-----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, Ht2JYb4T3ewRwreG5eDciKvvgIRIY8lhsPjlrNpNESZ/AzgiKKI7Ld02ZbdAc32F 13ompCWY8OQDlTC6JggF1A== 0000927016-00-002335.txt : 20001106 0000927016-00-002335.hdr.sgml : 20001106 ACCESSION NUMBER: 0000927016-00-002335 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000629 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DYNATECH CORP CENTRAL INDEX KEY: 0000030841 STANDARD INDUSTRIAL CLASSIFICATION: 3825 IRS NUMBER: 042258582 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 000-07438 FILM NUMBER: 663992 BUSINESS ADDRESS: STREET 1: 3 NEW ENGLAND EXECUTIVE PARK CITY: BURLINGTON STATE: MA ZIP: 01803-5087 BUSINESS PHONE: 6172726100 MAIL ADDRESS: STREET 1: 3 NEW ENGLAND EXECUTIVE PARK CITY: BURLINGTON STATE: MA ZIP: 01803-5087 FORMER COMPANY: FORMER CONFORMED NAME: DYNATECH CORP DATE OF NAME CHANGE: 19920703 10-K405 1 0001.txt FORM 10-K405 - - ------------------------------------------------------------------------------- - - ------------------------------------------------------------------------------- U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K [X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) For the fiscal year ended March 31, 2000 Commission file number 1-12657 ---------------- Dynatech Corporation (Exact name of registrant as specified in its charter) Delaware 04-2258582 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 3 New England Executive Park Burlington, Massachusetts 01803-5087 (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code: (781) 272-6100 Securities registered pursuant to Section 12(g) of the Act: Common Stock, no par value per share (Title of class) Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [_] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] At June 12, 2000, the aggregate market value of the Common Stock of the registrant held by non-affiliates was $303,548,219.06. At June 12, 2000, there were 181,990,892 shares of Common Stock of the registrant outstanding. DOCUMENTS INCORPORATED BY REFERENCE Portions of the proxy statement for the 2000 Annual Meeting of Shareholders are incorporated by reference in Part III. - - ------------------------------------------------------------------------------- - - ------------------------------------------------------------------------------- Item 1. Business. General Dynatech Corporation (the "Company" or "Dynatech") was formed in 1959 and is a global communications equipment company focused on network technology solutions. The Company's operations are conducted primarily by wholly owned subsidiaries located principally in the United States and Europe with other operations, primarily sales offices, located in Latin America and the Far East. The Company is managed in two business segments: communications test and inflight information systems. Unless otherwise noted the information presented in Item 1 of this Report reflects the combined businesses of the Company and Wavetek Wandel Goltermann, Inc. ("WWG"), which merged with one of the Company's subsidiaries on May 23, 2000, and their respective subsidiaries and gives effect to the Company's Board of Directors' decision to discontinue the Company's industrial computing and communications business segment. Unless otherwise noted, the information presented in the Appendices to this Report only reflects the business of the Company and its subsidiaries and does not include the business or results of WWG, because the WWG merger was consummated after the end of Dynatech's fiscal year. The communications test business develops, manufactures and markets instruments, systems, software and services that test, deploy, manage and optimize communications networks, equipment and services. The inflight information systems segment, through the Company's AIRSHOW, Inc. subsidiary, provides passenger cabin video information display systems and information services for the general and commercial aviation markets. The Company also has other subsidiaries that, in the aggregate, are not reportable as a segment ("Other Subsidiaries"). These Other Subsidiaries include da Vinci Systems, Inc. which provides digital color enhancement systems used in the production of television commercials and programming; and Dataviews, Inc., which was sold in June 2000. In years prior to fiscal 2000 the Company's consolidated statements of income and the Other Subsidiaries included the results of operations of two subsidiaries which have since been divested: ComCoTec, Inc. which was sold in June 1998, and Parallax Graphics, which was liquidated during fiscal 1999. On May 23, 2000, the Company completed the merger of one of its subsidiaries with WWG, a developer, manufacturer and marketer of communications test instruments, systems, software and services in Europe and Latin America. To finance the WWG merger, the Company sold 12.5 million and 30.625 million newly-issued but unregistered shares of Common Stock to Clayton, Dubilier & Rice Fund V Limited Partnership ("CDR Fund V") and Clayton Dubilier & Rice Fund VI Limited Partnership ("CDR Fund VI"), respectively, for an aggregate purchase price of $172.5 million, and established a new credit facility with a syndicate of lenders that provides for borrowings of up to $860 million. In addition, on June 1, 2000, the Company commenced a rights offering (the "Rights Offering") of 4.983 million newly-issued shares of Common Stock to shareholders of record on April 20, 2000 (other than CDR Fund V) at the same price per share that was paid by CDR Fund V and CDR Fund VI. The Rights Offering provides such shareholders with the opportunity to reverse the diminution of their percentage equity ownership interest in Dynatech that resulted from the sale of common stock to CDR Fund V and CDR Fund VI. The Rights Offering is expected to be completed on June 30, 2000. In May 2000, the Board of Directors of the Company approved a plan to divest the Company's industrial computing and communications business segment, which segment consists of the Company's ICS-Advent and Itronix Corporation subsidiaries. In connection with such decision, the Board authorized management to retain one or more investment banks to assist with the divestiture. The Company expects to divest these two subsidiaries, either separately or together, no later than the first quarter of the 2002 fiscal year. The businesses to be divested will be treated as discontinued operations for accounting purposes. In connection with the merger with WWG, the Company plans to issue to its new employees up to 10 million new options to purchase shares of its common stock. The Company expects that the exercise price of approximately 40% of such options will be $4.00 per share. The remaining options will be granted in subsequent years, with the exercise prices equal to the fair market value of the Company's common stock on the date they are granted. 2 The Company has its principal offices at 3 New England Executive Park, Burlington, Massachusetts 01803. CDR Fund V and CDR FUND VI, each of which are investment partnerships managed by Clayton, Dubilier and Rice, Inc. ("CDR"), hold approximately 66% and 16% of the Company's Common Stock, respectively. Communications Test Segment The Company sells a family of communications test and management products. The Company's products are designed to help communications service providers, equipment manufacturers and service users to test, deploy, manage and optimize their network's performance. The Company's products are based on an extensive technology base. All of the Company's products are designed to address the customers' desires to deploy new technologies and provision new services rapidly, decrease operations and maintenance costs and improve service reliability. The Company's products address the needs of deploying and managing a variety of technologies and segments of the network including the optical transport, broadband access (xDSL and Cable Network), wireless transmission, and data (IP, ATM, and Frame Relay). The Company markets its products to three primary groups of customers: communications service providers, communications equipment manufacturers and service users. Communications service providers rely on the Company's products and services to configure, test and manage network elements and the traffic that runs across them. Communications equipment manufacturers rely on the Company's products to shorten the development phase and verify the proper functioning of their products during final assembly and test, and to monitor the performance of their products during installation and maintenance in their customers' networks. Finally, service users rely on the Company's products to ensure the proper functioning of their communications networks. The instruments, systems, software and services described below offer focused solutions to these customers' specific needs. Instruments. Instruments are devices that perform specific communications test and monitoring functions. The majority of instruments are hand-held, mobile devices. The Company's instruments are used by equipment manufacturers for research and development, prototype testing and deployment. Instruments are also used by field technicians at service providers to assess the performance of networks and to verify the integrity of the information transmitted. The Company's instruments combine a high degree of functionality with simplified user interfaces, thereby decreasing the training required to use them. These instruments address the performance of a wide variety of communications products and networks, including optical transmission, systems for data communications, voice services, wireless voice and data services, cable services and video delivery. Systems. The Company's systems are devices that are placed in the network, and can be remotely accessed via intelligent terminals and allow multiple users to simultaneously perform specific communications test and management functions. Using an integrated testing and management system, the Company's customers are able to assess and monitor a variety of network elements, transmission technologies and protocols from a single console, thereby simplifying the process of deploying, provisioning, and managing network equipment and services. From a centralized location, technicians in the Company's Network Operations Center can have access to all of the test systems within a customer's network and can perform simultaneous test and monitoring functions on one or more systems both manually or automatically. These capabilities reduce the need for technicians to make on-site service calls and allow customers to respond to network faults proactively. Typically, the Company's systems consist of combinations of hardware and software components that are derived from the Company's instrument products. For a new network deployment, the Company's customers use instruments for initial testing and start using systems within a year. With the technology from the Company's instrument products, the Company is able to enter new markets rapidly with test and monitoring functions compatible with existing instrument functions. The Company expects that a growing proportion of its sales will be derived from systems products. Software. Once the Company's customers have deployed new networks or network technologies, they seek rapid deployment or service fulfillment, monitoring, and management or service assurance of services over those networks for their own new customers. The Company develops software applications that enable customers to automate their service fulfillment and service assurance processes. The Company's products assist customers 3 in provisioning network services, monitoring the performance of networks and services, and assessing the quality of the services delivered. Quality of service, or QoS, refers to the achievement of specific performance benchmarks defined by agreements between communications service providers and the customer. These agreements are commonly called service level agreements, or SLAs, and specify such things as network availability, maximum allowable latencies, guaranteed levels of bandwidth or maximum acceptable data loss. The Company's software applications are capable of integrating diverse network and transmission technologies, database management systems, order management and customer care applications, and other network management and assessment technologies. The Company's leading software products are described below: . NetOptimize Service Activator: This product enables flow through provisioning by activating new services for specific customers in real- time. Service Activator provides a graphical environment which enables the user to configure the service. Service Activator then automatically selects the most efficient routing for the services and performs the end-to-end activation by interfacing to all of the network elements that constitute that service. This product can activate services for mult- vendor transmission networks (TDM and optical), access networks (DSL), and Data/IP networks. . NetOptimize Alarm Manager: This fault management product performs real- time monitoring and surveillance of transmission on data networks. Alarm Manager filters, collects, and categorizes faults/alarms and enables the user to manage the resolution of the alarms. . NetOptimize Capacity Manager: This product enables users to manage the capacity of voice networks. It collects performance data from network switches and determines current or future capacity problems. This product enables customers to proactively anticipate network bottlenecks and reconfigure the network to avoid the capacity problem. With the advent of Voice over IP networks, this product is being applied to solve capacity management problems for data networks. . NetOptimize Service Monitor: This product enables our customers to monitor, manage, and report the QoS and SLA for specific customers. This product can monitor end-to-end services for transmission networks (TDM and optical), access networks, and Data/IP networks. Services. The Company offers customers a range of professional services, including process improvement, program management, training, installation, testing and management. Increasingly, communications service providers are seeking third party expertise to assist them with network planning and management. The Company's strong technical foundation, extensive customer relationships and decades of experience in designing and marketing communications test and management systems enable the Company to provide customers with an extensive array of services. Inflight Information Systems Segment AIRSHOW AIRSHOW is the leading supplier of inflight video information systems and services for passengers of private and commercial aircraft. The Company markets AIRSHOW products to airlines, aircraft manufacturers, avionics installation centers and owners and operators of corporate aircraft. AIRSHOW products are installed on over 4,500 general aviation aircraft and on approximately 3,800 aircraft owned by 120 commercial airlines. AIRSHOW's key products are: . The Airshow moving map system, which provides passengers with a graphical representation of the aircraft's location, heading, altitude and other information displayed in real time; . The Airshow Network, which delivers to passengers of private aircraft text-based network broadcasts of stock quotes, news briefs, business updates, and customized financial reports; AIRSHOW currently has agreements to provide up-to-the-minute content from CNN, Wall Street Journal Interactive, Bloomberg, SportsTicker and Intellicast weather products; and . Airshow TV, which provides direct broadcast satellite TV to corporate aircraft. 4 Other Subsidiary da Vinci da Vinci manufactures and sells digital color correction systems used by video post-production and commercial production facilities to correct and enhance color saturation levels as video images are transferred from film to video tape for editing and distribution. da Vinci systems are sold worldwide through its direct sales force in the United States, as well as in conjunction with manufacturers of related products. da Vinci has benefited from the transition from analog to digital production systems and digital high-definition television, or HDTV, broadcast standards. Many post-production facilities worldwide have begun retooling in advance of the availability of HDTV programming by purchasing new equipment such as HDTV- compatible color enhancement systems such as da Vinci's new "2K" product. Manufacturing The Company outsources to third parties a majority of its manufacturing activities, including the assembly of printed circuit boards and the fabrication of some mechanical parts. The Company generally performs its own final assembly and testing of its products. The Company operates 14 manufacturing and assembly facilities worldwide. Twelve of these facilities are certified as ISO 9002-compliant, and 10 are certified ISO-9001 facilities. In addition, in 1996, the Company received ISO 14001 certification, which relates to environmental compliance in Germany. The components the Company uses to build its products are generally available from a number of suppliers. The Company relies on a number of limited-source suppliers for specific components and parts. The Company has entered into long-term purchasing contracts with some of these suppliers. However, the Company can make no assurance that these suppliers will be able to meet its needs or that it will not experience component shortages. If the Company were required to locate new suppliers or additional sources of supply, the Company could experience a disruption in its operations or incur additional costs in procuring required materials. Competition The markets for communications test equipment are rapidly evolving and highly competitive. The Company believes that the principal competitive factors affecting its business include quality and breadth of product offerings, adaptability to evolving technologies and standards, speed of new product introductions, depth and breadth of customer relationships, price and financing terms, research and design capabilities, scale of installed base, technical support training and customer service and training, strength of distribution channels and product scalability and flexibility. The Company believes that it competes favorably with respect to the above factors. The Company's principal competitors in the communications test market include Agilent Technologies, Inc. and Tektronix, Inc. The Company also competes with a number of other vendors who offer products that address discrete portions of its markets including Digital Lightwave, Turnstone Systems and Tollgrade Communications. Some of the Company's competitors may have greater sales, marketing, research and financial resources than the Company does. Due to the rapidly evolving nature of the Company's markets, new competitors with significant market presence and financial resources may enter its markets and reduce its market share. Customers The Company markets its communications test instruments, systems, software and services to three primary groups of customers: communications service providers, communications equipment manufacturers and service users. Communications Service Providers. Communications service providers offer telecommunications and data communication services to end users, enterprises or other service providers. Typically, communications service providers utilize a variety of network equipment and software to originate, transport and terminate a 5 communications session. Communications service providers rely on the Company's products and services to configure, test and manage elements and the traffic that runs across them. Also, the Company's products help to ensure smooth operation of the network and can increase the reliability of services to customers. The Company sells its products and services to virtually all large national and international communications companies interchange carriers or IXCs; national post-telephone-telegraphs, or PTTs; Internet service providers, or ISPs; competitive local exchange carriers, or CLECs, incumbent local exchange carriers, or ILECs, and emerging carriers. Communications Equipment Manufacturers. Communications equipment manufacturers design, develop, install and maintain voice, data and video communications equipment. These products include switches, routers, voice and data gateways, cellular base stations, cable headends, optical access and multiplexing devices and other types of communications systems. Network equipment manufacturers rely on the Company's products to verify the proper functioning of their products during final assembly and test. Increasingly, because communications service providers are choosing to outsource installation and maintenance functions to the equipment vendors themselves, equipment manufacturers are using the Company's instruments, systems and software to assess the performance of their products during installation and maintenance in a customer's network. Service Users. The Company also sells its test and management instruments, systems, software, and services to large corporate customers, government operators and educational institutions. AIRSHOW products are marketed to airlines, aircraft manufacturers, avionics installation centers and owners and operators of corporate aircraft. da Vinci systems are sold to video post-production and commercial production facilities. None of the Company's customers represented more than 10 percent of its sales during fiscal 2000. Sales, Marketing and Customer Support The Company's products and services are primarily sold through its direct sales force. As of May 31, 2000, the Company employed approximately 750 communications test sales personnel throughout North America, Europe, Latin America and Asia. In addition, the Company markets and sells its products and services through third party distributors and sales representatives in areas in which its direct sales efforts are less prominent. Through its distributors, sales representatives and direct sales force, the Company has a presence in over 80 countries. In addition, the Company uses the Internet, advertisements in the trade press, direct mail, seminars, trade shows and quarterly newsletters to raise awareness of its products. The Company's sales and marketing staff consists primarily of engineers and technical professionals. These individuals undergo rigorous training, and ongoing professional development and education. The Company's local sales forces are highly knowledgeable of their respective markets, customer operations and strategies, and regulatory environments. The Company believes that the skill level of its sales and marketing staff has been instrumental in building longstanding customer relationships. The Company provides installation, repair and training services to enable its customers to improve performance of their networks. The Company operates service centers that are located near many of its major customers. The Company also offers on-line support services to supplement its on-site application engineering support. Seasonality; Backlogs As a result of purchasing patterns of the Company's telecommunications customers which tend to place large orders periodically typically at the end of the Company's second and fourth fiscal quarters, the Company expects that its results of operations may vary on a quarterly basis, as they have in the past. 6 The Company's backlog (excluding WWG) of orders at March 31, 1999 and 2000 was $90.8 million and $180.4 million, respectively, reflecting a 98.6% increase. The increase is a result of additional bookings within the communications test and inflight information systems segments. Of the $180.4 million backlog at March 31, 2000, approximately 94% is expected to ship in fiscal 2001. Product Development For the year ended March 31, 2000, on a pro forma basis to give effect to the WWG merger, the Company invested approximately $136.6 million in research and development activities of which approximately $117.0 million was applied to the Company's communications test segment. The market for the Company's products and services is characterized by rapidly changing technologies, new and evolving industry standards and protocols and product and service introductions and enhancements that render the Company's existing offerings obsolete or unmarketable. Automation in the Company's addressed markets for communications test equipment or a shift in customer emphasis from employee-operated communications test to automated test and monitoring systems could likewise render the Company's existing product offerings obsolete or unmarketable, or reduce the size of one or more of its addressed markets. In particular, incorporation of self-testing functions in the equipment currently addressed by the Company's communications test instruments could render the Company's offerings redundant and unmarketable. The development of new, technologically advanced products is a complex and uncertain process requiring the accurate anticipation of technological and market trends and the incurrence of substantial research and development costs. International The Company maintains sales subdivisions or branches for its communications test business in major countries in Europe, Latin America and Asia and has distribution agreements in other countries where sales volume does not warrant a direct sales organization. The Company's (excluding WWG) foreign sales from continuing operations (including exports from North America directly to foreign customers) were approximately 20%, 19% and 14% of consolidated net sales in fiscal 1998, 1999 and 2000, respectively. Patents and Proprietary Rights The Company relies primarily on trade secrets, trademark laws, confidentiality procedures and contractual restrictions to establish and protect its proprietary rights. The Company owns a number of U.S. and foreign patents and patent applications that are collectively important to its business. The Company does not believe, however, that the expiration of any patent or group of patents would materially affect its business. Government Regulation and Industry Standards and Protocols The Company designs its products to comply with a significant number of industry standards and regulations, some of which are evolving as new technologies are deployed. In the United States, the Company's products must comply with various regulations defined by the U.S. Federal Communications Commission and Underwriters Laboratories as well as industry standards established by Telcordia Technologies, Inc., formerly Bellcore, and the American National Standards Institute. Internationally, the Company's products must comply with standards established by the European Committee for Electrotechnical Standardization, the European Committee for Standardization, the European Telecommunications Standards Institute, telecommunications authorities in various countries as well as with recommendations of the International Telecommunications Union. The failure of the Company's products to comply, or delays in compliance, with the various existing and evolving standards could negatively impact the Company's ability to sell its products. Environmental Matters Federal, state and local laws or regulations concerning the discharge of materials into the environment have not had and, under present conditions, the Company does not foresee that they will have, a material adverse effect on capital expenditures, earnings or the competitive position of the Company. 7 Employees As of May 31, 2000, the Company employed approximately 4,700 persons from continuing operations. Some of the Company's European employees are members of one or more workers' councils, principally due to applicable legal requirements in the jurisdictions in which they work. However, none of the Company's other employees is represented by labor unions, and the Company believes its employee relations are good. Item 2. Properties. The Company operates design and manufacturing facilities in the United States, Germany, France, the United Kingdom, Switzerland, Canada and Argentina. The following table sets forth the location, use and size of the Company's facilities including those of WWG, the majority of which are leased:
Square Location Feet Title -------- ------- ------ Eningen, Germany.............................................. 779,000 Owned Indianapolis, Indiana......................................... 206,000 Leased Germantown, Maryland.......................................... 197,000 Leased Research Triangle Park, North Carolina........................ 93,100 Leased Plymouth, United Kingdom...................................... 86,400 Owned San Diego, California......................................... 62,368 Leased Tustin, California............................................ 52,000 Leased Munich, Germany............................................... 51,000 Leased Research Triangle Park, North Carolina........................ 50,800 Leased Kirkland, Washington.......................................... 50,500 Leased Salem, Virginia............................................... 35,900 Leased Sao Paulo, Brazil............................................. 32,400 Owned Burnaby, British Columbia..................................... 25,604 Leased St. Etienne, France........................................... 23,400 Leased Ft. Lauderdale, Florida....................................... 16,300 Leased Rennes, France................................................ 16,200 Owned Zurich, Switzerland........................................... 15,700 Leased Burlington, Massachusetts..................................... 14,600 Leased Terra Haute, Indiana.......................................... 12,600 Leased Milan, Italy.................................................. 11,200 Owned Baden, Austria................................................ 10,800 Owned Bern, Switzerland............................................. 9,800 Owned Scarborough, Ontario, Canada.................................. 8,200 Owned Buenos Aires, Argentina....................................... 3,400 Owned
The Company believes its facilities are in good operating condition. Item 3. Legal Proceedings. The Company is a party to various legal actions that arose in the ordinary course of its business. The Company does not expect that resolution of these legal actions will have, individually or in the aggregate, a material adverse effect on the Company's financial condition or results of operations. Whistler Litigation. In 1994, the Company sold its radar detector business to Whistler Corporation of Massachusetts. On June 27, 1996, Cincinnati Microwave, Inc. ("CMI") filed an action against the Company and Whistler in the United States District Court for the Southern District of Ohio alleging infringement of CMI's patent for a mute function in radar detectors. The Company responded that it did not infringe CMI's patent and that, in any event, the patent was invalid and unenforceable. The Company obtained an opinion from outside counsel that CMI's patent is invalid. The Company intends to offer that opinion (and other evidence) to demonstrate that any alleged infringement of CMI's patent due to the Company's prior manufacture and sale of the Whistler series radar detectors was not valid. 8 On February 14, 1997, CMI filed for bankruptcy in the United States Bankruptcy Court for the Southern District of Ohio. Pursuant to that filing, CMI sold its mute feature patent (and other assets) to Escort Acquisition Corp. CMI, however, retained the right to seek past damages from the Company. On March 24, 1998, CMI and its co-plaintiff Escort filed a motion for summary judgment. The Company opposed that motion and went on to complete discovery, which closed on June 20, 1998. The Company then filed its own series of summary judgment motions. A hearing on the parties' dispositive motions was held in May 1999. On May 27, 1999, Whistler filed a Chapter 11 bankruptcy petition in the United States District Court for the District of Massachusetts. As a result of that filing, CMI's patent infringement litigation is stayed as to Whistler. On February 18, 2000, the United States Magistrate issued a Report and Recommendation on some of the pending motions, recommending that judgment be entered in the Company's favor on half of the claims asserted by CMI. Then, on June 9, 2000, the Magistrate issued a second Report and Recommendation, recommending that the plaintiffs be precluded from recovering any damages for any alleged infringement that occurred prior to June 1996. Because the Company could not have infringed on CMI's patent after it sold its radar detector business to Whistler in 1994, if this Recommendation is adopted by the District Court Judge, the Company would have no liability to CMI. The parties have filed (and will file) various objections to the two Report and Recommendations. If necessary, trial in this matter is scheduled for November 2000. The Company intends to continue to defend this lawsuit vigorously and does not believe that the outcome of this litigation will have a material adverse effect on its financial condition, results of operation, or liquidity. Item 4. Submission of matters to a Vote of Security Holders. Pursuant to the written action of a majority of its shareholders, on May 18, 2000, the Company amended its certificate of incorporation to increase the number of shares of authorized common stock to 350 million from 200 million shares. No matters were submitted to a vote of the Company's shareholders, through the solicitation of proxies or otherwise, during the fourth quarter of fiscal 2000. Item 5. Market for Registrant's Common Stock and Related Security Holder Matters. The Company's common stock is traded in the over-the-counter market under the symbol "DYNA". As of March 31, 2000, there were 935 registered holders of the common stock and the price of the common stock on the over-the-counter market was $14.437. The following table sets forth the high and low sales prices of the Company's common stock on the over-the-counter market for each quarterly period within the three most recent fiscal years. Since April 1, 1995, the Company has not declared or paid cash dividends to the holders of common stock. The Company intends to retain earnings for use in the operation and expansion of its business. In addition, certain restrictions in the credit agreements limit the Company's ability to pay cash dividends.
Quarter Ended High Low ------------- ------- ------- March 31, 2000............................................... $15.937 $ 6.875 December 31, 1999............................................ 8.000 4.875 September 30, 1999........................................... 5.031 3.437 June 30, 1999................................................ 4.062 3.125 March 31, 1999............................................... 3.500 2.718 December 31, 1998............................................ 3.000 2.375 September 30, 1998........................................... 3.438 2.687 June 30, 1998................................................ 4.312 3.125 June 30, 1998(a)............................................. 50.125 48.1875
- - -------- (a) From January 28, 1997 to May 21, 1998, the common stock was traded on the New York Stock Exchange ("NYSE"). After the Recapitalization on May 21, 1998 with an entity formed by CDR Fund V, however, the 9 common stock ceased to be listed on the NYSE and became available in the over-the-counter market. The high and low sales prices of the common stock set forth herein are for the periods following May 21, 1998. Item 6. Selected Financial Data. The information requested by this Item is attached as Appendix A. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operation. The information requested by this Item is attached as Appendix B. Item 7A. Quantitative and Qualitative Disclosure About Market Risk. The information requested by this Item is included in Appendix B. Item 8. Financial Statements and Supplementary Data. The information requested by this Item is attached as Appendix C. Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure. None. Item 10. Directors and Executive Officers of the Registrant. Reference is made to the information responsive to Items 401 and 405 of Regulation S-K contained in the Company's definitive Proxy Statement relating to its 2000 Annual Meeting of Shareholders which will be filed with the U.S. Securities and Exchange Commission within 120 days after the close of the Company's fiscal year ended March 31, 2000, pursuant to Rule 14a-6(b) under the Securities and Exchange Act of 1934, as amended; said information is incorporated herein by reference. Item 11. Executive Compensation. Reference is made to the information responsive to Item 402 of Regulation S- K contained in the Company's definitive Proxy Statement relating to its 2000 Annual Meeting of Shareholders which will be filed with the U.S. Securities and Exchange Commission within 120 days after the close of the Company's fiscal year ended March 31, 2000, pursuant to Rule 14a-6(b) under the Securities Exchange Act of 1934, as amended; said information is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management. Reference is made to the information responsive to Item 403 of Regulation S- K contained in the Company's definitive Proxy Statement relating to its 2000 Annual Meeting of Shareholders which will be filed with the U.S. Securities and Exchange Commission within 120 days after the close of the Company's fiscal year ended March 31, 2000, pursuant to Rule 14a-6(b) under the Securities Exchange Act of 1934, as amended; said information is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions. Reference is made to the information responsive to Item 404 of Regulation S- K contained in the Company's definitive Proxy Statement relating to its 2000 Annual Meeting of Shareholders which will be filed with the U.S. Securities and Exchange Commission within 120 days after the close of the Company's fiscal year ended March 31, 2000, pursuant to Rule 14a-6(b) under the Securities Exchange Act of 1934, as amended; said information is incorporated herein by reference. 10 Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K. (a) (1) Financial statements The following financial statements and schedules of the Company are included as Appendix C to this Report. I. Report of Independent Accountants. II. Consolidated Balance Sheets--March 31, 2000 and 1999. III. Consolidated Statements of Income--Fiscal Years ended March 31, 2000, 1999, and 1998. IV. Consolidated Statements of Shareholders' Equity (Deficit)--Fiscal Years ended March 31, 2000, 1999, and 1998. V. Consolidated Statements of Cash Flows--Fiscal Years ended March 31, 2000, 1999, and 1998. VI. Notes to Consolidated Financial Statements. (2) Financial statement schedule I. Report of Independent Accountants on Financial Statement Schedule. II. Valuation and Qualifying Accounts. Schedules other than those listed above have been omitted because they are either not required or not applicable or because the required information has been included elsewhere in the financial statements or notes thereto. (b) Reports on Form 8-K I. Current Report on Form 8-K concerning the Company's acquisition of Applied Digital Access, Inc., filed with the SEC on November 9, 1999, and supplemented by the Company's Current Report on Form 8- K/A, filed with the SEC on January 14, 2000. II. Current Report on Form 8-K concerning the Company's acquisition of Wavetek Wandel Goltermann, Inc. and planned divestiture of its Industrial Computing and Communications business segment, filed with the SEC on May 31, 2000. (c) Exhibits The exhibits that are filed with this report or that are incorporated herein by reference are set forth in Appendix D. 11 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Dynatech Corporation /s/ Ned C. Lautenbach By: _________________________________ Chairman, President and Chief Executive Officer June 29, 2000 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature Title Date --------- ----- ---- /s/ Ned C. Lautenbach Chairman of the Board, June 29, 2000 ______________________________________ President and Chief Ned C. Lautenbach Executive Officer, Director /s/ Allan M. Kline Corporate Vice President, June 29, 2000 ______________________________________ Director, Chief Financial Allan M. Kline Officer, and Treasurer (Principal Financial Officer) /s/ Robert W. Woodbury, Jr. Corporate Vice President, June 29, 2000 ______________________________________ Controller, (Principal Robert W. Woodbury, Jr. Accounting Officer) /s/ John R. Peeler Director June 29, 2000 ______________________________________ John R. Peeler /s/ Brian D. Finn Director June 29, 2000 ______________________________________ Brian D. Finn /s/ Marvin L. Mann Director June 29, 2000 ______________________________________ Marvin L. Mann /s/ William O. McCoy Director June 29, 2000 ______________________________________ William O. McCoy /s/ Victor A. Pelson Director June 29, 2000 ______________________________________ Victor A. Pelson
12
Signature Title Date --------- ----- ---- /s/ Joseph L. Rice, III Director June 29, 2000 ______________________________________ Joseph L. Rice, III Director June 29, 2000 ______________________________________ Brian H. Rowe /s/ Richard J. Schnall Director June 29, 2000 ______________________________________ Richard J. Schnall Director June 29, 2000 ______________________________________ Peter M. Wagner
13 APPENDIX A Selected Historical Consolidated Financial Data The following tables set forth selected consolidated historical, financial and other data of the Company for the five fiscal years ended March 31, 2000 which have been derived from, and should be read in conjunction with, the audited historical Consolidated Financial Statements, and related notes thereto, of the Company contained herein.
Years Ended March 31, -------------------------------------------------- 2000 1999 1998 1997 1996 --------- --------- -------- -------- -------- (Amounts in thousands) Results of Operations Sales..................... $ 453,239 $ 329,532 $317,955 $284,070 $235,123 Cost of sales............. 157,090 108,618 103,923 90,401 77,676 --------- --------- -------- -------- -------- Gross profit.............. 296,149 220,914 214,032 193,669 157,447 Selling, general & administrative expense... 156,499 113,469 106,328 95,203 82,865 Product development expense.................. 61,172 42,472 42,919 39,037 35,461 Recapitalization and other related costs............ 27,942 40,767 -- -- -- Nonrecurring charges...... -- -- -- 5,063 16,852 Amortization of intangibles.............. 8,789 2,726 2,357 3,882 2,785 --------- --------- -------- -------- -------- Operating income.......... 41,747 21,480 62,428 50,484 19,484 Interest expense.......... (51,916) (46,178) (1,184) (679) (1,723) Interest income........... 2,354 3,392 3,013 2,675 2,181 Other income (expense), net...................... (68) 15,703 551 540 902 --------- --------- -------- -------- -------- Income (loss) from operations before income taxes.................... (7,883) (5,603) 64,808 53,020 20,844 Provision (benefit) for income taxes............. (1,169) (69) 26,521 24,092 8,446 --------- --------- -------- -------- -------- Income (loss) from continuing operations.... (6,714) (5,534) 38,287 28,928 12,398 Discontinued operations, net of income taxes...... 12,726 11,979 3,489 921 1,845 --------- --------- -------- -------- -------- Net income................ $ 6,012 $ 6,445 $ 41,776 $ 29,849 $ 14,243 ========= ========= ======== ======== ======== Income (loss) per common share--basic: Continuing operations... $ (0.05) $ (0.04) $ 1.87 $ 1.38 $ 0.57 Discontinued operations............. 0.09 0.09 0.17 0.04 .08 --------- --------- -------- -------- -------- $ 0.04 $ 0.05 $ 2.04 $ 1.42 $ 0.65 ========= ========= ======== ======== ======== Income (loss) per common share--diluted: Continuing operations... $ (0.05) $ (0.04) $ 1.80 $ 1.32 $ 0.55 Discontinued operations............. 0.09 0.09 0.16 0.04 0.08 --------- --------- -------- -------- -------- $ 0.04 $ 0.05 $ 1.96 $ 1.36 $ 0.63 ========= ========= ======== ======== ======== Weighted average number of shares: Basic................... 148,312 129,596 20,493 20,987 21,925 Diluted................. 148,312 129,596 21,272 21,997 22,347 ========= ========= ======== ======== ======== Balance Sheet Data Net working capital....... $ 52,262 $ 55,498 $117,791 $ 80,394 $105,861 Total assets.............. $ 414,838 $ 348,104 $288,130 $249,010 $205,189 Long-term debt............ $ 572,288 $ 504,151 $ 83 $ 5,226 $ 1,800 Shareholders' equity (deficit)................ $(296,675) $(316,440) $202,119 $160,686 $160,719 Shares of stock outstanding.............. 122,527 120,665 16,864 16,793 17,585 Shareholders' equity (deficit) per share...... $ (2.42) $ (2.62) $ 11.99 $ 9.57 $ 9.14
A-1 APPENDIX B Management Discussion and Analysis of Financial Condition and Results of Operations The following discussion of the results of operations, financial condition and liquidity of the Company should be read in conjunction with the information contained in the consolidated financial statements and notes thereto included elsewhere in this Form 10-K. These statements have been prepared in conformity with generally accepted accounting principles and require management to make estimates and assumptions that affect amounts reported and disclosed in the financial statements and related notes. Actual results could differ from these estimates. The market share and competitive position data contained in this Form 10-K are approximations derived from Company estimates, which the Company believes to be reasonable, but which have not been independently verified and, to a lesser extent, from industry sources, which the Company has not independently verified. The Company believes that such data are inherently imprecise, but are generally indicative of its relative market share and competitive position. Unless otherwise noted, the information presented in this Appendix B only reflects the business of the Company and its subsidiaries and does not include the business or results of WWG, because the WWG merger was consummated after the end of Dynatech's fiscal year. The statements contained in this report (other than Company's consolidated financial statements and other statements of historical fact) are forward-looking statements, as described below in greater detail in "Forward-Looking Statements". OVERVIEW General The Company is managed in two business segments: communications test and inflight information systems. The communications test business develops, manufactures and markets instruments, systems, software and services that test, deploy, manage and optimize communications networks, equipment and services. The inflight information systems segment, through the Company's AIRSHOW, Inc. subsidiary, provides passenger cabin video information display systems and information services for the general and commercial aviation markets. The Company also has other subsidiaries that, in the aggregate, are not reportable as a segment ("Other Subsidiaries"). These Other Subsidiaries include da Vinci Systems, Inc. which provides digital color enhancement systems used in the production of television commercials and programming; and Dataviews, Inc., which was sold in June 2000. In years prior to fiscal 2000 the Company's consolidated statements of income and the Other Subsidiaries section of Note S. Segment Information and Geographic Areas included the results of operations of two subsidiaries which have since been divested: ComCoTec, Inc. which was sold in June 1998, and Parallax Graphics, which was liquidated during fiscal 1999. In May 2000, the Board of Directors approved a plan to divest the industrial computing and communications segment, which consists of ICS Advent and Itronix Corporation subsidiaries. The segment's results of operations including net sales, operating costs and expenses, other income and expense and income taxes for fiscal 1998, 1999 and 2000, have been reclassified in the accompanying statements of operations as discontinued operations. The Company's balance sheet for fiscal 2000 reflects the net assets of the industrial computing and communications segment as net assets held for sale within non-current assets. The balance sheet for fiscal 1999 and the Statements of Cash Flows for fiscal years 1998, 1999 and 2000 have not been reclassified for the discontinued businesses. Management believes that the net proceeds from the disposition of these companies will exceed the carrying amount of the net assets. In addition, management does not anticipate net operating losses from the discontinued segment through the first quarter of fiscal 2002, at which time the Company anticipates to have sold these businesses. Accordingly, the anticipated gains from the disposal of the segment and the operating results will not be reflected in the statements of operations until they are realized. On May 21, 1998, the Company was merged with an entity formed by CDR Fund V (the "Recapitalization"). As a result of the Recapitalization, CDR Fund V became the Company's controlling shareholder. B-1 On May 23, 2000, the Company completed the merger of one of its subsidiaries with Wavetek Wandel Goltermann, Inc. ("WWG"), a developer, manufacturer and marketer of communications test instruments, systems, software and services in Europe and Latin America. To finance the WWG merger, the Company sold 12.5 million and 30.625 million newly-issued, but unregistered shares of Common Stock to CDR Fund V and CDR Fund VI, respectively, for an aggregate purchase price of $172.5 million. In addition, on June 1, 2000, the Company commenced a rights offering of 4.983 million newly-issued shares of Common Stock to shareholders of record on April 20, 2000 (other than CDR Fund V) at the same price per share that was paid by CDR Fund V and CDR Fund VI. The rights offering provides such shareholders with the opportunity to reverse the diminution of their percentage equity ownership interest in Dynatech that resulted from the sale of common stock to CDR Fund V and CDR Fund VI. Assuming the rights offering is fully subscribed and CDR Fund VI does not purchase any shares as a standby purchaser, CDR Fund V and CDR Fund VI, the Company's controlling shareholders, will hold, upon completion of the rights offering, approximately 66% and 16% respectively, of the outstanding shares of the Company's common stock. The rights offering is expected to be completed on June 30, 2000. In connection with the Merger, the Company also entered into a credit agreement for $860 million with a bank syndicate led by J.P. Morgan ("New Credit Agreement"). The proceeds were used to finance the Merger, refinance WWG and Dynatech debt and provide for additional working capital and borrowing capacity. On May 19, 1999, the Company's then Chairman, President and Chief Executive Officer, John F. Reno, announced his retirement. Ned C. Lautenbach, a principal of CDR, was named to replace Mr. Reno as Chairman, President and Chief Executive Officer. Current and Historical Trends During fiscal 2000, the communications test business, the Company's largest segment, experienced a significant increase in new orders received ("bookings"), an increase of 65% over the fiscal 1999, and a compound annual growth rate in bookings of 35% since fiscal 1998. This recent trend of bookings was due to increased demand primarily for the Company's high-speed transmission products, which include optical transmission test instruments. The growth in bookings for these products was a result of the increased demand for high-speed data transmission. The bookings for the Company's continuing operations have increased approximately 69% since fiscal 1998, which was primarily due to the communications test segment, but also the Company had an increase in bookings for the Company's inflight information systems. The Company's operating income excluding recapitalization and other related costs increased 12% from fiscal 1998 to 2000 as sales growth was 43% for the same period. During this period, the Company increased its spending in product development expense by 43% primarily for the next generation of communications test products. The Company also amended its compensation plans for its commissioned-based sales personnel during this period. In addition, the Company's gross margin decreased from 67% in fiscal 1998 to 65% in fiscal 2000 primarily the result of the acquisition of companies that operate at a lower gross margin than the consolidated group in fiscal 1998. Seasonality As a result of purchasing patterns of the Company's telecommunications customers which tend to place large orders periodically typically at the end of the Company's second and fourth fiscal quarters, the Company expects that its results of operations may vary on a quarterly basis, as they have in the past. Product Development For the year ended March 31, 2000, on a pro forma basis to give effect to the WWG merger, the Company invested approximately $136.6 million in research and development activities of which $117 million was applied to the communications test segment. B-2 The market for the Company's products and services is characterized by rapidly changing technologies, new and evolving industry standards and protocols and product and service introductions and enhancements that render the Company's existing offerings obsolete or unmarketable. Automation in addressed markets for communications test equipment or a shift in customer emphasis from employee-operated communications test to automated test and monitoring systems could likewise render the Company's existing product offerings obsolete or unmarketable, or reduce the size of one or more of its addressed markets. In particular, incorporation of self-testing functions in the equipment currently addressed by the Company's communications test instruments could render product offerings redundant and unmarketable. The development of new, technologically advanced products is a complex and uncertain process requiring the accurate anticipation of technological and market trends and the incurrence of substantial research and development costs. RECENT ACQUISITIONS AND DISPOSITIONS AND DISCONTINUED OPERATIONS Acquisitions Pacific Systems Corporation On June 19, 1998, the Company, through one of its indirectly wholly owned subsidiaries, acquired all of the outstanding stock of Pacific Systems Corporation of Kirkland, Washington ("Pacific") for a total purchase price of approximately $20 million in cash, which includes an incentive earnout. The acquisition was accounted for using the purchase method of accounting and resulted in $18.0 million of goodwill that is being amortized on a straight- line basis over 30 years. The operating results of Pacific have been included in Dynatech's consolidated financial statements within the inflight information systems segment since June 19, 1998. Pacific designs and manufactures customer-specified avionics and integrated cabin management. Flight TECH In February 1999, the Company, through one of its wholly owned subsidiaries, acquired Flight TECH of Hillsboro, Oregon for $2 million in cash. The acquisition was accounted for using the purchase method of accounting and resulted in approximately $1.9 million of goodwill that is being amortized on a straight-line basis over 30 years. The operating results of Flight TECH have been included in the Company's financial statements since February 1999 within the inflight information systems segment. Flight TECH is an inflight entertainment manufacturer specializing in equipment for small and medium jets, and turboprop aircraft. Sierra Design Labs On September 10, 1999, the Company, through one of its wholly owned subsidiaries, purchased the outstanding stock of Sierra Design Labs ("Sierra"), a Nevada Corporation for a total purchase price of $6.3 million in cash. The acquisition was accounted for using the purchase method of accounting and resulted in $4.9 million of goodwill that is being amortized on a straight-line basis over 10 years. The operating results of Sierra have been included in the Company's consolidated financial statements within Other Subsidiaries as presented in Note S. Segment Information and Geographic Areas since September 10, 1999. Sierra designs, manufactures, and markets uncompressed, real-time videodisk recorders. Applied Digital Access, Inc. On November 1, 1999, the Company, through one of its wholly owned subsidiaries, acquired all the outstanding stock of Applied Digital Access, Inc. ("ADA") for a total purchase price of approximately $81 million in cash, (of which $60 million was borrowed to finance this acquisition). The acquisition was accounted for using the purchase method of accounting and resulted in $36 million of goodwill that is being amortized on a straight-line basis over 3 years. The purchase price allocation for this acquisition is preliminary and further refinements are likely to be made based on the completion of final valuation studies and the Company's analysis of its business plan of integration. The operating results of ADA have been included in the Company's consolidated financial statements within the communications test segment since November 1, 1999. B-3 ADA is a provider of network performance management products that include systems, software and services used to manage the quality, performance, availability and reliability of telecommunications service providers' networks. ICS Advent (Europe) Ltd. On January 4, 2000, the Company purchased the remaining outstanding stock of ICS Advent (Europe) Ltd. ("ICS UK") for (Pounds)3.0 million (approximately $4.9 million) in cash. The Company previously owned approximately 25% of ICS UK. The acquisition was accounted for using the purchase method of accounting and generated approximately $4.0 million of goodwill that is being amortized on a straight-line basis over 5 years. The operating results of ICS UK have been included in the Company's consolidated financial statements within discontinued operations, since January 1, 2000. The Company intends to sell this acquired company in connection with the sale of the other business units within discontinued operations within the next year. ICS UK is primarily a distributor of mission-critical computer systems to the defense, factory- automation, data and telecommunications markets within Europe as well as a distributor of rack-mounted computers supplied by the Company's ICS Advent subsidiary. WPI Husky Technology, Inc., WPI Oyster Termiflex Limited, WPI Husky Technology Limited and WPI Husky Technology GmbH On February 24, 2000 the Company, through one of its wholly owned subsidiaries, purchased certain assets and liabilities of WPI Husky Technology, Inc., and WPI Oyster Termiflex Limited, and the stock of WPI Husky Technology Limited and WPI Husky Technology GmbH (collectively "Itronix UK") all which were subsidiaries of WPI, Inc. The total purchase price for Itronix UK totaled approximately $34.8 million in cash (of which approximately $15 million was borrowed to finance this acquisition). The acquisition was accounted for using the purchase method of accounting and resulted in approximately $30 million of goodwill that is being amortized on a straight- line basis over 5 years. The purchase price allocation for this acquisition is preliminary and further refinements are likely to be made based on the completion of final valuation studies and the Company's analysis of its business plan of integration. The operating results of Itronix UK have been included in the Company's consolidated financial statements within discontinued operations since February 23, 2000. The Company intends to sell this acquired company in connection with the sale of the other business units within discontinued operations within the next year. Itronix UK distributes rugged field computer systems including the provision of related services for incorporation into customers' specific applications. Divestitures ComCoTec, Inc. On June 30, 1998, the Company sold the assets of ComCoTec, Inc. ("ComCoTec") located in Lombard, Illinois to The Potomac Group, Inc. for $21 million. Dynatech recorded a pre-tax gain on $15.9 million on the sale of the assets, which was included in other income. Sales and operating results were insignificant for the periods ended March 31, 1999 and 1998. Parallax Graphics During fiscal year 1999, the Company liquidated the assets and liabilities of Parallax Graphics ("Parallax"). The loss from the liquidation activities was immaterial. Sales and operating results were insignificant for the periods ended March 31, 1999 and 1998. Results of Operations Fiscal 2000 Compared to Fiscal 1999 on a Consolidated Basis Sales. For the fiscal year ended March 31, 2000 consolidated sales from continuing operations increased $123.7 million or 37.5% to $453.2 million as compared to $329.5 million for the fiscal year ended March 31, B-4 1999. The increase was primarily attributable to increased demand for the Company's communications test products as this business segment experienced a recovery from fiscal 1999's reduced order volume. In addition, the Company also recognized additional revenue due to the acquisitions of ADA within the communications test segment and Sierra within Other Subsidiaries. These acquisitions contributed to approximately 7.5% of the total sales growth. International sales (defined as sales outside of North America) from continuing operations were $65.8 million or 14.5% of consolidated sales for the fiscal year ended March 31, 2000, as compared to $63.4 million or 19.2% of consolidated sales for the fiscal year ended March 31, 1999. Gross Profit. Consolidated gross profit from continuing operations increased $75.2 million to $296.2 million or 65.3% of consolidated sales for the fiscal year ended March 31, 2000 as compared to $220.9 million or 67.0% of consolidated sales for the fiscal year ended March 31, 1999. The dollar increase was directly related to the increase in sales; the percentage decrease is a result of the change in sales mix due to the shipment of additional lower-margin products in fiscal 2000 than in fiscal 1999 as well as certain purchase accounting effects from the acquisition of ADA. Operating Expenses. Operating expenses from continuing operations consist of selling, general and administrative expense; product development expense; recapitalization and other related costs; and amortization of intangibles. Total operating expenses were $254.4 million or 56.1% of consolidated sales for the fiscal year ended March 31, 2000, as compared to $199.4 million or 60.5% of consolidated sales for the fiscal year ended March 31, 1999. Excluding the impact of the recapitalization and other related costs, total operating expenses were $226.5 million or 50.0% of consolidated sales in fiscal 2000, as compared to $158.7 million or 48.1% of consolidated sales in fiscal 1999. The increase in total operating expenses excluding recapitalization and other related costs is due in part to an increase in research and development expenses as the Company invested in the next generation of communications test equipment. The Company also incurred additional expenses relating to improvements in the subsidiaries' customer service departments, ERP implementation, failed acquisitions, and additional consulting costs. Included in both cost of sales and operating expenses from continuing operations is the amortization of unearned compensation which relates to the issuance of stock options to employees and non-employee directors at a grant price lower than fair market value (defined as the closing price on the open market at the date of issuance). The amortization of unearned compensation in fiscal 2000 and 1999 was $1.9 million and $1.2 million, respectively, and has been allocated to cost of sales; selling, general and administrative expense; and product development expense. Selling, general and administrative expense from continuing operations was $156.5 million or 34.5% of consolidated sales for the fiscal year ended March 31, 2000, as compared to $113.5 million or 34.4% of consolidated sales for the fiscal year ended March 31, 1999. The marginal percentage increase is in part a result of the increase in sales as well as the timing of sales commission expense. Product development expense from continuing operations was $61.2 million or 13.5% of consolidated sales for the fiscal year ended March 31, 2000 as compared to $42.5 million or 12.9% of consolidated sales for the same period a year ago. During fiscal 2000, the Company invested in the next generation of high-speed test equipment as well as data services all within the communications test segment. Recapitalization and other related costs from continuing operations during fiscal 2000 was $27.9 million, most of which related to the retirement of John F. Reno, former Chairman, President and Chief Executive Officer of the Company, as well as other employees. Recapitalization and other related costs from continuing operations totaling $40.8 million were incurred during fiscal 1999 in connection with the Recapitalization, consisting of cancellation payments of employee stock options, compensation expense due to the acceleration of unvested stock options, and for certain other expenses resulting from the Recapitalization. B-5 Amortization of intangibles from continuing operations was $8.8 million for the fiscal year ended March 31, 2000 as compared to $2.7 million for the same period a year ago. The increase was primarily attributable to increased goodwill amortization related to the acquisitions in fiscal years 1999 and 2000. Operating income. Operating income from continuing operations increased to $41.7 million or 9.2% of consolidated sales for the fiscal year ended March 31, 2000 as compared to $21.5 million or 6.5% of consolidated sales for the same period a year ago. The increase was primarily a result of the recapitalization and other related costs in connection with the recapitalization completed in fiscal 1999. Excluding these expenses, the Company generated operating income of $69.7 million or 15.3% of consolidated sales in fiscal 2000 as compared to $62.2 million or 18.9% of consolidated sales during fiscal 1999. The percentage decrease was primarily the result of the increase in sales offset by the increase in operating expenses as discussed above. Interest. Interest expense, net of interest income from continuing operations was $49.6 million for the fiscal year ended March 31, 2000 as compared to $42.8 million for the same period a year ago. The increase in net interest expense during fiscal 2000 was a result of the debt incurred in connection with the Recapitalization which was outstanding for 12 months during fiscal 2000 and outstanding for slightly more than 10 months during fiscal 1999. Also included in interest expense is amortization expense of $3.2 million and $2.7 million in fiscal 2000 and 1999, respectively, related to deferred debt issuance costs which are being amortized over the life of the Senior Secured Credit Agreement. See Capital Resources and Liquidity--Debt. Other income. During fiscal 1999, the Company sold the net assets of ComCoTec for $21 million in gross proceeds that resulted in a gain of $15.9 million. Taxes. The effective tax rate changed for the fiscal year ended March 31, 2000 to (14.9)% as compared to (1.2)% for the fiscal year ended March 31, 1999, primarily due to nondeductible compensation incurred in connection with the Recapitalization during fiscal 1999, and lower foreign and states taxes incurred in fiscal 2000. Net loss. Net loss from continuing operations was $7.9 million for the fiscal year ended March 31, 2000 as compared to a net loss of $5.6 million for the same period a year ago. The increase was primarily attributable to the Recapitalization and other related expenses and the higher operating expenses described above. Backlog. Backlog from continuing operations at March 31, 2000 was $180.4 million, an increase of 98.6% from $90.8 million at March 31, 1999. The increase is a result of additional bookings within the communications test and inflight information systems segments. Fiscal 1999 Compared to Fiscal 1998 on a Consolidated Basis Sales. For the fiscal year ended March 31, 1999 consolidated sales from continuing operations increased $11.6 million or 3.6% to $329.5 million as compared to $318.0 million for the fiscal year ended March 31, 1998. The increase was primarily attributable to increased demand for the Company's aircraft cabin video information services within the inflight information systems segment offset by slightly lower sales of the Company's communications test products. International sales from continuing operations (defined as sales outside of North America) were $63.4 million or 19.2% of consolidated sales for the fiscal year ended March 31, 1999, as compared to $62.9 million or 19.8% of consolidated sales for the fiscal year ended March 31, 1998. The slight decrease in international sales is primarily a result of decreased demand for the Company's communications test products due in part to the economic slowdown in Asia. Gross Profit. Consolidated gross profit from continuing operations increased $6.9 million to $220.9 million or 67.0% of consolidated sales for the fiscal year ended March 31, 1999 as compared to $214.0 million or 67.3% of consolidated sales for the fiscal year ended March 31, 1998. The slight percentage decrease was attributable to a change in the sales mix within the consolidated group. B-6 Operating Expenses. Operating expenses from continuing operations consist of selling, general and administrative expense; product development expense; recapitalization and other related costs; and amortization of intangibles. Total operating expenses were $199.4 million or 60.5% for the fiscal year ended March 31, 1999 as compared to $151.6 million or 47.8% of consolidated sales for the fiscal year ended March 31, 1998. Excluding the impact of the recapitalization and other related costs, total operating expenses were $158.7 million or 48.1% of consolidated sales in fiscal 1999. Included in both cost of sales and operating expenses is the amortization of unearned compensation which relates to the issuance of stock options to employees and non-employee directors at a grant price lower than fair market value as defined as the closing price on the open market at the date of issuance. The amortization of unearned compensation in fiscal 1999 was $1.2 million and has been allocated to cost of sales; selling, general and administrative expense; and product development expense. Selling, general and administrative expense from continuing operations was $113.5 million or 34.4% of consolidated sales for the fiscal year ended March 31, 1999, as compared to $106.3 million or 33.4% of consolidated sales for the fiscal year ended March 31, 1998. The percentage increase is a result of increased selling and marketing expense due to an increase in compensation expense. Product development expense from continuing operations was $42.5 million or 12.9% of consolidated sales for the fiscal year ended March 31, 1999 as compared to $42.9 million or 13.5% of consolidated sales for the same period a year prior. The decrease is primarily due to the timing of expenses related to ongoing research and development programs. Recapitalization and other related costs from continuing operations totaling $40.8 million were incurred in connection with the Recapitalization, consisting of cancellation payments of employee stock options, compensation expense due to the acceleration of unvested stock options, and other expenses resulting from the Recapitalization. Amortization of intangibles from continuing operations was $2.7 million for the fiscal year ended March 31, 1999 as compared to $2.4 million for the same period a year prior. The increase was primarily attributable to increased goodwill amortization related to the acquisition of Pacific in June 1998. Operating income. Operating income from continuing operations decreased to $21.5 million or 6.5% of consolidated sales for the fiscal year ended March 31, 1999 as compared to $62.4 million or 19.6% of consolidated sales for the same period a year prior. The decrease was primarily a result of the costs in connection with the Recapitalization. Excluding these expenses, the Company generated operating income of $62.2 million or 18.9% of consolidated sales. The percentage decrease was primarily the result of higher operating expenses described above. Interest. Interest expense, net of interest income from continuing operations, was $42.8 million for the fiscal year ended March 31, 1999 as compared to interest income, net of interest expense of $1.8 million for the fiscal year ended March 31, 1998. The increase in net interest expense was attributable to the debt incurred in connection with the Merger on May 21, 1998. Also included in interest expense is $2.7 million of amortization expense related to deferred debt issuance costs. Other income. Other income from continuing operations was $15.7 million for the fiscal year ended March 31, 1999 as compared to $0.6 million for the same period in the previous year. The increase is a result of the sale of assets of ComCoTec for $21 million in gross proceeds that resulted in a gain of $15.9 million. Taxes. The effective tax rate from continuing operations changed to (1.2)% for the fiscal year ended March 31, 1999 as compared to 40.9% for the fiscal year ended March 31, 1998 due to permanent differences arising in connection with the accounting for the Recapitalization, and a smaller amount of income before income taxes, which magnified the effect of such permanent differences. B-7 Net income (loss). Net loss from continuing operations was $5.5 million or ($0.04) per share on a diluted basis for the fiscal year ended March 31, 1999 as compared to net income of $38.3 million or $1.80 per share on a diluted basis for the same period a year prior. The decrease was primarily attributable to the recapitalization and other related expenses, higher interest expense, and an increase in the weighted average number of shares outstanding in connection with the Recapitalization, which collectively resulted in a lower earnings per share. Backlog. Backlog from continuing operations at March 31, 1999 was $90.8 million, an increase of 50.5% from $60.3 million at March 31, 1998. The increase is a result of additional bookings within the communications test and inflight information systems segments. Business Segments The Company measures the performance of its subsidiaries by the their respective earnings before interest, taxes, amortization of intangibles, non- recurring items, one-time charges and gain on sale of subsidiary ("EBITA"). See Appendix C--Notes to Consolidated Financial Statements: Note S. Segment Information and Geographic Areas. The discussion below includes bookings (defined as new orders received) sales and EBITA for the two segments in which the Company participates in: communications test and inflight information systems as well as Other Subsidiaries.
Years Ended March 31, -------------------------- Segment 2000 1999 1998 - - ------- -------- -------- -------- Communications test segment: Bookings.......................................... $430,254 $260,722 $233,934 Sales............................................. 349,886 238,942 240,432 EBITA............................................. 62,447 42,800 50,614 Inflight information systems segment: Bookings.......................................... $ 71,411 $ 62,882 $ 38,758 Sales............................................. 70,960 58,794 34,797 EBITA............................................. 19,314 22,373 15,519 Other subsidiaries: Bookings.......................................... $ 32,391 $ 32,903 $ 43,627 Sales............................................. 32,394 31,796 42,726 EBITA............................................. 8,404 7,468 4,790
Fiscal 2000 Compared to Fiscal 1999--Communications Test Bookings for the communications test products increased 65.0% to $430.3 million for the fiscal year ended March 31, 2000, as compared to $260.7 million for the same period a year ago. The increase is due to a recovery from fiscal 1999's reduced order volume. The Company received an increase in orders for its transmission test equipment (transport and loop) as well as an increase in bookings due to the acquisition of ADA. The Company experienced a decrease in bookings during fiscal 1999 for its core instruments in part due to the Regional Bell Operating Companies (RBOC's) consolidation of their purchasing practices as well as the economic slowdown in Asia. Sales of communications test products increased 46.4% to $349.9 million for the fiscal year ended March 31, 2000, as compared to $238.9 million for the same period a year ago. The increase in sales is a direct result of the increase in bookings. The Company shipped an increased amount of orders for its transmission test equipment (transport and loop) as well as orders for its training and software development. EBITA for the communications test products increased 45.9% to $62.4 million for fiscal 2000 as compared to $42.8 million for the same period a year ago. The increase in EBITA is a direct result of the increase in sales. Fiscal 2000 Compared to Fiscal 1999--Inflight Information Systems Bookings for the inflight information systems increased 13.6% to $71.4 million for the fiscal year ended March 31, 2000 as compared to $62.9 million for the same period a year ago. The increase is due to the increase B-8 in the Company's real-time flight information passenger video displays both in the general and commercial aviation markets. In addition, the Company purchased Pacific in June 1998 that provided a full year of operations during fiscal 2000 as compared to nine months during fiscal 1999. Sales of the inflight information systems increased 20.7% to $71.0 million for the fiscal year ended March 31, 2000 as compared to $58.8 million for the same period a year ago. The increase is a direct result of the increase in bookings. The Pacific acquisition contributed approximately 12% to the total sales growth. EBITA for inflight information systems decreased 13.7% to $19.3 million for the fiscal year ended March 31, 2000 as compared to $22.4 million for the same period a year ago. The decrease was due primarily to costs associated with potential acquisitions that did not materialize, consulting expenses and expenses relating to the hiring of additional field service technicians. Fiscal 2000 Compared to Fiscal 1999--Other Subsidiaries Bookings for the Other Subsidiaries remained at essentially the same level during fiscal 2000 of $32.4 million as compared to $32.9 million for the same period a year ago. The bookings and the operating results during fiscal 2000 remained essentially the same although the mix differed. During June 1998 the Company sold ComCoTec, and in September 1999 the Company purchased Sierra. Sales of the Other Subsidiaries increased slightly to $32.4 million for the fiscal year ended March 31, 2000 as compared to $31.8 million for the same period a year ago. EBITA for the Other Subsidiaries increased 12.5% to $8.4 million for fiscal 2000 as compared to $7.5 million for the same period a year ago. The increase is due in part to better operating performance at the Company's da Vinci subsidiary. Fiscal 1999 Compared to Fiscal 1998--Communications Test Bookings for communications test products increased 11.5% to $260.7 million for the fiscal year ended March 31, 1999 as compared to $233.9 million for the same period in the previous year. Sales of communications test products decreased $1.5 million or 0.6% to $238.9 million for the fiscal year ended March 31, 1999 as compared to $240.4 million for the fiscal year ended March 31, 1998. The Company had been experiencing a decrease in demand for its core instruments in part due to the RBOC's consolidating their purchasing practices as well as the economic slowdown in Asia. This decrease was partially offset by an increase in demand for the Company's systems and services. EBITA for the communications test products decreased $7.8 million to $42.8 million for the fiscal year ended March 31, 1999 as compared to $50.6 million for the same period a year prior. The reduction in EBITA is in part due to the sales volume decrease as well as reorganizing and investing in the Company's sales force. Fiscal 1999 Compared to Fiscal 1998--Inflight Information Systems Bookings for the inflight information systems increased $24.1 million or 62.2% to $62.9 million for the fiscal year ended March 31, 1999 as compared to $38.8 million for the same period in the previous year. The increase was primarily a result of a continued increased demand for the Company's real-time flight information passenger video displays, as well as an increase in sales from the acquisition of Pacific. Sales for the Company's inflight information systems increased $24.0 million or 69.0% to $58.8 million for the year ended March 31, 1999 as compared to $34.8 million for the same period a year prior. The increase in shipments is a result of the increased order volume as described above. The Pacific Acquisition accounted for approximately 32% of total growth. EBITA for the inflight information systems increased $6.9 million or 44.2% to $22.4 million for the fiscal year ended March 31, 1999 as compared to $15.5 million for the fiscal year ended March 31, 1998. The increase in EBITA is a result of the increased shipments as well as reducing redundant functions at Pacific. B-9 Fiscal 1999 Compared to Fiscal 1998--Other Subsidiaries Bookings for the Other Subsidiaries decreased $10.7 million to $32.9 million for the fiscal year ended March 31, 1999 as compared to $43.6 million for the same period in the previous year. The decrease was primarily a result of the sale of ComCoTec in June 1998 as well as the shutdown of Parallax. Sales for the Company's Other Subsidiaries decreased $10.9 million to $31.8 million for the year ended March 31, 1999 as compared to $42.7 million for the same period a year prior. The decrease in shipments was a result of the decreased order volume as described above. EBITA for the Other Subsidiaries increased $2.7 million to $7.5 million for the fiscal year ended March 31, 1999 as compared to $4.8 million for the period ended March 31, 1998. The increase was a result of the shutdown reserve and operating loss at Parallax that was incurred during fiscal 1998 as well as better operating performance at the Company's da Vinci subsidiary. Capital Resources and Liquidity The Company broadly defines liquidity as its ability to generate sufficient cash flow from operating activities to meet its obligations and commitments. In addition, liquidity includes the ability to obtain appropriate debt and equity financing and to convert into cash those assets that are no longer required to meet existing strategic and financial objectives. Therefore, liquidity cannot be considered separately from capital resources that consist of current or potentially available funds for use in achieving long-range business objectives and meeting debt service commitments. The Company's liquidity needs arise primarily from debt service on the substantial indebtedness incurred in connection with the Recapitalization and from the funding of working capital and capital expenditures. As of March 31, 2000, the Company had $579.9 million of indebtedness, primarily consisting of $275.0 million principal amount of the Senior Subordinated Notes, $234.9 million in borrowings under the Term Loan Facility and $70.0 million borrowings under the Revolving Credit Facility. The Statement of Cash Flows for fiscal years 1998 through 2000 includes the cash flows from the industrial computing and communications segment on a fully-consolidated basis and has not been restated to reflect discontinued operations. Cash Flows. The Company's cash and cash equivalents decreased $34.6 million during the fiscal year ended March 31, 2000. Working Capital. For the fiscal year ended March 31, 2000, the Company's net working capital decreased as its operating assets and liabilities provided a $9.3 million source of cash, excluding acquisitions. Accounts receivable increased, creating a use of cash of $18.2 million, primarily due to the increase in shipments during the last month of the fiscal year. Inventory levels decreased, creating a source of cash of $7.2 million, due primarily to better inventory management throughout the organization. Other current assets increased, creating a use of cash of $7.3 million, primarily due to the prepayment of expenses relating to the merger of TTC and WWG. Accounts payable increased, creating a source of cash of $12.4 million as the Company continues to manage its working capital. Other current liabilities increased, creating a source of cash of $15.3 million, in part related to an increase in commission and compensation expense as a result of the increase in sales during the last quarter of fiscal 2000. Investing activities. The Company's investing activities totaled $142.3 million for the fiscal year ended March 31, 2000 in part for the purchase and replacement of property and equipment. The primary use of cash was for the acquisition of four companies during fiscal 2000 for a total purchase price of approximately $113.2 million (approximately $126.9 million in gross purchase price less $13.7 million of cash acquired): Sierra for net $6.2 million; ADA for net $67.2 million; ICS Advent (Europe) Ltd. for net $4.2 million; and Itronix UK for net $35.6 million. B-10 The Company's capital expenditures in fiscal 2000 were $21.9 million as compared to $11.3 in fiscal 1999. The increase during fiscal 2000 was primarily due to replacing certain of the Company's Enterprise Resource Planning (ERP) systems at the communications test and industrial computing and communications businesses. The Company is, according to the terms of the Senior Secured Credit Agreement, subject to annual maximum capital expenditures. Debt and equity. The Company's financing activities generated $50.4 million in cash during fiscal 2000, due primarily to revolving credit borrowings for the acquisition of the four companies described above. In addition, the Company repaid $17.1 million in term loan borrowings. Debt In connection with the Recapitalization, the Company entered into a senior secured credit facility (the "Senior Secured Credit Facility") which consisted of a $260 million term loan facility (the "Term Loan Facility") and a $110 million revolving credit facility ("the Revolving Credit Facility"). In addition, the Company incurred $275 million of debt through the sale of its 9 3/4% Senior Subordinated Notes (the "Senior Subordinated Notes"). The Company's weighted-average interest rate on the loans under the Senior Secured Credit Facility was 7.85% per annum for fiscal 2000. Principal and interest payments under the Senior Secured Credit Agreement and interest payments on the Senior Subordinated Notes represented significant liquidity requirements for the Company. Total interest expense including the amortization of deferred debt issuance costs was $51.9 million in fiscal 2000. In addition, during fiscal 2000 and 1999, the Company repaid approximately $17.1 million and $8 million, respectively, of term debt and incurred net borrowings under the Revolving Credit Facility of $70 million in fiscal 2000. At March 31, 2000, the Company had $40 million undrawn under the Revolving Credit Facility. To finance the acquisition of WWG, the Company needed to restructure its current debt and equity. As a result, on May 23, 2000 the Company entered into a new credit facility with a syndicate of lenders (the "New Credit Facility"). The Company's new senior credit agreement (the "New Senior Credit Agreement"), which established the New Credit Facility, provided for senior secured credit facilities in an aggregate principal amount of up to approximately $860 million, consisting of (1) a revolving credit facility available to Dynatech LLC in U.S. dollars or euros, in an aggregate principal amount of up to $175 million, which can also be used to issue letters of credit (the "New Revolving Credit Facility"), (2) a Tranche A term loan of $75 million to Dynatech LLC with a six year amortization (the "Tranche A Term Loan"), (3) a Tranche B term loan of $510 million to Dynatech LLC with a seven and one-half year amortization (the "Tranche B Term Loan"), and (4) German term loans from certain German banks in an aggregate amount equal to (Euro)108.375 million to the Company"s German subsidiaries with six year amortization periods (the "German Term Loans") (all term loans collectively, the "New Term Loans"). The New Credit Facility also provides for the issuance of a letter of credit that the German banks may draw upon in the event of the failure of the Company"s German subsidiaries to make payments on the (Euro)108.375 million loans, and the Company"s German subsidiaries are required to reimburse the letter of credit issuer for any such issuances. The amount of the letter of credit also may be fully drawn under certain circumstances, and in such event the amount of the draw shall convert into term loans to the Company's German subsidiaries with similar amortization to the German term loans. The Company collectively used the New Term Loans to refinance certain existing indebtedness of the Company and as part of the financing for the WWG merger. The New Revolving Credit Facility is available to the Company from time to time for potential acquisitions and other general corporate purposes. Principal and interest payments under the New Credit Facility and interest payments on the Senior Subordinated Notes represent significant liquidity requirements for the Company. The Tranche A Term Loan will be amortized in four quarterly installments of $750 thousand commencing on June 30, 2000; four quarterly installments of $2.0 million commencing on June 30, 2001; four quarterly installments of $3.75 million commencing on June 30, 2002; four quarterly installments of $7.5 million commencing on June 30, 2003; four quarterly installments of $2.5 million commencing on June 30, 2004; and four quarterly installments of $2.25 million commencing on B-11 June 30, 2005. The Tranche B Term Loan will be amortized in 24 quarterly installments of $2.0 million, commencing on June 30, 2000; four quarterly installments of $77.5 million commencing on June 30, 2006, and two quarterly installments of $76.0 million commencing on June 30, 2007. The German Term Loans will be amortized in four quarterly installments of (Euro)530 thousand commencing on June 30, 2000; twelve quarterly installments of (Euro)790 thousand commencing on June 30, 2001; four quarterly installments of (Euro)7.625 million commencing on June 30, 2004; three quarterly installments of (Euro)15.780 million commencing on June 30, 2005 and one quarterly installment of (Euro)18.935 million on March 31, 2006. The $275 million of Senior Subordinated Notes will mature in 2008, and bear interest at 9 3/4% per annum. As a result of the substantial indebtedness incurred in connection with the Merger, it is expected that the Company's interest expense will be higher and will have a greater proportionate impact on net income in comparison to preceding periods. The loans under the Senior Secured Credit Facility and the New Credit Facility bear interest at floating rates based upon the interest rate option elected by the Company. To fix the interest charged on a portion of the total debt outstanding under the Term Loan Facility and the New Term Loan Facility, the Company entered into interest rate swaps which are effective for periods ranging from two to three years which began in September 30, 1998. After giving effects to these arrangements, $220 million of the debt outstanding is subject to an effective average annual fixed rate of 5.66% (plus an applicable margin). The terms of one interest rate swap contract provide upon termination for a one-year option to renew 50% of the notional amount at the discretion of the lender. See Note L. Interest Rate Swap Contracts. The obligations of Dynatech LLC under the New Revolving Credit Facility, the Tranche A Term Loan, the Tranche B Term Loan and the reimbursement obligations of the German subsidiaries under the letter of credit relating to the German Term Loan is guaranteed by each active direct or indirect U.S. subsidiary of Dynatech LLC and by Dynatech Corporation. The obligations under the New Credit Facility are secured by a pledge of the Company's equity interest in Dynatech LLC, by substantially all of the assets of Dynatech LLC and each active direct or indirect U.S. subsidiary of Dynatech LLC, and by a pledge of the capital stock of each such direct or indirect U.S. subsidiary, and 65% of the capital stock of each subsidiary of Dynatech LLC that acts as a holding company of Dynatech LLC's foreign subsidiaries. The Company's New Credit Facility generally permits voluntary prepayment of loans thereunder without premium or penalty, subject to certain limitations. Mandatory prepayments are required to be made from (a) 100% of net proceeds from certain asset sales, casualty insurance and condemnation awards or other similar recoveries; (b) 100% of the net proceeds from the issuance of indebtedness by us, other than as permitted by the New Credit Facility; and (c) 50% of annual excess cash flow for each fiscal year in which the ratio of the Company's debt on the last day of such fiscal year to the Company's EBITDA (defined as earnings before interest, taxes, depreciation and amortization) for such fiscal year is greater than or equal to 4.0 to 1.0. Future Financing Sources and Cash Flows. The amount under the Revolving Credit Facility that remained undrawn at June 1, 2000 was $175 million. The undrawn portion of this facility will be available to meet future working capital and other business needs of the Company. The Company believes that cash generated from operations, together with amounts available under the Revolving Credit Facility and any other available sources of liquidity, will be adequate to permit the Company to meet its debt service obligations, capital expenditure program requirements, ongoing operating costs and working capital needs, although no assurance can be given in this regard. The Company's future operating performance and ability to service or refinance the Senior Subordinated Notes and to repay, extend or refinance the Senior Secured Credit Facilities (including the New Revolving Credit Facility) will be, among other things, subject to future economic conditions and to financial, business and other factors, many of which are beyond the Company's control. Covenant Restrictions. The Company's New Credit Facility contains covenants that, among other things, restrict the Company's ability to dispose of assets, incur additional debt, guarantee obligations or contingent liabilities, repay its 9 3/4% Senior Subordinated Notes due 2008, pay dividends, create liens on assets, make investments, loans or advances, engage in mergers or consolidations, make capital expenditures or engage in certain transactions with affiliates. The Company's New Credit Facility contains customary events of default. B-12 The indenture governing the Senior Subordinated Notes limit the Company's ability to incur additional indebtedness. Such restrictions, together with the highly leveraged nature of the Company, could limit the Company's ability to respond to market conditions, to meet its capital-spending program, to provide for unanticipated capital investments, or to take advantage of business opportunities. These restrictions, among other things, preclude Dynatech LLC from distributing assets to Dynatech Corporation (which has no independent operations and no significant assets other than its membership interest in Dynatech LLC), except in limited circumstances. In addition, under the New Credit Facility, the Company is required to comply with a minimum interest expense coverage ratio and a maximum leverage ratio. These financial tests become more restrictive in future years. The Term Loans under the New Credit Facility are governed by negative covenants that are substantially similar to the negative covenants contained in the indenture governing the Senior Subordinated Notes, which also impose restrictions on the operation of the Company's business. Going forward, the Company's principal sources of liquidity are expected to be cash flow from its operations and borrowings under its New Revolving Credit Facility. The Company anticipates that the principal uses of its liquidity will be able to provide working capital, meet debt service requirements and to finance capital expenditures. Year 2000 Issue Year 2000 issues exist when dates in computer systems are recorded using two digits (rather than four) and are then used for arithmetic operations, comparisons or sorting. A two-digit date recording may recognize a date using "00" as 1900 rather than 2000, which could cause the Company's computer systems to perform inaccurate computations. During 1998 and 1999, the Company completed a detailed assessment of its information systems and other hardware and software at each of the Company's business units. Based upon these assessments, non-compliant software or hardware were either upgraded to Year 2000 compliant versions, remediated to become Year 2000 compliant or replaced by other hardware or software which provided Year 2000 compliance and other benefits. As a result of the Company's Year 2000 readiness efforts, the Company's mission critical systems successfully distinguished between the year 1900 and 2000 without any critical system failures. In addition, the Company did not experience a significant adverse impact due to Year 2000 issues at any of its significant suppliers. The Company will continue to monitor its mission critical applications and equipment through the normal course of business operations to ensure that any Year 2000 matters that do arise are addressed promptly. With regard to financial cost, the Company estimates it had incurred $1.8 million on Year 2000 activities through December 31, 1999. New Pronouncements In December 1999 the Securities and Exchange Commission issued Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB 101"). SAB 101 summaries the staff's view in applying generally accepted accounting principles to selected revenue recognition issues. The application of the guidance in SAB 101 will be required in the Company's first quarter of fiscal 2001. The Company evaluated the application of SAB 101 and has determined that it not have a signifcant impact. In March 2000, the Financial Accounting Standards Board issued Financial Accounting Standards Board Interpretation No. 44, "Accounting for Certain Transactions Involving Stock Compensation--an Interpretation of APB Opinion No. 25" ("FIN 44"). FIN 44 clarifies the application of APB Opinion No. 25 and among other issues clarifies the following: the definition of an employee for purposes of applying APB Opinion No. 25; the criteria for determining whether a plan qualifies as a noncompensatory plan; the accounting consequence of various modifications to the terms of previously fixed stock options or awards; and the accounting for an exchange of stock compensation awards in a business combination. FIN 44 is effective July 1, 2000, but certain conclusions in FIN 44 cover specific events that occurred after either December 15, 1998 or January 12, 2000. The Company does not expect the application of FIN 44 to have a material impact on its results of operations and financial position. B-13 On June 15, 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for Derivative Instruments and Hedging Activities." SFAS 133 was amended by Statement of Financial Accounting Standards No. 137 which modified the effective date of SFAS 133 to all fiscal quarters of all fiscal years beginning after June 15, 2000. SFAS 133, as amended, requires that all derivative instruments be recorded on the balance sheet at their fair value. Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and, if it is, the type of hedge transaction. The Company is assessing the impact of the adoption of SFAS 133 on its results of operations and its financial position. Quantitative and Qualitative Disclosures about Market Risk The Company operates both manufacturing facilities and sales offices within the United States and primarily sales offices outside the United States. The Company is subject to business risks inherent in non-U.S. activities, including political and economic uncertainty, import and export limitations, and market risk related to changes in interest rates and foreign currency exchange rates. The Company believes the political and economic risks related to its foreign operations are mitigated due to the stability of the countries in which its sales offices are located, as well as the low percentage of overall sales outside the United States (approximately 15%, 19% and 20% in fiscal 2000, 1999 and 1998, respectively of consolidated sales relate to foreign sales including exports from the United States). The Company's principal currency exposures against the U.S. dollar are in the major European currencies and in Canadian currency. The Company does not use foreign currency forward exchange contracts to mitigate fluctuations in currency. The Company's market risk exposure to currency rate fluctuations is not material. The Company does not hold derivatives for trading purposes. The Company uses derivative financial instruments consisting solely of interest rate swap contracts. The Company's objective in managing its exposure to changes in interest rates (on its variable rate debt) is to limit the impact of such changes on earnings and cash flow and to lower its overall borrowing costs. At March 31, 2000, the Company had $234.9 million of variable rate debt outstanding. The Company currently has three interest rate swap contracts with notional amounts totaling $220 million which fixed its variable rate debt to a fixed interest rate for periods of two to three years in which the Company pays a fixed interest rate on a portion of its outstanding debt and receives three-month LIBOR. At March 31, 2000, all of the swap contracts had a fixed interest rate lower than the three-month LIBOR quoted by its financial institutions. However, the 3-month LIBOR rate was lower than the fixed interest rate during fiscal 1999 and the first part of fiscal 2000 creating a net additional interest expense (calculated as the difference between the interest rate in the swap contracts and the three-month LIBOR rate) recognized by the Company during fiscal 2000 and fiscal 1999 was $0.4 million and $0.5 million, respectively. The Company performed a sensitivity analysis assuming a hypothetical 10% adverse movement in the floating interest rate on the interest rate sensitive instruments described above. The Company believes that such a movement is reasonably possible in the near term. As of March 31, 2000, the analysis demonstrated that such movement would cause the Company to recognize additional interest expense of approximately $1.4 million, and accordingly, would cause a hypothetical loss in cash flows of approximately $1.4 million. Forward-Looking Statements This report (other than the Company's consolidated financial statements of historical fact) contains forward-looking statements, including, without limitation: 1. the statement in "Business--General", "Management Discussion and Analysis of Financial Condition and Results of Operations-- Overview", and in "Notes to Consolidated Financial Statements. Note B. Discontinued Operations" that the Company expects to divest these two subsidiaries, either separately or together, no later than the first quarter of the 2002 fiscal year; 2. The statement in "Business--General: Communications Test" that the Company expects that a growing proportion of its sales will be derived from its system products; B-14 3. the statement in "Business--Seasonality; Backlogs" and "Management Discussion and Analysis of Financial Condition and Results of Operations--Overview" concerning the Company's belief that its results of operations may vary on a quarterly basis; 4. the statement in "Business--Patents and Proprietary Rights" that the Company does not believe that the expiration of any patent or group of patents would materially effect its business; 5. the statement in "Business--Environmental Matters" that the Company does not foresee that federal, state and local laws or regulations which have been enacted or adopted regarding the discharge of materials into the environment will have a material adverse effect on capital expenditures, earnings or the competitive position of the Company; 6. the statements in "Legal Proceedings-Litigation" and "Financial Statements and Supplementary Data--Note Q. Commitments and Contingencies": a. concerning the Company's belief that the resolution of routine legal matters incidental to the Company's business in which the Company is involved from time to time will not have a material adverse effect on the Company's financial condition or results of operations; and b. that the Company does not believe that the outcome of current litigation is likely to have a material adverse effect on the Company's financial condition, results of operations or liquidity; 7. the statement in "Market for Registrant's Common Stock and Related Security Holder Matters" that the Company intends to retain earnings for use in the operation and expansion of its business; 8. the statements in "Management Discussion and Analysis of Financial Condition and Results of Operations--Capital Resources--and Liquidity" and "Financial Statements and Supplementary Data--Note K. Debt" that: a. the Company expects that its interest expense will be higher and will have a greater proportionate impact on net income in comparison to preceding periods; and b. the Company believes that cash generated from operations, together with amounts available under the Revolving Credit Facility and any other available sources of liquidity, will be adequate to permit the Company to meet its debt service obligations, capital expenditure program requirements, ongoing operating costs and working capital needs; 9. the statement in "Management Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources" that, going forward, the Company's principal sources of liquidity are expected to be cash flow from its operations and borrowings under its revolving credit facility, that the Company anticipates that the principal uses of its liquidity will be able to provide working capital, meet debt service requirements and to finance capital expenditures and that the Company's revolving credit facility will also be available for the issuance of letters of credit. 10. the statement in "Management Discussion and Analysis of Financial Condition and Results of Operations-Year 2000 Issue" that the Company will continue to monitor its mission critical applications and equipment through the normal course of business operations to ensure that any Year 2000 matters that do arise are addressed promptly; 11. the statement in "Quantitative and Qualitative Disclosures about Market Risk" concerning the Company's belief that the political and economic risks related to its foreign operations are mitigated due to the stability of the countries in which its sales offices are located, as well as the low percentage of overall sales outside the United States; and 12. other statements as to management's or the Company's expectations or beliefs presented in "Management Discussion and Analysis of Financial Condition and Results of Operations". B-15 All statements other than statements of historical facts included in this Annual Report on Form 10-K may constitute forward-looking statements. The Company has based these forward-looking statements on its current expectations and projections about future events. Although it believes that its assumptions made in connection with the forward-looking statements are reasonable, there can be no assurances that its assumptions and expectations will prove to have been correct. These forward-looking statements are subject to various risks, uncertainties and assumptions including, among other things: . the Company's outstanding indebtedness and its leverage, and the restrictions imposed by its indebtedness; . the cyclical nature of certain of the Company's businesses, and domestic and international economic conditions; . the high degree of competition in certain of the Company's businesses, and the potential for new competitors to enter into those businesses; . the integration of recent and future acquired businesses with the Company's existing operations in a timely and efficient manner; . the extent to which the Company undertakes new acquisitions or enters into strategic joint ventures or partnerships; . future modifications to existing laws and regulations; . discovery of unknown contingent liabilities, including environmental contamination at the Company's facilities; . fluctuations in interest rates and in foreign currency exchange rates; and . increases in the cost of raw materials and other inputs used to make the Company's products. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this report might not occur. B-16 APPENDIX C DYNATECH CORPORATION INDEX TO CONSOLIDATED FINANCIAL STATEMENTS REPORT OF INDEPENDENT ACCOUNTANTS.......................................... C-2 FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 2000 AND 1999................ C-3 CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED MARCH 31, 2000, 1999 AND 1998........................................................... C-4 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT) FOR THE YEARS ENDED MARCH 31, 2000, 1999 AND 1998..................................... C-5 CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED MARCH 31, 2000, 1999 AND 1998........................................................... C-6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS............................... C-7
C-1 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholders of Dynatech Corporation: In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, shareholders' equity (deficit) and cash flows present fairly, in all material respects, the financial position of Dynatech Corporation and its subsidiaries (the "Company") at March 31, 2000 and 1999, and the results of their operations and their cash flows for each of the three years in the period ended March 31, 2000, in conformity with accounting principles generally accepted in the United States. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. As discussed in Note S. to the consolidated financial statements, segment information for the fiscal years 1999 and 1998 has been restated to conform to the requirements of Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information". /s/ PricewaterhouseCoopers LLP Boston, Massachusetts June 21, 2000 C-2 DYNATECH CORPORATION CONSOLIDATED BALANCE SHEETS
March 31, -------------------- 2000 1999 --------- --------- (Amounts in thousands except share and per share data) ASSETS Current assets: Cash and cash equivalents.............................. $ 33,839 $ 70,362 Accounts receivable (net of allowance of $1,952 and $1,634, respectively)................................. 78,236 70,996 Inventories: Raw materials........................................ 11,085 16,680 Work in process...................................... 12,859 13,644 Finished goods....................................... 6,308 16,947 --------- --------- Total inventory.................................... 30,252 47,271 --------- --------- Deferred income taxes.................................. 21,548 15,921 Other current assets................................... 16,332 6,229 --------- --------- Total current assets............................... 180,207 210,779 --------- --------- Property and equipment: Leasehold improvements................................. 5,843 6,170 Machinery and equipment................................ 62,361 51,893 Furniture and fixtures................................. 18,908 14,748 --------- --------- 87,112 72,811 Less accumulated depreciation and amortization......... (59,796) (47,192) --------- --------- 27,316 25,619 Other assets: Net assets held for sale............................... 72,601 -- Intangible assets, net................................. 58,508 56,768 Deferred income taxes.................................. 42,689 23,852 Deferred debt issuance costs, net...................... 21,382 24,614 Other.................................................. 12,135 6,472 --------- --------- $ 414,838 $ 348,104 ========= ========= LIABILITIES AND SHAREHOLDERS' DEFICIT Current liabilities: Notes payable and current portion of long-term debt.... $ 7,646 $ 23,191 Accounts payable....................................... 38,374 34,317 Accrued expenses: Compensation and benefits............................ 35,036 24,420 Deferred revenue..................................... 13,564 27,141 Warranty............................................. 8,297 7,811 Interest............................................. 10,055 10,129 Other................................................ 9,270 14,874 Accrued income taxes................................... 5,703 13,398 --------- --------- Total current liabilities.......................... 127,945 155,281 Long-term debt........................................... 572,288 504,151 Deferred compensation.................................... 11,280 5,112 Commitments and contingencies (Note Q) Shareholders' deficit: Serial preference stock, par value $1 per share; authorized 100,000 shares; none issued................ -- -- Common stock, 2000 and 1999, respectively: par value $0.01 and $0.00, authorized 200,000,000 and 50,000,000 shares; issued and outstanding 122,526,750 and 120,665,048 shares................................ 1,225 -- Additional paid-in capital............................. 344,873 322,746 Accumulated deficit.................................... (623,929) (629,941) Unearned compensation.................................. (16,965) (7,563) Other comprehensive loss............................... (1,879) (1,682) --------- --------- Total shareholders' deficit........................ (296,675) (316,440) --------- --------- $ 414,838 $ 348,104 ========= =========
The accompanying notes are an integral part of the consolidated financial statements. C-3 DYNATECH CORPORATION CONSOLIDATED STATEMENTS OF INCOME
Years Ended March 31, ---------------------------- 2000 1999 1998 -------- -------- -------- (Amounts in thousands except per share data) Net sales........................................ $453,239 $329,532 $317,955 Cost of sales.................................... 157,090 108,618 103,923 -------- -------- -------- Gross profit..................................... 296,149 220,914 214,032 Selling, general and administrative expense...... 156,499 113,469 106,328 Product development expense...................... 61,172 42,472 42,919 Recapitalization and other related costs......... 27,942 40,767 -- Amortization of intangibles...................... 8,789 2,726 2,357 -------- -------- -------- Total operating expenses......................... 254,402 199,434 151,604 -------- -------- -------- Operating income............................... 41,747 21,480 62,428 Interest expense................................. (51,916) (46,178) (1,184) Interest income.................................. 2,354 3,392 3,013 Other income (expense), net...................... (68) 15,703 551 -------- -------- -------- Income (loss) from continuing operations before income taxes.................................... (7,883) (5,603) 64,808 Provision (benefit) for income taxes............. (1,169) (69) 26,521 -------- -------- -------- Income (loss) from continuing operations......... (6,714) (5,534) 38,287 Discontinued operations: Operating income, net of income tax provision of $7,967 in 2000, $6,903 in 1999, and $2,510 in 1998....................................... 12,726 11,979 3,489 -------- -------- -------- Net income....................................... $ 6,012 $ 6,445 $ 41,776 ======== ======== ======== Income (loss) per common share--basic: Continuing operations.......................... $ (0.05) $ (0.04) $ 1.87 Discontinued operations........................ 0.09 0.09 0.17 -------- -------- -------- $ 0.04 $ 0.05 $ 2.04 ======== ======== ======== Income (loss) per common share--diluted: Continuing operations.......................... $ (0.05) $ (0.04) $ 1.80 Discontinued operations........................ 0.09 0.09 0.16 -------- -------- -------- $ 0.04 $ 0.05 $ 1.96 ======== ======== ======== Weighted average number of common shares Basic.......................................... 148,312 129,596 20,493 Diluted........................................ 148,312 129,596 21,272
The accompanying notes are an integral part of the consolidated financial statements. C-4 DYNATECH CORPORATION CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
Total Number of Shares Retained Other Share- ----------------- Additional Earnings/ Unearned Compre- holders' Common Treasury Common Paid-In (Accumulated Compen- hensive Treasury Equity Stock Stock Stock Capital Deficit) sation Loss Stock (Deficit) ------- -------- ------- ---------- ------------ -------- ------- -------- --------- (Amounts in thousands) Balance, March 31, 1997................... 18,605 (1,812) $ 3,721 $ 9,887 $ 195,506 $ 0 $(1,247) $(47,181) $ 160,686 Net income--1998....... 41,776 41,776 Translation adjustment............ (353) (353) --------- Total comprehensive income................ 41,423 --------- Purchases of treasury stock................. (163) (5,330) (5,330) Exercise of stock options and other issuances............. 234 (2,919) 7,580 4,661 Tax benefit from exercise of stock options............... 679 679 ------- ------ ------- -------- --------- -------- ------- -------- --------- Balance, March 31, 1998................... 18,605 (1,741) 3,721 7,647 237,282 0 (1,600) (44,931) 202,119 ======= ====== ======= ======== ========= ======== ======= ======== ========= Net income--1999....... 6,445 6,445 Translation adjustment............ (82) (82) --------- Total comprehensive income................ 6,363 --------- Exercise of stock options and other issuances............. 414 59 (111) 1,946 1,835 Tax benefit from exercise of stock options............... 609 609 Recapitalization and other related costs: Common stock repurchased........... (18,605) 1,682 (3,721) (7,269) (873,668) 42,985 (841,673) Issuance of new stock, net of fees........... 120,251 298,148 298,148 Stock options expense.. 14,640 14,640 Unearned compensation.. 9,082 (9,082) -- Amortization of unearned compensation.......... 1,519 1,519 ------- ------ ------- -------- --------- -------- ------- -------- --------- Balance, March 31, 1999................... 120,665 0 $ 0 $322,746 $(629,941) $ (7,563) $(1,682) $ 0 $(316,440) ======= ====== ======= ======== ========= ======== ======= ======== ========= Net income--2000....... 6,012 6,012 Translation adjustment............ (197) (197) --------- Total comprehensive income................ 5,815 --------- Exercise of stock options and other issuances............. 1,862 11 4,725 4,736 Adjustment to unearned compensation.......... (1,143) 1,130 (13) Stock option expense... 12,327 12,327 Redemption of stock options............... (6,980) (6,980) Unearned compensation from stock option grants................ 12,951 (12,951) -- Change in par value of common stock.......... 1,214 (1,214) -- Amortization of unearned compensation.......... 2,419 2,419 Tax benefit from exercise of stock options............... 1,461 1,461 ------- ------ ------- -------- --------- -------- ------- -------- --------- Balance, March 31, 2000................... 122,527 0 $ 1,225 $344,873 $(623,929) $(16,965) $(1,879) $ 0 $(296,675) ======= ====== ======= ======== ========= ======== ======= ======== =========
The accompanying notes are an integral part of the consolidated financial statements. C-5 DYNATECH CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended March 31, ------------------------------ 2000 1999 1998 --------- --------- -------- (Amounts in thousands) Operating activities: Net income from operations.................... $ 6,012 $ 6,445 $ 41,776 Adjustment for noncash items included in net income: Depreciation.................................. 13,082 11,741 12,066 Amortization of intangibles................... 12,327 6,228 5,835 Gain on sale of subsidiary.................... -- (15,900) -- Recapitalization and other related costs...... 12,327 14,640 -- Amortization of unearned compensation......... 2,419 1,519 -- Amortization of deferred debt issuance costs.. 3,232 2,693 -- Change in net deferred income tax asset....... (2,840) (12,289) 2,638 Other......................................... 1,517 612 594 Changes in operating assets and liabilities, net of effects of purchase acquisitions and divestitures................................. 9,334 51,981 (17,564) --------- --------- -------- Net cash flows provided by operating activities................................... 57,410 67,670 45,345 --------- --------- -------- Investing activities: Purchases of property and equipment........... (21,859) (11,323) (15,879) Disposals of property and equipment........... 7 369 219 Proceeds from sales of businesses............. -- 21,000 507 Businesses acquired in purchase transactions, net of cash acquired......................... (113,227) (21,365) -- Incentive earnout related to the purchase of Advent....................................... -- (3,845) -- Other......................................... (7,172) (4,915) 144 --------- --------- -------- Net cash flows provided by (used in) investing activities................................... (142,251) (20,079) (15,009) --------- --------- -------- Financing activities: Borrowings (repayments) under revolving credit facility, net................................ 70,000 -- (5,000) Borrowings of term loan debt.................. -- 535,000 -- Repayment of term loan debt................... (17,139) (8,000) -- Repayment of notes payable.................... -- (2,192) -- Repayment of capital lease obligations........ (212) (159) (195) Financing fees................................ -- (38,631) -- Proceeds from issuance of common stock........ 3,257 277,035 4,513 Proceeds from exercise of stock options....... 1,479 1,800 -- Purchases of treasury stock, common stock and stock options................................ (6,980) (806,508) (5,330) --------- --------- -------- Net cash flows used in financing activities... 50,405 (41,655) (6,012) Effect of exchange rate on cash................ (157) (478) 798 --------- --------- -------- Increase (decrease) in cash and cash equivalents................................... (34,593) 5,458 25,122 Cash and cash equivalents at beginning of year.......................................... 70,362 64,904 39,782 --------- --------- -------- Cash and cash equivalents at end of year....... $ 35,769 $ 70,362 $ 64,904 ========= ========= ======== Change in operating asset and liability components: Decrease (increase) in trade accounts receivable................................... $ (18,176) $ (1,114) $ 994 Decrease (increase) in inventories............ 7,185 2,503 (8,739) Increase (decrease) in other current assets... (7,324) 2,089 (887) Increase in accounts payable.................. 12,397 11,025 6,009 Increase in accrued expenses, taxes and other........................................ 15,252 37,478 (14,941) --------- --------- -------- Change in operating assets and liabilities..... $ 9,334 $ 51,981 $(17,564) ========= ========= ======== Supplemental disclosures of cash flow information: Cash paid during the year for: Interest...................................... $ 48,791 $ 33,376 $ 934 Income taxes.................................. $ 14,737 $ 16,013 $ 24,307
The accompanying notes are an integral part of the consolidated financial statements. C-6 DYNATECH CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A. FORMATION AND BACKGROUND Dynatech Corporation was formed in 1959 and is a global communications equipment company focused on network technology solutions. The Company's operations are conducted primarily by wholly owned subsidiaries located principally in the United States with other operations, primarily sales offices, located in Europe and the Far East. The Company is managed in two business segments: communications test and inflight information systems. The communications test business, through the Company's TTC division, manufactures and markets a broad range of communications test solutions used in the planning, deploying, provisioning, manufacturing, managing and maintaining of communications equipment and networks. The inflight information systems segment, through the Company's AIRSHOW, Inc. subsidiary, provides passenger cabin video information display systems and information services for the general and commercial aviation markets. The Company also has other subsidiaries that, in the aggregate, are not reportable as a segment ("Other Subsidiaries"). These Other Subsidiaries include da Vinci Systems, Inc. which provides digital color enhancement systems used in the production of television commercials and programming; and Dataviews, Inc., which was sold in June 2000. In years prior to fiscal 2000 the Company's consolidated statements of income and the Other Subsidiaries section of Note S. Segment Information and Geographic Areas included the results of operations of two subsidiaries which have since been divested: ComCoTec, Inc. was sold in June 1998, and Parallax Graphics, which was liquidated during fiscal 1999. The Company operates on a fiscal year ended March 31 in the calendar year indicated (e.g., references to fiscal 2000 are references to the Company's fiscal year which began April 1, 1999 and ended March 31, 2000). B. DISCONTINUED OPERATIONS In May 2000, the Board of Directors approved a plan to divest the industrial computing and communications segment, which consists of ICS Advent and Itronix Corporation subsidiaries. In connection with its decision, the Board authorized management to retain one or more investment banks to assist the Company with respect to the divestiture. The segment's results of operations including net sales, operating costs and expenses, other income and expense and income taxes for fiscal 1998, 1999 and 2000, have been reclassified in the accompanying statements of operations as discontinued operations. The Company's balance sheet for fiscal 2000 reflects the net assets of the industrial computing and communications segment as net assets held for sale within non-current assets. The balance sheet for fiscal 1999 and the Statements of Cash Flows for fiscal years 1998, 1999 and 2000 have not been reclassified for the discontinued businesses. Management believes that the net proceeds from the disposition of these companies will exceed the carrying amount of the net assets. In addition, management does not anticipate net operating losses from the discontinued segment through the first quarter of fiscal 2002, at which time the Company anticipates to have sold these businesses. Accordingly, the anticipated gains from the disposal of the segment and the operating results will not be reflected in the statements of operations until they are realized. C-7 DYNATECH CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Summary operating results and balance sheet information of the discontinued operations are as follows:
2000 1999 1998 -------- -------- -------- (Amounts in thousands) Sales........................................... $203,361 $193,322 $154,993 Operating income................................ 21,304 18,638 6,036 Net income...................................... 12,726 11,979 3,489 Accounts receivable, net........................ 23,524 Inventories..................................... 28,453 Intangible assets, net.......................... 62,464 Accounts payable................................ (20,054) Deferred revenue................................ (28,812) Other, net...................................... 7,026
C. RECAPITALIZATION On May 21, 1998, CDRD Merger Corporation, a nonsubstantive transitory merger vehicle, which was organized at the direction of Clayton, Dubilier & Rice, Inc. ("CDR"), a private investment firm, was merged with and into the Company (the "Recapitalization" or the "Transaction") with the Company continuing as the surviving corporation. In the Recapitalization, (1) each then outstanding share of common stock, par value $0.20 per share, of the Company (the "Old Common Stock") was converted into the right to receive $47.75 in cash and 0.5 shares of common stock, no par value, of the Company (the "Common Stock") and (2) each then outstanding share of common stock of CDRD Merger Corporation was converted into one share of Common Stock. Upon consummation of the Recapitalization, Clayton, Dubilier & Rice Fund V Limited Partnership, an investment partnership managed by CDR ("CDR Fund V"), held approximately 91.8% of the Company's Common Stock and other shareholders held approximately 8.2% of the Common Stock. The Transaction was treated as a recapitalization for financial reporting purposes. Accordingly, the historical basis of the Company's assets and liabilities were not affected by these transactions. As of March 31, 2000, CDR Fund V holds approximately 90.5% of the Common Stock and other shareholders hold approximately 9.5% of the Common Stock. In connection with the Recapitalization, the Company incurred a charge of $40.8 million from continuing operations, for the cancellation payments of employee stock options and compensation expense due to the acceleration of unvested stock options, and $3.5 million for certain other expenses resulting from the Recapitalization, including employee termination expense. The Company incurred an additional $41.3 million in expenses, of which $27.3 million was capitalized and is being amortized over the life of the Senior Secured Credit Facilities and Senior Subordinated Notes. The remaining $14.0 million was charged directly to shareholders' equity. See Note K. Debt. Recapitalization and other related costs from continuing operations during fiscal 2000 totaled $27.9 million, most of which related to termination expenses of certain executives including the retirement of John F. Reno, former Chairman, President and Chief Executive Officer of the Company, as well as other employees. D. FINANCIAL POSITION OF DYNATECH CORPORATION AND DYNATECH LLC In connection with the Recapitalization and related transactions, Dynatech LLC (formerly known as Telecommunications Techniques Co., LLC), Dynatech Corporation's wholly owned subsidiary ("Dynatech C-8 DYNATECH CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) LLC"), became the primary obligor (and Dynatech Corporation, a guarantor) with respect to indebtedness of Dynatech Corporation, including the 9 3/4% Senior Subordinated Notes due 2008 (the "Senior Subordinated Notes") and the Senior Secured Credit Facilities referred to elsewhere in these Notes to the Consolidated Financial Statements. Dynatech Corporation has fully and unconditionally guaranteed the Senior Subordinated Notes. Dynatech Corporation, however, is a holding company with no independent operations and no significant assets other than its membership interest in Dynatech LLC. Accordingly, the condensed consolidated financial statements of Dynatech Corporation, presented in this report, are not materially different from those of Dynatech LLC. Management has not included separate financial statements of Dynatech LLC because management has determined that they would not be material to holders of the Senior Subordinated Notes or to the holders of Dynatech Corporation's common stock. Dynatech LLC is subject, under agreements governing its indebtedness, to prohibitions on its ability to make distributions to Dynatech Corporation (with limited exceptions) and other significant restrictions on its operations. See Note K. Debt. E. RELATED PARTY The Company paid an annual management fee to CDR totaling $0.5 million each in fiscal 2000 and in fiscal 1999. In return for the annual management fee, CDR provides management and financial consulting services to the Company and its subsidiaries. On May 19, 1999, Ned C. Lautenbach, a principal of CDR, became the Company's Chairman, President and Chief Executive Officer. Mr. Lautenbach does not receive direct compensation from the Company for these services. However, his compensation for any services is covered in the above mentioned management agreement. F. CHANGE OF JURISDICTION OF INCORPORATION On September 8, 1999 the shareholders of the Company approved a proposal to change the jurisdiction of incorporation of the Company from the Commonwealth of Massachusetts to the State of Delaware and the jurisdiction of incorporation changed effective on such date. The common stock of the Company, issued when it was incorporated under the laws of the Commonwealth of Massachusetts, had no par value per share. Therefore, the Company did not reflect a value for the common stock on the balance sheet. The common stock issued under the laws of the State of Delaware has a par value of $0.01 per share, and the consolidated balance sheet reflects a reclassification from additional paid-in capital of $1,214 (representing the par value of 121,408,993 outstanding shares at September 30, 1999). G. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation. The consolidated financial statements include the accounts of the parent company and its wholly owned domestic and international subsidiaries. Intercompany accounts and transactions have been eliminated. Certain prior year amounts have been reclassified to conform to the current year. Use of Estimates. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make certain estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. C-9 DYNATECH CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Significant estimates in these financial statements include allowances for accounts receivable, net realizable value of inventories, tax valuation reserves, nonrecurring charges, and the carrying values of discontinued operations. Actual results could differ from those estimates. Fair Value of Financial Instruments. The fair value of cash and cash equivalents, accounts receivable and accounts payable approximated book value at March 31, 2000 and 1999. Other financial instruments include debt and interest rate swaps. See Note K. Debt and Note L. Interest Rate Swap Contracts. Concentration of Credit Risk. Financial instruments which potentially subject the Company to concentrations of credit risk consist primarily of cash investments, accounts receivable and interest rate swap contracts. The Company maintains its cash accounts primarily with one institution and places its cash investments in prime quality certificates of deposit, commercial paper, or mutual funds. Credit risk related to its accounts receivable are limited due to the large number of customers and their dispersion across many business and geographic areas. However, a significant amount of trade receivables are with customers within the telecommunications industry. The Company extends credit to its customers based upon an evaluation of the customer's financial condition and credit history and generally does not require collateral. The Company has historically incurred insignificant credit losses. In fiscal 2000 the Company provided approximately $0.6 million for doubtful accounts ($0.5 million in fiscal 1999 and $0.4 million in fiscal 1998). The Company's counterparties to the agreements relating to the Company's investments and interest rate swap contracts consist of various major corporations and financial institutions of high credit standing. The Company does not believe there is significant risk of non-performance by these counterparties. Cash Equivalents. Cash equivalents represent highly liquid debt instruments with an original maturity of three months or less at the time of purchase. Inventories. Inventories are stated at the lower of cost (first-in, first-out) or market, not in excess of net realizable value. Property, Plant and Equipment. Property, plant and equipment is principally recorded at cost and depreciated on a straight-line basis over the estimated useful lives of the assets as follows: Buildings............................................ 30 years Leasehold improvements............................... Remaining life of lease Machinery and equipment.............................. 7 to 10 years Furniture and fixtures............................... 5 years Computer software/hardware........................... 3 years Tooling.............................................. 3 years Vehicles............................................. 3 years
Maintenance and repairs' expenditures are expensed when incurred. When a fixed asset is disposed of, the cost of the asset and any related accumulated depreciation is written off and any gain or loss is recognized. Intangible Assets. Intangible assets consist primarily of goodwill and product technology acquired in business combinations. The excess of cost over the fair market value of net assets (goodwill) is amortized C-10 DYNATECH CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) on a straight-line basis over 3 to 30 years. Product technology and other intangible assets are amortized on a straight-line basis primarily over 2 to 10 years, but in no event longer than their expected useful lives. Amortization expense from continuing operations related to product technology was $1.6 million in fiscal 2000, $1.5 million in fiscal 1999 and $1.5 million in fiscal 1998, and was excluded from cost of sales. Amortization expense from continuing operations related to goodwill was $8.8 million in fiscal 2000, $2.7 million in fiscal 1999, and $2.4 million in fiscal 1998. Long-Lived Assets. The Company periodically evaluates the recoverability of long-lived assets, including intangibles, whenever events and changes in circumstances indicate that carrying amount of an asset may not be fully recoverable. When indicators of impairment are present, the carrying values of the assets are evaluated in relation to the operating performance and future undiscounted cash flows of the underlying business. The net book value of the underlying assets is adjusted to fair value if the sum of the expected undiscounted cash flows is less than book value. Fair values are based on quoted market prices and assumptions concerning the amount and timing of estimated future cash flows and assumed discount rates, reflecting varying degrees of perceived risk. Deferred Debt Issuance Costs. In connection with the Recapitalization, the Company incurred financing fees that are being amortized over the life of the Senior Secured Credit Facilities and Senior Subordinated Notes. See Note K. Debt and Note R. Subsequent Events. Other Comprehensive Income (Loss). The functional currency for the majority of the Company's foreign operations is the applicable local currency. The translation from the local foreign currencies to U.S. dollars is performed for balance sheet accounts using the exchange rates in effect at the balance sheet date and for revenue and expense accounts using a weighted average exchange rate during the period. The unrealized gains or losses resulting from such translation are included in shareholders' equity (deficit). The realized gains or losses resulting from foreign currency transactions are included in other income. Other comprehensive income (loss) which is shown in the Statement of Shareholders' Equity (Deficit) consists only of foreign currency translation adjustments. Stock-Based Compensation. In 1996 the Financial Accounting Standards Board issued Statement No. 123 "Accounting for Stock-Based Compensation" ("FAS 123"), which prescribes the recognition of compensation expense based on the fair value of options on the grant date using the Black-Scholes valuation model with compensation costs recognized ratably over the vesting period. The Company has elected footnote disclosure only. See Note O. Stock-Based Compensation. Unearned Compensation. Since the time of the Recapitalization, the Company has issued non-qualified stock options to primarily all employees and non-employee directors at an exercise price equal to the fair market value as determined by the Company's board of directors. This price may or may not be equal to the trading price on the open market on the dates of the grants. During fiscal 1999, the Company granted non-qualified stock options to certain key employees to purchase 14.3 million shares of common stock at a price lower than the closing market price. The Company recorded a charge of $9.1 million within shareholder's deficit (under the caption "unearned compensation") related to the difference between the market price and the grant price. This unearned compensation is being charged to expense over a five-year vesting period and is recorded in cost of sales, selling, general and administrative expense, and product development expense as appropriate. During fiscal 1999 the amortization of unearned compensation was $1.2 million for continued operations and $0.3 million related to discontinued operations, all of which related to stock option grants during fiscal years 2000 and 1999. During fiscal 2000 the Company granted non-qualified stock options to primarily all employees and non-employee directors to purchase 4.3 million shares of common stock at a price lower than the trading C-11 DYNATECH CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) price on the open market. The Company incurred a charge of approximately $13.0 million for the difference between the market price and the fair market value as determined by the Board of Directors and recorded this unearned compensation within shareholders' deficit. This charge will be amortized over the options' vesting periods. During fiscal 2000 the amortization of unearned compensation was $1.9 million for continuing operations and $0.5 million for discontinued operations. The Company adjusts unearned compensation for employees and non-employee directors who have terminated employment with the Company whose options, which were granted at an exercise price lower than the trading price on the open market, were not fully vested at the time of departure. The adjustment reverses any amortization recognized for unvested options and eliminates any remaining unearned compensation. Revenue Recognition. The Company generally recognizes revenue from product sales upon shipment provided that (1) the shipping terms of the arrangement allow for recognizing revenue upon shipment (products sold with destination terms are recognized upon delivery), (2) no significant post- delivery obligations remain (including installation and acceptance), and (3) collection of the resulting receivable is reasonably assured. When significant post-delivery obligations exist, revenue is deferred until such obligations are fulfilled. The Company accrues for warranty costs, sales returns, and other allowances at the time of shipment based on its experience. Software development and consulting services are recognized when rendered based on contractual arrangements that allow for revenue and billing as actual time and costs are incurred. Service revenue is recognized over the contractual period or as services are rendered. In transactions that include multiple products and/or services, the Company allocates the sales value among each of the deliverables based on their relative fair values. Product Development Expense. Costs relating to research and development are expensed as incurred. Internal software development costs that qualify for capitalization are not significant. Warranty Costs. The Company generally warrants its products for one to three years after delivery. A provision for estimated warranty costs is recorded at the time revenue is recognized. Interest Rate Swap Contracts. The Company uses interest rate swap contracts to effectively fix a portion of its variable rate Term Loan Facility to a fixed rate to reduce the impact of interest rate changes on future income. The Company does not hold or issue financial instruments for trading or speculative purposes. The differential to be paid or received under these agreements is recognized within interest expense. See Note L. Interest Rate Swap Contracts. Income Taxes. Deferred tax liabilities and assets are recognized for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between the tax bases of assets and liabilities and their reported amounts using enacted tax rates in effect for the year in which the differences are expected to reverse. See Note M. Income Taxes. Tax credits are generally recognized as reductions of income tax provisions in the year in which the credits arise. The Company does not provide for U.S. income tax liability on undistributed earnings of its foreign subsidiaries. The earnings of non- U.S. subsidiaries, which reflect full provision for non-U.S. income taxes, are indefinitely reinvested in non-U.S. operations. Accordingly, no provision has been made for taxes that might be payable upon remittance of such non-U.S. earnings. C-12 DYNATECH CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) New Pronouncements In December 1999 the Securities and Exchange Commission issued Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB 101"). SAB 101 summarizes the staff's view in applying generally accepted accounting principles to selected revenue recognition issues. The application of the guidance in SAB 101 will be required in the Company's quarter ended June 30, 2000. The Company has evaluated the application of SAB 101 based on the current guidance and interpretations and has determined that it will not have a significant impact. In March 2000, the Financial Accounting Standards Board issued Financial Accounting Standards Board Interpretation No. 44, "Accounting for Certain Transactions Involving Stock Compensation--an interpretation of APB Opinion No. 25" ("FIN 44"). FIN 44 clarifies the application of APB Opinion No. 25 and among other issues clarifies the following: the definition of an employee for purposes of applying APB Opinion No. 25; the criteria for determining whether a plan qualifies as a noncompensatory plan; the accounting consequence of various modifications to the terms of previously fixed stock options or awards; and the accounting for an exchange of stock compensation awards in a business combination. FIN 44 is effective July 1, 2000, but certain conclusions in FIN 44 cover specific events that occurred after either December 15, 1998 or January 12, 2000. The Company does not expect the application of FIN 44 to have a material impact on results of operations and financial position. On June 15, 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for Derivative Instruments and Hedging Activities". SFAS 133 was amended by Statement of Financial Accounting Standards No. 137 which modified the effective date of SFAS 133 to all fiscal quarters of all fiscal years beginning after June 15, 2000. SFAS 133, as amended, requires that all derivative instruments be recorded on the balance sheet at their fair value. Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction. The Company is assessing the impact of the adoption of SFAS 133 on its results of operations and financial position. H. ACQUISITIONS AND DIVESTITURES ACQUISITIONS Pacific Systems Corporation On June 19, 1998, the Company, through one of its indirectly wholly owned subsidiaries, acquired all of the outstanding stock of Pacific Systems Corporation of Kirkland, Washington ("Pacific") for a total purchase price of approximately $20 million in cash, which includes an incentive earnout. The acquisition was accounted for using the purchase method of accounting and resulted in $18.0 million of goodwill that is being amortized on a straight-line basis over 30 years. The operating results of Pacific have been included in Dynatech's consolidated financial statements within the inflight information systems segment since June 19, 1998. Pacific designs and manufactures customer-specified avionics and integrated cabin management. Flight TECH In February 1999, the Company, through one of its wholly owned subsidiaries, acquired Flight TECH of Hillsboro, Oregon for $2 million in cash. The acquisition was accounted for using the purchase method of accounting and resulted in approximately $1.9 million of goodwill that is being amortized on a straight-line basis over 30 years. The operating results of Flight TECH have been included in the Company's financial statements since February 1999 within the inflight information systems segment. Flight TECH is C-13 DYNATECH CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) an inflight entertainment manufacturer specializing in equipment for small and medium jets, and turboprop aircraft. Sierra Design Labs On September 10, 1999, the Company, through one of its wholly owned subsidiaries, purchased the outstanding stock of Sierra Design Labs ("Sierra"), a Nevada Corporation for a total purchase price of $6.3 million in cash. The acquisition was accounted for using the purchase method of accounting and resulted in $4.9 million of goodwill that is being amortized on a straight-line basis over 10 years. The operating results of Sierra have been included in the Company's consolidated financial statements within Other Subsidiaries as presented in Note S. Segment Information and Geographic Areas since September 10, 1999. Sierra designs, manufactures, and markets uncompressed, real-time videodisk recorders. Applied Digital Access, Inc. On November 1, 1999, the Company, through one of its wholly owned subsidiaries, acquired all the outstanding stock of Applied Digital Access, Inc. ("ADA") for a total purchase price of approximately $81 million in cash, (of which $60 million was borrowed to finance this acquisition). The acquisition was accounted for using the purchase method of accounting and resulted in $36 million of goodwill that is being amortized on a straight- line basis over 3 years. The purchase price allocation for this acquisition is preliminary and further refinements are likely to be made based on the completion of final valuation studies and the Company's analysis of its business plan of integration. The operating results of ADA have been included in the Company's consolidated financial statements within the communications test segment since November 1, 1999. ADA is a provider of network performance management products that include systems, software and services used to manage the quality, performance, availability and reliability of telecommunications service providers' networks. ICS Advent (Europe) Ltd. On January 4, 2000, the Company purchased the remaining outstanding stock of ICS Advent (Europe) Ltd. ("ICS UK") for (Pounds)3.0 million (approximately $4.9 million) in cash. The Company previously owned approximately 25% of ICS UK. The acquisition was accounted for using the purchase method of accounting and generated approximately $4.0 million of goodwill that is being amortized on a straight-line basis over 5 years. The operating results of ICS UK have been included in the Company's financial statements presented within discontinued operations, since January 1, 2000. The Company intends to sell this acquired company in connection with the sale of the other business units within discontinued operations within the next year. ICS UK is primarily a distributor of mission-critical computer systems to the defense, factory-automation, data and telecommunications markets within Europe as well as a distributor of rack-mounted computers supplied by the Company's ICS Advent subsidiary. WPI Husky Technology, Inc., WPI Oyster Termiflex Limited, WPI Husky Technology Limited and WPI Husky Technology GmbH On February 24, 2000, the Company, through one of its wholly owned subsidiaries, purchased certain assets and liabilities of WPI Husky Technology, Inc., and WPI Oyster Termiflex Limited, and the stock of WPI Husky Technology Limited and WPI Husky Technology GmbH (collectively "Itronix UK") all which were subsidiaries of WPI, Inc. The total purchase price for Itronix UK totaled approximately $34.8 million in cash (of which approximately $15 million was borrowed to finance this acquisition). The acquisition was accounted for using the purchase method of accounting and resulted in approximately $30 million of goodwill that is being amortized on a straight-line basis over 5 years. The purchase price allocation for this C-14 DYNATECH CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) acquisition is preliminary and further refinements are likely to be made based on the completion of final valuation studies and the Company's analysis of its business plan of integration. The operating results of Itronix UK have been included in the Company's consolidated financial statements presented within discontinued operations since February 23, 2000. The Company intends to sell this acquired company in connection with the sale of the other business units within discontinued operations within the next year. Itronix UK distributes rugged field computer systems including the provision of related services for incorporation into customers' specific applications. The goodwill generated from these acquisitions was calculated based on the purchase price less the net assets acquired, as follows:
2000 1999 -------- ------- Total purchase price...................................... $126,891 $22,000 -------- ------- Less net assets acquired: Cash.................................................... 13,664 385 Accounts receivable..................................... 12,638 2,058 Inventories............................................. 19,684 1,865 Deferred tax asset...................................... 20,099 (46) Other assets............................................ 11,949 1,914 Notes payable........................................... (124) (2,221) Accounts payable........................................ (11,686) (575) Accrued liabilities..................................... (14,431) (872) Long-term debt.......................................... (139) (238) -------- ------- 51,654 2,270 -------- ------- Goodwill.................................................. $ 75,237 $19,730 ======== =======
The following unaudited pro forma information presents a summary of consolidated results of operations of the Company as if the acquisitions had occurred at the beginning of the fiscal year presented, with pro forma adjustments to give effect to amortization of goodwill and intangibles, interest expense on acquisition debt, and certain other adjustments, together with related income tax effect. These pro forma amounts do not purport to be indicative of the results that would have actually been obtained if the acquisitions had occurred as of the beginning of the periods presented, or that may be obtained in the future.
