-----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, DgjYVnijY5hTRPfOkbIpZWKVw1X+GInDpLahzs8rrfb761SzEZMVCCS5o5eMi1Ki IoJHOFrettg8oU6GbSWRbg== 0000892569-96-000272.txt : 19960326 0000892569-96-000272.hdr.sgml : 19960326 ACCESSION NUMBER: 0000892569-96-000272 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19960203 FILED AS OF DATE: 19960325 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FURON CO CENTRAL INDEX KEY: 0000037755 STANDARD INDUSTRIAL CLASSIFICATION: GASKETS, PACKAGING AND SEALING DEVICES & RUBBER & PLASTIC HOSE [3050] IRS NUMBER: 951947155 STATE OF INCORPORATION: CA FISCAL YEAR END: 0203 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-11425 FILM NUMBER: 96538243 BUSINESS ADDRESS: STREET 1: 29982 IVY GLENN DR CITY: LAGUNA NIGUEL STATE: CA ZIP: 92677 BUSINESS PHONE: 7148315350 FORMER COMPANY: FORMER CONFORMED NAME: FLUOROCARBON CO DATE OF NAME CHANGE: 19900322 10-K 1 FURON COMPANY - FORM 10-K ENDED 2-3-96 1 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 For the fiscal year ended FEBRUARY 3, 1996 or / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 0-8088 FURON COMPANY (Exact name of registrant as specified in its charter) CALIFORNIA 95-1947155 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 29982 IVY GLENN DRIVE, LAGUNA NIGUEL, CA 92677 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (714) 831-5350 Securities registered pursuant to Section 12(b) of the Act on the NEW YORK STOCK EXCHANGE: COMMON STOCK, WITHOUT PAR VALUE COMMON STOCK PURCHASE RIGHTS Securities registered pursuant to Section 12(g) of the Act: None 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 the 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. ----- As of February 12, 1996, the aggregate market value of voting stock held by non-affiliates of the registrant was approximately $171,577,000. As of March 19, 1996, the number of outstanding shares of Common Stock of the registrant was 8,913,802. DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant's definitive proxy statement for the 1996 Annual Meeting of Shareholders (to be held on June 4, 1996) have been incorporated by reference into Part III of this report. 1 2 PART I ITEM 1. BUSINESS GENERAL Furon(R) designs, develops and manufactures highly engineered components made primarily from specially formulated high performance polymer materials. Most of Furon's products are designed and engineered to meet specific requirements of customers in the industrial process, transportation, industrial equipment, electronics and healthcare industries. The Company has historically expanded its operations through the acquisition and further development of businesses which manufacture and sell components to original equipment manufacturers and which possess similar technologies and serve similar markets. On February 2, 1996, the Company acquired the Fluorglas business of AlliedSignal Inc. Fluorglas' principal product offerings are pressure-sensitive adhesive tapes and PTFE flexible composites and fabrications, as well as PTFE films and metal-clad PTFE/glass laminates. This acquisition, coupled with the acquisition on January 31, 1995 of Custom Coating & Laminating Corporation's business devoted to the manufacture and sale of release liners and other specialty engineered products incorporating surface chemistry technology, enabled the Company to expand and complement its CHR(R) brand of products. (See Note 2 of the "Notes to Consolidated Financial Statements" for additional information concerning these acquisitions.) In addition to its acquisition activities, the Company has developed its business through the introduction of new product lines and improvements in its existing products and capabilities and operational methodologies. For example, in addition to the reorganization of its operations described below, the Company believes that its World Class Performance program continues to improve its operations through improved product quality and performance features, improved customer service, minimization of waste, manufacturing costs and inventories, reduced cycle times and increased employee productivity and involvement. Further, the Company continues to focus its technology center on the development of proprietary polymer compounds that can be used to produce high margin, differentiated polymer products. During fiscal 1996, the Company sold two of its peripheral businesses. On December 31, 1995, the Company sold its metallic gasket business based in Houston, Texas to Garlock, Inc. and effective April 29, 1995, it sold its custom molded rubber goods business located in Sunnyvale, California to the business' management. For additional information concerning these divestitures, see Note 2 of the "Notes to Consolidated Financial Statements." Furon was incorporated in California in 1957 and changed its name from "The Fluorocarbon Company" to "Furon Company" in January 1990. Unless the context otherwise requires, the terms "Furon" and the "Company" are used in this report to refer to Furon Company and its subsidiaries. - ------------------------- (R)Furon and CHR are registered trademarks of the Company. 2 3 OPERATIONS Prior to fiscal 1995, the Company conducted its operations in independent business units developed and organized around manufacturing capabilities and products and grouped from time to time based on varying product, market or other criteria. In fiscal 1995, the Company consolidated the diverse independent business unit operations into one Furon operating unit that is organized around customers in the industrial process, transportation, industrial equipment, electronics and healthcare industries. The Company believes that its current organizational structure enables it to better serve its customers and grow its customer base, eliminate redundancies and other inefficiencies, and more fully leverage its technologies and other capabilities. MARKETS AND PRODUCTS The Company principally serves the industrial process, transportation, industrial equipment, electronics and healthcare industries, offering the following FURON(R) brand products: CHR(R) and FLUORGLAS(R) pressure sensitive tapes, and PTFE and silicone coated fabrics; CHR(R) release liners and solid and sponge silicone rubber; DEKORON(R) control and instrumentation cable and wire, self-regulating heating and fiber optics cable; FELSTED(R) cables, control cables, and control systems; OMNISEAL(R) spring energized PTFE seals, lip seals, hydraulic seals, and metallic O-rings and C-rings; RULON(R) high performance polymer materials and molded, extruded and machined bearings and other components made from those materials; SYNFLEX(R) hydraulic hose, specialty hose, and tubing, couplings and accessories; UNITHERM(R) heated hose and steam traced, preinsulated and electrical traced tubing; and FURON(R) fabricated and extruded high performance plastic and silicone components, fluid handling products, and custom fabricated composite, urethane and polyimide foam components. Furon's sales are generated primarily by its own salespersons located in most major industrial areas. The remaining sales are made by independent manufacturers' representatives and distributors. Most of the Company's customers are original equipment manufacturers, commercial or industrial construction companies or firms servicing the maintenance and replacement parts market or distributors to these markets. The Company's business is not dependent upon a single customer, or a few customers, and no single customer accounted for more than 5% of Furon's sales volume during any of the last three fiscal years. (For certain financial information concerning the Company's foreign and domestic operations and export sales, see Note 10 of the "Notes to Consolidated Financial Statements.") - ------------------------- (R) FURON, CHR, FLUORGLAS, DEKORON, FELSTED, OMNISEAL, RULON, SYNFLEX and UNITHERM are registered trademarks of the Company. 3 4 COMPETITION The Company competes with a large number of companies, some of which have greater financial resources, but none of which competes with the Company in more than a limited number of products. Depending on the product, the principal competitive factors for Furon are materials capability, engineering, design and process technology, quality, reliability and the ability to meet delivery dates. The Company believes that trade secrets are important to its proprietary products. To protect its trade secrets, the Company requires all salaried employees to enter into confidentiality agreements. While the Company holds many patents and trademarks with varying degrees of significance to its operations, the Company's business is not dependent upon any particular one. BACKLOG OF ORDERS Furon's backlog of unfilled orders at February 3, 1996 was $54,241,000 and $50,629,000 at January 28, 1995, a 7% increase. Excluding the effect of acquisitions and divestitures, Furon's backlog decreased 5% to 47,539,000 at February 3, 1996. It is estimated that substantially all of Furon's backlog of orders at February 3, 1996 will be filled during the next 12 months, except for approximately $1,200,000 of backlog which is scheduled to be filled during the subsequent 12-month period. The lead time between receipt of orders and shipment of products, other than products for commercial aircraft, is typically a matter of weeks. Although many of Furon's orders contain cancellation clauses, Furon has seldom experienced significant cancellations of orders. RAW MATERIALS Furon purchases its raw materials, ranging from polymer resins to component parts, from numerous suppliers. The top resins used by the Company are PTFE and related resins, Nylon 11 sold under the trade name Rilsan(R), and silicone polymers. The Company purchases its requirements for PTFE and related resins and silicone polymers from the major suppliers of those resins, while ELF Atochem is the Company's sole source for Rilsan. Rilsan is used primarily in the production of heavy duty air brake tubing. Alternative sources of material which can be substituted for Rilsan are available in the event a shortage of Rilsan develops. RESEARCH AND DEVELOPMENT For information concerning the amounts spent by the Company during the last three fiscal years on research and development activities, see Note 1 of the "Notes to Consolidated Financial Statements." EMPLOYEES At February 3, 1996, Furon employed 2,483 persons. Furon considers its employee relations to be good. - ------------------------- (R)Rilsan is a registered trademark of ELF Atochem. 4 5 ENVIRONMENTAL MATTERS Compliance with environmental laws and regulations designed to regulate the discharge of materials into the environment or otherwise protect the environment requires continuing management effort and expenditures by the Company. The Company does not believe that the operating costs incurred in the ordinary course of business to satisfy air and other permit requirements, properly dispose of hazardous wastes and otherwise comply with these laws and regulations form or will form a material component of its operating costs or have or will have a material adverse effect on its competitive or consolidated financial positions. The Company or one of its subsidiaries is currently involved in environmental remediation at six former manufacturing sites. In addition, one of the Company's subsidiaries is involved as an EPA-named potentially responsible party or private cost recovery/contribution action defendant in connection with environmental remediation at the following "superfund" waste disposal sites: Solvents Recovery Service of New England site in Southington, Connecticut; Gallups Quarry site in Plainfield, Connecticut; and the Davis Liquid Waste and Picillo Superfund sites in Coventry, Rhode Island. As of February 3, 1996, the Company's reserves for environmental remediation matters totaled approximately $1.9 million. While neither the timing nor the amount of the ultimate costs associated with these matters can be determined with certainty, based on investigations to determine the nature of the potential liability at each site, the estimated amount of investigation and remedial costs expected to be necessary to complete the remediation and other factors, the Company presently believes that these reserves should be sufficient to cover the Company's aggregate liability for these matters and, accordingly, does not expect them to have a material adverse effect on its consolidated financial position or results of operations. The actual costs to be incurred by the Company at each site will depend on a number of factors, including one or more of the following: the final delineation of contamination; the final determination of the remedial action required; negotiations with governmental agencies with respect to cleanup levels; changes in regulatory requirements; innovations in investigatory and remedial technology; effectiveness of remedial technologies employed; and the ultimate ability to pay of any other responsible parties. 5 6 ITEM 2. PROPERTIES Furon has organized its domestic manufacturing facilities according to the principal process used by each facility in the production of Furon's products. These domestic "Centers of Excellence" and the Company's European manufacturing facilities are identified below. Furon believes that these and its other facilities are suitable for its business and adequate for its present needs, and that appropriate additional or substitute space is available, if needed, to accommodate physical expansion of the business in the foreseeable future. For further information regarding the Company's lease commitments, see Note 6 of the "Notes to Consolidated Financial Statements."
EXPIRATION OF SQUARE MAXIMUM CENTERS OF EXCELLENCE FOOTAGE LEASE TERM --------------------- ------- ---------- Machining: Anaheim, CA 91,000 7/31/10 Los Alamitos, CA 74,000 12/14/03 Molding: Bristol, RI 106,000 8/31/32 Mundelein, IL 60,000 8/31/00 Extrusion: Mantua, OH 151,000 8/31/32 Aurora, OH 148,000 8/31/32 Mickleton, NJ 86,000 8/31/32 Mt. Pleasant, TX 67,000 8/31/32 Cape Coral, FL 30,000 5/31/06 Plastic Forming: Seattle, WA 116,000 1/31/97 Coating/Films: New Haven, CT 110,000 8/31/32 Hoosick Falls, NY 109,000 Owned Worcester, MA 76,000 Owned Clean Room Manufacturing: Fremont, CA 30,000 7/01/03
6 7 ITEM 2. PROPERTIES (CONTINUED) Assembly & Metal Fabrication: Kent, OH 50,000 1/06/01 Holmesville, OH 28,000 Owned Compounding: Aurora, OH 30,000 Owned Europe: Gembloux, Belgium 49,000 Owned Kontich, Belgium 30,000 11/30/99
ITEM 3. LEGAL PROCEEDINGS The Company is from time to time named as a defendant in various lawsuits. The Company vigorously defends all lawsuits brought against it, unless a reasonable settlement appears appropriate. While the outcome of pending proceedings cannot be predicted with certainty, the Company believes that the ultimate resolution of the actions currently pending should not have a material adverse effect on its consolidated financial condition. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There were no matters submitted to a vote of security holders during the fourth quarter of the year ended February 3, 1996. 7 8 OFFICERS OF FURON Furon's executive and other officers are as follows:
Name Age Position/Business Experience - ---- --- ---------------------------- EXECUTIVE OFFICERS J. Michael Hagan 56 Chairman of the Board Mr. Hagan has been employed by the Company since 1967 and was promoted to Division Manager in 1969, elected Vice President in 1975, and served as a director and President from 1980 to June 1991 when he was appointed Chairman of the Board. Terrence A. Noonan 58 President and Director Mr. Noonan has been the President of Furon since June 1991 and was elected as a director in August 1991. From 1989 to June 1991, he served as an Executive Vice President in charge of various operations. He joined Furon in 1987 as a Vice President, having previously served since 1980 as a Group General Manager of Eaton Corporation, a diversified manufacturing company. Monty A. Houdeshell 47 Vice President, Chief Financial Officer and Treasurer Mr. Houdeshell joined the Company in 1988 as Vice President, Chief Financial Officer and Treasurer and also served as Secretary from 1988 to February 1991. From 1985 to 1988, Mr. Houdeshell served as Vice President, Chief Financial Officer and Treasurer of Oak Industries, Inc., a manufacturer of electronic components and controls. OTHER OFFICERS Koichi Hosokawa 47 Controller Mr. Hosokawa joined the Company in 1988 as Controller and will be leaving the Company on April 30, 1996. From 1982 to 1988, Mr. Hosokawa was Corporate Controller of Acme Holding, Inc., a hardware manufacturing subsidiary of The Stanley Works. Donald D. Bradley 40 General Counsel and Secretary Mr. Bradley joined the Company in June 1990 as Senior Attorney and Assistant Secretary and was named Corporate Secretary in February 1991 and General Counsel in February 1992. Previously, he was a Special Counsel with O'Melveny & Myers, an international law firm with which he had been associated since 1982.
All officers of the Company are elected annually by and serve at the pleasure of the Board of Directors. There are no family relationships among any of Furon's officers. 8 9 STATEMENT REGARDING FORWARD LOOKING DISCLOSURE Except for the historical information contained in this report, certain matters discussed herein, including (without limitation) "Business -- Environmental Matters" (Item 1) and "Legal Proceedings" (Item 3) in Part I and "Management's Discussion and Analysis of Financial Condition and Results of Operations" (Item 7) in Part II, are forward looking statements. These statements involve risks and uncertainties, including (without limitation) the matters identified in those sections and the following: the effect of economic and market conditions and raw material price increases; the impact of costs, insurance recoveries and governmental, judicial and other third party interpretations and determinations in connection with legal and environmental proceedings; and the impact of current or pending legislation and regulation. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS The Company's Common Stock has traded on the New York Stock Exchange ("NYSE") under the trading symbol "FCY" since March 8, 1995. Previously, it traded on the NASDAQ National Market System under the trading symbol "FCBN." As of March 18, 1996, the Company had approximately 1,100 holders of record of its Common Stock. The following table sets forth for the periods indicated (i) the high and low closing sale prices per share of the Company's Common Stock as reported by the NYSE since March 8, 1995 and by NASDAQ prior to that date and (ii) the amount per share of cash dividends paid by the Company with respect to its Common Stock.
YEARS ENDED ------------------------------------------------------------------- FEBRUARY 3, 1996 JANUARY 28, 1995 --------------------------------- ----------------------------- QUARTER HIGH LOW DIVIDEND HIGH LOW DIVIDEND - ------- ---- --- -------- ---- --- -------- First $22-1/2 $18-7/8 $0.06 $18-1/2 $15-1/4 $0.06 Second 23-1/4 20 0.06 18-1/2 14-1/4 0.06 Third 21 16-1/2 0.06 21 15-3/4 0.06 Fourth 20-1/2 15-1/2 0.06 23 19-1/4 0.06
Future dividends will be considered by the Board of Directors taking into account the Company's profit levels and capital requirements as well as financial and other conditions existing at the time. ITEM 6. SELECTED FINANCIAL DATA The following selected consolidated financial data for the five years in the period ended February 3, 1996 should be read in conjunction with, and is qualified by, the more detailed information and consolidated financial statements included in Item 8 (Part II), "Consolidated Financial Statements and Supplementary Data." 9 10 ITEM 6. SELECTED FINANCIAL DATA (CONTINUED)
Years ended ----------------------------------------------------------------------- IN THOUSANDS, EXCEPT February 3, January 28, January 29, January 30, February 1, SHARE AND PER SHARE AMOUNTS 1996 1995 1994 1993 1992 - ---------------------------------------------------------------------------------------------------------------- Net sales $ 344,886 $ 312,060 $ 285,194 $ 300,107 $ 306,170 Cost of sales 249,102 217,827 204,727 213,932 224,781 ----------- ----------- ----------- ----------- ----------- Gross profit 95,784 94,233 80,467 86,175 81,389 Selling, general and administrative expenses 78,337 77,368 66,458 71,782 73,491 Restructuring charge - - - - 23,650 Unusual and nonrecurring charges - - - - 8,371 Other (income), net (3,866) (3,126) (2,296) (2,363) (2,104) Interest expense 2,899 2,394 3,337 4,243 5,824 ----------- ----------- ----------- ----------- ----------- Income (loss) before income taxes 18,414 17,597 12,968 12,513 (27,843) Provision (benefit) for income taxes 5,245 6,159 4,798 5,256 (5,501) ----------- ----------- ----------- ----------- ----------- Net income (loss) $ 13,169 $ 11,438 $ 8,170 $ 7,257 $ (22,342) =========== =========== =========== =========== =========== Net income (loss) per share $ 1.46 $ 1.27 $ 0.92 $ 0.84 $ (2.65) =========== =========== =========== =========== =========== Weighted average number of common shares and equivalents outstanding 9,040,262 8,992,926 8,859,200 8,681,606 8,439,121 Cash dividends per share $ 0.24 $ 0.24 $ 0.24 $ 0.24 $ 0.24 At year end: Total assets $ 211,484 $ 179,873 $ 175,224 $ 174,229 $ 181,021 Total long-term obligations $ 59,528 $ 32,791 $ 38,795 $ 43,488 $ 54,088 Total stockholders' equity $ 102,882 $ 91,599 $ 80,815 $ 75,247 $ 71,017
10 11 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS The Company's fiscal year ends on the Saturday closest to January 31. The fiscal year refers to the year in which the period ends (e.g. fiscal 1996 ended February 3, 1996). Fiscal year 1996 consists of 53 weeks and fiscal years 1995 and 1994 consisted of 52 weeks. Consolidated sales for fiscal year 1996 were 11% higher than in fiscal year 1995. When removing the effect of acquisitions and divestitures from fiscal 1996 and fiscal 1995, sales increased 7%. Sales to the semiconductor, truck and general industrial markets were particularly strong. Sales to the commercial aircraft, aerospace and healthcare markets were relatively flat. Sales to the chemical and industrial processing markets were down substantially from last year primarily due to the deferral of major capital expansion projects. Also contributing with improved sales were European operations. A healthier economy in Europe provided improved demand across all product lines, and coupled with stronger foreign currency exchange rates resulted in increased dollar sales of 21% (8% after removing the effect of foreign currency exchange rate changes) over last year. In fiscal 1995, sales were 9% higher than in fiscal 1994. However, when removing the effect of the divested businesses, sales increased 14%. The gross profit percentage for fiscal year 1996 has declined from 30.2% to 27.8% as compared to the prior fiscal year. Excluding the impact of acquisitions and divestitures, the gross profit percentage declined from 30.8% to 28.5%. Most of this decrease is attributable to higher raw material costs and sales mix compared to the prior year. Also affecting gross profit were higher costs incurred related to the implementation of the Company's new operating structure. The gross profit percentage increased from 28.2% in fiscal year 1994 to 30.2% in fiscal year 1995. This improvement was primarily attributable to the Company's focus on increasing productivity and cost reduction. When removing the effect of divestitures, the gross profit percentage improved from 29.2% in fiscal year 1994 to 30.7% in fiscal year 1995. Selling, general and administrative expenses as a percentage of sales were 22.7%, 24.8% and 23.3% for fiscal years 1996, 1995 and 1994, respectively. After removing the effect of acquisitions, operating expenses as a percentage of sales were 23.1%, 24.8% and 23.3% for fiscal years 1996, 1995 and 1994, respectively. In terms of dollars, operating expenses increased primarily due to increased selling expenses resulting from the Company's continued customer and market focus. Offsetting the higher selling expenses were lower general and administrative expenses over the prior year, mainly as a result of fewer costs incurred related to the implementation of the Company's new operating structure. The costs incurred in fiscal year 1995 included professional fees incurred in connection with various consulting projects, travel, communications and accelerated depreciation of information systems impacted by implementing the new strategy. Research and development costs were up as the Company continues to increase its focus on new product development. Other income, net for fiscal year 1996 increased 23.7% over fiscal year 1995, primarily as a result of higher licensee fees and a decrease in expenses attributable to the elimination of income related to businesses held for sale. This included the elimination of $180,000 of pretax loss from fiscal year 1996 and $500,000 and $363,000 of pretax profit from fiscal year 1995 and 1994, respectively, for the previously held for sale businesses. Offsetting these increases was lower interest income resulting from a reduction in cash balances available for investing due to acquisition activity. In addition, included is the net gain on divestitures of two businesses (see Note 2 of the "Notes to Consolidated Financial Statements") offset by charges for closure and consolidation of certain businesses, and charges to retiree medical liabilities related to prior acquisitions. The Company substantially completed its restructuring 11 12 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS (CONTINUED) program without incurring certain costs that were included in the 1992 charge. As a result, the Company reduced its restructuring accrual by $485,000. Interest expense increased by 21% in fiscal year 1996 as compared to fiscal year 1995. Amounts owing under the Company's bank credit facility increased by approximately $17 million over the prior year due to acquisition of the assets of the Custom Coating and Laminating Corporation ("CC&L") and Fluorglas businesses. Interest expense decreased 28% in fiscal year 1995 as compared to fiscal year 1994 due to a $6 million decrease in amounts owing under the Company's bank credit facility. Pretax results of operations improved 5% from a profit of $17.6 million in fiscal year 1995 to a profit of $18.4 million in fiscal year 1996. This improvement in profitability, which was the result of higher sales volumes and other income partially offset by higher manufacturing costs and interest expense, was more than enough to offset increased operating expenses incurred with implementing the new customer focused structure and strategy. The Company's effective tax rate for the fiscal year 1996 was 28.5% as compared to 35.0% in fiscal year 1995 and 37.0% in fiscal year 1994. The lower effective tax rate in 1996, as compared to fiscal year 1995, resulted from the realization of certain reserves and tax credits due to the completion of IRS audit cycles and closure of earlier fiscal years. The lower effective tax rate in fiscal 1995, as compared to fiscal year 1994, was primarily due to a reduction of the effect of foreign taxes as well as increased tax benefits from the Company's export sales corporation. LIQUIDITY AND CAPITAL RESOURCES During fiscal year 1996, cash provided by operations increased 225% over fiscal year 1995, to approximately $25.5 million. Included in fiscal 1996 was a use of cash from the change in working capital of $5.1 million versus $18.3 million in fiscal 1995. This cash flow allowed for further reductions in bank borrowings. The most significant component is the favorable change in accounts receivable offset by inventory which grew year over respective year, as well as accounts payable. Heavy volume of shipments in late January and a build up of stock to improve response time are primarily responsible. Additionally, the settlement of Internal Revenue Service audits noted above resulted in the reduction of current portion of income taxes payable. At February 3, 1996 the Company's working capital was $60.7 million, an increase of $6.0 million from the prior year. At February 3, 1996, the Company's ratio of current assets to current liabilities was approximately 2.5:1. Capital expenditures totaled $13.6 million and were primarily for renovating existing facilities, leasehold improvements or replacement of existing equipment in addition to implementation of the new operating structure referred to above. The Company continues to believe that it generates sufficient cash flow from its operations to finance near and long-term internal growth, capital expenditures and the principal and interest payments on its long-term debt. The Company will continue to evaluate its employment of capital resources including asset management and other sources of financing. The Company continually reviews possible acquisitions and should the Company make a substantial acquisition, it would require utilization of the remaining $62.0 million available at February 3, 1996 from its existing credit facility or financing from other sources. 12 13 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ENVIRONMENTAL MATTERS Compliance with environmental laws and regulations designed to regulate the discharge of materials into the environment or otherwise protect the environment requires continuing management effort and expenditures by the Company. The Company does not believe that the operating costs incurred in the ordinary course of business to satisfy air and other permit requirements, properly dispose of hazardous wastes and otherwise comply with these laws and regulations form or will form a material component of its operating costs or have or will have a material adverse effect on its competitive or consolidated financial positions. The Company or one of its subsidiaries is currently involved in environmental remediation at six former manufacturing sites. In addition, one of the Company's subsidiaries is involved as an EPA-named potentially responsible party or private cost recovery/contribution action defendant in connection with environmental remediation at the following "superfund" waste disposal sites: Solvents Recovery Service of New England site in Southington, Connecticut; Gallups Quarry site in Plainfield, Connecticut; and the Davis Liquid Waste and Picillo Superfund sites in Coventry, Rhode Island. As of February 3, 1996, the Company's reserves for environmental remediation matters totaled approximately $1.9 million. While neither the timing nor the amount of the ultimate costs associated with these matters can be determined with certainty, based on investigations to determine the nature of the potential liability at each site, the estimated amount of investigation and remedial costs expected to be necessary to complete the remediation and other factors, the Company presently believes that these reserves should be sufficient to cover the Company's aggregate liability for these matters and, accordingly, does not expect them to have a material adverse effect on its consolidated financial position or results of operations. The actual costs to be incurred by the Company at each site will depend on a number of factors, including one or more of the following: the final delineation of contamination; the final determination of the remedial action required; negotiations with governmental agencies with respect to cleanup levels; changes in regulatory requirements; innovations in investigatory and remedial technology; effectiveness of remedial technologies employed; and the ultimate ability to pay of any other responsible parties. 13 14 ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA REPORT OF INDEPENDENT AUDITORS Board of Directors and Stockholders Furon Company We have audited the accompanying consolidated balance sheets of Furon Company as of February 3, 1996 and January 28, 1995, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the three years in the period ended February 3, 1996. Our audits also included the financial statement schedule listed in the index at Item 14(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Furon Company at February 3, 1996 and January 28, 1995, and the consolidated results of its operations and its cash flows for each of the three years in the period ended February 3, 1996, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. ERNST & YOUNG LLP Orange County, California March 8, 1996 14 15 FURON COMPANY CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED ------------------------------------ FEBRUARY 3, JANUARY 28, JANUARY 29, IN THOUSANDS, EXCEPT PER SHARE AMOUNTS 1996 1995 1994 - ------------------------------------------------------------------------------- Net sales $ 344,886 $ 312,060 $ 285,194 Cost of sales 249,102 217,827 204,727 --------- --------- --------- Gross profit 95,784 94,233 80,467 Selling, general and administrative expenses 78,337 77,368 66,458 Other (income), net (3,866) (3,126) (2,296) Interest expense 2,899 2,394 3,337 --------- --------- --------- Income before income taxes 18,414 17,597 12,968 Provision for income taxes 5,245 6,159 4,798 --------- --------- --------- Net income $ 13,169 $ 11,438 $ 8,170 ========= ========= ========= Net income per share of Common Stock $ 1.46 $ 1.27 $ 0.92 ========= ========= =========
See accompanying notes. 15 16 FURON COMPANY CONSOLIDATED BALANCE SHEETS ASSETS
FEBRUARY 3, JANUARY 28, IN THOUSANDS 1996 1995 - ----------------------------------------------------------------------------------- Current assets: Cash and cash equivalents $ - $ 6,475 Accounts receivable, less allowance for doubtful accounts of $1,367 in 1996 and $696 in 1995 51,681 48,955 Inventories 39,827 31,197 Deferred income taxes 5,178 8,215 Prepaid expenses and other assets 5,367 6,843 --------- --------- Total current assets 102,053 101,685 Property, plant and equipment, at cost: Land 1,305 456 Buildings and leasehold improvements 18,044 13,868 Machinery and equipment 128,396 99,718 --------- --------- 147,745 114,042 Less accumulated depreciation and amortization (68,093) (61,981) --------- --------- Net property, plant and equipment 79,652 52,061 Intangible assets, at cost, less accumulated amortization of $27,498 in 1996 and $23,739 in 1995 23,543 17,953 Other assets 6,236 8,174 --------- --------- $ 211,484 $ 179,873 ========= =========
See accompanying notes. 16 17 FURON COMPANY CONSOLIDATED BALANCE SHEETS LIABILITIES AND STOCKHOLDERS' EQUITY
FEBRUARY 3, JANUARY 28, IN THOUSANDS, EXCEPT SHARE DATA 1996 1995 - ------------------------------------------------------------------------------------ Current liabilities: Cash, less checks outstanding $ 1,052 $ - Accounts payable 18,851 19,093 Salaries, wages and related benefits payable 11,101 10,508 Current portion of long-term debt - 8,000 Other current liabilities 10,345 9,359 --------- --------- Total current liabilities 41,349 46,960 Long-term debt 38,000 12,750 Other long-term liabilities 21,528 20,041 Deferred income taxes 7,725 8,523 Commitments and contingencies Stockholders' equity: Preferred stock without par value, 2,000,000 shares authorized, none issued or outstanding - - Common stock without par value, 15,000,000 shares authorized, 8,906,905 and 8,800,164 shares issued and outstanding in 1996 and 1995, respectively 37,575 36,280 Foreign currency translation adjustment 403 419 Unearned ESOP shares (3,205) (3,112) Unearned compensation (556) (885) Additional pension liability (1,649) (379) Retained earnings 70,314 59,276 --------- --------- Total stockholders' equity 102,882 91,599 --------- --------- $ 211,484 $ 179,873 ========= =========
See accompanying notes. 17 18 FURON COMPANY CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
IN THOUSANDS, EXCEPT SHARE AMOUNTS - ------------------------------------------------------------------------------------------------------------------------------------ YEARS ENDED FEBRUARY 3, 1996, JANUARY 28, 1995 AND JANUARY 29, 1994 Foreign Total Common Stock Currency Unearned Unearned Additional Stock- -------------------- Translation ESOP Compen- Pension Retained holders' Shares Amount Adjustment Shares sation Liability Earnings Equity -------------------------------------------------------------------------------------------- - -------------------------------------- BALANCE AT JANUARY 30, 1993 8,563,444 $34,628 $ 511 $(3,072) $ (644) $ - $43,824 $ 75,247 - -------------------------------------- ------------------------------------------------------------------------------------------- Cash dividends - - - - - - (2,068) (2,068) Exercise of stock options 56,774 539 - - - - - 539 Retired shares (10,412) (172) - - - - - (172) Grant of restricted shares, net of cancellations 15,900 325 - - (325) - - - Amortization of unearned compensation - - - - 260 - - 260 Foreign currency translation adjustment - - (1,545) - - - - (1,545) Principal payment from ESOP - - - 384 - - - 384 Net income - - - - - - 8,170 8,170 - -------------------------------------- ------------------------------------------------------------------------------------------- BALANCE AT JANUARY 29, 1994 8,625,706 35,320 (1,034) (2,688) (709) - 49,926 80,815 - -------------------------------------- ------------------------------------------------------------------------------------------- Cash dividends - - - - - - (2,088) (2,088) Exercise of stock options 349,272 5,018 - - - - - 5,018 Retired shares (218,529) (4,763) - - - - - (4,763) Grant of restricted shares, net of cancellations 43,715 705 - - (705) - - - Amortization of unearned compensation - - - - 529 - - 529 Foreign currency translation adjustment - - 1,453 - - - - 1,453 Loan to ESOP, net - - - (424) - - - (424) Excess of additional pension liability over unrecognized net transition obligation - - - - - (379) - (379) Net income - - - - - - 11,438 11,438 - -------------------------------------- ------------------------------------------------------------------------------------------- BALANCE AT JANUARY 28, 1995 8,800,164 36,280 419 (3,112) (885) (379) 59,276 91,599 - -------------------------------------- ------------------------------------------------------------------------------------------- Cash dividends - - - - - - (2,131) (2,131) Exercise of stock options 90,312 1,133 - - - - - 1,133 Retired shares (11,852) (251) - - - - - (251) Grant of restricted shares 10,610 215 - - (215) - - - Cancellations of restricted shares (13,420) (212) - - 112 - - (100) Stock issued under Employee Stock Purchase Plan 31,091 410 - - - - - 410 Amortization of unearned compensation - - - - 432 - - 432 Foreign currency translation adjustment - - (16) - - - - (16) Loan to ESOP, net - - - (93) - - - (93) Excess of additional pension liability over unrecognized net transition obligation - - - - - (1,270) - (1,270) Net income - - - - - - 13,169 13,169 - -------------------------------------- ------------------------------------------------------------------------------------------- BALANCE AT FEBRUARY 3, 1996 8,906,905 $37,575 $ 403 $(3,205) $ (556) $(1,649) $70,314 $102,882 - -------------------------------------- -------------------------------------------------------------------------------------------
See accompanying notes. 18 19 FURON COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED ---------------------------------------------- FEBRUARY 3, JANUARY 28, JANUARY 29, IN THOUSANDS 1996 1995 1994 - ----------------------------------------------------------------------------------------------------------------------------- OPERATING ACTIVITIES Net income $ 13,169 $ 11,438 $ 8,170 Adjustments to reconcile net income to cash provided by operating activities: Depreciation 11,292 9,540 8,547 Amortization 3,783 3,961 3,660 Provision for losses on accounts receivable 724 303 254 Deferred income taxes 2,239 46 65 (Gain) loss on sale of assets and divestitures (2,385) 15 390 Working capital changes, net of acquisitions and disposals: Accounts receivable 2,467 (11,173) (4,525) Inventories (2,059) (4,918) 1,129 Accounts payable and accrued liabilities (3,663) 4,063 3,964 Income taxes payable (1,790) (3,704) 2,913 Other current assets and liabilities, net (43) (2,561) (653) -------- -------- -------- (5,088) (18,293) 2,828 Changes in other long-term operating assets and liabilities 1,783 842 (3,091) -------- -------- -------- Net cash provided by operating activities 25,517 7,852 20,823 INVESTING ACTIVITIES Acquisition of businesses (43,497) -- -- Purchases of property, plant and equipment (13,570) (12,912) (8,458) Proceeds from sale of divestitures 8,517 543 9,772 Proceeds from sale of equipment 334 185 618 Proceeds from notes receivable 844 429 2,416 Increase in notes receivable (242) (810) (4,933) -------- -------- -------- Net cash used in investing activities (47,614) (12,565) (585) FINANCING ACTIVITIES Proceeds from long-term debt 46,756 8 27 Principal payments on long-term debt (29,506) (6,015) (8,471) Proceeds from issuance of common stock 782 255 367 Principal payments received from ESOP 384 384 384 Dividends paid on common stock (2,131) (2,088) (2,068) Loan to ESOP (579) (808) -- -------- -------- -------- Net cash provided by (used in) financing activities 15,706 (8,264) (9,761) EFFECT OF EXCHANGE RATE CHANGES ON CASH (84) 969 (1,441) -------- -------- -------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (6,475) (12,008) 9,036 -------- -------- -------- CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 6,475 18,483 9,447 -------- -------- -------- CASH AND CASH EQUIVALENTS AT END OF YEAR $ -- $ 6,475 $ 18,483 ======== ======== ========
See accompanying notes. 19 20 FURON COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FEBRUARY 3, 1996 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The consolidated financial statements include the accounts of Furon Company and its subsidiaries, all of which are wholly owned. All significant intercompany transactions have been eliminated. Certain reclassifications have been made to prior year amounts in order to be consistent with the current year presentation. Fiscal Year The Company's fiscal year ends on the Saturday closest to January 31. The fiscal year refers to the year in which the period ends (e.g. fiscal 1996 ended February 3, 1996). Fiscal year 1996 consists of 53 weeks and fiscal years 1995 and 1994 consisted of 52 weeks. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts 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 reporting period. Actual results could differ from those estimates. Consolidated Statements of Cash Flows Excess cash is invested in income-producing investments including commercial paper, money market accounts, overnight repurchase agreements and short-term certificates of deposit with original maturities of less than three months. These investments are stated at cost which approximates market. Included in other income is interest and dividend income from investments of $118,000, $677,000, and $490,000 in fiscal 1996, 1995 and 1994, respectively. Interest paid in fiscal 1996, 1995 and 1994 was $2,919,000, $2,451,000, and $3,536,000, respectively. Income taxes paid in fiscal 1996, 1995 and 1994 was $4,100,000, $8,500,000 and $1,800,000, respectively. 20 21 FURON COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FEBRUARY 3, 1996 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Inventories Inventories, stated at the lower of cost (first-in, first-out) or market, are summarized as follows:
FEBRUARY 3, JANUARY 28, IN THOUSANDS 1996 1995 - -------------------------------------------------------------------------------- Raw materials and purchased parts $16,878 $12,482 Work-in-process 9,872 9,153 Finished goods 13,077 9,562 ------- ------- $39,827 $31,197 ======= =======
Property, Plant and Equipment Depreciation is provided on the straight-line method over the following estimated useful lives: Buildings 25-45 years Machinery and equipment 3-18 years Leasehold improvements Term of the lease (including options) Concentration of Credit Risk Concentrations of credit risk with respect to trade receivables are limited due to the large number of customers comprising the Company's customer base, and their dispersion across many different geographical regions. At February 3, 1996, the Company had no significant concentrations of credit risk. Research and Development Costs Research and development costs are expensed as incurred. Total research and development expense, including application engineering, for fiscal 1996, 1995 and 1994 was $8,502,000, $7,125,000 and $6,103,000, respectively, and is included in selling, general and administrative expenses in the consolidated statements of income. Continuous research and development is necessary for the Company to maintain its competitive position. 21 22 FURON COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FEBRUARY 3, 1996 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Intangible Assets Intangible assets acquired in business combinations, net of accumulated amortization, are summarized as follows:
FEBRUARY 3, JANUARY 28, IN THOUSANDS 1996 1995 - ---------------------------------------------------------------------------------- Goodwill $ 9,113 $ 328 Other intangible assets 14,430 17,625 ------- ------- $23,543 $17,953 ======= =======
Goodwill is amortized over 25 years. Other intangible assets are amortized over periods ranging from 7 to 25 years. Translation of Foreign Currencies Foreign subsidiary financial statements are translated into U.S. dollars in accordance with Statement of Financial Accounting Standards ("SFAS") No. 52, "Foreign Currency Translations." The resulting cumulative foreign currency translation adjustment is reported separately in stockholders' equity. Transaction gains and losses included in results of operations were not significant in fiscal 1996, 1995 and 1994. The functional currency of the Company's foreign operations is the respective local currency. Net Income Per Share Net income per share is based on the weighted average number of common shares outstanding and common share equivalents resulting from dilutive stock options outstanding in each of the three years in the period ended February 3, 1996. The number of shares used in the computation was 9,040,262, 8,992,926 and 8,859,200, respectively. Recently Issued Accounting Standards In March 1995, the Financial Accounting Standards Board issued SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," which requires impairment losses to be recorded on long-lived assets used in operations, when indicators of impairment are present and when assets are expected to be disposed. The Company is required to adopt the provisions of SFAS No. 121 for fiscal 1997 and, based on current circumstances, does not believe the effect will be material. 22 23 FURON COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FEBRUARY 3, 1996 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) In October 1995, SFAS No. 123, "Accounting for Stock-Based Compensation," was issued. As permitted by this statement, the Company intends to continue to use the traditional accounting for stock-based awards prescribed by APB Opinion No. 25, "Accounting for Stock Issued to Employees." Adoption of the new standard in this form will have no impact on reported income in future years; however, pro forma disclosures of the effect of stock-based awards on net income and earnings per share as if SFAS No. 123 had been adopted will be required. 2. ACQUISITIONS AND DISPOSITIONS Acquisitions On January 31, 1995 the Company acquired certain assets of Custom Coating & Laminating Corporation ("CC&L"). The cash purchase price was $24.0 million, of which $18.0 million was borrowed under the Company's unsecured revolving credit facility. In addition, the Company assumed certain liabilities approximating $2.4 million, and may pay up to an additional $4.0 million based upon future product sales over the next three fiscal years. The business manufactures release liners and other specialty engineered products incorporating surface chemistry technology. Its manufacturing facilities are located in Worcester, Massachusetts. On February 2, 1996, the Company acquired certain assets and assumed certain liabilities of the Fluorglas business ("Fluorglas") from AlliedSignal Inc., for $19.0 million in cash. The purchase price was paid from borrowings under the Company's unsecured revolving facility. Fluorglas manufactures a broad line of pressure sensitive adhesive tapes and PTFE flexible composites and fabrications in facilities located in Hoosick Falls, New York. These acquisitions have been recorded using the purchase method of accounting, and their results of operations have been included in the consolidated financial statements since the respective dates of acquisition. The excess purchase price over the estimated fair value of net assets acquired for CC&L of approximately $9.3 million is being amortized using the straight-line method over 25 years. The purchase price for Fluorglas has been preliminarily allocated to the net assets acquired based on their estimated fair values with no goodwill being recorded. Management believes that any resulting adjustments will not have a material effect on the results of operations. 23 24 FURON COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FEBRUARY 3, 1996 2. ACQUISITIONS AND DISPOSITIONS (CONTINUED) Summarized below are the unaudited consolidated results of operations of the Company, including the CC&L and Fluorglas businesses on a pro forma basis, as though both acquisitions had occurred at the beginning of each respective fiscal year. The pro forma financial information is presented for informational purposes only and may not be indicative of the results of operations had the transactions been effected, nor is it necessarily indicative of the results of operations which may occur in the future.
