUCH OFFERING WILL OCCUR. 1. Purpose. The purpose of the Fairchild Semiconductor Corporation Employee Stock Purchase Savings Plan (the "Plan") is to provide a means for eligible employees of Fairchild Semiconductor Corporation (the "Company"), a Delaware corporation, and of entities directly or indirectly controlled by, controlling or under common control with the Company ("Affiliates") to set aside a portion of their compensation for use in the purchase of common stock in an initial public offering by the Company or FSC Semiconductor Corporation, and, in light of the possibility of such stock ownership, to provide incentives for such employees to exert maximum efforts toward the Company's success. By extending an opportunity to acquire such stock, and to participate in the Company's success, the Plan may be expected to benefit the Company by facilitating the attraction and retention by it of qualified employees. 2. Eligibility. Each active employee of the Company, other than an interim employee, as of the date enrollment forms are due pursuant to paragraph 4(a) is eligible to participate in the Plan. Eligibility of employees of any Affiliate of the Company shall be determined by such Affiliate. 3. Contributions under the Plan. Each eligible employee may contribute up to ten percent (10%) of his or her eligible earnings, which shall consist of such employee's base salary, overtime, lead premiums and shift differential income received from the Company or any of its Affiliates, but in no event may any participant's contributions to the Plan exceed $25,000 in any calendar year. Such contributions shall be made solely by means of payroll deductions in accordance with elections made by the Plan participant and reflected in the enrollment documentation referred to in paragraph 4(a), as thereafter adjusted, suspended, or terminated in accordance with paragraph 4. 4. Enrollment; Withdrawal; Termination; Adjustment of Contribution Levels; Suspension of Contributions; Currency Conversion; Allocation of Plan Income. (a) Eligible employees may enroll in the Plan by submitting to the Plan administrator the enrollment documentation then being utilized by the Company. Enrollment may occur effective as of February 26, 1998 by submission of such documentation not later than February 6, 1998, or effective as of any subsequent April 1, July 1, October 1 or January 1 by submission of such documentation not less than thirty (30) days prior to such effective date of enrollment. (b) Any Plan participant may withdraw from the Plan at any time by delivery to the Plan administrator of written notice of withdrawal, and will receive the entire balance of such participant's Plan account within ten (10) business days thereafter. Re-enrollment in the Plan will be subject to continuing eligibility to participate in the Plan, as provided in paragraph 2, and to compliance with the provisions of paragraph 4(a). Partial withdrawals of Plan account balances may not be made. (c) A participant's participation in the Plan shall terminate effective immediately upon, and the entire balance of such participant's Plan account will be delivered to the participant within ten (10) business days after, receipt of notice by the Plan administrator of the termination of the participant's status as an employee of the Company or any of its Affiliates. If a Plan participant continues to be an employee of the Company or any of its Affiliates but ceases to be an active employee (such as in connection with a leave of absence), the participant's contributions to the Plan will be suspended for the duration of such ineligibility, but the participant's accrued Plan account may, at the option of such participant, remain in the Plan, and may be utilized as provided in paragraph 5 hereof. (d) A Plan participant may prospectively adjust his or her level of contribution, within the limitations set forth in paragraph 3 above, by submitting to the Plan administrator the participation adjustment documentation then being utilized by the Company. Provided that such documentation is submitted at least thirty (30) days prior thereto, such adjustment shall take effect as of the next enrollment date under paragraph 4(a). (e) Notwithstanding the provisions of paragraph 4(d), a Plan participant may prospectively suspend his or her contributions to the Plan by submitting to the Plan administrator the suspension documentation then being utilized by the Company, which suspension shall take effect as of the next pay period that begins following such submittal. Any recommencement of Plan contributions by such participant shall be made in accordance with paragraph 4(d). (f) The contributions of Plan participants who are compensated in currencies other than U.S. dollars shall be converted into U.S. dollars at the time of each payroll deduction. The conversion rates shall be established by the Company on the first 2 day of each fiscal month of the Company, and will be equal to the Company Rate as defined in and calculated in accordance with the Company's Corporate Financial Policies as modified from time to time. Such conversion rate shall remain in effect throughout the succeeding fiscal month. Any amounts withdrawn from the Plan by such a participant or returned to such participants upon termination of the Plan or the termination of such participant's eligibility shall be converted from U.S. dollars into the currency in which such participant is compensated at the conversion rate in effect under this paragraph 4(f) on the effective date of such withdrawal or of the termination of the Plan or such participant's eligibility, as the case may be. PLAN PARTICIPANTS WHO ARE COMPENSATED IN CURRENCIES OTHER THAN U.S. DOLLARS WILL BE SUBJECT TO THE RISK OF EXCHANGE RATE FLUCTUATIONS, WHEREBY ANY APPRECIATION OF THE CURRENCY IN WHICH THEY ARE COMPENSATED RELATIVE TO THE U.S. DOLLAR, WOULD RESULT IN A DECLINE IN THE VALUE OF THEIR PLAN BALANCES (MEASURED IN TERMS OF THE CURRENCY IN WHICH THEY ARE COMPENSATED), WHICH DECLINE COULD BE SUBSTANTIAL. (g) Income generated with respect to amounts held under the Plan will be allocated to Plan participants pro rata at the end of each calendar quarter and upon termination of the Plan, and will be automatically reinvested, in the same manner in which Plan contributions are invested, for the benefit of such Plan participants without further action by Plan participants. Plan participants who withdraw from the Plan, or whose participation in the Plan terminates pursuant to paragraph 4(c), prior to the end of a calendar quarter will not be entitled to receive any income generated in respect of Plan account balances with respect to that calendar quarter. 