2000 1999 -------- -------- Revenue.................................................. $479,535 $369,389 Net loss from continuing operations...................... (14,687) (16,881) Loss per share from continuing operations: Basic.................................................. (0.10) (0.13) Diluted................................................ (0.10) (0.13) Weighted average shares: Basic.................................................. 148,312 129,596 Diluted................................................ 148,312 129,596
DIVESTITURES ComCoTec, Inc. On June 30, 1998, the Company sold the assets of ComCoTec, Inc. ("ComCoTec") located in Lombard, Illinois to The Potomac Group, Inc. for $21 million. Dynatech recorded a pre-tax gain on $15.9 C-15 DYNATECH CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) million on the sale of the assets, which was included in other income. Sales and operating results were insignificant for the periods ended March 31, 1999 and 1998. Parallax, Inc. During fiscal year 1999, the Company liquidated the assets and liabilities of Parallax, Inc. ("Parallax"). The loss from the liquidation activities was immaterial. Sales and operating results were insignificant for the periods ended March 31, 1999 and 1998. I. INTANGIBLE ASSETS Intangible assets, acquired primarily from business acquisitions, are summarized as follows (See Note H. Acquisitions and Divestitures):
2000(a) 1999 ------- ------- (Amounts in thousands) Product technology.......................................... $ 9,236 $17,042 Goodwill.................................................... 67,328 55,878 Other intangible assets..................................... 4,177 13,307 ------- ------- 80,741 86,227 Less accumulated amortization............................... 22,233 29,459 ------- ------- Total..................................................... $58,508 $56,768 ======= =======
-------- (a) Balances as of March 31, 2000 reflect continuing operations only. C-16 DYNATECH CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) J. EARNINGS PER SHARE The computation for earnings per share is as follows:
2000 1999 1998 -------- -------- ------- Net income (loss): Continuing operations....................... $ (6,714) $ (5,534) $38,287 Discontinued operations..................... 12,726 11,979 3,489 -------- -------- ------- Net income.................................... $ 6,012 $ 6,445 $41,776 ======== ======== ======= BASIC: Common stock outstanding, net of treasury stock, beginning of period................... 120,665 16,864 16,793 Weighted average common stock and treasury stock issued during the period............... 886 104,331 144 Weighted average common stock and treasury stock repurchased............................ -- (14,983) (142) -------- -------- ------- 121,551 106,212 16,795 Bonus element adjustment related to rights offering..................................... 26,761 23,384 3,698 -------- -------- ------- Weighted average common stock outstanding, net of treasury stock, end of period............. 148,312 129,596 20,493 ======== ======== ======= Net income per common share: Continuing operations....................... $ (0.05) $ (0.04) $ 1.87 Discontinued operations..................... 0.09 0.09 0.17 -------- -------- ------- Net income per common share................... $ 0.04 $ 0.05 $ 2.04 ======== ======== ======= DILUTED: Common stock outstanding, net of treasury stock, beginning of period................... 120,665 16,871 16,803 Weighted average common stock and treasury stock issued during the period............... 886 104,324 134 Weighted average common stock equivalents..... -- -- 639 Weighted average common stock and treasury stock repurchased............................ -- (14,983) (142) -------- -------- ------- 121,551 106,212 17,434 Bonus element adjustment related to rights offering..................................... 26,761 23,384 3,838 -------- -------- ------- Weighted average common stock outstanding, net of treasury stock, end of period............. 148,312 129,596 21,272 ======== ======== ======= Net income per common share: Continuing operations....................... $ (0.05) $ (0.04) $ 1.80 Discontinued operations..................... 0.09 0.09 0.16 -------- -------- ------- Net income per common share................... $ 0.04 $ 0.05 $ 1.96 ======== ======== =======
On May 23, 2000 in connection with the Wavetek Wandel Goltermann merger, the Company issued 12.5 million and 30.625 million shares of common stock to CDR, CDR Fund V and Clayton, Dubilier & Rice Limited Partnership, an investment partnership managed by CDR ("CDR Fund VI"), respectively at a price of $4.00 per share. See Note R. Subsequent Events. In order to reverse the diminution of all other common shareholders as a result of shares issued in connection with the WWG Merger, the Company granted a rights offering to all its common stock shareholders (including CDR Fund V) of record on C-17 DYNATECH CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) April 20, 2000 (the "Offering"). CDR elected to waive its right to participate in this Offering. Thus, 4,983,000 shares of common stock are covered under the Offering to shareholders other than CDR. As a result of these transactions, the Company has effectively granted a right to all shareholders to purchase 4,983,000 shares of common stock at a price of $4.00 per share. The closing trading price of the common stock on May 22, 2000, immediately prior to the sale of the common stock to CDR, was $11.25. For purposes of calculating weighted average shares and earnings per share, the Company has treated the sale of common stock to CDR and the anticipated sale of common stock to all other shareholders as a rights offer. Since the common stock has been offered to all shareholders at a price that is less than that of the market trading price (the "bonus element"), a retroactive adjustment of 1.22 per share has been made to weighted average shares to consider this bonus element. In fiscal 2000 and 1999 the Company excluded from its diluted weighted average shares outstanding the effect of the weighted average common stock equivalents (11.4 million in fiscal 2000 and 5.3 million in fiscal 1999) as the Company incurred a net loss from continuing operations. The common stock equivalents has been excluded from the calculation of diluted weighted average shares outstanding as inclusion would result in an antidilutive effect on net loss per common share from continuing operations. K. DEBT Long-term debt is summarized below:
2000 1999 -------- -------- (Amounts in thousands) Senior secured credit facilities.......................... $304,861 $252,000 Senior subordinated notes................................. 275,000 275,000 Capital lease obligations(a).............................. 73 342 -------- -------- Total debt.............................................. 579,934 527,342 -------- -------- Less current portion...................................... 7,646 23,191 -------- -------- Long-term debt.......................................... $572,288 $504,151 ======== ========
-------- (a) Balances as of March 31, 2000 reflect debt from continuing operations only. The book value of the debt under the Senior Secured Credit Facilities represent fair market value at March 31, 2000 and 1999. The fair market value of the Senior Subordinated Notes was $250.3 million and $274.3 million at March 31, 2000 and 1999, respectively. Senior Secured Credit Facilities In connection with the Recapitalization, the Company entered into a senior secured credit agreement (the "Senior Secured Credit Agreement") consisting of a $260 million term loan facility (the "Term Loan Facility") and a $110 million revolving credit facility (the "Revolving Credit Facility") (collectively, the "Senior Secured Credit Facilities"). In addition, the Company incurred $275 million of debt through the sale of its 9 3/4% Senior Subordinated Notes (the "Senior Subordinated Notes"). In connection with the Recapitalization and related transactions, Dynatech LLC became the primary obligor with respect to the Senior Secured Credit Facility and the Senior Subordinated Notes. See Note F. Financial Position of Dynatech Corporation and Dynatech LLC. Dynatech Corporation has guaranteed the Senior Secured Credit Facilities and the Senior Subordinated Notes. C-18 DYNATECH CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Principal and interest payments under the new Senior Secured Credit Agreement and interest payments on the Senior Subordinated Notes represent significant liquidity requirements for the Company. With respect to the $260 million initially borrowed under the Term Loan Facility (which is divided into four tranches, each of which has a different term and repayment schedule), the Company is required to make scheduled principal payments of the $50 million Tranche A Term Loan thereunder during its six- year term, with substantial amortization of the $70 million Tranche B Term Loan, $70 million Tranche C Term Loan and $70 million Tranche D Term Loan thereunder occurring after six, seven and eight years, respectively. The $275 million of Senior Subordinated Notes will mature in 2008, and bear interest at 9 3/4% per annum. The Senior Secured Credit Facilities are subject to mandatory prepayments and reductions in an amount equal to, subject to certain exceptions, (a) 100% of the net proceeds of (1) certain debt offerings by the Company and any of its subsidiaries, (2) certain asset sales or other dispositions by the Company or any of its subsidiaries, and (3) property insurance or condemnation awards received by the Company or any of its subsidiaries, and (b) 50% of the Company's excess cash flow (the "Recapture") (as defined in the Senior Secured Credit Agreement) for each fiscal year in which the Company exceeds a certain leverage ratio. The Senior Subordinated Notes are subject to certain mandatory prepayments under certain circumstances. During fiscal 2000 the Company was required, under the terms of the Recapture, to repay $15 million in Term Loan borrowings on June 30, 1999. The Company elected to use the $15 million in part to prepay the mandatory $8 million amortization due in fiscal 2000. Based on the Recapture calculation at March 31, 2000, the Company will not be required to make an additional mandatory principal reduction during fiscal 2001 based on the excess cash flow calculation at March 31, 2000. During fiscal 1999 the Company repaid $8 million of mandatory principal payments and repaid $40 million of indebtedness under its $110 million Revolving Credit Facility. The loans under the Senior Secured Credit Agreement bear interest at floating rates based upon the interest rate option elected by the Company. The Company's weighted-average interest rate on the loans under the Senior Credit Agreement was 7.85% per annum for fiscal 2000. The Company has entered into interest rate swaps which are effective for periods ranging from two to three years beginning September 30, 1998 to fix the interest charged on a portion of the total debt outstanding under the Term Loan Facility. After giving effects to these arrangements, approximately $220 million of the debt outstanding is subject to an effective average annual fixed rate of 5.66% (plus an applicable margin). The terms of one interest rate swap contract provide upon termination for a one-year option to renew 50% of the notional amount at the discretion of the lender. See Note L. Interest Rate Swap Contracts. At March 31, 2000, the Company had $70 million in borrowings outstanding and $40 million undrawn under the Revolving Credit Facility. The Revolving Credit Facility matures in 2004, with all amounts then outstanding becoming due. The Company expects that its working capital needs will require it to obtain new revolving credit facilities at the time that the Revolving Credit Facility matures, by extending, renewing, replacing or otherwise refinancing the Revolving Credit Facility. No assurance can be given that any such extension, renewal, replacement or refinancing can be successfully accomplished or accomplished on acceptable terms. The mandatory repayment schedule of the Senior Secured Credit Facilities and the Senior Subordinated Notes over the next five years and thereafter is as follows: $8.0 million in fiscal 2001, $11.5 million in fiscal 2002, $14.5 million in fiscal 2003, $82.7 million in fiscal 2004, $64.7 million in fiscal 2005, and $398.5 million in fiscal years subsequent to fiscal 2005. The Company is also required, under the terms of the Senior Secured Credit Facility, to pay a commitment fee based on the unused amount of the revolving credit facility. The rate is an annual rate, C-19 DYNATECH CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) paid quarterly, and ranges from 0.30% to 0.50%, and is based on the Company's leverage ratio in effect at the beginning of the quarter. The Company paid $0.3 million and $0.4 million in fiscal 2000 and 1999, respectively, in commitment fees. Covenant Restrictions. The Senior Secured Credit Agreement imposes restrictions on the ability of the Company to make capital expenditures, and both the Senior Secured Credit Facilities and the indenture governing the Senior Subordinated Notes limit the Company's ability to incur additional indebtedness. The covenants contained in the Senior Secured Credit Agreement also, among other things, restrict the ability of the Company and its subsidiaries to dispose of assets, incur guarantee obligations, prepay other indebtedness, make restricted payments, create liens, make equity or debt investments, make acquisitions, modify terms of the indenture governing the Senior Subordinated Notes, engage in mergers or consolidations, change the business conducted by the Company and its subsidiaries taken as a whole or engage in certain transactions with affiliates. These restrictions, among other things, preclude Dynatech LLC from distributing assets to Dynatech Corporation (which has no independent operations and no significant assets other than its membership interest in Dynatech LLC), except in limited circumstances. In addition, under the Senior Secured Credit Agreement, the Company is required to comply with a minimum interest expense coverage ratio and a maximum leverage ratio. These financial tests become more restrictive in future years. The term loans under the Senior Secured Credit Facilities (other than the $50 million Tranche A Term Loan) are governed by negative covenants that are substantially similar to the negative covenants contained in the indenture governing the Senior Subordinated Notes, which also impose restrictions on the operation of the Company's business. On May 23, 2000 the Company entered into a new credit facility in connection with the acquisition of Wavetek Wandel Goltermann. See Note R. Subsequent Events. Senior Subordinated Notes The Senior Subordinated Notes due 2008 will not be redeemable at the option of the Company prior to May 15, 2003 unless a change of control occurs. Should that happen, the Company may redeem the Notes in whole, but not in part, at a price equal to 100% of the principal amount plus the greater of (1) 1.0% of the principal amount of such Note and (2) the excess of (a) the present value of (i) redemption price of such Note plus (ii) all required remaining scheduled interest payments due on such Note through May 15, 2003, over (b) principal amount of such Note on the redemption date. Except as noted above, the Notes are redeemable at the Company's option, in whole or in part, anytime on and after May 15, 2003, and prior to maturity at the following redemption prices:
Redemption Period Price ------ ---------- 2003.............................................................. 104.875% 2004.............................................................. 103.250% 2005.............................................................. 101.625% 2006 and thereafter............................................... 100.000%
L. INTEREST RATE SWAP CONTRACTS The Company uses interest rate swap contracts to effectively fix a portion of its variable rate Term Loan Facility to a fixed rate in order to reduce the impact of interest rate changes on future income. The differential to be paid or received under these agreements is recognized as an adjustment to interest expense C-20 DYNATECH CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) related to the debt. At March 31, 2000 the Company had three interest rate swap contracts in which the Company pays a fixed interest rate and the Company receives a three-month LIBOR interest rate.
Fixed Swap Notional Interest Market No. Amount Term Rate Valuation ---- -------- ---- -------- --------- (Amounts in thousands) 1 $ 25,000 October 16, 1998--October 16, 2000 4.715% $ 307 2 $ 65,000 September 30, 1998--September 30, 2001 5.845% $1,003 3* $130,000 September 30, 1998--September 30, 2001 5.755% $1,980
-------- * This interest rate swap agreement has a one-year option to renew for 50% of the notional amount ($65 million) at the discretion of the lender. During fiscal 2000 and 1999, the Company recognized interest expense from the swap contracts of $0.4 million and $0.5 million, respectively. The valuations of derivatives transactions are indicative values based on mid-market levels as of the close of business of the date they are provided. These valuations are provided for information purposes only and do not represent (1) the actual terms at which new transactions could be entered into, (2) the actual terms at which existing transactions could be liquidated or unwound, or (3) the calculation or estimate of an amount that would be payable following the early termination of any master trading agreement to which the Company is a party to. The provided valuations of derivatives transactions are derived from proprietary models based upon well-recognized financial principles and reasonable estimates about relevant future market conditions. The valuations set forth above indicate a net payment from the financial institution to the Company. This valuation reflects a payment to the Company since the fixed interest rates in the contracts is less than the three-month LIBOR interest rate at March 31, 2000. M. INCOME TAXES The components of income (loss) from continuing operations before taxes are as follows:
2000 1999 1998 ------- ------- ------- (Amounts in thousands) Domestic........................................... $(8,645) $(5,398) $63,376 Foreign............................................ 762 (205) 1,432 ------- ------- ------- Total............................................ $(7,883) $(5,603) $64,808 ======= ======= =======
The components of the provision (benefit) for income taxes from continuing operations are as follows:
2000 1999 1998 ------- ----- ------- (Amounts in thousands) Provision for income taxes: United States..................................... $(1,334) $(469) $20,824 Foreign........................................... 213 (125) 327 State............................................. (48) 525 5,370 ------- ----- ------- Total........................................... $(1,169) $ (69) $26,521 ======= ===== =======
C-21 DYNATECH CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The components of the income tax provision are as follows:
2000 1999 1998 ------- ------ ------- Current: Federal.......................................... $ 346 $5,435 $18,847 Foreign.......................................... 213 (125) (978) State............................................ 84 142 5,567 ------- ------ ------- Total Current.................................. 643 5,452 23,436 ------- ------ ------- Deferred: Federal.......................................... (1,680) (5,904) 1,976 Foreign.......................................... -- -- 1,305 State............................................ (132) 383 (196) ------- ------ ------- Total deferred................................. (1,812) (5,521) 3,085 ------- ------ ------- Total.......................................... $(1,169) $ (69) $26,521 ======= ====== =======
Reconciliations between U.S. federal statutory rate and the effective tax rate of continuing operations follow:
2000 1999 1998 ------ ------ ---- Tax at U.S. federal statutory rate.................... (35.0)% (35.0)% 35.0% Increases (reductions) to statutory tax rate resulting from: Foreign income subject to tax at a rate different than U.S. rate..................................... (2.9) 8.3 0.6 State income taxes, net of federal income tax benefit............................................ (0.4) 6.1 5.4 Research and development tax credit................. -- -- (1.4) Nondeductible amortization.......................... 31.7 7.6 0.5 Nondeductible compensation.......................... 1.4 13.9 -- Foreign sales corporation tax benefit............... (12.1) (14.2) (.7) Non-deductible meals and entertainment expenses..... 4.0 4.1 0.5 Other............................................... (1.6) 8.0 1.0 ------ ------ ---- Effective tax rate before certain charges......... (14.9)% (1.2)% 40.9% ====== ====== ====
C-22 DYNATECH CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The principal components of the deferred tax assets and liabilities follow:
2000 1999 ------- ------- (Amounts in thousands) Deferred tax assets: Corporate severance...................................... $ 2,567 $ 571 Net operating loss and credit carryforwards.............. 15,931 4,758 Vacation benefits........................................ 1,264 1,109 Depreciation and amortization............................ 23,979 16,349 Other accruals........................................... 4,328 8,174 Deferred revenue......................................... 9,797 6,705 Compensation related to stock options.................... 9,708 5,126 Other deferred assets.................................... 3,616 2,755 ------- ------- 71,190 45,547 Valuation allowance........................................ (5,681) (4,758) ------- ------- 65,509 40,789 Deferred tax liabilities: Depreciation and amortization............................ 256 -- Other deferred liabilities............................... 1,016 1,016 ------- ------- 1,272 1,016 ------- ------- Net deferred tax assets.................................... $64,237 $39,773 ======= =======
The valuation allowance applies to state and foreign net operating loss carryforwards that may not be fully utilized by the Company. The increase in the valuation reserve relates to the net increase in these loss carryforwards. On March 31, 2000, the Company had foreign and state net operating loss carryforwards of $8.5 million and $43.8 million, respectively. The foreign loss carryforwards begin to expire in the year ending March 31, 2003, and the state net operating losses begin to expire in the year ending March 31, 2004. In addition, as a result of certain acquisitions, the Company had at March 31, 2000, U.S. federal net operating loss carryforwards of approximately $19.8 million and $2.8 million of research credits, which begin to expire in the years ending March 31, 2006 and March 31, 2003, respectively. The utilization of these carryforwards is subject to a yearly limitation of approximately $4 million under Internal Revenue Code Section 382. The realization of the remaining net deferred tax assets is considered more likely than not. U.S. income taxes have not been provided for unremitted foreign earnings of approximately $13.8 million. These earnings are considered to be permanently invested in non-U.S. operations. The residual U.S. tax liability, if such amounts were remitted, would be approximately $2.4 million. N. EMPLOYEE RETIREMENT PLANS The Company has a trusteed employee 401(k) savings plan for eligible U.S. employees. The Plan does not provide for stated benefits upon retirement. Employees outside the U.S. are covered principally by government-sponsored plans that are deferred contribution plans. The cost of Company-provided plans is not material. The Company has a nonqualified deferred compensation plan that permits certain key employees to annually elect to defer a portion of their compensation for their retirement. The amount of compensation C-23 DYNATECH CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) deferred and related investment earnings have been placed in an irrevocable rabbi trust and recorded within other assets in the Company's balance sheet, as this trust will be available to the general creditors of the Company in the event of the Company's insolvency. An offsetting deferred compensation liability, which equals the total value of the trust at March 31, 2000 and 1999 of $11.3 million and $5.1 million, respectively, reflect amounts due the key employees who contribute to the plan. The change in the valuation is due to employee contributions, the Company match on the contributions, and the change in the market valuation of the fund. Corporate contributions to employee retirement plans were $6.2 million in fiscal 2000, $4.9 million in fiscal 1999 and $4.5 million in fiscal 1998. O. STOCK-BASED COMPENSATION The Company maintains two Stock Option plans in which common stock is available for grant to key employees at prices not less than fair market value (110% of fair market value for employees holding more than 10% of the outstanding common stock) at the date of grant determined by the Board of Directors. Incentive or nonqualified options may be issued under the plans and are exercisable from one to ten years after grant. The Company maintains a third Stock Option plan in which common stock is available for grant to non-employee directors. Each eligible director is automatically granted a stock option to purchase 25,000 shares of stock when he or she is first elected to the Board of Directors. Stock options for all three plans vest primarily between three and five years. At the time of the Recapitalization, primarily all Company stock options became fully vested and exercisable. Any Company stock option that was outstanding immediately prior to the effective time of the Recapitalization was cancelled and each holder received an option cancellation payment. Stock options held by certain key executives were converted into equivalent options to purchase shares of Common Stock and were not cancelled. A summary of activity in the Company's option plans is as follows:
2000 1999 1998 Weighted Weighted Weighted Average Average Average 2000 Exercise 1999 Exercise 1998 Exercise Shares Price Shares Price Shares Price ---------- -------- ---------- -------- --------- -------- Shares under option, beginning of year...... 33,903,244 $1.85 2,135,719 $26.33 1,770,560 $21.87 Impact of converting shares on date of Recapitalization....... -- 18,479,093 Options granted (at an exercise price of $3.25 to $4.00 in 2000, $2.50 to $3.187 in 1999 and $35 to $44 in 1998).... 9,537,781 3.29 16,439,511 2.54 634,800 36.25 Options exercised....... (1,194,318) 1.24 (860,120) 15.15 (148,941) 17.20 Options canceled........ (8,862,596) 1.36 (2,290,959) 9.68 (120,700) 24.26 ---------- ---------- --------- Shares under option, end of year................ 33,384,111 $2.40 33,903,244 $ 1.85 2,135,719 $26.33 ========== ========== ========= Shares exercisable...... 13,178,441 $1.66 18,420,794 $ 1.30 512,999 $18.79
As of March 31, 2000 and 1999, the Company issued approximately 4.3 million and 14.3 million stock options, respectively, at a weighted-average exercise price of $3.33 and $2.50, respectively, which was C-24 DYNATECH CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) below the quoted market price on the day of grant. Options available for future grants under the plans were 3.9 million, 4.2 million and 497 thousand at March 31, 2000, 1999, and 1998, respectively. The following table summarizes information about currently outstanding and exercisable stock options at March 31, 2000:
Weighted Number of Average Weighted Options Remaining Average Outstanding Contractual Exercise Range of Exercise Price At 3/31/00 Life Price ----------------------- ----------- ----------- -------- $0.00 - $1.00............................... 2,563,680 4.800 .775 $1.00 - $2.00............................... 7,753,303 6.558 1.634 $2.00 - $3.00............................... 12,892,247 8.159 2.497 $3.00 - $4.00............................... 10,174,881 9.448 3.284 ---------- Total..................................... 33,384,111 7.922 2.404 ==========
The fair market value of each option granted during 2000, 1999, and 1998 is estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions:
2000 1999 1998 ------ ------ ------ Expected volatility.................................. 70.00% 45.00% 40.00% Risk-free rate of return............................. 6.13% 5.38% 6.00% Expected life (in years)............................. 5 yrs 5 yrs 5 yrs Weighted average fair value.......................... $3.274 $1.673 $19.20 Dividend yield....................................... 0.00% 0.00% 0.00%
Had compensation cost for the Company's stock-based compensation plans been recorded based on the fair value of awards or grant date consistent with the method prescribed by Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation", the Company's net income and earnings per share would approximate the pro forma amounts indicated below:
2000 1999 1998 As Pro As Pro As Pro Reported Forma Reported Forma Reported Forma -------- ------ -------- ------- -------- ------- (Amounts in thousands except per share) Net income............... $6,012 $2,579 $6,445 $(7,510) $41,776 $38,441 Net income per share: Basic.................. $ 0.04 $ 0.02 $ 0.05 $ (0.06) $ 2.04 $ 1.88 Diluted................ $ 0.04 $ 0.02 $ 0.05 $ (0.06) $ 1.96 $ 1.81
The effect of applying FAS123 in this pro forma disclosure is not indicative of future amounts. FAS123 does not apply to awards prior to 1995. Additional awards in future years are anticipated. P. SHAREHOLDER RIGHTS PLAN In February 1989 the Board of Directors adopted a Shareholder Rights Plan and declared a dividend distribution of one Right for each outstanding share of Dynatech's common stock. The Plan as amended entitled a qualifying shareholder to buy shares of Dynatech junior participating cumulative preferred stock in the case of an acquisition of, or tender offer for, more than a specified percentage of Dynatech's common stock. C-25 DYNATECH CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) All outstanding Rights issued and outstanding under the Rights Agreement and the Rights Agreement terminated immediately prior to the effective time of the Recapitalization and no shares of Common Stock issued on or after the effective time of the Recapitalization have or will have any Rights associated with them under the Rights Agreement. Q. COMMITMENTS AND CONTINGENCIES The Company has operating leases from continuing operations covering plant, office facilities, and equipment that expire at various dates through 2006. Future minimum annual fixed rentals required during the years ending in fiscal 2001 through 2005 under noncancelable operating leases having an original term of more than one year are $12.1 million, $10.7 million, $8.0 million, $6.6 million, and $3.5 million, respectively. The aggregate obligation subsequent to fiscal 2005 is $2.9 million. Rent expense was approximately $7.3 million, $7.1 million and $6.6 million in fiscal 2000, 1999 and 1998, respectively. The Company is a party to several pending legal proceedings and claims. Although the outcome of such proceedings and claims cannot be determined with certainty, the Company's counsel and management are of the opinion that the final outcome should not have a material adverse effect on the Company's operations or financial position. In 1994, the Company sold its radar detector business to Whistler Corporation of Massachusetts. On June 27, 1996, Cincinnati Microwave, Inc. ("CMI") filed an action against the Company and Whistler in the United States District Court for the Southern District of Ohio alleging infringement of CMI's patent for a mute function in radar detectors. The Company responded that it did not infringe CMI's patent and that, in any event, the patent was invalid and unenforceable. The Company obtained an opinion from outside counsel that CMI's patent is invalid. The Company intends to offer that opinion (and other evidence) to demonstrate that any alleged infringement of CMI's patent due to the Company's prior manufacture and sale of the Whistler series radar detectors was not valid. On February 14, 1997, CMI filed for bankruptcy in the United States Bankruptcy Court for the Southern District of Ohio. Pursuant to that filing, CMI sold its mute feature patent (and other assets) to Escort Acquisition Corp. CMI, however, retained the right to seek past damages from the Company. On March 24, 1998, CMI and its co-plaintiff Escort filed a motion for summary judgment. The Company opposed that motion and went on to complete discovery, which closed on June 20, 1998. The Company then filed its own series of summary judgment motions. A hearing on the parties' dispositive motions was held in May 1999. On May 27, 1999, Whistler filed a Chapter 11 bankruptcy petition in the United States District Court for the District of Massachusetts. As a result of that filing, CMI's patent infringement litigation is stayed as to Whistler. On February 18, 2000, the United States Magistrate issued a Report and Recommendation on some of the pending motions, recommending that judgment be entered in the Company's favor on half of the claims asserted by CMI. Then, on June 9, 2000, the Magistrate issued a second Report and Recommendation, recommending that the plaintiffs be precluded from recovering any damages for any alleged infringement that occurred prior to June 1996. Because the Company could not have infringed on CMI's patent after it sold its radar detector business to Whistler in 1994, if this Recommendation is adopted by the District Court Judge, the Company would have no liability to CMI. The parties have filed (and will file) various objections to the two Report and Recommendations. If necessary, trial in this matter is scheduled for November 2000. C-26 DYNATECH CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The Company intends to continue to defend this lawsuit vigorously and does not believe that the outcome of this litigation will have a material adverse effect on its financial condition, results of operation, or liquidity. R. SUBSEQUENT EVENTS Increase in Authorized Shares of Common Stock On April 28, 2000 the Company amended its Certificate of Incorporation of the Company to increase the number of shares of authorized common stock to be issued from 200,000,000 to 350,000,000. Acquisition of WWG On May 23, 2000, the Company and its wholly owned subsidiary DWW Acquisition Corporation, a Delaware corporation ("MergerCo"), completed their merger (the "Merger") with Wavetek Wandel Goltermann, Inc., a Delaware corporation ("WWG"), pursuant to which WWG became an indirect, wholly owned subsidiary of Dynatech. The Merger was consummated pursuant to an Agreement and Plan of Merger, dated as of February 14, 2000 (the "Merger Agreement"), among Dynatech, MergerCo and WWG. In connection with the Merger, Dynatech paid the former WWG stockholders approximately $250 million in cash and issued approximately 15 million newly-issued shares of Dynatech common stock, valued at approximately $130 million. In addition, Dynatech paid approximately $8 million in cash in exchange for all outstanding WWG options and paid approximately $200 million of WWG outstanding debt. Dynatech financed the Merger with the proceeds from the issuance of debt and common stock. The Company issued 43.125 million newly-issued, but unregistered shares of the Company's common stock to funds managed by CDR for $4.00 per share. The Company also intends to sell 4.983 million newly- issued shares of common stock at $4.00 per share to its shareholders of record of April 20, 2000 under a rights offering. See Note J. Earning Per Share. In addition to the issuance of common stock, the Company entered into a new credit facility with a syndicate of lenders (the "New Credit Facility"). The Company's new senior credit agreement (the "New Senior Credit Agreement"), which established the New Credit Facility, provided for senior secured credit facilities in an aggregate principal amount of up to approximately $860 million, consisting of (1) a revolving credit facility available to Dynatech LLC in U.S. dollars or euros, in an aggregate principal amount of up to $175 million, which can also be used to issue letters of credit (the "New Revolving Credit Facility"), (2) a Tranche A term loan of $75 million to Dynatech LLC with a six year amortization (the "Tranche A Term Loan"), (3) a Tranche B term loan of $510 million to Dynatech LLC with a seven and one-half year amortization (the "Tranche B Term Loan"), and (4) German term loans from certain German banks in an aggregate amount equal to (Euro)108.375 million to the Company's German subsidiaries with six-year amortization periods (the "German Term Loans") (all term loans collectively, the "New Term Loans"). The New Credit Facility also provides for the issuance of a letter of credit that the German banks may draw upon in the event of the failure of the Company's German subsidiaries to make payments on the (Euro)108.375 million loans, and the Company's German subsidiaries are required to reimburse the letter of credit issuer for any such issuances. The amount of the letter of credit also may be fully drawn under certain circumstances, and in such event the amount of the draw shall convert into term loans to the Company's German subsidiaries with similar amortization to the German term loans. The loans under the New Credit Facility bear interest at floating rates based upon the interest rate option elected by the Company. C-27 DYNATECH CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The Company collectively used the New Term Loans to refinance certain existing indebtedness of the Company and as part of the financing for the WWG merger. The New Revolving Credit Facility is available to the Company from time to time for potential acquisitions and other general corporate purposes. Principal and interest payments under the New Credit Facility and interest payments on the Senior Subordinated Notes represent significant liquidity requirements for the Company. The Tranche A Term Loan will be amortized in four quarterly installments of $750 thousand commencing on June 30, 2000; four quarterly installments of $2.0 million commencing on June 30, 2001; four quarterly installments of $3.75 million commencing on June 30, 2002; four quarterly installments of $7.5 million commencing on June 30, 2003; four quarterly installments of $2.5 million commencing on June 30, 2004 and four quarterly installments of $2.25 million commencing on June 30, 2005. The Tranche B Term Loan will be amortized in 24 quarterly installments of $2.0 million, commencing on June 30, 2000; four quarterly installments of $77.5 million commencing on June 30, 2006, and two quarterly installments of $76.0 million commencing on June 30, 2007. The German Term Loans will be amortized in four quarterly installments of (Euro)530 thousand commencing on June 30, 2000; twelve quarterly installments of (Euro)790 thousand commencing on June 30, 2001; four quarterly installments of (Euro)7.625 million commencing on June 30, 2004; three quarterly installments of (Euro)15.780 million commencing on June 30, 2005 and one quarterly installment of (Euro)18.935 million on March 31, 2006. Covenant Restrictions. The Company's New Credit Facility contains covenants that, among other things, restrict the Company's ability to dispose of assets, incur additional debt, guarantee obligations or contingent liabilities, repay its 9 3/4% Senior Subordinated Notes due 2008, pay dividends, create liens on assets, make investments, loans or advances, engage in mergers or consolidations, make capital expenditures or engage in certain transactions with affiliates. The Company's New Credit Facility contains customary events of default. In addition, under the New Credit Facility, the Company is required to comply with a minimum interest expense coverage ratio and a maximum leverage ratio. These financial tests become more restrictive in future years. The Term Loans under the New Credit Facility are governed by negative covenants that are substantially similar to the negative covenants contained in the indenture governing the Senior Subordinated Notes, which also impose restrictions on the operation of the Company's business. The following unaudited pro forma condensed consolidated financial statements give effect to the following assuming that these transactions occurred on the first day in the fiscal year presented: . The merger with WWG (after giving effect to the divestitures of the Precision Measurement and Test Tools divisions, which occurred in January 2000) . The acquisition of Pacific Systems Corporation . The acquisition of Flight TECH . The acquisition of Sierra Design Labs . The acquisition of Applied Digital Access, Inc. . The acquisition of ICS Advent (Europe) Ltd. . The acquisition of WPI Husky Technology, Inc., WPI Oyster Termiflex Limited, WPI Husky Technology Limited and WPI Husky Technology GmbH The condensed, unaudited pro forma statement of operations data listed below is for informational purposes only and does not necessarily represent what the Company's results of operations would have been if the above listed transactions had in fact occurred at the beginning of the fiscal periods presented and are not necessarily indicative of the results of operations for any future period. C-28 DYNATECH CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
2000 1999 -------- -------- Net sales.............................................. $972,381 $803,816 Loss from operations before income taxes from continuing operations................................. (79,991) (147,670) Loss per common share from continuing operations: Basic................................................ (0.43) (0.87) Diluted.............................................. (0.43) (0.87)
Extraordinary Charge In connection with the merger and related financing of debt, the Company will incur a pretax extraordinary charge of approximately $10.3 million during the first quarter of fiscal 2001 for the writeoff of unamortized debt discount fees relating to the early extinguishment of debt that originated from the Recapitalization. S. SEGMENT INFORMATION AND GEOGRAPHIC AREAS Segment Information. The Company is currently managed in two business segments: communications test and inflight information systems. The largest segment, communication test, develops, manufactures and markets instruments, systems, software and services which test, deploy, manage and optimize communications networks and equipment. The Company offers products that test and manage the performance of equipment found in modern, converged networks, including optical transmission systems for data communications, voice services, wireless voice and data services, cable services, and video delivery. The inflight information systems segment, which is operated by the Company's AIRSHOW, Inc. subsidiary, is a provider of systems that deliver real-time news, information and flight data to aircraft passengers. AIRSHOW's systems are marketed to commercial airlines and private aircraft owners. The Company also has other subsidiaries that, in the aggregate, are not reportable as a segment ("Other Subsidiaries"). These Other Subsidiaries include da Vinci Systems, Inc. ("da Vinci") and Dataviews, Inc. ("Dataviews"). da Vinci provides digital color enhancement systems used in the production of television commercials and programming. da Vinci's products are sold to post-production and video production professionals and producers of content for standard- and high-definition television market. Dataviews, Inc., was sold in June 2000. In years prior to fiscal 2000, the Company's consolidated statements of income and the Other Subsidiaries section of this Note included the results of operations of two subsidiaries which have since been divested: ComCoTec, Inc. was sold in June 1998, and Parallax Graphics, which was liquidated during fiscal 1999. The Company measures the performance of its subsidiaries by the their respective earnings before interest, taxes and amortization ("EBITA"), which excludes non-recurring and one-time charges. Included in each segment's EBITA is an allocation of corporate expenses. The information below includes sales and EBITA for the two segments the Company operates in. Corporate EBITA is comprised of corporate general and administrative expense that has not been allocated to each segment. Corporate assets are comprised primarily of cash, deferred financing fees, and deferred taxes. The Company is a multi-national corporation with continuing operations outside the United States consisting of distribution and sales offices in Germany, England, France and the Pacific Rim. The accounting policies for the segments are the same as those described in the summary of significant accounting policies. See Note G. Summary of Significant Accounting Policies. In order to conform to the requirements of Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information", the operating segment information for the fiscal years 1999 and 1998 has been restated. C-29 DYNATECH CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) No single customer accounted for more than 10% of sales from continuing operations during fiscal 2000, 1999, and 1998.
Segment 2000 1999 1998 ------- ------- ------- ------- Communications test segment: Sales.......................................... 349,886 238,942 240,432 Depreciation and amortization.................. 15,441 8,845 9,345 EBITA.......................................... 62,447 42,800 50,614 Total assets................................... 179,338 71,453 78,586 Capital expenditures........................... 13,629 5,147 8,898 Inflight information systems segment: Sales.......................................... 70,960 58,794 34,797 Depreciation and amortization.................. 2,102 1,477 399 EBITA.......................................... 19,314 22,373 15,519 Total assets................................... 39,728 36,583 8,012 Capital expenditures........................... 1,743 2,230 740 Other subsidiaries: Sales.......................................... 32,394 31,796 42,726 Depreciation and amortization.................. 1,218 1,114 1,731 EBITA.......................................... 8,404 7,468 4,790 Total assets................................... 13,061 5,165 8,857 Capital expenditures........................... 761 799 1,609 Discontinued operations: Net assets held for sale....................... 72,601 N/A N/A Total assets................................... N/A $93,753 $94,724 Capital expenditures........................... N/A 2,967 4,586 Corporate: Depreciation and amortization.................. 95 93 125 Loss before interest, taxes and amortization... (4,941) (6,638) (5,586) Total assets................................... 110,110 141,150 97,951 Capital expenditures........................... 31 180 46 Total Company: Sales.......................................... 453,239 329,532 317,955 Depreciation and amortization.................. 18,856 11,529 11,610 EBITA(a)....................................... 85,224 66,003 65,337 Total assets................................... 414,838 348,104 288,130 Capital expenditures........................... 16,164 11,323 15,879
-------- (a) Non-recurring charges of $33,241, $24,867, and $0 and amortization of unearned compensation of $1,515, $1,228 and $0, in fiscal 2000, 1999, and 1998 have been excluded from EBITA. C-30 DYNATECH CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Geographic Information. Information by geographic areas for the years ended March 31, 2000, 1999, and 1998 is summarized below:
Outside U.S. United (principally States Europe) Combined -------- ------------ -------- (Amounts in thousands) Sales to unaffiliated customers 2000.................................... $432,216* $21,023 $453,239 1999.................................... $310,724* $18,808 329,532 1998.................................... $298,907* 19,048 317,955 Income (loss) before taxes from continuing operations 2000.................................... $ (7,957) $ 74 $ (7,883) 1999.................................... $ (5,398) $ (205) $ (5,603) 1998.................................... $ 63,773 $ 1,035 $ 64,808 Long-lived assets at March 31, 2000.......................... $ 85,122 $ 702 $ 85,824 March 31, 1999.......................... $ 81,662 $ 725 $ 82,387 March 31, 1998.......................... $ 65,134 $ 826 $ 65,960
-------- * Includes export sales of $44,798, $44,567, and $43,865 in 2000, 1999, and 1998, respectively. Currency Income. Net income in fiscal 2000, 1999, and 1998 included currency gains (losses) of approximately $54,500, $9,800, and $12,600, respectively. T.SUMMARY OF OPERATIONS BY QUARTER (UNAUDITED)
FY 2000 --------------------------------------------- First Second Third Fourth Year ------- -------- -------- -------- -------- (Amounts in thousands except per share data) Sales....................... $90,794 $103,789 $122,225 $136,431 $453,239 Gross profit................ 60,080 69,730 81,409 84,930 296,149 Net income (loss) from continuing operations...... (6,066) 5,642 3,934 (10,224) (6,714) Net income (loss)........... 2,551 9,566 4,754 (10,859) 6,012 Income (loss) per common share--basic: Continuing operations..... $ (0.04) $ 0.04 $ 0.02 $ (0.07) $ (0.05) Net income (loss)......... 0.02 0.06 0.03 (0.07) 0.04 Income (loss) per common share--diluted: Continuing operations..... $ (0.04) $ 0.04 $ 0.02 $ (0.07) $ (0.05) Net income (loss)......... 0.02 0.06 0.03 (0.07) 0.04 Market Share Price(b)-- High....................... $ 4.062 $ 5.031 $ 8.000 $ 15.937 --Low.............. 3.125 3.437 4.875 6.875
C-31 DYNATECH CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
FY 1999 ------------------------------------------ First Second Third Fourth Year ------- ------- ------- ------- -------- Sales.......................... $75,192 $84,429 $90,219 $79,692 $329,532 Gross profit................... 50,214 57,050 60,744 52,906 220,914 Net income (loss) from continuing operations......... (11,983) 2,463 4,564 (578) (5,534) Net income (loss).............. (11,933) 3,662 6,949 7,767 6,445 Income (loss) per common share--basic: Continuing operations........ $ (0.15) $ 0.02 $ 0.03 $ 0.00 $ (0.04) Net income (loss)............ (0.15) 0.02 0.05 0.05 0.05 Income (loss) per common share--diluted: Continuing operations........ $ (0.15) $ 0.02 $ 0.03 $ 0.00 $ (0.04) Net income (loss).............. (0.15) 0.02 0.04 0.05 0.05 Market Share Price(a)--High.... $ 4.312 $ 3.438 $ 3.000 $ 3.500 --Low................. 3.125 2.687 2.375 2.718
-------- (a) From January 28, 1997 to May 21, 1998, shares of Common Stock of the Company were traded on the New York Stock Exchange. No cash dividends were paid on shares of Common Stock of the Company. As a result of the Recapitalization on May 21, 1998, trading in the Old Common Stock was halted and the Common Stock is traded only in the over-the-counter market. The market share prices reflect the high and low close prices after May 21, 1998. C-32 APPENDIX D EXHIBIT INDEX
Exhibit No. ------- 2.1 Agreement and Plan of Merger, dated as of December 20, 1997, by and between Dynatech Corporation and CDRD Merger Corporation.(1) 2.2 Agreement and Plan of Merger, dated as of September 7, 1999, by and among Dynatech Corporation, Dynatech Acquisition Corporation and Applied Digital Access, Inc.(2) 2.3 Agreement and Plan of Merger, dated as of February 14, 2000, by and among Dynatech Corporation, DWW Acquisition Corporation and Wavetek Wandel Goltermann, Inc.(3) 2.4 Agreement for the Sale and Purchase of Shares in WPI Husky Technology Ltd., dated February 23, 2000, by and among Dynatech Nominees Limited, WPI Group (UK), and WPI Group, Inc. 3.1 Amended and Restated Certificate of Incorporation of Dynatech Corporation. 3.2 Amended and Restated By-Laws of Dynatech Corporation.(4) 4.1 Indenture, dated as of May 21, 1998, among Dynatech Corporation, TTC Merger Co. LLC (now known as Dynatech LLC) and State Street Bank and Trust Company, as trustee.(5) 4.2 Form of 9 3/4% Senior Subordinated Note due 2008(5). 4.3 First Supplemental Indenture, dated as of May 21, 1998, among Dynatech Corporation, Telecommunications Techniques Co., LLC (now known as Dynatech LLC) and State Street Bank and Trust Company, as trustee.(5) 4.4 Registration Rights Agreement, dated May 21, 1998, by and among Dynatech Corporation, Telecommunications Techniques Co., LLC (now known as Dynatech LLC), Credit Suisse First Boston Corporation and J.P. Morgan Securities Inc.(5) 4.5 Registration Rights Agreement, dated as of May 21, 1998, among Dynatech Corporation, Clayton, Dubilier & Rice Fund V Limited Partnership, Mr. John F. Reno, The John F. Reno 1997 Qualified Annuity Trust, under Trust Agreement, dated as of the 28th day of November, 1997, between John F. Reno as Grantor and John F. Reno and John D. Hamilton, Jr. as Trustees, and The Suzanne D. Reno 1997 Qualified Annuity Trust, under Trust Agreement, dated as of the 28th day of November, 1997, between Suzanne D. Reno as Grantor and John F. Reno and John D. Hamilton, Jr. as Trustees.(5) 4.6 Amendment No. 1, dated as of May 23, 2000, among Dynatech Corporation ("Dynatech"), Clayton, Dubilier & Rice Fund V Limited Partnership ("Fund V") and Clayton, Dubilier & Rice Fund VI Limited Partnership, to the Registration Rights Agreement, dated as of May 21, 1998, among Dynatech, Fund V and the other parties thereto. 4.7 Form of Piggyback Registration Rights Agreement, dated as of February 29, 2000, by and among Wavetek Wandel Goltermann, Inc. ("WWG"), Dynatech Corporation and each stockholder of WWG party thereto. 4.8 Form of Subscription Warrant to Subscribe for Shares of Dynatech Corporation Common Stock.(6) 10.1 Credit Agreement, dated May 23, 2000, among Dynatech LLC, Wavetek Wandel Goltermann GmbH and Dynatech Subworld Holdings GmbH, the lenders named therein, Morgan Guaranty and Trust Company of New York ("Morgan Guaranty") as administrative agent, Morgan Guaranty as German Term Loan Servicing Bank, Credit Suisse First Boston as syndication agent and The Chase Manhattan Bank and Bankers Trust Company as co- documentation agents. 10.2 Guarantee and Collateral Agreement, dated as of May 23, 2000, among Dynatech LLC, certain of its subsidiaries and Morgan Guaranty and Trust Company of New York as administrative agent.
D-1
Exhibit No. ------- 10.3 Indemnification Agreement, dated as of May 21, 1998, by and among Dynatech Corporation, Telecommunications Techniques Co., LLC (now known as Dynatech LLC), Clayton, Dubilier & Rice, Inc. and Clayton, Dubilier & Rice Fund V Limited Partnership.(5) 10.4 Indemnification Agreement, dated as of May 23, 2000, by and among Dynatech Corporation, Clayton, Dubilier & Rice Fund VI Limited Partnership and Clayton, Dubilier & Rice, Inc. 10.5 Consulting Agreement, dated May 21, 1998, by and among Dynatech Corporation, Telecommunications Techniques Co., LLC (now known as Dynatech LLC) and Clayton, Dubilier & Rice, Inc.(5) 10.6 Agreement, dated as of May 23, 2000, by and between Clayton, Dubilier & Rice, Inc. and Dynatech Corporation. 10.7 Tax Sharing Agreement, dated as of May 21, 1998, by and between Dynatech Corporation and Telecommunications Techniques Co., LLC (now known as Dynatech LLC).(5) 10.8 Form of Letter Agreement by and between Dynatech Corporation ("Dynatech") and certain officers of Dynatech.(7) 10.9 Form of Management Equity Agreement among Dynatech Corporation, Clayton, Dubilier & Rice Fund V Limited Partnership and Messrs. Kline and Peeler.(7) 10.10 Form of Management Equity Agreement among Dynatech Corporation ("Dynatech"), Clayton, Dubilier & Rice Fund V Limited Partnership and certain officers of Dynatech.(7) 10.11 Amended and Restated Employment Agreement, entered into on November 1, 1998, by and between Dynatech Corporation and Allan M. Kline.(8) 10.12 Amended and Restated Employment Agreement, entered into on November 1, 1998, by and between Dynatech Corporation and John R. Peeler.(8) 10.13 Form of Nondisclosure, Noncompetition and Nonsolicitation Agreement by and between Dynatech Corporation ("Dynatech") and certain executives of Dynatech.(7) 10.14 Dynatech Corporation 1992 Stock Option Plan.(5) 10.15 Dynatech Corporation Amended and Restated 1994 Stock Option and Incentive Plan.(9) 10.16 Dynatech Corporation Non-Employee Directors Stock Incentive Plan.(9) 10.17 Dynatech Corporation Directors Stock Purchase Plan.(4) 10.18 Form of Non-Employee Director Stock Subscription Agreement between Dynatech Corporation ("Dynatech") and non-employee directors of Dynatech.(10) 10.19 Loanout Agreement, dated as of May 19, 1999, by and among Dynatech Corporation, Dynatech LLC and Clayton, Dubilier & Rice, Inc.(11) 21 Subsidiaries of Dynatech Corporation. 23 Consent of Independent Accountants. 27 Financial Data Schedule.
- - -------- (1) Incorporated by reference to Dynatech Corporation's Report on Form 8-K (File No. 0-7438). (2) Incorporated by reference to Dynatech Corporation's Schedule 14D-1 (File No. 5-44783). (3) Incorporated by reference to Dynatech Corporation's Report on Form 8-K (File No. 1-12657), filed May 31, 2000. (4) Incorporated by reference to Dynatech Corporation's Form 10-Q for the quarter ended September 30, 1999. D-2 (5) Incorporated by reference to Dynatech Corporation's Registration Statement on Form S-4 (Registration No. 333-60893). (6) Incorporated by reference to Dynatech Corporation's Registration Statement on Form S-3 (Registration No. 333-35476). (7) Incorporated by reference to Dynatech Corporation's Registration Statement on Form S-4 (File No. 333-44933). (8) Incorporated by reference to Dynatech Corporation's Form 10-Q for the quarter ended December 31, 1998. (9) Incorporated by reference to Dynatech Corporation's Registration Statement on Form S-8 (File No. 333-75797). (10) Incorporated by reference to Dynatech Corporation's Form 10-Q for the quarter ended December 31, 1999. (11) Incorporated by reference to Dynatech Corporation's Form 10-Q for the quarter ended June 30, 1999. D-3 REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE To the Board of Directors and Shareholders of Dynatech Corporation: Our audits of the consolidated financial statements referred to in our report dated June 21, 2000 appearing in this Annual Report on Form 10-K of Dynatech Corporation also included an audit of the financial statement schedule listed in Item 14(a)(2) of this Form 10-K. In our opinion, this financial statement schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. /s/ PricewaterhouseCoopers LLP Boston, Massachusetts June 21, 2000 SCHEDULE II DYNATECH CORPORATION VALUATION AND QUALIFYING ACCOUNTS For the years ended March 31, 2000, 1999, 1998, and 1997 Reserve for Doubtful Accounts (in thousands) Balance, March 31, 1997................................................. $1,872 Additions charged to income........................................... 425 Writeoff of uncollectible accounts, net............................... (533) ------ Balance, March 31, 1998................................................. 1,764 Additions charged to income........................................... 483 Writeoff of uncollectible accounts, net............................... (613) ------ Balance, March 31, 1999................................................. $1,634 Additions charged to income........................................... 620 Writeoff of uncollectible accounts, net............................... (22) Balance acquired by acquisition......................................... 247 Adjustment for discontinued operations.................................. (527) ------ Balance, March 31, 2000................................................. $1,952 ======
EX-2.4 2 0002.txt AGREEMENT FOR THE SALE AND PURCHASE OF SHARES EXHIBIT 2.4 ================================================================================ WPI Group (UK) and WPI Group Inc. and Dynatech Nominees Limited AGREEMENT FOR THE SALE AND PURCHASE OF SHARES IN WPI HUSKY TECHNOLOGY LTD AND WPI HUSKY TECHNOLOGY GMBH ================================================================================ TABLE OF CONTENTS 1 Sale and Purchase of Shares.......................................... 2 - - - --------------------------- 2 Completion........................................................... 3 - - - ---------- 3 Completion Accounts.................................................. 6 - - - ------------------- 4 Warranties........................................................... 12 - - - ---------- 5 Action Pending Completion............................................ 13 - - - ------------------------- 6 Purchaser's Rights................................................... 16 - - - ------------------ 7 Limitations on the Vendor's Liability................................ 17 - - - ------------------------------------ 8 Use of Intellectual Property Rights.................................. 20 - - - ----------------------------------- 9 Vendor's Undertakings and Guarantee.................................. 20 - - - ----------------------------------- 10 Confidential Information............................................. 25 - - -- -------------------------- 11 Announcements........................................................ 25 - - -- --------------- 12 Competition.......................................................... 25 - - -- ------------- 13 Costs................................................................ 26 - - -- ------- 14 Interest............................................................. 26 - - -- ---------- 15 General.............................................................. 26 - - -- --------- 16 Assignment........................................................... 27 - - -- ------------ 17 Time of the Essence.................................................. 27 - - -- --------------------- 18 Further Assurance.................................................... 27 - - -- ------------------- 19 Interpretation....................................................... 27 - - -- ---------------- 20 Notices.............................................................. 33 - - -- --------- 21 Governing Law and Jurisdiction....................................... 34 - - -- -------------------------------- 22 Counterparts......................................................... 35 - - -- ------------
i SCHEDULE 1................................................................ 36 - - ---------- SCHEDULE 2................................................................ 37 - - ---------- SCHEDULE 3................................................................ 39 - - ---------- SCHEDULE 4................................................................ 42 - - ---------- SCHEDULE 5................................................................ 73 - - ---------- SCHEDULE 6................................................................ 74 - - ---------- SCHEDULE 7................................................................ 79 - - ---------- SCHEDULE 8................................................................ 80 - - ---------- ii SALE AND PURCHASE AGREEMENT THIS AGREEMENT is made on 23 February, 2000. BETWEEN: (1) WPI Group (UK), a private unlimited liability company incorporated in England and Wales (the "Vendor"); ------ (2) WPI Group Inc., a publicly listed company on the NASDAQ stock exchange incorporated in New Hampshire (the "Guarantor"); and --------- (3) Dynatech Nominees Limited (Company number 3925088), a limited liability company incorporated in England and Wales (the "Purchaser"). --------- RECITALS -------- A. WPI Husky Technology Inc., a Florida corporation (the "US Vendor") owns --------- certain assets and businesses located within the US. B. The Vendor owns all of the issued share capital (the "WPI Husky Shares") ---------------- of WPI Husky Technology Ltd ("WPI Husky"), a limited liability company --------- incorporated in England and Wales. C. WPI Oyster Termiflex Ltd, a limited liability company incorporated in England and Wales (the "UK Vendor"), owns certain assets and businesses --------- located in the UK. D. The Vendor owns all of the issued share capital (the "WPI GmbH Shares") of --------------- WPI Husky Technology GmbH, a limited liability company incorporated in Germany and registered at the Commercial Register of the Siegburg Local Court under file number HRB 3396, formerly Cologne Local Court, HRB 20139. E. The Vendor wishes to sell, and the Purchaser wishes to purchase, the Shares (as hereinafter defined) on and subject to the terms of this Agreement. F. The US Vendor wishes to sell, and Itronix Corporation, a Delaware corporation (the "US Purchaser") wishes to purchase, certain assets and ------------ businesses on and subject to the terms of the Asset Purchase Agreement. G. The UK Vendor wishes to sell, and Dynatech Corporation Limited (the "UK -- Purchaser") wishes to purchase, certain assets and businesses on and --------- subject to the terms of the UK Asset Purchase Agreement. NOW THEREFORE, THE PARTIES AGREE as follows: 1 Sale and Purchase of Shares --------------------------- 1.1 Subject to the terms and conditions hereof, the Vendor agrees to sell, with full title guarantee, and the Purchaser agrees to buy, the Shares and each right attaching to the Shares at or after the date of this Agreement, free from any Encumbrances, and the US Vendor will sell, and the US Purchaser will buy, the US Assets pursuant to the Asset Purchase Agreement and the UK Vendor will sell, and the UK Purchaser will buy, the UK Assets pursuant to the UK Asset Purchase Agreement, for a purchase price of US$34,612,800 payable in US dollars as set forth in Clause 2.2 (the "Purchase Price") and subject to an adjustment as -------------- provided in Clause 3. 1.2 (a) The Purchase Price (including the Escrow Amount) shall be apportioned between the Shares, the US Assets and the UK Assets in accordance with the allocation set forth on Schedule 7. The Purchase Price adjustment determined pursuant to Clauses 3.3(a) and 3.3(b) shall be apportioned between the Shares, the US Assets and the UK Assets in accordance with an allocation schedule to be prepared by the Purchaser, and provided to the Vendor, as soon as practicable after the Completion Date or, if later, after the resolution of any dispute with respect to the purchase price adjustment. The allocation of the purchase price adjustment shall be prepared in a manner that is reasonably consistent with Schedule 7. (b) The portion of the Purchase Price that is apportioned to (i) the US - Assets pursuant to Clause 1.2(a) (after giving effect to the Purchase Price adjustment), the Assumed Liabilities, (as such term is defined in the Asset Purchase Agreement), and all other relevant items shall be allocated among the US Assets and (ii) the UK Assets pursuant to Clause 1.2(a) (after giving effect -- to the Purchase Price Adjustment), the UK Assumed Liabilities and all other relevant items shall be allocated among the UK Assets, in each case in accordance with an allocation schedule to be prepared by the US Purchaser and the UK Purchaser, and provided to the US Vendor and UK Vendor, as soon as practicable after the Completion Date or, if later, after the resolution of any dispute with respect to the purchase price adjustment. Such allocation schedule shall be prepared by the US Purchaser in a manner that is reasonably consistent with the requirements of applicable law including, in the case of allocation discussed in Clause (i), Section 1060 of the Code. (c) The Purchaser, the US Purchaser and the UK Purchaser shall consult with the Vendor, the US Vendor and the UK Vendor in preparing the final allocation schedules pursuant to Clauses 1.2(a) and 1.2(b), provided that absent manifest -------- error, the Purchaser's, the US Purchaser's and the UK Purchaser's final determinations of such allocation schedules shall be binding on the parties. The US Purchaser and the US Vendor shall each report the purchase and sale contemplated hereby for all purposes (including the filing of IRS Form 8594) in a manner consistent with such final allocation schedules. Neither the Purchaser, the US Purchaser, the UK Purchaser, the Vendor, the 2 US Vendor nor the UK Vendor shall contend or represent that any allocation set forth in such final allocation schedules is not a correct allocation, in any financial statement or tax return, or any audit or other proceeding with respect to Taxes without the express written consent of the others. 2 Completion ---------- 2.1 Subject to the prior satisfaction of the conditions set out in Clause 2.4 below, Completion shall take place at the offices of the Purchaser's Solicitors on February 22, 2000 or at such other Business Day and time as the parties shall have agreed to in writing (subject always to the due satisfaction, or if applicable, waiver of all the conditions specified (or deemed to be specified) in Clause 2.4). The date on which Completion shall occur is hereinafter referred to as the "Completion Date". --------------- 2.2 At Completion the Vendor and the Purchaser shall do all those things respectively required of them in Schedule 3 and the Purchaser shall pay, for its own account, and for the account of the US Purchaser and the UK Purchaser, the Purchase Price less the Escrow Amount to the Vendor, the US Vendor and the UK Vendor, as provided in Schedule 7 by transfer of funds for same day value, US$31,643,824 to be paid to the following account: Fleet Bank NH ABA Number 011- 400-495 Account Number 1510352-03133, Agency Services Wire Clearing Account, Attention: Heather Cunningham, Reference: WPI Group Inc, US$218,496.09 to be paid to the ANG Noteholders, to the account of Sheehan Phinney Bass & Green Trust Account, Citizens Bank, 875 Elm Street, Manchester, NH 03101, Account 330004-911-5, ABA:0115-0012-0, US$180,000 to be paid to the Vendor's solicitors to the account of Royal Bank of Scotland PLC, St. Anne Street, Manchester, Account No: 11943297, Sort Code: 16-00-2, Cobbetts Client Account and US$839,839.91 to be paid to the account of WPI Group Inc. to the account of Fleet Bank NH ABA Number 011-400-495, Account 9358942298. 2.3 Payment of the Purchase Price in accordance with Clause 2.2 shall be a good discharge to the Purchaser, the US Purchaser and the UK Purchaser. 2.4 The Purchaser is not obliged to complete this Agreement unless the following conditions are satisfied: (a) the purchase of all the Shares is completed simultaneously; (b) the Asset Purchase Agreement is entered into between the US Vendor and the US Purchaser prior to or on Completion; (c) the UK Asset Purchase Agreement is entered into between the UK Vendor and the UK Purchaser prior to or on Completion; 3 (d) completion by the Purchaser to its satisfaction of financial, tax, legal, technical, operational and human resources due diligence without adverse findings, provided that if the Purchaser has not advised the Vendor in writing on or before February 22, 2000 that the results of such due diligence exercise are not to its satisfaction and that this condition has therefore not been satisfied, the condition in this Clause 2.4(c) shall be deemed to have been satisfied; (e) delivery by Fleet Bank of a duly executed release relating to the Credit Facility provided to WPI Group Inc. (including a release of any charges on the Shares of any Group Company to permit the sale of Shares), in form and substance satisfactory to the Purchaser in its sole discretion; (f) delivery of a duly executed consent and release from each of the ANG Noteholders in form and substance satisfactory to the Purchaser; (g) delivery of a duly executed US legal opinion from the US Vendor's and Guarantor's US legal counsel in form and substance satisfactory to the Purchaser; (h) delivery of a duly executed UK legal opinion from the Vendor's solicitors in form and substance satisfactory to the Purchaser; (i) written confirmation from the Vendor that all inter-company indebtedness shall be discharged by the Vendor at or prior to Completion in accordance with Clause 3.6. (j) delivery of a duly executed consent, waiver or discharge, as the case may be, and evidence of any payments thereof, each in form and substance satisfactory to the Purchaser in respect of any other loan capital, borrowing or indebtedness and like obligations of any Group Company or any other party (including without limitation the guarantees and obligations to be discharged at the Completion Date in the Disclosure Letter); (k) delivery by the Vendor to the Purchaser of the Disclosure Letter, in form and substance satisfactory to the Purchaser by no later than February 22, 2000; (l) delivery by the Vendor of all those items specified in Clause 1.1 of Schedule 3; (m) receipt of all required regulatory approvals, in form and substance satisfactory to the Purchaser; (n) receipt of any required consents in relation to any Intellectual Property Rights which are not legally and beneficially owned by the Vendor or any Group Company on Completion; 4 (o) compliance by the Vendor with all of its obligations under this Agreement; (p) delivery of duly executed resolutions of the Vendor and the Guarantor approving the sale and purchase of the Shares in a form and substance satisfactory to the Purchaser; (q) delivery by the Vendor of a Deed of Change of Principal Employer duly and validly executed in relation to The Plan, whereby WPI Husky is substituted as Principal Employer of The Plan; and (r) delivery by the Vendor of a Deed of Change of Principal Employer duly and validly executed in relation to The Husky Plan, whereby WPI Husky ceases to be the Principal Employer of The Husky Plan. 2.5 If Completion does not take place on the Completion Date because the Vendor fails to comply with any of its obligations under this Clause 2, the Purchaser may by notice to the Vendor: (a) proceed to Completion to the extent reasonably practicable including without limitation by purchasing some, but not all of the Shares (but if the Purchaser exercises its right pursuant to this Clause 2.5, completion of the purchase of some of the Shares does not affect the Purchaser's rights in connection with the others); (b) postpone Completion to a date to be no later than 29 February. (c) terminate this Agreement. 2.6 If the Purchaser postpones Completion to another date in accordance with Clause 2.6(b), the provisions of this Agreement shall apply as if that other date is the date for Completion. 2.7 The Warranties and all other provisions of this Agreement, the Asset Purchase Agreement and the Tax Deed insofar as the same shall not have been performed at Completion shall not be extinguished or affected by Completion, or by any other event or matter whatsoever (including, without limitation, any satisfaction and/or waiver of any condition contained in Clause 2.4, except by a specific and duly authorised written waiver or release by the Purchaser). 2.8 If the Purchaser terminates this Agreement pursuant to Clause 2.5(c), each party's further rights and obligations cease immediately on termination, but termination does not affect a party's accrued rights and obligations at the date of termination. 2.9 If prior to Completion the Purchaser receives a notification from the Vendor pursuant to Clause 4.6 that any of the Warranties has, when given, or will be or would be, 5 at Completion (as if they had been given again at Completion) not complied with or otherwise untrue or misleading the Purchaser shall be entitled (in addition to and without prejudice to all other rights or remedies available to it and its successors in title including the right to claim damages) by notice in writing to the Vendor to terminate the Agreement. If, notwithstanding such notification pursuant to Clause 4.6, the Purchaser elects to complete this Agreement, the occurrence of such an event, the subject of the notification, shall not give rise to any right to damages or compensation for breach of Warranty. If any event shall occur (other than an event constituting or giving rise to a breach of any of the Warranties) which affects or is likely to affect adversely to a material degree the financial position or turnover or profitability of any of the Group Companies as a whole or any of the Group Companies, not being an event affecting or likely to affect generally all companies carrying on similar businesses in the United Kingdom, the Purchaser shall be entitled by notice in writing to the Vendor to terminate this Agreement but the occurrence of such an event shall not give rise to any right to damages or compensation. 2.10 The Vendor agrees with the Purchaser (for itself and as trustee for each Group Company and their respective officers, employees and agents) to assign to the Purchaser any rights, remedies or claims which it may have in respect of any misrepresentation, inaccuracy or omission in or from any information or advice supplied or given by any Group Company or its respective officers, employees or agents in connection with assisting the Vendor in the making of any representation and the giving of the Warranties or the preparation of the Disclosure Letter and the Tax Deed. 3 Completion Accounts ------------------- 3.1 The Completion Accounts. The Purchaser shall procure that as soon as ----------------------- practicable following Completion there shall be drawn up (a) a consolidated - balance sheet of the Group Companies, provided that (i) the US Assets and the UK -------- - Assets, the Assumed Liabilities and the UK Assumed Liabilities shall be reflected on such consolidated balance sheet and (ii) no items in respect of -- corporation tax shall be reflected on such consolidated balance sheet as at Completion, and (b) a calculation of the amount of the corporation tax currently - payable by the Group Companies as at Completion (the "Current Tax Adjustment") ---------------------- (collectively the "Completion Accounts") and that the same are reviewed by the ------------------- Purchaser's accountants. Any overpayment or prepayment by WPI Husky of life assurance premiums shall be shown as an asset of the Group Companies for the purpose of the Completion Accounts. Except as provided above in Clauses (i) and (ii), the Completion Accounts shall be drawn up in accordance with accountancy principles generally accepted in the United Kingdom and (so far as not inconsistent therewith) in accordance with the principles, methods and bases used in preparing the Accounts and so as to comply with the Companies Act 1985. 6 3.2 Preparation. (a) The Completion Accounts shall be delivered to the Vendor ----------- by the Purchaser as soon as is practicable following Completion and, in any event, not later than 60 days after Completion. Prior to such delivery, the Purchaser shall so far as is practicable consult with the Vendor with a view to reducing the potential areas of future disagreement. (b) In order to enable the Purchaser to prepare and the Purchaser's accountants to review the Completion Accounts, the Vendor shall keep up-to-date and make available to the Purchaser and to the Purchaser's accountants its books and records relating to the businesses of the Group Companies during normal office hours and cooperate with them with regard to the preparation and review of the Completion Accounts. The Vendor agrees, in so far as it is reasonable to do so, to make available the services of its employees to assist the Purchaser in the performance of its duties under this Agreement. (c) If the Vendor does not within 30 days of presentation to it of the Completion Accounts give notice to the Purchaser that it disagrees with the Completion Accounts or any item thereof, such written notice stating the reasons for the disagreement in reasonable detail (the "Vendor's Disagreement Notice"), ---------------------------- the Completion Accounts shall be final and binding on the parties for all purposes. If the Vendor gives a valid Vendor's Disagreement Notice within such 30 days, the parties shall attempt in good faith to reach agreement in respect thereof and, if they are unable to do so within 21 days of such notification or any other period as agreed between the parties, either party may by notice to the other require that the Completion Accounts be referred to the Reporting Accountants (as defined in Clause 3.2(e) below) (an "Appointment Notice"). ------------------ (d) Within 21 days of the giving of an Appointment Notice, the Purchaser may by notice to the Vendor indicate that, in the light of the fact that the Vendor has not accepted the Completion Accounts in their entirety, the Purchaser wishes the Reporting Accountants to consider matters relating to the Completion Accounts in addition to those specified in the Vendor's Disagreement Notice, such notice stating in reasonable detail the reasons why and in what respects the Purchaser believes that the Completion Accounts should be altered (the "Purchaser's Disagreement Notice"). ------------------------------- (e) Deloitte & Touche or such other firm of accountants the parties may agree (the "Reporting Accountants") shall be engaged jointly by the parties on --------------------- the terms set out in this Clause 3.2(e) and otherwise on such terms as shall be agreed provided that neither party shall unreasonably (having regard, inter -------- ----- alia, to the provisions of this Clause 3.2) refuse its agreement to terms - - ---- proposed by the Reporting Accountants or by the other party. If the terms of engagement of the Reporting Accountants have not been settled within 45 days of their identity having been determined (or such longer period as the parties may agree) then, unless one party is unreasonably refusing its agreement to those terms, those accountants shall be deemed never to have become the Reporting 7 Accountants and new Reporting Accountants shall be selected in accordance with the provisions of this Agreement. (f) Except to the extent that the parties agree otherwise, the Reporting Accountants shall determine their own procedure but: (i) apart from procedural matters and as otherwise set out in this Agreement shall determine only: (A) whether any of the arguments for an alteration to the Completion Accounts put forward in the Vendor's Disagreement Notice or the Purchaser's Disagreement Notice is correct in whole or in part; and (B) if so, what alterations should be made to the Completion Accounts in order to correct the relevant inaccuracy in it; (ii) shall apply the principles set out in Schedule 8; (iii) shall make their determination pursuant to paragraph (i) above as soon as is reasonably practicable; (iv) the procedure of the Reporting Accountants shall: (A) give the parties a reasonable opportunity to make written and oral representations to them; (B) require that each party supply the other with a copy of any written representations at the same time as they are made to the Reporting Accountants; (C) permit each party to be present while oral submissions are being made by the other party; and (D) for the avoidance of doubt, the Reporting Accountants shall not be entitled to determine the scope of their own jurisdiction. (g) The determination of the Reporting Accountants pursuant to Clause 3.2(f) shall (i) be made in writing and made available for collection by the - parties at the offices of the Reporting Accountants at such time as they shall determine and (ii) unless otherwise agreed by the parties include reasons for -- each relevant determination. (h) The Reporting Accountants shall act as experts and not as arbitrators and their determination of any matter falling within their jurisdiction shall be final and binding on the parties save in the event of manifest error (when the relevant part of their 8 determination shall be void and the matter shall be remitted to the Reporting Accountants for correction). In particular, without limitation: (i) their determination shall be deemed to be incorporated into the Completion Accounts, which shall then be final and binding on the parties save as aforesaid; (ii) their determination of any fact which they have found it necessary to determine for their determination pursuant to Clause 3.2(f)(i) shall be final and binding on the parties for all purposes including any Warranty claim or alleged or prospective Warranty claim or any claim or alleged or prospective claim for indemnification. (i) The expenses of the Reporting Accountant shall be borne as they shall direct at the time they make any determination under Clause 3.2(f)(i) or, failing such direction, equally between the Vendor, on the one hand, and the Purchaser, on the other. (j) The parties shall co-operate with the Reporting Accountants and comply with their reasonable requests made in connection with the carrying out of their duties under this Agreement. In particular, without limitation, the Vendor shall keep up-to-date and, subject to reasonable notice, make available to the Purchaser's representatives, the Purchaser's accountants and the Reporting Accountants its books and records relating to the businesses of the Group Companies during normal office hours during the period from the appointment of the Reporting Accountants down to the making of the relevant determination. (k) Subject to Clause 3.2(l), nothing in this Clause 3.2 shall entitle a party or the Reporting Accountants access to any information or document which is protected by legal professional privilege, or which has been prepared by the other party or its accountants or other professional advisers with a view to assessing the merits of any claim or argument. (l) A party shall not be entitled by reason of Clause 3.2(k) to refuse to supply such part or parts of documents or summaries thereof as contain only the facts on which the relevant claim or argument is based. (m) Each party and the Reporting Accountants shall, and shall procure that its accountants and other advisers shall, keep all information and documents provided to them pursuant to this Clause 3.2 confidential and shall not use the same for any purpose, except for disclosure or use in connection with the preparation of the Completion Accounts, the proceedings of the Reporting Accountants or another matter arising out of this Agreement or in defending any claim or argument or alleged claim or argument relating to this Agreement or its subject matter. 3.3 Adjustment of Consideration --------------------------- 9 (a) (i) If the net assets as shown in the consolidated balance sheet constituting part of the Completion Accounts are less than US$9,592,200, then, within 14 days of either the Completion Accounts becoming final and binding under Clause 3.2(c) or the determination of the Reporting Accountants being made available for collection by the parties pursuant to Clause 3.2(g), the Vendor shall pay to the Purchaser an amount equal to such difference together with interest thereon calculated from the Completion Date in accordance with Clause 14. If the net assets as shown in the consolidated balance sheet constituting part of the Completion Accounts exceed US$9,592,200, then, within 14 days of either the Completion Accounts becoming final and binding under Clause 3.2(c) or the determination of the Reporting Accountants being made available for collection by the parties pursuant to Clause 3.2(g), the Purchaser shall pay to the Vendor an amount equal to such difference together with interest thereon calculated from the Completion Date in accordance with Clause 14. (ii) If the Current Tax Adjustment as shown in the Completion Accounts is more than US$1,300,000, then within 14 days of either the Completion Accounts becoming final and binding under Clause 3.2(c) or the determination of the Reporting Accountants being made available for collection by the parties pursuant to Clause 3.2(g), the Vendor shall pay to the Purchaser an amount equal to such difference together with interest thereon calculated from the Completion Date in accordance with Clause 14. If the Current Tax Adjustment as shown in the Completion Accounts is less than US$1,300,000, then within 14 days of either the Completion Accounts becoming final and binding under Clause 3.2(c) or the determination of the Reporting Accountants being made available for collection by the parties pursuant to Clause 3.2(g), the Purchaser shall pay to the Vendor an amount equal to such difference together with the interest thereon calculated from the Completion Date in accordance with Clause 14. (iii) The Vendor and the Purchaser acknowledge and agree that, to the extent possible, the Purchaser shall obtain payment of any sums owing to it, as a result of the adjustment of the Purchase Price pursuant to Clause 3.3(a), from the Escrow Account for same day value. For the avoidance of doubt, in the event that the said payment cannot be satisfied in full from the monies in the Escrow Account, the Purchaser shall be entitled to any shortfall from the Vendor in immediately available funds. (b) (i) Schedule 6 shall apply with respect to the Coventry Property. (ii) If by the End Date (as defined in Schedule 6) the Vendor has not complied with paragraph 6 of Schedule 6 therein, the Vendor shall forthwith pay the Purchaser US$1,000,000 in immediately available funds. The Vendor and the Purchaser acknowledge and agree that to the extent possible the Purchaser shall obtain payment of the said US$1,000,000 from the Escrow Account for same day 10 value. For the avoidance of doubt, in the event that the said payment cannot be satisfied in full from the monies in the Escrow Account, the Purchaser shall be entitled to any shortfall from the Vendor in immediately available funds. Upon payment in accordance with the foregoing, the Vendor shall have no further responsibility in respect of the Coventry Lease and the Coventry Property (but without prejudice to the warranties contained in this Agreement). (iii) Notwithstanding the provisions of Clauses 3.3(b)(i) and 3.3(b)(ii), the Purchaser and WPI Husky shall cooperate with the Vendor in any negotiations with the landlord regarding the surrender of the Coventry Lease and the grant of a new lease to WPI Husky as provided in paragraphs 4.6 and 4.7 of Schedule 6 hereto. (c) (i) If, as a result of the Group Companies setting off their trading losses for the financial year ended 26 September 1999 against their profits for the financial year ended 27 September 1998, the Inland Revenue agrees to a reduction in the corporation tax liability of the Group Companies (or to a refund of corporation tax already paid by the Group Companies) in respect of the year ended 27 September 1998, to the extent that such reduction in liability (or refund) has not already been taken into account in the calculation of the Current Tax Adjustment, the Purchaser shall pay an amount equal to such reduction in liability (or refund) to the Vendor within 30 days of receiving the same PROVIDED THAT no such payment shall be made before the Inland Revenue has agreed the tax computations of the Vendor and WPI Husky for the financial year ended 26 September 1999. (ii) In order that the Group Companies may have sufficient trading losses for the financial year ended 26 September 1999 to set off against their profits for the financial year ended 27 September 1998, the Vendor hereby agrees to surrender for no cost its tax losses, and to procure the surrender for no cost by WPI Oyster Termiflex Limited of its tax losses, for the two financial years ended 26 September 1999 to such of the Group Companies as the Purchaser may direct and to cooperate fully with the Purchaser, on behalf of the Group Companies, as regards the filing of the necessary documentation with the Inland Revenue to effect such surrender. (d) It is acknowledged by the parties that WPI Husky has made payments on account to the Inland Revenue in respect of its anticipated tax liabilities for the financial year ending 26 September 1999 totalling (Pounds)250,000. It is anticipated that the Accounts for certain of the Group Companies will show a trading loss in respect of such year. The Purchaser agrees to use reasonable endeavours to obtain the refund of such pre-payments from the Inland Revenue and shall pay an amount equal to any such repayment to the Vendor within 30 days of receiving the same PROVIDED THAT no such payment shall 11 be made before the Inland Revenue has agreed the tax computations of the Vendor and WPI Husky for the financial year ended 26 September 1999. 3.4 Currency All amounts used or calculated in this Clause 3 shall be -------- determined in UK pounds sterling and then converted into US dollars using the prevailing London spot rate of exchange as reported in the Financial Times the day following February 21, 2000. All payments to be made under this Clause 3 shall be made in U.S. dollars. 3.5 Escrow Arrangements On Completion, 5% of the Purchase Price shall be ------------------- deposited by the Purchaser for itself and on behalf of the US Purchaser and the UK Purchaser with the Escrow Agent, to be held, invested and distributed subject to the terms of the Escrow Agreement. The Purchaser, the US Purchaser and the UK Purchaser may use money in the Escrow Account to settle claims by the Purchaser and/or the US Purchaser and/or the UK Purchaser under or pursuant to Clause 6 of this Agreement, under or pursuant to the Asset Purchase Agreement or under or pursuant to the UK Asset Purchase Agreement or under the Tax Deed. The Purchaser shall also be entitled to use money in the Escrow Account to settle any amount due to the Purchaser from the Vendor pursuant to Clause 3.3 of this Agreement. 3.6 Inter-Company Debt The Vendor agrees, at or prior to Completion, to ------------------ discharge or procure the discharge of all inter-company indebtedness in relation to each Group Company at or prior to Completion. 4 Warranties ---------- 4.1 The Vendor and Guarantor (collectively the "Warrantors") warrant jointly ---------- and severally to the Purchaser that each Warranty is true, accurate and not misleading at the date of this Agreement and at Completion in accordance with Clause 4.6. 4.2 The Warrantors acknowledge that the Purchaser is entering into this Agreement in reliance on each Warranty and the undertakings of the Vendor contained in Clause 9 which have also been given as a representation and with the intention of inducing the Purchaser to enter into this Agreement. 4.3 The Purchaser may rely on the Warranties in warranting to any subsequent purchaser of all or any of the Shares or of all or any part of the undertaking of any Group Company. 4.4 The Warranties are qualified by the facts and circumstances fairly disclosed in the Disclosure Letter. No other knowledge regarding any Group Company (actual, constructive or imputed) prevents or limits a claim made by the Purchaser for breach of Clause 4.1. The Vendor shall not seek to rely on the Purchaser's knowledge (actual, constructive or imputed) of a fact or circumstance which might make a Warranty untrue, inaccurate or misleading as a defence to a claim for breach of Clause 4.1. Where a 12 warranty is qualified by the words "so far as the Vendor is aware", "To the best of the knowledge, information and belief of the Vendor", it shall be deemed to be given after the Vendor has made reasonable enquiry only of the senior management of the Group Companies and for the purposes of this Clause "senior management" shall mean Messrs. M. Tule, J. Powers, J. Allard, K. Webb, C. Fellows, T. Blyth, R. Beyer, Ms. S. Patterson, P. Westmoreland, C. Quivaux and M. Krodel. 4.5 Each Warranty is to be construed independently and (except where this Agreement provides otherwise) is not limited by a provision of this Agreement or another Warranty. 4.6 The Vendor further warrants to the Purchaser and its successors in title that subject to Clause 4.1, each Warranty will be true and accurate in all respects and not misleading in any respect at Completion as if each Warranty had been given again at Completion. If after the signing of this Agreement and before Completion any event shall occur or matter arises which results or may result in any Warranty being unfulfilled, untrue, misleading or incorrect in any respect at Completion, the Vendor shall immediately notify the Purchaser in writing thereof prior to Completion and the Vendor (at its own cost) shall make investigation concerning the event or matter which the Purchaser may require. 5 Action Pending Completion ------------------------- 5.1 The Vendor shall procure that, pending Completion: (a) each Group Company will carry on business only in the ordinary course consistent with past practice, save insofar as agreed in writing by the Purchaser (such agreement not to be unreasonably withheld or delayed); (b) the Purchaser and its agents will, upon reasonable notice with the prior written agreement of the Vendor (acting by the Chief Executive Officer, Chief Financial Officer or General Counsel of the Guarantor), (such agreement not to be unreasonably withheld or delayed), be allowed access to, and to take copies of, the books and records of each Group Company including, without limitation, the statutory books, minute books, leases, licenses, contracts, details of receivables, Intellectual Property, tax records, supplier lists and customer lists in the possession or control of any Group Company; (c) such representatives and advisers as the Purchaser reasonably requests with the prior written agreement of the Vendor (acting by the Chief Executive Officer, Chief Financial Officer or General Counsel of the Guarantor), (such agreement not to be unreasonably withheld or delayed), may be designated to work with the Vendor with regard to the management and operations of any of the Group Companies. The Vendor will consult, and will cause the Group Companies to consult, with such representatives 13 and advisers with respect to any action which may materially affect the business of any Group Company taken as a whole. The Vendor will furnish and will cause the Group to provide to such representatives and advisers such information as they may reasonably request for this purpose; (d) each Group Company shall take all reasonable steps to preserve its assets and, in particular, will maintain in force all insurance policies currently in place and all other such insurances normally kept in force; and (e) each Group Company shall take all reasonable steps to preserve the validity of its Intellectual Property. 5.2 Without prejudice to the generality of Clause 5.1, the Vendor shall collaborate fully with the Purchaser in relation to all material matters concerning the running of the Group between the date of this Agreement and Completion and during that period shall procure that each Group Company shall not without the prior written consent of the Purchaser: (a) incur or enter into any agreement or commitment involving any capital expenditure in excess of (Pounds)20,000 per item and (Pounds)100,000 in aggregate; (b) enter into or amend any contract or commitment which is not capable of being terminated without compensation at any time with three months' notice or less or which is not in the ordinary course of business or which involves or may involve total annual expenditure in excess of (Pounds)25,000; (c) in relation to any Property: (i) apply for any planning permission or implement any planning permission already obtained but not implemented; (ii) carry out any material structural alteration or addition to, or materially effect any change of use of, such Property; (iii) terminate or serve any notice to terminate, surrender or accept any surrender of or waive the terms of any lease, tenancy or license which is material in the context of the relevant Group Company; (iv) agree any new rent or fee payable under any lease, tenancy or license which is material in the context of the relevant Group Company; (v) enter into or vary any agreement, lease, tenancy, license or other commitment which is material in the context of the relevant Group Company; 14 (vi) sell, convey, transfer, assign or charge any Property or grant any rights or easements over any Property or enter into any covenants affecting any Property or agree to do any of the foregoing; (d) incur any additional borrowing or incur any other indebtedness (including without limitation any overdrafts); (e) save as required by law, make any amendment to the terms and conditions of employment (including, without limitation, remuneration, pension entitlements and other benefits) of any employee (other than minor increases which the Vendor shall notify to the Purchaser as soon as reasonably possible), provide or agree to provide any gratuitous payment or benefit to any such person or any of their dependants, or dismiss any employee or engage or appoint any additional employee; (f) discontinue or amend The Plan to any material extent or commence to wind it up or cause it to cease to admit new members or communicate to any employee any material plan, proposal or intention to amend, wind up, terminate or exercise any discretion in relation to The Plan; (g) pay any benefits under The Plan other than in accordance with the terms of the documents governing such scheme and not under any discretionary power; (h) in relation to The Husky Plan, take any action to reverse the winding- up of The Husky Plan or to do or omit to do anything which would alter to any extent the liability (if any) of any Group Company in respect of The Husky Plan; (i) acquire or agree to dispose of or agree to dispose of any material asset or material stocks or enter into or amend any material contract or arrangement, in each case, involving consideration, expenditure or liabilities in excess of (Pounds)25,000; (j) take steps to procure payment by any debtor generally in advance of the date on which book and other debts are usually payable in accordance with the standard terms of business of any Group Company or (if different) the period extended to any particular debtor in which to make payment; (k) delay making payment to any trade creditors generally beyond the date on which payment of the relevant trade debt should be paid in accordance with credit periods authorised by the relevant creditors (or (if different) the period extended by creditors in which to make payment) or extend or amend any of the terms in respect of any trade creditors outside the ordinary course; (l) amend, to any material extent, any of the terms on which goods, facilities or services are supplied, such supplies being material in the context of the relevant Group 15 Company except where required to do so in order to comply with any applicable legal or regulatory requirement; (m) enter into any guarantee, indemnity or other agreement to secure any obligation of a third party or create any Encumbrance over any of its assets or undertaking; (n) amend any insurance contract, fail to notify any insurance claim in accordance with the provisions of the relevant policy or settle any such claim below the amount claimed; (o) allot, issue, redeem or repurchase any share or loan capital (or option to subscribe for the same) of any Group Company; (p) acquire or agree to acquire any share, shares or other interest in any company, partnership or other venture; (q) declare, make or pay any dividend or other distribution to shareholders; or (r) make any change to its accounting practices or policies or amend its memorandum or articles of association. 6 Purchaser's Rights ------------------ 6.1 If Completion takes place and there is a Warranty Claim, the Vendor shall pay the Purchaser on demand (at the Purchaser's option) an amount equal to either: (a) the reduction in the value of the Shares; or (b) if: (i) the value of an asset of each Group Company is or becomes less than the value would have been had the breach not occurred; or (ii) either Group Company is subject to or incurs a liability or an increase in a liability which it would not have been subject to or would not have incurred had the breach not occurred, the reduction in the value of the asset or, as the case may be, the amount of the liability or increased liability. 6.2 The Vendor shall indemnify the Purchaser on demand against each loss, liability and cost which the Purchaser incurs arising (directly or indirectly) out of: 16 (a) the settlement of a claim against the Vendor in respect of a breach or alleged breach of any provision of this Agreement or the enforcement of a settlement; (b) legal proceedings against the Vendor in respect of a breach or alleged breach of any provision of this Agreement in which judgment is given for the Purchaser or the enforcement of the judgment; (c) any Excluded Liabilities; (d) any UK Excluded Liabilities; and whether such loss, liability or cost is incurred before or after the commencement of an action. 7 Limitations on the Vendor's Liability ------------------------------------- 7.1 The Vendor is not liable in respect of a Warranty Claim unless the amount which would otherwise be recoverable from the Vendor (but for this Clause 7.1) in respect of that Warranty Claim exceeds (Pounds)50,000. 7.2 The Vendor is not liable for a Warranty Claim: (a) in respect of the Warranty contained in paragraph 6 of Schedule 4 or for any claim under the Tax Deed unless the Purchaser has notified the Vendor of the Warranty Claim or claim under the Tax Deed stating in reasonable detail the nature of the Warranty Claim or claim under the Tax Deed and, if practicable, the amount claimed not later than three months after the expiry of the period specified by statute during which an assessment of that liability to Tax may be issued by the relevant Tax Authority or, if there is no such period, on or before seven years from the date of Completion but any failure to give such notice shall not affect the rights of the Purchaser except to the extent the Vendor is prejudiced by such failure; (b) in respect of any other Warranty unless the Purchaser has notified the Vendor of the Warranty Claim stating in reasonable detail the nature of the Warranty Claim and, if practicable, the amount claimed on or before 24 months from the date of Completion but any failure to give such notice shall not affect the rights of the Purchaser except to the extent the Vendor is prejudiced by such failure; (c) if and to the extent that such Warranty Claim would occur as a result of any legislation not in force at the date hereof which takes effect retrospectively or occurs as a result of any increase in the rates of Tax in force at the date hereof; (d) if and to the extent that such Warranty Claim would not have arisen but for:- 17 (i) any act, omission, transaction or arrangement after Completion by the Purchaser or any Group Company otherwise than in the ordinary course of business of any Group Company as presently carried on occurring at the written request or with the written approval of the Purchaser; (ii) the effect of the provisions of Sections 393, 393A, 343 and/or 768 ICTA in any Group Company and/or the Purchaser. (e) if and to the extent that: (i) any Group Company actually recovers a sum in respect of the subject matter of such Warranty Claim under the terms of any insurance policy held by any Group Company or from any other third party in force at the date hereof; (ii) the Warranty Claim relates to a claim for Tax and the Vendor has surrendered or procured the surrender of amounts which have offset such Warranty Claim; (iii) the Warranty Claim would not have arisen or would have been reduced or eliminated but for the failure or omission on the part of the Purchaser to make any claim, election, surrender or disclaimer or give any notice or consent to do any other thing under the provisions of any enactment or regulation relating to Tax after Completion; (iv) the Warranty Claim would not have arisen but for any winding up or cessation after Completion of, or any change or diminution after Completion in, any trade or business (or part thereof) carried on by any Group Company; (v) the Warranty Claim would not have arisen but for any change in the accounting policy practice of any Group Company introduced after Completion at the written request or with the written approval of the Purchaser whether with retrospective effect or not unless such change in the accounting policy practice of any Group Company was required to comply with applicable law, regulations, or regulatory requirements or practice in force on or before Completion; (vi) if and to the extent that any sum is received by any Group Company which has previously been written off as unrecoverable in the accounts of that Group Company; (vii) to the extent that the matter giving rise to the Warranty Claim was done or omitted to be done prior to Completion by the Vendor or any Group Company at the request of the Purchaser or its authorised representatives or any of them; 18 (viii) to the extent that the aggregate amount of the liability of the Vendor for all Warranty Claims and all claims under the Tax Deed would thereby exceed 50% of the Purchase Price; (ix) to the extent that the claim has been made good or otherwise compensated for at no expense to the Group Company or the Purchaser. 7.3 If the Purchaser becomes aware of any matter that may give rise to a claim against the Vendor under this Agreement notice of the fact shall be given as soon as possible to the Vendor. 7.4 Without prejudice to the validity of the claim or alleged claim in question, the Purchaser shall allow, and shall procure that the relevant Group Companies allow the Vendor and its accountants and professional advisers to investigate the matter or circumstance alleged to give rise to such claim and whether and to what extent any amount is payable in respect of such claim and for such purpose the Purchaser shall give, and shall procure that the relevant Group Company give, subject to their being paid all reasonable costs and expenses as shall be agreed with the Vendor in advance, all such information and assistance, including access to premises and personnel, documents and records as the Vendor or its accountants or professional advisers may reasonably request. 7.5 If the claim in question is a result of or in connection with a claim or liability to a third party then no admission of liability shall be made by the Vendor and the claim shall not be compromised, disposed or settled without the prior written consent of the Purchaser. 7.6 The Purchaser shall be entitled at its own expense in its absolute discretion to take such action as it deems necessary to avoid, dispute, deny, defend, resist, appeal, compromise or contest such claim or liability (including, without limitation, making counter-claims or other claims against third parties), in the name of and on behalf of the Vendor or the Group Company concerned and to have the conduct of any related proceedings, negotiations or appeals provided that in taking such action the Purchaser will act in such a way to minimise as far as reasonably practicable any damage or harm to the name of the Vendor or, inter alia, damage or harm to the business, trading or financial prospects of the Vendor. The provision of Clauses 7.3, 7.4, 7.5 and 7.6 shall not apply to any claim for breach of a warranty contained in paragraph 6 of Schedule 4 and the provisions of Clause 5 of the Tax Deed shall apply to such claims. 7.7 Clauses 7.1 to 7.3 do not apply in respect of a Warranty Claim involving or relating to breach of Clause 4.1 in respect of a Warranty contained in paragraph 3 of Schedule 4. 19 7.8 Nothing in this Clause 7 shall have the effect of limiting or restricting any liability of the Vendor in respect of a Warranty Claim arising as a result of any fraud, wilful misconduct or wilful concealment by the Vendor or any officer or employee or any of the directors of the Group Companies. 7.9 Any amount paid in respect of any Warranty Claim or under the Tax Deed shall be treated as a reduction in the consideration paid for the Shares. 7.10 If the Purchaser is entitled in its sole discretion (but subject to Clause 5 of the Tax Deed) to make both a Warranty Claim and a claim under the Tax Deed, the Warranty Claim shall be made first. 7.11 All Warranties, representations, indemnifications, covenants, agreements and obligations given or entered into by more than one person in this Agreement are given or entered into jointly and severally. 7.12 The limitations on liability of the Vendor set out in Clause 3 of the Tax Deed shall apply to limit the liability of the Vendor in respect of Warranty Claims under the Warranties contained in paragraph 6 of Schedule 4 of this Agreement as if set out herein mutatis mutandis. 8 Use of Intellectual Property Rights ----------------------------------- The Vendor shall not with, through or as manager, adviser, consultant or agent for a person directly or indirectly use or authorise, encourage or assist any person to use in connection with a business which competes, directly or indirectly, with a business of any Group Company as operated at the date of this Agreement, any of the Intellectual Property Rights or use in that connection anything which is intended, or is likely to be confused, with any of the Intellectual Property Rights. 9 Vendor's Undertakings and Guarantee ----------------------------------- 9.1 The Vendor undertakes to the Purchaser and its successors in title, for itself and as agent and trustee for the Group Companies, that it will not and will procure that any subsidiary undertaking, fellow subsidiary undertaking or holding company or director of the Vendor will not and will procure that no person, firm or company carrying on with the consent of the Vendor any business in succession to the Vendor will do any of the following things: (a) for a period of 3 years starting on the date of this Agreement through or as adviser to, or agent of, or manager for, or any person directly or indirectly carry on or be engaged, concerned or interested in or assist a business which competes, directly or indirectly, with a business of any Group Company as carried on at the date of this Agreement (whether carried on under the name "WPI Group (UK)" or "WPI Husky 20 Technology" or any name likely to be confused therewith or otherwise) or at any time in the twelve months prior to that date in a territory in which that business is or was carried on at any such date or time provided that this Clause 9.1(a) shall not apply to the MPSI business and US Termiflex hand-held business currently carried on by and on behalf of the Guarantor; (b) for a period of 3 years starting on the date of this Agreement, do or say anything which is harmful to any Group Company's goodwill (as subsisting at the date of this Agreement) or which may lead a person who has dealt with any Group Company at any time during the twelve months prior to the date of this Agreement to cease to deal with any Group Company on substantially equivalent terms to those previously offered or at all; (c) for a period of 3 years starting on the date of this Agreement, other than in the ordinary course of business of any Group Company, on its own account or in conjunction with or on behalf of any other person in respect of the products or services of a business of any Group Company either seek to obtain orders from, or do business with, or encourage directly or indirectly another person to obtain orders from, or do business with, a person who has been a customer of that business at any time during the twelve months prior to the date of this Agreement for the products or services of that business in its territory of operation; (d) for a period of 3 years starting on the date of this Agreement, engage, employ, solicit or contact with a view to engagement or employment by another person, a director, officer, employee or manager of any Group Company or a person who was a director, employee or manager of any Group Company at any time during the twelve months prior to the date of this Agreement, in either case where the person in question either has Confidential Information or know-how and would be in a position to exploit either Company's trade connections or those of any Group Company; or (e) for a period of 3 years starting on the date of this Agreement, seek to contract with or engage (in such a way as to affect adversely a business of any Group Company as carried on at the date of this Agreement) a person who has been contracted with or engaged to manufacture, assemble, supply or deliver goods or services to that business at any time during the twelve months prior to the date of this Agreement. 9.2 Each undertaking in Clause 9.1 constitutes an entirely independent undertaking and if one or more of the undertakings is held to be against the public interest or unlawful or in any way an unreasonable restraint of trade: (a) the remaining undertaking(s) shall continue to bind the Vendor with such deletion or modification as may be necessary to make it valid and enforceable; and 21 (b) if such undertaking(s) would not be held to be so if any period of time expressed therein were expressed as a shorter period of time then such undertaking(s) shall be deemed given for such shorter period of time. 9.3 On receiving the Purchaser's reasonable request the Vendor shall (at its own cost): (a) do and execute, or arrange to be done and executed, each act, document and thing necessary to implement this Agreement; and (b) give to the Purchaser all information it possesses or to which it has access relating to the business of any Group Company and allow the Purchaser to copy any document containing that information. 9.4 The Vendor agrees that the restrictions contained in this Clause 9 are no greater than reasonable and necessary for the protection of the interest of the Purchaser. 9.5 As soon as possible prior to Completion, the Vendor shall procure that the name of WPI Husky and WPI Husky GmbH shall be changed to names not incorporating "WPI" or "Termiflex" or any words resembling the same. 9.6 Without prejudice to Clause 9.5, from the Completion Date, the Purchaser shall not and shall procure that each Group Company and any other company connected with the Purchaser shall not, save as permitted in Clause 9.7 or as contemplated by Clause 9.5 adopt, use or carry on business under any name incorporating the word "WPI" or any words resembling the same. 9.7 The Purchaser shall after Completion take all steps necessary to remove, and shall procure that each of the Group Companies and any other company connected with the Purchaser removes, the name "WPI" from all business materials used in the United Kingdom, France or Germany including without limitation, advertising materials and all company vehicles, properties and marketing products in the United Kingdom, France and Germany within 3 months after Completion. Prior to the expiry of the 3 month period all advertising materials shall be overstamped with the new names of the relevant companies. 9.8 The Vendor, the US Vendor, the UK Vendor and the Guarantor agree, that immediately upon receipt by the Vendor, the US Vendor, the UK Vendor of the Purchase Price pursuant to Clause a2.2, net of the Vendor's, the US Vendor's and the UK Vendor's costs arising out of such transactions (the "Proceeds"), the -------- Vendor, the US Vendor and the UK Vendor shall, and the Guarantor shall procure that the Vendor, the US Vendor and the UK Vendor pay the Proceeds to each of the creditors of the Vendor, the US Vendor and the UK Vendor. 22 9.9 In consideration of the Purchaser entering into this Agreement the Guarantor, at the request of the Vendor, the US Vendor and the UK Vendor, hereby unconditionally guarantees to the Purchaser, the US Purchaser and the UK Purchaser and their respective successors, transferees and assigns the due and punctual performance and observance by the Vendor, the US Vendor and the UK Vendor of all the Vendor's, the US Vendor's and the UK Vendor's obligations and the punctual discharge by the Vendor, the US Vendor and the UK Vendor of all the Vendor's, the US Vendor's and the UK Vendor's liabilities to the Purchaser, the US Purchaser and the UK Purchaser contained in or arising under this Agreement or under the Asset Purchase Agreement or under the UK Asset Purchase Agreement or the Tax Deed or arising from any termination thereof. 9.10 If the Vendor, the US Vendor or the UK Vendor shall make default in the payment when due of any amount payable to the Purchaser, the US Purchaser or the UK Purchaser under this Agreement or the Asset Purchase Agreement or the UK Asset Purchase Agreement or arising from the termination thereof, the Guarantor shall forthwith on demand by the Purchaser and/or the US Purchaser and/or the UK Purchaser unconditionally pay to the Purchaser and/or the US Purchaser and/or the UK Purchaser in the manner prescribed in this Agreement an amount equal to the amount payable by the Vendor, the US Vendor or the UK Vendor, as the case may be. 9.11 As an independent and primary obligation, without prejudice to Clause 9.9 the Guarantor hereby unconditionally and irrevocably agrees to indemnify and keep indemnified the Purchaser, the US Purchaser and the UK Purchaser against all and any losses, costs, claims, liabilities, damages, demands and expenses suffered or incurred by the Purchaser, the US Purchaser and the UK Purchaser arising from failure of the Vendor, the US Vendor and the UK Vendor to comply with any of its obligations or discharge any of its liabilities under this Agreement or the Asset Purchase Agreement or the UK Asset Purchase Agreement or the Tax Deed or arising from the termination thereof or by reason of the Vendor, the US Vendor or the UK Vendor not being at any time, or ceasing to be, liable in respect of the obligations and liabilities purported to be assumed by it in accordance with the express terms of this Agreement or the Asset Purchase Agreement or the UK Asset Purchase Agreement or the Tax Deed. 9.12 The guarantee and indemnity contained in this Clause shall be a continuing guarantee and indemnity and shall continue in full force and effect until all liabilities or purported liabilities of the Vendor, the US Vendor or the UK Vendor arising under, and all monies owing or payable or purported to be owing or payable by the Vendor, the US Vendor or the UK Vendor under this Agreement or the Asset Purchase Agreement or the UK Asset Purchase Agreement or the Tax Deed or arising from any termination thereof, have been paid, discharged or satisfied in full and notwithstanding any insolvency of the Vendor, the US Vendor or the UK Vendor or any change in the status of the Vendor, the US Vendor or the UK Vendor. 23 9.13 The Guarantor shall not be exonerated or discharged nor shall its liability be affected by any forbearance, whether as to payment, time, performance or otherwise howsoever, or by any other indulgence being given to the Vendor, the US Vendor or the UK Vendor or by any variation of the terms of this Agreement or by any act, thing, omission or means whatever which, but for this provision, might operate to exonerate or discharge the Guarantor from its obligations under the guarantee and indemnity contained in Clauses 9.9 to 9.13. 9.14 The Vendor undertakes to indemnify and keep indemnified the Purchaser from and against any liability, loss, damage, cost, claim or reasonable expense of whatever kind which it may incur arising out of or in connection with The Husky Plan up to the Completion Date. 9.15 The Vendor undertakes to indemnify and keep indemnified the Purchaser for itself and on behalf of any Group Company from and against any liability, cost, claim or reasonable expense of whatever kind which it may incur arising out of or in connection with any claims (and for the avoidance of doubt, in connection with and any payment made to the trustees for the time being of The Plan under clause 48.3 of the definitive trust deed and rules of The Plan dated September 15 1998 in respect of any such claim being made against the trustees ) from any current or former employees of the Group Companies relating to benefits on termination of service with a Group Company in respect of The Plan (or represented to have been available under The Plan) to the extent that such claims are made by individuals who on termination had completed less than two years' pensionable service and are for refunds of contributions (and for the avoidance of doubt employer's contributions) in excess of the amounts of their own contributions (plus interest less tax where applicable) in their personal accounts in The Plan. 9.16 The Vendor undertakes to indemnify and keep indemnified the Purchaser from and against any liability, loss, damage, cost, claim or reasonable expense of whatever kind which it may incur arising out of or in connection with Mr. David Pink's participation in The Plan up to the Completion Date. 9.17 The Vendor undertakes to indemnify and keep indemnified the Purchaser from and against any liability, loss, damage, cost, claim or expense of whatever kind which it may incur or may be suffered by the Purchaser arising from the performance by WPI Husky of the terms and conditions of the Purchase Contract of the Owner Obligations (as defined therein) whether for itself or for and on behalf of WPI Oyster Termiflex Ltd or arising from any non-performance or alleged non-performance of the terms and conditions of the Purchase Contract of such Owner Obligations. 24 10 Confidential Information ------------------------ 10.1 The Vendor undertakes to the Purchaser, for itself and as agent and trustee for each Group Company, that before and after Completion the Vendor shall not, except as required by Clause 5, use or disclose, or permit the use or disclosure of, any Confidential Information. 10.2 Clause 10.1 does not apply to disclosure of Confidential Information: (a) to a director, officer or employee of the Purchaser or any Group Company whose function requires him to have the Confidential Information; (b) required to be disclosed by law, provided that the disclosure shall be made after consultation with the Purchaser and after taking into account the Purchaser's reasonable requirements as to its timing, content and manner of making or despatch; or (c) to an adviser for the purpose of advising the Vendor in connection with the transactions contemplated by this Agreement provided that such disclosure is essential for these purposes and is on the basis that Clause 10.1 applies to the disclosure by the adviser. 11 Announcements ------------- Neither party may, before or after Completion, make or send or issue a public announcement, communication or circular concerning the transactions referred to in this Agreement unless they have first obtained the other party's prior written consent. This shall not affect any announcement or circular required by law or any regulatory body or the rules of any recognised stock exchange but the party with an obligation to make an announcement, communication or circular shall first consult with the other party on the form, substance and timing of such disclosure insofar as is reasonably practicable before complying with such obligations. 12 Competition ----------- Notwithstanding any other provision of this Agreement, if there are provisions of this Agreement (or of an agreement or arrangement of which it forms part) by virtue of which particulars of this Agreement (or of an agreement or arrangement of which it forms part) that are, at the date of this Agreement, required to be furnished to the Director General of Fair Trading under the Restrictive Practices Acts 1976 and 1977: (a) the Purchaser shall ensure that particulars are duly furnished as soon as possible and in any event within the time specified by these Acts; and 25 (b) those provisions do not take effect until the day after the particulars have been duly furnished. This Clause shall not apply if this Agreement is, or by virtue of the Competition Act 1998, is to be treated as, a non-notifiable agreement for the purposes of the Restrictive Trade Practices Acts 1976 and 1977. For the purposes of this Clause 12, the term "Agreement" shall include every other agreement which forms part of the same arrangement. 13 Costs ----- The Vendor shall bear all costs incurred by it and the Group in connection with the preparation, negotiation, execution and performance by it of this Agreement, the Tax Deed and the sale of Shares. The Purchaser shall bear all such costs incurred by it. 14 Interest -------- If the Vendor, the US Vendor, the UK Vendor or the Purchaser, the US Purchaser or the UK Purchaser default in the payment when due or any sum payable under this Agreement, the Asset Purchase Agreement, the UK Asset Purchase Agreement or the Tax Deed (howsoever determined) the liability of the relevant Vendor or the relevant Purchaser as the case may be shall be increased to include interest on such sum from the date when such payment is due until the date of actual payment (as well as after or before judgment) at a rate of 3 per cent above the base rate from time to time of Barclays Bank PLC. Such interest shall accrue from day to day. 15 General ------- 15.1 A variation of this Agreement is valid only if it is in writing and signed by or on behalf of each party. 15.2 The failure to exercise or delay in exercising a right or remedy provided with this Agreement or by law does not constitute a waiver of the right or remedy or a waiver of other rights or remedies. No single or partial exercise of a right or remedy provided by this Agreement or by law prevents further exercise of the right or remedy or the exercise of another right or remedy. 15.3 The Purchaser's rights and remedies contained in this Agreement are cumulative and not exclusive of rights and remedies provided by law. 15.4 Except to the extent that they have been performed and except where this Agreement provides otherwise, the obligations contained in this Agreement remain in force after Completion. 26 16 Assignment ---------- The Purchaser and the UK Purchaser may assign and transfer any of its rights under the Agreement, the UK Asset Purchase Agreement or Tax Deed in whole or in part and without restriction. 17 Time of the Essence ------------------- Time shall be of the essence of this Agreement both as regards any dates and periods mentioned and as regards any dates and periods which may be substituted for them in accordance with this Agreement or by agreement in writing between the parties. 18 Further Assurance ----------------- At any time after the date of this Agreement, the Vendor shall use its best endeavors to procure that any necessary third party shall execute such documents and do such acts and things as the Purchaser may reasonably require for the purpose of giving to the Purchaser the full benefit of all the provisions of this Agreement, the Asset Purchase Agreement, or the Asset Purchase Agreement or Tax Deed. 19 Interpretation -------------- 19.1 In this Agreement: "Accounts" means each Group Company's individual accounts (as that term is -------- used in section 226 of the CA 1985) and cashflow statement for the financial year ended on the Reference Accounts Date, the auditors' report on those accounts, the directors' report for that year and the notes to those accounts; "ANG Noteholders" means the holders of the promissory notes, each dated as --------------- of August 3, 1998, executed by the Guarantor in favour of the following persons or entities in the following original principal amounts: (a) $275,000 to The - Allard Children's Trust f/b/o Lisa Dibrigida; (b) $275,000 to The Allard - Children's Trust f/b/o Kim Allard; (c) $275,000 to The Allard Children's Trust - f/b/o Michael E. Allard; (d) $275,000 to Gerald R. Allard, trustee of The Gerald - R. Allard Revocable Trust; (e) $458,150 to David and Angella Nazarian, trustees - of The Nazarian Family Trust; (f) $458,425 to Younes Nazarian; and (g) $458,425 - - to David Nazarian, trustee of The Samy Nazarian Trust; "Asset Purchase Agreement" means the agreement to be entered into between ------------------------ the US Vendor, the Guarantor and the US Purchaser; "Asset Purchase Price" means the purchase price for each of the Shares, the -------------------- UK Assets and the US Assets set forth in Schedule 7 hereto; 27 "Assumed Liabilities" means the liabilities to be assumed by the US ------------------- Purchaser pursuant to the terms of the Asset Purchase Agreement; "Business Day" means any day (other than a Saturday) when banks are open in ------------ London for ordinary banking business; "CA 1985" means the Companies Act 1985; ------- "Claim" means a claim by the Purchaser under or pursuant to the provisions ----- of Clause 4.1 or a claim by the Purchaser under the Tax Deed; "Code" means the United States Internal Revenue Code of 1986, as amended. ---- "Company" means WPI Husky, a company incorporated in England and Wales ------- (registered number 01328356), and whose registered office is at Eden Road, Walsgrave Triangle Business Park, Coventry, West Midlands CV2 2TB and WPI Husky GmbH, incorporated in Germany (registered file number HRB 3396) and whose registered office is at Auelweg 18, 53797 Lohmar, Germany; "Completion" means completion of the sale and purchase of the Shares in ---------- accordance with this Agreement; "Completion Accounts" shall have the meanings set out in Clause 3.1; ------------------- "Confidential Information" means all information which is used in or ------------------------ otherwise relates to any Group Company's business, customers or financial or other affairs, including, without limitation, information relating to: (a) the marketing of goods or services including, without limitation, customer names and lists and other details of customers, sales data, prices and promotional material; or (b) future projects, business development or planning, commercial relationships and negotiations; but does not include information which is made public by, or with the consent of, the Purchaser after the Completion Date or which is in the public domain or becomes a part of the public domain through no fault of the Vendor; "Coventry Lease" means the lease of the Coventry Property as described in -------------- Schedule 5; 28 "Disclosure Letter" means the letter from the Vendor to the Purchaser in ----------------- relation to the Warranties having the same date as this Agreement, the receipt of which has been acknowledged by the Purchaser; "Encumbrance" means a mortgage, charge, pledge, lien, option, restriction, ----------- right of first refusal, right of pre-emption, third-party right or interest, other encumbrance or security interest of any kind, or another arrangement (including, without limitation, a title transfer or retention arrangement) having similar effect; "Escrow Account" means the designated account set forth in the Escrow -------------- Agreement; "Escrow Agent" means Citizens Bank appointed as agent under the Escrow ------------ Agreement or Cobbetts or such other person(s) to be appointed until the execution of the Escrow Agreement pursuant to the side letter to be entered into between Cobbetts, the Vendor and the Purchaser and references in this Agreement to "Escrow Agent" shall be deemed to refer to Citizens Bank and/or Cobbetts, as the case may be; "Escrow Agreement" means the agreement in the agreed form relating to the ---------------- deposit of 5% of the Purchase Price with the Escrow Agent pursuant to Clause 3.5 or such side letter in the agreed form to be entered into between the Vendor, the Purchaser and Cobbetts until the execution of the Escrow Agreement; "Escrow Amount" means US$1,730,640; ------------- "Excluded Liabilities" shall have the meaning set out in the UK Asset -------------------- Purchase Agreement; "Financial Statements" means the financial statements of the Guarantor as -------------------- of September 26, 1999 included in the Annual Report on Form 10-K for the fiscal year ending September 26, 1999; "FRS" means a financial reporting standard adopted or issued by the --- Accounting Standards Board; "Group" or "Group Companies" means each Company and "Group Company" means ----- --------------- ------------- any one of them; "ICTA" means the Income and Corporation Taxes Act 1988; ---- "Intellectual Property" means: --------------------- (a) patents, trade marks, service marks, registered designs, applications and rights to apply for any of those rights, trade, business and company names, logos, internet 29 domain names and e-mail addresses, unregistered trade marks and service marks, copyrights, database rights, know-how, rights in designs and inventions, database rights and all similar rights which may subsist in any part of the world including, where such rights are obtained or enhanced by registration, any registration of such rights and applications and rights to apply for such registrations; (b) rights under licences, consents, orders, statutes or otherwise in relation to a right in paragraph (a); (c) rights of the same or similar effect or nature as or to those in paragraphs (a) and (b) which now or in the future may subsist; and (d) the right to sue for past infringements of any of the foregoing rights; "Intellectual Property Rights" means all Intellectual Property owned, used ---------------------------- or required to be used, by WPI Group, or any Group Company; "Legal Opinion" means the legal opinion to be delivered to the Purchaser at ------------- or prior to Completion by the Vendor's Solicitors in accordance with Clause 2.4(h); "Management Accounts" means the unaudited profit and loss account of each ------------------- Company in respect of the period starting on the date after the Reference Accounts Date and ending on 31 December, 1999 and the unaudited balance sheet of each Group Company as at 30 September, 1999; "Permit" means: ------ (a) a permit, licence, consent, approval, certificate, qualification, specification, registration or other authorisation; or (b) a filing of a notification, report or assessment, in each case necessary for the effective operation of each Group Company's business, its ownership, possession, occupation or use of an asset or the execution or performance of this Agreement; "Property" means the property and interests set out in Schedule 5; -------- "Purchaser's Accountants" means PricewaterhouseCoopers of 9 Greyfriars ----------------------- Road, Reading RG1 1JG; "Purchase Contract" means the contract for the purchase of the Printapen ----------------- 5000 dated June 7, 1999 between WPI Husky and KPR Midlink Limited; 30 "Purchaser's Solicitors" means Debevoise & Plimpton of Tower 42, ---------------------- International Financial Centre, Old Broad Street, London EC2N 1HQ; "Reference Accounts Date" means 30 September 1999; ----------------------- "Shares" means 110 ordinary shares of 10p each and 100 deferred shares of ------ (Pounds)1 each, each fully paid, of WPI Husky, comprising the entire issued share capital of WPI Husky and 1 fully paid ordinary share of 50,000 DM of WPI Husky GmbH, comprising the entire issued share capital of WPI Husky GmbH; "Tax" and "Taxation" has the meaning given in the Tax Deed; --- -------- "Tax Authority" has the meaning given in the Tax Deed; ------------- "Tax Deed" means a Tax Deed in the agreed form between the Vendor, the -------- Guarantor and the Purchaser; "TCGA" means the Taxation of Chargeable Gains Act 1992; ---- "The Husky Plan" means the Husky Computers Employee Benefit Plan (1983); -------------- "The Plan" means the WPI Group Money Purchase Plan and where the context so -------- requires, the trustees of The Plan; "UK Asset Purchase Agreement" means the agreement to be entered into --------------------------- between the UK Vendor and the UK Purchaser; "UK Assets" means the assets owned by the UK Vendor to be sold to the UK --------- Purchaser pursuant to the UK Asset Purchase Agreement; "UK Assumed Liabilities" shall have the meaning set out in the UK Asset ---------------------- Purchase Agreement; "UK Excluded Liabilities" shall have the meaning referred to as the ----------------------- "Excluded Liabilities" set out in the UK Asset Purchase Agreement; "US Assets" means the assets owned by the US Vendor to be sold to the US --------- Purchaser pursuant to the Asset Purchase Agreement; "US Legal Opinion" means the US legal opinion to be delivered to the ---------------- Purchaser at or prior to Completion from the Vendor's and Guarantor's legal counsel in accordance with Clause 2.4(g); "VATA" means, in the United Kingdom, the Value Added Tax Act 1994 and, in a ---- jurisdiction outside the United Kingdom, any equivalent legalisation; 31 "Vendor's Accountants" means Arthur Andersen, of One Victoria Square, -------------------- Birmingham B1 1BD; "Vendor's Solicitors" means Cobbetts, of Ship Canal House, King Street, ------------------- Manchester, M2 4WB, Manchester; "Warranty" means a statement contained in Schedule 4 and "Warranties" means -------- ---------- all those statements; "Warranty Claim" means a claim by the Purchaser under or pursuant to the -------------- provisions of Clause 6 or attributable to any inaccuracy of a representation made by the US Vendor pursuant to Section 3 of the Asset Purchase Agreement or attributable to any claim made by the UK Purchaser under or pursuant to Clause 10 of the UK Asset Purchase Agreement; "WPI Group" means each of the Vendor, the Guarantor and any of their --------- respective subsidiaries; "WPI Husky GmbH" means WPI Husky Technology GmbH, a limited liability -------------- company incorporated in Germany and registered at the Commercial Register of the Siegburg Local Court (file number HRB 3396); "WPI France" means the French sales office of WPI Husky located at 12, rue ---------- le Corbusier, Parc d'Affaires SILIC, Batiment Iena B2, Rungis. 19.2 In this Agreement, a reference to: (a) a "subsidiary undertaking" or "parent undertaking" is to be construed ---------------------- ------------------ in accordance with section 258 of the CA 1985 and to a "subsidiary" or "holding ---------- ------- company" is to be construed in accordance with Section 736 of the CA 1985; - - ------- (b) liability under, pursuant to or arising out of (or any analogous expression) any agreement, contract, deed or other instrument includes a reference to contingent liability under, pursuant to or arising out of (or any analogous expression) that agreement, contract, deed or other instrument; (c) a document in the "agreed form" is a reference to a document in a form ----------- approved and for the purposes of identification signed by or on behalf of each party; (d) a statutory provision includes a reference to the statutory provision of modified or re-enacted or both from time to time before the date of this Agreement and any subordinate legislation made under the statutory provisions (as so modified or re-enacted) before the date of this Agreement; 32 (e) a person includes a reference to any individual, firm, company, corporation or other body corporate, government, state or agency or a state or any joint venture, association or partnership (whether or not having separate legal personality); (f) a person includes a reference to that person's legal personal representatives and successors; (g) a Clause, paragraph or Schedule, unless the context otherwise requires, is a reference to a Clause or paragraph of, or Schedule to, this Agreement; and (h) any English legal term for any action, remedy, method of judicial proceeding, legal document, legal status, court, official or any legal concept or thing shall in respect of any jurisdiction other than England be deemed to include what most nearly approximates in that jurisdiction to the English legal term and to any English statute shall be construed so as to include equivalent or analogous laws of any other jurisdiction. 19.3 The headings in this Agreement do not affect its interpretation. 20 Notices ------- 20.1 A notice, claim, demand or other communication under and in connection with this Agreement or with any arbitration under this Agreement (a "Notice") shall ------ be: (a) in writing (b) delivered personally or sent by first class post, prepaid recorded delivery (and airmail if overseas) or by fax to the party due to receive the Notice to the address set out in Clause 20.3 or to another address, person, or fax number specified by that party by not less than seven days' written notice to the other party received before the Notice was despatched. 20.2 Unless there is evidence that it was received earlier, a Notice is deemed given if: (a) delivered personally, when left at the address referred to in Clause 20.1(b); (b) sent by mail, two Business Days after posting; (c) sent by airmail, six Business Days after posting; (d) sent by fax, when confirmation of its transmission has been recorded by the sender's fax machine. 20.3 The address referred to in Clause 20.1(b) is: 33
