-----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, AHUepHd18FmGnRFHoaQ5p5SrMGxhbSCxet5B2TAs1YlE+HFgjiW5VJtgVgV+j9ou SN5EybP494KzULgd6xMXPw== 0000912057-97-025147.txt : 19970729 0000912057-97-025147.hdr.sgml : 19970729 ACCESSION NUMBER: 0000912057-97-025147 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 26 FILED AS OF DATE: 19970728 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: WAVETEK CORP CENTRAL INDEX KEY: 0001043015 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 330457664 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-32195 FILM NUMBER: 97646234 BUSINESS ADDRESS: STREET 1: 11995 EL CAMINO REAL STREET 2: STE 301 CITY: SAN DIEGO STATE: CA ZIP: 92130 BUSINESS PHONE: 6197932300 MAIL ADDRESS: STREET 1: 11995 EL CAMINO REAL STREET 2: STE 301 CITY: SAN DIEGO STATE: CA ZIP: 92130 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WAVETEK U S INC CENTRAL INDEX KEY: 0000700839 STANDARD INDUSTRIAL CLASSIFICATION: INSTRUMENTS FOR MEAS & TESTING OF ELECTRICITY & ELEC SIGNALS [3825] IRS NUMBER: 952263080 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-32195-01 FILM NUMBER: 97646235 BUSINESS ADDRESS: STREET 1: 11995 EL CAMINO REAL STREET 2: STE 301 CITY: SAN DIEGO STATE: CA ZIP: 92130 BUSINESS PHONE: 6197932300 MAIL ADDRESS: STREET 1: 11995 EL CAMINO REAL STREET 2: STE 301 CITY: SAN DIEGO STATE: CA ZIP: 92130 FORMER COMPANY: FORMER CONFORMED NAME: WAVETEK CORP/DE/ DATE OF NAME CHANGE: 19920703 S-4 1 S-4 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 28, 1997 REGISTRATION NO. 333- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------------------- FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ WAVETEK CORPORATION AND WAVETEK U.S. INC. (Exact name of registrants as specified in their charters) DELAWARE 3825 33-0457664 (WAVETEK CORPORATION) (State or other jurisdiction (Primary Standard Industrial 95-2263080 of Classification code number) (WAVETEK U.S. incorporation or organization) INC.) (I.R.S. Employer Identification Numbers)
11995 EL CAMINO REAL, SUITE 301 SAN DIEGO, CA 92130 (619) 793-2300 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) VICKIE L. CAPPS WAVETEK CORPORATION 11995 EL CAMINO REAL, SUITE 301 SAN DIEGO, CA 92130 (619) 793-2300 (Name, address, including zip code, and telephone number, including area code, of agent for service) -------------------------- WITH A COPY TO: ALISON S. RESSLER, ESQ. SULLIVAN & CROMWELL 444 SOUTH FLOWER STREET LOS ANGELES, CALIFORNIA 90071 (213) 955-8000 -------------------------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT. If any of the securities to be registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 of the Securities Act of 1933, check the following box. /X/ If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. / / -------------------------- CALCULATION OF REGISTRATION FEE
PROPOSED MAXIMUM AMOUNT OF TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED AGGREGATE OFFERING PRICE REGISTRATION FEE 10 1/8% Senior Subordinated Notes due 2007 of Wavetek Corporation $85,000,000 $29,311 Subsidiary Guarantee of Wavetek U.S. Inc. (1) -- --
(1) No consideration will be received for the Subsidiary Guarantee. -------------------------- THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8 OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8, MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- EXPLANATORY NOTE The Prospectus relating to the New Notes being registered hereby to be used in connection with the Exchange Offer (the "Exchange Offer Prospectus") is set forth following this page. The Prospectus to be used in connection with certain Market-Making Transactions in the New Notes (the "Market-Making Prospectus") will consist of alternate pages set forth following the Exchange Offer Prospectus and the balance of the pages included in the Exchange Offer Prospectus. The Exchange Offer Prospectus and the Market-Making Prospectus are identical except that they contain different front, inside front and back cover pages and different descriptions of the Plan of Distribution (contained under the caption "the Exchange Offer" and "Plan of Distribution" in the Exchange Offer Prospectus and under the caption "Plan of Distribution" in the Market-Making Prospectus). Alternate Pages for the Market-Making Prospectus are separately designated. PROSPECTUS , 1997 $85,000,000 [LOGO] WAVETEK CORPORATION OFFER TO EXCHANGE ITS 10 1/8% SENIOR SUBORDINATED NOTES DUE 2007, WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, FOR ITS OUTSTANDING 10 1/8% SENIOR SUBORDINATED NOTES DUE 2007, WHICH WERE ISSUED AND SOLD IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933.THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 1997, UNLESS EXTENDED. Wavetek Corporation ("Wavetek" or the "Company") hereby offers, upon the terms and subject to the conditions set forth in this Prospectus (as the same may be amended or supplemented from time to time, the "Prospectus") and in the accompanying Letter of Transmittal (which together constitute the "Exchange Offer"), to exchange up to $85,000,000 aggregate principal amount of its 10 1/8% Subordinated Notes due 2007 (the "New Notes"), which have been registered under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to a Registration Statement (as defined herein) of which this Prospectus constitutes a part, for a like principal amount of its outstanding 10 1/8% Senior Subordinated Notes due 2007 (the "Old Notes" and, together with the New Notes, the "Notes"), of which $85,000,000 aggregate principal amount is outstanding. Pursuant to the Exchange Offer, Wavetek Corporation is also exchanging the guarantee by the Subsidiary Guarantors (as defined) of the Old Notes (the "Old Subsidiary Guarantee") for a like guarantee of the New Notes (the "New Subsidiary Guarantee" and, together with the Old Subsidiary Guarantee, the "Subsidiary Guarantees") by the Subsidiary Guarantors. The Company will not receive any cash proceeds from the issuance of the New Notes offered hereby. The terms of the New Notes are identical in all material respects to the respective terms of the Old Notes, except that the New Notes have been registered under the Securities Act and therefore will not be subject to certain restrictions on transfer applicable to the Old Notes and will not be entitled to registration rights. The New Notes will be issued under the indenture governing the Old Notes. For a complete description of the terms of the New Notes, see "Description of Notes." The Old Notes were originally issued and sold on June 11, 1997 in a transaction not registered under the Securities Act in reliance upon the exemption provided in Section 4(2) of, and Rule 144A and Regulation S under, the Securities Act (the "Offering"). Accordingly, the Old Notes may not be offered or sold within the United States or to United States Persons (as such terms are defined under the Securities Act) except pursuant to an exception from, or in a transaction not subject to, the registration requirements of the Securities Act. The Company is making the Exchange Offer in reliance on the position of the staff of the Division of Corporation Finance of the Securities and Exchange Commission (the "Commission") as set forth in certain interpretive letters addressed to third parties in other transactions. Based on these interpretations by the staff of the Division of Corporation Finance, and subject to the two immediately following sentences, the Company believes that New Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be offered for resale, resold and otherwise transferred by a holder thereof (other than a holder who is a broker-dealer) without further compliance with the registration and prospectus delivery requirements of the Securities Act, provided that such New Notes are acquired in the ordinary course of such holder's business and that such holder is not participating, and has no arrangement or understanding with any person to participate, in a distribution (within the meaning of the Securities Act) of such New Notes. However, any holder of Old Notes who is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act (an "Affiliate") or who intends to participate in the Exchange Offer for the purpose of distributing New Notes, or any broker-dealer who purchased Old Notes from the Company to resell pursuant to Rule 144A under the Securities Act ("Rule 144A") or any other available exemption under the Securities Act, (i) will not be able to rely on the interpretations of the staff of the Division of Corporation Finance of the Commission set forth in the above-mentioned interpretive letters, (ii) will not be entitled to tender such Old Notes in the Exchange Offer and (iii) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any sale or other transfer of such Old Notes unless such sale is made pursuant to an exemption from such requirements. In addition, as described below, if any broker-dealer (a "Participating Broker-Dealer") holds Old Notes acquired for its own account as a result of market-making or other trading activities and exchanges such Old Notes for New Notes, then such Participating Broker-Dealer must deliver a prospectus meeting the requirements of the Securities Act in connection with any resales of such New Notes. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a Participating Broker-Dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. Based on the position taken by the staff of the Division of Corporation Finance of the Commission in the interpretive letters referred to above, the Company believes that Participating Broker-Dealers may fulfill their prospectus delivery requirements with respect to the New Notes received upon exchange of such Old Notes (other than Old Notes which represent an unsold allotment from the original sale of the Old Notes) with the prospectus prepared for an exchange offer so long as it contains a description of the plan of distribution with respect to the resale of such New Notes. Accordingly, this Prospectus, as it may be amended or supplemented from time to time, may be used by a Participating Broker-Dealer during the period referred to below in connection with resales of New Notes received in exchange for Old Notes where such Old Notes were acquired by such Participating Broker-Dealer for its own account as a result of market-making or other trading activities. The New Notes will be a new issue of securities for which there currently is no market. The Old Notes, however, have traded on the National Association of Securities Dealers, Inc.'s PORTAL market. To the extent that Old Notes are tendered and accepted in the Exchange Offer, the trading market, if any, for the Old Notes could be adversely affected. Following consummation of the Exchange Offer, the holders of Old Notes will continue to be subject to all of the existing restrictions upon transfer thereof and will not be entitled to any further registration rights under the Registration Rights Agreement. See "Risk Factors -- Consequences of Exchange and Failure to Exchange Old Notes." The Exchange Offer is not conditioned upon any minimum principal amount of Old Notes being tendered or accepted for exchange. The Exchange Offer will expire at 5:00 p.m., New York City time, on , 1997, unless extended (the "Expiration Date"). Upon the terms and subject to the conditions of the Exchange Offer, the Company will exchange, and will issue to the Exchange Agent, New Notes for Old Notes validly tendered and not withdrawn (pursuant to the withdrawal rights described under "-- Withdrawal Rights") promptly after the Expiration Date. Tenders of Old Notes may be withdrawn at any time on or prior to the Expiration Date. SEE "RISK FACTORS" BEGINNING ON PAGE 13 FOR A DISCUSSION OF CERTAIN MATTERS THAT SHOULD BE CONSIDERED BY HOLDERS OF OLD NOTES BEFORE TENDERING THEIR OLD NOTES FOR THE NEW NOTES OFFERED HEREBY. ------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. AVAILABLE INFORMATION The Company and Wavetek U.S. Inc. have filed with the Commission a Registration Statement on Form S-4 (the "Registration Statement," which term shall include all amendments, exhibits, annexes and schedules thereto) pursuant to the Securities Act, and the rules and regulations promulgated thereunder covering the New Notes being offered hereby. This Prospectus does not contain all the information set forth in the Registration Statement, certain parts of which are omitted in accordance with the rules and regulations of the Commission. Statements made in this Prospectus as to the contents of any contract, agreement or other document referred to in the Registration Statement are necessarily summaries of those documents, and, with respect to each such contract, agreement or other document filed as an exhibit to the Registration Statement, reference is made to the exhibit for a more complete description of the matter involved. Following consummation of the Exchange Offer, the Company will be subject to the periodic reporting and other informational requirements of the Securities Exchange Act of 1934 (the "Exchange Act"). Periodic reports, proxy statements and other information filed by the Company with the Commission may be inspected at the public reference facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, or at its regional offices located at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and Seven World Trade Center, Suite 1300, New York, New York 10043. Copies of such material can be obtained from the Company upon request. The Commission maintains a Web site that contains reports, proxy and information statements and other materials that are filed through the Commission's Electronic Data Gathering, Analysis, and Retrieval system. This Web site can be accessed at http://www.sec.gov. The Company has agreed in the indenture, dated as of June 11, 1997 (the "Indenture"), by and between the Company and The Bank of New York, as trustee (the "Trustee"), under which the Old Notes were issued, and under which the New Notes are to be issued, to furnish to the Holders of Notes and file with the Commission all quarterly and annual financial information that would be required to be contained in filings with the Commission on Forms 10-Q and 10-K and all current reports that would be required to be filed with the Commission on Form 8-K if the Company were required to file such reports. See "Description of Notes--Certain Covenants--Reports." Separate financial statements for the Subsidiary Guarantors are not included in this Prospectus and the Subsidiary Guarantors are not expected to file separate reports under the Exchange Act because (i) the Subsidiary Guarantors have jointly and severally guaranteed the Notes and (ii) separate financial statements and other disclosures concerning the Subsidiary Guarantors are not deemed to be material to investors. NO DEALER, SALESMAN OR ANY OTHER PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE EXCHANGE OFFER COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY THE EXCHANGE NOTES IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY EXCHANGE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCE, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR THE INFORMATION CONTAINED IN THIS PROSPECTUS SINCE THE DATE HEREOF. ------------------------ WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY. ------------------------ This Prospectus incorporates documents by reference which are not presented herein or delivered herewith. These documents are available upon request from Vickie L. Capps, who may be contacted at 11995 El Camino Real, Suite 301, San Diego, California 92130, telephone (619) 793-2300. In order to ensure timely delivery of the documents, any request should be made by five business days prior to the Expiration Date. 2 SUMMARY THE FOLLOWING SUMMARY DOES NOT PURPORT TO BE COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY AND THE UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA OF THE COMPANY INCLUDED ELSEWHERE IN THIS PROSPECTUS. EXCEPT AS OTHERWISE SET FORTH HEREIN, REFERENCES HEREIN TO "PRO FORMA" FINANCIAL DATA OF THE COMPANY ARE TO FINANCIAL DATA OF THE COMPANY WHICH GIVE EFFECT TO CERTAIN RECAPITALIZATION TRANSACTIONS DESCRIBED HEREIN THAT WERE EFFECTED BY THE COMPANY ON JUNE 11, 1997 (THE "RECAPITALIZATION TRANSACTIONS"), INCLUDING THE ISSUANCE OF THE OLD NOTES AND THE INCURRENCE OF INDEBTEDNESS UNDER THE NEW CREDIT AGREEMENT. THE COMPANY'S FISCAL YEAR ENDS ON SEPTEMBER 30. UNLESS THE CONTEXT OTHERWISE REQUIRES, REFERENCES TO THE "COMPANY" OR "WAVETEK" HEREIN SHALL BE TO WAVETEK CORPORATION AND ITS CONSOLIDATED SUBSIDIARIES. THE COMPANY Wavetek is a leading global designer, manufacturer and distributor of a broad range of electronic test instruments, with a primary focus on application-specific instruments for testing voice, video and data communications equipment and networks ("Communications Test"). The Company also designs, manufactures and distributes precision instruments to calibrate and test electronic equipment ("Calibration Instruments") and provides repair, upgrade and calibration services for its products on a worldwide basis ("Service"). The Company was acquired in 1991 by an investment group led by Dr. Terence J. Gooding ("Gooding") and consummated the Recapitalization Transactions in June 1997 with certain new equity investors. The Company has increased sales from $58.1 million in fiscal 1992 to $151.0 million in fiscal 1996 and EBITDA (as defined) from $3.8 million in fiscal 1992 to $20.9 million in fiscal 1996 by increasing its penetration of existing markets and by entering additional markets through new product introductions and acquisitions. For the latest twelve months ended June 30, 1997 ("LTM"), Wavetek had sales and EBITDA of $154.5 million and $22.3 million, respectively. Wavetek believes it has achieved its success by: (i) focusing on the $2.5 billion Communications Test market segment of the test instrument industry, which is expected to grow by approximately 10% per annum through 2001; (ii) identifying changing industry trends and customer needs and successfully introducing responsive new products on a timely basis; (iii) serving the increasing demand for application-specific, portable field service and maintenance equipment, which accounted for over 70% of the Company's LTM sales; and (iv) leveraging its operations and development capabilities outside the United States, where the Company generated 61% of its LTM sales. Wavetek believes that its product development capabilities, product quality, breadth of product line and geographic diversity should enable it to continue to expand its share of existing markets and successfully enter new markets. The Company's Communications Test products, which accounted for 75% of the Company's LTM sales, serve the cable television ("CATV"), wireless communications ("Wireless"), telecommunications ("Telecom"), local area network ("LAN") and general purpose hand-held electronic test tools ("Test Tools") market segments of the test instrument industry. The primary end users for the Company's Communications Test products are service, installation and maintenance personnel of CATV operators, wireless communications companies, telecommunications companies and data communications equipment installers. The Company's CATV products are used by CATV operators to diagnose and monitor CATV systems, test cable for signal quality and leakage and ensure the proper installation of new services such as cable modems. The Company's Wireless products are used by wireless operators, equipment manufacturers and retailers to test mobile phones during production, repair or at the point-of-sale and by wireless operators and equipment manufacturers to test base stations. The Company's Telecom products are used by telecommunications companies to install and maintain fiber optic cable. The Company's LAN products are used by LAN installation and service professionals to test LAN cables and connectors ("physical layer"). The Company's Test Tools products, primarily hand-held digital multimeters ("DMMs"), are used to test a wide variety of electronic and electrical equipment. The Company has strong competitive positions in its target markets and believes it is the worldwide market leader in the manufacture of CATV 3 test equipment, the second largest supplier of hand-held DMMs and one of the five largest manufacturers of Wireless and physical layer LAN test equipment. The Company's Calibration Instruments products, which accounted for 17% of the Company's LTM sales, are used in metrology, engineering and manufacturing environments worldwide to calibrate electronic equipment and certify compliance with international standards. The Company believes it is the second largest global manufacturer of products used for: (i) calibrating and verifying the accuracy of voltage measuring equipment ("Calibration Sources"); and (ii) transferring the accuracy of voltage measurements from national standards laboratories to industry calibration laboratories ("Transfer Standards"). The Company's Calibration Instruments products also include high precision DMMs ("Precision DMMs"). The Company successfully competes in this market based on its technical expertise, relationships with national laboratories and product reputation. The Company's Service business, which accounted for 8% of the Company's LTM sales, provides repair, upgrade and calibration services for the Company's products through eight Wavetek service centers worldwide and an international network of independent representatives. Wavetek has global design, manufacturing, marketing and distribution capabilities through facilities located in the United States, the United Kingdom, France and Germany. The Company is committed to providing high quality manufacturing and has received or is in the process of receiving ISO 9000 certification (an international quality standard) for each of its manufacturing facilities. In addition, Wavetek supports its broad international base of over 5,000 customers with regional sales offices in San Diego, Indianapolis, Norwich, Paris, Munich, Vienna, Singapore, Hong Kong, Beijing and Shanghai. The Company's products are sold through direct sales teams in the United States, the United Kingdom, France and Germany and a global network of over 250 distributors and independent representatives. BUSINESS STRATEGY Wavetek believes that it has achieved its strong position in the Communications Test and Calibration Instruments market segments by identifying changing industry trends and customer needs, and by successfully introducing high-quality, cost-effective, application-specific products to meet such needs on a timely basis. The Company's business strategy is to further enhance its strong position in these markets and to continue to increase sales and EBITDA through the following key initiatives: - FOCUS ON THE LARGE, RAPIDLY GROWING COMMUNICATIONS TEST SEGMENT. The Company generated 75% of its LTM sales from Communications Test products and intends to continue to focus on this segment of the test instrument industry. Prime Data, a market research firm, expects sales in the Communications Test market to grow at approximately 10% per annum from approximately $2.5 billion in 1996 to approximately $4.0 billion in 2001. The Company believes that the drivers of this growth include: (i) rapidly changing communications technology; (ii) growing demand for personal communications services (including mobile phones, interactive CATV and internet access); and (iii) increasing worldwide investment to build or upgrade data and communications infrastructure. Wavetek intends to capitalize on this large, rapidly growing market segment through its broad Communications Test product portfolio, extensive international presence and strong market positions in CATV, Wireless and LAN. - DEVELOP APPLICATION-SPECIFIC PRODUCTS FOR TARGET MARKETS ON A TIMELY BASIS. Wavetek's product development strategy is to: (i) focus on application-specific products that are responsive to customer needs; (ii) minimize development time in order to address rapidly changing technology; and (iii) leverage design efforts by generating multiple product line extensions from existing product platforms. Wavetek has a history of successful new product introductions, including eight new products in fiscal 1996, and the Company expects to introduce approximately ten new products in fiscal 1997. 4 - MEET DEMAND FOR ENHANCED PORTABLE TEST INSTRUMENTS. The Company generated over 70% of its LTM sales from portable field service and maintenance equipment and intends to continue to focus on these types of products. The increasing complexity of communications technology is creating demand for field test equipment that incorporates enhanced measurement performance. Furthermore, service, installation and maintenance personnel are demanding smaller, more portable products that enable them to service systems and equipment in the field rather than at a service facility. As a result of its product design, manufacturing and distribution strengths in portable test instruments, the Company believes it will continue to benefit from these demand trends. - LEVERAGE INTERNATIONAL OPERATIONS AND DISTRIBUTION. The Company believes that international capital investment in communications infrastructure has provided and will continue to provide growth in the worldwide Communications Test market. Wavetek believes it is well-positioned to capitalize on this growth with its substantial international operations that include: (i) three foreign manufacturing facilities; (ii) established international sales and distribution channels; and (iii) approximately 450 employees located outside of the United States. The Company generated 61% of its LTM sales from customers outside the United States and believes its international operations should enable it to gain market share in existing international markets and successfully enter new markets, particularly in the Asia-Pacific, Eastern Europe and South America regions. Additionally, the Company believes that its strategic alliance formed in 1996 with Yokogawa Electric Corporation ("Yokogawa"), a leading Japanese process control and test and measurement company, coupled with the development of new products tailored for the Japanese market, will increase the Company's sales in Japan. - ENHANCE PROFITABILITY THROUGH CONTINUED IMPROVEMENT IN THE WIRELESS AND TELECOM BUSINESSES. Wavetek has taken measures to improve the operations of its Wireless and Telecom businesses, acquired in October 1994, including: (i) introducing new products with higher gross margins; (ii) rationalizing old, low margin businesses and products; (iii) reducing headcount; (iv) hiring new management; and (v) reducing marketing and selling expenses as a percentage of sales. As a result of these ongoing efforts, the Company has significantly improved the operating results of these acquired businesses. As new products with higher margins continue to replace older products, and as the Company makes additional cost improvements in its European manufacturing operations, the Company expects results from these businesses to continue to improve. FINANCIAL CHARACTERISTICS The Company's business has the following financial characteristics: - DIVERSE AND GLOBAL CUSTOMER BASE. The Company has a broad international base of over 5,000 customers operating in a wide range of industries. In fiscal 1996, no customer represented more than 5% of the Company's sales, and the Company's top ten customers represented approximately 17% of sales. Customers outside the United States accounted for 61% of the Company's LTM sales. The Company believes that its diverse and global customer base should allow it to mitigate the impact of potential economic downturns in certain businesses or geographic areas. - STRONG SALES AND EBITDA GROWTH. The Company has increased sales from $58.1 million in fiscal 1992 to $151.0 million in fiscal 1996 and EBITDA from $3.8 million in fiscal 1992 to $20.9 million in fiscal 1996. During this period, the Company's EBITDA as a percentage of sales increased from 6.5% in fiscal 1992 to 13.9% in fiscal 1996. The Company believes that this performance can be attributed to: (i) developing application-specific products to address market needs; (ii) acquiring and significantly improving the operations of its Wireless and Telecom businesses; (iii) consolidating manufacturing facilities; and (iv) increasing operating efficiencies. - LIMITED CAPITAL EXPENDITURES. The Company's business is not capital intensive and its management emphasizes a disciplined approach to capital expenditures and working capital management. The 5 Company's primary capital expenditures in the past five years have been for upgrading manufacturing capabilities, purchasing tooling for new products and implementing a new management information systems infrastructure. Annual capital expenditures have averaged less than 2.5% of sales over the last five fiscal years and have recently increased primarily as a result of investment in new management information systems. CORPORATE INFORMATION The Company was founded in San Diego in 1962 and completed its initial public offering in 1972. In June 1991, Wavetek was acquired by an investment group led by Gooding and reorganized under a new management team, with Gooding as Chairman and Chief Executive Officer. The Company has been privately held since that time. Since Gooding acquired the Company, it has completed two strategic acquisitions: (i) the Instrumentation Products Division of Beckman Industrial ("Beckman") in October 1992; and (ii) the Wireless and Telecom businesses of Schlumberger S.A. ("Schlumberger") in October 1994. Since 1992, the Company has divested two small non-strategic businesses and has discontinued certain non-core products. As part of its strategy for growth in the future, Wavetek intends to continue to evaluate the acquisition of complementary businesses that could expand its presence in new or existing product areas or geographic markets or create cost savings opportunities. The Company is a Delaware corporation. The Company's executive offices are located at 11995 El Camino Real, Suite 301, San Diego, California 92130 and its telephone number is (619) 793-2300. THE RECAPITALIZATION TRANSACTIONS The Old Notes were originally issued in connection with the following Recapitalization Transactions: (i) DLJ Merchant Banking Partners II, L.P. and its affiliates ("DLJMB") and Green Equity Investors II, L.P. and its affiliates ("GEI" and, together with DLJMB, the "New Equity Investors") purchased shares of Common Stock from the Company, representing 49.7% of the Common Stock outstanding following the Recapitalization Transactions, for an aggregate of $43.5 million (the "New Equity Investment"); (ii) the Company issued the Old Notes; and (iii) the Company incurred indebtedness of $25.0 million under a five year and six month term loan facility and entered into a five year and six month revolving credit facility providing for borrowings up to $20.0 million (the "New Credit Agreement"). See "Description of Other Indebtedness -- New Credit Agreement." These proceeds were used to repurchase Common Stock from existing stockholders for an aggregate of $152.5 million and to make cash payments upon surrender of stock options by employees in an aggregate amount of $7.1 million. Gooding, Yokogawa and the other existing stockholders retained 50.3% of the shares of Common Stock outstanding following the Recapitalization Transactions. See "The Recapitalization Transactions" and "Ownership of Capital Stock." 6 THE EXCHANGE OFFER The Exchange Offer.................. Up to $85,000,000 aggregate principal amount of New Notes are being offered in exchange for a like principal amount of Old Notes. The Company is making the Exchange Offer in order to satisfy its obligations under a registration rights agreement (the "Registration Rights Agreement") entered into between the Company and Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ" or the "Initial Purchaser" in connection with the sale of the Old Notes. For a description of the procedures for tendering Old Notes, see "The Exchange Offer -- Procedures For Tendering Old Notes." Expiration Date..................... 5:00 p.m., New York City time, on , 1997 unless the Exchange Offer is extended by the Company (in which case the term "Expiration Date" shall mean the latest date and time to which the Exchange Offer is extended). See "The Exchange Offer -- Expiration Date; Extensions; Amendments." Conditions to the Exchange Offer.... The Exchange Offer is subject to certain conditions, which may be waived by the Company in its sole discretion. The Exchange Offer is not conditioned upon any minimum principal amount of Old Notes being tendered or accepted for exchange. See "The Exchange Offer -- Conditions to the Exchange Offer." The Company reserves the right in its sole discretion, subject to applicable law, at any time and from time to time, (i) to delay the acceptance of the Old Notes for exchange, (ii) to terminate the Exchange Offer if certain specified conditions have occurred or exist, (iii) to extend the Expiration Date of the Exchange Offer and retain all Old Notes tendered pursuant to the Exchange Offer, subject, however, to the right of holders of Old Notes to withdraw their tendered Old Notes, or (iv) to waive any condition or otherwise amend the terms of the Exchange Offer in any respect. See "The Exchange Offer -- Expiration Date; Extensions; Amendments." Withdrawal Rights................... Tenders of Old Notes may be withdrawn at any time on or prior to the Expiration Date by delivering a written notice of such withdrawal to the Exchange Agent in conformity with certain procedures set forth below under "The Exchange Offer -- Withdrawal Rights." Procedures for Tendering Old Tendering holders of Old Notes must complete and sign Notes............................. a Letter of Transmittal in accordance with the instructions contained therein and forward the same by mail, facsimile or hand delivery, together with any other required documents, to the Exchange Agent, either with the Old Notes to be tendered or in compliance with the specified procedures for guaranteed delivery of Old Notes. Certain brokers, dealers, commercial banks, trust companies and other nominees may also effect tenders by book-entry transfer. Holders of Old
7 Notes registered in the name of a broker, dealer, commercial bank, trust company or other nominee are urged to contact such person promptly if they wish to tender Old Notes pursuant to the Exchange Offer. See "The Exchange Offer -- Procedures for Tendering Old Notes." Letters of Transmittal and certificates representing Old Notes should not be sent to the Company. Such documents should only be sent to the Exchange Agent. Questions regarding how to tender and requests for information should be directed to the Exchange Agent. See "The Exchange Offer -- Exchange Agent." Exchange Agent...................... The exchange agent with respect to the Exchange Offer is The Bank of New York (the "Exchange Agent"). The addresses, and telephone and facsimile numbers of the Exchange Agent are set forth in "The Exchange Offer -- Exchange Agent" and in the Letter of Transmittal. Federal Income Tax Consequences..... An exchange of Old Notes for New Notes should not be taxable to holders. See "The Exchange Offer -- Federal Income Tax Consequences." TERMS OF THE NOTES The Exchange Offer applies to $85,000,000 aggregate principal amount of the Old Notes. The terms of the New Notes are identical in all material respects to the respective terms of the Old Notes, except that the New Notes have been registered under the Securities Act and therefore will not be subject to certain restrictions on transfer applicable to the Old Notes and will not be entitled to registration rights. The New Notes will be issued under the indenture governing the Old Notes. For a complete description of the terms of the New Notes, see "Description of Notes." Securities Offered.................. $85,000,000 aggregate principal amount of 10 1/8% Senior Subordinated Notes due 2007. Use of Proceeds..................... The Company will not receive any cash proceeds from the issuance of the New Notes offered hereby. See "Use of Proceeds." Maturity............................ June 15, 2007. Interest and Payment Dates.......... The Notes bear interest at the rate of 10 1/8% per annum, payable semi-annually on June 15 and December 15 of each year, commencing on December 15, 1997. Optional Redemption................. On or after June 15, 2002, the Notes will be redeemable at the option of the Company, in whole or in part, at the redemption prices set forth herein, plus accrued and unpaid interest and Liquidated Damages, if any, to the date of redemption. Notwithstanding the foregoing, during the first three years after the Issue Date, the Company may redeem up to 33 1/3% of the aggregate principal amount of Notes originally issued with the net proceeds of one or more Public Equity Offerings at a redemption price of 110.125% of the principal amount thereof, in each case plus accrued and unpaid interest and Liquidated Damages, if any, to the redemption date; PROVIDED, HOWEVER, that at least 66 2/3% of the
8 aggregate principal amount of Notes originally issued remains outstanding immediately after such redemption. See "Description of Notes -- Optional Redemption." Subsidiary Guarantees............... The Notes are guaranteed on a senior subordinated basis by the Subsidiary Guarantors, which consist of all of the Company's current and future domestic subsidiaries. As of the date of this Prospectus, Wavetek U.S. Inc. is the only Subsidiary Guarantor. The Subsidiary Guarantees may be released under certain circumstances. See "Description of Notes -- Subsidiary Guarantees." Ranking............................. The Notes are subordinated in right of payment to all existing and future Senior Debt of the Company, including borrowings under the New Credit Agreement. The Subsidiary Guarantees are subordinated in right of payment to all existing and future Senior Debt of the Subsidiary Guarantors, including guarantees of the New Credit Agreement. The Notes, the Subsidiary Guarantees and borrowings under the New Credit Agreement will be effectively subordinated to the indebtedness of the Foreign Subsidiaries. As of June 30, 1997, the Company and its Subsidiary Guarantors had approximately $25.0 million of Senior Debt and the Foreign Subsidiaries had approximately $4.3 million of outstanding debt, all of which effectively ranks senior to the Notes and the Subsidiary Guarantees. The Indenture permits the Company and its Subsidiaries to incur additional Indebtedness, including Senior Debt, subject to certain limitations, and prohibits the incurrence of any Indebtedness by the Company and the Subsidiary Guarantors that is senior to the Notes and the Subsidiary Guarantees, as the case may be, and subordinated to Senior Debt and Senior Debt of the Subsidiary Guarantors, as the case may be. See "Description of Notes -- Subordination," "-- Certain Covenants" and "Description of Other Indebtedness." Change of Control................... Upon the occurrence of a Change of Control, holders of the Notes will have the right to require the Company to purchase all or any part of their Notes at a price equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, to the date of purchase. See "Description of Notes -- Certain Covenants -- Change of Control." Certain Covenants................... The Indenture contains certain covenants that, among other things, limit the ability of the Company and its subsidiaries to: (i) pay dividends or make certain other Restricted Payments (as defined); (ii) incur additional Indebtedness (as defined); (iii) encumber or sell assets; (iv) enter into certain guarantees of Indebtedness; (v) enter into transactions with affiliates; and (vi) merge or consolidate with any other entity or to transfer or lease all or substantially all of their assets. In addition, under certain circumstances, the Company will be
9 required to offer to purchase Notes at a price of 100% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, to the date of purchase with the proceeds of certain Asset Sales (as defined). See "Description of Notes -- Certain Covenants." Exchange Offer; Registration Rights; Liquidated Damages................ Pursuant to the Registration Rights Agreement, the Company agreed (i) to file a registration statement on or prior to 60 days after the Issue Date with respect to the Exchange Offer to issue the New Notes in exchange for the Old Notes and (ii) to use its best efforts to cause the Exchange Offer Registration Statement to be declared effective by the Commission on or prior to 120 days after the Issue Date. The Exchange Offer is being made to satisfy the contractual obligations of the Company under the Registration Rights Agreement. In certain circumstances, the Company will be required to provide a shelf registration statement to cover resales of the Old Notes by the holders thereof. If the Company fails to satisfy these registration obligations, it will be required to pay liquidated damages ("Liquidated Damages") to the Holders of Old Notes under certain circumstances. See "Description of Notes -- Registration Rights; Liquidated Damages." The New Notes will not be entitled to registration rights.