YEARS ENDED IN THOUSANDS, EXCEPT PER SHARE DATA FEBRUARY 3, 1996 JANUARY 28, 1995 - ------------------------------------------------------------------------------------ Net sales $377,501 $365,954 Net income 14,594 13,257 Net income per share of Common Stock 1.48 1.45
Dispositions During the fiscal year ended February 3, 1996 the Company sold two businesses for a net pre-tax gain of $2.7 million and accrued approximately $665,000 for insurance reserves relative to one of the businesses. These amounts are included in Other income, net in the accompanying statement of income. In conjunction with the acquisitions and divestitures made during fiscal year ended February 3, 1996, the Company has developed plans to close and consolidate certain businesses. Accordingly, a pre-tax charge of $1.3 million for closing duplicate facilities and severance costs is included in Other income, net. In fiscal year ended February 3, 1996, retiree medical liabilities related to prior acquisitions increased by $865,000. 3. RESTRUCTURING CHARGE During fiscal 1992, the Company implemented a comprehensive restructuring program designed to improve profitability and improve the Company's focus on its primary objectives and strengths. Accordingly, a pretax charge of $23.7 million, primarily related to the estimated loss on the disposal of the Company's businesses which did not meet its long-term strategy was taken. The change in the reserve during fiscal 1996 was primarily attributable to payments on consulting and non-compete agreements and abandoned leases related to divested businesses. As of February 3, 1996, the company substantially completed its restructuring program without incurring certain costs that had been included in 1992 charge. As a result, the Company reduced its restructuring accrual by $485,000. 24 25 FURON COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FEBRUARY 3, 1996 4. INCOME TAXES The provision (benefit) for income taxes for the three years ended February 3, 1996, consists of the following:
IN THOUSANDS CURRENT DEFERRED TOTAL - -------------------------------------------------------------------------------- 1996: Federal $ 954 $ 2,300 $3,254 Foreign 1,197 -- 1,197 State 855 (61) 794 ------ ------- ------ $3,006 $ 2,239 $5,245 ====== ======= ====== 1995: Federal $4,714 $ (79) $4,635 Foreign 848 -- 848 State 551 125 676 ------ ------- ------ $6,113 $ 46 $6,159 ====== ======= ====== 1994: Federal $3,810 $ (368) $3,442 Foreign 472 -- 472 State 451 433 884 ------ ------- ------ $4,733 $ 65 $4,798 ====== ======= ======
25 26 FURON COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FEBRUARY 3, 1996 4. INCOME TAXES (CONTINUED) The provision (benefit) for income taxes differs from the amount computed by applying the statutory income tax rate for the following reasons:
FEBRUARY 3, 1996 JANUARY 28, 1995 JANUARY 27, 1994 ----------------- ---------------- ---------------- DOLLARS IN THOUSANDS AMOUNT % AMOUNT % AMOUNT % - -------------------------------------------------------------------------------------- Statutory federal provision $ 6,445 35.0 $ 6,159 35.0 $ 4,539 35.0 Realization of reserves due to completed audit cycles and closure of earlier fiscal years (1,200) (6.5) -- -- -- -- State and local taxes, net of federal tax benefit 801 4.4 1,076 6.1 832 6.4 Effect of foreign taxes (164) (0.9) (145) (0.8) 104 0.8 Research and experimental credit (195) (1.1) (424) (2.4) (303) (2.3) Export sales corporation benefit (376) (2.0) (393) (2.2) (243) (1.9) Other (66) (0.4) (114) (0.7) (131) (1.0) ------- ---- ------- ---- ------- ---- $ 5,245 28.5 $ 6,159 35.0 $ 4,798 37.0 ======= ==== ======= ==== ======= ====
26 27 FURON COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FEBRUARY 3, 1996 4. INCOME TAXES (CONTINUED) Significant components of the Company's deferred tax liabilities and assets are as follows:
FEBRUARY 3, JANUARY 28, IN THOUSANDS 1996 1995 - -------------------------------------------------------------------------------- Deferred tax liabilities: Tax over book depreciation $(5,844) $(4,923) ------- ------- Deferred tax assets: Inventories 923 1,007 Accruals recognized in different periods for tax than financial reporting 4,113 6,830 ------- ------- Total assets 5,036 7,837 Valuation allowance for realization of and payment for reserves and depreciable assets (1,739) (3,222) ------- ------- Net deferred assets 3,297 4,615 ------- ------- Total deferred taxes $(2,547) $ (308) ======= =======
Applicable U.S. income and foreign withholding taxes have not been provided on undistributed earnings of certain foreign subsidiaries and affiliates aggregating $6,500,000 at February 3, 1996. Management's intention is to reinvest such undistributed earnings outside the United States for an indefinite period except for distributions upon which incremental U.S. income taxes would not be material. Any withholding taxes ultimately paid, which could approximate $325,000, may be recoverable as foreign tax credits in the United States. 27 28 FURON COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FEBRUARY 3, 1996 4. INCOME TAXES (CONTINUED) During the fourth quarter of fiscal 1995 the Company resolved the Internal Revenue Service audit for fiscal years 1988 and 1989 relating to the purchase price allocation of an acquisition made in fiscal 1988. This resolution resulted in realization of reserves due to completed audit cycles and closure of earlier fiscal years. During the fourth quarter of fiscal 1994 the Company resolved the Internal Revenue Service audit for fiscal years 1990 and 1991. It was determined that the Company had provided sufficient income tax expense for the resolution of the 1990 and 1991 audits as of fiscal 1993, and beginning with fourth quarter fiscal 1994, the Company has decreased the taxes provided for the issues resolved in this audit. 5. LONG-TERM DEBT On October 30, 1995, the Company entered into a credit agreement with a syndicate of banks. The agreement provides the Company with a five year, unsecured, revolving credit facility in the amount of $100,000,000. Beginning October 30, 1998 availability under the facility will be reduced by $6,250,000 on a semi-annual basis. All advances outstanding under the credit facility are due on October 30, 2000. Under terms of the agreement, the Company may borrow at the prevailing prime rate or at a rate based upon LIBOR. Borrowings based upon the LIBOR rate are subject to performance grid pricing. In addition, the Company pays a commitment fee on the unused portion of the revolving facility. The commitment fee is subject to performance grid pricing. At February 3, 1996, the unused portion of the credit facility was $62,000,000. Borrowing rates during the year ranged from 5.8% to 7.0% (5.9% at February 3, 1996). In order to reduce the impact of changes in interest rates on its variable rate borrowings, the Company entered into an 8-year Interest Rate Swap agreement with a commercial bank in August 1988. The notional amount of the swap, which decreases $2,000,000 each quarter, totaled $6,000,000 at February 3, 1996. The swap agreement effectively changes the Company's interest rate on $6,000,000 of its variable borrowings to a fixed interest rate of 9.938%. Due to the fact that the swap agreement increases the effective rate of the Company's borrowings, the Company is not exposed to credit risk in the event of nonperformance by the other parties to the interest rate swap agreement. The fair market value of this off balance sheet instrument as determined by an independent third party at February 3, 1996 is $128,000. 28 29 FURON COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FEBRUARY 3, 1996 5. LONG-TERM DEBT (CONTINUED) Long-term debt is summarized as follows:
FEBRUARY 3, JANUARY 28, IN THOUSANDS 1996 1995 - ------------------------------------------------------------------------------- Loans under bank credit agreements $38,000 $ 20,750 Less current portion -- (8,000) ------- -------- Due after one year $38,000 $ 12,750 ======= ========
6. COMMITMENTS AND CONTINGENCIES At February 3, 1996, the Company is obligated under non-cancelable leases of real property and equipment used in its operations for minimum annual rentals plus insurance and taxes. Amounts payable under these obligations are as follows:
FISCAL YEARS ENDED IN THOUSANDS ------------ ------------ 1997 $ 7,925 1998 6,926 1999 5,904 2000 4,574 2001 4,004 2002 to 2006 15,288 2007 to 2011 3,778
29 30 6. COMMITMENTS AND CONTINGENCIES (CONTINUED) Certain leases contain escalation provisions for periodic adjustments based on certain indices. Rental expense for operating leases for the three years in the period ended February 3, 1996 was $8,646,000, $7,956,000 and $7,952,000, respectively. At February 3, 1996, the Company is obligated under irrevocable letters of credit totaling $2,145,000. At February 3, 1996, the Company had approximately $2,300,000 of foreign currency hedge contracts outstanding consisting of over-the-counter forward contracts. The contracts reflect the selective hedging of the Belgium Franc with varying maturities up to six months. Net unrealized gains/losses from hedging activities were not material as of February 3, 1996. The Company is currently involved in various litigation. Management of the Company is of the opinion that the ultimate resolution of such litigation should not have a material effect on the Company's consolidated financial position or results of operations. Compliance with environmental laws and regulations designed to regulate the discharge of materials into the environment or otherwise protect the environment requires continuing management effort and expenditures by the Company. The Company does not believe that the operating costs incurred in the ordinary course of business to satisfy air and other permit requirements, properly dispose of hazardous wastes and otherwise comply with these laws and regulations form or will form a material component of its operating costs or have or will have a material adverse effect on its competitive or consolidated financial positions. The Company or one of its subsidiaries is currently involved in environmental remediation at six former manufacturing sites. In addition, one of the Company's subsidiaries is involved as an EPA-named potentially responsible party or private cost recovery/contribution action defendant in connection with environmental remediation at the following "superfund" waste disposal sites: Solvents Recovery Service of New England site in Southington, Connecticut; Gallups Quarry site in Plainfield, Connecticut; and the Davis Liquid Waste and Picillo Superfund sites in Coventry, Rhode Island. As of February 3, 1996, the Company's reserves for environmental remediation matters totaled approximately $1.9 million. While neither the timing nor the amount of the ultimate costs associated with these matters can be determined with certainty, based on investigations to determine the nature of the potential liability at each site, the estimated amount of investigation and remedial costs expected to be necessary to complete the remediation and other factors, the Company presently believes that these reserves should be sufficient to cover the Company's aggregate liability for these matters and, accordingly, does not expect them to have a material adverse effect on its consolidated financial position or results of operations. The actual costs to be incurred by the Company at each site will depend on a number of factors, including one or more of the following: the final delineation of contamination; the final determination of the remedial action required; negotiations with governmental agencies with respect to cleanup levels; changes in regulatory requirements; innovations in investigatory and remedial technology; effectiveness of remedial technologies employed; and the ultimate ability to pay of any other responsible parties. 30 31 FURON COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FEBRUARY 3, 1996 7. STOCKHOLDERS' EQUITY Stock Incentive Plan The Company has a 1995 Stock Incentive Plan (approved by the Board of Directors in April 1995) and a 1982 Stock Incentive Plan. Under both plans, the Compensation Committee, appointed by the Board of Directors, is authorized to grant awards to any officer or key employee of the Company. Awards granted can take the form of non-qualified stock options, stock appreciation rights, restricted stock awards (RSAs), and performance share awards. The 1995 Stock Incentive Plan does not provide for depreciation rights and tax-offset bonuses which are components of the 1982 Stock Incentive Plan. The 1995 Stock Incentive Plan provides for the annual grant of awards in a maximum number of shares of common stock of 1.8% of the Company's issued and outstanding shares as of the last day of the preceding fiscal year, commencing with the fiscal year beginning February 4, 1996. Accordingly no awards have been issued under this plan. Shares of common stock authorized under the 1982 Stock Incentive Plan have been nearly exhausted as approximately 49,969 shares are available for grant at February 3, 1996. Options are granted at a price equal to 100% of the fair market value at the date of grant and become exercisable not earlier than six months after the award date and vest at a rate of 25% per year. The options shall remain exercisable until the expiration date but not later than ten years after the award date. At February 3, 1996, 153,775 RSAs have been granted (of which 28,320 have been canceled) under the 1982 Stock Incentive Plan. The issuance of these RSAs resulted in $1,907,000 (net of cancellations) of unearned compensation which is being amortized over the five year period in which the awards vest. The following summarizes stock option transactions under the 1982 Stock Incentive Plan for the year ended February 3, 1996:
NUMBER PER SHARE OF SHARES OPTION PRICE --------- ------------- Options outstanding at January 28, 1995 729,328 $8.17 - 18.00 Granted 118,000 19.38 Exercised (90,312) 8.17 - 13.31 Canceled (6,500) 19.38 ------- ------------- Options outstanding at February 3, 1996 750,516 $9.75 - 19.38 ======= ============= Exercisable at February 3, 1996 531,516 $9.75 - 18.00 ======= =============
31 32 FURON COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FEBRUARY 3, 1996 7. STOCKHOLDERS' EQUITY (CONTINUED) Shareholders' Rights Plan On March 21, 1989, the Board of Directors authorized the distribution of one right for each outstanding share of common stock under the Shareholders' Rights Plan. The rights which were distributed on May 23, 1989, become exercisable ten business days after (i) a person has acquired or obtained the right to acquire 20% or more of the Company's general voting power without approval by the Board of Directors, or (ii) a tender or exchange offer which would make a person the beneficial owner of 30% or more of the Company's general voting power, whichever is earlier. When exercisable, each right entitles the shareholder to purchase one-fourth of a share of common stock at a price of $13.75, subject to adjustment. In the event the Company engages in certain business combinations or a 20% shareholder engages in certain transactions with the Company, each holder of a right (other than those of the acquiring person) shall have the right to receive, upon the exercise thereof and payment of four times the then current exercise price, that number of shares of Common Stock of the surviving Company's common stock which at the time of such transaction would have a market value of two times such price paid. 8. EMPLOYEE BENEFIT PLANS The Company and its subsidiaries sponsor various qualified plans which cover substantially all of its domestic employees including a profit-sharing/retirement plan, an employee stock ownership plan, and an employee stock purchase plan. The Company also sponsors a nonqualified defined benefit plan covering certain employees. Profit-Sharing/Retirement Plan The trusteed profit-sharing/retirement plan provides for an employee salary deferral contribution, a company matching contribution and a company primary contribution. Under the deferral provisions (401K), eligible employees are permitted to contribute up to 10% of gross compensation to the profit-sharing/retirement plan. For amounts up to 8% of the employee's gross compensation the Company will match the employee's contribution at a rate determined by the Board of Directors. Under the company primary contribution provision, each eligible employee will receive a contribution to the profit-sharing/retirement plan based on a percentage of qualified wages as determined based on the Company's performance. Total Company contributions for the years ended February 3, 1996, January 28, 1995 and January 29, 1994 were $1,917,000, $1,528,000 and $1,336,000, respectively. 32 33 FURON COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FEBRUARY 3, 1996 8. EMPLOYEE BENEFIT PLANS (CONTINUED) Employee Stock Ownership Plan The Company sponsors an Employee Stock Ownership Plan (ESOP) covering substantially all of its employees (subject to certain limitations). The Company annually contributes amounts sufficient to cover principal and interest on loans made to the ESOP as determined by the Board of Directors. Prior to December 31, 1992, the Company loaned the ESOP $3,666,000 ($1,957,000 outstanding at February 3, 1996) to purchase 311,000 shares of stock, at interest rates ranging from 7.83% to 9.12%. The loans are payable in ten annual installments of principal and interest. In fiscal 1996, the Company loaned the ESOP $579,063 to purchase 27,500 shares of stock from a director of the Company, at interest rates ranging from 6.36% to 7.31%. In fiscal 1995, the Company loaned the ESOP $808,125 to purchase 45,000 shares of stock from a director of the Company, at interest rates ranging from 7.45% to 7.67%. These loans are payable in ten annual installments of principal and interest, beginning in fiscal 1996. Shares are released and allocated to participant accounts annually as loan repayments are made. In fiscal 1995, the Company adopted the provisions of AICPA Statement of Position No. 93-6 (the SOP) which requires that compensation expense be measured based on the fair value of the shares over the period the shares are earned. In addition, the SOP requires that dividends paid on unallocated shares held by the ESOP are reported as a reduction of accrued interest or as compensation expense rather than a charge to retained earnings, and shares not yet committed to be released are not considered outstanding in the calculation of earnings per share. As allowed by the SOP, the Company has elected not to apply the SOP's provisions to shares acquired prior to fiscal 1994. As such, compensation expense related to such shares is measured based on the historical cost of the shares, dividends have been deducted as a charge to retained earnings and the unallocated shares are considered outstanding in the calculation of earnings per share. The adoption of the SOP did not have a material impact on the consolidated financial statements. Of the leveraged shares acquired prior to fiscal 1994, 117,367 and 165,731 are allocated and unallocated, respectively, at February 3, 1996. Of the leveraged shares acquired in fiscal 1996 and 1995, there were 2,021 allocated shares, 5,615 committed-to-be-released shares and 64,864 unallocated shares at February 3, 1996. The fair value of unallocated shares acquired in fiscal 1996 was $1,232,000 at February 3, 1996. Total compensation cost recognized by the Company during fiscal 1996, 1995 and 1994, which consists of the annual contribution and plan administrative costs, net of dividend income on unallocated and forfeited shares, totaled $699,000, $528,000 and $339,000, respectively. 33 34 FURON COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FEBRUARY 3, 1996 8. EMPLOYEE BENEFIT PLANS (CONTINUED) Employee Stock Purchase Plan Effective November 1, 1994 the Company adopted an Employee Stock Purchase Plan to provide substantially all employees who have completed one year of service an opportunity to purchase shares of its common stock through payroll deductions, up to 10% of eligible compensation. Annually, on October 31, participant account balances are used to purchase shares of stock at the lesser of 85 percent of the fair market value of shares on November 1 (grant date) or October 31 (exercise date). The aggregate number of shares purchased by an employee may not exceed 5,000 shares annually (subject to limitations imposed by the Internal Revenue Code). The stock purchase plan expires on October 31, 2004. A total of 200,000 shares are available for purchase under the plan. There were 31,091 shares issued under the plan during fiscal 1996. Supplemental Executive Retirement Plan In fiscal 1987, the Company adopted an unfunded executive defined benefit retirement plan for certain key officers of the Company, which provides for benefits which supplement those provided by the Company's other retirement plans. Benefits payable under the plan are based upon compensation levels and length of service of the participants. In accordance with SFAS No. 87, "Employers' Accounting for Pensions," the Company has recorded an additional liability of $2,342,000 and $1,156,000 in fiscal 1996 and 1995, respectively, which represents the excess of the accumulated benefit obligation over previously recognized accrued pension costs. In 1996 and 1995, the excess of additional pension liability over the unrecognized net transition obligation has been recorded as a component of stockholders' equity. 34 35 FURON COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FEBRUARY 3, 1996 8. EMPLOYEE BENEFIT PLANS (CONTINUED) Actuarial present value of benefit obligations:
FEBRUARY 3, JANUARY 28, IN THOUSANDS 1996 1995 - -------------------------------------------------------------------------------- Vested benefit obligation $ 8,200 $ 6,574 ======= ======= Accumulated benefit obligation $ 8,345 $ 6,662 ======= ======= Unfunded projected benefit obligation $ 8,652 $ 7,419 Unrecognized net loss (1,956) (1,136) Unrecognized net transition obligation (693) (777) ------- ------- 6,003 5,506 Additional minimum liability 2,342 1,156 ------- ------- Accrued pension cost $ 8,345 $ 6,662 ======= ======= Assumptions: Discount rate 7.5% 8.5% Salary increase rate 5.0% 5.0%
Net periodic pension costs for fiscal 1996, 1995 and 1994 were as follows:
YEARS ENDED -------------------------------------------- FEBRUARY 3, JANUARY 28, JANUARY 29, IN THOUSANDS 1996 1995 1994 - ----------------------------------------------------------------------------------------- Service cost $ 37 $ 44 $ 41 Interest cost 618 609 605 Net amortization and deferral 211 212 184 ---- ---- ---- $866 $865 $830 ==== ==== ====
35 36 FURON COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FEBRUARY 3, 1996 9. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
IN THOUSANDS, EXCEPT INCOME NET INCOME PER SHARE DATA NET SALES GROSS PROFIT BEFORE TAXES NET INCOME PER SHARE - ------------------------------------------------------------------------------------------------------- YEAR ENDED FEBRUARY 3, 1996 1st Quarter $88,453 $25,560 $5,162 $3,355 $ 0.37 2nd Quarter 82,300 22,343 4,169 2,710 0.30 3rd Quarter 85,401 23,065 4,457 3,797 0.42 4th Quarter 88,732 24,816 4,626(a) 3,307 0.37 YEAR ENDED JANUARY 28, 1995 1st Quarter $74,960 $21,960 $3,832 $2,414 $ 0.27 2nd Quarter 75,127 22,580 4,234 2,667 0.30 3rd Quarter 81,071 25,092 5,119 3,357 0.37 4th Quarter 80,902 24,601 4,412 3,000 0.33
(a) The fourth quarter of fiscal year ended February 3, 1996 includes a gain on sale of businesses of approximately $2.7 million, a charge of approximately $1.4 million relative to various compensation plans and a charge of approximately $1.3 million in connection with the closing of certain facilities as described in Note 2. 36 37 FURON COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FEBRUARY 3, 1996 10. SEGMENT INFORMATION The Company designs, develops and manufactures highly engineered components made primarily from specially formulated high performance polymer materials, a single business segment. Most of Furon's products are designed and engineered to meet specific requirements of customers in the industrial process, transportation, industrial equipment, electronics and healthcare industries. The following table provides information as to the significant geographic areas in which the Company has operations.
YEARS ENDED ------------------------------------------ FEBRUARY 3, JANUARY 28, JANUARY 29, IN THOUSANDS 1996 1995 1994 - ---------------------------------------------------------------------------------------- Net sales to outside customers: United States $309,683 $283,006 $261,424 Europe 35,203 29,054 23,770 -------- -------- -------- $344,886 $312,060 $285,194 ======== ======== ======== Income before income taxes: United States $ 15,333 $ 15,096 $ 11,407 Europe 3,081 2,501 1,561 -------- -------- -------- $ 18,414 $ 17,597 $ 12,968 ======== ======== ======== Identifiable assets: United States $190,463 $160,848 $160,905 Europe 21,021 19,025 14,319 -------- -------- -------- $211,484 $179,873 $175,224 ======== ======== ======== Export sales $ 35,967 $ 38,145 $ 27,536 ======== ======== ========
37 38 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information in response to this Item is incorporated herein by reference from the Company's definitive Proxy Statement for the Annual Meeting of Shareholders to be held on June 4, 1996. Information concerning the Company's executive officers is included in Part I. ITEM 11. EXECUTIVE COMPENSATION Information in response to this Item is incorporated herein by reference from the Company's definitive Proxy Statement for the Annual Meeting of Shareholders to be held on June 4, 1996. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information in response to this Item is incorporated herein by reference from the Company's definitive Proxy Statement for the Annual Meeting of Shareholders to be held on June 4, 1996. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information in response to this Item is incorporated herein by reference from the Company's definitive Proxy Statement for the Annual Meeting of Shareholders to be held on June 4, 1996. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. (a) 1. Index to Financial Statements Page ---- Report of Independent Auditors 14 Consolidated Statements of Income 15 Years ended February 3, 1996, January 28, 1995 and January 29, 1994 38 39 PART IV (CONTINUED) ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. (CONTINUED) Page ---- Consolidated Balance Sheets February 3, 1996 and January 28, 1995 16 Consolidated Statements of Stockholders' Equity Years ended February 3, 1996, January 28, 1995 and January 29, 1994 18 Consolidated Statements of Cash Flows Years ended February 3, 1996, January 28, 1995 and January 29, 1994 19 Notes to Consolidated Financial Statements February 3, 1996 20 2. Index to Financial Statement Schedules Schedule II - Valuation and Qualifying Accounts *40 All other schedules have been omitted since the required information is not present or not present in amounts sufficient to require the submission of the schedules, or because the information required is included in the consolidated financial statements or the notes thereto. 3. Exhibits: The exhibits listed in the accompanying Index to Exhibits are filed as part of this annual report. (b) Reports on Form 8-K: No reports on Form 8-K were filed during the last quarter of the period covered by this report. * Schedule not included in this document. 39 40 FURON COMPANY SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS YEARS ENDED FEBRUARY 3, 1996, JANUARY 28, 1995 AND JANUARY 29, 1994
DEDUCTIONS/ BALANCE AT ADDITIONS ACCOUNTS WRITTEN BEGINNING CHARGED TO COSTS OFF NET OF BALANCE AT OF YEAR AND EXPENSES RECOVERIES OTHER END OF YEAR ---------- ---------------- ---------------- ---------- ----------- ALLOWANCE FOR DOUBTFUL RECEIVABLES: 1996 $695,750 $724,147 $(256,851) $ 203,889 (a) $1,336,935 ======== ======== ========= ========== ========== 1995 $631,540 $302,954 $(238,744) -- $ 695,750 ======== ======== ========= ========== ========== 1994 $740,700 $253,770 $(362,930) -- $ 631,540 ======== ======== ========= ========== ==========
(a) Relates to opening balances of acquisitions. 40 41 FURON COMPANY INDEX TO EXHIBITS REGULATION S-K SEQUENTIAL ITEM NUMBER PAGE NUMBER - -------------- ----------- 3 Restated Articles of Incorporation (Incorporated by reference to Exhibit 3 to the Registrant's Annual Report on Form 10-K filed on April 7, 1994, Commission File No. 0-8088) 3.1 Amended and Restated Bylaws (Incorporated by reference to Exhibit 3.1 to the Registrant's Annual Report on Form 10-K filed on April 7, 1994 and Exhibit 3.2 to the Registrant's Quarterly Report on Form 10-Q filed on September 13, 1994, Commission File 0-8088) 4 Rights Agreement as amended (Incorporated by reference to Exhibit 2.1 to the Registrant's Registration Statement on Form 8-A filed March 22, 1989, and Exhibit 4.1 to the Registrant's Annual Report on Form 10-K filed on April 28, 1992, Commission File No. 0-8088) 10.1* 1982 Stock Incentive Plan (as Amended and Restated as of March 22, 1994) (Incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q filed on September 13, 1994, Commission File No. 0-8088) 10.2* Employee Relocation Assistance Plan as amended (Incorporated by reference to Exhibit 10.2 to the Registrant's Annual Report on Form 10-K filed on March 21, 1990, Commission File No. 0-8088) 10.3* Supplemental Executive Retirement Plan as presently in effect (Incorporated by reference to Exhibit 10.5 to the Registrant's Annual Report on Form 10-K filed on March 28, 1991, Exhibit 10.4 to the Registrant's Annual Report on Form 10-K filed on March 29, 1993, and Exhibit 10.4A to the Registrant's Quarterly Report on Form 10-Q filed on September 13, 1994, Commission File No. 0-8088) 10.4 Asset Purchase Agreement, dated as of January 31, 1995, by and between the Registrant and Custom Coating & Laminating Corporation (Incorporated by reference to Exhibit 2 to the Registrant's Current Report on Form 8-K/A filed on February 17, 1995, Commission File No. 0-8088) * A management contract or compensatory plan or arrangement. 41 42 FURON COMPANY INDEX TO EXHIBITS (CONTINUED)
REGULATION S-K SEQUENTIAL ITEM NUMBER PAGE NUMBER ----------- ----------- 10.5* Form of Indemnity Agreement with each of the directors and officers of the Registrant (Incorporated by reference to Exhibit C to the Registrant's definitive Proxy Statement filed May 2, 1988, Commission File No. 0-8088) 10.6* Form of Change-in-Control Agreement between the Registrant and each of its executive officers (Incorporated by reference to Exhibit 10.7 to the Registrant's Annual Report on Form 10-K filed on March 28, 1991, Commission File No. 0-8088) 10.7* Deferred Compensation Plan (Incorporated by reference to Exhibit 10.7 to the Registrant's Annual Report on Form 10-K filed on March 29, 1993, Commission File No. 0-8088) 10.8* Economic Value Added (EVA) Incentive Compensation Plan, as Amended and Restated (Incorporated by reference to Exhibit 10.8 to the Registrant's Annual Report on Form 10-K filed on April 7, 1994, Commission File No. 0-8088) 10.9* Consulting agreement with Peter Churm for fiscal 48 year 1997 10.9A* Consulting agreement with Peter Churm for fiscal year 1996 (Incorporated by reference to Exhibit 10.9 to the Registrant's Annual Report on Form 10-K filed on March 22, 1995, Commission File No. 0-8088) 10.10* Promissory note and subordination agreement for Terrence A. Noonan relocation (Incorporated by reference to Exhibit 10.10 to the Registrant's Annual Report on Form 10-K filed on April 7, 1994, Commission File No. 0-8088)
* A management contract or compensatory plan or arrangement. 42 43 FURON COMPANY INDEX TO EXHIBITS (CONTINUED)
REGULATION S-K SEQUENTIAL ITEM NUMBER PAGE NUMBER ----------- ----------- 10.11 1993 Non-Employee Directors' Stock Compensation Plan, as amended (Incorporated by reference to Exhibit 10.12 to the Registrant's Quarterly Report on Form 10-Q filed on June 2, 1994 and Exhibit 10.12A to the Registrant's Quarterly Report on Form 10-Q filed on August 24, 1995, Commission File No. 0-8088). 10.12* 1995 Stock Incentive Plan (Incorporated by reference to Exhibit A to the Registrant's definitive Proxy Statement filed May 1, 1995, Commission File No. 0-8088) 10.13 Credit Agreement, dated as of October 30, 1995, between the Registrant, as Borrower, Bank of America National Trust and Savings Association, as the Agent, and the Banks named therein. 10.14 Asset Purchase Agreement, dated November 9, 1995, by and among the Registrant, as Purchaser, AlliedSignal Laminate Systems, Inc., as Seller, and AlliedSignal Inc., as Parent. 11 Statement re Computation of Net Income Per Share 21 Subsidiaries of the Registrant 23 Consent of Independent Auditors 27 Financial Data Schedule
* A management contract or compensatory plan or arrangement. 43 44 SIGNATURES AND POWER OF ATTORNEY 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 on March 19, 1996 by the undersigned, thereunto duly authorized. FURON COMPANY By: /S/ MONTY A. HOUDESHELL /S/ KOICHI HOSOKAWA ------------------------------- -------------------------- Monty A. Houdeshell Koichi Hosokawa Vice President, Chief Financial Controller Officer and Treasurer 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. Each person whose signature appears below hereby authorizes and appoints J. Michael Hagan, Terrence A. Noonan, and Monty A. Houdeshell as attorneys-in-fact and agents, each acting alone, to execute and file with the applicable regulatory authorities any amendment to this report on his behalf individually and in each capacity stated below. /S/ J. MICHAEL HAGAN /S/ COCHRANE CHASE - -------------------------------------- --------------------------- J. Michael Hagan Cochrane Chase Chairman of the Board Director, March 19, 1996 (Principal Executive Officer), March 19, 1996 /S/ TERRENCE A. NOONAN /S/ H. DAVID BRIGHT - -------------------------------------- --------------------------- Terrence A. Noonan H. David Bright President and Director, March 19, 1996 Director, March 19, 1996 /S/ PETER CHURM /S/ WILLIAM D. CVENGROS - -------------------------------------- --------------------------- Peter Churm William D. Cvengros Chairman Emeritus, March 19, 1996 Director, March 19, 1996 /S/ MONTY A. HOUDESHELL /S/ R. DAVID THRESHIE - -------------------------------------- --------------------------- Monty A. Houdeshell R. David Threshie Vice President, Chief Financial Director, March 19, 1996 Officer and Treasurer, March 19, 1996 /S/ KOICHI HOSOKAWA /S/ BRUCE E. RANCK - -------------------------------------- --------------------------- Koichi Hosokawa Bruce E. Ranck Controller, March 19, 1996 Director, March 19, 1996 /S/ WILLIAM C. SHEPHERD --------------------------- William C. Shepherd Director, March 19, 1996 44 45 FURON COMPANY INDEX TO EXHIBITS
REGULATION S-K SEQUENTIAL ITEM NUMBER PAGE NUMBER ----------- ----------- 3 Restated Articles of Incorporation (Incorporated by reference to Exhibit 3 to the Registrant's Annual Report on Form 10-K filed on April 7, 1994, Commission File No. 0-8088) 3.1 Amended and Restated Bylaws (Incorporated by reference to Exhibit 3.1 to the Registrant's Annual Report on Form 10-K filed on April 7, 1994 and Exhibit 3.2 to the Registrant's Quarterly Report on Form 10-Q filed on September 13, 1994, Commission File 0-8088) 4 Rights Agreement as amended (Incorporated by reference to Exhibit 2.1 to the Registrant's Registration Statement on Form 8-A filed March 22, 1989, and Exhibit 4.1 to the Registrant's Annual Report on Form 10-K filed on April 28, 1992, Commission File No. 0-8088) 10.1* 1982 Stock Incentive Plan (as Amended and Restated as of March 22, 1994) (Incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q filed on September 13, 1994, Commission File No. 0-8088) 10.2* Employee Relocation Assistance Plan as amended (Incorporated by reference to Exhibit 10.2 to the Registrant's Annual Report on Form 10-K filed on March 21, 1990, Commission File No. 0-8088) 10.3* Supplemental Executive Retirement Plan as presently in effect (Incorporated by reference to Exhibit 10.5 to the Registrant's Annual Report on Form 10-K filed on March 28, 1991, Exhibit 10.4 to the Registrant's Annual Report on Form 10-K filed on March 29, 1993, and Exhibit 10.4A to the Registrant's Quarterly Report on Form 10-Q filed on September 13, 1994, Commission File No. 0-8088) 10.4 Asset Purchase Agreement, dated as of January 31, 1995, by and between the Registrant and Custom Coating & Laminating Corporation (Incorporated by reference to Exhibit 2 to the Registrant's Current Report on Form 8-K/A filed on February 17, 1995, Commission File No. 0-8088)
* A management contract or compensatory plan or arrangement. 45 46 FURON COMPANY INDEX TO EXHIBITS (CONTINUED)
REGULATION S-K SEQUENTIAL ITEM NUMBER PAGE NUMBER ----------- ----------- 10.5* Form of Indemnity Agreement with each of the directors and officers of the Registrant (Incorporated by reference to Exhibit C to the Registrant's definitive Proxy Statement filed May 2, 1988, Commission File No. 0-8088) 10.6* Form of Change-in-Control Agreement between the Registrant and each of its executive officers (Incorporated by reference to Exhibit 10.7 to the Registrant's Annual Report on Form 10-K filed on March 28, 1991, Commission File No. 0-8088) 10.7* Deferred Compensation Plan (Incorporated by reference to Exhibit 10.7 to the Registrant's Annual Report on Form 10-K filed on March 29, 1993, Commission File No. 0-8088) 10.8* Economic Value Added (EVA) Incentive Compensation Plan, as Amended and Restated (Incorporated by reference to Exhibit 10.8 to the Registrant's Annual Report on Form 10-K filed on April 7, 1994, Commission File No. 0-8088) 10.9* Consulting agreement with Peter Churm for fiscal year 1997 48 10.9A* Consulting agreement with Peter Churm for fiscal year 1996 (Incorporated by reference to Exhibit 10.9 to the Registrant's Annual Report on Form 10-K filed on March 22, 1995, Commission File No. 0-8088) 10.10* Promissory note and subordination agreement for Terrence A. Noonan relocation (Incorporated by reference to Exhibit 10.10 to the Registrant's Annual Report on Form 10-K filed on April 7, 1994, Commission File No. 0-8088)
* A management contract or compensatory plan or arrangement. 46 47 FURON COMPANY INDEX TO EXHIBITS (CONTINUED)
REGULATION S-K SEQUENTIAL ITEM NUMBER PAGE NUMBER ----------- ----------- 10.11 1993 Non-Employee Directors' Stock Compensation Plan, as amended (Incorporated by reference to Exhibit 10.12 to the Registrant's Quarterly Report on Form 10-Q filed on June 2, 1994, and Exhibit 10.12A to the Registrant's Quarterly Report on Form 10-Q filed on August 24, 1995, Commission File No. 0-8088). 10.12* 1995 Stock Incentive Plan (Incorporated by reference to Exhibit A to the Registrant's definitive Proxy Statement filed May 1, 1995, Commission File No. 0-8088) 10.13 Credit Agreement, dated as of October 30, 1995, between the Registrant, as Borrower, Bank of America National Trust and Savings Association, as the Agent, and the Banks named therein. 10.14 Asset Purchase Agreement, dated November 9, 1995, by and among the Registrant, as Purchaser, AlliedSignal Laminate Systems, Inc., as Seller, and AlliedSignal Inc., as Parent. 11 Statement re Computation of Net Income Per Share 21 Subsidiaries of the Registrant 23 Consent of Independent Auditors 27 Financial Data Schedule
* A management contract or compensatory plan or arrangement. 47 EX-10.9 2 CONSULTING AGREEMENT WITH PETER CHURM 1 EXHIBIT 10.9 March 19, 1996 Mr. Peter Churm 67 Monarch Bay Dana Point, CA 92629-3459 Re: Consulting Agreement Dear Pete: This will confirm that: 1. Effective February 4, 1996, Furon retained you to provide management consulting services for Furon's fiscal year ending February 1, 1997. You will be paid $76,800 and will be reimbursed for business related expenses incurred in the performance of those services. As part of this arrangement, you are entitled to, and Furon has purchased, general medical insurance coverage for your spouse, as well as medical insurance to supplement Medicare coverage maintained by you, at an aggregate cost to Furon of approximately $600 per month, and Furon will reimburse you and your spouse for any uninsured out-of-pocket medical expenses. It is contemplated that the consulting arrangement will require the commitment of approximately 50% of your business time. 2. In performing your services as a consultant pursuant to that arrangement, you have been and will continue to be an independent contractor, and not an employee of Furon. 3. This consulting arrangement is subject to the annual review and approval of Furon's Board of Directors. If the foregoing accurately sets forth the terms of your consulting agreement with Furon, please so indicate by signing the extra-enclosed copy of this letter at the place provided for your signature and returning it to me. Cordially, /s/ J. MICHAEL HAGAN -------------------------------- J. Michael Hagan Chairman of the Board APPROVED AND AGREED EFFECTIVE AS OF FEBRUARY 4, 1996 /s/ PETER CHURM - -------------------------------- Peter Churm 48 EX-10.13 3 CREDIT AGREEMENT, DATED NOVEMBER 9, 1995 1 EXHIBIT 10.13 CREDIT AGREEMENT This Credit Agreement ("Agreement") is entered into as of October 30, 1995 by and among Furon Company, a California corporation ("Borrower"), Bank of America National Trust and Savings Association, a national banking association, and each other bank signatory hereto set forth on the signature pages of this Agreement and any financial institution which may hereafter execute and deliver a Commitment Assignment and Acceptance that is registered with the Agent pursuant to Section 9.8 (collectively, the "Banks" and individually, a "Bank"), and Bank of America National Trust and Savings Association, as Agent. RECITALS A. Borrower is party to that certain Second Amended and Restated Credit Agreement dated as of January 28, 1994, as amended, among Borrower, the banks named therein and Agent (the "Prior Credit Agreement"). B. Borrower, the Agent and the banks under the Prior Credit Agreement desire to terminate such credit facility and concurrently enter into this Agreement on the terms and conditions set forth herein. In consideration of the mutual covenants and agreements herein contained, the parties hereto covenant and agree as follows: ARTICLE I DEFINITIONS, ACCOUNTING TERMS AND EXHIBITS 1.1 Defined Terms. As used in this Agreement, the following terms shall have the meanings set forth respectively after each: - 1 - 2 "Acquisition" means any transaction, or any series of related transactions, by which Borrower and/or any of its Subsidiaries directly or indirectly (i) acquires any going business or all or substantially all of the assets of any firm, partnership, joint venture, corporation or division thereof, whether through purchase of assets, merger or otherwise, or (ii) acquires (in one transaction or as the most recent transaction in a series of transactions) control of at least a majority in ordinary voting power of the securities of a corporation which have ordinary voting power for the election of directors, or (iii) acquires control of a 50% or more ownership interest in any partnership or joint venture. "Adjusted Consolidated Tangible Effective Net Worth" means Borrower's actual Consolidated Tangible Effective Net Worth as of July 29, 1995, adjusted, if the Acquisition of Fluorglas is completed, on a pro forma basis as if such Acquisition had been completed on July 29, 1995. "Advance" means any advance made or to be made by a Bank to Borrower as provided in Article 2. "Affiliate" means, as to any Person, any other Person which directly or indirectly controls, or is under common control with, or is controlled by, such Person. As used in this definition, "controls (and the correlative terms, "controlled by" and "under common control with") shall mean possession, directly or indirectly, of power to direct or cause the direction of management or policies (whether through ownership of securities or partnership or other ownership interests, by contract or otherwise); provided that, in any event, any Person which owns directly or indirectly 10% or more of the securities having ordinary voting power for the election of directors or other governing body of a corporation that has more than 100 record holders of such securities or 10% or more of the partnership or other ownership interests of any other Person that has more than 100 record holders of such interests will be deemed to control such corporation or other Person. "Agent" means Bank of America National Trust and Savings Association as agent for the Banks hereunder and under the other Loan Documents, and each successor agent. - 2 - 3 "Agent's Office" means Bank of America National Trust and Savings Association, Global Agency #5596, 1455 Market Street, 13th Floor, San Francisco, California 94103, Attention: Peggy Fujimoto, or such other office as the Agent may designate in writing to Borrower and the Banks. "Agreement" means this Credit Agreement, either as originally executed or as it may from time to time be supplemented, modified, amended, renewed, extended or supplanted. "Applicable Amount" means, (a) for the Pricing Period from the Closing Date through December 15, 1995, the per annum rate, expressed in basis points, indicated by the Compliance Certificate delivered on the Closing Date, and (b) for each Pricing Period thereafter, the applicable per annum rate set forth below opposite the indicated ratios as of the last day of the Fiscal Quarter most recently ended prior to the commencement of that Pricing Period, as set forth in the most recently delivered Compliance Certificate:
Level Leverage Fixed LIBOR Rate Commitment Ratio Charge Fee Coverage Ratio ================================================================================================ I less than 1.00:1 37.50 15.00 greater than 2.00:1 - ----------------------------------------- ---------------------------- II greater than or equal to 1.00:1 but less than 1.50:1 43.75 15.00 - ------------------------------------------------------------------------------------------------ III less than 1.50:1 less than or equal to 2.00:1 50.00 17.50 - ------------------------------------------------------------------------------------------------ IV greater than or equal to 1.50:1 but less than 2.00:1 50.00 17.50 n/a - ----------------------------------------- ---------------------------- V greater than or equal to 2.00:1 but less than 2.50:1 62.50 20.00 - ----------------------------------------- ---------------------------- VI greater than or equal to 2.50:1 75.00 25.00 ================================================================================================
provided that (a) if Borrower does not deliver a Compliance Certificate prior to the commencement of any Pricing Period, then until (but only until) such certificate is delivered the - 3 - 4 Applicable Amount for that Pricing Period shall be based on Level VI, and (b) as long as any Default or Event of Default exists the Applicable Amount shall be based on Level VI; provided, further, that if any Compliance Certificate based on preliminary Fiscal Year numbers is subsequently determined to be in error, then any resulting increase (but not decrease) in interest or fees indicated by such correction shall be made retroactively; any resulting decrease in interest or fees indicated by such correction shall be effective from the Agent's date of receipt of such revised Compliance Certificate. "Applicable Currency" means, as to any particular payment or Advance, Dollars or the Offshore Currency in which it is denominated or is payable. "Arranger" means BA Securities, Inc., a Delaware corporation. "Bank of America" means Bank of America National Trust and Savings Association in its capacity as a Bank. "Banking Day" means any Monday, Tuesday, Wednesday, Thursday, or Friday other than a day on which banks are authorized or required to be closed in California or New York and (i) with respect to disbursements and payments of LIBOR Rate Loans denominated in Dollars, a day on which dealings in dollars are carried on in the London interbank market, and (ii) with respect to any disbursements and payments in and calculations pertaining to any Offshore Currency Advance, a day on which commercial banks are open for foreign exchange business in London, England and the applicable Agent's Payment Office, and on which dealings in the relevant Offshore Currency are carried on in the applicable offshore foreign exchange interbank market in which disbursement of or payment in such Offshore Currency will be made or received hereunder. "Base Rate" means a fluctuating rate per annum equal to the higher of (a) the Federal Funds Rate plus 1/2 of 1% and (b) the rate of interest publicly announced from time to time by Bank of America in San Francisco, California, as its reference rate. It is a rate set by Bank of America based upon various factors including Bank of America's costs and desired return, general economic conditions and other factors, and is used as a reference - 4 - 5 point for pricing some loans, which may be priced at, above, or below such announced rate. "Base Rate Loan" means a Loan made hereunder and designated as a Base Rate Loan in accordance with Section 2.3. "Borrower" means Furon Company, a California corporation. "Borrowing" means a borrowing hereunder consisting of (a) Loans of the same Type and in the same Applicable Currency made to Borrower on the same day by the Banks under Section 2, and, other than in the case of Base Rate Loans or Swing Line Advances, having the same LIBOR Period or (b) Swing Line Advances. "Capital Expenditure" means any expenditure (including any capitalized lease expenditure) that is considered a capital expenditure under Generally Accepted Accounting Principles, consistently applied, including without limitation, any amount that is required to be treated as a capitalized asset pursuant to Financial Accounting Standards Board Statement No. 13. "Cash" means all monetary items (including currency coin and bank demand deposits) that are treated as cash under Generally Accepted Accounting Principles. "Cash Equivalents" means, when used in connection with any Person, the Person's Investments in: - 5 - 6 (a) Government securities due within one year of the making of the Investment; (b) Marketable direct obligations issued or unconditionally guaranteed by the United States Government or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within one year from the date of acquisition thereof; (c) Marketable direct obligations of any State of the United States of America or any political subdivision of any such state or any public instrumentality thereof, in each case maturing within one year from the date of acquisition thereof and, at the time of acquisition, having a rating of at least Baa3 by Moody's Investors Service, Inc. or BBB- by S&P. (d) Readily marketable commercial paper of corporations doing business in and incorporated under the Laws of the United States of America or any State thereof, in each case due within one year after the date of the making of the Investment and, on the date of such Investment, having a rating of at least Prime-2 by Moody's Investors Service, Inc. or A-2 by S&P; and (e) Certificates of deposit or banker's acceptances maturing within one year from the date of acquisition thereof issued by (i) commercial banks organized under the laws of the United States of America or any State thereof or the District of Columbia, each having combined capital and surplus of not less than $500,000,000; or (ii) foreign commercial banks, each having combined capital and surplus of not less than $500,000,000, and as to which Agent and/or Banks maintain a correspondent relationship. "Change in Control" means any transaction or series of related transactions (a) in which any Person or two or more Persons acting in concert acquire beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended (the "Exchange Act")), directly or indirectly, of 35% or more of the common stock of Borrower, or (b) in which individuals who as of the Closing Date constitute the board of directors of Borrower (the "Incumbent Board"), cease for any reason to constitute at - 6 - 7 least a majority of the board of directors, provided that any person becoming a director subsequent to the Closing Date whose election, or nomination for election by Borrower or shareholders, is approved by a vote of at least a majority of the directors then comprising the Incumbent Board (other than an election or nomination of an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election or removal of the directors of Borrower, as contemplated in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) shall for the purposes of this Agreement, be considered as though such person were a member of the Incumbent Board of Borrower, or (c) constituting a "Change in Control," or other similar occurrence under documentation evidencing or governing any Indebtedness of Borrower of $15,000,000 or more which results in an obligation of Borrower to prepay, purchase, offer to purchase, redeem or defease such Indebtedness. "Closing Date" means, if all of the conditions precedent to the effectiveness to this Agreement have then been satisfied, October 30, 1995. "Commitment" means, subject to Articles 2 and 5, the amount set forth on Schedule 1.1 hereto. The initial share of the Commitment of each Bank signatory hereto is set forth in Schedule 1.1. "Commitment Assignment and Acceptance" means the document executed by a Bank and an assignee substantially in the form of Exhibit B. "Compliance Certificate" means a compliance certificate in the form of Exhibit C signed, on behalf of Borrower, by a Senior Officer of Borrower. "Computation Date" means (a) with respect to Borrowings of Offshore Currency Advances, the requested Borrowing date; (b) with respect to outstanding Offshore Currency Advances, the last applicable Banking Day of each month and the date of any reduction in the Commitment; and (c) with respect to the conversion or continuation of Offshore Currency Advances, the date of such conversion or continuation. - 7 - 8 "Consolidated EBITDA" means, for any period for Borrower and its Subsidiaries, an amount equal to the sum of (a) Consolidated Net Income, (b) interest expense, (c) the amount of taxes, based on or measured by income, used or included in the determination of Consolidated Net Income, (d) extraordinary losses and (e) the amount of depreciation and amortization expense deducted in determining Consolidated Net Income less (f) extraordinary gains, all determined in conformity with Generally Accepted Accounting Principles. "Consolidated Net Income" means, with respect to any fiscal period, the consolidated net income of Borrower and its consolidated Subsidiaries for that period, determined in accordance with Generally Accepted Accounting Principles consistently applied. "Consolidated Tangible Effective Net Worth" means, as at the end of each fiscal year, Shareholders' Equity minus intangible assets (as determined in accordance with Generally Accepted Accounting Principles). "Conversion/Continuation Date" means any date on which, under Section 2.4, Borrower (a) converts Loans of one Type to another Type, or (b) maintains as Loans of the same Type, but with a new LIBOR Period, Loans having LIBOR Periods expiring on such date. "Debtor Relief Laws" means the Bankruptcy Code of the United States of America, as amended from time to time, and all other applicable liquidation, conservatorship, insolvency, reorganization, or similar debtor relief Laws from time to time in effect affecting the rights of creditors generally. "Default" means any event that, with the giving of notice or passage of time or both, would be an Event of Default. "Default Rate" means the interest rate described in Section 3.9. "Designated Deposit Account" means a deposit account to be maintained by Borrower with Bank of America, as from time to time - 8 - 9 designated by Borrower by written notification to Bank of America. "Distribution" means, with respect to any shares of capital stock or any warrant or right to acquire shares of capital stock or any other equity security issued by a Person, (a) the retirement, redemption, purchase, or other acquisition for value by such Person of any such security, (b) the declaration or (without duplication) payment by such Person of any Dividend in Cash or in Property (other than common stock of such Person) on or with respect to any such security, (c) any Investment by such Person in the holder of any such security, and (d) any other payment by such Person constituting a distribution under applicable Laws with respect to such security. "Disposition" means the sale, transfer or other disposition in any single transaction or series of related transactions of any asset, or group of related assets, of Borrower or any of its Subsidiaries. "Dividend" means, with respect to any shares of capital stock or any warrant or right to acquire shares of capital stock or any other equity security issued by a Person, the declaration or (without duplication) payment by such Person of any dividend in Cash or Property (including common stock) on or with respect to any such security. "Dollars" means the national currency of the United States of America. "Dollar Equivalent" means, at any time, (a) as to any amount denominated in Dollars, the amount thereof at such time, and (b) as to any amount denominated in an Offshore Currency, the equivalent amount in Dollars on the basis of the Spot Rate for the delivery of such Offshore Currency on the most recent Computation Date therefor. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended and as in effect from time to time. "Events of Default" has the meaning set forth for that term in Section 7.1. - 9 - 10 "Expiration Date" means the earlier to occur of: (a) October 31, 2000; and (b) the date on which the Commitment terminates in accordance with the provisions of this Agreement. "Federal Funds Rate" means the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day of determination (or if such day of determination is not a Banking Day, for the next preceding Banking Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Banking Day, the average of the quotations for such day on such transaction received by the Agent from three Federal funds brokers of recognized standing selected by it. "Fiscal Year" means the 52 or 53 week fiscal periods of Borrower, ending always on either the last Saturday of January or on the first Saturday of February, generally the Saturday nearest to each January 31. "Fixed Charge Coverage Ratio" means, at the end of each Fiscal Year for the preceding Fiscal Year just ended, and at the end of each quarter of each Fiscal Year for the preceding four fiscal quarters, for Borrower and its consolidated Subsidiaries, the ratio of (a) Consolidated EBITDA for such period plus rental expense during such period minus Capital Expenditures during such period to (b) the amount of scheduled principal payments to be made on any outstanding Indebtedness of Borrower within the next four fiscal quarters plus interest expense for such period plus rental expense for such period. "Funded Debt" means, at any date, all Indebtedness for borrowed money of Borrower and its consolidated Subsidiaries. "FX Trading Office" means the Foreign Exchange Trading Center #5193, San Francisco, California, of Bank of America, or such other of Bank of America's offices as Bank of America may designate from time to time. "Generally Accepted Accounting Principles" means, as of any date of determination, accounting principles (a) set forth as - 10 - 11 generally accepted in then currently effective opinions of the Accounting Principles Board of the American Institute of Certified Public Accountants, (b) set forth as generally accepted in then currently effective Statements of the Financial Accounting Standards Board or (c) that are then approved by such other entity as may be approved by a significant segment of the accounting profession. The term "consistently applied," as used in connection therewith, means that the accounting principles applied as at any dates and for any periods are either (i) consistent in all material respects with those applied to the consolidated financial statements of Borrower as at January 28, 1995, and for the fiscal period then ended or (ii) not so consistent but the inconsistency is disclosed in a report on such financial statements, or prior financial statements, by a firm of independent certified public accountants and the report states that such firm concurs in the change of accounting principles applied thereto. "Governmental Agency" means (a) any federal, state, county or municipal government, or political subdivision thereof, (b) any governmental or quasi-governmental agency, authority, board, bureau, commission, department, instrumentality, or public body, (c) any court or administrative tribunal, or (d) any arbitration tribunal or other nongovernmental authority to whose jurisdiction a Person has consented, in each case whether of the United States of America or any other nation. "Hostile Acquisition" means any Acquisition, or any agreement by Borrower to make any Acquisition of any corporation or other business entity whose board of directors or comparable group has notified Borrower that it opposes such Acquisition. "Indebtedness" means all obligations, contingent and otherwise, that in accordance with Generally Accepted Accounting Principles should be classified upon the obligor's balance sheet as liabilities; provided that Indebtedness of any Person shall not include any particular Indebtedness if, upon or prior to the maturity thereof, there shall have been deposited with the proper depository, in trust, money (or evidences of such Indebtedness as permitted by the instrument creating such Indebtedness) in the necessary amount to pay, redeem or satisfy such Indebtedness. - 11 - 12 "Investment" means, when used in connection with any Person, any investment by or of that Person, whether by means of purchase or other acquisition of stock or other securities of any other Person or by means of loan, advance, capital contribution, guaranty, or other debt or equity participation or interest, or otherwise, in any other Person, including any partnership or joint venture interest of such Person. "Laws" means, collectively, all international, foreign, federal, state and local statutes, treaties, codes, ordinances, rules, regulations and precedents of any court or other Governmental Agency. "Level" means Level I, Level II, Level III, Level IV, Level V or Level VI, as determined by reference to the definition of "Applicable Amount." "Leverage Ratio" means, as of any date of determination, the ratio of Borrower's Funded Debt as of such date to Consolidated EBITDA for the four fiscal quarters ending on such date. "LIBOR Period" means, as to each LIBOR Rate Loan, the period commencing on the date specified by Borrower pursuant to the applicable Request for Loan and ending 1, 2, 3 or 6 months thereafter, as specified by Borrower in the applicable Request for Loan, provided that: (a) The first day in any LIBOR Period shall be a Banking Day; (b) Any LIBOR Period that would otherwise end on a day that is not a Banking Day shall be extended to the next succeeding Banking Day unless such Banking Day falls in another calendar month, in which case such LIBOR Period shall end on the next preceding Banking Day; and (c) No LIBOR Period shall extend beyond the Expiration Date. "LIBOR Rate" means, with respect to any LIBOR Rate Loan, the average of the rates per annum (determined by the Agent and rounded upward to the nearest 1/100 of 1%) at which deposits in - 12 - 13 the Applicable Currency are offered to the Reference Bank in the London interbank market at approximately 11:00 a.m., London time, two Banking Days before the first day of the applicable LIBOR Period in an aggregate amount, approximately equal to the amount of each such Reference Bank's portion of such LIBOR Rate Loan and for a period of time comparable to the number of days in the applicable LIBOR Period. The determination of the LIBOR Rate by Agent shall be conclusive in the absence of manifest error. "LIBOR Rate Loan" means an Advance made hereunder and designated as a LIBOR Rate Loan in accordance with Section 2.3, and may be a LIBOR Rate Loan denominated in Dollars or in an Offshore Currency. "Lien" means any mortgage, chattel mortgage, deed of trust, pledge, security interest, encumbrance, lien or charge of any kind, affecting any Property, including any agreement to give any of the foregoing, any conditional sale or other title retention agreement, any lease in the nature thereof, and the filing of or agreement to give any financing statement or comparable document under the Uniform Commercial Code or comparable Law of any jurisdiction. "Loan" or "Loans" means the Advances to be made by the Banks to Borrower pursuant to this Agreement. Loans may be a Base Rate Loan or a LIBOR Rate Loan (each, a "Type" of Loan). "Loan Documents" means, collectively, this Agreement, the Notes, any Compliance Certificate, the Swing Line Documents and any other certificates, documents or agreements of any type or nature heretofore or hereafter executed or delivered by Borrower to Agent or Banks in any way relating to or in furtherance of this Agreement either as originally executed or as the same may from time to time be supplemented, modified, amended or extended. "Majority Banks" means Banks holding 66 2/3% of the aggregate principal amount outstanding hereunder, or, if no amounts are outstanding, Banks holding 66 2/3% of the Commitment. "Minimum Tranche" means, in respect of Advances comprising part of the same Borrowing, or to be converted or continued under Section 2.4, (a) in the case of Advances other than Swing Line - 13 - 14 Advances, $5,000,000 or any multiple of $1,000,000 in excess thereof, (b) in the case of Swing Line Advances, $1,000,000 or any amount in excess thereof and (c) in the case of Offshore Currency Advances, 10,000 units of the Applicable Currency, or multiples thereof, having a Dollar Equivalent of not less than $5,000,000 and multiples of 10,000 units of the Applicable Currency in excess thereof. "Multiemployer Plan" means any employee benefit plan of the type described in Section 4001(a)(3) of ERISA. "Net Cash Proceeds" means, with respect to any Disposition, (a) the gross cash proceeds received by Borrower or its Subsidiaries upon such Disposition, (b) the gross cash installments paid to Borrower or its Subsidiaries by an obligor on any promissory note or other instrument or security received upon such Disposition, and (c) the gross cash consideration received by Borrower or its Subsidiaries upon the sale or other disposition of property received by Borrower or its Subsidiaries upon such Disposition, minus in each case (y) the actual expenses of such Disposition paid or payable by Borrower or its Subsidiaries in connection with such Disposition and (z) the present value of the amount of taxes on or measured by income estimated by Borrower to be payable in connection with such Disposition, which estimate is reasonably acceptable to the Banks. "Note" means a promissory note substantially in the form of Exhibit A evidencing the Advances made by each Bank (and any promissory note that may be issued in substitution, renewal, extension or exchange therefor) with all blanks properly filled in, and executed by Borrower in favor of each Bank requesting a Note, either as originally executed or as the same may from time to time be supplemented, replaced, modified, amended, renewed, extended, increased or refinanced. "Obligations" means all present or future obligations of every kind or nature whatsoever of Borrower at any time or from time to time owed under the Loan Documents, whether due or to become due, matured or unmatured, liquidated or unliquidated, or contingent or noncontingent, and includes obligations of performance as well as obligations of payment. - 14 - 15 "Offshore Currency" means at any time English pounds sterling, Deutsche Marks, Japanese yen and any other freely available currency approved by the Majority Banks that is traded in the London foreign exchange market and for which Bank of America can determine a Spot Rate. "Offshore Currency Advance" means any LIBOR Rate Loan denominated in an Offshore Currency. "Offshore Currency Limit" means, as to all Offshore Currencies, an amount of Offshore Currencies, the Dollar Equivalent of which is $30,000,000. "Overnight Rate" means, for any day, the rate of interest per annum at which overnight deposits in the Applicable Currency, in an amount approximately equal to the amount with respect to which such rate is being determined, would be offered for such day by Bank of America's London Branch to major banks in the London or other applicable offshore interbank market. "Party" means any Person other than the Agent and the Banks, which now or hereafter is a party to any of the Loan Documents. "PBGC" means the Pension Benefit Guaranty Corporation or any successor established under ERISA. "Person" means any entity, whether an individual, trustee, corporation, partnership, joint stock company, trust, unincorporated organization, bank, business association or firm, joint venture, Governmental Agency or otherwise. "Plan" means any employee benefit plan subject to ERISA and maintained by Borrower or any of its Subsidiaries or to which Borrower or any of its Subsidiaries is required to contribute on behalf of its employees. "Pricing Period" means (a) the period commencing on the Closing Date and ending on December 15, 1995, and (b) the period commencing on each December 16 and ending on the next following March 15, (c) the period commencing on each March 16 and ending on the next following June 15, (d) the period commencing on each - 15 - 16 June 16 and ending on the next following September 15 and (e) the period commencing on each September 16 and ending on the next following December 15. "Property" means any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible. "Quarterly Payment Date" means each February 28, May 29, August 29, and November 29; provided, however, that the last Quarterly Payment Date for Advances shall be the Expiration Date. "Reference Bank" means Bank of America National Trust and Savings Association. "Regulation D" means Regulation D, as at any time amended, of the Board of Governors of the Federal Reserve System or any other regulation in substance substituted therefor. "Regulatory Development" means any or all of the following: (a) any change in any applicable law or the interpretation thereof by any Governmental Agency (whether or not having the force of Law); (b) the application of any existing applicable law or the interpretation thereof by any Governmental Agency (whether or not having the force of Law); and (c) compliance by any Bank with any request or directive (whether or not having the force of Law) of any Governmental Agency or central bank. "Request for Loan" means a request for an Advance signed by a Responsible Official of Borrower, substantially in the form of Exhibit D. "Requirement of Law" means, as to any Person, the articles or certificate of incorporation and by-laws or other organizational or governing documents of such Person, any Law or any judgment, award, decree, writ or determination of, or any consent or similar agreement with a Governmental Agency, in each case applicable to or binding upon such Person or any of its Property or to which such Person or any of its Property is subject. "Responsible Official" means, (a) when used with reference to Borrower, any corporate officer thereof, and (b) when used with - 16 - 17 reference to any other Person, any officer or general partner or any other responsible official thereof. Except as otherwise specifically provided herein, any requirement that any document or certificate be signed or executed by any Person requires that such document or certificate be signed or executed by a Responsible Official of such Person, and that such Responsible official signing or executing such document or certificate on behalf of such Person shall be authorized to do so. "S&P" means Standard & Poor's Ratings Group, a division of McGraw Hill, Inc. "Same Day Funds" means (i) with respect to disbursements and payments in Dollars, immediately available funds, and (ii) with respect to disbursements and payments in an Offshore Currency, same day or other funds as may be determined by the Agent to be customary in the place of disbursement or payment for the settlement of international banking transactions in the relevant Offshore Currency. "Senior Officer" means the (a) chief executive officer, (b) chief operating officer, (c) chief financial officer, (d) controller, (e) any executive vice president, (f) treasurer or (g) general counsel, in each case whatever the title nomenclature may be, of the Person designated. "Shareholders' Equity" means, as of any date of determination, shareholders' equity in Borrower and its consolidated Subsidiaries as of that date determined in accordance with Generally Accepted Accounting Principles; provided that there shall be excluded from Shareholders' Equity any amount attributable to capital stock that is, directly or indirectly, required to be redeemed or repurchased by the issuer thereof at a specified date or upon the occurrence of specified events or at the election of the holder thereof. "Special LIBOR Circumstance" means the application or adoption of any Law or interpretation, or any change therein or thereof, or any change in the interpretation or administration thereof by any Governmental Agency, central bank or comparable authority charged with the interpretation or administration thereof, or compliance by a Bank with any request or directive - 17 - 18 (whether or not having the force of Law) of any such Governmental Agency, central bank or comparable authority, or the existence or occurrence of circumstances affecting the London interbank market generally that are beyond the reasonable control of the Bank. "Spot Rate" for a currency means the rate quoted by Bank of America at approximately 8:00 a.m. (San Francisco time) on the date two Banking Days prior to the Computation Date as the spot rate for purchase by Bank of America of such currency with another currency through its FX Trading Office as of the Computation Date. "Subordinated Obligations" means any Indebtedness of Borrower which (a) is subordinated to the Obligations, (b) the terms of which are in form, substance and amount substantially the same as the terms of the Indenture dated as of January 15, 1986, pursuant to which Borrower issued $25,000,000 in principal amount of 8% Convertible Subordinated Debentures due 2011 (none of which debentures remains outstanding), (c) has subordination provisions consistent with current market conventions for similar indebtedness at the time of issuance, and (d) has been approved by Majority Banks as being in compliance with clauses (b) and (c) above. "Subsidiary" means any corporation of which more than 50% of the outstanding securities of any class or classes (however designated) having ordinary voting power to elect directors of the corporation (other than securities having the power only by reason of the happening of a contingency) is at the time owned by any Person and/or one or more than one other Subsidiary of such Person. "Swing Line" means the revolving line of credit established by the Swing Line Bank in favor of Borrower pursuant to Section 2.5. "Swing Line Advances" means advances made by the Swing Line Bank to Borrower pursuant to Section 2.5. "Swing Line Bank" means Bank of America. - 18 - 19 "Swing Line Documents" means any promissory note and any other documents executed by Borrower as requested by the Swing Line Bank from time to time in favor of the Swing Line Bank in connection with the Swing Line. "Swing Line Outstandings" means, as of any date of determination, the aggregate principal Indebtedness of Borrower on all Swing Line Advances then outstanding. "Type" has the meaning specified in the definition of "Loan." 1.2 Use of Defined Term. Except as otherwise expressly provided herein, any defined terms used in the plural shall refer to all members of the relevant class, and any defined term used in the singular shall refer to any one or more of the members of the relevant class. 1.3 Accounting Terms. Except as otherwise expressly provided herein, all accounting terms not specifically defined in this Agreement shall be construed in conformity with, and all financial data required to be submitted by this Agreement shall be prepared in conformity with Generally Accepted Accounting Principles, applied on a consistent basis. 1.4 Exhibits and Schedules. All exhibits and schedules to this Agreement, either as now existing or as the same may from time to time be supplemented, modified or amended, are incorporated herein by this reference. 1.5 Rounding. Any financial ratios required to be maintained by Borrower pursuant to this Agreement shall be calculated by dividing the appropriate component by the other component, carrying the result to one place more than the number of places by which such ratio is expressed in this Agreement and rounding the result up or down to the nearest number (with a round-up if there is no nearest number) to the number of places by which such ratio is expressed in this Agreement. 1.6 Currency Equivalents Generally. For all purposes of this Agreement (but not for purposes of the preparation of any financial statements delivered pursuant hereto or the calculation of any financial covenant), the equivalent in any Offshore - 19 - 20 Currency or other currency of an amount in Dollars, and the equivalent in Dollars of an amount in any Offshore Currency or other currency, shall be determined at the Spot Rate for delivery of such Offshore Currency on the applicable Computation Date. ARTICLE 2 LOANS 2.1 General Provisions. (a) Subject to the terms and conditions set forth in this Agreement, at any time and from time to time from the Closing Date to the Expiration Date, each Bank shall, pro rata according to its pro rata share of the Commitment then in effect make Advances to Borrower in such amounts as Borrower may request in an aggregate amount outstanding at any one time not to exceed the Commitment. Until the Expiration Date, Borrower may borrow and repay Advances in whole or in part, and reborrow, all in accordance with the terms hereof. (b) No new Advances shall be made under the Commitment if (i) the aggregate amount of such Advances and of all Advances previously made and then outstanding shall exceed the Commitment or (ii) the aggregate amount of all outstanding Offshore Currency Advances shall on any Computation Date exceed the Offshore Currency Limit. 2.2 Loan Accounts. (a) The Advances made by each Bank shall be evidenced by one or more accounts or records maintained by such Bank in the ordinary course of business. The accounts or records maintained by each Bank shall be presumptive evidence of the amount of the Advances made by the Banks to Borrower, and the interest and payments thereon. Any failure so to record or any error in doing so shall not, however, limit, increase or otherwise affect the obligation of Borrower hereunder to pay any amount owing with respect to the Advances. (b) Upon the request of any Bank made through the Agent, the Advances made by such Bank may be evidenced by one or more Notes, instead of loan accounts. Each such Bank shall endorse on the schedules annexed to its Note(s) the date, amount - 20 - 21 and maturity of each Advance made by it and the amount of each payment of principal made by Borrower with respect thereto. Each such Bank is irrevocably authorized by Borrower to endorse its Note(s) and each Bank's record shall be presumptive evidence of the amount owing; provided, however, that the failure of a Bank to make, or an error in making, a notation thereon with respect to any Advance shall not limit, increase or otherwise affect the obligations of Borrower hereunder or under any such Note to such Bank. (c) The Swing Line Advances shall be evidenced by one or more loan accounts maintained by the Swing Line Bank in the ordinary course of business, and such accounts shall be presumptive evidence of the principal amount owing under the Swing Line. Any failure to so record or any error in doing so shall not, however, limit or otherwise affect the obligation of Borrower to pay any amount owing with respect to Swing Line Advances; provided, however, that the Swing Line Bank may request Borrower to execute and deliver a promissory note to evidence the Swing Line Advances, and Borrower agrees to execute and deliver such a promissory note, and such other Swing Line Documents as the Swing Line Bank may from time to time reasonably request. 2.3 Procedure for Borrowing. (a) Each Borrowing shall be made upon Borrower's irrevocable (except as set forth herein) telephonic notice (in each case confirmed immediately by delivery of a Request for Loan) received by the Agent prior to 9:00 a.m. (San Francisco time) (i) four Banking Days prior to the requested Borrowing date, in the case of Offshore Currency Advances; (ii) three Banking Days prior to the requested Borrowing date, in the case of LIBOR Rate Loans denominated in Dollars; and (iii) one Banking Day prior to the requested Borrowing date, in the case of Base Rate Loans, specifying: (A) the amount of the Borrowing, which shall be in an aggregate amount not less than the Minimum Tranche; (B) the requested Borrowing date, which shall be a Banking Day; (C) the Type of Advances comprising the Borrowing; (D) the duration of the LIBOR Period applicable to such Advances included in such notice; if the Request for Loan fails to specify the duration of the LIBOR Period for any Borrowing comprised of LIBOR Rate Loans, such LIBOR Period shall be one month; and (E) in the case of a Borrowing comprised of Offshore Currency Advances, the Applicable Currency. - 21 - 22 (b) The Dollar Equivalent amount of any Borrowing in an Offshore Currency will be determined by the Agent for such Borrowing as of the Computation Date therefor determined in accordance with the definition thereof. Upon receipt of the Request for Loan, the Agent will promptly notify each Bank thereof and of the amount of such Bank's pro rata share of the Borrowing. In the case of a Borrowing comprised of Offshore Currency Advances, such notice will provide the amount of each Bank's pro rata share of the Borrowing, and the Agent will, upon the determination of the Dollar Equivalent amount of the Borrowing as specified in the Request for Loan, promptly notify each Bank of the exact Dollar Equivalent of such Bank's pro rata share of the Borrowing. (c) In the case of a proposed Borrowing comprised of Offshore Currency Advances, the Banks shall be under no obligation to make such Offshore Currency Advances if the Agent has received notice from any of the Banks by 12:00 noon (San Francisco time) four Banking Days prior to the day of such Borrowing that such Bank cannot provide Loans in the requested Offshore Currency. The Agent shall promptly notify the Banks and Borrower of such notice. Borrower may withdraw such Request for Loan by notifying the Agent not later than 8:00 a.m. (San Francisco time) one Banking Day prior to the requested date of such Borrowing. If Borrower does not so withdraw such Request for Loan, such Request for Loan shall be deemed to be requesting a Borrowing in Dollars comprised of Base Rate Loans in an amount equal to the Dollar Equivalent amount of the Borrowing originally requested in such Request for Loan. (d) Each Bank will make the amount of its pro rata share of each Borrowing available to the Agent for the account of Borrower at the Agent's Payment Office on the Borrowing date requested by Borrower in Same Day Funds and in the requested currency (i) in the case of a Borrowing comprised of Advances in Dollars, by 10:00 a.m. (San Francisco time) and (ii) in the case of a Borrowing comprised of Offshore Currency Advances, by such time as the Agent may reasonably specify, but in no event later than 11:00 a.m. (San Francisco time) on the date of Borrowing. The proceeds of all such Advances will then be made available to Borrower by the Agent at such office by crediting the account of - 22 - 23 Borrower on the books of Bank of America with the aggregate of the amounts made available to the Agent by the Banks and in like funds as received by the Agent. (e) If any Bank shall not have made its full amount available to the Agent and the Agent in such circumstances has made available to Borrower such amount, that Bank shall within one Banking Day following the Borrowing date make such amount available to the Agent, together with interest at the Federal Funds Rate for each day during such period. A certificate of the Agent submitted to any Bank with respect to amounts owing under this Section 2.9 shall be conclusive, absent manifest error. If such amount is so made available, such payment to the Agent shall constitute such Bank's Loan on the Borrowing date for all purposes of this Agreement. If such amount is not made available to the Agent within one Banking Day following the Borrowing date, the Agent shall notify Borrower of such failure to fund and, upon demand by the Agent, Borrower shall pay such amount to the Agent for the Agent's account, together with interest thereon for each day elapsed since the date of such Borrowing, at a rate per annum equal to the interest rate applicable at the time to the Advances comprising such Borrowing. (f) After giving effect to any Borrowing, there may not be more than 10 different LIBOR Periods in effect. 2.4 Conversion and Continuation Elections. (a) Borrower may, upon delivery of notice in accordance with Section 2.4(b): (i) elect, as of any Banking Day, in the case of Base Rate Loans, or as of the last day of the applicable LIBOR Period, in the case of any LIBOR Rate Loans denominated in Dollars, to convert any such Loans (or any part thereof in an amount not less than the Minimum Tranche) into Loans in Dollars of any other Type; or (ii) elect, as of the last day of the applicable LIBOR Period, to continue any Loans having LIBOR Periods expiring on such day (or any part thereof in an amount not less than the Minimum Tranche); provided, that if at any time the aggregate amount of LIBOR Rate Loans in respect of any Borrowing is reduced, by payment, prepayment, or conversion of part thereof to be less than the Minimum Tranche, such LIBOR Rate Loans shall automatically convert into Base Rate Loans, and on and after such date the right of Borrower to continue such Loans as, and convert such - 23 - 24 Loans into, LIBOR Rate Loans shall terminate, unless there are additional Loans sufficient to equal the Minimum Tranche. (b) Borrower shall deliver irrevocable (except as set forth herein) telephonic notice (in each case confirmed immediately by delivery of a Notice of Conversion/Continuation) received by the Agent not later than 9:00 a.m. (San Francisco time) at least (i) three Banking Days in advance of the Conversion/Continuation Date, if the Loans are to be converted into or continued as LIBOR Rate Loans denominated in Dollars; (ii) four Banking Days in advance of the continuation date, if the Loans are to be continued as Offshore Currency Advances; and (iii) one Banking Day in advance of the Conversion/Continuation Date, if the Loans are to be converted into Base Rate Loans, specifying: (A) the proposed Conversion/Continuation Date; (B) the aggregate amount and Applicable Currency of Loans to be converted or continued; (C) the Type of Loans resulting from the proposed conversion or continuation; and (D) other than in the case of conversions into Base Rate Loans, the duration of the requested LIBOR Period. (c) If upon the expiration of any LIBOR Period applicable to LIBOR Rate Loans in Dollars, Borrower has failed to select timely a new LIBOR Period to be applicable to such LIBOR Rate Loans, as the case may be, or if any Event of Default then exists, Borrower shall be deemed to have elected to convert such LIBOR Rate Loans into Base Rate Loans effective as of the expiration date of such LIBOR Period. If Borrower has failed to select a new LIBOR Period to be applicable to Offshore Currency Advances prior to 8:00 a.m. on the fourth Banking Day in advance of the expiration date of the current LIBOR Period applicable thereto as provided in Section 2.4(b), or if any Event of Default shall then exist, subject to the provisions of Section 2.4(d), Borrower shall be deemed to have elected to continue such Offshore Currency Advances on the basis of a one month LIBOR Period. (d) In the case of a proposed continuation of Offshore Currency Advances, the Banks shall be under no obligation to continue such Offshore Currency Advances if the Agent has received notice from any of the Banks by 12:00 Noon (San Francisco time) four Banking Days prior to the day of such - 24 - 25 continuation that such Bank cannot continue to provide Loans in the relevant Offshore Currency. The Agent shall promptly notify the Banks and Borrower of such notice and such Notice of Continuation/Conversion shall be deemed withdrawn, and such Offshore Currency Advance shall be due and payable at the end of the LIBOR Period thereof. (e) The Agent will promptly notify each Bank of its receipt of a Notice of Conversion/Continuation, or, if no timely notice is provided by Borrower, the Agent will promptly notify each Bank of the details of any automatic conversion or continuation. All conversions and continuations shall be made ratably according to the respective outstanding principal amounts of the Loans with respect to which the notice was given held by each Bank. (f) Unless the Majority Banks otherwise agree, during the existence of an Event of Default, Borrower may not elect to have any Advance converted into or continued as a LIBOR Rate Loan in Dollars or an Offshore Currency Advance, and all such Advances shall be converted into Base Rate Loans in an amount equal to the Dollar Equivalent of such Advances on the last day of the LIBOR Interest Period of such Advances. (g) After giving effect to any conversion or continuation of Loans, there may not be more than 10 different LIBOR Periods in effect. 2.5 The Swing Line. (a) Availability. The Swing Line Bank shall from time to time through the day prior to the Final Maturity Date make Swing Line Advances in Dollars to Borrower in such amounts as Borrower may request, provided that (i) giving effect to such Swing Line Advance, the Swing Line Outstandings shall not exceed $5,000,000 and the aggregate amount of all Advances shall not exceed the Commitment, (ii) without the consent of the Majority Banks, no Swing Line Advance may be made during the existence of a Default or an Event of Default, and (iii) the Swing Line Bank may at any time in its sole discretion, upon at least two Banking Days' prior notice to Borrower, suspend or terminate availability under the Swing Line. Subject to the foregoing, Borrower may - 25 - 26 borrow, repay and reborrow under this Section. The Swing Line Bank shall promptly notify the Agent of the Swing Line Advance Outstandings each time there is a change therein. (b) Borrowings. Unless notified to the contrary by the Swing Line Bank, Borrowings under the Swing Line may be made in an amount not less than the Minimum Tranche upon telephonic request made to the Swing Line Bank not later than 3:00 p.m., San Francisco time, on the Business Day of the requested Borrowing (which telephonic request shall be promptly confirmed in writing by a Responsible Official of Borrower by telecopier with telephonic notice to the Agent). Promptly after receipt of such a request for borrowing, the Swing Line Bank shall obtain telephonic verification from the Agent that, giving effect to such request, availability for Advances will exist under Section 2.1 (and such verification shall be promptly confirmed in writing by telecopier). (c) Repayments. Unless notified to the contrary by the Swing Line Bank, each repayment of a Swing Line Advance shall be in an amount which is an integral multiple of $1,000,000. If Borrower instructs the Swing Line Bank to debit its demand deposit account at the Swing Line Bank in the amount of any payment with respect to a Swing Line Advance, or the Swing Line Bank otherwise receives repayment, after 3:00 p.m., San Francisco time, on a Business Day, such payment shall be deemed received on the next Business Day. (d) Mandatory Repayments. In the event that there are Swing Line Outstandings on five (5) consecutive Business Days, then on the next Business Day (unless Borrower has made other arrangements acceptable to the Swing Line Bank to reduce the Swing Line Outstandings to zero), Borrower shall request an Advance pursuant to Section 2.3 in an amount complying with Section 2.1 and sufficient to reduce the Swing Line Outstandings to zero. The Agent shall automatically provide such amount directly to the Swing Line Bank (which the Swing Line Bank shall then apply to the Swing Line Outstandings) and credit any balance of the Advance in immediately available funds as provided in Section 2.3(d). In the event that Borrower fails to request a Advance within the time specified by Section 2.3 on any such date, the Agent may, but is not required to, without notice to or - 26 - 27 the consent of Borrower, cause Advances to be made by the Banks under the Commitment in the amount necessary to comply with Section 2.1 and sufficient to reduce the Swing Line Outstandings to zero and, for this purpose, the conditions precedent set forth in Sections 6.1 and 6.2 shall not apply. The proceeds of such Advances shall be paid to the Swing Line Bank for application to the Swing Line Outstandings. (e) Purchase of Participations. Upon the making of a Swing Line Advance, each Bank shall be deemed to have purchased from the Swing Line Bank a participation therein in an amount equal to that Bank's pro rata share of the Commitment multiplied by the amount of the Swing Line Advance. Upon demand made by the Swing Line Bank, each Bank shall, according to its pro rata share of the Commitment, promptly provide to the Swing Line Bank its purchase price therefor in an amount equal to its participation therein. The obligation of each Bank to so provide its purchase price to the Swing Line Bank shall be absolute and unconditional and shall not be affected by the occurrence of an Event of Default or any other occurrence or event. 2.6 Commitment Reductions. (a) Scheduled Reductions. The Commitment, and each Bank's pro rata share thereof, shall automatically reduce on each October 31 and April 30 to an amount not exceeding the amount shown opposite each date, commencing on October 31, 1998 until the Expiration Date, on which date all amounts outstanding under the Commitment shall be due and payable in full, as follows:
Maximum Scheduled Remaining Reduction Dates Commitment ---------------- ----------- October 31, 1998 $93,750,000 April 30, 1999 87,500,000 October 31, 1999 81,250,000 April 30, 2000 75,000,000 October 31, 2000 0
- 27 - 28 If, after giving effect to any of the foregoing reductions, the aggregate amount of all Loans outstanding exceeds the Commitment, Borrower shall immediately, and without notice or demand, prepay the outstanding principal amount of the Loans in an aggregate amount equal to such excess in accordance with Section 2.6(d). (b) Dispositions. The Commitment, and each Bank's pro rata share thereof, shall automatically reduce by an amount equal to the Net Cash Proceeds received by Borrower or any of its Subsidiaries from Dispositions in excess of $7,500,000 in the aggregate in any four-quarter period. Such reduction shall be effective 12 months after the receipt of such Net Cash Proceeds; provided, however, that no reduction shall be required to the extent any of such excess Net Cash Proceeds are used to make permitted Acquisitions or Capital Expenditures hereunder within 12 months after the receipt of such Net Cash Proceeds. If, after giving effect to any of the foregoing reductions, the aggregate amount of all Loans outstanding exceeds the Commitment, Borrower shall immediately, and without notice or demand, prepay the outstanding principal amount of the Loans in an aggregate amount equal to such excess in accordance with Section 2.6(d). (c) Optional Reductions of Commitment. Subject to the provisions of Section 2.6(d) hereof, Borrower shall have the right, without premium or penalty, at any time and from time to time prior to the Expiration Date, upon at least three (3) Banking Days prior written notice to Agent at Agent's Office, to reduce permanently and irrevocably the Commitment in aggregate principal amounts of not less than $5,000,000 or any integral multiple of $1,000,000 in excess thereof, or to terminate the undisbursed portion of the Commitment. Each optional reduction of the Commitment shall be applied in the order of occurrence of scheduled reductions of the Commitment. (d) Prepayments if Loans Exceed Commitment. If, after giving effect to any of the foregoing reductions, the aggregate amount of all Loans outstanding exceeds the Commitment, Borrower shall immediately, and without notice or demand, prepay the outstanding principal amount of the Loans in an aggregate amount equal to such excess. If Borrower intends to prepay Offshore Currency Advances, the Agent will, upon Borrower's request, calculate the Dollar Equivalent thereof as of the reduction date. - 28 - 29 Each prepayment of principal shall be accompanied by payment of interest accrued through the date of payment on the amount of principal paid and, in any event, any payment or prepayment of all or any part of any LIBOR Rate Loan on a day other than the last day of the applicable LIBOR Period shall be subject to Section 3.8. All accrued commitment fees to, but not including, the effective date of each reduction shall be paid on the effective date of such reduction. 2.7 Prepayments. (a) Subject to Section 3.8, if on any Computation Date the Agent shall have determined that the aggregate amount of all Loans exceeds the Commitment due to a change in the Spot Rate, the Agent shall give notice to Borrower, and Borrower shall thereupon prepay the outstanding principal amount of the Loans in an aggregate amount equal to such excess in accordance with Section 2.6(d). (b) Subject to Section 3.8, Borrower may, at any time or from time to time, ratably prepay Loans in whole or in part, in minimum Dollar Equivalent amounts of the Minimum Tranche. Borrower shall deliver a notice of prepayment to be received by the Agent not later than 10:00 a.m. (San Francisco time) (i) at least four Banking Days in advance of the prepayment date if the Loans to be prepaid are Offshore Currency Advances, (ii) at least three Banking Days in advance of the prepayment date if the Loans to be prepaid are LIBOR Rate Loans denominated in Dollars, and (iii) no later than the prepayment date if the Loans to be prepaid are Base Rate Loans. Such notice of prepayment shall specify the date and amount of such prepayment and whether such prepayment is of Base Rate Loans, LIBOR Rate Loans, or any combination thereof, and the Applicable Currency. Such notice shall not thereafter be revocable by Borrower and the Agent will promptly notify each Bank thereof and of such Bank's pro rata share of such prepayment. If such notice is given by Borrower, Borrower shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein, together with accrued interest to each such date on the amount of any LIBOR Rate Loans prepaid and any amounts required pursuant to Section 3.8. Any Commitment reductions shall be applied against remaining scheduled Commitment reductions as designated by Borrower. - 29 - 30 2.8 Loan Proceeds. The Advances shall be applied by Borrower to pay all amounts owing under the Prior Credit Agreement, to general working capital purposes, and to finance non-Hostile Acquisitions. 2.9 Involuntary Termination of Commitment Upon Change In Control. Upon the occurrence of a Change in Control, the Commitment hereunder shall terminate unless Borrower requests by written notice to the Agent that the Banks approve a waiver of this provision and the Banks unanimously approve such waiver in writing. In the event of a Change in Control which has not been approved by the board of directors of Borrower, the Banks shall have the right to determine in their sole discretion that none or only a portion of the Commitment shall be terminated and become due and payable. In the event of a Change in Control which has been approved by the board of directors of Borrower, the Banks shall have the right to determine in their reasonable judgment that none or only a portion of the Commitment shall be terminated and become due and payable hereunder. No waiver of this provision shall be effective unless approved by all of the Banks in writing. ARTICLE 3 PAYMENTS; FEES 3.1 Principal and Interest. (a) Interest shall be payable on the outstanding daily unpaid principal amount of each Advance from the date thereof until payment in full and shall accrue and be payable at the rates set forth herein, before and after default, before and after maturity, before and after any judgment, and before and after the commencement of any proceeding under any Debtor Relief Law, with interest on overdue interest to bear interest at the Default Rate to the extent permitted by applicable Laws. (b) Subject to the terms and conditions of this Agreement, Borrower may, by delivering to the Agent a Request for Loan in accordance with the terms of this Agreement, from time to time request that outstanding Advances bear interest calculated based either on the Base Rate or the LIBOR Rate. If Borrower - 30 - 31 shall fail to deliver a Request for Loan in accordance with the terms hereof prior to the expiration of a LIBOR Period, Borrower shall be deemed to have requested that the relevant Advance shall be converted to an Advance bearing interest calculated based on the Base Rate as of such date. (c) Interest accrued on each Base Rate Loan shall be due and payable on each Quarterly Payment Date and on the Expiration Date. (d) LIBOR Rate Loans shall bear interest at the relevant rate calculated based on the LIBOR Rate from the first day of the relevant LIBOR Period until but not including the last day of the LIBOR Period therefor. Interest accrued on each LIBOR Rate Loan which is for a term of three (3) months or less shall be due and payable on the last day of the related LIBOR Period. Interest accrued on each other LIBOR Rate Loan shall be due and payable on the date which is three months after the date such LIBOR Rate Loan was made and on the last day of the related LIBOR Period. Except as otherwise provided in Section 3.9, the unpaid principal amount of any LIBOR Rate Loan shall bear interest at a rate per annum as set forth below in Section 3.1(f). (e) Interest accrued on each Swing Line Loan shall be due and payable on such dates, not more frequently than monthly, as may be specified by the Swing Line Bank and in any event on the Expiration Date. The Swing Line Bank shall be responsible for invoicing Borrower for such interest. The interest payable on Swing Line Advances is solely for the account of the Swing Line Bank. (f) Except as otherwise provided in Section 3.9, Advances shall bear interest on a per annum basis as follows: (i) Base Rate Loans shall bear interest at the Base Rate; (ii) LIBOR Rate Loans shall bear interest at the LIBOR Rate plus the Applicable Amount; and (iii) Swing Line Loans shall bear interest at the Base Rate. - 31 - 32 3.2 Fees. (a) Agent's and Arranger's Fees. Borrower agrees to pay to the Agent and the Arranger, for their own accounts, the fees referred to in the letter agreement dated October 17, 1995 between Borrower, Bank of America and the Arranger. (b) Participation Fee. Borrower agrees to pay to the Agent, for the account of each Bank, a fee equal to .0625% of each Bank's final allocated pro rata share of the Commitment hereunder. (c) Commitment Fee. From the Closing Date until but not including the Expiration Date, Borrower shall pay to the Agent, for the account of each Bank pro rata according to that Bank's pro rata share of the Commitment, a commitment fee on the average daily amount by which the Commitment exceeds Advances outstanding under the Commitment; provided, however, that Swing Line Advances shall not be considered usage. Such fee shall equal a rate per annum equal to the Applicable Amount. The commitment fee shall accrue daily and be payable quarterly in arrears on each Quarterly Payment Date. The Agent shall calculate the basic commitment fee and the amount thereof allocable to each Bank according to that Bank's pro rata share of the Commitment and shall notify Borrower in writing of such amounts. The amount of each commitment fee received by the Agent for the account of a Bank shall be promptly paid by the Agent to that Bank in immediately available funds. 3.3 Increased Commitment Costs. Upon reasonable notice from any Bank (with a copy to the Agent), Borrower forthwith shall reimburse such Bank for any increase in the costs of such Bank relating to any fees, premiums, assessments, charges and/or reserve requirements imposed or requested subsequent to the Closing Date by any Governmental Agency (whether or not having the force of Law) against credit commitments of such Bank that is attributed by such Bank, using any reasonable attribution method, from time to time, to its pro rata share of the Commitment. Such Bank's notice shall set forth the basis on which it has been determined that such an amount is due from Borrower, a calculation of the amount due, and a certification that the - 32 - 33 corresponding costs have been incurred by the Bank. Borrower shall only be obligated to reimburse a Bank for costs incurred after the date of such notice and for such costs incurred within the 120 day-period immediately preceding the date such notice is received by Borrower. In the event such Bank fails to provide notice to Borrower as provided hereinabove, Borrower shall not be obligated to reimburse such Bank for increased commitment costs. 3.4 LIBOR Fees. So long as any Bank may be required to maintain reserves against "eurocurrency liabilities" under Regulation D, Borrower shall pay to that Bank a LIBOR fee that shall be calculated by applying an annual rate determined from the formula set forth below against that Bank's share of the principal amount of each LIBOR Rate Loan made by that Bank for the term of that LIBOR Period, as applicable: LIBOR Rate for that LIBOR Rate Loan - ---------------------------------------- 1 minus rate of reserve requirements minus LIBOR Rate for that (expressed as a decimal) for that Bank LIBOR Rate Loan under Regulation D in respect of Eurocurrency liabilities during the term of that LIBOR Rate Loan Amounts payable to any Bank under this section shall be determined solely by that Bank based upon the assumption that the Bank funded 100% of its share of each LIBOR Rate Loan in the London interbank market for a corresponding amount and term, regardless of whether that Bank did so in fact. In the event of any change in the rate of reserve requirements for that Bank under Regulation D during the term of any LIBOR Rate Loan, or any variation in those requirements based upon amounts or kinds of assets or liabilities, or other factors, that Bank may use any reasonable attribution and/or averaging method it deems appropriate and practical for determining the rate of reserve requirements for that Bank that shall be used in the computation of the formula set forth above. Each Bank shall notify Borrower of the amount of its LIBOR fee for each LIBOR Rate Loan within 45 days after the last day of its term and Borrower shall pay that LIBOR fee within five days after its receipt of the notice. Any such notice from a Bank shall describe the manner of calculation - 33 - 34 of the fee and include a statement that the Bank has been, during the applicable period, required to maintain reserves against "eurocurrency liabilities" under Regulation D. In the event such Bank fails to provide notice as set forth hereinabove, Borrower shall not be obligated to pay such LIBOR fee. 3.5 LIBOR Costs. Upon notice from any Bank, Borrower shall promptly reimburse that Bank for any increase in its costs, including without limitation taxes (other than any tax, or changes in the rate of any tax, based upon the income, profits or business of that Bank, or upon any personal property or franchise of that Bank, or any similar tax which may be levied upon that Bank, or any change in the rate of any such similar tax by the United States, or any other government having jurisdiction, or any political subdivision or taxing authority of any thereof, and other than a withholding tax covered by Section 3.12), fees, charges, and/or reserve requirements directly or indirectly resulting from or relating to any LIBOR Rate Loan made by that Bank due to any circumstance after the date hereof, including any payment of principal or interest on a date other than the due date. As used in the preceding sentence, "reserve requirements" shall be calculated after taking into account any compensation received by that Bank through the computation of any LIBOR fee paid to that Bank. Amounts payable to any Bank under this Section shall be determined solely by such Bank upon the assumption that such Bank funded 100% of its share of the LIBOR Rate Loan in the London interbank market for a corresponding amount and term, regardless of whether that Bank did so in fact. In attributing any Bank's general costs relating to issuance of certificates of deposit, or to its eurocurrency operations to any transaction under this Agreement, or averaging any cost over a period of time, that Bank may use any reasonable attribution and/or averaging method it deems appropriate and practical. Any notice under this Section shall be given to Borrower, with a copy to the Agent, and shall be accompanied by a certificate from that Bank setting forth in reasonable detail the nature and calculation of the relevant amounts. Borrower shall only be obligated to reimburse a Bank for costs incurred after the date of such notice and for such costs incurred within the 120 day-period immediately preceding the date such notice is received by Borrower. In the event such Bank fails to provide notice as set - 34 - 35 forth hereinabove, Borrower shall not be obligated to reimburse such Bank for LIBOR costs. 3.6 Special LIBOR Circumstances. If any Regulatory Development or the applicable offshore interbank market shall at any time in the reasonable opinion of any Bank make it unlawful or impractical for that Bank to fund or maintain its share of a LIBOR Rate Loan (including LIBOR Rate Loans in any Applicable Currency) in such interbank market for a corresponding amount or term, or to continue that funding or maintaining, or to determine or charge interest rates based upon any appropriate LIBOR Rate, that Bank shall promptly notify the Agent, who shall notify Borrower and the other Banks, and: (a) that Bank may then determine that its then outstanding aggregate principal amounts of any LIBOR Rate Loan shall be redesignated, prospectively, a Base Rate Loan and, upon written notice to Borrower by the Agent, each LIBOR Rate Loan of such Bank shall be so redesignated; and (b) such Bank's obligation to make LIBOR Rate Advances shall be suspended for the duration of such illegality, impossibility or impracticability. In the case of any Offshore Currency Advances, unless Borrower has notified the Agent to the contrary, each such Offshore Currency Advance made by such Bank shall be redesignated, prospectively, a Base Rate Loan equal to the Dollar Equivalent amount thereof. 