Marked for the -------------- Name of Party Address Facsimile Number Attention of ------------- ------- ---------------- ------------ The Vendor and WPI 001 603 627 3150 Mike Tule the Guarantor c/o 1155 Elm Street New Hampshire USA Copy to: Cobbetts 0161 833 3030 Chris Dunn Ship Canal House King Street Manchester M2 4WB The Purchaser 3 New England Mark Tremallo Executive Park Burlington Massachusetts 01 803 5087 USA Copy to: Debevoise & Plimpton 0171 588 4180 James Kiernan Tower 42 International Financial Centre Old Broad Street London EC2N 1HQ
21 Governing Law and Jurisdiction ------------------------------ 21.1 This Agreement and the documents to be entered into pursuant to it shall be governed by English law. 21.2 The courts of England have exclusive jurisdiction to settle any dispute arising from or connected with this Agreement and the documents to be entered into pursuant to it (a "Dispute"). ------- 21.3 The parties agree that the courts of England are the most appropriate and convenient courts to settle any Dispute and, accordingly, they will not argue to the 34 contrary. This Clause 21.3 is for the benefit of the Purchaser and shall not limit its right to take proceedings in any other court of competent jurisdiction. 21.4 The parties agree that the documents which start any such action or proceedings (the "Proceedings") and any other documents required to be served in ----------- relation to those Proceedings may be served on the Vendor in accordance with Clause 20. These documents may however be served in any other manner allowed by law. This Clause applies to all Proceedings wherever started. 22 Counterparts ------------ This Agreement may be executed in any number of counterparts, each of which is an original and all of which together evidence the same Agreement. Any party may enter into this Agreement by executing any such counterpart. 35 SCHEDULE 1 ---------- Shareholder Details ------------------- Shareholder No. of Shares Consideration - - ----------- ------------- ------------- WPI Group (UK) 110 ordinary shares of US$21,204,400 10p each 100 deferred shares of (Pounds)1 each in WPI Husky WPI Group (UK) 1 ordinary share of US$500,000 50,000 DM in WPI Husky GmbH 36 SCHEDULE 2 ---------- PART 1. Vendor Details - - -------------- 1 Registered number: 03227062 2 Place of incorporation: England and Wales 3 Registered office: Walsgrave Business Triangle, Coventry, CV2 2TB 4 Type of company: Private Unlimited 5 Allotted share capital: 10,400,000 ordinary shares of (Pounds)1 each 6 Issued share capital: 10,390,540 ordinary shares 7 Directors: John Raymond Allard Michael Henry Foster 8 Secretary: Michael Bradford Tule 9 Accounting reference date: September 30 10 Auditors: Arthur Andersen PART 2. Particulars of each Company: - - --------------------------- WPI Husky - - --------- 1 Registered number: 01328356 2 Place of incorporation: England and Wales 3 Registered office: Walsgrave Business Triangle, Coventry, CV2 2TB 4 Type of company: Private Limited 5 Allotted share capital: 110 ordinary shares of 10p each 100 deferred shares of (Pounds)1 each 37 6 Issued share capital: 110 ordinary shares of 10p each 100 deferred shares of (Pounds)1 each 7 Directors: John Raymond Allard Michael Henry Foster Richard Kantor Karl David Webb 8 Secretary: Michael Bradford Tule 9 Accounting reference date: September 30 10 Auditors: Arthur Andersen WPI Husky Technology GmbH - - ------------------------- 1 Registered number: HRB 3396, Amtsgericht Siegburg 2 Place of incorporation: Germany 3 Registered office: Auelweg 18, 53797 Lohmar, Germany 4 Type of company: Private Limited (GmbH) 5 Allotted share capital: 1 share of 50,000 DM 6 Issued share capital: 1 share of 50,000 DM 7 Directors: Michael Krodel Michael Henry Foster John Raymond Allard 8 Secretary: N/A 9 Accounting reference date: September 30 10 Auditors: Arthur Andersen 38 SCHEDULE 3 ---------- Completion Requirements ----------------------- 1. Vendor's Obligations - - ------------------------- 1.1 At Completion the Vendor shall deliver to the Purchaser: (a) duly executed transfer(s) in respect of the Shares to the Purchaser or its nominee(s) and the share certificate(s) for the Shares and, in the case of WPI Husky GmbH, a duly executed notarial transfer deed; (b) any waiver, consent, release or other document necessary to give the Purchaser or its nominee(s) full legal and beneficial ownership of the Shares; (c) the common seal (if any) of each Group Company and each register, minute book and other book required to be kept by each Group Company under the CA 1985 duly written up to the date of Completion and each certificate of incorporation and certificate of incorporation on change of name for each Group Company the share certificates in respect of each of the subsidiaries; (d) a copy of a letter to each Group Company from its auditors resigning their office with effect from Completion and containing the statement referred to in Section 394 of the CA 1985, the original of the letter having been deposited at the registered office of the relevant company; (e) a resignation in the agreed form from the secretary of each Group Company expressed to take effect from the end of the meeting held pursuant to paragraph 1.2; (f) a resignation in the agreed form from each of the directors of each Group Company expressed to take effect from the end of the meeting held pursuant to paragraph 1.2; (g) the Management Accounts and all title deeds and other documentation relating to the Properties; (h) a copy of each bank mandate of each Group Company and copies of statements of each bank account of each Group Company made up to a date not earlier than two Business Days before Completion; (i) unconditional receipts for rent and other payments due in respect of the leasehold Property; 39 (j) all documentation relating to the Intellectual Property Rights, including (without limitation) the original registration and renewal certificates for each of the Intellectual Property Rights which are registered or pending as at Completion (or copies thereof where such original documentation is not available); (k) evidence satisfactory to the Purchaser that the provisions of Clause 23 of Schedule 4 ("Insider Agreements") have been duly complied with insofar as ------------------ they require certain matters to be dealt with prior to Completion; (l) bank statements of all bank accounts of all Group Companies as at the date of Completion; (m) the Tax Deed duly executed by the Vendor; (n) the Escrow Agreement duly executed by the Vendor, the Guarantor, the US Vendor and the Escrow Agent; 1.2 The Vendor shall ensure that at Completion a meeting of the board of directors of each Group Company is held at which the directors: (a) vote in favour of the registration of the Purchaser or its nominee(s) as member(s) of each Group Company in respect of the Shares (subject to the production of properly stamped transfers); (b) subject to the CA 1985, change each Group Company's accounting reference date to 31 March; (c) appoint persons nominated by the Purchaser as directors, secretary and auditors of each Group Company with effect from the end of the meeting; (d) revoke each existing mandate given by each Group Company for the operation of its bank accounts and pass the resolutions contained in new mandate(s) giving authority to persons nominated by the Purchaser OR with effect from the end of the meeting, authorise the secretary to notify the specimen signatures of the new officers of each Group Company in connection with each existing mandate given by the Group Company for the operation of its bank accounts; (e) accept the resignation of the secretary so as to take effect from the end of the meeting and shall hand to the Purchaser duly certified copies of such Resolutions; (f) accept the resignation of each director so as to take effect from the end of the meeting and shall hand to the Purchaser duly certified copies of such Resolutions. 40 1.3 Each of the requirements set out in Clauses 1.1 and 1.2 above shall apply equally to WPI Husky GmbH to the extent applicable under German law. 2. Purchaser's Obligations - - ---------------------------- 2.1 On Completion, the Purchaser shall deliver to the Vendor: (a) the Tax Deed duly executed duly executed by the Purchaser; and (b) the Escrow Agreement duly executed by the Purchaser and the US Purchaser. 41 SCHEDULE 4 ---------- Warranties ---------- 1. Capacity and Authority - - --------------------------- 1.1 The Vendor and each Group Company are companies duly incorporated and validly existing under English law or the relevant law of incorporation and have been in continuous existence since incorporation. 1.2 Each Group Company has the right, power and authority to conduct its business as conducted at the date of this Agreement and to own or lease its properties, as now conducted, owned or leased. 1.3 The Vendor's obligations under this Agreement, the Tax Deed, the Escrow Agreement and each document to be executed at or before Completion are, or when the relevant document is executed will be, enforceable in accordance with their terms and will not conflict with any other obligation of the Vendor. 2. Information - - ---------------- 2.1 All the information provided to the Purchaser or its agents, employees or advisers is true, accurate and not misleading, save for the information which to the knowledge of the Purchaser is not true, accurate and not misleading. 2.2 The information set out in this Agreement, the Tax Deed and the Disclosure Letter is true, accurate and not misleading. 3. Shares and Subsidiary Undertakings - - --------------------------------------- 3.1 The Vendor is the sole legal and beneficial owner of the number of Shares set out against his name in Schedule 1, free from any Encumbrances. 3.2 The Shares comprise the entire issued share capital of each Group Company, have been properly allotted and issued and are fully paid or credited as fully paid. The particulars of each Group Company set out in Schedule 2 are true and complete and the Vendor has no other subsidiaries other than WPI Husky, WPI Oyster Termiflex Ltd. and WPI Husky GmbH. 3.3 There is no Encumbrance, and there is no agreement, arrangement or obligation to create or give an Encumbrance, in relation to any of the Shares or unissued shares in the capital of any Group Company. No person has claimed to be entitled to an Encumbrance in relation to any of the Shares. 42 3.4 Other than this Agreement, there is no agreement, arrangement or obligation requiring the creation, allotment, issue, transfer, redemption or repayment of or the grant to a person of the right (conditional or not) to require the allotment, issue, transfer, redemption or payment of a share in the capital of any Group Company (including, without limitation, an option or right of pre- emption or conversion). 3.5 A copy of the memorandum and articles of association of each Group Company is annexed to the Disclosure Letter and is true, accurate and complete and has annexed thereto a copy of every resolution or agreement as is required by law to be annexed to it and sets out the rights and restrictions attaching to each class of share capital in each Group Company. 3.6 WPI Husky GmbH does not have and has never had any subsidiary undertaking. 3.7 Each Group Company has no interest in, and has not agreed to acquire an interest in, any corporate body. 4. Accounts - - ------------- 4.1 The Accounts have been prepared and audited on a proper and consistent basis in accordance with the Companies Act 1985 and applicable standards, principles and practices generally accepted in the United Kingdom. 4.2 No change in accounting policies has been made in preparing the accounts of each Group Company for each of the three financial years of each Group Company ended on the Reference Accounts Date, except as stated in the audited financial statements for those years. 4.3 The Accounts show a true and fair view of the assets, liabilities and state of affairs of each Group Company as at the Reference Accounts Date and of the profits and losses of each Group Company for the financial year ended on the Reference Accounts Date. 4.4 To the extent required by the Companies Act 1985 and all appropriate FRS, the Accounts disclose and provide for all bad and doubtful debts, all liabilities (actual contingent or otherwise) and all financial commitments existing at the Reference Accounts Date. 4.5 The results shown by the audited profit and loss accounts of each Group Company for each of the three financial years of each Group Company ended on the Reference Accounts Date have not (except as disclosed in those accounts) been effected by any extraordinary, exceptional or non-recurring item or by another fact or circumstance making the profit or loss for a period covered by any of those accounts unusually high or low. 43 4.6 The Accounts reserve or provide in accordance with applicable standards, principles and practices generally accepted in the United Kingdom for all Tax liable to be assessed on each Group Company, or for which it is or may become accountable, for all periods starting on or before the Reference Accounts Date (whether or not each Group Company has or may have a right of reimbursement against another person). The Accounts reserve in accordance with applicable standards, principles and practices generally accepted in the United Kingdom for all contingent or deferred liabilities to Tax for all periods starting on or before the Reference Accounts Date. 4.7 In the Accounts: (a) stock (except long term contract balances) was valued in the same way as in the audited accounts of each Group Company for the two preceding financial years and on the basis of the lower of cost and net realisable value; (b) all redundant and obsolete stock was written off and all sold, moving and damaged stock was written down appropriately. 4.8 The basis and rates of depreciation and amortisation used in the Accounts were the same as those used in the audited accounts of each Group Company for the two preceding financial years. 4.9 The rates of depreciation and amortisation used in the audited accounts of each Company for the three financial years of each Group Company ended on the Reference Accounts Date were sufficient to ensure that each fixed asset of the Group Company will be written down to nil by the end of its useful life. 4.10 The Management Accounts have been carefully and properly prepared with all due care on a basis consistent with each other and with the Accounts are not misleading with respect to the state of assets, liabilities and affairs of the Group Companies as at the relevant Accounts Date and of the profits or losses for the period concerned. 4.11 Each Group Company's accounting records are up to date, in its possession or under its control and are properly completed in accordance with the law and applicable standards, principles and practices generally accepted in the United Kingdom. 4.12 None of the debts receivable or due to any Group Company which are included in the Audited Accounts or which have subsequently arisen has been outstanding for more than three months from its due date for payment or has been released on terms that the debtor has paid less than the full value of his debt and all such debts have realised or, so far as the Vendor is aware (having made all due enquiry), will realise in the normal course of collection their full value as included in the Audited Accounts or in the books of the relevant Group Company after taking into account the provision for bad and doubtful debts made in the Audited Accounts. For the avoidance of doubt, a debt shall 44 not be regarded as realising its full value to the extent that it is paid, received or otherwise recovered in circumstances in which such payment, receipt or recovery is or may be void, voidable or otherwise liable to be reclaimed or set aside. 4.13 The Guarantor has made available to the Purchaser a complete and correct copy of the Annual Report on Form 10-K of the Guarantor for the fiscal year ending September 26, 1999. The Financial Statements included in such Annual Report have been prepared in accordance with United States generally accepted accounting principles ("GAAP") applied on a consistent basis during the periods involved (except as otherwise noted therein) and fairly present in all material respects the consolidated financial position and the consolidated results of operations and cash flows of the Guarantor and its subsidiaries on a consolidated basis as at the dates thereof or for the periods presented therein. Since September 26, 1999, there has not been any material adverse change in the business, assets, condition (financial or otherwise) or results of operations of the Guarantor and any of its subsidiaries. 5. Changes since the Reference Accounts Date - - ---------------------------------------------- 5.1 Since the Reference Accounts Date: (a) each Group Company's business has been operated in the ordinary and usual course so as to maintain it as a going concern and without any interruption or alteration in the nature, scope or manner of its business; (b) there has been no adverse change in the financial or trading position or turnover of each Group Company; (c) no material change has occurred in the assets and liabilities shown in the Accounts and there has been no reduction in the value of the net tangible assets of each Group Company on the basis of valuation used in the Accounts; and (d) no Group Company has borrowed or raised any money or taken any form of financial facility (whether pursuant to a factoring arrangement or otherwise). 5.2 Since the Reference Accounts Date: (a) each Group Company has not, other than in the usual course of its business: (i) acquired or disposed of or agreed to acquire or dispose of, an asset; or (ii) assumed or incurred, or agreed to assume or incur, a liability, obligation or expense (actual or contingent); (b) each Group Company has not factored, sold or agreed to sell a debt; 45 (c) each Group Company's business has not been materially or adversely affected by the loss of any important customer or source of supply. For these purposes, an important customer or source of supply means a customer with a revenue exceeding (Pounds)10,000. (d) each Group Company has not: (i) made, or agreed to make, capital expenditure exceeding in total (Pounds)20,000; or (ii) incurred, or agreed to incur, a commitment or commitments involving capital expenditure exceeding in total (Pounds)20,000, (e) each Group Company's business has not been materially or adversely affected by the termination of, or a change in the terms of, an agreement or by the loss of a customer or supplier; (f) each Group Company has not declared, paid or made a dividend or distribution (including, without limitation, a distribution within the meaning of ICTA) except as provided in the Accounts; (g) each Group Company has not changed its accounting reference period; (h) no resolutions of the shareholders of any Group Company have been passed; and (i) each Group Company has not created, allotted, issued, acquired, repaid or redeemed share or loan capital or made an agreement or arrangement or undertaken an obligation to do any of those things. (j) each Group Company has not been refused any insurance claims or settled below the amount claimed. 6. Tax - - -------- 6.1 Each Group Company and the Vendor, save for WPI Husky GmbH and WPI France, is and has at all times been resident only in the United Kingdom for all Tax purposes. Each Group Company and the Vendor is not liable to pay and has at no time incurred any liability to Tax chargeable under the laws of any jurisdiction other than the United Kingdom. 6.2 Each Group Company has paid all Tax which it has become liable to pay and is not and has not in the six years ending on the date of this Agreement been, liable to pay a penalty, surcharge, fine or interest in connection with Tax. 46 6.3 Without prejudice to paragraph 6.2 each Group Company has deducted or withheld all Tax which it has been obliged by law to deduct or withhold from amounts paid by it, has properly accounted to the relevant Tax Authority for all amounts of Tax so deducted or withheld and has otherwise complied with its legal obligations in respect of such deductions or withholdings. 6.4 Each Group Company has within applicable time limits made all returns, provided all information and maintained all records in relation to Tax as it is required to make, provide or maintain and has fully complied on a timely basis with all notices served on it and any other requirements lawfully made of it by any Tax Authority. No return (and nothing in a return) is disputed or is yet to be determined by, or is subject to agreement with, a Tax Authority. 6.5 Each Group Company has properly operated in all material respects the Pay- As-You-Earn system and has complied in all material respects with each reporting obligation in connection with benefits provided (whether by each Company or by any other person) for each Group Company's directors, other officers and employees. 6.6 So far as the Vendor is aware, having made all reasonable enquiries, each Group Company is not and does not expect to be involved in a dispute in relation to Tax. No Tax Authority has investigated or indicated that it intends to investigate each Group Company's Tax affairs. 6.7 Each Group Company has sufficient records to determine the Tax consequences which would arise on a disposal or on the realisation of each asset owned by it at the Reference Accounts Date, or acquired since the Reference Accounts Date but before the date of this Agreement. 6.8 No Tax Authority has agreed to operate any special arrangement (that is, an arrangement which is not based on a strict application of all relevant Tax legislation, published extra-statutory concessions and published statements of practice) in relation to the affairs of each Group Company. All notices and other communications from a Tax Authority requiring or permitting each Group Company to deal with its Tax affairs in a particular manner or on a particular basis are in the possession of each Group Company. 6.9 The Disclosure Letter contains full details of all applications which have been made at any time by each Group Company for any statutory consent or clearance. All particulars and other information given to any Tax Authority in connection with any such application for such consent or clearance were full and accurate in all material respects and any consent or clearance given in response to such application was valid and effective. All transactions in respect of which such consent or clearance was obtained have been carried into effect, and have been undertaken strictly in accordance with the terms of the application for the relevant consent or clearance. 47 6.10 Except as disclosed in the Disclosure Letter, each Group Company is not and has not been a party to or otherwise involved in any transaction, agreement or arrangement otherwise than by way of a bargain at arms' length, or any transaction, agreement or arrangement (whether or not by way of a bargain at arms' length) under which it has been or is or may be required to make any payment for any goods, services or facilities provided to it which is in excess of the market value of such goods, services or facilities or under which it has been, or is or may be required to provide goods, services or facilities for a consideration which is less than the market value of such goods, services or facilities and/or in consequence of which it is or will be liable to Tax in respect of an amount deemed for Tax purposes to be income or gains of each Group Company but not actually income or gains of each Group Company. 6.11 Each Group Company: (a) is registered for the purposes of the VATA; (b) has made, given, obtained and kept up-to-date, full and accurate records, invoices and documents appropriate or required for the purposes of the VATA; (c) has complied in all material respects with all other applicable VAT legislation and in particular has filed all returns and made all payments of VAT on a timely basis; and (d) has not been required by a Tax Authority to give security under the VATA. 6.12 Each Group Company is not under a duty to make payments on account of VAT pursuant to any order made under section 28 of the VATA. 6.13 In the three years ending on the date of this Agreement each Group Company has not been in default in respect of an accounting period, as the terms "default" and "accounting period" are used in section 59(1) of the VATA (the default surcharge). 6.14 Each Group Company is not and has not been liable to a penalty under section 63 of the VATA. 6.15 No VAT Return made by each Group Company has contained a material inaccuracy for the purposes of section 64 of the VATA. 6.16 Each Group Company is entitled under the VATA to credit for all of its input tax. 6.17 The Disclosure Letter contains adequate details of any method agreed with or directed by H M Customs and Excise or otherwise applicable to each Group Company for determining the allowability to that company of input tax in accordance with Part XIV of the Value Added Tax Regulations 1995. 48 6.18 The Disclosure Letter contains details of each claim for bad debt relief under section 36 of the VATA (bad debts) or section 22 of the Value Added Tax Act 1983 (refund of tax in cases of bad debts) made by each Group Company. 6.19 No Group Company owns any asset which is a capital item, the input tax on which may be subject to adjustment in accordance with Part XV of the Value Added Tax Regulations 1995 (capital goods scheme). 6.20 No Group Company, nor a company of which any Group Company is a relevant associate within the meaning of paragraph 3(7) of Schedule 10 to the VATA (election to waive exemption), has elected to waive exemption under paragraph 2 of Schedule 10 in relation to any land owned by it at Completion except as disclosed in the Disclosure Letter. Each such election disclosed in the Disclosure Letter has effect. Where any such election has been made, no supplies in relation to the relevant land will be taken by virtue of paragraph 2(3AA) of Schedule 10 to the VATA to be supplies other than taxable supplies. Each Group Company does not have an interest in any land supplies in relation to which, if an election to waive exemption under paragraph 2 of Schedule 10 to the VATA were to be made by each Group Company (or by a company of which any Group Company is a relevant associate within the meaning of paragraph 3(7) of Schedule 10 to the VATA), would be taken by virtue of the said paragraph 2(3AA) to be supplies other than taxable supplies. 6.21 No Group Company has received a notice of and to the best of the Vendor's knowledge, information and belief there is nothing which indicates that the grant to any Group Company of an interest in or right over land owned by a Group Company at Completion or of a licence to occupy land owned by a Group Company at Completion will not be an exempt supply because of an election under Schedule 10 to the VATA (election to waive exemption). 6.22 No event, transaction, act or omission has occurred by reason or in consequence of which any Group Company may be deemed to make a taxable supply under paragraph 1 of Schedule 10 to the VATA or under the Value Added Tax (Self- Supply of Construction Services) Order 1989. 6.23 No tenancy, lease or licence to which any Group Company is a party is or may become a developmental tenancy, developmental lease or developmental licence for the purposes of Group 1 of Schedule 9 to the VATA. 6.24 No Group Company is and has not been a party to any transaction or arrangements in respect of which a direction has been or could be made under paragraphs 1 or 2 of Schedule 6 or paragraph 1 of Schedule 7 to the VATA. 49 6.25 No Group Company is, nor has it, agreed to become an agent, manager or factor for the purposes of section 47 of the VATA (agents, etc.) of a person not resident in the United Kingdom. 6.26 No Group Company has been a party to any transactions in respect of which a direction under the provisions of Schedule 9A to the VATA has been or may be made. 6.27 All value added tax payable on the import of goods and all customs duties and duties of excise payable to a Tax Authority in respect of any asset (including, without limitation, trading stock) imported or owned by each Company have been paid. 6.28 No Group Company has been a close company for the purposes of ICTA. 6.29 All documents by virtue of which any Group Company has any right or in the enforcement of which any Group Company is interested have been duly stamped. 7. Assets - - ------------ 7.1 Each asset included in the Accounts or acquired by any Group Company since the Reference Accounts Date (other than stock disposed of in the usual course of business) and each asset used by any Group Company or which is in the reputed ownership of any Group Company is: (a) legally and beneficially owned solely by each Group Company free from any Encumbrance; and (b) where capable of possession, in the possession or under the control of each Group Company. 7.2 Each Group Company owns or has a right to use each asset necessary for the effective operation of its business as currently conducted. 7.3 All plant, machinery, vehicles and equipment owned, possessed or used by each Group Company are in good condition and working order and have been regularly and properly maintained. None is in need of renewal or replacement or surplus to each Group Company's requirements. 7.4 Each Group Company's asset registers comprise a complete and accurate record of all the plant, machinery, equipment, vehicles and other assets owned, possessed or used by it. 7.5 Maintenance contracts are in force for each asset of each Group Company which it is normal to have maintained by independent or specialist contractors and for each asset which each Group Company is obliged to maintain or repair under a leasing or similar 50 agreement. Those assets have been regularly maintained to a good technical standard and in accordance with: (a) safety regulations required to be observed in relation to them; and (b) the provision of any applicable leasing or similar agreement. 7.6 No Group Company is a party to, nor is liable under, a lease or hire, hire purchase, credit sale or conditional sale agreement. 7.7 No charge in favour of any Group Company is void or voidable for want of registration. 7.8 Each Group Company's stock is of satisfactory quality and saleable in the usual course of its business in accordance with its current price list. 7.9 No Group Company has supplied, or agreed to supply, defective or unsafe goods or goods which fail to comply with their terms of sale. 7.10 No goods in a state ready for supply by each Group Company are defective or unsafe or will fail to comply with terms of sale similar to terms of sale on which similar goods have previously been sold by any Group Company. 7.11 Each Group Company's level of stock is reasonable having regard to current and anticipated demand. 7.12 No debt shown in the Accounts, the Management Accounts or any Group Company's accounting records is overdue by more than 12 weeks or is the subject of an arrangement other than of the kind, particulars of which are set out in the Disclosure Letter. 7.13 No Group Company has released a debt shown in the Accounts, the Management Accounts or its accounting records so that the debtor has paid or will pay less than the debt's book value. None of the debts shown in the Accounts, the Management Accounts or any Group Company's accounting records has been deferred, subordinated or written off or become irrecoverable to any extent. To the best of the Vendor' knowledge, information and belief, each of those debts will realise its book value in the usual course of collection. 7.14 No Group Company has acquired or agreed to acquire any material asset on terms that property thereon does not pass until full payment is made. 51 8. Year 2000 - - -------------- 8.1 Each item of equipment and software programme used by any Group Company (a "Company System") in the course of its business has been produced, tested and/or -------------- amended in a manner which ensures that: (a) a change of, reference to or use of a date before, on or after 31 December 1999 in the operation of that Company System, whether alone or in conjunction with each other Company System, will not have an adverse effect on, nor give rise to inconvenience in, the operation of that Company System; and (b) the inclusion of a date or dates before, on or after 31 December 1999 in the date information exchanged with any item of equipment and software programme which is not a Company System but with which that Company System exchanges date information in the course of the Company's business will not have an adverse effect on, nor give rise to inconvenience in, that exchange of date information or the subsequent use of that date information. 8.2 Each product and service sold by each Group Company (the "Product and Service") both now and at any time within the last six years has ensured that a change of, reference to or use of a date before, on or after 31 December 1999 in the operation of the Product and Service will not have an adverse effect on, nor give rise to inconvenience in, the operation of that Product and Service. 8.3 Each Company System and Product and Service will, in responding to two- digit date input and providing date output, resolve an ambiguity as to century in a manner which is consistent, clearly defined and apparent to the user. 9. Intellectual Property - - -------------------------- 9.1 Each of the Intellectual Property Rights is: (a) valid and enforceable and nothing has been done or omitted to be done by which it may cease to be valid and enforceable; (b) legally and beneficially owned by and validly granted to each Group Company alone, free from any licence, Encumbrance, restriction on use or disclosure obligation (or is lawfully used with the consent of the owner under a licence); and (c) not, and will not be, the subject of a claim or opposition from a person (including, without limitation, an employee of each Company) as to title, validity, enforceability, entitlement or otherwise. 52 9.2 The Disclosure Letter contains details of all the Intellectual Property Rights in respect of which each Group Company is a registered or beneficial owner or applicant for registration including full correct and up-to-date information in relation to each registration and application. 9.3 All renewal and maintenance fees and taxes due and payable prior to completion in respect of each of the pending and registered Intellectual Property Rights have been paid in full. Each other action required to maintain and protect the pending and registered Intellectual Property Rights has been taken. 9.4 Nothing has been done or omitted to be done and no circumstances exist by which a person is or will be able to seek cancellation, rectification or other modification of a registration of any of the Intellectual Property Rights. 9.5 There is and during the two years ending on the date of this Agreement has been, no civil, criminal, arbitration, administrative or other proceeding or dispute in any jurisdiction concerning any of the Intellectual Property Rights. No civil, criminal, arbitration, administrative or other proceeding or dispute concerning any of the Intellectual Property Rights is pending or threatened. To the best of the Vendor's knowledge, information and belief, no fact or circumstance exists which might give rise to a proceeding of that type. 9.6 No Group Company has granted and nor is obliged to grant a licence, assignment, consent, undertaking, security interest, or other right in respect of any of the Intellectual Property Rights. 9.7 There are no, and never have been, any outstanding claims against any Group Company for an infringement or unauthorised use of any of the Intellectual Property Rights. No Group Company has received any written claim that any of the Intellectual Property is invalid. 9.8 The activities, processes, methods, products, services or Intellectual Property used, manufactured, dealt in or supplied on or before the date of this Agreement by each Company: (a) are not, at the date of this Agreement, nor were they at the time used, manufactured, dealt in or supplied, subject to licence, consent or permission of, or payment to, another person; (b) to the best of the Vendor's knowledge, information and belief, do not at the date of this Agreement, nor did they at the time used, manufactured, dealt in or supplied, infringe, misuse or embody the subject matter of any rights in the Intellectual Property (including, without limitation, moral rights) of another person; 53 (c) to the best of the Vendor's knowledge, information and belief, have not given, and will not give, rise to a claim against any Group Company. 9.9 No party to an agreement relating to the use: (a) by each Group Company of Intellectual Property owned by another person; or (b) of any Intellectual Property Rights owned by each Group Company by another person is, or has at any time been, in breach of the agreement and no circumstances exist which would give rise to any breach of any such agreement or to any such agreement being terminated, suspended, varied or revoked without each Group Company's consent (other than termination without cause upon notice in accordance with the terms of the agreement). 9.10 All the Confidential Information is adequately and properly documented to enable the Purchaser to acquire and retain its full benefit. 9.11 Each Group Company has not disclosed and is not obliged to disclose any Confidential Information to any person other than its employees who are bound by obligations of confidence or except in the ordinary and usual course of business and then only on condition that the disclosure is to be treated as being of a confidential nature. The Vendor is not aware of any such confidentiality having been breached. 9.12 The Intellectual Property Rights and each Group Company's ownership, licence or rights in them will not be adversely affected by the transaction contemplated by this Agreement. 9.13 The Intellectual Property Rights comprise all the Intellectual Property necessary for each Group Company to operate its business, and for the business to continue to operate, as it has been operated during the two year period ending on the date of this Agreement. 9.14 Each Group Company is not a party to a confidentiality or other agreement and is not otherwise subject to any duty which restricts the free use or disclosure of information or of any of the Intellectual Property Rights. 9.15 Each Group Company does not use or operate its business under a name other than its corporate name. 9.16 The maximum liability of WPI Husky, to the Vendor's knowledge, is not in excess of (Pounds)60,000 at the date of this Agreement with respect to the overdue royalty payments due to Teology Networks, Inc. 54 10. Insurance - - --------------- 10.1 Each insurable asset of each Group Company has at all material times been and is at the date of this Agreement insured to its full replacement value (with no provision for deduction or excess) against each risk normally insured against by a person operating the types of business operated by each Group Company. 10.2 Each Group Company has at all material times been and is at the date of this Agreement adequately insured against accident, damage, injury, third party loss (including, without limitation, product liability), credit risk, loss of profits and all other risks to which a person operating the types of business operated by each Group Company is exposed. 10.3 The Disclosure Letter contains a list of each current insurance and indemnity policy in respect of which each Group Company has an interest (including any active historic policies which provide cover on a losses occurring basis) (together the "Policies") and sets out, in relation to each of the Policies, a summary including details of the parties, cover, deductibles, limits, exclusions, conditions and premium payable. 10.4 Each of the Policies is valid and enforceable and is not void or voidable and will be maintained in full force and effect without alteration pending Completion and all premiums will be paid on times. 10.5 No Group Company has done anything or omitted to do anything which might: (a) make any of the Policies void or voidable; or (b) prejudice the ability to effect insurance on the same or better terms in the future. 10.6 No insurer under any of the Policies has disputed, or given any indication that they intend to dispute, the validity of any of the Policies on any grounds. 10.7 To the best of the Vendor's knowledge, information and belief, there is nothing which could vitiate any of the Policies or prejudice the ability to effect insurance on the same or better terms in the future. 10.8 No insurer has ever canceled or refused to accept or continue any insurance in relation to each Group Company. 10.9 No claims have been made, no claim is outstanding and no fact or circumstance exists which might give rise to a claim under any of the Policies. 55 10.10 No event, act or omission has occurred which requires notification under any of the Policies. 10.11 None of the insurers under any of the Policies has refused, or given any indication that it intends to refuse, indemnity in whole or in part in respect of any claims under the Policies. 10.12 Nothing has been done or omitted to be done, and there is nothing, which might entitle the insurers under any of the Policies to refuse indemnity in whole or in part in respect of any claims under the Policies. 10.13 All premiums which are due under the Policies have been paid. 10.14 No Group Company has not done anything or omitted to do anything, and there is nothing, which might result in an increase in the premium payable under any of the Policies. 11. Real Property - - -------------------- 11.1 The Property comprises all land and premises owned, occupied or used by, or in the possession of, each Group Company. 11.2 There is appurtenant to the Property each right and easement necessary for its proper and existing use including, without limitation, emergency escape routes. No right or easement is restricted in any way (including, without limitation, a restriction on hours of use) or is capable of being lawfully interrupted or terminated by any person. 11.3 Each Group Company holds each right or easement appurtenant for a term not less than the unexpired term of the lease, tenancy or licence. 11.4 Each service necessary for the Property's existing use (including, without limitation, electricity, gas and water supplies, sewerage and telecommunications lines) is available to each Group Company. 11.5 Each Group Company's access to the Property is sufficient for the existing use of the Property and is by means of a road adopted by the local highway authority and maintainable at public expense. 11.6 The Property is not subject to outgoings other than the uniform business rate, water and sewerage rates, rent, service charge and insurance premiums. 11.7 Neither the Property nor any of its title deeds is subject to an Encumbrance, agreement, obligation, condition, right, easement, exception, reservation, or other interest. 56 11.8 There is no person in possession or occupation of, or who has or claims a right or interest of any kind, in the Property adversely to each Company's interest and each Group Company is entitled to and has exclusive vacant possession of the Property. 11.9 No fact or circumstance exists which materially and adversely affects the Property's value or the use or enjoyment of the Property or casts doubt on each Group Company's right or title to the Property. 11.10 Each Group Company has performed or complied with each Property Permit, obligation, condition, restriction, agreement (including, without limitation, the term of any lease) and legal and administrative requirement affecting the Property, or its respective ownership, occupation, possession or existing use. 11.11 There is, and during the two years ending on the date of this Agreement has been, no civil, criminal, arbitration, administrative, or other proceeding or dispute concerning the Property. No civil, criminal, arbitration, administrative or other proceeding concerning the Property is pending or threatened. To the best of the Vendor' knowledge, information and belief, no fact or circumstance exists which might give rise to a proceeding of that type. There is no outstanding notice affecting the Property. 11.12 There is no resolution or proposal for compulsory acquisition of the Property by a local or other authority. 11.13 The Property's existing use as hitech/light industrial with associated offices is the lawful use permitted under applicable town and country planning legislation and such permission is not temporary or personal. 11.14 Any permission necessary for the Property's existing use, construction and any subsequent alteration has been obtained and is in force, unimpeachable and unconditional or subject only to a condition that has been satisfied (and nothing more remains to be done under the condition). 11.15 To the best of the Vendor's knowledge, information and belief there is no material deficiency which requires correction in the state or condition of any building or other structure on or forming part of the Property. 11.16 No flooding, subsidence or other material defect of any kind (including, without limitation, a design or construction defect) which affects or has affected the Property. 11.17 No building or other structure on or forming part of the Property contains a deleterious substance or a substance which is not at the date of this Agreement used in generally accepted good building practice. 57 11.18 There is no fact or circumstance (and, to the best of the Vendor's knowledge, information and belief, no fact or circumstance will within six months starting on the date of this Agreement occur or arise) which: (a) could entitle or require a person (including, without limitation, a landlord or licensor) to forfeit or enter on, or take possession of, or occupy, the Property; (b) could restrict or terminate each Group Company's continued and uninterrupted possession or occupation of the Property; or (c) could prevent or restrict the Property's development for which planning permission has been or is expected to be obtained. 11.19 A rent or fee payable in respect of the Property is not at the date of this Agreement being reviewed and cannot be reviewed before Completion. 11.20 No person (including, without limitation, a landlord or licensor) has elected to waive, or indicated an intention to waive, an exemption from payment by each Group Company of value added tax in respect of a payment made under the Lease. 11.21 The documents disclosed relating to the Property are all those that are relevant and are complete copies. 11.22 No Group Company has any contingent liability or other liability as original tenant, landlord, assignee or otherwise in respect of any real property or interest in real property except the Property. 11.23 No Group Company has any contingent liability or other actual liability as original tenant, landlord, assignee or otherwise except in respect of the Coventry Lease. 12. Environmental Matters, Health and Safety and Products Liability - - ---------------------------------------------------------------------- 12.1 The operation of each Group Company's business does not involve and has never involved the use, or the release or discharge of a hazardous substance or article, waste, sewage or other pollutant or contaminant. 12.2 No land or other asset owned, occupied, possessed or used by each Group Company on or at any time before the date of this Agreement: 12.2.1 contains or has contained (in the case of land, above or below ground) a hazardous substance or article, waste or other pollutant or contaminant; 12.2.2 is or has been used for the deposit, storage, treatment or disposal of waste or sewage; or 58 12.2.3 is referred to or listed in a register of polluted or contaminated land and no fact or circumstance exists which might give rise to an entry in such a register . 12.3 No Group Company has sold, supplied or provided a defective product or services in the course of its business on or prior to the date hereof. 12.4 No Group Company has manufactured, sold or supplied any product or service which: 12.4.1 is, was or will become, in any material respect, faulty or defective; or 12.4.2 does not comply in any material respect with any warranty or representation, express or implied, made by or on behalf of any Group Company in respect of it or with all laws, regulations, standards and requirements applicable to it; or 12.4.3 was sold or supplied on terms that any Group Company accepts an obligation to service or repair or replace such products after delivery. 12.5 No Group Company has received a prohibition notice, a notice to warn or a suspension notice under the Consumer Protection Act 1987 in relation to any of its products at any time within the last 3 years. 12.6 Each Group Company has in relation to its plant and machinery and other fixed assets, and the Premises and its employees, complied with all legal requirements relating to health and safety including, but not limited to, those imposed by the Health and Safety at Work etc. Act 1974 and all regulations made thereunder, and no action has been taken by any entering authority in relation to any actual or alleged breach of such requirements and neither is any Group Company in receipt of any claim by any officer or employee or any past officer or employee in relation to any such breach and the Vendor is not aware of any circumstances which may lead to such action or claim. 12.7 12.7.1 For the purpose of this Warranty, "Environmental Laws" shall mean any existing laws (local or national) or regulations having application to the operation of the business of any Group Company including, without limitation, directives, regulations, rules, codes of practice and guidance notes made thereunder relating to environmental and health & safety matters. 12.7.2 Each Group Company is and to the Vendor's knowledge always has been in full compliance with all Environmental Laws and the existence and the use of the Premises, machinery and other property of any Group Company has been and is in accordance with all Environmental Laws. 12.7.3 No written notice, written demand or written request for information has been issued or made and no investigation or review is or has been threatened or is 59 pending by any governmental authority or other person with respect to any alleged violation by any Group Company of any Environmental Law or liability thereunder. 12.7.4 No Group Company owns or has in the past owned or had any interest in land which has been used for a contaminative use or upon which toxic, radioactive, caustic or other hazardous substances (of whatever kind) have been stored or processed in a manner inconsistent with any Environmental Laws. 13. Agreements - - ----------------- 13.1 To the best of the Vendor's knowledge, information and belief no fact or circumstance exists which might invalidate or give rise to a ground for termination, avoidance or repudiation of an agreement, arrangement or obligation of which each Group Company is a party. No party with whom each Group Company has entered into an agreement, arrangement or obligation has given notice of its intention to terminate, or has sought to repudiate or disclaim, the agreement, arrangement or obligation. 13.2 No Group Company nor any party with whom each Group Company has entered into an agreement, arrangement or obligation is in material breach of the agreement, arrangement or obligation. To the best of the Vendor's knowledge, information and belief, no fact or circumstance exists which might give rise to a breach of this type. 13.3 No Group Company is a party to and is not liable under a long-term, onerous or unusual legally binding agreement, arrangement or obligation including, without limitation: 13.3.1 an agreement, arrangement or obligation entered into other than in the usual course of its business; 13.3.2 an agreement, arrangement or obligation entered into other than by way of a bargain at arms length; 13.3.3 an agreement, arrangement or obligation restricting each Group Company's freedom to operate the whole or part of its business or to use or exploit any of its assets; 13.3.4 a sale or purchase, option or similar agreement, arrangement or obligation affecting an asset owned, occupied, possessed or used by each Group Company or by which each Group Company is bound; 13.3.5 a material agreement, arrangement or obligation with which each Group Company cannot comply on time or without undue or unusual expenditure of money or effort; 60 13.3.6 a contract for the sale of shares or assets comprising a business undertaking which contains warranties or indemnities under which any Group Company still has a remaining liability or obligation or can be terminated as a result of any change in the underlying ownership or control of any Group Company, or would be materially affected by such change; or 13.3.7 an agreement, arrangement or obligation which is in any way otherwise than in the ordinary course of any Company's business. 13.4 Each Group Company is not: 13.4.1 a member of a joint venture, consortium, partnership or association (other than the bona fide trade association); or 13.4.2 a party to a distributorship, agency, franchise or management agreement or arrangement. 14. Terms of Trade and Business - - ---------------------------------- 14.1 Each Group Company has paid its creditors within the times agreed with them. No debt owing by it has been due for more than 30 days. 14.2 During the year ending on the date of this Agreement, no substantial supplier or customer of each Group Company has: 14.2.1 stopped, or indicated an intention to stop, trading with each Company; 14.2.2 reduced, or indicated an intention to reduce, trading with each Company; or 14.2.3 changed or indicated an intention to change, substantially the terms on which it is prepared to trade with each Group Company. 14.3 To the best of the Vendor's knowledge, information and belief no substantial supplier or customer of each Group Company is likely to: 14.3.1 stop trading with each Group Company; 14.3.2 reduce substantially its trading with each Group Company; or 14.3.3 change substantially the terms on which it is prepared to trade with each Group Company. 14.4 To the best of the Vendor's knowledge, information and belief, the attitude of customers, suppliers and employees with regard to each Group Company will not be 61 prejudicially affected by the execution or performance of this Agreement or any document to be executed at or before Completion. 14.5 No Group Company has entered into an agreement or arrangement with a supplier or customer in terms materially different to its standard terms of business. 14.6 No person (either individually or jointly with another person) has bought from or sold to each Company, either in the financial year of each Group Company ended on the Reference Accounts Date or since the Reference Accounts Date, more than five per cent of the total amount of all purchases or sales made by each Group Company in that period. 14.7 No Group Company has outstanding any bid, tender, sale or service proposal. 14.8 None of the records, systems, data or information of each Group Company is recorded, stored, maintained, operated or otherwise wholly or partly dependent on or held or accessible by any means (including, without limitation, any electronic, mechanical or photographic process, computerised or not) which are not under the exclusive ownership and direct control of each Group Company. 14.9 Each Group Company has at all times complied with the Data Protection Acts 1984 and 1998 (including, for the avoidance of doubt, the data protection principles set out in Schedule 1 to the Data Protection Act 1984 and the Telecommunications (Data Protection and Privacy) (Direct Marketing) Regulations 1998. 15. Effect of Sale - - --------------------- Neither the execution nor the performance of this Agreement or any document to be executed at or before Completion will result in any Group Company losing the benefit of any licence, consent, permit, approval or authorisation (public or private) necessary for carrying on each Group Company's business in the places and in the manner currently carried on or any asset, grant, subsidy, right or privilege which it enjoys at the date of this Agreement or will: 15.0.1 conflict with; 15.0.2 result in the breach of; 15.0.3 give rise to an event of default under; 15.0.4 require the consent of a person under; 15.0.5 enable a person to terminate; or 15.0.6 relieve a person from an obligation under 62 any agreement or arrangement to which any Group Company is a party or any legal or administrative requirement by which any Group Company is bound or result in any present or future indebtedness of any Group Company becoming due or capable of being declared due and payable prior to its stated maturity. 16. Employees - - --------------- 16.1 There is no employment or other contract of engagement between any Group Company and any of its directors or other officers. No Group Company is a party to a consultancy contract. 16.2 There is no employment contract between any Group Company and any its employees which cannot be terminated by any Group Company by three month's notice or less without giving rise to a claim for damages or compensation (other than a statutory redundancy payment or statutory compensation for unfair dismissal). 16.3 There is no employment or consultancy contract or other contract of engagement between any Group Company and any person which is in suspension or has been terminated but is capable of being revised or enforced and in respect of which each Company has a continuing obligation. 16.4 The Disclosure Letter contains details of: 16.4.1 the total number of Group Company's employees including those who are on maternity leave or absent because of disability or other long-term leave of absence and who have or may have a right to return to work with each Group Company. 16.4.2 the name, date of start of employment, period of continuous employment, salary and other benefits, grade and age of each employee of each Group Company and, where an employee has been continually absent for more than one month, the reason for the absence; and 16.4.3 the terms of the contract of each director, other officer and employee of each Group Company entitled to remuneration at an annual rate or an average annual rate, or an average annual rate over the last three financial years, of more than (Pounds)10,000. 16.5 The basis of the remuneration payable to each Group Company's directors, other officers and employees is the same as that in force at the Reference Accounts Date. Each Group Company is not obliged to increase, nor has it made provision to increase, the total annual remuneration payable to its directors, other officers and employees by more than five per cent. 63 16.6 No Group Company owes any amount to a present or former director, other officer or employee of each Group Company (or his dependant) other than for accrued remuneration or reimbursement of business expenses. 16.7 There is no agreement or arrangement between each Group Company and an employee or former employee with respect to his employment, his ceasing to be employed or his retirement which is not included in the written terms of his employment or previous employment. No Group Company has provided, or agreed to provide, a gratuitous payment or benefit to a director, officer or employee or to any of their dependants. 16.8 Each Group Company has maintained up-to-date, full and accurate records regarding the employment of each of its employees (including, without limitation, details of terms of employment, payments of statutory sick pay and statutory maternity pay, income tax and social security contributions, disciplinary and health and safety matters), and termination of employment. 16.9 Except as disclosed in the Accounts, no Group Company has: 16.9.1 incurred a liability for breach or termination of an employment contract including, without limitation, a redundancy payment, protective award and compensation for wrongful dismissal, unfair dismissal and failure to comply with an order for the reinstatement or re-engagement of an employee; 16.9.2 incurred a liability for breach or termination of a consultancy agreement; or 16.9.3 made or agreed to make a payment or provided or agreed to provide a benefit to a present or former director, other officer or employee of each Company or to any of their dependants in connection with the actual or proposed termination or suspension of employment or variation of an employment contract. 16.10 Each Group Company has complied with: 16.10.1 each obligation imposed on it by, and each order and award made under, statute, regulation, code for conduct and practice, collective agreement, custom and practice relevant to relations between it and its employees or a trade union or the terms of employment of its employees; and 16.10.2 each recommendation made by the Advisory, Conciliation and Arbitration Service and each award and declaration made by the Central Arbitration Committee. 16.11 Within the year ending on the date of this Agreement, no Group Company has: 64 16.11.1 given notice of redundancies to the relevant Secretary of State or started consultations with a trade union under Chapter II of Part IV of the Trade Union and Labour Relations (Consolidation) Act 1992 or failed to comply with its obligations under Chapter II of Part IV of that Act; or 16.11.2 been a party to a relevant transfer (as defined in the Transfer of Undertakings (Protection of Employment Regulations 1981) or failed to comply with a duty to inform and consult a trade union under those Regulations. 16.12 No Group Company has any arrangement with and does not recognise a trade union, works council, staff association or other body representing any of its employees. 16.13 No Group Company is involved in, and no fact or circumstance exist which might give rise to, a dispute with a trade union, works council, staff association or other body representing any of its employees. 16.14 No Group Company has and is not proposing to introduce a share incentive, share option, profit sharing, bonus or other incentive scheme for any of its directors, other officers or employees. 16.15 There is not and has not been a training scheme, arrangement or proposal in relation to each Company in respect of which a levy may become payable by each Company under the Industrial Training Act 1982. 17. Pensions and Other Benefits - - ---------------------------------- 17.1 Save in respect of The Plan, the Group Companies have no obligation (whether legally binding or not) to provide "relevant benefits" (within the meaning of Section 612 ICTA 1988) to, or in respect of any person who is now or has been an officer or employee of any Group Company or spouse or dependant of such officer or employee; 17.2 Full and accurate details and particulars of The Plan have been disclosed in the Disclosure Letter together with accurate, up-to-date and complete copies of all documents relating to The Plan including a list of investments held for The Plan and there is no obligation to provide benefits under The Plan other than as revealed in such documents and particulars; 17.3 The Plan is an "exempt approved scheme" (within the meaning of Chapter I of Part XIV ICTA 1988) and, to the best of the Vendor's knowledge and awareness, there is no reason why approval of the Board of Inland Revenue should be withdrawn; 17.4 Other than benefits on death as disclosed, The Plan provides only money purchase benefits as defined in Section 181 Pension Schemes Act 1993. No person who is now or has been an officer or employee has been promised that he or his dependants will receive 65 benefits on his retirement, death or leaving service other than money purchase benefits as defined above. 17.5 During the Vendor's period of ownership of the Companies, the provisions of The Plan has never discriminated between male and female members. 17.6 All premiums payable under contracts of insurance relating to payment of benefits on death before normal pension age in respect of any officer or employee of any Group Company have been paid and all contributions to, and expenses of, The Plan which have fallen due for payment have been paid. 17.7 Except as fairly disclosed in the Disclosure Letter, there is no dispute with regard to the benefits payable under The Plan or any other payments or benefits referred to in paragraph 17.1. Except as fairly disclosed in the Disclosure Letter, no legal proceedings in connection with The Plan are pending, threatened or expected nor is there any fact or circumstance likely to give rise to any such proceedings. 17.8 The Plan has at all times complied with and been administered in accordance with the provisions governing it and all applicable laws, regulations and requirements, including the requirements of the Inland Revenue for continued approval as an exempt approved scheme, and of trust law. 17.9 The Group Companies have at all times complied with all the provisions of The Plan which apply to it. 17.10 The Plan is not a contracted out plan within the meaning of the Pension Schemes Act 1993. 18. Liabilities - - ------------------ 18.1 Except as disclosed in the Accounts or in the Disclosure Letter, no Group Company has any outstanding and has not agreed to create or incur loan capital, borrowing or indebtedness in the nature of borrowing. 18.2 No Group Company is a party to and is not liable under a guarantee, indemnity or other agreement to secure or incur a financial or other obligation with respect to another person's obligation. 18.3 No part of the loan capital, borrowing or indebtedness in the nature of borrowing of each Group Company is dependent on the guarantee or indemnity of, or security provided by, another person. 18.4 No event has occurred or been alleged to have occurred which: 66 18.4.1 constitutes an event of default, or otherwise gives rise to an obligation to repay, under an agreement relating to borrowing or indebtedness in the nature of borrowing (or will do so with the giving of notice or lapse of time or both) or 18.4.2 will lead to an Encumbrance constituted or created in connection with borrowing or indebtedness in the nature of borrowing, a guarantee, an indemnity or other obligation of each Group Company becoming enforceable (or will do so with the giving of notice or lapse of time or both). 18.5 No Group Company is liable to repay an investment or other grant or subsidy made to it by a body (including, without limitation, the Department of Trade and Industry or its predecessor). 18.6 No fact or circumstance (including, without limitation, execution and performance of this Agreement) exists which might entitle a body to require repayment of, or refuse an application by each Group Company for, the whole or part of a grant or subsidy. 18.7 No subsidiary or affiliate of the Guarantor is a creditor of the Guarantor. 18.8 No subsidiary or affiliate of the Vendor is a creditor of the Vendor. 18.9 The Guarantor has no liabilities or obligations of any nature, whether known or unknown, absolute, accrued, contingent or otherwise and whether due or to become due, arising out of or relating to the business and operations of the Guarantor as previously or currently conducted or contemplated to be conducted except (a) as and to the extent disclosed or provided for in the Financial - Statements and (b) for liabilities and obligations that (i) were incurred after - - the date of the Financial Statements in the ordinary course of business consistent with past practice; (ii) individually and in the aggregate would not -- have a material adverse effect; and (iii) do not and will not materially impair --- the ability of the Guarantor to perform its obligations hereunder or under any document, instrument, certificate or agreement necessary to transfer to the Purchaser good and valid title to the Shares, free and clear of any and all Encumbrances thereon, at the Completion Date, or the ability of the Purchaser to conduct the business and operations of the Company from and after the Completion Date. 18.10 The Vendor has no liabilities or obligations of any nature, whether known or unknown, absolute, accrued contingent or otherwise and whether due or to become due, arising out of relating to the business and operations of the Vendor as previously or currently conducted or contemplated to be conducted except (a) - as and to the extent disclosed or provided for in the Accounts and (b) for - liabilities and obligations that (i) were incurred after the Reference Accounts - Date in the ordinary course of business consistent with past practice; (ii) -- individually and in the aggregate would not have a 67 material adverse effect; and (iii) do not and will not materially impair the --- ability of the Vendor to perform its obligations hereunder or under any document, instrument, certificate or agreement necessary to transfer to the Purchaser good and valid title to the Shares, free and clear of any and all Encumbrances thereon, at the Completion Date, or the ability of the Purchaser to conduct the business and operations of the Company from and after the Completion Date. 19. Permits - - -------------- 19.1 Each Group Company has obtained and has complied with the terms and conditions of each Permit. 19.2 Details of each Permit are set out in the Disclosure Letter. 19.3 Each Permit is in force, unimpeachable and unconditional or subject only to a condition that has been satisfied. No expenditure or work is or will be necessary to comply with, maintain or obtain a Permit. To the best of the Vendor's knowledge, information and belief, no Permit will be revoked, suspended, canceled or varied or not renewed. 19.4 Each action required for the renewal or extension of each Permit has been taken. 19.5 No Permit will be revoked, suspended, canceled, varied or not renewed as a result of the execution or performance of this Agreement or any document to be executed at or before Completion and there is no circumstances which indicate that any such Permit is likely to be revoked, suspended, canceled, varied or not renewed or that any of them will expire within a period of one year from the date of this Agreement. 20. Insolvency - - ----------------- 20.1 No order has been made, petition presented or resolution passed for the winding up of any Group Company or for the appointment of a provisional liquidator to any Group Company and no administration order has been made in respect of each Group Company. 20.2 No receiver or manager has been appointed of the whole or part of any Group Company's business or assets. 20.3 No voluntary arrangement has been proposed under Section 1 of the Insolvency Act 1986 in respect of any Group Company. No compromise or arrangement has been proposed, agreed to or sanctioned under section 425 of the CA 1985 in respect of each Group Company. 68 20.4 No Group Company is insolvent or unable to pay its debts within the meaning of Section 123 of the Insolvency Act 1986. 20.5 No Group Company has stopped paying its debts as they fall due. 20.6 No distress, execution or other process has been levied on an asset of each Group Company or action taken to repossess goods in each Group Company's possession which has not been satisfied in full. 20.7 There is no unsatisfied judgment or court order outstanding against any Group Company. 20.8 No floating charge created by any Group Company has crystallized and, so far as the Vendor is aware, there are no circumstances likely to cause such floating charge to crystallize. 20.9 No action has been taken by the Registrar of Companies to strike any Group Company off the register under section 652 of the CA 1985. 20.10 No Group Company has at any time during the two years immediately prior to the date of this Agreement: 20.10.1 entered into a transaction with any person at an undervalue (as referred to in Section 238(4) of the Insolvency Act 1986) or 20.10.2 been given a preference by any person (as referred to in section 239(4) of the Insolvency Act 1986). 20.11 No event analogous to any of the foregoing has occurred in or outside England. 21. Competition - - ------------------ 21.1 No Group Company has any liability under, and is not a party to, any agreement or arrangement 21.1.1 particulars of which have been furnished to the Director General of Fair Trading under the Restrictive Trade Practices Acts 1976 and 1977; 21.1.2 which is prohibited by any competition law. 21.2 No Group Company has given an undertaking or written assurance (legally binding or not) to a governmental authority or an authority of the European Communities or European Economic Area under the Fair Trading Act 1973, Competition Act 1980, Restrictive Trade Practices Acts 1976 and 1977, Resale Prices Act 1976, Treaty of Rome, 69 Agreement on the European Economic Area or any other statute or legal instrument. No Group Company is affected by an order or regulation made under the Fair Trading Act 1973 or the Competition Act 1980 or by a decision of the Commission of the European Communities, EFTA Surveillance Authority or a competition or governmental authority of another jurisdiction. 21.3 No Group Company has received a communication or request for information relating to any aspect of each Group Company's business from or by the Director General of Fair Trading, Competition Commission, Secretary of State for Trade and Industry, Commission of the European Communities or EFTA Surveillance Authority or a competition or governmental authority of another jurisdiction. No agreement, arrangement or conduct (by omission or otherwise) of each Group Company is or has been the subject of an investigation, report or decision by any of those persons or bodies and none is pending or threatened. To the best of the Vendor's knowledge, information and belief, no fact or circumstance exists which might give rise to an investigation, report or decision by any of those persons or bodies. 22. Litigation and Compliance with Law - - ----------------------------------------- 22.1 No Group Company nor a person for whose acts or defaults each Group Company may be vicariously liable is involved, or has during the two years ending on the date of this Agreement been involved, in a civil, criminal, arbitration, administrative or other proceedings. No civil, criminal, arbitration, administrative or other proceeding is pending or threatened by or against each Group Company or a person for whose acts or default each Group Company may be vicariously liable. 22.2 To the best of the Vendor's knowledge, information and belief, no fact or circumstance exists which might give rise to a civil, criminal, arbitration, administrative or other proceeding involving each Group Company or a person for whose acts or defaults each Group Company may be vicariously liable. 22.3 There is no outstanding judgement, order, decree, arbitral award or decision of the court, tribunal, arbitrator or governmental agency against each Group Company or a person for whose acts or defaults each Group Company may be vicariously liable. 22.4 Each Group Company has, in the Vendor's reasonable knowledge, conducted its business and dealt with its assets in all material respects in accordance with all applicable legal and administrative requirements. 22.5 There is not and has not been any governmental or other investigation, inquiry or disciplinary proceeding concerning each Group Company and none is pending or threatened. To the best of the Vendor's knowledge, information and belief no fact or 70 circumstance exits which might give rise to an investigation, inquiry or proceeding of that type. 22.6 No Group Company or any person for whose acts or defaults each Group Company may be vicariously liable has: (a) induced a person to enter into an agreement or arrangement with any Group Company by means of a unlawful or immoral payment, contribution, gift or other inducement; (b) offered or made an unlawful or immoral payment, contribution, gift or other inducement to a government official or employee; or (c) directly or indirectly made an unlawful contribution to a political activity. 23. Insider Agreements - - ------------------------- There is not, and during the three years ending on the date of this Agreement, there has not been, any agreement or arrangement (legally enforceable or not) to which any Group Company is or was a party and in which any of the Vendor, a director or former director of any Group Company or a person connected with any of them is or was interested in any way. For this purpose, "connected" has the meaning given by section 839 of ICTA, except that in construing section 839 "control" has the meaning given by section 840 or section 416 of ICTA so that there is control wherever either section 840 or 416 requires. 24. Miscellaneous - - -------------------- 24.1 Each Group Company is operating and has always operated its business in all respects in accordance with its memorandum and articles of association at the relevant time. 24.2 Each register, minute book and other book which the CA 1985 requires each Group Company to keep has been properly kept and contains a complete and accurate record of the matters which it is required by the CA 1985 to record. No notice has been received or allegation made that a register or book is incorrect or should be rectified. 24.3 All returns, particulars, resolutions and other documents required to be delivered by each Group Company to the Registrar of Companies and other governmental or other authority or agency have been properly prepared and delivered. 24.4 No Group Company has not given a power of attorney or other authority by which a person my enter into an agreement, arrangement or obligation on any Group 71 Company's behalf (other than an authority for a director, other officer or employee to enter into an agreement in the usual course of that person's duties). 25. Brokerage or Commission - - ------------------------------ No person is entitled to receive a finder's fee, brokerage or commission from any Group Company in connection with this Agreement. 72 SCHEDULE 5 ---------- Properties ---------- 1. The Coventry Property - Premises at Coventry Walsgrave Triangle, Hinckley Road, Coventry more particularly described in a lease dated January 24, 1992 between Ashford Developments Limited (1) and Husky Computers Limited (2) (the "Coventry Lease"). Leasehold - for a term of 25 years from December 16, 1991 (registered at HM Land Registry under title no: WK340933). 2. 30, rue du Morvan, Batiment G, Rungis. Leasehold - for a term of 9 years from April 15, 1989 between SILIC and the French Office of WPI Husky. 12, rue Le Corbusier, Parc d'Affaires SILIC, Batiment Iena B2, Rungis. Leasehold - for a term of 9 years from June 1, 1998 between SILIC and the French Office of WPI Husky. 4. Leasehold - for a term of 5 years from April 1995 until March 28, 2000 (automatic renewal for 5 years unless terminated) between WPI Husky GmbH and Helmut Hermes Verpachtungen. 73 SCHEDULE 6 ---------- Property Provisions ------------------- Terms of Sale and Leaseback or Surrender and New Lease of the Coventry Property - - ------------------------------------------------------------------------------- Section 1 1. The Vendor agrees with the Purchaser to accept or procure the acceptance by one of its affiliates of an assignment ("Assignment") of the Coventry Lease and the Purchaser agrees to grant or procure the grant of the Assignment (and where reference in this Schedule is made to WPI Husky it shall mean the Purchaser or at its direction WPI Husky) upon the following provisions of this part of this Schedule. 2. Insofar as the same are applicable and are not consistent with or varied by the express terms of this Agreement, the foregoing agreement relating to the Assignment shall incorporate the Standard Conditions of Sale (Third Edition) ("Conditions") as varied in the manner set out below and for the avoidance of doubt for the purposes of the Conditions the seller is the Purchaser or at its discretion WPI Husky and the Vendor is the buyer. 2.1 In paragraphs (a) and (b) of Condition 1.3.6 the words "unless returned undelivered" shall be added after the word "posting". 2.2 Paragraph (c) of Condition 3.1.2 shall be amended to read "those of which the seller does not have actual knowledge" and the following paragraph (f) shall be added to the Condition: "(f) all other matters disclosed or reasonably to be expected to be disclosed by searches and as a result of enquiries made by or for the buyer or which a prudent buyer ought to make". 2.3 In Condition 3.1.3 the words "of which he receives actual knowledge" shall be inserted after the words "new public requirement" and shall also be substituted for the words "which he learns about". 2.4 Condition 4.3.2 shall not apply. 2.5 Conditions 5.1.1 and 5.2.1 shall not apply and the risk of damage to or destruction of the Coventry Property passes to the Vendor from the date of this Agreement save that the Purchaser shall continue to comply with the insurance provisions of the Coventry Lease. 74 2.6 The following proviso shall be added at the end of Condition 6.6: "PROVIDED that the production of such receipt shall not be a condition of completion but if the seller is unable to produce the same then the Vendor shall furnish such other evidence (if any) as may be available in respect thereof" and in paragraph (a) of Condition 8.3.2 the words "but the Seller shall not be obliged to pay a premium for such consent" shall be added after the words "obtain it". 2.7 The Coventry Lease is sold together with all easements, rights and licences attaching or appurtenant thereto and all buildings, structures and fixed and non-severable plant, machinery and equipment thereon except: 2.7.1 property belonging to the suppliers of gas, water, electricity, telecommunications or other services; and 2.7.2 landlord's fixtures and fittings; and 2.7.3 tenant's and trade fixtures and fittings on any part of the Coventry Property which are owned by the Purchaser or WPI Husky but subject to the easements, rent charges, covenants, restrictions, leases, tenancies (including statutory tenancies), licences, agreements, overriding interests (as defined in Section 70(1) of the Land Registration Act 1925) and also are sold subject also to the rents, covenants and conditions reserved by or contained in the leases under which the same are respectively held. The Vendor shall raise no requisitions nor make any objection in respect of any of the above. 2.8 The Assignment shall be made without title guarantee. 2.9 The Vendor (as the transferee) will covenant with WPI Husky (as the transferor) as follows: "The Assignee hereby covenants with the Assignor that the Assignee and the Assignee's successors in title will henceforth during the continuance of the term of the Lease pay the rents reserved thereby and observe and perform the lessee's covenants and the conditions contained therein and will indemnify the Assignor and the successors in title of the Assignor from and against all actions, proceeds, costs, claims, expenses and liability for or on account of (i) any future breach, non-observance or - non-performance thereof and (ii) any breach, non-observance or non- -- performance of any covenants concerning the state or condition of the Property". 75 2.10 The Vendor is deemed to buy with knowledge in all respects of the authorised uses of the Coventry Property for the purposes of the enactments from time to time in force relating to town and country planning. 2.11 Upon the actual completion of the sale and purchase of the Coventry Property the Vendor shall simultaneously grant and WPI Husky shall accept the New Sublease of the Coventry Property. 3. Consents to Transfer of Coventry Property and New Sublease 3.1 WPI Husky shall (or at the request of the Vendor, permit the Vendor to): 3.1.1 apply at the expense of the Vendor for consent to assign the Coventry Property to the Vendor and for the grant of the New Sublease to WPI Husky by the Vendor; and 3.1.2 use all reasonable endeavours to obtain such consent; 3.1.3 keep the Vendor fully informed of all progress made with regard to the obtaining of such consent; 3.1.4 enter into a direct covenant with the landlord for the New Sublease as reasonably required by the Coventry lease. 3.2 The Vendor shall in connection with obtaining the consents referred to in paragraph 3.1.1 above: 3.2.1 provide all information and references reasonably required by the landlord; 3.2.2 enter into direct covenants and provide such other security as required under the Coventry lease or as the landlord may otherwise require. Section 2 4.1 The Vendor may, if it appears that the Landlord will not grant such consents, request that negotiations be had with the Landlord for the Landlord to take a surrender from WPI Husky of the Coventry Lease (at a premium or otherwise) and the simultaneous grant of a new lease by the Landlord to WPI Husky upon the same terms as the New Sublease. 4.2 WPI Husky, as tenant under the Coventry Lease, shall authorise in writing Mike Tule of the Vendor to conduct all negotiations with the Landlord but he shall have no authority to bind or commit WPI Husky or the Purchaser and all negotiations shall be on a subject to contract and without prejudice basis. 76 4.3 Mr. Tule shall keep WPI Husky fully informed of the progress of any negotiations, invite WPI Husky to attend any meetings, and copy them in on all correspondence. 4.4 Any negotiations by the Vendor and/or Mr. Tule under this Schedule shall be at the cost of the Vendor and any costs and expenses required by the landlord (including legal) in connection with such negotiations and the completion of any documentation shall also be at the cost of the Vendor and the Purchaser and WPI Husky shall be indemnified by the Vendor in respect of such costs. 4.5 In the event that a surrender of the Coventry Lease and grant of a new lease to WPI Husky can be negotiated, the Vendor shall pay and indemnify, in addition to the costs and expenses of the Landlord, any premium or other consideration required by the Landlord for such Surrender including VAT thereon and all stamp duty payable on the new lease. 4.6 WPI Husky shall retain the discretion as to whether the terms proposed by the Landlord for the surrender or a new lease are acceptable to the Purchaser provided that the Purchaser shall if the following conditions are fulfilled procure that WPI Husky effects such surrender and accepts a new lease. 4.7 The conditions referred to in the foregoing paragraph are: 4.7.1 Any premium demanded by the Landlord is paid by the Vendor; 4.7.2 All costs are met by the Vendor; 4.7.3 The terms of the surrender do not impose any post completion obligations on WPI Husky and all pre-completion obligations are observed or performed by the Vendor at the Vendor's costs; 4.7.4 The terms of the new lease offered by the Landlord are those of the New Sublease. Section 3 5. In this Schedule:- "New Sublease" means a sublease of the whole of the Coventry Property to be granted by the Vendor as Transferee of the Coventry Lease at the passing rent currently payable under the Coventry Lease for a term of five years commencing on the date of the Assignment with a rent review at 25/12/2001 substantially in the form of the Coventry Lease except that the Tenant shall not be liable to keep the premises the subject of the demise in a better state or condition than at the date of this Agreement and the Lease shall contain an option for the Tenant upon 77 giving not less than 6 months' notice before the end of the term for a further lease for a term expiring 10 years after the date of the Assignment with a review as at 25.12.2006. Section 6. The Vendor shall by the End Date either: 6.1 Complete the Assignment and the grant of the New Sublease; or 6.2 Complete the Surrender and procure the grant of a new lease. 7. In paragraph 6 the End Date means 90 days after the date of this Agreement. - - -- 78 SCHEDULE 7 ---------- Purchase Price Apportionment ---------------------------- Purchase Price apportioned to the Shares: U.S.$20,704,400 Purchase Price apportioned to the US Assets: U.S.$10,908,400 Purchase Price apportioned to the UK Assets: U.S.$3,000,000 Total Purchase Price U.S.$34,612,800 79 SCHEDULE 8 ---------- Accounting Principles --------------------- UK GAAP 80 SIGNED BY ) on behalf of ) DYNATECH NOMINEES ) /S/ MARK TREMALLO LIMITED in the presence of:- ) Witness: ALLAN M. KLINE Signature: /S/ ALLAN M. KLINE Address:3 NEW ENGLAND EXECUTIVE PARK, BURLINGTON, MA 01802 Occupation: DIRECTOR SIGNED BY JOHN ALLARD ) for and on behalf of ) WPI GROUP (UK) ) /S/ JOHN ALLARD in the presence of:- ) Witness: LINDA M. RACETTE Signature: /S/ LINDA M. RACETTE Address: 54 MAPLE LANE, MANCHESTER, NH 03109 Occupation: LEGAL ASSISTANT SIGNED BY JOHN ALLARD ) for and on behalf of ) /S/ JOHN ALLARD WPI GROUP INC. ) in the presence of:- ) Witness: LINDA M. RACETTE Signature: /S/ LINDA M. RACETTE Address: 54 MAPLE LANE, MANCHESTER, NH 03109 Occupation: LEGAL ASSISTANT EX-3.1 3 0003.txt AMENDED AND RESTATED CERTIFICATE OF INCORPORATION EXHIBIT 3.1 CERTIFICATE OF INCORPORATION OF DYNATECH CORPORATION FIRST: The name of the corporation is Dynatech Corporation (the ----- "Corporation"). SECOND: The Corporation's registered office in the State of Delaware ------ is c/o Corporation Trust Center, 1209 Orange Street in the City of Wilmington, County of New Castle. The name of its registered agent at such address is The Corporation Trust Company. THIRD: The nature of the business of the Corporation and its purpose ----- is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. FOURTH: The total number of shares of all classes of stock which the ------ Corporation shall have authority to issue is 350,100,000 shares, consisting of 350,000,000 shares of Common Stock, par value $.01 per share, and 100,000 shares of Preferred Stock, par value $1.00 per share. The Preferred Stock may be issued at any time and from time to time in one or more series. The Board of Directors is hereby authorized to provide for the issuance of shares of Preferred Stock in series and, by filing a certificate of designation pursuant to the applicable provisions of the General Corporation Law of the State of Delaware (hereinafter referred to as a "Preferred Stock Certificate of Designation"), to establish from time to time the number of shares to be included in each such series, and to fix the designation, powers, preferences and rights of shares of each such series and the qualifications, limitations and restrictions thereof. The authority of the Board of Directors with respect to each series of Preferred Stock shall include, but not be limited to, determination of the following: (a) the designation of the series, which may be by distinguishing number, letter or title; (b) the number of shares of the series, which number the Board of Directors may thereafter (except where otherwise provided in the applicable Preferred Stock Certificate of Designation) increase or decrease (but not below the number of shares thereof then outstanding); (c) whether dividends, if any, shall be cumulative or noncumulative and the dividend rate of the series; (d) the dates on which dividends, if any, shall be payable; the redemption rights and price or prices, if any, for shares of the series; (e) the terms and amount of any sinking fund provided for the purchase or redemption of shares of the series; (f) the amounts payable on shares of the series in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation; (h) whether the shares of the series shall be convertible or exchangeable into shares of any other class or series, or any other security, of the Corporation or any other corporation, and, if so, the specification of such other class or series or such other security, the conversion or exchange price or prices or rate or rates, any adjustments thereof, the date or dates as of which such shares shall be convertible or exchangeable and all other terms and conditions upon which such conversion or exchange may be made; (i) restrictions on the issuance of shares of the same series or of any other class or series; (j) the voting rights, if any, of the holders of shares of the series; and (k) such other terms and provisions as the Board of Directors may determine. FIFTH: The name and mailing address of the incorporator is as follows: ----- Andrew S. Borodach c/o Debevoise & Plimpton 875 Third Avenue New York, New York 10022 SIXTH: The following provisions are inserted for the management of the ----- business and for the conduct of the affairs of the Corporation and for the purpose of creating, defining, limiting and regulating the powers of the Corporation and its directors and stockholders: 2 (a) The number of Directors constituting the Board of Directors shall be as set forth in, or determined by the Board of Directors in accordance with, the By-Laws of the Corporation. The Board of Directors shall be divided into three classes, designated Classes I, II and III, which shall be as nearly equal in number as possible. Directors of Class I shall be elected at any time on and after the date of filing of this Certificate of Incorporation with the Secretary of State of the State of Delaware to hold office for an initial term expiring at the annual meeting of stockholders to be held in 2001. Directors of Class II shall be elected at any time on and after the date of filing of this Certificate of Incorporation with the Secretary of State of the State of Delaware to hold office for an initial term expiring at the annual meeting of stockholders to be held in 2002. Directors of Class III shall be elected at any time on and after the date of filing of this Certificate of Incorporation with the Secretary of State of the State of Delaware to hold office for an initial term expiring at the annual meeting of stockholders to be held in 2000; provided that, prior to the annual meeting of stockholders to be held in 2000, the Board of Directors may, by resolution duly adopted, create and appoint one or more persons to fill one or more Class III Directorships up to a number not to exceed the number of Directors in Class I for an interim term expiring at the annual meeting of stockholders to be held in 2000. At each annual meeting of stockholders following the annual meeting of stockholders to be held 2000, the respective successors of the Directors whose terms are expiring shall be elected for terms expiring at the annual meeting of stockholders held in the third succeeding year. Vacancies in the Board of Directors and newly-created Directorships resulting from any increase in the authorized number of Directors may be filled as provided in the By- Laws. Directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of Directors. (b) The election of directors may be conducted in any manner approved by the stockholders at the time when the election is held and need not be by ballot. (c) All corporate powers and authority of the Corporation (except as at the time otherwise provided by law, by this Certificate of Incorporation or by the By-Laws) shall be vested in and exercised by the Board of Directors. (d) The Board of Directors shall have the power without the assent or vote of the stockholders to adopt, amend, alter or repeal the By-Laws of the Corporation, except to the extent that the By-Laws or this Certificate of Incorporation otherwise provide. (e) No director of the Corporation shall be liable to the Corporation or its stockholders for monetary damages for breach of his or her fiduciary duty as a 3 director, provided that nothing contained in this Certificate of Incorporation shall eliminate or limit the liability of a director (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of the law, (iii) under Section 174 of the General Corporation Law of the State of Delaware or (iv) for any transaction from which the director derived an improper personal benefit. SEVENTH: The Corporation reserves the right to amend, alter, ------- change or repeal any provision contained in this certificate in the manner now or hereafter prescribed by statute; and all rights herein conferred upon the stockholders are granted subject to this reservation. IN WITNESS WHEREOF, I, the undersigned, being the incorporator hereinabove named, for the purpose of forming a corporation pursuant to the General Corporation Law of the State of Delaware, do make and file this Certificate of Incorporation, hereby declaring and certifying that the facts herein stated are true, and accordingly have hereunto set my hand this 8th day of September, 1999. /s/ Andrew S. Borodach ------------------------------------------ Andrew S. Borodach 4 EX-4.6 4 0004.txt AMENDMENT 1 TO THE REGISTRATION RIGHTS AGREEMENT EXHIBIT 4.6 Amendment No. 1, dated as of May 23, 2000 (the "Amendment"), among Dynatech Corporation, a Delaware corporation (the "Company"), Clayton, Dubilier & Rice Fund V Limited Partnership, a Cayman Islands limited partnership ("Fund V"), and Clayton, Dubilier & Rice Fund VI Limited Partnership, a Cayman Islands limited partnership ("Fund VI"), to the Registration Rights Agreement, dated as of May 21, 1998 (the "Registration Rights Agreement"), among the Company, Fund V and the other parties thereto. Capitalized terms used herein without definition have the meanings ascribed thereto in the Registration Rights Agreement. WHEREAS, in order to finance the merger of a subsidiary of the Company and Wavetek Wandel Goltermann, Inc., the Company sold 12.5 million and 30.625 million newly-issued but unregistered shares of Common Stock to Fund V and Fund VI, respectively, for $4.00 per share, in each case pursuant to a stock subscription agreement, dated as of the date hereof (each a "Fund Stock Subscription Agreement"), between the Company and Fund V and Fund VI, respectively; WHEREAS, the Company, Fund V and Fund VI desire to amend the Registration Rights Agreement to provide registration rights to each of Fund V and Fund VI in respect of the shares of Common Stock purchased pursuant to the Fund Stock Subscription Agreements; NOW, THEREFORE, in consideration of the premises and the mutual promises and agreements herein made, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: 1. Amendment to Section 2. Section 2 of the Registration Rights Agreement is amended as follows: (a) to add the following definitions: "Fund V": Clayton, Dubilier & Rice Fund V Limited Partnership, a Cayman Islands limited partnership and "Fund VI": Clayton, Dubilier & Rice Fund VI Limited Partnership, a Cayman Islands limited partnership. (b) to amend the definition of "Registrable Securities" to read in its entirety as follows: "Registrable Securities": (a) The Common Stock (i) received by ----------------------- Fund V, the Manager and the Trusts as a result of the Merger, (ii) issued to each of Fund V and Fund VI pursuant to the Fund Stock Subscription Agreements or (iii) issued to Individual Investors pursuant to a stock subscription agreement or other agreement that provides that such Common Stock shall be Registrable Securities, (b) any shares of Common Stock issued pursuant to the terms of, and under the circumstances set forth in, Section 4, and (c) any securities issued or issuable with respect to any Common Stock referred to in the foregoing clauses (w) upon any conversion or exchange thereof, (x) by way of stock dividend or stock split, (y) in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization or (z) otherwise, in all cases subject to the last paragraph of Section 3.3. As to any particular Registrable Securities, once issued such securities shall cease to be Registrable Securities when (A) a registration statement (other than a Special Registration pursuant to which such securities were issued by the Company) with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been disposed of in accordance with such registration statement, (B) such securities shall have been distributed to the public in reliance upon Rule 144, (C) such securities shall have been otherwise transferred, new certificates for such securities not bearing a legend restricting further transfer shall have been delivered by the Company and subsequent disposition of such securities shall not require registration or qualification of such securities under the Securities Act or any similar state law then in force, or (D) such securities shall have ceased to be outstanding. 2. Amendment to Section 4.4. Section 4.4 of the Registration Rights Agreement is amended as follows: (a) to amend Clause (iii) to read in its entirety as follows: (iii) if to Fund V, to: Clayton, Dubilier & Rice Fund V Limited Partnership 1403 Foulk Road, Suite 106 Wilmington, Delaware 19803 Attention: Brian D. Finn; and (b) to add a new clause (iv) as follows: (iv) if to Fund VI, to: Clayton, Dubilier & Rice 2 Fund VI Limited Partnership 1403 Foulk Road, Suite 106 Wilmington, Delaware 19803 Attention: Brian D. Finn. --------- 3. Amendment of Reference to "Fund". The references to the "Fund" -------------------------------- in Section 1(c), the definition of "Affiliate" in Section 2, and the first paragraph of Section 4.4 shall be amended to refer to both Fund V and Fund VI. 4. Confirmation of Registration Rights Agreement. Other than as --------------------------------------------- expressly modified pursuant to this Amendment, all provisions of the Registration Rights Agreement remain unmodified and in full force and effect. 5. Miscellaneous. This Amendment shall be governed by and construed ------------- in accordance with the internal laws of the State of New York without giving effect to any choice or conflict of law provision or rule to the extent such provision or rule would require or permit the application of the laws of any jurisdiction other than the State of New York. This Amendment may be executed in one or more counterparts, each of which shall be deemed an original and all of which shall together constitute one and the same instrument and shall bind and inure to the benefit of the parties and their respective successors and assigns. 3 IN WITNESS WHEREOF, each of the undersigned has executed this Amendment as of the date first written above. DYNATECH CORPORATION By: /s/ Mark Tremallo ------------------------------------------------- Name: Mark V.B. Tremallo Title: Corporate Vice President and General Counsel CLAYTON, DUBILIER & RICE FUND V LIMITED PARTNERSHIP By: CD&R Associates V Limited Partnership, its general partner By: CD&R Investment Associates II, Inc., a general partner By: /s/ Donald J. Gogel -------------------------------------------- Name: Donald J. Gogel Title: President, Chief Executive Officer, Secretary and Assistant Treasurer CLAYTON, DUBILIER & RICE FUND VI LIMITED PARTNERSHIP By: CD&R Associates VI Limited Partnership, the general partner By: CD&R Investment Associates VI, Inc., its general partner By: /s/ Donald J. Gogel ----------------------------------------------- Name: Donald J. Gogel Title: President, Chief Executive Officer, Secretary and Assistant Treasurer 4 EX-4.7 5 0005.txt FORM OF PIGGYBACK REGISTRATION RIGHTS AGREEMENT EXHIBIT 4.7 DYNATECH CORPORATION PIGGYBACK REGISTRATION RIGHTS AGREEMENT Dated as of February 29, 2000 Table of Contents -----------------
Page ---- 1. Background................................................. 1 2. Definitions................................................ 1 3. Registration............................................... 3 3.1. Incidental Registration.............................. 3 3.2. Registration Procedures.............................. 4 3.3. Preparation; Reasonable Investigation................ 8 3.4. Indemnification...................................... 9 4. Miscellaneous.............................................. 11 4.1. Amendments and Waivers............................... 11 4.2. Nominees for Beneficial Owners....................... 12 4.3. Successors, Assigns and Transferees.................. 12 4.4. Notices.............................................. 12 4.5. Remedies; Attorneys' Fees............................ 13 4.6. Stock Splits, etc.................................... 13 4.7. Term................................................. 13 4.8. Severability......................................... 13 4.9. Headings............................................. 14 4.10. Counterparts......................................... 14 4.11. Governing Law........................................ 14 4.12. No Third Party Beneficiaries......................... 14 4.13. Consent to Jurisdiction.............................. 14 4.14. Waiver of Jury Trial................................. 14 4.15. Effectiveness........................................ 15