RISK FACTORS For a discussion of certain matters that should be considered by holders of Old Notes before tendering their Old Notes for the New Notes offered hereby, see "Risk Factors." 10 SUMMARY CONSOLIDATED FINANCIAL DATA The following summary consolidated financial data for the fiscal years ended September 30, 1994, 1995 and 1996 are derived from the audited consolidated financial statements of the Company. The summary historical financial data of the Company for the nine month periods ended June 30, 1996 and 1997 and as of and for the twelve months ended June 30, 1997 are derived from the unaudited consolidated financial statements of the Company. The pro forma financial data for the twelve months ended June 30, 1997 is derived from the Unaudited Pro Forma Consolidated Financial Data of the Company. The summary consolidated financial data should be read in conjunction with the consolidated financial statements of the Company and the Unaudited Pro Forma Consolidated Financial Data of the Company included elsewhere herein.
TWELVE NINE MONTHS ENDED MONTHS FISCAL YEARS ENDED SEPTEMBER 30, JUNE 30, ENDED ---------------------------------- ---------------------- JUNE 30, 1994 1995 1996 1996 1997 1997 ---------- ---------- ---------- ---------- ---------- ---------- (DOLLARS IN THOUSANDS) STATEMENT OF INCOME DATA: Sales................................... $ 74,815 $ 133,619 $ 150,993 $ 115,181 $ 118,700 $ 154,512 Gross margin............................ 33,442 60,970 78,629 59,402 63,221 82,448 Operating expenses...................... 27,911 54,073 62,558 45,068 47,426 64,916 Operating income........................ 5,531 6,897 16,071 14,334 8,734 10,471 Net income.............................. 3,710 3,069 13,475 12,436 4,451 5,490 OTHER FINANCIAL DATA: EBITDA (1).............................. $ 7,141 $ 9,944 $ 20,933 $ 16,988 $ 18,327 $ 22,272 Stock option compensation related to recapitalization (2).................. -- -- -- -- 7,061 7,061 Provision for restructuring operations (3)................................... -- -- 1,832 188 -- 1,644 Depreciation and amortization expense... 1,610 3,047 3,030 2,466 2,532 3,096 Capital expenditures.................... 1,332 2,920 4,544 3,207 4,784 6,121 EBITDA as a percentage of sales......... 9.5% 7.4% 13.9% 14.7% 15.4% 14.4% PRO FORMA DATA (4): Interest expense........................ $ 11,692 Ratio of EBITDA to interest expense..... 1.9x Ratio of net debt to EBITDA (5)......... 5.0x
AS OF JUNE 30, 1997 --------------------- (DOLLARS IN THOUSANDS) BALANCE SHEET DATA: Cash and cash equivalents (6)............. $ 7,059 Total assets.............................. 79,963 Total debt................................ 118,360 Stockholders' deficit..................... (72,969)
(SEE NOTES ON FOLLOWING PAGE) 11 - ------------------------ (1) EBITDA is operating income plus depreciation and amortization expense, stock option compensation related to recapitalization and provision for restructuring operations. While EBITDA should not be construed as a substitute for income from operations, net income or cash flows from operating activities in analyzing the Company's operating performance, financial position or cash flows, the Company has included EBITDA because it is commonly used by certain investors and analysts to analyze and compare companies on the basis of operating performance, leverage and liquidity and to determine a Company's ability to service debt. A similar concept to EBITDA is defined as "Consolidated Cash Flow" in the Indenture and used in the calculation of certain covenants therein. See "Description of Notes -- Certain Covenants" and "-- Certain Definitions." (2) In connection with the Recapitalization Transactions, the Company made cash payments upon the surrender of stock options by employees in an aggregate amount of $7.1 million. This amount is included in operating expenses for the nine month period ended June 30, 1997. (3) In fiscal 1996, the Company initiated a plan to restructure certain corporate management functions, its European manufacturing, service and sales activities, and its San Diego manufacturing activities. The restructuring costs primarily include expenses for employee severance and closedown of certain manufacturing operations. The restructuring is expected to be completed during fiscal 1997. (4) See "Unaudited Pro Forma Consolidated Financial Data." (5) Net debt is total debt less cash and cash equivalents and short-term investments. As of June 30, 1997, net debt was $111.3 million. (6) Cash and cash equivalents includes short-term investments of $3.0 million, which are comprised primarily of U.S. Treasury securities and guaranteed obligations of the U.S. government or its agencies with original maturities between 3 and 12 months. 12 RISK FACTORS IN ADDITION TO THE OTHER INFORMATION SET FORTH IN THIS PROSPECTUS, BEFORE TENDERING THEIR OLD NOTES FOR THE NEW NOTES OFFERED HEREBY, HOLDERS OF OLD NOTES SHOULD CONSIDER CAREFULLY THE FOLLOWING MATTERS, WHICH (OTHER THAN "CONSEQUENCES OF EXCHANGE AND FAILURE TO EXCHANGE OLD NOTES" AND "ABSENCE OF PUBLIC MARKET") ARE GENERALLY APPLICABLE TO THE OLD NOTES AS WELL AS THE NEW NOTES. CONSEQUENCES OF EXCHANGE AND FAILURE TO EXCHANGE OLD NOTES Holders of Old Notes who do not exchange their Old Notes for New Notes pursuant to the Exchange Offer will continue to be subject to all of the restrictions on transfer of such Old Notes as set forth in the legend thereon as a consequence of the issuance of the Old Notes pursuant to exemptions from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws. In general, the Old Notes may not be offered or sold within the United States or to United States Persons (as such terms are defined under the Securities Act) except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. The Company does not intend to register the Old Notes under the Securities Act, and such Old Notes will not be entitled to any further registration rights under the Registration Rights Agreement. In addition, any holder of Old Notes who tenders in the Exchange Offer for the purpose of participating in a distribution of the Exchange Notes may be deemed to have received restricted securities and, if so, will be required to comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. To the extent Old Notes are tendered and accepted in the Exchange Offer, the trading market, if any, for the Old Notes could be adversely affected. See "The Exchange Offer," "Description of the Notes--Registration Covenant; Exchange Offer" and "Plan of Distribution." LEVERAGE As a result of the Recapitalization Transactions, the Company became highly leveraged. As of June 30, 1997, including the issuance of the Old Notes and incurrence of Indebtedness under the New Credit Agreement, the Company had approximately $114.1 million of outstanding debt, of which $25.0 million was Senior Debt. In addition, the Company's foreign subsidiaries ("Foreign Subsidiaries") had approximately $4.3 million in outstanding debt, which debt was effectively senior to the Notes. See "Capitalization." This leverage, together with restrictions in the New Credit Agreement and the Indenture, may limit the Company's ability to obtain additional debt financing in the future, to implement its business strategies, to pursue strategic acquisitions or to respond to changing business and economic conditions. In addition, required payments of principal and interest on the Company's debt are expected to be financed from operating cash flow, thus limiting the availability of such cash flow for other corporate purposes. The Company's ability to generate sufficient cash to meet its obligations is subject to many factors, certain of which are beyond its control, including economic conditions, competition, technological changes and regulatory standards. In addition, the Company depends on dividends from its operating subsidiaries to generate income to meet its debt obligations. While the Company believes that, based on current levels of operations and anticipated growth, its cash flow from operations, together with funds available under its revolving credit facility under the New Credit Agreement will be adequate to meet its obligations, there can be no assurance that its actual cash flow will in fact be sufficient to service its debt. In the event the Company's operating cash flow and working capital are not sufficient to fund the Company's expenditures or to service its debt, including the Notes and borrowings under the New Credit Agreement, the Company would be required to raise additional funds through the sale of capital stock or assets or the refinancing of all or part of its debt. There can be no assurance that any of these sources of funds would be available in amounts sufficient for the Company to meet its obligations. See "Description of Notes" and "Description of Other Indebtedness." 13 RANKING The Notes are subordinated in right of payment to all existing and future Senior Debt of the Company, including borrowings under the New Credit Agreement. The Subsidiary Guarantees are subordinated in right of payment to all existing and future Senior Debt of the Subsidiary Guarantors, including guarantees of the New Credit Agreement. The Notes, the Subsidiary Guarantees and borrowings under the New Credit Agreement are effectively subordinated to the indebtedness of the Foreign Subsidiaries. As of June 30, 1997, the Company and its Subsidiary Guarantors had approximately $25.0 million of Senior Debt and the Foreign Subsidiaries had approximately $4.3 million of outstanding debt, all of which effectively ranks senior to the Notes and the Subsidiary Guarantees. In the event of a bankruptcy, liquidation, dissolution, reorganization or other winding up of the Company or any of the Subsidiary Guarantors, the assets of the Company or the Subsidiary Guarantors, as the case may be, will be available to pay the Notes and the Subsidiary Guarantees only after all Senior Debt has been paid in full, and there may not be sufficient assets remaining to pay amounts due on the Notes or Subsidiary Guarantees. Additional Senior Debt may be incurred by the Company and its subsidiaries from time to time, subject to certain restrictions. See "Description of Notes -- Subordination," "-- Certain Covenants" and "Description of Other Indebtedness." COMPETITION The Company operates in markets that are highly competitive, and the Company expects that competition will increase in the future. Some of the industries in which the Company operates are characterized by rapid technological advances and emerging industry standards. Failure to keep pace with technological advances could adversely affect the Company's competitive positions and results of operations. The Company competes primarily on the basis of technology, performance, price, brand identity, quality, reliability, distribution and customer service and support. To remain competitive, the Company must continue to develop new products, periodically enhance its existing products and compete effectively in the areas described above. Although the Company believes its products are competitive in each of these areas, there can be no assurance that existing or future competitors, some of which have greater financial resources than the Company, will not introduce comparable or superior products incorporating more advanced technology at lower prices. The Company's competitors are numerous, ranging from some of the world's largest corporations to many relatively small and highly specialized firms. Some of these competitors have more extensive engineering, manufacturing and marketing capabilities and substantially greater financial, technological and personnel resources than the Company. See "Business -- Competition." DEPENDENCE ON NEW PRODUCTS AND TECHNOLOGICAL CHANGE The communications industry is characterized by large communications service providers competing with opposing technologies, some but not all of which are served by the Company's equipment. To the extent that certain of these opposing technologies are in direct competition and some communications service providers will gain at the expense of others, the markets for the Company's products may be affected adversely if those technologies not served by the Company are more successful. Such changes in market demand may require the Company to develop new products or expand into new markets or technologies. While the Company is currently evaluating a number of potential new products, some of which will address emerging technologies, there can be no assurance that these products will be successful or profitable. The Company participates in markets where timely introduction of new products is critical to the success and market acceptance of the products. The Company's new product development programs are subject to delays due to unforeseen complexities in the design of the products that arise during the development process. When encountered, these complexities may cause delays in product introductions or 14 costly design modifications which could have a material adverse impact on the Company. See "Business -- Product Development." DEPENDENCE ON PROPRIETARY RIGHTS The Company's success and ability to compete depends in part upon protecting its proprietary technology. There can be no assurance that the steps taken by the Company will be adequate to deter misappropriation or independent third-party development of its technology or that its intellectual property rights can be successfully enforced or defended if challenged. Given the rapid development of technology, there can be no assurance that certain aspects of the Company's products do not or will not infringe upon the existing or future proprietary rights of others or that, if licenses or rights are required to avoid infringement, such licenses or rights could be obtained or obtained on terms that would not have a material adverse effect on the Company. See "Business -- Intellectual Property." The Company has been notified by two competitors that they believe that certain of the Company's CATV products, including in one case, its Stealth line of products, infringe patents that have been issued to each of them. The Company has investigated or is currently investigating the validity of those two claims. Neither competitor has commenced litigation against the Company and, in each case, the Company has been engaged in an exchange of correspondence with the patent owner regarding the substance of the claims of infringement. Based upon its investigation to date, the Company believes that both of these claims can be resolved in a manner that will not have a material adverse impact on the Company. However, there can be no assurance that either or both of these competitors will not initiate litigation against the Company and may not prevail in such litigation. To the extent that the Company does not prevail in any such litigation or either or both of these claims are proven, the Company could be required to: (i) redesign existing or future products so that they do not use the rights covered by the patent rights in question; (ii) negotiate licenses or other rights to use those patent rights; (iii) withdraw existing products or not introduce future products that are covered by those patent rights; or (iv) pay damages for any past infringement, any and all of which could have a material adverse impact on the Company. The Company is also a defendant in a litigation alleging that the design of certain models of hand-held DMMs formerly sold by the Company violated the trade dress rights of another competitor and in a recently filed patent infringement litigation involving certain limited CATV products. The Company does not believe that the likely outcome of either action will have a material adverse impact on the Company or its ability to develop new products. See "Business -- Legal Proceedings." RELIANCE ON SUPPLIERS A portion of the Company's manufacturing operations is dependent on the ability of significant suppliers to deliver completed products, integral sub-assemblies or components in time to meet critical distribution and manufacturing schedules. The Company periodically experiences constrained supply of certain component parts in some product lines as a result of strong demand in those product lines as well as strong demand in the industry. Continued constraints may adversely affect the Company's operating results until alternate sourcing is developed. Although the Company attempts to use common, multi-source components throughout its design, certain technological requirements may necessitate the use of single-source, unique components. The Company attempts to minimize its exposures on these components through careful vendor qualification and purchasing, though risk exists that these parts may become obsolete, necessitating re-design or withdrawal of product from the market. See "Business - -- Manufacturing." RELIANCE ON DISTRIBUTION CHANNELS Changing industry practices and customer preferences require the Company to expand into new distribution channels. As more of the Company's products are distributed through distributors and 15 independent representatives, these channels become more critical to the Company's success. Some of these distributors are thinly capitalized and may be unable to withstand changes in business conditions. The Company's financial results could be adversely affected in the event that the financial condition of these distributors weakens. See "Business -- Sales and Distribution." FACTORS AFFECTING CATV SALES Demand for test equipment for CATV networks has historically depended primarily upon capital spending cycles by CATV operators for constructing, rebuilding, upgrading and maintaining their systems. Sales of the Company's CATV products accounted for approximately 28% of the Company's LTM sales. Such capital spending by CATV operators is affected by a variety of factors including general economic conditions, access by CATV operators to financing, changes in governmental regulation of the CATV industry, competitive pressures, advances in technology and alternatives to CATV. Over the last year, certain CATV operators in the United States, including Tele-Communications, Inc. ("TCI"), one of the Company's largest customers in fiscal 1996, have begun to slow down their equipment spending. There can be no assurance that capital spending by CATV operators will not be further reduced in the future, adversely affecting the demand for the Company's CATV products. PERIODIC FLUCTUATIONS A variety of factors may cause period-to-period fluctuations in the operating results of the Company. Such factors include, but are not limited to, product mix, European summer holidays and other seasonal influences, competitive pricing pressures, materials costs, currency fluctuations, revenue and expenses related to new products and enhancements of existing products, as well as delays in customer purchases in anticipation of the introduction of new products or product enhancements by the Company or its competitors. The majority of the Company's revenues in each quarter results from orders received in that quarter. As a result, the Company establishes its production, inventory and operating expenditure levels based on anticipated revenue levels. Thus, if sales do not occur when expected, expenditure levels could be disproportionately high and operating results for that quarter, and potentially future quarters, would be adversely affected. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Periodic Fluctuations." INTERNATIONAL SALES AND REGULATORY STANDARDS Customers outside of the United States accounted for approximately 61% of the Company's LTM sales. The Company expects that international sales will continue to represent a significant percentage of its total sales in the future. The communications industry is characterized by proprietary standards that vary from region to region around the world and may evolve rapidly with time, in a divergent manner from region to region. Several of the Company's product lines address technologies where meeting current global standards, as well as changes in those standards, is critical to competing successfully in the market. As the number of such competing standards grows, the Company may find that is does not have adequate resources to maintain products which address all significant standards, resulting in an adverse effect on the Company. The Company's international business may be affected by changes in demand resulting from fluctuations in currency exchange rates as well as other risks such as tariff regulations and difficulties in obtaining export licenses. In addition, the ability of certain of the Company's customers to access the currencies in which the Company sells its products may have an adverse effect on their ability to purchase the Company's products. See "Business -- Sales and Distribution" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." DEPENDENCE ON KEY PERSONNEL The Company's success depends upon the continued contributions of its officers and key personnel, many of whom, including Gooding, the Company's Chairman and Chief Executive Officer, and Derek T. 16 Morikawa ("Morikawa"), the Company's President and Chief Operating Officer, would be difficult to replace. Although the Company has entered into executive severance agreements with such officers in connection with the Recapitalization Transactions, the loss of either could have a material adverse effect on the Company. The Company's continued growth depends on its ability to attract and retain skilled employees. See "Management." VOTING CONTROL BY OFFICERS, DIRECTORS AND AFFILIATES DLJMB, Gooding and GEI beneficially own 34.3%, 31.3% and 15.4%, respectively, of the outstanding shares of Common Stock. Accordingly, together, DLJMB, Gooding and GEI have the ability to elect all of the Company's directors, and to control corporate actions requiring stockholder approval. Such concentration of ownership may have the effect of delaying, deferring or preventing a change in control of the Company. In addition, the stockholders of the Company have entered into a stockholders agreement (the "Stockholders Agreement") with respect to election of directors, transfer restrictions on shares of Common Stock, rights of first offer for the sale of shares and certain other matters. See "The Recapitalization Transactions," "Management -- Executive Officers and Directors," "Ownership of Capital Stock" and "Certain Relationships and Related Transactions." FRAUDULENT CONVEYANCE MATTERS Various fraudulent conveyance laws enacted for the protection of creditors may apply to the incurrence of indebtedness by the Company in the Recapitalization Transactions, including the issuance of the Old Notes and the Subsidiary Guarantees. To the extent that a court were to find that (x) such indebtedness or guarantees were incurred by the Company or a Subsidiary Guarantor with intent to hinder, delay or defraud any present or future creditor or the Company or the Subsidiary Guarantor contemplated insolvency with a design to prefer one or more creditors to the exclusion in whole or in part of others or (y) the Company or the Subsidiary Guarantor did not receive fair consideration or reasonably equivalent value for issuing such indebtedness or guarantee and the Company or the Subsidiary Guarantor (i) was insolvent, (ii) was rendered insolvent by reason of such issuance, (iii) was engaged or about to engage in a business or transaction for which the remaining assets of the Company or Subsidiary Guarantor constituted unreasonably small capital to carry on its business or (iv) intended to incur, or believed that it would incur, debts beyond its ability to pay such debts as they matured, the court could avoid or subordinate the Notes or the Subsidiary Guarantee in favor of the Company's or the Subsidiary Guarantor's creditors. Among other things, a legal challenge of the Notes or a Subsidiary Guarantee may focus on the benefits, if any, realized by the Company or the Subsidiary Guarantor as a result of the Company's issuance of the Notes or the Subsidiary Guarantor's issuance of its Subsidiary Guarantee. The Indenture contains a savings clause, which generally limits the obligations of any Subsidiary Guarantor under its Subsidiary Guarantee to the maximum amount as will, after giving effect to all of the liabilities of such Subsidiary Guarantor, result in such obligations not constituting a fraudulent conveyance. To the extent any Subsidiary Guarantee was avoided or limited as a fraudulent conveyance or held unenforceable for any other reason, holders of the Notes would cease to have any claim against such Subsidiary Guarantor and would be creditors solely of Wavetek Corporation. In such event, the claims of holders of the Notes against such Subsidiary Guarantor would be subject to the prior payment of all liabilities (including trade payables) of such Subsidiary Guarantor. There can be no assurance that, after providing for all prior claims, there would be sufficient assets to satisfy the claims of the holders of the Notes relating to any avoided portion of the Subsidiary Guarantees. The measure of insolvency for the purposes of the foregoing considerations will vary depending upon the law applied in any such proceeding. Generally, however, a company may be considered insolvent if the sum of its debts, including contingent liabilities, is greater than the fair marketable value of all of its assets at a fair valuation or if the present fair marketable value of its assets is less than the amount that would be required to pay its probable liability on its existing debts, including contingent liabilities, as they become 17 absolute and mature. Based upon financial and other information, the Company believes that the Notes and the Subsidiary Guarantees are being incurred for proper purposes and in good faith and that the Company and the Subsidiary Guarantors are solvent and will continue to be solvent after issuing the Notes and the Subsidiary Guarantees, will have sufficient capital for carrying on their respective businesses after such issuance and will be able to pay their debts as they mature. There can be no assurance, however, that a court passing on such standards would agree with such beliefs. See "Description of Notes -- Subsidiary Guarantees." FOREIGN SUBSIDIARIES The Indenture and the New Credit Agreement permit the Company and its subsidiaries to make investments in, and intercompany loans to, the Foreign Subsidiaries. Payments to the Company or its other subsidiaries by such Foreign Subsidiaries, including the payment of dividends, redemption of capital stock or repayment of such intercompany loans, may be restricted by the credit agreements of the Foreign Subsidiaries. The Company's inability to make such payments or repatriate such monies may have a material adverse effect on the Company's ability to pay interest or Liquidated Damages, if any, on or principal of the Notes when due. In addition, in the event of a liquidation, bankruptcy or reorganization of the Company, the right of the Company to collect amounts owed to it by the Foreign Subsidiaries may be similarly restricted. All intercompany loans from the Company to the Foreign Subsidiaries are pledged to the lenders under the New Credit Agreement. POSSIBLE INABILITY TO PURCHASE NOTES UPON A CHANGE OF CONTROL The New Credit Agreement prohibits the Company from purchasing Notes and also provides that certain change of control events with respect to the Company would constitute a default thereunder. Any future credit agreements or other agreements relating to Senior Debt to which the Company becomes a party may contain similar restrictions and provisions. In the event a Change of Control occurs at a time when the Company is prohibited from purchasing Notes, the Company could seek the consent of its lenders to the purchase of Notes or could attempt to refinance the borrowings that contain such prohibition. If the Company does not obtain such a consent or repay such borrowings, the Company will remain prohibited from purchasing Notes. In such case, the Company's failure to purchase tendered Notes would constitute an event of default under the Indenture which would, in turn, constitute a default under the New Credit Agreement. In such circumstances, the subordination provisions in the Indenture would likely restrict payments to the holders of Notes. See "Description of Notes -- Certain Covenants -- Change of Control" and "Description of Other Indebtedness -- New Credit Agreement." ABSENCE OF PUBLIC MARKET FOR THE NOTES There is no active trading market for the Notes and there can be no assurance as to the liquidity of any markets that may develop for the Notes, the ability of holders of the Notes to sell their Notes, or the price at which holders would be able to sell their Notes. Future trading prices of the Notes will depend on many factors, including, among other things, prevailing interest rates, the Company's operating results and the market for similar securities. The Initial Purchaser has advised the Company that it currently intends to make a market in the Notes. However, the Initial Purchaser is not obligated to do so and any market-making may be discontinued at any time without notice. In addition, such market-making activity will be subject to the limits imposed by the Securities Act and the Exchange Act. The Company does not intend to apply for listing of the Notes on any securities exchange. 