3.7 Capital Requirements. If any Bank determines that either (i) the introduction of or any change in any law or regulation or in the interpretation or administration of any law or regulation by any governmental authority charged with the interpretation or administration thereof from the date hereof or (ii) compliance with any guideline or request from any such governmental authority (whether or not having the force of Law) has or would have the effect of reducing the rate of return on the capital of the Bank or any corporation controlling the Bank as a consequence of or with reference to the Bank's making or maintaining any commitment, credit, advance or other transaction hereunder below the rate which the Bank or such other corporation - 35 - 36 could have achieved but for such introduction, change or compliance (taking into account the policies of the Bank or corporation with regard to capital), then Borrower shall from time to time, upon reasonable demand by the Bank, pay to the Bank additional amounts sufficient to compensate the Bank or other corporation for such reduction. A certificate as to such amounts, submitted to Borrower by the Bank (with a copy to the Agent), shall be conclusive and binding for all purposes, absent manifest error. Borrower shall only be obligated to reimburse a Bank for costs incurred after the date of such notice and for such costs incurred within the 120 day-period immediately preceding the date such notice is received by Borrower. 3.8 Indemnification. Borrower hereby indemnifies the Banks against, and agrees to hold the Banks harmless from and reimburse the Banks on demand for all costs, expenses, claims, penalties, liabilities, losses, legal fees and damages (including without limitation any interest paid or that would be paid by the Banks for deposits in the applicable interbank market and from fees payable to terminate the deposits from which such funds were obtained or from charges relating to any Offshore Currency Advances) incurred or sustained, or that would be incurred or sustained, by the Banks, as reasonably determined by the Banks, as a result of the prepayment of a LIBOR Rate Loan prior to the last day of its LIBOR Period, or any failure of Borrower to consummate, or the failure by Borrower to satisfy any condition required for the consummation of, any LIBOR Rate Loan, on the date or in the amount specified in any notice requesting or designating a LIBOR Rate Loan, such indemnification to be determined as though the Banks had funded or would have funded 100% of such LIBOR Rate Loan in the offshore interbank market. The determination of such amount by any Bank, when evidenced by a certificate from that Bank giving a,reasonably detailed calculation of the amount of said cost, expense, claim, penalty, liability, loss, fee, damage or other charge, shall be presumed correct in the absence of manifest error. 3.9 Late Payments. Should any installment of principal or interest or any other amount payable under any Loan Document not be paid within five (5) days of when due, whether by acceleration or otherwise, it shall thereafter bear interest at a fluctuating interest rate per annum at all times equal to the sum of 2% plus - 36 - 37 the Base Rate in effect on the date this rate goes into effect as to any particular amount due, to the extent permitted by applicable Law, until paid in full (whether before or after judgment). 3.10 Computation of Interest and Fees. All computations of interest and fees hereunder shall be calculated on the basis of a year of 365 days or 366 days, as the case may be, and the actual number of days elapsed, except that computations of interest and fees on all LIBOR Rate Loans and Offshore Currency Advances shall be calculated on the basis of a year of 360 days and an actual day month. Any Advance that is repaid on the same day on which it is made shall bear interest for one day. 3.11 Holidays. If any principal payment to be made by Borrower on a Base Rate Loan shall come due on a day other than a Banking Day, payment shall be made on the next succeeding Banking Day and the extension of time shall be reflected in computing interest. if any principal payment to be made by Borrower on a LIBOR Rate Loan shall come due on a day other than a Banking Day, payment shall be made on the next preceding or succeeding Banking Day as determined by the Agent in accordance with the then current banking practice in the London interbank market and the adjustment shall be reflected in computing interest. 3.12 Payment Free of Taxes. Any payments made by any Party under the Loan Documents shall be made free and clear of, and without reduction by reason of, any tax, assessment or other charge imposed by any Governmental Agency, central bank or comparable authority (other than taxes on income or gross receipts generally applicable to banks). To the extent that Borrower is obligated by applicable Laws to make any deduction or withholding on account of taxes, assessments or other charges imposed by any Governmental Agency from any amount payable to any Bank under this Agreement, Borrower shall (a) make such deduction or withholding and pay the same to the relevant Governmental Agency and (b) pay such additional amount to that Bank as is necessary to result in that Bank's receiving a net after-tax (or after-assessment or after-charge) amount equal to the amount to which that Bank would have been entitled under this Agreement absent such deduction or withholding. If and when receipt of such payment results in an excess payment or credit to that Bank - 37 - 38 on account of such taxes, assessments or other charges, that Bank shall refund such excess to Borrower. Each Bank agrees that, if requested by Borrower, it will assign its pro rata share of the Commitment to a lender designated by Borrower, and reasonably acceptable to the Majority Banks, if Borrower becomes obligated under this Section to pay any material amount with respect to interest payable to that Bank and the event or condition causing such payment has continued for not less than 90 days. 3.13 Funding Sources. Nothing in this Agreement shall be deemed to obligate any Bank to obtain the funds for its share of any Advance in any particular place or manner or to constitute a representation by any Bank that it has obtained or will obtain the funds for its share of any Advance in any particular place or manner. 3.14 Failure to Charge Not Subsequent Waiver. Any decision by any Bank not to require payment of any fee or costs, or to reduce the amount of the payment required for any fee or costs, or to calculate any fee or any cost in any particular manner, shall in no way limit or be deemed a waiver of any Bank's right to require full payment of any fee or costs, or to calculate any fee or any costs in any other manner. 3.15 Pro Rata Treatment. Each payment and prepayment of principal on an Advance shall be made pro rata according to the unpaid principal amount of such Advance held by each Bank. 3.16 Time and Place of Payments: Evidence Payments. The amount of each payment hereunder, under the Notes or under any Loan Document shall be made to the Agent at the Agent's Office, for the account of each of the Banks or the Agent, as the case may be, (a) with respect to principal of, interest on, and any other amounts (other than commitment fees) relating to, any Offshore Currency Advance, in the Offshore Currency in which such Loan is denominated or payable, and, with respect to all other amounts payable hereunder, in Dollars. Such payments shall be made in Same Day Funds, and (i) in the case of Offshore Currency payments, no later than such time on the dates specified herein as may be notified by the Agent to Borrower at least one Banking Day prior to the date due to be necessary for such payment to be credited on such date in accordance with normal banking - 38 - 39 procedures in the place of payment, and (ii) in the case of any Dollar payments, no later than 11:00 a.m. (San Francisco time) on the date specified herein. For ease of administration, all Advances shall be credited to the Designated Deposit Account, and payments due hereunder shall be made by debiting the Designated Deposit Account. All payments received after the above times shall be deemed received on the next succeeding Banking Day. The amount of all payments received by the Agent for the account of a Bank shall be promptly paid by the Agent to that Bank in immediately available funds. 3.17 Agent's Right to Assume Payments Will Be Made. Unless the Agent shall have been notified by Borrower prior to the date on which any payment to be made by Borrower hereunder is due that Borrower does not intend to remit such payment, the Agent may, in its discretion, assume that Borrower has remitted such payment when so due and the Agent may, in its discretion and in reliance upon such assumption, make available to each Bank on such payment date an amount equal to such Bank's share of such assumed payment. If Borrower has not in fact remitted such payment to the Agent, each Bank shall forthwith on demand repay to the Agent the amount of such assumed payment made available to such Bank, together with interest thereon in respect of each day from and including the date such amount was made available by the Agent to such Bank to the date such amount is repaid to the Agent at the effective average daily Federal Funds Rate as published by the Federal Reserve Bank of New York as notified by the Agent to such Bank or, in the case of a payment in an Offshore Currency, at the Overnight Rate. 3.18 Applications of Payments. Amounts received by the Agent for application to amounts due and payable to the Agent or the Banks shall be applied, if not otherwise specified by Borrower or if received after the occurrence and continuance of an Event of Default, to amounts due and payable as follows: first, to any amounts due and payable under Section 9.3, second, to the ratable payment of any accrued interest or fees that are then due and payable, third, to the payment of the outstanding Swing Line Advances, fourth, to the ratable payment of the outstanding Base Rate Advances, and fifth to the ratable payment of other outstanding Advances in the order of nearest expiring LIBOR Periods, together with, in the case of payment of LIBOR Rate - 39 - 40 Loans, any additional amount for which Borrower shall be obligated in respect of the payment of LIBOR Rate Loans pursuant to Section 3.8. 3.19 Survivability. All of Borrower's obligations under this Article 3 shall survive for six months following the date on which all Advances hereunder were fully paid and the Commitment terminated. ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BORROWER Borrower represents and warrants to the Banks that: 4.1 Incorporation, Qualification, Powers and Stock. Borrower and each of its Subsidiaries is a corporation duly incorporated, validly existing and in good standing under the Laws of the State of its incorporation, is duly qualified to do business as, and is in good standing as, a foreign corporation in each other jurisdiction in which the conduct of its business or the ownership of its Property makes such qualification necessary (except where the failure to so qualify would not have a material adverse effect on the business of Borrower and its Subsidiaries taken as a whole), and has all requisite corporate power and corporate authority to conduct its business and to own its Property. All outstanding shares of stock of Borrower and each of its Subsidiaries are duly authorized, validly issued, fully paid and non-assessable. 4.2 Execution, Delivery and Performance of Loan Documents. (a) Borrower has all requisite corporate power and corporate authority to execute and deliver, and to perform all of its obligations under, each Loan Document to which it is a Party. (b) The execution and delivery by Borrower and the performance by Borrower of each of its obligations under, each Loan Document have been duly authorized by all necessary corporate action and do not: - 40 - 41 (1) require any consent or approval not heretofore obtained of any stockholder, security holder or creditor of Borrower; (2) violate any provision of the articles of incorporation or the bylaws of Borrower; (3) result in or require the creation or imposition of any Lien (other than under the Loan Documents) upon or with respect to Property now owned or leased or hereafter acquired by Borrower; or (4) violate any provision of any Law (including without limitation Regulations G, r, U or X of the Board of Governors of the Federal Reserve System), order, writ, judgment, injunction, decree, determination or award presently in effect having applicability to Borrower which would reasonably be expected to have a materially adverse effect on the Property or business condition (financial or otherwise) of Borrower and its Subsidiaries taken as a whole; or (5) result in a breach of or constitute a default under, or cause or permit the acceleration of any obligation owed under, any indenture or loan or credit agreement or any other material agreement, lease or instrument to which Borrower is a party or by which Borrower or any Property of Borrower is bound or affected. (c) Borrower and each of its Subsidiaries is not in default under or in violation of any Law, orders, writ, judgment, injunction, decree, determination, award, indenture, agreement, lease or instrument in any respect that is materially adverse to the interests of the Banks under the Loan Documents or that could materially impair the ability of Borrower to perform its obligations under the Loan Documents. (d) No authorization, consent, approval, order, license, permit or exemption from, or filing, registration or qualification with, any Governmental Agency is or will be required under applicable Law to authorize or permit the - 41 - 42 execution and delivery by Borrower of each Loan Document, and the payment by Borrower of all amounts due under the Loan Documents. (e) Each of the Loan Documents, when executed and delivered, will constitute legal, valid and binding obligations of Borrower and each of them is enforceable against Borrower in accordance with its terms except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors, rights generally. 4.3 Compliance With Laws and Other Requirements. Borrower and each of its Subsidiaries is in compliance with all Laws and other requirements applicable to its business and has obtained all authorizations, consents, approvals, orders, licenses, permits and exemptions from, and have accomplished all filings, registrations or qualifications with, any Governmental Agency that are necessary for the transaction of its business, except where the failure to be in such compliance, obtain such authorizations, consents, approvals, orders, licenses, permits or exemptions, or accomplish such filings, registrations or qualifications, is not materially adverse to the interests of the Banks, and does not materially impair the ability of Borrower to perform its obligations under the Loan Documents. 4.4 Financial Statements. Borrower has furnished to Agent complete and accurate copies of the audited consolidated balance sheet of Borrower as of January 28, 1995, and its audited consolidated statements of income, of changes in financial position, and of changes in stockholder's equity for the Fiscal Year then ended. The financial statements described were prepared in accordance with Generally Accepted Accounting Principles, consistently applied, and fairly present the financial condition, results of operations and changes in financial position of Borrower and its Subsidiaries as at the dates thereof and for the periods covered thereby. 4.5 No Material Adverse Change. There has been no material adverse change in the condition, financial or otherwise, of Borrower and its Subsidiaries taken as a whole, since the date of the financial statements described in Section 4.4, and Borrower and each of its Subsidiaries does not, taken as a whole, have any material liability or, to the best knowledge of Borrower, - 42 - 43 material contingent liability, not reflected or disclosed in the financial statements or notes thereto described in Section 4.4. 4.6 Tax Liability. Except to the extent that failure to file tax returns or to pay taxes would not reasonably be expected to have a materially adverse effect on the Property or business condition (financial or otherwise) of Borrower and its Subsidiaries taken as a whole, Borrower and each of its Subsidiaries have filed all tax returns (federal, state and local) required to be filed and has paid all taxes shown thereon to be due and all property taxes due, including interest and penalties, if any. To the best knowledge of Borrower, there does not exist any substantial likelihood that any Governmental Agency will, in respect of periods prior to January 31, 1992, successfully assert a tax deficiency against Borrower or any of its Subsidiaries that is material to Borrower and its Subsidiaries taken as a whole that has not been adequately reserved against in the financial statements described in Section 4.4. Borrower and each of its Subsidiaries has established and is maintaining adequate reserves for tax liabilities, if any, sufficient to comply with Generally Accepted Accounting Principles. 4.7 Litigation. There are no actions, suits or proceedings pending or, to the best knowledge of Borrower, threatened against or affecting Borrower or any of its Subsidiaries or any Property of Borrower or any of its Subsidiaries before any Governmental Agency which could have a material adverse effect on the interests of the Banks under the Loan Documents, or could materially impair the ability of Borrower to perform its Obligations under the Loan Documents. 4.8 No Default. No event has occurred and is continuing that is a Default or an Event of Default. 4.9 Subsidiaries. The Subsidiaries of Borrower are listed in Schedule 4.9. 4.10 ERISA. (a) other than as set forth in Schedule 4.10 there are no Plans. - 43 - 44 (b) With respect to each Plan: (1) such Plan complies in all material respects with ERISA and/or any other applicable Laws; (2) no "reportable event" (as defined in Section 4043 of ERISA) has occurred that could result in the termination or disqualification of such Plan; and (3) Neither Borrower nor any of its Subsidiaries has engaged in any "prohibited transaction" (as defined in Section 4975 of the Internal Revenue Code of 1986, as amended). (c) With respect to each Plan that is an employee pension benefit plan" (as defined in ERISA): (1) the actuarial present value of all vested benefits under such Plan does not exceed the current fair market value of the assets of such Plan by an amount that could materially affect the ability of Borrower to perform its obligations under the Loan Documents; and (2) such Plan has not incurred any "accumulated funding deficiency", (as defined in ERISA), whether or not waived, since the effective date of ERISA. (d) Neither Borrower nor any of its Subsidiaries is a party to or has any employees that are covered by any Multiemployer Plan subject to ERISA, and neither Borrower nor any of its Subsidiaries are currently subject to any withdrawal liability under any Multiemployer Plan subject to ERISA. 4.11 Regulations G, T, U and X. Neither Borrower nor any of its Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying any "margin security" or "margin stock" (within the meaning of Regulations G and U, respectively, of the Board of Governors of the Federal Reserve System of the United States of America). If requested by Agent, Borrower and each of its Subsidiaries will furnish each Bank with - 44 - 45 a statement or statements in conformity with the requirements of Federal Reserve Forms G-3 and/or U-1 referred to in Regulations G or U of said Board of Governors. No part of the proceeds of any Advance hereunder will be used to purchase or carry any such margin security or margin stock or to extend credit to others for the purpose of purchasing or carrying any such margin security or margin stock. Neither the making of any Advance hereunder nor the use of proceeds thereof will violate, or be inconsistent with, the provisions of Regulations G, T, U or X of said Board of Governors. 4.12 Fiscal Year. Borrower operates on a 52 or 53 week Fiscal Year, ending on either the last Saturday of January or the first Saturday of February, generally on the Saturday nearest to each January 31. 4.13 Disclosure of Material Facts. No written statement made or delivered by or on behalf of Borrower in connection with the Loan Documents or the making of any Loan hereunder contains at the time when made or delivered, to the best knowledge of Borrower, any untrue statement of a material fact, or omits, at the time when made or delivered, to the best knowledge of Borrower, to state a material fact with respect to the subject matter of such statement necessary to make the statement made or delivered not misleading. ARTICLE 5 COVENANTS OF BORROWER As long as any Loan remains unpaid or any of the obligations remains owing or any portion of the Commitment remains in effect, unless the Agent (with the approval of the Majority Banks) otherwise consents in writing: 5.1 Limitations on Business Activity. Borrower shall not, and shall not permit any of its Subsidiaries to, substantially change the character or nature of its business, as conducted as of the Closing Date. 5.2 Maintenance of Corporate Existence, Property, Insurance, Etc. Borrower shall, and shall cause each of its Subsidiaries to: - 45 - 46 (a) Maintain its Property in good condition and make all necessary renewals, replacements, additions, betterments and improvements thereto, consistent with sound business practice and as is customary in the case of Persons of established reputation engaged in the same or similar businesses and similarly situated; (b) Maintain, with financially sound and reputable insurers, insurance with respect to its Property and businesses against such casualties and contingencies of such types and in such amounts as is customary in the case of Persons of established reputations engaged in the same or similar businesses and similarly situated; (c) Keep true books of account and records in which full and correct entries will be made of all its business transactions, and reflect in its financial statements adequate accruals and appropriations to reserves all in accordance with Generally Accepted Accounting Principles, consistently applied; (d) Do or cause to be done all things necessary to preserve and keep in full force and effect its existence, rights and franchises; and (e) Not be in violation of any Laws, ordinances or governmental rules and regulations to which it is subject and shall not fail to maintain any licenses, permits, franchises or other governmental authorizations necessary to the ownership of its Property or to the conduct of its business, if such violation or failure to maintain would reasonably be expected to materially adversely affect the Property or business condition (financial or otherwise) of Borrower and its Subsidiaries taken as a whole. 5.3 Payment of Taxes and Claims. Borrower shall pay, and shall cause each of its Subsidiaries to pay, before they become delinquent: (a) All taxes, assessments and governmental charges or levies imposed upon Borrower or any Subsidiary, or upon the Property of Borrower or any Subsidiary; and - 46 - 47 (b) All claims or demands of materialmen, mechanics, carriers, warehousemen, landlords and other like persons which, if unpaid, might result in the creation of a Lien upon any Property of Borrower or any of its Subsidiaries; provided, however, that none of the foregoing need be paid while being contested in good faith so long as Borrower's or the Subsidiary's title to, and its right to use, its Property is not materially adversely affected thereby, and so long as adequate reserves, if required by Generally Accepted Accounting Principles, are maintained for such claims. 5.4 Compliance with Agreements, Duties and Obligations. Borrower shall, and shall cause each of its Subsidiaries to, promptly and fully comply with all of its respective agreements, duties and obligations under the Loan Documents, and under any other agreements or instruments to which it is a party, including but not limited to any agreements or instruments with respect to any Indebtedness of Borrower or any of its Subsidiaries, where failure to comply, as aforesaid, with such other agreements and instruments would have a material adverse effect on the Property or business condition (financial or otherwise) of Borrower and its Subsidiaries taken as a whole. 5.5 Inspection. Borrower covenants that Agent shall, at Banks' expense, have the right, upon notice (which notice shall specify the nature and purpose of the inspection) to Borrower or any of its Subsidiaries, to visit and inspect any of the Property of, to examine or audit the books of account and records of and to copy and take extracts therefrom and to discuss the affairs, finances or accounts of, and to be advised as to the same by the officers of Borrower or the Subsidiary, in such detail and through such agents and representatives as Agent may desire, all at such reasonable times and as often as may be reasonably requested; provided, however, that Agent shall conduct no more than four inspections in any Fiscal Year. Borrower shall cause each of its Subsidiaries to comply with this Section 5.5. 5.6 Mergers and Sale of Assets. Borrower shall not, and shall cause each of its Subsidiaries to not: - 47 - 48 (a) Sell or otherwise dispose of any material Property for less than its fair value; or (b) Sell or otherwise dispose of, in a single transaction or a series of related transactions, all or a substantial part of its Property; or (c) Merge with or into any other Person, firm or corporation, except that a Subsidiary of Borrower may merge with or into Borrower or another Subsidiary of Borrower. In the event that the aggregate consideration paid from the Closing Date through the Expiration Date in connection with the disposition of assets exceeds $7,500,000 in any four quarter period, then the net cash proceeds from the disposition of assets in excess of such amounts shall be paid to the Agent for the account of the Banks pursuant to Section 2.6(b). Automatically and simultaneously with each such payment, the Commitment shall be reduced in like amount and the scheduled Commitment reductions under Section 2.6(a) shall be reduced in the inverse order of their occurrence. 5.7 Consolidated Tangible Effective Net Worth. Borrower shall maintain, as of the end of any fiscal quarter, a Consolidated Tangible Effective Net Worth of at least (i) 80% of the amount of Borrower's Adjusted Consolidated Tangible Effective Net Worth as of July 29, 1995 plus (ii) 50% of all positive Consolidated Net Income of Borrower earned since July 29, 1995 plus (iii) 50% of the net proceeds from the issuance of equity securities (other than equity securities issued pursuant to any of Borrower's employee benefit plans). 5.8 Leverage Ratio. Borrower shall not, as of the end of any fiscal quarter, permit the Leverage ratio to be greater than 3:00 to 1. 5.9 Fixed Charge Coverage Ratio. Borrower shall not, as of the end of any fiscal quarter, permit the Fixed Charge Coverage Ratio to be less than 1.50 to 1. - 48 - 49 5.10 Restricted Payments. Borrower shall not, and shall not suffer or permit any Subsidiary to, declare or make any Distribution or Dividend; except that: (a) Borrower and any Subsidiary may declare or pay cash dividends in respect of its capital stock in an amount not to exceed (i) 50% of the positive net income of Borrower and its Subsidiaries arising after the Closing Date and computed on a cumulative consolidated basis, plus (ii) a cumulative amount not exceeding $5,000,000; provided, that prior to any payment under clause (i) the Agent and the Banks shall have received the financial statements required by Section 5.13(a)(3) for the year in respect of which such dividends are being made and (ii) immediately after giving effect to such proposed action, no Default or Event of Default would exist; and (b) Subsidiaries of Borrower may make distributions, dividends or other payments of the type described above to Borrower or other Subsidiaries of Borrower. 5.11 Liens. Borrower shall not, and shall cause each of its Subsidiaries to not, pledge, mortgage, lien or hypothecate, or suffer the creation or existence of any pledge, mortgage, lien or hypothecation of any of its Property and shall not, and shall cause each of its Subsidiaries to not suffer to exist any contractual obligation that contains a covenant binding Borrower or any of its Subsidiaries that prohibits Liens on its Property, except for: (a) Existing Liens disclosed in Schedule 5.11 hereto securing obligations outstanding on the Closing Date as such obligations may be extended or refinanced; provided that the Obligations secured thereby are not increased; (b) Liens securing taxes, assessments or governmental charges or levies or the claims or demands of materialmen, mechanics, carriers, warehousemen, landlords and other like Persons not yet delinquent or thereafter payable without penalty or which are being contested in good faith in accordance with Section 5.3, so long as Borrower's or the Subsidiary's title to, and right to use, the Property so affected is not materially - 49 - 50 adversely affected thereby, and so long as adequate reserves are maintained for such claims; (c) Liens constituting purchase money real Property mortgages, and refinancing thereof, where recourse may be had only against the Real Property purchased or financed, and where the obligations secured by such Liens against such real Property do not exceed, in the aggregate, $7,000,000; (d) Liens for amounts not in excess of those amounts under lien at the Closing Date, where such Liens are not otherwise allowed hereunder; (e) Capitalized leases which do not secure obligations in excess of $5,000,000 in the aggregate over the term thereof, outstanding at any one time; and (f) other miscellaneous Liens incidental to the conduct of Borrower's or the Subsidiary's business or the ownership or leasing of its Properties that were not incurred in connection with the borrowing of money or the purchase of Property or the obtaining of advances or credit and that do not, in the aggregate, materially detract from the value of its Property, materially impair the use of Borrower's or the Subsidiary's Property in the operation of its businesses, or materially impair Borrower's or the Subsidiary's ability to perform the obligations. 5.12 Notice of Default. Borrower covenants that if any Responsible Official of Borrower shall obtain knowledge of the occurrence of any Default hereunder or under any Subordinated Obligation, Borrower at once shall give notice to Agent specifying with particularity the nature of such Default, the period of existence of such Default, and the action Borrower is taking and/or proposes to take with respect thereto. - 50 - 51 5.13 Financial and Business Information. (a) Borrower shall deliver to Agent: (1) as soon as practicable after the end of each fiscal quarter of Borrower (including the last quarter of each Fiscal Year, provided that with respect to such last quarter the financial statements required hereby may be in preliminary form, prior to year-end and audit adjustments) and in any event within forty-five (45) days thereafter, (i) consolidated (and consolidating, if prepared) balance sheets as at the end of such fiscal quarter, (ii) consolidated (and consolidating, if prepared) statements of income for the portion of its Fiscal Year ending with such fiscal quarter and (iii) consolidated (and consolidating, if prepared) statements of changes in stockholders, equity and cash flows of Borrower and its Subsidiaries for the portion of its Fiscal Year ending with such fiscal quarter, all in reasonable detail, prepared in accordance with Generally Accepted Accounting Principles applicable to interim financial statements, consistently applied, and certified by a Responsible Official of Borrower as fairly presenting the financial condition, results of operations and changes in financial position of Borrower and its Subsidiaries as at the end of and for the period ending on such date, subject only to changes resulting from year-end adjustments; notwithstanding the foregoing, in the event Borrower prepares and files a 10-Q Report with the Securities and Exchange Commission, such report may be provided to Banks for the applicable fiscal quarter in lieu of the report described above; (2) as soon as practicable after the end of each Fiscal Year of Borrower and in any event within one hundred twenty (120) days thereafter (i) the consolidated balance sheet of Borrower and its Subsidiaries as at the end of such year and (ii) consolidated statements of income, of changes in stockholders, equity and of cash flows of Borrower and its Subsidiaries for such Fiscal Year, all in reasonable detail, prepared in accordance with Generally Accepted Accounting Principles, consistently applied, and certified by an independent public "big-six" accounting firm acceptable to - 51 - 52 Agent and the Majority Banks as fairly presenting the financial condition, results of operations and changes in financial position of Borrower and its Subsidiaries as at the end of and for the period ending on such date, such certification to contain no qualifications as to the scope of the audit and only such other qualifications as are acceptable to Agent and the Majority Banks, together with a copy of the "management letter" provided by such independent accounting firm to Borrower in connection with its annual audit; notwithstanding the foregoing, in the event Borrower prepares and files a 10-K Report with the Securities and Exchange Commission, such report may be provided to Banks for the applicable Fiscal Year in lieu of the annual audit described above; and (3) within sixty (60) days after the end of a Fiscal Year, an annual financial forecast, with appropriate schedules, for the then current Fiscal Year, including, without limitation, a balance sheet, income statement and statement of cash flow, as prepared for internal distribution to management of Borrower; (b) Each set of quarterly financial statements delivered pursuant to subsection (a)(2) of this Section and each set of annual financial statements delivered pursuant to subsection (a)(3) of this Section shall be accompanied by a properly completed Compliance Certificate executed by a Responsible Official of Borrower, certifying the matters required therein as of the date of such financial statements; if there is any material variance in the calculations set forth in any Compliance Certificate based on preliminary numbers for the last quarter of each Fiscal Year from such calculations based on the final, audited financial statements for such Fiscal Year, Borrower shall promptly deliver a revised Compliance Certificate setting forth the revised calculations thereof; (c) Borrower shall furnish to Agent such other information and data with respect to Borrower as Banks from time to time may reasonably request. 5.14 Maintenance of Corporate Structure. Except as otherwise permitted by Section 5.6. Borrower shall not change its - 52 - 53 corporate structure through mergers, acquisitions, creation or dissolution of Subsidiaries or otherwise without the prior written permission of the Majority Banks. 5.15 Maintenance of Fiscal Year. Borrower shall not change its Fiscal Year without notifying Agent. 5.16 Disclosure of Material Litigation. Borrower immediately shall notify Agent of any litigation or other action, suit or proceeding before any Governmental Agency to which, to the best knowledge of Borrower, Borrower or any of its Subsidiaries is a party if the amount in controversy exceeds $5,000,000, or in the reasonable opinion of Borrower otherwise is material. Thereafter, Borrower shall keep Agent apprised of the status of the litigation or other such action, suit or proceeding in such manner as Agent may reasonably request. 5.17 ERISA Compliance. (a) Borrower shall not, and shall cause each of its Subsidiaries to not: (1) engage in any "prohibited transaction" as such term is defined in Section 4975 of the Internal Revenue Code of 1986, as amended; (2) incur any "accumulated funding deficiency" as that term is defined in Section 302 of ERISA; or (3) terminate any plan in a manner which could result in material liability of Borrower or any of its Subsidiaries to the Plan or to the PBGC or the imposition of a Lien on the Property of Borrower or any of its Subsidiaries pursuant to Section 4068 of ERISA. (b) Borrower shall not, and shall cause each of its Subsidiaries to not, assume any obligation to contribute to any Multiemployer Plan, nor shall it acquire any Person or the assets of any Person which has, or has had at any time from and after January 2, 1974, an obligation to contribute to any Multiemployer Plan, where the withdrawal liability may exceed $15,000,000. - 53 - 54 (c) Borrower immediately shall notify Agent of the occurrence of any "reportable event," as defined in Section 4043 of ERISA (other than a "reportable event" that is not subject to the provision of 30 day notice to the PBGC), or of any "prohibited transaction" (as defined in Section 4975 of the Internal Revenue Code of 1986, as amended) with respect to any Plan or any trust created thereunder. Upon request by Agent, Borrower promptly shall furnish to Agent copies of any reports or other documents filed by Borrower or any of its Subsidiaries with the United States Secretary of Labor, the PBGC, the Internal Revenue Service and/or any other Governmental Agency with respect to any Plan. (d) Each Plan shall comply in all material respects with ERISA and all other applicable Laws. 5.18 Payment or Prepayment of Indebtedness. Borrower shall not pay or prepay any principal, interest or any other amount with respect to any of the Subordinated Obligations or purchase or redeem any Subordinated Obligations, except that, so long as no Default or Event or Default has occurred and is continuing, Borrower may make such payments or prepayments with support of a certificate from a Senior Officer of Borrower substantiating, on a pro forma basis, compliance with all financial ratio covenants and, in any event, Borrower may pay interest in accordance with the terms of any Subordinated Obligation. 5.19 Investments. Borrower shall not, and shall cause each of its Subsidiaries to not, make any Investments, including Hostile Acquisitions, except (a) Investments in Cash Equivalents, (b) loans or extensions of credit in connection with Borrower's employee relocation program, so long as the aggregate outstanding amount of such loans and extensions at any one time does not exceed $2,000,000 and (c) aggregate Investments in partnerships, joint ventures, minority positions and treasury stock of Borrower, not to exceed $15,000,000. 5.20 Disposition of Assets. Borrower shall not, and shall not suffer or permit any Subsidiary to, directly or indirectly, sell, assign, lease, convey, transfer or otherwise dispose of (whether in one or a series of transactions) any property (including accounts and notes receivable, with or without - 54 - 55 recourse) or enter into any agreement to do any of the foregoing, except: (a) dispositions of inventory, or used, worn-out or surplus equipment or other dispositions in the ordinary course of business; (b) the sale of equipment to the extent that such equipment is exchanged for credit against the purchase price of similar replacement equipment, or the proceeds of such sale are reasonably promptly applied to the purchase price of such replacement equipment; provided, that (i) at the time of any disposition, no Event of Default shall exist or shall result from such disposition, (ii) the aggregate sales price from such disposition shall be paid in cash, and (iii) Borrower shall comply with Section 2.6(b). 5.21 Indebtedness, Including Guaranties. Borrower, on a consolidated basis, shall not create, incur, assume or suffer to exist any Indebtedness except: (a) trade credit incurred in favor of vendors of goods, services, supplies or merchandise in the ordinary course of Borrower's or a Subsidiary's business; (b) Subordinated Obligations; (c) Indebtedness to the Banks under this Agreement; (d) Indebtedness presently outstanding as set forth in Schedule 5.20, provided that the terms thereof are not modified to impose more burdensome terms on Borrower; (e) other Indebtedness for the purchase of real Property (or the refinancing thereof) where recourse may be had only against the Property purchased, and such Indebtedness shall not exceed in the aggregate $7,000,000; (f) Indebtedness with respect to any commercial or standby letters of credit outstanding at any one time not to exceed in the aggregate $7,000,000; - 55 - 56 (g) additional Indebtedness under capitalized leases not to exceed $5,000,000 over the term thereof in the aggregate, outstanding at any one time; (h) obligations with respect to any guaranties at any one time not to exceed in the aggregate $5,000,000; (i) senior unsecured Indebtedness outstanding at any one time not to exceed in the aggregate $50,000,000; (j) Indebtedness consisting of interest rate swap agreements; and (k) Indebtedness of Borrower to its Subsidiaries. 5.22 Transfers Among Affiliates. Borrower shall not (a) allow transfers of assets from Borrower and its consolidated Subsidiaries to any unconsolidated Subsidiary or unconsolidated Subsidiaries of Borrower in an aggregate amount in excess of $5,000,000 or (b) allow the cumulative intercompany payables of unconsolidated Subsidiaries of Borrower payable to Borrower and its consolidated Subsidiaries to increase more than $5,000,000 over the amount of such payables as of the Closing Date. ARTICLE 6 CONDITIONS 6.1 First Advance. The obligation of the Banks to make the initial Advances is subject to the condition precedent (in addition to any applicable conditions precedent set forth in Section 6.2) that the Agent shall have received all of the following documents, each of which shall be originals unless otherwise specified, each properly executed by a Responsible Official of each party thereof, and each dated as of the Closing Date and in form and substance satisfactory to Agent (unless otherwise specified or, in the case of the date of any of the following, unless Agent otherwise agrees): - 56 - 57 (a) sufficient executed counterparts of this Agreement such that the Agent, each Bank and Borrower may receive an executed set of counterparts of this Agreement; (b) Notes executed by Borrower payable to the order of each Bank requesting a Note equal to that Bank's pro rata share of the Commitment; (c) a certificate of the corporate secretary of Borrower certifying that, except as amended by any amendments attached to such certificate, the articles of incorporation of Borrower and its domestic Subsidiaries, including any amendments thereto, delivered pursuant to the Prior Credit Agreement or before are complete and accurate copies thereof as in effect on the date hereof; (d) a certificate of the corporate secretary of Borrower certifying that, except as amended by any amendments attached to such certificate, the bylaws of Borrower and its domestic Subsidiaries, including any amendments thereto, delivered pursuant to the Prior Credit Agreement or before are complete and accurate copies thereof as in effect on the date hereof; (e) a certificate of the corporate secretary of Borrower setting forth: (i) a copy of the resolutions adopted by the board of directors of Borrower authorizing the execution, delivery and performance of the Loan Documents by Borrower; (ii) a copy of the resolution authorizing unsecured borrowings from the Banks adopted by the board of directors; and (iii) the name of each incumbent officer of Borrower and each other Responsible Official authorized to sign Loan Documents and Compliance Certificates on behalf of Borrower; (f) the written legal opinion of in-house counsel for Borrower, as counsel for Borrower, in form and content acceptable to Agent and substantially in the form of Exhibit E; (g) a current certificate of a Responsible Official of Borrower certifying that the representations and warranties set forth in Article 4 are true and correct and - 57 - 58 that no event has occurred and is continuing that constitutes a Default or an Event of Default; (h) a Request for Loan; (i) a Compliance Certificate as of the last day of the most recently ended Fiscal Quarter; (j) payment of the fees referred to in Sections 3.2(a) and (b); and (k) such other documents and assurances as the Agent may reasonably require. 6.2 Any Advance. The obligation of the Banks to make any Advance is subject to the following conditions precedent (in addition to any applicable conditions precedent specified elsewhere in this Article 6): (a) All representations and warranties contained in Article 4 (except as modified with the consent of Majority Banks or as allowed hereunder) shall be correct on and as of the date of the Advance, both immediately before and immediately after giving effect to such Advance, as though made on and as of that date, and no Default or Event of Default shall have occurred and be continuing; (b) Borrower shall have complied with all applicable requirements of Article 2 with respect to such Advance. ARTICLE 7 EVENTS OF DEFAULT AND REMEDIES 7.1 Events of Default. The occurrence of any one or more of the following events or conditions, whatever the reason therefor, shall constitute an Event of Default hereunder: (a) Failure to pay the principal of any Advance or any portion thereof when due, whether at the stated maturity, upon acceleration, by reason of required prepayment or otherwise; or - 58 - 59 (b) Failure to pay any installment of interest on any Advance or the commitment fee within five (5) days of the time when due; or (c) Failure to pay any other amount payable by Borrower under the Loan Documents within thirty (30) days after notice of such failure is given by Agent or by any Bank to Borrower; or (d) Failure to perform the covenants contained in 5.6 [Mergers and Sale of Assets], 5.7 [Consolidated Tangible Effective Net Worth], 5.8 [Leverage Ratio], 5.9 [Fixed Charge Coverage Ratio], 5.14 [Maintenance of Corporate Structure], 5.18 [Payment or Prepayment of Indebtedness]; or (e) Failure to perform or observe any other term, covenant or agreement contained in any Loan Document on its part to be performed or observed and such failure shall continue for more than thirty (30) calendar days after notice of such failure is given by Agent or Borrower; or (f) Any representation or warranty in any Loan Document proves to have been incorrect when made in any material respect provided, however, that if such Default can be cured, then such Default shall not constitute an Event of Default if, within thirty (30) days after Borrower or Agent discovers such Default, Borrower cures such Default; or (g) This Agreement or any Note at any time after its execution and delivery and for any reason other than the agreement of the Banks or satisfaction in full of all obligations, ceases to be in full force and effect or is declared to be null and void by a court of competent jurisdiction; or the validity or enforceability thereof is contested in a judicial proceeding by Borrower (except a shareholder derivative action); or Borrower denies that it has any or further liability or obligation under any Loan Document, unless all obligations of Borrower thereunder have been fully paid and performed; or (h) Other than as permitted herein, Borrower is dissolved or liquidated or all or substantially all of the assets of Borrower or any Subsidiary are sold or otherwise transferred without the written consent of the Banks; or - 59 - 60 (i) Borrower or any of its Subsidiaries is the subject of an order for relief by a bankruptcy court, or is unable or admits in writing its inability to pay its debts as they mature or makes an assignment for the benefit of creditors; or applies for or consents to the appointment of any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer for it or for all or any material part of its Property; or any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer is appointed for Borrower or any of its Subsidiaries or for all or any material part of its Property without the application or consent of Borrower or the Subsidiary; or Borrower or any of its Subsidiaries institutes or consents to any bankruptcy, insolvency, reorganization, arrangement, readjustment of debt, dissolution, custodianship, conservatorship, liquidation, rehabilitation or similar proceeding relating to it or to all or any material part of its Property under the Laws of any jurisdiction; or any similar proceeding is instituted without the consent of Borrower or the Subsidiary; or any judgment, writ, warrant, attachment, execution or similar process is issued or levied against all or any material part of the Property of Borrower and its Subsidiaries taken as a whole and is not released, vacated or fully-bonded within sixty (60) calendar days after its issue or levy; or (j) Borrower or any of its Subsidiaries has defaulted with respect to any Indebtedness owed to any Person having an aggregate principal amount of more than $1,000,000, and such Person, as a consequence of such default, has the right to accelerate the maturity of such Indebtedness, or has commenced judicial or nonjudicial action to collect such Indebtedness or foreclose or otherwise realize upon security held therefor where such default or action would, in the reasonable judgment of the Majority Banks, have a material effect on the business of Borrower and its Subsidiaries, taken as a whole, or such Person has taken or is taking such other actions as might materially and adversely affect the interests of the Banks under the Loan Documents; or (k) Majority Banks have reasonably determined that a material adverse change has occurred since the Closing Date in the operations, business or condition, financial or otherwise, of - 60 - 61 Borrower that would prevent or preclude Borrower from discharging its obligations under the Agreement or the Notes, and sixty (60) calendar days have elapsed since the date that notice of such determination (which notice shall specify in reasonable detail the nature of such material adverse change) is given to Borrower. 7.2 Remedies Upon Event of Default. Without limiting any other rights or remedies of the Agent or the Banks provided for elsewhere in this Agreement or the Loan Documents, or by applicable Law or in equity, or otherwise: (a) Upon the occurrence of any Event of Default, and so long as any such Event of Default shall be continuing (other than an Event of Default described in Section 7.1(i)): (i) all commitments to make Advances and all other obligations of the Agent or the Banks and all rights of Borrower and any other Parties under the Loan Documents shall be suspended without notice to or demand upon Borrower, which are expressly waived by Borrower; and (ii) the Majority Banks may request the Agent to, and the Agent thereupon shall, declare the unpaid principal of or unperformed balance of all obligations due to Banks hereunder and under the Notes, all interest accrued and unpaid thereon, and all other amounts payable under the Loan Documents to be forthwith due and payable, whereupon the same shall become and be forthwith due and payable, without protest, presentment, notice of dishonor, demand, or further notice of any kind, all of which are expressly waived by Borrower. (b) Upon the occurrence of any Event of Default described in Section 7.1(i): (i) all commitments to make Advances and all other obligations of the Agent or the Banks and all rights of Borrower and any other parties under the Loan Documents shall terminate without notice to or demand upon Borrower, which are expressly waived by Borrower, except that all the Banks may waive the Event of Default or, without waiving, determine, upon terms and conditions satisfactory to all the - 61 - 62 Banks, to reinstate the Commitment and make further Advances, which waiver or determination shall apply equally to, and shall be binding upon, all of the Banks; and (ii) the unpaid principal of or unperformed balance of all obligations due to the Banks hereunder and under the Notes, and all interest accrued and unpaid on such obligations, and all other amounts payable under the Loan Documents shall be forthwith due and payable, without protest, presentment, notice of dishonor, demand, or further notice of any kind, all of which are expressly waived by Borrower. (c) Upon the occurrence of an Event of Default, the Banks and the Agent, or any of them, without notice to or demand upon Borrower, which are expressly waived by Borrower, may proceed to protect, exercise, and enforce their rights and remedies under the Loan Documents against Borrower or any other Party and such other rights and remedies as are provided by Law or equity. The order and manner in which the rights and remedies of the Banks under the Loan Documents and otherwise are exercised shall be determined by the Majority Banks. (d) All payments received by the Agent and the Banks, or any of them, shall be applied first to the costs and expenses (including attorneys' fees and disbursements) of the Agent, acting as Agent, and of the Banks and thereafter paid pro rata to the Banks in the same proportion that the aggregate of the unpaid principal amount owing on the obligations of Borrower to each Bank, plus accrued and unpaid interest thereon, bears to the aggregate of the unpaid principal amount owing on all the obligations, plus accrued and unpaid interest thereon. Regardless of how each Bank may treat the payments for the purpose of computing Borrower's obligations, the payments shall be applied first, to the costs and expenses of the Agent, acting as Agent, and the Banks as set forth above, second to the payment of accrued and unpaid fees hereunder and interest on all Obligations to the Banks, to and including the date of such application (ratably according to the accrued and unpaid interest on the Advances), third, to the ratable payment of the unpaid principal of all Obligations to the Banks, and fourth, to the - 62 - 63 payment of all other amounts then owing to the Agent or the Banks under the Loan Documents. No application of payments will cure any Event of Default or prevent acceleration, or continued acceleration, of amounts payable under the Loan Documents or prevent the exercise, or continued exercise, of rights or remedies of the Banks hereunder or under applicable Law. ARTICLE 8 THE AGENT 8.1 Appointment and Authorization. Each Bank hereby irrevocably appoints and authorizes the Agent to take such action as Agent on its behalf and to exercise such powers under the Loan Documents as are delegated to the Agent by the terms thereof or are reasonably incidental, as determined by the Agent, thereto. This appointment and authorization does not constitute appointment of the Agent as trustee for any Bank and, except as specifically set forth herein to the contrary, the Agent shall take such action and exercise such powers only in an administrative and ministerial capacity. 8.2 Agent and Affiliates. Bank of America National Trust and Savings Association (and each successor Agent) has the same rights and powers under the Loan Documents as any other Bank and may exercise the same as though it were not the Agent; and the term "Bank" or "Banks" includes Bank of America National Trust and Savings Association in its individual capacity. Bank of America National Trust and Savings Association (and each successor Agent) and its respective Affiliates may accept deposits from, lend money to, and generally engage in any kind of banking, trust or other business with Borrower and any Affiliate of Borrower, as if it were not the Agent and without any duty to account therefor to the Banks. Bank of America National Trust and Savings Association (and each successor Agent) need not account to any other Bank for any monies received by it for reimbursement of its costs and expenses as Agent hereunder, or for any monies received by it in its capacity as a Bank hereunder, except as otherwise provided herein. 