PIGGYBACK REGISTRATION RIGHTS AGREEMENT ---------------------------------------- PIGGYBACK REGISTRATION RIGHTS AGREEMENT, dated as of February 29, 2000, among Dynatech Corporation, a Delaware corporation (the "Company"), and the ------- undersigned persons (the "Stockholders"), who will be electing to receive shares ------------- of common stock, no par value, of the Company (the "Common Stock") in the Merger ------------ (as defined below). 1. Background. The Company is a party to an Agreement and Plan of Merger, ---------- dated as of February 14, 2000 (the "Merger Agreement"), with DWW Acquisition ---------------- Corporation, a Delaware corporation ("MergerCo"), and Wavetek Wandel Goltermann, -------- Inc., a Delaware corporation ("WWG"), pursuant to which MergerCo shall merge --- (the "Merger") with WWG, with WWG as the surviving corporation. In the Merger, ------ certain shares of WWG common stock shall be converted into the right to receive shares of Common Stock. 2. Definitions. For purposes of this Agreement, the following terms have ----------- the following respective meanings: "Affiliate": With respect to any Person, any other Person directly or --------- indirectly Controlling, Controlled by or under common Control with such first Person. "Control" means the power to direct the affairs of a Person by reason of ownership of voting securities, by contract or otherwise. "Board": The Board of Directors of the Company. ----- "Business Day": A day other than a Saturday, Sunday or other day on which ------------ commercial banks in New York City are authorized or required to close. "CD&R": Clayton, Dubilier & Rice, Inc., a Delaware corporation. ---- "Common Stock": See the introduction to this Agreement. ------------ "Company": See the introduction to this Agreement. ------- "Exchange Act": The Securities Exchange Act of 1934, as amended, or any ------------ successor Federal statute, and the rules and regulations thereunder which shall be in effect at the time. Any reference to a particular section thereof shall include a reference to the corresponding section, if any, of any such successor Federal statute, and the rules and regulations thereunder. "Fund V": See Section 3.1(a). ------ "Funds": See Section 3.1(a). ----- "Merger": See Section 1. ------ "NASD": National Association of Securities Dealers, Inc. ---- "NASDAQ": The NASD Automated Quotation System. ------ "Person": Any natural person, firm, partnership, association, corporation, ------ company, trust, business trust, governmental entity or other entity. "Public Offering": An underwritten public offering of Common Stock led by --------------- at least one underwriter of nationally recognized standing. "Qualifying Piggyback Event": See Section 3.1(a). -------------------------- "Registrable Securities": The Common Stock received by the Stockholders as ---------------------- a result of the Merger and any securities issued or issuable with respect thereto (x) upon any conversion or exchange thereof, (y) by way of stock - - dividend or stock split, or (z) in connection with a combination of shares, - recapitalization, merger, consolidation or other reorganization. As to any particular Registrable Securities, once issued such securities shall cease to be Registrable Securities when (A) a registration statement with respect to the - sale of such securities shall have become effective under the Securities Act and such securities shall have been disposed of in accordance with such registration statement, (B) such securities shall have been distributed to the public in - reliance upon Rule 144, (C) both (i) the first anniversary of the Merger and - - (ii) a Public Offering, shall have occurred, (D) such securities shall have been -- - otherwise transferred to a person other than a Stockholder, or (E) such - securities shall have ceased to be outstanding. "Registration Expenses": All expenses incident to the Company's performance --------------------- of its obligations under or compliance with Section 3, including, but not limited to, all registration and filing fees, all fees and expenses of complying with securities or blue sky laws, all fees and expenses associated with listing securities on exchanges or NASDAQ, all fees and other expenses associated with filings with the NASD (including, if required, the fees and expenses of any "qualified independent underwriter" and its counsel), all printing expenses, the fees and disbursements of counsel for the Company and of its independent public accountants, and the expenses of any special audits made by such accountants required by or incidental to such performance and compliance, but not including (a) fees and disbursements of counsel retained by the holders of Registrable - Securities or (b) any underwriting discounts or commissions or any transfer - any transfer taxes payable in respect of the sale of Registrable Securities by the holders thereof. "Rule 144": Rule 144 (or any successor provision) under the Securities Act. -------- "Rule 144A": Rule 144A (or any successor provision) under the Securities --------- Act. "Securities Act": The Securities Act of 1933, as amended, or any successor -------------- Federal statute, and the rules and regulations thereunder which shall be in effect at the 2 time. Any reference to a particular section thereof shall include a reference to the corresponding section, if any, of any such successor Federal statute, and the rules and regulations thereunder. "SEC": The Securities and Exchange Commission or any other Federal agency --- at the time administering the Securities Act or the Exchange Act. "Special Registration": (a) The registration of shares of equity securities -------------------- - and/or options or other rights in respect thereof to be offered to directors, members of management, employees, consultants or sales agents, distributors or similar representatives of the Company or its direct or indirect subsidiaries, or (b) the registration of equity securities and/or options or other rights in - respect thereof solely on Form S-4 or S-8 or any successor form. "Stockholder": See the introduction to this Agreement. ----------- 3. Registration. ------------ 3.1. Incidental Registration. (a) If the Company at any time proposes to ----------------------- register any of its equity securities (as defined in the Exchange Act) under the Securities Act (other than pursuant to a Special Registration) (i) for a Public - Offering, (ii) other than for sale for its own account, (iii) in which either -- --- Clayton, Dubilier & Rice Fund V Limited Partnership ("Fund V") or Clayton, ------ Dubilier & Rice Fund VI Limited Partnership (collectively with Fund V, the "Funds") proposes to sell equity securities of the Company and (iv) the - - ------ -- registration form to be used may be used for the registration of Registrable Securities (any such registration of the Company's equity securities a "Qualifying Piggyback Event"), then the Company will at such time give prompt - - --------------------------- written notice to all holders of Registrable Securities of its intention to do so and, upon the written request of any holder of Registrable Securities given to the Company within 30 days after the Company has given any such notice (which request shall specify the Registrable Securities intended to be disposed of by such holder and the intended method of disposition thereof), the Company will use its best efforts to effect the registration under the Securities Act of all Registrable Securities which the Company has been so requested to register by the holders thereof, to the extent required to permit the disposition (in accordance with the intended methods thereof as aforesaid) of the Registrable Securities so to be registered, provided that: -------- (x) if, at any time after giving written notice of its intention to register any securities and prior to the effective date of the registration statement filed in connection with such registration, either (A) the Board - shall determine for any reason not to register such securities or (B) both - the Funds shall have determined not to participate in such registration, then the Company may, at its election, give written notice of such determination to each holder of Registrable Securities that 3 was previously notified of such registration and, thereupon, shall not register any Registrable Securities in connection with such registration (but shall nevertheless pay the Registration Expenses in connection therewith); and (y) if the Company shall be advised in writing by the managing underwriters (or, in connection with an offering which is not underwritten, by an investment banker) that in their or its opinion the number of securities requested to be included in such registration (whether pursuant to this Section 3.1 or pursuant to any other rights granted by the Company to a holder or holders of its securities to request or demand such registration or inclusion of any such securities in any such registration) exceeds the number of such securities which can be sold in such offering, then the holders of the Registrable Securities requested to be included therein and the holders of such other securities requested to be included therein shall share pro rata (based on the number of shares if the requested or demanded registration is to cover only Common Stock and, if not, based on the proposed offering price of the total number of securities included in such public offering requested to be included therein) in the number of securities included in such registration. The Company will pay all Registration Expenses in connection with each registration of Registrable Securities requested pursuant to this Section 3.1. 3.2. Registration Procedures. ----------------------- (a) If and whenever the Company is required to use its best efforts to effect the registration of any Registrable Securities under the Securities Act as provided in Section 3.1, the Company will promptly: (i) as soon as practicable, prepare and file with the SEC a registration statement with respect to such securities, make all required filings with the NASD and use best efforts to cause such registration statement to become effective; (ii) prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection therewith and such other documents as may be necessary to keep such registration statement effective and to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement until such time as all of such securities have been disposed of in accordance with the intended methods of disposition by the seller or sellers thereof set forth in such registration statement, but in no event for a period of more than six months after such registration statement becomes effective; 4 (iii) furnish to counsel (if any) selected by the holders of a majority (by number of shares) of the Registrable Securities covered by such registration statement and to counsel for the underwriters in any underwritten offering copies of all documents proposed to be filed with the SEC (including all documents to be filed on a confidential basis) in connection with such registration; (iv) furnish to each seller of such securities, without charge, such number of conformed copies of such registration statement and of each such amendment and supplement thereto (in each case, including all exhibits and documents filed therewith (other than those filed on a confidential basis), except that the Company shall not be obligated to furnish any seller of securities with more than two copies of such exhibits and documents), such number of copies of the prospectus included in such registration statement (including each preliminary prospectus and any summary prospectus) in conformity with the requirements of the Securities Act, and such other documents, as such seller may reasonably request in order to facilitate the disposition of the securities owned by such seller; (v) use its best efforts to register or qualify the securities covered by such registration statement under such other securities or blue sky laws of such jurisdictions as each seller shall request, and do any and all other acts and things which may be necessary or advisable to enable such seller to consummate the disposition in such jurisdictions of the securities owned by such seller, except that the Company shall not for any such purpose be required to qualify generally to do business as a foreign corporation in any jurisdiction wherein it is not so qualified, subject itself to taxation in any jurisdiction wherein it is not so subject, or take any action which would subject it to general service of process in any jurisdiction wherein it is not so subject; (vi) (A) notify each seller of any securities covered by such - registration statement if such registration statement, at the time it or any amendment thereto became effective, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and, as promptly as practicable, prepare and file with the SEC a post-effective amendment to such registration statement and use best efforts to cause such post-effective amendment to become effective such that such registration statement, as so amended, shall not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and (B) - notify each holder of Registrable Securities covered by such registration statement, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, if the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in 5 light of the circumstances under which they were made, not misleading, and, as promptly as is practicable, prepare and furnish to such holder a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (vii) otherwise use its best efforts to comply with all applicable rules and regulations of the SEC, and make available to its security holders, as soon as reasonably practicable, an earnings statement of the Company complying with the provisions of Section 11(a) of the Securities Act and Rule 158 under the Securities Act; (viii) notify each seller of any securities covered by such registration statement (A) when such registration statement, or any post- - effective amendment to such registration statement, shall have become effective, or any amendment of or supplement to the prospectus used in connection therewith shall have been filed, (B) of any request by the SEC - to amend such registration statement or to amend or supplement such prospectus or for additional information, (C) of the issuance by the SEC of - any stop order suspending the effectiveness of such registration statement or of any order preventing or suspending the use of any preliminary prospectus, and (D) of the suspension of the qualification of such securities for offering or sale in any jurisdiction, or of the institution of any proceedings for any of such purposes; (ix) use its best efforts (A) (1) to list such securities on any - - securities exchange on which the Common Stock is then listed or, if no Common Stock is then listed, on an exchange selected by the Company, if such listing is then permitted under the rules of such exchange or (2) if - such listing is not practicable or the Board determines that quotation as a NASDAQ National Market System security is preferable, to secure designation of such securities as a NASDAQ "national market system security" within the meaning of Rule 11Aa2-1 under the Exchange Act or, failing that, to secure NASDAQ authorization for such securities, and, without limiting the foregoing, to arrange for at least two market makers to register as such with respect to such securities with the NASD, (B) to provide a transfer - agent and registrar for such Registrable Securities not later than the effective date of such registration statement and (C) to obtain a CUSIP - number for the Registrable Securities; and 6 (x) use every reasonable effort to obtain the lifting of any stop order that might be issued suspending the effectiveness of such registration statement or of any order preventing or suspending the use of any preliminary prospectus. (b) Offerings Exclusive. The Stockholders hereby agree that only ------------------- securities which are to be distributed by the underwriters may be included in the registration. (c) Underwriting Agreement, Etc. The holders of Registrable Securities to --------------------------- be distributed by the underwriters shall be parties to the underwriting agreement between the Company and such underwriters and may, at their option, require that any or all of the representations and warranties by, and the other agreements on the part of, the Company to and for the benefit of such underwriters shall also be made to and for the benefit of such holders of Registrable Securities and that any or all of the conditions precedent to the obligations of the underwriters under such underwriting agreement shall also be conditions precedent to the obligations of such holders of Registrable Securities. No such holder of Registrable Securities shall be required by the Company to make any representations or warranties to, or agreements with, the Company or the underwriters other than as set forth in Section 3.2(d) and 3.4(b) and representations, warranties or agreements regarding such holder and such holder's intended method of distribution. (d) Hold Back Agreements. If and whenever the Company proposes to register --------------------- any of its equity securities under the Securities Act, whether or not for its own account (other than pursuant to a registration on Form S-8), each holder of Registrable Securities, if required by the managing underwriter, agrees by electing to receive Registrable Securities in the Merger not to effect (other than pursuant to such registration) any public sale or distribution, including, but not limited to, any sale pursuant to Rule 144 or Rule 144A, of any Registrable Securities, any other equity securities of the Company or any securities convertible into or exchangeable or exercisable for any equity securities of the Company, for 180 days after, and during the 20 days prior to, the effective date of such registration, to the extent timely notified in writing by the Company or the managing underwriter. (e) The Company may require each seller of any securities as to which any registration is being effected to furnish to the Company such information regarding such seller and the distribution of such securities as the Company may from time to time reasonably request in writing and as shall be required by law in connection therewith. Each such holder agrees to furnish promptly to the Company all information required to be disclosed in order to make the information previously furnished to the Company by such holder not materially misleading. (f) The Company agrees not to file or make any amendment to any registration statement with respect to any Registrable Securities, or any amendment of or supplement to the prospectus used in connection therewith, which refers to any seller of 7 any securities covered thereby by name, or otherwise identifies such seller as the holder of any securities of the Company, without the consent of such seller, such consent not to be unreasonably withheld, except that no such consent shall be required for any disclosure that is required by law. (g) By acquisition of Registrable Securities, each holder of such Registrable Securities shall be deemed to have agreed that upon receipt of any notice from the Company pursuant to Section 3.2(a)(vi), such holder will promptly discontinue such holder's disposition of Registrable Securities pursuant to the registration statement covering such Registrable Securities until such holder shall have received, in the case of clause (A) of Section 3.2(a)(vi), notice from the Company that such registration statement has been amended, as contemplated by Section 3.2(a)(vi), and, in the case of clause (B) of Section 3.2(a)(vi), copies of the supplemented or amended prospectus contemplated by Section 3.2(a)(vi). If so directed by the Company, each holder of Registrable Securities will deliver to the Company (at the Company's expense) all copies, other than permanent file copies, in such holder's possession of the prospectus covering such Registrable Securities at the time of receipt of such notice. In the event that the Company shall give any such notice, the period mentioned in Section 3.2(a)(vi) shall be extended by the number of days during the period from and including the date of the giving of such notice to and including the date when each seller of any Registrable Securities covered by such registration statement shall have received the copies of the supplemented or amended prospectus contemplated by Section 3.2(a)(vi). (h) Notwithstanding any other provision of this Agreement, the parties hereto acknowledge that the Company shall have no obligation to prepare or file any registration statement prior to the time that financial information required to be included therein is available for inclusion therein. 3.3. Preparation; Reasonable Investigation. In connection with the ------------------------------------- preparation and filing of each registration statement registering Registrable Securities under the Securities Act, the Company will give the holders of such Registrable Securities so to be registered and their underwriters, if any, and their respective counsel and accountants the opportunity to participate in the preparation of such registration statement, each prospectus included therein or filed with the SEC, and each amendment thereof or supplement thereto, and will give each of them such access to its books and records and such opportunities to discuss the business of the Company with its officers and the independent public accountants who have issued audit reports on its financial statements as shall be necessary, in the opinion of such holders' and such underwriters' respective counsel, to conduct a reasonable investigation within the meaning of the Securities Act. 8 3.4. Indemnification. --------------- (a) Indemnification by the Company. In the event of any registration of ------------------------------ any Registrable Securities under the Securities Act pursuant to Section 3.1, the Company will indemnify and hold harmless the seller of such securities, its directors, officers, and employees, each other person who participates as an underwriter, broker or dealer in the offering or sale of such securities and each other person, if any, who controls such seller or any such participating person within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act, against any and all losses, claims, damages or liabilities, joint or several, to which such seller or any such director, officer, employee, participating person or controlling person may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of a fact - contained in any registration statement under which such securities were registered under the Securities Act, any preliminary prospectus, final prospectus or summary prospectus contained therein or related thereto, or any amendment or supplement thereto, or (ii) any omission or alleged omission to -- state a fact required to be stated in any such registration statement, preliminary prospectus, final prospectus, summary prospectus, amendment or supplement or necessary to make the statements therein not misleading; and the Company will reimburse such seller and each such director, officer, employee, participating person and controlling person for any legal or any other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, liability, action or proceeding, provided that the Company -------- shall not be liable in any such case to the extent that any such loss, claim, damage, liability or expense arises out of or is based upon an untrue statement or omission made in such registration statement, any such preliminary prospectus, final prospectus, summary prospectus, amendment or supplement in reliance upon and in conformity with written information furnished to the Company by such seller or participating person expressly for use in the preparation thereof. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such seller or any such director, officer, employee, participating person or controlling person and shall survive the transfer of such securities by such seller. (b) Indemnification by the Sellers. In the event of any registration of ------------------------------ any Registrable Securities under the Securities Act pursuant to Section 3.1, each of the prospective sellers of such securities, will indemnify and hold harmless the Company, each director of the Company, each officer of the Company who shall sign such registration statement, each other person who participates as an underwriter, broker or dealer in the offering or sale of such securities and each other person, if any, who controls the Company or any such participating person within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, against any and all losses, claims, damages or liabilities, joint or several, to which the Company or any such director, officer, employee, participating person or controlling person may become subject under 9 the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of a fact - contained in any registration statement under which such securities were registered under the Securities Act, any preliminary prospectus, final prospectus or summary prospectus contained therein or related thereto, or any amendment or supplement thereto, if such statement or omission was made in reliance upon and in conformity with written information furnished to the Company by such seller expressly for use in the preparation of such registration statement, preliminary prospectus, final prospectus, summary prospectus, amendment or supplement or (ii) any omission or alleged omission to state a fact -- with respect to such seller required to be stated in any such registration statement, preliminary prospectus, final prospectus, summary prospectus, amendment or supplement or necessary to make the statements therein not misleading; and the seller will reimburse the Company and each such director, officer, employee, participating person and controlling person for any legal or any other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, liability, action or proceeding, provided -------- that the liability of each such seller will be in proportion to and limited to the net amount received by such seller (after deducting any underwriting discount and expenses) from the sale of Registrable Securities pursuant to such registration statement. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Company or any such director, officer, participating person or controlling person and shall survive the transfer of such securities by such seller. (c) Notices of Claims, etc. Promptly after receipt by an indemnified party ---------------------- of notice of the commencement of any action or proceeding involving a claim referred to in the preceding paragraphs of this Section 3.4, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party hereunder, give written notice to the latter of the commencement of such action, provided that the failure of any indemnified party to give notice as -------- provided therein shall not relieve the indemnifying party of its obligations under the preceding paragraphs of this Section 3.4. In case any such action is brought against an indemnified party, the indemnifying party will be entitled to participate therein and to assume the defense thereof, jointly with any other indemnifying party similarly notified to the extent that it may wish, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof, provided that if such indemnified -------- party and the indemnifying party reasonably determine, based upon advice of their respective independent counsel, that a conflict of interest may exist between the indemnified party and the indemnifying party with respect to such action and that it is advisable for such indemnified party to be represented by separate counsel, such indemnified party may retain other counsel, reasonably satisfactory to the indemnifying party, to represent such indemnified party, and the indemnifying party shall 10 pay all reasonable fees and expenses of such counsel. No indemnifying party, in the defense of any such claim or litigation, shall, except with the consent of such indemnified party, which consent shall not be unreasonably withheld, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation. (d) Other Indemnification. Indemnification similar to that specified in --------------------- the preceding paragraphs of this Section 3.4 (with appropriate modifications) shall be given by the Company and each seller of Registrable Securities with respect to any required registration or other qualification of such Registrable Securities under any Federal or state law or regulation of governmental authority other than the Securities Act. (e) Other Remedies. If for any reason the foregoing indemnity is -------------- unavailable, or is insufficient to hold harmless an indemnified party, other than by reason of the exceptions provided therein, then the indemnifying party shall contribute to the amount paid or payable by the indemnified party as a result of such losses, claims, damages, liabilities or expenses (i) in such - proportion as is appropriate to reflect the relative benefits received by the indemnifying party on the one hand and the indemnified party on the other from the offering of Registrable Securities (taking into account the portion of the proceeds of the offering realized by each such party) or (ii) if the allocation -- provided by clause (i) above is not permitted by applicable law, or provides a lesser sum to the indemnified party than the amount hereinafter calculated, in such proportion as is appropriate to reflect not only the relative benefits received by the indemnifying party on the one hand and the indemnified party on the other but also the relative fault of the indemnifying party and the indemnified party as well as any other relevant equitable considerations. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. No party shall be liable for contribution under this Section 3.4(e) except to the extent and under such circumstances as such party would have been liable to indemnify under this Section 3.4 if such indemnification were enforceable under applicable law. (f) Officers and Directors. As used in this Section 3.4, the terms ---------------------- "officers" and "directors" shall include the partners of the holders of Registrable Securities which are partnerships and the trustees and beneficiaries of the holders of Registrable Securities which are trusts. 4. Miscellaneous. ------------- 4.1. Amendments and Waivers. This Agreement may be amended, and the Company ---------------------- may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Company shall have obtained the written 11 consent to such amendment, action or omission to act, of the holder or holders of at least a majority of the shares then constituting Registrable Securities then held by the Stockholders. No amendment , modification or discharge of this Agreement, and no waiver hereunder, shall be valid or binding unless set forth in writing. Any such waiver shall constitute a waiver only with respect to the specific matter described in such writing and shall in no way impair the rights of the party or parties granting such waiver in any other respect or at any other time. 4.2. Nominees for Beneficial Owners. In the event that any Registrable ------------------------------ Securities are held by a nominee for the beneficial owner thereof, the beneficial owner thereof may, at its election and unless notice is otherwise given to the Company by the record owner, be treated as the holder of such Registrable Securities for purposes of any request or other action by any holder or holders of Registrable Securities pursuant to this Agreement. 4.3. Successors, Assigns and Transferees. This Agreement shall be binding ----------------------------------- upon and shall inure to the benefit of the parties hereto and their respective successors and assigns. 4.4. Notices. All notices and other communications required or permitted ------- to be given under this Agreement shall be in writing and shall be deemed to have been given if delivered personally or sent by certified or express mail, return receipt requested, postage prepaid, or by any recognized international equivalent of such delivery, to the Company, or a Stockholder, as the case may be, as follows: (i) if to the Company, to it at: Dynatech Corporation 3 New England Executive Park Burlington, Massachusetts 01803 Attention: General Counsel --------- (ii) if to a Stockholder, to such Stockholder at the address set forth on the signature pages hereof. All such notices and communications shall be deemed to have been received on the date of delivery if delivered personally or on the fifth business day after the mailing thereof. Copies of any notice or other communication given under this Agreement shall also be given to: Clayton, Dubilier & Rice, Inc. 375 Park Avenue, 18th Floor 12 New York, New York 10152 Attention: Joseph L. Rice, III --------- and Debevoise & Plimpton 875 Third Avenue New York, New York 10022 Attention: Franci J. Blassberg, Esq. --------- 4.5. Remedies; Attorneys' Fees. Each holder of Registrable Securities, in ------------------------- addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Agreement. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of any provision of this Agreement and hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate. 4.6. Stock Splits, etc. Each party hereto agrees that it will vote to ----------------- effect a stock split (forward or reverse, as the case may be) with respect to any Registrable Securities in connection with any registration of such Registrable Securities hereunder, or otherwise, if the managing underwriter shall advise the Company in writing (or, in connection with an offering that is not underwritten, if an investment banker shall advise the Company in writing) that in their or its opinion such a stock split would facilitate or increase the likelihood of success of the offering. Each party hereto agrees that any number of shares of Common Stock referred to in this Agreement shall be equitably adjusted to reflect any stock split, stock dividend, stock combination, recapitalization or similar transaction. 4.7. Term. This Agreement shall be effective as of the date hereof and ---- shall continue in effect thereafter until the earliest of (a) its termination by - the consent of the parties hereto or their respective successors in interest, (b) the date on which no Registrable Securities remain outstanding, (c) the - - dissolution, liquidation or winding up of the Company and (d) the fifth - anniversary of the date hereof. 4.8. Severability. If any provision of this Agreement is inoperative or ------------ unenforceable for any reason, such circumstances shall not have the effect of rendering the provision in question inoperative or unenforceable in any other case or circumstance, or of rendering any other provision or provisions herein contained invalid, inoperative, or unenforceable to any extent whatsoever. The invalidity of any one or more phrases, sentences, clauses, Sections or subsections of this Agreement shall not affect the remaining portions of this Agreement. 13 4.9. Headings. The headings contained in this Agreement are for purposes -------- of convenience only and shall not affect the meaning or interpretation of this Agreement. 4.10. Counterparts. This Agreement may be executed in several counterparts, ------------ each of which shall be deemed an original and all of which together constitute one and the same instrument. 4.11. Governing Law. This agreement shall be governed by and construed in ------------- accordance with the laws of the state of New York, without giving effect to its principles or rules of conflict of laws to the extent such principles or rules would require or permit the application of the laws of any other jurisdiction. 4.12. No Third Party Beneficiaries. Except as provided in Sections 3.4 and ---------------------------- 4.3, nothing in this Agreement shall confer any rights upon any person or entity other than the parties hereto, each such party's respective successors and permitted assigns. 4.13. Consent to Jurisdiction. Each party irrevocably submits to the ----------------------- exclusive jurisdiction of the United States District Court for the Southern District of New York, for the purposes of any suit, action or other proceeding arising out of this Agreement or any transaction contemplated hereby (and agrees not to commence any such suit, action or proceeding except in such courts). Each party further agrees that service of any process, summons, notice or document by U.S. registered mail to such party's respective address set forth above shall be effective service of process for any such suit, action or proceeding. Each party irrevocably and unconditionally waives any objection to the laying of venue of any such suit, action or proceeding in the United States District Court for the Southern District of New York, that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. 4.14. WAIVER OF JURY TRIAL. EACH PARTY HEREBY WAIVES, TO THE FULLEST EXTENT -------------------- PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY. EACH PARTY (A) CERTIFIES THAT NO - REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER - PARTIES HAVE BEEN INDUCED TO ENTER INTO THE AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 4.14. 14 4.15. Effectiveness. The effectiveness of this Agreement is conditioned ------------- upon the occurrence of the Effective Time as contemplated by the Merger Agreement. If the Effective Time does not occur, or the Merger Agreement is terminated in accordance with its terms, this Agreement shall be of no force or effect. IN WITNESS WHEREOF, each of the undersigned has executed this Agreement or caused this Agreement to be executed on its behalf as of the date first written above. DYNATECH CORPORATION By:_____________________________ Name: Mark V.B. Tremallo Title: Corporate Vice President and General Counsel Stockholder: Name: Address: 15 EX-10.1 6 0006.txt CREDIT AGREEMENT, DATED MAY 23, 2000 Exhibit 10.1 CONFORMED COPY DYNATECH LLC AND THE GERMAN BORROWERS NAMED HEREIN _________________________ $860,000,000 CREDIT AGREEMENT dated as of May 23, 2000 _________________________ J.P. MORGAN SECURITIES INC. as Arranger MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent and as German Term Loan Servicing Bank CREDIT SUISSE FIRST BOSTON, as Syndication Agent THE CHASE MANHATTAN BANK, and BANKERS TRUST COMPANY as Co-Documentation Agents TABLE OF CONTENTS
Page SECTION 1. DEFINITIONS............................................................ 2 1.1 Defined Terms............................................................ 2 1.2 Other Definitional Provisions............................................ 28 SECTION 2. AMOUNT AND TERMS OF TRANCHE A LOAN..................................... 28 2.1 Tranche A Term Loans..................................................... 28 2.2 Procedure for Tranche A Loan Borrowing................................... 29 2.3 Amortization of Tranche A Loans.......................................... 29 2.4 Use of Proceeds of Tranche A Loans....................................... 30 SECTION 3. AMOUNT AND TERMS OF TRANCHE B LOAN..................................... 30 3.1 Tranche B Term Loans..................................................... 30 3.2 Procedure for Tranche B Loan Borrowing................................... 30 3.3 Amortization of Tranche B Loans.......................................... 30 3.4 Use of Proceeds of Tranche B Loans....................................... 31 SECTION 4. AMOUNT AND TERMS OF GERMAN TERM LOANS.................................. 31 4.1 German Term Loans........................................................ 31 4.2 Procedure for German Term Loan Borrowing................................. 32 4.3 Amortization of German Term Loans........................................ 32 4.4 Use of Proceeds of German Term Loans..................................... 33 4.5 German Borrower Assumption............................................... 33 SECTION 5. AMOUNT AND TERMS OF GERMAN L/C FACILITY................................ 33 5.1 German L/C Participation Commitment...................................... 33 5.2 Procedure for Issuance of the German L/C................................. 33 5.3 Fees, Commissions and Other Charges...................................... 34 5.4 German L/C Participations................................................ 34 5.5 Reimbursement Obligation of the German Borrowers......................... 35 5.6 Obligations Absolute..................................................... 37 5.7 German L/C Payments...................................................... 38 5.8 Reduction of German L/C Participation Commitment......................... 38 5.9 German Borrower Assumption............................................... 39 5.10 Obligation of German Term Loan Servicing Bank........................... 39 SECTION 6. AMOUNT AND TERMS OF REVOLVING CREDIT COMMITMENTS....................... 39 6.1 Revolving Credit Commitments............................................. 39 6.2 Procedure for Revolving Credit Borrowing................................. 39 6.3 Use of Proceeds of Revolving Credit Loans................................ 40 SECTION 7. DOMESTIC LETTERS OF CREDIT............................................. 40 7.1 Domestic L/C Commitment.................................................. 40
i 7.2 Procedure for Issuance of Domestic L/Cs.................................. 41 7.3 Fees, Commissions and Other Charges...................................... 41 7.4 L/C Participations....................................................... 42 7.5 Reimbursement Obligation of the Primary Borrower......................... 43 7.6 Obligations Absolute..................................................... 44 7.7 Domestic L/C Payments.................................................... 45 7.8 Application.............................................................. 45 SECTION 8. AMOUNT AND TERMS OF SWING LINE SUB-FACILITY............................ 45 8.1 Swing Line Commitments................................................... 45 8.2 Procedure for Swing Line Loan Borrowing.................................. 45 8.3 Refunding of Swing Line Loans............................................ 46 8.4 Unconditional Obligation to Refund Swing Line Loans...................... 46 8.5 Use of Proceeds of Swing Line Loans...................................... 47 SECTION 9. PROVISIONS RELATING TO THE EXTENSIONS OF CREDIT; FEES AND PAYMENTS.................................................................. 47 9.1 Repayment of Loans; Evidence of Debt..................................... 47 9.2 Commitment Fee; Other Fees............................................... 48 9.3 Optional Prepayments..................................................... 49 9.4 Optional Termination or Reduction of Aggregate Revolving Credit Commitment............................................................... 50 9.5 Mandatory Reduction of Commitments and Prepayments....................... 51 9.6 Conversion and Continuation Options...................................... 53 9.7 Minimum Amounts and Maximum Number of Tranches........................... 54 9.8 Interest Rates and Payment Dates......................................... 55 9.9 German Term Loans ; Additional Interest.................................. 55 9.10 Computation of Interest and Fees........................................ 56 9.11 Inability to Determine Interest Rate.................................... 56 9.12 Pro Rata Treatment and Payments......................................... 57 9.13 Illegality.............................................................. 59 9.14 Requirements of Law..................................................... 60 9.15 Taxes................................................................... 61 9.16 Indemnity............................................................... 64 9.17 Certain Fees............................................................ 65 9.18 Certain Rules Relating to the Payment of Additional Amounts............. 65 SECTION 10. REPRESENTATIONS AND WARRANTIES......................................... 67 10.1 Financial Condition..................................................... 67 10.2 No Change............................................................... 68 10.3 Corporate Existence; Compliance with Law................................ 68 10.4 Corporate Power; Authorization; Enforceable Obligations................. 69 10.5 No Legal Bar............................................................ 69 10.6 No Material Litigation.................................................. 70 10.7 No Default.............................................................. 70 10.8 Ownership of Property; Liens............................................ 70 10.9 Intellectual Property................................................... 70 10.10 No Burdensome Restrictions............................................. 70 10.11 Taxes.................................................................. 70 10.12 Federal Regulations.................................................... 71 10.13 ERISA.................................................................. 71
ii 10.14 Investment Company Act; Other Regulations.............................. 71 10.15 Subsidiaries........................................................... 71 10.16 Environmental Matters.................................................. 71 10.17 Collateral Documents................................................... 73 10.18 Accuracy and Completeness of Information............................... 73 10.19 Solvency............................................................... 73 10.20 Senior Indebtedness.................................................... 73 SECTION 11. CONDITIONS PRECEDENT.................................................. 74 11.1 Conditions to Initial Loans............................................. 74 11.2 Conditions to the German Term Loans and the German L/C.................. 77 11.3 Conditions to Each Loan................................................. 77 SECTION 12. AFFIRMATIVE COVENANTS................................................. 78 12.1 Financial Statements.................................................... 78 12.2 Certificates; Other Information......................................... 79 12.3 Payment of Obligations.................................................. 79 12.4 Conduct of Business and Maintenance of Existence........................ 80 12.5 Maintenance of Property; Insurance...................................... 80 12.6 Inspection of Property; Books and Records; Discussions.................. 80 12.7 Notices................................................................. 80 12.8 Environmental Laws...................................................... 82 12.9 Additional Collateral................................................... 82 SECTION 13. FINANCIAL COVENANTS................................................... 84 13.1 Minimum Interest Coverage Ratio......................................... 84 13.2 Maximum Leverage Ratio.................................................. 85 SECTION 14. NEGATIVE COVENANTS.................................................... 86 14.1 Limitation on Indebtedness.............................................. 86 14.2 Limitation on Liens..................................................... 88 14.3 Limitation on Guarantee Obligations..................................... 90 14.4 Limitation on Fundamental Changes....................................... 92 14.5 Limitation on Sale of Assets............................................ 92 14.6 Limitation on Restricted Payments....................................... 94 14.7 Limitation on Capital Expenditures...................................... 95 14.8 Limitation on Investments, Loans and Advances........................... 96 14.9 Limitation on Transactions with Affiliates.............................. 98 14.10 Limitation on Sales and Leasebacks...................................... 99 14.11 Limitation on Changes in Fiscal Year.................................... 99 14.12 Limitation on Optional Payments and Modifications of Debt Instruments and other Material Agreements.......................................... 99 14.13 Limitation on Negative Pledge Clauses................................... 100 14.14 Limitation on Lines of Business......................................... 100 SECTION 15. EVENTS OF DEFAULT..................................................... 100 15.1 Certain Bankruptcy Events............................................... 100 15.2 Other Events of Default................................................. 102 15.3 Certain Provisions Applicable to Domestic L/Cs.......................... 104 15.4 Certain Waivers......................................................... 105
iii SECTION 16. THE ADMINISTRATIVE AGENT.............................................. 105 16.1 Appointment............................................................. 105 16.2 Delegation of Duties.................................................... 106 16.3 Exculpatory Provisions.................................................. 106 16.4 Reliance by Administrative Agent and German Term Loan Servicing Bank......................................... 106 16.5 Notice of Default....................................................... 107 16.6 Acknowledgments and Representations by Lenders.......................... 107 16.7 Indemnification......................................................... 108 16.8 Agents in their Individual Capacities................................... 108 16.9 Successor Agents........................................................ 109 SECTION 17. MISCELLANEOUS......................................................... 110 17.1 Amendments and Waivers.................................................. 110 17.2 Notices................................................................. 112 17.3 No Waiver; Cumulative Remedies.......................................... 113 17.4 Survival of Representations and Warranties.............................. 113 17.5 Payment of Expenses and Taxes........................................... 113 17.6 Successors and Assigns; Participations and Assignments.................. 114 17.7 Adjustments; Set-off.................................................... 118 17.8 Counterparts............................................................ 118 17.9 Severability............................................................ 118 17.10 Integration............................................................ 118 17.11 GOVERNING LAW.......................................................... 119 17.12 Submission To Jurisdiction; Waivers.................................... 119 17.13 Acknowledgements....................................................... 120 17.14 WAIVERS OF JURY TRIAL.................................................. 120 17.15 Confidentiality........................................................ 120 17.16 Judgment Currency....................................................... 121
iv SCHEDULES Schedule I Lenders; Commitments Schedule II Addresses for Notices Schedule 1.1(a) Inactive Subsidiaries Schedule 1.1(b) Permitted Investors Schedule 10.4(a) Required Consents, Authorizations and Filings Schedule 10.6 Existing Litigation Schedule 10.9 Intellectual Property Schedule 10.11 Taxes Schedule 10.15 Subsidiaries Schedule 11.1(m) Existing Indebtedness Schedule 14.2(q) Existing Liens Schedule 14.3 Existing Guarantee Obligations Schedule 14.5(j) Permitted Dispositions Schedule 14.8(f) Existing Investments Schedule 14.9(iv) Permitted Transactions with Guarantor Affiliates EXHIBITS Exhibit A-1 Form of Revolving Credit Note Exhibit A-2 Form of Tranche [A][B] Note Exhibit A-3 Form of Swing Line Note Exhibit B Form of Guarantee and Collateral Agreement Exhibit C-1 Form of Opinion of Debevoise & Plimpton Exhibit C-2 Form of Opinion of Mark V.B. Tremallo Exhibit C-3 Form of Opinion of German counsel Exhibit D Form of Assignment and Acceptance Exhibit E-1 Form of Notice of Borrowing (Drawings) Exhibit E-2 Form of Notice of Borrowing (Conversions) Exhibit E-3 Form of Notice of Borrowing (Continuations) Exhibit F Form of German L/C Exhibit G Form of U.S. Tax Compliance Certificate Exhibit H Form of Eligible German Bank Certificate Exhibit I Form of [Optional][Mandatory] Prepayment Option Notice v CREDIT AGREEMENT, dated as of May 23, 2000, among: (a) DYNATECH LLC, a Delaware limited liability company wholly owned by the Guarantor (the "Primary Borrower"); (b) the GERMAN BORROWERS (as hereinafter defined; together with the Primary Borrower, the "Borrowers"); (c) MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as agent (in such capacity, the "German Term Loan Servicing Bank") for the German Term Loan Lenders (as hereinafter defined); (d) the Lenders (as hereinafter defined) from time to time parties hereto; (e) MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as administrative agent (in such capacity, the "Administrative Agent") for the Lenders; (f) CREDIT SUISSE FIRST BOSTON, as syndication agent (in such capacity, the "Syndication Agent") for the Lenders; and (g) THE CHASE MANHATTAN BANK and BANKERS TRUST COMPANY, each in its capacity as co-documentation agent (collectively, the "Co-Documentation Agents") for the Lenders. W I T N E S S E T H : ------------------- WHEREAS, Dynatech Corporation, a Delaware corporation, (the "Guarantor"), the Primary Borrower and DWW Acquisition Corporation, a Delaware corporation ("Mergco") have entered into the Agreement and Plan of Merger, dated as of February 14, 2000 (as amended, supplemented or otherwise modified from time to time in accordance with the terms hereof, the "Merger Agreement"), with Wavetek Wandel Goltermann, Inc., a Delaware corporation (together with any successor thereto, "WWG"), pursuant to which Mergco is to merge with WWG (the "Merger"), with WWG to be the survivor of the Merger; WHEREAS, the Guarantor and the Primary Borrower are parties to the Credit Agreement, dated as of May 21, 1998 (as heretofore amended, supplemented or otherwise modified, the "Existing Dynatech Credit Agreement"), with the lenders parties thereto, Morgan Guaranty Trust Company of New York, as administrative agent, and others; WHEREAS, in connection with the Merger, the Guarantor and the Primary Borrower wish to refund, refinance and replace the Existing Dynatech Credit Agreement with the credit facilities described herein to provide financing for (i) the Merger, (ii) the repayment and refinancing of amounts outstanding under the Existing Dynatech Credit Agreement, (iii) the repurchase of WWG's 10-1/8% Senior Subordinated Notes due 2007 (the "WWG Senior Subordinated Notes"), (iv) the repayment of certain other existing Indebtedness of WWG and its Subsidiaries, (v) the repayment of the Interim Intercompany Loan (as hereinafter defined), (vi) the conversion of WWG into a limited liability company and (vii) the working capital needs and general corporate purposes of the Primary Borrower and its Subsidiaries following the Merger (the Merger and such refinancing transactions, collectively, the "Transaction"); 2 WHEREAS, in connection with the Merger, the Guarantor is to receive at least $160,000,000 of gross cash proceeds from the issuance and sale of its common stock to Fund V and Fund VI (the "Equity Financing"); WHEREAS, the Primary Borrower desires that a portion of the credit facilities described herein be made available to certain of its German subsidiaries; and WHEREAS, the Lenders are willing to provide the credit facilities described herein upon the terms and subject to the conditions set forth herein; NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein, the parties hereto hereby agree as follows: SECTION DEFINITIONS 1.1 Defined Terms. As used in this Agreement, the following terms shall have the following meanings: "ABR": for any day, a rate per annum equal to the greater of (a) the Prime Rate in effect on such day and (b) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. Any change in the ABR due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective as of the opening of business on the effective day of such change in the Prime Rate or the Federal Funds Effective Rate, respectively. "ABR Loans": Loans (including, without limitation, Swing Line Loans) the rate of interest applicable to which is based upon the ABR. "Active Subsidiaries": all Subsidiaries of the Guarantor other than those listed on Schedule 1.1(a). "Administrative Agent": as defined in the preamble hereto. "Affiliate": as to any Person, any other Person (other than a Subsidiary) which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. For purposes of this definition, "control" of a Person means the power, directly or indirectly, either to (a) vote 20% or more of the securities having ordinary voting power for the election of directors of such Person or (b) direct or cause the direction of the management and policies of such Person, whether by contract or otherwise. "Agreement Currency": as defined in subsection 17.16. "Aggregate German L/C Participation Commitment": (Euro)110,000,000, as such amount may be reduced from time to time pursuant to this Agreement. "Aggregate German Term Loan Commitment": (Euro)108,375,000, as such amount may be reduced from time to time pursuant to this Agreement. "Aggregate Outstanding Extensions of Credit": as to any Revolving Credit Lender at any time, an amount equal to the sum of (a) the aggregate outstanding principal amount of all Revolving Credit Loans denominated in Dollars made by such Revolving Credit Lender, (b) the Dollar Equivalent Amount of Revolving Credit Loans denominated in euro made by such Revolving Credit Lender then outstanding and (c) such Revolving Credit Lender's Revolving Credit Commitment Percentage of the Domestic L/C Obligations and Swing Line Loans then 3 outstanding; provided, however, that the Swing Line Loans shall be deemed not to be outstanding for purposes only of determining the commitment fee which is payable from time to time pursuant to subsection 9.2. "Aggregate Revolving Credit Commitment": $175,000,000, as such amount may be reduced from time to time pursuant to this Agreement. "Aggregate Tranche A Commitment": $75,000,000, as such amount may be reduced from time to time pursuant to this Agreement. "Aggregate Tranche B Commitment": $510,000,000, as such amount may be reduced from time to time pursuant to this Agreement. "Agreement": this Credit Agreement, as amended, supplemented or otherwise modified from time to time. "Applicable Commitment Fee Rate": at any date, the rate per annum set forth below opposite the Level then in effect with respect to the Revolving Credit Facility: =================== Level Rate ------------------- Level I .375% Level II .375% Level III .50% Level IV .50% Level V .50% =================== ; provided that, until the date which is six months after the Closing Date, the Level in effect shall be deemed to be Level V. "Applicable Margin": (a) with respect to Tranche B Loans, 3.25% (for Eurocurrency Loans), and 2.25% (for ABR Loans), (b) with respect to the German Term Loan, 0.30% and (c) with respect to Revolving Credit Loans, Swing Line Loans , Tranche A Loans and Reimbursement Term Loans (if any), the rate per annum set forth below under the relevant column heading below opposite the Level then in effect: ====================================== Applicable Margin --------------------------- Eurocurrency ABR Loans Level Loans -------------------------------------- Level I 1.75% 0.75% Level II 2.00% 1.00% Level III 2.25% 1.25% Level IV 2.50% 1.50% Level V 2.75% 1.75% ====================================== 4 Notwithstanding the foregoing, (y) the "Applicable Margin" from time to time in effect for Swing Line Loans shall be the rate which would then be applicable to Revolving Credit Loans which are ABR Loans and (z) for each day prior to the date which is six months following the Closing Date, the Level in effect shall be deemed to be Level V. "Application": an application, in such form as the relevant Domestic L/C Issuing Bank may reasonably specify from time to time, requesting such Domestic L/C Issuing Bank to open a Domestic L/C. "Assignee": as defined in subsection 17.6(c). "Available Revolving Credit Commitment": as to any Revolving Credit Lender, at any time, an amount equal to the excess, if any, of (a) such Revolving Credit Lender's Revolving Credit Commitment at such time over (b) such Revolving Credit Lender's Aggregate Outstanding Extensions of Credit. "Borrowers": as defined in the preamble hereto. "Borrowing Date": any Business Day specified in a Notice of Borrowing pursuant to subsection 2.2, 3.2, 4.2, 5.2, 6.2 or 8.2 or in an Application pursuant to subsection 7.2, as a date on which the relevant Borrower requests the Lenders to make Loans, issue the German L/C or issue a Domestic L/C, as applicable, hereunder. "Business": as defined in subsection 10.16(b). "Business Day": a day other than a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to close; provided, however, that, with respect to matters relating to the German Term Loan, any day on which commercial banks in Frankfurt am Main, Germany are authorized or required by law to close shall not constitute a "Business Day"; provided, that when such term is used for the purpose of determining the date on which the Eurocurrency Base Rate is determined under this Agreement for any Loan denominated in euro for any Interest Period therefor and for purposes of determining the first and last day of any such Interest Period, references in this Agreement to Business Days shall be deemed to be references to Target Operating Days. "Capital Expenditure": as defined in subsection 14.7. "Capital Stock": any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation) and any and all warrants or options to purchase any of the foregoing. "Cash Equivalents": (a) securities with maturities of one year or less from the date of acquisition issued or fully guaranteed or insured by the United States Government or any agency thereof, (b) certificates of deposit and time deposits, bankers acceptances and overnight bank deposits of any Lender or of any commercial bank having capital and surplus in excess of $500,000,000, (c) repurchase obligations of any Lender or of any commercial bank satisfying the requirements of clause (b) of this definition, having a term of not more than 30 days with respect to securities issued or fully guaranteed or insured by the United States Government or any agency or instrumentality thereof, (d) commercial paper of a domestic issuer rated at least A-2 or the equivalent thereof by Standard and Poor's Rating Group or any successor rating agency ("S&P") or P-2 or the equivalent thereof by Moody's Investors Service, Inc. or any successor 5 rating agency ("Moody's") (or if at such time neither is issuing ratings, then a comparable rating of such other nationally recognized rating agency as shall be approved by the Administrative Agent in its reasonable judgment), (e) securities with maturities of one year or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States, by any political subdivision or taxing authority of any such state, commonwealth or territory or by any foreign government, the securities of which state, commonwealth, territory, political subdivision, taxing authority or foreign government (as the case may be) are rated at least A by S&P or A by Moody's, (f) securities with maturities of one year or less from the date of acquisition backed by standby letters of credit issued by any Lender or any commercial bank satisfying the requirements of clause (b) of this definition, (g) shares of money market mutual or similar funds complying with the risk limiting conditions of Rule 2a-7 or any successor rule of the Securities and Exchange Commission under the Investment Company Act of 1940, as amended, and (h) investments similar to any of the foregoing denominated in foreign currencies approved by the board of directors or comparable body of the Guarantor or the Primary Borrower, in each case provided in clauses (a), (b) and (d) above, maturing within twelve months after the date of acquisition. "CD&R": Clayton, Dubilier & Rice, Inc., a Delaware corporation. "CD&R Group": CD&R, Fund V, Fund VI or other investment fund or vehicle managed, sponsored or advised by CD&R, or any Affiliate of or successor to CD&R, Fund V, Fund VI or any such other investment fund or vehicle. "Change of Control": the occurrence of the following: (a) any Person or "group" (within the meaning of Section 13(d) or 14(d) of the Exchange Act), other than any of the Permitted Investors, shall have acquired a percentage of shares of Voting Stock that is greater than as held in the aggregate by the Permitted Investors or (b) the Permitted Investors shall cease to hold in the aggregate at least (i) at any time prior to a New Equity Financing, 35% of the outstanding Voting Stock of the Guarantor or (ii) upon or at any time after a New Equity Financing, 25% of the outstanding Voting Stock of the Guarantor. As used in this paragraph, "Voting Stock" shall mean shares of Capital Stock entitled to vote generally in the election of directors and "Permitted Investors" means any of (i) CD&R, Fund V, Fund VI, any other investment fund or vehicle managed, sponsored or advised by CD&R, or any Affiliate of or successor to CD&R, Fund V, Fund VI or any such other investment fund or vehicle, (ii) any Person listed on Schedule 1.1(b) or Affiliate thereof, (iii) any Management Investor and (iv) for a period not exceeding three Business Days, any Person acting in the capacity of an underwriter in connection with a public or private offering of Capital Stock of the Guarantor. "Closing Date": the date on which the conditions precedent set forth in subsection 11.1 shall be satisfied or waived. "Code": the Internal Revenue Code of 1986, as amended from time to time. "Co-Documentation Agents": as defined in the preamble hereto. "Collateral": all assets of the Credit Parties, now owned or hereinafter acquired, upon which a Lien is purported to be created by any Security Document. "Collateral Agreement": the Guarantee and Collateral Agreement to be executed and delivered by the Guarantor, the Primary Borrower and each of its Domestic Subsidiaries that is an Active Subsidiary, substantially in the form of Exhibit B, as the same may be amended, supplemented or otherwise modified from time to time. 6 "Commitment": as to any Lender, its Tranche A Commitment, Tranche B Commitment, German Term Loan Commitment, German L/C Participation Commitment or Revolving Credit Commitment, as the context shall require; as to all Lenders, the "Commitments". "Commitment Percentage": as to any Lender at any time, its Tranche A Commitment Percentage, its Tranche B Commitment Percentage, German Term Loan Commitment Percentage, German L/C Participation Commitment Percentage or its Revolving Credit Commitment Percentage, as the context shall require. "Commitment Period": the period from and including the Closing Date to but not including the Termination Date or such earlier date on which the Aggregate Revolving Credit Commitment shall terminate as provided herein. "Commonly Controlled Entity": an entity, whether or not incorporated, which is under common control with the Primary Borrower within the meaning of Section 4001 of ERISA or is part of a group which includes the Primary Borrower and which is treated as a single employer under Section 414(b) or 414(c) of the Code. "Consolidated Net Income" or "Consolidated Net Loss": for any fiscal period, the amount which, in conformity with GAAP, would be set forth opposite the caption "net income" (or any like caption) or "net loss" (or any like caption), as the case may be, on a consolidated statement of earnings of the Guarantor and its Subsidiaries for such fiscal period. "Contractual Obligation": as to any Person, any provision of any material security issued by such Person or of any material agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound. "Credit Documents": this Agreement, the Notes, the German L/C, the Applications and the Security Documents. "Credit Parties": the Guarantor, each Borrower and each of their Subsidiaries that is a party to a Credit Document. "Current Assets": at any date, all amounts (other than cash and Cash Equivalents) which would, in conformity with GAAP, be set forth opposite the caption "total current assets" (or any like caption) on a consolidated balance sheet of the Guarantor and its Subsidiaries at such date. "Current Liabilities": at any date, all amounts which would, in conformity with GAAP, be set forth opposite the caption "total current liabilities" (or any like caption) on a consolidated balance sheet of the Guarantor and its Subsidiaries at such date, but excluding (a) the current portion of any Funded Debt of the Guarantor and its Subsidiaries and (b) without duplication of clause (a) above, all Indebtedness consisting of Revolving Credit Loans or Swing Line Loans to the extent otherwise included therein. "Default": any of the events specified in subsections 15.1 or 15.2, whether or not any requirement for the giving of notice (other than any notice to be delivered pursuant to subsection 15.2(e)(ii)), the lapse of time, or both, or any other condition, has been satisfied. "Dollar Equivalent Amount": on any date of determination thereof, with respect to the principal amount of any Loan denominated in euro or the amount of any Domestic L/C denominated in euro or any drawing thereunder, the amount of Dollars that may be purchased with such amount of euro at the Spot Exchange Rate on such date. 7 "Dollars" and "$": dollars in lawful currency of the United States of America. "Domestic L/C Issuing Bank": ABN AMRO Bank N.V or any other Lender appointed by the Administrative Agent (provided that such other Lender agrees to serve in the capacity of Domestic L/C Issuing Bank), in its capacity as issuer thereof. "Domestic L/C Commitment": $35,000,000. "Domestic L/C Obligations": at any time, an amount equal to the sum of (a) the aggregate then undrawn and unexpired amount of the then outstanding Domestic L/Cs denominated in Dollars, (b) the Dollar Equivalent Amount of the aggregate then undrawn and unexpired amount of the then outstanding Domestic L/Cs denominated in euro, (c) the aggregate amount of drawings under Domestic L/Cs denominated in Dollars which have not then been reimbursed pursuant to subsection 7.5 and (d) the Dollar Equivalent Amount of the aggregate amount of drawings under Domestic L/Cs denominated in euros which have not then been reimbursed pursuant to subsection 7.5. "Domestic L/C Participants": with respect to any Domestic L/C, the collective reference to all Revolving Credit Lenders other than the Domestic L/C Issuing Bank with respect to such Domestic L/C. "Domestic L/Cs": as defined in subsection 7.1 "Domestic Subsidiary": any Subsidiary of the Primary Borrower organized under the laws of any jurisdiction within the United States (other than any Foreign Subsidiary Holdco). "EBITDA" for any period, the Consolidated Net Income or Consolidated Net Loss, as the case may be, for such period adjusted to exclude the following items to the extent that such items were included in the calculation of such Consolidated Net Income or Consolidated Net Loss: (a) depreciation and amortization (including write-offs or write-downs of amortizable and depreciable items) for such period, (b) the amount of interest expense (net of interest income) of the Guarantor and its Subsidiaries, determined on a consolidated basis in accordance with GAAP, for such period on the aggregate principal amount of their consolidated Indebtedness, (c) the amount of tax expense of the Guarantor and its Subsidiaries, determined on a consolidated basis in accordance with GAAP, for such period, (d) any non cash expenses and charges, in each case, which represents an accrual for which no cash is expected to be paid in the short term, (e) any gain or loss associated with the sale or write-down of assets not in the ordinary course of business, (f) any non-cash provisions for reserves of discontinued operations, (g) any extraordinary, unusual or non- recurring gains or losses or charges or credits and (h) any gains or losses relating to the repatriation of foreign currency denominated investments; provided, that for purposes of calculating EBITDA of the Guarantor and its Subsidiaries for any period (other than for purposes of the definition of Excess Cash Flow), (i) EBITDA attributable to any Person acquired by the Primary Borrower or any of its Subsidiaries during such period shall be included on a pro forma basis for such period (assuming the consummation of such acquisition and the incurrence, assumption or repayment of any Indebtedness in connection therewith occurred on the first day of such period) if the consolidated balance sheet of such acquired Person and its consolidated Subsidiaries as at the end of the period preceding the acquisition of such Person and the related consolidated statements of income and stockholders' equity and of cash flows for the period in respect of which EBITDA of the Guarantor and its Subsidiaries is to be calculated (x) have been previously provided to the Administrative Agent and the Lenders and (y) either (1) have been reported on without a qualification arising out of the scope of the audit (or the review, in the case of any such financial statements that are interim unaudited statements) by independent certified public accountants of nationally recognized standing or (2) are reasonably 8 acceptable to the Administrative Agent and (ii) the EBITDA attributable to any Person disposed of by the Primary Borrower or any of its Subsidiaries during such period shall be excluded for such period (assuming the consummation of such disposition and the repayment of any Indebtedness in connection therewith occurred on the first day of such period). "EMU": Economic and Monetary Union as contemplated in the Treaty on European Union. "EMU Legislation": legislative measures of the European Union for the introduction of, changeover to or operation of the euro in one or more member states. "Eligible German Bank": a bank or other financial institution that (a) constitutes a "German bank" or a "German taxable branch of a bank" within the meaning of chapter 23 of the German revenue ruling on the section 8a of the German Corporate Revenue Code and (b) has delivered a certificate to the Administrative Agent substantially in the form of Exhibit H, with copies to each of the German Borrowers. "Environmental Laws": any and all foreign, Federal, state, local or municipal laws, rules, orders, regulations, statutes, ordinances, codes, decrees, requirements of any Governmental Authority properly promulgated and having the force and effect of law, or other Requirements of Law (including, without limitation, common law) regulating, relating to or imposing liability or standards of conduct concerning protection of the environment or human health as related to the environment, as now or may at any relevant time hereafter be in effect. "Equity Financing": as defined in the recitals hereto. "ERISA": the Employee Retirement Income Security Act of 1974, as amended from time to time. "euro" and "(euro)": the single currency of the EMU as constituted by the Treaty on European Union and as referred to in EMU Legislation. "euro unit": the currency unit of the euro as defined in the EMU Legislation. "Eurocurrency Base Rate": with respect to each day during each Interest Period pertaining to a Eurocurrency Loan denominated in any currency, the rate per annum determined by the Administrative Agent at approximately 11:00 a.m. (London time) on the date which is two Business Days prior to the beginning of the relevant Interest Period (as specified in the applicable Notice of Borrowing) by reference to the applicable Telerate Page for deposits in such currency for a period equal to such Interest Period (rounded, if necessary, upward to the nearest whole multiple of 1/100th of 1%); provided that, to the extent that an interest rate is not ascertainable for any currency pursuant to the foregoing provisions of this definition, the "Eurocurrency Base Rate" shall be the interest rate per annum determined by the Administrative Agent to be the average (rounded, if necessary, upward to the nearest whole multiple of 1/100th of 1% per annum, if such average is not such a multiple) of the rates per annum at which deposits in such currency are offered for such relevant Interest Period to major banks in the London interbank market in London, England by Morgan Guaranty Trust Company of New York at approximately 11:00 a.m. (London time) on the date which is two Business Days prior to the beginning of such Interest Period. "Eurocurrency Loans": Loans the rate of interest applicable to which is based upon the Eurocurrency Rate. 9 "Eurocurrency Rate": with respect to each day during each Interest Period pertaining to a Eurocurrency Loan, a rate per annum determined for such day in accordance with the following formula (rounded upward to the nearest 1/100th of 1%): Eurocurrency Base Rate ------------------------------------------ 1.00 - Eurocurrency Reserve Requirements "Eurocurrency Reserve Requirements": for any day as applied to a Eurocurrency Loan, the aggregate (without duplication) of the rates (expressed as a decimal fraction) of reserve requirements in effect on such day (including, without limitation, basic, supplemental, marginal and emergency reserves under any regulations of the Board of Governors of the Federal Reserve System or other Governmental Authority having jurisdiction with respect thereto) dealing with reserve requirements prescribed for eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of such Board) maintained by a member bank of such System. "Event of Default": any of the events specified in subsections 15.1 or 15.2, provided that any requirement for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied. "Excess Cash Flow": for any fiscal year (or, in the case of the fiscal year ending March 31, 2001, the portion thereof commencing on the first day of the month next succeeding the Closing Date) of the Guarantor, the amount equal to the excess, if any, of (a) the sum of (i) EBITDA for such fiscal year (or portion thereof) and (ii) decreases in Working Capital for such fiscal year (or portion thereof) minus (b) the sum, without duplication, of (i) the aggregate amount actually paid by the Guarantor and its Subsidiaries in cash during such fiscal year (or portion thereof) on account of (w) Capital Expenditures, (x) interest expense on the aggregate principal amount of their consolidated Indebtedness, (y) tax expense and (z) any investments made pursuant to subsection 14.8(c), (e) or (j), (ii) the aggregate amount of all principal payments of Indebtedness (net of any refinancings of any such Indebtedness to the extent applied to fund such payments) during such fiscal year (or portion thereof) resulting in permanent reductions of such Indebtedness (excluding, in the case of the Loans, any principal payment pursuant to subsection 9.5(c), (d) or (e) except to the extent that the event giving rise to such payment causes an increase in EBITDA), (iii) the Net Proceeds from any sale or other disposition of property or assets of the Guarantor or any of its Subsidiaries to the extent that such Net Proceeds (A) consist of any Reinvested Amount or are otherwise applied in accordance with subsection 9.5(d) and (B) are included in the calculation of EBITDA, and (iv) increases in Working Capital for such fiscal year (or portion thereof). "Excess Cash Flow Recapture Amount": for (a) each fiscal year of the Guarantor when the Leverage Ratio at the last day of such fiscal year is greater than or equal to 4.0 to 1.0, the amount equal to 50% of Excess Cash Flow for such fiscal year and (b) for each other period, $0. "Existing Dynatech Credit Agreement": as defined in the recitals hereto. "Existing Transaction Documents": the Transaction Documents, as that term is defined in the Existing Dynatech Credit Agreement. "Facility": each of (a) the Tranche A Commitments and the Tranche A Loans made thereunder (the "Tranche A Facility"), (b) the Tranche B Commitments and the Tranche B Loans made thereunder (the "Tranche B Facility"), (c) the German L/C Facility and the extensions of credit made thereunder (the "German L/C Facility"), (d) the German Term Loan Commitment and the German Term Loans (the "German Term Loan Facility"), (e) the Reimbursement Term 10 Loans (the "Reimbursement Loan Facility") and (f) the Revolving Credit Commitments and the extensions of credit made thereunder (the "Revolving Credit Facility"). "Federal Funds Effective Rate": shall mean, for any day, the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for the day of such transactions received by the Administrative Agent from three federal funds brokers of recognized standing selected by it. "Fee Letter": the amended and restated agreement, dated March 10, 2000, among the Guarantor, the Primary Borrower, J.P. Morgan Securities Inc., Credit Suisse First Boston Corporation, the Administrative Agent, the Syndication Agent and the Co-Documentation Agents, relating to the payment of certain fees. "Financing Lease": any lease of property, real or personal, the obligations of the lessee in respect of which are required in accordance with GAAP to be capitalized on a balance sheet of the lessee. "Foreign Backstop Letters of Credit": any Domestic L/C issued under this Agreement to any Person for the account of the Primary Borrower to provide credit support for Indebtedness of any Foreign Subsidiary to such Person which is permitted under subsection 14.1(l). "Foreign Pledge Agreement": each pledge agreement (or analogous document), which pledge agreement (or analogous document) shall be in form and substance reasonably satisfactory to the Administrative Agent, pursuant to which the Primary Borrower or any of its Domestic Subsidiaries purports to grant a Lien on any portion of the Capital Stock of any Foreign Subsidiary, as the same may be amended, supplemented or otherwise modified from time to time. "Foreign Subsidiary": any Subsidiary of the Primary Borrower that is organized under the laws of any jurisdiction outside the United States of America, or that is a Foreign Subsidiary Holdco. "Foreign Subsidiary Holdco": any Subsidiary of the Primary Borrower that has no material assets other than Capital Stock or other securities of one or more Foreign Subsidiaries or other Foreign Subsidiary Holdcos, and other assets relating to an ownership interest in such Capital Stock, securities or Foreign Subsidiaries. "Former Plan": any employee benefit plan in respect of which the Primary Borrower or a Commonly Controlled Entity has engaged in a transaction described in Section 4069 or Section 4212(c) of ERISA. "Fund V": Clayton, Dubilier & Rice Fund V Limited Partnership, a Cayman Islands exempted limited partnership managed by CD&R, and its successors and its assigns who are existing members of the CD&R Group at the time of any such assignment. "Fund VI": Clayton, Dubilier & Rice Fund VI Limited Partnership, a Cayman Islands exempted limited partnership managed by CD&R, and its successors and its assigns who are existing members of the CD&R Group at the time of any such assignment. "Funded Debt": as to any Person, all Indebtedness of such Person that matures more than one year from the date of its creation or matures within one year from such date but is 11 renewable or extendible, at the option of such Person, to a date more than one year from such date or arises under a revolving credit or similar agreement that obligates the lender or lenders to extend credit during a period of more than one year from such date, including, without limitation, all current maturities and current sinking fund payments in respect of such Indebtedness whether or not required to be paid within one year from the date of its creation and, in the case of any Borrower, Indebtedness in respect of the Loans. "Funding Office": the office of the Administrative Agent specified in subsection 17.2 or such other office in the United States as may be specified by the Administrative Agent as its funding office by written notice to the Borrowers and the Lenders. "GAAP": generally accepted accounting principles in the United States of America as in effect from time to time; provided that, for purposes of determining compliance with the provisions of Section 13 or subsection 14.8(e), "GAAP" shall mean generally accepted accounting principles in the United States of America as in effect on December 31, 1999. "German Borrower": until consummation of the German Borrower Merger, each of Wavetek GmbH and Holdings II GmbH; and thereafter, Wavetek GmbH or Holdings II GmbH, whichever is the surviving corporation in the German Borrower Merger. "German Borrower Merger": as defined in subsection 4.5 "German L/C": as defined in subsection 5.1. "German L/C Issuing Bank": Morgan Guaranty Trust Company of New York, in its capacity as issuer of the German L/C. "German L/C Participant": each bank or other financial institution holding a German L/C Participation Commitment hereunder; collectively, the "German L/C Participants". "German L/C Participation Commitment": as to any German L/C Participant its obligation to participate in the German L/C and, if applicable pursuant to subsection 5.5(c), to make Reimbursement Term Loans hereunder in an aggregate amount not to exceed the amount set forth opposite such Lender's name on Schedule I under the heading "German L/C Participation Commitment". "German L/C Participation Commitment Percentage": as to any German L/C Participant at any time prior to the deemed incurrence of the Reimbursement Term Loans pursuant to subsection 5.5(c), the percentage which such German L/C Participant's German L/C Participation Commitment then constitutes of the Aggregate German L/C Participation Commitment (or, at any time after the deemed incurrence of the Reimbursement Term Loans pursuant to subsection 5.5(c), the percentage which the aggregate principal amount of such German L/C Participant's Reimbursement Term Loans then outstanding constitutes of the aggregate principal amount of the Reimbursement Term Loans then outstanding. "German Loan Percentage": as to any German Borrower at any time, the percentage that the then outstanding principal amount of German Term Loans (or, if incurred, the Reimbursement Term Loans) owing by it constitutes of the aggregate principal amount of all German Term Loans (or, if incurred, the Reimbursement Term Loans) then outstanding. "German Mortgage Debt": Indebtedness of Wavetek GmbH and/or one or more Subsidiaries thereof arising under financing arrangements existing on the Closing Date (as such Indebtedness and arrangements may be amended, waived, modified, refunded, refinanced or 12 replaced from time to time), including Liens on certain real property of one or more such Persons, in an aggregate outstanding principal amount at any time not to exceed 50,000,000 Deutsche marks. "German Term Loan": as defined in subsection 4.1. "German Term Loan Availability Period": the period from and including the day after the Closing Date, to and including the date that is ten Business Days thereafter. "German Term Loan Commitment": as to any German Term Loan Lender, its obligation to make its German Term Loans to each German Borrower hereunder in an aggregate principal amount not to exceed the amount set forth opposite such Lender's name on Schedule I under the heading "German Term Loan Commitment". "German Term Loan Commitment Percentage": as to any German Term Loan Lender at any time on or prior to the Borrowing Date for the German Term Loans, the percentage which such German Term Loan Lender's German Term Loan Commitment then constitutes of the Aggregate German Term Loan Commitment (or, at any time after the Borrowing Date for the German Term Loans, the percentage which the aggregate principal amount of such German Term Loan Lender's German Term Loans then outstanding constitutes of the aggregate principal amount of the German Term Loans then outstanding). "German Term Loan Exposure": as of any date, the sum of (a) the then outstanding principal amount of the German Term Loans, plus (b) the amount of interest that will be due and payable on the next succeeding Interest Payment Date(s) with respect to each of the then current Interest Periods for the German Term Loans (including any overdue interest as of such date). "German Term Loan Lender": each Eligible German Bank holding a German Term Loan Commitment hereunder (or, after the Borrowing Date for the German Term Loans and subject to the provisions of subsection 17.6(c), holding any German Term Loans hereunder); collectively, the "German Term Loan Lenders". "German Term Loan Servicing Bank": as defined in the recitals hereto. "German Term Loan Repayment Date": the first date on which the German Term Loans and (if incurred) the Reimbursement Term Loans, and all Reimbursement Obligations in respect of the German L/C then due and owing, shall have been paid in full and the German L/C shall have expired or no longer be outstanding. "Governmental Authority": any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "Guarantee Obligation": as to any Person (the "guaranteeing person"), any obligation of (a) the guaranteeing person or (b) another Person (including, without limitation, any bank under any letter of credit) to induce the creation of which the guaranteeing person has issued a reimbursement, counterindemnity or similar obligation, in either case guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends or other obligations (the "primary obligations") of any other third Person (the "primary obligor") in any manner, whether directly or indirectly, including, without limitation, any such obligation of the guaranteeing 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 (1) for the purchase or payment of any such primary obligation or (2) to maintain working capital or equity capital of the primary 13 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 owner of any such primary obligation against loss in respect thereof; provided, however, that the term Guarantee Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Guarantee Obligation of any guaranteeing person shall be deemed to be the lower of (a) an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee Obligation is made and (b) the maximum amount for which such guaranteeing person may be liable pursuant to the terms of the instrument embodying such Guarantee Obligation, unless such primary obligation and the maximum amount for which such guaranteeing person may be liable are not stated or determinable, in which case the amount of such Guarantee Obligation shall be such guaranteeing person's maximum reasonably anticipated liability in respect thereof as determined by the Primary Borrower in good faith. "Guarantor": as defined in the recitals hereto. "Hedging Arrangement": means any agreement or arrangement that relates to any interest rate protection, future, option, swap, cap, collar or hedge, or to any foreign exchange contract or currency swap or hedge, or any other similar agreement or arrangement (including any derivative agreement or arrangement), and is entered into, purchased or otherwise acquired by the Primary Borrower or any of its Subsidiaries in the ordinary course of business and not for purposes of speculation. "Historical Period": with respect to any Permitted Acquisition, the period of four consecutive fiscal quarters of the Primary Borrower most recently ended prior to the consummation of such Permitted Acquisition for which consolidated financial statements of the Guarantor have been delivered pursuant to subsection 12.1. "Historical Pro Forma Compliance": with respect to any Permitted Acquisition, the Primary Borrower shall be in Historical Pro Forma Compliance if the Leverage Ratio as of the end of the relevant Historical Period shall be less than or equal to the ratio set forth below opposite the period during which such Historical Period ends, with such compliance determined on a pro forma basis as if such Permitted Acquisition had been consummated on the first day of such Historical Period:[CAPTION] Period Ratio ------ ----- Closing Date December 31, 2001 6.00 to 1.0 January 1, 2002 September 30, 2002 5.25 to 1.0 October 1, 2002 December 31, 2002 5.00 to 1.0 January 1, 2003 thereafter 4.50 to 1.0 "Holdings I GmbH": Dynatech World Holdings GmbH, a Wholly Owned Subsidiary of the Primary Borrower, organized under the laws of Germany. "Holdings II GmbH": Dynatech Subworld Holdings GmbH, a Wholly Owned Subsidiary of Holdings I GmbH, organized under the laws of Germany "Indebtedness": of any Person at any date, without duplication, (a) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services (other than current trade liabilities incurred in the ordinary course of business and payable in accordance with customary practices), (b) any other indebtedness of such Person which is 14 evidenced by a note, bond, debenture or similar instrument, (c) all obligations of such Person under Financing Leases, (d) all reimbursement obligations (contingent or otherwise) of such Person in respect of letters of credit issued for the account of such Person, (e) all obligations of such Person in respect of acceptances created for the account of such Person, (f) all obligations of such Person, contingent or otherwise, to purchase, redeem, retire or otherwise acquire for value any preferred stock (or equivalent equity interests) of such Person which is mandatorily redeemable prior to the scheduled maturity of the Tranche B Loans (other than any such stock held by Management Investors), and (g) all obligations of the types referred to in clauses (a) through (f) above secured by any Lien on any property owned by such Person even though such Person has not assumed or otherwise become liable for the payment thereof. "Insolvency": with respect to any Multiemployer Plan, the condition that such Plan is insolvent within the meaning of Section 4245 of ERISA. "Insolvent": pertaining to a condition of Insolvency. "Intellectual Property": as defined in subsection 10.9. "Interest Coverage Ratio": for any period, the ratio of (i) EBITDA for such period to (ii) Interest Expense for such period. "Interest Expense": for any period, the amount equal to the interest expense (accrued and paid or payable in cash for such period, and in any event excluding any amortization or write-off of financing costs otherwise included therein), net of interest income, of the Guarantor and its Subsidiaries, determined on a consolidated basis in accordance with GAAP, for such period on the aggregate principal amount of their consolidated Indebtedness; provided, that for the purposes of calculating Interest Expense of the Guarantor and its Subsidiaries for any period, (i) Interest Expense attributable to any Person acquired by the Primary Borrower or any of its Subsidiaries during such period shall be included on a pro forma basis for such period (assuming the consummation of such acquisition and the incurrence, assumption or repayment of any Indebtedness in connection therewith occurred on the first day of such period) if the consolidated balance sheet of such acquired Person and its consolidated Subsidiaries as at the end of the period preceding the acquisition of such Person and the related consolidated statements of income and stockholders' equity and of cash flows for the period in respect of which Interest Expense of the Guarantor and its Subsidiaries is to be calculated (x) have been previously provided to the Administrative Agent and the Lenders and (y) either (1) have been reported on without a qualification arising out of the scope of the audit (or the review, in the case of any such financial statements that are interim unaudited statements) by independent certified public accountants of nationally recognized standing or (2) are reasonably acceptable to the Administrative Agent and (ii) the Interest Expense attributable to any Person disposed of by the Primary Borrower or any of its Subsidiaries during such period shall be excluded for such period (assuming the consummation of such disposition and the repayment of any Indebtedness in connection therewith occurred on the first day of such period). "Interest Payment Date": (a) as to any ABR Loan, the last Business Day of each March, June, September and December, (b) as to any Eurocurrency Loan having an Interest Period of three months or less, the last day of such Interest Period and (c) as to any Eurocurrency Loan having an Interest Period longer than three months, each day which is three months, or a whole multiple thereof, after the first day of such Interest Period (or, if such day is not a Business Day, the next succeeding Business Day) and the last day of such Interest Period. "Interest Period": with respect to any Eurocurrency Loan: 15 (a) initially, the period commencing on the borrowing or conversion date, as the case may be, with respect to such Eurocurrency Loan and ending one, two, three or six months thereafter, as selected by the relevant Borrower in its Notice of Borrowing given with respect thereto; and (b) thereafter, each period commencing on the last day of the next preceding Interest Period applicable to such Eurocurrency Loan and ending one, two, three or six months thereafter, as selected by the relevant Borrower by irrevocable notice to the Administrative Agent not less than three Business Days prior to the last day of the then current Interest Period with respect thereto; provided that, all of the foregoing provisions relating to Interest Periods -------- are subject to the following: (1) if any Interest Period would otherwise end on a day that is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless the result of such extension would be to carry such Interest Period into another calendar month in which event such Interest Period shall end on the immediately preceding Business Day; (2) any Interest Period that would otherwise extend beyond the Termination Date or beyond the date final payment is due on the relevant Tranche A Loan, Tranche B Loan or German Term Loan (as the case may be) shall end on the Termination Date or such date of final payment, as the case may be; (3) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of a calendar month; and (4) the relevant Borrower shall select Interest Periods so as not to require a payment or prepayment of any Eurocurrency Loan during an Interest Period for such Loan. "Interim Intercompany Loan": a (Euro)70,000,000 intercompany loan, on terms and conditions reasonably satisfactory to the Administrative Agent, from a Wholly Owned Subsidiary of the Primary Borrower to Holdings I GmbH in connection with the acquisition of Wavetek GmbH from such Subsidiary, which loan shall be financed with proceeds of Revolving Credit Loans borrowed on the Closing Date and repaid with proceeds of the German Term Loan. "International Standby Practices": the International Standby Practices (ISP98), International Chamber of Commerce Publication No. 590, as the same may be amended from time to time. "L/C Fee Payment Date": the last Business Day of each March, June, September, and December occurring after the date of issuance of a Domestic L/C or the German L/C, as the case may be. "Lenders": the collective reference to the Tranche A Lenders, the Tranche B Lenders, the German L/C Participants, the German Term Loan Lenders, the Revolving Credit Lenders and the Swing Line Lender. 16 "Level": with respect to the Tranche A Facility, the Revolving Credit Facility and the Applicable Commitment Fee Rate, the Level set forth below corresponding to the Leverage Ratio then in effect: Level Leverage Ratio ----------------------------------------------- I Less than 3.50 to 1.00 ----------------------------------------------- II Greater than or equal to 3.50 to 1.00 and less than 4.00 to 1.00 ----------------------------------------------- III Greater than or equal to 4.00 to 1.00 and less than 4.50 to 1.00 ----------------------------------------------- IV Greater than or equal to 4.50 to 1.00 and less than 4.75 to 1.00 ----------------------------------------------- V Greater than or equal to 4.75 to 1.00 =============================================== ; provided that, any change in the Applicable Margin or the Applicable Commitment Fee Rate resulting from a change in the Level shall become effective as of the opening of business on the date which is the earlier of (A) the date upon which the Administrative Agent receives the financial statements required to be delivered pursuant to subsection 12.1(a) or (b) which evidence such change in the Level and (B) the date upon which such financial statements are required to be delivered pursuant to subsection 12.1(a) or (b), as applicable; provided, further, that, in the event that the financial statements required to be delivered pursuant to subsection 12.1(a) or (b), as applicable, are not delivered when due (after giving effect to the applicable cure period), then during the period from the date upon which such financial statements were required to be delivered until the date upon which they actually are delivered, the Level in effect shall be deemed for purposes of this definition to be Level V. "Leverage Ratio": at the last day of any fiscal quarter, the ratio of (i) total Indebtedness of the Primary Borrower and its Subsidiaries required to be reflected on a consolidated balance sheet of the Primary Borrower on such date in accordance with GAAP, to (ii) EBITDA for the period of four consecutive fiscal quarters ended on such date. "Lien": any mortgage, pledge, hypothecation, assignment security deposit arrangement, encumbrance, lien (statutory or other), charge or other security interest or any preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement and any Financing Lease having substantially the same economic effect as any of the foregoing). "Loan": any of the Tranche A Loans, the Tranche B Loans, the German Term Loans, the Revolving Credit Loans, the Reimbursement Term Loans (if any), the Preference Replacement Loans (if any), or any Swing Line Loan, as the context shall require. "Majority Facility Lenders": (a) with respect to any Term Loan Facility, the Lenders holding more than 50% of the aggregate principal amount of Term Loans outstanding under such Facility, (b) with respect to the Revolving Credit Facility at any time prior to the termination of the Aggregate Revolving Credit Commitment, Lenders having more than 50% of the Revolving Credit Commitments (or at any time after the termination or expiration of the Aggregate Revolving Credit Commitment, Lenders holding more than 50% of the Aggregate Outstanding 17 Extensions of Credit), and (c) with respect to the German L/C Facility, Lenders holding more than 50% of the Aggregate German L/C Participation Commitment. "Majority Lenders": at any time, Lenders holding more than 50% of the amount equal to the sum of (a) the aggregate principal amount of the U.S. Term Loans then outstanding, (b) the Dollar Equivalent Amount of the Aggregate German L/C Participation Commitment at such time and (c) at any time prior to the termination of the Aggregate Revolving Credit Commitment, the Aggregate Revolving Credit Commitment then in effect (or, at any time after the termination or expiration of the Aggregate Revolving Credit Commitments, the Aggregate Outstanding Extensions of Credit then outstanding). "Management Investors": the collective reference to the officers, directors, employees and other members of the management of the Guarantor or any of its Subsidiaries, or immediate family members or relatives thereof, or trusts or partnerships for the benefit of any of the foregoing, or any of their heirs, executors or legal representatives, who at any particular date shall beneficially own or have the right to acquire, directly or indirectly, common stock of the Guarantor or the Primary Borrower. "Management Subscription Agreements": one or more stock subscription, stock option, grant or other agreements which have been or may be entered into between the Guarantor or the Primary Borrower and certain Management Investors, with respect to the issuance to or ownership by such parties of common stock of the Guarantor or the Primary Borrower or options, warrants, units or other rights in respect of common stock of the Guarantor or the Primary Borrower, any agreements entered into from time to time by transferees of any such stock, options, warrants or other rights in connection with the sale, transfer or reissuance thereof, and any assumptions of any of the foregoing by third parties, as amended, supplemented, waived or otherwise modified from time to time. "Mandatory Prepayment Option Notice": as defined in subsection 9.5(g). "Mandatory Prepayment Date": as defined in subsection 9.5(g). "Material Adverse Effect": a material adverse effect on (a) the business, operations, property or condition (financial or otherwise) of the Guarantor and its Subsidiaries (after giving effect to the Transaction) taken as a whole or (b) the validity or enforceability of the Credit Documents as to any Credit Parties party thereto or the rights and remedies of the Administrative Agent or the Lenders hereunder and thereunder taken as a whole. "Material Environmental Amount": an amount payable by the Primary Borrower and/or its Subsidiaries in respect of or under any Environmental Law for remedial costs, compliance costs, compensatory damages, punitive damages, fines, penalties or any combination thereof in an amount that would reasonably be expected to have a Material Adverse Effect. "Material Subsidiary": at any date, any Subsidiary of the Primary Borrower which at such date has assets with a market value in excess of $5,000,000 or annual revenues in excess of $5,000,000. "Materials of Environmental Concern": any hazardous or toxic substances, materials, pollutants or wastes, defined or regulated as such in or under any applicable Environmental Law, including, without limitation, gasoline or petroleum (including, without limitation, crude oil or any fraction thereof) or petroleum products, asbestos, polychlorinated biphenyls and urea-formaldehyde insulation. 18 "Mergco": as defined in the recitals hereto. "Merger": as defined in the recitals. "Merger Agreement": as defined in the recitals. "Multiemployer Plan": a Plan which is a multiemployer plan as defined in Section 4001(a)(3) of ERISA. "Net Proceeds": with respect to any of the events referred to in subsection 9.5(c) or (d) and the defined terms used therein, (a) the gross cash consideration, and all cash proceeds (as and when received) of non- cash consideration (including, without limitation, any such cash proceeds in the nature of principal and interest payments on account of promissory notes or similar obligations), received by the Primary Borrower and its Subsidiaries in connection with such event, minus (b) the sum, without duplication, of (i) any taxes reasonably estimated to be payable to any federal, state, local or foreign taxing authority by the Guarantor and its Subsidiaries as a result thereof, (ii) the amount of fees and commissions (including reasonable investment banking fees, legal, accounting, consulting, survey, title and recording tax expenses and other costs and expenses) actually incurred in connection with such event which are paid or payable by the Primary Borrower and its Subsidiaries, (iii) the amount of such net cash proceeds which are attributable to (and payable to) minority interests, (iv) the amount of any reserve reasonably maintained by the Primary Borrower and its Subsidiaries with respect to indemnification obligations owing pursuant to the definitive documentation pursuant to which such event is consummated (with any unused portion of such reserve to constitute Net Proceeds on the date upon which the indemnification obligations terminate or such reserve is reduced other than in connection with a payment), (v) the amount of Indebtedness (other than intercompany Indebtedness) of any Person, or secured by a Lien permitted hereunder on or that otherwise relates to any asset, that is the subject of such event, if any, which is required to be repaid at the time or as a result of such event out of the proceeds thereof and (vi) with respect to the determination of Net Proceeds from a sale or other disposition of property or assets referred to in subsection 9.5(d), appropriate amounts to be provided by the Primary Borrower or any of its Subsidiaries to be applied to satisfy any reasonable expenses and liabilities associated with any such property or assets and retained by the Primary Borrower or any such Subsidiary after such sale or other disposition and other appropriate amounts which shall be used by the Primary Borrower or any of its Subsidiaries to discharge or pay on a current basis any other reasonable expenses and liabilities associated with such property or assets. "New Equity Financing": the receipt by the Guarantor of at least $150,000,000 in gross cash proceeds from the issuance and sale of its common stock after the Closing Date to Persons other than the Permitted Investors and other than pursuant to the share rights offering described in subsection 14.12. "Non-Excluded Taxes": as defined in subsection 9.15(a). "Non-U.S Lender": as defined in subsection 9.15(c). "Note": as defined in subsection 9.1(f); collectively, the "Notes." "Notice of Borrowing": with respect to (a) any borrowing of Loans, a Notice of Borrowing (Drawings), substantially in the form of Exhibit E-1, (b) any conversion of Loans, a Notice of Borrowing (Conversions), substantially in the form of Exhibit E-2 and (c) any continuation of Eurocurrency Loans, a Notice of Borrowing (Continuations), substantially in the form of Exhibit E-3 hereto. 19 "Notice of Prepayment": as defined in subsection 9.5(g). "Optional Prepayment Date": as defined in subsection 9.3(a). "Optional Prepayment Option Notice": as defined in subsection 9.3(a). "Participant": as defined in subsection 17.6(b). "Participating Member State": any member state of EMU which has the euro as its lawful currency. "Payment Office": with respect to payments hereunder in any currency, the office in the United States specified from time to time by the Administrative Agent or the German Term Loan Servicing Bank, as the case maybe, as its payment office for such currency by notice to the relevant Borrowers and the relevant Lenders. "PBGC": the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA. "Permitted Acquisition": as defined in subsection 14.8(e). "Person": an individual, partnership, corporation, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or other entity of whatever nature. "Plan": any employee benefit plan which is covered by ERISA and in respect of which the Primary Borrower or a Commonly Controlled Entity is an "employer" as defined in Section 3(5) of ERISA. "Preference Replacement Loans": as defined in subsection 5.5(d). "Prime Rate" shall mean the rate of interest per annum publicly announced from time to time by the Administrative Agent as its prime rate in effect at its principal office in New York City. "Properties": as defined in subsection 10.16(a). "Refunded Swing Line Loans": as defined in subsection 8.3(a). "Register": as defined in subsection 17.6(d). "Regulation U": Regulation U of the Board of Governors of the Federal Reserve System as in effect from time to time. "Reimbursement Obligation": (a) with respect to the Primary Borrower, the obligation of the Primary Borrower to reimburse the Domestic L/C Issuing Bank pursuant to subsection 7.5 for amounts drawn under Domestic L/Cs issued by it and (b) with respect to the German Borrower, the obligation of either German Borrower to reimburse the German L/C Issuing Bank pursuant to subsection 5.5 for amounts drawn under the German L/C. "Reimbursement Term Loan": as defined in subsection 5.5(c). 20 "Reinvested Amount": with respect to any sale, transfer or other disposition of property or assets of the Primary Borrower or any of its Subsidiaries permitted by subsection 14.5(h), (j) or (k) or any recovery of amounts under any property insurance policies, that portion of the Net Proceeds thereof as shall, according to a certificate of a Responsible Officer of the Primary Borrower delivered to the Administrative Agent within 30 days of such sale or other disposition, be reinvested in the business of the Primary Borrower and its Subsidiaries in a manner consistent with the requirements of subsection 14.14 and the other provisions hereof within 360 days of the receipt of such Net Proceeds or, if such reinvestment is in a project authorized by the board of directors or comparable body of the Primary Borrower that will take longer than such 360 days to complete, the period of time necessary to complete such project (so long as the Primary Borrower or the relevant Subsidiary has committed to expend such portion of the Net Proceeds within, and is diligently pursuing such project during, the period of 360 days from the receipt of such Net Proceeds); provided that (i) if any such certificate of a Responsible Officer is not delivered to the Administrative Agent on the date of such sale or other disposition, any Net Proceeds of such sale or other disposition shall be promptly (x) deposited in a cash collateral account established at Morgan Guaranty Trust Company of New York to be held as collateral in favor of the Administrative Agent for the benefit of the Lenders on terms reasonably satisfactory to the Administrative Agent and shall remain on deposit in such cash collateral account until such certificate of a Responsible Officer is (or is required to be) delivered to the Administrative Agent or (y) to the extent that the Primary Borrower has indicated that no such certificate will be delivered, used to make a prepayment of the Revolving Credit Loans in accordance with subsection 9.3; provided that, notwithstanding anything in this Agreement to the contrary, the Primary Borrower may not request any borrowings under the Revolving Credit Commitments that would reduce the aggregate amount of the Available Revolving Credit Commitments to an amount that is less than the amount of any such prepayment until such certificate of a Responsible Officer is delivered to the Administrative Agent and (ii) any Net Proceeds not so reinvested by such 360th day or later day, as applicable, shall be utilized on such day to prepay the Loans pursuant to subsection 9.5(d). "Related Fund": with respect to any Lender that is a fund or trust that invests in loans, either any other fund or trust that invests in loans and is managed by the same investment advisor as such Lender or by an Affiliate of such investment advisor. "Reorganization": with respect to any Multiemployer Plan, the condition that such plan is in reorganization within the meaning of Section 4241 of ERISA. "Reportable Event": any of the events set forth in Section 4043(b) of ERISA, other than those events as to which the thirty day notice period is waived under subsections .13, .14, .16, .18, .19 or .20 of PBGC Reg. (S) 2615. "Required German L/C Amount": as of any date of determination, the sum of (i) the then outstanding principal amount of the German Term Loans and (ii) an amount equal to 1.45% of the then outstanding principal amount of the German Term Loans; provided, however, that if such determination occurs on a date that is less than 90 days prior to the Termination Date, the foregoing percentage shall be multiplied by a fraction the numerator of which is the number of days remaining in the period from such date to the Termination Date and the denominator of which is 360. "Requirement of Law": as to any Person, the Certificate of Incorporation and By-Laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or 21 any of its property is subject; provided that the foregoing shall not apply to any non-binding recommendation of any Governmental Authority. "Responsible Officer": the chief executive officer and the president of the Primary Borrower or, with respect to financial or benefits matters, the chief financial officer of the Primary Borrower. "Revolving Credit Commitment": as to any Revolving Credit Lender, its obligation to make Revolving Credit Loans to and/or make, issue or participate in Swing Line Loans and/or Domestic L/Cs made or issued on behalf of the Primary Borrower hereunder in an aggregate principal and/or face amount at any one time outstanding not to exceed the amount set forth opposite such Revolving Credit Lender's name on Schedule I (as deemed amended by any Assignment and Acceptance) under the heading "Revolving Credit Commitment"; collectively, as to all the Revolving Credit Lenders, the "Revolving Credit Commitments". "Revolving Credit Commitment Percentage": as to any Revolving Credit Lender at any time prior to the expiration or termination of the Aggregate Revolving Credit Commitment, the percentage which such Revolving Credit Lender's Revolving Credit Commitment then constitutes of the Aggregate Revolving Credit Commitment (or, at any time after the Aggregate Revolving Credit Commitment shall have expired or terminated, the percentage which the aggregate principal amount of such Revolving Credit Lender's Revolving Credit Loans then outstanding constitutes of the aggregate principal amount of the Revolving Credit Loans then outstanding). "Revolving Credit Lenders": each bank or other financial institution holding a Revolving Credit Commitment hereunder (or, after the last day of the Commitment Period and subject to the provisions of subsection 17.6(d), holding any Revolving Credit Loans or participating interests in Domestic L/Cs or Swing Line Loans hereunder); collectively, the "Revolving Credit Lenders". "Revolving Credit Loans": as defined in subsection 6.1. "Section 9.15 Lender": the collective reference to the Lenders, the German L/C Issuing Bank and the German Term Loan Servicing Bank. "Security Documents": the collective reference to the Collateral Agreement, the Foreign Pledge Agreements, if any, and all other security documents hereafter delivered to the Administrative Agent granting a Lien on any asset or assets of any Person to secure the obligations and liabilities of the Borrowers hereunder and under any of the other Credit Documents or to secure any guarantee of any such obligations and liabilities. "Senior Subordinated Note Indenture": the Indenture, dated as of May 21, 1998, between the Primary Borrower, the Guarantor and State Street Bank and Trust Company, as trustee, relating to the Senior Subordinated Notes, as the same may be amended, supplemented or otherwise modified from time to time in accordance with subsection 14.12. "Senior Subordinated Notes": the Primary Borrower's 9 3/4% Senior Subordinated Notes due 2008, as the same may be amended, supplemented or otherwise modified from time to time in accordance with subsection 14.12. "Single Employer Plan": any Plan which is covered by Title IV of ERISA, but which is not a Multiemployer Plan. 22 "Solvent": when used with respect to any Person, means that, as of any date of determination, (a) the amount of the assets of such Person, at a fair valuation, will, as of such date, exceed the amount of all liabilities of such Person, contingent or otherwise, as of such date, (b) the present fair saleable value of the assets of such Person will, as of such date, be greater than the amount that will be required to pay the probable liability of such Person on its debts as such debts become absolute and matured, (c) such Person will not have, as of such date, an unreasonably small amount of capital with which to conduct its business, and (d) such Person will be able to pay its debts as they mature. For purposes of determining whether a Person is Solvent, the amount of any contingent liability shall be computed as the amount that, in light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability. "Specified Change": as defined in subsection 17.1(b). "Spot Exchange Rate": with respect to any exchange of euro for Dollars or Dollars for euro, as the case may be, at any date of determination thereof, the spot rate of exchange in London that appears on the display page applicable to euro on the Reuters System (or such other page as may replace such page on such service for the purpose of displaying the spot rate of exchange in London) for the conversion of euro into Dollars or the conversion of Dollars into euro, as the case may be; provided that (i) if there shall at any time no longer exist such a page on such service, the spot rate of exchange shall be determined by reference to another similar rate publishing service selected by the Administrative Agent and if no such similar rate publishing service is available, by reference to the published rate of the Administrative Agent in effect at such date for similar commercial transactions, (ii) with respect to any determination of the Available Revolving Credit Commitment hereunder, such determination shall be based on the Spot Exchange Rate in effect on the Business Day immediately preceding the date of determination of the Available Revolving Credit Commitment and (iii) with respect to any determination of fees payable under subsection 9.2(a), such determination shall be based on the Spot Exchange Rate in effect on the Business Day immediately preceding the last Business Day of the quarter in respect of which such payment is being made and (iv) with respect to any calculation of the Majority Lenders at any time, such determination with respect to the Dollar Equivalent Amount of the Aggregate German L/C Participation Commitment shall be based on the Spot Exchange Rate in effect on the Business Day immediately preceding the date such calculation becomes necessary pursuant to the term of this Agreement. "Subsidiary": as to any Person, a corporation, partnership or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise qualified, all references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of the Primary Borrower (after giving effect to the Transaction). "Subsidiary Guarantor": any Person (other than the Primary Borrower, the Guarantor and the Administrative Agent) party to the Collateral Agreement pursuant to this Agreement. "Swing Line Commitment": at any date, the obligation of the Swing Line Lender to make Swing Line Loans pursuant to subsection 8.1 in the amount referred to therein. "Swing Line Lender": Morgan Guaranty Trust Company of New York. "Swing Line Loans": as defined in subsection 8.1(a). 23 "Syndication Agent": as defined in the preamble hereto. "Target Operating Day": any day that is not (a) a Saturday or Sunday, (b) Christmas Day or New Year's Day or (c) any other day on which the Trans-European Real-time Gross Settlement Operating System (or any successor settlement system) is not operating (as reasonably determined by the Administrative Agent). "Tax Allocation Agreement": the Tax Sharing Agreement, dated as of May 21, 1998, among the Guarantor, the Primary Borrower and the Subsidiaries, as amended, modified or supplemented from time to time, any profit and loss pooling agreement between two or more German Subsidiaries of the Primary Borrower to effect a German tax Organschaft (a fiscal unity) and any tax sharing agreement to allocate German income, trade or value- added taxes payable by Subsidiaries participating in an Organschaft. "Termination Date": March 31, 2006. "Term Loan Facilities": the collective reference to the Tranche A Facility, the Tranche B Facility, the Reimbursement Loan Facility (if any) and the German Term Loan Facility. "Term Loans": the collective reference to the Tranche A Loans, the Tranche B Loans , the Reimbursement Term Loans (if any) and the German Term Loans. "Tranche": the collective reference to Eurocurrency Loans of the same currency under the same Facility, the then current Interest Periods with respect to all of which begin on the same date and end on the same later date (whether or not such Loans shall originally have been made on the same day); Tranches may be identified as "Eurocurrency Tranches". "Tranche A Commitment": as to any Tranche A Lender, its obligation to make its Tranche A Loan to the Primary Borrower hereunder in an aggregate principal amount not to exceed the amount set forth opposite such Lender's name on Schedule I under the heading "Tranche A Commitment". "Tranche A Commitment Percentage": as to any Tranche A Lender at any time on or prior to the Closing Date, the percentage which such Tranche A Lender's Tranche A Commitment then constitutes of the Aggregate Tranche A Commitment (or, at any time after the Closing Date, the percentage which the aggregate principal amount of such Tranche A Lender's Tranche A Loans then outstanding constitutes of the aggregate principal amount of the Tranche A Loans then outstanding). "Tranche A Lender": each bank or other financial institution holding a Tranche A Commitment hereunder (or, after the Closing Date and subject to the provisions of subsection 17.6(d), holding any Tranche A Loans hereunder); collectively, the "Tranche A Lenders". "Tranche A Loan": as defined in subsection 2.1. "Tranche B Commitment": as to any Tranche B Lender, its obligation to make its Tranche B Loan to the Primary Borrower hereunder in an aggregate principal amount not to exceed the amount set forth opposite such Lender's name on Schedule I under the heading "Tranche B Commitment". "Tranche B Commitment Percentage": as to any Tranche B Lender at any time on or prior to the Closing Date, the percentage which such Tranche B Lender's Tranche B 24 Commitment then constitutes of the Aggregate Tranche B Commitment (or, at any time after the Closing Date, the percentage which the aggregate principal amount of such Tranche B Lender's Tranche B Loans then outstanding constitutes of the aggregate principal amount of the Tranche B Loans then outstanding). "Tranche B Lender": each bank or other financial institution holding a Tranche B Commitment hereunder (or, after the Closing Date and subject to the provisions of subsection 17.6(d), holding any Tranche B Loans hereunder); collectively, the "Tranche B Lenders". "Tranche B Loan": as defined in subsection 3.1. "Transaction": as defined in the recitals. "Transaction Documents": the Merger Agreement; this Agreement and the other Credit Documents; and any subscription, registration rights or stockholders agreements relating to the Equity Financing. "Transferee": as defined in subsection 17.6(f). "Treaty on European Union": the Treaty of Rome of March 25, 1957, as amended by the Single European Act 1986 and the Maastricht Treaty (which was signed at Maastricht on February 7, 1992, and came into force on November 1, 1993), as amended from time to time. "Type": as to any Loan, its nature as an ABR Loan or a Eurocurrency Loan. "Underfunding": an excess of all accrued benefits under a Plan (based on those assumptions used to fund such Plan), determined as of the most recent annual valuation date, over the value of the assets of such Plan allocable to such accrued benefits. "Uniform Customs": the Uniform Customs and Practice for Documentary Credits (1993 Revision), International Chamber of Commerce Publication No. 500, as the same may be amended from time to time. "U.S. Term Loan Facility": the collective reference to the Tranche A Term Loan Facility, the Tranche B Term Loan Facility and the Reimbursement Loan Facility (if any). "U.S. Term Loans": the collective reference to the Tranche A Loans , the Tranche B Loans and the Reimbursement Term Loans (if any). "Wavetek GmbH": Wavetek Wandel Goltermann GmbH, a company organized under the laws of Germany and, after consummation of the Transaction, a Wholly Owned Subsidiary of the Primary Borrower. "Wholly Owned Subsidiary": as to any Person, any Subsidiary of such Person of which such Person owns, directly or indirectly through one or more Wholly Owned Subsidiaries, all of the Capital Stock of such Subsidiary other than directors qualifying shares or shares held by nominees. "Working Capital": at any date, Current Assets on such date minus Current Liabilities on such date. "WWG": as defined in the recitals hereto. 25 "WWG Senior Subordinated Notes": as defined in the recitals hereto. 1.2 Other Definitional Provisions. (a) Unless otherwise specified therein, all terms defined in this Agreement shall have the defined meanings when used in any Notes or any certificate or other document made or delivered pursuant hereto. (b) As used herein and in any Notes, and any certificate or other document made or delivered pursuant hereto, accounting terms relating to the Guarantor, the Primary Borrower and their Subsidiaries not defined in subsection 1.1 and accounting terms partly defined in subsection 1.1, to the extent not defined, shall have the respective meanings given to them under GAAP. (c) The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section, subsection, Schedule and Exhibit references are to this Agreement unless otherwise specified. (d) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. SECTION 2. AMOUNT AND TERMS OF TRANCHE A LOAN 2.1 Tranche A Term Loans. Subject to the terms and conditions hereof, each Tranche A Lender severally agrees to make a term loan (a "Tranche A Loan") denominated in Dollars to the Primary Borrower on the Closing Date in an amount not to exceed the amount of the Tranche A Commitment of such Tranche A Lender then in effect. The Tranche A Loans may from time to time be (a) Eurocurrency Loans, (b) ABR Loans or (c) a combination thereof, as determined by the Primary Borrower and notified to the Administrative Agent in accordance with subsections 2.2 and 9.6; provided that the Tranche A Loans to be made on the Closing Date initially shall be made as ABR Loans. 2.2 Procedure for Tranche A Loan Borrowing. The Primary Borrower shall give the Administrative Agent its irrevocable Notice of Borrowing (which notice must be received by the Administrative Agent prior to 12:00 Noon, New York City time, one Business Day prior to the Closing Date) requesting that the Tranche A Lenders make the Tranche A Loans on the Closing Date and specifying the amount to be borrowed. Upon receipt of such Notice of Borrowing, the Administrative Agent shall promptly notify each Tranche A Lender thereof. Each Tranche A Lender will make the amount of its pro rata share of the Tranche A Loans available to the Administrative Agent for the account of the Primary Borrower at the applicable Funding Office prior to 10:00 A.M., New York City time, on the Closing Date in funds immediately available to the Administrative Agent. Such Tranche A Loans will then be made available to the Primary Borrower by the Administrative Agent transferring to the account directed by the Primary Borrower (which account need not be maintained by the Administrative Agent) with the aggregate of the amounts made available to the Administrative Agent by the Tranche A Lenders and in like funds as received by the Administrative Agent. 2.3 Amortization of Tranche A Loans. (a) The Primary Borrower shall repay the Tranche A Loans on each date set forth below (or, if such date is not a Business Day, on the immediately preceding Business Day) by the amount set forth below opposite such date: Date Amount -------------------- ---------- June 30, 2000 $ 750,000 September 30, 2000 $ 750,000 December 31, 2000 $ 750,000 26 Date Amount -------------------- ---------- March 31, 2001 $ 750,000 June 30, 2001 $2,000,000 September 30, 2001 $2,000,000 December 31, 2001 $2,000,000 March 31, 2002 $2,000,000 June 30, 2002 $3,750,000 September 30, 2002 $3,750,000 December 31, 2002 $3,750,000 March 31, 2003 $3,750,000 June 30, 2003 $7,500,000 September 30, 2003 $7,500,000 December 31, 2003 $7,500,000 March 31, 2004 $7,500,000 June 30, 2004 $2,500,000 September 30, 2004 $2,500,000 December 31, 2004 $2,500,000 March 31, 2005 $2,500,000 June 30, 2005 $2,250,000 September 30, 2005 $2,250,000 December 31, 2005 $2,250,000 March 31, 2006 $2,250,000 (b) The Primary Borrower shall repay any then-outstanding Tranche A Loans on the Termination Date. 2.4 Use of Proceeds of Tranche A Loans. The proceeds of the Tranche A Loans shall be utilized by the Primary Borrower only (a) to finance the Transaction and (b) to pay any fees and expenses relating thereto. SECTION 3. AMOUNT AND TERMS OF TRANCHE B LOAN 3.1 Tranche B Term Loans. Subject to the terms and conditions hereof, each Tranche B Lender severally agrees to make a term loan (a "Tranche B Loan") denominated in Dollars to the Primary Borrower on the Closing Date in an amount not to exceed the amount of the Tranche B Commitment of such Tranche B Lender then in effect. The Tranche B Loans may from time to time be (a) Eurocurrency Loans, (b) ABR Loans or (c) a combination thereof, as determined by the Primary Borrower and notified to the Administrative Agent in accordance with subsections 3.2 and 9.6; provided that the Tranche B Loans to be made on the Closing Date initially shall be made as ABR Loans. 