18 THE RECAPITALIZATION TRANSACTIONS The Old Notes were originally issued in connection with the following Recapitalization Transactions: (i) the New Equity Investors purchased shares of Common Stock from the Company, representing 49.7% of the Common Stock outstanding following the Recapitalization Transactions, for an aggregate of $43.5 million; (ii) the Company issued the Old Notes; and (iii) the Company incurred indebtedness under the New Credit Agreement of approximately $25.0 million under a five year and six month term loan facility and entered into a five year and six month revolving credit facility providing for borrowings up to $20.0 million. See "Description of Other Indebtedness -- New Credit Agreement." These proceeds were used to repurchase shares of Common Stock and Class B Common Stock from existing stockholders for an aggregate of $152.5 million. All of the outstanding Class B Common Stock were repurchased and retired, leaving only Common Stock outstanding. An amendment to the Company's Certificate of Incorporation was filed, eliminating the two classes of common stock in favor of one class with identical rights, preferences and privileges, and effecting a 10 for 1 stock split. Gooding, Yokogawa and certain other existing stockholders retained 50.3% of the Common Stock outstanding following the Recapitalization Transactions. See "Ownership of Capital Stock." USE OF PROCEEDS The Company will not receive any cash proceeds from the issuance of the New Notes offered hereby. The proceeds to the Company from the Old Notes, together with the other sources of funds in the Recapitalization Transactions, were used to: (i) repurchase shares of Common Stock and Class B Common Stock from existing stockholders; (ii) make cash payments upon surrender of stock options; and (iii) pay fees and expenses of the Recapitalization Transactions. See "The Recapitalization Transactions" and "Capitalization." THE EXCHANGE OFFER PURPOSE AND EFFECT OF THE EXCHANGE OFFER In connection with the sale of the Old Notes, the Company and the Initial Purchaser entered into the Registration Rights Agreement, pursuant to which the Company agreed to file and to use its best efforts to cause to be declared effective by the Commission a registration statement with respect to the exchange of the Old Notes for New Notes with terms identical in all material respects to the terms of the Old Notes. See "Description of Notes--Registration Rights; Liquidated Damages." The Exchange Offer is being made to satisfy the contractual obligations of the Company under the Registration Rights Agreement. The terms of the New Notes are identical in all material respects to the respective terms of the Old Notes, except that the New Notes have been registered under the Securities Act and therefore will not be subject to certain restrictions on transfer applicable to the Old Notes and will not be entitled to registration rights. Unless the context requires otherwise, the term "holder" with respect to the Exchange Offer means any person in whose name the Old Notes are registered on the books of the Company or any other person who has obtained a properly completed bond power from the registered holder, or any person whose Old Notes are held of record by Cede & Co. who desires to deliver such Old Notes by book-entry transfer at The Depository Trust Company ("DTC"). Pursuant to the Exchange Offer, the Company will exchange as soon as practicable after the date hereof the Old Subsidiary Guarantee for the New Subsidiary Guarantee. The New Subsidiary Guarantee has been registered under the Securities Act. 19 TERMS OF EXCHANGE The Company hereby offers, upon the terms and subject to the conditions set forth in this Prospectus and in the accompanying Letter of Transmittal, to exchange up to $85,000,000 aggregate principal amount of New Notes for a like aggregate principal amount of Old Notes properly tendered on or prior to the Expiration Date and not properly withdrawn in accordance with the procedures described below. The Company will issue, promptly after the Expiration Date, an aggregate principal amount of up to $85,000,000 of New Notes in exchange for a like principal amount of outstanding Old Notes tendered and accepted in connection with the Exchange Offer. The terms of the New Notes are identical in all material respects to the terms of the Old Notes for which they may be exchanged pursuant to the Exchange Offer, except that (i) the New Notes will generally be freely transferable by holders thereof and (ii) the holders of the New Notes will not be entitled to registration rights under the Registration Rights Agreement. See "Description of Notes -- Registration Rights; Liquidated Damages." The New Notes will evidence the same debt as the Old Notes and will be entitled to the benefits of the Indenture. See "Description of Notes." The Exchange Offer is not conditioned upon any minimum principal amount of Old Notes being tendered. As of the date of this Prospectus, $85,000,000 aggregate principal amount of Old Notes is outstanding. Old Notes which are not tendered for or are tendered but not accepted in connection with the Exchange Offer will remain outstanding and be entitled to the benefits of the Indenture, but will not be entitled to any further registration rights under the Registration Rights Agreement. See "Risk Factors Consequences of a Failure to Exchange Old Notes" and "Description of Old Notes." If any tendered Old Notes are not accepted for exchange because of an invalid tender, the occurrence of certain other events set forth herein or otherwise, any such unaccepted Old Notes will be returned, without expense, to the tendering holder thereof promptly after the Expiration Date. Holders who tender Old Notes in connection with the Exchange Offer will not be required to pay brokerage commissions or fees or, subject to the instructions in the Letter of Transmittal, transfer taxes with respect to the exchange of Old Notes in connection with the Exchange Offer. The Company will pay all charges and expenses, other than certain applicable taxes described below, in connection with the Exchange Offer. See "-- Fees and Expenses." THE BOARD OF DIRECTORS OF THE COMPANY MAKES NO RECOMMENDATIONS TO HOLDERS OF OLD NOTES AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING ALL OR ANY PORTION OF THEIR OLD NOTES PURSUANT TO THE EXCHANGE OFFER. IN ADDITION, NO ONE HAS BEEN AUTHORIZED TO MAKE ANY SUCH RECOMMENDATION. HOLDERS OF OLD NOTES MUST MAKE THEIR OWN DECISION WHETHER TO TENDER PURSUANT TO THE EXCHANGE OFFER AND, IF SO, THE AGGREGATE AMOUNT OF OLD NOTES TO TENDER AFTER READING THIS PROSPECTUS AND THE LETTER OF TRANSMITTAL AND CONSULTING WITH THEIR ADVISERS, IF ANY, BASED ON THEIR OWN FINANCIAL POSITION AND REQUIREMENTS. EXPIRATION DATE; EXTENSIONS; AMENDMENTS The Exchange Officer will expire on the Expiration Date. The term "Expiration Date" means 5:00 p.m., New York City time, on ________, 1997, unless the Exchange Offer is extended by the Company (in which case the term "Expiration Date" shall mean the latest date and time to which the Exchange Offer is extended). The Company expressly reserves the right in its sole discretion, subject to applicable law, at any time and from time to time, (i) to delay the acceptance of the Old Notes for exchange, (ii) to terminate the Exchange Offer (whether or not any Old Notes have theretofore been accepted for exchange) if the 20 Company determines, in its sole discretion, that any of the events or conditions referred to under " Conditions to the Exchange Offer" have occurred or exist, (iii) to extend the Expiration Date of the Exchange Offer and retain all Old Notes tendered pursuant to the Exchange Offer, subject, however, to the right of holders of Old Notes to withdraw their tendered Old Notes as described under " Withdrawal Rights," and (iv) to waive any condition or otherwise amend the terms of the Exchange Offer in any respect. If the Exchange Offer is amended in a manner determined by the Company to constitute a material change, or if the Company waives a material condition of the Exchange Offer, the Company will promptly disclose such amendment by means of an amended or supplemented Prospectus that will be distributed to the registered holders of the Old Notes, and the Company will extend the Exchange Offer to the extent required by Rule 14e-1 under the Exchange Act. Any such delay in acceptance, extension, termination or amendment will be followed promptly by oral or written notice thereof to the Exchange Agent and by making a public announcement thereof, and such announcement in the case of an extension will be made no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date. Without limiting the manner in which the Company may choose to make any public announcement and subject to applicable law, the Company shall have no obligation to publish, advertise or otherwise communicate any such public announcement other than by issuing a release to an appropriate news agency. ACCEPTANCE FOR EXCHANGE AND ISSUANCE OF NEW NOTES Upon the terms and subject to the conditions of the Exchange Offer, the Company will exchange, and will issue to the Exchange Agent, New Notes for Old Notes validly tendered and not withdrawn (pursuant to the withdrawal rights described under "-- Withdrawal Rights") promptly after the Expiration Date. In all cases, delivery of New Notes in exchange for Old Notes tendered and accepted for exchange pursuant to the Exchange Offer will be made only after timely receipt by the Exchange Agent of (i) Old Notes or a book-entry confirmation of a book-entry transfer of Old Notes into the Exchange Agent's account at DTC, including an Agent's Message if the tendering holder has not delivered a Letter of Transmittal, (ii) the Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees or (in the case of a book-entry transfer) an Agent's Message in lieu of the Letter of Transmittal, and (iii) any other documents required by the Letter of Transmittal. The term "book-entry confirmation" means a timely confirmation of a book-entry transfer of Old Notes into the Exchange Agent's account at DTC. The term "Agent's Message" means a message, transmitted by DTC to and received by the Exchange Agent and forming a part of a book-entry confirmation, which states that DTC has received an express acknowledgment from the tendering participant, which acknowledgment states that such participant has received and agrees to be bound by the Letter of Transmittal and that the Company may enforce such Letter of Transmittal against such participant. Subject to the terms and conditions of the Exchange Offer, the Company will be deemed to have accepted for exchange, and thereby exchanged, Old Notes validly tendered and not withdrawn as, if and when the Company gives oral or written notice to the Exchange Agent of the Company's acceptance of such Old Notes for exchange pursuant to the Exchange Offer. The Exchange Agent will act as agent for the Company for the purpose of receiving tenders of Old Notes, Letters of Transmittal and related documents, and as agent for tendering holders for the purpose of receiving Old Notes, Letters of Transmittal and related documents and transmitting New Notes to validly tendering holders. Such exchange will be made promptly after the Expiration Date. If for any reason whatsoever, acceptance for exchange or the exchange of any Old Notes tendered pursuant to the Exchange Offer is delayed (whether before or after the Company's acceptance for exchange of Old Notes) or the Company extends the Exchange Offer or is unable to accept for exchange or exchange Old Notes tendered pursuant to the Exchange Offer, then, without prejudice to the Company's rights set forth herein, the Exchange Agent may, nevertheless, on 21 behalf of the Company and subject to Rule 14e-1(c) under the Exchange Act, retain tendered Old Notes and such Old Notes may not be withdrawn except to the extent tendering holders are entitled to withdrawal rights as described under "-- Withdrawal Rights." Pursuant to the Letter of Transmittal or Agent's Message in lieu thereof, a holder of Old Notes will warrant and agree in the Letter of Transmittal that it has full power and authority to tender, exchange, sell, assign and transfer Old Notes, that the Company will acquire good, marketable and unencumbered title to the tendered Old Notes, free and clear of all liens, restrictions, charges and encumbrances, and the Old Notes tendered for exchange are not subject to any adverse claims or proxies. The holder also will warrant and agree that it will, upon request, execute and deliver any additional documents deemed by the Company or the Exchange Agent to be necessary or desirable to complete the exchange, sale, assignment, and transfer of the Old Notes tendered pursuant to the Exchange Offer. PROCEDURES FOR TENDERING OLD NOTES VALID TENDER. Except as set forth below, in order for Old Notes to be validly tendered pursuant to the Exchange Offer, a properly completed and duly executed Letter of Transmittal (or facsimile thereof), with any required signature guarantees, or (in the case of a book-entry tender) an Agent's Message in lieu of the Letter of Transmittal, and any other required documents, must be received by the Exchange Agent at its address set forth under "-- Exchange Agent," and either (i) tendered Old Notes must be received by the Exchange Agent, or (ii) such Old Notes must be tendered pursuant to the procedures for book-entry transfer set forth below and a book-entry confirmation, including an Agent's Message if the tendering holder has not delivered a Letter of Transmittal, must be received by the Exchange Agent, in each case on or prior to the Expiration Date, or (iii) the guaranteed delivery procedures set forth below must be complied with. If less than all of the Old Notes are tendered, a tendering holder should fill in the amount of Old Notes being tendered in the appropriate box on the Letter of Transmittal. The entire amount of Old Notes delivered to the Exchange Agent will be deemed to have been tendered unless otherwise indicated. THE METHOD OF DELIVERY OF THE NOTES, THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING HOLDER, AND DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL, RETURN RECEIPT REQUESTED, PROPERLY INSURED, OR AN OVERNIGHT DELIVERY SERVICE IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. BOOK ENTRY TRANSFER. The Exchange Agent will make a request to establish an account with respect to the Old Notes at DTC for purposes of the Exchange Offer within two business days after the date of this Prospectus. Any financial institution that is a participant in DTC's book-entry transfer facility system may make a book-entry delivery of the Old Notes by causing DTC to transfer such Old Notes into the Exchange Agent's account at DTC in accordance with DTC's procedures for transfers. However, although delivery of Old Notes may be effected through book-entry transfer into the Exchange Agent's account at DTC, the Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees, or an Agent's Message in lieu of the Letter of Transmittal, and any other required documents, must in any case be delivered to and received by the Exchange Agent at its address set forth under "-- Exchange Agent" on or prior to the Expiration Date, or the guaranteed delivery procedure set forth below must be complied with. DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH DTC'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT. 22 SIGNATURE GUARANTEES. The Old Notes need not be endorsed and signature guarantees on the Letter of Transmittal are unnecessary unless (i) an Old Note is registered in a name other than that of the person surrendering the certificate or (ii) such registered holder completes the box entitled "Special Issuance Instructions" or "Special Delivery Instructions" in the Letter of Transmittal. In the case of (i) or (ii) above, such Old Notes must be duly endorsed or accompanied by a properly executed bond power, with the endorsement or signature on the bond power and on the Letter of Transmittal guaranteed by a firm or other entity identified in Rule 17Ad-15 under the Exchange Act as an "eligible guarantor institution," including (as such terms are defined therein): (i) a bank; (ii) a broker, dealer, municipal securities broker or dealer or government securities broker or dealer; (iii) a credit union; (iv) a national securities exchange, registered securities association or clearing agency; or (v) a savings association that is a participant in a Securities Transfer Association (an "Eligible Institution"), unless surrendered on behalf of such Eligible Institution. See Instruction 1 to the Letter of Transmittal. GUARANTEED DELIVERY. If a holder desires to tender Old Notes pursuant to the Exchange Offer and the Old Notes are not immediately available or time will not permit all required documents to reach the Exchange Agent on or before the Expiration Date, or the procedures for book-entry transfer cannot be completed on a timely basis, such Old Notes may nevertheless be tendered, provided that all of the following guaranteed delivery procedures are complied with: (i) such tenders are made by or through an Eligible Institution; (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form accompanying the Letter of Transmittal, is received by the Exchange Agent on or prior to Expiration Date; and (iii) all of the tendered Old Notes (or a book-entry confirmation), in proper form for transfer, together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof or Agent's Message in lieu thereof), with any required signature guarantees and any other documents required by the Letter of Transmittal, are received by the Exchange Agent within three New York Stock Exchange trading days after the date of execution of such Notice of Guaranteed Delivery. The Notice of Guaranteed Delivery may be delivered by hand or transmitted by facsimile or mail to the Exchange Agent, and must include a guarantee by an Eligible Institution in the form set forth in such Notice. Notwithstanding any other provision hereof, the delivery of New Notes in exchange for Old Notes tendered and accepted for exchange pursuant to the Exchange Offer will in all cases be made only after timely receipt by the Exchange Agent of Old Notes, or of a book-entry confirmation with respect to such Old Notes, and a properly completed and duly executed Letter of Transmittal (or facsimile thereof or Agent's Message in lieu thereof), together with any required signature guarantees and any other documents required by the Letter of Transmittal. Accordingly, the delivery of New Notes might not be made to all tendering holders at the same time, and will depend upon when Old Notes, book-entry confirmations with respect to Old Notes and other required documents are received by the Exchange Agent. The Company's acceptance for exchange of Old Notes tendered pursuant to any of the procedures described above will constitute a binding agreement between the tendering holder and the Company upon the terms and subject to the conditions of the Exchange Offer. DETERMINATION OF VALIDITY. All questions as to the form of documents, validity, eligibility (including time of receipt) and acceptance for exchange of any tendered Old Notes will be determined by the Company, in its sole discretion, whose determination shall be final and binding on all parties. The Company reserves the absolute right, in its sole discretion, to reject any and all tenders determined by it not to be in proper form or the acceptance of which, or exchange for, may, in the view of counsel to the Company, be unlawful. The Company also reserves the absolute right, subject to applicable law, to waive 23 any of the conditions of the Exchange Offer as set forth under "-- Conditions to the Exchange Offer" or any condition or irregularity in any tender of Old Notes of any particular holder whether or not similar conditions or irregularities are waived in the case of other holders. The Company's interpretation of the terms and conditions of the Exchange Offer (including the Letter of Transmittal and the instructions thereto) will be final and binding. No tender of Old Notes will be deemed to have been validly made until all irregularities with respect to such tender have been cured or waived. Neither the Company, any affiliates or assigns of the Company, the Exchange Agent nor any other person shall be under any duty to give any notification of any irregularities in tenders or incur any liability for failure to give any such notification. If any Letter of Transmittal, endorsement, bond power, power of attorney or any other document required by the Letter of Transmittal is signed by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, such person should so indicate when signing, and unless waived by the Company, proper evidence satisfactory to the Company, in its sole discretion, of such person's authority to so act must be submitted. A beneficial owner of Old Notes that are held by or registered in the name of a broker, dealer, commercial bank, trust company or other nominee or custodian is urged to contact such entity promptly if such beneficial holder wishes to participate in the Exchange Offer. TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL The Letter of Transmittal contains, among other things, the following terms and conditions, which are part of the Exchange Offer. The party tendering Old Notes for exchange (the "Transferor") exchanges, assigns and transfers the Old Notes to the Company and irrevocably constitutes and appoints the Exchange Agent as the Transferor's agent and attorney-in-fact to cause the Old Notes to be delivered to the Company and transferred and to acquire New Notes issuable upon the exchange of such tendered Old Notes, and that, when the same are accepted for exchange, the Company will acquire good, marketable and unencumbered title to the tendered Old Notes, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claim. The Transferor also warrants that it will, upon request, execute and deliver any additional documents deemed by the Company to be necessary or desirable to complete the exchange, assignment and transfer of tendered Old Notes. The Transferor further agrees that acceptance of any tendered Old Notes by the Company and the issuance of New Notes in exchange therefor shall constitute performance in full by the Company of obligations under the Registration Rights Agreement and that the Company shall have no further obligations or liabilities thereunder except in certain limited circumstances. All authority conferred by the Transferor will survive the death or incapacity of the Transferor and every obligation of the Transferor shall be binding upon the heirs, legal representatives, successors, assigns, executors and administrators of such Transferor. By tendering Old Notes and executing the Letter of Transmittal, the Transferor certifies that it is not an Affiliate of the Company within the meaning of Rule 405 under the Securities Act, that it is not a broker-dealer that owns Old Notes acquired directly from the Company or any Affiliate of the Company, it is acquiring the New Notes offered hereby in the ordinary course of such Transferor's business and that such Transferor has no arrangement with any person to participate in the distribution of such New Notes. WITHDRAWAL RIGHTS Except as otherwise provided herein, tenders of Old Notes may be withdrawn at any time on or prior to the Expiration Date. In order for a withdrawal to be effective a written, telegraphic, telex or facsimile transmission of such notice of withdrawal must be timely received by the Exchange Agent at its address set forth under 24 "-- Exchange Agent" on or prior to the Expiration Date. Any such notice of withdrawal must specify the name of the person who tendered the Old Notes to be withdrawn, the aggregate principal amount of Old Notes to be withdrawn, and (if such Old Notes have been tendered) the name of the registered holder of the Old Notes as set forth on the Old Notes, if different from that of the person who tendered such Old Notes. If Old Notes have been delivered or otherwise identified to the Exchange Agent, then prior to the physical release of such Old Notes, the tendering holder must submit the certificate numbers shown on the particular Old Notes to be withdrawn and the signature on the notice of withdrawal must be guaranteed by an Eligible Institution, except in the case of Old Notes tendered for the account of an Eligible Institution. If Old Notes have been tendered pursuant to the procedures for book-entry transfer set forth in "-- Procedures for Tendering Old Notes," the notice of withdrawal must specify the name and number of the account at DTC to be credited with the withdrawal of Old Notes, in which case a notice of withdrawal will be effective if delivered to the Exchange Agent by written, telegraphic, telex or facsimile transmission on or prior to the Expiration Date. Withdrawals of tenders of Old Notes may not be rescinded. Old Notes properly withdrawn will not be deemed validly tendered for purposes of the Exchange Offer, but may be retendered at any subsequent time on or prior to the Expiration Date by following any of the procedures described above under "-- Procedures for Tendering Old Notes." All questions as to the validity, form and eligibility (including time of receipt) of such withdrawal notices will be determined by the Company, in its sole discretion, whose determination shall be final and binding on all parties. Neither the Company, any affiliates or assigns of the Company or the Exchange Agent nor any other person shall be under any duty to give any notification of any irregularities in any notice of withdrawal or incur any liability for failure to give any such notification. Any Old Notes which have been tendered but which are withdrawn will be returned to the holder thereof promptly after withdrawal. INTEREST ON THE NEW NOTES The New Notes will bear interest from and including their respective dates of issuance. Holders whose Old Notes are accepted for exchange will receive accrued interest thereon to, but not including, the date of issuance of the New Notes, such interest to be payable with the first interest payment on the New Notes, but will not receive any payment in respect of interest on the Old Notes accrued after the issuance of the New Notes. CONDITIONS TO THE EXCHANGE OFFER Notwithstanding any other provisions of the Exchange Offer, or any extension of the Exchange Offer, the Company will not be required to accept for exchange, or to exchange, any Old Notes for any New Notes, and, as described below, may terminate the Exchange Offer (whether or not any Old Notes have theretofore been accepted for exchange) or may waive any conditions to or amend the Exchange Offer, if any of the following conditions has occurred or exists: (a) there shall occur a change in the current interpretation by the staff of the Commission which permits the New Notes issued pursuant to the Exchange Offer in exchange for Old Notes to be offered for resale, resold and otherwise transferred by holders thereof (other than broker- dealers and any such holder which is an Affiliate) without compliance with the registration and prospectus delivery provisions of the Securities Act provided that such New Notes are acquired in the ordinary course of such holders' business and such holders have no arrangement or understanding with any person to participate in the distribution of such New Notes; (b) any action or proceeding shall have been instituted or threatened in any court or by or before any governmental agency or body with respect to the Exchange Offer which, in the Company's judgment, would reasonably be expected to impair the ability of the Company to proceed with the Exchange Offer; 25 (c) any law, statute, rule or regulation shall have been adopted or enacted which, in the Company's judgment, would reasonably be expected to impair the ability of the Company to proceed with the Exchange Offer; (d) a banking moratorium shall have been declared by United States federal or California or New York State authorities which, in the Company's judgment, would reasonably be expected to impair the ability of the Company to proceed with the Exchange Offer; (e) trading on the New York Stock Exchange or generally in the United States over-the-counter market shall have been suspended by order of the Commission or any other governmental authority which, in the Company's judgment, would reasonably be expected to impair the ability of the Company to proceed with the Exchange Offer; (f) a stop order shall have been issued by the Commission or any state securities authority suspending the effectiveness of the Registration Statement or proceedings shall have been initiated or, to the knowledge of the Company, threatened for that purpose or any governmental approval has not been obtained, which approval the Company shall, in its sole discretion, deem necessary for the consummation of the Exchange Offer as contemplated hereby; or (g) any change, or any development involving a prospective change, in the business or financial affairs of the Company or any of its subsidiaries has occurred which, in the judgment of the Company, might materially impair the ability of the Company to proceed with the Exchange Offer. If the Company determines in its sole discretion that any of the foregoing events or conditions has occurred or exists, the Company may, subject to applicable law, terminate the Exchange Offer (whether or not any Old Notes have theretofore been accepted for exchange) or may waive any such condition or otherwise amend the terms of the Exchange Offer in any respect. If such waiver or amendment constitutes a material change to the Exchange Offer, the Company will promptly disclose such waiver by means of an amended or supplemented Prospectus that will be distributed to the registered holders of the Old Notes, and the Company will extend the Exchange Offer to the extent required by Rule 14e-1 under the Exchange Act. EXCHANGE AGENT The Bank of New York has been appointed as Exchange Agent for the Exchange Offer. Delivery of the Letters of Transmittal and any other required documents, questions, requests for assistance, and requests for additional copies of this Prospectus or of the Letter of Transmittal, all whether by registered or certified mail, by hand or by overnight courier, should be directed to the Exchange Agent as follows: The Bank of New York 101 Barclay Street New York, NY 10286 Attention: Shilpa Priveda Telephone: (212) 815-5789 and if by facsimile, to (212) 815-6339 Delivery to other than the above address or facsimile number will not constitute a valid delivery. FEES AND EXPENSES The Company has agreed to pay the Exchange Agent reasonable and customary fees for its services and will reimburse it for its reasonable out-of-pocket expenses in connection therewith. The Company will also pay brokerage houses and other custodians, nominees and fiduciaries the reasonable out-of-pocket 26 expenses incurred by them in forwarding copies of this Prospectus and related documents to the beneficial owners of Old Notes, and in handling or tendering for their customers. Holders who tender their Old Notes for exchange will not be obligated to pay any transfer taxes in connection therewith. If, however, New Notes are to be delivered to, or are to be issued in the name of, any person other than the registered holder of the Old Notes tendered, or if a transfer tax is imposed for any reason other than the exchange of Old Notes in connection with the Exchange Offer, then the amount of any such transfer taxes (whether imposed on the registered holder or any other persons) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted with the Letter of Transmittal, the amount of such transfer taxes will be billed directly to such tendering holder. The Company will not make any payment to brokers, dealers or others soliciting acceptances of the Exchange Offer. FEDERAL INCOME TAX CONSEQUENCES In the opinion of Sullivan & Cromwell, counsel to the Company, the exchange of Old Notes for New Notes in the Exchange Offer should not be a taxable exchange for federal income tax purposes and, accordingly, a holder should not recognize any taxable gain or loss as a result of such exchange. OTHER Participation in the Exchange Offer is voluntary, and holders should carefully consider whether to accept the Exchange Offer and tender their Old Notes. Holders of the Old Notes are urged to consult their financial and tax advisors in making their own decisions on what action to take. As a result of the making of, and upon acceptance for exchange of all validly tendered Old Notes pursuant to the terms of this Exchange Offer, the Company will have satisfied its obligations under the Registration Rights Agreement. Holders of the Old Notes who do not tender their Old Notes in the Exchange Offer will continue to hold such Old Notes and will be entitled to all the rights, and subject to all the limitations applicable thereto, under the Indenture, such holders will have no further rights to registration of Old Notes under the Registration Rights Agreement. See "Description of the Notes -- Registration Rights; Liquidated Damages." All untendered Old Notes will continue to be subject to the restriction on transfer set forth in the Indenture. To the extent that Old Notes are tendered and accepted in the Exchange Offer, the trading market, if any, for the Old Notes could be adversely affected. See "Risk Factors -- Consequences of Exchange and Failure to Exchange Old Notes." The Company may in the future seek to acquire untendered Old Notes in the open market or privately negotiated transactions, through subsequent exchange offers or otherwise. The Company has no present plan to acquire any Old Notes that are not tendered in the Exchange Offer. 27 UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA The following unaudited pro forma consolidated financial data are derived from the Company's consolidated financial statements appearing elsewhere herein, as adjusted to give effect to the Recapitalization Transactions. The unaudited pro forma consolidated statement of income data for the fiscal year ended September 30, 1996 and nine month periods ended June 30, 1996 and 1997 give effect to the Recapitalization Transactions as if they had occurred at the beginning of such periods. The pro forma adjustments are based upon available data and certain assumptions that the Company believes are reasonable. The unaudited pro forma consolidated financial data does not purport to represent what the Company's results of operations would actually have been had the Recapitalization Transactions in fact occurred at such prior times or to project the Company's results of operations for any future period. The unaudited pro forma consolidated financial data should be read in conjunction with the consolidated financial statements of the Company and the information contained in "The Recapitalization Transactions," "Use of Proceeds" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere herein. UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME DATA