8.3 Banks' Credit Decisions. Each Bank agrees that it has, independently and without reliance upon the Agent, any other - 63 - 64 Bank, or the directors, officers, agents, or employees of the Agent or of any other Bank, and instead in reliance upon information supplied to it by or on behalf of Borrower and its Subsidiaries and upon such other information as it has deemed appropriate, made its own independent credit analysis and decision to enter into this Agreement. Each Bank also agrees that it shall, independently and without reliance upon the Agent, any other Bank, or the directors, officers, agents, or employees of the Agent or of any other Bank, continue to make its own independent credit analyses and decisions in acting or not acting under the Loan Documents. 8.4 Action by Agent. (a) The Agent may assume that no Event of Default has occurred and is continuing, unless the Agent has actual knowledge of the Event of Default, has received notice from Borrower stating the nature of the Event of Default, or has received notice from a Bank stating the nature of the Event of Default and that Bank considers the Event of Default to have occurred and to be continuing. (b) The Agent has only those obligations under the Loan Documents that are expressly set forth therein. Without limitation on the foregoing, the Agent shall have no duty to inspect any property of Borrower or any of its Subsidiaries, although the Agent may in its discretion periodically inspect any property from time to time, in accordance with Section 5.5 hereof and, upon request by any Bank shall provide the results of such inspection to that Bank provided that Bank shares in the costs of such inspection. If the Agent desires to seek reimbursement from a Bank for the cost of any such inspection it will obtain the approval of that Bank prior to each such inspection. (c) Except for any obligation expressly set forth in the Loan Documents and as long as the Agent may assume that no Event of Default has occurred and is continuing, the Agent may, but shall not be required to, exercise its discretion to act or not act, except that the Agent shall be required to act or not act upon the instructions of the Majority Banks (or of all the Banks, to the extent required by this Agreement) and those instructions shall be binding upon the Agent and all the Banks, - 64 - 65 provided that the Agent shall not be required to act or not act if to do so would expose the Agent to significant liability or would be contrary to any Loan Document or to applicable law. (d) If the Agent has received a notice specified in clause (a), the Agent shall give notice thereof to the Banks and shall act or not act upon the instructions of the Majority Banks (or of all the Banks, to the extent required by this Agreement), provided that the Agent shall not be required to act or not act if to do so would be contrary to any Loan Document or to applicable Law or would result, in the reasonable judgment of the Agent, in substantial risk of liability to the Agent, and except that if the Majority Banks (or all the Banks, if required under this Agreement) fail, for three (3) Banking Days after the receipt of notice from the Agent, to instruct the Agent, then the Agent in its sole discretion, may act or not act as it deems advisable for the protection of the interests of the Banks. (e) The Agent shall have no liability to any Bank for acting, or not acting, as instructed by the Majority Banks (or all the Banks, if required under this Agreement), notwithstanding any other provision hereof. 8.5 Liability of Agent. Neither the Agent nor any of its respective directors, officers, agents, or employees shall be liable for any action taken or not taken by them under or in connection with the Loan Documents, except for their own gross negligence or willful misconduct. Without limitation on the foregoing, the Agent and its respective directors, officers, agents and employees: (a) may treat the payee of any Note as the holder thereof until the Agent receives notice of the assignment or transfer thereof in form satisfactory to the Agent, signed by the payee and may treat each Bank as the owner of that Bank's interest in the obligations due to Banks for all purposes of this Agreement until the Agent receives notice of the assignment or transfer thereof, in form satisfactory to the Agent, signed by that Bank; (b) may consult with legal counsel, in-house legal counsel, independent public accountants, in-house accountants and - 65 - 66 other professionals, or other experts selected by it with reasonable care, or with legal counsel, independent public accountants, or other experts for Borrower, and shall not be liable for any action taken or not taken by it or them in good faith in accordance with the advice of such legal counsel, independent public accountants, or experts; (c) will not be responsible to any Bank for any statement, warranty, or representation made in any of the Loan Documents or in any notice, certificate, report, request, or other statement (written or oral) in connection with any of the Loan Documents; (d) except to the extent expressly set forth in the Loan Documents, will have no duty to ascertain or inquire as to the performance or observance by Borrower or any other Person of any of the terms, conditions, or covenants of any of the Loan Documents or to inspect the property, books, or records of Borrower or any of its Subsidiaries or other Person; (e) will not be responsible to any Bank for the due execution, legality, validity, enforceability, genuineness, effectiveness, sufficiency, or value of any Loan Document, any other instrument or writing furnished pursuant thereto or in connection therewith; (f) will not incur any liability by acting or not acting in reliance upon any Loan Document, notice, consent, certificate, statement, or other instrument or writing believed by it or them to be genuine and signed or sent by the proper party or parties; and (g) will not incur any liability for any arithmetical error in computing any amount payable to or receivable from any Bank hereunder, including without limitation payment of principal and interest on the Advances, payment of commitment fees, Advances, and other amounts; provided that promptly upon discovery of such an error in computation, the Agent, the Banks, and (to the extent applicable) Borrower shall make such adjustments as are necessary to correct such error and to restore the parties to the position that they would have occupied had the error not occurred. - 66 - 67 8.6 Indemnification. Each Bank shall, ratably in accordance with the respective principal amount of its Bank Commitment, indemnify and hold the Agent and its directors, officers, agents, and employees harmless against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses, or disbursements of any kind or nature whatsoever (including, without limitation, attorneys' fees and disbursements) that may be imposed on, incurred by, or asserted against it or them in any way relating to or arising out of the Loan Documents (other than losses incurred by reason of the failure by Borrower to pay the obligations due to Banks hereunder or under the Notes) or any action taken or not taken by it as Agent thereunder, except for the Agent's gross negligence or willful misconduct. Without limitation on the foregoing, each Bank shall reimburse the Agent upon demand for that Bank's ratable share of any reasonable cost or expense incurred by the Agent in connection with the negotiation, preparation, execution, delivery, administration, amendment, waiver, refinancing, restructuring, reorganization (including a bankruptcy reorganization), or enforcement of the Loan Documents, to the extent that Borrower is required by Section 9.3 to pay that cost or expense but fails to do so upon demand. Any such reimbursement shall not relieve Borrower of its obligations under Section 9.3. 8.7 Successor Agent. The Agent may resign as such at any time upon 30 days' notice to Borrower and the Banks. The Majority Banks may at any time remove the Agent by written notice to that effect to be effective on such date as the Majority Banks designate. In either event, the Majority Banks shall appoint a successor Agent or Agents, which shall be reasonably Acceptable to Borrower and which must be from among the Banks; provided, that if the Majority Banks have not appointed a successor Agent within thirty (30) days after the date the Agent gave notice of resignation or was removed, the Agent shall be entitled to appoint a successor Agent from among the Banks, which is reasonably acceptable to Borrower, and in such event Agent's resignation shall then be effective upon such successor's acceptance of appointment. Upon a successor's acceptance of appointment as Agent, the successor will thereupon succeed to and become vested with all the rights, powers, privileges, and duties - 67 - 68 of the Agent under the Loan Documents, and the resigning or removed Agent will thereupon be discharged from its duties and obligations thereafter arising under the Loan Documents. If no successor agent shall have succeeded to the rights, powers and privileges and duties of the Agent within thirty (30) days after the retiring Agent's notice of resignation the retiring Agent's resignation shall nevertheless thereupon become effective, and the Banks shall perform all of the duties of the Agent hereunder until such time, if any, as the Majority Banks appoint a successor agent as provided above. 8.8 No Obligations of Borrower. Nothing contained in this Article 8 shall be deemed to impose upon Borrower any obligation in respect of the due and punctual performance by the Agent of its obligations to the Banks under any provision of this Agreement, and Borrower shall have no liability to the Agent or any of the Banks in respect of any failure by the Agent or any Bank to perform any of its obligations to the Agent or the Banks under this Agreement. Without limiting the generality of the foregoing, where any provision of this Agreement relating to the payment of any amounts due and owing under the Loan Documents provides that such payments shall be made by Borrower to the Agent for the account of the Banks, Borrower's obligations to the Banks in respect of such payments shall be deemed to be satisfied upon the making of such payments to the Agent in the manner provided by this Agreement. ARTICLE 9 MISCELLANEOUS 9.1 Cumulative Remedies; No Waiver. The rights, powers, and remedies of Agent, Banks or any Party hereto provided herein or in any Note or other Loan Document are cumulative and not exclusive of any right, power, or remedy provided by law or equity. No failure or delay on the part of Agent, Banks or any Party in exercising any right, power, or remedy may be, or may be deemed to be, a waiver thereof; nor may any single or partial exercise of any right, power, or remedy preclude any other or further exercise of any other right, power or remedy. - 68 - 69 9.2 Amendments; Consents. No amendment, modification, supplement, termination, or waiver of any provision of this Agreement or any other Loan Document, and no consent to any departure by Borrower or any other Party therefrom, may in any event be effective unless in writing signed by Borrower and Agent, with the approval of the Majority Banks, and then only for the specific purpose given. Without the approval in writing of Borrower and all the Banks, no amendment, modification, supplement, termination, waiver, or consent may be effective: (a) to amend or modify the principal of, or the amount of principal, principal prepayments, or the rate of interest payable on, any Obligation or the amount of any Commitment or of any fee payable to any Bank; (b) to postpone any date fixed for any payment of principal of, prepayment of principal of, or any installment of interest on, any obligation or any installment of any fee or to extend the term of any Commitment; (c) to amend or modify the provisions of the definitions in Section 1.1 of "Majority Banks" or of Sections 9.2, 9.9, 9.10 or 9.11; or (d) to amend or modify any provision of this Agreement or the Loan Documents that expressly requires the consent or approval of all the Banks. Any amendment, modification, supplement, termination, waiver, or consent pursuant to this Section 9.2 shall apply equally to, and shall be binding upon, Borrower, all the Banks and the Agent. 9.3 Costs, Expense and Taxes. Borrower shall pay within five (5) Banking Days of receiving written notice thereof from the Agent: (a) the reasonable costs and expenses of Agent in connection with the negotiation, preparation, execution, and delivery of this Agreement or any other Loan Document and the syndication of the Advances hereunder or any matter related thereto; (b) the reasonable costs and expenses of Agent in connection with any amendment or waiver of any of the Loan - 69 - 70 Documents or the administration of this Agreement or any other Loan Document or any matter related thereto; and (c) the reasonable costs and expenses of Agent and the Banks in connection with enforcement of this Agreement or any other Loan Document or other matter related thereto (including any enforcement in any bankruptcy or similar proceedings); in each case including without limitation recording fees, filing fees, search fees and other out-of-pocket expenses, and the reasonable fees and out-of-pocket expenses of any legal counsel (including, without limitation, the reasonable allocated cost of Agent's in-house counsel and staff), independent public accountants and other outside experts. Borrower shall also pay within five (5) Banking Days of receiving written notice thereof from the Agent any and all documentary and other taxes (other than income or gross receipts taxes generally applicable to banks) and all costs, expenses, fees and charges payable or determined to be payable in connection with the execution, delivery, filing or recording of this Agreement, any other Loan Document or any other instrument or writing to be delivered hereunder or thereunder, or in connection with any transaction pursuant hereto or thereto. In the event of litigation relating to this Agreement, the prevailing party shall be entitled to attorneys' fees and costs. Borrower shall reimburse, hold harmless and indemnify Agent and the Banks from and against any and all loss, liability or legal or other expense with respect to or resulting from any delay in paying or failure to pay any tax, cost, expenses, fee or charge or that any Bank may suffer or incur by reason of the failure of Borrower to perform any of its obligations under this Agreement or any Loan Document. Any amount payable under the Loan Documents other than the Advances which is not paid when due or within any applicable grace period shall, thereafter, bear interest at the Default Rate in effect under the Notes with respect to Base Rate Loans, as set forth in Section 3.9 hereof. 9.4 Nature of Banks, Obligations. Nothing contained in this Agreement or any other Loan Document and no action taken by the Agent or the Banks or any of them pursuant hereto or thereto may, or may be deemed to, make the Banks a partnership, an association, a joint venture, or other entity, either among themselves or with Borrower. Each Bank's obligation to make any Advance pursuant hereto is several and not joint or joint and several, and is not conditioned upon the performance by any other - 70 - 71 Bank of its obligation to make Advances. A default by any Bank will not increase the Commitment of any other Bank. Any Bank not in default may, if it desires, assume in such proportion as the nondefaulting Banks agree the obligations of any Bank in default, but is not obligated to do so. 9.5 Representations and Warranties. All representations and warranties of Borrower and any other party contained herein or in any other Loan Document (including, for this purpose, all representations and warranties contained in any certificate or other writing required to be delivered by or on behalf of Borrower or such party pursuant to any Loan Document) will survive the making of the Advances hereunder and the execution and delivery of this Agreement, and, in the absence of actual knowledge by the Agent of the untruth of any representation or warranty, have been or will be relied upon by the Agent and each Bank, notwithstanding any investigation made by the Agent or any Bank or on their behalf. 9.6 Notices. Except as otherwise provided in any Loan Document, (a) all notices, requests, demands, directions, and other communications provided for hereunder and under any other Loan Document must be in writing and must be mailed, telegraphed, delivered, or sent by telex, telecopier or cable to the appropriate party at the address set forth on the signature pages of this Agreement or, as to any Party, at any other address as may be designated by it in the applicable Loan Document or in a written notice sent to all other parties in accordance with this section, and (b) any notice, request, demand, direction, or other communication given by telegram, telex, or cable must be confirmed within 48 hours by letter mailed or delivered to the appropriate party at its respective address. Except as otherwise provided in any Loan Document, if any notice, request, demand, direction, or other communication is given by mail it will be effective on the third Banking Day after deposited in the United States mails with first class or airmail postage prepaid; if given by telegraph or cable, when delivered to the telegraph company with charges prepaid; if given by telex, when sent; or if given by personal delivery, when delivered. 9.7 Execution in Counterparts. This Agreement and any other Loan Document in which Borrower is a Party may be executed in any - 71 - 72 number of counterparts and any party hereto or thereto may execute any counterpart, each of which when executed and delivered will be deemed to be an original and all of which counterparts of this Agreement or any other Loan Document, as the case may be, taken together will be deemed to be but one and the same instrument. The execution of this Agreement or any other Loan Document by any party hereto or thereto will not become effective until counterparts hereof or thereof, as the case may be, have been executed by all the parties hereto or thereto. 9.8 Binding Effect; Assignment. (a) This Agreement and the other Loan Documents to which Borrower is a Party will be binding upon and inure to the benefit of Borrower, the Agent, each of the Banks, and their respective successors and assigns, except that Borrower may not assign its rights hereunder or thereunder or any interest herein or therein without the prior written consent of all the Banks. Each Bank represents that it is not acquiring its Advances with a view to the distribution thereof within the meaning of the Securities Act of 1933, as amended (subject to any requirement that disposition of its Advances must be within the control of such Bank). Any Bank may at any time pledge its Note or any other instrument evidencing its rights as a Bank under this Agreement to a Federal Reserve Bank, but no such pledge shall release that Bank from its obligations hereunder or grant to such Federal Reserve Bank the rights of a Bank hereunder absent foreclosure of such pledge. (b) From time to time subsequent to the Closing Date, each Bank may assign to one or more commercial banks a portion of its pro rata share of the Commitment; provided that (i) the minimum amount of any such assignment shall be the lesser of $10,000,000 or such Bank's total Commitment hereunder; (ii) such commercial bank, if not then a Bank, shall be reasonably acceptable to the Agent and acceptable to Borrower in Borrower's sole discretion; and (iii) the assignee shall execute and deliver to the Agent a Commitment Assignment and Acceptance; and (v) prior to the effective date of any such assignment, the Agent shall have received a fee of $1,500. In the event that such assignee is at the time of such assignment a Bank, then the assigning bank shall not be permitted to assign any portion of - 72 - 73 its commitment unless such assigning bank assigns to the assignee bank all of its commitment hereunder. Upon the effective date of the Commitment Assignment and Acceptance, the commercial banks therein shall be a Bank for all purposes of this Agreement, with the pro rata share of the Commitment therein set forth and, to the extent of such pro rata share, the assigning Bank shall be released from its obligations under this Agreement. Borrower agrees that, upon the request of any Bank made through the Agent, it shall execute and deliver (against delivery by the assigning Bank to Borrower of its Note) to such assignee Bank, a Note evidencing that assignee Bank's pro rata share of the Commitment, and to the assigning Bank, a Note evidencing the remaining balance pro rata share retained by the assigning Bank. (c) By executing and delivering a Commitment Assignment and Acceptance, the assignee thereunder acknowledges and agrees that: (i) other than the representation and warranty that it is the legal and beneficial owner of the pro rata share of the Commitment being assigned thereby free and clear of any adverse claim, the assigning Bank has made no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or the execution, legality, validity, enforceability, genuineness or sufficiency of this Agreement or any other Loan Document; (ii) the assigning Bank has made no representation or warranty and assumes no responsibility with respect to the financial condition of Borrower or the performance by Borrower of the obligations; (iii) it has received a copy of this Agreement, together with copies of the most recent financial statements delivered pursuant hereto and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Commitment Assignment and Acceptance; (iv) it will, independently and without reliance upon the Agent or any Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) it appoints and authorizes the Agent to take such action and to exercise such powers under this Agreement as are delegated to the Agent by Article 8; and (vi) it will perform in accordance with their terms all of the obligations which by the terms of this Agreement are required to be performed by it as a Bank. - 73 - 74 (d) The Agent shall maintain at the Agent's office a copy of each Commitment Assignment and Acceptance delivered to it and a register for recordation of the names and addresses of the Banks and their respective pro rata shares of the Commitment. The entries in such register shall be conclusive, in the absence of manifest error, and Borrower, the Agent and the Banks may treat each Person whose name is recorded in the register as a Bank hereunder for all purposes of this Agreement. Promptly following any entry in the register, the Agent shall provide to Borrower and the Banks a revised Schedule 1.1 giving effect thereto. (e) Each Bank may from time to time without the consent of Borrower or the Agent grant participations to one or more banks or other financial institutions in a portion of its pro rata share of the Commitment; provided, however, that (i) such Bank's obligations under this Agreement shall remain unchanged, (ii) such Bank shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) the participating banks or other financial institutions shall not be a Bank hereunder for any purpose except, if the participation agreement so provides, for the purposes of Sections 3.3 [Increased Commitment Costs], 3.4 [LIBOR Fees], 3.5 [LIBOR Costs] and 9.10 [Indemnity by Borrower], but only to the extent that the cost of such benefits to Borrower does not exceed the cost which Borrower would have incurred in respect of such Bank absent the participation, and (iv) Borrower, the Agent and the other Banks shall continue to deal solely and directly with such Bank in connection with such Bank's rights and obligations under this Agreement, (v) the consent of the holder of such participation interest shall not be required for amendments or waivers of provisions of the Loan Documents other than those which (A) increase the monetary amount of any of the Commitment, (B) extend the Expiration Date or any other date upon which any payment of money is due to the Banks or (C) reduce the rate of interest on the Advances, any fee or any other monetary amount payable to the Banks. (f) In the event that (i) any Person or two or more Persons acting in concert acquire beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange - 74 - 75 Commission under the Exchange Act), directly or indirectly of 35% or more of the common stock of a Bank, or (ii) individuals who as of the Closing Date constitute the board of directors of any Bank (the "Incumbent Board"), ceases for any reason to constitute at least a majority of the board of directors, provided that any person becoming a director subsequent to the Closing Date whose election or nomination for election by such Bank or its stockholders is approved by a vote of at least a majority of the directors then comprising the Incumbent Board (other than an election or nomination of an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election or removal of the directors of such Bank, as contemplated in Rule 14a-11 of Regulation 14a promulgated under the Exchange Act), shall for the purposes of this Agreement be considered as though such person were a member of the Incumbent Board of such Bank, then Borrower shall have the right for a period of sixty (60) days from the date of the consummation of either of the events set forth in clause (i) or (ii) above to reallocate that Bank's commitment hereunder to another Bank consenting thereto or to replace the subject Bank with another financial institution reasonably acceptable to Agent or, if the subject Bank is the Agent, to the other Banks. 9.9 Sharing of Setoffs. Each Bank severally agrees that if it, through the exercise of the right of setoff, banker's lien, or counterclaim against Borrower or otherwise, receives payment of the obligations due it hereunder and under the Notes that is ratably more than any other Bank, through any means, then: (a) the Bank exercising the right of setoff, banker's lien, or counterclaim or otherwise receiving such payment shall purchase, and shall be deemed to have simultaneously purchased, from the other Banks a participation in the obligations held by the other Banks and shall pay to the other Banks a purchase price in an amount so that the share of the obligations held by each Bank after the exercise of the right of setoff, banker's lien, or counterclaim or receipt of payment shall be in the same proportion that existed prior to the exercise of the right of setoff, banker's lien, or counterclaim or receipt of payment, and (b) such other adjustments and purchases of participations shall be made from time to time and shall be equitable to ensure that all of the Banks share any payment obtained in respect of the obligations ratably in accordance with each Bank's share of the - 75 - 76 obligations immediately prior to, and without taking into account, the payment, provided that, if all or any portion of a disproportionate payment obtained as a result of the exercise of the right of setoff, banker's lien, counterclaim or otherwise is thereafter recovered from the purchasing Bank by Borrower or any Person claiming through or succeeding to the rights of Borrower, the purchase of a participation shall be rescinded and the purchase price thereof shall be restored to the extent of the recovery, but without interest. Each Bank that purchases a participation in the obligations pursuant to this Section shall from and after the purchase have the right to give all notices, requests, demands, directions and other communications under this Agreement with respect to the portion of the Obligations purchased to the same extent as though the purchasing Bank were the original owner of the obligations purchased. Borrower expressly consents to the foregoing arrangements and agrees that any Bank holding a participation in an obligation so purchased may exercise any and all rights of setoff, banker's lien or counterclaim with respect to the participation as fully as if the Bank were the original owner of the obligation purchased; provided, however, that each Bank agrees that it shall not exercise any right of setoff, banker's lien or counterclaim without first obtaining the consent of the Majority Banks. 9.10 Indemnity by Borrower. Borrower agrees to indemnify, save, and hold harmless the Agent and each Bank and their directors, officers, agents, attorneys, and employees (collectively, the "indemnitees") from and against: (i) any and all claims, demands, actions, or causes of action that are asserted against any indemnitee by any Person if the claim, demand, action, or cause of action arises out of or relates to a claim, demand, action or cause of action that the Person asserts or may assert against Borrower, any Affiliate of Borrower or any officer, director or shareholder of Borrower in their capacity as such, (ii) any and all claims, demands, actions or causes of action that are asserted against any indemnitee (other than by Borrower or by another indemnitee) if the claim, demand, action or cause of action arises out of or relates to the Commitment, the use of proceeds of any Advances, or the relationship of Borrower and the Banks under this Agreement or any transaction contemplated pursuant to this Agreement, (iii) any administrative or investigative proceeding by any Governmental Agency arising - 76 - 77 out of or related to a claim, demand, action or cause of action described in clauses (i) or (ii) above; (iv) any and all liabilities, losses, costs, or expenses (including attorneys' fees and disbursements) that any indemnitee suffers or incurs as a result of any of the foregoing; and (v) any and all claims, demands, actions or causes of action arising out of or relating to the Agent acting in reliance on telephonic instructions from a Person identifying himself as a Responsible Official of Borrower; provided, that Borrower shall have no obligation under this Section to the Agent or any Bank with respect to any of the foregoing arising out of the gross negligence or willful misconduct of the Agent or such Bank or the breach by the Agent or such Bank of this Agreement or from the transfer or disposition of any Advance by any Bank. If any claim, demand, action or cause of action is asserted against any indemnitee, such indemnitee shall promptly notify Borrower, but the failure to so promptly notify Borrower shall not affect Borrower's obligations under this Section unless such failure materially prejudices Borrower's right to participate in the contest of such claim, demand, action or cause of action, as hereinafter provided. If requested by Borrower in writing and so long as no Default or Event of Default shall have occurred and be continuing, such indemnitee shall in good faith contest the validity, applicability and amount of such claim, demand, action or cause of action, shall permit Borrower to participate in such contest and shall cooperate with Borrower to the extent their interests are aligned. Any indemnitee that proposes to settle or compromise any claim or proceeding for which Borrower may be liable for payment of indemnity hereunder shall give Borrower written notice of the terms of such proposed settlement or compromise reasonably in advance of settling or compromising such claim or proceeding and shall obtain Borrower's written approval thereof, which approval may be withheld in Borrower's sole discretion. Any voluntary settlement by an indemnitee of such a claim or proceeding without Borrower's written approval, shall relieve Borrower of its obligation to indemnify that indemnitee with respect to such claim or proceeding. In any legal action involving more than one indemnitee, all indemnitees shall be represented by a single legal counsel unless such legal counsel determines that a defense or counterclaim is available to an indemnitee that is not available to all indemnitees and that to assert such a defense or counterclaim would create a conflict of - 77 - 78 interest, or potential conflict of interest, in which case such indemnitee shall be entitled to separate legal counsel. Any obligation or liability of Borrower to any indemnitee under this Section shall survive the expiration or termination of this Agreement and the repayment of all Advances and all other obligations owed to the Banks. 9.11 Nonliability of Banks. The relationship between Borrower and the Banks is, and shall at all times remain, solely that of borrower and lenders, and the Banks and the Agent neither undertake nor assume any responsibility or duty to Borrower to review, inspect, supervise, pass judgment upon, or inform Borrower of any matter in connection with any phase of Borrower's business, operations, or condition, financial or otherwise. Borrower shall rely entirely upon its own judgment with respect to such matters, and any review, inspection, supervision, exercise of judgment, or information supplied to Borrower by any Banks or the Agent in connection with any such matter is for the protection of the Banks and the Agent, and neither Borrower nor any third party is entitled to rely thereon. 9.12 Confidentiality. Each Bank agrees to use any confidential information that it may receive, directly or indirectly, from Borrower pursuant to this Agreement only for the purposes of this Agreement, and hold such confidential information in confidence, except for disclosure: (a) to Affiliates of the Bank; (b) to other Banks; (c) to legal counsel, accountants and (subject to reasonable prior notice to Borrower) other professional advisors to that Bank; (d) to regulatory officials having jurisdiction over that Bank; (e) as required by Law or legal process or in connection with any legal proceeding to which that Bank and Borrower are adverse parties; and (f) to another financial institution in connection with a disposition or proposed disposition to that financial institution of all or part of that Bank's interests hereunder or a participation interest in its Advances, provided that such disclosure to such financial institution is made subject to an appropriate confidentiality agreement on terms substantially similar to this Section. For purposes of the foregoing, "confidential information" shall mean any information respecting Borrower or its Subsidiaries reasonably considered by Borrower to be confidential and so designated in writing by Borrower, other than (i) information - 78 - 79 previously filed with any Governmental Agency and available to the public, (ii) information previously published in any public medium from a source other than, directly or indirectly, that Bank, and (iii) information previously disclosed by Borrower to any Person not associated with Borrower without a written confidentiality agreement substantially similar to this section. Nothing in this section shall be construed to create or give rise to any fiduciary duty on the part of the Agent or the Banks to Borrower. 9.13 No Third Parties Benefited. This Agreement is made for the purpose of defining and setting forth certain obligations, rights and duties of Borrower, the Agent and the Banks in connection with the Commitment, and is made for the sole benefit of Borrower, the Agent and the Banks, and the Agent's and the Bank's successors and assigns. Except as provided in Sections 9.8 and 9.10, no other Person shall have any rights of any nature hereunder or by reason hereof. 9.14 Right of Setoff - Deposit Accounts. Upon the occurrence of an Event of Default and the acceleration of maturity of the principal indebtedness of the Advances pursuant to Section 7.2, Borrower hereby specifically authorizes each Bank (subject to the approval of the Majority Banks) in which Borrower or any of its Subsidiaries maintains a deposit account (whether a general or special deposit account, other than trust accounts) or a certificate of deposit to setoff any obligations owed to the Banks against such deposit account or certificate of deposit without prior notice to Borrower or such Subsidiary (which notice is hereby waived) whether or not such deposit account or certificate of deposit has then matured. Nothing in this section shall limit or restrict the exercise by a Bank of any right to setoff or banker's lien under applicable Law, subject to the approval of the Majority Banks. Borrower further hereby grants to the Banks a security interest in all present and future "deposit accounts" (as such term is defined in California Commercial Code Section 9105(i)(e)) of Borrower held in any of the Banks and any proceeds thereof to secure the obligations and, upon the occurrence of an Event of Default and the acceleration of maturity of the principal indebtedness of the Advances pursuant to Section 7.2, each Bank may (subject to the approval - 79 - 80 of the Majority Banks) exercise its rights under Article 9 of the Uniform Commercial Code with respect thereto. 9.15 Further Assurances. Borrower shall, at its expense and without expense to the Banks or the Agent, do, execute, and deliver such further acts and documents as any Bank or the Agent from time to time reasonably requires for the assuring and confirming unto the Banks or the Agent the rights hereby created or intended now or hereafter so to be, or for carrying out the intention or facilitating the performance of the terms of any Loan Document. 9.16 Integration. This Agreement, together with the other Loan Documents, comprises the complete and integrated agreement of the parties on the subject matter hereof and supersedes all prior agreements (including, without limitation, the Prior Credit Agreement), written or oral, on the subject matter hereof except as expressly provided herein to the contrary. The initial draft of the Loan Documents was prepared by counsel for Agent, and fully reviewed by Borrower and its counsel. Borrower and its counsel have negotiated certain revisions and cooperated in the preparation of the final Loan Documents. Hence, the Loan Documents shall be construed neither against nor in favor of either, but rather in accordance with the fair meaning thereof. 9.17 Governing Law. The Loan Documents shall be governed by, and construed and enforced in accordance with, the Laws of California. 9.18 Judgment Currency. If, for the purposes of obtaining judgment in any court, it is necessary to convert a sum due hereunder or any other Loan Document in one currency into another currency, the rate of exchange used shall be that at which in accordance with normal banking procedures the Agent could purchase the first currency with such other currency on the Banking Day preceding that on which final judgment is given. The obligation of each Loan Party in respect of any such sum due from it to the Agent hereunder or under the other Loan Documents 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 - 80 - 81 the Banking Day following receipt by the Agent of any sum adjudged to be so due in the Judgment Currency, the Agent may in accordance with normal banking procedures purchase the Agreement Currency with the Judgment Currency. If the amount of the Agreement Currency so purchased is less than the sum originally due to the Agent in the Agreement Currency, each Loan Party agrees, as a separate obligation and notwithstanding any such judgment, to indemnify the Agent or the Person to whom such obligation was owing against such loss. If the amount of the Agreement Currency so purchased is greater than the sum originally due to the Agent in such currency, the Agent agrees to return the amount of any excess to the applicable Loan Party (or to any other Person who may be entitled thereto under applicable law). 9.19 Choice of Forum. Except as otherwise expressly provided in any Loan Document, the parties hereto and thereto agree and intend that the proper and exclusive forum for any litigation of any disputes or controversies arising out of or related to the Loan Documents shall be the Superior Court of the State of California for the County of Los Angeles. Each Party to any Loan Document hereby expressly waives any defense or objection to jurisdiction or venue based on the doctrine of forum non conveniens, and stipulates that the Superior Court of the State of California for the County of Los Angeles shall have in personam jurisdiction and venue over such Party for the purpose of litigating any dispute or controversy arising out of or related to the Loan Documents. In the event any party commences or maintains any action or proceeding arising out of or related to the Loan Documents in a forum other than the Superior Court of the State of California for the County of Los Angeles, any party shall be entitled to request the dismissal or stay of such action or proceeding, and each party stipulates that such action or proceeding shall be dismissed or stayed. 9.20 Severability of Provisions. Any provision in any Loan Document that is held to be inoperative, unenforceable, or invalid in any jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable, or invalid without affecting the remaining provisions in that jurisdiction or the operation, enforceability, or validity of that provision in any other - 81 - 82 jurisdiction, and to this end the provisions of all Loan Documents are declared to be severable. 9.21 Headings. Article and section headings in this Agreement and the other Loan Documents are included for convenience of reference only and are not part of this Agreement or the other Loan Documents for any other purpose. 9.22 Time of the Essence. Time is of the essence of the Loan Documents. 9.23 Conflict in Loan Documents. To the extent there is any actual irreconcilable conflict between the provisions of this Agreement and any other Loan Document, the provisions of this Agreement shall prevail. 9.24 PURPORTED ORAL AMENDMENTS. BORROWER EXPRESSLY ACKNOWLEDGES THAT THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS MAY ONLY BE AMENDED OR MODIFIED, OR THE PROVISIONS HEREOF OR THEREOF WAIVED OR SUPPLEMENTED, BY AN INSTRUMENT IN WRITING THAT COMPLIES WITH SECTION 9.2. BORROWER AGREES THAT IT WILL NOT RELY ON ANY COURSE OF DEALING, COURSE OF PERFORMANCE, OR ORAL OR WRITTEN STATEMENTS BY ANY REPRESENTATIVE OF THE AGENT OR ANY BANK THAT DOES NOT COMPLY WITH SECTION 9.2 TO EFFECT AN AMENDMENT, MODIFICATION, WAIVER OR SUPPLEMENT TO THE AGREEMENT OR THE OTHER LOAN DOCUMENTS. 9.25 WAIVER OF RIGHT TO TRIAL BY JURY. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER ANY LOAN DOCUMENT OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTY HERETO OR ANY OF THEM WITH RESPECT TO ANY LOAN DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. - 82 - 83 9.26 Termination of Prior Credit Agreement. The Borrower, the Agent and the Banks party to the Prior Credit Agreement hereby agree that the commitments under the Prior Credit Agreement are terminated as of the Closing Date. The Borrower agrees to pay in full all principal, accrued interest, fees and other amounts outstanding under the Prior Credit Agreement on the Closing Date. Subject to Section 3.18 of the Prior Credit Agreement, upon payment in full of such amounts, any and all obligations of the Borrower under the Prior Credit Agreement will have been paid, satisfied and discharged in full; provided, however, that to the extent that any payments made under the Prior Credit Agreement shall be subsequently invalidated, declared to be fraudulent, a fraudulent conveyance, or preferential, set aside and/or required to be repaid to a trustee, receiver, debtor in possession, or any other party, then to the extent of such payment, the obligations which were intended to be satisfied shall be revived and continue in full force and effect, as if such payment had never been received by such person. Amounts repaid to the banks under the Prior Credit Agreement that are borrowed from the Banks under this Agreement on the Closing Date may, as among the Banks, be netted such that amounts funded on the Closing Date hereunder by any Bank which is funding more than it is being repaid under the Prior Credit Agreement may be applied to partially repay amounts owing to any Bank which is owed more under the Prior Credit Agreement that the amount it is funding hereunder. - 83 - 84 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written. BORROWER: FURON COMPANY By: /S/J. MICHAEL HAGAN ------------------------- J. Michael Hagan Its CHAIRMAN OF THE BOARD OF DIRECTORS By: /S/MONTY A. HOUDESHELL ------------------------- Monty A. Houdeshell Its VICE-PRESIDENT and CHIEF FINANCIAL OFFICER Borrower's address for notices: Furon Company 29982 Ivy Glenn Drive Laguna Niguel, California 92677 Attn: Chief Financial Officer Telephone: (714) 831-5350 Telecopier: (714) 643-1548 with a copy of a notice pursuant to Section 7 to: Furon Company 29982 Ivy Glenn Drive Laguna Niguel, California 92677 Attn: General Counsel BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent - 84 - 85 By: /S/PEGGY FUJIMOTO ------------------------- Peggy Fujimoto Vice President (Signatures continue) Address for notices: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION Agency Management Services 1455 Market Street, 12th Floor San Francisco, CA 94103 Telephone: (415) 436-3310 Telecopier: (415) 436-2700 Attention: Peggy Fujimoto Vice President BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as a Bank By: /S/GINA M. WEST ------------------------- Vice President Address for notices: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION Credit Products #5618 555 South Flower Street, 11th Floor Los Angeles, CA 90071 Attention: Gina West Vice President Telephone: (213) 228-6400 Telecopier: (213) 623-1959 THE BANK OF NEW YORK - 85 - 86 By: /S/REBECCA K. LEVINE ------------------------- Its: Address for Notices: THE BANK OF NEW YORK One Wall Street, 22nd Floor New York, NY 10286 with a copy to: THE BANK OF NEW YORK 10990 Wilshire Blvd., Suite 1700 Los Angeles, CA 90024 Attention: Rebecca Levine Telephone: (310) 996-8650 Telecopier: (310) 996-8667 BANK ONE, COLUMBUS, NATIONAL ASSOCIATION By: /S/JEAN PORE ------------------------- Its: Address for Notices: BANK ONE, COLUMBUS, NATIONAL ASSOCIATION Large Corporate 100 East Broad Street Columbus, OH 43271-0209 Attention: Jean Pore Telephone: (614) 248-5810 Telecopier: (614) 248-5518 ABN AMRO BANK NV - 86 - 87 By: /S/ELLEN M. COLEMAN ------------------------- Its: By: /S/MATTHEW S. THOMSON ------------------------- Its: Address for Notices: 300 S. Grand Avenue, Suite 1115 Los Angeles, CA 90071 Attention: John Miller Telephone: (213) 687-2072 Telecopier: (213) 687-2061 - 87 - 88 SCHEDULE 1.1 COMMITMENTS
Bank Commitment Pro Rata Share ---- ---------- -------------- Bank of America National $ 33,000,000 33% Trust and Savings Association The Bank of New York 25,000,000 25% Bank One, Columbus, National Association 25,000,000 25% ABN AMRO Bank NV 17,000,000 17% ============ === TOTAL $100,000,000 100%
- 1 - 89 SCHEDULE 4.9 FURON COMPANY SIGNIFICANT AND CERTAIN OTHER SUBSIDIARIES October 30, 1995 State or Other Jurisdiction of Incorporation or Name of Subsidiary* Organization - ------------------- ---------------- Bunnell Plastics. Inc. New Jersey CHR Industries, Inc. Connecticut Dixon Industries Corporation Rhode Island Fluorocarbon Components, Inc. New York Fluorocarbon Foreign Sales Corporation Barbados Furon B.V. Netherlands Furon Europe, S.A. Belgium Furon Limited England Furon Seals N.V./S.A. Belgium Furon S.A. Belgium Furon S.A.R.I. France Sepco Corporation California - --------------------- * Each of Furon Company's domestic subsidiaries is a general business corporation with a wholly owned domestic subsidiary. - 2 - 90 SCHEDULE 4.10 ERISA PLANS SPONSORED BY FURON COMPANY October 30, 1995 Plan Name Plan # - --------- ------ The Furon Employees' Profit-Sharing-Retirement Plan 001 The Group Welfare Benefits Plan for Employees of the Furon Company 510 The Furon Company Employee Stock Ownership Plan 016 - 3 - 91 SCHEDULE 5.11 LIENS INCLUDING CAPITALIZED LEASES October 30, 1995 CAPITALIZED LEASES Inception Terms Monthly Description Date (Months) Payment - ----------- --------- -------- ------- None LIST OF LIENS Original Current Payee Security Balance Balance - ----- -------- -------- ------- None - 4 - 92 SCHEDULE 5.20 LIST OF INDEBTEDNESS October 30, 1995 Total Current Long Term (In thousands) Principal Portion Portion - -------------- --------- ------- --------- None - 5 - 93 EXHIBIT A FORM OF PROMISSORY NOTE $_______________ October 30, 1995 Los Angeles, California FOR VALUE RECEIVED, the undersigned promises to pay to the order of __________________________________________________________ (the "Bank") the principal amount of ____________________________________ ($________________), or so much thereof as may be advanced hereunder from time to time, payable as hereinafter set forth. The undersigned promises to pay interest on the principal amount hereof remaining unpaid from time to time from the date hereof until the date of payment in full, payable as hereinafter set forth. Reference is made to the Credit Agreement dated as of October 30, 1995, among the undersigned, as Borrower, the Banks that are parties thereto, and Bank of America National Trust and Savings Association, as the Agent (the "Credit Agreement"). Terms defined in the Credit Agreement and not otherwise defined herein are used herein with the meanings defined for those terms in the Credit Agreement. This is one of the Notes referred to in the Credit Agreement, and any holder hereof is entitled to all of the rights, remedies, benefits and privilege provided for in the Credit Agreement as originally executed or as it may from time to time be supplemented, modified or amended. The Credit Agreement, among other things, contains provisions for acceleration of the maturity hereof upon the happening of certain stated events upon the terms and conditions therein specified. The principal indebtedness evidenced by this Note shall be payable in installments as provided in the Credit Agreement. Interest shall be payable on the outstanding daily unpaid principal amount of each Advance hereunder from the date thereof until payment in full and shall accrue and be payable at the rates and on the dates set forth in the Credit Agreement both A - 1 NOTE 94 before and after default and before and after maturity and judgment, with interest on overdue interest to bear interest at the rates set forth in the Credit Agreement. The amount of each payment hereunder shall be made to the Agent at the Agent's office, for the account of the Bank, in lawful money of the United States of America and in immediately available funds in the Applicable Currency on the dates and by the times set forth in the Credit Agreement. The Bank shall use its best efforts to keep a record of Advances made by it in connection with Loans and payments of principal with respect to this Note. The undersigned hereby promises to pay all costs and expense of any holder hereof incurred in collecting the undersigned's obligations hereunder or in enforcing or attempting to enforce any of any holder's rights hereunder, including attorneys' fees and disbursements and the allocated cost of inhouse counsel, whether or not an action is filed in connection therewith. The undersigned hereby waives presentment, demand for payment, dishonor, notice of dishonor, protest, notice of protest and any other notice or formality, to the fullest extent permitted by applicable laws. This Note shall be delivered to and accepted by the Bank, or by the Agent on its behalf, in the State of California, and shall be governed by, and construed and enforced in accordance with, the local Laws thereof. FURON COMPANY, a California corporation By: -------------------------- By: -------------------------- A - 2 NOTE 95 EXHIBIT B COMMITMENT ASSIGNMENT AND ACCEPTANCE AGREEMENT This COMMITMENT ASSIGNMENT AND ACCEPTANCE AGREEMENT (this "Assignment and Acceptance") dated as of __________, 199__ is made between ______________________________ (the "Assignor") and __________________________ (the "Assignee"). RECITALS A, The Assignor is party to that certain Credit Agreement dated as of October 30, 1995, among Furon Company ("Borrower"), the Banks that are parties thereto, and Bank of America National Trust and Savings Association, as the agent (in such capacity, the "Agent") (as extended, renewed, amended or restated from time to time, the "Credit Agreement"). Terms defined in the Credit Agreement and not otherwise defined herein are used herein with the meanings defined for those terms in the Credit Agreement. B. As provided under the Credit Agreement, the Assignor has committed to making Loans to the Borrower in an aggregate amount not to exceed $__________ (the "Commitment"). C. [The Assignor has made Loans in the aggregate principal amount of Dollar Equivalent ("USDE") $__________ to the Borrower] [No Loans are outstanding under the Credit Agreement]. D. The Assignor wishes to assign to the Assignee [part of the] [all] rights and obligations of the Assignor under the Credit Agreement in respect of its Commitment, together with a corresponding portion of each of its outstanding Loans in an amount equal to $__________ (the "Assigned Amount") on the terms and subject to the conditions set forth herein and the Assignee wishes to accept assignment of such rights and to assume such obligations from the Assignor on such terms and subject to such conditions; B - 1 COMMITMENT ASSIGNMENT AND ACCEPTANCE AGREEMENT 96 NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein, the parties hereto agree as follows: B - 2 COMMITMENT ASSIGNMENT AND ACCEPTANCE AGREEMENT 97 1. Assignment and Acceptance. (a) Subject to the terms and conditions of this Assignment and Acceptance, (i) the Assignor hereby sells, transfers and assigns to the Assignee, and (ii) the Assignee hereby purchases, assumes and undertakes from the Assignor, without recourse and without representation or warranty (except as provided in this Assignment and Acceptance) __% (the "Assignee's Percentage Share") of (A) the Commitment and the Loans of the Assignor and (B) all related rights, benefits, obligations, liabilities and indemnities of the Assignor under and in connection with the Credit Agreement and the Loan Documents. (b) With effect on and after the Effective Date (as defined in Section 5 hereof), the Assignee shall be a party to the Credit Agreement and succeed to all of the rights and be obligated to perform all of the obligations of a Bank under the Credit Agreement, including the requirements concerning confidentiality and the payment of indemnification, with a Commitment in an amount equal to the Assigned Amount. The Assignee agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Credit Agreement are required to be performed by it as a Bank. It is the intent of the parties hereto that the Commitment of the Assignor shall, as of the Effective Date, be reduced by an amount equal to the Assigned Amount and the Assignor shall relinquish its rights and be released from its obligations under the Credit Agreement to the extent such obligations have been assumed by the Assignee; provided, however, the Assignor shall not relinquish its rights under Sections 3 and 9.10 of the Credit Agreement to the extent such rights relate to the time prior to the Effective Date. (c) After giving effect to the assignment and assumption set forth herein, on the Effective Date the Assignee's Commitment will be $__________. (d) After giving effect to the assignment and assumption set forth herein, on the Effective Date the Assignor's Commitment will be $__________. B - 3 COMMITMENT ASSIGNMENT AND ACCEPTANCE AGREEMENT 98 2. Payments. (a) As consideration for the sale, assignment and transfer contemplated in Section 1 hereof, the Assignee shall pay to the Assignor on the Effective Date in immediately available funds an amount equal to USDE $__________, representing the Assignee's Pro Rata Share of the principal amount of all Loans. (b) The [Assignor] [Assignee] further agrees to pay to the Agent a processing fee in the amount specified in Section 9.8(b) of the Credit Agreement. 