3.2 Procedure for Tranche B Loan Borrowing. The Primary Borrower shall give the Administrative Agent its irrevocable Notice of Borrowing (which notice must be received by the Administrative Agent prior to 12:00 Noon, New York City time, one Business Day prior to the Closing Date) requesting that the Tranche B Lenders make the Tranche B Loans on the requested Borrowing Date and specifying the amount to be borrowed. Upon receipt of such Notice of Borrowing, the Administrative Agent shall promptly notify each Tranche B Lender thereof. Each Tranche B Lender will make the amount of its pro rata share of the Tranche B Loans available to the Administrative Agent for the account of the Primary Borrower at the applicable Funding Office prior to 10:00 A.M., New York City time, on the Closing Date in funds immediately available to the Administrative Agent. Such Tranche B Loans will then be made available to the Primary Borrower by the Administrative Agent 27 transferring to the account directed by the Primary Borrower (which account need not be maintained by the Administrative Agent) with the aggregate of the amounts made available to the Administrative Agent by the Tranche B Lenders and in like funds as received by the Administrative Agent. 3.3 Amortization of Tranche B Loans. (a) The Primary Borrower shall repay the Tranche B Loans on each date set forth below (or, if such date is not a Business Day, on the immediately preceding Business Day) by the amount set forth below opposite such date: Date Amount -------------------- ----------- June 30, 2000 $ 2,000,000 September 30, 2000 $ 2,000,000 December 31, 2000 $ 2,000,000 March 31, 2001 $ 2,000,000 June 30, 2001 $ 2,000,000 September 30, 2001 $ 2,000,000 December 31, 2001 $ 2,000,000 March 31, 2002 $ 2,000,000 June 30, 2002 $ 2,000,000 September 30, 2002 $ 2,000,000 December 31, 2002 $ 2,000,000 March 31, 2003 $ 2,000,000 June 30, 2003 $ 2,000,000 September 30, 2003 $ 2,000,000 December 31, 2003 $ 2,000,000 March 31, 2004 $ 2,000,000 June 30, 2004 $ 2,000,000 September 30, 2004 $ 2,000,000 December 31, 2004 $ 2,000,000 March 31, 2005 $ 2,000,000 June 30, 2005 $ 2,000,000 September 30, 2005 $ 2,000,000 December 31, 2005 $ 2,000,000 March 31, 2006 $ 2,000,000 June 30, 2006 $77,500,000 September 30, 2006 $77,500,000 December 31, 2006 $77,500,000 March 31, 2007 $77,500,000 June 30, 2007 $76,000,000 September 30, 2007 $76,000,000 (b) The Primary Borrower shall repay any then-outstanding Tranche B Loans on September 30, 2007. 3.4 Use of Proceeds of Tranche B Loans. The proceeds of the Tranche B Loans shall be utilized by the Primary Borrower only (a) to finance the Transaction and (b) to pay any fees and expenses relating thereto. 28 SECTION 4. AMOUNT AND TERMS OF GERMAN TERM LOANS 4.1 German Term Loans. Subject to the terms and conditions hereof, at any time during the German Term Loan Availability Period, each German Term Loan Lender severally agrees to make a term loan (each, a "German Term Loan") denominated in euro (a) to Wavetek GmbH in an amount not to exceed its German Term Loan Commitment Percentage of (euro)35,375,000 and (b) to Holdings II GmbH in an amount not to exceed its German Term Loan Commitment Percentage of (euro)73,000,000. The borrowing of the German Term Loans by such two entities shall occur on the same Business Day, and such Loans shall be Eurocurrency Loans with identical Interest Periods . 4.2 Procedure for German Term Loan Borrowing. Wavetek GmbH and Holdings II GmbH may borrow under the German Term Loan Commitment on any Business Day during the German Term Loan Availability Period; provided that Wavetek GmbH and Holdings II GmbH shall give the German Term Loan Servicing Bank, the German L/C Issuing Bank and the Administrative Agent irrevocable Notice of Borrowing (which notice must be received by the German Term Loan Servicing Bank, the German L/C Bank and the Administrative Agent prior to 12:00 Noon, New York time four Business Days prior to the requested Borrowing Date and (i) specifying the initial Interest Period for the German Term Loans and (ii) requesting that the German L/C be issued pursuant to subsection 5.2. Upon receipt of such Notice of Borrowing, the German Term Loan Servicing Bank shall promptly notify each German Term Loan Lender thereof. Each German Term Loan Lender will make the amount of its pro rata share of the German Term Loans available to Wavetek GmbH and Holdings II GmbH prior to 10:00 A.M., Frankfurt time, on the requested Borrowing Date in funds immediately available to Wavetek GmbH and Holdings II GmbH, as applicable, by transferring to the account or accounts directed by such parties in the Notice of Borrowing referred to above (which account or accounts need not be maintained by any German Term Loan Lender). 4.3 Amortization of German Term Loans. (a) Each German Borrower shall repay the German Term Loans owing by it on each date set forth below (or, if such date is not a Business Day, on the immediately preceding Business Day) by such German Borrower's German Loan Percentage of the amount set forth below opposite such date: Date Amount -------------------- ------------ June 30, 2000 (euro)530,000 September 30, 2000 (euro)530,000 December 31, 2000 (euro)530,000 March 31, 2001 (euro)530,000 June 30, 2001 (euro)790,000 September 30, 2001 (euro)790,000 December 31, 2001 (euro)790,000 March 31, 2002 (euro)790,000 June 30, 2002 (euro)790,000 September 30, 2002 (euro)790,000 December 31, 2002 (euro)790,000 March 31, 2003 (euro)790,000 June 30, 2003 (euro)790,000 September 30, 2003 (euro)790,000 December 31, 2003 (euro)790,000 March 31, 2004 (euro)790,000 June 30, 2004 (euro)7,625,000 September 30, 2004 (euro)7,625,000 December 31, 2004 (euro)7,625,000 March 31, 2005 (euro)7,625,000 29 Date Amount -------------------- ------------ June 30, 2005 (euro)15,780,000 September 30, 2005 (euro)15,780,000 December 31, 2005 (euro)15,780,000 March 31, 2006 (euro)18,935,000 (b) Each German Borrower shall repay any then-outstanding amount of the German Term Loans owing by it on the Termination Date. 4.4 Use of Proceeds of German Term Loans. The proceeds of the German Term Loans shall be utilized by the German Borrowers (a) to repay the Interim Intercompany Loan, (b) to otherwise finance the Transaction, (c) to pay any fees and expenses relating to the foregoing and (d) for general corporate purposes, including working capital. 4.5 German Borrower Assumption. At any time after the Borrowing Date of the German Term Loans, Wavetek Holdings II GmbH may merge with Wavetek GmbH, with either such corporation surviving (the "German Borrower Merger"). Wavetek GmbH, Holdings II GmbH, the Administrative Agent, the Lenders and the other parties hereto hereby irrevocably agree that, as a result of the German Borrower Merger, such successor corporation shall succeed to all the rights, obligations, covenants, agreements, duties and liabilities of its predecessor corporation under or with respect to this Agreement, the German Term Loans, any Reimbursement Term Loans, any Notes, the German L/C and the other Credit Documents as fully as if such successor corporation were originally the "German Borrower" and obligor in respect thereof. SECTION 5. AMOUNT AND TERMS OF GERMAN L/C FACILITY 5.1 German L/C Participation Commitment. (a) Subject to the terms and conditions hereof, the German L/C Issuing Bank, in reliance on the agreements of the German L/C Participants set forth in subsection 5.4(a), agrees to issue a standby letter of credit (the "German L/C") denominated in euro, substantially in the form of Exhibit F, for the several account of Wavetek GmbH and Holdings II GmbH in a face amount not exceeding the Aggregate German L/C Participation Commitment then in effect. (b) The German L/C shall be subject to the Uniform Customs , subject to the terms and conditions of this Agreement, and to the extent consistent therewith or otherwise mandatorily applicable, the laws of the State of New York. (c) The German L/C shall expire on the earliest to occur of (i) the payment in full of the principal of and interest then due and owing on the German Term Loans, (ii) payment by the German L/C Issuing Bank of the final drawing available to be made under the German L/C, (iii) the date of any drawing pursuant to subsection 5.5(c) and (iv) the date that is thirty days after the Termination Date. 5.2 Procedure for Issuance of the German L/C. The German L/C Issuing Bank agrees to issue the German L/C to the German Term Loan Servicing Bank, as agent on behalf of the German Term Loan Lenders, on the Borrowing Date for the German Term Loans; provided, that the Administrative Agent and the German L/C Issuing Bank shall have received the required Notice of Borrowing pursuant to subsection 4.2. Upon receipt of such Notice of Borrowing, (a) the Administrative Agent shall promptly notify the German L/C Participants thereof and (b) immediately prior to the making of the German Term Loans by the German Term Loan Lenders, the German L/C Issuing Bank shall issue the original of the German L/C to the German Term Loan Servicing Bank. The German L/C Issuing Bank 30 shall furnish a copy of the German L/C to each Borrower, each German Term Loan Lender and the Administrative Agent promptly following the issuance thereof. 5.3 Fees, Commissions and Other Charges. (a) Promptly upon receipt by the German Term Loan Servicing Bank of any amounts payable for the account of the German Term Loan Lenders pursuant to subsection 9.9(a), the German Term Loan Servicing Bank, on behalf of the German Term Loan Lenders, shall pay such amounts as a letter of credit fee to the Administrative Agent for the ratable account of the German L/C Participants. (b) Promptly upon receipt by the German Term Loan Servicing Bank of any amounts payable to the account of the German Term Loan Lenders pursuant to subsection 9.9(b), the German Term Loan Servicing Bank, on behalf of the German Term Loan Lenders, shall pay such amounts as a fronting fee to the Administrative Agent for the account of the German L/C Issuing Bank. (c) Promptly upon receipt by the German Term Loan Servicing Bank of any amounts payable to the account of the German Term Loan Lenders pursuant to subsection 9.9(c), the German Term Loan Servicing Bank, on behalf of the German Term Loan Lenders, shall pay such amounts to the Administrative Agent for the account of the German L/C Issuing Bank. (d) The Administrative Agent shall, promptly following its receipt thereof, distribute to the German L/C Issuing Bank and the German L/C Participants, as the case may be, all amounts received by the Administrative Agent for their respective accounts pursuant to this subsection. 5.4 German L/C Participations. (a) The German L/C Issuing Bank irrevocably agrees to grant and hereby grants to each German L/C Participant, and, to induce the German L/C Issuing Bank to issue the German L/C hereunder, each German L/C Participant irrevocably agrees to accept and purchase and hereby accepts and purchases from the German L/C Issuing Bank, on the terms and conditions hereinafter stated, for such German L/C Participant's own account and risk an undivided interest equal to such German L/C Participant's German L/C Participation Commitment Percentage from time to time in effect in the German L/C Issuing Bank's obligations and rights under the German L/C and the amount of each draft paid by the German L/C Issuing Bank thereunder. Each German L/C Participant unconditionally and irrevocably agrees with the German L/C Issuing Bank that, if a draft is paid under the German L/C for which the German L/C Issuing Bank is not reimbursed in full by the relevant German Borrower in accordance with the terms of this Agreement, such German L/C Participant shall pay to the German L/C Issuing Bank upon demand at the German L/C Issuing Bank's address for notices specified herein an amount equal to such German L/C Participant's then German L/C Participation Commitment Percentage of the amount of such draft, or any part thereof, which is not so reimbursed; provided that, if such demand is made prior to 12:00 Noon, New York City time, on a Business Day, such German L/C Participant shall make such payment to the German L/C Issuing Bank prior to the end of such Business Day and otherwise such German L/C Participant shall make such payment on the next succeeding Business Day. (b) If any amount required to be paid by any German L/C Participant to the German L/C Issuing Bank pursuant to subsection 5.4(a) in respect of any unreimbursed portion of any payment made by the German L/C Issuing Bank under the German L/C is paid to the German L/C Issuing Bank within three Business Days after the date such payment is due, such German L/C Participant shall pay to the German L/C Issuing Bank on demand an amount equal to the actual cost to the German L/C Issuing Bank of funding such amount during the period from and including the date such payment is required to the date on which such payment is immediately available to the German L/C Issuing Bank. If any such amount required to be paid by any German L/C Participant pursuant to subsection 5.4(a) is not in fact made available to the German L/C Issuing Bank by such L/C Participant within three Business Days after the date such payment is due, the German L/C Issuing Bank shall be entitled to recover from such German L/C Participant, on demand, such amount together with interest thereon from such date 31 calculated at a rate per annum equal to (i) the actual interest rate paid by the German L/C Issuing Bank (as conclusively certified by it) to fund such amount, plus (ii) the Applicable Margin then applicable to Eurocurrency Loans under the Revolving Credit Facility. A certificate of the German L/C Issuing Bank submitted to any German L/C Participant with respect to any amounts owing under this subsection shall be conclusive in the absence of manifest error. (c) Whenever, at any time after the German L/C Issuing Bank has made payment under the German L/C and has received from any German L/C Participant its pro rata share of such payment in accordance with subsection 5.4(a), the German L/C Issuing Bank receives any payment related to the German L/C (whether directly from either German Borrower or otherwise, including proceeds of collateral applied thereto by the German L/C Issuing Bank), or any payment of interest on account thereof, the German L/C Issuing Bank will, if such payment is received prior to 12:00 Noon, New York City time, on a Business Day, distribute to such German L/C Participant its pro rata share thereof prior to the end of such Business Day and otherwise the German L/C Issuing Bank will distribute such payment on the next succeeding Business Day; provided, however, that in the event that any such payment received by the German L/C Issuing Bank and distributed to the German L/C Participants shall be required to be returned by the German L/C Issuing Bank, each such German L/C Participant shall return to the German L/C Issuing Bank the portion thereof previously distributed by the German L/C Issuing Bank to it. 5.5 Reimbursement Obligation of the German Borrowers. (a) Except in the case of a draft described in subsection 5.5(c), upon payment by the German L/C Issuing Bank of a draft under the German L/C, each German Borrower agrees to reimburse the German L/C Issuing Bank for the amount of such draft in respect of the German Term Loans owing by it, on the same Business Day on which it receives notice that a draft presented under the German L/C has been paid by the German L/C Issuing Bank, provided that the German L/C Issuing Bank provides such notice to the relevant German Borrower(s) prior to 11:00 A.M., New York City time, on such Business Day and otherwise such German Borrower will reimburse the German L/C Issuing Bank on the next succeeding Business Day; provided, further, that the failure to provide such notice shall not affect such German Borrower's absolute and unconditional obligation to so reimburse the German L/C Issuing Bank for the amount of any draft paid under the German L/C in respect of the German Term Loans owing by it. Any such notice shall include a copy of such draft so paid and the other related documents referred to in subsection 5.7, and shall indicate the amount of (i) such draft so paid and (ii) any taxes, fees, charges or other costs or expenses reasonably incurred by the German L/C Issuing Bank in connection with such payment. Each such payment shall be made to the German L/C Issuing Bank at its address for notices specified herein in euro and in immediately available funds. (b) Interest shall be payable on any and all amounts remaining unpaid by either German Borrower under subsection 5.5(a) from the date on which a draft presented under the German L/C is paid by the German L/C Issuing Bank until payment in full at the rate per annum equal to (i) the actual interest rate paid by the German L/C Issuing Bank (as conclusively certified by it) to fund such amount, plus (ii) the Applicable Margin then applicable to Eurocurrency Loans under the Revolving Credit Facility. (c) If at any time the stated amount of the German L/C is less than the German Term Loan Exposure then the German Term Loan Servicing Bank , with the consent of the Majority Facility Lenders under the German Term Loan Facility, shall have the right on ten Business Days notice to each Borrower (with a copy to the Administrative Agent) to draw an amount under the German L/C equal to the then outstanding principal amount of, and accrued and unpaid interest on, the German Term Loans as of the date of such drawing for the ratable account of each German Term Loan Lender, in payment in full of such amounts of principal and interest, provided, however, that if at the time such drawing is to occur, the stated amount of the German L/C equals or exceeds the German Term Loan Exposure, such drawing shall not be permitted. On the date of any such drawing, (i) if the German Borrower Merger has 32 occurred, each German L/C Participant shall be deemed to have made a term loan to the German Borrower (each, a "Reimbursement Term Loan") denominated in euro hereunder in a principal amount equal to such German L/C Participant's German L/C Participation Commitment Percentage of the amount of such drawing and (ii) if the German Borrower Merger has not occurred, each German L/C Participant shall be deemed to have made a Reimbursement Term Loan denominated in euro to each German Borrower, such Reimbursement Term Loans being in an aggregate principal amount equal to such German L/C Participant's German L/C Participation Commitment Percentage of the amount of such drawing, with each such Reimbursement Term Loan to the applicable German Borrower being in an aggregate principal amount equal to such German Borrower's German Loan Percentage of the amount of such drawing. The Reimbursement Term Loans shall be deemed to be in payment of and satisfaction in full of all Reimbursement Obligations of each German Borrower otherwise owing in respect of such drawing; provided that nothing in this paragraph shall relieve the German L/C Issuing Bank or any German L/C Participant of any liability resulting from the gross negligence or willful misconduct of the German L/C Issuing Bank or any German L/C Participant, or otherwise affect any defense or other right that either German Borrower may have as a result of any such gross negligence or willful misconduct, or affect any claim, right or defense the German Borrower may have against the German Term Loan Servicing Bank or any German Term Loan Lender. The Reimbursement Term Loans shall bear interest at a rate per annum equal to (i) the actual interest rate paid by the German L/C Issuing Bank (as conclusively certified by it) to fund such amount, plus (ii) the Applicable Margin from time to time applicable to Eurocurrency Loans under the Revolving Credit Facility, until such date as the German Borrower shall request that such Loans be converted into Eurocurrency Loans ; provided, that the German Borrower has delivered an irrevocable notice to the Administrative Agent by 10:00 A.M., New York time, at least three Business Days' prior to the requested conversion date for such Loans specifying the length of the initial Interest Period therefor. Each German Borrower shall repay the Reimbursement Term Loans to the Administrative Agent, for the ratable account of the German L/C Participants, on the dates and in the amounts set forth in subsection 4.3 with respect to the German Term Loans. Each German Borrower may prepay the Reimbursement Term Loans owing by it, in whole or in part, in accordance with subsection 9.3. (d) If at any time (i) any payment made by either German Borrower in respect of the German Term Loans is rescinded or must otherwise be restored or returned by the German Term Loan Servicing Bank or any German Term Loan Lender upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of either German Borrower, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for either German Borrower (the amount of any such payment, the "Preference Amount") and (ii) at such time, the amount available to be drawn under the German L/C is less than the sum of (A) such Preference Amount and (B) the then outstanding principal amount of, and accrued and unpaid interest on, the German Term Loans, then, upon return by the German Term Loan Servicing Bank or such German Term Loan Lender of the Preference Amount to such German Borrower, a Loan payable by such German Borrower to the relevant German Term Loan Lenders in a principal amount equal to the Preference Amount shall be reinstated hereunder (any such Loan, a "Preference Replacement Loan"). Upon request by the German Term Loan Servicing Bank, the German L/C Issuing Bank shall immediately purchase and assume from the German Term Loan Lenders, and the German Term Loan Lenders shall sell and assign to the German L/C Issuing Bank, any Preference Replacement Loans held by the German Term Loan Lenders for an amount equal to the then outstanding principal amount of, and accrued and unpaid interest on, such Preference Replacement Loans. Upon any such assignment of any Preference Replacement Loan to the German L/C Issuing Bank, each German L/C Participant shall purchase, and the German L/C Issuing Bank shall sell, a participating interest in such Preference Replacement Loan for an amount equal to such German L/C Participant's German L/C Participation Commitment Percentage of the principal amount of such Preference Replacement Loan. The Preference Replacement Loans shall bear interest at a rate per annum equal to (x) the actual interest rate paid by the German L/C Issuing Bank (as conclusively certified by it) to fund such Preference Replacement Loans, plus (y) the Applicable Margin from time to time applicable to the German Term Loans, until such date as the German Borrower shall request that 33 such Loans be converted into Eurocurrency Loans; provided, that the German Borrower has delivered an irrevocable notice to the Administrative Agent by 10:00 A.M., New York time, at least three Business Days' prior to the requested conversion date for such Loans specifying the length of the initial Interest Period therefor. Each Preference Replacement Loan deemed made under this paragraph (d) shall immediately become due and payable. Notwithstanding the provisions set forth in subsection 17.6, any assignment or participation of a Preference Replacement Loan made pursuant to this paragraph (d) shall not require the consent of any party hereto or payment of any fee under such subsection. 5.6 Obligations Absolute. (a) Each German Borrower's obligations under subsection 5.5(a) shall be absolute and unconditional under any and all circumstances and irrespective of any set-off, counterclaim or defense to payment which such German Borrower may have or have had against the German L/C Issuing Bank, any German L/C Participant or any German Term Loan Lender, provided that this paragraph shall not relieve the German L/C Issuing Bank or any German L/C Participant of any liability resulting from the gross negligence or willful misconduct of the German L/C Issuing Bank or any German L/C Participant, or otherwise affect any defense or other right that either German Borrower may have as a result of any such gross negligence or willful misconduct, or affect any claim, right or defense either German Borrower may have against the German Term Loan Servicing Bank or any German Term Loan Lender. (b) Each German Borrower also agrees with the German L/C Issuing Bank that the German L/C Issuing Bank shall not be responsible for, and such German Borrower's Reimbursement Obligations under subsection 5.5(a) shall not be affected by, among other things, (i) the validity or genuineness of documents or of any endorsements thereon, even though such documents shall in fact prove to be invalid, fraudulent or forged, or (ii) any dispute between such German Borrower and any German Term Loan Lender or (iii) any claims whatsoever of such German Borrower against any German Term Loan Lender, provided that this paragraph shall not relieve the German L/C Issuing Bank of any liability resulting from the gross negligence or willful misconduct of the German L/C Issuing Bank, or otherwise affect any defense or other right that either German Borrower may have as a result of any such gross negligence or willful misconduct, or affect any claim, right or defense either German Borrower may have against the German Term Loan Servicing Bank or any German Term Loan Lender. (c) Neither the German L/C Issuing Bank with respect to the German L/C nor any German L/C Participant with respect thereto shall be liable for any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with the German L/C, except for errors or omissions caused by such Person's gross negligence or willful misconduct. (d) Each German Borrower agrees that any action taken or omitted by the German L/C Issuing Bank under or in connection with the German L/C or the related drafts or documents, if done in the absence of gross negligence or willful misconduct and in accordance with the standards of care specified in the Uniform Commercial Code of the State of New York, shall be binding on such German Borrower and shall not result in any liability of such German L/C Issuing Bank or any German L/C Participant to such German Borrower. 5.7 German L/C Payments. If any draft shall be presented for payment under the German L/C, the German L/C Issuing Bank shall promptly notify each German Borrower of the date and amount thereof. The responsibility of the German L/C Issuing Bank to each German Borrower in connection with any such draft shall, in addition to any payment obligation expressly provided for in the German L/C, be limited to determining that the documents (including each draft) delivered under the German L/C in connection with such presentment are in conformity with the German L/C, provided that this paragraph shall not relieve the German L/C Issuing Bank of any liability resulting from the gross negligence or willful misconduct of the German L/C Issuing Bank, or otherwise affect any defense or other right that either German Borrower may have as a result of any such gross negligence or willful 34 misconduct , or affect any claim, right or defense either German Borrower may have against the German Term Loan Servicing Bank or any German Term Loan Lender. 5.8 Reduction of German L/C Participation Commitment. Each of the German Term Loan Lenders, the German L/C Issuing Bank and the German L/C Participants hereby agrees that immediately upon receipt of any payment or prepayment of principal of or interest on the German Term Loans under this Agreement, (a) the German Term Loan Servicing Bank shall instruct the German L/C Issuing Bank to, and the German L/C Issuing Bank shall, reduce the available amount of the German L/C to an amount equal to the Required German L/C Amount, after giving effect to such payment or prepayment, and (b) the Aggregate German L/C Participation Commitment automatically shall be reduced to such amount. 5.9 German Borrower Assumption. Wavetek GmbH and Holdings II GmbH hereby irrevocably agree that, as a result of the German Borrower Merger pursuant to subsection 4.5, Wavetek GmbH or Holdings II GmbH, as the case may be, as the surviving corporation of the German Borrower Merger, shall succeed to all the rights, obligations, covenants, agreements, duties and liabilities of its predecessor under or with respect to the German L/C as if such surviving corporation were originally the sole account party thereunder and obligor in respect thereof. 5.10 Obligation of German Term Loan Servicing Bank. Upon any drawing by the German Term Loan Servicing Bank pursuant to the German L/C, the amount of such drawing shall be allocated by the German Term Loan Servicing Bank to, and promptly forwarded by the German Term Loan Servicing Bank to, the German Term Loan Lenders pro rata according to the respective German Term Loan Commitment Percentages of the German Term Loan Lenders. SECTION 6. AMOUNT AND TERMS OF REVOLVING CREDIT COMMITMENTS 6.1 Revolving Credit Commitments. (a) Subject to the terms and conditions hereof, each Revolving Credit Lender severally agrees to make revolving credit loans ("Revolving Credit Loans") denominated in Dollars or euro to the Primary Borrower from time to time during the Commitment Period in an aggregate principal amount at any one time outstanding which, when added to such Revolving Credit Lender's Revolving Credit Commitment Percentage of the then outstanding Domestic L/C Obligations and Swing Line Loans, does not exceed the amount of such Revolving Credit Lender's Revolving Credit Commitment then in effect; provided that, after giving effect to the making of such Revolving Credit Loan, the Aggregate Outstanding Extensions of Credit of all Revolving Credit Lenders shall not exceed the Aggregate Revolving Credit Commitment then in effect. During the Commitment Period the Primary Borrower may use the Aggregate Revolving Credit Commitment by borrowing, prepaying the Revolving Credit Loans in whole or in part, and reborrowing, all in accordance with the terms and conditions hereof. (b) The Revolving Credit Loans may from time to time be (i) Eurocurrency Loans or (ii) in the case of Revolving Credit Loans denominated in Dollars only, (x) ABR Loans or (y) a combination of Eurocurrency Loans and ABR Loans, as determined by the Primary Borrower and notified to the Administrative Agent in accordance with subsections 6.2 and 9.6, provided that (x) no Revolving Credit Loan shall be made as a Eurocurrency Loan after the day that is one month prior to the Termination Date and (y) any Revolving Credit Loans to be made on the Closing Date initially shall be made as ABR Loans. 6.2 Procedure for Revolving Credit Borrowing. The Primary Borrower may borrow under the Aggregate Revolving Credit Commitment during the Commitment Period on any Business Day, provided that the Primary Borrower shall give the Administrative Agent irrevocable notice (which notice must be received by the Administrative Agent prior to 12:00 Noon, New York City time, (a) four 35 Business Days prior to the requested Borrowing Date, if all or any part of the requested Revolving Credit Loans are to be initially Eurocurrency Loans denominated in euros, (b) at least three Business Days prior to the requested Borrowing Date, if all or any part of the requested Revolving Credit Loans are to be initially Eurocurrency Loans denominated in Dollars, or (c) one Business Day prior to the requested Borrowing Date, otherwise), specifying (i) the amount and currency to be borrowed, (ii) the requested Borrowing Date, (iii) whether the borrowing is to be of Eurocurrency Loans, ABR Loans or a combination thereof and (iv) if the borrowing is to be entirely or partly of Eurocurrency Loans, the amount of such Type of Loan and the length of the initial Interest Period therefor. Each borrowing under the Aggregate Revolving Credit Commitment (other than any borrowing of Swing Line Loans or of Revolving Credit Loans the proceeds of which are used to refund Swing Line Loans) shall be in an amount equal to (x) in the case of ABR Loans, $5,000,000 or a whole multiple of $1,000,000 in excess thereof (or, if the then Available Revolving Credit Commitments are less than $5,000,000, such lesser amount), (y) in the case of Eurocurrency Loans denominated in Dollars, $5,000,000 or a whole multiple of $1,000,000 in excess thereof and (z) in the case of Eurocurrency Loans denominated in euro, (euro)5,000,000 or a whole multiple of (euro)1,000,000 in excess thereof. Upon receipt of any such notice from the Primary Borrower, the Administrative Agent shall promptly notify each Revolving Credit Lender thereof. Each Revolving Credit Lender will make the amount of its pro rata share of each borrowing available to the Administrative Agent for the account of the Primary Borrower at the applicable Funding Office prior to 10:00 A.M., New York City time on the Borrowing Date requested by the Primary Borrower in funds immediately available to the Administrative Agent. Such borrowing will then be made available to the Primary Borrower by the Administrative Agent crediting the account of the Primary Borrower on the books of such office with the aggregate of the amounts made available to the Administrative Agent by the Revolving Credit Lenders and in like funds as received by the Administrative Agent. 6.3 Use of Proceeds of Revolving Credit Loans. The proceeds of the Revolving Credit Loans shall be utilized by the Primary Borrower only (a) to finance the Transaction (including, without limitation, pursuant to the Interim Intercompany Loan), (b) to pay any fees and expenses relating thereto and (c) for other general corporate purposes; provided, however, that not more than $100,000,000 in the aggregate of Revolving Credit Loans may be utilized by the Primary Borrower for the purposes described in clauses (a) and (b) above. SECTION 7. DOMESTIC LETTERS OF CREDIT 7.1 Domestic L/C Commitment. (a) Subject to the terms and conditions hereof, the Domestic L/C Issuing Bank, in reliance on the agreements of the other Revolving Credit Lenders set forth in subsection 7.4(a), agrees to issue letters of credit (the "Domestic L/Cs") denominated in Dollars or euros for the account of the Primary Borrower on any Business Day during the Commitment Period in such form as may be approved from time to time by the Domestic L/C Issuing Bank; provided that the Domestic L/C Issuing Bank shall have no obligation to issue any Domestic L/C if, after giving effect to such issuance, (i) the Domestic L/C Obligations would exceed the Domestic L/C Commitment, (ii) the Available Revolving Credit Commitment of any Revolving Credit Lender would be less than zero or (iii) the Aggregate Outstanding Extensions of Credit of all Revolving Credit Lenders would exceed the Aggregate Revolving Credit Commitment then in effect. (b) Each Domestic L/C shall (i) be denominated in Dollars or euros, (ii) be (x) a standby letter of credit issued to support obligations of the Primary Borrower or any of its Subsidiaries, contingent or otherwise, or to finance the working capital and business needs of the Primary Borrower or any of its Subsidiaries in the ordinary course of business or (y) a commercial letter of credit issued in respect of the purchase of goods or services by the Primary Borrower and its Subsidiaries in the ordinary course of business and (iii) expire no later than the earlier of (x) the date that is 12 months after the date of its issuance and (y) five Business Days prior to the Termination Date; provided that any Domestic L/C 36 with an expiration date occurring up to twelve months after such Domestic L/Cs date of issuance may be automatically renewable for subsequent 12-month periods (but in no event to a date which is later than five Business Days prior to the Termination Date). (c) Each Domestic L/C shall be subject to the Uniform Customs or, if agreed upon by the Primary Borrower and the Domestic L/C Issuing Bank, the International Standby Practices, in either case, subject to the terms and conditions provided for in this Agreement and, to the extent consistent therewith or otherwise mandatorily applicable thereto, the laws of the State of New York. (d) The Domestic L/C Issuing Bank shall not at any time be obligated to issue any Domestic L/C hereunder if such issuance would conflict with, or cause the Domestic L/C Issuing Bank or any Domestic L/C Participant to exceed any limits imposed by, any applicable Requirement of Law. 7.2 Procedure for Issuance of Domestic L/Cs. The Primary Borrower may request that the Domestic L/C Issuing Bank issue a Domestic L/C at any time during the Commitment Period by delivering to the Domestic L/C Issuing Bank (with a copy to the Administrative Agent) at its address for notices specified herein an Application therefor, completed to the satisfaction of the Domestic L/C Issuing Bank, and such other certificates, documents and other papers and information as the Domestic L/C Issuing Bank may reasonably request. Upon receipt of any Application, the Domestic L/C Issuing Bank will process such Application and the certificates, documents and other papers and information delivered to it in connection therewith in accordance with its customary procedures and shall promptly issue the Domestic L/C requested thereby (but in no event shall the Domestic L/C Issuing Bank be required to issue any Domestic L/C earlier than three Business Days after its receipt of the Application therefor and all such other certificates, documents and other papers and information relating thereto) by issuing the original of such Domestic L/C to the beneficiary thereof or as otherwise may be agreed by the Domestic L/C Issuing Bank and the Primary Borrower. The Domestic L/C Issuing Bank shall furnish a copy of such Domestic L/C to the Primary Borrower and the Administrative Agent promptly following the issuance thereof. The Administrative Agent shall in turn promptly furnish to the Lenders, notice of the issuance of each Domestic L/C (including the amount thereof). 7.3 Fees, Commissions and Other Charges. (a) The Primary Borrower shall pay to the Administrative Agent, for the account of the Domestic L/C Issuing Bank and the Domestic L/C Participants, a letter of credit fee with respect to each Domestic L/C, computed for the period from and including the date of issuance of such Domestic L/C to the expiration date of such Domestic L/C, at a rate per annum equal to the Applicable Margin then in effect for Revolving Credit Loans which are Eurocurrency Loans (calculated on the basis of the actual number of days elapsed over a 365 day year or 366 day year, as the case may be) of the aggregate face amount of Domestic L/Cs outstanding. Such fee shall be payable to the Administrative Agent, for the ratable account of the Revolving Credit Lenders, in arrears on each L/C Fee Payment Date and on the Termination Date. (b) The Primary Borrower shall pay to the Administrative Agent, for the account of the Domestic L/C Issuing Bank, a fronting fee with respect to each Domestic L/C issued by such Domestic L/C Issuing Bank, computed for the period from and including the date of issuance of such Domestic L/C to the expiration date of such Domestic L/C, at the rate to be agreed upon by the Primary Borrower and the Domestic L/C Issuing Bank (but in any event, not more than 0.25% per annum) of the aggregate face amount of Domestic L/Cs outstanding which were issued by such Domestic L/C Issuing Bank. Such fee shall be payable in arrears on each L/C Fee Payment Date and on the Termination Date. (c) In addition to the foregoing fees and commissions, the Primary Borrower shall pay or reimburse the Domestic L/C Issuing Bank for such normal and customary costs and expenses as are incurred or charged by such Domestic L/C Issuing Bank in issuing, effecting payment under, amending or otherwise administering any Domestic L/C issued by it. 37 (d) The Administrative Agent shall, promptly following its receipt thereof, distribute to the relevant Domestic L/C Issuing Bank and the Domestic L/C Participants all fees and commissions received by the Administrative Agent for their respective accounts pursuant to this subsection. (e) All fees and commissions applicable to any Domestic L/C shall be calculated and payable in the currency in which such Domestic L/C is denominated. 7.4 L/C Participations. (a) The Domestic L/C Issuing Bank irrevocably agrees to grant and hereby grants to each Domestic L/C Participant, and, to induce the Domestic L/C Issuing Bank to issue Domestic L/Cs hereunder, each Domestic L/C Participant irrevocably agrees to accept and purchase and hereby accepts and purchases from the Domestic L/C Issuing Bank, on the terms and conditions hereinafter stated, for such Domestic L/C Participant's own account and risk an undivided interest equal to such Domestic L/C Participant's Revolving Credit Commitment Percentage from time to time in effect in the Domestic L/C Issuing Bank's obligations and rights under each Domestic L/C issued hereunder and the amount of each draft paid by the Domestic L/C Issuing Bank thereunder. Each Domestic L/C Participant unconditionally and irrevocably agrees with the Domestic L/C Issuing Bank that, if a draft is paid under any Domestic L/C for which the Domestic L/C Issuing Bank is not reimbursed in full by the Primary Borrower in accordance with the terms of this Agreement, such Domestic L/C Participant shall pay to the Domestic L/C Issuing Bank upon demand at the Domestic L/C Issuing Bank's address for notices specified herein an amount equal to such Domestic L/C Participant's then Revolving Credit Commitment Percentage of the amount of such draft, or any part thereof, which is not so reimbursed; provided that, if such demand is made prior to 12:00 Noon, New York City time, on a Business Day, such Domestic L/C Participant shall make such payment to the Domestic L/C Issuing Bank prior to the end of such Business Day and otherwise such Domestic L/C Participant shall make such payment on the next succeeding Business Day. (b) If any amount required to be paid by any Domestic L/C Participant to the Domestic L/C Issuing Bank pursuant to subsection 7.4(a) in respect of any unreimbursed portion of any payment made by the Domestic L/C Issuing Bank under any Domestic L/C is paid to the Domestic L/C Issuing Bank within three Business Days after the date such payment is due, such Domestic L/C Participant shall pay to the Domestic L/C Issuing Bank on demand an amount equal to the product of (i) such amount, times the daily average Federal Funds Effective Rate, as quoted by the Domestic L/C Issuing Bank, during the period from and including the date such payment is required to the date on which such payment is immediately available to the Domestic L/C Issuing Bank, times (ii) a fraction the numerator of which is the number of days that elapse during such period and the denominator of which is 360. If any such amount required to be paid by any Domestic L/C Participant pursuant to subsection 7.4(a) is not in fact made available to the Domestic L/C Issuing Bank by such Domestic L/C Participant within three Business Days after the date such payment is due, the Domestic L/C Issuing Bank shall be entitled to recover from such Domestic L/C Participant, on demand, such amount with interest thereon calculated from such due date at the rate per annum applicable to ABR Loans hereunder (in the case of Domestic L/Cs denominated in Dollars) or the rate reasonably determined by the Administrative Agent as its actual cost of funding such amounts, plus the Applicable Margin for Eurocurrency Loans denominated in euros under the Revolving Credit Facility (in the case of Domestic L/Cs denominated in euros). A certificate of the Domestic L/C Issuing Bank submitted to any Domestic L/C Participant with respect to any amounts owing under this subsection shall be conclusive in the absence of manifest error. (c) Whenever, at any time after the Domestic L/C Issuing Bank has made payment under any Domestic L/C issued by it and has received from any Domestic L/C Participant its pro rata share of such payment in accordance with subsection 7.4(a), the Domestic L/C Issuing Bank receives any payment related to such Domestic L/C (whether directly from the Primary Borrower or otherwise, including proceeds of collateral applied thereto by the Domestic L/C Issuing Bank), or any payment of interest on account thereof, the Domestic L/C Issuing Bank will, if such payment is received prior to 12:00 Noon, New York City time, on a Business Day, distribute to such Domestic L/C Participant its pro 38 rata share thereof prior to the end of such Business Day and otherwise the Domestic L/C Issuing Bank will distribute such payment on the next succeeding Business Day; provided, however, that in the event that any such payment received by the Domestic L/C Issuing Bank and distributed to the Domestic L/C Participants shall be required to be returned by the Domestic L/C Issuing Bank, each such Domestic L/C Participant shall return to the Domestic L/C Issuing Bank the portion thereof previously distributed by the Domestic L/C Issuing Bank to it. 7.5 Reimbursement Obligation of the Primary Borrower. (a) Upon payment of a draft under a Domestic L/C, the Primary Borrower agrees to reimburse the Domestic L/C Issuing Bank on the same Business Day on which it receives notice that a draft presented under any Domestic L/C issued by such Domestic L/C Issuing Bank has been paid by such Domestic L/C Issuing Bank, provided that such Domestic L/C Issuing Bank provides such notice to the Primary Borrower prior to 11:00 A.M., New York City time, on such Business Day and otherwise the Primary Borrower will reimburse the Domestic L/C Issuing Bank on the next succeeding Business Day; provided, further, that the failure to provide such notice shall not affect the Primary Borrower's absolute and unconditional obligation to reimburse the Domestic L/C Issuing Bank for any draft paid under any Domestic L/C issued by it. Any such notice shall indicate the amount of (i) such draft so paid and (ii) any taxes, fees, charges or other costs or expenses reasonably incurred by the Domestic L/C Issuing Bank in connection with such payment. Each such payment shall be made to the Domestic L/C Issuing Bank at its address for notices specified herein in Dollars and in immediately available funds. (b) Interest shall be payable on any and all amounts remaining unpaid by the Primary Borrower under this subsection from the date on which a draft presented under any Domestic L/C issued by such Domestic L/C Issuing Bank is paid by such Domestic L/C Issuing Bank until payment in full at the rate which would be payable on any outstanding Loans that are ABR Loans which were then overdue. (c) Each drawing under any Domestic L/C shall constitute a request by the Primary Borrower to the Administrative Agent for a borrowing pursuant to subsection 6.2 of ABR Loans in the amount of the Reimbursement Obligations in respect of such drawing but without any requirement for compliance with the prior notice or minimum borrowing amount provisions of subsection 6.2 or the conditions set forth in subsection 11.3. The Borrowing Date with respect to such borrowing shall be the date of such drawing. Any such request or borrowing shall not relieve the Domestic L/C Issuing Bank or Domestic L/C Participant of any liability resulting from the gross negligence or willful misconduct of the Domestic L/C Issuing Bank or any Domestic L/C Participant, or otherwise affect any defenses or other right that the Primary Borrower may have as a result of any such gross negligence or willful misconduct. 7.6 Obligations Absolute. (a) The Primary Borrower's obligations under subsection 7.5(a) shall be absolute and unconditional under any and all circumstances and irrespective of any set-off, counterclaim or defense to payment which the Primary Borrower may have or have had against the Domestic L/C Issuing Bank, any Domestic L/C Participant or any beneficiary of a Domestic L/C, provided that this paragraph shall not relieve the Domestic L/C Issuing Bank or any Domestic L/C Participant of any liability resulting from the gross negligence or willful misconduct of the Domestic L/C Issuing Bank or any Domestic L/C Participant, or otherwise affect any defense or other right that the Primary Borrower may have as a result of any such gross negligence or willful misconduct. (b) The Primary Borrower also agrees with the Domestic L/C Issuing Bank that the Domestic L/C Issuing Bank shall not be responsible for, and the Primary Borrower's Reimbursement Obligations under subsection 7.5(a) shall not be affected by, among other things, (i) the validity or genuineness of documents or of any endorsements thereon, even though such documents shall in fact prove to be invalid, fraudulent or forged, or (ii) any dispute between or among the Primary Borrower and any beneficiary of any Domestic L/C or any other party to which such Domestic L/C may be transferred or (iii) any claims whatsoever of the Primary Borrower against any beneficiary of such Domestic L/C or 39 any such transferee, provided that this paragraph shall not relieve the Domestic L/C Issuing Bank of any liability resulting from the gross negligence or willful misconduct of the Domestic L/C Issuing Bank, or otherwise affect any defense or other right that the Primary Borrower may have as a result of any such gross negligence or willful misconduct. (c) Neither the Domestic L/C Issuing Bank with respect to any Domestic L/C nor any Domestic L/C Participant with respect thereto shall be liable for any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with such Domestic L/C, except for errors or omissions caused by such Person's gross negligence or willful misconduct. (d) The Primary Borrower agrees that any action taken or omitted by the Domestic L/C Issuing Bank under or in connection with any Domestic L/C issued by it or the related drafts or documents, if done in the absence of gross negligence or willful misconduct and in accordance with the standards of care specified in the Uniform Commercial Code of the State of New York, shall be binding on the Primary Borrower and shall not result in any liability of such Domestic L/C Issuing Bank or any Domestic L/C Participant to the Primary Borrower. 7.7 Domestic L/C Payments. If any draft shall be presented for payment under any Domestic L/C, the Domestic L/C Issuing Bank shall promptly notify the Primary Borrower of the date and amount thereof. The responsibility of the Domestic L/C Issuing Bank thereof to the Primary Borrower in connection with any such draft shall, in addition to any payment obligation expressly provided for in such Domestic L/C, be limited to determining that the documents (including each draft) delivered under such Domestic L/C in connection with such presentment are in conformity with such Domestic L/C, provided that this paragraph shall not relieve the Domestic L/C Issuing Bank of any liability resulting from the gross negligence or willful misconduct of the Domestic L/C Issuing Bank, or otherwise affect any defense or other right that such Primary Borrower may have as a result of any such gross negligence or willful misconduct. 7.8 Application. To the extent that any provision of any Application related to any Domestic L/C is inconsistent with the provisions of this Section 7, the provisions of this Section 7 shall apply. SECTION 8. AMOUNT AND TERMS OF SWING LINE SUB-FACILITY 8.1 Swing Line Commitments. (a) Subject to the terms and conditions hereof, the Swing Line Lender agrees to make swing line loans (the "Swing Line Loans") denominated in Dollars to the Primary Borrower on any Business Day from time to time during the Commitment Period in an aggregate principal amount not to exceed $10,000,000 at any one time outstanding; provided that, after giving effect to the making of such Swing Line Loan, the Aggregate Outstanding Extensions of Credit of all Revolving Credit Lenders shall not exceed the Aggregate Revolving Credit Commitment then in effect. Amounts borrowed under this subsection 8.1 may be repaid and, to but excluding the Termination Date, reborrowed. (b) All Swing Line Loans shall be made and maintained as ABR Loans and shall not be entitled to be converted into Eurocurrency Loans; provided that nothing contained in this subsection 8.1 shall prohibit the conversion into Eurocurrency Loans of any Revolving Credit Loans the proceeds of which are utilized to refund Swing Line Loans. 8.2 Procedure for Swing Line Loan Borrowing. The Primary Borrower may borrow under the Swing Line Commitment during the Commitment Period on any Business Day; provided that the Primary Borrower shall give the Administrative Agent irrevocable Notice of Borrowing (which 40 notice must be received by the Administrative Agent prior to 1:00 P.M., New York City time), on the requested borrowing date (which shall be a Business Day) specifying the amount of each requested Swing Line Loan, which shall be in a minimum amount of $500,000 or a multiple of $100,000 in excess thereof. Upon receipt of any such notice from the Primary Borrower, the Administrative Agent shall promptly notify the Swing Line Lender thereof. The Swing Line Lender will make the proceeds of the Swing Line Loan available to the Administrative Agent by crediting the account of the Primary Borrower with such proceeds in Dollars, at the office of the Administrative Agent in such manner as may be agreed upon by the Swing Line Lender and the Primary Borrower prior to 3:30 P.M., New York City time, on the Borrowing Date requested by the Primary Borrower. 8.3 Refunding of Swing Line Loans. (a) The Administrative Agent, at any time in its sole and absolute discretion, may (or, upon the request of the Swing Line Lender, shall), on behalf of the Primary Borrower (which hereby irrevocably directs the Administrative Agent to act on its behalf) request that each Revolving Credit Lender make a Revolving Credit Loan in an amount equal to such Revolving Credit Lender's Commitment Percentage of the then outstanding principal amount of Swing Line Loans (the "Refunded Swing Line Loans") on the date such notice is given (regardless of whether the Refunded Swing Line Loans comply with the minimum borrowing provisions of subsection 6.2). In the event that the Swing Line Lender makes its request for refunding of the Swing Line Loans, each Revolving Credit Lender shall make the proceeds of its Revolving Credit Loan available in immediately available funds to the Administrative Agent, for the benefit of the Swing Line Lender, at the applicable Funding Office prior to 11:00 A.M., New York City time, on the first Business Day following such request (or, if such request is made prior to 10:00 A.M., New York City time, on any date, then the proceeds of such Revolving Credit Loans shall instead be so made available to the Administrative Agent prior to 2:00 P.M., New York City time, on the date of such request); provided that in the event that any of the events described in subsection 15.1(a) or (b) shall have occurred and be continuing, the Revolving Credit Lenders shall not make such Revolving Credit Loans and the provisions of subsection 8.3(b) shall apply. (b) If, prior to the making of a Revolving Credit Loan pursuant to subsection 8.3(a), one of the events described in subsection 15.1(a) or (b) shall have occurred and be continuing, each Revolving Credit Lender will, on the date such Revolving Credit Loan was to have been made, purchase from the Swing Line Lender an undivided participating interest in the Swing Line Loan to be refunded in an amount equal to its Revolving Credit Commitment Percentage of such Swing Line Loan to be refunded. Each Revolving Credit Lender will immediately transfer to the Administrative Agent, in immediately available funds, the amount of its participation. (c) Whenever, at any time after the Swing Line Lender has received from any Revolving Credit Lender such Lender's participating interest in a Swing Line Loan to be refunded pursuant to subsection 8.3(b), the Swing Line Lender receives any payment on account thereof, the Swing Line Lender will pay to the Administrative Agent for distribution to such Revolving Credit Lender its participating interest in such amount (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Lender's participating interest was outstanding and funded) in like funds as received; provided that in the event that such payment received by the Swing Line Lender is required to be returned, such Revolving Credit Lender will return to the Swing Line Lender any portion thereof previously distributed by the Swing Line Lender through the Administrative Agent to it in like funds as such payment is required to be returned by the Swing Line Lender. 8.4 Unconditional Obligation to Refund Swing Line Loans. (a) Each Revolving Lender's obligation to make Revolving Credit Loans and to purchase participating interests in accordance with subsections 8.3(a) and (b) above shall be absolute and unconditional and shall not be affected by any circumstance, including, without limitation, (i) any set-off, counterclaim, recoupment, defense or other right which such Revolving Credit Lender may have against the Swing Line Lender, the Primary Borrower or any other Person for any reason whatsoever; (ii) the occurrence or continuance of 41 any Default or Event of Default; (iii) any adverse change in the condition (financial or otherwise) of the Primary Borrower or any other Person; (iv) any breach of this Agreement by the Primary Borrower or any other Person; (v) any inability of the Primary Borrower to satisfy the conditions precedent to borrowing set forth in this Agreement on the date upon which such Revolving Credit Loan is to be made or participating interest is to be purchased or (vi) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. If any Revolving Credit Lender does not make available to the Administrative Agent the amount required pursuant to subsections 8.3(a) and (b) above, as the case may be, the Administrative Agent shall be entitled to recover such amount on demand from such Revolving Credit Lender, together with interest thereon for each day from the date of non-payment until such amount is paid in full at the Federal Funds Effective Rate for the first two Business Days and at the rate applicable to ABR Loans thereafter. 8.5 Use of Proceeds of Swing Line Loans. The proceeds of Swing Line Loans hereunder shall be used by the Primary Borrower for any purpose for which the proceeds of Revolving Credit Loans may be used. SECTION 9. PROVISIONS RELATING TO THE EXTENSIONS OF CREDIT; FEES AND PAYMENTS 9.1 Repayment of Loans; Evidence of Debt. (a) The Primary Borrower hereby unconditionally promises to pay to the Administrative Agent for the account of each applicable Lender: (i) the then unpaid principal amount of each Revolving Credit Loan of each Revolving Credit Lender, and each Swing Line Loan, on the Termination Date (or such earlier date on which the Revolving Credit Loans become due and payable pursuant to Section 15); (ii) the then unpaid principal amount of the Tranche A Loan of each Tranche A Lender on the dates and in the amounts set forth in subsection 2.3 (or the then unpaid principal amount of such Tranche A Loan, on the date that the Tranche A Loans become due and payable pursuant to Section 15); (iii) the then unpaid principal amount of the Tranche B Loan of each Tranche B Lender on the dates and in the amounts set forth in subsection 3.3 (or the then unpaid principal amount of such Tranche B Loan, on the date that the Tranche B Loans become due and payable pursuant to Section 15); The Primary Borrower hereby further agrees to pay interest on the unpaid principal amount of the Loans made to it from time to time outstanding from the date hereof until payment in full thereof at the rates per annum, and on the dates, set forth in subsection 9.8. (b) Each German Borrower hereby unconditionally promises to pay to the German Term Loan Servicing Bank for the account of each German Term Loan Lender the then unpaid principal amount of each German Term Loan made by such German Term Loan Lender and owing by such German Borrower on the dates and in the amounts set forth in subsection 4.3 (or the then unpaid principal amount of such German Term Loan, on the date that the German Term Loans become due and payable pursuant to Section 15). Each German Borrower hereby further agrees to pay interest on the unpaid principal amount of the German Term Loans outstanding and owing by such German Borrower from the date hereof until payment in full thereof at the rates per annum, and on the dates, set forth in subsection 9.8. (c) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing indebtedness of each Borrower to such Lender resulting from each Loan of such 42 Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time under this Agreement. (d) The Administrative Agent and the German Term Loan Servicing Bank, as applicable, shall maintain the Register pursuant to subsection 17.6(d), and a subaccount therein for each Lender, in which shall be recorded (i) the amount of each Loan made hereunder, the Type thereof and each Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from each Borrower to each Lender hereunder and (iii) both the amount of any sum received by the Administrative Agent or the German Term Loan Servicing Bank, as the case may be, hereunder from each Borrower and each applicable Lender's share thereof. (e) The entries made in the Register and the accounts of each Lender maintained pursuant to subsection 9.1(d) shall, to the extent permitted by applicable law, be prima facie evidence (i) of the existence and amounts of the obligations of the Borrowers therein recorded and (ii) for the purposes of determining the Required German L/C Amount on any date of determination thereof; provided, however, in either case that the failure of any Lender or the Administrative Agent or the German Term Loan Servicing Bank to maintain the Register or any such account, or any error therein, shall not in any manner affect the obligation of each Borrower to repay (with applicable interest) the Loans made to such Borrower by such Lender in accordance with the terms of this Agreement. (f) The Primary Borrower agrees that, upon request of any Lender through the Administrative Agent (which request is made on or prior to the date on which such Lender becomes a Lender), the Primary Borrower will execute and deliver to such Lender a promissory note, substantially in the form of Exhibit A-1, A-2 or A-3 , as the case may be (each, a "Note"), evidencing the Loans made by such Lender to the Primary Borrower. 9.2 Commitment Fee; Other Fees. (a) The Primary Borrower agrees to pay to the Administrative Agent for the account of each Revolving Credit Lender a commitment fee for the period from and including the first day of the Commitment Period to and including the Termination Date, computed at the rate per annum equal to the Applicable Commitment Fee Rate on the average daily amount of the Available Revolving Credit Commitment of such Revolving Credit Lender during the period for which payment is made. Such commitment fee shall be payable quarterly in arrears on the last Business Day of each March, June, September and December and on the Termination Date or such earlier date as the Aggregate Revolving Credit Commitment shall terminate as provided herein, commencing on the first of such dates to occur after the date hereof; provided that no commitment fee shall be payable hereunder in the event that the Closing Date does not occur. (b) The Primary Borrower shall pay (without duplication, including of any fee payable under subsection 9.2(a)) to the Administrative Agent, for its account and, as specified therein, for the account of the Lenders, the other fees required to be paid pursuant to the Fee Letter in the amounts and on the dates set forth therein. 9.3 Optional Prepayments. (a) Any Borrower may at any time and from time to time prepay the Loans made to or owing by it, in whole or in part, without premium or penalty, upon at least three Business Days' (or, in the case of prepayments of ABR Loans, one Business Day's) irrevocable notice to the Administrative Agent (which notice must be received by the Administrative Agent prior to 12:00 Noon, New York City time on the date when such notice is due) or, in the case of the German Term Loans, the German Term Loan Servicing Bank with a copy to the Administrative Agent (which notice must be received by the German Term Loan Servicing Bank prior to 12:00 Noon, New York time, on the date upon which such notice is due), specifying (i) the date and amount of such prepayment and (ii) in the case of the Primary Borrower, (A) whether such prepayment is to be applied to the Revolving Credit Loans or U.S. Term Loans and (B) whether the prepayment is of Eurocurrency Loans, ABR Loans or a combination thereof, and, if of a combination thereof, the amount allocable to each. Upon receipt of 43 any such notice (x) the Administrative Agent (or, in the case of the German Term Loans, the German Term Loan Servicing Bank) shall promptly notify each affected Lender thereof. If any such notice is given by any Borrower, the amount specified in such notice shall be due and payable on the date specified therein (subject to subsection 9.3(b)(ii)), together with any amounts payable pursuant to subsection 9.16 and, except in the case of prepayments of Revolving Credit Loans which are ABR Loans and Swing Line Loans, accrued interest to such date on the amount prepaid. Amounts prepaid on account of the Term Loans may not be reborrowed. Notwithstanding the foregoing, if any desired optional prepayment includes any amount of Tranche B Loans (unless after giving effect to such prepayment, no Tranche A Loans or Reimbursement Term Loans would remain outstanding) the Administrative Agent shall immediately prepare and provide to each Tranche B Lender a notice (an "Optional Prepayment Option Notice"), which shall be in the form of Exhibit I and shall include an offer by the Primary Borrower to prepay the amount of any optional prepayment allocated to the Tranche B Loans pursuant to this subsection on a date (the "Optional Prepayment Date") that is five Business Days after the date of such Optional Prepayment Option Notice. (b) Any partial prepayments of the U.S. Term Loans due pursuant to this subsection 9.3 shall be applied to repay the principal amounts outstanding under each of the U.S. Term Loan Facilities ratably among such Facilities (based upon the percentage which such Facility constitutes of the aggregate then outstanding principal amount of all U.S. Term Loans) and ratably among the installments owing under each such Facility (based upon the percentage which each installment of such Facility then constitutes of the aggregate principal amount then outstanding under such Facility); provided that: (i) the Primary Borrower may (in its sole discretion) prepay (or, in the case of any Reimbursement Term Loans, cause to be prepaid) any installments of the U.S. Term Loans which are due within 12 months following the date of prepayment, ratably as between installments with the same due dates; and (ii) each Tranche B Lender may (in its sole discretion) elect to decline any such prepayment by giving notice of such election in writing to the Administrative Agent within two Business Days of receipt of an Optional Prepayment Option Notice, and, if it so declines , the amount so declined shall instead be used on the Optional Prepayment Date to increase the amount applied to prepay the U.S. Term Loans of the non-declining Tranche B Lenders first, based upon the method described in clause (i) of this proviso and second, based upon the method described in this paragraph (b) prior to giving effect to this proviso; provided, however, that: (x) no Tranche B Lender shall have the right to decline such payment if, after giving effect to the Primary Borrower's desired prepayment(s), no Tranche A Loans or Reimbursement Term Loans shall remain outstanding, and (y) if the amount of the Primary Borrower's desired prepayment exceeds the existing U.S. Term Loans of the non-declining Tranche B Lenders (the amount of such excess desired prepayment, the "Surplus Optional Prepayment Amount"), then on the Optional Prepayment Date, first, the Surplus Optional Prepayment Amount shall be applied to prepay the Tranche A Loans and any Reimbursement Term Loans (ratably among the remaining installments thereof) and second, any remaining Surplus Optional Prepayment Amount shall be applied to prepay the U.S. Term Loans of the declining Tranche B Lenders (ratably among the remaining installments thereof). Partial prepayments of the U.S. Term Loans shall be in an aggregate principal amount of $5,000,000 (or (euro)5,000,0000 in the case of any Reimbursement Term Loans) or a whole multiple of $1,000,000 (or (euro)1,000,000 in the case of any Reimbursement Term Loans) in excess thereof. 44 (c) The Primary Borrower may at any time and from time to time prepay, in whole or in part and without premium or penalty, any Swing Line Loans then owing by it on any Business Day; provided that such Borrower has given irrevocable notice to the Administrative Agent not later than 1:00 P.M., New York City time, on the date of such prepayment. Partial prepayments of Swing Line Loans shall be in an aggregate principal amount of $500,000 or a whole multiple in excess thereof (or, if less, the outstanding principal amount of the Swing Line Loans). (d) Any partial prepayments of the German Term Loans pursuant to this subsection 9.3 shall be applied to repay the principal amounts of such Loans outstanding under the German Term Loan Facility ratably among the installments of such Loans owing under the German Term Loan Facility (based upon the percentage which each installment of such Loans then constitutes of the aggregate principal amount then outstanding under the German Term Loan Facility); provided that the applicable German Borrower may (in its sole discretion) prepay any installments of the German Term Loans owing by it which are due within 12 months following the date of prepayment. Partial prepayments of the German Term Loans shall be in an aggregate principal amount of or (euro)5,000,000 or a whole multiple of (euro)1,000,000 in excess thereof. 9.4 Optional Termination or Reduction of Aggregate Revolving Credit Commitment. The Primary Borrower shall have the right, upon not less than five Business Days' notice to the Administrative Agent, to terminate the Aggregate Revolving Credit Commitment or, from time to time, to reduce the amount thereof; provided that no such termination or reduction shall be permitted if, after giving effect thereto and to any prepayments of the Revolving Credit Loans and Swing Line Loans made on the effective date thereof, the aggregate principal amount of the Revolving Credit Loans and Swing Line Loans then outstanding, when added to the then outstanding Domestic L/C Obligations, would exceed the Aggregate Revolving Credit Commitment then in effect. Any such reduction shall be in an amount equal to $5,000,000 or a whole multiple of $1,000,000 in excess thereof and shall reduce permanently the Aggregate Revolving Credit Commitment then in effect. 9.5 Mandatory Reduction of Commitments and Prepayments. (a) The Aggregate Revolving Credit Commitment shall terminate on the Termination Date and all amounts outstanding thereunder shall be due and payable. (b) If the Aggregate Outstanding Extensions of Credit of all Lenders shall exceed the Aggregate Revolving Credit Commitment then in effect (i) as a result of any permanent reduction of the Aggregate Revolving Credit Commitment pursuant to subsection 9.4 or this subsection 9.5, the Primary Borrower shall immediately repay the amounts outstanding under the Aggregate Revolving Credit Commitment by the amount equal to such excess or (ii) by more than 10% on the date on which the interest rate is to be determined for any Interest Period in respect of a Eurocurrency Loan under the Revolving Credit Facility (for any reason other than as described in the foregoing clause (i)), the Primary Borrower shall, on the first day of such Interest Period, repay the amounts outstanding under the Aggregate Revolving Credit Commitment by an amount sufficient to reduce such excess to 0%. Any repayments pursuant to this paragraph (b) shall be applied, first, to repay any then outstanding Swing Line Loans, second, to repay any then outstanding Revolving Credit Loans and, third, to cash collateralize the Domestic L/C Obligations in a manner reasonably satisfactory to the Administrative Agent. (c) If the Primary Borrower or any of its Subsidiaries shall incur any Indebtedness (excluding Indebtedness permitted pursuant to subsection 14.1), as promptly as is practicable (and, in any event, within one Business Day following the receipt thereof), the Primary Borrower shall give notice thereof to the Administrative Agent, and on the applicable Mandatory Prepayment Date, the Loans shall be prepaid and the Commitments shall be reduced by the amount equal to the aggregate amount of Net Proceeds received from such incurrence of indebtedness. Any repayment of Loans and reduction of 45 Commitments required by this subsection 9.5(c) shall be made in accordance with the provisions of subsection 9.5(f). (d) If on any date the Primary Borrower or any of its Subsidiaries shall receive Net Proceeds from (i) the sale, transfer or other disposition by the Primary Borrower, or any of its Subsidiaries of any real or personal, tangible or intangible, property of the Primary Borrower or such Subsidiary (including, without limitation, any Capital Stock of a Subsidiary of the Primary Borrower) to any Person (other than to the Primary Borrower or any of its Subsidiaries) pursuant to subsection 14.5(f), (h), (j) or (k) or (ii) the recovery by the Primary Borrower or any of its Subsidiaries of amounts owing to it under property insurance policies if the Primary Borrower and its Subsidiaries have not commenced replacement of the property on account of which such amounts were paid within one year of the later of the date of the casualty to, or condemnation of, such property or the receipt of such Net Proceeds, the Primary Borrower shall give notice thereof to the Administrative Agent, and on the applicable Mandatory Prepayment Date, the Loans shall be prepaid and the Commitments reduced by the aggregate amount of such Net Proceeds (minus the Reinvestment Amount related thereto); provided that, notwithstanding the foregoing, any such repayment of the Loans or reduction of the Commitments pursuant to this subsection 9.5(d) shall only be required upon any such sale, transfer, other disposition or recovery (A) pursuant to subsections 14.5(h), (j) or (k) to the extent the Net Proceeds received therefrom, when aggregated with the Net Proceeds received from all such sales, transfers, other dispositions or recoveries in the immediately preceding twelve-month period and minus all applicable Reinvested Amounts relating to all such Net Proceeds, exceed $5,000,000 and (B) pursuant to subsection 14.5(f) to the extent the Net Proceeds received from any one such sale and minus the applicable Reinvested Amounts relating to such Net Proceeds exceeds $5,000,000 or to the extent that Net Proceeds received therefrom, when aggregated with the Net Proceeds received from all such sales and minus all applicable Reinvested Amounts relating to all such Net Proceeds, exceed $10,000,000. Any Notice of Prepayment given pursuant to this subsection 9.5(d) shall be given as promptly as practicable (and in any event, within three Business Days) following the date of receipt of any such Net Proceeds (except that if any such Net Proceeds are eligible to be reinvested in accordance with the definition of the term "Reinvested Amount" in subsection 1.1 and the Primary Borrower has not elected to reinvest such proceeds, such Notice of Prepayment shall be given on the earlier of (1) the date on which the certificate of a Responsible Officer of the Primary Borrower to such effect is delivered to the Administrative Agent in accordance with such definition and (2) the last day of the period within which a certificate setting forth such election is required to be delivered in accordance with such definition). (e) Within one Business Day following delivery of the certificate referenced in subsection 12.2(a) (commencing with the fiscal year ending March 31, 2001) the Primary Borrower shall give notice thereof to the Administrative Agent, and on the applicable Mandatory Prepayment Date, the Loans shall be repaid and the Commitment reduced by the amount equal to the Excess Cash Flow Recapture Amount for such fiscal year (or, in the case of the fiscal year ending March 31, 2001, the portion thereof commencing on the first day of the first full fiscal month after the Closing Date and ending on March 31, 2001) covered by such certificate, with any such repayment of Loans and reduction of Commitments to be made in accordance with the provisions of subsection 9.5(f). (f) Any payments of the Loans and reductions of the Commitments made pursuant to subsection 9.5(c), (d) or (e) shall be applied, first, to the prepayment of the Term Loans and, second, to reduce the Aggregate Revolving Credit Commitment then in effect. For purposes of this subsection 9.5(f), any partial prepayment of the Term Loans shall be applied to repay the principal amounts outstanding under each of the Term Loan Facilities ratably among such Term Loan Facilities (based upon the aggregate principal amount then outstanding thereunder) and ratably among the installments owing under each such Facility (based upon the aggregate then outstanding principal amount of each such installment); provided that: 46 (i) the Primary Borrower (in the Primary Borrower's sole discretion) may, and/or may cause the German Borrowers to, prepay any installments of the Term Loans which are due within 12 months following the date of prepayment, ratably as between installments with the same due date; and (ii) each Tranche B Lender may (in its sole discretion) elect to decline any such prepayment by giving notice of such election in writing to the Administrative Agent within two Business Days of receipt of a Mandatory Prepayment Option Notice and, if it so declines, the amount so declined shall instead be used on the Mandatory Prepayment Date to increase the amount applied to prepay the Term Loans of the non-declining Tranche B Lenders first, based upon the method described in clause (i) of this proviso and second, based upon the method described in this paragraph (f) prior to giving effect to this proviso; provided, however, that: (x) no Tranche B Lender shall have the right to decline such payment if, after giving effect to the otherwise required prepayment(s), no Tranche A Loans or Reimbursement Term Loans shall remain outstanding, and (y) if the amount of the required prepayment exceeds the existing Term Loans of the non-declining Tranche B Lenders (the amount of such excess desired prepayment, the "Surplus Mandatory Prepayment Amount"), then on the Mandatory Prepayment Date, first, the Surplus Mandatory Prepayment Amount shall be applied to prepay the Tranche A Loans, any Reimbursement Term Loans and any German Term Loans (ratably among the remaining installments thereof); second, any remaining Surplus Mandatory Prepayment Amount shall be applied to prepay the Term Loans of the declining Tranche B Lenders (ratably among the remaining installments thereof) until the Tranche B Loans are fully prepaid; and third, any remaining Surplus Mandatory Prepayment Amount shall reduce the Aggregate Revolving Credit Commitment then in effect. Unless the Primary Borrower otherwise elects, the application of prepayments by the Primary Borrower made pursuant to this subsection 9.5 shall be made, first, to ABR Loans and, second, to Eurocurrency Loans. In determining the ratable amounts owing pursuant to this subsection 9.5 when such determination must be made with respect to Loans denominated in euro, the principal amount of such euro-denominated Loans shall be deemed to be the Dollar Equivalent Amount of such euro-denominated Loans using the Spot Exchange Rate on the date on which the interest rate was most recently determined with respect to such Loans. (g) Upon receipt by the Administrative Agent of a notice of prepayment pursuant to paragraphs (c), (d) or (e) of this subsection (a "Notice of Prepayment"), unless, after giving effect to the otherwise required prepayment(s) no Tranche A Loans or Reimbursement Term Loans would remain outstanding, the Administrative Agent shall immediately prepare and provide to each Tranche B Lender a notice (the "Mandatory Prepayment Option Notice"), which shall be in the form of Exhibit I and shall include an offer by the Primary Borrower to prepay the amount of any mandatory prepayment allocated to the Tranche B Loans pursuant to this subsection on a date that is five Business Days after the date of such Mandatory Prepayment Option Notice. For purposes hereof, the term "Mandatory Prepayment Date" means either (i) the date that is five Business Days after the date of the applicable Mandatory Prepayment Option Notice, or (ii) if no Mandatory Prepayment Option Notice is required, a date specified in the applicable Notice of Prepayment that is not later than five Business Days after the date of such Notice of Prepayment (or if no date is so specified, the date of such Notice of Prepayment). 9.6 Conversion and Continuation Options. (a) The Primary Borrower may elect from time to time to convert Eurocurrency Loans denominated in Dollars to ABR Loans by delivering to the Administrative Agent an irrevocable Notice of Borrowing by 10:00 A.M., New York City time, at least 47 one Business Day prior to the requested date of conversion; provided that any such conversion of Eurocurrency Loans may only be made on the last day of an Interest Period with respect thereto. The Primary Borrower may elect from time to time to convert ABR Loans to Eurocurrency Loans denominated in Dollars by delivering to the Administrative Agent an irrevocable Notice of Borrowing by 10:00 A.M., New York City time, at least three Business Days' prior to the requested conversion date. Any such Notice of Borrowing with respect to a conversion to Eurocurrency Loans shall specify the length of the initial Interest Period or Interest Periods therefor. Upon receipt of any such Notice of Borrowing, the Administrative Agent shall promptly notify each Lender thereof. All or any part of outstanding Eurocurrency Loans and ABR Loans may be converted as provided herein, provided that (i) no Loan may be converted into a Eurocurrency Loan when any Event of Default has occurred and is continuing and the Administrative Agent has or the Majority Term Lenders have determined that such a conversion is not appropriate and the Administrative Agent has given notice to the Primary Borrower that no conversion may be made, (ii) no Revolving Credit Loan may be converted into a Eurocurrency Loan after the date that is one month prior to the Termination Date and (iii) no Tranche A Loan or Tranche B Loan may be converted into a Eurocurrency Loan after the date that is one month prior to the date of the final installment of principal thereof. Notwithstanding anything to the contrary contained herein, Swing Line Loans shall at all times be maintained as ABR Loans and shall not be converted to Eurocurrency Loans hereunder. (b) Any Eurocurrency Loans may be continued as such upon the expiration of the then current Interest Period with respect thereto by any Borrower delivering to the Administrative Agent (and, in the case of the German Term Loans, to the German Term Loan Servicing Bank) an irrevocable Notice of Borrowing, in accordance with the applicable provisions of the term "Interest Period" set forth in subsection 1.1, setting forth (among other things) the length of the next Interest Period to be applicable to such Loans, provided that (i) no Loan under any Facility may be continued as a Eurocurrency Loan when any Event of Default has occurred and is continuing and the Administrative Agent (in consultation with the German Term Loan Servicing Bank, in the case of the German Term Loan Facility) has or the Majority Facility Lenders with respect to such Facility have determined that such a continuation is not appropriate and the Administrative Agent has given notice to the relevant Borrower that no such continuations may be made, (ii) no Revolving Credit Loan may be continued as a Eurocurrency Loan after the date that is one month prior to the Termination Date and (iii) no Term Loan may be continued as a Eurocurrency Loan after the date that is one month prior to the date of the final installment of principal of such Term Loan and provided, further, that if the relevant Borrower shall fail to give such notice or if such continuation is not permitted such Loans (A) in the case of Loans denominated in Dollars, shall be automatically converted to ABR Loans on the last day of such then expiring Interest Period and (B) in the case of Loans denominated in euro, shall be continued for Interest Periods of one month or such shorter duration as the Administrative Agent (in consultation with the German Term Loan Servicing Bank, with respect to the German Term Loan Facility) may select. Upon receipt of any such Notice of Borrowing, the Administrative Agent (or, in the case of the German Term Loans, the German Term Loan Servicing Bank) shall promptly notify each affected Lender thereof. 9.7 Minimum Amounts and Maximum Number of Tranches. All borrowings, conversions and continuations of Loans hereunder and all selections of Interest Periods hereunder shall be in such amounts and be made pursuant to such elections so that, after giving effect thereto, the aggregate principal amount of the Loans comprising each Tranche of Eurocurrency Loans shall be equal to $5,000,000 or a whole multiple of $1,000,000 in excess thereof (in the case of Eurocurrency Loans denominated in Dollars) or (euro)5,000,000 or a whole multiple of (euro)1,000,000 in excess thereof (in the case of Eurocurrency Loans denominated in euro). In no event shall there be more than 15 Eurocurrency Tranches outstanding at any time. 9.8 Interest Rates and Payment Dates. (a) Each Eurocurrency Loan shall bear interest for each day during each Interest Period with respect thereto at a rate per annum equal to the 48 Eurocurrency Rate determined for such day plus the Applicable Margin with respect thereto in effect on such day. (b) Each ABR Loan (including, without limitation, each Swing Line Loan) shall bear interest at a rate per annum equal to the ABR plus the Applicable Margin with respect thereto in effect on such day. (c) If all or a portion of (i) any principal of any Loan, (ii) any interest payable thereon, (iii) any commitment fee or (iv) any other amount payable hereunder shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), such overdue amount shall bear interest at a rate per annum which is (x) in the case of principal, the rate that would otherwise be applicable thereto pursuant to the foregoing provisions of this subsection (or, in the case of any Preference Replacement Loans, pursuant to subsection 5.5(d)) plus 2%, (y) in the case of overdue Reimbursement Obligations with respect to the German L/C payable pursuant to subsection 5.5(a), the lesser of (A) the rate that would otherwise be applicable thereto pursuant to subsection 5.5(b) plus 2% and (B) the rate then applicable to Eurocurrency Loans denominated in euros plus 2%, or (z) in the case of any such overdue interest, commitment fee or other amount, the rate described in paragraph (b) of this subsection plus 2%, in each case from the date of such non-payment until such overdue principal, interest, commitment fee or other amount is paid in full (after as well as before judgment). (d) Interest shall be payable in arrears on each Interest Payment Date, provided that interest accruing pursuant to paragraph (c) of this subsection shall be payable from time to time on demand. (e) It is the intention of the parties hereto to comply strictly with applicable usury laws; accordingly, it is stipulated and agreed that the aggregate of all amounts which constitute interest under applicable usury laws, whether contracted for, charged, taken, reserved, or received, in connection with the indebtedness evidenced by this Agreement or any Notes, or any other document relating or referring hereto or thereto, now or hereafter existing, shall never exceed under any circumstance whatsoever the maximum amount of interest allowed by applicable usury laws. 9.9 German Term Loans; Additional Interest. (a) The German Term Loans shall bear additional interest, computed for the period from and including the date of issuance of the German L/C to but excluding the expiration date thereof, at a rate per annum equal to the Applicable Margin then in effect for Revolving Credit Loans which are Eurocurrency Loans (calculated on the basis of the actual number of days elapsed over a 360 day year) of the aggregate face amount of the German L/C then outstanding. Such interest shall be payable by each German Borrower according to its German Loan Percentage of the amount of such interest to the German Term Loan Servicing Bank, for the ratable account of the German Term Loan Lenders, in arrears on each L/C Fee Payment Date and on the Termination Date. (b) The German Term Loans shall bear additional interest, computed for the period from and including the date of issuance of the German L/C to but excluding the expiration date thereof, at a rate per annum equal 0.125% of the aggregate face amount of the German L/C then outstanding. Such interest shall be payable by each German Borrower according to its German Loan Percentage of the amount of such interest to the German Term Loan Servicing Bank, for the ratable account of the German Term Loan Lenders, in arrears on each L/C Fee Payment Date and on the Termination Date. (c) In addition to the foregoing, each German Borrower shall pay (as additional interest) the German Term Loan Servicing Bank for its German Loan Percentage of such normal and customary costs and expenses as are incurred or charged by the German L/C Issuing Bank in issuing, effecting payment under, amending or otherwise administering the German L/C. Each German Borrower's German Loan Percentage of such interest shall be payable by such German Borrower to the 49 German Term Loan Servicing Bank, for the ratable account of the German Term Loan Lenders, promptly after presentment to the German Borrowers of a copy of the request for any such payment by the German L/C Issuing Bank substantiating the amount so incurred or charged in reasonable detail. 9.10 Computation of Interest and Fees. (a) Commitment fees and, whenever it is calculated on the basis of the Prime Rate, interest shall be calculated on the basis of a 365- (or 366-, as the case may be) day year for the actual days elapsed; and, otherwise, interest shall be calculated on the basis of a 360-day year for the actual days elapsed. The Administrative Agent shall as soon as practicable notify the affected Borrower and the affected Lenders of each determination of a Eurocurrency Rate. Any change in the interest rate on a Loan resulting from (i) a change in the ABR or the Eurocurrency Reserve Requirements shall become effective as of the opening of business on the day on which such change becomes effective and (ii) the Leverage Ratio of the Primary Borrower and its Subsidiaries shall become effective as of the opening of business (x) on the date upon which the Administrative Agent receives the financial statements required to be delivered pursuant to subsection 12.1 which evidence such change in the Leverage Ratio or (y) if such financial statements are not delivered when due (after giving effect to the applicable cure period), on the date such financial statements were required to be delivered. The Administrative Agent shall as soon as practicable notify the German Term Loan Servicing Bank, the affected Borrower and the affected Lenders of the effective date and the amount of each such change in interest rate. (b) Each determination of an interest rate by the Administrative Agent pursuant to any provision of this Agreement shall be conclusive and binding on the Borrowers and the Lenders in the absence of manifest error. The Administrative Agent shall, at the request of the Primary Borrower, deliver to the Primary Borrower a statement showing the quotations used by the Administrative Agent in determining any interest rate pursuant to subsection 9.10(a). 9.11 Inability to Determine Interest Rate. If prior to the first day of any Interest Period the Administrative Agent shall have reasonably determined (which determination shall be conclusive and binding upon the Borrowers and which, in the case of the German Term Loans, shall be made in consultation with the German Term Loan Servicing Bank) that, by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the Eurocurrency Rate for the relevant currency for such Interest Period, the Administrative Agent shall give telecopy or telephonic notice thereof to the relevant Borrower(s) and the affected Lenders as soon as practicable thereafter. If such notice is given (a) any Eurocurrency Loans in the relevant currency requested to be made on the first day of such Interest Period shall (i) if Term Loans denominated in Dollars, be made as ABR Loans, (ii) Term Loans if denominated in euros, be made at the rate reasonably determined by the Administrative Agent (in consultation with the German Term Loan Servicing Bank, with respect to the German Term Loans) as its actual cost of funding such Loans plus the Applicable Margin for Eurocurrency Loans for the relevant Facility and (iii) if Revolving Credit Loans, be made in Dollars as ABR Loans and (b) any Loans in the relevant currency that were to have been converted to or continued as Eurocurrency Loans on the first day of such Interest Period shall (i) if denominated in Dollars, be converted to ABR Loans and (ii) if Term Loans denominated in euros, be continued at the rate reasonably determined by the Administrative Agent (in consultation with the German Term Loan Servicing Bank, with respect to the German Term Loans) as its actual cost of funding such Loans plus the Applicable Margin for Eurocurrency Loans for the relevant Facility and (iii) if Revolving Credit Loans denominated in euro, shall be repaid on the last day of the current Interest Period and may be reborrowed in Dollars in accordance with the provisions of subsection 6.2. Until such notice has been withdrawn by the Administrative Agent, no further Eurocurrency Loans in the relevant currency under the Revolving Credit Commitments shall be made or continued as such, nor shall the Primary Borrower have the right to convert any Loans in the relevant currency to Eurocurrency Loans. 9.12 Pro Rata Treatment and Payments. (a) Each borrowing (other than a borrowing of Swing Line Loans) by the Primary Borrower from the Lenders hereunder, each payment by the Primary 50 Borrower on account of any commitment fee hereunder and any reduction of the Commitments of the Lenders shall be allocated by the Administrative Agent pro rata according to the respective relevant Commitment Percentages of the Lenders holding obligations in respect of which such amounts were paid. Except as otherwise contemplated by subsections 9.3(b) and 9.5(f), each payment (including each prepayment) by (i) the Primary Borrower on account of principal of and (subject to the provisions of subsection 9.13) interest on the Loans made to it (other than a payment of Swing Line Loans) shall be allocated by the Administrative Agent pro rata according to the respective outstanding principal amounts of such Loans then held by the Lenders and (ii) either German Borrower on account of principal of and (subject to the provisions of subsection 9.13) interest on the German Term Loans shall be allocated by the German Term Loan Servicing Bank pro rata according to the respective outstanding principal amounts of the German Term Loans then held by the German Term Loan Lenders. Except as otherwise set forth herein, all payments (including prepayments) to be made by any Borrower hereunder, whether on account of principal, interest, fees or otherwise, shall be made without set off or counterclaim in immediately available funds and shall be made (i) in the case of the German Term Loans, prior to 1:00 P.M., New York time, on the due date thereof to the German Term Loan Servicing Bank for the ratable account of the German Term Loan Lenders, at the relevant Payment Office in euro and (ii) in the case of any other Loan (including any Reimbursement Term Loans), prior to 1:00 P.M., New York City time, on the due date thereof to the Administrative Agent, for the account of the applicable Lenders, at the relevant Payment Office, in Dollars (or euro, in the case of payments of principal and interest in respect of Loans denominated in euro). In relation to the payment of any amount of euro, such amount shall be made available to the Administrative Agent or the German Term Loan Servicing Bank, as the case may be, in immediately available, freely transferable, cleared funds to such account at such Payment Office as the Administrative Agent or the German Term Loan Servicing Bank, as the case may be, shall from time to time nominate for this purpose. The Administrative Agent or the German Term Loan Servicing Bank, as the case may be, shall distribute such payments to the Lenders holding obligations on account of which such amounts were paid promptly upon receipt in like funds as received. Except as otherwise set forth herein, if any payment hereunder (other than payments on Eurocurrency Loans) becomes due and payable on a day other than a Business Day, the maturity of such payment shall be extended to the next succeeding Business Day (and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension). If any payment on a Eurocurrency Loan becomes due and payable on a day other than a Business Day, the maturity of such payment shall be extended to the next succeeding Business Day (and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension) unless the result of such extension would be to extend such payment into another calendar month, in which event such payment shall be made on the immediately preceding Business Day. (b) Unless the Administrative Agent shall have been notified in writing by any Lender (other than any German Term Loan Lender) prior to a borrowing that such Lender will not make the amount that would constitute its relevant Commitment Percentage of such borrowing available to the Administrative Agent, the Administrative Agent may assume that such Lender is making such amount available to the Administrative Agent, and the Administrative Agent may, in reliance upon such assumption, make available to the Primary Borrower in respect of such borrowing a corresponding amount. If such amount is not made available to the Administrative Agent by the required time on the Borrowing Date therefor, such Lender shall pay to the Administrative Agent, on demand, such amount with interest thereon at a rate equal to the daily average Federal Funds Effective Rate for the period until such Lender makes such amount immediately available to the Administrative Agent. A certificate of the Administrative Agent submitted to any Lender with respect to any amounts owing under this subsection 9.12 shall be conclusive in the absence of manifest error. If such Lender's relevant Commitment Percentage of such borrowing is not made available to the Administrative Agent by such Lender within three Business Days of such Borrowing Date, the Administrative Agent shall notify the Primary Borrower of the failure of such Lender to make such amount available to the Administrative Agent and the Administrative Agent shall also be entitled to recover such amount with interest thereon at the rate per annum applicable to ABR Loans under the relevant Facility (in the case of Loans denominated in 51 Dollars) or the rate reasonably determined by the Administrative Agent as its actual cost of funding such amounts, plus the Applicable Margin for Eurocurrency Loans under such Facility (in the case of Loans denominated in euros), upon three Business Days after receipt by the Primary Borrower of written notice from the Administrative Agent specifying the amount such Lender failed to make available to the Administrative Agent, from the Primary Borrower. Nothing contained in this subsection 9.12(b) shall prejudice any claims otherwise available to any Borrower against any Lender as a result of such Lender's failure to make its share of any borrowing available to the Administrative Agent or the German Term Loan Servicing Bank for the account of the relevant Borrower. (c) Notwithstanding anything to the contrary contained herein, in the event that the Administrative Agent or the German Term Loan Servicing Bank, as the case may be, shall make any payment to a Lender on account of amounts owing to such Lender by any Borrower hereunder and the Administrative Agent or the German Term Loan Servicing Bank, as the case may be, either (i) shall not receive the corresponding amount from such Borrower or (ii) shall be required to be return such amount to such Borrower, such Lender shall (upon the request of the Administrative Agent or the German Term Loan Servicing Bank, as the case may be) promptly return to the Administrative Agent or the German Term Loan Servicing Bank, as the case may be, the amount of such payment. (d) In the event that (i) the Primary Borrower gives notice to the Administrative Agent that (A) the Primary Borrower intends to make a borrowing under subsection 6.2 of Revolving Credit Loans denominated in euro, (B) the Primary Borrower intends, on the requested Borrowing Date for such Eurocurrency Loans, to prepay under subsection 9.4 Revolving Credit Loans denominated in Dollars and (C) after giving effect to such borrowing and prepayment, the aggregate Available Revolving Credit Commitment shall not be less than zero, and (ii) if (after giving effect to such requested Revolving Credit Loans, but before giving effect to such prepayment) the aggregate Available Revolving Credit Commitment shall be less than zero, the Administrative Agent may, in reliance on the foregoing notice, make available to the Primary Borrower the amount of such requested Revolving Credit Loans; provided, however, that, in the event that the Primary Borrower fails to make such prepayment on the requested Borrowing Date, the Primary Borrower shall, without notice or demand, immediately prepay the Revolving Credit Loans made to it in an aggregate principal amount equal to the amount by which the Aggregate Outstanding Extensions of Credit exceeds the Aggregate Revolving Credit Commitments then in effect, together with interest accrued to the date of such prepayment and any amounts payable under subsection 9.16. (e) A payment in euro shall be deemed to have been made by the Administrative Agent or the German Term Loan Servicing Bank, as the case may be, on the date on which it is required to be made under this Agreement if the Administrative Agent or the German Term Loan Servicing Bank, as the case may be, has, on or before that date, taken all relevant steps to make that payment. With respect to the payment of any amount denominated in euro, the Administrative Agent (or, in the case of the German Term Loan, the German Term Loan Servicing Bank) shall not be liable to any Borrower or any of the Lenders in any way whatsoever for any delay, or the consequences of any delay, in the crediting to any account of any amount required by this Agreement to be paid by the Administrative Agent or the German Term Loan Servicing Bank, as the case may be, if the Administrative Agent or the German Term Loan Servicing Bank, as the case may be, shall have taken all relevant steps to achieve, on the date required by this Agreement, the payment of such amount in immediately available, freely transferable, cleared funds in the euro unit to the account with the bank in the principal financial center in the Participating Member State which the relevant Borrower or, as the case may be, any Lender shall have specified for such purpose. In this paragraph, "all relevant steps" means all such steps as may be prescribed from time to time by the regulations or operating procedures of such clearing or settlement system as the Administrative Agent or the German Term Loan Servicing Bank, as the case may be, may from time to time determine for the purpose of clearing or settling payments of euro. 52 9.13 Illegality. Notwithstanding any other provision herein, if the adoption of or any change in any Requirement of Law or in the interpretation or application thereof shall make it unlawful for any Lender to make or maintain Eurocurrency Loans to the Primary Borrower as contemplated by this Agreement ("Affected Eurocurrency Loans"), (a) such Lender shall promptly give written notice of such circumstances to Primary Borrower and the Administrative Agent (which notice shall be withdrawn whenever such circumstances no longer exist), (b) the commitment of such Lender hereunder to make Affected Eurocurrency Loans, continue Affected Eurocurrency Loans as such and convert ABR Loans to Affected Eurocurrency Loans shall forthwith be canceled and, until such time as it shall no longer be unlawful for such Lender to make or maintain such Affected Eurocurrency Loans, such Lender shall then have a commitment only to make an ABR Loan when an Affected Eurocurrency Loan is requested, (c) such Lender's Loans denominated in Dollars then outstanding as Affected Eurocurrency Loans, if any, shall be converted automatically to ABR Loans on the respective last days of the then current Interest Periods with respect to such Loans or within such earlier period as required by law and (d) such Lender's Loans denominated in euros then outstanding as Affected Eurocurrency Loans, if any, shall be converted automatically to ABR Loans (such conversion to be affected at the Spot Exchange Rate in effect on such conversion date) on the last day of the current Interest Period or within such earlier period as required by law. If any such conversion of a Eurocurrency Loan occurs on a day which is not the last day of the then current Interest Period with respect thereto, the Primary Borrower shall pay to such Lender such amounts, if any, as may be required pursuant to subsection 9.16. 9.14 Requirements of Law. (a) If the adoption of or any change in any Requirement of Law or in the interpretation or application thereof applicable to any Lender or compliance by any Lender with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority made subsequent to the date hereof (or, if later, the date on which such Lender becomes a Lender): (i) shall subject any Lender to any tax of any kind whatsoever with respect to any Domestic L/C, any Application, the German L/C or any Eurocurrency Loan made by it or its obligation to make Eurocurrency Loans or change the basis of taxation of payments to such Lender in respect thereof (except for Non-Excluded Taxes covered by subsection 9.15 (including Non-Excluded Taxes imposed solely by reason of any failure of such Lender to comply with its obligations under subsection 9.15(c) or 9.15(d)) and changes in taxes measured by or imposed upon the overall net income, or franchise taxes, or taxes measured by or imposed upon overall capital or net worth, or branch taxes (in the case of such capital, net worth or branch taxes, imposed in lieu of such net income tax), of such Lender or its applicable lending office, branch, or any affiliate thereof); (ii) shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances, loans or other extensions of credit by, or any other acquisition of funds by, any office of such Lender which is not otherwise included in the determination of the Eurocurrency Rate hereunder; or (iii) shall impose on such Lender any other condition excluding any tax of any kind whatsoever; and the result of any of the foregoing is to increase the cost to such Lender, by an amount which such Lender deems to be material, of making, converting into, continuing or maintaining Eurocurrency Loans, participating in the German L/C or issuing or participating in Domestic L/Cs or to reduce any amount receivable hereunder in respect thereof, then, in any such case, upon notice to the relevant Borrower from such Lender, through the Administrative Agent (or, in the case of a German Term Lender, through the German Term Loan Servicing Bank with a copy to the Administrative Agent), in accordance herewith, the relevant Borrower shall promptly pay such Lender, upon its demand, any additional amount or 53 amounts necessary to compensate such Lender for such increased cost or reduced amount receivable with respect to such Eurocurrency Loans, the German L/C or Domestic L/Cs, provided that, in any such case involving Eurocurrency Loans denominated in Dollars, the Primary Borrower may elect to convert Eurocurrency Loans made by such Lender hereunder to ABR Loans by giving the Administrative Agent at least one Business Day's notice of such election, in which case the Primary Borrower shall promptly pay to such Lender, upon demand, without duplication, amounts theretofore required to be paid to such Lender pursuant to this subsection 9.14(a) and such amounts, if any, as may be required pursuant to subsection 9.16. If any Lender becomes entitled to claim any additional amounts pursuant to this subsection, it shall provide prompt notice thereof to the relevant Borrower, through the Administrative Agent (or, in the case of a German Term Lender, through the German Term Loan Servicing Bank with a copy to the Administrative Agent), certifying (x) that one of the events described in this paragraph (a) has occurred and describing in reasonable detail the nature of such event, (y) as to the increased cost or reduced amount resulting from such event and (z) as to the additional amount demanded by such Lender and a reasonably detailed explanation of the calculation thereof. (b) If any Lender shall have determined that the adoption of or any change in any Requirement of Law regarding capital adequacy or in the interpretation or application thereof or compliance by such Lender or any corporation controlling such Lender with any request or directive regarding capital adequacy (whether or not having the force of law) from any Governmental Authority, in each case, made subsequent to the Closing Date (or, if later, the date on which such Lender becomes a Lender) shall have the effect of reducing the rate of return on such Lender's or such corporation's capital as a consequence of such Lender's obligations hereunder or under any Domestic L/C or the German L/C to a level below that which such Lender or such corporation could have achieved but for such adoption, change or compliance (taking into consideration such Lender's or such corporation's policies with respect to capital adequacy) by an amount deemed by such Lender to be material, then from time to time, within ten Business Days after submission by such Lender to the Primary Borrower (with a copy to the Administrative Agent) of a written request therefor certifying (x) that one of the events described in this paragraph (b) has occurred and describing in reasonable detail the nature of such event, (y) as to the reduction of the rate of return on capital resulting from such event and (z) as to the additional amount or amounts demanded by such Lender or corporation and a reasonably detailed explanation of the calculation thereof, the Primary Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender or corporation for such reduction. (c) Any certificate provided pursuant to (a) or (b) above as to any additional amounts payable pursuant to this subsection submitted by such Lender, through the Administrative Agent (or, in the case of a German Term Lender, through the German Term Loan Servicing Bank with a copy to the Administrative Agent), to any Borrower shall be conclusive in the absence of manifest error. The agreements in this subsection shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. 9.15 Taxes. (a) All payments made by any Borrower under this Agreement and any Notes or (subject to the last sentence of this paragraph (a)) by the German Term Loan Servicing Bank on behalf of the German Term Loan Lenders pursuant to subsection 5.3 shall be made free and clear of, and without deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority excluding taxes measured by or imposed upon the overall net income of the Administrative Agent, the German L/C Issuing Bank or any Lender or its applicable lending office, or any branch or affiliate of either, and all franchise taxes, branch taxes, taxes on doing business or taxes measured by or imposed upon the overall capital or net worth of the Administrative Agent, the German L/C Issuing Bank or any Lender or its applicable lending office, or any branch or affiliate of either, in each case imposed: (i) by the jurisdiction under the laws of which the Administrative Agent, the German L/C Issuing Bank or such Lender, applicable lending office, 54 branch or affiliate is organized or is located, or in which the principal executive office of the Administrative Agent, the German L/C Issuing Bank or any Lender is located, or any nation within which such jurisdiction is located or any political subdivision thereof; or (ii) by reason of any present or former connection between the jurisdiction imposing such tax and the Administrative Agent, the German L/C Issuing Bank or such Lender, applicable lending office, branch or affiliate other than a connection arising solely from the Administrative Agent, the German L/C Issuing Bank or such Lender having executed, delivered or performed its obligations under, or received payment under or enforced, this Agreement or any Note. If any such non-excluded taxes, levies, imposts, duties, charges, fees deductions or withholdings ("Non-Excluded Taxes") are required to be withheld by any Borrower or (subject to the last sentence of this paragraph (a)) the German Term Loan Servicing bank on behalf of the German Term Loan Lenders from any amounts payable to the Administrative Agent or any Section 9.15 Lender hereunder or under any Note, the amounts so payable to the Administrative Agent or such Section 9.15 Lender shall be increased to the extent necessary to yield to the Administrative Agent or such Section 9.15 Lender (after payment of all Non-Excluded Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Agreement, provided, however, that any Borrower or (subject to the last sentence of this paragraph (a)) the German Term Loan Servicing Bank on behalf of the German Term Loan Lenders shall be entitled to deduct and withhold any Non- Excluded Taxes and shall not be required to increase any such amounts payable to any Section 9.15 Lender that is not organized under the laws of the United States of America or a state thereof if such Section 9.15 Lender fails to comply with the requirements of paragraph (c) or (d) of this subsection. Whenever any Non-Excluded Taxes are payable by a Borrower or the German Term Loan Servicing Bank on behalf of the German Term Loan Lenders, as promptly as possible thereafter such Borrower or the German Term Loan Servicing Bank on behalf of the German Term Loan Lenders shall send to the Administrative Agent for its own account or for the account of such Section 9.15 Lender, as the case may be, a certified copy of an original official receipt or other documentary evidence acceptable to the Administrative Agent received by such Borrower or the German Term Loan Servicing Bank on behalf of the German Term Loan Lenders showing payment thereof; provided that, in the case of the German Term Loans, such receipt shall be sent directly to the German Term Loan Servicing Bank for its own account or the account of such Section 9.15 Lender with a copy to the Administrative Agent. If a Borrower or (subject to the last sentence of this paragraph (a)) the German Term Loan Servicing Bank on behalf of the German Term Loan Lenders fails to pay any Non-Excluded Taxes when due to the appropriate taxing authority or fails to remit to the Administrative Agent the required receipts or other required documentary evidence, such Borrower or (subject to the last sentence of this paragraph (a)) the German Term Loan Servicing Bank on behalf of the German Term Loan Lenders shall indemnify the Administrative Agent and the Section 9.15 Lenders for any incremental taxes, interest or penalties that may become payable by the Administrative Agent or any Section 9.15 Lender as a result of any such failure. Notwithstanding anything to the contrary set forth in this clause (a), so long as the German Term Loan Servicing Bank has provided notice to the applicable German Borrower pursuant to paragraph (b) of this subsection, the German Term Loan Servicing Bank shall be entitled to deduct or withhold any Non-Excluded Taxes from amount payable by it to the Administrative Agent pursuant to subsection 5.3 and shall not be required to increase any amounts payable by it to the Administrative Agent unless or until the relevant German Borrower(s) has made the amount equal to such required increase available to the German Term Loan Servicing Bank pursuant to paragraph (b) of this subsection. (b) Each German Borrower hereby agrees that promptly upon receipt of notice from the German Term Loan Servicing Bank that the German Term Loan Servicing Bank is required pursuant to the terms of paragraph (a) above to increase any amounts payable by the German Term Loan Servicing Bank to the Administrative Agent under subsection 5.3, the amounts payable by the German Borrowers to the German Term Loan Servicing Bank pursuant to subsection 9.9 shall be increased (based on the German Loan Percentage of each such German Borrower) to the extent necessary to yield to the Administrative Agent (after payment of all Non- Excluded Taxes) the amounts payable under subsection 5.3. The German Term Loan Servicing Bank hereby agrees that if Non- Excluded Taxes are required to 55 be withheld from amounts payable to it from either German Borrower, it shall exercise its rights under paragraph (a) above to the fullest extent permitted under applicable law. (c) Each Lender making Loans to the Primary Borrower that is not incorporated under the laws of the United States of America or a state thereof (a "Non-U.S. Lender") shall: (X)(i) on or before the date of any payment by the Primary Borrower under this Agreement or any Note to such Lender, deliver to the Primary Borrower and the Administrative Agent two duly completed copies of United States Internal Revenue Service Form W-8BEN or W-8ECI, or successor applicable form, certifying that such Lender is entitled to an exemption from deduction or withholding of United States federal income taxes and United States backup withholding taxes with respect to payments under this Agreement and any Notes, together with such other forms, documentation or certifications as may be necessary to establish this exemption. (ii) deliver to the Primary Borrower and the Administrative Agent two further copies of any such form or certification on or before the date that any such form or certification expires or becomes obsolete and after the occurrence of any event requiring a change in the most recent form previously delivered by it to the Primary Borrower; and (iii) obtain such extensions of time for filing and completing such forms or certifications as may reasonably be requested by the Primary Borrower or the Administrative Agent; and (Y) in the case of any such Non-U.S. Lender that is not a "bank" within the meaning of Section 881(c)(3)(A) of the Code and that cannot comply with the requirements of subsection 9.15(c)(x) above, (i) represent to the Primary Borrower (for the benefit of the Primary Borrower and the Administrative Agent) that it is not a bank within the meaning of Section 881(c)(3)(A) of the Code, (ii) agree to furnish to the Primary Borrower on or before the date of any payment by the Primary Borrower, with a copy to the Administrative Agent, (A) a certificate substantially in the form of Exhibit G (any such certificate a "U.S. Tax Compliance Certificate") and (B) two accurate and complete original signed copies of Internal Revenue Service Form W-8BEN, or successor applicable form certifying to such Lender's legal entitlement at the date of such certificate to an exemption from U.S. withholding tax under the provisions of Section 881(c) of the Code and United States backup withholding taxes with respect to payments to be made under this Agreement and any Notes (and to deliver to the Primary Borrower and the Administrative Agent two further copies of such form on or before the date it expires or becomes obsolete and after the occurrence of any event requiring a change in the most recently provided form, and, if necessary, obtain any extensions of time reasonably requested by the Primary Borrower or the Administrative Agent for filing and completing such forms), and (iii) agree, to the extent legally entitled to do so, upon reasonable request by the Primary Borrower, to provide to the Primary Borrower (for the benefit of the Primary Borrower and the Administrative Agent) such other forms as may be reasonably required in order to establish the legal entitlement of such Lender to an exemption from withholding with respect to payments under this Agreement and any Notes; unless in any such case, any change in treaty, law or regulation has occurred after the date such Person becomes a Lender hereunder which renders all such forms inapplicable or which would prevent such Lender from duly completing and delivering any such form with respect to it and such Lender so advises the Primary Borrower and the Administrative Agent. Each Person that shall become a Lender or a Participant pursuant to subsection 17.6 shall, upon the effectiveness of the related transfer, be required to provide all of the forms and statements required pursuant to this subsection, provided that in the case of a Participant such Participant shall furnish all such required forms, documentation or certifications to the Lender from which the related participation shall have been purchased, and such Lender shall in turn furnish all such required forms (including without limitation Internal Revenue Service Form W-8IMY), 56 documentation and certifications to the Primary Borrower and the Administrative Agent. Notwithstanding the foregoing, a Non-U.S. Lender shall not be required to deliver any form pursuant to this paragraph that such Lender is not legally able to deliver. (d) A Section 9.15 Lender that is entitled to an exemption from or reduction of non-U.S. withholding tax under the law of the jurisdiction in which a Borrower is located, or any treaty to which such jurisdiction is a party, with respect to payments under this Agreement shall deliver to such Borrower or the applicable taxing authority, if required by law to do so (with a copy to the Administrative Agent and, in the case of the German Borrower, to the German Term Loan Servicing Bank), at the time or times reasonably requested by such Borrower, such properly completed and executed documentation prescribed by applicable law as will permit such payments to be made without withholding or at a reduced rate, provided that such Borrower furnishes such documentation to such Section 9.15 Lender, such Section 9.15 Lender is legally entitled to complete, execute and deliver such documentation and in such Section 9.15 Lender's reasonable judgment such completion, execution or submission would not be materially disadvantageous to its business or operations or would require it to incur additional costs (unless such Borrower is required to pay such additional amount agrees to reimburse such Section 9.15 Lender for the reasonable out-of- pocket costs thereof). (e) The agreements in this subsection 9.15 shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. 9.16 Indemnity. Each Borrower agrees to indemnify each Lender and to hold each Lender harmless from any loss or expense (other than through such Lender's gross negligence or willful misconduct) which such Lender may sustain or incur as a consequence of (a) default by such Borrower in making a borrowing of, conversion into or continuation of Eurocurrency Loans after such Borrower has given a notice requesting the same in accordance with the provisions of this Agreement, (b) default by such Borrower in making any prepayment after such Borrower has given a notice thereof in accordance with the provisions of this Agreement or (c) the making of a prepayment by such Borrower of Eurocurrency Loans on a day which is not the last day of an Interest Period with respect thereto. Such indemnification may include an amount equal to the excess, if any, of (i) the amount of interest which would have accrued on the amount so prepaid, or not so borrowed, converted or continued, for the period from the date of such prepayment or of such failure to borrow, convert or continue to the last day of such Interest Period (or, in the case of a failure to borrow, convert or continue, the Interest Period that would have commenced on the date of such failure) in each case at the applicable rate of interest for such Loans provided for herein (excluding, however, the Applicable Margin included therein, if any) over (ii) the amount of interest (as reasonably determined by such Lender) which would have accrued to such Lender on such amount by placing such amount on deposit for a comparable period with leading banks in the interbank eurocurrency market. If any Lender becomes entitled to claim any amounts under the indemnity contained in this subsection 9.16, it shall provide prompt notice thereof to the Primary Borrower, through the Administrative Agent, certifying (x) that one of the events described in clause (a), (b) or (c) has occurred and describing in reasonable detail the nature of such event, (y) as to the loss or expense sustained or incurred by such Lender as a consequence thereof and (z) as to the amount for which such Lender seeks indemnification hereunder and a reasonably detailed explanation of the calculation thereof. Such a certificate as to any indemnification pursuant to this subsection submitted by such Lender, through the Administrative Agent, to the Primary Borrower shall be conclusive in the absence of manifest error. This covenant shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder. 9.17 Certain Fees. The Primary Borrower agrees to pay to the Administrative Agent, for its own account, a non-refundable administration fee in an amount previously agreed to with the Administrative Agent in the Fee Letter, payable in the manner and on the dates set forth therein. 