FISCAL YEAR ENDED SEPTEMBER 30, 1996 ------------------------------------ PRO FORMA ACTUAL ADJUSTMENTS PRO FORMA ---------- ----------- ----------- (DOLLARS IN THOUSANDS) Sales....................................................................... $ 150,993 $ 150,993 Cost of goods sold.......................................................... 72,364 72,364 ---------- ----------- Gross margin................................................................ 78,629 78,629 Operating expenses: Marketing and selling..................................................... 36,197 36,197 Research and development.................................................. 12,917 12,917 General and administrative................................................ 11,612 11,612 Provision for restructuring operations.................................... 1,832 1,832 ---------- ----------- 62,558 62,558 ---------- ----------- Operating income............................................................ 16,071 16,071 Non-operating income (expense): Interest income........................................................... 167 167 Interest expense.......................................................... (762) $ (11,171)(1) (11,933) Other, net................................................................ (1,036) (1,036) ---------- ----------- ----------- (1,631) (11,171) (12,802) ---------- ----------- ----------- Income before provision for income taxes.................................... 14,440 (11,171) 3,269 Provision for income taxes.................................................. 965 (896)(2) 69 ---------- ----------- ----------- Net income (3).............................................................. $ 13,475 $ (10,275) $ 3,200 ---------- ----------- ----------- ---------- ----------- ----------- EBITDA (4).................................................................. $ 20,933 $ 20,933 ---------- ----------- ---------- ----------- Ratio of earnings to fixed charges (5)...................................... 9.9x 1.3x
See Notes to Unaudited Pro Forma Consolidated Statement of Income Data 28 UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME DATA
NINE MONTHS ENDED JUNE 30, 1996 ------------------------------------ PRO FORMA ACTUAL ADJUSTMENTS PRO FORMA ---------- ----------- ----------- (DOLLARS IN THOUSANDS) Sales....................................................................... $ 115,181 $ 115,181 Cost of goods sold.......................................................... 55,779 55,779 ---------- ----------- Gross margin................................................................ 59,402 59,402 Operating expenses: Marketing and selling..................................................... 26,809 26,809 Research and development.................................................. 9,416 9,416 General and administrative................................................ 8,655 8,655 Provision for restructuring operations.................................... 188 188 ---------- ----------- 45,068 45,068 ---------- ----------- Operating income............................................................ 14,334 14,334 Non-operating income (expense): Interest income........................................................... 99 99 Interest expense.......................................................... (616) $ (8,364)(1) (8,980) Other, net................................................................ (488) (488) ---------- ----------- ----------- (1,005) (8,364) (9,369) ---------- ----------- ----------- Income before provision for income taxes.................................... 13,329 (8,364) 4,965 Provision for income taxes.................................................. 893 (789)(2) 104 ---------- ----------- ----------- Net income (3).............................................................. $ 12,436 $ (7,575) $ 4,861 ---------- ----------- ----------- ---------- ----------- ----------- EBITDA (4).................................................................. $ 16,988 $ 16,988 ---------- ----------- ---------- ----------- Ratio of earnings to fixed charges (5)...................................... 11.4x 1.5x
See Notes to Unaudited Pro Forma Consolidated Statement of Income Data 29 UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME DATA
NINE MONTHS ENDED JUNE 30, 1997 ------------------------------------ PRO FORMA ACTUAL ADJUSTMENTS PRO FORMA ---------- ----------- ----------- (DOLLARS IN THOUSANDS) Sales....................................................................... $ 118,700 $ 118,700 Cost of goods sold.......................................................... 55,479 55,479 ---------- ----------- Gross margin................................................................ 63,221 63,221 Operating expenses: Marketing and selling..................................................... 27,913 27,913 Research and development.................................................. 11,635 11,635 General and administrative................................................ 7,878 7,878 Stock option compensation related to recapitalization (3)................. 7,061 7,061 ---------- ----------- 54,487 54,487 ---------- ----------- Operating income............................................................ 8,734 8,734 Non-operating income (expense): Interest income........................................................... 254 254 Interest expense.......................................................... (948) $ (7,791)(1) (8,739) Other, net................................................................ (861) (861) ---------- ----------- ----------- (1,555) (7,791) (9,346) ---------- ----------- ----------- Income (loss) before provision for income taxes............................. 7,179 (7,791) (612) Provision for income taxes.................................................. 2,728 (2,959)(2) (231) ---------- ----------- ----------- Net income (loss)........................................................... $ 4,451 $ (4,832) $ (381) ---------- ----------- ----------- ---------- ----------- ----------- EBITDA (4).................................................................. $ 18,327 $ 18,327 ---------- ----------- ---------- ----------- Ratio of earnings to fixed charges (5)...................................... 5.4x 0.9x
See Notes to Unaudited Pro Forma Consolidated Statement of Income Data 30 NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME DATA (dollars in thousands) (1) The pro forma adjustment to interest expense is as follows:
FISCAL NINE MONTHS ENDED YEAR ENDED JUNE 30, SEPTEMBER 30, -------------------- 1996 1996 1997 ------------- --------- --------- Interest expense on the Notes and on borrowings under the New Credit Agreement at an assumed weighted average interest rate of 9.62%, including revolving credit commitment and administration fees........................ $ 10,581 $ 7,922 $ 7,382 Amortization of deferred debt issuance costs................................. 590 442 409 ------------- --------- --------- Total adjustment to interest expense..................................... $ 11,171 $ 8,364 $ 7,791 ------------- --------- --------- ------------- --------- ---------
(2) The pro forma provision for income taxes reflects an assumed effective rate of 2.1%, 2.1% and 37.7% for fiscal 1996 and the nine months ended June 30, 1996 and 1997, respectively. The effective historical tax rates for fiscal year 1996 and the nine months ended June 30, 1996 are lower than expected statutory rates due primarily to the reduction of certain deferred tax asset valuation allowances due to the realization of such deferred tax assets becoming more likely than not. The pro forma effective tax rates for the periods presented differ from the historical effective tax rate because the pro forma adjustment to interest expense would have resulted in a lower reduction in the deferred tax valuation allowance available to the Company. (3) The Company recorded a charge of $7,061 in June 1997 related to its cash payments to certain employees in exchange for their surrender of stock options in connection with the Recapitalization Transactions. This non-recurring expense, and a related non-recurring income tax benefit of $2,779, are not reflected in the pro forma income statement data for fiscal 1996 or the nine months ended June 30, 1996. (4) EBITDA is operating income plus depreciation and amortization expense, stock option compensation related to recapitalization and provision for restructuring operations. While EBITDA should not be construed as a substitute for income from operations, net income or cash flows from operating activities in analyzing the Company's operating performance, financial position or cash flows, the Company has included EBITDA because it is commonly used by certain investors and analysts to analyze and compare companies on the basis of operating performance, leverage and liquidity and to determine a Company's ability to service debt. A similar concept to EBITDA is defined as "Consolidated Cash Flow" in the Indenture and used in the calculation of certain covenants therein. See "Description of Notes -- Certain Covenants" and "-- Certain Definitions." (5) For purposes of computing this ratio, earnings consist of income before provision for income taxes plus fixed charges. Fixed charges consist of interest expense, including amortization of deferred debt issuance costs, and one-third of the rent expense from operating leases, which management believes is a reasonable approximation of the interest factor of the rent. 31 SELECTED CONSOLIDATED FINANCIAL DATA The following selected consolidated financial data as of September 30, 1995 and 1996 and for the fiscal years ended September 30, 1994, 1995 and 1996 are derived from, and should be read in conjunction with, the audited consolidated financial statements of the Company included elsewhere herein. The selected consolidated financial data of the Company as of September 30, 1992, 1993 and 1994 and for the fiscal years ended September 30, 1992 and 1993 are derived from audited consolidated financial statements of the Company that are not contained herein. The selected historical consolidated financial data for the nine month periods ended June 30, 1996 and 1997 have been derived from the unaudited consolidated financial statements of Wavetek contained herein and reflect all adjustments (consisting of normal recurring adjustments) that, in the opinion of management of Wavetek, are necessary for a fair presentation of such information. Operating results for the nine months ended June 30, 1997 are not necessarily indicative of results that may be expected for fiscal 1997. The pro forma data for the twelve months ended June 30, 1997 are derived from the Unaudited Pro Forma Consolidated Financial Data of the Company. The selected consolidated financial data should be read in conjunction with the consolidated financial statements of the Company, the Unaudited Pro Forma Consolidated Financial Data of the Company and the information contained in "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere herein.
NINE MONTHS ENDED FISCAL YEARS ENDED SEPTEMBER 30, JUNE 30, ----------------------------------------------------- -------------------- 1992 1993 1994 1995 1996 1996 1997 --------- --------- --------- --------- --------- --------- --------- (DOLLARS IN THOUSANDS) STATEMENT OF INCOME DATA: Sales........................................ $ 58,081 $ 71,891 $ 74,815 $ 133,619 $ 150,993 $ 115,181 $ 118,700 Cost of goods sold........................... 30,483 41,112 41,373 72,649 72,364 55,779 55,479 --------- --------- --------- --------- --------- --------- --------- Gross margin................................. 27,598 30,779 33,442 60,970 78,629 59,402 63,221 Operating expenses: Marketing and selling...................... 14,017 15,539 16,429 32,586 36,197 26,809 27,913 Research and development................... 5,507 5,114 5,425 12,096 12,917 9,416 11,635 General and administrative................. 5,350 5,704 6,057 9,391 11,612 8,655 7,878 Stock option compensation related to recapitalization (1)..................... -- -- -- -- -- -- 7,061 Provision for restructuring operations (2)...................................... -- -- -- -- 1,832 188 -- --------- --------- --------- --------- --------- --------- --------- 24,874 26,357 27,911 54,073 62,558 45,068 54,487 --------- --------- --------- --------- --------- --------- --------- Operating income............................. 2,724 4,422 5,531 6,897 16,071 14,334 8,734 Non-operating income (expense): Interest income............................ 117 24 33 90 167 99 254 Interest expense........................... (966) (676) (645) (1,190) (762) (616) (948) Loss on sale and leaseback financing....... -- -- -- (1,824) -- -- -- Other, net................................. 1,077 24 (387) (288) (1,036) (488) (861) --------- --------- --------- --------- --------- --------- --------- 228 (628) (999) (3,212) (1,631) (1,005) (1,555) --------- --------- --------- --------- --------- --------- --------- Income before provision for income taxes..... 2,952 3,794 4,532 3,685 14,440 13,329 7,179 Provision for income taxes................... 90 168 822 616 965 893 2,728 --------- --------- --------- --------- --------- --------- --------- Net income................................... $ 2,862 $ 3,626 $ 3,710 $ 3,069 $ 13,475 $ 12,436 $ 4,451 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- OTHER FINANCIAL DATA: EBITDA (3)................................... $ 3,760 $ 5,903 $ 7,141 $ 9,944 $ 20,933 $ 16,988 $ 18,327 Depreciation and amortization expense........ 1,036 1,481 1,610 3,047 3,030 2,466 2,532 Capital expenditures......................... 1,062 2,108 1,332 2,920 4,544 3,207 4,784 EBITDA as a percentage of sales.............. 6.5% 8.2% 9.5% 7.4% 13.9% 14.7% 15.4% Ratio of earnings to fixed charges (4)....... 3.2x 4.7x 5.3x 2.8x 9.9x 11.4x 5.4x PRO FORMA DATA (5): Interest expense............................. Ratio of EBITDA to interest expense.......... Ratio of net debt to EBITDA (6).............. Ratio of earnings to fixed charges (4)....... TWELVE MONTHS ENDED JUNE 30, 1997 ----------- STATEMENT OF INCOME DATA: Sales........................................ $ 154,512 Cost of goods sold........................... 72,064 ----------- Gross margin................................. 82,448 Operating expenses: Marketing and selling...................... 37,301 Research and development................... 15,136 General and administrative................. 10,835 Stock option compensation related to recapitalization (1)..................... 7,061 Provision for restructuring operations (2)...................................... 1,644 ----------- 71,977 ----------- Operating income............................. 10,471 Non-operating income (expense): Interest income............................ 322 Interest expense........................... (1,094) Loss on sale and leaseback financing....... -- Other, net................................. (1,409) ----------- (2,181) ----------- Income before provision for income taxes..... 8,290 Provision for income taxes................... 2,800 ----------- Net income................................... $ 5,490 ----------- ----------- OTHER FINANCIAL DATA: EBITDA (3)................................... $ 22,272 Depreciation and amortization expense........ 3,096 Capital expenditures......................... 6,121 EBITDA as a percentage of sales.............. 14.4% Ratio of earnings to fixed charges (4)....... 5.2x PRO FORMA DATA (5): Interest expense............................. $ 11,692 Ratio of EBITDA to interest expense.......... 1.9x Ratio of net debt to EBITDA (6).............. 5.0x Ratio of earnings to fixed charges (4)....... 0.8x
AS OF SEPTEMBER 30, AS OF JUNE 30, 1997 ----------------------------------------------------- ---------------------- 1992 1993 1994 1995 1996 --------- --------- --------- --------- --------- BALANCE SHEET DATA: Cash and cash equivalents (7).......................... $ 3,531 $ 3,513 $ 3,807 $ 3,689 $ 6,126 $ 7,059 Total assets................... 28,701 36,755 34,705 62,578 68,852 79,963 Total debt..................... 6,647 9,269 9,860 14,684 5,954 118,360 Stockholders' equity (deficit).................... 11,535 14,592 11,637 19,416 32,688 (72,969)
(SEE NOTES ON FOLLOWING PAGE) 32 - ------------------------------ (1) In connection with the Recapitalization Transactions, the Company made cash payments upon the surrender of stock options by employees in an aggregate amount of $7.1 million. This amount is included in operating expenses for the nine month period ended June 30, 1997. (2) In fiscal 1996, the Company initiated a plan to restructure certain corporate management functions, its European manufacturing, service and sales activities and its San Diego manufacturing activities. The restructuring costs primarily include expenses for employee severance and closedown of certain manufacturing operations. The restructuring is expected to be completed during fiscal 1997. (3) EBITDA is operating income plus depreciation and amortization expense, stock option compensation related to recapitalization and provision for restructuring operations. While EBITDA should not be construed as a substitute for income from operations, net income or cash flows from operating activities in analyzing the Company's operating performance, financial position or cash flows, the Company has included EBITDA because it is commonly used by certain investors and analysts to analyze and compare companies on the basis of operating performance, leverage and liquidity and to determine a Company's ability to service debt. A similar concept to EBITDA is defined as "Consolidated Cash Flow" in the Indenture and used in the calculation of certain covenants therein. See "Description of Notes -- Certain Covenants" and "-- Certain Definitions." (4) For purposes of computing this ratio, earnings consist of income before provision for income taxes plus fixed charges. Fixed charges consist of interest expense, amortization of deferred debt issuance costs and one-third of the rent expense from operating leases, which management believes is a reasonable approximation of the interest factor of the rent. (5) See "Unaudited Pro Forma Consolidated Financial Data." (6) Net debt is total debt less cash and cash equivalents and short-term investments. As of June 30, 1997, net debt was $111.3 million. (7) Cash and cash equivalents includes short-term investments, which are comprised primarily of U.S. Treasury securities and guaranteed obligations of the U.S. government or its agencies with original maturities between 3 and 12 months. 33 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with the Company's consolidated financial statements and the Unaudited Pro Forma Consolidated Financial Data of the Company included elsewhere herein. OVERVIEW Wavetek is a leading global designer, manufacturer and distributor of a broad range of electronic test instruments, with a primary focus on application-specific instruments for testing voice, video and data communications equipment and networks. The Company also designs, manufacturers and distributes precision instruments to calibrate and test electronic equipment and provides repair, upgrade and calibration services for its products on a worldwide basis. The Company derives its revenues primarily from the sale of its products to a broad international base of over 5,000 customers operating in a wide range of industries. A majority of the Company's sales come from its Communications Test product lines which serve the CATV, Wireless, Telecom, LAN and Test Tools market segments of the test instrument industry. The Company also sells Calibration Instruments and provides repair, upgrade and calibration services for its products on a worldwide basis. The Company sells products that are manufactured at its four facilities located in: (i) Indianapolis, Indiana; (ii) Norwich, England; (iii) St. Etienne, France; and (iv) Munich, Germany. In major markets such as the United States, England, France and Germany, the Company sells its products to customers in their local currencies. In the rest of the world, the Company generally sells its products to customers or local distributors in the functional currency of the location where the products are manufactured. During fiscal 1996, approximately 59% of the Company's sales were generated outside of the United States and approximately 47% of the Company's sales were made in currencies other than the United States dollar. As a result of such foreign currency sales, the equivalent United States dollar amount of the Company's sales is impacted by changes in foreign currency exchange rates. The Company's ability to maintain and grow its sales depends on a variety of factors including its ability to maintain its competitive position in areas such as technology, performance, price, brand identity, quality, reliability, distribution and customer service and support, and its ability to continue to introduce new products that respond to technological change and market demand in a timely manner. Wavetek's cost of goods sold, and its resulting gross margin, are driven primarily by the cost of the material in its products, the cost of the labor to manufacture such products and the overhead expenses in its facilities. In recent years, the Company has focused on improving its gross margin by: (i) consolidating manufacturing operations; (ii) focusing its new product development efforts on lower-cost, easier to manufacture designs; (iii) controlling headcount and expenses in its manufacturing facilities; and (iv) gaining efficiencies and economies of scale in its material and component procurement activities. The Company's operating expenses are substantially impacted by marketing and selling activities and by research and development activities. Marketing and selling expenses are primarily driven by: (i) sales volume, with respect to sales force expenses and sales and commission expenses; (ii) the extent of market research activities for new product design efforts; (iii) advertising and trade show activities; and (iv) the number of new products launched in the period. In recent periods, the Company has increased its spending on research and development activities. This increase has resulted from the Company's October 1994 acquisition of its Wireless and Telecom businesses, which had a higher spending level than the Company's historical activities, and from a planned increase in spending to accelerate the timing of new product introductions. General and administrative expenses primarily include costs associated with the Company's administrative employees, facilities and functions. The Company incurs expenses in foreign countries primarily in the functional currencies of such locations. As a result of the Company's substantial 34 international operations, the United States dollar amount of its expenses is impacted by changes in foreign currency exchange rates. In recent years, the Company's results of operations have been significantly impacted by its October 1994 acquisition of its Wireless and Telecom businesses, the Company's efforts to improve the operating results of these businesses and by the rapid growth in sales and profitability of the Company's CATV product lines. RESULTS OF OPERATIONS The following table sets forth selected financial information as a percentage of sales for the periods indicated:
FISCAL YEARS ENDED SEPTEMBER 30, NINE MONTHS ENDED JUNE 30, ------------------------------- -------------------- 1994 1995 1996 1996 1997 --------- --------- --------- --------- --------- Sales.............................................. 100.0% 100.0% 100.0% 100.0% 100.0% Cost of goods sold................................. 55.3 54.4 47.9 48.4 46.7 --------- --------- --------- --------- --------- Gross margin....................................... 44.7 45.6 52.1 51.6 53.3 Operating expenses................................. 37.3 40.4 41.5 39.1 45.9 --------- --------- --------- --------- --------- Operating income................................... 7.4 5.2 10.6 12.5 7.4 Interest expense, net.............................. (0.8) (0.8) (0.4) (0.5) (0.7) Other non-operating income (expense), net.......... (0.5) (1.6) (0.7) (0.4) (0.7) --------- --------- --------- --------- --------- Income before provision for income taxes........... 6.1 2.8 9.5 11.6 6.0 Provision for income taxes......................... (1.1) (0.5) (0.6) (0.8) (2.3) --------- --------- --------- --------- --------- Net income......................................... 5.0% 2.3% 8.9% 10.8% 3.7% --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- EBITDA (1)......................................... 9.5% 7.4% 13.9% 14.7% 15.4%
- ------------------------ (1) EBITDA is operating income plus depreciation and amortization expense, stock option compensation related to recapitalization and provision for restructuring operations. While EBITDA should not be construed as a substitute for income from operations, net income or cash flows from operating activities in analyzing the Company's operating performance, financial position or cash flows, the Company has included EBITDA because it is commonly used by certain investors and analysts to analyze and compare companies on the basis of operating performance, leverage and liquidity and to determine a Company's ability to service debt. A similar concept to EBITDA is defined as "Consolidated Cash Flow" in the Indenture and used in the calculation of certain covenants therein. See "Description of Notes -- Certain Covenants" and "-- Certain Definitions." 35 NINE MONTHS ENDED JUNE 30, 1997 COMPARED TO NINE MONTHS ENDED JUNE 30, 1996 SALES. Sales in the nine months ended June 30, 1997 increased $3.5 million, or 3.1%, to $118.7 million from $115.2 million in the comparable fiscal 1996 period. This increase was due to an increase in sales to international customers of $5.3 million, or 7.7%, offset by a decrease of $1.7 million, or 3.7%, in sales to customers in the United States. The Company's sales to customers outside the United States increased to 62.2% in the nine months ended June 30, 1997 from 59.5% in the comparable fiscal 1996 period. Changes in foreign exchange rates had an unfavorable impact on the United States dollar equivalent of international sales in the nine months ended June 30, 1997. Sales of the Company's Communications Test products increased $1.0 million, or 1.1%, from the comparable fiscal 1996 period primarily as a result of an increase in international sales partially offset by reduced domestic sales. Sales of Calibration Instruments products increased $2.5 million, or 14.2%, from the comparable fiscal 1996 period, due partially to changes in foreign exchange rates and partially to higher shipments in connection with a planned reduction in the backlog of this product line. Sales from repair, upgrade and calibration services remained relatively constant during the nine months ended June 30, 1997, increasing $0.1 million, or 0.8%, from the comparable fiscal 1996 period. Within its Communications Test product lines, sales of the Company's CATV and Wireless products increased in the nine months ended June 30, 1997 from the comparable fiscal 1996 period, while sales of the Company's Telecom, LAN and Test Tools products declined. The growth in CATV sales in the first nine months of fiscal 1997 can be substantially attributed to the Company's continued penetration of international markets as it continues to benefit from the increasing international investment in CATV infrastructure. The increase in Wireless product sales in the first nine months of fiscal 1997 is due primarily to the shipment of a large order to a customer in Korea, offset by the impact of the devaluation of the Deutsche mark against the United States dollar. The Company's Telecom sales decreased during the first nine months of fiscal 1997 as a result of reduced sales in France, including sales to one of the Company's largest Telecom customers. Telecom sales in the first nine months of fiscal 1997 were also adversely affected by the devaluation in the French franc against the United States dollar. Decreases in sales of LAN and Test Tools products during the first nine months of fiscal 1997 were primarily attributable to pending transitions to new or updated LAN and Test Tools products which are being introduced in fiscal 1997. The Company's sales were also adversely impacted in the first nine months of fiscal 1997 by the discontinuance of selected non-core Communications Test products. GROSS MARGIN. The Company's gross margin in the nine months ended June 30, 1997 increased $3.8 million, or 6.4%, to $63.2 million from $59.4 million in the first nine months of fiscal 1996. Gross margin as a percentage of sales increased to 53.3% in the first nine months of fiscal 1997 from 51.6% in the first nine months of fiscal 1996. The increase in the gross margin percentage during the first nine months of fiscal 1997 results from a higher proportion of the Company's sales coming from its higher margin CATV products, offset by reductions in the gross margin percentage achieved in its Wireless, Telecom and Calibration Instruments product lines. The Company has also experienced higher gross margin percentages in the first nine months of fiscal 1997 as a result of a more favorable geographic mix. The decline in Wireless gross margin percentages in the first nine months of fiscal 1997 is due primarily to a large sale of a non-core product to a customer in Korea on which a lower than average gross margin percentage was achieved. OPERATING EXPENSES. Operating expenses in the nine months ended June 30, 1997 increased $9.4 million, or 20.9%, to $54.5 million from $45.1 million in the comparable fiscal 1996 period. Operating expenses as a percentage of sales increased to 45.9% in the first nine months of fiscal 1997 from 39.1% in the first nine months of fiscal 1996. The increase in operating expenses in the first nine months of fiscal 1997 was due to a one-time charge of $7.1 million, or 5.9% of sales, for stock option compensation related to the Recapitalization Transactions and an increase in spending for research and development activities of $2.2 million, to 9.8% of sales in the first nine months of fiscal 1997 from 8.2% of sales in the first nine months of fiscal 1996, in order to accelerate the timing of new product introductions. The increase in the 36 first nine months of fiscal 1997 was also partially due to increased spending, as a percentage of sales, in marketing and selling activities to 23.5% in the first nine months of fiscal 1997 from 23.3% in the first nine months of fiscal 1996. These increases in the first nine months of fiscal 1997 were partially offset by reduced spending in general and administrative activities of $0.8 million to 6.6% in the first nine months of fiscal 1997 from 7.5% in the first nine months of fiscal 1996, reflecting the Company's ability to spread certain fixed expenses over a higher sales volume. NON-OPERATING INCOME (EXPENSE). Non-operating expense, net, in the nine months ended June 30, 1997 increased by $0.6 million over the comparable