5. Purchase of Stock. In the event of an initial public offering of the common stock of the Company or FSC Semiconductor Corporation, a Delaware corporation, pursuant to a registration statement filed with the Securities and Exchange Commission (the "SEC") (excluding any offering under Form S-8, Form S-4 or any successor form), the Company will endeavor to make available for purchase in such public offering by persons then participating in the Plan not less than $5.0 million of such common stock (calculated on the basis of the offering price to the public of such stock), at a price per share (payable in U.S. dollars) equal to or less than the price at which such stock is being offered to the public generally. Each Plan participant shall be entitled, in his or her sole and absolute discretion, not to purchase any of such stock, or to utilize all or any portion of the balance of the participant's Plan account to purchase such stock; provided, however, that in the event that the aggregate proposed stock purchases by Plan participants exceed the amount of such stock that has been made available hereunder for such purchases, such stock will be apportioned among those electing to purchase stock pro rata to reflect the relative stock purchase elections of such electing participants. An election to purchase such stock may be made by submitting to the Plan administrator, in accordance with delivery instructions to be provided by the Company to participants, documentation evidencing 3 such election to be provided to participants in connection with such offering together with (or following delivery to participants of) a prospectus pertaining to such offering. Fractional shares may not be purchased under the Plan. 6. Account Maintenance; Plan Administration. (a) The Plan shall be administered by the Company or one or more third party administrators designated by the Company from time to time. The initial administrator of the Plan shall be AST Stock Plan, Inc. (b) The Plan account balances will be held in trust for the benefit of Plan participants, and, at the direction of the Company, such funds will be invested under the name of such trust in one or more money market mutual funds whose shares have been registered with the SEC, and such amounts will be segregated from the Company's assets and will at all times be assets of the Plan participants. Fleet Bank of Maine will serve as the initial trustee of such trust, and successor trustees may be appointed by the President of the Company. Before any eligible employee commences participation in the Plan, such employee will be furnished with a copy of the prospectus relating to any such mutual fund together with all other materials required to be delivered pursuant to the regulations of the SEC, and any annual reports and other materials required by SEC regulations to be furnished to shareholders of any such mutual fund will be timely provided to each Plan participant on an ongoing basis. (c) The Plan administrator will be furnished such information by the Company as the administrator may deem necessary or desirable in order to enable the administrator to establish and maintain accurate records of each Plan participant's account balance on a continuous basis, and the administrator will provide each Plan participant with a quarterly statement of such participant's Plan account activity during the preceding quarter, including his or her beginning and ending Plan account balances and income received on account thereof during such quarterly period. (d) The Plan administrator will make any tax withholdings required under the Internal Revenue Code of 1986, as amended (the "Code") with respect to taxable income generated on the Plan participants' account balances, and will timely provide Plan participants with all necessary reporting required under the Code with respect to such income. Plan participants shall be solely responsible for the payment of any taxes with respect to such income. (e) Other than as set forth in the last sentence of paragraph 6(d), all expenses of the Plan (including without limitation the fees of the Plan administrator) shall be borne solely by the Company. 4 7. Term; Termination. The Plan shall commence as of February 26, 1998, and shall terminate upon the closing of the initial public offering of common stock of the Company or FSC Semiconductor Corporation described in paragraph 5, unless earlier terminated by action of the Board of Directors of the Company. Any remaining account balances of the Plan participants (including any income generated with respect to participants' account balances subsequent to the end of the most recent calendar quarter, which shall not be available for stock purchases under paragraph 5 hereof) shall be returned to them within ten (10) business days following the effective date of the termination of the Plan. 8. Amendment; Suspension. This Plan may be amended or suspended at any time or from time to time by the Board of Directors of the Company; provided, however, that no such amendment or suspension may adversely affect any participant's entitlement to his or her existing Plan account balance. 9. Miscellaneous. (a) The rights of any Plan participant under the Plan are not assignable or transferable. Any right to purchase stock under paragraph 5 may be exercised only by a Plan participant. (b) Participation in the Plan will not impose any obligation upon the Company or any of its Affiliates to continue the employment of any Plan participant for any specific period of time and will not affect the right of the Company or its Affiliates to terminate such person's employment at any time, with or without cause. (c) This document, as it may be amended in accordance with paragraph 8 hereof, constitutes the entire Plan, and supersedes any and all prior oral or written expressions with respect to the subject matter hereof, and may not be amended or modified other than as provided in paragraph 8. 5 EX-27 4 EXHIBIT 27
5 1,000 3-MOS 9-MOS MAY-31-1998 MAY-31-1998 NOV-24-1997 MAY-26-1997 MAR-01-1998 MAR-01-1998 12,400 12,400 0 0 101,900 101,900 15,300 15,300 99,600 99,600 215,100 215,100 771,900 771,900 437,700 437,700 629,100 629,100 142,500 142,500 442,000 442,000 0 0 0 0 0 0 44,200 44,200 629,100 629,100 206,600 601,900 206,600 601,900 146,900 421,700 196,800 528,500 0 0 0 0 12,100 33,800 (2,300) 39,600 (1,700) 13,000 (600) 26,600 0 0 0 0 (1,500) (1,500) (2,100) (25,100) 0 0 0 0
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