57 9.18 Certain Rules Relating to the Payment of Additional Amounts. (a) Upon the request, and at the expense, of any Borrower, each Section 9.15 Lender to which such Borrower is required to pay any additional amount pursuant to subsection 9.14 or 9.15, and any Participant in respect of whose participation such payment is required, shall reasonably afford such Borrower or the German Term Loan Servicing Bank on behalf of the German Term Loan Lenders the opportunity to contest, and reasonably cooperate with such Borrower in contesting, the imposition of any Non-Excluded Tax giving rise to such payment; provided that (i) such Section 9.15 Lender shall not be required to afford such Borrower the opportunity to so contest unless such Borrower shall have confirmed in writing to such Section 9.15 Lender its obligation to pay such amounts pursuant to this Agreement and (ii) such Borrower shall reimburse such Section 9.15 Lender for its reasonable attorneys' and accountants' fees and disbursements incurred in so cooperating with such Borrower in contesting the imposition of such Non-Excluded Tax. (b) If a Section 9.15 Lender changes its applicable lending office (other than pursuant to paragraph (c) below) and the effect of the change, as of the date of the change, would be to cause any Borrower to become obligated to pay any additional amount under subsection 9.14 or 9.15, such Borrower shall not be obligated to pay such additional amount. (c) If a condition or an event occurs which would, or would upon the passage of time or giving of notice, result in the payment of any additional amount to any Section 9.15 Lender by any Borrower or by the German Term Loan Servicing Bank on behalf of the German Term Loan Lenders pursuant to subsection 9.14 or 9.15, or which results in interests payments in respect of the German Term Loans becoming non-deductible (without regard to any debt-equity safe harbor) for German income tax purposes, such Section 9.15 Lender shall take such steps as may reasonably be available to it and acceptable to the Primary Borrower to mitigate the effects of such condition or event (which shall include efforts to rebook the Loans held by such Section 9.15 Lender at another lending office, or through another branch or an affiliate, of such Section 9.15 Lender); provided that such Section 9.15 Lender shall not be required to take any step that, in its reasonable judgment, would be materially disadvantageous to its business or operations or would require it to incur additional costs (unless the Borrower that would be required to pay such additional amounts agrees to reimburse such Lender for the reasonable incremental out-of-pocket costs thereof). If a condition or event occurs which would, or would upon the passage of time or giving of notice, result in the payment of any additional amount to any Lender by any Borrower pursuant to subsection 9.14(a)(i) (i.e. increased costs for taxes) such Lender shall promptly notify the Primary Borrower and the Administrative Agent; provided that a failure on the part of a Lender to notify the Primary Borrower shall not result in any liability to such Lender and shall not reduce the amount of any additional amounts payable hereunder to such Lender to the extent that such failure to notify the Primary Borrower does not result in the payment of any additional amount by any Borrower pursuant to subsection 9.14(a)(i) which payment could have been avoided or reduced had the Lender notified the Primary Borrower in accordance with this subsection 9.18(c). (d) If any Borrower or the German Term Loan Servicing Bank on behalf of the German Term Loan Lenders shall become obligated to pay additional amounts pursuant to subsection 9.14 or 9.15 and any affected Lender shall not have promptly taken steps necessary to avoid the need for payments under subsection 9.14 or 9.15, the Primary Borrower shall have the right, for so long as such obligation remains, (x) with the assistance of the Administrative Agent, to seek one or more substitute Lenders reasonably satisfactory to the Administrative Agent and the Primary Borrower to purchase the affected Loan, in whole or in part, at an aggregate price no less than such Loan's principal amount plus accrued interest, and assume the affected obligations under this Agreement, or (y) to the extent that no Default or Event of Default under subsection 15.2(a) or subsection 15.2(c) (with respect to violations of covenants in Section 13) shall have occurred of which the Primary Borrower has actual knowledge and is then continuing, upon at least four Business Days irrevocable notice to the Administrative Agent, to prepay the affected Loan, in whole or in part, subject to subsection 9.16, without premium or penalty. In the case of the substitution of a Lender, the Primary Borrower, the Administrative Agent, the affected Lender, and any substitute Lender shall execute and deliver an appropriately completed Assignment and 58 Acceptance pursuant to subsection 17.6(c) to effect the assignment of rights to, and the assumption of obligations by, the substitute Lender. In the case of a prepayment of an affected Loan, the amount specified in the notice shall be due and payable on the date specified therein, together with any accrued interest to such date on the amount prepaid. In the case of each of the substitution of a Lender and of the prepayment of an affected Loan, the Primary Borrower shall first pay the affected Lender any additional amounts owing under subsections 9.14, 9.15 and 9.16 (as well as any commitment fees and other amounts then due and owing to such Lender) prior to such substitution or prepayment. (e) If the Administrative Agent or any Section 9.15 Lender receives a refund in respect of taxes for which any Borrower has made additional payments pursuant to subsection 9.14(a) or 9.15(a), the Administrative Agent or such Section 9.15 Lender, as the case may be, shall promptly pay such refund (together with any interest with respect thereto received from the relevant taxing authority) to such Borrower, provided, however, that such Borrower agrees promptly to return such refund (together with any interest with respect thereto due to the relevant taxing authority) (free of all Non-Excluded Taxes) to the Administrative Agent or the applicable Lender, as the case may be, upon receipt of a notice that such refund is required to be repaid to the relevant taxing authority. Notwithstanding anything to the contrary contained in this clause (e), no Lender shall have any obligation to disclose to any Borrower any of such Lender's books, records or tax filings. (f) For the purposes of subsections 9.14 and 9.15, a change in treaty, law, rule or regulation shall not include (i) the ratification or entry into force of the income tax treaty between Luxembourg and the United States of America or (ii) the new United States withholding regulations (Treasury Decision 8734, Treasury Decision 8804, Treasury Decision 8856 and Treasury Decision 8881) which become effective on January 1, 2001. (g) The obligations of the Administrative Agent and each Section 9.15 Lender or Participant under this subsection 9.18 shall survive the termination of this Agreement and the payment of the Loans and all amounts payable hereunder. (h) Except as provided in section 9.18(c), no German Term Loan Lender shall rebook or otherwise transfer its German Term Loan and no Participant in a German Term Loan shall rebook or otherwise transfer its participating interest in such German Term Loan to a branch or a lending office of such Lender or such Participant, respectively, that is not an Eligible German Bank. SECTION 10. REPRESENTATIONS AND WARRANTIES To induce the Administrative Agent, each Domestic L/C Issuing Bank, the German L/C Issuing Bank and the Lenders to enter into this Agreement and to make the Loans and issue or participate in the Domestic L/Cs and to issue or participate in the German L/C, the Primary Borrower hereby represents and warrants to the Administrative Agent, each Domestic L/C Issuing Bank, the German L/C Issuing Bank and each Lender that: 10.1 Financial Condition. (a) The unaudited pro forma consolidated balance sheet of the Guarantor and its consolidated Subsidiaries as at December 31, 1999 (including the notes thereto) (the "Pro Forma Balance Sheet"), copies of which have heretofore been furnished to each Lender, has been prepared giving effect (as if such events had occurred on such date) to (i) the consummation of the Transaction on the Closing Date, (ii) the Loans to be made on the Closing Date and the use of proceeds thereof (including to repay amounts outstanding under the Existing Dynatech Credit Agreement, the WWG Senior Subordinated Notes and the other existing Indebtedness of WWG and its Subsidiaries to be repaid on the Closing Date), (iii) the consummation of the Equity Financing and (iv) the payment of estimated fees, expenses and financing costs in connection with the foregoing. The Pro Forma Balance Sheet has been prepared based on the good faith assumptions of the Guarantor as of the date of delivery 59 thereof, and based on such assumptions presents fairly in all material respects on a pro forma basis the estimated financial position of Guarantor and its consolidated Subsidiaries as at December 31, 1999, assuming that the events specified in the preceding sentence had actually occurred at such date. (b) The audited consolidated balance sheets of the Guarantor and its Subsidiaries as at March 31, 1998 and March 31, 1999, and the related consolidated statements of income and of cash flows for the fiscal years ended on such dates, reported on by and accompanied by an unqualified report from PricewaterhouseCoopers, present fairly, in all material respects, the consolidated financial condition of the Guarantor and its Subsidiaries as at such date, and the consolidated results of its operations and its consolidated cash flows for the respective fiscal years then ended. The unaudited consolidated balance sheet of the Guarantor and its Subsidiaries as at December 31, 1999, and the related unaudited consolidated statements of income and cash flows for the nine-month period ended on such date, on the basis disclosed in the footnotes to such financial statements, present fairly, in all material respects, the consolidated financial condition of the Guarantor and its Subsidiaries as at such date, and the consolidated results of its operations and its consolidated cash flows for the nine-month period then ended (subject to the omission of certain footnotes and normal year-end audit and other adjustments). All such financial statements, including the related schedules and notes thereto, have been prepared in accordance with GAAP applied consistently throughout the periods involved (except as approved by a Responsible Officer, and disclosed in any such schedules and notes, and except that such unaudited financial statements do not contain certain footnotes). All material Guarantee Obligations, material contingent liabilities and liabilities for taxes, or all material long-term leases or unusual forward or long-term commitments, including, without limitation, any interest rate or foreign currency swap or exchange transaction or other obligation in respect of derivatives, which according to GAAP must be reflected in such financial statements or the notes thereto are so reflected. During the period from December 31, 1999 to and including the date hereof there has been no disposition by the Guarantor or any of its Subsidiaries of any business or property that would be material to the Guarantor and its Subsidiaries taken as a whole, other than any such disposition which is reflected in the foregoing financial statements or in the notes thereto, or which has otherwise been disclosed in writing to the Lenders on or prior to the Closing Date, or which is pursuant to the Transaction. 10.2 No Change. Since March 31, 1999, there has been no development or event relating to or affecting the Guarantor or its Subsidiaries which has had or would reasonably be expected to have a Material Adverse Effect (after giving effect to the Transaction and the transactions related thereto). 10.3 Corporate Existence; Compliance with Law. Each of the Primary Borrower and the Active Subsidiaries (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has the corporate or other organizational power and authority, and the legal right, to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently engaged, except to the extent that the failure to have such legal right would not be reasonably expected to have a Material Adverse Effect, (c) is duly qualified as a foreign entity and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification, other than in such jurisdictions where the failure to be so qualified and in good standing would not be reasonably expected to have a Material Adverse Effect and (d) is in compliance with all Requirements of Law except to the extent that the failure to comply therewith would not, in the aggregate, reasonably be expected to have a Material Adverse Effect. 10.4 Corporate Power; Authorization; Enforceable Obligations. (a) Each Borrower and each other Credit Party has the corporate or other organizational power and authority, and the legal right, to make, deliver and perform the Credit Documents to which it is a party and, in the case of the Borrowers, to borrow hereunder and has taken all necessary corporate or other organizational action to authorize the execution, delivery and performance of the Credit Documents to which it is a party and, in 60 the case of the Borrowers, the borrowings on the terms and conditions of this Agreement and any Notes or Applications. No consent or authorization of, filing with, notice to or other similar act by or in respect of, any Governmental Authority or any other Person is required to be obtained or made by or on behalf of any Credit Party or any other Subsidiary of the Guarantor in connection with the borrowings hereunder or with the execution, delivery, performance, validity or enforceability of the Credit Documents to which the Borrowers and each other Credit Party is a party, except for (i) consents, authorizations, notices and filings described in Schedule 10.4(a), all of which have been obtained or made or have the status described therein, (ii) filings to perfect the Liens created by the Security Documents, (iii) filings pursuant to the Assignment of Claims Act of 1940, as amended (31 U.S.C. (S) 3737 et seq.), in respect of Accounts of the Primary Borrower and its Subsidiaries the obligor in respect of which is the United States of America or any department, agency or instrumentality thereof and (iv) consents, authorizations, notices and filings which the failure to obtain or make would not reasonably be expected to have a Material Adverse Effect. (b) This Agreement has been, and each of the other Credit Documents and any other agreement to be entered into by any Credit Party pursuant hereto will be, duly executed and delivered on behalf of such Credit Party that is party thereto. This Agreement constitutes, and each of the other Credit Documents and any other agreement to be entered into by any Credit Party pursuant hereto will constitute upon execution and delivery, the legal, valid and binding obligation of such Credit Party, enforceable against such Credit Party in accordance with its terms, except as may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, or similar laws relating to or affecting creditors' rights generally and by general equitable principles (regardless of whether enforcement is sought in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing. 10.5 No Legal Bar. The execution, delivery and performance of each Credit Document by each Credit Party party thereto, the incurrence of the Loans, the Domestic L/Cs and the German L/C by the applicable Borrower, and the use of the proceeds of the Loans or drawings under such letters of credit by the applicable Borrower, as the case may be, and the consummation on the Closing Date of the other transactions contemplated by the Credit Documents (a) will not violate any Requirement of Law or any Contractual Obligation applicable to or binding upon the Guarantor, any Subsidiary of the Guarantor or any of their respective properties or assets in any respect that would reasonably be expected to have a Material Adverse Effect and (b) will not result in the creation or imposition of any Lien on any of their properties or assets pursuant to any Requirement of Law applicable to it, as the case may be, or any of its Contractual Obligations, except for the Liens arising under the Security Documents or permitted under subsection 14.2. 10.6 No Material Litigation. Except as disclosed on Schedule 10.6, no litigation by, investigation by, or proceeding of or before any arbitrator or any Governmental Authority is pending or, to the knowledge of the Primary Borrower, threatened by or against the Guarantor or the Primary Borrower or any of its Subsidiaries, or against any of its or their respective properties or revenues (including after giving effect to the Transaction), which (a) is so pending or threatened at any time on or prior to the Closing Date and relates to any Credit Document, the Loans made hereunder, the use of proceeds thereof, or any drawings under a Domestic L/C and the other transactions contemplated hereby or (b) would reasonably be expected to have a Material Adverse Effect. 10.7 No Default. Neither the Primary Borrower nor any of its Subsidiaries is in default under or with respect to any of its Contractual Obligations in any respect which would reasonably be expected to have a Material Adverse Effect. No Default or Event of Default has occurred and is continuing. 10.8 Ownership of Property; Liens. Each of the Primary Borrower and its Subsidiaries has good record and marketable title in fee simple to, or a valid leasehold interest in, all its material real 61 property, and good title to, or a valid leasehold interest in, all its other material property, and none of such property is subject to any Lien, except for Liens permitted by subsection 14.2. 10.9 Intellectual Property. The Primary Borrower and each of its Subsidiaries owns, or is licensed to use (or otherwise has the legal right), all United States trademarks, tradenames, copyrights, technology, know-how and processes necessary for the conduct of its business substantially as currently conducted except for those the failure to own or license (or otherwise have the legal right to use) which would not reasonably be expected to have a Material Adverse Effect (the "Intellectual Property"). Except as set forth on Schedule 10.9 no claim has been asserted and is pending by any Person challenging or questioning the use of any such Intellectual Property or the validity or effectiveness of any such Intellectual Property, nor does the Primary Borrower know of any valid basis for any such claim and to the knowledge of the Primary Borrower, the use of such Intellectual Property by the Primary Borrower and its Subsidiaries does not infringe on the rights of any Person, except for such claims and infringements that, in the aggregate, would not reasonably be expected to have a Material Adverse Effect. 10.10 No Burdensome Restrictions. Except as previously disclosed to the Lenders in writing prior to the Closing Date, no Requirement of Law applicable to or Contractual Obligation of the Primary Borrower or any of its Subsidiaries would reasonably be expected to have a Material Adverse Effect. 10.11 Taxes. Each of the Guarantor, the Primary Borrower and its Subsidiaries has filed or caused to be filed all United States federal income tax returns and all other material tax returns which, to the knowledge of the Primary Borrower, are required to be filed and has paid all taxes shown to be due and payable on said returns or on any assessments made against it or any of its property and all other taxes, fees or other charges imposed on it or any of its property by any Governmental Authority (other than any (i) taxes, fees or other charges with respect to which the failure to pay, in the aggregate, would not have a Material Adverse Effect or (ii) taxes, fees or other charges the amount or validity of which are currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided on the books of the Guarantor, the Primary Borrower or its Subsidiaries, as the case may be); other than as disclosed on Schedule 10.11, no tax Lien has been filed, and, to the knowledge of the Primary Borrower, no claim is being asserted, with respect to any such tax, fee or other charge. 10.12 Federal Regulations. No part of the proceeds of any Loans will be used for "purchasing" or "carrying" any "margin stock" within the respective meanings of each of the quoted terms under Regulation U of the Board of Governors of the Federal Reserve System as now and from time to time hereafter in effect. If requested by any Lender or the Administrative Agent, the Primary Borrower will furnish to the Administrative Agent and each Lender a statement to the foregoing effect in conformity with the requirements of FR Form G-3 or FR Form U-1 referred to in said Regulation U. 10.13 ERISA. During the five year period prior to each date as of which this representation is made, or deemed made, with respect to any Plan (or, with respect to (vi) or (viii) below, as of the date such representation is made or deemed made), none of the following events or conditions, either individually or in the aggregate, has resulted or is reasonably likely to result in a liability to the Guarantor, the Primary Borrower or any of its Subsidiaries which would be reasonably expected to have a Material Adverse Effect: (i) a Reportable Event; (ii) an "accumulated funding deficiency" (within the meaning of Section 412 of the Code or Section 302 of ERISA); (iii) any material noncompliance with the applicable provisions of ERISA or the Code; (iv) a termination of a Single Employer Plan (other than a standard termination pursuant to Section 4041(b) of ERISA); (v) a Lien in favor of the PBGC or a Plan; (vi) Underfunding with respect to any Single Employer Plan; (vii) a complete or partial withdrawal from any Multiemployer Plan by the Guarantor, the Primary Borrower or any Commonly Controlled Entity; (viii) any liability of the Guarantor, the Primary Borrower or any Commonly Controlled Entity under 62 ERISA if the Guarantor, the Primary Borrower or any such Commonly Controlled Entity were to withdraw completely from all Multiemployer Plans as of the annual valuation date most closely preceding the date on which this representation is made or deemed made; (ix) the Reorganization or Insolvency of any Multiemployer Plan; and (x) an event or condition with respect to which the Guarantor, the Primary Borrower or any Commonly Controlled Entity has incurred or could incur any liability in respect of a Former Plan. 10.14 Investment Company Act; Other Regulations. No Borrower is an "investment company", or a company "controlled" by an "investment company" required to register as such under the Investment Company Act of 1940, as amended, within the meaning of such act. No Borrower is subject to regulation under any Federal or State statute or regulation (other than Regulation X of the Board of Governors of the Federal Reserve System) which limits its ability to incur Indebtedness. 10.15 Subsidiaries. On the Closing Date, the Subsidiaries of the Primary Borrower and their jurisdiction of incorporation shall be as set forth on Schedule 10.15. 10.16 Environmental Matters. Other than exceptions to any of the following that would not, individually or in the aggregate, reasonably be expected to result in the payment of a Material Environmental Amount: (a) the facilities and properties owned, leased or operated by the Primary Borrower or any of its Subsidiaries (the "Properties") do not contain any Materials of Environmental Concern in amounts or concentrations which (i) constitute a violation of, or (ii) would reasonably be expected to give rise to liability on the part of the Primary Borrower or any of its Subsidiaries under, any applicable Environmental Law. (b) the Properties and all operations at the Properties are in compliance, and have in the last five years been in compliance, in all material respects with all applicable Environmental Laws, and there is no contamination at, under or about the Properties or violation of any applicable Environmental Law with respect to the Properties or the business operated by the Primary Borrower or any of its Subsidiaries (the "Business") which would materially interfere with the continued operation of the Properties. (c) neither the Primary Borrower nor any of its Subsidiaries has received any written notice of violation, alleged violation, non- compliance, liability or potential liability regarding environmental matters or compliance with applicable Environmental Laws with regard to any of the Properties or the Business, nor does the Primary Borrower have knowledge or reason to believe that any such notice will be received or is being threatened. (d) Materials of Environmental Concern have not been transported or disposed of from the Properties, in violation of, or in a manner or to a location which would reasonably be expected to give rise to liability on the part of the Primary Borrower or any of its Subsidiaries under, any applicable Environmental Law, nor have any Materials of Environmental Concern been generated, treated, stored or disposed of at, on or under any of the Properties, in violation of, or in a manner that would reasonably be expected to give rise to liability on the part of the Primary Borrower or any of its Subsidiaries under, any applicable Environmental Law. (e) no judicial proceeding or governmental or administrative action is pending or, to the knowledge of the Primary Borrower, threatened, under any applicable Environmental Law to which the Primary Borrower or any Subsidiary is or will be named as a party with respect to the Properties or the Business, nor are there any consent decrees or other decrees, consent orders, administrative orders or other orders, or other administrative or judicial requirements 63 outstanding under any applicable Environmental Law with respect to the Properties or the Business. (f) there has been no release or threat of release of Materials of Environmental Concern at or from the Properties, or arising from or related to the operations of the Primary Borrower or any Subsidiary in connection with the Properties or otherwise in connection with the Business, in violation of or in amounts or in a manner that would reasonably be expected to give rise to liability on the part of the Primary Borrower or any of its Subsidiaries under applicable Environmental Laws. (g) Neither the Primary Borrower nor any of its Subsidiaries has assumed or retained, by contract or, to its knowledge, operation of law, any known or suspected liabilities of any kind, fixed or contingent, as a result of any violation or breach of applicable Environmental Law or with respect to any contamination by any Materials of Environmental Concern. 10.17 Collateral Documents. Upon execution and delivery thereof by the parties thereto, the Collateral Agreement will be effective to create (to the extent described therein) in favor of the Administrative Agent, for the ratable benefit of the Lenders, a legal, valid and enforceable security interest in the Collateral described therein, except as may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing. When the actions specified in Schedule 9 to the Collateral Agreement have been duly taken, the security interests granted pursuant thereto shall constitute (to the extent described therein) a perfected first lien on, and security interest in, all right, title and interest of each pledgor party thereto in the Collateral described therein with respect to such pledgor. 10.18 Accuracy and Completeness of Information. The factual statements contained in the financial statements referred to in subsection 10.1(a) and (b), the Credit Documents (including the schedules thereto, but excluding any statements by the Administrative Agent or any Lender) and any other certificates or documents furnished by or on behalf of the Primary Borrower or any of its Subsidiaries to the Administrative Agent or the Lenders from time to time in connection with this Agreement, taken as a whole, did not as of the Closing Date, to the best knowledge of the Primary Borrower, contain any material misstatement of fact or omit to state a material fact necessary in order to make the statements contained therein, in light of the circumstances in which the same were made, not materially misleading in their presentation of the Transaction or the other transactions contemplated hereby or by the other Transaction Documents or of the Primary Borrower and its Subsidiaries taken as a whole; all except as otherwise qualified herein or therein, and such knowledge qualification being given only with respect to factual statements made by Persons other than the Primary Borrower or any of its Subsidiaries. It is understood that no representation or warranty is made concerning any forecasts, estimates, pro forma information, projections and statements as to anticipated future performance or conditions, and the assumptions on which they were based, contained in any such financial statements, certificates or documents except that as of the date such forecasts, estimates, pro forma information, projections and statements were generated, (i) such forecasts, estimates, pro forma information, projections and statements were based on the good faith assumptions of the management of the Primary Borrower and (ii) such assumptions were believed by such management to be reasonable. Such forecasts, estimates, pro forma information and statements, and the assumptions on which they were based, may or may not prove to be correct. 10.19 Solvency. As of the Closing Date, immediately prior to and after giving effect to the Transaction and the incurrence of all Indebtedness and obligations being incurred in connection herewith and therewith and after giving effect to the guarantee of the Guarantor, guaranteeing the obligations of the Borrowers pursuant to the Collateral Agreement, each Credit Party will be, Solvent. 64 10.20 Senior Indebtedness. The monetary obligations of the Primary Borrower under this Agreement and the Notes constitute "Senior Indebtedness" under and as defined in the Senior Subordinated Note Indenture. The Guarantor's Guarantee pursuant to the Collateral Agreement constitutes "Parent Senior Indebtedness" under and as defined in the Senior Subordinated Note Indenture. SECTION 11. CONDITIONS PRECEDENT 11.1 Conditions to Initial Loans. The agreement of each Lender to make the initial Loans on the Closing Date and other extensions of credit requested to be made by it on the Closing Date is subject to the satisfaction or waiver immediately prior to or concurrently with the making of such Loan or other extension of credit, of the following conditions precedent: (a) Credit Documents. The Administrative Agent shall have received (i) this Agreement, executed and delivered by a duly authorized officer of the Primary Borrower and the German Borrower, (ii) the Collateral Agreement and (iii) each of the Foreign Pledge Agreements, if any, executed and delivered by a duly authorized officer of each Credit Party thereto. (b) Related Agreements. The Administrative Agent shall have received, with a copy for each Lender, complete and correct copies, certified as to authenticity by the Primary Borrower, of each of (i) the Merger Agreement, (ii) the Senior Subordinated Note Indenture and (iii) such other documents or instruments as may be reasonably requested by the Administrative Agent. (c) Corporate Proceedings of the Credit Parties. The Administrative Agent shall have received, with a photocopy for each Lender, a copy of the resolutions, in form and substance reasonably satisfactory to the Administrative Agent, of the Board of Directors or comparable body of each Credit Party authorizing (i) the execution, delivery and performance of each Credit Document to which such Credit Party is a party, (ii) in the case of any Borrower, the borrowings contemplated hereunder and (iii) the granting by such Credit Party of Liens pursuant to the Collateral Agreement, certified by the Secretary, an Assistant Secretary or other officer of such Credit Party as of the Closing Date, which certificate shall be in form and substance reasonably satisfactory to the Administrative Agent and shall state that the resolutions thereby certified have not been amended, modified, revoked or rescinded except as any later such resolution may modify any earlier such resolution. (d) Incumbency Certificates. The Administrative Agent shall have received, with a photocopy for each Lender, a Certificate of each Credit Party, dated the Closing Date, as to the incumbency and signature of the officers of such Credit Party executing any Credit Document reasonably satisfactory in form and substance to the Administrative Agent, executed by a Responsible Officer and the Secretary or any Assistant Secretary or other officer such Credit Party. (e) Corporate Documents. The Administrative Agent shall have received, with a photocopy for each Lender, complete and correct copies of the certificate of incorporation and by-laws (or analogous documents) of each Credit Party, certified as of the Closing Date as complete and correct copies thereof by the Secretary, an Assistant Secretary or other officer of such Credit Party. (f) Consents, Licenses and Approvals. The Administrative Agent shall have received, with a photocopy for each Lender, a certificate of a Responsible Officer of each of the Guarantor and the Primary Borrower stating that all consents, authorizations and filings referred to in 65 Schedule 10.4(a) are in full force and effect or have the status described therein, and the Administrative Agent shall have received evidence thereof reasonably satisfactory to it. (g) Legal Opinions. The Administrative Agent shall have received, with a photocopy counterpart for each Lender, the following executed legal opinions: (i) the legal opinion of Debevoise & Plimpton, special New York counsel to the Primary Borrower and the other Credit Parties, substantially in the form of Exhibit C-1; and (ii) the legal opinion of Mark V.B. Tremallo, Esq., internal counsel to the Primary Borrower, substantially in the form of Exhibit C-2. Each such legal opinion shall cover such other matters incident to the transactions contemplated by this Agreement as the Administrative Agent may reasonably require. (h) Pledged Stock; Stock Powers; Pledged Notes. The Administrative Agent shall have received the certificates representing the shares pledged pursuant to the Collateral Agreement and (to the extent that such shares are evidenced by certificates) each Foreign Pledge Agreement, if any, together with an undated stock power for each such certificate executed in blank by a duly authorized officer of the pledgor thereof. (i) Actions to Perfect Liens. The Administrative Agent shall have received evidence in form and substance reasonably satisfactory to it that all filings, recordings, registrations and other actions, including, without limitation, the filing of duly executed financing statements on form UCC-1, necessary or, in the reasonable opinion of the Administrative Agent, reasonably desirable to perfect the Liens created by the Security Documents shall have been completed or shall be ready to be completed promptly following the Closing Date. (j) Lien Searches. The Administrative Agent shall have received the results of a recent search by a Person satisfactory to the Administrative Agent, of the Uniform Commercial Code, judgement and tax lien filings which may have been filed with respect to personal property of the Guarantor, the Primary Borrower and their Domestic Subsidiaries (including Foreign Subsidiary Holdcos) which are Credit Parties, and the results of such search shall be reasonably satisfactory to the Administrative Agent. (k) Transaction Sources and Uses. The Lenders shall be reasonably satisfied with the terms and conditions of the Equity Financing, and the Administrative Agent shall have received a certificate of a Responsible Officer, dated the Closing Date, stating that, in connection with the Transactions, (i) the Guarantor has received at least $160,000,000 in cash equity capital pursuant to the Equity Financing, (ii) the aggregate amount payable to option holders as cash consideration for the Merger shall not exceed $10,000,000 and (iii) the total cost of the Transaction shall not have exceeded $928,000,000; such certificate also shall contain a good faith estimate (in reasonable detail) of the fees and expenses relating to the Transaction (which estimate shall not exceed $50,000,000 in the aggregate). (l) The Merger. The Administrative Agent and the Lenders shall be reasonably satisfied that (i)) all conditions precedent under the Merger Agreement to the consummation of the Merger (other than the payment of the Merger consideration) shall have been satisfied in all material respects (except for any modification or waiver of any such condition made with the consent of the Administrative Agent) and (ii) the Merger has been, or substantially simultaneously with the funding hereof, will be, consummated. 66 (m) Repayment of Material Indebtedness. The Administrative Agent shall have received evidence reasonably satisfactory to the Administrative Agent that (i) simultaneously with the making of the Loans on the Closing Date, all material Indebtedness of WWG and the Guarantor and their respective Subsidiaries (other than the Senior Subordinated Notes, the German Mortgage Debt, any intercompany Indebtedness and the Indebtedness described on Schedule 11.1(m)) shall be paid in full and (ii) arrangements reasonably satisfactory to the Administrative Agent have been made for the termination (or assignment) of Liens and security interests granted, or other credit support provided, in connection with such material Indebtedness. (n) No Consents. The Guarantor, the Primary Borrower and their Subsidiaries shall have obtained all consents and approvals of Governmental Authorities and third parties necessary in connection with the Transaction, the Loans and other extensions of credit hereunder and the continuing operations of the Primary Borrower and its Subsidiaries (after giving effect to the Transaction) except for such consents and approvals which the failure to obtain would not reasonably be expected to have a Material Adverse Effect; all such consents and approvals shall be in full force and effect and all applicable waiting periods under applicable law shall have expired without any governmental or judicial action being taken that has had or would be reasonably likely to have the effect of restraining, preventing or imposing materially burdensome condi tions on the Transaction and the related financing transactions contemplated hereby. (o) Corporate Structure. The Administrative Agent and the Lenders shall have received a corporate structure chart of the Guarantor and its Active Subsidiaries (after giving effect to the Transaction) and shall be reasonably satisfied with the corporate, capital and legal structure of the Guarantor and its Active Subsidiaries described therein. (p) Pro Forma Balance Sheet; Covenant Compliance. The Administrative Agent (i) shall have received a copy of the Pro Forma Balance Sheet and the related pro forma income statement, each of which shall be substantially similar to those provided to the Lenders prior to the date hereof and (ii) shall be reasonably satisfied that the foregoing pro forma financial statements demonstrate that the covenants set forth in Section 13 are satisfied as of the Closing Date on a pro forma basis after giving effect the Transaction. (q) Insurance. The Administrative Agent shall have received a schedule describing all material insurance policies maintained by the Guarantor and the Primary Borrower in accordance with the provisions of subsection 12.5, which schedule shall be in form and substance reasonably satisfactory to the Administrative Agent. (r) Fees. The Administrative Agent and the Lenders shall have received all fees, costs, and expenses due and payable on or prior to the Closing Date, including, without limitation, the fees referred to in subsection 9.2 and subsection 9.17. The making of the initial Loans by the Lenders hereunder shall conclusively be deemed to constitute an acknowledgment by the Administrative Agent and each Lender that each of the conditions precedent set forth in this subsection 11.1 shall have been satisfied in accordance with its respective terms or shall have been irrevocably waived by such Person. 11.2 Conditions to the German Term Loans and the German L/C. The agreement of each German Term Loan Lender to make the German Term Loans, the German L/C Issuing Bank to issue the German L/C and the German L/C Participants to participate in the German L/C is subject to the satisfaction or waiver immediately prior to or concurrently with the making of such Loan or other extensions of credit, of the following conditions precedent. 67 (a) Closing Date Conditions. The initial Loans shall have been made on the Closing Date. (b) German L/C. Concurrently with each borrowing under the German Term Loan Commitment, the German Term Loan Servicing Bank shall have received the original German L/C and the face amount of the German L/C at such time shall equal (euro)104,500,000. (c) Legal Opinion. The Administrative Agent shall have received, with a photocopy counterpart for each Lender, the executed legal opinion of Gleiss Lutz Hootz Hirsch, special German counsel to the Primary Borrower and the other Credit Parties, substantially in the form of Exhibit C-3 covering such matters incident to the transactions contemplated by this Agreement as the Administrative Agent may reasonably require. (d) Corporate Structure. The Administrative Agent shall be reasonably satisfied that (i) WWG and Wavetek GmbH are Wholly Owned Subsidiaries of the Primary Borrower, (ii) WWG owns, directly or indirectly, at least 99% of Holdings I GmbH and Holdings II GmbH, and (iii) the Primary Borrower owns, directly or indirectly, the remaining interest in Holdings I GmbH and Holdings II GmbH. The making of the German Term Loans and the issuance of the German L/C hereunder shall conclusively be deemed to constitute an acknowledgment by the Administrative Agent, the German Term Loan Servicing Bank, the German L/C Issuing Bank and the relevant Lenders that each of the conditions precedent set forth in this subsection 11.2 shall have been satisfied in accordance with its respective terms or shall have been irrevocably waived by such Person. (a) Conditions to Each Loan. The agreement of each Lender to make any Loan or other extension of credit requested to be made by it on any date (including, without limitation, any Loan or other extension of credit to be made on the Closing Date and the German Term Loans to be made and German L/C to be issued during the German Term Loan Availability Period) is subject to the satisfaction or waiver of the following conditions precedent: (a) Representations and Warranties. Each of the representations and warranties made by each Credit Party in or pursuant to the Credit Documents to which it is a party shall, except to the extent that they relate to a particular date, be true and correct in all material respects on and as of such date as if made on and as of such date. (b) No Default. No Default or Event of Default shall have occurred and be continuing on such date or after giving effect to the Loans and other extensions of credit requested to be made on such date. Each borrowing by any Borrower hereunder shall constitute a representation and warranty by such Borrower as of the date thereof that the conditions contained in this subsection have been satisfied. SECTION 12. AFFIRMATIVE COVENANTS The Primary Borrower hereby agrees that, from and after the Closing Date and so long as any Commitments remain in effect, and thereafter until payment in full of the Loans, all Reimbursement Obligations then due and owing, and any other amount then due and owing to any Lender or the Administrative Agent hereunder or under any Note, the Primary Borrower shall and (except in the case of delivery of financial information, reports and notices) shall cause each of its Subsidiaries to: 12.1 Financial Statements. Furnish to each Lender: 68 (a) as soon as available, but in any event within 90 days after the end of each fiscal year of the Guarantor, a copy of the consolidated balance sheet of the Guarantor and its consolidated Subsidiaries as at the end of such year and the related consolidated statements of income and retained earnings and of cash flows for such year, setting forth in each case in comparative form the figures for the previous year, reported on without a "going concern" or like qualification or exception, or qualification arising out of the scope of the audit, by PricewaterhouseCoopers or other independent certified public accountants of nationally recognized standing; and (b) as soon as available, but in any event not later than 45 days after the end of each of the first three quarterly periods of each fiscal year of the Guarantor, the unaudited consolidated balance sheet of the Guarantor and its consolidated Subsidiaries as at the end of such quarter and the related unaudited consolidated statements of income and retained earnings and of cash flows of the Guarantor and its consolidated Subsidiaries for such quarter and the portion of the fiscal year through the end of such quarter, setting forth in each case in comparative form the figures for the previous year, certified by a Responsible Officer as being fairly stated in all material respects (subject to normal year-end audit and other adjustments); all such financial statements shall be complete and correct in all material respects and shall be prepared in reasonable detail and in accordance with GAAP applied consistently throughout the periods reflected therein and with prior periods (except as approved by a Responsible Officer and disclosed therein, and except, in the case of any financial statements delivered pursuant to subsection 12.1(b), for the absence of certain notes). 12.2 Certificates; Other Information. Furnish to each Lender: (a) concurrently with the delivery of the financial statements referred to in subsection 12.1(a), a certificate of the independent certified public accountants reporting on such financial statements stating that in making the audit necessary therefor no knowledge was obtained of any Default or Event of Default, insofar as the same relates to any financial accounting matters covered by their audit, except as specified in such certificate; (b) concurrently with the delivery of the financial statements referred to in subsections 12.1(a) and (b), a certificate of a Responsible Officer stating that, to the best of such Responsible Officer's knowledge, during such period (i) no Subsidiary has been formed or acquired (or, if any such Subsidiary has been formed or acquired, the Primary Borrower has complied with the requirements of subsection 12.9 with respect thereto), (ii) neither the Primary Borrower nor any other Credit Party has changed its name, its principal place of business, its chief executive office or the location of any material item of tangible Collateral without complying with the requirements of this Agreement and the Security Documents with respect thereto and (iii) to the best of such Responsible Officer's knowledge, each of the Primary Borrower and the other Credit Parties has observed or performed all of its covenants and other agreements, and satisfied every condition, contained in this Agreement and the other Credit Documents to be observed, performed or satisfied by it (and including therein a reasonably detailed calculation of the covenants set forth in Section 13 and, in the case of the annual financial statements, of Excess Cash Flow as of the last day of such period), and that such Responsible Officer has obtained no knowledge of any Default or Event of Default except, in each case as specified in such certificate; (c) not later than 60 days after the beginning of each fiscal year of the Primary Borrower, a copy of the projections by the Primary Borrower of the operating budget and cash flow budget of the Primary Borrower and its Subsidiaries for such fiscal year, such projections to be accompanied by a certificate of a Responsible Officer to the effect that such Responsible Officer believes such projections have been prepared on the basis of reasonable assumptions; 69 (d) within five Business Days after the same are sent, copies of all financial statements and reports which the Guarantor sends to its public stockholders, and within five Business Days after the same are filed, copies of all financial statements and reports which the Guarantor or Primary Borrower may make to, or file with, the Securities and Exchange Commission or any successor or analogous Governmental Authority; and (e) promptly, such additional financial and other information as the Administrative Agent or any Lender (acting through the Administrative Agent) may from time to time reasonably request. 12.3 Payment of Obligations. Pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all its material obligations of whatever nature, except where the amount or validity thereof is currently being contested in good faith by appropriate proceedings and reserves in conformity with GAAP with respect thereto have been provided on the books of the Primary Borrower or its Subsidiaries, as the case may be. 12.4 Conduct of Business and Maintenance of Existence. Continue to engage in business of the same general type as now conducted by the Primary Borrower and its Subsidiaries taken as a whole and preserve, renew and keep in full force and effect its corporate existence and take all reasonable action to maintain all rights, privileges and franchises necessary or desirable in the normal conduct of the business of the Primary Borrower and its Subsidiaries taken as a whole except as otherwise permitted pursuant to subsection 14.4; provided that the Primary Borrower and its Subsidiaries shall not be required to maintain any such rights, privileges or franchises, if the failure to do so would not reasonably be expected to have a Material Adverse Effect; and comply with all Contractual Obligations and Requirements of Law except to the extent that failure to comply therewith would not, in the aggregate, be reasonably expected to have a Material Adverse Effect. 12.5 Maintenance of Property; Insurance. Keep all property useful and necessary in the business of the Primary Borrower and its Subsidiaries taken as a whole in good working order and condition; maintain with financially sound and reputable insurance companies insurance on all its property material to the business of the Primary Borrower and its Subsidiaries taken as a whole in at least such amounts and against at least such risks as are usually insured against in the same general area by companies engaged in the same or a similar business; and furnish to the Administrative Agent, upon written request, full information as to the insurance carried. 12.6 Inspection of Property; Books and Records; Discussions. Keep proper books of records and account in which full, complete and correct entries in conformity with all material Requirements of Law shall be made of all dealings and transactions in relation to its business and activities; and permit representatives of the Administrative Agent or any Lender (acting through the Administrative Agent), at any reasonable time, upon reasonable notice, and as often as may reasonably be desired, to visit and inspect any of its properties and examine and, to the extent reasonable, make abstracts from any of its books and records and to discuss the business, operations, properties and financial and other condition of the Primary Borrower and its Subsidiaries with officers and employees of the Primary Borrower and its Subsidiaries and with its independent certified public accountants, in each case (i) at the expense of the Primary Borrower (A) with respect to any such actions by a Lender during the continuance of a Default or an Event of Default or as otherwise required by subsection 17.5 or (B) with respect to any such actions by the Administrative Agent and (ii) at the expense of the relevant Lender in any other case. 12.7 Notices. Promptly give notice to the Administrative Agent and each Lender of: 70 (a) as soon as possible after a Responsible Officer of the Primary Borrower knows or reasonably should know thereof, the occurrence of any Default or Event of Default; (b) as soon as possible after a Responsible Officer of the Primary Borrower knows or reasonably should know thereof, any (i) default or event of default under any Contractual Obligation of the Primary Borrower or any of its Subsidiaries other than as previously disclosed to the Lenders, or (ii) litigation, investigation or proceeding which may exist at any time between the Guarantor, the Primary Borrower or any of its Subsidiaries and any Governmental Authority, which in either case, if not cured or if adversely determined, as the case may be, would reasonably be expected to have a Material Adverse Effect; (c) as soon as possible after a Responsible Officer of the Primary Borrower knows or reasonably should know thereof, any litigation or proceeding which has a reasonable possibility of an adverse determination which would result in a judgment against the Guarantor, the Primary Borrower or any of its Subsidiaries of $5,000,000 or more and which is not covered by insurance, or in which injunctive or similar relief is sought that would reasonably be expected to have a Material Adverse Effect; (d) the following events, as soon as possible and in any event within 30 days after a Responsible Officer of the Primary Borrower knows or reasonably should know thereof: (i) the occurrence or expected occurrence of any Reportable Event with respect to any Single Employer Plan (other than a Reportable Event described in Section 4043(c)(9) of ERISA), a failure to make any required contribution to a Single Employer Plan or Multiemployer Plan, the creation of any Lien on the property of the Guarantor, the Primary Borrower or any of its Subsidiaries in favor of the PBGC or a Plan or any withdrawal from, or the termination, Reorganization or Insolvency of, any Multiemployer Plan, if, as a result thereof, the Guarantor, the Primary Borrower, or any of its Subsidiaries could reasonably be expected to incur any material liability; (ii) the existence of an Underfunding under a Single Employer Plan that exceeds 10% of the value of the assets of such Single Employer Plan, determined as of the most recent annual valuation date of such Single Employer Plan on the basis of the actuarial assumptions used to determine the funding requirements of such Single Employer Plan as of such date; (iii) the institution of proceedings or the taking of any other formal action by the PBGC or the Guarantor, the Primary Borrower or any Commonly Controlled Entity or any Multiemployer Plan with respect to the withdrawal from, or the termination, Reorganization or Insolvency of, any Single Employer Plan or Multiemployer Plan if, as a result thereof, the Guarantor, the Primary Borrower or any of its Subsidiaries could reasonably be expected to incur any material liability; or (iv) the occurrence or expected occurrence of any event or condition under which the Guarantor, the Primary Borrower or any Commonly Controlled Entity has incurred or could incur any liability in respect of a Former Plan; (e) As soon as possible after a Responsible Officer of the Primary Borrower knows, and except as would not, individually or in the aggregate, reasonably be expected to result in the payment of a Material Environmental Amount, that (i) any Governmental Authority has identified the Primary Borrower or any of its Subsidiaries as a potentially responsible party under the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") or any similar Environmental Law for the cleanup of Materials of Environmental Concern at any location, whether or not owned, leased or operated by the Primary Borrower or any of its Subsidiaries; (ii) any Governmental Authority may revoke any permit pursuant to Environmental Law held by the Primary Borrower or any of its Subsidiaries, or deny or refuse to renew any such permit sought by the Primary Borrower or any of its Subsidiaries; or (iii) any property owned, leased, or operated by the Primary Borrower or any of its Subsidiaries is being listed on, or proposed for listing on, the National Priorities List ("NPL") or the Comprehensive Environmental Response, Compensation and Liability Information System ("CERCLIS") 71 maintained by the U.S. Environmental Protection Agency or any similar list maintained by any Governmental Authority; and (f) as soon as possible after a Responsible Officer of the Primary Borrower knows or reasonably should know thereof, any development or event which has had or would reasonably be expected to have a material adverse change in the business, operations, property or condition (financial or otherwise) of the Primary Borrower and its Subsidiaries, taken as a whole. Each notice pursuant to this subsection shall be accompanied by a statement of a Responsible Officer setting forth details of the occurrence referred to therein and stating what action the Primary Borrower proposes to take with respect thereto. 12.8 Environmental Laws. (i) Comply substantially with all Environmental Laws applicable to it, and obtain, comply substantially with and maintain any and all licenses, approvals, notifications, registrations or permits required by applicable Environmental Laws (collectively, "Environmental Permits"); and (ii) take all reasonable efforts to ensure that all of its tenants, subtenants, contractors, subcontractors and invitees comply substantially with all Environmental Laws, and obtain, comply substantially with and maintain any and all Environmental Permits applicable to any of them insofar as any failure to so comply, obtain or maintain reasonably would be expected to adversely affect the Primary Borrower or any of its Subsidiaries. For purposes of this subsection 12.8, noncompliance shall be deemed not to constitute a breach of this covenant, provided that, upon learning of any actual or suspected noncompliance, the Primary Borrower shall in a timely manner undertake all reasonable efforts to achieve substantial compliance, and provided, further that, in any case, such noncompliance, and any other such noncompliance with any Environmental Law or Environmental Permit, individually or in the aggregate, would not reasonably be expected to give rise to the payment of a Material Environmental Amount. 12.9 Additional Collateral. (a) With respect to any owned real property or fixtures located on owned real property, in each case with a purchase price or a fair market value of at least $1,000,000, in which the Primary Borrower or any of its Subsidiaries acquires ownership rights at any time after the Closing Date, promptly grant to the Administrative Agent, for the benefit of the Lenders, a Lien of record on all such owned real property and fixtures, upon terms reasonably satisfactory in form and substance to the Administrative Agent and in accordance with any applicable requirements of any Governmental Authority (including, without limitation, any appraisals of such property under the Financial Institutions Reform, Recovery and Enforcement Act of 1989 which the Administrative Agent reasonably deems to be required by law); provided that (i) nothing in this subsection 12.9(a) shall defer or impair the attachment or perfection of any security interest in any Collateral covered by any of the Security Documents which would attach or be perfected pursuant to the terms thereof without action by the Primary Borrower, any of its Subsidiaries or any other Person and (ii) no such Lien shall be required to be granted as contemplated by this subsection 12.9(a) on any owned real property or fixtures the acquisition of which is financed, or is to be financed within any time period permitted by subsection 14.1, until such Indebtedness is repaid in full (and not refinanced as permitted by subsection 14.1) or, as the case may be, the Primary Borrower determines not to proceed with such financing or refinancing. In connection with any such grant to the Administrative Agent, for the benefit of the Lenders, of a Lien of record on any such real property in accordance with this subsection, the Primary Borrower or such Subsidiary shall deliver or cause to be delivered to the Administrative Agent any surveys, title insurance policies, environmental reports and other documents in connection with such grant of such Lien obtained by it in connection with the acquisition of such ownership rights in such real property or as the Administrative Agent shall reasonably request (in light of the value of such real property and the cost and availability of such surveys, title insurance policies, environmental reports and other documents and whether the delivery of such surveys, title insurance policies, environmental reports and other documents would be customary in connection with such grant of such Lien in similar circumstances). 72 (b) With respect to any Person that, subsequent to the Closing Date, becomes a Domestic Subsidiary or Foreign Subsidiary Holdco (other than to the extent that compliance with this subsection 12.9(b) would have an adverse tax consequence to the Primary Borrower), promptly upon the request of the Administrative Agent: (i) execute and deliver to the Administrative Agent, for the benefit of the Lenders, a new pledge agreement or such amendments to the Collateral Agreement as the Administrative Agent shall reasonably deem necessary or reasonably advisable to grant to the Administrative Agent, for the benefit of the Lenders, a Lien on the Capital Stock of such Subsidiary which is owned by the Primary Borrower or any of its Domestic Subsidiaries (provided that in no event shall more than 65% of the Capital Stock of any Foreign Subsidiary Holdco be required to be so pledged), (ii) deliver to the Administrative Agent the certificates (if any) representing such Capital Stock, together with undated stock powers executed and delivered in blank by a duly authorized officer of the Primary Borrower or such Subsidiary, as the case may be, and (iii) cause any such new Domestic Subsidiary (A) to become a party to the Collateral Agreement, in each case pursuant to documentation which is in form and substance reasonably satisfactory to the Administrative Agent, and (B) to take all actions reasonably deemed by the Administrative Agent to be necessary or reasonably advisable to cause the Lien created by the Collateral Agreement to be duly perfected in accordance with all applicable Requirements of Law, including, without limitation, the filing of financing statements in such jurisdictions as may be reasonably requested by the Administrative Agent. (c) With respect to any Person that, subsequent to the Closing Date, becomes a Foreign Subsidiary (other than a Foreign Subsidiary Holdco) and which has Capital Stock which is owned directly by the Primary Borrower or a Domestic Subsidiary (other than WWG) and with respect to any Foreign Subsidiary of WWG that, subsequent to the Closing Date, becomes a direct Subsidiary of the Primary Borrower or of a Domestic Subsidiary (other than WWG), promptly upon the request of the Administrative Agent: (i) execute and deliver to the Administrative Agent a new Foreign Pledge Agreement or such amendments to the relevant Foreign Pledge Agreement or the Collateral Agreement as the Administrative Agent shall reasonably deem necessary or reasonably advisable to grant to the Administrative Agent, for the benefit of the Lenders, a Lien on the Capital Stock of such Subsidiary which is owned directly by the Primary Borrower or any of its Domestic Subsidiaries (other than WWG) (provided that in no event shall more than 65% of the Capital Stock of any such Subsidiary be required to be so pledged) and (ii) to the extent reasonably deemed advisable by the Administrative Agent, deliver to the Administrative Agent any certificates (if any) representing such Capital Stock, together with undated stock powers executed and delivered in blank by a duly authorized officer of the Primary Borrower or such Domestic Subsidiary, as the case may be. (d) Notwithstanding anything to the contrary contained herein, no Subsidiary of the Primary Borrower shall be required to comply with the provisions of this subsection 12.9 until such date as either (i) the consolidated gross revenues of such Subsidiary and its Subsidiaries for the most recently completed period of four consecutive fiscal quarters or (ii) the consolidated assets of such Subsidiary and its Subsidiaries, exceed $10,000,000 (it being understood that any Subsidiary which achieves such assets or revenues after the date hereof shall be deemed, for purposes of this subsection 12.9 only, to have been newly acquired by the Primary Borrower on the date upon which such assets or revenues, as the case may be, are achieved). SECTION 13. FINANCIAL COVENANTS The Primary Borrower hereby agrees that, from and after the Closing Date and so long as the Revolving Credit Commitments remain in effect, and thereafter until payment in full of the Loans, all Reimbursement Obligations then due and owing, and any other amount then due and owing hereunder or under any Note to any Lender, the Primary Borrower shall not: 73 13.1 Minimum Interest Coverage Ratio. Permit, for any period of four consecutive fiscal quarters ending with any fiscal quarter set forth below set forth below, the Interest Coverage Ratio at the last day of such four-quarter period to be less than the ratio set forth opposite such period below: Fiscal Quarter Ratio -------------- ------ September 30, 2000 1.65 to 1.0 December 31, 2000 1.65 to 1.0 March 31, 2001 1.65 to 1.0 June 30, 2001 1.65 to 1.0 September 30, 2001 1.65 to 1.0 December 31, 2001 1.80 to 1.0 March 31, 2002 1.95 to 1.0 June 30, 2002 1.95 to 1.0 September 30, 2002 1.95 to 1.0 December 31, 2002 1.95 to 1.0 March 31, 2003 2.00 to 1.0 June 30, 2003 2.00 to 1.0 September 30, 2003 2.00 to 1.0 December 31, 2003 2.00 to1.0 March 31, 2004 2.00 to 1.0 June 30, 2004 2.00 to 1.0 September 30, 2004 2.00 to 1.0 December 31, 2004 2.00 to1.0 March 31, 2005 2.00 to 1.0 June 30, 2005 2.00 to 1.0 September 30, 2005 2.00 to 1.0 December 31, 2005 2.00 to1.0 March 31, 2006 2.00 to 1.0 June 30, 2006 2.00 to 1.0 September 30, 2006 2.00 to 1.0 December 31, 2006 2.00 to 1.0 March 31, 2007 2.00 to 1.0 June 30, 2007 2.00 to 1.0 September 30, 2007 2.00 to 1.0 13.2 Maximum Leverage Ratio. Permit the Leverage Ratio at the last day of any fiscal quarter ending during a period set forth below to be greater than the ratio set forth opposite such period below: Fiscal Quarter Ratio ------------------- ----- September 30, 2000 6.25 to 1.0 December 31, 2000 6.25 to 1.0 March 31, 2001 6.25 to 1.0 June 30, 2001 6.25 to 1.0 September 30, 2001 6.25 to 1.0 December 31, 2001 5.95 to 1.0 March 31, 2002 5.25 to 1.0 June 30, 2002 5.25 to 1.0 September 30, 2002 5.25 to 1.0 December 31, 2002 5.00 to 1.0 74 Fiscal Quarter Ratio ------------------- ----- March 31, 2003 4.50 to 1.0 June 30, 2003 4.50 to 1.0 September 30, 2003 4.50 to 1.0 December 31, 2003 4.50 to1.0 March 31, 2004 4.50 to 1.0 June 30, 2004 4.50 to 1.0 September 30, 2004 4.50 to 1.0 December 31, 2004 4.50 to1.0 March 31, 2005 4.50 to 1.0 June 30, 2005 4.50 to 1.0 September 30, 2005 4.50 to 1.0 December 31, 2005 4.50 to1.0 March 31, 2006 4.50 to 1.0 June 30, 2006 4.50 to 1.0 September 30, 2006 4.50 to 1.0 December 31, 2006 4.50 to 1.0 March 31, 2007 4.50 to 1.0 June 30, 2007 4.50 to 1.0 September 30, 2007 4.50 to 1.0 SECTION 14. NEGATIVE COVENANTS The Primary Borrower hereby agrees that, from and after the Closing Date and so long as the Commitments remain in effect, and thereafter until payment in full of the Loans, all Reimbursement Obligations then due and owing, and any other amount then due and owing hereunder or under any Note to any Lender and the Primary Borrower shall not, and shall not permit any of their respective Subsidiaries to, directly or indirectly: 14.1 Limitation on Indebtedness. Create, incur, assume or suffer to exist any Indebtedness (including, in any event, any preferred stock which is mandatorily redeemable prior to the scheduled maturity of the Loans, other than any such stock held by Management Investors), except: (a) Indebtedness of the Primary Borrower and its Subsidiaries under this Agreement and the other Credit Documents; (b) Indebtedness of the Primary Borrower to any Subsidiary and of any Subsidiary to the Primary Borrower or any other Subsidiary; (c) Indebtedness of the Primary Borrower and its Subsidiaries incurred to finance or refinance the acquisition of fixed or capital assets (whether pursuant to a loan, a Financing Lease or otherwise) and any other Financing Leases in an aggregate principal amount not exceeding as to the Primary Borrower and its Subsidiaries $25,000,000 at any time outstanding; (d) Indebtedness of a Person which becomes a Subsidiary after the date hereof, provided that (i) such indebtedness existed at the time such Person became a Subsidiary and was not created in anticipation thereof and (ii) immediately after giving effect to the acquisition of such Person by the Primary Borrower no Default or Event of Default shall have occurred and be continuing; (e) Indebtedness of the Primary Borrower on account of the Senior Subordinated Notes; 75 (f) additional Indebtedness of the Primary Borrower or any of its Subsidiaries which is subordinated to the obligations of the Credit Parties hereunder not exceeding $50,000,000 in aggregate principal amount at any one time outstanding; provided that (i) any such Indebtedness shall have terms and conditions which are not materially more burdensome to the Credit Parties than, and subordination provisions substantially similar to, the Senior Subordinated Notes and (ii) the aggregate principal amount of Indebtedness owing by Subsidiaries of the Primary Borrower that are not Subsidiary Guarantors in reliance upon the provisions of this clause (f) and subsection 14.1(p) shall not exceed $20,000,000 at any one time outstanding; (g) Indebtedness of the Primary Borrower or any of its Subsidiaries incurred to finance or refinance the purchase price of, or Indebtedness of the Primary Borrower and any of its Subsidiaries assumed in connection with, any Permitted Acquisition permitted by subsection 14.8(e), provided that (i) such Indebtedness is incurred substantially simultaneously with or within six months after such acquisition or in connection with a refinancing thereof, (ii) if such Indebtedness is owed to a Person, other than the Person from whom such acquisition is made or any Affiliate thereof, such Indebtedness shall have terms and conditions reasonably satisfactory to the Administrative Agent and shall not exceed 60% of the purchase price of such acquisition (including any Indebtedness assumed in connection with such acquisition but excluding any Indebtedness under this Agreement incurred to finance such acquisition) and (iii) immediately after giving effect to such acquisition no Default or Event of Default shall have occurred and be continuing; and any refinancing, refunding, renewal or extension of any such Indebtedness; provided, that, the amount of such Indebtedness is not increased at the time of such refinancing, refunding, renewal or extension except by an amount equal to the premium or other amounts paid, and fees and expenses incurred, in connection with such refinancing, refunding, renewal or extension; provided, further, the aggregate principal amount of Indebtedness which may be incurred in reliance on this subsection 14.2(g) shall not exceed $70,000,000 during the term of this Agreement; provided, further that such amount shall be increased by an amount equal to $10,000,000 on each anniversary of the Closing Date, commencing on the first anniversary of the Closing Date, so long as no Default or Event of Default shall have occurred and be continuing on any date on which such amount is to be so increased; (h) to the extent that any Guarantee Obligation permitted under subsection 14.3 constitutes Indebtedness, such Indebtedness; (i) Indebtedness of Foreign Subsidiaries of the Primary Borrower for working capital purposes (including in respect of overdrafts and letters of credit issued for the account of any Foreign Subsidiary) not exceeding, as to all such Foreign Subsidiaries, $35,000,000 in aggregate principal amount at any one time outstanding; (j) Indebtedness to finance the general working capital needs of the Primary Borrower and its Subsidiaries incurred after the Termination Date in an aggregate principal amount not to exceed the amount of the Revolving Credit Commitments as of the Closing Date, provided that (i) the Tranche A Loans shall have been repaid in full and the Revolving Credit Commitment shall have been or shall concurrently be terminated and the Revolving Credit Loans, the Swing Line Loans and the Reimbursement Obligations shall have been or shall concurrently be repaid in full and any outstanding Domestic L/C Obligations shall have been or shall concurrently be cash collateralized on terms reasonably satisfactory to the Administrative Agent and (ii) the terms and conditions of such replacement working capital facility shall be substantially similar to, or otherwise not less favorable to the Primary Borrower in any material respect than, the analogous provisions applicable to the Revolving Credit Commitments; (k) Indebtedness of the Primary Borrower or any of its Subsidiaries incurred to finance insurance premiums in the ordinary course of business; 76 (l) Indebtedness of any Foreign Subsidiary of the Primary Borrower fully supported on the date of the incurrence thereof by a Foreign Backstop Letter of Credit; (m) Indebtedness arising from the honoring of a check, draft or similar instrument against insufficient funds; provided that such Indebtedness is extinguished within two Business Days of its incurrence; (n) to the extent that any Indebtedness may be incurred or arise thereunder, Indebtedness of the Primary Borrower and any of its Subsidiaries under any Hedging Arrangements; (o) the German Mortgage Debt and any Indebtedness described in Schedule 11.1(m) and any refinancing thereof; and (p) additional Indebtedness not exceeding $40,000,000 in aggregate principal amount at any one time outstanding; provided that the aggregate principal amount of Indebtedness owing by Subsidiaries of the Primary Borrower that are not Subsidiary Guarantors in reliance upon the provisions of this clause (p) and subsection 14.1(f) shall not exceed $20,000,000 at any one time outstanding. For the purposes of determining compliance with subsection 14.1(i) and (p), the amount of any Indebtedness denominated in any currency other than Dollars shall be calculated based on customary currency exchange rates in effect, in the case of such Indebtedness incurred (in respect of term debt) or committed (in respect of revolving debt) on or prior to the Closing Date, on the Closing Date and, in the case of such Indebtedness incurred (in respect of term debt) or committed (in respect of revolving debt) after the Closing Date, on the date that such Indebtedness was incurred (in respect of term debt) or committed (in respect of revolving debt). 14.2 Limitation on Liens. Create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, except for: (a) Liens for taxes, assessments and similar charges not yet delinquent or the nonpayment of which in the aggregate would not reasonably be expected to have a Material Adverse Effect, or which are being contested in good faith by appropriate proceedings, provided that adequate reserves with respect thereto are maintained on the books of the Guarantor, the Primary Borrower or their Subsidiaries, as the case may be, in conformity with GAAP (or, in the case of Foreign Subsidiaries, generally accepted accounting principles in effect from time to time in their respective jurisdictions of incorporation); (b) carriers', warehousemen's, mechanics', materialmen's, repairmen's or other like Liens arising in the ordinary course of business which are not overdue for a period of more than 60 days or which are being contested in good faith by appropriate proceedings; (c) pledges, deposits or other Liens in connection with workers' compensation, unemployment insurance and other social security benefits or other insurance related obligations (including, without limitation, pledges or deposits or other Liens securing liability to insurance carriers under insurance or self-insurance arrangements); (d) Liens to secure the performance of bids, contracts (other than for borrowed money), obligations for utilities, leases, statutory obligations, surety and appeal bonds, performance bonds, judgment and like bonds, replevin and similar bonds, reimbursement obligations with respect to letters of credit issued for the account of any Foreign Subsidiary and otherwise 77 permitted hereunder, and other obligations of a like nature incurred in the ordinary course of business; (e) zoning restrictions, easements, rights-of-way, restrictions, other similar encumbrances incurred in the ordinary course of business and minor irregularities of title which do not materially interfere with the ordinary conduct of the business of the Primary Borrower and its Subsidiaries taken as a whole; (f) Liens securing or consisting of Indebtedness of the Primary Borrower and its Subsidiaries permitted by subsection 14.1(c) or 14.1(g), provided that (i) such Liens shall be created prior to or substantially simultaneously with or within six months of the acquisition thereby financed or the date of the incurrence or assumption of such Indebtedness and, (ii) such Liens do not at any time encumber any property other than the property financed by such Indebtedness and, in the case of Indebtedness assumed in connection with any acquisition, the property subject thereto immediately prior to such acquisition; (g) Liens on the property or assets of a Person which becomes a Subsidiary after the date hereof securing Indebtedness permitted by subsection 14.1(d), provided that (i) such Liens existed at the time such Person became a Subsidiary and were not created in anticipation thereof and (ii) any such Lien is not spread to cover any property or assets of such Person after the time such Person becomes a Subsidiary; (h) Liens (not otherwise permitted hereunder) which secure obligations not exceeding (as to the Primary Borrower and all Subsidiaries in the aggregate) $10,000,000 in aggregate amount at any time outstanding; (i) Liens created pursuant to the Security Documents; (j) Liens of landlords or of mortgages of landlords arising by operation of law or pursuant to the terms of real property leases, provided that the rental payments secured thereby are not yet due and payable; (k) Liens arising by reason of any judgment, decree or order of any court or other Governmental Authority, if appropriate legal proceedings which may have been duly initiated for the review of such judgment, decree or order, are being diligently prosecuted and shall not have been finally terminated or the period within which such proceedings may be initiated shall not have expired; (l) Liens existing on assets or properties at the time of the acquisition thereof by the Primary Borrower or any of its Subsidiaries which do not materially interfere with the use, occupancy, operation and maintenance of structures existing on the property subject thereto or extend to or cover any assets or properties of the Primary Borrower or such Subsidiary other than the assets or property being acquired; (m) Liens securing Guarantee Obligations permitted under subsection 14.3(j)(i) or (ii); (n) any encumbrance or restriction (including, without limitation, put and call agreements) with respect to the Capital Stock of any joint venture or similar arrangement pursuant to the joint venture or similar agreement with respect to such joint venture or similar arrangement, provided that no such encumbrance or restriction affects in any way the ability of the Primary Borrower or any of its Subsidiaries to comply with subsection 12.9; 78 (o) Liens on property subject to Sale and Leaseback Transactions permitted under subsection 14.10 and general intangibles related thereto; (p) Liens on property of any Foreign Subsidiary of the Primary Borrower securing Indebtedness of any Foreign Subsidiary of the Primary Borrower permitted by subsection 14.1(i) or (p); (q) Liens in respect of the German Mortgage Debt; and other Liens in existence on the date hereof and listed on Schedule 14.2(q); and (r) Liens on Intellectual Property and foreign patents, trademarks, trade names, service marks, copyrights, technology, know-how and processes to the extent such Liens arise from the granting of licenses to use such Intellectual Property and foreign patents, trademarks, trade names, service marks, copyrights, technology, know-how and processes to any Person in the ordinary course of business of the Primary Borrower and its Subsidiaries. 14.3 Limitation on Guarantee Obligations. Create, incur, assume or suffer to exist any Guarantee Obligation except: (a) Guarantee Obligations in existence on the date hereof and listed on Schedule 14.3 and any refinancings, refundings, extensions or renewals thereof, provided that the amount of such Guarantee Obligation shall not be increased at the time of such refinancing, refunding, extension or renewal, except by an amount equal to the premium or other amounts paid, and fees and expenses incurred, in connection with such refinancing, refunding, extension or renewal; (b) guarantees made in the ordinary course of its business by the Primary Borrower or any of its Subsidiaries of obligations of the Primary Borrower or any of its Subsidiaries, which obligations are otherwise permitted under this Agreement; (c) the Collateral Agreement or otherwise in respect of Indebtedness permitted by subsection 14.1(a); (d) Guarantee Obligations incurred after the date hereof in an aggregate amount not to exceed $5,000,000 at any one time outstanding; (e) Guarantee Obligations in connection with up to an aggregate principal amount of $20,000,000 of Indebtedness outstanding at any time incurred by any Management Investors in connection with any Management Subscription Agreements or other purchases by them of Capital Stock of the Guarantor or the Primary Borrower, and any refinancings, refundings, extensions or renewals thereof; provided that such amount shall be reduced by the aggregate then outstanding principal amount of loans and advances made in reliance upon the provisions of subsection 14.8(l); (f) Guarantee Obligations for performance, appeal, judgment, replevin and similar bonds, letters of credit and suretyship arrangements, all in the ordinary course of business; (g) Guarantee Obligations in respect of indemnification and contribution agreements expressly permitted by subsection 14.9(iii) or similar agreements by the Primary Borrower or any of its Subsidiaries; (h) Reimbursement Obligations in respect of the Domestic L/Cs and the German L/C; 79 (i) obligations to insurers required in connection with worker's compensation and other insurance coverage incurred in the ordinary course of business; (j) Guarantee Obligations in respect of third-party loans and advances to officers or employees of the Guarantor, the Primary Borrower or any of their Subsidiaries (i) for travel and entertainment expenses incurred in the ordinary course of business, (ii) for relocation expenses incurred in the ordinary course of business, or (iii) for other purposes, and in the case of this clause (iii), in an aggregate amount (as to the Primary Borrower and all its Subsidiaries), together with the aggregate amount of all Investments permitted under subsection 14.8(c)(ii), of up to $2,000,000 outstanding at any time; (k) (i) Guarantee Obligations of the Primary Borrower or any Domestic Subsidiary and (ii) Guarantee Obligations of any Foreign Subsidiary (other than Indebtedness for borrowed money or for reimbursement obligations in respect of drawn letters of credit), in the case of clauses (i) and (ii), incurred in connection with Permitted Acquisitions permitted under subsection 14.8(e), provided that if any such Guarantee Obligation inures to the benefit of any Person other than the Person from whom such acquisition is made or any Affiliate thereof, such Guarantee Obligation shall not exceed, with respect to any such acquisition, 60% of the purchase price of such acquisition (including any Indebtedness assumed in connection with any such acquisition) (or such greater percentage as shall be reasonably satisfactory to the Administrative Agent or, if any such purchase price shall be greater than $25,000,000, such greater percentage shall be reasonably satisfactory to the Majority Lenders); (l) Guarantee Obligations in connection with sales or other dispositions permitted under subsection 14.5, including indemnification obligations with respect to leases, and guarantees of collectability in respect of accounts receivable or notes receivable for up to face value; (m) (i) Guarantee Obligations represented by contracts entered into by the Primary Borrower or any of its Subsidiaries for the purchase of equipment, inventory and supplies required by the Primary Borrower or such Subsidiary in the ordinary course of business and (ii) accommodation guarantees for the benefit of trade creditors of the Primary Borrower or any of its Subsidiaries in the ordinary course of business; (n) Guarantee Obligations in respect of Indebtedness of a Person in connection with joint ventures or similar arrangements in respect of which no other co-investor or other Person has a greater legal or beneficial ownership interest than the Primary Borrower or any of its Subsidiaries, and as to all of such Persons does not at any time exceed $15,000,000 in aggregate principal amount; provided that (i) such amount shall be increased by an amount equal to $2,000,000 on each anniversary of the Closing Date, commencing on the second anniversary of the Closing Date, so long as no Default or Event of Default shall have occurred and be continuing on any date on which such amount is to be increased and (ii) such amount and any increase in such amount permitted by clause (i) shall be reduced by the aggregate amount of Investments permitted by subsection 14.8(j); (o) Guarantee Obligations of the Primary Borrower and its Subsidiaries under any Hedging Arrangements; and (p) Guarantee Obligations by Subsidiaries of the Primary Borrower in respect of the Senior Subordinated Notes as provided in the Senior Subordinated Note Indenture, which are subordinated as provided in the Senior Subordinated Note Indenture. 14.4 Limitation on Fundamental Changes. Enter into any merger, consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution), or 80 convey, sell, lease, assign, transfer or otherwise dispose of, all or substantially all of its property, business or assets, except: (a) any Subsidiary of the Primary Borrower may be merged or consolidated with or into the Primary Borrower (provided that the Primary Borrower shall be the continuing or surviving corporation) or with or into any one or more Wholly Owned Subsidiaries of the Primary Borrower (provided that the Wholly Owned Subsidiary or Subsidiaries shall be the continuing or surviving corporation); (b) any Subsidiary may liquidate or sell, lease, transfer or otherwise dispose of any or all of its assets (upon voluntary liquidation or otherwise) to the Primary Borrower or any other Wholly Owned Subsidiary of the Primary Borrower; (c) pursuant to the Transaction or the German Borrower Merger; or (d) as expressly permitted by subsection 14.5. 14.5 Limitation on Sale of Assets. Convey, sell, lease, assign, transfer or otherwise dispose of any of its property, business or assets (including, without limitation, receivables and leasehold interests), whether now owned or hereafter acquired, or, in the case of any Subsidiary, issue or sell any shares of such Subsidiary's Capital Stock to any Person other than the Primary Borrower or any Wholly Owned Subsidiary, except: (a) the sale or other disposition of inventory, or of surplus, obsolete or worn- out property or assets, whether now owned or hereafter acquired, in the ordinary course of business; (b) the sale or other disposition of any other property or assets in the ordinary course of business (it being understood that this shall not include the sale or other disposition of all or substantially all of any business unit); (c) the sale or other disposition of any property or assets (other than assets described in clauses (a) and (b) above), provided that the aggregate market value of all assets so sold or disposed of in any period of twelve consecutive months shall not exceed $20,000,000; (d) the sale or discount without recourse of accounts receivable or notes receivable arising in the ordinary course of business, or the conversion or exchange of accounts receivable into or for notes receivable in connection with the compromise or collection thereof, provided that, in the case of any Foreign Subsidiary of the Primary Borrower, any such sale or discount may be with recourse if such sale or discount is consistent with customary practice in such Foreign Subsidiary's country of business; (e) the sale or other disposition of any assets or property by the Primary Borrower or any of its Subsidiaries to the Primary Borrower or any Wholly Owned Subsidiary of the Primary Borrower; provided that, in the case of any such fixed capital asset that is subject to any Lien created and existing under the Security Documents and the fair value of which exceeds $5,000,000, such Lien may not be released upon such disposition unless such disposition is for fair value as evidenced by a certificate of a Responsible Officer of the Primary Borrower. (f) the sale of the Capital Stock or all or substantially all of the assets of the Subsidiaries of the Primary Borrower contemplated in the side letter of the Primary Borrower to the Administrative Agent delivered on the date hereof; provided that any such sale is consummated for fair value as determined at the time of consummation in good faith by the board of directors or comparable body of the Primary Borrower. 81 (g) as permitted by subsection 14.4(b) or (c); (h) pursuant to Sale and Leaseback Transactions permitted by subsection 14.10; (i) the abandonment, sale or other disposition of patents, trademarks or other intellectual property that are, in the reasonable judgment of the Primary Borrower, no longer economically practicable to maintain or useful in the conduct of the business of the Primary Borrower and its Subsidiaries taken as a whole; (j) any sale or other disposition of the property of the Primary Borrower or any of its Subsidiaries set forth on Schedule 14.5(j); (k) any sale or other disposition of the property of the Primary Borrower or any of its Subsidiaries, so long as the Net Proceeds of any such sale or other disposition do not exceed $50,000,000 in the aggregate after the Closing Date, provided that an amount equal to 100% of the Net Proceeds of such sale or other disposition less the Reinvested Amount is applied in accordance with subsection 9.5(d); and (l) any issuance, sale or other disposition of preferred stock (or equivalent equity interest) of any Subsidiary constituting Indebtedness created, incurred, assumed or existing in compliance with subsection 14.1. 14.6 Limitation on Restricted Payments. Declare or pay any dividend (other than dividends payable solely in common stock of the Primary Borrower or options, warrants or other rights to purchase common stock of the Primary Borrower) on, or make any payment on account of, or set apart assets for a sinking or other analogous fund for, the purchase, redemption, defeasance, retirement or other acquisition of, any shares of any class of Capital Stock of the Primary Borrower that is not Indebtedness or any warrants or options to purchase any such stock, whether now or hereafter outstanding, or make any other distribution (other than dividends payable solely in the common stock of the Primary Borrower or options, warrants or other rights to purchase common stock of the Primary Borrower) in respect thereof, either directly or indirectly, whether in cash or property or in obligations of the Primary Borrower or any Subsidiary (such declarations, payments, setting apart, purchases, redemptions, defeasances, retirements, acquisitions and distributions being herein called "Restricted Payments"), except that: (a) the Primary Borrower may pay cash dividends in an amount sufficient to allow the Guarantor to pay its obligations to CD&R under any agreement with CD&R for the rendering of management consulting or financial advisory services, provided that such amount shall not exceed in the aggregate $750,000 per year plus reasonable out-of-pocket expenses; (b) the Primary Borrower may pay cash dividends in an amount sufficient to allow the Guarantor to pay expenses incurred in the ordinary course of business in an aggregate amount not to exceed $1,000,000 in any fiscal year; (c) the Primary Borrower may pay cash dividends in an amount sufficient to cover reasonable and necessary expenses (including professional fees and expenses) incurred by the Guarantor in connection with (i) registration, public offerings and exchange listing of equity or debt securities and maintenance of the same, (ii) compliance with reporting obligations under federal or state laws or under this Agreement or any of the other Credit Documents and (iii) indemnification and reimbursement of directors, officers and employees in respect of liabilities relating to their serving in any such capacity; 82 (d) the Primary Borrower may pay cash dividends in amounts sufficient to pay tax liabilities of the Guarantor which are paid in cash by the Guarantor to any taxing authority; (e) the Primary Borrower may, and may pay cash dividends in an amount sufficient to allow the Guarantor to, repurchase shares of its common stock or rights, options or units in respect thereof, from Management Investors, including as contemplated by the Management Subscription Agreements which may be entered into between the Guarantor or the Primary Borrower and Management Investors, for an aggregate purchase price not to exceed $17,500,000 in any fiscal year and $40,000,000 during the term of this Agreement; provided that such amount shall be increased by an amount equal to the proceeds of any resales or new issuances of shares and options to any such Management Investors, at any time after the initial issuances to any Management Investors, together with the aggregate amount of deferred compensation owed by the Guarantor, the Primary Borrower or any of their Subsidiaries to any such Management Investor that shall thereafter have been canceled, waived or exchanged in connection with the grant to such Management Investor of the right to receive or acquire shares of the Guarantor's or the Primary Borrower's common stock; and (f) the Primary Borrower may enter into and consummate the Transaction and the transactions expressly contemplated by the Transaction Documents, and may pay cash dividends in an amount sufficient to allow the Guarantor (i) to pay all fees and expenses incurred in connection with the Transaction and the transactions expressly contemplated by the Transaction Documents, (ii) to allow the Guarantor to perform its obligations under or in connection with the Transaction Documents or the Existing Transaction Documents and (iii) permit the Guarantor to pay its Guarantee Obligations on account of the Senior Subordinated Notes and the Senior Subordinated Note Indenture, to the extent that the payment of such Guarantee Obligations does not violate the subordination provisions contained in the Senior Subordinated Notes or the Senior Subordinated Note Indenture. 14.7 Limitation on Capital Expenditures. Make or commit to make (by way of the acquisition of securities of a Person or otherwise) any expenditure (a "Capital Expenditure") in respect of the purchase or other acquisition of fixed or capital assets (excluding (i) any such asset acquired in connection with normal replacement and maintenance programs properly charged to current operations and (ii) any Permitted Acquisition permitted by subsection 14.8(e)) except for (x) Capital Expenditures described in the immediately preceding parenthetical and (y) additional Capital Expenditures, in the case of this clause (y) not exceeding, in the aggregate for the Primary Borrower and its Subsidiaries, during any fiscal year of the Primary Borrower the amount set forth below opposite such fiscal year: - - ---------------------------------------------------------------------- Fiscal Year Amount ------------- ------------ - - ---------------------------------------------------------------------- 2001 $ 58,900,000 - - ---------------------------------------------------------------------- 2002 $ 66,600,000 - - ---------------------------------------------------------------------- 2003 $ 62,500,000 - - ---------------------------------------------------------------------- 2004 $ 70,900,000 - - ---------------------------------------------------------------------- 2005 $ 80,600,000 - - ---------------------------------------------------------------------- 2006 $ 91,500,000 2007 and thereafter $103,800,000 ; provided that any portion of such amount which is not so expended in the fiscal year for which it is permitted above may be carried-over to increase the amount permitted for the next fiscal year of the 83 Primary Borrower and shall be deemed to be the first amounts expended in such next fiscal year; provided, further that none of the amounts set forth in the table above shall be increased by more than the 50% of such amount by virtue of any such carry-over. 14.8 Limitation on Investments, Loans and Advances. Make any advance, loan, extension of credit or capital contribution to, or purchase any stock, bonds, notes, debentures or other securities of or any assets constituting a business unit of, or make any other investment (each an "Investment") in, any Person, except: (a) extensions of trade credit in the ordinary course of business; (b) Investments in cash and Cash Equivalents; (c) loans and advances to officers, directors or employees of the Guarantor, the Primary Borrower or their Subsidiaries (i) for travel, entertainment and relocation expenses in the ordinary course of business, (ii) for other purposes in an aggregate amount for the Guarantor, the Primary Borrower and their Subsidiaries, together with the aggregate amount of all Guarantee Obligations permitted pursuant to subsection 14.3(j)(iii), not to exceed $2,000,000 at any one time outstanding, (iii) relating to indemnification or reimbursement of any officers, directors or employees in respect of liabilities relating to their serving in any such capacity or as otherwise specified in subsection 14.9 and (iv) existing on the Closing Date and described in Schedule 14.8(f); (d) Investments by the Primary Borrower in, and loans, advances and capital contributions by the Primary Borrower to, any Wholly Owned Subsidiary and investments by Subsidiaries in, and loans, advances and capital contributions by Subsidiaries to, the Primary Borrower and Wholly Owned Subsidiaries; (e) the acquisition of all or substantially all of the business or assets or the Capital Stock of any Person or any business unit thereof or all or substantially all of the Capital Stock of any Person (a "Permitted Acquisition"), provided that: (i) upon giving effect to such Permitted Acquisition on a pro forma basis, either (A) the Primary Borrower would be in Historical Pro Forma Compliance with respect to such Permitted Acquisition, or (B) the Primary Borrower would not be in Historical Pro Forma Compliance but would otherwise be in compliance on a pro forma basis with each of the financial covenants contained in Section 13 as if such Permitted Acquisition had been made on the first day of the Historical Period, and the aggregate cash purchase price paid by the Primary Borrower and its Subsidiaries for all Permitted Acquisitions made pursuant to this subclause (B) does not exceed an amount initially equal to $50,000,000, which amount shall be increased by $10,000,000 on each anniversary of the Closing Date, or (C) the Primary Borrower would be in compliance on a pro forma basis with each of the financial covenants contained in Section 13 as if such Permitted Acquisition had been made on the first day of the Historical Period, and such Permitted Acquisition is financed entirely through the issuance of equity (excluding any financing through the assumption of Indebtedness not for borrowed money in connection with the Acquisition); (ii) no Default or Event of Default has occurred and is continuing at the time of consummation of such Permitted Acquisition or will result therefrom; and 84 (iii) any such acquisition of Capital Stock of any Person may exclude any Capital Stock of such Person to the extent necessary in the good faith judgment of the Primary Borrower, to permit such acquisition to be accounted for as a recapitalization; (f) Investments existing on the Closing Date and described in Schedule 14.8(f), setting forth the respective amounts of such Investments as of a recent date; (g) Investments in notes receivable and other instruments and securities obtained in connection with transactions permitted by subsection 14.5(d); (h) Investments in the nature of pledges or deposits with respect to leases or utilities provided to third parties in the ordinary course of business or otherwise described in subsection 14.2(c), (d) or (j); (i) Investments representing non-cash consideration received by the Primary Borrower or any of its Subsidiaries in connection with any sale or other disposition of the property of the Primary Borrower or any of its Subsidiaries, provided that in the case of any sale or other disposition permitted under subsection 14.5(j), such non-cash consideration constitutes not more than 25% of the aggregate consideration received in connection with such sale or other disposition and any such non-cash consideration received by the Primary Borrower or any of its Domestic Subsidiaries is pledged to the Administrative Agent for the benefit of the Lenders pursuant to the Security Documents; (j) Investments by the Primary Borrower or any of its Subsidiaries in one or more Persons in connection with joint ventures or similar arrangements in respect of which no other co-investor or other Person has a greater legal or beneficial ownership interest than the Primary Borrower or such Subsidiary in an aggregate amount not to exceed $15,000,000 at any one time outstanding; (k) Investments representing evidences of Indebtedness, securities or other property received from another Person by the Primary Borrower or any of its Subsidiaries in connection with any bankruptcy proceeding or other reorganization of such other Person or as a result of foreclosure, perfection or enforcement of any Lien or exchange for evidences of Indebtedness, securities or other property of such other Person held by the Primary Borrower or any of its Subsidiaries; provided that any such securities or other property received by the Primary Borrower or any of its Domestic Subsidiaries is pledged to the Administrative Agent for the benefit of the Lenders pursuant to the Security Documents; (l) loans and advances to Management Investors in connection with the purchase by such Management Investors of Capital Stock of the Guarantor or the Primary Borrower of up to $20,000,000 outstanding at any one time; provided that such amount shall be reduced by the aggregate principal amount of Indebtedness in respect of Guarantee Obligations permitted by subsection 14.3(e); (m) Investments in the Capital Stock of the Guarantor which is held by the Guarantor as treasury stock and is restored to unissued status or is eliminated from authorized shares, or options in respect thereof; (n) Investments constituting Capital Expenditures, to the extent permitted by subsection 14.7; (o) Investments of the Primary Borrower and its Subsidiaries under any Hedging Arrangements; and 85 (p) Investments not otherwise permitted by the preceding clauses of subsection 14.8 in an aggregate amount not to exceed $30,000,000 at any one time outstanding. 14.9 Limitation on Transactions with Affiliates. Enter into any transaction, including, without limitation, any purchase, sale, lease or exchange of property or the rendering of any service, with any Affiliate of the Primary Borrower unless such transaction (a) is otherwise permitted under this Agreement and (b) either (i) is upon terms no less favorable to the Primary Borrower or such Subsidiary, as the case may be, than it would obtain in a comparable arm's length transaction with a Person which is not such an Affiliate or (ii) has been approved by a majority of the Disinterested Directors of the Guarantor, or in the event that at the time of any such transaction, there are no Disinterested Directors serving on the board of directors or comparable body of the Guarantor, such transaction shall be approved by a nationally recognized expert with expertise in appraising the terms and conditions of the type of transaction for which approval is required; provided that nothing contained in this subsection 14.9 shall be deemed to prohibit: (i) the Primary Borrower or any of its Subsidiaries from entering into or performing any consulting, management or employment agreements or other compensation arrangements with a director, officer or employee of the Primary Borrower or any of its Subsidiaries that provides for annual aggregate base compensation not in excess of $1,000,000 for each such director, officer or employee; (ii) the payment of transaction expenses in connection with this Agreement, the Transaction and the German Borrower Merger; (iii) the Primary Borrower or any of its Subsidiaries from entering into, making payments pursuant to and otherwise performing an indemnification and contribution agreement in favor of any of the persons listed on Schedule 1.1(b) and their Affiliates, any Management Investor, and each person who is or becomes a director, officer, agent or employee of the Guarantor or any of its Subsidiaries, in respect of liabilities (A) arising under the Securities Act, the Exchange Act and any other applicable securities laws or otherwise, in connection with any offering of securities by the Guarantor or any of its Subsidiaries, (B) incurred to third parties for any action or failure to act of the Guarantor or any of its Subsidiaries, predecessors or successors, (C) arising out of the performance by CD&R of management consulting or financial advisory services provided to the Guarantor or any of its Subsidiaries, (D) arising out of the fact that any indemnitee was or is a director, officer, agent or employee of the Guarantor or any of its Subsidiaries, or is or was serving at the request of any such corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or enterprise or (E) to the fullest extent permitted by Delaware or other applicable state law, arising out of any breach or alleged breach by such indemnitee of his or her fiduciary duty as a director or officer of the Guarantor or any of its Subsidiaries; (iv) the Guarantor or any of its Subsidiaries from performing any agreements or commitments with or to any Affiliate existing on the Closing Date and described on Schedule 14.9(iv); (v) payments pursuant to the Tax Allocation Agreement; or (vi) any transaction permitted under subsection 14.2(m), 14.3(e), 14.3(g), 14.3(j), 14.4, 14.6, 14.8(c) or 14.8(l), or any transaction with the Primary Borrower or a Wholly Owned Subsidiary of the Primary Borrower. 86 For purposes of this subsection 14.9, "Disinterested Director" shall mean, with respect to any Person and transaction, a member of the board of directors or comparable body of such Person who does not have any material direct or indirect financial interest in or with respect to such transaction (other than by virtue of such member's ownership of Capital Stock of the Guarantor). 14.10 Limitation on Sales and Leasebacks. Enter into any arrangement with any Person providing for the leasing by the Primary Borrower or any Subsidiary of real or personal property which has been or is to be sold or transferred by the Primary Borrower or such Subsidiary to such Person or to any other Person to whom funds have been or are to be advanced by such Person on the security of such property or rental obligations of the Primary Borrower or such Subsidiary (any of such arrangements, a "Sale and Leaseback Transaction") other than in connection with any sale or other disposition permitted under subsection 14.5 and except for Sale and Leaseback Transactions entered into by the Primary Borrower or any such Subsidiary with respect to real or personal property with an aggregate book value not to exceed $20,000,000 at any one time. 14.11 Limitation on Changes in Fiscal Year. Permit the fiscal year of the Primary Borrower to end on a day other than March 31. 14.12 Limitation on Optional Payments and Modifications of Debt Instruments and other Material Agreements. (a) Make any optional payment, prepayment, repurchase or redemption of the Senior Subordinated Notes or make any optional payments on account of or for a sinking or other analogous fund for the repurchase, redemption, defeasance or other acquisition thereof (other than mandatory payments of principal and interest and payments of, in each case, fees and expenses required by the Senior Subordinated Notes or the Senior Subordinated Note Indenture, only to the extent permitted under the subordination provisions, if any, applicable thereto); provided, however, that up to $50,000,000 of the Senior Subordinated Notes may be repurchased, redeemed or otherwise acquired provided that the Guarantor shall have received at least $190,000,000 in gross cash proceeds on or after the Closing Date from a share rights offering to its shareholders and/or from the sale of common stock of the Guarantor to one or more members of the CD&R Group, (b) make any amendment, supplement, modification or waiver of any of the terms of the Senior Subordinated Notes or the Senior Subordinated Note Indenture (i) which amends or modifies the subordination provisions contained in the Senior Subordinated Notes and the Senior Subordinated Note Indenture; (ii) which shortens the fixed maturity or increases the principal amount of, or increases the rate or shortens the time of payment of interest on, or increases the amount or shortens the time of payment of any principal or premium payable whether at maturity, at a date fixed for prepayment or by acceleration or otherwise of the Indebtedness evidenced by the Senior Subordinated Notes or increases the amount of, or accelerates the time of payment of, any fees or other amounts payable in connection therewith to any holder of the Senior Subordinated Notes; (iii) which relates to any material affirmative or negative covenants or any events of default or remedies thereunder and the effect of which is to subject the Primary Borrower, or any of its Subsidiaries, to any more onerous or more restrictive provisions; or (iv) which otherwise adversely affects the interests of the Lenders as senior creditors with respect to the Senior Subordinated Notes or the interests of the Lenders hereunder in any material respect or (c) in the event of the occurrence of a Change of Control, repurchase the Senior Subordinated Notes, unless the Primary Borrower shall have (i) made, or caused to have been made, payment in full of the Loans, all Reimbursement Obligations and any other amounts then due and owing to any Lender or the Administrative Agent hereunder and under any Note and cash collateralized the Domestic L/C Obligations on terms reasonably satisfactory to the Administrative Agent or (ii) made, or caused to have been made, an offer to pay the Loans, all Reimbursement Obligations and any amounts then due and owing to each Lender and the Administrative Agent hereunder and under any Note and to cash collateralize the Domestic L/C Obligations in respect of each Lender and shall have made, or caused to have been made, payment in full thereof to each such Lender or the Administrative Agent which has accepted such offer and cash collateralized the Domestic L/C Obligations in respect of each such Lender which has accepted such offer. 87 14.13 Limitation on Negative Pledge Clauses. Enter into any agreement which prohibits or limits the ability of the Primary Borrower or any of its Subsidiaries to create, incur, assume or suffer to exist any Lien upon any of its property or revenues, whether now owned or hereafter acquired, to secure the obligations hereunder or, in the case of any guarantor, its obligations under the Collateral Agreement, other than (a) this Agreement and the other Credit Documents and any related documents and (b) any industrial revenue or development bonds, agreements governing any purchase money Liens, acquisition agreements or Financing Leases or operating leases of real property entered into in the ordinary course of business otherwise permitted hereby (in which case, any prohibition or limitation shall only be effective against the assets financed, acquired or leased thereby). 14.14 Limitation on Lines of Business. Enter into any business, either directly or through any Subsidiary, except for those businesses of the same general type as those in which the Primary Borrower and its Subsidiaries are engaged on the Closing Date or which are related thereto. SECTION 15. EVENTS OF DEFAULT 15.1 Certain Bankruptcy Events. If any of the following events shall occur and be continuing: (a) the Guarantor, the Primary Borrower or any of its Material Subsidiaries (including, without limitation, prior to the German Term Loan Repayment Date, either German Borrower) shall commence any case, proceeding or other action (i) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (ii) seeking appointment of a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets, or the Guarantor or the Primary Borrower or any of its Material Subsidiaries shall make a general assignment for the benefit of its creditors; or (b) there shall be commenced against the Guarantor or the Primary Borrower or any of its Material Subsidiaries (including, without limitation, prior to the German Term Loan Repayment Date, either German Borrower) any case, proceeding or other action of a nature referred to in clause (a) above which (i) results in the entry of an order for relief or any such adjudication or appointment or (ii) remains undismissed, undischarged or unbonded for a period of 60 days; or (c) there shall be commenced against the Guarantor or the Primary Borrower or any of its Material Subsidiaries (including, without limitation, prior to the German Term Loan Repayment Date, either German Borrower) any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets which results in the entry of an order for any such relief which shall not have been vacated, discharged, or stayed or bonded pending appeal within 60 days from the entry thereof; or (d) the Guarantor or the Primary Borrower or any of its Material Subsidiaries (including, without limitation, prior to the German Term Loan Repayment Date, either German Borrower) shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (a), (b), or (c) above; or (e) the Guarantor or the Primary Borrower or any of its Material Subsidiaries (including, without limitation, prior to the German Term Loan Repayment Date, either German Borrower) 88 shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due; then, and in any such event: (A) if such event is an Event of Default specified in clause (a) or (b) of this subsection 15.1 with respect to any Borrower, automatically the Commitments shall immediately terminate and the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement (including, without limitation, all amounts of Domestic L/C Obligations, whether or not the beneficiaries of the then outstanding Domestic L/Cs shall have presented the documents required thereunder) shall immediately become due and payable; and (B) if such event is any other Event of Default specified in this subsection 15.1, any or all of the following actions may be taken: (i) with the consent of the Majority Lenders, the Administrative Agent may, or upon the request of the Majority Lenders, the Administrative Agent shall, by notice to the Primary Borrower declare the Commitments to be terminated forthwith, whereupon the Commitments shall immediately terminate; (ii) with the consent of the Majority Lenders, the Administrative Agent may, or upon the request of the Majority Lenders, the Administrative Agent shall, by notice to the Primary Borrower, declare the Loans hereunder (with accrued interest thereon) and all other amounts owing on account thereof under this Agreement (including, without limitation, all amounts of Domestic L/C Obligations, whether or not the beneficiaries of the then outstanding Domestic L/Cs shall have presented the documents required thereunder) to be due and payable forthwith, whereupon the same shall immediately become due and payable. 15.2 Other Events of Default. If any of the following events shall occur and be continuing: (a)(i) Any Borrower shall fail to pay any principal of any Loan (other than a German Term Loan) made to it or Reimbursement Obligation owing by it when due in accordance with the terms thereof or hereof (it being understood that any conversion of a Reimbursement Obligation into a borrowing pursuant to subsection 5.5(c) or subsection 7.5(c) shall not constitute a failure to make a payment in satisfaction of such Reimbursement Obligation) or any Borrower shall fail to pay any interest on any Loan (other than the German Term Loan) made to it or any other amount payable hereunder (including, without limitation, any amounts payable on any L/C Fee Payment Date), within five days after any such interest or other amount becomes due in accordance with the terms thereof or hereof; or (b) Any representation or warranty made or deemed made by the Primary Borrower or any other Credit Party herein or in any other Credit Document or which is contained in any certificate furnished by it at any time under or pursuant to this Agreement or any such other Credit Document shall prove to have been incorrect in any material respect on or as of the date made or deemed made; or (c) Any Borrower or any other Credit Party shall default in the observance or performance of any agreement contained in Section 13 or 14; or (d) Any Borrower or any other Credit Party shall default in the observance or performance of any other agreement contained in this Agreement or any other Credit Document (other than as provided in paragraphs (a) through (c) of this subsection 15.2), and such default shall continue unremedied for a period ending on the earlier of (i) the date 30 days after a Responsible Officer of the Primary Borrower shall have discovered or should have discovered 89 such default and (ii) the date 15 days after written notice has been given to the Primary Borrower by the Administrative Agent; or (e) Any Borrower or any of its Subsidiaries shall (i) default in any payment of principal of or interest of any Indebtedness (other than the Loans and the Reimbursement Obligations) or in the payment of any Guarantee Obligation, beyond the period of grace, if any, provided in the instrument or agreement under which such Indebtedness or Guarantee Obligation was created; or (ii) default in the observance or performance of any other agreement or condition relating to any such Indebtedness or Guarantee Obligation 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 beneficiary or beneficiaries of such Guarantee Obligation (or a trustee or Administrative Agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice or lapse of time if required, such Indebtedness to become due prior to its stated maturity or such Guarantee Obligation to become payable (an "Acceleration"), and such time shall have lapsed and, if any notice shall be required to commence a grace period or declare the occurrence of an event of default before notice of Acceleration may be delivered, such notice shall have been given; provided, however, that no Default or Event of Default shall exist under this paragraph unless the amount of any such Indebtedness or Guarantee Obligation in respect of which any default or other event or condition referred to in this paragraph shall have occurred shall be equal to at least $15,000,000; or (f) (i) Any Person shall engage in any "prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302 of ERISA), whether or not waived, shall exist with respect to any Plan or any Lien in favor of the PBGC or a Plan shall arise on the assets of the Primary Borrower or any Commonly Controlled Entity, (iii) a Reportable Event shall occur with respect to, or proceedings shall commence to have a trustee appointed, or a trustee shall be appointed, to administer or to terminate, any Single Employer Plan, which Reportable Event or commencement of proceedings or appointment of a trustee is reasonably likely to result in the termination of such Plan for purposes of Title IV of ERISA (other than a standard termination pursuant to Section 4041(b) of ERISA), (iv) any Single Employer Plan shall terminate for purposes of Title IV of ERISA, (v) the Primary Borrower or any Commonly Controlled Entity shall, or is reasonably likely to, incur any liability in connection with a withdrawal from, or the Insolvency or Reorganization of, a Multiemployer Plan, (vi) the occurrence or expected occurrence of any event or condition which results or is reasonably likely to result in the Primary Borrower's or any Commonly Controlled Entity's becoming responsible for any liability in respect of a Former Plan, or (vii) any other event or condition shall occur or exist with respect to a Plan; and in each case in clauses (i) through (vii) above, such event or condition, together with all other such events or conditions, if any, would be reasonably expected to result in liability which would have a Material Adverse Effect; or (g) One or more judgments or decrees shall be entered against the Primary Borrower or any of its Active Subsidiaries involving in the aggregate a liability (net of any insurance or indemnity payments actually received in respect thereof prior to or within 60 days from the entry thereof, or to be received in respect thereof, in the event any appeal thereof shall be unsuccessful) of $15,000,000 or more, and all such judgments or decrees shall not have been vacated, discharged, stayed or bonded pending appeal within 60 days from the entry thereof; or (h) (i) Any of the Security Documents (or any guarantee thereunder by any Credit Party of the monetary obligations of the Borrowers hereunder) shall cease, for any reason, to be in full force and effect other than pursuant to the terms hereof and thereof, or any Borrower or any other Credit Party which is a party to any of the Security Documents shall so assert in writing or 90 (ii) the Lien created by any of the Security Documents shall cease to be enforceable and of the same effect as to perfection and priority purported to be created thereby with respect to any significant portion of the Collateral (other than in connection with any termination of such Lien in respect of any Collateral as permitted hereby or by any Security Document), and such failure of such Lien to be perfected and enforceable with such priority shall have continued unremedied for a period of 20 days; or (i) The Senior Subordinated Notes, for any reason, shall not be or shall cease to be validly subordinated as provided therein and in the Senior Subordinated Note Indenture to the obligations of the Primary Borrower under this Agreement, any Notes and the other Credit Documents; or (j) a Change of Control shall have occurred or the Guarantor shall cease to own directly or indirectly 100% of the issued and outstanding common stock (or equivalent equity interests) of the Primary Borrower or (if prior to the German Term Loan Repayment Date) either German Borrower; then, and in any such event, either or both of the following actions may be taken: (i) with the consent of the Majority Lenders, the Administrative Agent may, or upon the request of the Majority Lenders, the Administrative Agent shall, by notice to the Borrowers declare the Commitments to be terminated forthwith, whereupon the Commitments shall immediately terminate; and (ii) with the consent of the Majority Lenders, the Administrative Agent may, or upon the request of the Majority Lenders, the Administrative Agent shall, by notice to the Borrowers, declare the Loans hereunder (with accrued interest thereon) and all other amounts owing on account thereof under this Agreement (including, without limitation, all amounts of Domestic L/C Obligations, whether or not the beneficiaries of the then outstanding Domestic L/Cs shall have presented the documents required thereunder) to be due and payable forthwith, whereupon the same shall immediately become due and payable. 15.3 Certain Provisions Applicable to Domestic L/Cs. With respect to all Domestic L/Cs with respect to which presentment for honor shall not have occurred at the time of an acceleration pursuant to subsection 15.1 or 15.2, the Primary Borrower shall at such time deposit in a cash collateral account opened by the Administrative Agent an amount equal to the aggregate then undrawn and unexpired amount of such Domestic L/Cs. The Primary Borrower hereby grants to the Administrative Agent, for the benefit of the Domestic L/C Issuing Bank and the Domestic L/C Participants, a security interest in such cash collateral to secure all obligations of the Primary Borrower under this Agreement and the other Credit Documents. Any amounts held in such cash collateral account shall be applied by the Administrative Agent to the payment of drafts drawn under such Domestic L/Cs, and the unused portion thereof after all such Domestic L/Cs shall have expired or been fully drawn upon, if any, shall be applied to repay other obligations of the Primary Borrower hereunder and under the Notes. After all such Domestic L/Cs shall have expired or been fully drawn upon, all Reimbursement Obligations shall have been satisfied and all other obligations of the Primary Borrower hereunder and under the Notes shall have been paid in full, the balance, if any, in such cash collateral account shall be returned to the Primary Borrower. The Primary Borrower shall execute and deliver to the Administrative Agent, for the account of the Domestic L/C Issuing Bank and the Domestic L/C Participants, such further documents and instruments as the Administrative Agent may reasonably request to evidence the creation and perfection of the within security interest in such cash collateral account. 