3. Reallocation of Payments. Any interest, fees and other payments accrued to the Effective Date with respect to the Commitment and Loans shall be for the account of the Assignor. Any interest, fees and other payments accrued on and after the Effective Date with respect to the Assigned Amount shall be for the account of the Assignee. Each of the Assignor and the Assignee agrees that it will hold in trust for the other party any interest, fees and other amounts which it may receive to which the other party is entitled pursuant to the preceding sentence and pay to the other party any such amounts which it may receive promptly upon receipt. 4. Independent Credit Decision. The Assignee (a) acknowledges that it has received a copy of the Credit Agreement and the Schedules and Exhibits thereto, together with copies of the most recent financial statements referred to in Section 5.13(a) of the Credit Agreement, and such other documents and information as it has deemed appropriate to make its own credit and legal analysis and decision to enter into this Assignment and Acceptance; and (b) agrees that it will, independently and without reliance upon the Assignor, the Agent or any other Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit and legal decisions in taking or not taking action under the Credit Agreement. 5. Effective Date; Notices. B - 4 COMMITMENT ASSIGNMENT AND ACCEPTANCE AGREEMENT 99 (a) As between the Assignor and the Assignee, the effective date for this Assignment and Acceptance shall be __________, 199__ (the "Effective Date"); provided that the following conditions precedent have been satisfied on or before the Effective Date: (i) this Assignment and Acceptance shall be executed and delivered by the Assignor and the Assignee; (ii) if applicable, the consent of the Agent and the Borrower required for an effective assignment of the Assigned Amount by the Assignor to the Assignee under Section 9.8(b)(ii) of the Credit Agreement shall have been duly obtained in writing and shall be in full force and effect as of the Effective Date; (iii) the Assignee shall pay to the Assignor all amounts due to the Assignor under this Assignment and Acceptance; (iv) the processing fee referred to in Section 2(b) hereof and in Section 9.8(b) of the Credit Agreement shall have been paid to the Agent; and (v) the Assignor shall have assigned and the Assignee shall have assumed a percentage equal to the Assignee's Percentage Share of the rights and obligations of the Assignor under the Credit Agreement (if such agreement exists). (b) Promptly following the execution of this Assignment and Acceptance, the Assignor shall deliver to the Borrower and the Agent for acknowledgement by the Agent, a Notice of Assignment substantially in the form attached hereto as Schedule 1. B - 5 COMMITMENT ASSIGNMENT AND ACCEPTANCE AGREEMENT 100 6. Withholding Tax. The Assignee (a) represents and warrants to the Assignor, the Agent and the Borrower that under applicable law and treaties no tax will be required to be withheld by the Assignor with respect to any payments to be made to the Assignee hereunder or by the Borrower or the Agent under the Credit Agreement, (b) agrees to furnish (if it is organized under the laws of any jurisdiction other than the United States or any State thereof) to the Agent and the Borrower prior to the time that the Agent or Borrower is required to make any payment of principal, interest or fees hereunder or under the Credit Agreement, duplicate executed originals of either U.S. Internal Revenue Service Form 4224 or U.S. Internal Revenue Service Form 1001 (wherein the Assignee claims entitlement to the benefits of a tax treaty that provides for a complete exemption from U.S. federal income withholding tax on all payments hereunder or under the Credit Agreement) and agrees to provide new Forms 4224 or 1001 upon the expiration of any previously delivered form or comparable statements in accordance with applicable U.S. law and regulations and amendments thereto, duly executed and completed by the Assignee, and (c) agrees to comply with all applicable U.S. laws and regulations with regard to such withholding tax exemption. B - 6 COMMITMENT ASSIGNMENT AND ACCEPTANCE AGREEMENT 101 7. Representations and Warranties. (a) The Assignor represents and warrants that (i) it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any Lien or other adverse claim; (ii) it is duly organized and existing and it has the full power and authority to take, and has taken, all action necessary to execute and deliver this Assignment and Acceptance and any other documents required or permitted to be executed or delivered by it in connection with this Assignment and Acceptance and to fulfill its obligations hereunder; (iii) no notices to, or consents, authorizations or approvals of, any Person are required (other than any already given or obtained) for its due execution, delivery and performance of this Assignment and Acceptance, and apart from any agreements or undertakings or filings required by the Credit Agreement, no further action by, or notice to, or filing with, any Person is required of it for such execution, delivery or performance; and (iv) this Assignment and Acceptance has been duly executed and delivered by it and constitutes the legal, valid and binding obligation of the Assignor, enforceable against the Assignor in accordance with the terms hereof, subject, as to enforcement, to bankruptcy, insolvency, moratorium, reorganization and other laws of general application relating to or affecting creditors' rights and to general equitable principles. (b) The Assignor makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement or any other instrument or document furnished pursuant thereto. The Assignor makes no representation or warranty in connection with, and assumes no responsibility with respect to, the solvency, financial condition or statements of the Borrower, or the performance or observance by the Borrower, of any of its respective obligations under the Credit Agreement or any other instrument or document furnished in connection therewith. (c) The Assignee represents and warrants that (i) it is duly organized and existing and it has full power and authority to take, and has taken, all action necessary to execute and B - 7 COMMITMENT ASSIGNMENT AND ACCEPTANCE AGREEMENT 102 deliver this Assignment and Acceptance and any other documents required or permitted to be executed or delivered by it in connection with this Assignment and Acceptance, and to fulfill its obligations hereunder; (ii) no notices to, or consents, authorizations or approvals of, any Person are required (other than any already given or obtained) for its due execution, delivery and performance of this Assignment and Acceptance; and apart from any agreements or undertakings or filings required by the Credit Agreement, no further action by, or notice to, or filing with, any Person is required of it for such execution, delivery or performance; (iii) this Assignment and Acceptance has been duly executed and delivered by it and constitutes the legal, valid and binding obligation of the Assignee, enforceable against the Assignee in accordance with the terms hereof, subject, as to enforcement, to bankruptcy, insolvency, moratorium, reorganization and other laws of general application relating to or affecting creditors' rights and to general equitable principles; and (iv) it is an Eligible Assignee. 8. Further Assurances. The Assignor and the Assignee each hereby agree to execute and deliver such other instruments, and take such other action, as either party may reasonably request in connection with the transactions contemplated by this Assignment and Acceptance, including the delivery of any notices or other documents or instruments to the Borrower or the Agent, which may be required in connection with the assignment and assumption contemplated hereby. 9. Miscellaneous. (a) Any amendment or waiver of any provision of this Assignment and Acceptance shall be in writing and signed by the parties hereto. No failure or delay by either party hereto in exercising any right, power or privilege hereunder shall operate as a waiver thereof and any waiver of any breach of the provisions of this Assignment and Acceptance shall be without prejudice to any rights with respect to any other or further breach thereof. B - 8 COMMITMENT ASSIGNMENT AND ACCEPTANCE AGREEMENT 103 (b) All payments made hereunder shall be made without any set-off or counterclaim. (c) The Assignor and the Assignee shall each pay its own costs and expenses incurred in connection with the negotiation, preparation, execution and performance of this Assignment and Acceptance. (d) This Assignment and Acceptance may be executed in any number of counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument. (e) THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF CALIFORNIA. The Assignor and the Assignee each irrevocably submits to the non-exclusive jurisdiction of any State or Federal court sitting in California over any suit, action or proceeding arising out of or relating to this Assignment and Acceptance and irrevocably agrees that all claims in respect of such action or proceeding may be heard and determined in such California State or Federal court. Each party to this Assignment and Acceptance hereby irrevocably waives, to the fullest extent it may effectively do so, the defense of an inconvenient forum to the maintenance of such action or proceeding. (f) THE ASSIGNOR AND THE ASSIGNEE EACH HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS ASSIGNMENT AND ACCEPTANCE, THE CREDIT AGREEMENT, ANY RELATED DOCUMENTS AND AGREEMENTS OR ANY COURSE OF CONDUCT, COURSE OF DEALING, OR STATEMENTS (WHETHER ORAL OR WRITTEN). [Other provisions to be added as may be negotiated between the Assignor and the Assignee, provided that such provisions are not inconsistent with the Credit Agreement.] IN WITNESS WHEREOF, the Assignor and the Assignee have caused this Assignment and Acceptance to be executed and delivered by their duly authorized officers as of the date first above written. B - 9 COMMITMENT ASSIGNMENT AND ACCEPTANCE AGREEMENT 104 [ASSIGNOR] By: -------------------------------- Title: ----------------------------- [ASSIGNEE] By: -------------------------------- Title: ----------------------------- B - 10 COMMITMENT ASSIGNMENT AND ACCEPTANCE AGREEMENT 105 SCHEDULE 1 TO COMMITMENT ASSIGNMENT AND ACCEPTANCE AGREEMENT NOTICE OF COMMITMENT ASSIGNMENT AND ACCEPTANCE _______________, 19__ Bank of America National Trust and Savings Association, as Agent Agency Management Services #5596 1455 Market Street, 12th Floor San Francisco, CA 94103 Attention: Peggy Fujimoto Vice President FURON COMPANY 29982 Ivy Glenn Drive Laguna Niguel, California 92677 Attention: Chief Financial Officer Ladies and Gentlemen: We refer to that certain Credit Agreement dated as of October 30, 1995, among Furon Company ("Borrower"), the Banks that are parties thereto, and Bank of America National Trust and Savings Association, as the agent (in such capacity, the Agent") (as extended, renewed, amended or restated from time to time, the "Credit Agreement"). Terms defined in the Credit Agreement and not otherwise defined herein are used herein with the meanings defined for those terms in the Credit Agreement. 1. We hereby give you notice of, and request your consent to, the assignment by __________________ (the "Assignor") to _______________ (the "Assignee") of _____% of the right, title and interest of the Assignor in and to the Credit Agreement (including, without limitation, all related rights, title and interest of the Assignor in and to the Commitment of the Assignor so assigned and all outstanding Loans made by the Assignor so assigned) pursuant to the Commitment Assignment and Acceptance Agreement attached hereto (the "Commitment Assignment and B - 11 COMMITMENT ASSIGNMENT AND ACCEPTANCE AGREEMENT 106 Acceptance"). Before giving effect to such assignment the Assignor's Commitment is $ ___________ and the aggregate amount of its outstanding Loans and L/C Borrowings is USDE $___________. 2. The Assignee agrees that, upon receiving the consent of the Agent and, if applicable, Borrower to such assignment, the Assignee will be bound by the terms of the Credit Agreement as fully and to the same extent as if the Assignee were the Bank originally holding such interest in the Credit Agreement. 3. The following administrative details apply to the Assignee: (A) Notice Address: Assignee name: __________________________ Address: _______________________________ _______________________________ _______________________________ Attention: _____________________________ Telephone: (___) _______________________ Telecopier: (___) ______________________ Telex (Answerback): ____________________ (B) Payment Instructions: Account No.: ___________________________ At: ___________________________ ___________________________ ___________________________ Reference: ___________________________ Attention: ___________________________ 4. You are entitled to rely upon the representations, warranties and covenants of each of the Assignor and Assignee contained in the Assignment and Acceptance. IN WITNESS WHEREOF, the Assignor and the Assignee have caused this Notice of Assignment and Acceptance to be executed by their respective duly authorized officials, officers or agents as of the date first above mentioned. B - 12 COMMITMENT ASSIGNMENT AND ACCEPTANCE AGREEMENT 107 Very truly yours, [NAME OF ASSIGNOR] By: ---------------------------- Title: ------------------------- [NAME OF ASSIGNEE] By: ---------------------------- Title: ------------------------- (Signatures continue) ACKNOWLEDGED AND ASSIGNMENT CONSENTED TO: FURON COMPANY By: ------------------------------- Title: ---------------------------- BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent By: ------------------------------- Vice President B - 13 COMMITMENT ASSIGNMENT AND ACCEPTANCE AGREEMENT 108 EXHIBIT C COMPLIANCE CERTIFICATE 1. This Compliance Certificate ("Certificate") is executed and delivered by Borrower to Agent pursuant to that certain Credit Agreement ("Agreement") dated as of October 30, 1995, entered into by Borrower, the Banks that are parties thereto, and Bank of America National Trust and Savings Association, as the Agent. Any terms used herein and not defined herein shall have the meanings defined in the Agreement. 2. The information in this Certificate is for the fiscal period beginning ________________, ____ and ending ________________, ____ (the "Relevant Date"). Except as otherwise expressly noted herein, all information contained herein and all certifications made herein are as of the Relevant Date. 3. A review of the activities of Borrower during the fiscal period beginning ________________, ____ and ending on the Relevant Date has been made under the supervision of the undersigned Responsible Official with a view to determining whether during that fiscal period Borrower performed and observed all Obligations. 4. To the best knowledge of the undersigned Responsible Official, during the fiscal period beginning and ending on the Relevant Date, Borrower performed and observed each of the covenants and Obligations under the Credit Documents, and no Default or Event of Default has occurred or is continuing except (a) those failures to perform and observe covenants and Obligations and those Defaults and Events of Defaults noted in a prior Compliance Certificate; (b) those failures to perform or observe a covenant or Obligation which are set forth in the attached statement describing the nature and status of each such failure and the actions Borrower is taking or proposes to take with respect to each such failure; and (c) those defaults and Events of Default which are set forth in the attached statement C - 1 COMPLIANCE CERTIFICATE 109 describing the nature and status of each such Default or Event of Default and the actions Borrower is taking or proposes to take with respect to each such Default or Event of Default. 5. To the best knowledge of the undersigned, no circumstance or event has occurred which (a) has or could reasonably be expected to have any material adverse effect whatsoever upon the validity or enforceability of any Credit Document, (b) is or could reasonably be expected to be material and adverse to the condition (financial or otherwise) or business operations of Borrower or to the prospects of Borrower, (c) materially impairs or could reasonably be expected to materially impair the ability of Borrower to perform its Obligations or (d) materially impairs or could reasonably be expected to materially impair the ability of the Banks to enforce their legal remedies pursuant to the Credit Documents since the date of the last Compliance Certificate, except as noted herein. If any such circumstance or event has occurred, a statement describing each such change in reasonable detail is attached. 6. To the best knowledge of the undersigned, the financial statements attached hereto as Exhibit "A" fairly present the financial condition, results of operations and changes in financial position of Borrower in accordance with Generally Accepted Accounting Principles, consistently applied (other than, with respect to any financial statements for the period of a calendar month, any requirements for footnote disclosures), as at the date and for such periods reflected by such financial statements (subject to year-end accruals and audit adjustments for statements as of any date other than year-end). 7. To the best knowledge of the undersigned, the certificate attached hereto as Exhibit "B" is true and correct. 8. This Certificate is executed by a Senior Officer of Borrower. BORROWER: FURON COMPANY, a California corporation C - 2 COMPLIANCE CERTIFICATE 110 By: ----------------------------- Senior Officer ----------------------------- Printed Name of Signer ----------------------------- Title of Signer C - 3 COMPLIANCE CERTIFICATE 111 EXHIBIT A TO COMPLIANCE CERTIFICATE [BORROWER'S FINANCIAL STATEMENTS] C - 4 COMPLIANCE CERTIFICATE 112 EXHIBIT B TO COMPLIANCE CERTIFICATE FURON COMPANY SELECTED FINANCIAL CALCULATIONS FOR THE PERIOD ENDED _______________, ____ Capitalized terms used herein shall have the meanings set forth in the Credit Agreement dated as of October 30, 1995 (the "Credit Agreement") among Furon Company ("Borrower"), the Banks named therein, and Bank of America National Trust and Savings Association, as agent ("Agent"). Section references herein relate to the section of the Credit Agreement. The following calculations are selected items from the Credit Agreement and are no way intended to limit the scope of the Compliance Certificate. A. Consolidated Tangible Effective Net Worth (Section 5.7): 1. Actual Consolidated Tangible Effective Net Worth: (a) Shareholders Equity _______________ (b) Intangible Assets _______________ (c) Actual Consolidated Tangible Effective Net Worth (Line (a)-(b)) _______________ 2. Required Consolidated Tangible Effective Net Worth: (a) 50% of Positive Consolidated Net Income earned since July 29, 1995 _______________ (b) 50% of net proceeds from equities _______________ (c) Adjusted Consolidated Tangible Effective Net Worth: C - 5 COMPLIANCE CERTIFICATE 113 Consolidated Tangible Effective Net Worth as of July 29, 1995, adjusted on a pro forma basis as if the Fluorglas Acquisition, if completed, had been completed on July 29, 1995 _______________ (d) Line (c) times 80% _______________ (e) Required Consolidated Tangible Effective Net Worth (Lines (a)+ (b)+(d)) _______________ B. Leverage Ratio (Section 5.8): 1. Funded Debt _______________ 2. Consolidated EBITDA: (a) Consolidated Net Income for the fiscal quarter last ended and the three immediately preceding fiscal quarters (total for the four periods) _______________ C - 6 COMPLIANCE CERTIFICATE 114 (b) Interest expense for period: _______________ (c) Taxes on Consolidated Net Income for period: _______________ (d) Extraordinary losses _______________ (e) Depreciation and amortization for period: _______________ (f) Extraordinary gains _______________ (g) Consolidated EBITDA (Lines (a)+(b)+(c)+(d)+(e)-(f)): _______________ C. Leverage Ratio (Line B1 divided by Line 2(g)): ________ to 1 D. Maximum Permitted Leverage Ratio: 3 to 1 C. Fixed Charge Coverage Ratio (Section 5.10): 1. (a) Consolidated EBITDA (Line B.2(g)) _______________ (b) Rental expense _______________ (c) Capital Expenditures _______________ (d) Lines (a)+(b)-(c) _______________ 2. (a) Scheduled principal payments on any Indebtedness _______________ (b) Interest expense for such period _______________ C - 7 COMPLIANCE CERTIFICATE 115 (c) Rental expense _______________ (d) Lines (a)+(b)+(c) _______________ 3. Fixed Charge Coverage (Item 1(d) divided by 2(d)) _______________ 4. Minimum Fixed Charge Coverage Ratio: 1.50 to 1.00 D. Indebtedness, Including Guaranties (Section 5.21): 1. Aggregate Indebtedness for the purchase of real property (not to exceed $7,000,000) _______________ 2. Aggregate Indebtedness with respect to any commercial or standby letters of credit (not to exceed $7,000,000) _______________ 3. Capitalized leases (not to exceed $5,000,000) _______________ 4. Aggregate Indebtedness with respect to any guaranties (not to exceed $5,000,000) _______________ 5. Senior unsecured Indebtedness (not to exceed $50,000,000) _______________ To the best knowledge of the undersigned Senior Officer of Furon Company, the information contained herein is true and correct. FURON COMPANY By:___________________________ Name:_________________________ C - 8 COMPLIANCE CERTIFICATE 116 Title:________________________ C - 9 COMPLIANCE CERTIFICATE 117 EXHIBIT D REQUEST FOR LOAN 1. This REQUEST FOR LOAN is executed and delivered by Borrower to Bank of America National Trust and Savings Association, as the Agent, pursuant to the Credit Agreement (the "Agreement") dated as of October 30, 1995, entered into by Borrower, the Agent and the Banks therein named. Any terms used herein and not defined herein shall have the meanings defined in the Agreement. 2. Borrower hereby requests that the Banks make or continue to make an Advance for the account of Borrower pursuant to the Agreement, as follows: (a) Amount and Applicable Currency of Advance: /$//__/ _________________. (b) Date of Advance to be made or continued: _____________________, 19__. (c) Type of Loan (check one box only): / / Base Rate Loan / / LIBOR Rate Loan with a ____-month LIBOR Period (d) This is a (check one box only): / / New Advance / / Continuation of an outstanding Advance D - 1 REQUEST FOR LOAN 118 3. This Request for Loan is executed on ________________, 199_, by a Responsible Official of Borrower, on behalf of Borrower. The undersigned, in such capacity, hereby certifies each and every matter contained herein to be true and correct. FURON COMPANY By:__________________________ Its:_________________________ D - 2 REQUEST FOR LOAN 119 EXHIBIT E OPINION OF COUNSEL October 30, 1995 Bank of America National Trust and Savings Association, As Agent 1455 Market Street, 12th Floor San Francisco, CA 94103 and the Banks listed on Annex I hereto Re: Credit Agreement Between Furon Company, Bank of America National Trust and Savings Association, as the Agent, and the Banks named therein Gentlemen: This opinion is being delivered to you pursuant to Section 6.1(f) of that certain Credit Agreement, dated as of October 30, 1995 (the "Agreement"), between Furon Company, a California corporation, as Borrower, Bank of America National Trust and Savings Association, as the Agent, and the Banks named therein. Terms not otherwise defined herein shall have the meanings defined for such terms in the Agreement. I am the ____________________ of the Borrower and have made such investigations of fact and law, obtained such certificates of Responsible Officials of Borrower and of public officials, and done such other things as I have deemed necessary for the purpose of this opinion. I have examined originals, or copies identified to my satisfaction as being true copies, of the Agreement and the other Loan Documents. E - 1 OPINION OF COUNSEL 120 Bank of America National Trust and Savings Association and Banks listed on Annex I hereto October __, 1995 Page 2 Based on the foregoing and in reliance thereon, I am of the opinion that: (i) Each of Borrower and its material Subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, and is dully qualified to transact business in each jurisdiction in which the conduct of its business or the ownership or leasing of its properties makes such qualification necessary, except where the failure so to qualify would not have a material adverse effect on the business, operations or condition (financial or otherwise) of Borrower and its Subsidiaries, taken as a whole. (ii) Borrower has all requisite corporate power and corporate authority to conduct its business, to own and lease its properties and to execute, deliver and perform all of its obligations under the Credit Documents. (iii) To the best of my knowledge the execution, delivery and performance by Borrower of each of the Credit Documents to which it is a party have been duly authorized by all necessary corporate action on the part of Borrower and do not (a) require any consent or approval not heretofore obtained of any Person, (b) violate or conflict with any provision of the Articles of Incorporation or Bylaws of Borrower, (c) violate any provisions of any material law (including, without limitation, Regulations G, T, U or X of the Board of Governors of the Federal Reserve System) or order, writ, judgment, injunction or decree presently in effect and having applicability to Borrower or (d) violate or result in a breach of any material agreement to which Borrower is a party. (iv) No authorization, consent, approval, order, license or permit from, or filing, registration or qualification with, or E - 2 OPINION OF COUNSEL 121 Bank of America National Trust and Savings Association and Banks listed on Annex I hereto October __, 1995 Page 3 exemption from any of the foregoing from, any Governmental Agency is required to authorize or permit under applicable law the execution, delivery and performance by Borrower of the Credit Documents to which it is a Party. (v) Each of the Credit Documents to which Borrower is a Party has been duly executed and delivered and constitutes the valid and binding obligation of Borrower, enforceable against Borrower in accordance with its terms, except as limited by bankruptcy, insolvency, reorganization moratorium or similar laws affecting creditor's right generally. I advise you that the enforceability of the Agreement is subject to the effect of general principles of equity including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing and the possible unavailability of specific performance of injunctive relief, regardless of whether considered in a proceeding in equity or at law. (vi) To the best of my knowledge there are no actions, suits or proceedings pending or threatened against or affecting Borrower or any property of Borrower in any court or before any Governmental Agency except where any such action, suit or proceeding should not have a material adverse effect on the consolidated financial conditions of the Borrower and its Subsidiaries, taken as a whole. (vii) Borrower is not engaged principally, or as one of its important activities, in the business of extending credit for the purpose of "purchasing" or "carrying" any "margin stock" or "margin security" within the meanings of Regulations G, T, U or X, respectively, of the Board of Governors of the Federal Reserve System. E - 3 OPINION OF COUNSEL 122 Bank of America National Trust and Savings Association and Banks listed on Annex I hereto October __, 1995 Page 4 My opinions above as to compliance with certain statutes, rules and regulations are based upon a review of those statutes, rules and regulations which in my experience are normally applicable to transactions of the type contemplated by the Loan Documents, and statutes, rules and regulations applicable to corporations conducting businesses similar to Borrower. I have assumed the genuineness of all signatures (other than those of the Borrower), the authenticity of all items submitted to me as originals, and the conformity with originals of all items submitted to me as copies and the due authority of all persons executing the same. I have also assumed the due authorization, execution and delivery by you and the Banks of the Agreement, the valid and binding nature of the Agreement as to you and the Banks and the due authorization, execution and delivery by you and the Banks of all other agreements required by the Agreement to be delivered by you and the Banks on or prior to the Closing Date. I am a member of the bar of the State of California and do not express any opinion as to laws other than those of the United States and the State of California. This opinion is rendered as of the date hereof and I disclaim any undertaking or obligation to advise you of changes which may thereafter effect the matters covered herein. This opinion is rendered to you in connection with the transactions referred to herein and may not be relied on by any other Person (other than permitted assignees or participants or successors in interest of any Bank) or by you in any other context. This opinion may not be quoted nor may copies hereof be furnished to any other Person without the prior written consent of the undersigned, except that you may furnish a copy hereof (a) to your independent auditors and attorneys, (b) to any E - 4 OPINION OF COUNSEL 123 Bank of America National Trust and Savings Association and Banks listed on Annex I hereto October __, 1995 Page 5 Governmental Agency or authority having regulatory jurisdiction over you, (c) pursuant to order or legal process of any court of Governmental Agency or authority, (d) in connection with any legal action to which you are a party arising out of the transactions referred to above or (e) to a financial institution in connection with a proposed assignment of your interest. Respectfully submitted, E - 5 OPINION OF COUNSEL 124 ANNEX I Bank of America National Trust and Savings Association The Bank of New York Bank One, Columbus, National Association ABN AMRO Bank, NV E - 6 OPINION OF COUNSEL 125 ================================================================================ - -------------------------------------------------------------------------------- CREDIT AGREEMENT DATED AS OF OCTOBER 30, 1995 AMONG FURON COMPANY BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, AS AGENT AND THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO ARRANGED BY 126 [BANK OF AMERICA LOGO] BA SECURITIES, INC. - -------------------------------------------------------------------------------- ================================================================================ E - 8 OPINION OF COUNSEL 127 TABLE OF CONTENTS
Page ---- ARTICLE I DEFINITIONS, ACCOUNTING TERMS AND EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . 1 1.1 Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.2 Use of Defined Term . . . . . . . . . . . . . . . . . . . . . . . . . . 15 1.3 Accounting Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 1.4 Exhibits and Schedules . . . . . . . . . . . . . . . . . . . . . . . . . 16 1.5 Rounding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 1.6 Currency Equivalents Generally . . . . . . . . . . . . . . . . . . . . . 16 ARTICLE 2 LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 2.1 General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 2.2 Loan Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 2.3 Procedure for Borrowing. . . . . . . . . . . . . . . . . . . . . . . . . 17 2.4 Conversion and Continuation Elections . . . . . . . . . . . . . . . . . 19 2.5 The Swing Line . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 2.6 Commitment Reductions . . . . . . . . . . . . . . . . . . . . . . . . . 22 2.7 Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 2.8 Loan Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 2.9 Involuntary Termination of Commitment Upon Change In Control . . . . . . 24 ARTICLE 3 PAYMENTS; FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 3.1 Principal and Interest . . . . . . . . . . . . . . . . . . . . . . . . . 25 3.2 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 3.3 Increased Commitment Costs . . . . . . . . . . . . . . . . . . . . . . . 27 3.4 LIBOR Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 3.5 LIBOR Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 3.6 Special LIBOR Circumstances . . . . . . . . . . . . . . . . . . . . . . 29 3.7 Capital Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . 29 3.8 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 3.9 Late Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 3.10 Computation of Interest and Fees . . . . . . . . . . . . . . . . . . . . 30
E - 9 OPINION OF COUNSEL 128 3.11 Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 3.12 Payment Free of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . 31 3.13 Funding Sources . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 3.14 Failure to Charge Not Subsequent Waiver . . . . . . . . . . . . . . . . 31 3.15 Pro Rata Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 3.16 Time and Place of Payments: Evidence Payments . . . . . . . . . . . . . 31 3.17 Agent's Right to Assume Payments Will Be Made . . . . . . . . . . . . . 32 3.18 Applications of Payments . . . . . . . . . . . . . . . . . . . . . . . . 32 3.19 Survivability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BORROWER . . . . . . . . . . . . . . . . . . . . . . . . 33 4.1 Incorporation, Qualification, Powers and Stock . . . . . . . . . . . . . 33 4.2 Execution, Delivery and Performance of Loan Documents . . . . . . . . . 33 4.3 Compliance With Laws and Other Requirements . . . . . . . . . . . . . . 34 4.4 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 35 4.5 No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . 35 4.6 Tax Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 4.7 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 4.8 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 4.9 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 4.10 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 4.11 Regulations G, T, U and X . . . . . . . . . . . . . . . . . . . . . . . 37 4.12 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 4.13 Disclosure of Material Facts . . . . . . . . . . . . . . . . . . . . . . 37 ARTICLE 5 COVENANTS OF BORROWER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 5.1 Limitations on Business Activity . . . . . . . . . . . . . . . . . . . . 37 5.2 Maintenance of Corporate Existence, Property, Insurance, Etc . . . . . . 37 5.3 Payment of Taxes and Claims . . . . . . . . . . . . . . . . . . . . . . 38 5.4 Compliance with Agreements, Duties and Obligations . . . . . . . . . . . 39 5.5 Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 5.6 Mergers and Sale of Assets . . . . . . . . . . . . . . . . . . . . . . . 39 5.7 Consolidated Tangible Effective Net Worth . . . . . . . . . . . . . . . 40 5.8 Leverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 5.9 Fixed Charge Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . 40 5.10 Restricted Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . 40
E - 10 OPINION OF COUNSEL 129 5.11 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 5.12 Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 5.13 Financial and Business Information . . . . . . . . . . . . . . . . . . . 41 5.14 Maintenance of Corporate Structure . . . . . . . . . . . . . . . . . . . 43 5.15 Maintenance of Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . 43 5.16 Disclosure of Material Litigation . . . . . . . . . . . . . . . . . . . 43 5.17 ERISA Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 5.18 Payment or Prepayment of Indebtedness . . . . . . . . . . . . . . . . . 44 5.19 Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 5.20 Disposition of Assets. . . . . . . . . . . . . . . . . . . . . . . . . . 45 5.21 Indebtedness, Including Guaranties . . . . . . . . . . . . . . . . . . . 45 5.22 Transfers Among Affiliates . . . . . . . . . . . . . . . . . . . . . . . 46 ARTICLE 6 CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 6.1 First Advance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 6.2 Any Advance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 ARTICLE 7 EVENTS OF DEFAULT AND REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 7.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 7.2 Remedies Upon Event of Default . . . . . . . . . . . . . . . . . . . . . 50 ARTICLE 8 THE AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 8.1 Appointment and Authorization . . . . . . . . . . . . . . . . . . . . . 51 8.2 Agent and Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . 52 8.3 Banks' Credit Decisions . . . . . . . . . . . . . . . . . . . . . . . . 52 8.4 Action by Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 8.5 Liability of Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 8.6 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 8.7 Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 8.8 No Obligations of Borrower . . . . . . . . . . . . . . . . . . . . . . . 56 ARTICLE 9 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 9.1 Cumulative Remedies; No Waiver . . . . . . . . . . . . . . . . . . . . . 56 9.2 Amendments; Consents . . . . . . . . . . . . . . . . . . . . . . . . . . 56 9.3 Costs, Expense and Taxes . . . . . . . . . . . . . . . . . . . . . . . . 57
E - 11 OPINION OF COUNSEL 130 9.4 Nature of Banks, Obligations . . . . . . . . . . . . . . . . . . . . . . 58 9.5 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . 58 9.6 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 9.7 Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . 59 9.8 Binding Effect; Assignment . . . . . . . . . . . . . . . . . . . . . . . 59 9.9 Sharing of Setoffs . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 9.10 Indemnity by Borrower . . . . . . . . . . . . . . . . . . . . . . . . . 62 9.11 Nonliability of Banks . . . . . . . . . . . . . . . . . . . . . . . . . 64 9.12 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 9.13 No Third Parties Benefited . . . . . . . . . . . . . . . . . . . . . . . 65 9.14 Right of Setoff - Deposit Accounts . . . . . . . . . . . . . . . . . . . 65 9.15 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 9.16 Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 9.17 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 9.18 Judgment Currency . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 9.19 Choice of Forum . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 9.20 Severability of Provisions . . . . . . . . . . . . . . . . . . . . . . . 67 9.21 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 9.22 Time of the Essence . . . . . . . . . . . . . . . . . . . . . . . . . . 67 9.23 Conflict in Loan Documents . . . . . . . . . . . . . . . . . . . . . . . 67 9.24 PURPORTED ORAL AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . 67 9.25 WAIVER OF RIGHT TO TRIAL BY JURY . . . . . . . . . . . . . . . . . . . . 67 9.26 Termination of Prior Credit Agreement . . . . . . . . . . . . . . . . . 68
EXHIBITS A Promissory Note B Commitment Assignment and Acceptance C Compliance Certificate D Request for Loan E Opinion of Counsel SCHEDULES 1.1 Commitment and Pro Rata Shares 4.9 Subsidiaries 4.10 ERISA Plans 5.11 Liens Including Capitalized Liens 5.20 Existing Indebtedness E - 12 OPINION OF COUNSEL EX-10.14 4 ASSET PURCHASE AGREEMENT 1 EXHIBIT 10.14 ASSET PURCHASE AGREEMENT ASSET PURCHASE AGREEMENT dated as of November 9, 1995 by and among AlliedSignal Laminate Systems, Inc., a Delaware corporation ("SELLER"), Furon Company, a California corporation ("PURCHASER"), and AlliedSignal Inc., a Delaware corporation and the indirect parent of Seller ("PARENT"). WITNESSETH: WHEREAS, Seller, through its Fluorglas division, is engaged in the business (the "BUSINESS") of developing, manufacturing and selling the products (the "PRODUCTS") listed in Schedule A hereto, including (i) pressure-sensitive adhesive tapes, PTFE flexible composites and fabrications and PTFE films (the "FLUORGLAS CORE BUSINESS") and (ii) metal-clad PTFE/glass laminates (the "FLUORGLAS MICROWAVE BUSINESS"); and WHEREAS, Seller desires to sell and Purchaser desires to purchase certain assets of Seller used primarily in the Business; NOW, THEREFORE, in consideration of the mutual covenants, agreements, representations and warranties contained herein, the parties agree as follows: 1. PURCHASE AND SALE 1.1 Purchase and Sale. Subject to the terms and conditions of this Agreement and except as otherwise provided herein, at the Closing, Seller and Parent shall sell, convey, transfer, assign and deliver to Purchaser, and Purchaser shall purchase and accept from Seller and Parent, all of Seller's and Parent's right, title and interest in and to (i) all of the assets of Seller and Parent primarily used in or primarily related to the Fluorglas Core Business and all assets of Seller and Parent which are exclusively used in the Fluorglas Microwave Business, in each case, together with such changes, deletions or additions occurring between the respective dates of the Schedules hereto and the Closing Date in the ordinary course of business, and (ii) such other assets as are identified in the schedules to this Agreement (the "ASSETS"), including without limitation all of Seller's and Parent's right, title and interest in and to the following: 2 (a) "PERSONAL PROPERTY" of Seller, which term includes (i) the machinery and equipment, fixtures, furniture, office equipment, vehicles, tools and other tangible personal property which is located at the Facilities (as defined in Section 4.18) and is used in or related to the Business, including but not limited to those items listed in Schedule 4.5(a) hereto; and (ii) the machinery and equipment listed in Schedule 4.5(a) hereto located at Seller's plant in La Crosse, Wisconsin, utilized exclusively to manufacture metal-clad PTFE/glass laminates for the Fluorglas Microwave Business; (b) accounts receivable of the Business as of the Closing Date, whether recorded or unrecorded, provided that the accounts receivable of the Fluorglas Microwave Business will be handled in accordance with the provisions of Schedule 1.1(b) attached hereto (the "ACCOUNTS RECEIVABLE"); (c) inventory of the Business as of the Closing Date, wherever located, including raw materials, work-in-process and finished goods (the "INVENTORY"); (d) the patents and patent applications, trademarks, trade names, copyrights and licenses specified in Schedule 4.6(a) hereto, and other intellectual property exclusively used in the Business, including, without limitation, processes, products, apparatus, formulae, drawings, trade secrets, know-how, discoveries, inventions (including conceptions of inventions), software, and design, manufacturing, engineering and other technical information, except as otherwise expressly excluded pursuant to Section 1.3 (the "INTELLECTUAL PROPERTY"); provided, however, that with respect to such other intellectual property, except for the provisions of Section 6.7(a), nothing in this Agreement shall prevent Seller from using such other intellectual property which (1) is now or hereafter becomes through no fault of Seller or its Affiliates part of the public domain, (2) is independently developed by Seller without reference to Confidential Information (as defined in Section 6.9) which Seller is obligated to maintain in confidence under Section 6.9, or (3) is made available to Seller by a third party not in violation of any confidential obligation to Purchaser; 2 3 (e) all contracts, agreements, arrangements, leases, purchase orders and commitments of the Business, including those listed on Schedule 4.7 hereto (the "CONTRACTS") provided that Purchaser assumes the obligations under such Contracts; (f) all sales data and information, customer lists, supplier lists, engineering and production records, mailing lists, catalogues, brochures, sales literature, promotional material, advertising material and other selling material of the Business; (g) transferable governmental and other permits, licenses (other than licenses encompassed within Intellectual Property), approvals, certificates of inspection, filings, franchises and other authorizations relating to the Assets including, but not limited to those listed in Schedule 4.17 hereto (the "PERMITS AND LICENSES"); (h) all prepaid expenses of the Business except as set forth on Schedule 1.1(h) hereto; (i) rights of Seller pursuant to any express or implied warranties, representations or guarantees made by suppliers furnishing goods or services to the Business; (j) the land identified in Schedule 1.4.2, including all buildings, fixtures and improvements attached thereto, and all rights appurtenant thereto (the "REAL PROPERTY"); (k) all books and records and all files, documents and papers (including, but not limited to, those contained in computerized storage media) pertaining to the Assets, the Assumed Liabilities (as defined below) or otherwise relating to the Business and customarily located at the Facilities prior to the Closing Date (excluding the corporate minute book, stock transfer ledger and other corporate records of Seller, copies of which will be available to Purchaser upon reasonable request); and (l) the goodwill incident to the Business. 1.2 Non-Assignable Assets. Notwithstanding anything in this Agreement to the contrary, this Agreement shall not 3 4 constitute an agreement to assign any Asset if the attempted assignment thereof, without the consent of a third party thereto, would constitute a breach of any obligation of Seller or would in any way adversely affect the rights of Purchaser or Seller thereunder. If such consent is not obtained, or if an attempted assignment thereof would be ineffective or would affect the rights of Seller thereunder so that Purchaser would not in fact receive all such rights, Seller will, to the extent not prohibited by or not in violation of any such agreement, (a) cooperate with Purchaser in any commercially-reasonable arrangement designed to provide for Purchaser the benefits (including the exercise of Seller's rights) under any such Asset, including enforcement for the benefit of Purchaser of any and all rights of Seller against a third party thereto arising out of the breach or cancellation by such third party or otherwise, (b) hold all funds paid to Seller thereunder on and after the Closing Date in trust for the account of Purchaser, and (c) remit such money to Purchaser as promptly as possible. Any transfer or assignment to Purchaser by Seller of any property or property rights or any agreement which shall require the consent or approval of any third party shall be made subject to such consent or approval being obtained. 1.3 Excluded Assets. Notwithstanding anything to the contrary contained in this Agreement, the following are not intended to be sold, assigned, transferred or conveyed to Purchaser hereunder (the "EXCLUDED ASSETS"): (a) all cash, cash equivalents and overdrafts of the Business; (b) the basic books and records of account and all supporting vouchers, invoices and other records and materials relating to any or all income taxes of Seller with respect to the Business; (c) any books or records relating to the Assets or the Business, which were not customarily located at the Facilities on or before the Closing Date; provided, however, that Seller shall permit Purchaser to have reasonable access to such books and records and permit Purchaser to copy the same to the extent reasonably required for the operation of the Business after the Closing; 4 5 (d) except for any name or logo listed in Schedule 4.6(a), any right to use any name or logo of Seller or its Affiliates (as defined in Section 4.7 hereof) or any variant or derivative thereof, including but not limited to "Allied-Signal," "AlliedSignal," "Allied," "Allied Chemical," "Signal," "Oak Materials" or "Oak" whether or not such logo, name, variant or derivative was used by the Business, other than in connection with the Inventory being purchased hereunder; (e) the insurance policies of Seller pertaining to the Business and/or the Facilities, and the rights of Seller thereunder; (f) all intellectual property not exclusively used in the Business; provided, however, that with respect to any such intellectual property which is used in the Business as of the Closing Date, Seller and Parent will grant to Purchaser a non-exclusive, paid up, worldwide, royalty free, freely assignable (without Seller's or Parent's consent) license to use such intellectual property in the Business in the form attached as Schedule 1.3(f) hereto (the "LICENSE"); (g) all prepaid corporate insurance and taxes related to the Business as set forth on Schedule 1.1(h); (h) the real property and any other assets identified in Schedule 1.3(h) hereto; and (i) any and all assets at Seller's LaCrosse, Wisconsin plant not exclusively used in the Business. 1.4 Transfer of Title to the Assets. Seller shall sell, assign, convey, transfer and deliver the Assets to Purchaser at the Closing by means of bills of sale and assignments in the forms attached as Schedule 1.4.1 hereto and such other endorsements, certificates and instruments of transfer as shall be necessary or appropriate to vest good and marketable title to the Assets in Purchaser, free and clear of any liens, charges and encumbrances, except as otherwise set forth in this Agreement or in the Schedules hereto, provided that title to the 5 6 Real Property shall be transferred by deed in the form of Schedule 1.4.2 attached hereto. 1.5 Lease Agreement. At the Closing, Seller and Purchaser will enter into lease agreements (the "LEASE AGREEMENTS") in the forms of Schedules 1.5.1 and 1.5.2 attached hereto, pursuant to which Seller will lease to Purchaser the real property identified therein. The real property being leased pursuant to the Lease Agreements together with the Real Property being sold pursuant to this Agreement are sometimes collectively referred to herein as the "TRANSFERRED FACILITIES." 2. PURCHASE PRICE 2.1 Purchase Price. The purchase price to be paid by Purchaser for the Assets shall be Nineteen Million Dollars ($19,000,000) (the "PURCHASE PRICE") and shall be adjusted in accordance with Section 2.2. The Purchase Price shall be paid by Purchaser in full at Closing. 2.2 Post-Closing Adjustment. (a) The Purchase Price shall be adjusted dollar-for-dollar following the Closing Date to the extent that the Final Net Assets (as defined below) of the Business as of the Closing Date do not equal the Reference Net Assets (as defined below). The "FINAL NET ASSETS" means the aggregate amount of the Assets, minus the aggregate amount of the Assumed Liabilities (as defined below), recorded on the statement of assets and liabilities of the Business as of the Closing Date prepared and audited in accordance with the procedures set forth herein (the "CLOSING STATEMENT OF ASSETS AND LIABILITIES"). The "REFERENCE NET ASSETS" means the amount identified as "Assets in Excess of Liabilities" recorded on the audited statement of assets and liabilities of the Business as of March 25, 1995 which is set forth in Schedule 4.4(a)(1) (the "REFERENCE STATEMENT OF ASSETS AND LIABILITIES"). It is agreed that the Reference Statement of Assets and Liabilities does not reflect the items set forth on Schedule 2.2(a) which are recorded on the audited balance sheet dated December 24, 1994 set forth in Schedule 4.4(a)(1). The Purchase Price as adjusted pursuant to this 6 7 Section 2.2 is hereinafter referred to as the "ADJUSTED PURCHASE PRICE." (b) Seller shall prepare and furnish to Price Waterhouse LLP, Seller's independent public accountants ("PRICE WATERHOUSE"), a proposed Closing Statement of Assets and Liabilities no later than 90 days following the Closing Date. The proposed Closing Statement of Assets and Liabilities shall be audited by Price Waterhouse to establish that it has been prepared in accordance with the accounting principles used in the Reference Statement of Assets and Liabilities applied on a consistent basis, using the same accounting principles, methods, practices, procedures and policies used in preparing the Reference Statement of Assets and Liabilities except as otherwise provided in Schedule 2.2(b) attached hereto and except for the purchase accounting relating to Seller's purchase of Oak Materials Group. Seller will retain Price Waterhouse to perform the audit of the Closing Statement of Assets and Liabilities for such fees and expenses reasonably acceptable to Purchaser. Purchaser shall be responsible for such fees and expenses and will reimburse Seller for such fees and expenses within ten (10) days after receipt from Seller of an invoice therefor. Price Waterhouse will deliver the audited Closing Statement of Assets and Liabilities to Purchaser and Seller within thirty (30) days of its receipt of the proposed Closing Statement of Assets and Liabilities from Seller. Purchaser shall give representatives of Seller access to the books and records of the Business for purposes of preparing the Closing Statement of Assets and Liabilities and will cause appropriate Purchaser personnel to assist Seller, at no cost to Seller, in the preparation of such Closing Statement of Assets and Liabilities. In connection with the preparation of the Closing Statement of Assets and Liabilities, Seller and Purchaser will rely upon a roll forward of the physical inventory observed by Price Waterhouse during the period of August 17-19, 1995. The audited Closing Statement of Assets and Liabilities shall be conclusive and binding upon Purchaser and Seller, unless Purchaser or Seller notifies the other, in writing, within 30 days of its receipt of the audited Closing Statement of Assets and Liabilities from Price Waterhouse, of such party's disagreement with the audited Closing Statement of 7 8 Assets and Liabilities, setting forth all of such party's disagreements and an explanation therefor including but not limited to the dollar amount of each item in dispute. Purchaser and Seller shall promptly attempt to resolve their differences with respect thereto within 30 days after receipt of written notice of disagreement. If any such difference is not resolved within such 30 day period, either party may refer the difference for resolution to an accounting firm mutually acceptable to both Seller and Purchaser or, in the absence of agreement, within 15 days, to a "national" accounting firm selected by lot after eliminating Purchaser's and Seller's principal outside accountants and one additional firm designated as objectionable by each of Purchaser and Seller (hereinafter, the "FIRM"). The Firm shall make a determination on the disputes so submitted and shall make such modifications, if any, to the Closing Statement of Assets and Liabilities and the Final Net Assets to reflect such determination, and the same shall be conclusive and binding upon the parties, provided that the Firm may not award an amount exceeding the amount in dispute. The fees and expenses of the Firm shall be shared equally by Seller and Purchaser. (c) Not later than 30 days after the engagement of the Firm (as evidenced by the date of its written acceptance by facsimile or as otherwise designated by the Firm to both parties), the parties shall submit simultaneous briefs to the Firm (with a copy to the other party) setting forth their respective positions regarding the issues in dispute, and not later than 15 days after the submittal of such briefs the parties shall submit simultaneous reply briefs (with a copy to the other party). The Firm shall issue its decision within 30 days after the due date for the reply briefs. If additional briefing, a hearing, or other information is required by the Firm, the Firm shall give notice thereof to the parties as soon as practicable before the expiration of such 30 day period, and the parties shall promptly respond to all requests of the Firm with a view to minimizing any delay in the decision date. (d) If the Reference Net Assets are greater than the Final Net Assets, then Seller shall pay to Purchaser an amount equal to the difference. If the Final Net Assets are 8 9 greater than the Reference Net Assets, Purchaser shall pay Seller an amount equal to the difference. Any amount not in dispute under this Section 2.2 shall be due and payable immediately. Any amount in dispute under this Section 2.2 shall be due and payable within five days of the resolution of the dispute as set forth in this Section 2.2, and shall include any interest required by Section 2.3. 