15.4 Certain Waivers. Except as expressly provided above in this Section, presentment, demand, protest and all other notices of any kind are hereby expressly waived. 91 SECTION 16. THE ADMINISTRATIVE AGENT 16.1 Appointment. (a) Each Lender hereby irrevocably designates and appoints the Administrative Agent as the agent of such Lender under this Agreement and the other Credit Documents, and each such Lender irrevocably authorizes the Administrative Agent, in such capacity, to take such action on its behalf under the provisions of this Agreement and the other Credit Documents and to exercise such powers and perform such duties as are expressly delegated to the Administrative Agent by the terms of this Agreement and the other Credit Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, the Administrative Agent shall not have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Credit Document or otherwise exist against the Administrative Agent. (b) Each German Term Loan Lender hereby irrevocably designates and appoints the German Term Loan Servicing Bank as the agent of such Lender under this Agreement and the other Credit Documents, and each such Lender irrevocably authorizes the German Term Loan Servicing Bank, in such capacity, to take such action on its behalf under the provisions of this Agreement and the other Credit Documents and to exercise such powers and perform such duties as are expressly delegated to the German Term Loan Servicing Bank by the terms of this Agreement and the other Credit Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, the German Term Loan Servicing Bank shall not have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any German Term Loan Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Credit Document or otherwise exist against the German Term Loan Servicing Bank. (c) Each Lender hereby irrevocably designates and appoints Credit Suisse First Boston as the syndication agent and The Chase Manhattan Bank and Bankers Trust Company as co-documentation agents under this Agreement and the other Credit Documents. Notwithstanding any provision to the contrary elsewhere in this Agreement, neither the Syndication Agent nor the Co-Documentation Agents shall have any duties or responsibilities hereunder, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Credit Document or otherwise exist against the Syndication Agent or the Co-Documentation Agents. 16.2 Delegation of Duties. The Administrative Agent and the German Term Loan Servicing Bank may execute any of their respective duties under this Agreement and the other Credit Documents by or through their respective agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. Neither the Administrative Agent nor the German Term Loan Servicing Bank shall be responsible for the negligence or misconduct of any agent or attorneys in-fact selected by it with reasonable care. 16.3 Exculpatory Provisions. Neither the Administrative Agent nor the German Term Loan Servicing Bank nor any of their respective officers, directors, employees, agents, attorneys-in-fact or Affiliates shall be (i) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement or any other Credit Document (except for its or such Person's own gross negligence or willful misconduct) or (ii) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by any Credit Party or any officer thereof contained in this Agreement or any other Credit Document or in any certificate, report, statement or other document referred to or provided for in, or received by the Administrative Agent or 92 the German Term Loan Servicing Bank, as the case may be, under or in connection with, this Agreement or any other Credit Document or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Credit Document or for any failure of any Credit Party to perform its obligations hereunder or thereunder. Neither the Administrative Agent nor the German Term Loan Servicing Bank shall be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any Credit Document, or to inspect the properties, books or records of any Credit Party. 16.4 Reliance by Administrative Agent and German Term Loan Servicing Bank. The Administrative Agent and the German Term Loan Servicing Bank shall be entitled to rely, and shall be fully protected in relying, upon any Note, writing, resolution, notice, consent, certificate, affidavit, letter, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Credit Parties), independent accountants and other experts selected by the Administrative Agent or the German Term Loan Servicing Bank, as the case may be. The Administrative Agent and the German Term Loan Servicing Bank may deem and treat the payee of any Note as the owner thereof for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with the Administrative Agent or the German Term Loan Servicing Bank, as the case may be. The Administrative Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Credit Document unless it shall first receive such advice or concurrence of the Majority Lenders (or such larger number of Lenders as may be explicitly required hereunder) as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action, and the German Term Loan Servicing Bank shall be fully justified in failing or refusing to take any action under this Agreement or any other Credit Document unless it shall first receive such advice or concurrence of the Administrative Agent or the Majority Facility Lenders under the German Term Loan Facility as it deems appropriate. With respect to any action permitted to be taken by the German Term Loan Servicing Bank hereunder or under any other Credit Document, the German Term Loan Servicing Bank shall take such action if directed to do so by the Majority Facility Lenders under the German Term Loan Facility (or such larger number of German Term Loan Lenders as may be explicitly required hereunder). With respect to any action permitted to be taken by the Administrative Agent hereunder or under any other Credit Document, the Administrative Agent shall take such action if directed to do so by the Majority Lenders (or such larger number of Lenders as may be explicitly required hereunder). The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the other Credit Documents in accordance with a request of the Majority Lenders (or such larger number of Lenders as may be explicitly required hereunder), and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of the Loans. The German Term Loan Servicing Bank shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the other Credit Documents in accordance with a request of the Majority Facility Lenders under the German Term Loan Facility (or such larger number of Lenders as may be explicitly required hereunder), and such request and any action taken or failure to act pursuant thereto shall be binding upon all such Lenders and all future holders of the German Term Loans. 16.5 Notice of Default. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless the Administrative Agent has received notice from a Lender or the Primary Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default". In the event that the Administrative Agent receives such a notice, the Administrative Agent shall give notice thereof to the Lenders. The Administrative Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Majority Lenders; provided that unless and until the Administrative Agent shall have received such directions, the Administrative Agent 93 may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Lenders. 16.6 Acknowledgments and Representations by Lenders. Each Lender expressly acknowledges that neither the Administrative Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates has made any representations or warranties to it and that no act by the Administrative Agent hereinafter taken, including any review of the affairs of a Credit Party, shall be deemed to constitute any representation or warranty by the Administrative Agent to any Lender. Each Lender represents to each other party hereto that it has, independently and without reliance upon the Administrative Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Credit Parties and made its own decision to make its Loans hereunder and enter into this Agreement. Each Lender also represents to each other party hereto that it will, independently and without reliance upon the Administrative Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Credit Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Credit Parties. Each Lender represents to each other party hereto that it is a bank, savings and loan association or other similar savings institution, insurance company, investment fund or company or other financial institution that makes or acquires commercial loans in the ordinary course of its business, that it is participating hereunder as a Lender for such commercial purposes, and that it has the knowledge and experience to be and is capable of evaluating the merits and risks of being a Lender hereunder. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Administrative Agent or the German Term Loan Servicing Bank hereunder, neither the Administrative Agent nor the German Term Loan Servicing Bank shall have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of any Credit Party which may come into the possession of the Administrative Agent or the German Term Loan Servicing Bank or any of their respective officers, directors, employees, agents, attorneys-in-fact or Affiliates. 16.7 Indemnification. The Lenders agree to indemnify each of the Administrative Agent, the German Term Loan Servicing Bank, the Syndication Agent and each Co-Documentation Agent in its respective capacity as such (to the extent not reimbursed by a Borrower and without limiting the obligation of the Borrowers to do so), ratably according to their respective Commitment Percentages in effect on the date on which indemnification is sought, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (including, without limitation, at any time following the payment of the Loans) be imposed on, incurred by or asserted against the Administrative Agent, the German Term Loan Servicing Bank, the Syndication Agent and/or the Co-Documentation Agents in any way relating to or arising out of, the Commitments, this Agreement, any of the other Credit Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by the Administrative Agent, the German Term Loan Servicing Bank, the Syndication Agent and/or either Co-Documentation Agent under or in connection with any of the foregoing; provided that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the gross negligence or willful misconduct of the Administrative Agent, the German Term Loan Servicing Bank, the Syndication Agent or the Co-Documentation Agents (as the case may be). The agreements in this subsection shall survive the payment of the Loans and all other amounts payable hereunder. 16.8 Agents in their Individual Capacities. Each of the Administrative Agent, the German Term Loan Servicing Bank, the Syndication Agent and the Co- Documentation Agents and their 94 respective Affiliates may make loans to, accept deposits from and generally engage in any kind of business with any Borrower or any other Credit Party as though the Administrative Agent, the German Term Loan Servicing Bank, the Syndication Agent or the Co-Documentation Agents (as the case may be) were not the Administrative Agent, the German Term Loan Servicing Bank, Syndication Agent or Co-Documentation Agents hereunder and under the other Credit Documents. With respect to the Loans made by it, each of the Administrative Agent, the German Term Loan Servicing Bank, the Syndication Agent and the Co-Documentation Agents shall have the same rights and powers under this Agreement and the other Credit Documents as any Lender and may exercise the same as though it were not the Administrative Agent, the German Term Loan Servicing Bank, the Syndication Agent or the Co-Documentation Agents (as the case may be), and the terms "Lender" and "Lenders" shall include each of the Administrative Agent, the German Term Loan Servicing Bank, the Syndication Agent and the Co-Documentation Agents in its respective individual capacity. 16.9 Successor Agents. Each of the Administrative Agent, the German Term Loan Servicing Bank, the Syndication Agent and the Co-Documentation Agents may resign as Administrative Agent, the German Term Loan Servicing Bank, Syndication Agent or Co-Documentation Agents (as the case may be) upon 10 days' notice to the Lenders. (b) If the Administrative Agent shall resign as "Administrative Agent" under this Agreement and the other Credit Documents, then the Majority Lenders shall appoint from among the Lenders a successor Administrative Agent (which shall be a bank) for the Lenders, which successor Administrative Agent (provided that, to the extent that no Default or Event of Default is continuing at the time of such appointment, such Administrative Agent shall have been approved by the Primary Borrower), shall succeed to the rights, powers and duties of the Administrative Agent hereunder. Effective upon such appointment and approval, the term "Administrative Agent" shall mean such successor Administrative Agent, and the former Administrative Agent's rights, powers and duties as Administrative Agent shall be terminated, without any other or further act or deed on the part of such former Administrative Agent or any of the parties to this Agreement or any holders of the Loans. After any retiring Administrative Agent's resignation as Administrative Agent, the provisions of this Section 16 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement and the other Credit Documents. (c) Upon appointment of the successor Administrative Agent (the "Successor Administrative Agent"), the retiring Administrative Agent shall promptly (i) deliver to the Successor Administrative Agent, all Security Collateral (as defined in the Collateral Agreement) and any other collateral held by such retiring Administrative Agent pursuant to a Security Document, (ii) execute and file uniform commercial code financing statements prepared by the Primary Borrower and the Successor Administrative Agent, naming the Successor Administrative Agent as assignee, in each jurisdiction financing statements have been filed in connection with any Credit Document, (iii) take all such actions required or requested by the Primary Borrower to name the Successor Administrative Agent as mortgagee under the mortgages, if any, and (iv) take all such actions reasonably required or requested by the Primary Borrower to perfect the pledge or lien pursuant to the Security Documents in the name of the new Administrative Agent. The Primary Borrower shall pay or reimburse the retiring Administrative Agent for the reasonable out of pocket costs and expenses (including, without limitation, reasonable fees and disbursements of counsel to the retiring Administrative Agent) incurred by the retiring Administrative Agent in connection with actions pursuant to the foregoing sentence. (d) If the German Term Loan Servicing Bank shall resign as "German Term Loan Servicing Bank" under this Agreement and the other Credit Documents, then the Majority Facility Lenders under the German Term Loan Facility shall appoint from among the German Term Loan Lenders a successor German Term Loan Servicing Bank (which shall be a bank) for the German Term Loan Lenders, which successor German Term Loan 95 Servicing Bank (provided that, to the extent that no Default or Event of Default is continuing at the time of such appointment, such German Term Loan Servicing Bank shall have been approved by the Primary Borrower), shall succeed to the rights, powers and duties of the German Term Loan Servicing Bank hereunder. Effective upon such appointment and approval, the term "German Term Loan Servicing Bank" shall mean such successor German Term Loan Servicing Bank, and the former German Term Loan Servicing Bank's rights, powers and duties as German Term Loan Servicing Bank shall be terminated, without any other or further act or deed on the part of such former German Term Loan Servicing Bank or any of the parties to this Agreement or any holders of the Loans. After any retiring German Term Loan Servicing Bank's resignation as German Term Loan Servicing Bank, the provisions of this Section 16 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was German Term Loan Servicing Bank under this Agreement and the other Credit Documents. (e) If the Syndication Agent shall resign as "Syndication Agent" or either Co-Documentation Agent shall resign as a "Co-Documentation Agent" under this Agreement and the other Credit Documents, then no successor Syndication Agent or Co-Documentation Agent, as the case may be, shall be appointed. SECTION 17. MISCELLANEOUS 17.1 Amendments and Waivers. Neither this Agreement nor any other Credit Document, nor any terms hereof or thereof may be amended, supplemented or modified except in accordance with the provisions of this subsection 17.1. (b) Except as set forth in the succeeding paragraphs of this subsection 17.1, the Majority Lenders may, or, with the written consent of the Majority Lenders, the Administrative Agent may, from time to time, (i) enter into with the relevant Credit Parties written amendments, supplements or modifications hereto and to the other Credit Documents for the purpose of adding any provisions to this Agreement or the other Credit Documents or changing in any manner the rights of the Lenders or of the Credit Parties hereunder or thereunder or (ii) waive at any Credit Party's request on such terms and conditions as the Majority Lenders or the Administrative Agent, as the case may be, may specify in such instrument, any of the requirements of this Agreement or the other Credit Documents or any Default or Event of Default and its consequences (any such amendment, supplement, modification or waiver, a "Specified Change"); provided, that (w) without the written consent of the Domestic L/C Issuing Bank, no Specified Change shall amend, supplement or otherwise modify any provisions of or directly applicable to any Domestic L/C, (x) without the written consent of the Swing Line Lender, no Specified Change shall amend, modify or waive any provision of Section 8 or any other provision of this Agreement governing the rights or obligations of the Swing Line Lender, (y) without the written consent of the then Administrative Agent, no Specified Change shall amend, modify or waive any provision of Section 16 or, without the prior written consent of the then Administrative Agent, German Term Loan Servicing Bank or the then Syndication Agent (as applicable), no Specified Change shall amend, modify or waive any other provision of this Agreement governing the rights or obligations of the Administrative Agent, the German Term Loan Servicing Bank or the Syndication Agent and (z) without the written consent of all the Lenders (other than the German Term Loan Lender), no Specified Change shall reduce any percentage specified in the definition of "Majority Lenders". (c) Without the written consent of the Majority Facility Lenders under the German Term Loan Facility, the German L/C Issuing Bank and the Majority Facility Lenders under the German L/C Facility, no Specified Change shall (i) waive any of the conditions precedent to the funding of the German Term Loans and the issuance of, and participation in, the German L/C set forth in subsection 11.2 or (ii) amend, supplement or otherwise modify any provision of the German L/C or any provision of Article 5 to the extent directly relating to the German L/C. For the avoidance of doubt, notwithstanding any provision of this Agreement or any other Credit Document, no provision of the German L/C may be amended, supplemented or waived without the prior written consent of the Primary Borrower. 96 (d) Without the written consent of the Lenders having Commitment Percentages which aggregate more than 80% of the amount equal to the sum of the Aggregate Tranche A Commitment, the Aggregate Tranche B Commitment, the Dollar Equivalent Amount of the Aggregate German L/C Participation Commitment and the Aggregate Revolving Credit Commitment then in effect, no Specified Change shall take any action which has the effect of releasing all or substantially all of the Collateral or all or substantially all of the Subsidiary Guarantors from their Guarantee Obligations in respect hereof (except as permitted hereby or by any Security Document). (e) Without the written consent of each Lender directly affected thereby, no Specified Change shall reduce the amount or extend the scheduled date of maturity of any Loan or scheduled date of any installment thereof, or reduce the stated rate of any interest or fee payable hereunder or extend the scheduled date of any payment thereof, or increase the amount or extend the expiration date of any Lender's Commitments or amend, modify or waive any provision of this subsection 17.1. (f) Without the written consent of all the Lenders (other than the German Term Loan Lenders), no Specified Change shall consent to the assignment or transfer by the Primary Borrower of any of its rights and obligations under this Agreement and the other Credit Documents. (g) Without the written consent of all the German L/C Participants, all the German Term Loan Lenders and the German L/C Issuing Bank, no Specified Change shall consent to the assignment or transfer by the German Borrower (other than as provided herein in subsections 4.5 and 5.9 or pursuant to a transaction permitted by paragraphs (a) through (c) of subsection 14.4) of any of its rights and obligations under this Agreement and the other Credit Documents. (h) Without the written consent of the Majority Facility Lenders in respect of any Facility adversely affected thereby, no Specified Change shall amend or modify subsection 9.5(f) to change the order of applying prepayments thereunder among the respective Facilities. (i) Without the written consent of all the Lenders in respect of any Facility adversely affected thereby, no Specified Change shall (i) reduce the percentage specified in the definition of "Majority Facility Lenders" with respect to such Facility or (ii) remove such Facility from the definition of "Majority Lenders". (j) Any such waiver and any such amendment, supplement or modification shall apply equally to each of the Lenders and shall be binding upon the Credit Parties, the Lenders, the Administrative Agent and all future holders of the Loans. In the case of any waiver, each of the Credit Parties, the Lenders and the Administrative Agent shall be restored to their former positions and rights hereunder and under the other Credit Documents, and any Default or Event of Default waived shall be deemed to be cured and not continuing; no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereon. 17.2 Notices. All notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by facsimile transmission) and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made (a) in the case of delivery by hand, when delivered; (b) in the case of delivery by mail, three days after being deposited in the mails, postage prepaid; (c) in the case of delivery by a nationally recognized overnight courier, when received or (d) in the case of delivery by facsimile transmission, when sent and receipt has been confirmed, addressed as follows in the case of the Borrowers and the Administrative Agent, and as set forth in Schedule II in the case of the other parties hereto, or to such other address as may be hereafter notified by the respective parties hereto and any future holders of the Loans: The Guarantor, the Primary Borrower or the German Borrower: 97 Dynatech Corporation 3 New England Executive Park Burlington, Massachusetts 01803 Attention: Mark V.B. Tremallo, Corporate Vice President and General Counsel Fax: (781) 272-2304 Phone: (781) 221-2008 with a copy to: Debevoise & Plimpton 875 Third Avenue New York, New York 10022 Attention: David A. Brittenham, Esq. Fax: (212) 909-6836 Phone: (212) 909-6000 The Administrative Agent or the German Term Loan Servicing Bank: Morgan Guaranty Trust Company of New York 60 Wall Street New York, New York 10260 Attention: Colleen Galle Fax: (212) 648-7010 Phone: (212) 648-5005 with a copy to: Morgan Guaranty Trust Company of New York c/o J.P. Morgan Services Inc. 500 Stanton Christiana Road Newark, Delaware 19713 Attention: Mark Connor Fax: (302) 634-4300 Phone: (302) 634-4218 provided that any notice, request or demand to or upon the Administrative Agent or the Lenders pursuant to subsections 2.2, 3.2, 4.2, 5.2, 6.2, 7.2, 8.2. 9.3, 9.4, 9.6 or 9.12(b) shall not be effective until received. 17.3 No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of the Administrative Agent, any Lender or any Credit Party, any right, remedy, power or privilege hereunder or under the other Credit Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. 17.4 Survival of Representations and Warranties. All representations and warranties made hereunder, in the other Credit Documents and in any certificate delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Agreement and the making of the Loans hereunder. 17.5 Payment of Expenses and Taxes. The Primary Borrower agrees (a) to pay or reimburse each of the Administrative Agent, the German Term Loan Servicing Bank, the Syndication Agent and the Co-Documentation Agents for all its reasonable out-of-pocket costs and expenses incurred in connection with the preparation and execution of, and any amendment, supplement or modification to, this Agreement and the other Credit Documents and any other documents prepared in connection 98 herewith or therewith, and the consummation and administration of the transactions contemplated hereby and thereby, including, without limitation, the reasonable fees and disbursements of joint counsel to the Administrative Agent, the German Term Loan Servicing Bank, the Syndication Agent and the Co- Documentation Agents; (b) to pay or reimburse each Lender, the German Term Loan Servicing Bank and the Administrative Agent for all its reasonable costs and expenses incurred in connection with the enforcement or preservation of any rights under this Agreement, the other Credit Documents and any such other documents, including, without limitation, the reasonable fees and disbursements of counsel to the Administrative Agent and the several Lenders; (c) to pay, indemnify, and hold each Lender, the German Term Loan Servicing Bank and the Administrative Agent harmless from, any and all recording and filing fees and any and all liabilities with respect to, or resulting from any delay in paying, stamp, excise and other similar taxes, if any, which may be payable or determined to be payable in connection with the execution and delivery of, or consummation or administration of any of the transactions contemplated by, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, this Agreement, the other Credit Documents and any such other documents and (d) to pay, indemnify, and hold harmless each Lender, each Co- Documentation Agent, the Syndication Agent, the German Term Loan Servicing Bank and the Administrative Agent from and against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of this Agreement, the other Credit Documents and any such other documents, or the use of the proceeds of the Loans and other extensions of credit hereunder, including, without limitation, any of the foregoing relating to the violation of, noncompliance with or liability under, any Environmental Law applicable to the operations of the Primary Borrower, any of its Subsidiaries or any of the Properties (all the foregoing in this clause (d), collectively, the "indemnified liabilities"), provided that the Primary Borrower shall have no obligation hereunder to the Administrative Agent, the German Term Loan Servicing Bank, the Syndication Agent, either Co-Documentation Agent or any Lender with respect to indemnified liabilities arising from (i) the gross negligence or willful misconduct of the Administrative Agent, the German Term Loan Servicing Bank, the Syndication Agent, either Co-Documentation Agent or such Lender, as the case may be, (or any of their respective directors, trustees, officers, employees, agents, successors and assigns) or (ii) claims made or legal proceedings commenced against the Administrative Agent, the German Term Loan Servicing Bank, the Syndication Agent, either Co-Documentation Agent or any such Lender by any securityholder or creditor thereof arising out of and based upon rights afforded any such securityholder or creditor solely in its capacity as such. Notwithstanding the foregoing, except as provided in clauses (b) and (c) above, the Primary Borrower shall have no obligation under this subsection 17.5 to the Administrative Agent, the German Term Loan Servicing Bank, the Syndication Agent, either Co-Documentation Agent or any Lender with respect to any tax, levy, impost, duty, charge, fee, deduction or withholding imposed, levied, collected, withheld or assessed by any Governmental Authority. The agreements in this subsection shall survive repayment of the Loans and all other amounts payable hereunder. 17.6 Successors and Assigns; Participations and Assignments. (a) This Agreement shall be binding upon and inure to the benefit of the Borrowers, the Lenders, the Administrative Agent and their respective successors and assigns, except that no Borrower may assign or transfer any of its rights or obligations under this Agreement without the prior written consent of each Lender (other than pursuant to subsections 4.5 and 5.9 or pursuant to a transaction permitted by paragraphs (a) through (c) of subsection 14.4). (b) Any Lender may, in the ordinary course of its business and in accordance with applicable law, at any time sell to one or more banks or other entities ("Participants") participating interests in any Loan owing to such Lender, any Commitment of such Lender or any other interest of such Lender hereunder and under the other Credit Documents; provided that (unless the Primary Borrower and the Administrative Agent otherwise consent in writing) (y) no such participating interests shall be in an aggregate principal amount of less than $5,000,000 in the aggregate (or, if less, the full amount of such selling Lender's Loans and Commitments) and (z) in the case of a participating interest 99 in the German Term Loan, such Participant is an Eligible German Bank. In the event of any such sale by a Lender of a participating interest to a Participant, such Lender's obligations under this Agreement to the other parties to this Agreement shall remain unchanged, such Lender shall remain solely responsible for the performance thereof, such Lender shall remain the holder of any such Loan for all purposes under this Agreement and the other Credit Documents, and the Credit Parties and the Administrative Agent shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and the other Credit Documents. Any agreement pursuant to which any Lender shall sell any such participating interest shall provide that such Lender shall retain the sole right and responsibility to exercise such Lender's rights and enforce each of the relevant Borrower's obligations hereunder, including the right to consent to any amendment, supplement, modification or waiver of any provision of this Agreement or any of the other Credit Documents, and no Lender shall be entitled to create in favor of any Participant, in the participation agreement pursuant to which such Participant's participating interest shall be created or otherwise, any right to vote on, consent to or approve any matter relating to this Agreement or any other Credit Document, provided that such participation agreement may provide that, without the consent of the Participant, such Lender will not agree to any amendment, supplement, modification or waiver, specified in subsection 17.1(e) or (f). Each Borrower also agrees that each Lender shall be entitled to the benefits of subsections 9.14, 9.15 and 9.16 without regard to whether it has granted any participating interests, and that all amounts payable to a Lender under subsections 9.14, 9.15 and 9.16 shall be determined as if such Lender had not granted any such participating interests. (c) (i) Any Lender (other than a German Term Loan Lender) may, in the ordinary course of its business and in accordance with applicable law, at any time and from time to time assign to (A) any Lender or any Affiliate thereof that is a Permitted Affiliate Transferee (as hereinafter defined), or (B) with the consent of the Administrative Agent (which shall not be unreasonably withheld), to any Related Fund or (C) with the consent of the Administrative Agent and the Primary Borrower (which, in each case, shall not be unreasonably withheld), to any additional bank or financial institution and (ii) any German Term Loan Lender may, in the ordinary course of its business and in accordance with applicable law, with the consent of the Primary Borrower, the Administrative Agent and the German Term Loan Servicing Bank (which, in each case, shall not be unreasonably withheld) at any time and from time to time assign to any Eligible German Bank (any assignee described in clause (i) or (ii), an "Assignee") all or any part of its rights and obligations under this Agreement and the other Credit Documents pursuant to an Assignment and Acceptance, substantially in the form of Exhibit D, executed by such Assignee, such assigning Lender (and, in the case of an Assignee that is not then a Permitted Affiliate Transferee, by the Administrative Agent and, to the extent required pursuant to subclause (i)(C) or clause (ii) above, by the Primary Borrower and to the extent required pursuant to clause (ii) above, by the German Term Loan Servicing Bank, as the case may be) and delivered to the Administrative Agent or the German Term Loan Servicing Bank, as the case may be, for its acceptance and recording in the Register, provided that (u) any assignment of a Revolving Credit Commitment shall require the consent of the Domestic L/C Issuing Bank, and any assignment of the German L/C Participation Commitment shall require the consent of the German L/C Issuing Bank, (v) unless the Primary Borrower, the German Term Loan Servicing Bank and the Administrative Agent otherwise consent in writing, any assignment of a German Term Loan by a German Term Loan Lender (A) shall be of all rights and obligations of such Lender under this Agreement and the other Credit Documents and (B) at any time after a change in law or regulation has made the exception described in chapter 23 of the German revenue ruling on section 8a of the German Corporate Revenue Code (or any successor provision of applicable law) inapplicable, may not result in interest payments in respect of such German Term Loans becoming non- deductible (without regard to any debt-equity safe harbor) for German income tax purposes, (w) in the case of any such assignment which is not to a Permitted Affiliate Transferee, the sum (without duplication) of the aggregate principal amount of the Loans, the aggregate amount of the Domestic L/C Obligations, the aggregate amount the German L/C Participation Commitment and the aggregate amount of the Available Revolving Credit Commitment being assigned is not less than $5,000,000 (or, if less, the full amount of such selling Lender's Loans and Commitments), or such lesser amount as may be agreed to by the 100 Primary Borrower and the Administrative Agent, (x) any assignment of all or any portion of a Lender's Revolving Credit Commitment, German L/C Participation Commitment, Reimbursement Term Loans (if any) or Tranche A Loans shall be accompanied by the assignment to the same Assignee of a ratable share of the others and (y) if any Lender assigns all or any part of its rights and obligations under this Agreement to one of its Affiliates in connection with or in contemplation of the sale or other disposition of its interest in such Affiliate, the Primary Borrower's prior written consent shall be required for such assignment. Upon such execution, delivery, acceptance and recording, from and after the effective date determined pursuant to such Assignment and Acceptance, (x) the Assignee thereunder shall be a party hereto and, to the extent provided in such Assignment and Acceptance, have the rights and obligations of a Lender hereunder with a Commitment as set forth therein, and (y) the assigning Lender thereunder shall, to the extent provided in such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such assigning Lender shall cease to be a party hereto). Notwithstanding the foregoing, no Assignee, which as of the date of any assignment to it pursuant to this subsection 17.6(c) would be entitled to receive any greater payment under subsection 9.14 or 9.15 than the assigning Lender would have been entitled to receive as of such date under such subsections with respect to the rights assigned, shall be entitled to receive such payments unless the Primary Borrower has consented in writing to the assignment and agreed in writing to waive the benefit of this sentence. As used herein, the term "Permitted Affiliate Transferee" means (i) as to any assigning Tranche A Lender, German L/C Participant or Revolving Credit Lender, any Tranche A Lender, German L/C Participant or Revolving Credit Lender or any Affiliate thereof and (ii) as to any assigning Tranche B Lender, any Tranche B Lender or any Affiliate thereof. (d) The Administrative Agent, on behalf of the Primary Borrower, and the German Term Loan Servicing Bank, on behalf of the German Borrower, shall maintain at the address of the Administrative Agent or the German Term Loan Servicing Bank, as the case may be, referred to in subsection 17.2 a copy of each Assignment and Acceptance delivered to it and a register (the "Register") for the recordation of the names and addresses of the Lenders and the Commitments of, and principal amounts of the Loans owing to, each Lender from time to time. The entries in the Register shall be conclusive and the Borrowers, the Administrative Agent, the German Term Loan Servicing Bank and the Lenders shall treat each Person whose name is recorded in the Register as the owner of a Loan or other obligation hereunder as the owner thereof for all purposes of this Agreement and the other Credit Documents, notwithstanding any notice to the contrary. Any assignment of any Loan or other obligation hereunder whether or not evidenced by a Note shall be effective only upon appropriate entries with respect thereto being made in the Register (and each Note shall expressly provide so). The Register shall be available for inspection by any Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice. (e) Upon receipt of an Assignment and Acceptance executed by an assigning Lender and an Assignee (and, in the case of an Assignee that is not then a Lender or an affiliate thereof, by the Primary Borrower and the Administrative Agent), together with payment to the Administrative Agent (or in the case of an assignment of a German Term Loan, to the German Term Loan Servicing Bank) of a registration and processing fee of $2,500 (provided, however, that no such fee shall be payable by a Lender in the case of an assignment to an Affiliate of such Lender or a Related Fund; and provided, further that, in the case of contemporaneous assignments by a Lender to more than one fund managed by the same investment advisor (which funds are not then Lenders hereunder), only a single $2,500 such fee shall be payable for all such contemporaneous assignments), the Administrative Agent or the German Term Loan Servicing Bank, as the case may be, shall (i) promptly accept such Assignment and Acceptance and (ii) on the effective date determined pursuant thereto record the information contained therein in the Register and give notice of such acceptance and recordation to the Lenders and the Primary Borrower and, if applicable thereto, each German Borrower. On or prior to such effective date, the assigning Lender shall surrender any outstanding Notes held by it all or a portion of which are being assigned, and each relevant Borrower, at its own expense, shall, upon the request to the Administrative 101 Agent (or, in the case of a German Borrower, the German Term Loan Servicing Bank) made at the time of such assignment by the assigning Lender or the Assignee, as applicable, execute and deliver to the Administrative Agent (or, in the case of the German Borrower, to the German Term Loan Servicing Bank) (in exchange for the outstanding Notes of the assigning Lender) a new Note to the order of such Assignee in an amount equal to (i) in the case of an assigned Revolving Credit Loan, the lesser of (A) the amount of such Assignee's Revolving Credit Commitment and (B) the aggregate principal amount of all Revolving Credit Loans made by such Assignee, (ii) in the case of an assigned Tranche A Loan, the amount of such Assignee's Tranche A Loan, (iii) in the case of an assigned Tranche B Loan, the amount of such Assignee's Tranche B Loan, (iv) in the case of an assigned German Term Loan, the amount of such Assignee's German Term Loan and (v) in the case of an assigned Swing Line Loan, the lesser of (A) the Swing Line Commitment and (B) the aggregate principal amount of all Swing Line Loans made by such Assignee, in each case with respect to the relevant Loan after giving effect to such Assignment and Acceptance and, if the assigning Lender has retained a Loan hereunder, a new Note, as the case may be, to the order of the assigning Lender in an amount equal to (i) in the case of a retained Revolving Credit Loan, the lesser of (A) the amount of such Lender's Revolving Credit Commitment and (B) the aggregate principal amount of all Revolving Credit Loans made by such Lender, (ii) in the case of a retained Tranche A Loan, the amount of such Lender's Tranche A Loan, (iii) in the case of a retained Tranche B Loan, the amount of such Lender's Tranche B Loan, (iv) in the case of a retained German Term Loan, the amount of such Lender's German Term Loan and (v) in the case of a retained Swing Line Loan, the lesser of (A) the Swing Line Commitment and (B) the aggregate principal amount of all Swing Line Loans made by such Lender, in each case with respect to the relevant Loan after giving effect to such Assignment and Acceptance. Any such new Notes shall be dated the Closing Date and shall otherwise be in the form of the Note replaced thereby. Any Notes surrendered by the assigning Lender shall be returned by the Administrative Agent or the German Term Loan Servicing Bank, as the case may be, to the Primary Borrower or the German Borrower, as the case may be, marked "canceled". (f) The Primary Borrower authorizes each Lender to disclose to any Participant or Assignee (each, a "Transferee") and any prospective Transferee, subject to the provisions of subsection 17.15, any and all financial information in such Lender's possession concerning the Primary Borrower and its Affiliates which has been delivered to such Lender by or on behalf of the Primary Borrower pursuant to this Agreement or which has been delivered to such Lender by or on behalf of the Primary Borrower in connection with such Lender's credit evaluation of the Primary Borrower and its Affiliates prior to becoming a party to this Agreement. No assignment or participation made or purported to be made to any Transferee shall be effective without the prior written consent of the Primary Borrower if it would require the Primary Borrower to make any filing with any Governmental Authority or qualify any Loan or Note under the laws of any jurisdiction, and the Primary Borrower shall be entitled to request and receive such information and assurances as it may reasonably request from any Lender or any Transferee to determine whether any such filing or qualification is required or whether any assignment or participation is otherwise in accordance with applicable law. (g) For avoidance of doubt, the parties to this Agreement acknowledge that the provisions of this subsection concerning assignments of Loans and Notes do not prohibit any pledge (i) by a Lender of any Loan or Note to any Federal Reserve Bank in accordance with applicable law or (ii) by any Tranche B Lender of any Tranche B Loan, or any Note evidencing such Loan, to any trustee with respect to a pool of collateralized loan obligations which includes the obligations owing to such Lender hereunder, provided that any foreclosure or similar action by such trustee shall be subject to the provisions of this subsection concerning assignments and shall be void and of no force or effect unless effected in compliance with such provisions. 17.7 Adjustments; Set-off. (a) If any Lender (a "benefitted Lender") shall at any time receive any payment of all or part of any of its Loans or Reimbursement Obligations owing to it under any Commitment, or interest thereon, pursuant to a guarantee or otherwise, or receive any collateral in respect thereof (whether voluntarily or involuntarily, by set-off or otherwise), in a greater proportion 102 than any such payment to and collateral received by any other Lender, if any, in respect of such other Lender's Loans or Reimbursement Obligations owing to it under such Commitment or interest thereon, such benefitted Lender shall purchase for cash from the other Lender such portion of each such other Lender's similar Loans or Reimbursement Obligations, or shall provide such other Lender with the benefits of any such collateral, or the proceeds thereof, as shall be necessary to cause such benefitted Lender to share the excess payment or benefits of such collateral or proceeds ratably with each of the Lenders which hold such Commitment; provided, however, that if all or any portion of such excess payment or benefits is thereafter recovered from such benefitted Lender, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest. Each Borrower agrees that each Lender so purchasing a portion of another Lender's Loans or Reimbursement Obligations may exercise all rights of payment (including, without limitation, rights of set- off) with respect to such portion as fully as if such purchasing Lender were the direct holder of such portion. (b) In addition to any rights and remedies of the Lenders provided by law, each Lender shall have the right, without prior notice to any Borrower, any such notice being expressly waived by each Borrower to the extent permitted by applicable law, upon the occurrence of an Event of Default under subsection 15.2(a) to set-off and appropriate and apply against any amount then due and payable by the relevant Borrower under such subsection any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by such Lender or any branch or agency thereof to or for the credit or the account of the relevant Borrower. Each Lender agrees promptly to notify the relevant Borrower and the Administrative Agent (or, in the case of the German Term Loans, the German Term Loan Servicing Bank) after any such set- off and application made by such Lender, provided that the failure to give such notice shall not affect the validity of such set-off and application. 17.8 Counterparts. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts (including by facsimile transmission), and all of said counterparts taken together shall be deemed to constitute one and the same instrument. A set of the copies of this Agreement signed by all the parties shall be delivered to the Primary Borrower, each German Borrower, the German Term Loan Servicing Bank and the Administrative Agent. 17.9 Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 17.10 Integration. This Agreement and the other Credit Documents represent the agreement of the Borrowers, the Administrative Agent, the German Term Loan Servicing Bank and the Lenders with respect to the subject matter hereof, and there are no promises, undertakings, representations or warranties by the Borrowers, the Administrative Agent, the German Term Loan Servicing Bank or any Lender relative to subject matter hereof not expressly set forth or referred to herein or in the other Credit Documents. 17.11 GOVERNING LAW. THIS AGREEMENT AND ANY NOTES AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT AND ANY NOTES SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 17.12 Submission To Jurisdiction; Waivers. Each party hereto hereby irrevocably and unconditionally: 103 (a) submits for itself and its property in any legal action or proceeding relating to this Agreement and the other Credit Documents to which it is a party, or for recognition and enforcement of any judgment in respect thereof, to the non-exclusive general jurisdiction of the courts of the State of New York, the courts of the United States of America for the Southern District of New York, and appellate courts from any thereof; (b) consents that any such action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient forum and agrees not to plead or claim the same; (c) in the case of the German Borrower, each of Wavetek GmbH and Holdings II GmbH hereby irrevocably designates the Primary Borrower (and the Primary Borrower hereby irrevocably accepts such designation) as its agent to receive service of process in any such action or proceeding, and agrees that such service upon the Primary Borrower shall be effective whether or not the Primary Borrower shall inform the German Borrower thereof; (d) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to any Borrower or the applicable Lender, as the case may be, at its address set forth in subsection 17.2 or at such other address of which the Administrative Agent, any such Lender and the Primary Borrower shall have been notified pursuant thereto; (e) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction; and (f) waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this subsection any punitive damages. 17.13 Acknowledgements. Each Borrower hereby acknowledges that: (a) it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Credit Documents; (b) none of the Administrative Agent, the German Term Loan Servicing Bank or any Lender has any fiduciary relationship with or duty to any Borrower arising out of or in connection with this Agreement or any of the other Credit Documents, and the relationship between Administrative Agent, the German Term Loan Servicing Bank and Lenders, on one hand, and any Borrower, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and (c) no joint venture is created hereby or by the other Credit Documents or otherwise exists by virtue of the transactions contemplated hereby among the Lenders or among the Borrowers and the Lenders. 17.14 WAIVERS OF JURY TRIAL. EACH BORROWER, THE ADMINISTRATIVE AGENT AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN. 17.15 Confidentiality. Each Lender and the Administrative Agent agrees (on behalf of itself and each of its affiliates, directors, officers, employees, agents, advisors and representatives) to 104 keep confidential any Confidential Information, and in connection therewith comply with their customary procedures for handling confidential information of this nature and with safe and sound lending practices; provided that nothing herein shall limit its disclosure of any such information (i) to the extent required by statute, rule, regulation or judicial process, (ii) to counsel for any of the Lenders or the Administrative Agent, (iii) to bank examiners, insurance commissioners or other Governmental Authorities, having jurisdiction over the disclosing Lender, or to such Lender's auditors or accountants, (iv) to the Administrative Agent or any other Lender, (v) by the Administrative Agent or any Lender to an Affiliate thereof, (vi) in connection with any enforcement of any of the Credit Documents or (vii) to any Transferee or prospective Transferee or to any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to the Borrowers and their obligations that agrees to comply with this subsection and (in the case of any such Person that at the time of such disclosure has not yet become a Lender) executes and delivers to the Primary Borrower a written instrument in favor of the Primary Borrower confirming such agreement, in form and substance reasonably satisfactory to the Primary Borrower; provided that (x) in the case of the preceding clauses (i) and (iii), such Lender shall, to the extent legally permissible, notify the Primary Borrower of the proposed disclosure as far in advance as is reasonably practicable under the circumstances, (y) in the case of the preceding clauses (ii) and (iii), such Lender shall inform each such counsel, auditor or accountant of the agreement under this subsection 17.15 and take reasonable actions to cause compliance by any such Person with this agreement (including, where appropriate, to cause any such Person to acknowledge its agreement to be bound by the agreement under this subsection 17.15) and (z) in the case of the preceding clause (v), such Lender or the Administrative Agent shall be responsible for any failure by such Affiliate of the Lender or the Administrative Agent to comply with this subsection. For purposes of this subsection 17.15, "Confidential Information" shall mean, with respect to the Administrative Agent or any Lender (an "Affected Party"), information delivered to such Affected Party by or on behalf of any Credit Party, the Administrative Agent or any other Lender in connection with the transactions contemplated by or otherwise pursuant to this Agreement or information obtained by the Affected Party in the course of any review of the books or records of the Guarantor or any Borrower; provided that such term shall not include information (i) that was publicly known or otherwise known to such Affected Party prior to the time of such disclosure on a nonconfidential basis without a duty of confidentiality to any Credit Party or Subsidiary thereof being violated, (ii) that subsequently becomes publicly known through no act or omission by any Affected Party or any Person acting on the Affected Party's behalf, (iii) that becomes known to such Affected Party on a nonconfidential basis without a duty of confidentiality to any Credit Party or Subsidiary thereof being violated and other than through disclosure by or on behalf of any Borrower or (iv) that constitutes financial information delivered to any Affected Party that is otherwise publicly available through no act or omission of any Affected Party or Person acting on such Affected Person's behalf. 17.16 Judgment Currency. (a) If for the purpose of obtaining judgment in any court it is necessary to convert a sum due hereunder in one currency into another currency, the parties hereto agree, to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures the Administrative Agent could purchase the first currency with such other currency in the city in which it normally conducts its foreign exchange operation for the first currency on the Business Day preceding the day on which final judgment is given. (b) The obligation of each Borrower in respect of any sum due from it to any Lender hereunder shall, notwithstanding any judgment in a currency (the "Judgment Currency") other than that in which such sum is denominated in accordance with the applicable provisions of this Agreement (the "Agreement Currency"), be discharged only to the extent that on the Business Day following receipt by such Lender of any sum adjudged to be so due in the Judgment Currency such Lender may in accordance with normal banking procedures purchase the Agreement Currency with the Judgment Currency; if the amount of Agreement Currency so purchased is less than the sum originally due to such Lender in the Agreement Currency, such Borrower agrees notwithstanding any such judgment to indemnify such Lender against such loss, and if the amount of the Agreement Currency so purchased exceeds the sum originally due to any Lender, such Lender agrees to remit to such Borrower such excess. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. DYNATECH LLC, as Primary Borrower By: /s/ Allan M. Kline -------------------------- Name: Allan M. Kline Title: Vice President WAVETEK WANDEL GOLTERMANN GMBH, as German Borrower By: /s/ Allan M. Kline --------------------------- Name: Allan M. Kline Title: Managing Director DYNATECH SUBWORLD HOLDINGS GMBH, as German Borrower By: /s/ Dr. Schwarzel-Peters ---------------------------------- Name: Dr. Schwarzel-Peters Title: Corporate Counsel MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent, as German Term Loan Servicing Bank, as German L/C Issuing Bank and as a Lender By: /s/ Colleen B. Galle -------------------------------- Name: Collen B. Galle Title: Vice President CREDIT SUISSE FIRST BOSTON, as Syndication Agent and as a Lender By: /s/ Robert Hetu --------------------------------- Name: Robert Hetu Title: Vice President By: /s/ Vitaly G. Butenko --------------------------------- Name: Vitaly G. Butenko Title: Assistant Vice President THE CHASE MANHATTAN BANK, as Co-Documentation Agent and as a Lender By: /s/ William J. Caggiano --------------------------------- Name: William J. Caggiano Title: Managing Director BANKERS TRUST COMPANY, as Co- Documentation Agent and as a Lender By: /s/ William W. Archer ------------------------------- Name: William W. Archer Title: Managing Director COMMERZBANK AG, as a German Term Loan Lender By: /s/ Heinz Schopp ------------------------------------- Name: Heinz Schopp Title: Managing Director By: /s/ Winfried Becker ------------------------------------ Name: Winfried Becker Title: Assistant Vice President ABN AMRO BANK N.V. By: /s/ James S. Adelsheim ----------------------------------- Name: James S. Adelsheim Title: Group Vice President By: /s/ Richard J. Schrage ------------------------------------ Name: Richard J. Schrage Title: Vice President BANK OF AMERICA, N.A. By: /s/ W. Larry Hess ------------------------------------- Name: W. Larry Hess Title: Managing Director THE BANK OF NOVA SCOTIA By: /s/ T. M. Pitcher ------------------------------------- Name: T. M. Pitcher Title: Authorized Signatory BANK OF TOKYO-MITSUBISHI TRUST COMPANY By: /s/ Paul P. Malecki ------------------------------------- Name: Paul P. Malecki Title: Vice President ERSTE BANK NEW YORK By: /s/ Arcinee Hovanessian ------------------------------------ Name: Arcinee Hovanessian Title: Vice President By: /s/ John S. Runnion ------------------------------------- Name: John S. Runnion Title: First Vice President FIRST UNION NATIONAL BANK By: /s/ Gerald P. Hullinger ------------------------------------ Name: Gerald P. Hullinger Title: Vice President FLEET NATIONAL BANK By: /s/ Debra E. Del Vecchio ------------------------------------- Name: Debra E. Del Vecchio Title: Vice President HSBC BANK USA By: /s/ Paul M. Harrington ------------------------------------- Name: Paul M. Harrington Title: Authorized Signatory NATEXIS BANQUE By: /s/ Gary Kania ------------------------------------- Name: Gary Kania Title: Vice President By: /s/ Jordan Sadler ------------------------------------- Name: Jordan Sadler Title: Assistant Vice President NATIONAL CITY BANK By: /s/ Julie Sabroff ------------------------------------- Name: Julie Sabroff Title: Vice President BADEN-WURTTEMBERGISCHE BANK AG, as a German Term Loan Lender By: /s/ Mr. Bley ------------------------------------- Name: Mr. Bley Title: Prokurist By: /s/ Dr. Wolfgang Arndt ------------------------------------- Name: Dr. Wolfgand Arndt Title: Abteilungs-direktor DEUTSCHE BANK AG UNTERNINEHMEN UND IMMOBILIEN, as a German Term Loan Lender By: /s/ Armin Wissman ------------------------------------- Name: Armin Wissman Title: Vice President By: /s/ Jurgen Beck ------------------------------------- Name: Jurgen Beck Title: Vice President GZB-BANK GENOSSENSCHAFTLICHE ZENTRALBANK AG STUTTGART, as a German Term Loan Lender By: /s/ Karl Deuschle ------------------------------------- Name: Karl Deuschle Title: Authorized Signatory By: /s/ Hans-Dieter Neurohr ------------------------------------- Name: Hans-Dieter Neurohr Title: Authorized Signatory FRANKLIN FLOATING RATE TRUST By: /s/ Chauncey Lufkin ------------------------------------- Name: Chauncey Lufkin Title: Vice President GENERAL ELECTRIC CAPITAL CORPORATION By: /s/ Gregory Hong ------------------------------------- Name: Gregory Hong Title: Duly Authorized Signatory KZH ING-1 LLC By: /s/ Peter Chin ------------------------------------- Name: Peter Chin Title: Authorized Agent KZH ING-2 LLC By: /s/ Peter Chin ------------------------------------- Name: Peter Chin Title: Authorized Agent KZH SHOSHONE LLC By: /s/ Peter Chin ------------------------------------- Name: Peter Chin Title: Authorized Agent KZH STERLING LLC By: /s/ Peter Chin ------------------------------------- Name: Peter Chin Title: Authorized Agent MERRILL LYNCH SENIOR FLOATING RATE FUND, INC. By: /s/ Joseph Moroney ------------------------------------- Name: Joseph Moroney Title: Authorized Signatory MERRILL LYNCH SENIOR FLOATING RATE FUND II, INC. By: /s/ Joseph Moroney ------------------------------------- Name: Joseph Moroney Title: Authorized Signatory DEBT STRATEGIES FUND, INC. By: /s/ Joseph Moroney ------------------------------------- Name: Joseph Moroney Title: Authorized Signatory PILGRIM PRIME RATE TRUST By: Pilgrim Investments, Inc. as its Investment Manager By: /s/ Robert L. Wilson ------------------------------------- Name: Robert L. Wilson Title: Vice President SAWGRASS TRADING LLC By: /s/ Kelly C. Walker ------------------------------------- Name: Kelly C. Walker Title: Vice President VAN KAMPEN PRIME RATE INCOME TRUST By: /s/ Darvin D. Pierce ------------------------------------- Name: Darvin D. Pierce Title: Vice President VAN KAMPEN SENIOR INCOME TRUST By: /s/ Darvin D. Pierce ------------------------------------- Name: Darvin D. Pierce Title: Vice President SCHEDULE II ADDRESSES FOR NOTICES MORGAN GUARANTY TRUST COMPANY 60 Wall Street New York, NY 10260-0060 Attn: Colleen Galle Tel: (212) 648-6838 Fax: (212) 648-5000 with a copy to: MORGAN GUARANTY OF NEW YORK c/o J.P. Morgan Services Inc. 500 Stanton Christiana Road Newark, DE 19713 Attn: Mark Connor Tel: (302) 634-4218 Fax: (302) 634-4300 CREDIT SUISSE FIRST BOSTON Eleven Madison Avenue 20th Floor New York, NY 10010-3629 Attn: Robert Hetu Tel: (212) 325-4542 Fax: (212) 325-8309 THE CHASE MANHATTAN BANK 270 Park Avenue New York, NY 10017 Attn: William J. Caggiano Tel: (212) 270-1338 Fax: (212) 972-0009 BANKERS TRUST COMPANY 130 Liberty Street New York, NY 10006 Attn: William Hughes Tel: (212) 250-2836 Fax: (212) 250-1343 ABN AMRO BANK, N.V. 500 Park Avenue 2/nd/ Floor New York, NY 10022 Attn: Rich Schrage Tel: (212) 446-4383 Fax: (212) 446-4237 with a copy to: ABN AMRO BANK, N.V. 208 South LaSalle Street Suite 1500 Chicago, IL 60603 Attn: Kathy Oczko Tel: (312) 992-5139 Fax: (312) 992-5111 ABN AMRO BANK, N.V. One Post Office Square 39th Floor Boston, MA 02109 Attn: Jim Adelsheim Tel: (617) 988-7930 Fax: (617) 988-7910 BANK OF AMERICA, N.A. 9 West 57/th/ Street New York, NY 10019 Attn: Larry Hess Tel: (212) 847-5005 Fax: (212) 847-6847 THE BANK OF NOVA SCOTIA Boston Branch 28 State Street 17th Floor Boston, MA 02109 Attn: Stephen Foley Tel: (617) 624-7612 Fax: (617) 624-7607 BANK OF TOKYO-MITSUBISHI TRUST COMPANY 1251 Avenue of the Americas 12th Floor New York, NY 10020-1104 Attn: Paul Malecki Tel: (212) 782-4343 Fax: (212) 782-4981 ERSTE BANK NEW YORK 280 Park Avenue West Building New York, NY 10017 Attn: Arcinee Hovanessian Tel: (212) 984-5635 Fax: (212) 984-5627 FIRST UNION NATIONAL BANK 301 South College Street Charlotte, NC 28288-1183 Attn: Thierry Riek Tel: (704) 374-4552 Fax: (704) 374-4793 with a copy to: FIRST UNION NATIONAL BANK 301 South College Street One First Union Center, DC-5 Charlotte, NC 28288-0608 Attn: Jamie Johnson Tel: (704) 715-1359 Fax: (704) 383-0202 FLEET NATIONAL BANK 100 Federal Street High-Tech Division Boston, MA 02110 Attn: Debra Del Vecchio Tel: (617) 434-2815 Fax: (617) 434-0819 HSBC BANK USA 140 Broadway 5th Floor New York, NY 10005-1196 Attn: Christopher French Tel: (212) 658-2742 Fax: (212) 658-2586 NATEXIS BANQUE POPULAIRE 645 5/th/ Avenue 20/th/ Floor New York, NY 10022 Attn: Gary Kania Tel: (212) 872-5113 Fax: (212) 872-5045 NATIONAL CITY BANK 1900 East 9th Street Cleveland, OH 44114 Attn: Lisa B. Lisi Tel: (216) 575-9166 Fax: (216) 222-0003 FRANKLIN FLOATING RATE TRUST c/o Franklin Templeton Group 777 Mariners Island Blvd. San Mateo, CA 94404 Attn: Matt Gregory Tel: (650) 312-3309 Fax: (650) 312-3346 GENERAL ELECTRIC CAPITAL CORPORATION 60 Long Ridge Road Stamford, CT 06927-5100 Attn: Mei Nishiwaki Tel: (203) 316-7874 Fax: (203) 316-7978 with a copy to: PAUL HASTINGS JANOFSKY & WALKER 1055 Washington Blvd. 9th Floor Stamford, CT 06901 Attn: Matthew Donaher Tel: (203) 961-7427 Fax: (203) 359-3031 KZH ING-1 KZH ING-2 KZH SHOSHONE LLC KZH STERLING LLC c/o The Chase Manhattan Bank 450 West 33rd Street 15th Floor New York, NY 10001 Attn: Virginia Conway Tel: (212) 946-7575 Fax: (212) 946-7776 with a copy to: WEIL, GOTSCHAL & MANGES LLP 767 Fifth Avenue 34/th/ Floor New York, NY 10153 Attn: Shan McSweeney Tel: (212) 310-6857 Fax: (212) 833-3118 MERRILL LYNCH SENIOR FLOATING RATE FUND, INC. MERRILL LYNCH SENIOR FLOATING RATE FUND II, INC. DEBT STRATEGIES FUND, INC. c/o Merrill Lynch Asset Management 800 Scudders Mill Road-Area 1B Plainsboro, New Jersey 08536 Attn: Janet S. Hansen Tel: (609) 282-3136 Fax: (609) 282-3542 with a copy to: MERRILL LYNCH 800 Scudders Mill Road, 2A Plainsboro, NJ 08536 Attn: Brad Lucido Tel: (609) 282-1715 Fax: (609) 282-3222 and: BROWN & WOOD 1 World Trade Center 58/th/ Floor New York, NY 10048 Attn: Pat Murphy Tel: (212) 839-5789 Fax: (212) 839-5599 PILGRIM PRIME RATE TRUST c/o Pilgrim Investments, Inc. Two Renaissance Square 40 North Central Avenue Suite 1200 Phoenix, AZ 85004-4424 Attn: Robert Wilson Tel: (602) 417-8128 Fax: (602) 417-8327 SAWGRASS TRADING LLC c/o Banc of America Securities LLC 100 North Tryon Street NC1-0007-06-07 Charlotte, NC 28255 Attn: Ashley Hamilton Tel: (704) 387-1939 Fax: (704) 388-0648 with a copy to: CARAVELLE ADVISORS, L.L.C. 425 Lexington Avenue 2/nd/ Floor New York, NY 10017 Attn: Dean Criares/Bonnie Gleason Tel: (212) 885-4554/(212) 885-4593 Fax: (212) 885-4520 VAN KAMPEN PRIME RATE INCOME TRUST VAN KAMPEN SENIOR INCOME TRUST c/o Van Kampen Investment Advisory Corp. One Parkview Plaza 5/th/ Floor Oakbrook Terrace, IL 60181-5555 Attn: Brian Buscher Tel: (630) 684-6283 Fax: (630) 684-6740 COMMERZBANK AG Filiale Reutlingen Abteilung fur Firmenkunden Herr Becker, Postfach 11 44 Reutlingen, 72701 Attn: Heinz Schopp Tel: (49) 7121 304-200 Fax: (49) 7121 304-180 BADEN-WURTTEMBERGISCHE BANK AG Filiale Reutlingen Marktplatz 9 Reutlingen 72764 Germany Attn: Wolfgang Arndt Tel: (49) 7121 3195 50 Fax: (49) 7121 3195 43 with a copy to: BW CAPITAL MARKETS, INC. 630 Fifth Avenue Rockefeller Center Suite 1919 New York, NY 10111 Attn: Philip Waldrop Tel: (212) 218-1805 Fax: (212) 218-1810 DEUTSCHE BANK AG Unterninehmen und Immobilien Filiale Reutlingen Kaiserpassage 72764 Reutlingen Germany Attn: Thomas Hoesle Tel: (49) 7121 335-100 Fax: (40) 7121 335-112 GZB-BANK GENOSSENSCHAFTLICHE ZENTRALBANK AG Stuttgart Heilbronner Strasse 41 Stuttgart, Germany D-70191 Attn: Mariella Kurzenberger Tel: (49) 0711-940-2127 Fax: (49) 0711-940-6127 SCHEDULE I LENDERS; COMMITMENTS
- - ----------------------------------------------------------------------------------------------------------------------------------- Tranche A Tranche B German Term German L/C Revolving Lender Commitment Commitment Loan Commitment Participation Credit Commitment Commitment - - ------------------------------------------------------------------------------------------------------------------------------------ Morgan Guaranty Trust Company of New York $10,285,714.29 $264,000,000.00 (euro) 15,085,714.29 $ 24,000,000.00 Credit Suisse First Boston $ 8,464,285.71 $ 28,500,000.00 (euro) 12,414,285.71 $ 19,750,000.00 The Chase Manhattan Bank $ 7,071,428.57 $ 23,500,000.00 (euro) 10,371,428.57 $ 16,500,000.00 Bankers Trust Company $ 7,071,428.57 $ 23,500,000.00 (euro) 10,371,428.57 $ 16,500,000.00 ABN-AMRO Bank, N.V. $ 6,857,142.86 (euro) 10,057,142.86 $ 16,000,000.00 Bank of America, N.A. $ 1,607,142.86 $ 7,500,000.00 (euro) 2,357,142.86 $ 3,750,000.00 Bank of Tokyo-Mitsubishi Trust Company $ 5,357,142.86 (euro) 7,857,142.86 $ 12,500,000.00 Erste Bank of New York $ 2,142,857.14 (euro) 3,142,857.14 $ 5,000,000.00 First Union National Bank $ 2,142,857.14 $ 25,000,000.00 (euro) 3,142,857.14 $ 5,000,000.00 Fleet National Bank $ 5,357,142.86 (euro) 7,857,142.86 $ 12,500,000.00 HSBC Bank USA $ 6,857,142.86 (euro) 10,057,142.86 $ 16,000,000.00 Natexis Banque $ 1,714,285.71 $ 7,000,000.00 (euro) 2,514,285.71 $ 4,000,000.00 National City Bank $ 3,214,285.71 (euro) 4,714,285.71 $ 7,500,000.00 The Bank of Nova Scotia $ 6,857,142.86 (euro) 10,057,142.86 $ 16,000,000.00 Commerzbank AG (euro) 75,862,500.00 Baden-Wurttembergische Bank AG (euro) 10,837,500.00 Deutsche Bank AG (euro) 10,837,500.00 Unterninehmen Und Immobilien GZB Bank (euro) 10,837,500.00
- - ----------------------------------------------------------------------------------------------------------------------------------- Tranche A Tranche B German Term German L/C Revolving Lender Commitment Commitment Loan Commitment Participation Credit Commitment Commitment - - ------------------------------------------------------------------------------------------------------------------------------------ Debt Strategies Fund, Inc. $ 2,000,000.00 Franklin Floating Rate Trust $ 24,000,000.00 General Electric Capital Corporation $ 10,000,000.00 KZH-ING-1 LLC $ 2,000,000.00 KZH-ING-2 LLC $ 8,000,000.00 KZH Shoshone LLC $ 5,000,000.00 Pilgrim Prime Rate Trust $ 8,000,000.00 Sawgrass Trading LLC $ 10,000,000.00 Merrill Senior Floating Rate Fund $ 15,000,000.00 Merrill Senior Floating Rate Fund II $ 5,000,000.00 KZH Sterling LLC $ 5,000,000.00 Van Kampen Prime Rate Income Trust $ 15,000,000.00 Van Kampen Senior Income Trust $ 22,000,000.00 - - ------------------------------------------------------------------------------------------------------------------------------------ TOTAL $75,000,000.00 $510,000,000.00 (euro)108,375,000.00 (euro)110,000,000.00 $175,000,000.00 - - ------------------------------------------------------------------------------------------------------------------------------------
EX-10.2 7 0007.txt GUARANTEE AND COLLATERAL AGREEMENT Exhibit 10.2 CONFORMED COPY ================================================================================ GUARANTEE AND COLLATERAL AGREEMENT made by DYNATECH LLC and its parent DYNATECH CORPORATION and certain of its Subsidiaries in favor of MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent Dated as of May 23, 2000 ================================================================================ TABLE OF CONTENTS Page SECTION 1. DEFINED TERMS.......................................................... 2 1.1 Definitions........................................................... 2 1.2 Other Definitional Provisions......................................... 7 SECTION 2. GUARANTEE.............................................................. 8 2.1 Guarantee............................................................. 8 2.2 Right of Contribution................................................. 9 2.3 No Subrogation........................................................ 9 2.4 Amendments, etc. with respect to the Borrower Obligations............. 10 2.5 Guarantee Absolute and Unconditional.................................. 10 2.6 Reinstatement......................................................... 11 2.7 Payments.............................................................. 11 SECTION 3. GRANT OF SECURITY INTEREST............................................. 12 3.1 Grant................................................................. 12 3.2 Pledged Collateral.................................................... 12 3.3 Certain Exceptions.................................................... 13 SECTION 4. REPRESENTATIONS AND WARRANTIES......................................... 13 4.1 Representations and Warranties of Each Guarantor...................... 13 4.2 Representations and Warranties of Each Grantor........................ 14 4.2.1 Title; No Other Liens................................................. 14 4.2.2 Perfected First Priority Liens........................................ 14 4.2.3 Chief Executive Office................................................ 16 4.2.4 Inventory and Equipment............................................... 16 4.2.5 Farm Products......................................................... 16 4.2.6 Accounts.............................................................. 16 4.2.7 Intellectual Property................................................. 16 4.3 Representations and Warranties of Each Pledgor........................ 17 SECTION 5. COVENANTS.............................................................. 18 5.1 Covenants of Each Guarantor........................................... 18 5.2 Covenants of Each Grantor............................................. 18 5.2.1 Delivery of Instruments and Chattel Paper............................. 18 5.2.2 Maintenance of Insurance.............................................. 18 5.2.3 Payment of Obligations................................................ 19 5.2.4 Maintenance of Perfected Security Interest; Further Documentation..... 19 5.2.5 Changes in Locations, Name, etc....................................... 19 5.2.6 Notices............................................................... 20 5.2.7 Pledged Securities.................................................... 20 5.2.8 Accounts.............................................................. 20
i 5.2.9 Maintenance of Records................................................ 21 5.2.10 Acquisition of Intellectual Property.................................. 21 5.2.11 Protection of Trade Secrets........................................... 21 5.3 Covenants of Each Pledgor............................................. 21 5.4 Covenant of Dynatech.................................................. 22 SECTION 6. REMEDIAL PROVISIONS.................................................... 23 6.1 Certain Matters Relating to Accounts.................................. 23 6.2 Communications with Obligors; Grantors Remain Liable.................. 25 6.3 Pledged Stock......................................................... 26 6.4 Proceeds to be Turned Over To Administrative Agent.................... 27 6.5 Application of Proceeds............................................... 27 6.6 Code and Other Remedies............................................... 27 6.7 Registration Rights................................................... 28 6.8 Waiver; Deficiency.................................................... 29 SECTION 7. THE ADMINISTRATIVE AGENT............................................... 30 7.1 Administrative Agent's Appointment as Attorney-in-Fact, etc........... 30 7.2 Duty of Administrative Agent.......................................... 31 7.3 Execution of Financing Statements..................................... 32 7.4 Authority of Administrative Agent..................................... 32 7.5 Right Of Inspection................................................... 32 SECTION 8. MISCELLANEOUS.......................................................... 33 8.1 Amendments in Writing................................................. 33 8.2 Notices............................................................... 33 8.3 No Waiver by Course of Conduct; Cumulative Remedies................... 33 8.4 Enforcement Expenses; Indemnification................................. 33 8.5 Successors and Assigns................................................ 34 8.6 Set-Off............................................................... 34 8.7 Counterparts.......................................................... 34 8.8 Severability.......................................................... 34 8.9 Section Headings...................................................... 35 8.10 Integration........................................................... 35 8.11 GOVERNING LAW......................................................... 35 8.12 Submission To Jurisdiction; Waivers................................... 35 8.13 Acknowledgments....................................................... 36 8.14 WAIVER OF JURY TRIAL.................................................. 36 8.15 Additional Granting Parties........................................... 36 8.16 Releases.............................................................. 36
ii SCHEDULES 1 Notice Addresses of Guarantors 2 Description of Pledged Securities 3 Location of Jurisdiction of Organization and Chief Executive Office or Sole Place of Business 4 Location of Inventory and Equipment 5 Copyrights and Copyright Licenses; Patents and Patent Licenses; Trademarks and Trademark Licenses 6 Existing Prior Liens 7 Accounts 8 Contracts 9 Filings 10 De Minimus Foreign Subsidiaries ANNEXES 1 Assumption Agreement 2 Supplemental Agreement iii GUARANTEE AND COLLATERAL AGREEMENT GUARANTEE AND COLLATERAL AGREEMENT, dated as of May 23, 2000, made by Dynatech Corporation, a Delaware corporation ("Dynatech"), Dynatech LLC, a Delaware limited liability company wholly owned by Dynatech (the "Primary Borrower") and certain Subsidiaries of the Primary Borrower that are signatories hereto, in favor of MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as administrative agent (in such capacity, the "Administrative Agent") for the banks and other financial institutions (collectively, the "Lenders"; individually, a "Lender") from time to time parties to the Credit Agreement, dated as of May 23, 2000 (as amended, waived, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the Primary Borrower, the German Borrowers (as defined in the Credit Agreement; together with the Primary Borrower, the "Borrowers"),Morgan Guaranty Trust Company of New York, as the German Term Loan Servicing Bank, the Lenders, the Administrative Agent, Credit Suisse First Boston, as syndication agent for the Lenders, and The Chase Manhattan Bank and Bankers Trust Company, each in its capacity as co-documentation agent for the Lenders. W I T N E S S E T H: ------------------- WHEREAS, the Borrowers are members of an affiliated group of companies that includes Dynatech, the Primary Borrower's Active Subsidiaries which are Domestic Subsidiaries and any Subsidiary of the Primary Borrower that becomes a party hereto from time to time after the date hereof (the Primary Borrower, Dynatech, the Primary Borrower's Active Subsidiaries which are Domestic Subsidiaries and each such other Subsidiary collectively, the "Granting Parties"); WHEREAS, the proceeds of extensions of credit under the Credit Agreement will be used in part to make valuable transfers to one or more of the Granting Parties in connection with the operation of their respective businesses, WHEREAS, the Primary Borrower and the other Granting Parties are engaged in related businesses, and each such Granting Party will derive substantial direct and indirect benefit from the making of the extensions of credit under the Credit Agreement; and WHEREAS, it is a condition to the obligation of the Lenders to make their respective extensions of credit under the Credit Agreement that the Granting Parties shall execute and deliver this Agreement to the Administrative Agent for the benefit of the Secured Parties; NOW, THEREFORE, in consideration of the premises and to induce the Administrative Agent and the Lenders to enter into the Credit Agreement and to induce the Lenders to make their respective extensions of credit thereunder, each Granting Party hereby agrees with the Administrative Agent, for the ratable benefit of the Secured Parties, as follows: 2 SECTION 1. DEFINED TERMS 1.1 Definitions. (a) Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement, and the following terms that are defined in the Code (as defined below) are used herein as so defined: Chattel Paper, Documents, Equipment, Farm Products, Fixtures and Inventory. (b) The following terms shall have the following meanings: "Accounts": all accounts (as defined in the Code) of each Grantor. "Agreement": this Guarantee and Collateral Agreement, as the same may be amended, supplemented or otherwise modified from time to time. "Borrower Obligations": the collective reference to the Primary Borrower Obligations and the German Borrower Obligations. "Code": the Uniform Commercial Code as from time to time in effect in the State of New York. "Collateral": as defined in Section 3. "Collateral Account Bank": Morgan Guaranty Trust Company of New York or another bank which at all times is a Lender as selected by the relevant Grantor and notified to the Administrative Agent in writing promptly following such selection. "Collateral Proceeds Account": the cash collateral account established by the relevant Grantor at an office of the Collateral Account Bank in the name of the Administrative Agent. "Contracts": with respect to any Grantor, all contracts, agreements, instruments and indentures in any form, and portions thereof (except for the contracts listed on Schedule 8), to which such Grantor is a party or under which such Grantor has any right, title or interest or to which such Grantor or any property of such Grantor is subject, as the same may from time to time be amended, supplemented or otherwise modified, including, without limitation, (i) all rights of such Grantor to receive moneys due and to become due to it thereunder or in connection therewith, (ii) all rights of such Grantor to damages arising thereunder and (iii) all rights of such Grantor to perform and to exercise all remedies thereunder. "Copyright Licenses": with respect to any Grantor, all United States written license agreements of such Grantor providing for the grant by or to such Grantor of any right to use any Copyright of such Grantor, other than agreements with any Person who is an Affiliate or a Subsidiary of the Primary Borrower, including, without limitation, any license agreements listed on Schedule 5 hereto, subject, in each case, to the terms of such license agreements, and the right to prepare for sale, sell and advertise for sale, all Inventory now or hereafter covered by such licenses. 3 "Copyrights": with respect to any Grantor, all of such Grantor's right, title and interest in and to all United States copyrights, whether or not the underlying works of authorship have been published or registered, United States copyright registrations and copyright applications, and (a) all renewals thereof, (b) all income, royalties, damages and payments now and hereafter due and/or payable with respect thereto, including, without limitation, payments under all licenses entered into in connection therewith, and damages and payments for past or future infringements thereof and (c) the right to sue or otherwise recover for past, present and future infringements thereof. "General Fund Account": the general fund account of the relevant Grantor established at the same office of the Collateral Account Bank as the Collateral Proceeds Account. "General Intangibles": all "general intangibles" as such term is defined in Section 9-106 of the Uniform Commercial Code in effect in the State of New York on the date hereof. "German Borrower Obligations": the collective reference to the unpaid principal and interest of the Reimbursement Term Loans if any incurred by any German Borrower, the Preference Replacement Loans if any incurred by any German Borrower, the Reimbursement Obligations of any German Borrower with respect to the German L/C and all other obligations and liabilities of any German Borrower (including, without limitation, interest accruing at the then applicable rate provided in the Credit Agreement after the maturity of such Reimbursement Term Loans or Reimbursement Obligations and interest accruing at the then applicable rate provided in the Credit Agreement after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the German Borrower, whether or not a claim for post-filing or post- petition interest is allowed in such proceeding) to the German L/C Issuing Bank, the German Term Loan Servicing Bank or the Administrative Agent arising out of or in connection with the German L/C, the Reimbursement Term Loans or the Credit Agreement (other than principal or interest owing in respect of the German Term Loans), whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred. "Granting Parties": as defined in the recitals hereto. "Grantor": the Primary Borrower and each Domestic Subsidiary of the Primary Borrower that from time to time becomes a party hereto. "Guarantor Obligations": with respect to any Guarantor, the collective reference to (i) the Borrower Obligations guaranteed by such Guarantor pursuant to Section 2 and (ii) all obligations and liabilities of such Guarantor that may arise under or in connection with this Agreement or any other Credit Document to which such Guarantor is a party, in each case whether on account of guarantee obligations, reimbursement obligations, fees, indemnities, costs, expenses or otherwise (including, without limitation, all fees and disbursements of counsel to the Administrative Agent or to the Lenders that are required to be paid by such Guarantor pursuant to the terms of this Agreement or any other Credit Document). 4 "Guarantor": (i) with respect to the Primary Borrower Obligations, each Granting Party other than the Primary Borrower, and (ii) with respect to the German Borrower Obligations, each Granting Party including the Primary Borrower. "Hedge Agreements": as to any Grantor, all interest rate swaps, caps or collar agreements or similar arrangements entered into by such Person providing for protection against fluctuations in interest rates or currency exchange rates or the exchange of nominal interest obligations, either generally or under specific contingencies (including, without limitation, all Hedging Arrangements with respect to currency exchange rates entered into in connection with the Credit Agreement). "Instruments": has the meaning specified in the Code, but excluding the Pledged Securities. "Intellectual Property": with respect to any Grantor, the collective reference to such Grantor's Copyrights, Copyright Licenses, Patents, Patent Licenses, Trade Secrets, Trademarks and Trademark Licenses. "Intercompany Note": with respect to any Grantor, any promissory note in a principal amount in excess of $1,000,000 evidencing loans made by such Grantor to the Primary Borrower or any of its Subsidiaries. "Issuers": the collective reference to the Persons identified on Schedule 2 as the issuers of the Pledged Stock. "Inventory": with respect to any Grantor, all inventory (as defined in the Code) of such Grantor. "Letters of Credit": the collective reference to the Domestic L/C's and the German L/C. "Loans": the collective reference to the "Loans" as defined in the Credit Agreement. "Notes": the collective reference to the "Notes" as defined in the Credit Agreement. "Obligations": (i) in the case of the Primary Borrower, the Primary Borrower Obligations and the Guarantor Obligations of the Primary Borrower, and (ii) in the case of each Guarantor other than the Primary Borrower, the Guarantor Obligations of such Guarantor. "Patent Licenses": with respect to any Grantor, all United States written license agreements of such Grantor with any Person who is not an Affiliate or a Subsidiary in connection with any of the Patents of such Grantor or such other Person's patents, whether such Grantor is a licensor or a licensee under any such agreement, including, without limitation, the license agreements listed on Schedule 5, subject, in each case, to the terms of such license agreements, and the right to prepare for sale, sell and advertise for sale, all Inventory now or hereafter covered by such licenses. 5 "Patents": with respect to any Grantor, all of such Grantor's right, title and interest in and to all United States patents, patent applications and patentable inventions, including, without limitation, all patents and patent applications identified in Schedule 5, and including, without limitation, (a) all inventions and improvements described and claimed therein, (b) the right to sue or otherwise recover for any and all past, present and future infringement thereof, (c) all income, royalties, damages and other payments now and hereafter due and/or payable with respect thereto (including, without limitation, payments under all licenses entered into in connection therewith, and damages and payments for past or future infringements thereof), and (d) all other rights corresponding thereto in the United States and all reissues, divisions, continuations, continuations-in-part, substitutes, renewals, and extensions thereof, all improvements thereon, and all other rights of any kind whatsoever of such Grantor accruing thereunder or pertaining thereto. "Pledged Collateral": as defined in Section 3. "Pledged Notes": with respect to any Pledgor, all Intercompany Notes at any time issued to such Pledgor. "Pledged Securities": the collective reference to the Pledged Notes and the Pledged Stock. "Pledged Stock": with respect to any Pledgor, the shares of Capital Stock listed on Schedule 2 as held by such Pledgor, together with any other shares, stock certificates, options or rights of any nature whatsoever in respect of the Capital Stock of any Issuer that may be issued or granted to, or held by, such Pledgor while this Agreement is in effect (provided that in no event shall there be pledged, nor shall any Pledgor be required to pledge, directly or indirectly, (x) any Capital Stock of any Subsidiary other than an Active Subsidiary or (y) more than 65% of any series of the outstanding Capital Stock of any Foreign Subsidiary pursuant to this Agreement). "Pledgor": Dynatech (with respect to the Pledged Stock of the Primary Borrower), the Primary Borrower (with respect to Pledged Stock of the entities listed on Schedule 2 hereto under the name of the Primary Borrower and any other Pledged Securities held by the Primary Borrower) and any other Granting Party (with respect to Pledged Securities held by such Granting Party). "Primary Borrower Obligations": the collective reference to the unpaid principal of and interest on the Loans made to the Primary Borrower, Reimbursement Obligations of the Primary Borrower in respect of any Domestic L/C and all other obligations and liabilities of the Primary Borrower (including, without limitation, interest accruing at the then applicable rate provided in the Credit Agreement after the maturity of such Loans and Reimbursement Obligations and interest accruing at the then applicable rate provided in the Credit Agreement after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Primary Borrower, whether or not a claim for post-filing or 6 post-petition interest is allowed in such proceeding) to the Administrative Agent or any Lender (or, in the case of any Hedge Agreement referred to below, any Affiliate of any Lender), whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, the Credit Agreement, this Agreement, the other Credit Documents (other than the German L/C) and any Domestic L/C, or any Hedge Agreement entered into by the Primary Borrower with any Person which is, at the time such Hedge Agreement is entered into, a Lender or an Affiliate of any Lender, any Guarantee Obligations of the Primary Borrower or any of its Subsidiaries referred to in subsection 14.3(e) of the Credit Agreement as to which any Lender or any Affiliate thereof is a beneficiary, or any other document made, delivered or given in connection therewith, in each case whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses or otherwise (including, without limitation, all reasonable fees and disbursements of counsel to the Administrative Agent or to the Lenders that are required to be paid by the Primary Borrower pursuant to the terms of any of the foregoing agreements) and obligations in respect of over- drafts and related liabilities owed to any Lender or any Affiliate of any Lender and arising from treasury, depository and cash management services or in connection with any automated clearing house transfers of funds. "Proceeds": all "proceeds" as such term is defined in Section 9- 306(1) of the Uniform Commercial Code in effect in the State of New York on the date hereof and, in any event, Proceeds of Pledged Securities shall include, without limitation, all dividends or other income from the Pledged Securities, collections thereon or distributions or payments with respect thereto. "Secured Parties": the collective reference to the Administrative Agent, the Lenders (including, without limitation the Domestic L/C Issuing Bank and the German L/C Issuing Bank) and any Affiliate of any Lender which has entered into any Hedge Agreement with the Primary Borrower or any of its Subsidiaries or which is the beneficiary of any Guarantee Obligation of the Primary Borrower or any of its Subsidiaries referred to in subsection 14.3(e) of the Credit Agreement, and their respective successors, indorsees, transferees and assigns. "Securities Act": the Securities Act of 1933, as amended from time to time. "Security Collateral": as defined in Section 3. "Trade Secrets": with respect to any Grantor, all of such Grantor's right, title and interest in and to all United States trade secrets, including, without limitation, know-how, processes, formulae, compositions, designs, and confidential business and technical information, and all rights of any kind whatsoever accruing thereunder or pertaining thereto, including, without limitation, (a) all income, royalties, damages and payments now and hereafter due and/or payable with respect thereto, including, without limitation, payments under all licenses, non-disclosure agreements and memoranda of understanding entered into in connection therewith, and damages and payments for past or future misappropriations thereof, and (b) the right to sue or otherwise recover for past, present or future misappropriations thereof. 7 "Trademark Licenses": with respect to any Grantor, all United States written license agreements of such Grantor with any Person who is not an Affiliate or a Subsidiary in connection with any of the Trademarks of such Grantor or such other Person's names or trademarks, whether such Grantor is a licensor or a licensee under any such agreement, including, without limitation, the license agreements listed on Schedule 5, subject, in each case, to the terms of such license agreements, and the right to prepare for sale, sell and advertise for sale, all Inventory now or hereafter covered by such licenses. "Trademarks": with respect to any Grantor, all of such Grantor's right, title and interest in and to all United States trademarks, service marks, trade names, trade dress or other indicia of trade origin or business identifiers, trademark and service mark registrations, and applications for trademark or service mark registrations (except for "intent to use" applications for trademark or service mark registrations filed pursuant to Section 1(b) of the Lanham Act, 15 U.S.C. (S) 1051, unless and until an Amendment to Allege Use or a Statement of Use under Sections 1(c) and 1(d) of said Act has been filed), and any renewals thereof, including, without limitation, each registration and application identified in Schedule 5, and including, without limitation, (a) the right to sue or otherwise recover for any and all past, present and future infringements or dilutions thereof, (b) all income, royalties, damages and other payments now and hereafter due and/or payable with respect thereto (including, without limitation, payments under all licenses entered into in connection therewith, and damages and payments for past or future infringements thereof), and (c) all other rights corresponding thereto in the United States and all other rights of any kind whatsoever of such Grantor accruing thereunder or pertaining thereto in the United States, together in each case with the goodwill of the business connected with the use of, and symbolized by, each such trademark, service mark, trade name, trade dress or other indicia of trade origin or business identifiers. "Vehicles": all cars, trucks, trailers, construction and earth moving equipment and other vehicles covered by a certificate of title law of any state and all tires and other appurtenances to any of the foregoing. 1.2 Other Definitional Provisions. The words "hereof," "herein", "hereto" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section, Schedule and Annex references are to this Agreement unless otherwise specified. (b) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. (c) Where the context requires, terms relating to the Collateral, Pledged Collateral or Security Collateral, or any part thereof, when used in relation to a Granting Party shall refer to such Granting Party's Collateral, Pledged Collateral or Security Collateral or the relevant part thereof. 8 (d) All references in this Agreement to any of the property described in the definition of the term "Collateral" or "Pledged Collateral," or to any Proceeds thereof, shall be deemed to be references thereto only to the extent the same constitute Collateral or Pledged Collateral, respectively. SECTION 2. GUARANTEE 2.1 Guarantee. Each of the Guarantors (other than the Primary Borrower) hereby, jointly and severally, unconditionally and irrevocably, guarantees to the Administrative Agent, for the ratable benefit of the Secured Parties, the prompt and complete payment and performance by the Primary Borrower when due and payable (whether at the stated maturity, by acceleration or otherwise) of the Primary Borrower Obligations. Each of the Guarantors (including the Primary Borrower) hereby, jointly and severally, unconditionally and irrevocably, guarantees to the Administrative Agent, for the ratable benefit of the Secured Parties, the prompt and complete payment and performance by each German Borrower when due and payable (whether at the stated maturity, by acceleration or otherwise) of the German Borrower Obligations. (b) Anything herein or in any other Credit Document to the contrary notwithstanding, the maximum liability of each Guarantor hereunder and under the other Credit Documents shall in no event exceed the amount that can be guaranteed by such Guarantor under applicable law, including applicable federal and state laws relating to the insolvency of debtors. (c) Each Guarantor agrees that the Borrower Obligations guaranteed by it hereunder may at any time and from time to time exceed the amount of the liability of such Guarantor hereunder without impairing the guarantee contained in this Section 2 or affecting the rights and remedies of the Administrative Agent or any other Secured Party hereunder. (d) The guarantee contained in this Section 2 shall remain in full force and effect until the earlier to occur of (i) the first date on which all the Loans, any Reimbursement Obligations, all other Borrower Obligations then due and owing, and the obligations of each Guarantor under the guarantee contained in this Section 2 then due and owing shall have been satisfied by payment in full, no Letter of Credit shall be outstanding and the Commitments shall be terminated, notwithstanding that from time to time during the term of the Credit Agreement the Borrowers may be free from any Borrower Obligations or (ii) as to any Guarantor, the sale or other disposition of all of the Capital Stock of such Guarantor as permitted under the Credit Agreement. (e) No payment made by any of the Borrowers, any of the Guarantors, any other guarantor or any other Person or received or collected by the Administrative Agent or any other Secured Party from any of the Borrowers, any of the Guarantors, any other guarantor or any other Person by virtue of any action or proceeding or any set-off or appropriation or application at any time or from time to time in reduction of or in payment of any of the Borrower Obligations shall be deemed to modify, reduce, release or otherwise affect the liability of any Guarantor hereunder which shall, notwithstanding any such payment 9 (other than any payment made by such Guarantor in respect of the Borrower Obligations or any payment received or collected from such Guarantor in respect of the Borrower Obligations), remain liable for the Borrower Obligations guaranteed by it hereunder up to the maximum liability of such Guarantor hereunder until the earlier to occur of (i) the first date on which the Loans, any Reimbursement Obligations, and all other Borrower Obligations then due and owing, are paid in full, no Letter of Credit shall be outstanding and the Commitments are terminated or (ii) the sale or other disposition of all of the Capital Stock of such Guarantor as permitted under the Credit Agreement. 2.2 Right of Contribution. Each Guarantor hereby agrees that to the extent that a Guarantor shall have paid more than its proportionate share of any payment made hereunder, such Guarantor shall be entitled to seek and receive contribution from and against any other Guarantor hereunder that has not paid its proportionate share of such payment. Each Guarantor's right of contribution shall be subject to the terms and conditions of Section 2.3. The provisions of this Section 2.2 shall in no respect limit the obligations and liabilities of any Guarantor to the Administrative Agent and the other Secured Parties, and each Guarantor shall remain liable to the Administrative Agent and the Lenders for the full amount guaranteed by such Guarantor hereunder. 2.3 No Subrogation. Notwithstanding any payment made by any Guarantor hereunder or any set-off or application of funds of any Guarantor by the Administrative Agent or any other Secured Party, no Guarantor shall be entitled to be subrogated to any of the rights of the Administrative Agent or any other Secured Party against any Borrower or any other Guarantor or any collateral security or guarantee or right of offset held by the Administrative Agent or any other Secured Party for the payment of the Borrower Obligations, nor shall any Guarantor seek or be entitled to seek any contribution or reimbursement from any Borrower or any other Guarantor in respect of payments made by such Guarantor hereunder, until all amounts owing to the Administrative Agent and the other Secured Parties by the Borrowers on account of the Borrower Obligations are paid in full, no Letter of Credit shall be outstanding and the Commitments are terminated. If any amount shall be paid to any Guarantor on account of such subrogation rights at any time when all of the Borrower Obligations shall not have been paid in full, such amount shall be held by such Guarantor in trust for the Administrative Agent and the other Secured Parties, segregated from other funds of such Guarantor, and shall, forthwith upon receipt by such Guarantor, be turned over to the Administrative Agent in the exact form received by such Guarantor (duly indorsed by such Guarantor to the Administrative Agent, if required), to be applied against the Borrower Obligations, whether matured or unmatured, in such order as the Administrative Agent may determine. 10 2.4 Amendments, etc. with respect to the Borrower Obligations. To the maximum extent permitted by law, each Guarantor shall remain obligated hereunder notwithstanding that, without any reservation of rights against any Guarantor and without notice to or further assent by any Guarantor, any demand for payment of any of the Borrower Obligations made by the Administrative Agent or any other Secured Party may be rescinded by the Administrative Agent or such other Secured Party and any of the Borrower Obligations continued, and the Borrower Obligations, or the liability of any other Person upon or for any part thereof, or any collateral security or guarantee therefor or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered or released by the Administrative Agent or any other Secured Party, and the Credit Agreement and the other Credit Documents and any other documents executed and delivered in connection therewith may be amended, modified, supplemented or terminated, in whole or in part, as the Administrative Agent (or the Required Lenders, as the case may be) may deem advisable from time to time, and any collateral security, guarantee or right of offset at any time held by the Administrative Agent or any other Secured Party for the payment of the Borrower Obligations may be sold, exchanged, waived, surrendered or released. Neither the Administrative Agent nor any other Secured Party shall have any obligation to protect, secure, perfect or insure any Lien at any time held by it as security for the Borrower Obligations or for the guarantee contained in this Section 2 or any property subject thereto, except to the extent required by applicable law. 2.5 Guarantee Absolute and Unconditional. Each Guarantor waives, to the maximum extent permitted by applicable law, any and all notice of the creation, renewal, extension or accrual of any of the Borrower Obligations and notice of or proof of reliance by the Administrative Agent or any other Secured Party upon the guarantee contained in this Section 2 or acceptance of the guarantee contained in this Section 2; the Borrower Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred, or renewed, extended, amended or waived, in reliance upon the guarantee contained in this Section 2; and all dealings between any of the Borrowers and any of the Guarantors, on the one hand, and the Administrative Agent and the other Secured Parties, on the other hand, likewise shall be conclusively presumed to have been had or consummated in reliance upon the guarantee contained in this Section 2. Each Guarantor waives, to the maximum extent permitted by applicable law, diligence, presentment, protest, demand for payment and notice of default or nonpayment to or upon any of the Borrowers or any of the other Guarantors with respect to the Borrower Obligations. Each Guarantor understands and agrees, to the extent permitted by law, that the guarantee contained in this Section 2 shall be construed as a continuing, absolute and unconditional guarantee of payment. Each Guarantor hereby waives, to the maximum extent permitted by applicable law, any and all defenses (other than any suit for breach of a contractual provision of any of the Credit Documents) that it may have arising out of or in connection with any and all of the following: (a) the validity or enforceability of the Credit Agreement or any other Credit Document, any of the Borrower Obligations or any other collateral security therefor or guarantee or right of offset with respect thereto at any time or from time to time held by the Administrative Agent or any other Secured Party, (b) any defense, set-off or counterclaim (other than a defense of payment or performance) that may at any time be available to or be asserted by any Borrower against the Administrative Agent or any other Secured Party, (c) any change in the time, place, manner or place of payment, amendment, or waiver or increase in the Obligations, (d) any exchange, taking, or release of Security Collateral, (e) any change in the structure or existence of any 11 Borrower, (f) any application of Security Collateral to Obligations or (g) any other circumstance whatsoever (other than payment in full of the Borrower Obligations guaranteed by it hereunder) (with or without notice to or knowledge of the applicable Borrower or such Guarantor) that constitutes, or might be construed to constitute, an equitable or legal discharge of such Borrower for such Borrower Obligations, or of such Guarantor under the guarantee contained in this Section 2, in bankruptcy or in any other instance. When making any demand hereunder or otherwise pursuing its rights and remedies hereunder against any Guarantor, the Administrative Agent or any other Secured Party may, but shall be under no obligation to, make a similar demand on or otherwise pursue such rights and remedies as it may have against the relevant Borrower, any other Guarantor or any other Person or against any collateral security or guarantee for the Borrower Obligations guaranteed by such Guarantor hereunder or any right of offset with respect thereto, and any failure by the Administrative Agent or any other Secured Party to make any such demand, to pursue such other rights or remedies or to collect any payments from such Borrower, any other Guarantor or any other Person or to realize upon any such collateral security or guarantee or to exercise any such right of offset, or any release of such Borrower, any other Guarantor or any other Person or any such collateral security, guarantee or right of offset, shall not relieve any Guarantor of any obligation or liability hereunder, and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of law, of the Administrative Agent or any other Secured Party against any Guarantor. For the purposes hereof "demand" shall include the commencement and continuance of any legal proceedings. 2.6 Reinstatement. The guarantee of any Guarantor contained in this Section 2 shall continue to be effective, or be reinstated, as the case may be, if at any time payment, or any part thereof, of any of the Borrower Obligations guaranteed by such Guarantor hereunder is rescinded or must otherwise be restored or returned by the Administrative Agent or any other Secured Party upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of any Borrower or any Guarantor, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, any Borrower or any Guarantor or any substantial part of its property, or otherwise, all as though such payments had not been made. 2.7 Payments. Each Guarantor hereby guarantees that payments hereunder will be paid to the Administrative Agent without set-off or counterclaim, in the currency in which the relevant Borrower Obligations are outstanding pursuant to the Credit Agreement, at the applicable Payment Office or such at other address as may be designated in writing by the Administrative Agent to such Guarantor from time to time in accordance with subsection 17.2 of the Credit Agreement. 12 SECTION 3. GRANT OF SECURITY INTEREST 3.1 Grant. Each Granting Party that is a Grantor hereby grants, subject to existing licenses to use the Copyrights, Patents, Trademarks and Trade Secrets granted by such Grantor in the ordinary course of its business, to the Administrative Agent, for the ratable benefit of the Secured Parties, a security interest in all of the Collateral of such Grantor, as collateral security for the prompt and complete payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of the Obligations of such Grantor, except as provided in Section 3.3. The term "Collateral", as to any Grantor, means the following property now owned or at any time hereafter acquired by such Grantor or in which such Grantor now has or at any time in the future may acquire any right, title or interest, except as provided in Section 3.3: (a) all Accounts; (b) all Chattel Paper; (c) all Contracts; (d) all Documents; (e) all Equipment (other than Vehicles); (f) all General Intangibles; (g) all Instruments; (h) all Intellectual Property; (i) all Inventory; (j) all books and records pertaining to any of the foregoing; (k) the Collateral Proceeds Account; and (l) to the extent not otherwise included, all Proceeds and products of any and all of the foregoing and all collateral security and guarantees given by any Person with respect to any of the foregoing; provided that Collateral shall not include any Pledged Collateral, or any property or assets specifically excluded from Pledged Collateral (including any Capital Stock of any Foreign Subsidiary in excess of 65% of any series of such stock). 3.2 Pledged Collateral. Each Granting Party that is a Pledgor hereby grants to the Administrative Agent, for the ratable benefit of the Secured Parties, a security interest in all of the Pledged Collateral of such Pledgor, as collateral security for the prompt and complete performance when due (whether at the stated maturity, by acceleration or otherwise) of the Obligations of such Pledgor, except as provided in Section 3.3. The term "Pledged Collateral", as to any Pledgor, means the Pledged Securities now owned or at any time hereafter acquired by such Pledgor, and any Proceeds thereof. The term "Security Collateral", as to any Granting Party, means, collectively, the Collateral (if any) and the Pledged Collateral (if any) of such Granting Party. 13 3.3 Certain Exceptions. No security interest is or will be granted pursuant hereto in any right, title or interest of any Granting Party under or in: (a) any Instruments, Contracts, Chattel Paper, General Intangibles, Copyright Licenses, Patent Licenses, Trademark Licenses or other contracts or agreements with or issued by Persons other than a Subsidiary of the Primary Borrower (collectively, "Excluded Agreements") that would otherwise be included in the Security Collateral (and such Excluded Agreements shall not be deemed to constitute a part of the Security Collateral) for so long as, and to the extent that, the granting of such a security interest pursuant hereto would result in a breach, default or termination of such Excluded Agreements; (b) any Equipment that would otherwise be included in the Security Collateral (and such Equipment shall not be deemed to constitute a part of the Security Collateral) during such time as such Equipment is subject to a Lien permitted by subsection 14.2(f) of the Credit Agreement; (c) any Capital Stock of WWG in excess of 65% of any series of such Capital Stock; (d) any Capital Stock of Holdings I GmbH held by the Primary Borrower (so long as such Capital Stock is equal to or less than 1% of the Capital Stock of Holdings I GmbH); (e) any Capital Stock of any Foreign Subsidiary of WWG; or (f) Capital Stock of any Foreign Subsidiary listed in Schedule 10 (so long as such Capital Stock is not required to be pledged hereunder pursuant to subsections 12.9(c) and 12.9(d) of the Credit Agreement). SECTION 4. REPRESENTATIONS AND WARRANTIES 4.1 Representations and Warranties of Each Guarantor. To induce the Administrative Agent and the Lenders to enter into the Credit Agreement and to induce the Lenders to make their respective extensions of credit to the Borrowers thereunder, each Guarantor hereby represents and warrants to the Administrative Agent and each other Secured Party that the representations and warranties set forth in Section 10 of the Credit Agreement as they relate to such Guarantor or to the Credit Documents to which such Guarantor is a party, each of which representations and warranties is hereby incorporated herein by reference, are true and correct in all material respects, and the Administrative Agent and each other Secured Party shall be entitled to rely on each of such representations and warranties as if fully set forth herein; provided that each reference in each such representation and warranty to the Primary Borrower's knowledge shall, for the purposes of this Section 4.1, be deemed to be a reference to such Guarantor's knowledge. 14 4.2 Representations and Warranties of Each Grantor. To induce the Administrative Agent and the Lenders to enter into the Credit Agreement and to induce the Lenders to make their respective extensions of credit to the Borrowers thereunder, each Grantor hereby represents and warrants to the Administrative Agent and each other Secured Party that: 4.2.1 Title; No Other Liens. Except for the security interest granted to the Administrative Agent, for the ratable benefit of the Secured Parties, pursuant to this Agreement and the other Liens permitted to exist on such Grantor's Collateral by the Credit Agreement (including without limitation subsection 14.2 thereof), such Grantor owns each item of such Grantor's Collateral free and clear of any and all Liens. Except as set forth on Schedule 6, no currently effective financing statement or other similar public notice with respect to all or any part of such Grantor's Collateral is on file or of record in any public office, except such as have been filed in favor of the Administrative Agent, for the ratable benefit of the Secured Parties, pursuant to this Agreement or as are permitted by the Credit Agreement (including without limitation subsection 14.2 thereof) or any other Credit Document or for which termination statements will be delivered on the Closing Date. 4.2.2 Perfected First Priority Liens. (i) This Agreement is effective to create, as collateral security for the Obligations of such Grantor, valid and enforceable Liens on such Grantor's Collateral in favor of the Administrative Agent, for the benefit of the Secured Parties, except as enforceability may be affected by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditor's rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing. (ii) Except with regard to Liens (if any) on Specified Assets, upon the completion of the Filings, and the delivery to and continuing possession by the Administrative Agent of all Instruments, Chattel Paper and Documents a security interest in which is perfected by possession, the Liens created pursuant to this Agreement will constitute valid Liens on and (to the extent provided herein) perfected security interests in such Grantor's Collateral in favor of the Administrative Agent for the benefit of the Secured Parties, and will be prior to all other Liens of all other Persons other than Permitted Liens, and enforceable as such as against all other Persons other than Ordinary Course Buyers, except to the extent that the recording of an assignment or other transfer of title to the Administrative Agent or the recording of other applicable documents in the United States Patent and Trademark Office or United States Copyright Office may be necessary for perfection or enforceability, and except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law) or by an implied covenant of good faith and fair dealing. As used in this Section 4.2.2(ii), the following terms shall have the following meanings: 15 "Filings": the filing or recording of the Financing Statements, any Patent and Trademark Security Agreement as set forth in Schedule 9, and any filings after the Closing Date in any other jurisdiction as may be necessary under any Requirement of Law. "Financing Statements": the financing statements delivered to the Administrative Agent by such Grantor on the Closing Date for filing in the jurisdictions listed in Schedule 9. "Ordinary Course Buyers": with respect to goods only, buyers in the ordinary course of business to the extent provided in Section 9-307(1) of the Uniform Commercial Code as in effect from time to time in the relevant jurisdiction. "Permitted Liens": Liens permitted pursuant to the Credit Documents, including without limitation those permitted to exist pursuant to subsection 14.2 of the Credit Agreement. "Specified Assets": the following property and assets of such Grantor: (1) Equipment constituting Fixtures; (2) Patents, Patent Licenses, Trademarks and Trademark Licenses to the extent that (a) Liens thereon which cannot be perfected by the filing of financing statements under the Uniform Commercial Code or by the filing and acceptance thereof in the United States Patent and Trademark Office or (b) such Patents, Patent Licenses, Trademarks and Trademark Licenses are not, individually or in the aggregate, material to the business of Dynatech and its Subsidiaries taken as a whole; (3) Copyrights and Copyright Licenses and Accounts or receivables arising therefrom to the extent that the Uniform Commercial Code as in effect from time to time in the relevant jurisdiction is not applicable to the creation or perfection of Liens thereon; (4) uncertificated securities; (5) Collateral for which the perfection of Liens thereon requires filings in or other actions under the laws of jurisdictions outside the United States of America, any State, territory or dependency thereof or the District of Columbia; (6) contracts, Accounts or receivables subject to the Assignment of Claims Act; (7) goods included in Collateral received by any Person for "sale or return" within the meaning of Section 2-326 of the Uniform Commercial Code of the applicable jurisdiction, to the extent of claims of creditors of such Person; 16 (8) Proceeds of Accounts, receivables or Inventory which do not themselves constitute Collateral or which have not been transferred to or deposited in the Collateral Proceeds Account (if any); and (9) Equipment at various sales offices with a fair market value of less than $10,000 per sales office and mobile goods. 4.2.3 Chief Executive Office. On the date hereof, such Grantor's jurisdiction of organization and the location of such Grantor's chief executive office or sole place of business are specified on Schedule 3. 4.2.4 Inventory and Equipment. On the date hereof, such Grantor's Inventory (other than Inventory held by various Persons (other than a Grantor and its Affiliates) that is being finished or modified by such Persons and thereafter returned to the respective Grantor ("WIP Inventory")) and Equipment (other than equipment at various sales offices with a fair market value of less than $10,000 per sales office and mobile goods) are kept at the locations listed on Schedule 4. 4.2.5 Farm Products. None of such Grantor's Collateral constitutes, or is the Proceeds of, Farm Products. 4.2.6 Accounts. The amount represented by such Grantor to the Administrative Agent or the other Secured Parties from time to time as owing by each account debtor or by all account debtors in respect of such Grantor's Accounts will at such time be the correct amount, in all material respects, actually owing by such account debtor or debtors thereunder, except to the extent that appropriate reserves therefor have been established on the books of such Grantor in accordance with GAAP. The places where such Grantor keeps its records concerning such Grantor's Accounts are listed on Schedule 7 or such other location or locations of which such Grantor shall have provided prior written notice to the Administrative Agent pursuant to Section 5.2.5 hereof. Unless otherwise indicated in writing to the Administrative Agent, each Account of such Grantor arises out of a bona fide sale and delivery of goods or rendition of services by such Grantor. Such Grantor has not given any account debtor any deduction in respect of the amount due under any such Account, except in the ordinary course of business or as such Grantor may otherwise advise the Administrative Agent in writing. 4.2.7 Intellectual Property. Schedule 5 lists all material Trademarks and material Patents, in each case, registered in the United States Patent and Trademark Office and owned by such Grantor in its own name as of the date hereof, and all material Trademark Licenses and all material Patent Licenses (including, without limitation, material Trademark Licenses for registered Trademarks and material Patent Licenses for registered Patents) owned by such Grantor in its own name as of the date hereof. 4.3 Representations and Warranties of Each Pledgor. To induce the Administrative Agent and the Lenders to enter into the Credit Agreement and to induce the Lenders to make their respective extensions of credit thereunder, each Pledgor hereby represents and warrants to the Administrative Agent and each other Secured Party that: 17 4.3.1 Except as provided in Section 3.3, the shares of Pledged Stock pledged by such Pledgor hereunder constitute (i) in the case of each Active Subsidiary which is a Domestic Subsidiary, all the issued and outstanding shares of all classes of the Capital Stock of each such Active Subsidiary owned by such Pledgor and (ii) in the case of each Foreign Subsidiary such percentage (not more than 65%) as is specified on Schedule 2 of all the issued and outstanding shares of all classes of the Capital Stock of each such Foreign Subsidiary. 4.3.2 All the shares of the Pledged Stock pledged by such Pledgor hereunder have been duly and validly issued and are fully paid and nonassessable. 4.3.3 Such Pledgor is the record and beneficial owner of, and has good title to, the Pledged Securities pledged by it hereunder, free of any and all Liens or options in favor of, or claims of, any other Person, except the security interest created by this Agreement and Liens arising by operation of law or permitted by the Credit Agreement. 4.3.4 Upon delivery to the Administrative Agent of the certificates evidencing the Pledged Securities held by such Pledgor together with executed stock or bond powers or other instruments of transfer, the security interest created by this Agreement in such Pledged Securities evidenced by certificates, assuming the continuing possession of such Pledged Securities by the Administrative Agent, will constitute a valid, perfected first priority security interest in such Pledged Securities to the extent provided in and governed by the Code, enforceable in accordance with its terms against all creditors of such Pledgor and any persons purporting to purchase such Pledged Securities from such Pledgor, except as enforceability may be affected by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing. 4.3.5 Upon the filing of financing statements in the appropriate jurisdictions under the Code, the security interest created by this Agreement in such Pledged Securities that constitute uncertificated securities, will constitute a valid, perfected first priority security interest in such Pledged Securities constituting uncertificated securities to the extent provided in and governed by the Code, enforceable in accordance with its terms against all creditors of such Pledgor and any persons purporting to purchase such Pledged Securities from such Pledgor, except as enforceability may be affected by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing. SECTION 5. COVENANTS 5.1 Covenants of Each Guarantor. Each Guarantor covenants and agrees with the Administrative Agent and the other Secured Parties that, from and after the date of this Agreement until the earlier to occur of (i) the date upon which the Loans, any Reimbursement Obligations, and all other Obligations then due and owing, shall have been 18 paid in full, no Letter of Credit shall be outstanding and the Commitments shall have terminated, or (ii) as to any Guarantor the date upon which all the Capital Stock of such Guarantor shall have been sold or otherwise disposed of in accordance with the terms of the Credit Agreement, such Guarantor shall take, or shall refrain from taking, as the case may be, each action that is necessary to be taken or not taken, as the case may be, so that no Default or Event of Default is caused by the failure to take such action or to refrain from taking such action by such Guarantor or any of its Subsidiaries. 5.2 Covenants of Each Grantor. Each Grantor covenants and agrees with the Administrative Agent and the other Secured Parties that, from and after the date of this Agreement until the earlier to occur of (i) the date upon which the Loans, any Reimbursement Obligations, and all other Obligations then due and owing, shall have been paid in full, no Letter of Credit shall be outstanding and the Commitments shall have terminated or (ii) as to any Grantor the date upon which all the Capital Stock of such Grantor shall have been sold or otherwise disposed of in accordance with the terms of the Credit Agreement: 5.2.1 Delivery of Instruments and Chattel Paper. If any amount payable under or in connection with any of such Grantor's Collateral shall be or become evidenced by any Instrument or Chattel Paper, such Grantor shall (except as provided in the following sentence) be entitled to retain possession of all Collateral of such Grantor evidenced by any Instrument or Chattel Paper, and shall hold all such Collateral in trust for the Administrative Agent, for the ratable benefit of the Secured Parties. In the event that an Event of Default shall have occurred and be continuing, upon the request of the Administrative Agent, such Instrument or Chattel Paper shall be promptly delivered to the Administrative Agent, duly indorsed in a manner satisfactory to the Administrative Agent, to be held as Collateral pursuant to this Agreement. Such Grantor shall not permit any other Person to possess any such Collateral at any time other than in connection with any sale or other disposition of such Collateral in a transaction permitted by the Credit Agreement. 5.2.2 Maintenance of Insurance. Such Grantor will maintain, with financially sound and reputable companies, insurance policies (i) insuring such Grantor's Inventory and Equipment against loss by fire, explosion, theft and such other casualties as may be reasonably satisfactory to the Administrative Agent and (ii) insuring such Grantor, the Administrative Agent and the other Secured Parties against liability for personal injury and property damage relating to such Inventory and Equipment, such policies to be in such form and amounts and having such coverage as may be reasonably satisfactory to the Administrative Agent. (b) All such insurance shall (i) provide that no cancellation, material reduction in amount or material change in coverage thereof shall be effective until at least 15 days after receipt by the Administrative Agent of written notice thereof, (ii) name the Administrative Agent as an additional insured party or loss payee, (iii) include deductibles consistent with past practice or consistent with industry practice or otherwise reasonably satisfactory to the Administrative Agent. 19 5.2.3 Payment of Obligations. Such Grantor will pay and discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all material taxes, assessments and governmental charges or levies imposed upon such Grantor's Collateral or in respect of income or profits therefrom, as well as all material claims of any kind (including, without limitation, material claims for labor, materials and supplies) against or with respect to such Grantor's Collateral, except that no such tax, assessment, charge or levy need be paid or satisfied if the amount or validity thereof is currently being contested in good faith by appropriate proceedings and reserves in conformity with GAAP with respect thereto have been provided on the books of such Grantor. 5.2.4 Maintenance of Perfected Security Interest; Further Documentation. (a) Such Grantor shall maintain the security interest created by this Agreement in such Grantor's Collateral as a perfected security interest having at least the priority described in Section 4.2.2 and shall defend such security interest against the claims and demands of all Persons whomsoever. (b) Such Grantor will furnish to the Administrative Agent from time to time statements and schedules further identifying and describing such Grantor's Collateral and such other reports in connection with such Grantor's Collateral as the Administrative Agent may reasonably request in writing, all in reasonable detail. (c) At any time and from time to time, upon the written request of the Administrative Agent, and at the sole expense of such Grantor, such Grantor will promptly and duly execute and deliver such further instruments and documents and take such further actions as the Administrative Agent may reasonably request for the purpose of obtaining or preserving the full benefits of this Agreement and of the rights and powers herein granted by such Grantor, including, without limitation, the filing of any financing or continuation statements under the Uniform Commercial Code (or other similar laws) in effect in any jurisdiction with respect to the security interests created hereby. 5.2.5 Changes in Locations, Name, etc. Such Grantor will not, except upon not less than 30 days' prior written notice to the Administrative Agent and delivery to the Administrative Agent, if applicable, of a written supplement to Schedule 4 showing any additional location at which such Grantor's Inventory or Equipment shall be kept: (i) permit any of such Grantor's Inventory (other than WIP Inventory) or Equipment (other than Equipment at various sales offices with a fair market value of less than $10,000 per sales office and mobile goods) to be kept at a location other than the location(s) applicable to such Grantor listed on Schedule 4 (other than Inventory or Equipment being conveyed, sold, leased, assigned, transferred or otherwise disposed of as permitted by the Credit Agreement or Inventory having a fair market value not in excess of $500,000 in the aggregate); (ii) change the location of its chief executive office or sole place of business from that referred to in Section 4.2.3; or (iii) change its name, identity or corporate structure to such an extent that any financing statement filed by the Administrative Agent in connection with this Agreement would become seriously misleading; 20 provided that, prior to taking any such action, or promptly after receiving a written request therefor from the Administrative Agent, such Grantor shall deliver to the Administrative Agent all additional executed financing statements and other documents reasonably requested by the Administrative Agent to maintain the validity, perfection and priority of the security interests provided for herein. 5.2.6 Notices. Such Grantor will advise the Administrative Agent promptly, in reasonable detail, of: (a) any Lien (other than security interests created hereby or Liens permitted under the Credit Agreement) on any of such Grantor's Collateral which would adversely affect the ability of the Administrative Agent to exercise any of its remedies hereunder; and (b) of the occurrence of any other event which would reasonably be expected to have a material adverse effect on the aggregate value of such Grantor's Collateral or on the security interests created hereby. 5.2.7 Pledged Securities. In the case of each Grantor that is an Issuer, such Issuer agrees that (i) it will be bound by the terms of this Agreement relating to the Pledged Stock issued by it and will comply with such terms insofar as such terms are applicable to it, (ii) it will notify the Administrative Agent promptly in writing of the occurrence of any of the events described in Section 5.3.1 with respect to the Pledged Stock issued by it and (iii) the terms of Sections 6.3(c) and 6.7 shall apply to it, mutatis mutandis, with respect to all actions that may be required of it pursuant to Section 6.3(c) or 6.7 with respect to the Pledged Stock issued by it. 5.2.8 Accounts. (a) Other than in the ordinary course of business or as permitted by the Credit Documents, such Grantor will not (i) grant any extension of the time of payment of any of such Grantor's Accounts, (ii) compromise or settle any such Account for less than the full amount thereof, (iii) release, wholly or partially, any Person liable for the payment of any Account, (iv) allow any credit or discount whatsoever on any such Account or (v) amend, supplement or modify any Account unless such extensions, compromises, settlements, releases, credits or discounts would not reasonably be expected to materially adversely affect the value of the Accounts constituting Collateral taken as a whole. (b) Such Grantor will deliver to the Administrative Agent a copy of each material demand, notice or document received by it that questions or calls into doubt the validity or enforceability of more than 10% of the aggregate amount of the then outstanding Accounts. 5.2.9 Maintenance of Records. Such Grantor will keep and maintain at its own cost and expense reasonably satisfactory and complete records of its Collateral, including, without limitation, a record of all payments received and all credits granted with respect to such Collateral, and shall mark such records to evidence this Agreement and the Liens and the security interests created hereby. 21 5.2.10 Acquisition of Intellectual Property. Within 90 days after the end of each calendar year, such Grantor will notify the Administrative Agent of any acquisition by such Grantor of (i) any registration of any material Copyright, Patent or Trademark or (ii) any exclusive rights under a material Copyright License, Patent License or Trademark License constituting Collateral, and shall take such actions as may be reasonably requested by the Administrative Agent (but only to the extent such actions are within such Grantor's control) to perfect the security interest granted to the Administrative Agent and the other Secured Parties therein, to the extent provided herein in respect of any Copyright, Patent or Trademark constituting Collateral on the date hereof, by (x) the execution and delivery of a Patent and Trademark Security Agreement (or amendments to any such agreement previously executed or delivered by such Grantor) or other comparable agreements with respect to Copyrights or Copyright Licenses constituting Collateral and/or (y) the making of appropriate filings (I) of financing statements under the Uniform Commercial Code of any applicable jurisdiction and/or (II) in the United States Patent and Trademark Office, or with respect to Copyrights and Copyright Licenses, another applicable office). 5.2.11 Protection of Trade Secrets. Such Grantor shall take all steps which it deems commercially reasonable to preserve and protect the secrecy of all material Trade Secrets of such Grantor. 5.3 Covenants of Each Pledgor. Each Pledgor covenants and agrees with the Administrative Agent and the other Secured Parties that, from and after the date of this Agreement until the earlier to occur of (i) the Loans, any Reimbursement Obligations, and all other Obligations then due and owing shall have been paid in full, no Letter of Credit shall be outstanding and the Commitments shall have terminated or (ii) as to any Pledgor, all the Capital Stock of such Pledgor shall have been sold or otherwise disposed of as permitted under the terms of the Credit Agreement: 5.3.1 If such Pledgor shall, as a result of its ownership of its Pledged Securities, become entitled to receive or shall receive any stock certificate (including, without limitation, any stock certificate representing a stock dividend or a distribution in connection with any reclassification, increase or reduction of capital or any certificate issued in connection with any reorganization), stock option or similar rights in respect of the Capital Stock of any Issuer, whether in addition to, in substitution of, as a conversion of, or in exchange for, any shares of the Pledged Stock, or otherwise in respect thereof, such Pledgor shall accept the same as the agent of the Administrative Agent and the other Secured Parties, hold the same in trust for the Administrative Agent and deliver the same forthwith to the Administrative Agent in the exact form received, duly indorsed by such Pledgor to the Administrative Agent, if required, together with an undated stock power covering such certificate duly executed in blank by such Grantor, to be held by the Administrative Agent, subject to the terms hereof, as additional collateral security for the Obligations (subject to Section 3.3 and provided that in no event shall there be pledged, nor shall any Pledgor be required to pledge, more than 65% of any series of the outstanding Capital Stock of any Foreign Subsidiary Holdco or other Foreign Subsidiary pursuant to this Agreement). Any sums paid upon or in respect of the Pledged Securities upon the liquidation or dissolution of any Issuer or maker (except any liquidation or dissolution of any Subsidiary of the Primary Borrower in accordance with the Credit Agreement) shall be paid over to the Administrative Agent to be held by it hereunder as additional collateral security for the Obligations, and in case any distribution of capital shall be made on or in respect of the Pledged Stock or any property shall be distributed upon or with respect to the Pledged Stock pursuant to the 22 recapitalization or reclassification of the capital of any Issuer or pursuant to the reorganization thereof, the property so distributed shall, unless otherwise subject to a perfected security interest in favor of the Administrative Agent, be delivered to the Administrative Agent to be held by it hereunder as additional collateral security for the Obligations. If any sums of money or property so paid or distributed in respect of the Pledged Securities shall be received by such Pledgor, such Pledgor shall, until such money or property is paid or delivered to the Administrative Agent, hold such money or property in trust for the Secured Parties, segregated from other funds of such Pledgor, as additional collateral security for the Obligations. 5.3.2 Without the prior written consent of the Administrative Agent, such Pledgor will not (except as permitted by the Credit Agreement) (i) vote to enable, or take any other action to permit, any Issuer to issue any stock or other equity securities of any nature or to issue any other securities convertible into or granting the right to purchase or exchange for any stock or other equity securities of any nature of any Issuer, (ii) sell, assign, transfer, exchange, or otherwise dispose of, or grant any option with respect to, the Pledged Securities or Proceeds thereof or (iii) create, incur or permit to exist any Lien or option in favor of, or any material adverse claim of any Person with respect to, any of the Pledged Securities or Proceeds thereof, or any interest therein, except for the security interests created by this Agreement or Liens arising by operation of law. 5.3.3 Such Pledgor shall maintain the security interest created by this Agreement in such Pledgor's Pledged Collateral as a perfected security interest having at least the priority described in Section 4.3.4 and shall defend such security interest against the claims and demands of all Persons whomsoever. At any time and from time to time, upon the written request of the Administrative Agent, and at the sole expense of such Pledgor, such Pledgor will promptly and duly execute and deliver such further instruments and documents and take such further actions as the Administrative Agent may reasonably request for the purpose of obtaining or preserving the full benefits of this Agreement and of the rights and powers herein granted by such Pledgor. 5.4 Covenant of Dynatech. Dynatech covenants and agrees with the Administrative Agent and the other Secured Parties that, from and after the date of this Agreement until the Loans, any Reimbursement Obligations, and all other Obligations then due and owing, shall have been paid in full, no Letter of Credit shall be outstanding and the Commitments shall have terminated that Dynatech shall not conduct or otherwise engage, in any business or operations other than: (i) the Transaction, the German Borrower Merger and the other transactions contemplated by the Transaction Documents or the Existing Transaction Documents or the provision of administrative, legal, accounting and management services to or on behalf of any of its Subsidiaries, (ii) the ownership of the Capital Stock or other interests of its Subsidiaries, the sale and transfer of such ownership interests (to the extent not otherwise prohibited by the Credit Agreement), and the exercise of rights and performance of obligations in connection therewith, (iii) the entry into, and exercise of rights and performance of obligations in respect of, (A) the Transaction Documents, the Existing Transaction Documents, this Agreement and any other Credit Document to which Dynatech is a party, any other agreement to which Dynatech is a party on the date hereof, the Senior Subordinated Note Indenture and the Senior Subordinated Notes or any guarantee thereof, and any guarantee of Indebtedness or other obligations of any of its Subsidiaries permitted pursuant to 23 the Credit Documents, in each case as amended, supplemented, waived or otherwise modified from time to time, and any refinancings, refundings, renewals or extensions thereof, (B) contracts and agreements with officers, directors and employees of Dynatech or a Subsidiary thereof relating to their employment or directorships, (C) insurance policies and related contracts and agreements, and (D) equity subscription agreements, registration rights agreements, voting and other stockholder agreements, engagement letters, underwriting agreements and other agreements in respect of its equity securities or any offering, issuance or sale thereof, including but not limited to in respect of the Management Subscription Agreements, (iv) the offering, issuance, sale and repurchase or redemption of, and dividends or distributions on, its equity securities, (v) the filing of registration statements, and compliance with applicable reporting and other obligations, under federal, state or other securities laws, (vi) the listing of its equity securities and compliance with applicable reporting and other obligations in connection therewith, (vii) the retention of (and the entry into, and exercise of rights and performance of obligations in respect of, contracts and agreements with) transfer agents, private placement agents, underwriters, counsel, accountants and other advisors and consultants, (viii) the performance of obligations under and compliance with its certificate of incorporation and by-laws, or any applicable law, ordinance, regulation, rule, order, judgment, decree or permit, including, without limitation, as a result of or in connection with the activities of its Subsidiaries, (ix) the incurrence and payment of its operating and business expenses and any taxes for which it may be liable, (x) making loans to or other Investments in, or incurrence of Indebtedness to, its Subsidiaries, (xi) the ownership of, and exercise of rights and performance of obligations in respect of, Intellectual Property (as defined in the Credit Agreement for the purposes of this subsection only) and foreign patents, trademarks, trade names, copyrights, technology, know-how and processes and licensing such Intellectual Property and foreign patents, trademarks, trade names, copyrights, technology, know-how and processes (other than such Intellectual Property and foreign patents, trademarks, trade names, copyrights, technology, know-how and processes which is material to the business of the Primary Borrower and its Subsidiaries, which Intellectual Property and foreign patents, trademarks, trade names, copyrights, technology, know-how and processes shall be owned by the Primary Borrower and its Subsidiaries) and (xii) other activities incidental or related to the foregoing. SECTION 6. REMEDIAL PROVISIONS 6.1 Certain Matters Relating to Accounts. At any time and from time to time after the occurrence and during the continuance of an Event of Default, the Administrative Agent shall have the right to make test verifications of the Accounts in any reasonable manner and through any reasonable medium that it reasonably considers advisable, and the relevant Grantor shall furnish all such assistance and information as the Administrative Agent may reasonably require in connection with such test verifications. At any time and from time to time after the occurrence and during the continuance of an Event of Default, upon the Administrative Agent's reasonable request and at the expense of the relevant Grantor, such Grantor shall cause independent public accountants or others reasonably satisfactory to the Administrative Agent to furnish to the Administrative Agent reports showing reconciliations, aging and test verifications of, and trial balances for, the Accounts. 24 (b) The Administrative Agent hereby authorizes each Grantor to collect such Grantor's Accounts, and the Administrative Agent may curtail or terminate said authority at any time after the occurrence and during the continuance of an Event of Default. If required by the Administrative Agent at any time after the occurrence and during the continuance of an Event of Default, any Proceeds constituting collections of such Accounts, when collected by such Grantor, (i) shall be forthwith (and, in any event, within two Business Days of receipt by such Grantor) be deposited in or otherwise transferred to the Collateral Proceeds Account established by such Grantor maintained under the sole dominion and control of the Administrative Agent, subject to withdrawal by the Administrative Agent for the account of the Secured Parties only as provided in Section 65, and (ii) until so turned over, shall be held by such Grantor in trust for the Administrative Agent and the other Secured Parties, segregated from other funds of such Grantor. All Proceeds constituting collections of Accounts while held by the Collateral Account Bank (or by any Guarantor in trust for the benefit of the Administrative Agent and the other Secured Parties) shall continue to be collateral security for all of the Obligations and shall not constitute payment thereof until applied as hereinafter provided. At any time when an Event of Default has occurred and is continuing, at the Administrative Agent's election, the Administrative Agent may apply all or any part of the funds on deposit in the Collateral Proceeds Account established by the relevant Grantor to the payment of the Obligations of such Grantor then due and owing, such application to be made as set forth in Section 6.5 hereof. So long as no Event of Default has occurred and is continuing, the funds on deposit in the Collateral Proceeds Account shall be remitted as provided in Section 6.1(d) hereof. (c) At any time and from time to time after the occurrence and during the continuance of an Event of Default and if the Administrative Agent has terminated a Grantor's right to collect Accounts pursuant to clause (b) above, at the Administrative Agent's request, each Grantor shall deliver to the Administrative Agent all original and other documents evidencing, and relating to, the agreements and transactions which gave rise to such Grantor's Accounts, including, without limitation, all original orders, invoices and shipping receipts. (d) General Fund Account. So long as no Event of Default has occurred and is continuing, the Administrative Agent shall instruct the Collateral Account Bank to promptly remit any funds on deposit in each Grantor's Collateral Proceeds Account to such Grantor's General Fund Account. In the event that an Event of Default has occurred and is continuing, the Administrative Agent and the Grantors agree that the Administrative Agent, at its option, may require that each Collateral Proceeds Account be established at Morgan Guaranty Trust Company of New York. Each Grantor shall have the right, at any time and from time to time, to withdraw such of its own funds from its own General Fund Account, and to maintain such balances in its General Fund Account, as it shall deem to be necessary or desirable. (e) Restructuring of Deposit Accounts. If (a) any Collateral Proceeds Account is maintained at a Collateral Account Bank located in a state within the United States in which Article 9 of the Uniform Commercial Code in effect in such state has been expressly made applicable to (and only for so long as it is applicable to) demand deposit accounts and all filings have been made in such state that are necessary to perfect the Secured Parties' security interest in such Collateral Proceeds Account or (b) after the Closing Date the relevant Grantor demonstrates to the Administrative Agent, and the Administrative Agent in its sole discretion agrees, that the costs associated with maintaining both a Collateral Proceeds Account and a 25 General Fund Account outweigh any benefits to the Secured Parties in terms of any additional protection to their rights in such Grantor's Collateral that could not be achieved with the use of a single account, then upon the request of such Grantor, the Administrative Agent may amend this Agreement to delete the requirement that a separate General Fund Account be maintained and provide that such Grantor be entitled to withdraw funds on deposit in such Collateral Proceeds Account at any time so long as no Event of Default has occurred and is continuing. 6.2 Communications with Obligors; Grantors Remain Liable. The Administrative Agent in its own name or in the name of others may at any time and from time to time after the occurrence and during the continuance of an Event of Default specified in Section 15.2(a) of the Credit Agreement, communicate with obligors under the Accounts and parties to the Contracts (in each case, to the extent constituting Collateral) to verify with them to the Administrative Agent's satisfaction the existence, amount and terms of any Accounts or Contracts. (b) Upon the request of the Administrative Agent at any time after the occurrence and during the continuance of an Event of Default specified in Section 15.2(a) of the Credit Agreement, each Grantor shall notify obligors on such Grantor's Accounts and parties to such Grantor's Contracts (in each case, to the extent constituting Collateral) that such Accounts and such Contracts have been assigned to the Administrative Agent, for the ratable benefit of the Secured Parties, and that payments in respect thereof shall be made directly to the Administrative Agent. (c) Anything herein to the contrary notwithstanding, each Grantor shall remain liable under each of such Grantor's Accounts to observe and perform all the conditions and obligations to be observed and performed by it thereunder, all in accordance with the terms of any agreement giving rise thereto. Neither the Administrative Agent nor any Lender shall have any obligation or liability under any Account (or any agreement giving rise thereto) by reason of or arising out of this Agreement or the receipt by the Administrative Agent or any other Secured Party of any payment relating thereto, nor shall the Administrative Agent or any other Secured Party be obligated in any manner to perform any of the obligations of any Grantor under or pursuant to any Account (or any agreement giving rise thereto) to make any payment, to make any inquiry as to the nature or the sufficiency of any payment received by it or as to the sufficiency of any performance by any party thereunder, to present or file any claim, to take any action to enforce any performance or to collect the payment of any amounts that may have been assigned to it or to which it may be entitled at any time or times. 6.3 Pledged Stock. Unless an Event of Default shall have occurred and be continuing and the Administrative Agent shall have given notice to the relevant Pledgor of the Administrative Agent's intent to exercise its corresponding rights pursuant to Section 6.3(b), each Pledgor shall be permitted to receive all cash dividends and distributions paid in respect of the Pledged Stock and all payments made in respect of the Pledged Notes, to the extent permitted in the Credit Agreement, and to exercise all voting and corporate rights with respect to the Pledged Stock; provided, however, that no vote shall be cast or corporate right exercised or such other action taken (other than in connection with a transaction expressly permitted by the Credit Agreement) which, in the Administrative Agent's reasonable judgment, would materially impair the Pledged Collateral or the related rights or remedies of the Secured Parties or which would be inconsistent with or result in any violation of any provision of the Credit Agreement, this Agreement or any other Credit Document. 26 (b) If an Event of Default shall occur and be continuing and the Administrative Agent shall give notice of its intent to exercise such rights to the relevant Pledgor or Pledgors, (i) the Administrative Agent shall have the right to receive any and all cash dividends, payments or other Proceeds paid in respect of the Pledged Stock and make application thereof to the Obligations in such order as is provided in Section 6.5, and (ii) any or all of the Pledged Stock shall be registered in the name of the Administrative Agent or its nominee, and the Administrative Agent or its nominee may thereafter exercise (x) all voting, corporate and other rights pertaining to such Pledged Stock at any meeting of shareholders of the relevant Issuer or Issuers or otherwise and (y) any and all rights of conversion, exchange, subscription and any other rights, privileges or options pertaining to such Pledged Stock as if it were the absolute owner thereof (including, without limitation, the right to exchange at its discretion any and all of the Pledged Stock upon the merger, consolidation, reorganization, recapitalization or other fundamental change in the corporate structure of any Issuer, or upon the exercise by the relevant Pledgor or the Administrative Agent of any right, privilege or option pertaining to such Pledged Stock, and in connection therewith, the right to deposit and deliver any and all of the Pledged Stock with any committee, depositary, transfer agent, registrar or other designated agency upon such terms and conditions as the Administrative Agent may reasonably determine), all without liability (other than for its gross negligence or willful misconduct) except to account for property actually received by it, but the Administrative Agent shall have no duty to any Pledgor to exercise any such right, privilege or option and shall not be responsible for any failure to do so or delay in so doing, provided that the Administrative Agent shall not exercise any voting or other consensual rights pertaining to the Pledged Stock in any way that would constitute an exercise of the remedies described in Section 6.6 other than in accordance with Section 6.6. (c) Each Pledgor hereby authorizes and instructs each Issuer or maker of any Pledged Securities pledged by such Pledgor hereunder to (i) comply with any instruction received by it from the Administrative Agent in writing that (x) states that an Event of Default has occurred and is continuing and (y) is otherwise in accordance with the terms of this Agreement, without any other or further instructions from such Pledgor, and each Pledgor agrees that each Issuer or maker shall be fully protected in so complying, and (ii) unless otherwise expressly permitted hereby, pay any dividends or other payments with respect to the Pledged Securities directly to the Administrative Agent. 6.4 Proceeds to be Turned Over To Administrative Agent. In addition to the rights of the Administrative Agent and the other Secured Parties specified in Section 6.1 with respect to payments of Accounts, if an Event of Default shall occur and be continuing, and the Administrative Agent shall have instructed any Grantor to do so, all Proceeds received by such Grantor consisting of cash, checks and other Cash Equivalent items shall be held by such Grantor in trust for the Administrative Agent and the other Secured Parties, segregated from other funds of such Grantor, and shall, forthwith upon receipt by such Grantor, be turned over to the Administrative Agent in the exact form received by such Grantor (duly indorsed by such Grantor to the Administrative Agent, if required). All Proceeds received by the Administrative Agent hereunder shall be held by the Administrative Agent in the relevant Collateral Proceeds Account maintained under its sole dominion and control. All Proceeds while held by the Administrative Agent in such Collateral Proceeds Account (or by such Grantor in trust for the Administrative Agent and the other Secured Parties) shall continue to be held as collateral security for all the Obligations and shall not constitute payment thereof until applied as provided in Section 65. 27 6.5 Application of Proceeds. It is agreed that if an Event of Default shall occur and be continuing, any and all Proceeds of the relevant Granting Party's Security Collateral received by the Administrative Agent (whether from the relevant Granting Party or otherwise) shall be held by the Administrative Agent for the benefit of the Secured Parties as collateral security for the Obligations of the relevant Granting Party (whether matured or unmatured), and/or then or at any time thereafter may, in the sole discretion of the Administrative Agent, be applied by the Administrative Agent against the Obligations of the relevant Granting Party then due and owing in the following order of priority: FIRST, to the payment of all reasonable costs and expenses incurred by the Administrative Agent in connection with this Agreement, the Credit Agreement, any other Credit Document or any of the Obligations of the relevant Granting Party, including, without limitation, all court costs and the reasonable fees and expenses of its agents and legal counsel, and any other reasonable costs or expenses incurred in connection with the exercise by the Administrative Agent of any right or remedy under this Agreement, the Credit Agreement, or any other Credit Document; SECOND, to the ratable satisfaction of all other Obligations of the relevant Granting Party; and THIRD, to the relevant Granting Party or its successors or assigns, or to whomsoever may be lawfully entitled to receive the same. 6.6 Code and Other Remedies. If an Event of Default shall occur and be continuing, the Administrative Agent, on behalf of the Secured Parties, may exercise, in addition to all other rights and remedies granted to them in this Agreement and in any other instrument or agreement securing, evidencing or relating to the Obligations to the extent permitted by applicable law, all rights and remedies of a secured party under the Code or any other applicable law. Without limiting the generality of the foregoing, to the extent permitted by applicable law, the Administrative Agent, without demand of performance or other demand, presentment, protest, advertisement or notice of any kind (except any notice required by law referred to below) to or upon any Granting Party or any other Person (all and each of which demands, defenses, advertisements and notices are hereby waived), may in such circumstances forthwith collect, receive, appropriate and realize upon the Security Collateral, or any part thereof, and/or may forthwith sell, lease, assign, give option or options to purchase, or otherwise dispose of and deliver the Security Collateral or any part thereof (or contract to do any of the foregoing), in one or more parcels at public or private sale or sales, at any exchange, broker's board or office of the Administrative Agent or any other Secured Party or elsewhere upon such terms and conditions as it may deem advisable and at such prices as it may deem best, for cash or on credit or for future delivery without assumption of any credit risk. The Administrative Agent or any other Secured Party shall have the right upon any such public sale or sales, and, to the extent permitted by law, upon any such private sale or sales, to purchase the whole or any part of the Security Collateral so sold, free of any right or equity of redemption in any Granting Party, which right or equity is hereby waived or released. Each Granting Party further agrees, at the Administrative Agent's request, to assemble the Security 28 Collateral and make it available to the Administrative Agent at places which the Administrative Agent shall reasonably select, whether at such Granting Party's premises or elsewhere. The Administrative Agent shall apply the net proceeds of any action taken by it pursuant to this Section 6.6, after deducting all reasonable costs and expenses of every kind incurred in connection therewith or incidental to the care or safekeeping of any of the Security Collateral or in any way relating to the Security Collateral or the rights of the Administrative Agent and the other Secured Parties hereunder, including, without limitation, reasonable attorneys' fees and disbursements, to the payment in whole or in part of the Obligations of the relevant Granting Party then due and owing (including, without limitation, to the extent required by Section 15.3 of the Credit Agreement to cash collateralize Domestic L/C Obligations outstanding at such time), in the order of priority specified in Section 6.5 above, and only after such application and after the payment by the Administrative Agent of any other amount required by any provision of law, including, without limitation, Section 9-504(1)(c) of the Code, need the Administrative Agent account for the surplus, if any, to any Granting Party. To the extent permitted by applicable law, each Granting Party waives all claims, damages and demands it may acquire against the Administrative Agent or any other Secured Party arising out of the repossession, retention or sale of collateral, except to the extent arising as a result of the gross negligence or willful misconduct of the Administrative Agent or such other Secured Party. If any notice of a proposed sale or other disposition of Collateral shall be required by law, such notice shall be deemed reasonable and proper if given at least 10 days before such sale or other disposition. 6.7 Registration Rights. (a) If the Administrative Agent shall determine to exercise its right to sell any or all of the Pledged Stock pursuant to Section 6.6, and if in the reasonable opinion of the Administrative Agent it is necessary or reasonably advisable to have the Pledged Stock, or that portion thereof to be sold, registered under the provisions of the Securities Act, the relevant Pledgor will use its reasonable best efforts to cause the Issuer thereof to (i) execute and deliver, and use its best efforts to cause the directors and officers of such Issuer to execute and deliver, all such instruments and documents, and do or cause to be done all such other acts as may be, in the reasonable opinion of the Administrative Agent, necessary or advisable to register such Pledged Stock, or that portion thereof to be sold, under the provisions of the Securities Act, (ii) use its reasonable best efforts to cause the registration statement relating thereto to become effective and to remain effective for a period of not more than one year from the date of the first public offering of such Pledged Stock, or that portion thereof to be sold, and (iii) make all amendments thereto and/or to the related prospectus which, in the reasonable opinion of the Administrative Agent, are necessary or advisable, all in conformity with the requirements of the Securities Act and the rules and regulations of the Securities and Exchange Commission applicable thereto. Such Pledgor agrees to cause such Issuer to comply with the provisions of the securities or "Blue Sky" laws of any and all states and the District of Columbia that the Administrative Agent shall reasonably designate and to make available to its security holders, as soon as practicable, an earnings statement (which need not be audited) that will satisfy the provisions of Section 11(a) of the Securities Act. (b) Such Pledgor recognizes that the Administrative Agent may be unable to effect a public sale of any or all such Pledged Stock, by reason of certain prohibitions contained in the Securities Act and applicable state securities laws or otherwise, and may be compelled to resort to one or more private sales thereof to a restricted group of purchasers which will be obliged to agree, among other things, to acquire such securities for their own 29 account for investment and not with a view to the distribution or resale thereof. Such Pledgor acknowledges and agrees that any such private sale may result in prices and other terms less favorable than if such sale were a public sale and, notwithstanding such circumstances, agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner. The Administrative Agent shall be under no obligation to delay a sale of any of the Pledged Stock for the period of time necessary to permit the Issuer thereof to register such securities for public sale under the Securities Act, or under applicable state securities laws, even if such Issuer would agree to do so. (c) Such Pledgor agrees to use its reasonable best efforts to do or cause to be done all such other acts as may be necessary to make such sale or sales of all or any portion of such Pledged Stock pursuant to this Section 6.7 valid and binding and in compliance with any and all other applicable Requirements of Law. Such Pledgor further agrees that a breach of any of the covenants contained in this Section 6.7 will cause irreparable injury to the Administrative Agent and the Lenders, that the Administrative Agent and the Lenders have no adequate remedy at law in respect of such breach and, as a consequence, that each and every covenant contained in this Section 6.7 shall be specifically enforceable against such Pledgor, and to the extent permitted by applicable law, such Pledgor hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants except for a defense that no Event of Default has occurred or is continuing under the Credit Agreement. 6.8 Waiver; Deficiency. Each Granting Party (other than the Primary Borrower) waives and agrees not to assert any rights or privileges that it may acquire under Section 9-112 of the Code, to the extent permitted by applicable law. Each Granting Party shall remain liable for any deficiency if the proceeds of any sale or other disposition of the Security Collateral are insufficient to pay in full, the Loans (other than the German Term Loans, but including any Reimbursement Term Loans), Reimbursement Obligations (including, without limitation, any Domestic L/C Obligations which subsequently become Reimbursement Obligations) constituting Obligations of such Granting Party and, to the extent then due and owing, all other Obligations of such Granting Party and the reasonable fees and disbursements of any attorneys employed by the Administrative Agent or any other Secured Party to collect such deficiency. 30 SECTION 7. THE ADMINISTRATIVE AGENT 7.1 Administrative Agent's Appointment as Attorney-in-Fact, etc. Each Granting Party hereby irrevocably constitutes and appoints the Administrative Agent and any authorized officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of such Granting Party and in the name of such Granting Party or in its own name, for the purpose of carrying out the terms of this Agreement, to take any and all appropriate action and to execute any and all documents and instruments that may be reasonably necessary or desirable to accomplish the purposes of this Agreement to the extent permitted by applicable law, provided that the Administrative Agent agrees not to exercise such power except upon the occurrence and during the continuance of an Event of Default. Without limiting the generality of the foregoing, at any time when an Event of Default has occurred and is continuing (in each case to the extent permitted by applicable law), (x) each Pledgor hereby gives the Administrative Agent the power and right, on behalf of such Pledgor, without notice or assent by such Pledgor, to execute, in connection with any sale provided for in Section 6.6 or 6.7, any indorsements, assessments or other instruments of conveyance or transfer with respect to such Pledgor's Pledged Collateral, and (y) each Grantor hereby gives the Administrative Agent the power and right, on behalf of such Grantor, without notice to or assent by such Grantor, to do any or all of the following: (i) in the name of such Grantor or its own name, or otherwise, take possession of and indorse and collect any checks, drafts, notes, acceptances or other instruments for the payment of moneys due under any Account of such Grantor that constitutes Collateral or with respect to any other Collateral of such Grantor and file any claim or take any other action or institute any proceeding in any court of law or equity or otherwise deemed appropriate by the Administrative Agent for the purpose of collecting any and all such moneys due under any Account of such Grantor that constitutes Collateral or with respect to any other Collateral of such Grantor whenever payable; (ii) in the case of any Copyright, Patent or Trademark constituting Collateral of such Grantor, execute and deliver any and all agreements, instruments, documents and papers as the Administrative Agent may reasonably request to such Grantor to evidence the Administrative Agent's and the Lenders' security interest in such Copyright, Patent or Trademark and the goodwill and general intangibles of such Grantor relating thereto or represented thereby; (iii) pay or discharge taxes and Liens, other than Liens permitted under this Agreement or the other Credit Documents, levied or placed on the Collateral of such Grantor, effect any repairs or any insurance called for by the terms of this Agreement and pay all or any part of the premiums therefor and the costs thereof; and (iv) (i) direct any party liable for any payment under any of the Collateral of such Grantor to make payment of any and all moneys due or to become due thereunder directly to the Administrative Agent or as the Administrative Agent shall direct; (ii) ask or demand for, collect, receive payment of and receipt for, any and all moneys, 31 claims and other amounts due or to become due at any time in respect of or arising out of any Collateral of such Grantor; (iii) sign and indorse any invoices, freight or express bills, bills of lading, storage or warehouse receipts, drafts against debtors, assignments, verifications, notices and other documents in connection with any of the Collateral of such Grantor; (iv) commence and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect the Collateral of such Grantor or any portion thereof and to enforce any other right in respect of any Collateral of such Grantor; (v) defend any suit, action or proceeding brought against such Grantor with respect to any Collateral of such Grantor; (vi) settle, compromise or adjust any such suit, action or proceeding described in clause (v) above and, in connection therewith, to give such discharges or releases as the Administrative Agent may deem appropriate; (vii) subject to any existing reserved rights or licenses, assign any Copyright, Patent or Trademark constituting Collateral of such Grantor (along with the goodwill of the business to which any such Copyright, Patent or Trademark pertains), for such term or terms, on such conditions, and in such manner, as the Administrative Agent shall in its sole discretion determine; and (viii) generally, sell, transfer, pledge and make any agreement with respect to or otherwise deal with any of the Collateral of such Grantor as fully and completely as though the Administrative Agent were the absolute owner thereof for all purposes, and do, at the Administrative Agent's option and such Grantor's expense, at any time, or from time to time, all acts and things which the Administrative Agent deems necessary to protect, preserve or realize upon the Collateral of such Grantor and the Administrative Agent's and the other Secured Parties' security interests therein and to effect the intent of this Agreement, all as fully and effectively as such Grantor might do. Anything in this Section 7.1(a) to the contrary notwithstanding, the Administrative Agent agrees that it will not exercise any rights under the power of attorney provided for in this Section 7.1(a) unless an Event of Default shall have occurred and be continuing. (b) The reasonable expenses of the Administrative Agent incurred in connection with actions undertaken as provided in this Section 7.1, together with interest thereon at a rate per annum equal to the rate per annum at which interest would then be payable on past due ABR Loans that are Term Loans under the Credit Agreement, from the date of payment by the Administrative Agent to the date reimbursed by the relevant Granting Party, shall be payable by such Granting Party to the Administrative Agent on demand. (c) Each Granting Party hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue hereof. All powers, authorizations and agencies contained in this Agreement are coupled with an interest and are irrevocable as to the relevant Granting Party until this Agreement is terminated as to such Granting Party, and the security interests in the Security Collateral of such Granting Party created hereby are released. 7.2 Duty of Administrative Agent. The Administrative Agent's sole duty with respect to the custody, safekeeping and physical preservation of the Security Collateral in its possession, under Section 9-207 of the Code or otherwise, shall be to deal with it in the same manner as the Administrative Agent deals with similar property for its own account. Neither the Administrative Agent, any other Secured Party nor any of their respective officers, directors, employees or agents shall be liable for failure to demand, collect or realize upon any 32 of the Security Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Security Collateral upon the request of any Granting Party or any other Person or, except as otherwise provided herein, to take any other action whatsoever with regard to the Security Collateral or any part thereof. The powers conferred on the Administrative Agent and the other Secured Parties hereunder are solely to protect the Administrative Agent's and the other Secured Parties' interests in the Security Collateral and shall not impose any duty upon the Administrative Agent or any other Secured Party to exercise any such powers. The Administrative Agent and the other Secured Parties shall be accountable only for amounts that they actually receive as a result of the exercise of such powers, and neither they nor any of their officers, directors, employees or agents shall be responsible to any Granting Party for any act or failure to act hereunder, except as otherwise provided herein or for their own gross negligence or willful misconduct. 7.3 Execution of Financing Statements. Pursuant to Section 9-402 of the Code and any other applicable law, each Granting Party authorizes the Administrative Agent to file or record financing statements with respect to such Granting Party's Security Collateral without the signature of such Granting Party in such form and in such filing offices as the Administrative Agent reasonably determines appropriate to perfect the security interests of the Administrative Agent under this Agreement. A photographic or other reproduction of this Agreement shall be sufficient as a financing statement in any jurisdiction. The Administrative Agent agrees to notify the relevant Granting Party of any financing or continuation statement filed by it pursuant to this Section 7.3, provided that any failure to give such notice shall not affect the validity or effectiveness of any such filing. 7.4 Authority of Administrative Agent. Each Granting Party acknowledges that the rights and responsibilities of the Administrative Agent under this Agreement with respect to any action taken by the Administrative Agent or the exercise or non-exercise by the Administrative Agent of any option, voting right, request, judgment or other right or remedy provided for herein or resulting or arising out of this Agreement or any amendment, supplement or other modification of this Agreement shall, as between the Administrative Agent and the Secured Parties, be governed by the Credit Agreement and by such other agreements with respect thereto as may exist from time to time among them, but, as between the Administrative Agent and the Granting Parties the Administrative Agent shall be conclusively presumed to be acting as agent for the Secured Parties with full and valid authority so to act or refrain from acting, and no Granting Party shall be under any obligation, or entitlement, to make any inquiry respecting such authority. 7.5 Right Of Inspection. Upon reasonable written advance notice to any Grantor and as often as may reasonably be desired, the Administrative Agent shall have reasonable access during normal business hours to all the books, correspondence and records of such Grantor, and the Administrative Agent and its representatives may examine the same, and to the extent reasonable, take extracts therefrom and make photocopies thereof, and such Grantor agrees to render to the Administrative Agent, at such Grantor's reasonable cost and expense, such clerical and other assistance as may be reasonably requested with regard thereto. The Administrative Agent and its representatives shall also have the right, upon reasonable advance written notice to such Grantor subject to any lease restrictions to enter during normal business hours into and upon any premises owned, leased or operated by such 33 Grantor where any of such Grantor's Inventory or Equipment is located for the purpose of inspecting the same, observing its use or otherwise protecting its interests therein. SECTION 8. MISCELLANEOUS 8.1 Amendments in Writing. None of the terms or provisions of this Agreement may be waived, amended, supplemented or otherwise modified except by a written instrument executed by each affected Granting Party and the Administrative Agent, provided that any provision of this Agreement imposing obligations on any Granting Party may be waived by the Administrative Agent in a written instrument executed by the Administrative Agent. 8.2 Notices. All notices, requests and demands to or upon the Administrative Agent or any Granting Party hereunder shall be effected in the manner provided for in subsection 17.2 of the Credit Agreement; provided that any such notice, request or demand to or upon any Guarantor shall be addressed to such Guarantor at its notice address set forth on Schedule 1, unless and until such Guarantor shall change such address by notice to the Administrative Agent given in accordance with subsection 17.2 of the Credit Agreement. 8.3 No Waiver by Course of Conduct; Cumulative Remedies. Neither the Administrative Agent nor any other Secured Party shall by any act (except by a written instrument pursuant to Section 8.1), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any Default or Event of Default. No failure to exercise, nor any delay in exercising, on the part of the Administrative Agent or any other Secured Party, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by the Administrative Agent or any other Secured Party of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which the Administrative Agent or such other Secured Party would otherwise have on any future occasion. The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any other rights or remedies provided by law. 8.4 Enforcement Expenses; Indemnification. (a) Each Guarantor agrees to pay or reimburse each Secured Party and the Administrative Agent for all their respective reasonable costs and expenses incurred in collecting against such Guarantor under the guarantee contained in Section 2 or otherwise enforcing or preserving any rights under this Agreement against such Guarantor and the other Credit Documents to which such Guarantor is a party, including, without limitation, the reasonable fees and disbursements of one firm of counsel to the Secured Parties and the Administrative Agent. (b) Each Guarantor agrees to pay, and to save the Administrative Agent and the Secured Parties harmless from, (x) any and all liabilities with respect to, or resulting from any delay in paying, any and all stamp, excise, sales or other similar taxes which may be payable or determined to be payable with respect to any of the Security Collateral or in connection with any of the transactions contemplated by this Agreement and (y) any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, 34 enforcement, performance and administration of this Agreement (collectively, the "indemnified liabilities"), in each case to the extent the Primary Borrower would be required to do so pursuant to subsection 17.5 of the Credit Agreement, and in any event excluding any taxes or other indemnified liabilities arising from gross negligence or willful misconduct of the Administrative Agent or any Secured Party. (c) The agreements in this Section 8.4 shall survive repayment of the Obligations and all other amounts payable under the Credit Agreement and the other Credit Documents. 8.5 Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the Granting Parties, the Administrative Agent and the Secured Parties and their respective successors and assigns; provided that no Granting Party may assign, transfer or delegate any of its rights or obligations under this Agreement without the prior written consent of the Administrative Agent. 8.6 Set-Off. Each Guarantor hereby irrevocably authorizes the Administrative Agent and each other Secured Party at any time and from time to time without notice to such Guarantor, any other Guarantor or any Borrower, any such notice being expressly waived by each Guarantor and by each Borrower, to the extent permitted by applicable law, upon the occurrence and during the continuance of an Event of Default under subsection 15.2(a) of the Credit Agreement so long as any amount remains unpaid after it becomes due and payable by such Guarantor hereunder, to set-off and appropriate and apply against any such amount any and all deposits (general or special, time or demand, provisional or final) (other than the Collateral Proceeds Account and the General Fund Account), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by the Administrative Agent or such other Secured Party to or for the credit or the account of such Guarantor, or any part thereof in such amounts as the Administrative Agent or such other Secured Party may elect. The Administrative Agent and each other Secured Party shall notify such Guarantor promptly of any such set-off and the application made by the Administrative Agent or such other Secured Party of the proceeds thereof; provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of the Administrative Agent and each other Secured Party under this Section 8.6 are in addition to other rights and remedies (including, without limitation, other rights of set-off) which the Administrative Agent or such other Secured Party may have. 8.7 Counterparts. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. 8.8 Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction; provided that, with respect to any Pledged Stock issued by a Foreign Subsidiary, all rights, powers and remedies provided in this Agreement may be exercised only to the extent that they do not violate any provision of 35 any law, rule or regulation of any Governmental Authority applicable to any such Pledged Stock or affecting the legality, validity or enforceability of any of the provisions of this Agreement against the Pledgor (such laws, rules or regulations, "Applicable Law") and are intended to be limited to the extent necessary so that they will not render this Agreement invalid, unenforceable or not entitled to be recorded, registered or filed under the provisions of any Applicable Law. 8.9 Section Headings. The Section headings used in this Agreement are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof. 8.10 Integration. This Agreement and the other Credit Documents represent the entire agreement of the Granting Parties, the Administrative Agent and the other Secured Parties with respect to the subject matter hereof, and there are no promises, undertakings, representations or warranties by the Granting Parties, the Administrative Agent or any other Secured Party relative to subject matter hereof not expressly set forth or referred to herein or in the other Credit Documents. 8.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 8.12 Submission To Jurisdiction; Waivers. Each party hereto hereby irrevocably and unconditionally: (a) submits for itself and its property in any legal action or proceeding relating to this Agreement and the other Credit Documents to which it is a party, or for recognition and enforcement of any judgement in respect thereof, to the non-exclusive general jurisdiction of the courts of the State of New York, the courts of the United States of America for the Southern District of New York, and appellate courts from any thereof; (b) consents that any such action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same; (c) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to such party at its address referred to in Section 8.2 or at such other address of which the Administrative Agent (in the case of any other party hereto) or the Primary Borrower (in the case of the Administrative Agent) shall have been notified pursuant thereto; (d) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction; and 36 (e) waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this Section any punitive damages. 8.13 Acknowledgments. Each Guarantor hereby acknowledges that: (a) it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Credit Documents to which it is a party; (b) neither the Administrative Agent nor any other Secured Party has any fiduciary relationship with or duty to any Guarantor arising out of or in connection with this Agreement or any of the other Credit Documents, and the relationship between the Guarantors, on the one hand, and the Administrative Agent and the Secured Parties, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and (c) no joint venture is created hereby or by the other Credit Documents or otherwise exists by virtue of the transactions contemplated hereby among the Secured Parties or among the Guarantors and the Secured Parties. 8.14 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN. 8.15 Additional Granting Parties. Each new Domestic Subsidiary of the Primary Borrower that is required to become a party to this Agreement pursuant to subsection 12.9(b) of the Credit Agreement shall become a Granting Party for all purposes of this Agreement upon execution and delivery by such Subsidiary of an Assumption Agreement in the form of Annex 1 hereto. Each existing Granting Party that is required to become a Pledgor with respect to Capital Stock of any new Subsidiary of the Primary Borrower pursuant to Section 12.9(b) of the Credit Agreement shall become a Pledgor with respect thereto upon execution and delivery by such Granting Party of a Supplemental Agreement in the form of Annex 2 hereto. 8.16 Releases. (a) At such time as the Loans, the Reimbursement Obligations and the other Obligations then due and owing shall have been paid in full, the Commitments have been terminated and no Letters of Credit shall be outstanding, all Security Collateral shall be released from the Liens created hereby, and this Agreement and all obligations (other than those expressly stated to survive such termination) of the Administrative Agent and each Granting Party hereunder shall terminate, all without delivery of any instrument or performance of any act by any party, and all rights to the Security Collateral shall revert to the Granting Parties. At the request and sole expense of any Granting Party following any such termination, the Administrative Agent shall deliver to such Granting Party any Security Collateral held by the Administrative Agent hereunder, and execute and deliver to such Granting Party such documents (including without limitation UCC termination statements) as such Granting Party shall reasonably request to evidence such termination. (b) In connection with any sale or other disposition of Security Collateral permitted by the Credit Agreement, the Lien pursuant to this Agreement on such sold or disposed of Security Collateral shall be automatically released. In connection with the sale or other disposition of all of the Capital Stock of any Guarantor or the sale or other disposition of Security Collateral permitted under the Credit Agreement, the Administrative Agent shall, upon receipt from the Primary Borrower of a written request for the release of such Guarantor from its Guarantee or the release of the Security Collateral subject to such sale or other disposition, identifying such Guarantor or the relevant Security Collateral and the terms of the sale or other disposition in reasonable detail, including the price thereof and any expenses in connection therewith, together with a certification by the Primary Borrower stating that such transaction is in compliance with the Credit Agreement and the other Credit Documents, execute and deliver to the relevant Granting Party (at the sole cost and expense of such Granting Party) all releases or other documents (including without limitation UCC termination statements) necessary or reasonably desirable for the release of such Guarantee or the Liens created hereby on such Security Collateral, as applicable, as such Granting Party may reasonably request. IN WITNESS WHEREOF, each of the undersigned has caused this Guarantee and Collateral Agreement to be duly executed and delivered as of the date first above written. DYNATECH CORPORATION By: /s/ Allan M. Kline ---------------------------------------- Name: Allan M. Kline Title: Corporate Vice President, Chief Financial Officer and Treasurer DYNATECH LLC By: /s/ Allan M. Kline ---------------------------------------- Name: Allan M. Kline Title: Vice President AIRSHOW, INC. By: /s/ Allan M. Kline ---------------------------------------- Name: Allan M. Kline Title: Vice President APPLIED DIGITAL ACCESS, INC. By: /s/ Allan M. Kline ---------------------------------------- Name: Allan M. Kline Title: Vice President DATAVIEWS LCC By: /s/ Allan M. Kline ---------------------------------------- Name: Allan M. Kline Title: Vice President DATAVIEWS INTERNATIONAL, INC. By: /s/ Allan M. Kline ---------------------------------------- Name: Allan M. Kline Title: Vice President DA VINCI SYSTEMS, INC. By: /s/ Allan M. Kline ---------------------------------------- Name: Allan M. Kline Title: Vice President ICSADVENT CORPORATION By: /s/ Allan M. Kline ---------------------------------------- Name: Allan M. Kline Title: Vice President ITRONIX CORPORATION By: /s/ Allan M. Kline ---------------------------------------- Name: Allan M. Kline Title: Vice President PARALLAX GRAPHICS, INC. By: /s/ Allan M. Kline ---------------------------------------- Name: Allan M. Kline Title: Vice President SIERRA DESIGN LABS By: /s/ Allan M. Kline ---------------------------------------- Name: Allan M. Kline Title: Vice President TELE-PATH INSTRUMENTS, INC. By: /s/ Allan M. Kline ---------------------------------------- Name: Allan M. Kline Title: Vice President W&G EQUITIES, INC. By: /s/ Allan M. Kline ---------------------------------------- Name: Allan M. Kline Title: Vice President WANDEL & GOLTERMANN, INC. By: /s/ Allan M. Kline ---------------------------------------- Name: Allan M. Kline Title: Vice President WAVETEK WANDEL GOLTERMANN LLC By: Dynatech LLC, its sole member By: /s/ Allan M. Kline ---------------------------------------- Name: Allan M. Kline Title: Vice President WANDEL & GOLTERMANN A.T.E. SYSTEMS, INC. By: /s/ Allan M. Kline ---------------------------------------- Name: Allan M. Kline Title: Vice President WANDEL & GOLTERMANN TECHNOLOGIES, INC. By: /s/ Allan M. Kline ---------------------------------------- Name: Allan M. Kline Title: Vice President WAVETEK U.S. INC. By: /s/ Allan M. Kline ---------------------------------------- Name: Allan M. Kline Title: Vice President WESTCOMPCO CORPORATION By: /s/ Allan M. Kline ---------------------------------------- Name: Allan M. Kline Title: Vice President Acknowledged and Agreed to as of the date hereof by: MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent By: /s/ Colleen B. Galle ----------------------------------- Name: Colleen B. Galle Title: Vice President Schedule 1 ---------- NOTICE ADDRESSES OF GUARANTORS [Names of Subsidiaries] [Address] Attention: Telephone: Telecopy: With copies to: Attention: Telephone: Telecopy: Debevoise & Plimpton 875 Third Avenue New York, New York 10022 Attention: David A. Brittenham, Esq. Telephone: (212) 909-6000 Telecopy: (212) 909-6836 Schedule 2 ---------- DESCRIPTION OF PLEDGED SECURITIES PLEDGED STOCK: Schedule 3 ---------- LOCATION OF JURISDICTION OF ORGANIZATION AND CHIEF EXECUTIVE OFFICE OR SOLE PLACE OF BUSINESS Granting Party Location -------------- -------- Schedule 4 ---------- LOCATION OF INVENTORY AND EQUIPMENT Locations --------- Schedule 5 ---------- PATENTS AND PATENT LICENSES TRADEMARKS AND TRADEMARK LICENSES Schedule 6 ---------- EXISTING PRIOR LIENS Schedule 7 ---------- ACCOUNTS Schedule 8 ---------- CONTRACTS Schedule 9 ---------- FILINGS Schedule 10 ----------- DE MINIMUS FOREIGN SUBSIDIARIES Annex 1 to Guarantee and Collateral Agreement ASSUMPTION AGREEMENT, dated as of _________ __, ____, made by ______________________________, a ______________ corporation (the "Additional Granting Party"), in favor of MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as administrative agent (in such capacity, the "Administrative Agent") for the banks and other financial institutions (the "Lenders") from time to time parties to the Credit Agreement referred to below and the other Secured Parties (as defined below). All capitalized terms not defined herein shall have the meaning ascribed to them in such the Guarantee and Collateral Agreement referred to below, or if not defined therein, in the Credit Agreement. W I T N E S S E T H : - - - - - - - - - - WHEREAS, Dynatech LLC, a Delaware limited liability company (the "Primary Borrower"), the German Borrowers named therein, the Lenders, the Administrative Agent, Morgan Guaranty Trust Company of New York, as German Term Loan Servicing Bank, Credit Suisse First Boston, as Syndication Agent, and The Chase Manhattan Bank and Bankers Trust Company, each as Co-Documentation Agent, are parties to a Credit Agreement, dated as of May 23, 2000 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"); WHEREAS, in connection with the Credit Agreement, Dynatech Corporation, a Delaware corporation ("Dynatech"), the Primary Borrower and certain of its Subsidiaries are, or are to become, parties to the Guarantee and Collateral Agreement, dated as of May 23, 2000 (as amended, supplemented or otherwise modified from time to time, the "Guarantee and Collateral Agreement") in favor of the Administrative Agent, for the ratable benefit of the Secured Parties (as defined in the Guarantee and Collateral Agreement); WHEREAS, the Additional Granting Party is a member of an affiliated group of companies that includes the Borrowers and each other Granting Party; the proceeds of the extensions of credit under the Credit Agreement will be used in part to enable the Borrowers to make valuable transfers to one or more of the other Granting Parties (including the Additional Granting Party) in connection with the operation of their respective businesses; and the Borrowers and the other Granting Parties (including the Additional Granting Party) are engaged in related businesses, and each such Granting Party (including the Additional Granting Party) will derive substantial direct and indirect benefit from the making of the extensions of credit under the Credit Agreement; WHEREAS, the Credit Agreement requires the Additional Granting Party to become a party to the Guarantee and Collateral Agreement; and WHEREAS, the Additional Granting Party has agreed to execute and deliver this Assumption Agreement in order to become a party to the Guarantee and Collateral Agreement; 2 NOW, THEREFORE, IT IS AGREED: 1. Guarantee and Collateral Agreement. By executing and delivering this Assumption Agreement, the Additional Granting Party, as provided in Section 8.15 of the Guarantee and Collateral Agreement, hereby becomes a party to the Guarantee and Collateral Agreement as a Granting Party thereunder with the same force and effect as if originally named therein as a Guarantor [, Grantor and Pledgor] [and Grantor] [and Pledgor]/1/ and, without limiting the generality of the foregoing, hereby expressly assumes all obligations and liabilities of a Guarantor [, Grantor and Pledgor] [and Grantor] [and Pledgor]/2/ thereunder. The information set forth in Annex 1-A hereto is hereby added to the information set forth in Schedules ____________ to the Guarantee and Collateral Agreement, and such Schedules are hereby amended and modified to include such information. The Additional Granting Party hereby represents and warrants that each of the representations and warranties of such Additional Grantor, in its capacities as a Guarantor [, Grantor and Pledgor] [and Grantor] [and Pledgor],/3/ contained in Section 4 of the Guarantee and Collateral Agreement is true and correct in all material respects on and as the date hereof (after giving effect to this Assumption Agreement) as if made on and as of such date. 2. GOVERNING LAW. THIS ASSUMPTION AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. IN WITNESS WHEREOF, the undersigned has caused this Assumption Agreement to be duly executed and delivered as of the date first above written. [ADDITIONAL GRANTING PARTY] By: _______________________________ Name: Title: Acknowledged and Agreed to as of the date hereof by: MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent By: _______________________________ Name: Title: - - --------------------------- /1/ Indicate the capacities in which the Additional Granting Party is becoming a Grantor. /2/ Indicate the capacities in which the Additional Granting Party is becoming a Grantor. /3/ Indicate the capacities in which the Additional Granting Party is becoming a Grantor. Annex 1-A to Assumption Agreement Annex 2 to Guarantee and Collateral Agreement SUPPLEMENTAL AGREEMENT, dated as of __________ __, ____, made by _____________________, a ___________ corporation [(the "Additional Pledgor")][(the "Primary Borrower")]/1/, in favor of MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as administrative agent (in such capacity, the "Administrative Agent") for the banks and other financial institutions (the "Lenders") from time to time parties to the Credit Agreement referred to below and the other Secured Parties (as defined below). All capitalized terms not defined herein shall have the meaning ascribed to them in the Guarantee and Collateral Agreement referred to below, or if not defined therein, in the Credit Agreement. W I T N E S S E T H: ------------------- WHEREAS, Dynatech LLC, a Delaware limited liability company (the "Primary Borrower"), the German Borrowers named therein, the Lenders, the Administrative Agent, Morgan Guaranty Trust Company of New York, as German Term Loan Servicing Bank, Credit Suisse First Boston, as Syndication Agent, and The Chase Manhattan Bank and Bankers Trust Company, each as Co-Documentation Agent, are parties to a Credit Agreement, dated as of May 23, 2000 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"); WHEREAS, in connection with the Credit Agreement, Dynatech Corporation, a Delaware corporation ("Dynatech"), the Primary Borrower and certain of its Subsidiaries are parties to the Guarantee and Collateral Agreement, dated as of May 23, 2000 (as amended, supplemented or otherwise modified from time to time, the "Guarantee and Collateral Agreement") in favor of the Administrative Agent, for the ratable benefit of the Secured Parties (as defined in the Guarantee and Collateral Agreement); WHEREAS, the Credit Agreement requires the [Additional Pledgor] [Borrower] to become a Pledgor under the Guarantee and Collateral Agreement with respect to Capital Stock of a new Subsidiary of the Primary Borrower; and WHEREAS, the [Additional Pledgor][Primary Borrower] has agreed to execute and deliver this Supplemental Agreement in order to [supplement/become such a Pledgor to] the Guarantee and Collateral Agreement; - - ----------------------- /1/ Use "Additional Pledgor" if other than the Primary Borrower, and "Primary Borrower" if the Primary Borrower. 2 NOW, THEREFORE, IT IS AGREED: 1. Guarantee and Collateral Agreement. By executing and delivering this Supplemental Agreement, the [Additional Pledgor][Primary Borrower], as provided in Section 8.15 of the Guarantee and Collateral Agreement, hereby becomes a Pledgor under the Guarantee and Collateral Agreement with respect to the shares of Capital Stock of the Subsidiary of the Primary Borrower listed in Annex 2-A hereto, as a Granting Party thereunder. The information set forth in Annex 2-A hereto is hereby added to the information set forth in Schedule 2 to the Guarantee and Collateral Agreement, and such Schedule 2 is hereby amended and modified to include such information. 2. GOVERNING LAW. THIS SUPPLEMENTAL AGREEMENT AND RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. IN WITNESS WHEREOF, the undersigned has caused this Assumption Agreement to be duly executed and delivered as of the date first above written. [ADDITIONAL PLEDGOR] [BORROWER] By: _______________________________ Name: Title: Acknowledged and Agreed to as of the date hereof by: MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Administrative Agent By: _______________________________ Name: Title: EX-10.4 8 0008.txt INDEMNIFICAITON AGREEMENT EXHIBIT 10.4 INDEMNIFICATION AGREEMENT ------------------------- INDEMNIFICATION AGREEMENT, dated as of May 23, 2000 (the "Agreement"), by and among Dynatech Corporation, a Delaware corporation (the "Company"), Dynatech LLC, a Delaware limited liability company and wholly-owned subsidiary of the Company ("Dynatech LLC"), Clayton, Dubilier & Rice Fund VI Limited Partnership, a Cayman Islands exempted limited partnership ("Fund VI"; together with any other investment vehicle managed by CD&R, the "CD&R Fund") and Clayton, Dubilier & Rice, Inc., a Delaware corporation ("CD&R"). Capitalized terms used herein and not otherwise defined have the meanings set forth in Section 1 of this Agreement. WHEREAS, the Company, DWW Acquisition Corporation, a Delaware corporation ("MergerCo") and Wavetek Wandel Goltermann, Inc., a Delaware corporation ("WWG"), entered into an Agreement and Plan of Merger, dated as of February 14, 2000 (the "Merger Agreement"), providing for the merger (the "Merger") of MergerCo with and into WWG, with WWG continuing as the surviving corporation and a wholly-owned subsidiary Dynatech LLC; WHEREAS, in connection with the Merger, the Company sold 30.625 million shares of Common Stock to the CD&R Fund for $122.5 million (the "CD&R Fund Subscription"); WHEREAS, in connection with the Merger and the related equity financing of the Merger, the Company made a rights offering (the "Rights Offering") of Common Stock to its stockholders of record on April 20, 2000 (other than the Clayton, Dubilier & Rice Fund V Limited Partnership); WHEREAS, in connection with the Rights Offering, the CD&R Fund (other than the Clayton, Dubilier & Rice Fund V Limited Partnership) agreed to act as standby purchasers to purchase any shares of Common Stock not purchased by eligible stockholders in the Rights Offering; WHEREAS, following the CD&R Fund Subscription and the purchase of shares as a standby purchasers in the Rights Offering, if any, the CD&R Fund will be a significant stockholder of the Company; WHEREAS, the CD&R Fund is managed by CD&R, and the general partner of the CD&R Fund is CD&R Associates VI Limited Partnership, a Cayman Islands exempted limited partnership (together with any general partner of any other investment vehicle managed by CD&R, "CD&R Associates"), and the general partner of CD&R Associates is CD&R Investment Associates VI, Inc. (including any Person that may become a general partner thereof in the future, "Associates Inc."); WHEREAS, the Company and CD&R are parties to the Consulting Agreement, dated as of May 21, 1998, as amended from time to time (the "Consulting Agreement"); WHEREAS, in connection with the offer (the "Note Tender") by WWG to purchase its 10-1/8% Senior Subordinated Notes due 2007 (the "Notes"), the Company prepared and sent to the holders of such Notes an Offer to Purchase and Consent Solicitation Statement, dated March 14, 2000 (as the same may be amended from time to time, the "Offer to Purchase and Consent Solicitation Statement"); WHEREAS, in order to finance the Merger and the Note Tender and to refinance existing debt and provide liquidity for ongoing business needs, the Company entered into a Credit Agreement, dated as of May __, 2000, among Dynatech LLC, the German Borrowers named therein, J.P. Morgan Securities Inc., as arranger, Morgan Guaranty Trust Company of New York, as Administrative Agent, Credit Suisse First Boston, as Syndication Agent, and the other lenders named therein, providing for borrowing of up to a maximum principal amount of $860 million (the "Senior Secured Credit Facilities"); WHEREAS, CD&R has performed financial, management advisory and other services for the Company, including but not limited to providing assistance in connection with (i) the preparation of the Offer to Purchase and Consent Solicitation Statement, (ii) the retention of various financial and other advisors and consultants in connection with the Transactions and the Securities Offerings, (iii) the preparation, negotiation, execution and delivery of the commitment, fee and engagement letters, credit agreements, indenture supplements, guarantees, mortgages, pledge agreements and other security agreements, subscription, registration rights agreements, dealer manager agreements, and other agreements, instruments and documents, relating to the Senior Secured Credit Facilities, the Note Tender, or otherwise relating to the Financing or the Transactions, (iv) the preparation and circulation of information and offering memoranda and other materials in connection with the Senior Secured Credit Facilities and a registration statement in connection the Rights Offering and (v) the structuring, implementation and consummation of the foregoing transactions; WHEREAS, the Company or one or more of its Subsidiaries from time to time in the future (a) may offer and sell or cause to be offered and sold equity or debt securities (such offerings collectively referred to as the "Subsequent Offerings"), including without limitation (i) offerings of shares of common stock of the Company, and/or options to purchase such shares, to employees, directors, managers and consultants of and to the Company or any Subsidiary (a "Management Offering"), and (ii) one or more offerings of debt securities for the purpose of refinancing any indebtedness of the Company or any Subsidiary or for other corporate purposes, and (b) may repurchase, redeem or otherwise acquire certain securities (and options in respect thereof) of the Company or one or more of its Subsidiaries (any such repurchase or redemption being referred to herein as a "Redemption"); 2 WHEREAS, the parties hereto recognize the possibility that claims might be made against and liabilities incurred by CD&R, the CD&R Fund, CD&R Associates, Associates Inc. or related persons or affiliates under applicable securities laws or otherwise in connection with the Transactions or the Securities Offerings, or relating to other actions or omissions of or by the Company or its Subsidiaries, or relating to the provision by CD&R of management consulting, monitoring and financial advisory services to the Company or its Subsidiaries, and the parties hereto accordingly wish to provide for CD&R, the CD&R Fund, CD&R Associates, Associates Inc. and related persons and affiliates to be indemnified in respect of any such claims and liabilities; NOW, THEREFORE, in consideration of the foregoing premises, and the mutual agreements and covenants and provisions herein set forth, the parties hereto hereby agree as follows: 1. Definitions. ----------- (a) "Claim" means with respect to any Indemnitee, any claim against ----- such Indemnitee involving any Obligation with respect to which such Indemnitee may be entitled to be defended and indemnified by the Company under this Agreement. (b) "Common Stock" means the common stock, par value $.01 per share, ------------ of the Company. (c) "Financing" means the financing provided for by the Senior --------- Secured Credit Facilities. (d) "Indemnitee" means each of CD&R, the CD&R Fund, CD&R Associates, ---------- Associates Inc., their respective successors and assigns, and each of their respective directors, officers, partners, employees, agents, advisors, representatives, holders of voting securities and controlling persons (within the meaning of the Securities Act) and their respective successors and assigns, and any Person (other than the Company and its Subsidiaries) that controls, is controlled by, or is under common control with, CD&R, and the directors, officers, partners, employees, agents, advisors, representatives, holders of voting securities and controlling persons (within the meaning of the Securities Act) of such Person and their respective successors and assigns. (e) "Person" means any individual, partnership, joint venture, ------ corporation, limited liability company, trust, unincorporated organization or other entity. (f) "Obligations" means, collectively, any and all claims, ----------- obligations, liabilities, causes of actions, actions, suits, proceedings, investigations, judgments, decrees, losses, damages, fees, costs and expenses (including without limitation interest, penalties and fees and disbursements of attorneys, accountants, investment bankers and other professional 3 advisors), in each case whether incurred, arising or existing with respect to third parties at any time or from time to time. (g) "Related Document" means any agreement, certificate, instrument or ---------------- other document to which the Company or any Subsidiary may be a party or by which it or any of its properties or assets may be bound or affected from time to time relating in any way to the Transactions or any Securities Offering or any of the transactions contemplated thereby, including without limitation, in each case as the same may be amended, modified, waived or supplemented from time to time, (A) any registration statement filed by or on behalf of the Company or any Subsidiary with the Commission in connection with the Transactions or any Securities Offering, including all exhibits, financial statements and schedules appended thereto, and any submissions to the Commission in connection therewith, (B) any prospectus, preliminary or otherwise, included in such registration statements or otherwise filed by or on behalf of the Company or any Subsidiary in connection with the Transactions or any Securities Offering or used to offer or confirm sales of their respective securities in any Securities Offering, (C) any private placement or offering memorandum or circular, or other information or materials distributed by or on behalf of the Company or any Subsidiary or any placement agent or underwriter in connection with the Transactions or any Securities Offering, (D) any federal, state or foreign securities law or other governmental or regulatory filings or applications made in connection with any Securities Offering, the Transactions, or any of the transactions contemplated thereby, (E) any deal-manager, underwriting, subscription, purchase, stockholders, option or registration rights agreement or plan entered into or adopted by the Company or any Subsidiary in connection with the Transactions or any Securities Offerings, (F) any quarterly, annual or current reports filed by the Company or any Subsidiary with the Commission or any prospectus, proxy statement or transaction statements filed by or on behalf of the Company, any Subsidiary or any Indemnitee with the Commission in connection with the Transactions or any transaction contemplated thereby, including all exhibits, financial statements and schedules appended thereto, and any submission to the Commission in connection therewith. (h) "Securities Offerings" means the CD&R Fund Subscription, the -------------------- Rights Offering, any Redemption, any Management Offering and any other Subsequent Offering. (i) "Subsidiary" means each corporation or other person or entity in ---------- which the Company owns or controls, directly or indirectly, capital stock or other equity interests representing at least 25% of the outstanding voting stock or other equity interests. (j) "Transactions" means the CD&R Fund Subscription, the Merger, the ------------ Note Tender, the Financing and the Rights Offering. 4 2. Indemnification. --------------- (a) Each of the Company and Dynatech LLC (each an "Indemnifying Party" and collectively, the "Indemnifying Parties") jointly and severally agree to indemnify, defend and hold harmless each Indemnitee: (i) from and against any and all Obligations in any way resulting from, arising out of or in connection with, based upon or relating to (A) the Securities Act, the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or any other applicable securities or other laws, in connection with any Transaction, any Securities Offering, any Related Document or any of the transactions contemplated thereby, (B) any other action or failure to act of the Company or any Subsidiary or any of their predecessors, whether such action or failure has occurred or is yet to occur or (C) except to the extent that any such Obligation is found in a final judgment by a court of competent jurisdiction to have resulted from the gross negligence or wilful or intentional misconduct of any of the Indemnitees, the performance by CD&R of management consulting, monitoring, financial advisory or other services for the Company or any Subsidiary (whether performed prior to the date hereof, hereafter, pursuant to the Consulting Agreement or otherwise); and (ii) to the fullest extent permitted by applicable law, from and against any and all Obligations in any way resulting from, arising out of or in connection with, based upon or relating to (A) the fact that such Indemnitee is or was a director or an officer of the Company or any Subsidiary, as the case may be, or is or was serving at the request of such corporation as a director, officer, employee or agent of or advisor or consultant to another corporation, partnership, joint venture, trust or other enterprise or (B) any breach or alleged breach by such Indemnitee of his or her fiduciary duty as a director or an officer of the Company or any Subsidiary, as the case may be; in each case including, but not limited to, any and all reasonable fees, costs and expenses (including without limitation reasonable fees and disbursements of attorneys) incurred by or on behalf of any Indemnitee in asserting, exercising or enforcing any of its rights, powers, privileges or remedies in respect of this Agreement or the Consulting Agreement. (b) Without in any way limiting the foregoing Section 2(a), each Indemnifying party agrees, jointly and severally, to indemnify, defend and hold harmless each Indemnitee from and against any and all Obligations resulting from, arising out of or in connection with, based upon or relating to liabilities under the Securities Act, the Exchange Act or any other applicable securities or other laws, rules or regulations in connection with (i) the inaccuracy or breach of or default under any representation, warranty, covenant or agreement in any Related Document, (ii) any untrue statement or alleged untrue statement of a material fact contained in any Related Document or (iii) any omission or alleged omission to state in any 5 Related Document a material fact required to be stated therein or necessary to make the statements therein not misleading. (c) Notwithstanding the foregoing provisions of this Section 2, the Company shall not be obligated to indemnify any Indemnitee from and against any such Obligation to the extent that such Obligation arises out of or is based upon an untrue statement or omission made in a Related Document in reliance upon and in conformity with written information furnished by any of the Indemnitees to the Company expressly for use in the preparation of such Related Document. 3. Contribution. ------------ (a) Except to the extent that Section 3(b) is applicable, if for any reason the indemnity provided for in Section 2(a) is unavailable or is insufficient to hold harmless any Indemnitee from any of the Obligations covered by such indemnity, then the Indemnifying Parties, jointly and severally, shall contribute to the amount paid or payable by such Indemnitee as a result of such Obligation in such proportion as is appropriate to reflect (i) the relative fault of the Company and the Subsidiaries, on the one hand, and the Indemnitees, on the other, in connection with the state of facts giving rise to such Obligation, (ii) if such Obligation results from, arises out of, is based upon or relates to the Transactions or any Securities Offering, the relative benefits received by the Company and the Subsidiaries, on the one hand, and the Indemnitees, on the other, from such Transaction or Securities Offering and (iii) if required by applicable law, any other relevant equitable considerations. (b) If for any reason the indemnity specifically provided for in Section 2(b) is unavailable or is insufficient to hold harmless any Indemnitee from any of the Obligations covered by such indemnity, then the Indemnifying Parties, jointly and severally, shall contribute to the amount paid or payable by the Indemnitees as a result of such Obligation in such proportion as is appropriate to reflect (i) the relative fault of the Company and the Subsidiaries, on the one hand, and the Indemnitees, on the other, in connection with the information contained in or omitted from any Related Document, which inclusion or omission resulted in the inaccuracy or breach of or default under any representation, warranty, covenant or agreement therein, or which information is or is alleged to be untrue, required to be stated therein or necessary to make the statements therein not misleading, (ii) the relative benefits received by the Company and the Subsidiaries, on the one hand, and the Indemnitees, on the other, from such Transaction or Securities Offering and (iii) if required by applicable law, any other relevant equitable considerations. (c) For purposes of Section 3(a), the relative fault of the Company and the Subsidiaries, on the one hand, and of the Indemnitees, on the other, shall be determined by reference to, among other things, their respective relative intent, knowledge, access to information and opportunity to correct the state of facts giving rise to such Obligation. For purposes of Section 3(b), the relative fault of the Company and the Subsidiaries on the one hand, 6 and of the Indemnitees, on the other, shall be determined by reference to, among other things, (i) whether the included or omitted information relates to information supplied by the Company or the Subsidiaries on the one hand, or by the Indemnitees, on the other, and (ii) their respective relative intent, knowledge, access to information and opportunity to correct such inaccuracy, breach, default, untrue or alleged untrue statement, or omission or alleged omission. For purposes of Section 3(a) or 3(b), the relative benefits received by the Company and the Subsidiaries, on the one hand, and the Indemnitees, on the other, shall be determined by weighing the direct monetary proceeds to the Company and the Subsidiaries, on the one hand, and the Indemnitees, on the other, from such Securities Offering. (d) The parties hereto acknowledge and agree that it would not be just and equitable if contributions pursuant to Section 3(a) or 3(b) were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to in such respective Section. The Company shall not be liable under Section 3(a) or 3(b), as applicable, for contribution to the amount paid or payable by any Indemnitee except to the extent and under such circumstances as the Indemnifying Party would have been liable to indemnify, defend and hold harmless such Indemnitee under the corresponding Section 2(a) or 2(b) (in either case as interpreted by Section 2(c)), as applicable, if such indemnity were enforceable under applicable law. No Indemnitee shall be entitled to contribution from an Indemnifying Party with respect to any Obligation covered by the indemnity specifically provided for in Section 2(b) in the event that such Indemnitee is finally determined to be guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) in connection with such Obligation and the Company is not guilty of such fraudulent misrepresentation. 4. Indemnification Procedures. -------------------------- (a) Whenever any Indemnitee shall have actual knowledge of the reasonable likelihood of the assertion of a Claim, CD&R (acting on its own behalf or, if requested by any such Indemnitee other than itself, on behalf of such Indemnitee) or such Indemnitee shall notify the Indemnifying Parties in writing of the Claim (the "Notice of Claim") with reasonable promptness after such Indemnitee has such knowledge relating to such Claim and has notified CD&R thereof. The Notice of Claim shall specify all material facts known to CD&R (or if given by such Indemnitee, such Indemnitee) that may give rise to such Claim and the monetary amount or an estimate of the monetary amount of the Obligation involved if CD&R (or if given by such Indemnitee, such Indemnitee) has knowledge of such amount or a reasonable basis for making such an estimate. The failure of CD&R to give such Notice of Claim shall not relieve the Indemnifying Parties of their indemnification obligations under this Agreement except to the extent that such omission results in a failure of actual notice to the Company and it is materially injured as a result of the failure to give such Notice of Claim. The Company shall, at its expense, undertake the defense of such Claim with attorneys of its own choosing reasonably satisfactory to CD&R. CD&R may participate in such defense with counsel of CD&R's choosing at its own expense. In the event that the Company does not undertake the defense of the Claim within a 7 reasonable time after CD&R has given the Notice of Claim, or in the event that CD&R shall in good faith determine that, in the defense of any claim, the interests of the Indemnifying Parties may be in conflict with those of any Indemnitee, CD&R may, at the expense of the Indemnifying Parties and after giving notice to the Indemnifying Parties of such action, (i) undertake the defense of the Claim and (ii) with the consent of the Indemnifying Parties (which shall not be unreasonably withheld or delayed), compromise or settle the Claim, all for the account of and at the risk of the Indemnifying Parties. In the defense of any Claim, (x) the Indemnifying Parties shall act diligently and in good faith and (y) the Indemnifying Parties shall not (where it is in control of such Claim), except with the consent of CD&R, and CD&R shall not (where it is in control of such Claim), except with the consent of the Indemnifying Parties, consent to entry of any judgment or enter into any settlement that includes any injunctive or other non-monetary relief, or that does not include as an unconditional term thereof the giving by the person or persons asserting such Claim to such Indemnitee of a release from all liability with respect to such Claim. In each case, CD&R and each Indemnitee seeking indemnification hereunder will cooperate with the Indemnifying Parties, so long as the Indemnifying Parties are conducting the defense of the Claim, in the preparation for and the prosecution of the defense of such Claim, including making available evidence within the control of CD&R or such Indemnitee, as the case may be, and persons needed as witnesses who are employed by CD&R or such Indemnitee, as the case may be, in each case as reasonably needed for such defense and at cost, which cost, to the extent reasonably incurred, shall be paid by the Indemnifying Parties. (b) The Indemnifying Parties hereby agree, jointly and severally, to advance reasonable costs and expenses, including attorney's fees, incurred by CD&R (acting on its own behalf or, if requested by any such Indemnitee other than itself, on behalf of such Indemnitee) in defending any Claim in advance of the final disposition of such Claim upon receipt of an undertaking by or on behalf of CD&R to repay amounts so advanced if it shall ultimately be determined that CD&R or such Indemnitee is not entitled to be indemnified by the Indemnifying Parties as authorized by this Agreement. (c) CD&R shall notify the Indemnifying Parties in writing of the amount of any Claim actually paid by CD&R (the "Notice of Payment") in accordance with this Agreement. The amount of any Claim actually paid by CD&R shall bear simple interest at the rate equal to Chase Manhattan Bank's prime rate as of the date of such payment plus 2% per annum, from the date the Company receives the Notice of Payment to the date on which the Indemnifying Parties shall repay the amount of such Claim plus interest thereon, if any, to CD&R. 5. Certain Covenants; Other Indemnities. The rights of each ------------------------------------ Indemnitee to be indemnified under any other agreement, document, certificate or instrument or applicable law are independent of and in addition to any rights of such Indemnitee to be indemnified under this Agreement. The rights of each Indemnitee and the obligations of the Indemnifying Parties hereunder shall remain in full force and effect regardless of any investigation made by or on behalf of such Indemnitee. The Indemnifying Parties shall implement and maintain in full force and effect any and all corporate articles or charter and by-law provisions that may be necessary 8 or appropriate to enable them to carry out their obligations hereunder to the fullest extent permitted by applicable corporate law, including without limitation a provision of its certificate of incorporation eliminating liability of a director for breach of fiduciary duty to the fullest extent permitted by applicable corporate law, as it may be amended from time to time. 6. Notices. All notices and other communications hereunder shall be ------- in writing and shall be delivered by certified or registered mail (first class postage prepaid and return receipt requested), facsimile, overnight courier or hand delivery, as follows: If to the Company or Dynatech LLC, to: Dynatech Corporation 3 New England Executive Park Burlington, MA 01803 Telephone: 781-221-2008 Facsimile: 781-229-8850 Attention: President --------- with a copy to: Debevoise & Plimpton 875 Third Avenue New York, New York 10022 Telephone: (212) 909-6000 Facsimile: (212) 909-6836 Attention: Franci J. Blassberg, Esq. --------- if to the CD&R Fund, to: Clayton, Dubilier & Rice Fund VI Limited Partnership 1403 Foulk Road, Suite 106 Wilmington, Delaware 19803 Attention: Brian Finn --------- with a copy to: Clayton, Dubilier & Rice, Inc. 375 Park Avenue, 18th Floor New York, New York 10152 Telephone: (212) 407-5200 Facsimile: (212) 407-5252 Attention: Brian Finn --------- 9 if to CD&R or any other Indemnitee to: Clayton, Dubilier & Rice, Inc. 375 Park Avenue, 18th Floor New York, New York 10152 Telephone: (212) 407-5200 Facsimile: (212) 407-5252 Attention: Brian Finn --------- with a copy to: Debevoise & Plimpton 875 Third Avenue New York, New York 10022 Telephone: (212) 909-6000 Facsimile: (212) 909-6836 Attention: Franci J. Blassberg, Esq. --------- All communications hereunder shall be effective upon receipt by the party to which they are addressed. 7. Governing Law. This Agreement shall be governed in all respects, ------------- including as to validity, interpretation and effect, by the law of the State of New York without giving effect to its principles or rules of conflict of laws to the extent such principles or rules would require or permit the application of the laws of another jurisdiction, except to the extent that the corporate law of another jurisdiction specifically and mandatorily applies, in which case such law shall apply. 8. Severability. If any provision or provisions of this Agreement ------------ shall be held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions hereof shall not in any way be affected or impaired thereby. 9. Miscellaneous. The headings contained in this Agreement are for ------------- reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. This Agreement shall be binding upon and inure to the benefit of each party hereto and its successors and permitted assigns, and each other Indemnitee, but neither this Agreement nor any right, interest or obligation hereunder shall be assigned, whether by operation of law or otherwise, by the Company or Dynatech LLC, without the prior written consent of CD&R. This Agreement is not intended to confer any right or remedy hereunder upon any person other than each of the parties hereto and their respective successors and permitted assigns and each other Indemnitee. No amendment, modification, supplement or discharge of this Agreement, and no waiver hereunder shall be valid and binding unless set forth in writing and duly executed by the party or other Indemnitee against whom enforcement of the amendment, modification, 10 supplement or discharge is sought. Neither the waiver by any of the parties hereto or any other Indemnitee of a breach of or a default under any of the provisions of this Agreement, nor the failure by any party hereto or any other Indemnitee on one or more occasions, to enforce any of the provisions of this Agreement or to exercise any right, powers or privilege hereunder, shall be construed as a waiver of any other breach or default of a similar nature, or as a waiver of any provisions hereof, or any rights, powers or privileges hereunder. The rights and remedies herein provided are cumulative and are not exclusive of any rights or remedies that any party or other Indemnitee may otherwise have at law or in equity or otherwise. This Agreement may be executed in several counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument. 11 IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement by their authorized representatives as of the date first above written. DYNATECH CORPORATION By: /s/ Mark Tremallo -------------------------------------- Name: Mark V.B. Tremallo Title: Corporate Vice President and General Counsel DYNATECH LLC By: /s/ Mark Tremallo -------------------------------------- Name: Mark V.B. Tremallo Title: Corporate Vice President and General Counsel CLAYTON, DUBILIER & RICE FUND VI LIMITED PARTNERSHIP By: CD&R Associates VI Limited Partnership, the General Partner By: CD&R Investment Associates VI, Inc., its General Partner By: /s/ Donald J. Gogel -------------------------------------- Name: Donald J. Gogel Title: President, Chief Executive Officer, Secretary and Assistant Treasurer 12 CLAYTON, DUBILIER & RICE By: /s/ Donald J. Gogel --------------------------------------------- Name: Donald J. Gogel Title: President, Chief Executive Officer, Secretary and Assistant Treasurer CLAYTON, DUBILIER & RICE FUND VI-A LIMITED PARTNERSHIP By: CD&R Associates VI Limited Partnership, the General Partner By: CD&R Investment Associates VI, Inc., its general partner By: ____________________________________________ Name: Title: 13 EX-10.6 9 0009.txt AGREEMENT, DATED AS OF MAY 23, 2000 EXHIBIT 10.6 FEE AGREEMENT ------------- This FEE AGREEMENT, dated as of May 23, 2000 (the "Agreement"), by and between Dynatech Corporation, a Delaware corporation (the "Company") and Clayton, Dubilier & Rice, Inc., a Delaware corporation ("CD&R"). W I T N E S S E T H: WHEREAS, pursuant to an Agreement and Plan of Merger, dated as of February 14, 2000 (the "Merger Agreement"), by and among the Company, Wavetek Wandel Goltermann, Inc., a Delaware corporation ("WWG") and DWW Acquisition Corporation, a Delaware corporation and an indirect subsidiary of the Company ("MergerCo"), MergerCo has merged with and into WWG (the "Merger") on the date hereof; WHEREAS, in connection with the Merger, the Company sold an aggregate of 43.125 million shares of Company Common Stock to the Clayton, Dubilier & Rice Fund V Limited Partnership ("Fund V") and the Clayton, Dubilier & Rice Fund VI Limited Partnership ("Fund VI"; and together with Fund V and any other investment vehicle managed by CD&R, the "CD&R Funds") for an aggregate purchase price of $172.5 million (the "CD&R Funds Subscription"); WHEREAS, the CD&R Funds are managed by CD&R, and the general partner of Fund V is Clayton, Dubilier & Rice Associates II Limited Partnership, a Cayman Islands exempted limited partnership ("Associates II") and the general partner of Fund VI is Clayton, Dubilier & Rice Associates VI Limited Partnership, a Cayman Islands exempted limited partnership ("Associates VI"; together with Associates II and any general partner of any other investment vehicle managed by CD&R, "CD&R Associates"), and the general partner of Associates II is CD&R Investment Associates II, Inc., a Delaware corporation ("Associates II Inc.") and the general partner of Associates VI is CD&R Investment Associates VI, Inc., a Delaware corporation ("Associates VI Inc."; together with Associates II Inc. and any other general partner of CD&R Associates, "Associates Inc."); WHEREAS, the Company has previously entered into: (i) an Indemnification Agreement, dated as of May 21, 1998 (the "Fund V Indemnification Agreement"), by and among the Company, Dynatech LLC (formerly known as Telecommunications Techniques Co., LLC), a Delaware limited liability company ("Dynatech LLC"), CD&R and Fund V, (ii) a Consulting Agreement, dated as of May 21, 1998 (the "Consulting Agreement"), by and among the Company, Dynatech LLC, CD&R and Fund V, and (iii) an Indemnification Agreement, dated as of date hereof (the "Fund VI Indemnification Agreement"; together with the Fund V Indemnification Agreement, the "Indemnification Agreements"), by and among the Company, Dynatech LLC, CD&R and Fund VI; WHEREAS, the Company is entering into a Credit Agreement, dated as of the date hereof, among the Company, Dynatech LLC, Wavetek Wandel Goltermann GmbH and Dynatech Subworld Holdings GmbH, the lenders named therein, Morgan Guaranty and Trust Company of New York, as Administrative Agent, Commerz Bank, as German Term Loan Servicing Bank, Credit Suisse First Boston, as Syndication Agent and The Chase Manhattan Bank and Bankers Trust Company, as Co-Documentation Agents, providing for borrowing of up to a maximum principal amount of $860 million (the "Senior Secured Financing"); and WHEREAS, CD&R has performed financial, management advisory and other services for the Company, including but not limited to assistance in connection with (i) the preparation, negotiation, execution and delivery of the Merger Agreement, (ii) the retention of legal, accounting, environmental, insurance, investment banking, financial and other advisors and consultants in connection with the Merger and the Senior Secured Financing, (iii) the preparation, negotiation, execution and delivery of the commitment, fee and engagement letters, purchase agreement, credit agreement, guarantee and collateral agreement, pledge agreements and other security agreements, subscription agreements, registration rights agreement amendment, transfer and paying agent agreement, and other agreements, instruments and documents, relating to the Merger and the Senior Secured Financing, (iv) the preparation and circulation of information and offering memoranda, a registration statement and other materials in connection with the Senior Secured Financing and (v) the structuring, implementation and consummation of the Merger and the CD&R Funds Subscription (all such services listed in clauses (i) - (v) collectively, the "Merger Services"). NOW, THEREFORE, in consideration of the premises and the respective agreements hereinafter set forth and the mutual benefits to be derived herefrom, the parties hereto hereby agree as follows: 1. Compensation; Payment of Expenses. (a) The Company agrees to --------------------------------- pay to CD&R, concurrent with the execution of this Agreement, as compensation for the Merger Services, a fee of $6,000,000. 2. Indemnification. (a) The Company confirms and reaffirms its --------------- obligations pursuant to the Indemnification Agreements. Without limiting the generality of the foregoing, the Company confirms and agrees that (i) it shall indemnify, defend and hold harmless CD&R, the CD&R Funds, CD&R Associates and Associates Inc., their respective successors and assigns and each of the respective directors, officers, partners, employees, agents, advisors, representatives and controlling persons (within the meaning of the Securities Act of 1933, as amended) and their respective successors and assigns (collectively, "Indemnitees") from and against any and all claims, obligations, liabilities, causes of action, actions, suits, proceedings, investigations, judgments, decrees, losses, damages, fees, costs and expenses (including without limitation interest, penalties and fees and disbursements of attorneys, accountants, investment bankers and other professional advisors) (collectively, "Obligations"), whether incurred with respect to third parties or otherwise, in any way 2 resulting from, arising out of or in connection with, based upon or relating to, the performance of the Merger Services, except to the extent that any such Obligation is found in a final judgment by a court having jurisdiction to have resulted from the gross negligence or intentional misconduct of an Indemnitee, (ii) no Indemnitee shall have any liability (whether direct or indirect, in contract or tort or otherwise) to the Company or their respective security holders or creditors with respect to any Obligation in any way resulting from, arising out of or in connection with, based upon or relating to, the performance of the Merger Services, except to the extent that any such Obligation is found in a final judgment by a court having jurisdiction to have resulted from the gross negligence or intentional misconduct of an Indemnitee, and (iii) the rights of each Indemnitee to be indemnified under any agreement, document, certificate or instrument or applicable law are independent of and in addition to any rights of such Indemnitee under any other agreement, document, certificate or instrument or applicable law. (b) The Company hereby agrees to advance costs and expenses, including attorneys' fees, incurred by CD&R (acting on its own behalf or, if requested by any such Indemnitee other than itself, on behalf of such Indemnitee) or any Indemnitee in defending any claim relating to any Obligation in advance of the final disposition of such claim within 30 days of receipt from CD&R of (i) a notice setting forth the amount of such costs and expenses (a "Payment Notice") and (ii) an undertaking by or on behalf of CD&R or such Indemnitee to repay amounts so advanced if it shall ultimately be determined that CD&R or such Indemnitee is not entitled to be indemnified by the Company as authorized by this Agreement. CD&R may submit Payment Notices to the Company monthly. 3. Independent Contractor Status. The parties agree that CD&R shall ----------------------------- perform services hereunder as an independent contractor, retaining control over and responsibility for its own operations and personnel. Neither CD&R nor any of its employees or agents shall, solely by virtue of this Agreement or the arrangements hereunder, be considered employees or agents of the Company nor shall any of them have authority to contract in the name of or bind the Company, except as expressly agreed to in writing by the Company. The Company hereby acknowledges and agrees that the agreements, arrangements or understandings entered into by CD&R on behalf of the Company, MergerCo or any of their respective subsidiaries prior to the date hereof in connection with the Merger (including, but not limited to, any confidentiality agreements and agreements with brokers or finders) and set forth on a schedule attached hereto shall be obligations of the Company binding on it to the same extent as such obligations may be binding on CD&R, and the Company shall fully perform, and indemnify and hold harmless CD&R from and against, all such obligations. Any duties of CD&R arising out of its engagement to perform services hereunder shall be owed solely to the Company. 4. Notices. Any notice or other communication required or permitted ------- to be given or made under this Agreement by one party to the other parties shall be in writing and shall be deemed to have been duly given and effective (i) on the date of delivery if 3 delivered personally or (ii) when sent if sent by prepaid telegram, or mailed first-class, postage prepaid, registered or certified mail, or facsimile transmission as follows (or to such other address as shall be given in writing by one party to the other parties in accordance herewith): If to the Company, to: Dynatech Corporation Corporate Headquarters 3 New England Executive Park Burlington, Massachusetts 01803-5087 Facsimile: (781) 229-8850 Telephone: (781) 221-2012 Attention: General Counsel --------- If to CD&R, to: Clayton, Dubilier & Rice, Inc. 375 Park Avenue 18th Floor New York, New York 10152 Telephone: (212) 407-5200 Telecopy: (212) 407-5252 Attention: Joseph L. Rice, III --------- with a copy to: Debevoise & Plimpton 875 Third Avenue New York, New York 10022 Telephone: (212) 909-6000 Telecopy: (212) 909-6836 Attention: Franci J. Bladdberg, Esq. --------- 5. Entire Agreement. This Agreement, together with the ---------------- Indemnification Agreements, (i) contains the complete and entire understanding and agreement of CD&R, Dynatech LLC and the Company with respect to the subject matter hereof and (ii) supersedes all prior and contemporaneous understandings, conditions and agreements, oral or written, express or implied, in respect of the subject matter hereof, including but not limited to in respect of the engagement of CD&R in connection with the subject matter hereof. There are no representations or warranties of CD&R in connection with this Agreement or the services to be provided hereunder, except as expressly made and contained in this Agreement. 4 6. Headings. The headings contained in this Agreement are for -------- purposes of convenience only and shall not affect the meaning or interpretation of this Agreement. 7. Counterparts. This Agreement may be executed in several ------------ counterparts, each of which shall be deemed an original and all of which shall together constitute one and the same instrument. 8. Binding Effect; Assignment. This Agreement shall be binding upon -------------------------- and inure to the benefit of the parties to this Agreement and their respective successors and assigns and to each Indemnitee, provided that none of CD&R, the Company or Dynatech LLC may assign any of its rights or obligations under this Agreement without the express written consent of the other party hereto. This Agreement is not intended to confer any right or remedy hereunder upon any person other than the parties to this Agreement and their respective successors and permitted assigns and each Indemnitee. 9. Governing Law. This Agreement shall be governed in all respects ------------- including as to validity, interpretations and effects by the laws of the State of New York, without giving effect to its principles or rules of conflict of laws to the extent such principles or rules would require or permit the application of the laws of another jurisdiction. The Company, Dynatech LLC and CD&R hereby irrevocably submit to the jurisdiction of the courts of the State of New York and the Federal courts of the United States of America, in each case located in the State, City and County of New York, solely in respect of the interpretation and enforcement of the provisions of this Agreement, and hereby waive, and agree not to assert, as a defense in any action, suit or proceeding for the interpretation or enforcement hereof, that it is not subject thereto or that such action, suit or proceeding may not be brought or is not maintainable in such courts or that the venue thereof may not be appropriate or that this Agreement may not be enforced in or by such courts, and the parties hereto irrevocably agree that all claims with respect to such action or proceeding shall be heard and determined in such a New York State or Federal court. The Company, Dynatech LLC and CD&R hereby consent to and grant any such court jurisdiction over the person of such parties and over the subject matter of any such dispute and agree that mailing of process or other papers in connection with any such action or proceeding in the manner provided in Section 4, or in such other manner as may be permitted by law, shall be valid and sufficient service thereof. 10. Waiver of Jury Trial. Each party hereto acknowledges and agrees -------------------- that any controversy that may arise under this Agreement is likely to involve complicated and difficult issues, and therefore it hereby irrevocably and unconditionally waives any right it may have to a trial by jury in respect of any litigation directly or indirectly arising out of or relating to this Agreement, or the breach, termination or validity of this Agreement, or the transactions contemplated by this Agreement. Each party certifies and acknowledges that (i) no representative, agent or attorney of any other party has represented, expressly or otherwise, that such other party would not, in the event of litigation, seek to enforce the foregoing waiver, (ii) it understands and has considered the implications of this 5 waiver, (iii) it makes this waiver voluntarily, and (iv) it has been induced to enter into this Agreement by, among other things, the mutual waivers and certifications contained in this Section 10. 11. Amendment; Waivers. No amendment, modification, supplement or ------------------ discharge of this Agreement, and no waiver hereunder, shall be valid or binding unless set forth in writing and duly executed by the party or Indemnitee against whom enforcement of the amendment, modification, supplement, discharge or waiver is sought (and in the case of the Company, approved by resolution of the Board of Directors of the Company). Any such waiver shall constitute a waiver only with respect to the specific matter described in such writing and shall in no way impair the rights of the party or Indemnitee granting such waiver in any other respect or at any other time. Neither the waiver by any of the parties hereto or any Indemnitee of a breach of or a default under any of the provisions of this Agreement, nor the failure by any party hereto or any Indemnitee on one or more occasions, to enforce any of the provisions of this Agreement or to exercise any right, powers or privilege hereunder, shall be construed as a waiver of any other breach or default of a similar nature, or as a waiver of any of such provisions, rights, power or privileges hereunder. The rights and remedies herein provided are cumulative and are not exclusive of any rights or remedies that any party or Indemnitee may otherwise have at law or in equity or otherwise. 6 IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date first above written. CLAYTON, DUBILIER & RICE, INC. By: /s/ Donald J. Gogel ----------------------------------------------- Name: Donald J. Gogel Title: President, Chief Executive Officer, Secretary and Assistant Treasurer DYNATECH CORPORATION By: /s/ Allan M. Kline ------------------------------------------------ Name: Allan M. Kline Title: Vice President DYNATECH LLC By: Dynatech Corporation, its sole member By: /s/ Allan M. Kline ------------------------------------------------- Name: Allan M. Kline Title: Vice President 7 EX-21 10 0010.txt SUBSIDIARIES OF DYNATECH CORPORATION EXHIBIT 21 SUBSIDIARIES OF DYNATECH CORPORATION
State or Other Name of Parent or Subsidiary Organization* Jurisdiction ------------------------------------------ ------------------------- Dynatech Corporation (Parent)........................ Delaware Dynatech LLC......................................... Delaware Airshow, Incorporated................................ Delaware DataViews Corporation................................ Massachusetts daVinci Systems, Inc................................. Florida ICS Advent........................................... California Itronix Corporation.................................. Washington Pacific Systems Corporation.......................... Washington Parallax Graphics, Inc............................... Delaware Synergistic Solutions, Inc........................... Georgia Tele-Path Instruments, Inc........................... Delaware TTC International Holdings, Inc...................... Delaware Dynatech Export Incorporated......................... Barbados, West Indies TTC Belgium B.V.B.A.................................. Belgium TTC Canada Ltd....................................... Canada Dynatech Corporation Ltd............................. England ICS Advent Europe.................................... France TTC Telecommunications France SARL................... France Dynatech Gesellschaft Fur Datenveravbeitung, GmbH.... Germany TTC Federal Systems, Inc............................. Delaware Dynatech Holdings Ltd................................ Guernsey, Channel Islands Dynatech Investments, Ltd............................ Guernsey, Channel Islands TTC Asia Pacific Limited............................. Hong Kong WWG LLC.............................................. Delaware Dynatech World Holdings GmbH......................... Germany Dynatech Subworld Holdings GmbH...................... Germany WWG GmbH............................................. Germany Wavetek GmbH......................................... Germany Wavetek SA........................................... France W+G ATE Systems, Inc. ............................... North Carolina W+G Technologies, Inc................................ Delaware Wavetek US........................................... Delaware Applied Digital Access, Inc.......................... Delaware Sierra Design Labs................................... Nevada Airshow France SARL.................................. France Itronix GmbH......................................... Germany Itronix Limited...................................... UK
- - -------- * Excludes nonmaterial subsidiaries. EX-23 11 0011.txt CONSENT OF INDEPENDENT ACCOUNTANTS EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (File Nos. 2-78465, 2-81026, 2-82260, 2-85387, 2-86457, 2-92391, 2-94757, 33-365, 33-2387, 33-5544, 33-17169, 33-24058, 33-30610, 33- 62551 and 333-35476), on Form S-4 (File No. 333-44933) and on Form S-8 (File Nos. 2-87779, 33-10465, 33-17243, 33-42427, 33-50768, 33-57491, 33-57495, 33- 16461, 333-01639, and 333-75797) of Dynatech Corporation of our reports dated June 21, 2000 relating to the consolidated financial statements and financial statement schedule, which appear in this Annual Report on Form 10-K. /s/ PricewaterhouseCoopers LLP Boston, Massachusetts June 21, 2000 EX-27 12 0012.txt FINANCIAL DATA SCHEDULE
5 1,000 12-MOS MAR-31-2000 APR-01-1999 MAR-31-2000 33,839 0 80,188 1,952 30,252 37,880 87,112 59,796 414,838 127,945 275,000 1,225 0 0 (297,900) 414,838 453,239 453,239 100,999 157,090 253,470 0 51,916 (7,883) (1,169) (1,714) 12,126 0 0 6,012 0.04 0.04
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