2.3 Payments. All payments required to be made pursuant to this Article 2 and any other provisions of this Agreement shall be made in United States dollars in immediately available funds by wire transfer to an account designated, in writing, by the recipient. Interest shall accrue on any payment required to be paid pursuant to Article 2, beginning on the Closing Date, at a rate equal to the prime rate, as quoted by The Wall Street Journal, in effect from time-to-time, until the time of payment. 2.4 Allocation of Purchase Price. (a) Seller and Purchaser agree that the Purchase Price shall be allocated to the Assets pursuant to an allocation schedule to be agreed upon by Seller and Purchaser after the Closing (the "ALLOCATION"). The parties agree that the Allocation will be in accordance with Section 1060 of the Internal Revenue Code of 1986, as amended (the "CODE"), and will be reasonably determined in good faith pursuant to arm's-length bargaining between the parties regarding the fair market value of the Assets. Seller and Purchaser shall make any adjustments to the Allocation with respect to the Purchase Price that are necessary to reflect any adjustments to the Purchase Price made pursuant to Section 2.2 (the "ADJUSTMENTS"). In the event the parties cannot agree on the Allocation or the Adjustments to the Allocation, such dispute shall be resolved in accordance with the procedures set forth in Section 2.2. (b) Seller and Purchaser shall prepare and file their respective income tax returns and Internal Revenue Service ("IRS") Form 8594, or such other form or statement as may be required of the respective parties by law, and any comparable state or local income tax form, in a manner consistent with the Allocation and will not, in connection 9 10 with the filing of such returns, make any allocation of the Purchase Price, as the same may be adjusted herein, which is contrary to the Allocation. 3. ASSUMPTION OF LIABILITIES AND OBLIGATIONS 3.1 Assumed Liabilities. Upon the terms and subject to the conditions contained herein, on the Closing Date Purchaser shall assume the following liabilities and obligations of Seller (the "ASSUMED LIABILITIES"): (1) all liabilities of the Business as of the Closing Date of the type recorded in the Reference Statement of Assets and Liabilities as "Accounts Payable - Trade", "Other Accrued Liabilities" and "Intercompany - Trade Related", but only to the extent of the amount recorded on the Closing Statement of Assets and Liabilities; (2) all obligations of Seller to perform each of the Contracts in accordance with their terms after the Closing Date to the extent (a) either (x) such Contract is listed in Schedule 4.7 (as updated through the Closing Date and which is reasonably acceptable to Purchaser) and a true and complete copy has been provided to Purchaser or Purchaser's counsel on or before the Closing Date or (y) such Contract is not required to be listed in Schedule 4.7 pursuant to the terms of Section 4.7, provided that Purchaser shall not be obligated to assume payment obligations under such undisclosed Contracts (excluding any orders for the sale of Products or purchase of goods or services entered into in the ordinary course of the Business and consistent with past practices) to the extent that such obligations in the aggregate exceed $50,000, and further provided that if Purchaser elects not to assume any such obligation Purchaser shall not be entitled to any of the rights or benefits under such Contract and Seller may take all steps to minimize its obligations under any such Contract notwithstanding any other provision of this Agreement, and (b) such obligations arise out of or otherwise apply to the conduct of the Business subsequent to the Closing and are not the result of a breach of any such Contract occurring on or prior to the Closing Date; 10 11 (3) all obligations to repair or replace any defective Product which is returned following the Closing and was sold within 360 days prior to the Closing, provided that the maximum aggregate liability assumed by Purchaser pursuant to this Section 3.1(3) shall not exceed $164,000; (4) any obligation or liability for any claim in which damages are sought for defective Product and/or for bodily injury or death to any person or for injury to or destruction of property or the like in respect of any Product with respect to which the book value has been written down to zero or scrap value on or before the Closing Date, which was manufactured by Seller prior to the Closing Date and sold by Purchaser after the Closing Date; and (5) all sums payable pursuant to the retention bonus agreements specified on Schedule 6.1(d) in respect of the period commencing on the Closing Date, provided that in no event will Purchaser's obligations therefor exceed $35,000 in the aggregate. 3.2 Excluded Liabilities. Except for the Assumed Liabilities, Purchaser shall not assume, or otherwise be responsible for, any liabilities or obligations (whether actual or contingent, matured or unmatured, liquidated or unliquidated, or known or unknown) of Parent, Seller, any other owner or operator of the Business or any Facility prior to the Closing Date, or any Affiliate of any of the foregoing (collectively, the "EXCLUDED LIABILITIES"), including but not limited to any liability or obligation as a result of, or based upon or arising out of the conduct of the Business on or prior to the Closing Date, including but not limited to the following: (a) except as described in Section 3.1(4), any and all product liability claims with respect to products manufactured by the Business (or, in the case of Extruded PTFE Film-Unsintered, -Sintered, or -Low Density, shipped by the Business) on or prior to the Closing Date, provided that no act or omission by Purchaser after Closing is the primary cause of the defect in such products; 11 12 (b) the alleged or actual violation of any law, rule or regulation (other than any Environmental Law (as hereinafter defined)), prior to the Closing, by the Business; (c) all claims, liabilities, or obligations, known or unknown (other than those that constitute Assumed Liabilities), to the extent arising out of the employment relationship existing prior to the Closing between the Business and any and all current or former employees of the Business, including but not limited to (i) work-related accidents or injuries, age and sex discrimination, sexual harassment, violation of employment or safety laws and wrongful discharge, where the act, omission, event, or occurrence giving rise to the claim, obligation, or liability shall have taken place on or prior to the Closing Date, (ii) medical or health care claims, obligations and liabilities, under any plan, policy or program of the Business or applicable law, and (iii) state workers' compensation claims made against the Business by employees or former employees of the Business arising from occurrences which took place on or prior to the Closing Date but only to the extent caused by occurrences on or prior to the Closing Date; and (d) any liability or obligation under any Environmental Law as a result of, or based upon or arising out of the operation of the Business or any Facility prior to the Closing ("ENVIRONMENTAL EXCLUDED LIABILITIES"). 4. REPRESENTATIONS AND WARRANTIES OF SELLER Seller and Parent represent and warrant to Purchaser as follows: 4.1 Corporate Status. Seller is a corporation duly organized and validly existing under the laws of the State of Delaware, the jurisdiction in which it is incorporated, and has full power and authority to carry on the Business as now conducted. Seller has all requisite corporate power and authority to enter into this Agreement and to perform its obligations and consummate the transactions contemplated hereby 12 13 in accordance with the terms of this Agreement. Seller is duly qualified to do business in each jurisdiction in which the failure to be so qualified would have a material adverse effect on the Seller's conduct of the Business. 4.2 Authorization. All corporate and other proceedings required to be taken by or on the part of Seller, including, without limitation, all action required to be taken by the directors or stockholder of Seller to authorize Seller to enter into and carry out this Agreement and the related documents contemplated herein, have been, or prior to the Closing will be, duly and properly taken. This Agreement has been, and each of the related documents will be at Closing, duly executed and delivered by Seller and constitute, or will, when delivered, constitute the valid and binding obligations of Seller, enforceable against Seller in accordance with their respective terms, subject to laws of general application relating to bankruptcy, insolvency and the relief of debtors and the rules of law governing specific performance, injunctive relief and other equitable remedies. 4.3 Compliance. The execution and delivery of this Agreement and the related documents by Seller do not, and the consummation of the transactions contemplated hereby and thereby will not, (a) violate any provision of the charter documents or bylaws of Seller, (b) result in a material breach (or an event which, with the giving of notice or lapse of time or both, would constitute a material breach) of any term or provision of, or constitute a default under, or give rise to a right to terminate, any indenture, mortgage, deed of trust or other material agreement or arrangement to which Seller is a party or by which any of the Assets are bound or affected, (c) result in the creation of any lien, charge or encumbrance on the Assets, or (d) violate any statute or law or any judgment, decree, order, regulation or rule of any court or governmental authority to which Seller is subject or by which any of the Assets are bound or affected. 4.4 Financial Statements; Changes. (a) Schedule 4.4(a)(1) contains the balance sheet of the Business as of December 24, 1994, the Reference Statement of Assets and Liabilities and the related 13 14 statements of income for the Business for the year ended December 24, 1994 and the three-month period ended March 25, 1995, including the footnotes thereto (collectively, the "FINANCIAL STATEMENTS"). The Financial Statements other than the statement of income for the three-month period ended March 25, 1995 have been audited by Price Waterhouse and include the report of Price Waterhouse therein. Except as set forth in Schedule 4.4(a)(2), the Financial Statements: (i) have been prepared based upon the books and records of Seller, (ii) have been prepared in accordance with United States generally accepted accounting principles ("GAAP") consistently applied, and (iii) fairly present in all material respects the financial position of the Business and the results of operations as of their respective dates. (b) Except as set forth in Schedule 4.4(b), since the date of the Reference Statement of Assets and Liabilities, there has not been, occurred or arisen: (i) any change in or event affecting Seller or the Business that has had or to Seller's Knowledge may reasonably be expected to have a material adverse effect on the Business (including its results of operations, financial condition and the Assets) other than as a result of general economic conditions or industry-wide developments affecting other companies engaged in similar businesses; or (ii) any transaction entered into or carried out other than in the usual and ordinary course of the Business. 4.5 Condition of Property; Sufficiency of Assets. Schedule 4.5(a) attached hereto lists (i) all material items of Seller's Personal Property located at the Facilities, and (ii) the machinery and equipment located at Seller's plant in La Crosse, Wisconsin, utilized exclusively to produce metal-clad PTFE/glass laminates for the Fluorglas Microwave Business. Except as set forth in Schedule 4.5(a), the Personal Property, in the aggregate, has been maintained in accordance with standard industry practices and is in reasonable operating condition and repair (normal wear and tear excepted). Except as set forth in Schedule 4.5(a), the improvements constructed on the Facilities 14 15 located at McCaffrey Street and Liberty Street are (i) to Seller's Knowledge structurally sound in all material ways, with no known material defects, (ii) have been maintained in the aggregate in accordance with standard industry practices, (iii) are in reasonable operating condition and repair, and (iv) to Seller's Knowledge are not in need of any material maintenance or repair except for ordinary routine maintenance and repair, the cost of which would not be material taking into account the operation of the Business as a whole. Except as set forth in Schedule 4.5(b), the Assets are sufficient for the operation of the Business as presently conducted. 4.6 Intellectual Property. (a) Schedule 4.6(a) lists all material (i) patents and patent applications (including those granted to or applied for or owned by Seller), (ii) intellectual property agreements (other than secrecy or confidentiality agreements), and (iii) trademark registrations and applications, registered copyrights and applications therefor and currently used trade names, exclusively used in or exclusively relating to the Business. (b) Schedule 4.6(b) lists all material (i) patents and patent applications (including those granted to or applied for or owned by Seller), (ii) intellectual property agreements (other than secrecy or confidentiality agreements), and (iii) trademark registrations and applications, registered copyrights and applications therefor and currently used trade names, used in, but not exclusively used in, the Business. 15 16 (c) Except as set forth on Schedule 4.6(c), Seller has not received written notice alleging, and Seller has no Knowledge concerning existing claims of, any current infringement of any material patent, trademark, trade name, copyright or other intellectual property right relating to the Business. 4.7 Contracts. Schedule 4.7 lists each Contract of the Business (other than intellectual property agreements) or relating to any of the Assets or to which the Business or any of the Assets is subject or bound that individually, or together as a series of related Contracts involving the same party or parties, or the successors to such party or parties: (a) obligates Seller or its Affiliates to pay an amount of $25,000 or more, (b) has an unexpired term as of the date of this Agreement in excess of six (6) months, (c) provides for an extension of credit to any customer or client of the Business for any amount over $25,000 (other than for sales in the ordinary course of business where terms of such credit extension for domestic sales are for 30 days or less and for foreign sales are for 60 days or less), (d) provides for the borrowing of money by the Business other than credit agreements with banks having normal credit terms, (e) was not made in the ordinary course of the Business, or (f) is in any way otherwise material to the Business taken as a whole. To Seller's Knowledge, each Contract is valid and existing. Seller has duly performed all its obligations under the Contracts listed in Schedule 4.7 in all material respects to the extent that such obligations to perform have accrued. Seller has not received written notice of any alleged breach or default, and to Seller's Knowledge, no event which would (with the passage of time, notice or both) constitute a material breach or default by Seller or any other party or obligor with respect thereto, has occurred. True and correct copies of the Contracts listed in Schedule 4.7, including all amendments and supplements thereto, have been delivered to Purchaser or Purchaser's counsel or are attached to Schedule 4.7. It is understood that inclusion of a Contract on Schedule 4.7 shall not be considered to be an admission that or evidence that a contract is material to the operation of the Business taken as a whole. For purposes of this Agreement, the term "AFFILIATE" of any person or entity means any corporation, partnership or other entity of which more than 50% of the securities or other ownership interests having by the terms thereof ordinary voting 16 17 power to elect more than 50% of the board of directors or others performing similar functions with respect to such corporation, partnership or other entity directly or indirectly controls, is controlled by, or is under common control with such person or entity. 4.8 Title to Assets. Excluding the Real Property, and except as disclosed in Schedule 4.8, Seller has good and marketable title to all of the Assets free and clear of all liens, mortgages, pledges and encumbrances other than liens for taxes not yet due and payable or being contested in good faith. 4.9 Litigation. Except as disclosed in Schedule 4.9, there is no action, suit, proceeding, arbitration, litigation, or, to Seller's Knowledge, product warranty claim, pending, or to Seller's Knowledge, Threatened against Seller that relates to the Business or arises out of the ownership, use or possession or condition of the Assets, or the operation or conduct of the Business. 4.10 Environmental Matters. (a) Definitions. For purposes of this Agreement, the following terms shall have the meanings set forth below: (i) "HAZARDOUS SUBSTANCE" shall mean substances that are defined or listed in, or otherwise classified pursuant to, any applicable laws as "hazardous substances," "hazardous materials," "hazardous wastes" or "toxic substances," or any other substance whose presence in the ecosystem is regulated by any applicable Environmental Law, including, without limitation, petroleum and petroleum products. (ii) "ENVIRONMENTAL LAWS" shall mean all applicable laws relating to the protection of the environment including: (A) all applicable requirements for reporting, licensing, permitting, controlling, investigating or remediating emissions, discharges, releases or threatened releases of Hazardous Substances into the air, surface water, groundwater or land; and (B) all applicable requirements for the 17 18 manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Substances. (iii) "ENVIRONMENTAL CONDITION" shall mean the presence in, on or under the specified real property of any Hazardous Substance which requires investigation or remediation pursuant to any Environmental Law. (b) Environmental Information. To Seller's Knowledge, Schedule 4.10, which has been delivered previously to Purchaser by Seller, contains all material information with respect to (i) the use of Hazardous Substances upon the Transferred Facilities, or in the operation of the Business, (ii) any Environmental Condition existing upon the Transferred Facilities, or (iii) the compliance of the Business or the Transferred Facilities with any Environmental Laws, except for information that discloses a use of Hazardous Substances, the existence of an Environmental Condition or a noncompliance with Environmental Laws which would not have a material adverse effect on the Assets or on the Business taken as a whole. (c) Compliance with Environmental Laws. Except as disclosed in Schedule 4.10, to Seller's Knowledge the Business is, and since January 1, 1993 has been, operated in all material respects in compliance with all Environmental Laws. (d) Environmental Conditions; Action by Governmental Agency. Except as disclosed in Schedule 4.10, to Seller's Knowledge no investigation, inquiry or other proceeding is pending or, to the Knowledge of Seller, Threatened by any governmental entity with respect to the Transferred Facilities or the Business and relating to any actual or alleged Environmental Condition or failure to comply with any applicable Environmental Law that could reasonably be expected to have a material adverse effect on the Business. 4.11 Employee Benefit Plans and Policies. All of the employee benefit plans and policies maintained or contributed to by Seller for the Business, or in which employees of the Business, including employees on disability, medical, sick or 18 19 other leave of absence (the "EMPLOYEES"), are entitled to participate, are listed on Schedule 4.11 (collectively, the "BENEFIT PLANS") and copies of all such written Benefit Plans have been made available to Purchaser. Except as listed on Schedule 4.11 (a) such Benefit Plans comply in all material respects, to the extent applicable, with the requirements of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and the "Code"; (b) none of the Benefit Plans subject to Part 3, Subtitle B of Title I of ERISA has incurred any "accumulated funding deficiency" within the meaning of Section 302 of ERISA or Section 412 of the Code; (c) no material liability, other than required premium payments, to the Pension Benefit Guaranty Corporation has been incurred with respect to any of the Benefit Plans subject to Title IV of ERISA; (d) Seller has not incurred any material liability for any tax imposed under Section 4975 of the Code or Part 4, Subtitle B of Title I of ERISA with respect to any of the Benefit Plans; and (e) none of the Benefit Plans is a multiemployer plan within the meaning of Section 3(37)(A) of ERISA. 4.12 Employees. Schedule 4.12 sets forth a list of the names and current salary or wage rates of the employees of the Business employed as of five (5) days prior to the date hereof, and the names and compensation arrangements with any consultants or agents of the Business. Seller is not under any obligation to recognize or bargain with any labor union with respect to such employees. Upon termination of the employment of any such employees by Seller, Purchaser will not, by reason of anything done by Seller prior to or at the Closing, be liable to any of said employees for so-called "severance pay" or other similar payments, except as expressly set forth in Section 6.1(d). Except as set forth in Schedule 4.12, there are no pending or threatened employment claims or suits under applicable federal or state fair employment laws (including claims arising under workers' compensation laws) relating to or arising out of the conduct of the Business. 4.13 Undisclosed Liabilities. Except as set forth in Schedule 4.13, there are no liabilities or obligations of Seller, either direct or indirect, matured or unmatured, absolute, contingent or otherwise, which are material to the Business taken as a whole, except (a) those liabilities or obligations set forth on the Reference Statement of Assets and Liabilities (including 19 20 the footnotes thereto) and not heretofore paid or discharged, (b) those liabilities set forth in this Agreement or the Schedules attached hereto, (c) those liabilities not required to be set forth in the Schedules attached hereto because of an exception provided for in this Agreement, and (d) those liabilities arising since the date of the Reference Statement of Assets and Liabilities in the ordinary course of Business. 4.14 Compliance with Law. Except as set forth in Schedule 4.14, since January 1, 1993 Seller has conducted the Business and operated and used the Assets in accordance with all federal, state and local laws and regulations (excluding Environmental Laws) applicable to the conduct of the Business, and is not in violation of any such laws other than violations which would not have a material adverse effect on the Assets taken as a whole, or on the Business taken as a whole. 4.15 Consents. Except as otherwise provided in this Agreement or set forth in Schedule 4.15, no action, approval, consent or authorization, including but not limited to any action, approval, consent or authorization by any third party, financial institution, governmental or quasi-governmental agency, commission, board, bureau or instrumentality (i) material to the Business taken as a whole is required for the transfer or assignment of any of the Assets or (ii) is necessary to make this Agreement or any of the agreements or instruments to be executed and delivered pursuant hereto a legal, valid and binding obligation of Seller or to consummate the transactions contemplated hereunder. 4.16 Taxes. All Taxes (as hereinafter defined) with respect to the Business which are due and payable prior to the Closing Date have been or will be duly and properly computed, reported, fully paid and discharged or otherwise adequately reserved in accordance with GAAP. There are no unpaid Taxes with respect to any period ending on or before the Closing Date which are or would become a lien on the Assets, except for current Taxes not yet due and payable. As used herein, the term "Taxes" shall include all federal, state, local and foreign taxes, assessments or other governmental charges (including, without limitation, net income, gross income, excise, franchise, sales and value added taxes, taxes withheld from employees' salaries and other withholding taxes and obligations and all deposits 20 21 required to be made with respect thereto), levies, assessments, deficiencies, import duties, licenses and registration fees and charges of any nature whatsoever, including any interest, penalties, additions to tax or additional amounts with respect thereto, imposed by any government or taxing authority which are levied upon the Assets. 4.17 Permits and Licenses. Schedule 4.17 attached hereto lists all material Permits and Licenses, or any waiver thereof, obtained by Seller in connection with the conduct of the Business (other than Permits and Licenses the failure to obtain which could not reasonably be expected to have a material adverse effect on the Business) together with the name of the governmental entity issuing such Permit and License. Seller has all Permits and Licenses required for the conduct of the Business as presently conducted. Except as set forth in Schedule 4.17, such Permits and Licenses are valid and in full force and effect. To the extent any of such Permits and Licenses are not transferable from Seller to Purchaser, Seller has no Knowledge of any reason or condition which is likely to prevent Purchaser from obtaining such Permits and Licenses upon application therefor to the appropriate governmental entity. To Seller's Knowledge, no suspension, cancellation or termination of any Permits and Licenses required by any governmental entity to permit the Business to be conducted is threatened that could reasonably be expected to have a material adverse effect on the Business. 4.18 Real Property. (a) Schedule 4.18(a)(i) identifies all real property owned by Seller that is currently used by Seller primarily for the conduct of the Business (the "FACILITIES"). It is expressly understood and agreed that Seller's real property in La Crosse, Wisconsin is not primarily used in the Business and is not being sold to Purchaser under this Agreement. Schedule 4.18(a)(ii) lists all real property leased for use in the conduct of the Business. (b) Seller has not received written notice of any violation of any applicable zoning or building regulation or ordinance relating to the Transferred Facilities (as defined in Section 1.5) and, to the Knowledge of Seller, there is no such violation. Except as otherwise indicated in Schedule 21 22 4.18(b), to the Knowledge of Seller, no fact or condition exists which is reasonably likely to result in discontinuation of presently available water, sewer, gas, electricity, telephone, drainage facilities and other utilities or services for the Transferred Facilities. Seller has not received written notice of any proposed material special assessments, or any proposed material changes in property tax or land use laws, or condemnation proceedings affecting any portion of the Transferred Facilities and, to the Knowledge of Seller, there are no such proposals or proceedings. (c) Seller has good and marketable fee simple title to all Real Property subject to the state of facts set forth in Schedule 4.18(c), including the title commitment attached as a part of Schedule 4.18(c). (d) Except as otherwise set forth in Schedule 4.18(c), there are no leases, subleases, licenses, occupancy agreements, options, rights, concessions or other agreements or arrangements, written or oral, granting to any person the right to purchase, use or occupy any of the Transferred Facilities or any portion thereof or interest in any such Transferred Facilities. 4.19 No Brokers or Finders. No agent, broker, finder, or investment or commercial banker, or other person or firm engaged by or acting on behalf of Seller or any of its Affiliates in connection with the negotiation, execution or performance of this Agreement or the related documents, is or will be entitled to any brokerage or finder's or similar fee or other commission as a result of this Agreement or the transactions contemplated herein. Any fees or expenses resulting from such engagement shall be the sole responsibility of Seller. 4.20 Product Warranty. The aggregate amounts of valid Product Warranty claims of the Business in the years ended December 31, 1993 and 1994 were $177,600 and $150,100, respectively. 4.21 Intercompany Payables. All intercompany trade payable balances reflected on the Reference Statement of Assets and Liabilities have been incurred for goods and services 22 23 provided to the Business in the ordinary course of business at reasonable prices and fees. 4.22 Construction of Certain Provisions. (a) As used in this Article 4, the term "Knowledge" means the knowledge of the executive officers of Parent's Engineered Materials Sector, and the knowledge of the General Manager of the Business and his direct reports and other key employees of the Business identified in Schedule 4.22. (b) An action, suit, proceeding, arbitration or litigation shall be considered "Threatened" if a written notice or communication has been received, within two years prior to the date of the applicable disclosure schedule, reasonably indicating that an action, suit or proceeding may be commenced. 4.23 No Additional Representations. Notwithstanding anything to the contrary contained in this Agreement, Seller makes no representation or warranty whatsoever, express or implied, beyond those expressly given in this Agreement, including but not limited to any implied warranty or representation as to condition, merchantability or suitability as to any of the properties or assets of Seller. 5. REPRESENTATIONS AND WARRANTIES OF PURCHASER Purchaser represents and warrants to Seller as follows: 5.1 Corporate Status. Purchaser is a corporation duly organized and validly existing under the laws of the State of California, the jurisdiction in which it is incorporated and has full power and authority to carry on its business and to own all of its properties and assets. Purchaser has all requisite corporate power and authority to enter into, execute and deliver this Agreement and to perform its obligations and consummate the transactions contemplated hereby in accordance with the terms of this Agreement. 23 24 5.2 Authorization. All corporate and other proceedings required to be taken by or on the part of Purchaser, including, without limitation, all action required to be taken by the directors or shareholders of Purchaser to authorize Purchaser to enter into and carry out this Agreement and the related documents contemplated herein, have been, or prior to the Closing will be, duly and properly taken. This Agreement has been, and each of the related documents will be at Closing, duly executed and delivered by Purchaser and constitute, or will, when delivered, constitute the valid and binding obligations of Purchaser, enforceable against Purchaser in accordance with their respective terms, subject to laws of general application relating to bankruptcy, insolvency and the relief of debtors and the rules of law governing specific performance, injunctive relief and other equitable remedies. 5.3 Compliance. The execution and delivery of this Agreement and the related documents by Purchaser do not, and the consummation of the transactions contemplated hereby and thereby will not (a) violate any provision of the Restated Articles of Incorporation or Bylaws of Purchaser, (b) result in the breach (or an event which, with the giving of notice or lapse of time or both, would constitute a breach) of any term or provision of, or constitute a default under, or give rise to a right to terminate, any material indenture, mortgage, deed of trust or other agreement or arrangement to which Purchaser is a party, or (c) violate any statute or law or any judgment, decree, order, regulation or rule of any court or governmental authority to which Purchaser is subject. 5.4 Financing. Purchaser has funds of its own, or has binding commitments from responsible banks or other financial institutions to provide funds, which will be sufficient and available to pay the Purchase Price. 5.5 No Brokers or Finders. No agent, broker, finder or investment or commercial banker, or other person or firm engaged by or acting on behalf of Purchaser or any of its Affiliates in connection with the negotiation, execution or performance of this Agreement and the related documents, is or will be entitled to any broker's or finder's or similar fees or other commission as a result of this Agreement or the transactions contemplated herein. Any fees or expenses resulting 24 25 from such engagement shall be the sole responsibility of Purchaser. 5.6 Consents. Except as otherwise provided in this Agreement or set forth in Schedule 5.6, no action, approval, consent or authorization, including but not limited to any action, approval, consent or authorization by any third party, financial institution, governmental or quasi-governmental agency, commission, board, bureau or instrumentality, is necessary to make this Agreement or any of the agreements or instruments to be executed and delivered pursuant hereto a legal, valid and binding obligation of Purchaser or to consummate the transactions contemplated hereunder. 6. COVENANTS 6.1 Employment. (a) Purchaser agrees to offer employment, effective immediately following the Closing, to all employees of the Business who are then employed by Seller, except for the employees listed in Schedule 6.1(a)(1). Seller agrees in this regard to cooperate with Purchaser by permitting Purchaser throughout the period prior to the Closing to meet with the employees of the Business at reasonable times and to distribute to them such forms and other documents relating to employment by Purchaser after the Closing as Purchaser deems appropriate. (b) To assist Purchaser during the post-Closing transition period, Seller and Purchaser have agreed that Purchaser will be entitled to utilize the services of Phil Guy on a full-time basis from the Closing Date through December 31, 1995, provided that Purchaser reimburses Seller for the cost to Seller of his salary and benefits incurred by Seller during such period, and further provided that Phil Guy remains in the employ of Seller or one of its Affiliates during such period. (c) Purchaser agrees to make available to each employee of the Business who accepts employment with Purchaser as of the Closing Date and who is not listed on Schedule 6.1(a)(1) (collectively, "TRANSFERRED EMPLOYEES"), Purchaser's standard benefits package, including health benefits substantially equivalent to the benefits currently provided by Seller to such 25 26 employees, such benefits to become effective without a waiting period and without regard to pre-existing conditions, except with respect to long term disability benefits and supplemental life insurance to the extent such benefits are made available through third-party insurance carriers and will not cover pre-existing conditions. Nothing herein shall be deemed to require Purchaser to retain any of the employees it hires for any specific period of time or to maintain compensation rates or fringe benefit programs for any specific period of time, however, Purchaser shall be responsible for all actions taken or omitted to be taken with respect to such employees following their hiring by Purchaser. Seller shall amend, effective on the Closing Date, each Benefit Plan which is an "employee pension benefit plan" (as defined in Section 3(2) of ERISA) to fully vest all employees of the Business in their accrued benefits as of the Closing Date. (d) Purchaser agrees to be responsible for the payment of all sums payable in respect of the period following the Closing pursuant to those certain Retention Bonus Agreements specified on Schedule 6.1(d) attached hereto; provided, however, Purchaser's payment obligations pursuant to this sentence shall not exceed $35,000. Except as expressly provided in this Agreement, Purchaser does not assume, and shall not be deemed to have assumed, any liability or obligation of Seller relating to employment matters involving current or former employees of Seller, including, without limitation, any matters arising under any employee benefit plan of Seller or its Affiliates. The term "Contract" as used in this Agreement does not include any Benefit Plan. 6.2 Non-Solicitation. Seller covenants that for a period of two years after the Closing, neither Seller nor any of its Affiliates will directly or indirectly solicit, raid, entice, induce or in any other manner encourage any Transferred Employee to discontinue his or her employment with Purchaser or to seek employment with Seller or any of its Affiliates. The parties expressly agree that advertisements addressed to the general public made in newspapers or other periodicals of general circulation shall not constitute direct or indirect solicitation for purposes of this Agreement. Seller agrees that for a period of two years after the Closing, neither Seller nor any of its Affiliates without the prior written consent of Purchaser which consent shall not unreasonably be withheld will enter into any 26 27 employment or consultant relationship with any Transferred Employee listed on Schedule 6.2, unless Purchaser has previously terminated the employment of such Transferred Employee. 6.3 COBRA Coverage. Seller shall timely provide all notices required to be provided to any of Seller's employees, former employees, or the beneficiaries or dependents of such employees or former employees, under Part 6 of Subtitle B of Title I of ERISA or Section 4980B(f) of the Code (herein collectively referred to as "COBRA"), to the extent such notices are required to be provided by Seller by reason of events occurring prior to or on the Closing Date or by reason of the transactions contemplated by this Agreement. For the purposes of the foregoing, Seller shall treat any Transferred Employee and such employee's beneficiaries and dependents, as of the Closing Date as having incurred a "qualifying event" (within the meaning of ERISA Section 603 and Code Section 4980B(f)(3)) as of the Closing Date. 6.4 WARN Act. Purchaser agrees to pay and be responsible for all liability, cost, expense and sanctions resulting from the failure to comply with the Worker Adjustment and Retraining Notification Act ("WARN ACT"), and the regulations thereunder, in connection with the consummation of the transactions described in or contemplated by this Agreement. 6.5 Welfare and Pension Benefit Plans. (a) For purposes of vesting and determining eligibility to participate and benefits payable under Purchaser's "employee welfare benefit plans," as defined in Section 3(1) of ERISA, Purchaser shall credit each Transferred Employee with his or her service with Seller before the Closing Date. (b) For purposes of vesting and determining eligibility to participate and benefits payable under Purchaser's "employee pension benefit plans," as defined in Section 3(2) of ERISA, Purchaser shall credit each Transferred Employee with his or her service with Seller before the Closing Date. 27 28 (c) Purchaser agrees to make payroll deductions as requested by each Transferred Employee for timely payment of loans outstanding at the Closing Date under Seller's savings plans, and to remit such amounts withheld each calendar month to the trustee of Seller's 401(k) Plan. 6.6 Title Insurance. Prior to the Closing, Seller shall deliver to Purchaser a copy of the survey of the Liberty Street Site and a copy of the survey of the McCaffrey Street Site, each prepared by David Barrass ("BARRASS") in April 1995 (each, a "SURVEY"), certified to Purchaser by Barrass and containing the embossed seal of Barrass. At the Closing and at Purchaser's expense, Seller shall cause Lawyers Title Insurance Company (the "TITLE COMPANY") to issue, or to be unconditionally committed to issue, to Purchaser an ALTA Owner's Policy of Title Insurance (10-17-92) with a liability amount of $4,000,000 insuring Purchaser as the owner of fee title to the Real Property. Such policy (the "TITLE POLICY") shall contain only the conditions and exceptions set forth in the form of the title commitment attached hereto as Schedule 4.18(c). 6.7 Seller's Covenant Not to Compete. (a) Restrictions. Parent and Seller each agrees that for a period of three (3) years after the Closing Date, neither they nor their Affiliates will engage in the business of manufacturing and selling pressure sensitive adhesive tapes, PTFE flexible composites and fabrications, and PTFE films. Parent and Seller further agree that during the term of the Toll Agreement, neither they nor their Affiliates will engage in the business of manufacturing and selling metal-clad PTFE/glass laminates for the microwave laminates market, except as required for the performance of the Toll Agreement. Nothing in this Agreement shall restrict Parent, Seller or any of their Affiliates from engaging in the business of manufacturing and selling metal-clad PTFE/glass laminates after the expiration or termination of the Toll Agreement. Additionally, nothing in this Agreement is intended to prevent Parent, Seller and/or their Affiliates from: (i) acquiring shares of capital stock, partnership or other equity interests in any entity that is engaged in the Business, provided that (a) the primary purposes of such acquisition is not to acquire an 28 29 interest in any entity engaged in the Business and (b) the annual revenues of such entity from the Business are not more than 30% of such entity's aggregate revenues; or (ii) acquiring shares of capital stock, partnership, or other equity interests in any entity as investments in Seller's pension funds or funds of any other employee benefit plan whether or not such entity is engaged in the Business, provided that such interests are acquired and held for investment purposes only. (b) Special Remedies and Enforcement. Parent and Seller agree with Purchaser that a breach by Parent, Seller or any of their Affiliates of any of the covenants set forth in this Section 6.7 could cause irreparable harm to Purchaser, that Purchaser's remedies at law in the event of such breach would be inadequate, and that, accordingly, in the event of such breach, a restraining order or injunction or both may be issued against Parent, Seller and any of their Affiliates, in addition to any other rights and remedies that are available to Purchaser. In connection with any such action or proceeding for injunctive relief, Parent and Seller each hereby waives the claim or defense that a remedy at law alone is adequate and agrees, to the maximum extent permitted by law, to have each provision of this Section 6.7 specifically enforced against Parent and Seller. (c) Severability. If this Section 6.7 is more restrictive than permitted by the laws of any jurisdiction in which Purchaser seeks enforcement hereof, this Section 6.7 shall be limited to the extent required to permit enforcement under such laws. In particular, the parties intend that the covenants contained in Section 6.7(a) shall be construed as a series of separate covenants, one for each county and city in which the Business has been carried on or in which Purchaser may conduct a similar business after the Closing Date. Except for geographic coverage, each such separate covenant shall be deemed identical in terms. If, in any proceeding, a court or arbitrator shall refuse to enforce any of the separate covenants, then such unenforceable covenant shall be deemed eliminated from this Section 6.7 for the purpose of those proceedings to the extent necessary to permit the 29 30 remaining separate covenants to be enforced. If the provisions of this Section 6.7 shall ever be deemed to exceed the duration or geographic limitations or scope permitted by applicable law, then such provisions shall be reformed to the maximum time or geographic limitations in scope, as the case may be, permitted by applicable law. 6.8 Tax Returns; Taxes. (a) Purchaser and Seller shall cooperate in preparing and filing tax returns relating to all sales, excise, real estate, use, transfer or license tax due with regard to the transactions contemplated by this Agreement. Purchaser and Seller shall each be responsible for and pay for one-half (1/2) of all of such sales, excise, use, transfer or license taxes resulting from the purchase, sale or transfer of the Assets and transactions contemplated hereby. (b) All of the other fees and charges which are payable by Seller or attributable to the conduct of the Business or the ownership, possession or use of the Assets, including rents, general and special assessments, street surfacing and other municipal charges, fuel, water, sewer, electrical and other utility charges and documentation, license and registration fees (collectively, the "OTHER CHARGES") shall be prorated (as described below) as of the Closing Date. After the Closing, Purchaser shall make or cause to be made all necessary filings with respect to Taxes and the Other Charges. (c) All Taxes related to the Transferred Facilities or to the Business accrued or accruable with respect to events occurring prior to the close of business on the Closing Date shall be borne by Seller. For this purpose, the Closing Date shall be treated as the last day of a taxable period, whether or not the taxable period in fact ends on such period. All Taxes related to the Real Property, the real property subject to the Lease Agreements so long as such Lease Agreements are in effect, or to the Business accrued or accruable with respect to events occurring after the close of business on the Closing Date will be borne by Purchaser. 30 31 (d) Real and personal property taxes with respect to any Assets sold pursuant to this Agreement shall be prorated based on the ratio of number of days in the pre-closing period to the number of days in the actual taxable period with respect to which tax is assessed, irrespective of when such taxes are due, become a lien or are assessed; provided, however, nothing in this Section 6.8(d) shall cause a duplication in the payment of real or personal property taxes. (e) Purchaser shall at its own cost and expense fully and accurately complete and submit any tax data packages with respect to taxable years ending on or prior to the Closing Date or for the 1995 taxable year reasonably required by Seller by the earlier of March 15, 1996 or 180 days after the Closing Date; provided, however, that if compliance with this Section requires more than eighty (80) hours of service from Purchaser's personnel, Seller shall reimburse Purchaser for the prorated wages, salaries and fringe benefits of such personnel for each hour of service in excess of such amount. 6.9 Preservation of Confidentiality. For a period of five (5) years from the date of this Agreement, Seller agrees to treat all Confidential Information (as defined below) of the Business, as confidential, to preserve the confidentiality thereof and to not disclose any Confidential Information, except (i) disclosures made to customers and vendors in the ordinary course of the Business through the Closing Date, (ii) disclosure to its representatives who need to know such confidential information in connection with the transactions contemplated herein at any time before or after the Closing, (iii) disclosures required by law or government authority, and (iv) with respect to any Confidential Information used, but not exclusively used in the Fluorglas Microwave Business, disclosures by Seller in the ordinary course of conducting its laminates business after the Closing, which are consistent with the standard of care Seller applies to its own confidential information. As used in this Agreement, "CONFIDENTIAL INFORMATION" means any and all technical, manufacturing or marketing information, ideas, methods, developments, inventions, improvements, business plans, trade secrets, scientific or statistical data, diagrams, drawings, specifications or other proprietary information 31 32 relating to the Business normally treated as confidential and proprietary by Seller in the ordinary course of the Business consistent with past practice, together with all analyses, compilations, studies or other documents, records or data prepared by Seller or Purchaser or their respective representatives, as the case may be, which contain or otherwise reflect or are generated from such information, or which are generated in connection with the transactions contemplated herein at any time before or after the Closing. Seller shall have no obligations with respect to any portion of the Confidential Information (i) which is now in the public domain or hereafter comes into the public domain through no fault of Seller, (ii) which is hereafter disclosed to Seller by a third party not in violation of any confidentiality obligation to Purchaser, or (iii) which is hereafter independently developed by Seller's employees without reference to the Confidential Information Seller is obligated to maintain in confidence under this Section. 6.10 Removal of Underground Storage Tanks. At Seller's sole cost and expense, Seller shall diligently proceed to remove and close in accordance with all applicable Environmental Laws the underground storage tanks described in Schedule 6.10 hereto (the "TANKS"), and shall provide Purchaser with written evidence of its performance of this obligation. If Seller fails to diligently perform the obligations set forth in this Section, Purchaser may, at Seller's sole cost and expense, cause the removal and closure of the Tanks in accordance with all applicable Environmental Laws. 6.11 Removal of Certain Assets. All assets which are located at the Transferred Facilities but which are not being transferred by Seller to Purchaser pursuant to this Agreement will be removed from the Transferred Facilities by Seller on or before the Closing Date. 6.12 Environmental Reports. Purchaser shall deliver to Seller a true and complete copy of the Phase I and Phase II environmental reports prepared by Parsons Engineering Science ("PARSONS") in connection with Purchaser's acquisition of the Real Property when and as such reports become available. Purchaser shall, to the extent it has the power and authority to do so, make available or cause Parsons to make available to Seller the field notes, laboratory reports, sampling and test 32 33 results and other relevant documentation relating to such reports to the extent such information is not included in the reports. Purchaser also agrees to grant to Seller the right to conduct sampling at the Transferred Facilities (to the extent Purchaser retains control of such Transferred Facilities) to confirm the results or conclusions presented in any of the environmental reports delivered to Seller by Purchaser, provided that: (i) Purchaser shall have the right to approve the scope and method of sampling and testing, which approval shall not be unreasonably withheld or delayed; (ii) Seller shall use reasonable efforts to minimize any interference with the business operations of Purchaser and shall not materially interfere with such operations unless (y) no reasonable alternative action is available that would cause less interference and (z) the proposed action or alternative action must be taken to satisfy a requirement of a governmental entity to investigate or remediate an Environmental Condition; (iii) Seller shall maintain or cause to be maintained insurance coverage relating to the sampling to be performed as reasonably required by Purchaser (provided such coverage is available at reasonable cost) and to name Purchaser an additional insured with respect to such coverage; and (iv) Seller shall provide to Purchaser a copy of all reports obtained by Seller when and as received by Seller and shall, to the extent it has the power and authority to do so, make available, or cause its consultant to make available, to Purchaser the field notes, laboratory reports, sampling and test results and other relevant documentation relating to such reports to the extent such information is not included in the reports. 6.13 Intercompany Receivables and Payables. Each of Seller and Purchaser agrees to pay any and all intercompany trade receivables and payables, respectively, of the Business outstanding as of the Closing Date within the time period for 33 34 payment in the ordinary course of business but no later than thirty (30) days after the Closing; provided, however, to the extent any such intercompany receivable or payable is not recorded on the Closing Statement of Assets and Liabilities (as finally agreed upon pursuant to Section 2.2) or the amount recorded differs from the amount paid in respect thereof by Seller or Purchaser, as the case may be, such party shall refund to the other party any overpayment received, or shall pay any additional amount owing to the other party, as the case may be, in each case together with interest at the rate specified in Section 2.3 from the date payment was originally made or due. 6.14 Health and Safety Operational Issues. At Seller's sole cost and expense, Seller shall diligently proceed to take reasonable action to correct the items identified in Schedule 6.14 attached hereto. Purchaser acknowledges that Seller may be able to provide Purchaser additional information concerning the issues set forth in the referenced memorandum that reasonably establish that one or more of such issues do not constitute a current violation or noncompliance, in which case Seller shall have no obligation under this Section 6.14 with respect thereto. 7. TOLL AGREEMENT At the Closing, Purchaser and Seller shall execute the Toll Agreement attached hereto as Schedule 7, pursuant to which Seller will toll produce for Purchaser metal clad PTFE/glass laminates utilizing the Personal Property located at Seller's La Crosse, Wisconsin Laminated Products plant, for a period of up to two years from the Closing Date. 8. PRE-CLOSING COVENANTS 8.1 Conduct of Business. During the period from the date hereof through the Closing Date, and except as otherwise provided in this Agreement, Seller: (i) Shall conduct the Business in the ordinary course, consistent with past practice; (ii) Shall refrain from disclosing or entering into any license or agreement with respect to the Intellectual Property; 34 35 (iii) Shall use reasonable efforts to maintain the good relations of its suppliers, customers and others with whom it has business relations; (iv) Shall notify Purchaser of any material adverse change with respect to the condition of the Assets or the Assumed Liabilities or the Business; (v) Shall not grant any compensation increase or bonus, except in the ordinary course of business, consistent with past practices; (vi) Shall use reasonable efforts to preserve the business organization of the Business intact, and to preserve for Seller the present relationship between the Business and its employees, suppliers, clients and others having business relations with them; (vii) Shall comply with all laws, ordinances, rules, regulations and orders applicable to the Business, or Seller's operations, assets or properties in respect thereof, the noncompliance with which might materially affect the Business or the Assets; (viii) Shall not sell, assign, transfer, convey, lease, mortgage, pledge or otherwise dispose of or encumber any of the Assets, or any interests therein, except in the ordinary course of the Business; and (ix) Shall not acquire by merger or consolidation with, or merge or consolidate with, or purchase substantially all of the assets of, or otherwise acquire any material assets or business of any corporation, partnership, association or other business organization or division thereof if any such transaction could materially affect the Assets, the Business or the consummation of the transactions contemplated hereby. 8.2 Access to Records and Properties. (a) From the date hereof until the Closing Date or earlier termination of this Agreement, Seller will: 35 36 (i) provide Purchaser, its officers, counsel and other representatives with reasonable access to the Assets, the principal personnel and representatives of Seller, and such books and records pertaining to the Business as Purchaser may reasonably request, during Seller's regular business hours, provided that Purchaser has provided Seller with reasonable prior written notice, and provided further that Purchase agrees that such access will be requested and exercised with due regard to minimizing interference with the operations of the Business; (ii) furnish to Purchaser or its representatives such additional financial and operating data and other information relating to the business as may be reasonably requested, to the extent that such access and disclosure would not violate the terms of any agreement to which Seller is bound or any applicable law or regulation; and (iii) make available to Purchaser for inspection and review all documents, or copies thereof, listed in the Schedules hereto, and all files, records and papers of any and all proceedings and matters listed in the Schedules hereto, except to the extent prohibited or restricted by law, regulation, contract with a third party or where the documents are subject to the attorney client or work product privilege. 8.3 Consents. Seller and Purchaser each has made required filings with the Federal Trade Commission ("FTC") and U.S. Department of Justice ("DOJ") pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR ACT") (including, without limitation, responses to requests for additional information). The parties shall not consummate the transactions contemplated by this Agreement unless and until all applicable waiting periods under the HSR Act have expired or are otherwise terminated and shall use good faith efforts to demonstrate that such transactions should not be opposed by the FTC or DOJ. All HSR Act filing fees are the responsibility of Purchaser. 8.4 Public Announcements. On and after the date hereof and through the Closing Date, neither of the parties shall issue any press release or make any public statement prior to 36 37 obtaining the other party's approval, which approval shall not be unreasonably withheld, except that no such approval shall be necessary to the extent that, in the opinion of counsel to the party proposing to make such disclosure, disclosure is required by law or by any listing agreement of either party hereto. Such opinion of counsel shall be confirmed in writing and promptly delivered to the other party. The parties may disclose information with respect to the transactions contemplated hereby to their employees, agents and consultants only to the extent such persons have a need to know and agree to be bound by the terms hereof relative to the disclosure of such information. 9. CLOSING 9.1 Closing Date and Place. The consummation of the purchase and sale contemplated hereby (the "CLOSING") will take place at the offices of Seller in Morristown, NJ at 10:00 a.m. on the third business day following the later of the execution of this Agreement or the date on which the conditions to the Closing set forth in Sections 10.1(a) and (e) and Sections 10.2(a) and (e) have been satisfied, or on such other date and time as may be mutually agreed upon by the parties in writing. Either party may elect to effect the Closing via the exchange of executed documents and certificates by telecopier or overnight mail. The date upon which the Closing occurs is referred to herein as the "CLOSING DATE". 10. CONDITIONS TO CLOSING 10.1 Conditions to the Obligations of Purchaser. The obligations of Purchaser under this Agreement are subject to the fulfillment prior to or at the Closing of each of the following conditions, any one or more of which may be waived in writing by Purchaser in its sole discretion: (a) No law or order shall have been enacted, entered, issued, promulgated or enforced by any governmental entity, nor shall any action have been instituted and remain pending or have been threatened and remain so at what would otherwise be the Closing Date, which prohibits or restricts or would (if successful) prohibit or restrict the transactions contemplated herein. 37 38 (b) The representations and warranties of Seller contained in this Agreement or in any certificate or document delivered to Purchaser pursuant hereto shall be complete, true and correct in all material respects on the Closing Date, with the same force and effect as though such representations and warranties had been made on and as of the Closing Date. (c) Seller shall have performed all of its covenants, obligations and agreements contained in this Agreement to the extent required to be performed and complied with by it prior to the Closing Date. (d) Purchaser shall have received all certificates, instruments, agreements, deeds, title policies and other documents to be delivered by Seller on or before the Closing Date pursuant to this Agreement. (e) The waiting periods under the HSR Act applicable to the purchase of the Business shall have expired without the initiation of legal action by the FTC or the DOJ. 10.2 Conditions to the Obligations of Seller. The obligations of Seller under this Agreement are subject to the fulfillment, prior to the Closing, of each of the following conditions, any one or more of which may be waived in writing by Seller in its sole discretion: (a) No law or order shall have been enacted, entered, issued, promulgated or enforced by any governmental entity, nor shall any action have been instituted and remain pending or have been threatened and remain so at what would otherwise be the Closing Date, which prohibits or restricts or would (if successful) prohibit or restrict the transactions contemplated herein. (b) The representations and warranties of Purchaser contained in this Agreement or in any certificates or documents delivered to Seller pursuant hereto shall in all material respects be complete, true and correct on the Closing Date, with the same force and effect as though such representations and warranties, had been made on and as of the Closing Date. 38 39 (c) Purchaser shall have performed all of its covenants, obligations and agreements contained in this Agreement to the extent required to be performed and complied with by the Closing Date. (d) Seller shall have received all certificates, instruments, agreements and other documents to be delivered on or before the Closing Date pursuant to this Agreement. (e) The waiting periods under the HSR Act applicable to the purchase of the Business shall have expired without the initiation of legal action by the FTC or the DOJ. 11. TERMINATION AND SURVIVAL 11.1 Termination. Both of the parties hereto shall use good faith efforts to bring about the satisfaction of the conditions hereunder prior to and at Closing. Notwithstanding anything to the contrary set forth herein, this Agreement may be terminated and the transactions contemplated hereby abandoned at any time prior to the Closing: (a) by mutual written consent of Purchaser and Seller; or (b) by Purchaser or Seller, upon written notice to the other, if such party or its Affiliate has breached any material representation, warranty or covenant contained in this Agreement in any material respect, if the non-breaching party has notified the breaching party of the breach in writing and the breach has continued without cure for a period of thirty (30) days after notice of the breach; or (c) by Purchaser or Seller, upon the earlier of three (3) months from the date hereof or the issuance of a preliminary injunction enjoining the Closing of the transactions contemplated herein. 11.2 Effect of Termination. 39 40 (a) If this Agreement is terminated pursuant to Section 11.1(a) or Section 11.1(c), this Agreement shall become void and of no further force and effect, and neither of the parties hereto (nor their respective Affiliates, directors, shareholders, officers, employees, agents, consultants, attorneys-in-fact or other representatives) shall have any liability in respect of such termination. (b) If this Agreement is terminated pursuant to Section 11.1(b), then subject to Section 15.17, the nonbreaching party shall be entitled to receive reimbursement from the breaching party for all reasonable fees, costs and expenses (including legal and accounting) incurred by the non-breaching party in connection with this Agreement and the transactions contemplated hereby. 12. CLOSING DOCUMENTS 12.1 Documents to be Delivered by Seller. At the Closing, Seller shall deliver to Purchaser the following documents: (i) Copies of resolutions of Seller certified by a Secretary, Assistant Secretary or other appropriate officer of Seller, authorizing the execution, delivery and performance of this Agreement and the transactions contemplated hereby; (ii) Duly executed bills of sale and assignments in the forms attached as Schedule 1.4.1 and such other appropriate instruments of transfer with respect to all of the Assets not transferred or assigned by any other documents or instruments described in this Section; (iii) Duly executed and acknowledged deed in the form attached as Schedule 1.4.2 and such other appropriate instruments of transfer with respect to the Real Property; (iv) Duly executed and acknowledged assignments sufficient to transfer title to the Intellectual Property; (v) Duly executed License in the form attached as Schedule 1.3(f); 40 41 (vi) Duly executed assignment and assumption agreement with respect to the Assumed Liabilities in the form attached as Schedule 1.4.1; (vii) Duly executed Lease Agreements in the forms attached as Schedules 1.5.1 and 1.5.2; (viii) Duly executed documents of assignment or transfer with respect to each of the transferable Permits and Licenses listed in Schedule 4.17; (ix) A certificate of an appropriate officer of Seller relating to the representations, warranties and covenants of Seller made herein as provided in Section 10.1(b) and (c); (x) Duly executed Toll Agreement in the form attached hereto as Schedule 7; (xi) Intentionally Omitted; (xii) The Title Policy; and (xiii) Any other documents reasonably necessary to effectuate the transactions contemplated hereby. 12.2 Documents to be Delivered by Purchaser. At the Closing, Purchaser shall pay the Purchase Price to Seller by wire transfer and shall duly execute, where applicable, and deliver to Seller the following documents: (i) Copies of resolutions of the Purchaser, certified by the Secretary or Assistant Secretary of Purchaser, authorizing the execution, delivery and performance of this Agreement and the transactions contemplated hereby; (ii) Duly executed assignment and assumption agreement with respect to the Assumed Liabilities in the form attached as Schedule 1.4.1; 41 42 (iii) Duly executed Lease Agreements in the forms attached as Schedules 1.5.1 and 1.5.2; (iv) A certificate of an appropriate officer of Purchaser relating to the representations, warranties and covenants made herein by Purchaser, as provided in Sections 10.2(b) and (c); (v) Duly executed Toll Agreement in the form attached hereto as Schedule 7; (vi) Intentionally Omitted; (vii) Duly executed License in the form attached as Schedule 1.3(f); and (viii) Any other documents reasonably necessary to effectuate the transactions contemplated hereby. 13. POST CLOSING OBLIGATIONS 13.1 Further Assurances. From time to time after the Closing, without further consideration, the parties shall cooperate with each other and shall execute and deliver instruments of transfer or assignment, or such other documents to the other party as such other party reasonably may request to evidence or perfect Purchaser's right, title and interest to the Assets, and otherwise carry out the transactions contemplated by this Agreement. Recordation of any such instruments shall be at the sole expense of Purchaser. 13.2 Access to Books and Records. After the Closing, Purchaser shall permit Seller, at Seller's sole expense, to have access to and the right to make copies of such of Seller's books, records and files as constitute part of the Assets for any reasonable purpose at any time during regular business hours, such as for use in litigation or financial reporting, tax return preparation, or tax compliance matters. Prior to disposing of or destroying any such information or records after the Closing Date, Purchaser shall afford Seller a reasonable opportunity to segregate, remove or copy such books, records and files as Seller may select. Purchaser shall not be required to retain such 42 43 books, records and files beyond the expiration of any applicable statute of limitations, including extensions thereof. 13.3 Cooperation in Litigation. The parties shall reasonably cooperate with each other at the requesting party's expense in the prosecution or defense of any litigation or other proceeding arising from or relating to the operation of the Business. 13.4 Proprietary Information. Prior to the Closing Date, the Business was routinely supplied copies of proprietary and confidential information relating to strategic, technical, and/or marketing plans of Seller and its Affiliates and their various operations. Although Seller has attempted to recover such information from the Business, some may still be present within the Business. Purchaser therefore agrees that it will not use such information for any purpose whatsoever, and shall destroy any remaining copies. 14. INDEMNIFICATION 14.1 Indemnification by Seller and Parent. Seller and Parent (collectively and individually referred to hereinafter in this Article 14 as "Seller" unless otherwise expressly provided), jointly and severally, shall defend, indemnify and hold harmless Purchaser and Purchaser's directors, shareholders, officers, employees, agents, Affiliates, successors and assigns from and against any and all claims, liabilities, obligations, losses, costs, expenses (including, without limitation, interest, penalties and reasonable attorneys' fees), fines, or damages of any kind or nature (individually a "LOSS" and collectively "LOSSES"), as a result of, or based upon or arising out of: (a) any breach or violation by Seller of any of the covenants made by Seller in this Agreement or any agreement, certificate or similar document delivered pursuant hereto; (b) any breach of, or any inaccuracy or misrepresentation in, any of the representations or warranties made by Seller in this Agreement or in any Schedule, agreement, instrument, certificate or similar document required to be delivered pursuant to the terms hereof; 43 44 (c) all Losses resulting from the assertion of claims made against the Assets sold hereunder or against Purchaser by creditors of Seller under any applicable bulk transfer law, including, but not limited to, the bulk transfer provisions of the Uniform Commercial Code of any state, or any similar statute, with respect to the transactions contemplated hereby; provided, that this Subsection shall in no event apply to Losses resulting from the assertion of claims included in the Assumed Liabilities; or (d) any and all Excluded Liabilities (other than Environmental Excluded Liabilities), it being understood that neither the Hazardous Substances referred to in the last sentence of Section 14.2(e)(B) which may have been present prior to the Closing Date, nor Purchaser's obligations under that provision with respect thereto, are intended to or shall be deemed to constitute an Excluded Liability; (e) any and all of the following: (A) the alleged or actual violation of any Environmental Law prior to the Closing or subsequent to the Closing to the extent the violation is a continuation of a violation that existed as of the Closing, provided that Purchaser gives Seller a Notice of Claim (as hereinafter defined) with respect to such continuing violation within two (2) years after the Closing Date in which event the procedures set forth in Schedule 14.1(e)(A) attached hereto shall apply; (B) the presence, at any time on or prior to the Closing Date, of Hazardous Substances on or in the soil, groundwater or surface water at the Real Property or at any property or facility used in connection with the Business (including any property or facility at which any Hazardous Substances were disposed or treated), which presence constitutes an Environmental Condition as of the Closing Date or which becomes an Environmental Condition after the Closing Date due to a change in Environmental Laws. 44 45 14.1.1 Limitation on Environmental Indemnification. Notwithstanding the foregoing, Seller's obligation to Purchaser with respect to any Losses as a result of, or based upon or arising out of the circumstances described in Section 14.1(e) shall be limited to (i) third party claims, (ii) performance of investigation and remediation activities, (iii) reimbursement of or payment of out-of-pocket costs Purchaser may incur in connection with investigation or remediation activities or activities required to bring into compliance a continuing violation of an Environmental Law existing as of the Closing, and (iv) in the event any required investigation or remediation activities in respect of a Notice of Claim given to Seller during the three (3) year period following the Closing, or any compliance activities in respect of a Notice of Claim given to Seller pursuant to Section 14.1(e)(A) during the two (2) year period following the Closing, shall limit or shut down Purchaser's manufacturing operations, fifty percent (50%) of any profits Purchaser can reasonably establish that it lost as a result of such limitation on its manufacturing of Products for sale, provided that in no event will Seller's obligation with respect to such lost profits exceed $3,000,000 in the aggregate. It is understood that Seller shall not be required to indemnify Purchaser for any lost profits which Purchaser may claim as a result of delays or changes in implementation of any of Purchaser's expansion plans due to the performance of required investigation or remediation or compliance activities. In no event will Seller be required to conduct remediation to standards more strict than those then required by applicable governmental entities for a manufacturing operation conducted at the Transferred Facilities similar to the Business as conducted as of the Closing Date. 14.2 Indemnification by Purchaser. Purchaser shall indemnify and hold harmless Seller, Parent and their respective directors, stockholder, officers, employees, agents, consultants, representatives, Affiliates, successors and assigns from and against any and all Losses, as a result of, or based upon or arising out of: (a) any breach or violation by Purchaser of any of the covenants made by Purchaser in this Agreement or any agreement, certificate or similar document delivered pursuant hereto; 45 46 (b) any breach of, or any inaccuracy in any of the representations or warranties made by Purchaser in this Agreement, or in any Schedule, agreement, certificate, instrument or similar documents required to be delivered pursuant to the terms hereof; (c) any Assumed Liability; (d) the operation of the Business by Purchaser after the Closing Date except to the extent otherwise the obligation or responsibility of Seller under this Agreement or otherwise covered by Section 14.2(e) or (f); (e) any and all of the following: (A) the alleged or actual violation by the Business of any Environmental Law subsequent to the Closing, unless such violation existed on or prior to the Closing and falls within Seller's indemnification obligation under Section 14.1(e)(A), and (B) the release or deposit, at any time subsequent to the Closing, of Hazardous Substance(s) onto or into the soil, groundwater or surface water at the Real Property or at any property or facility (excluding Seller's Lacrosse, WI property and facility) used in connection with the Business (including any property or facility at which any Hazardous Substances were disposed or treated), unless the release or deposit does not materially increase the cost of investigating or remediating an Environmental Condition for which Seller is obligated to indemnify Purchaser pursuant to Section 14.1(e), provided that, if such release or deposit does materially increase the cost of investigating or remediating an Environmental Condition for which Seller is obligated to indemnify Purchaser pursuant to Section 14.1(e), the cost of investigation and remediation shall be equitably allocated between Seller and Purchaser taking into consideration their relative contributions to the condition. (For the purposes of this subsection, an additional cost shall be "material" if it adds more than $75,000 to the cost 46 47 of the investigation or remediation.) In the event such release or deposit subsequent to the Closing gives rise to an Environmental Condition which did not exist prior to such release or deposit, it is agreed that Purchaser shall be responsible for the entire cost of investigating and remediating such Environmental Condition, including any Hazardous Substances comprising a portion of the Environmental Condition, regardless of whether such Hazardous Substances were present prior to the Closing Date; or (f) Purchaser's hiring practices in connection with its compliance with Section 6.1(a) to the extent arising from claims by any employee listed in Schedule 6.1(a)(1) that Purchaser and/or Seller unlawfully discriminated against such employee in connection with Purchaser's hiring decisions on the basis of such employee's age, race, gender, religion or other legally protected classification. 14.2.1 Limitation on Environmental Indemnification. Notwithstanding the foregoing, Purchaser's obligation to Seller with respect to any Losses as a result of, or based upon or arising out of the circumstances described in Section 14.2(e) shall be limited to (i) third party claims, (ii) performance of investigation and remediation activities, and (iii) reimbursement of or payment of out-of-pocket costs Seller may incur in connection with investigation or remediation activities or activities required to bring into compliance a violation of an Environmental Law subsequent to the Closing. In no event will Purchaser be required to conduct remediation to standards more strict than those then required by applicable governmental entities for a manufacturing operation conducted at the Transferred Facilities similar to the Business as conducted as of the Closing Date. 14.3 Indemnification Procedure. (a) Any party seeking indemnification hereunder (the "INDEMNITEE") shall notify the party liable for such indemnification (the "INDEMNITOR") in writing of any event, omission or occurrence which the Indemnitee has determined has given or could give rise to Losses which are indemnifiable hereunder (such written notice being 47 48 hereinafter referred to as a "NOTICE OF CLAIM"); provided, that a Notice of Claim in respect of any action at law or suit in equity by or against a third person as to which indemnification will be sought shall be given promptly after the action or suit is commenced. A Notice of Claim shall specify in reasonable detail the nature and any particulars of the event, omission or occurrence giving rise to a right of indemnification. Neither the failure of any Indemnitee to give notice as provided in this Section 14.3 nor any defect or error in the notices given shall relieve the Indemnitor of its obligations under this Section 14.3, except to the extent that the Indemnitor is actually prejudiced by such failure, defect or error. After the giving of a Notice of Claim pursuant hereto, the amount of indemnification to which an Indemnitee shall be entitled shall be determined: (i) by the written agreement between the Indemnitee and the Indemnitor; (ii) by a judgment or decree of any court of competent jurisdiction; or (iii) by any other means to which the Indemnitee and the Indemnitor shall agree. (b) The Indemnitor shall have the right to conduct and control, through counsel of its choosing reasonably acceptable to the Indemnitee, the defense, compromise or settlement of any third person claim, action or suit against such Indemnitee as to which indemnification is sought by any Indemnitee from any Indemnitor hereunder, provided that the Indemnitor (i) has acknowledged and agreed in writing, within 14 days after the giving of a Notice of Claim or such shorter period as may be required to avoid any prejudice to the right of the Indemnitee, that, if the same is adversely determined, the Indemnitor has an obligation to provide indemnification to the Indemnitee in respect thereof and (ii) diligently and timely defends against such claim, action or suit. In any such case the Indemnitee shall cooperate in connection therewith and shall furnish such records, information and testimony and attend such conferences, discovery proceedings, hearings, trials and appeals as may be reasonably requested by the Indemnitor in connection therewith; provided, that the Indemnitor shall not, without the written consent of the Indemnitee (which consent shall not be withheld unreasonably) compromise or settle any such claim, action or suit. The Indemnified 48 49 Party shall have the right to employ separate counsel in any claim, action or suit and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of the Indemnitee unless (i) the Indemnitor has agreed in writing to pay such fees and expenses, (ii) the Indemnitor has failed to assume the defense and employ counsel, or (iii) the named parties to any such claim, action or suit (including any impleaded parties) include both the Indemnitor and the Indemnitee and the Indemnitee shall have been advised in writing by its counsel that representation of the Indemnitor and the Indemnitee by the same counsel would be inappropriate under applicable standards of professional conduct (whether or not such representation by the same counsel has been proposed) due to actual or potential differing conflicts of interest between them (in which case the Indemnitor shall not have the right to assume the defense of such claim, action or suit on behalf of the Indemnitee). (c) In the event Purchaser gives Seller a Notice of Claim for indemnification under Section 14.1(e), Seller shall notify Purchaser within ninety (90) days of Seller's receipt of the Notice of Claim whether or not Seller intends to conduct the required remediation and investigation activities. During such ninety (90) day period, Purchaser shall permit Seller and its consultants reasonable access to the relevant property for the purposes of determining whether or not Seller agrees with the claim. In the event a governmental authority requires action more quickly, Seller and Purchaser will cooperate with each other in good faith in order to negotiate a schedule reasonably acceptable to the governmental authority. Seller shall have the right to reasonably conduct and shall have reasonable control over any and all investigation and remediation activities that it undertakes, provided that Seller diligently and timely commences and performs such activities. Prior to the commencement of any such activities on the Real Property, Seller shall provide to Purchaser for its review and approval, which approval shall not unreasonably be withheld, the following: (i) a work plan setting forth in reasonable detail the work to be performed; and 49 50 (ii) reasonably satisfactory evidence that Seller maintains, or has caused the party performing the work to maintain, insurance reasonably required by Purchaser (provided that such insurance is available at reasonable cost), naming Purchaser as an additional insured. Seller shall provide to Purchaser copies of all reports, studies and sampling results, and drafts thereof, prepared with respect to the work and the Environmental Condition when and as such reports, studies or results become available. 14.(jjjj) In connection with the performance of any such investigation or remediation activities, Purchaser shall provide Seller and its representatives with access to the Transferred Facilities, and shall cooperate with all reasonable requests of Seller, provided that Seller shall reimburse Purchaser for reasonable out-of-pocket costs incurred as a result of providing such assistance. (e) Seller shall use reasonable efforts to minimize any interference with the business operations of Purchaser and shall not materially interfere with such operations unless (y) no reasonable alternative action is available that would cause less interference, and (z) the proposed action or alternative action must be taken to satisfy a requirement of a governmental entity to investigate or remediate an Environmental Condition. 14.4 Limitation on Certain Claims. Anything to the contrary contained herein notwithstanding, (i) no party shall assert any claim against the other for indemnification hereunder with respect to any Losses unless and until the amount of such Losses or claims recoverable by the claiming party shall exceed $200,000 calculated on a cumulative basis and not a per item basis, and then only in respect to the excess over said amount; provided, however, any Losses which arise pursuant to Sections 14.1(c), (d) or (e) or 14.2(c), (d), (e) or (f) shall not be subject to the $200,000 minimum set forth in this Section 14.4; and (ii) neither Purchaser nor Seller shall be entitled to recover from the other party more than an aggregate of 50 51 $17,000,000 with respect to all claims for indemnity or damages in respect of matters for which it is entitled to be indemnified under (x) Sections 14.1(a), (b) or (c) in the case of Purchaser, and (y) Sections 14.2(a) or (b) in the case of Seller, whether such claims are brought under this Article 14 or otherwise. 14.5 Term. This Article 14 shall survive the Closing and shall remain in effect as follows: (i) as to any indemnification obligation arising pursuant to Sections 14.1(a) or (b) or 14.2(a) or (b), this Article 14 shall survive the Closing, and shall remain in effect for a period of two (2) years after the Closing, (ii) as to any indemnification obligation arising pursuant to Sections 14.1(e) or 14.2(e), this Article 14 shall remain in effect for a period of twenty (20) years after the Closing, and (iii) as to any indemnification obligation arising pursuant to Sections 14.1(c) or (d) or 14.2(c), (d) or (f), this Article 14 shall remain in effect indefinitely. The expiration of indemnity obligations under Article 14 shall not be deemed to constitute an assumption of liability by the party to whom the obligation ran or a waiver by such party of any other right or claim. 15. MISCELLANEOUS 15.1 Expenses. Except as specifically set forth elsewhere herein, each of the parties hereto shall pay its own expenses and costs incurred or to be incurred by it in negotiating, closing and carrying out this Agreement. In the event of any action for the breach of this Agreement or misrepresentation by any party, the prevailing party shall be entitled to reasonable attorney's fees, costs and expenses incurred in such action. 15.2 Notices. Any notice or communication given pursuant to this Agreement by a party hereto to the other party shall be in writing and hand delivered, or mailed by registered or certified mail, postage prepaid, return receipt requested (notices so mailed shall be deemed effective on the third day after mailing), or sent via facsimile (notices so transmitted shall be deemed effective upon transmission), with an original mailed as follows: If to Seller: 51 52 AlliedSignal Laminate Systems Inc. c/o AlliedSignal Inc. 101 Columbia Road Morristown, New Jersey 07962 Attention: Vice President and General Counsel Engineered Materials Fax No.: (201) 455-6840 If to Purchaser: Furon Company 29982 Ivy Glenn Drive Laguna Niguel, California 92677 Attention: Chairman of the Board and General Counsel Fax No.: (714) 363-6276 15.3 Confidentiality. Seller and Purchaser have entered into a Confidentiality Agreement dated March 8, 1995, which notwithstanding any provision herein to the contrary shall survive the execution and delivery of this Agreement and any termination of this Agreement, but shall expire upon the consummation of the Closing and thereafter be of no further force or effect. 15.4 Post Closing Services. Seller agrees that following the Closing Date Seller will continue to provide those services set forth on Schedule 15.4 for the periods specified in Schedule 15.4, provided, however that Purchaser and Seller shall agree on a fee to be paid to Seller which fully compensates for all its costs in providing such services including wage and expenses of Seller's employees and allocable overhead, and terms for the provision of such services. 15.5 Counterparts. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 15.6 Entire Agreement. Except for the Confidentiality Agreement referred to in Section 15.3, this Agreement is the 52 53 entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior communication, representations, agreements and understandings between the parties hereto, whether oral or written, including, without limitation, any financial or other projections or predictions regarding the Seller or the Business. 15.7 Construction. When the context so requires, references herein to the singular number include the plural and vice versa and pronouns in the masculine or neuter gender include the feminine. The headings contained in this Agreement and the tables of contents, exhibits and schedules are for reference purposes only and shall not affect the meaning or interpretation of this Agreement. 15.8 Assignment. This Agreement may not be assigned without the prior written consent of the other party hereto, which consent shall not unreasonably be withheld. 15.9 Amendment. This Agreement may be amended only by written agreements duly executed by representatives of both of the parties hereto. 15.10 Applicable Law. This Agreement shall be construed in accordance with the laws of the State of New York, disregarding its conflicts of laws principles which may require the application of the laws of another jurisdiction. 15.11 Failure to Close. If for any reason this Agreement is terminated prior to Closing, Purchaser shall promptly upon the request of Seller return to Seller all documents and other information (and notes made therefrom), including all originals and all copies thereof, theretofore delivered to Purchaser by or on behalf of Seller. Purchaser shall in any case comply with the terms of the Confidentiality Agreement referred to in Section 15.3. 15.12 No Third Party Rights. This Agreement is not intended and shall not be construed to create any rights in any parties other than Seller and Purchaser and no other person shall assert any rights as a third party beneficiary hereunder. 53 54 15.13 Schedules. Schedules attached hereto are incorporated into this Agreement and shall be deemed a part hereof as if set forth herein in full. References herein to "this Agreement" and the words "herein," "hereof" and words of similar import refer to this Agreement (including Schedules) as an entirety. In the event of any conflict between the provisions of this Agreement and any such Schedule, the provisions of this Agreement shall control. 15.14 Waivers. Any waiver of rights hereunder must be set forth in writing. A waiver of any breach or failure to enforce any of the terms or conditions of this Agreement shall not in any way affect, limit or waive either party's rights at any tine to enforce strict compliance thereafter with every term or condition of this Agreement. 15.15 Severability. If and to the extent that any court of competent jurisdiction holds any provisions (or any part thereof) of this Agreement to be invalid or unenforceable, such holding shall in no way affect the validity of the remainder of this Agreement. 15.16 Remedies Cumulative. Except with respect to remedies for the breach of representations and warranties and except for the limitations on recovery of damages set forth in Sections 14.1.1, 14.2.1 and 14.4, all rights and remedies existing under this Agreement are cumulative to, and not exclusive of, any rights or remedies otherwise available and Article 14 shall not be deemed to preclude or otherwise limit in any way the exercise of any such other rights or pursuit of other remedies. 15.17 Specific Performance. Seller and Purchaser each acknowledge that, in view of the uniqueness of the Business and the transactions contemplated by this Agreement, each party would not have an adequate remedy at law for money damages in the event that this Agreement has not been performed in accordance with its terms, and therefore agrees that the other party shall be entitled to specific enforcement of the terms hereof in addition to any other remedy to which it may be entitled, at law or in equity. 54 55 [SIGNATURES ON FOLLOWING PAGE] 55 56 IN WITNESS WHEREOF, Seller and Purchaser have duly executed and delivered this Agreement as of the day and year first above written. "SELLER" AlliedSignal Laminate Systems Inc., a Delaware corporation By: /S/STANLEY R. STEVINSON --------------------------------------- Name: Stanley R. Stevinson Title: --------------------------------- "PARENT" AlliedSignal Inc., a Delaware corporation By: /S/DANIEL K. CLIFT --------------------------------------- Name: Daniel K. Clift Title: --------------------------------- "PURCHASER" Furon Company, a California corporation By: /S/J. MICHAEL HAGAN --------------------------------------- Name: J. Michael Hagan Title: --------------------------------- 57 ASSET PURCHASE AGREEMENT BY AND AMONG FURON COMPANY, AS PURCHASER, ALLIEDSIGNAL LAMINATE SYSTEMS, INC., AS SELLER, AND ALLIEDSIGNAL INC., AS PARENT DATED AS OF NOVEMBER 9, 1995 58 TABLE OF CONTENTS
Page ---- ARTICLE 1. PURCHASE AND SALE................................................................................... 1 1.1 Purchase and Sale........................................................................ 1 1.2 Non-Assignable Assets.................................................................... 3 1.3 Excluded Assets.......................................................................... 3 1.4 Transfer of Title to the Assets.......................................................... 4 1.5 Lease Agreement.......................................................................... 5 ARTICLE 2. PURCHASE PRICE...................................................................................... 5 2.1 Purchase Price........................................................................... 5 2.2 Post-Closing Adjustment.................................................................. 5 2.3 Payments................................................................................. 7 2.4 Allocation of Purchase Price............................................................. 7 ARTICLE 3. ASSUMPTION OF LIABILITIES AND OBLIGATIONS........................................................... 8 3.1 Assumed Liabilities...................................................................... 8 3.2 Excluded Liabilities..................................................................... 9 ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF SELLER............................................................ 10 4.1 Corporate Status......................................................................... 10 4.2 Authorization............................................................................ 10 4.3 Compliance............................................................................... 11 4.4 Financial Statements; Changes............................................................ 11 4.5 Condition of Property; Sufficiency of Assets............................................. 12 4.6 Intellectual Property.................................................................... 12 4.7 Contracts................................................................................ 13 4.8 Title to Assets.......................................................................... 14 4.9 Litigation............................................................................... 14 4.10 Environmental Matters.................................................................... 14 4.11 Employee Benefit Plans and Policies...................................................... 15 4.12 Employees................................................................................ 15 4.13 Undisclosed Liabilities.................................................................. 16 4.14 Compliance with Law...................................................................... 16 4.15 Consents................................................................................. 16 4.16 Taxes.................................................................................... 16 4.17 Permits and Licenses..................................................................... 17 4.18 Real Property............................................................................ 17 4.19 No Brokers or Finders.................................................................... 18 4.20 Product Warranty......................................................................... 18
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Page ---- 4.21 Intercompany Payables.................................................................... 18 4.22 Construction of Certain Provisions....................................................... 18 4.23 No Additional Representations............................................................ 19 ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF PURCHASER......................................................... 19 5.1 Corporate Status......................................................................... 19 5.2 Authorization............................................................................ 19 5.3 Compliance............................................................................... 19 5.4 Financing................................................................................ 20 5.5 No Brokers or Finders.................................................................... 20 5.6 Consents................................................................................. 20 ARTICLE 6. COVENANTS........................................................................................... 20 6.1 Employment............................................................................... 20 6.2 Non-Solicitation......................................................................... 21 6.3 COBRA Coverage........................................................................... 22 6.4 WARN Act................................................................................. 22 6.5 Welfare and Pension Benefit Plans........................................................ 22 6.6 Title Insurance.......................................................................... 22 6.7 Seller's Covenant Not to Compete......................................................... 23 6.8 Tax Returns; Taxes....................................................................... 24 6.9 Preservation of Confidentiality.......................................................... 25 6.10 Removal of Underground Storage Tanks..................................................... 26 6.11 Removal of Certain Assets................................................................ 26 6.12 Environmental Reports.................................................................... 26 6.13 Intercompany Receivables and Payables.................................................... 27 6.14 Health and Safety Operational Issues..................................................... 27 ARTICLE 7. TOLL AGREEMENT...................................................................................... 28 ARTICLE 8. PRE-CLOSING COVENANTS............................................................................... 28 8.1 Conduct of Business...................................................................... 28 8.2 Access to Records and Properties......................................................... 29 8.3 Consents................................................................................. 29 8.4 Public Announcements..................................................................... 30 ARTICLE 9. CLOSING............................................................................................. 30 9.1 Closing Date and Place................................................................... 30 ARTICLE 10. CONDITIONS TO CLOSING.............................................................................. 30 10.1 Conditions to the Obligations of Purchaser............................................... 30 10.2 Conditions to the Obligations of Seller.................................................. 31
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Page ---- ARTICLE 11. TERMINATION AND SURVIVAL........................................................................... 32 11.1 Termination.............................................................................. 32 11.2 Effect of Termination.................................................................... 32 ARTICLE 12. CLOSING DOCUMENTS.................................................................................. 32 12.1 Documents to be Delivered by Seller...................................................... 32 12.2 Documents to be Delivered by Purchaser................................................... 33 ARTICLE 13. POST CLOSING OBLIGATIONS.......................................................................... 34 13.1 Further Assurances....................................................................... 34 13.2 Access to Books and Records.............................................................. 34 13.3 Cooperation in Litigation................................................................ 35 13.4 Proprietary Information.................................................................. 35 ARTICLE 14. INDEMNIFICATION.................................................................................... 35 14.1 Indemnification by Seller and Parent..................................................... 35 14.1.1 Limitation on Environmental Indemnification.............................................. 36 14.2 Indemnification by Purchaser............................................................. 37 14.2.1 Limitation on Environmental Indemnification.............................................. 38 14.3 Indemnification Procedure................................................................ 38 14.4 Limitation on Certain Claims............................................................. 41 14.5 Term..................................................................................... 41 ARTICLE 15. MISCELLANEOUS...................................................................................... 41 15.1 Expenses................................................................................. 41 15.2 Notices.................................................................................. 42 15.3 Confidentiality.......................................................................... 42 15.4 Post Closing Services.................................................................... 42 15.5 Counterparts............................................................................. 42 15.6 Entire Agreement......................................................................... 43 15.7 Construction............................................................................. 43 15.8 Assignment............................................................................... 43 15.9 Amendment................................................................................ 43 15.10 Applicable Law........................................................................... 43 15.11 Failure to Close......................................................................... 43 15.12 No Third Party Rights.................................................................... 43 15.13 Schedules................................................................................ 43 15.14 Waivers.................................................................................. 44 15.15 Severability............................................................................. 44 15.16 Remedies Cumulative...................................................................... 44 15.17 Specific Performance..................................................................... 44
iii 61 SCHEDULES Schedule A Products Schedule l.1(b) Fluorglas Microwave Business Accounts Receivable Schedule 1.1(h) Excluded Prepaid Expenses Schedule 1.3(f) License Agreement Schedule 1.3(h) Certain Excluded Assets Schedule 1.4.1 Forms of Assignment Documents Schedule 1.4.2 Form of Deed Schedule 1.5.1 Form of River Road Lease Agreement Schedule 1.5.2 Form of John Street Lease Agreement Schedule 2.2(a) Exclusions from the Reference Statement of Assets and Liabilities Schedule 2.2(b) Closing Statement of Assets and Liabilities Preparation Method Schedule 4.4(a)(1) Financial Statements Schedule 4.4(a)(2) Exceptions in Financial Statements Schedule 4.4(b) Material Changes Schedule 4.5(a) Personal Property Schedule 4.5(b) Excluded Necessary Assets Schedule 4.6(a) Intellectual Property Exclusively Used in Business Schedule 4.6(b) Dual Use Intellectual Property Schedule 4.6(c) Intellectual Property Claims Schedule 4.7 Contracts Schedule 4.8 Liens and Encumbrances Schedule 4.9 Litigation and Proceedings Schedule 4.10 Environmental Information Schedule 4.11 Benefit Plans Schedule 4.12 Employee Information & Claims Schedule 4.13 Undisclosed Liabilities Schedule 4.14 Compliance with Law Schedule 4.15 Consents Schedule 4.17 Permits and Licenses Schedule 4.18(a)(i) Facilities Schedule 4.18(a)(ii) Leased Property Schedule 4.18(b) Exceptions to Use of Transferred Facilities Schedule 4.18(c) Title Commitment; Title Exceptions iv 62 Schedule 4.22 Direct Reports Schedule 5.6 Purchaser Consents Schedule 6.1(a)(1) Non-Transferring Employees Schedule 6.1(d) Retention Bonus Agreements Schedule 6.2 High-level Salaried Employees Schedule 6.10 Location of Tanks Schedule 6.14 Health and Safety Memorandum Schedule 7 Form of Toll Agreement Schedule 14.1(e)(A) Continuing Violation Procedures Schedule 15.4 Post-Closing Services v EX-11 5 STATEMENT OF COMPUTATION OF NET INCOME PER SHARE 1 EXHIBIT 11 FURON COMPANY COMPUTATION OF NET INCOME PER SHARE
YEARS ENDED --------------------------------------------------------- FEBRUARY 3, JANUARY 28, JANUARY 29, 1996 1995 1994 --------------------------------------------------------- PRIMARY INCOME PER SHARE Earnings Net income $ 13,169,000 $ 11,438,000 $ 8,170,000 ============== ============== ============ Shares Weighted average number of common shares outstanding 8,821,297 8,674,135 8,615,289 Shares issuable from assumed exercise of stock options 218,965 318,791 243,911 --------------- -------------- ------------ Average shares as adjusted 9,040,262 8,992,926 8,859,200 ============== ============== ============ Primary income per share $ 1.46 $ 1.27 $ 0.92 ============== ============== ============ FULLY DILUTED INCOME PER SHARE Earnings Net income $ 13,169,000 $ 11,438,000 $ 8,170,000 ============== ============== ============ Shares Weighted average number of common shares outstanding 8,821,297 8,674,135 8,615,289 Shares issuable from assumed exercise of stock options 220,961 443,300 243,911 --------------- -------------- ------------ Average shares as adjusted for full dilution 9,042,258 9,117,435 8,859,200 ============== ============== ============ Fully diluted income per share $ 1.46 $ 1.25 $ 0.92 ============== ============== ============
50 EX-21 6 SUBSIDIARIES OF THE REGISTRANT 1 EXHIBIT 21 Furon Company Significant and Certain Other Subsidiaries February 3, 1996 State or Other Jurisdiction of Name of Subsidiary * Incorporation or Organization - -------------------- ----------------------------- Bunnell Plastics, Inc. New Jersey CHR Industries, Inc. Connecticut Dixon Industries Corporation Rhode Island Fluorocarbon Components, Inc. New York Fluorocarbon Foreign Sales Corporation Barbados Furon B.V. Netherlands Furon Europe, S.A. Belgium Furon Limited England Furon Seals N.V./S.A. Belgium Furon S.A. Belgium Sepco Corporation California - --------------- * Each of Furon Company's domestic subsidiaries is a general business corporation with a wholly owned domestic subsidiary. 50 EX-23 7 CONSENT OF INDEPENDENT AUDITORS 1 EXHIBIT 23 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statement, as amended (Form S-8 No. 33-54031), pertaining to the Furon Company 1982 Stock Incentive Plan and related Prospectus and in the Registration Statement, as amended (Form S-8 No. 2-93028), pertaining to the Furon Company Employees' Profit-Sharing/Retirement Plan and related Prospectus and in the Registration Statement, as amended (Form S-8 No. 33-55535), pertaining to the Furon Company Employee Stock Purchase Plan and related Prospectus and in the Registration Statement, as amended (Form S-8 No. 33-53987), pertaining to the Furon Company 1993 Non-Employee Directors' Stock Compensation Plan and related Prospectus of our report dated March 8, 1996, with respect to the consolidated financial statements and schedule of Furon Company included in the Annual Report (Form 10-K) for the year ended February 3, 1996. ERNST & YOUNG LLP Orange County, California March 21, 1996 51 EX-27 8 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S CONSOLIDATED STATEMENTS OF INCOME, CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS CONTAINED WITHIN THE COMPANY'S FORM 10-K FOR THE YEAR ENDED FEBRUARY 3, 1996. 1,000 U.S. DOLLARS YEAR FEB-03-1996 FEB-03-1996 1,000 0 0 53,048 1,367 39,827 102,053 147,745 68,093 211,484 41,349 0 37,575 0 0 65,307 211,484 344,886 344,886 249,102 327,439 (3,866) 724 2,899 18,414 5,245 13,169 0 0 0 13,169 1.46 1.46
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