fiscal 1996 period to $1.6 million. The Company's net interest expense increased to $0.7 million during the nine months ended June 30, 1997 from $0.5 million in the comparable fiscal 1996 period, reflecting additional interest expense due to the Notes and the New Credit Agreement. In addition, in the nine months ended June 30, 1997, the Company's exchange losses from foreign currency transactions, included in the "Other, net" caption in the Company's consolidated statements of income, increased by $0.5 million over the comparable fiscal 1996 period. PROVISION FOR INCOME TAXES. The Company's effective tax rate in the nine months ended June 30, 1997 was 38.0%. In the nine months ended June 30, 1996, the Company's effective tax rate was only 6.7% due to the reduction of certain deferred tax asset valuation allowances due to the realization of such deferred tax assets becoming more likely than not. At June 30, 1997, the deferred tax assets were $4.5 million. NET INCOME. As a result of the above factors, net income was $4.5 million in the nine months ended June 30, 1997 as compared to $12.4 million in the nine months ended June 30, 1996. EBITDA. EBITDA was $18.3 million in the nine months ended June 30, 1997 as compared to $17.0 million in the nine months ended June 30, 1996. EBITDA as a percentage of sales increased to 15.4% in the first nine months of fiscal 1997 from 14.7% in the first nine months of fiscal 1996. FISCAL YEAR ENDED SEPTEMBER 30, 1996 COMPARED TO FISCAL YEAR ENDED SEPTEMBER 30, 1995 SALES. Sales in fiscal 1996 increased $17.4 million, or 13.0%, to $151.0 million from $133.6 million in fiscal 1995. The Company's mix of business in the United States versus international markets remained constant at approximately 41% domestic and approximately 59% international in each of fiscal 1996 and 1995. Changes in foreign exchange rates did not have a material impact on total sales in fiscal 1996 compared to fiscal 1995. Sales of the Company's Communications Test products in fiscal 1996 increased $15.6 million, or 15.7%, from fiscal 1995. Sales of Calibration Instruments products in fiscal 1996 increased by $0.7 million, or 2.8%, from fiscal 1995. Revenues from repair, upgrade and calibration services increased $1.1 million in fiscal 1996, or 10.6%, over fiscal 1995 primarily due to increased service revenues for the Company's Wireless and Telecom products in France and Germany. Within its Communications Test product lines, sales of the Company's CATV products increased in fiscal 1996 as a result of the impact of new products introduced in fiscal 1996 and 1995 and the positive impact of overall growth in CATV markets due to infrastructure upgrading by United States CATV operators and the rapid increase of cable subscribers and cable infrastructure development in international markets. Sales of the Company's LAN products also increased in fiscal 1996 as a result of the full-year effect of the Company's LANTEKPRO family of products that were introduced mid-year in fiscal 1995. These CATV and LAN increases in fiscal 1996 were offset by decreases in sales of the Company's Test Tools products primarily due to the discontinuance of non-core product lines and a decrease in sales of the Company's Wireless products attributable to declines in sales of older products. The Company's Communications Test sales were also impacted by the sale of a non-strategic business in fiscal 1996. GROSS MARGIN. The Company's gross margin in fiscal 1996 increased $17.7 million, or 29.0%, to $78.6 million from $61.0 million in fiscal 1995. Gross margin as a percentage of sales increased to 52.1% in fiscal 1996 from 45.6% in fiscal 1995. The increase in gross margin in fiscal 1996 was due to: (i) the closing of the Company's San Diego manufacturing facility in fiscal 1996; (ii) increased sales of higher gross margin 37 Communications Test products; (iii) the benefits of improved overhead absorption due to the significant increase in volume of sales of CATV and LAN products; and (iv) reduced overhead spending in the Company's Wireless and Telecom business areas, which were acquired in October 1994. OPERATING EXPENSES. Operating expenses in fiscal 1996 increased $8.5 million, or 15.7%, to $62.6 million from $54.1 million in fiscal 1995. Operating expenses as a percentage of sales increased to 41.5% in fiscal 1996 from 40.4% in fiscal 1995. The increase in operating expenses in fiscal 1996 was due to: (i) a provision recorded by the Company of $1.8 million for the restructuring of certain corporate management functions, its European manufacturing, service and sales activities and San Diego manufacturing activities; and (ii) an increase in general and administrative activities of $2.2 million, to 7.7% of sales in fiscal 1996 from 7.0% of sales in fiscal 1995, due to higher than normal charges in 1996 for executive recruitment and relocation and provisions for potentially doubtful accounts receivable. Excluding the $1.8 million provision for restructuring operations, operating expenses as a percentage of sales would have decreased to 40.2% in fiscal 1996 from 40.4% in fiscal 1995. The increase in fiscal 1996 was partially offset by reduced spending, as a percentage of sales, in marketing and selling activities to 24.0% in fiscal 1996 from 24.4% in fiscal 1995 and in research and development activities to 8.6% in fiscal 1996 from 9.1% in fiscal 1995, reflecting the Company's efforts to reduce expenses in the Wireless and Telecom business areas it acquired in October 1994. NON-OPERATING INCOME (EXPENSE). Non-operating expense, net, in fiscal 1996 decreased to $1.6 million from $3.2 million in fiscal 1995. The Company's net interest expense decreased to $0.6 million in fiscal 1996 from $1.1 million in fiscal 1995, reflecting a reduction in average net borrowings. Other non- operating expenses decreased to $1.0 million in fiscal 1996 from $2.1 million in fiscal 1995, due primarily to a loss of $1.8 million incurred in fiscal 1995 related to the sale and leaseback financing of the Company's Indianapolis facility. This decrease was partially offset by an increase in other expense of $0.7 million in fiscal 1995 due primarily to certain non-recurring legal expenses. PROVISION FOR INCOME TAXES. The Company's effective tax rate in fiscal 1996 was 6.7% due to the reduction of certain deferred tax asset valuation allowances due to the realization of such deferred tax assets becoming more likely than not, compared to a fiscal 1995 effective rate of 16.7%. NET INCOME. As a result of the above factors, net income was $13.5 million in fiscal 1996 as compared to $3.1 million in fiscal 1995. EBITDA. EBITDA was $20.9 million in fiscal 1996 as compared to $9.9 million in fiscal 1995. EBITDA as a percentage of sales increased to 13.9% in fiscal 1996 from 7.4% in fiscal 1995. FISCAL YEAR ENDED SEPTEMBER 30, 1995 COMPARED TO FISCAL YEAR ENDED SEPTEMBER 30, 1994 SALES. Sales in fiscal 1995 increased $58.8 million, or 78.6%, to $133.6 million from $74.8 million in fiscal 1994. The Company's sales to customers outside the United States increased to 59.5% of sales in fiscal 1995 from 42.6% in fiscal 1994. The increases in total sales and the international portion of total sales are substantially attributable to the Company's acquisition of the Wireless and Telecom business of Schlumberger in October 1994. Additionally, sales of the Company's CATV products increased due to the early effects of the overall growth in the CATV market and infrastructure spending described above, and sales of the Company's LAN products grew due to the introduction of a new product platform in the middle of fiscal 1995. GROSS MARGIN. The Company's gross margin in fiscal 1995 increased $27.5 million, or 82.3%, to $61.0 million from $33.4 million in fiscal 1994. Gross margin as a percentage of sales increased to 45.6% in fiscal 1995 from 44.7% in fiscal 1994. The increase in margins was due to the positive effects of volume increases in the CATV and LAN product lines, offset by the impact of lower gross margins associated with the acquired Wireless and Telecom business. 38 OPERATING EXPENSES. Operating expenses in fiscal 1995 increased $26.2 million, or 93.7%, to $54.1 million from $27.9 million in fiscal 1994. Operating expenses as a percentage of sales increased to 40.4% in fiscal 1995 from 37.3% in fiscal 1994, reflecting increased fixed expenses, higher spending levels and goodwill amortization associated with the acquired Wireless and Telecom business. NON-OPERATING INCOME (EXPENSE). Non-operating expense, net, in fiscal 1995 increased to $3.2 million from $1.0 million in fiscal 1994. The Company's net interest expense increased to $1.1 million during fiscal 1995 from $0.6 million during fiscal 1994, reflecting increased borrowings to complete the October 1994 acquisition by the Company of its Wireless and Telecom businesses. Other non-operating expenses increased to $2.1 million in fiscal 1995 from $0.4 million in fiscal 1994, due primarily to a loss of $1.8 million incurred in fiscal 1995 related to the sale and leaseback financing of the Company's Indianapolis facility. PROVISION FOR INCOME TAXES. The Company's effective tax rate in fiscal 1995 was 16.7%, compared to a fiscal 1994 effective rate of 18.1%. NET INCOME. As a result of the above factors, net income was $3.1 million in fiscal 1995 as compared to $3.7 million in fiscal 1994. EBITDA. EBITDA was $9.9 million in fiscal 1995 as compared to $7.1 million in fiscal 1994. EBITDA as a percentage of sales decreased to 7.4% in fiscal 1995 from 9.5% in fiscal 1994. LIQUIDITY AND CAPITAL RESOURCES The Company's cash flow from operating activities was $6.4 million, $12.5 million and $15.1 million in fiscal 1994, 1995 and 1996, respectively, and $14.1 million (excluding a one-time charge of $7.1 million for stock option compensation related to the Recapitalization Transactions) for the nine months ended June 30, 1997. The Company had cash, cash equivalents and short-term investments at June 30, 1997 of $7.1 million. The Company invests its excess cash in money market funds and U.S. Treasury obligations. Historically the Company has funded its business through operating cash flow, has not relied on sales of equity to provide cash and has used short-term debt primarily for cash management purposes. The Company's European subsidiaries had borrowings outstanding under their existing credit agreements (the "Existing Credit Agreements") of $3.4 million at June 30, 1997 for funding short-term working capital requirements, and the Company had additional obligations outstanding totalling approximately $2.1 million in the form of letters of credit and bank guarantees. As of June 30, 1997, the Company had outstanding an unsecured note of approximately $0.9 million issued in the October 1994 acquisition of the Company's Telecom business and a financing obligation of $4.1 million recorded in connection with the sale and leaseback of the Company's facilities in Indianapolis, Indiana. See "Description of Other Indebtedness -- Other Debt." The Company's primary cash needs have been for the funding of working capital requirements (primarily inventory) and capital expenditures. The Company made capital expenditures in fiscal 1994, 1995 and 1996 of $1.3 million, $2.9 million and $4.5 million, respectively, and $4.8 million for the nine months ended June 30, 1997. Capital expenditures in fiscal 1994 and 1995 primarily reflect spending for manufacturing and engineering equipment resulting from the increase in the size of the business and the number of facilities following the October 1994 acquisition by the Company of its Wireless and Telecom businesses. In fiscal 1996, the expenditures reflect increasing investment in manufacturing and engineering equipment and also include approximately $1.1 million related to investing in new management information system hardware and software. The Company expects its capital expenditures to increase to approximately $6.0 million in fiscal 1997, which would represent a higher than average percentage of sales as compared to historical levels. These higher than average expenditures primarily reflect the Company's continued investment in new management information systems and manufacturing equipment. 39 As part of the Recapitalization Transactions, the Company entered into the New Credit Agreement with Fleet National Bank, DLJ Capital Funding, Inc. and various other lenders providing for a term loan facility of $25.0 million and a revolving credit facility providing for borrowings up to $20.0 million, of which the Company borrowed all $25.0 million of the term loan facility and none of the revolving credit facility to complete the Recapitalization Transactions. See "Description of Other Indebtedness -- New Credit Agreement." In connection with entering into the New Credit Agreement, the Company terminated $4.0 million of availability under its Existing Credit Agreements, leaving borrowing availability of approximately $10.5 million at its Foreign Subsidiaries. The Company believes that its cash flow from operations, combined with the remaining available borrowings under the Existing and New Credit Agreements will be sufficient to fund its debt service obligations, including its obligations under the Notes, and working capital requirements, as well as implement its growth strategy. FOREIGN OPERATIONS As discussed above, a significant portion of the Company's sales and expenses are denominated in currencies other than the United States dollar. In order to maintain access to such foreign currencies, the Company's subsidiaries in the United Kingdom, France and Germany have credit facilities providing for borrowings in British pounds, French francs and Deutsche marks, respectively. The revolving credit facility under the New Credit Agreement provides for up to an aggregate of $7.5 million of borrowings in British pounds, French francs and Deutsche marks. Adjustments made in translating the balance sheet accounts of the Foreign Subsidiaries from their respective functional currencies at appropriate exchange rates are included as a separate component of stockholders' equity. In addition, the Company periodically uses forward exchange contracts to hedge certain known foreign exchange exposures. Gains or losses from such contracts are included in the Company's statements of income to offset gains and losses from the underlying foreign currency transactions. The Indenture and the New Credit Agreement permit the Company and its subsidiaries to make investments in, and intercompany loans to, the Foreign Subsidiaries. Payments to the Company or its other subsidiaries by such Foreign Subsidiaries, including the payment of dividends, redemption of capital stock or repayment of such intercompany loans, may be restricted by the credit agreements of the Foreign Subsidiaries. All intercompany loans from the Company to the Foreign Subsidiaries are pledged to the lenders under the New Credit Agreement. PERIODIC FLUCTUATIONS A variety of factors may cause period-to-period fluctuations in the operating results of the Company. Such factors include, but are not limited to, product mix, European summer holidays and other seasonal influences, competitive pricing pressures, materials costs, currency fluctuations, revenues and expenses related to new products and enhancements of existing products, as well as delays in customer purchases in anticipation of the introduction of new products or product enhancements by the Company or its competitors. The majority of the Company's revenues in each quarter results from orders received in that quarter. As a result, the Company establishes its production, inventory and operating expenditure levels based on anticipated revenue levels. Thus, if sales do not occur when expected, expenditures levels could be disproportionately high and operating results for that quarter, and potentially future quarters, would be adversely affected. 40 BUSINESS GENERAL Wavetek is a leading global designer, manufacturer and distributor of a broad range of electronic test instruments, with a primary focus on application-specific instruments used for testing voice, video and data communications equipment and networks. The Company also designs, manufacturers and distributes precision instruments to calibrate and test electronic equipment and provides repair, upgrade and calibration services for its products on a worldwide basis. The Company was acquired in 1991 by an investment group led by Gooding and consummated the Recapitalization Transations in June 1997 with the New Equity Investors. The Company has increased sales from $58.1 million in fiscal 1992 to $151.0 million in fiscal 1996 and EBITDA from $3.8 million in fiscal 1992 to $20.9 million in fiscal 1996 by increasing its penetration of existing markets and by entering additional markets through introductions of new products and acquisitions. For the LTM ended June 30, 1997, Wavetek had sales and EBITDA of $154.5 million and $22.3 million, respectively. Wavetek believes it has achieved its success by: (i) focusing on the $2.5 billion Communications Test market segment of the test instrument industry, which is expected to grow by approximately 10% per annum through 2001; (ii) identifying changing industry trends and customer needs and successfully introducing responsive new products on a timely basis; (iii) serving the increasing demand for application-specific, portable field service and maintenance equipment, which accounted for over 70% of the Company's LTM sales; and (iv) leveraging its operations and development capabilities outside the United States, where the Company generated 61% of its LTM sales. Wavetek believes that its product development capabilities, product quality, breadth of product line and geographic diversity should enable it to continue to expand its share of existing markets and successfully enter new markets. The Company's Communications Test products, which accounted for 75% of the Company's LTM sales, serve the CATV, Wireless, Telecom, LAN and Test Tools segments of the test instrument industry. The primary end users for the Company's Communications Test products are service, installation and maintenance personnel of CATV operators, wireless communications companies, telecommunications companies and data communications equipment installers. The Company's CATV products are used by CATV operators to diagnose and monitor CATV systems, test cable for signal quality and leakage and ensure the proper installation of new services such as cable modems. The Company's Wireless products are used by wireless operators, equipment manufacturers and retailers to test mobile phones during production, repair, or at the point-of-sale and by wireless operators to test base stations. The Company's Telecom products are used by telecommunications companies to install and maintain fiber optic cable. The Company's LAN products are used by LAN installation and service professionals to test LAN cables and connectors ("physical layer"). The Company's Test Tools products, primarily hand-held DMMs, are used to test a wide variety of electronic and electrical equipment. The Company has strong competitive positions in its target markets and believes it is the worldwide market leader in the manufacture of CATV test equipment, the second largest supplier of hand-held DMMs and one of the five largest manufacturers of Wireless and physical layer LAN test equipment. The Company's Calibration Instruments products, which accounted for 17% of the Company's LTM sales, are used in metrology, engineering and manufacturing environments worldwide to calibrate electronic equipment and certify compliance with international standards. The Company believes it is the second largest global manufacturer of Calibration Sources and Transfer Standards. The Company's Calibration Instruments products also include Precision DMMs. The Company successfully competes in this market based on its technical expertise, relationships with national laboratories and product reputation. The Company's Service business, which accounted for 8% of the Company's LTM sales, provides repair, upgrade and calibration services for the Company's products through eight Wavetek service centers worldwide and an international network of independent representatives. 41 Wavetek has global design, manufacturing, marketing and distribution capabilities through facilities located in the United States, the United Kingdom, France and Germany. The Company is committed to providing high quality manufacturing and has received or is in the process of receiving ISO 9000 certification for each of its manufacturing facilities. In addition, Wavetek supports its broad international base of over 5,000 customers with regional sales offices in San Diego, Indianapolis, Norwich, Munich, Paris, Vienna, Singapore, Hong Kong, Beijing and Shanghai. The Company's products are sold through direct sales teams in the United States, the United Kingdom, France and Germany and a global network of over 250 distributors and independent representatives. BUSINESS STRATEGY Wavetek believes that it has achieved its strong position in the Communications Test and Calibration Instruments market segments by identifying changing industry trends and customer needs, and by successfully introducing high-quality, cost-effective, application-specific products to meet such needs on a timely basis. The Company's business strategy is to further enhance its strong position in these markets and to continue to increase sales and EBITDA through the following key initiatives: - FOCUS ON THE LARGE, RAPIDLY GROWING COMMUNICATIONS TEST SEGMENT. The Company generated 75% of its LTM sales from Communications Test products and intends to continue to focus on this segment of the test instrument industry. Prime Data expects sales in the Communications Test market to grow at approximately 10% per annum from approximately $2.5 billion in 1996 to approximately $4.0 billion in 2001. The Company believes that the drivers of this growth include (i) rapidly changing communications technology; (ii) growing demand for personal communications services (including mobile phones, interactive CATV and internet access); and (iii) increasing worldwide investment to build or upgrade data and communications infrastructure. Wavetek intends to capitalize on this large, rapidly growing market segment through its broad Communications Test product portfolio, extensive international presence and strong market positions in CATV, Wireless and LAN. - DEVELOP APPLICATION-SPECIFIC PRODUCTS FOR TARGET MARKETS ON A TIMELY BASIS. Wavetek's product development strategy is to: (i) focus on application-specific products that are responsive to customer needs; (ii) minimize development time in order to address rapidly changing technology; and (iii) leverage design efforts by generating multiple product line extensions from existing product platforms. Wavetek has a history of successful new product introductions, including eight new products in fiscal 1996, and the Company expects to introduce approximately ten new products in fiscal 1997. - MEET DEMAND FOR ENHANCED PORTABLE TEST INSTRUMENTS. The Company generated over 70% of its LTM sales from portable field service and maintenance equipment and intends to continue to focus on these types of products. The increasing complexity of communications technology is creating demand for field test equipment that incorporates enhanced measurement performance. Furthermore, service, installation and maintenance personnel are demanding smaller, more portable products that enable them to service systems and equipment in the field rather than at a service facility. As a result of its product design, manufacturing and distribution strengths in portable test instruments, the Company believes it will continue to benefit from these demand trends. - LEVERAGE INTERNATIONAL OPERATIONS AND DISTRIBUTION. The Company believes that international capital investment in communications infrastructure has provided and will continue to provide growth in the worldwide Communications Test market. Wavetek believes it is well-positioned to capitalize on this growth with its substantial international operations that include: (i) three foreign manufacturing facilities; (ii) established international sales and distribution channels; and (iii) approximately 450 employees located outside of the United States. The Company generated 61% of its LTM sales from customers outside the United States and believes its international operations should enable it 42 to gain market share in existing international markets and successfully enter new markets, particularly in the Asia-Pacific, Eastern Europe and South America regions. Additionally, the Company believes that its strategic alliance formed in 1996 with Yokogawa, a leading Japanese process control and test and measurement company, coupled with the development of new products tailored for the Japanese market, will increase the Company's sales in Japan. - ENHANCE PROFITABILITY THROUGH CONTINUED IMPROVEMENT IN THE WIRELESS AND TELECOM BUSINESSES. Wavetek has taken measures to improve the operations of its Wireless and Telecom businesses acquired in October 1994, including: (i) introducing new products with higher gross margins; (ii) rationalizing old, low margin businesses and products; (iii) reducing headcount; (iv) hiring new management; and (v) reducing marketing and selling expenses as a percentage of sales. As a result of these ongoing efforts, the Company has significantly improved the operating results of these acquired businesses. As new products with higher margins continue to replace older products, and as the Company makes additional cost improvements in its European manufacturing operations, the Company expects results from these businesses to continue to improve. TEST INSTRUMENT INDUSTRY The global test instrument industry encompasses the manufacturing, marketing and distribution of a wide variety of electronic test equipment used in the design, development and service of various types of electronic equipment, cables and systems. Test instruments are used primarily by service, installation, maintenance, manufacturing and research and engineering professionals in a broad range of industries, including communications, technology, aerospace, process control and automotive. Selected products include signal meters, DMMs, sweep generators, spectrum analyzers, function generators and network analyzers. Wavetek focuses on two segments of the $7.8 billion test instrument industry: Communications Test and Calibration Instruments. COMMUNICATIONS TEST The Communications Test segment is the largest and one of the fastest growing segments of the test instrument industry. This segment consists of a broad range of equipment used to install, diagnose, maintain and service equipment for voice, video and data communications networks. According to Prime Data, sales in the Communications Test segment have grown from approximately $1.2 billion in 1989 to approximately $2.5 billion in 1996. Prime Data further expects this segment to grow approximately 10% per annum to over $4.0 billion by 2001. In 1995, approximately 61% of Communications Test market revenues occurred outside of the United States, with Asia and Europe representing 25% and 28% of the market, respectively, and the rest of the world representing 8%. The following graph presents the historical and projected size (as compiled by Prime Data) of the Communications Test segment of the test instrument industry: WORLDWIDE COMMUNICATIONS TEST INSTRUMENT SALES (dollars in millions) EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
1989 $1,182 1990 $1,265 1991 $1,351 1992 $1,416 1993 $1,558 1994 $1,867 1995 $2,187 1996 $2,460 1997E $2,710 1998E $3,000 1999E $3,315 2000E $3,670 2001E $4,005
- -------------- Source: Prime Data 1997. 43 The Company believes that the consistent growth of the Communications Test segment has been driven and will continue to be driven, in large part, by the following factors: RAPIDLY CHANGING TECHNOLOGY. Many segments of the communications industry are experiencing rapid change due to new and competing technologies. For example, digital formats are replacing analog formats in many forms of communication systems. In addition, the need to increase data capacity should lead to higher bandwidths, new signalling formats and new transmission technologies. Each change or upgrade in communications systems or infrastructure requires substantial testing, which creates demand for new or upgraded test instruments. SUBSTANTIAL CAPITAL INVESTMENT IN COMMUNICATIONS INFRASTRUCTURE. Developed countries, such as the United States, are investing substantial capital to construct, rebuild, upgrade and maintain information and communications systems. Although such expenditures have slowed in certain areas, operators generally need to upgrade their systems in order to support the increased demand for new services and methods of communication that require more technologically advanced communications infrastructure. Less mature countries, including selected Asia-Pacific, Eastern European and South American countries, are building communications infrastructure to meet increasing demand for basic communications services such as CATV, Wireless and Telecom. Demand for Communications Test products has historically depended upon capital spending for such communications infrastructure. INCREASED DEMAND FOR WIRELESS PRODUCTS. According to industry sources, the number of global cellular and personal communications system ("PCS") subscribers is expected to grow from 123 million in 1996 to 334 million in 2001, representing an average growth rate of approximately 22% per annum. In addition to the growth in subscribers, wireless technologies are constantly evolving. The Company believes that the combination of growth in cellular and PCS subscribers and changing technology should increase the need for wireless Communications Test products. SHIFT TO ENHANCED PORTABLE FIELD TEST EQUIPMENT. The increasing complexity of communications technology is creating demand for field test equipment that incorporates enhanced measurement performance. Furthermore, service and installation personnel are demanding smaller, more portable products that enable them to service systems and equipment in the field rather than at a service facility. As a result, there is a continuing need to develop more portable field test equipment with enhanced features and technology. CALIBRATION INSTRUMENTS The Calibration Instruments segment of the test instrument industry is comprised of instruments which measure voltage, current, power quality, frequency, temperature, pressure and other key functional parameters of electronic equipment. Calibration Instruments are typically used by engineering and manufacturing professionals and national laboratories to ensure that the accuracy of the calibration or verification of electronic test equipment can be traced to national, international or military reference standards. The Company focuses on the metrology area of Calibration Instruments with three types of products: Calibration Sources, Transfer Standards and Precision DMMs. Calibration Sources provide high accuracy voltages and currents for calibrating and verifying the accuracy of voltage measuring equipment. Transfer Standards transfer the accuracy of voltage measurements from national standards laboratories to industry calibration laboratories. Precision DMMs measure voltages and currents produced by electronic equipment to accuracies up to 8 1/2 digits. The Company estimates that the aggregate market for these products was $365 million in 1996, with DMMs (of which Precision DMMs are a small segment), Calibration Sources and Transfer Standards representing approximately 78%, 19% and 3%, respectively, of the market. The Company believes that future growth in the Calibration Instruments industry will be primarily driven by: (i) increased adherence to quality standards such as ISO 9000, which require companies to regularly calibrate and verify electronic 44 equipment used in manufacturing and repair; (ii) demand for more automated and user-friendly Calibration Instruments to increase efficiency and allow less skilled technicians to administer calibration procedures; and (iii) demand for Calibration Instruments to accommodate a wider range of equipment with specific test programs in order to increase efficiency and reduce the cost of calibration and maintenance. The Company believes that several barriers to entry exist in the Calibration Instruments market that limit the number of competitors. Users of Calibration Instruments depend on the accuracy of such instruments and generally require instrument manufacturers to have long standing reputations for technical expertise and product quality. Furthermore, sales often depend on relationships with major quality standards organizations such as national laboratories and worldwide first tier metrology labs. BUSINESS Within the test instrument industry, Wavetek has a primary focus on Communications Test instruments. The Company also manufactures Calibration Instruments and provides repair, upgrade and calibration services for its products on a worldwide basis. The Company's Communications Test, Calibration Instruments and Service businesses accounted for 75%, 17% and 8%, respectively, of the Company's LTM sales. COMMUNICATIONS TEST The Company's Communications Test business, which accounted for 75% of the Company's LTM sales, consists of CATV, Wireless, Telecom, LAN and Test Tools. CATV. The Company is the global leader in developing and manufacturing test equipment used for commissioning new and maintaining existing CATV networks. Major products include: sweep systems, signal level meters, leakage meters, monitoring systems and related software. These products allow CATV operators to test and monitor the quality of signals transmitted over a CATV network. The Company believes that the development and deployment by CATV operators of advanced services, including two-way data paths to provide telephony or internet services, has created new product opportunities for Wavetek. For example, Wavetek's close customer relationships gave the Company early indication of the need for return path testing capability. Wavetek used this information to create an extension to Wavetek's successful Stealth product line to assist CATV technicians in the installation and servicing of the return path of CATV networks. One of the primary technical problems facing two-way CATV networks is interference (noise) on the return path. If the return path is not securely installed with tight connectors and well-maintained cable, noise from external sources such as computers, home appliances and motors can enter the CATV system, be amplified and interfere with data on the return path. In order to reduce the time and difficulty in locating the source of noise, Wavetek has developed a family of leakage meters, including the CLI 1750, that assists installers in detecting leaks in CATV networks. Significant CATV customers of the Company include Continental Cablevision, Inc., Deutsche Telekom A.G., TCI and Time Warner Cable. The Company's CATV business is headquartered in Indianapolis, Indiana. 45 The following table lists selected CATV product offerings of the Company:
APPROXIMATE U.S. PRICE PRODUCT NAME DESCRIPTION PRIMARY CUSTOMER POINT - ------------------- ---------------------------------------------------- ------------------------ ------------ MicroStealth Hand-held unit which tests signal quality at CATV service technicians $ 1,200 multiple points in a CATV network and installers SAM 4040 Hand-held, broadband communication service monitor CATV service technicians $ 2,500 which performs CATV network maintenance and installers CLI 1750 Tests for interfering signals in a CATV network CATV service technicians $ 2,000 and installers Stealth Flexible, portable instrument for testing specific CATV service technicians $ 3,600 segments of a CATV network and installers 3SM Monitors and controls signal parameters of up to 200 Network operations and $ 4,300 remote head ends or hub sites reliability managers Benchmark 1175 Versatile sweep/scalar analyzer used to test for Radio frequency ("RF") $ 10,000 sweep response, transmission loss or gain amplifier manufacturers, service and repair facilities
WIRELESS. The Company's Wireless business, acquired from Schlumberger in October 1994, is one of the world's five largest manufacturers of test instruments for mobile phone and base station testing and service. Wavetek manufactures instruments to test most analog and digital formats including PCS, Groupe Speciale Mobile ("GSM"), Time Division Multiple Access ("TDMA") and Code Division Multiple Access ("CDMA"). The Company's products are used during the manufacturing process, at service facilities and at the point-of-sale. Wavetek's point-of-sale application-specific product for the Wireless market, the 4100 GSM Tester, was designed to address the increasing demand for testing in the GSM market. The shift in phone repair from local repair shops or retail stores to high volume service facilities, combined with the high cost to process, ship and test a phone at a service facility, is creating a need for "go/no-go" testing at retail sites to minimize the number of properly functioning phones that are mistakenly returned to the manufacturer for repair. The 4100 GSM Tester family provides accurate "go/no-go" testing at a price point approximately one-third of the price of traditional service testers, allowing economical sorting of phones at the point-of-sale. Wavetek was able to bring the 4100 GSM Tester family to market quickly, due in part to the application of technology from its LAN products and existing wireless products. Wavetek's 3600D CDMA Tester provides application-specific, low cost service capability on cellular or PCS phones that use CDMA technology. In the early phase of the deployment of a new phone technology, phones must be thoroughly tested prior to delivery to customers, as well as during repair. This testing can be performed with manufacturing-oriented test instruments ranging in price from $50,000-$60,000. However, as new phones are shipped in higher volumes, a more economical, easier to use tester is desired. The 3600D CDMA Tester is a lower cost (approximately $28,000) solution for phone commissioning and repair. Significant Wireless customers of the Company include AT&T and Ericsson. The Company's Wireless business is headquartered in Munich, Germany, with engineering and marketing teams in Indianapolis, Indiana. 46 The following table lists selected Wireless product offerings of the Company:
APPROXIMATE U.S. PRICE PRODUCT NAME DESCRIPTION PRIMARY CUSTOMER POINT - ------------------- ---------------------------------------------------- ------------------------ ------------ 4032 (MS) Benchtop tester for analog and digital cellular or Phone manufacturers, $ 27,000 PCS phones carriers, repair organizations 4032 (BTS) Portable tester for cellular base stations in Manufacturers of base $ 34,000 commissioning and maintenance stations, carriers 3600D CDMA Tester Benchtop tester for analog and digital cellular or Phone manufacturers, $ 28,000 PCS phones carriers, repair organizations 4015 Benchtop tester for many types of analog radios Service shops, $ 14,000 governments, aircraft workshops 4100 GSM Tester Hand-held, point-of-sale tester for cellular or PCS Phone manufacturers, $ 6,000 phones carriers, retail outlets
TELECOM. The Company's Telecom business, also acquired from Schlumberger in October 1994, designs and manufactures test instruments, systems and software used for the installation, maintenance and monitoring of fiber optic cable. The Company serves this market with both mainframe and portable optical time domain reflectometers ("OTDRs"), remote fiber test systems ("RFTS"), light sources, optical power meters and various other products. As Telecom operators install more passive optical networks ("PONs") and provide fiber to the home ("FTTH"), demand has increased for more versatile OTDRs. Wavetek's new MTS-5000 OTDR family responds to this trend by offering a modular product that allows installers to have specialized high resolution modules for PONs and FTTH networks, in addition to high performance modules for long distance links. With this family of products Wavetek combined the high performance optical knowledge of its OTDR design team with the low cost design expertise of its CATV engineering group, resulting in a product that offers high performance features at a competitive cost. Wavetek intends to add multi-mode modules used for LAN fiber measurements to its OTDR family. Significant Telecom customers of the Company include France Telecom, Russia Telecom and Siemens A.G. The Company's Telecom business is headquartered in St. Etienne, France. The following table lists selected Telecom product offerings of the Company:
APPROXIMATE U.S. PRICE PRODUCT NAME DESCRIPTION PRIMARY CUSTOMER POINT - ------------------- ---------------------------------------------------- ------------------------ ------------ Flash Mini OTDR Hand-held, portable tester of fiber optic networks Telecom operators, LAN $ 12,000 fiber installers, utilities, private networks MTS-5000 OTDR Modular portable OTDR, next generation platform Telecom operators, CATV $ 12,000 operators, LAN fiber installers Helios Mainframe, high performance OTDR, measures and Telcom operators, fiber $ 26,000 characterizes fiber optic networks manufacturers, utilities, private networks Atlas Fiber optic network monitoring (construction and Telcom operators, $ 50,000 maintenance) utilities, private networks
47 LAN. The Company acquired its LAN business as part of the Beckman acquisition in October 1992, and the Company is now one of the five largest global manufacturers of physical layer LAN test equipment. LAN testing products include diagnostic instruments used to certify and verify the integrity of the LAN physical layer. The Company's products are used by third party cable installers, value added resellers of network equipment and management information systems managers to verify the quality of cable installation. The Company has developed its LT-8000 family of LAN cable testers to measure the next generation of LAN cable rated to 650 MHz bandwidth, compared to the current 100 MHz standard. The Company was able to design the LT-8000, a cost effective, high performance unit, by combining its expertise in high speed oscilloscope calibration from its Calibration Instruments business with expertise in RF technology from its CATV business. Significant LAN customers of the Company include distributors such as Anixter International, Inc. and Graybar Electric Company, Inc. The Company's LAN business is headquartered in San Diego, California. The following table lists selected LAN product offerings of the Company:
APPROXIMATE U.S. PRICE PRODUCT NAME DESCRIPTION PRIMARY CUSTOMER POINT - ------------------- ------------------------------------------------- ------------------------ --------------- LANTEKPRO XL Hand-held, portable unit used to certify and LAN technicians, network $4,600 troubleshoot LAN cable installation managers LT-8000 Hand-held, portable unit used to certify and LAN technicians, network $ 2,000-$6,000 troubleshoot LAN cable installation. Supports managers emerging 350 and 650 MHz LAN cable technologies
TEST TOOLS. The Company's Test Tools business, also acquired as part of the Beckman acquisition, develops and distributes portable measurement instruments that are used to measure and service a broad range of electrical and electronic equipment including wiring, appliances, computer equipment and consumer electronics. The Company's Test Tools products are used by the electronic and electro-mechanical installation, maintenance and service industries. Hand-held DMMs are the primary instrument in this segment and range from hobbyist products to tools for professional electrical and electronic technicians. The Company is the second largest supplier of hand-held DMMs. Wavetek believes that its shipments of over 100,000 hand-held DMMs per year worldwide increase the Company's overall visibility in the test instruments industry. The Company also believes that the Test Tools business complements its other Communications Test businesses by providing a distribution channel for certain of its LAN products and potential new low cost Communications Test products. Significant Test Tools customers of the Company include Newark Electronics and W. W. Grainger. The Company's Test Tools business is headquartered in San Diego, California. 48 The following table lists selected Test Tools product offerings of the Company:
APPROXIMATE U.S. PRICE PRODUCT NAME DESCRIPTION PRIMARY CUSTOMER POINT - -------------- -------------------------------------------------------- -------------------------- ------------ Hand-held DMMs Portable, field troubleshooting of electronic and Electronics repair $20-$350 electrical circuits personnel, electricians, electronics engineers, industrial plant servicers, home/ hobbyist Clamp-on Verify and test electrical circuits Electricians, electrical $100-$300 Multimeters repair personnel, wiring installers, industrial plant service personnel Component Verify quality and sorting of electronic parts Electronic technicians and $70-$180 Checkers quality control departments of electronic manufacturers
CALIBRATION INSTRUMENTS The Company's Calibration Instruments products, which accounted for 17% of the Company's LTM sales, are used in metrology, engineering and manufacturing environments worldwide to calibrate electronic equipment and certify compliance with international standards. The Company believes it is the second largest global manufacturer of Calibration Sources and Transfer Standards. The Company also produces Precision DMMs. The Company believes that it successfully competes in the Calibration Instruments market by capitalizing on its technical expertise, relationships with national laboratories and product reputation. Wavetek has recognized the needs of an increasing number of companies to calibrate their test equipment, including oscilloscopes and DMMs, in order to comply with international quality standards such as ISO 9000. In response to such customer needs, Wavetek repackaged its high precision calibration technology into more application-specific instruments, such as its 9100 Multi-function Calibrator and 9500 Oscilloscope Calibrator, replacing expensive, manually operated equipment, with small, accurate, automated test solutions. Significant Calibration Instruments customers of the Company include Northrop Grumman Corporation, Tektronix, Inc. and the U.S. Army and Navy. The Company's Calibration Instruments business is headquartered in Norwich, England. 49 The following table lists selected Calibration Instruments product offerings of the Company:
APPROXIMATE U.S. PRICE PRODUCT NAME DESCRIPTION PRIMARY CUSTOMER POINT - ------------------- ------------------------------------------- --------------------------- ------------------ 1271/81 Precision Provides accurate measurement of voltage Military forces, aerospace $10,000 DMM and current up to 8 1/2 digits contractors, government institutes, automated test equipment manufacturers, calibration/service repair providers, national laboratories 4800/4808 Calibrates Precision DMMs up to 8 1/2 Calibration/service repair $20,000-$34,000 Calibration Source digits providers, national laboratories 9100 Multi-function Universal calibrator for general purpose Calibration/service repair $14,000 Calibrator analog and digital test equipment providers, ISO- accredited certification to ISO 9000 standards industries, oscilloscope manufacturers 9500 Oscilloscope Calibrates oscilloscopes up to 1GHz Calibration/service, repair $32,000 Calibrator providers, ISO- accredited industries, oscilloscope manufacturers, national laboratories
SERVICE Wavetek's Service business, which accounted for 8% of the Company's LTM sales, provides repair, upgrade and calibration services for the Company's products through eight Wavetek service centers and a network of independent representatives worldwide. The Company believes that opportunities exist to expand this business, and is in the process of developing a comprehensive worldwide customer care plan ("Care Plan") for its customers. The Care Plan program offers customers the opportunity to extend their standard warranty and add a package of various service and calibration options for a fee paid at the time of purchase. CUSTOMERS The Company has a broad international base of over 5,000 customers operating in a wide range of industries. The primary end users for the Company's Communication Test products are service, installation and maintenance personnel of CATV operators, wireless communications companies, telecommunications companies and data communications equipment installers. Significant customers of the Company's Communications Test business include AT&T, Continental Cablevision, Inc., Deutsche Telekom A.G., Ericsson, France Telecom, Russia Telecom, Siemens A.G., TCI and Time Warner Cable. The Company's Calibration Instruments products are used primarily by service and quality personnel in metrology, engineering and manufacturing environments in a wide variety of industries. Significant Calibration Instruments customers include Northrop Grumman Corporation, Tektronix, Inc. and the U.S. Army and Navy. For fiscal 1996, no 50 one customer accounted for more than 5% of the Company's sales and the top ten customers represented approximately 17% of sales. PRODUCT DEVELOPMENT The Company seeks to develop and introduce application-specific products for its target markets on a timely basis. The Company designs products for domestic and international markets and often deploys market research and product definition teams worldwide to meet and work with major communications and metrology customers in order to determine and address the needs of its customers. Wavetek's product development strategy is to: (i) focus on application-specific products that are responsive to market-driven customer needs; (ii) minimize development time in order to be responsive to shifts in market demand and meet customer needs on a timely basis; (iii) aggressively drive cost reductions throughout the design process; and (iv) leverage design efforts by generating product families and product line extensions from existing product platforms. As of March 31, 1997, the Company had approximately 130 employees involved in its engineering activities who operate in teams based out of five locations and generally focus on product development within a particular business area. In addition, Wavetek's engineering teams share or apply other teams' product designs where possible to improve use of resources. The Company typically introduces 8 to 12 major new products or product extensions per year and expects to introduce approximately 10 new products in fiscal 1997. The Company intends to continue to develop products to meet market demands for reduced cost, size and weight, while achieving increased performance through the use of application-specific integrated circuits ("ASICs"), digital signal processing ("DSP") technology and increasing computing power available in embedded processors. The Company has made a significant effort in recent years to supplement its engineering staff with engineers skilled in these key technology areas, as well as emerging technology areas such as digital communications and advanced signal processing. The Company also makes selective use of outside technical consulting companies to supplement internal capabilities. SALES AND DISTRIBUTION Wavetek products are sold through direct sales teams in the United States, the United Kingdom, France and Germany. The Company also utilizes a network of over 250 distributors and independent representatives. Wavetek sales personnel manage and provide technical support to the distributors and independent representatives. Sales offices are located in the United States, the United Kingdom, France, Germany, Austria, Singapore, Hong Kong, Beijing and Shanghai. As of March 31, 1997, Wavetek had approximately 130 employees involved in sales and customer support activities. The Company also markets its products through advertising and participating in trade shows. YOKOGAWA RELATIONSHIP In April 1996, Wavetek formed a strategic alliance with Yokogawa to jointly develop Communications Test products for the Japanese market and to distribute Wavetek's products in Japan. In September 1996, Yokogawa also purchased approximately 12.0% of the Company's Common Stock outstanding prior to the Recapitalization Transactions. As of the date of this Prospectus, Yokogawa owns approximately 5.8% of the outstanding Common Stock of Wavetek. See "Ownership of Capital Stock." Yokogawa, based in Tokyo, Japan, is a leading supplier of process control equipment and test and measurement equipment. It currently distributes Wavetek's CATV, Wireless, LAN and Calibration Instruments product lines in Japan. In fiscal 1996, Wavetek's sales through Yokogawa were approximately $1.8 million. In addition, Wavetek and Yokogawa have joint engineering and marketing programs for Wireless products. With the support of Yokogawa engineers located in Wavetek's Indianapolis and Munich facilities, 51 Wavetek and Yokogawa are developing products aimed at the Japanese cellular market. The first product is a cellular tester for the Japanese CDMA market based on Wavetek's 3600D CDMA Tester product line, which is expected to be introduced in late fiscal 1997. BACKLOG As of June 30, 1997, the Company had a firm open order backlog of $22.3 million (compared to $32.4 million as of June 30, 1996), of which it expects less than $1.0 million may not be shippable prior to September 30, 1997. Backlog reflects firm customer orders for products and services scheduled for shipment within 12 months. The level of backlog at any particular time is not necessarily indicative of future operating performance of the Company. Delivery schedules may be extended, and orders may be canceled at any time subject to certain cancellation penalties. MANUFACTURING Wavetek has four manufacturing facilities worldwide. All North American designed products except Test Tools (CATV, LAN and US-designed Wireless products) are manufactured in Indianapolis. The Company manufactures its Calibration Instruments products in Norwich, England, its Telecom products in St. Etienne, France and its German-designed Wireless products in Munich, Germany. Since the Company outsources certain of its manufacturing to subcontractors, including the printed circuit boards for its French and German products, the manufacturing at its St. Etienne and Munich facilities consists primarily of final assembly and test. These facilities were acquired in the October 1994 Schlumberger acquisition, and the Company is currently evaluating consolidation opportunities in order to improve manufacturing efficiency and capitalize on economies of scale. The Company's Test Tools products are manufactured by third party suppliers, primarily in Taiwan. Although the Company attempts to use common, multi-sourced components throughout its design, certain technological requirements may necessitate the use of single-sourced, unique components. The Company attempts to minimize its exposure on these components through careful vendor qualification and purchasing, though risk exists that these parts may become obsolete, necessitating redesign or withdrawal of the product from the market. PROPERTIES AND FACILITIES The table below sets forth selected relevant statistics for Wavetek's current facilities:
LEASE LOCATION FACILITY TYPE/USE SIZE OF FACILITY TITLE EXPIRATION - ------------------------ ----------------------------------------- -------------------- --------- ------------ San Diego, California Executive offices (1) 4,305 sq. ft. Leased 12/31/1999 Headquarters for LAN and Test Tools 70,000 sq. ft. Leased 6/29/2006 businesses; U.S. distribution center for Test Tools and Calibration Instruments (2) Indianapolis, Indiana U.S. manufacturing center; headquarters 206,000 sq. ft. (3) Leased 10/31/2014 for CATV business; U.S. distribution center for Communications Test products Norwich, England Headquarters for Calibration Instruments 40,000 sq. ft. Owned -- business, including manufacturing; UK 3.2 acres-land Leased 3/31/2103 sales and distribution; European distribution center for Test Tools
52
LEASE LOCATION FACILITY TYPE/USE SIZE OF FACILITY TITLE EXPIRATION - ------------------------ ----------------------------------------- -------------------- --------- ------------ St. Etienne, France Headquarters for Telecom business, 23,414 sq. ft. Leased 9/30/2005 including final assembly and test Munich, Germany Headquarters for Wireless business, 51,067 sq. ft. Leased 12/31/2002 including final assembly and test; German sales office
- ------------------------ (1) Gooding has the right to take control of the lease at this facility under certain circumstances. See "Certain Relationships and Related Transactions." Wavetek has a renewal option on the lease for this facility, permitting it to extend the term up to an additional five years. (2) The Company leases this facility from a company controlled by Gooding. See "Certain Relationships and Related Transactions." (3) 120,739 sq. ft. of this facility are subleased to unrelated parties through October 31, 1999. The Company also leases sales offices in Paris, Vienna, Hong Kong, Singapore, Beijing and Shanghai. COMPETITION The Company operates in markets that are highly competitive, and the Company expects that competition will increase in the future. Some of the industries in which the Company operates are characterized by rapid technological advances and emerging industry standards. Failure to keep pace with technological advances would adversely affect the Company's competitive positions and results of operations. The Company competes primarily on the basis of technology, performance, price, brand identity, quality, reliability, distribution and customer service and support. To remain competitive, the Company must continue to develop new products, periodically enhance its existing products and compete effectively in the areas described above. Although the Company believes its products are competitive in each of these areas, there can be no assurance that existing or future competitors, some of which have greater financial resources than the Company, will not introduce comparable or superior products incorporating more advanced technology at lower prices. The Company's competitors are numerous, ranging from some of the world's largest corporations to many relatively small and highly specialized firms. Although no single company competes in all of the Company's product markets, some of the major competitors which compete in the individual product markets include Anritsu Corporation, Fluke Corporation, Hewlett-Packard Company, Microtest, Inc., Rohde & Schwartz, Inc. and Tektronix, Inc. Some of these competitors have more extensive engineering, manufacturing and marketing capabilities and substantially greater financial, technological and personnel resources than the Company. INTELLECTUAL PROPERTY The Company's success and ability to compete depends in part upon protecting its proprietary technology. The Company relies upon a combination of patents, trademark and trade secret laws, together with licenses, confidentiality agreements and other contractual covenants, to establish and protect its technology and other intellectual property rights. 53 There can be no assurance that the steps taken by the Company to protect its proprietary rights will be adequate to deter misappropriation or independent third-party development of its technology, or that its intellectual property can be successfully enforced or defended if challenged. Given the rapid development of technology, there can be no assurance that certain aspects of the Company's products do not or will not infringe upon the existing or future proprietary rights of others or that, if licenses or rights are required to avoid infringement, such licenses or rights could be obtained or obtained on terms that would not have a material adverse effect on the Company. In any event, because of the rapid pace of technological change in many of the Company's product industries, the Company believes that patent protection for its products is less significant to its success than the knowledge, ability and experience of its employees and the frequent introduction and market acceptance of new products and product enhancements. The Company uses a number of trademarks in its business, including Wavetek-Registered Trademark-, LANTEK-Registered Trademark- and Stabilock which are registered in various countries where the Company operates. The Company currently has fourteen patents and two pending patent applications and expects to rely on patents to a greater extent in the future. EMPLOYEES As of June 30, 1997, the Company had approximately 800 employees. Many of the Company's employees are highly skilled and the Company's continued success will depend in part upon its ability to attract and retain these employees. Many of the Company's manufacturing employees in Europe are members of standard unions. The Company believes its relationship with its employees is good. LEGAL PROCEEDINGS In the ordinary course of its business, the Company from time to time is subjected to legal claims. The Company does not believe that the likely outcome of any such claims or related lawsuits would have a material adverse effect on the Company or its ability to develop new products. A matter is pending in the United States District Court for the Western District of Washington involving a claim that certain models of the Company's hand-held DMMs infringe the trade dress of certain Fluke Corporation ("Fluke") competitive products in violation of Section 43(a) of the Lanham Act, 15 U.S.C. Section1125(a) and state statutory and common law, seeking injunctive and monetary relief of approximately $1 million. Wavetek no longer sells hand-held DMMs with the trade dress that Fluke alleged infringed its trade dress, and Wavetek sold such DMMs for a period of less than ten months. The Company and Fluke have entered into a settlement agreement resolving all of Fluke's claims, but the action has not yet been dismissed with prejudice due to the inability of the parties to agree upon the language of a Consent Judgment, which is to be entered pursuant to the settlement. Under the terms of the settlement, Wavetek has no financial obligations. However, if the settlement is not finalized, it is possible that Fluke will be permitted to reassert its claims. The Company does not believe that the litigation, even if the present settlement is not finalized, is likely to have a material adverse impact on the Company. A matter is pending in the United States District Court for the Southern District of Indiana, involving a claim by Trilithic, Inc. ("Trilithic") that certain products of the Company infringe Trilithic's patent on a radio frequency leakage detection system for a CATV system and seeks injunctive and unspecified monetary relief. The product line potentially affected by this claim, and by a second patent that has been issued to Trilithic subsequent to the filing of the lawsuit, had LTM sales of approximately $5.8 million. Trilithic's complaint, which was served on the Company in March 1997, was the first notice to the Company of Trilithic's patent. The Company is presently obtaining advice of counsel as to the claim of infringement and as to the validity and enforceability of the patent. In the event the outcome of such investigation is not favorable, the Company could be required to: (i) redesign existing or future products so that they do not use the rights covered by Trilithic's patent; (ii) negotiate licenses from Trilithic; or (iii) withdraw existing products or not introduce future products that are covered by those patent rights. The Company could also be liable to Trilithic for damages for any infringement since March 1997. The Company does not believe that any such damages are likely to have a material adverse impact on the Company. In addition, the Company has been notified by two other competitors that they believe that certain of the Company's CATV product lines, including in one case its Stealth line of products, infringe their patents. The Company has investigated or is currently investigating the validity of these two claims and, based upon its investigation to date, believes that both of these claims can be resolved in a manner that will not have a material adverse impact on the Company. See "Risk Factors--Dependence on Proprietary Rights." 54 MANAGEMENT EXECUTIVE OFFICERS AND DIRECTORS Set forth below is certain information regarding each director and executive officer of the Company:
NAME AGE POSITION - ----------------------------- --- ------------------------------------------------------------------- Terence J. Gooding (1)(3) 63 Chairman of the Board and Chief Executive Officer Derek T. Morikawa (1) 42 President, Chief Operating Officer and Director Ben J. Constantini 54 Executive Vice President, Sales and Director Joseph A. Budano 35 Senior Vice President, North American Operations Vickie L. Capps 36 Treasurer, Secretary, Vice President and Chief Financial Officer Kenneth Baker (2) 62 Director Malcolm R. Bates (1)(3) 62 Director Kenneth D. Moelis (1) 38 Director Peter J. Nolan (1)(2)(3) 38 Director David B. Wilson (2)(3) 38 Director
- ------------------------ (1) Member of the Executive Committee (2) Member of the Audit Committee (3) Member of the Compensation Committee The following are biographies of the Company's executive officers and directors: TERENCE J. GOODING, CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER. In June 1991, Terence J. Gooding formed a holding company to acquire Wavetek Corporation. Dr. Gooding has been involved in the management of technology companies since 1965 when he formed Maxwell Laboratories, which today is a successful defense contractor. He was President of Kratos (1971-1979), Chairman of the Board of Cambridge Instruments and Leica plc (1979-1990) and President of Picker International (1981-1986). DEREK T. MORIKAWA, PRESIDENT, CHIEF OPERATING OFFICER AND DIRECTOR. Derek T. Morikawa has been with Wavetek for 11 years, and was promoted to President and Chief Operating Officer in October 1996. Prior to that he was Executive Vice President of Operations, managing Wavetek's operating divisions and integrating the Wireless and Telecom businesses acquired from Schlumberger in October 1994. Mr. Morikawa has been Vice President and General Manager of the Indianapolis CATV Division, the San Diego LAN Division and the former Microwave Division of Wavetek. Prior to joining Wavetek, Mr. Morikawa spent seven years with the Microwave Instrumentation Division of Hewlett-Packard where he managed the Product Marketing Department. BEN J. CONSTANTINI, EXECUTIVE VICE PRESIDENT, SALES AND DIRECTOR. Ben J. Constantini joined Wavetek in June 1991 with responsibility for worldwide sales and customer service. Prior to joining Wavetek, Mr. Constantini was President of North American Operations for Leica plc. He has also been Senior Vice President, Sales for Picker International and District Sales Manager for Siemens Medical Systems, Inc. Prior to that, he spent ten years with General Motors in various management positions. JOSEPH A. BUDANO, SENIOR VICE PRESIDENT, NORTH AMERICAN OPERATIONS. Joseph A. Budano joined Wavetek April 1994 as the General Manager of the CATV Division. Mr. Budano has since been promoted to his current position of Senior Vice President, North American Operations with responsibility for 55 Wavetek's CATV, LAN and Test Tools Divisions. Prior to joining Wavetek, Mr. Budano worked at the Boston Consulting Group as a Management Consultant and held several positions in Development Engineering and Manufacturing at Motorola's Paging Products and Land Mobile Products Divisions. VICKIE L. CAPPS, TREASURER, SECRETARY, VICE PRESIDENT AND CHIEF FINANCIAL OFFICER. Vickie L. Capps joined Wavetek in October 1992 as Group Controller -- North America and was later promoted to Vice President, Corporate Finance and in October 1996 to her current position as Chief Financial Officer. Ms. Capps is also the Secretary and Treasurer of the Company. Prior to joining Wavetek, Ms. Capps was a Senior Manager at Ernst & Young LLP where she specialized in providing audit and consulting services, for over ten years, to both publicly and privately owned corporations in technology and other industries. Ms. Capps is a Certified Public Accountant. KENNETH BAKER, DIRECTOR. Kenneth Baker has served as a director of Wavetek since 1992. Mr. Baker has served as a Member of Parliament in the United Kingdom since 1968. In the early 1980's he was the Minister of Information Technology and later was promoted to Margaret Thatcher's Cabinet and served as Environment Secretary, Education Secretary and Home Secretary. He served as Chairman of the Conservative Party from 1989 to 1990. Mr. Baker serves on the board of directors of Hanson plc, Bell Cablemedia Inc. and Millenium Chemicals Inc. MALCOLM R. BATES, DIRECTOR. Malcolm R. Bates became a director of the Company on July 21, 1997. Mr. Bates has been Chairman of Pearl Group PLC since March 1996 and Chairman of Premier Farnell plc since January 1997. Until March 31, 1997, Mr. Bates was the Deputy Managing Director of The General Electric Company, p.l.c. (GEC), a position he held for twelve years, having joined GEC as Senior Commercial Director in January 1976. He serves on the board of directors of several companies, including BICC plc and is a member of the Advisory Board of Phoenix Equity Partners II. Mr. Bates is also a member of the United Kingdom Government's Industrial Development Advisory Board, Chairman of Business in the Arts and a Governor of The University of Westminster. KENNETH D. MOELIS, DIRECTOR. Kenneth D. Moelis became a director of the Company upon consummation of the Recapitalization Transactions. Mr. Moelis is a Managing Director and is in charge of Corporate Finance at DLJ and has been with DLJ since 1990. Mr. Moelis is also a director of Levitz Furniture Corporation. PETER J. NOLAN, DIRECTOR. Peter J. Nolan became a director of the Company upon consummation of the Recapitalization Transactions. He has been an executive officer and equity owner of Leonard Green & Partners, L.P., a merchant banking firm which manages GEI, since April 1997. Mr. Nolan had previously been a Managing Director of DLJ and had been with DLJ since 1990. Mr. Nolan is also a director of adidas AG, The Recycler, Inc. and M2 Automotive, Inc. DAVID B. WILSON, DIRECTOR. David B. Wilson became a director of the Company upon consummation of the Recapitalization Transactions. Mr. Wilson is a Principal at DLJMB and has been with DLJMB since 1992. From 1989 to 1991, he was a Vice President at Grauer & Wheat, Inc. Mr. Wilson is also a director of Manufacturers' Services Limited. BOARD OF DIRECTORS Members of the Board of Directors serve until the next annual meeting of Stockholders and until a successor has been elected and qualified. Pursuant to the Stockholders Agreement, the members are designated as follows: (i) two (or three if an additional director is designated as described in this paragraph) of such members shall be persons designated by DLJMB for as long as DLJMB and/or their Permitted Transferees own at least 20% of the outstanding Common Stock of the Company; (ii) one of such members shall be a person designated by GEI for so long as GEI and/or its Permitted Transferees shall own at least 5% of the outstanding Common Stock of the Company; (iii) three (or four if an additional director is designated as described in this paragraph) of such members will be persons designated by Gooding for as long as Gooding and/or his Permitted Transferees own at least 10% of the 56 outstanding Common Stock of the Company; and (iv) one of such members shall be a person designated by Gooding for as long as Gooding and/or his Permitted Transferees own at least 10% of the outstanding Common Stock of the Company, subject to approval by DLJMB for as long as DLJMB and/or their Permitted Transferees own at least 20% of the outstanding Common Stock of the Company. In the event DLJMB and/or their Permitted Transferees own at least 10% but less than 20% of the outstanding Common Stock of the Company, DLJMB shall have the right to appoint only two directors. In the event DLJMB and/or their Permitted Transferees own at least 5% but less than 10% of the outstanding Common Stock of the Company, DLJMB shall have the right to appoint only one director. In the event Gooding and/or his Permitted Transferees own at least 5% but less than 10% of the outstanding Common Stock of the Company, Gooding shall have the right to appoint only two directors. Prior to a Qualified IPO (as defined in the Stockholders Agreement), each of DLJMB and Gooding may designate an additional director. There are currently seven directors of the Company, each of whom is named under "--Executive Officers and Directors." The Company's Certificate of Incorporation contains a provision permitted under the Delaware General Corporation Law (the "DGCL") eliminating each director's personal liability for monetary damages for breach of fiduciary duty as a director, except to the extent that such exemption from liability or limitation thereof is not permitted under the DGCL as currently in effect at the time. The Company's Bylaws authorize the Company to indemnify its present and former directors, officers and employees against expenses, judgments, fines and amounts paid in settlement if such person is made a party, or is threatened to be made a party, to a legal proceeding by reason of the fact that such person is or was a director, officer, employee or agent of the Company, or was serving in such position at another company at the request of Wavetek. Such indemnification is mandatory in certain circumstances and permissive in others, subject to authorization by the Company's Board of Directors. In addition, the Bylaws authorize the Company to advance litigation expenses to such person prior to the final disposition of the legal proceeding. BOARD COMMITTEES The Board of Directors has three standing committees: an Executive Committee, an Audit Committee and a Compensation Committee (together, the "Committees"). The Executive Committee, currently consisting of Messrs. Bates, Gooding, Moelis, Morikawa and Nolan, has the power to exercise all of the powers and authority of the Board of Directors in the management of the business of the Company, with certain exceptions. The Audit Committee, currently consisting of Messrs. Baker, Nolan and Wilson, meets with the Company's financial management and its independent accountants at various times during each year, reviews internal control conditions, audit plans and results, and makes recommendations to the Board of Directors concerning the Company's engagement of independent accountants. The Compensation Committee, currently consisting of Messrs. Bates, Gooding, Nolan and Wilson, reviews and proposes to the Board of Directors compensation arrangements for directors and officers of the Company. 57 SUMMARY COMPENSATION TABLE The following table sets forth the compensation paid in fiscal year 1996 to the Company's Chief Executive Officer and the Company's four other most highly compensated executive officers (the "Named Executive Officers"). SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION TOTAL ---------------------- AUTO 401(K) ANNUAL NAME AND PRINCIPAL POSITION SALARY BONUS ALLOWANCE MATCH COMPENSATION - ------------------------------------------- ---------- ---------- ----------- --------- ------------- Terence J. Gooding ........................ $ 292,512 $ 202,500 $ 5,820 $ 3,000 $ 503,832 Chairman of the Board and Chief Executive Officer Derek T. Morikawa ......................... 182,115 111,000 5,820 3,000 301,935 President and Chief Operating Officer Ben J. Constantini ........................ 172,692 105,000 5,820 3,000 286,512 Executive Vice President, Sales Joseph A. Budano .......................... 130,923 68,300 5,820 3,000 208,043 Senior Vice President, North American Operations Vickie L. Capps ........................... 113,124 51,750 5,820 2,351 173,045 Treasurer, Secretary, Vice President and Chief Financial Officer
The following table sets forth information concerning individual grants of stock options made during the fiscal year ended September 30, 1996 to the Named Executive Officers. OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE VALUE AT ASSUMED NUMBER OF ANNUAL RATES OF SECURITIES OF PERCENT OF STOCK PRICE UNDERLYING TOTAL OPTION EXERCISE APPRECIATION OPTIONS GRANTS IN PRICE PER EXPIRATION ---------------------- NAME GRANTED FISCAL YEAR SHARE DATE 5% 10% - ----------------------------- ------------- ------------- ----------- ----------- ---------- ---------- Terence J. Gooding........... -- -- -- -- -- -- Derek T. Morikawa............ 3,000 15.7% $ 52.09 4/28/02 $ 212,959 $ 285,332 Ben J. Constantini........... -- -- -- -- -- -- Joseph A. Budano............. 2,000 10.5% 52.09 4/28/02 141,973 190,888 Vickie L. Capps.............. -- -- -- -- -- --
The following table sets forth information with respect to each of the Named Executive Officers concerning the exercise of stock options and unexercised stock options held at September 30, 1996. 58 AGGREGATED OPTION EXERCISES IN THE LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
AGGREGATED OPTION EXERCISES IN THE LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES -------------------------------------------------------------------------------------- NUMBER OF SECURITIES VALUE OF UNEXERCISED UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS NUMBER OF OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END* SHARES ACQUIRED VALUE ---------------------------- -------------------------- NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE - ------------------------- --------------- ----------- ------------- ------------- ----------- ------------- Terence J. Gooding....... -- -- -- -- -- -- Derek T. Morikawa........ -- -- 3,200 10,800 533,200 1,641,190 Ben J. Constantini....... -- -- -- 4,800 -- 689,088 Joseph A. Budano......... -- -- -- 6,000 -- 867,970 Vickie L. Capps.......... -- -- 200 3,800 33,325 593,585
- ------------------------ * The value of $179.125 per share is used representing the purchase price per share for the New Equity Investment in the Recapitalization Transactions. EMPLOYMENT AGREEMENTS The Company does not currently have any employment agreements with any of its directors or executive officers. In connection with the Recapitalization Transactions, the Company entered into executive severance agreements with each of the Named Executive Officers providing for a specified level of U.S. benefits and for a lump sum payment upon termination other than for cause equal to twenty four months salary if termination occurs in the first month following June 11, 1997, the date on which the Recapitalization Transactions were consummated, declining by one month for each month thereafter until the twelfth month following June 11, 1997, after which the lump sum payment will equal twelve months salary. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION The Board of Directors established a Compensation Committee in July 1997. Messrs. Bates, Gooding, Nolan and Wilson are the members of the Compensation Committee. Other than Mr. Gooding, none of the members of the Compensation Committee has served as an officer or employee of the Company. Prior to the establishment of the Compensation Committee, all decisions relating to compensation of executive officers were made by the Company's Board of Directors. For a description of the transactions between the Company and members of the Compensation Committee and entities affiliated with such members, see "Certain Relationships and Related Transactions." No executive officer of the Company serves as a member of the board of directors or compensation committee of any entity which has one or more executive officers serving as a member of the Company's Board of Directors or Compensation Committee. COMPENSATION OF DIRECTORS Executive officers of the Company and representatives of the New Equity Investors who serve on the Board of Directors do not receive any compensation for such services. Other directors receive $10,000 per year, plus a fee of $2,500 per Board meeting attended and are reimbursed for their expenses incurred in connection with attendance of meetings of, and other activities relating to serving on, the Board of Directors. Members of the Committees of the Board of Directors receive no additional compensation for their membership in, or participation in the meetings of, such Committees. 59 OWNERSHIP OF CAPITAL STOCK The following table sets forth certain information about persons known to the Company to own beneficially more than 5% of the outstanding Common Stock, each director of the Company, each named executive officer and all directors and executive officers of the Company as a group, in each case as of the date of this Prospectus. There are 4,884,860 shares of Common Stock outstanding. Share numbers beneficially owned reflect the 10 for 1 stock split that was effected as part of the Recapitalization Transactions. See "The Recapitalization Transactions."
SHARES PERCENTAGE BENEFICIALLY BENEFICIALLY NAME AND ADDRESS OWNED (1) OWNED - ------------------------------------------------------------------------------------- ----------- --------------- Terence J. Gooding (2)(3) ........................................................... 1,526,780 31.3% DLJ Merchant Banking Partners II, L.P. (4) .......................................... 1,674,810 34.3 277 Park Avenue New York, NY 10172 Green Equity Investors II, L.P. ..................................................... 753,660 15.4 11111 Santa Monica Boulevard Suite 2000 Los Angeles, CA 90025 Schroder UK Venture Fund III L.P. (5) ............................................... 431,690 8.8 c/o Peter L. Everson, Director Schroder Venture Managers Ltd. 22 Church Street Hamilton HM 11, Bermuda Yokogawa Electric Corporation ....................................................... 284,240 5.8 2-9-2 Nakacho Musashino-shi, Tokyo 180 Japan Derek T. Morikawa (3)(6) ............................................................ 155,000 3.1 Ben J. Constantini (3) .............................................................. 35,000 * Joseph A. Budano (3) ................................................................ 30,000 * Vickie L. Capps (3) ................................................................. 16,000 * Kenneth Baker (7) ................................................................... 31,667 * Malcolm R. Bates (8) ................................................................ 3,333 * Kenneth D. Moelis (9) ............................................................... -- -- Peter J. Nolan (10) ................................................................. 753,660 15.4 David B. Wilson (11) ................................................................ -- -- All directors and executive officers as a group (12) ........................................................................ 4,226,250 84.8
- ------------------------ * Less than 1%. (1) Computed in accordance with Rule 13d-3(d)(1) of the Securities Exchange Act of 1934, as amended. Includes options that will be fully vested as part of the Recapitalization Transactions. (2) Includes 1,050,000 shares held by Gooding's spouse, children and grandchildren and trusts for the benefit thereof over which Gooding has investment and voting control. (3) Address is c/o Wavetek Corporation, 11995 El Camino Real, Suite 301, San Diego, CA 92130. (4) Consists of shares held directly by the following investors related to DLJ Merchant Banking Partners II, L.P.: DLJ Diversified Partners, L.P. ("DLJ Diversified"), DLJ Offshore Partners II, C.V. ("DLJOP"), DLJMB Funding II, Inc. ("DLJ Funding"), DLJ EAB Partners, L.P. ("DLJ EAB"), DLJ 60 First ESC LLC ("DLJ ESC") and UK Investment Plan 1997 Partners ("UK Investment"). See "The Recapitalization Transactions" and "Plan of Distribution." The address of each of DLJMB, DLJ Diversified, DLJ Funding, DLJ EAB and DLJ ESC is 277 Park Avenue, New York, New York 10172. The address of DLJOP is John B. Gorsiraweg, 14 Willemstad, Curacao, Netherlands Antilles. The address of UK Investment is 2121 Avenue of the Stars, Los Angeles, California 90067. (5) Includes shares owned by Schroder UK Venture Fund III L.P. 2 and Schoder UK Venture Fund III Trust. (6) Includes 40,000 shares held in two trusts for the benefit of his children. Morikawa is the trustee of one of the trusts and his wife is the trustee of the other. (7) The address of the registered stockholder is Snow Hill Trustees - Account SH, Snow Hill Trustees Limited, 1 Snow Hill, London EC1A 2EN. The beneficial owners of the Common Stock (and number of shares owned) are: (i) Kenneth Baker (18,000); (ii) Mary Baker (9,000); (iii) Sophia Baker (1,500); and (iv) Oswin Baker (1,500). (8) Address is Flat 10, 71 Upper Berkeley St., London, England, WIH 7BD (9) Address is c/o Donaldson, Lufkin & Jenrette Securities Corporation, 2121 Avenue of the Stars, Los Angeles, CA 90067. Mr. Moelis is a Managing Director of DLJ. Share data for Mr. Moelis excludes shares shown as held by DLJMB and its affiliates, as to which Mr. Moelis disclaims beneficial ownership. (10) Address is c/o Green Equity Investors II, L.P., 11111 Santa Monica Boulevard, Suite 2000, Los Angeles, CA 90025. The shares shown as beneficially owned by Mr. Nolan include all of the shares owned of record by GEI. GEI is a Delaware limited partnership managed by Leonard Green & Partners, L.P. ("LGP"), which is an affiliate of the general partner of GEI. Mr. Nolan, either directly (whether through ownership interest or position) or through one or more intermediaries, may be deemed to control LGP and such general partner. LGP and such general partner may be deemed to control the voting and disposition of the shares of Common Stock of the Company owned by GEI. As such, Mr. Nolan may be deemed to have shared voting and investment power with respect to all shares held by GEI. However, Mr. Nolan disclaims beneficial ownership of the securities held by GEI except to the extent of his respective pecuniary interests therein. (11) Address is c/o DLJ Merchant Banking Partners II, L.P., 277 Park Avenue, New York, NY 10172. Mr. Wilson is a Principal at DLJ Merchant Banking II, Inc., the general partner of DLJMB and an affiliate of DLJ. Share data for Mr. Wilson excludes shares shown as held by DLJMB and its affiliates, as to which Mr. Wilson disclaims beneficial ownership. (12) There are currently ten individuals in this group, including eight directors. See "Management." Includes the shares referred to in Note 10 above. STOCK OPTION PLAN From time to time, the Company issues stock options to employees of the Company in order to attract, retain and provide equity incentives to key employees and to stimulate the efforts of such employees. One quarter of each grant of stock options becomes exercisable on each anniversary date of their issuance, so that after four years, all of the options are vested. Pursuant to the Recapitalization Transactions, 75% of the stock options existing prior to the Recapitalization Transactions, representing 805,000 shares, were vested and the holders thereof had the right to surrender such options to the Company for a cash payment equal to the difference between the purchase price per share of the New Equity Investment and the exercise price of the options, less a pro rata portion of certain fees payable to DLJ. Approximately 59% of the stock options existing prior to the Recapitalization Transactions were surrendered for a cash payment. The aggregate pre-tax cost to the Company was approximately $7.1 million ($4.3 million net of a related income tax benefit). 61 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS During fiscal year 1994, the Company received loans from Gooding aggregating $4.5 million. Such loans were fully repaid, with interest, on September 30, 1994. During fiscal year 1994, the Company received a loan from Schroder UK Venture Fund III L.P. ("Schroder") in the amount of $360,000. Such loan was fully repaid, with interest, on October 26, 1994. In September 1995, the Board of Directors of the Company resolved that in the event Gooding's shareholdings in the Company are reduced to less than 50% of the outstanding shares, and/or if Gooding's employment as Chief Executive Officer of the Company is terminated for any reason, Gooding or his nominee shall have the right, but not the obligation, to take over the lease and occupancy of the Company's executive offices at 11995 El Camino Real, Suite 301, San Diego, California 92130, and to purchase all of the leasehold improvements and fixed assets (including furniture, fixtures, paintings and office equipment) located in such offices at such time, at depreciated net book value. See "Business -- Properties and Facilities." The Company leases its headquarters for its LAN and Test Tools businesses in San Diego from a corporation controlled by Gooding for an annual rent of $585,000, plus annual consumer price index adjustments, not to exceed 3% per annum. The lease expires in June 2006. See "Business -- Properties and Facilities." The Company and Gooding were parties to shareholders agreements with Yokogawa and Schroder, which were terminated as part of the Recapitalization Transactions. The Company, Gooding, Yokogawa and Schroder entered into the Stockholders Agreement with the New Equity Investors, which contains provisions relating to the election of directors. See "Management -- Board of Directors." The Stockholders Agreement also provides for transfer restrictions on the shares of Common Stock held by such stockholders, rights of first offer, tag-along rights, preemptive rights and certain other matters relating to the ownership and sales of Common Stock of the Company. The Company is a party to a distribution agreement with Yokogawa pursuant to which Yokogawa has the right to distribute the Company's products in Japan and a technical collaboration agreement pursuant to which Wavetek and Yokogawa develop joint engineering and marketing programs for Wireless products, both of which were entered into in connection with the purchase by Yokogawa of Common Stock of the Company in April 1996. See "Business -- Yokogawa Relationship." 62 DESCRIPTION OF NOTES GENERAL The New Notes will be issued pursuant to the Indenture governing the Old Notes between the Company and The Bank of New York, as Trustee. The terms of the New Notes are identical in all material reports to the respective terms of the Old Notes, except that the New Notes have been registered under the Securities Act and therefore will not be subject to certain restrictions on transfer applicable to the Old Notes and will not be entitled to registration rights. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (the "Trust Indenture Act"). The Notes are subject to all such terms, and Holders of Notes are referred to the Indenture and the Trust Indenture Act for a statement thereof. The following summary of the material provisions of the Indenture does not purport to be complete and is qualified in its entirety by reference to the Indenture, including the definitions therein of certain terms used below. Copies of the Indenture and Registration Rights Agreement are filed as exhibits to the Registration Statement of which this Prospectus is a part. The definitions of certain terms used in the following summary are set forth below under "-- Certain Definitions." For purposes of this summary, the term "Company" refers only to Wavetek Corporation and not to any of its Subsidiaries. The Notes are subordinated in right of payment to all current and future Senior Debt, including borrowings under the New Credit Agreement. The Subsidiary Guarantees are subordinated in right of payment to all existing and future Senior Debt of the Subsidiary Guarantors, including guarantees of the New Credit Agreement. The Notes, the Subsidiary Guarantees and borrowings under the New Credit Agreement are effectively subordinated to the indebtedness of the Foreign Subsidiaries. As of June 30, 1997, the Company and its Subsidiary Guarantors had approximately $25.0 million of Senior Debt and the Foreign Subsidiaries had approximately $4.3 million of outstanding debt, all of which would effectively rank senior to the Notes and the Subsidiary Guarantees. The Indenture permits the Company and its Subsidiaries to incur additional indebtedness, including Senior Debt, subject to certain limitations, and prohibits the incurrence of any indebtedness that is senior to the Notes and subordinated to Senior Debt. The Notes are limited in aggregate principal amount to $85.0 million and will mature on June 15, 2007. Interest on the Notes will accrue at the rate of 10 1/8% per annum and will be payable semi-annually on June 15 and December 15 of each year, commencing on December 15, 1997, to Holders of record on the immediately preceding June 1 and December 1. Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the Issue Date. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months. Principal of and premium, interest and Liquidated Damages, if any, on the Notes will be payable at the office or agency of the Company maintained for such purpose within the City and State of New York or, at the option of the Company, payment of interest and Liquidated Damages, if any, may be made by check mailed to the Holders of the Notes at their respective addresses set forth in the register of Holders of Notes; PROVIDED that all payments of principal, premium, interest and Liquidated Damages, if any, with respect to Global Notes and with respect to Certificated Notes the Holders of which have given wire transfer instructions to the Company, will be required to be made by wire transfer of immediately available funds to the accounts specified by the Holders thereof. Until otherwise designated by the Company, the Company's office or agency in New York will be the office of the Trustee maintained for such purpose. The Notes will be issued in denominations of $1,000 and integral multiples thereof. SUBSIDIARY GUARANTEES The Company's payment obligations under the Notes are jointly and severally guaranteed (the "Subsidiary Guarantees") by the Subsidiary Guarantors. As of the date of this Prospectus, Wavetek U.S. Inc. is the only Subsidiary Guarantor. The Subsidiary Guarantee of each Subsidiary Guarantor is subordinated to the prior payment in full of all Senior Debt of the Subsidiary Guarantors, which, as of 63 June 30, 1997 includes approximately $25.0 million of Indebtedness, which presently consists solely of the Guarantees of the New Credit Agreement. The obligations of each Subsidiary Guarantor under its Subsidiary Guarantee are limited so as not to constitute a fraudulent conveyance under applicable law. See, however, "Risk Factors -- Fraudulent Conveyance Matters." The Indenture provides that no Subsidiary Guarantor may consolidate with or merge with or into (whether or not such Subsidiary Guarantor is the surviving Person), another corporation, Person or entity whether or not affiliated with such Subsidiary Guarantor unless: (i) subject to the provisions of the following paragraph, the Person formed by or surviving any such consolidation or merger (if other than such Subsidiary Guarantor) assumes all the obligations of such Subsidiary Guarantor, pursuant to a supplemental indenture in form and substance reasonably satisfactory to the Trustee, under the Subsidiary Guarantee and the Indenture; (ii) immediately after giving effect to such transaction, no Default or Event of Default exists; and (iii) the Company would be permitted by virtue of the Company's pro forma Fixed Charge Coverage Ratio, immediately after giving effect to such transaction, to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the covenant described above under the caption "-- Certain Covenants -- Incurrence of Indebtedness and Issuance of Preferred Stock." The requirements of clause (iii) of this paragraph will not apply in the case of a consolidation or merger of a Subsidiary Guarantor with or into the Company or another Subsidiary Guarantor. The Indenture provides that in the event of a sale or other disposition of all of the assets of any Subsidiary Guarantor, by way of merger, consolidation or otherwise, or a sale or other disposition of all of the capital stock of any Subsidiary Guarantor, then such Subsidiary Guarantor (in the event of a sale or other disposition, by way of such a merger, consolidation or otherwise, of all of the capital stock of such Subsidiary Guarantor) or the corporation acquiring the property (in the event of a sale or other disposition of all of the assets of such Subsidiary Guarantor) will be released and relieved of any obligations under its Subsidiary Guarantee; PROVIDED that the Net Proceeds of such sale or other disposition are applied in accordance with the applicable provisions of the Indenture. See "-- Certain Covenants Asset Sales." SUBORDINATION The payment of principal of, premium, interest and Liquidated Damages, if any, on the Notes are subordinated in right of payment, as set forth in the Indenture, to the prior payment in full in cash of all Senior Debt, whether outstanding on the date of the Indenture or thereafter incurred. Upon any distribution to creditors of the Company in a liquidation or dissolution of the Company or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property, an assignment for the benefit of creditors or any marshalling of the Company's assets and liabilities, the holders of Senior Debt will be entitled to receive payment in full in cash of all Obligations due in respect of such Senior Debt (including interest after the commencement of any such proceeding at the rate specified in the applicable Senior Debt whether or not allowable as a claim in any such proceeding) before the Holders of Notes will be entitled to receive any payment with respect to the Notes, and until all Obligations with respect to Senior Debt are paid in full, any distribution to which the Holders of Notes would be entitled shall be made to the holders of Senior Debt (except that Holders of Notes may receive Permitted Junior Securities and payments made from the trust described under "-- Legal Defeasance and Covenant Defeasance"). The Company also may not make any payment upon or in respect of the Notes (except in Permitted Junior Securities or from the trust described under "Legal Defeasance and Covenant Defeasance") if (i) a default in the payment of the principal of, premium, if any, or interest on Designated Senior Debt occurs and is continuing or (ii) any other default occurs and is continuing with respect to Designated Senior Debt that permits holders of the Designated Senior Debt as to which such default relates to accelerate its maturity and the Trustee receives a notice of such default (a "Payment Blockage Notice") from the 64 Company or the holders of any Designated Senior Debt. Payments on the Notes may and shall be resumed (a) in the case of a payment default, upon the date on which such default is cured or waived and (b) in case of a nonpayment default, the earlier of the date on which such nonpayment default is cured or waived or 179 days after the date on which the applicable Payment Blockage Notice is received, unless a payment default on any Designated Senior Debt then exists. No new period of payment blockage may be commenced unless and until 360 days have elapsed since the delivery of the immediately prior Payment Blockage Notice. No nonpayment default that existed or was continuing on the date of delivery of any Payment Blockage Notice to the Trustee shall be, or be made, the basis for a subsequent Payment Blockage Notice. The Indenture further requires that the Company promptly notify holders of Senior Debt if payment of the Notes is accelerated because of an Event of Default. As a result of the subordination provisions described above, in the event of a liquidation or insolvency, Holders of Notes may recover less ratably than creditors of the Company who are holders of Senior Debt. As of June 30, 1997, the principal amount of Senior Debt outstanding was approximately $25.0 million. The Indenture limits, subject to certain financial tests, the amount of additional Indebtedness, including Senior Debt, that the Company and its subsidiaries can incur. See "-- Certain Covenants -- Incurrence of Indebtedness and Issuance of Preferred Stock." OPTIONAL REDEMPTION Except as set forth below, the Notes will not be redeemable at the Company's option prior to June 15, 2002. Thereafter, the Notes will be subject to redemption at any time at the option of the Company, in whole or in part, upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Liquidated Damages, if any, to the applicable redemption date, if redeemed during the twelve-month period beginning on June 15 of the years indicated below:
YEAR PERCENTAGE - ---------------------------------------------------------------------------------- ----------- 2002.............................................................................. 105.063% 2003.............................................................................. 103.375 2004.............................................................................. 101.688 2005 and thereafter............................................................... 100.000
Notwithstanding the foregoing, during the first three years after the Issue Date, the Company may on any one or more occasions redeem up to an aggregate 33 1/3% of the principal amount of Notes originally issued at a redemption price of 110.125% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, to the redemption date, with the net cash proceeds of one or more Public Equity Offerings; PROVIDED that at least 66 2/3% of the aggregate principal amount of Notes originally issued remains outstanding immediately after such redemption; and PROVIDED, FURTHER, that such redemption shall occur within 60 days of the date of the closing of such Public Equity Offering. If less than all of the Notes are to be redeemed at any time, selection of Notes for redemption will be made by the Trustee in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed, or, if the Notes are not so listed, on a pro rata basis, by lot or by such method as the Trustee shall deem fair and appropriate; PROVIDED that no Notes of $1,000 or less shall be redeemed in part. Notices of redemption shall be mailed by first class mail at least 30 but not more than 60 days before the redemption date to each Holder of Notes to be redeemed at its registered address. Notices of redemption may not be conditional. If any Note is to be redeemed in part only, the notice of redemption that relates to such Note shall state the portion of the principal amount thereof to be redeemed. A new Note in principal amount equal to the unredeemed portion thereof will be issued in the name of the Holder thereof upon cancellation of the original Note. Notes called for redemption become due on the 65 date fixed for redemption. On and after the redemption date, interest ceases to accrue on Notes or portions of them called for redemption. CERTAIN COVENANTS CHANGE OF CONTROL Upon the occurrence of a Change of Control, each Holder of Notes will have the right to require the Company to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the offer described below (the "Change of Control Offer") at an offer price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Liquidated Damages, if any, to the date of purchase (the "Change of Control Payment"). Within ten days following any Change of Control, the Company will mail a notice to each Holder describing the transaction or transactions that constitute the Change of Control and offering to repurchase Notes on the date specified in such notice, which date shall be no earlier than 30 days and no later than 60 days from the date such notice is mailed (the "Change of Control Payment Date"), pursuant to the procedures required by the Indenture and described in such notice. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of the Notes as a result of a Change of Control. On the Change of Control Payment Date, the Company will, to the extent lawful, (1) accept for payment all Notes or portions thereof properly tendered pursuant to the Change of Control Offer, (2) deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes or portions thereof so tendered and (3) deliver or cause to be delivered to the Trustee the Notes so accepted together with an Officers' Certificate stating the aggregate principal amount of Notes or portions thereof being purchased by the Company. The Paying Agent will promptly mail to each Holder of Notes so tendered the Change of Control Payment for such Notes, and the Trustee will promptly authenticate and mail (or cause to be transferred by book entry) to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any; PROVIDED that each such new Note will be in a principal amount of $1,000 or an integral multiple thereof. The Company will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date. The Change of Control provisions described above will be applicable whether or not any other provisions of the Indenture are applicable. Except as described above with respect to a Change of Control, the Indenture does not contain provisions that permit the Holders of the Notes to require that the Company repurchase or redeem the Notes in the event of a takeover, recapitalization or similar transaction. The New Credit Agreement currently prohibits the Company from purchasing any Notes and also provides that certain change of control events with respect to the Company would constitute a default thereunder. Any future credit agreements or other agreements relating to Senior Debt to which the Company becomes a party may contain similar restrictions and provisions. In the event a Change of Control occurs at a time when the Company is prohibited from purchasing Notes, then prior to purchasing the Notes in a Change of Control Offer, the Company shall either repay all outstanding Senior Debt that contain such prohibitions or obtain the requisite consents, if any, under all agreements governing such outstanding Senior Debt. If the Company does not obtain such a consent or repay such borrowings, the Company will remain prohibited from purchasing Notes. In such case, the Company's failure to purchase tendered Notes would constitute an Event of Default under the Indenture which would, in turn, constitute as default under the New Credit Agreement. In such circumstances, the subordination provisions in the Indenture would likely restrict payments to the Holders of Notes. See "Risk Factors -- Possible Inability to Purchase Notes Upon a Change of Control." 66 The Company will not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in the Indenture applicable to a Change of Control Offer made by the Company, including any requirement to repay in full any Senior Debt or obtain the consents of such lenders to such Change of Control Offer as set forth in the preceding paragraph, and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer. The definition of Change of Control includes a phrase relating to the sale, lease, transfer, conveyance or other disposition of "all or substantially all" of the assets of the Company and its Subsidiaries taken as a whole. Although there is a developing body of case law interpreting the phrase "substantially all," there is no precise established definition of the phrase under applicable law. Accordingly, the ability of a Holder of Notes to require the Company to repurchase such Notes as a result of a sale, lease, transfer, conveyance or other disposition of less than all of the assets of the Company and its Subsidiaries taken as a whole to another Person or group may be uncertain. ASSET SALES The Indenture provides that the Company will not, and will not permit any of its Subsidiaries to, consummate an Asset Sale unless (i) the Company (or the Subsidiary, as the case may be) receives consideration at the time of such Asset Sale at least equal to the fair market value (evidenced by a resolution of the Board of Directors set forth in an Officers' Certificate delivered to the Trustee) of the assets or Equity Interests issued or sold or otherwise disposed of and (ii) at least 75% of the consideration therefor received by the Company or such Subsidiary is in the form of cash; PROVIDED that the amount of (x) any liabilities (as shown on the Company's or such Subsidiary's most recent balance sheet), of the Company or any Subsidiary (other than contingent liabilities and liabilities that are by their terms subordinated to the Notes or any guarantee thereof) that are assumed by the transferee of any such assets pursuant to a customary novation agreement that releases the Company or such Subsidiary from further liability and (y) any securities, notes or other obligations received by the Company or any such Subsidiary from such transferee that are converted by the Company or such Subsidiary into cash (to the extent of the cash received), shall be deemed to be cash for purposes of this provision. Within 12 months after the receipt of any Net Proceeds from an Asset Sale, the Company may apply such Net Proceeds, at its option, (a) to repay permanently Senior Debt or Senior Debt of the Subsidiary Guarantors, or (b) to the acquisition of an interest in another business, the making of a capital expenditure or the acquisition of other long-term assets, in each case, in the test instrumentation industry or a business reasonably related thereto. Pending the final application of any such Net Proceeds, the Company may temporarily reduce revolving indebtedness under the New Credit Agreement or otherwise invest such Net Proceeds in any manner that is not prohibited by the Indenture. Any Net Proceeds from Asset Sales that are not applied or invested as provided in the first sentence of this paragraph will be deemed to constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $5.0 million, the Company will be required to make an offer to all Holders of Notes (an "Asset Sale Offer") to purchase the maximum principal amount of Notes that may be purchased out of the Excess Proceeds, at an offer price in cash in an amount equal to 100% of the principal amount thereof plus accrued and unpaid interest and Liquidated Damages, if any, to the date of purchase, in accordance with the procedures set forth in the Indenture. If the aggregate principal amount of Notes surrendered by Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select the Notes to be purchased on a pro rata basis. Upon completion of such offer to purchase, the amount of Excess Proceeds shall be reset at zero. 67 RESTRICTED PAYMENTS The Indenture provides that the Company will not, and will not permit any of its Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make any other payment or distribution on account of the Company's or any of its Subsidiaries' Equity Interests (including, without limitation, any payment in connection with any merger or consolidation involving the Company) or to the direct or indirect holders of the Company's or any of its Subsidiaries' Equity Interests in their capacity as such (other than dividends or distributions payable in Equity Interests (other than Disqualified Stock) of the Company); (ii) purchase, redeem or otherwise acquire or retire for value (including without limitation, in connection with any merger or consolidation involving the Company) any Equity Interests of the Company or any direct or indirect parent of the Company or other Affiliate of the Company (other than any such Equity Interests owned by the Company or any Wholly Owned Subsidiary of the Company); (iii) make any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value any Indebtedness that is subordinated to the Notes, except a payment of interest or principal at Stated Maturity; or (iv) make any Restricted Investment (all such payments and other actions set forth in clauses (i) through (iv) above being collectively referred to as "Restricted Payments"), unless, at the time of and after giving effect to such Restricted Payment: (a) no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof; and (b) the Company would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the applicable four-quarter period, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of the covenant described above under caption "-- Incurrence of Indebtedness and Issuance of Preferred Stock"; and (c) such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Company and its Subsidiaries after the date of the Indenture (excluding Restricted Payments permitted by clauses (ii), (iii) and (iv) of the next succeeding paragraph), is less than the sum of (i) 50% of the Consolidated Net Income of the Company for the period (taken as one accounting period) from the beginning of the first fiscal quarter commencing after the date of the Indenture to the end of the Company's most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment (or, if such Consolidated Net Income for such period is a deficit, less 100% of such deficit), plus (ii) 100% of the aggregate net cash proceeds received by the Company from the issue or sale since the date of the Indenture of Equity Interests of the Company (other than Disqualified Stock) or of Disqualified Stock or debt securities of the Company that have been converted into such Equity Interests (other than Equity Interests (or Disqualified Stock or convertible debt securities) sold to a Subsidiary of the Company and other than Disqualified Stock or convertible debt securities that have been converted into Disqualified Stock), plus (iii) to the extent that any Restricted Investment that was made after the date of the Indenture is sold for cash or otherwise liquidated or repaid for cash, the lesser of (A) the cash return of capital with respect to such Restricted Investment (less the cost of disposition, if any) and (B) the initial amount of such Restricted Investment. The foregoing provisions will not prohibit (i) the payment of any dividend within 60 days after the date of declaration thereof, if at said date of declaration such payment would have complied with the provisions of the Indenture; (ii) the redemption, repurchase, retirement, defeasance or other acquisition of any subordinated Indebtedness or Equity Interests of the Company in exchange for, or out of the net cash proceeds of the substantially concurrent sale (other than to a Subsidiary of the Company) of, other Equity Interests of the Company (other than any Disqualified Stock); PROVIDED that the amount of any such net cash proceeds that are utilized for any such redemption, repurchase, retirement, defeasance or other acquisition shall be excluded from clause (c) (ii) of the preceding paragraph; (iii) the defeasance, 68 redemption, repurchase or other acquisition of subordinated Indebtedness with the net cash proceeds from an incurrence of Permitted Refinancing Indebtedness; (iv) the payment of any dividend by a Subsidiary of the Company to the holders of its common Equity Interests on a pro rata basis; and (v) the repurchase, redemption or other acquisition or retirement for value of any Equity Interests of the Company or any Subsidiary of the Company held by any member of the Company's (or any of its Subsidiaries') management pursuant to any management equity subscription agreement or stock option agreement; PROVIDED that the aggregate price paid for all such repurchased, redeemed, acquired or retired Equity Interests shall not exceed $1.0 million in any twelve-month period and $5.0 million in total and no Default or Event of Default shall have occurred and be continuing immediately after such transaction. The amount of all Restricted Payments (other than cash) shall be the fair market value on the date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued by the Company or such Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair market value of any non-cash Restricted Payment shall be determined by the Board of Directors whose resolution with respect thereto shall be delivered to the Trustee. Not later than the date of making any Restricted Payment, the Company shall deliver to the Trustee an Officers' Certificate stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required by the covenant "Restricted Payments" were computed, together with a copy of any fairness opinion required by the Indenture. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK The Indenture provides that the Company will not, and will not permit any of its Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively, "incur") any Indebtedness (including Acquired Debt) and that the Company will not issue any Disqualified Stock and will not permit any of its Subsidiaries to issue any shares of preferred stock; PROVIDED, HOWEVER, that the Company may incur Indebtedness (including Acquired Debt) or issue shares of Disqualified Stock if the Fixed Charge Coverage Ratio for the Company's most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is incurred or such Disqualified Stock is issued would have been at least 2.0 to 1, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred, or the Disqualified Stock had been issued, as the case may be, at the beginning of such four-quarter period. The provisions of the first paragraph of this covenant will not apply to the incurrence of any of the following items of Indebtedness (collectively, "Permitted Debt"): (i) the incurrence by the Company of Indebtedness and letters of credit (with letters of credit being deemed to have a principal amount equal to the maximum potential liability of the Company and its Subsidiaries thereunder) under the New Credit Agreement and the incurrence by the Subsidiary Guarantors of Guarantees thereof; PROVIDED that the aggregate principal amount of all Indebtedness outstanding under the New Credit Agreement after giving effect to such incurrence does not exceed $45.0 million less the aggregate amount of all Net Proceeds of Asset Sales applied to permanently repay any such Indebtedness or, in the case of any such revolving Indebtedness, permanently reduce commitments therefor pursuant to the covenant described above under the caption "-- Asset Sales"; (ii) the incurrence by the Company or any of its Subsidiaries of Hedging Obligations that are incurred for the purpose of fixing or hedging interest rate risk with respect to any floating rate Indebtedness that is permitted by the terms of this Indenture to be outstanding or that are incurred by the Company or any of its Subsidiaries to protect against currency exchange rate risk in the conduct of its operations; (iii) the incurrence by the Foreign Subsidiaries of Indebtedness in an aggregate amount that, when combined with Existing Indebtedness of such Foreign Subsidiaries (other than Indebtedness described in 69 clause (iv) below), does not exceed $6.5 million and the incurrence by the Company of Guarantees of such Indebtedness; (iv) the incurrence by the Foreign Subsidiaries of Indebtedness in connection with the issuance of completion bonds, performance guaranties or letters of credit, and the incurrence by the Company of Guarantees thereof (with such bonds, guaranties or letters of credit being deemed to have a principal amount equal to the maximum potential liability of the Foreign Subsidiaries thereunder) in an aggregate amount that, when combined with such Existing Indebtedness of such Foreign Subsidiaries (other than Indebtedness described in clause (iii) above), does not exceed $4.0 million; (v) the incurrence by the Company and its Subsidiaries of the Existing Indebtedness; (vi) the incurrence by the Company of Indebtedness represented by the Notes and the incurrence by the Subsidiary Guarantors of Indebtedness represented by the Subsidiary Guarantees; (vii) the incurrence by the Company or any of its Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which are used to refund, refinance or replace Indebtedness that was permitted by the Indenture to be incurred; (viii) the incurrence by the Company or any of its Subsidiaries of intercompany Indebtedness between or among the Company and any of its Wholly Owned Subsidiaries; PROVIDED, HOWEVER, that (i) if the Company is the obligor on such Indebtedness, such Indebtedness is expressly subordinated to the prior payment in full in cash of all Obligations with respect to the Notes and if a Subsidiary Guarantor is the obligor on such Indebtedness, such Indebtedness is expressly subordinated to the prior payment in full in cash of all Obligations with respect to the Subsidiary Guarantees and (ii)(A) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than the Company or a Wholly Owned Subsidiary and (B) any sale or other transfer of any such Indebtedness to a Person that is not either the Company or a Wholly Owned Subsidiary shall be deemed, in each case, to constitute an incurrence of such Indebtedness by the Company or such Subsidiary, as the case may be; (ix) the incurrence by the Company or any of the Subsidiary Guarantors of Indebtedness represented by Capital Lease Obligations, mortgage financings or purchase money obligations, in each case incurred for the purpose of financing all or any part of the purchase price or cost of construction or improvements of property used in the business of the Company or such Subsidiary Guarantors, in an aggregate principal amount not to exceed $5.0 million at any time outstanding; and (x) the incurrence by the Company of additional Indebtedness in an aggregate principal amount (or accreted value, as applicable) at any time outstanding, including all Permitted Refinancing Indebtedness incurred to refund, refinance or replace any other Indebtedness incurred pursuant to this clause (x), not to exceed $15.0 million. For purposes of determining compliance with this covenant, in the event that an item of Indebtedness meets the criteria of more than one of the categories of Permitted Debt described in clauses (i) through (x) above or is entitled to be incurred pursuant to the first paragraph of this covenant, the Company shall, in its sole discretion, classify such item of Indebtedness in any manner that complies with this covenant and such item of Indebtedness will be treated as having been incurred pursuant to only one of such clauses or pursuant to the first paragraph hereof. Any Indebtedness that may be incurred pursuant to this covenant may be incurred under the New Credit Agreement. LIENS The Indenture provides that the Company will not, and will not permit any of its Subsidiaries to, directly or indirectly, create, incur, assume or suffer to exist any Lien on any asset now owned or hereafter acquired, or any income or profits therefrom or assign or convey any right to receive income therefrom, except Permitted Liens. 70 DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES The Indenture provides that the Company will not, and will not permit any of its Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any Subsidiary to (i)(a) pay dividends or make any other distributions to the Company or any of its Subsidiaries (1) on its Capital Stock or (2) with respect to any other interest or participation in, or measured by, its profits, or (b) pay any indebtedness owed to the Company or any of its Subsidiaries, (ii) make loans or advances to the Company or any of its Subsidiaries or (iii) transfer any of its properties or assets to the Company or any of its Subsidiaries, except for such encumbrances or restrictions existing under or by reason of (a) Existing Indebtedness as in effect on the date of the Indenture, (b) the New Credit Agreement as in effect as of the date of the Indenture, and any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings thereof, PROVIDED that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacement or refinancings are no more restrictive in the aggregate with respect to such dividend and other payment restrictions than those contained in the New Credit Agreement as in effect on the date of the Indenture, (c) the Indenture, the Notes and the Subsidiary Guarantees, (d) applicable law, (e) any instrument regarding the sale, lease or purchase of any asset or governing Indebtedness or Capital Stock of a Person acquired by the Company or any of its Subsidiaries as in effect at the time of such acquisition (except to the extent such Indebtedness was incurred in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired, PROVIDED that, in the case of Indebtedness, such Indebtedness was permitted by the terms of the Indenture to be incurred, (f) by reason of customary non-assignment provisions in licenses or leases entered into in the ordinary course of business and consistent with past practices, (g) purchase money obligations or Capital Lease Obligations for property acquired in the ordinary course of business that impose restrictions of the nature described in clause (iii) above on the property so acquired, or (h) Permitted Refinancing Indebtedness, PROVIDED that the restrictions contained in the agreements governing such Permitted Refinancing Indebtedness are no more restrictive in the aggregate than those contained in the agreements governing the Indebtedness being refinanced. LIMITATION ON LAYERING DEBT The Indenture provides that the Company will not incur, create, issue, assume, guarantee or otherwise become liable for any Indebtedness that is subordinate or junior in right of payment to any Senior Debt and senior in any respect in right of payment to the Notes. In addition, the Indenture provides that the Subsidiary Guarantors will not incur, create, issue, assume, guarantee or otherwise become liable for any Indebtedness that is subordinate or junior in right of payment to any Senior Debt of the Subsidiary Guarantor and senior in any respect in right of payment to the Subsidiary Guarantees. TRANSACTIONS WITH AFFILIATES The Indenture provides that the Company will not, and will not permit any of its Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless (i) such Affiliate Transaction is on terms that are at least as favorable as those that could reasonably be expected to be obtained by the Company or the relevant Subsidiary in a comparable transaction by the Company or such Subsidiary with an unrelated Person and (ii) the Company delivers to the Trustee (a) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $1.0 million, a resolution of the Board of Directors set forth in an Officers' Certificate certifying that such Affiliate Transaction complies with clause (i) above and that such Affiliate Transaction has been approved by a majority of the disinterested members of the Board 71 of Directors and (b) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $5.0 million, an opinion as to the fairness to the Company of such Affiliate Transaction from a financial point of view issued by an accounting, appraisal or investment banking firm of national standing; PROVIDED that the following shall not be deemed to be Affiliate Transactions: (s) transactions pursuant to the Distribution Agreement, dated April 23, 1996, and the Technical Collaboration Agreement, dated as of April 23, 1996, each between the Company or one of its Subsidiaries and Yokogawa, to the extent that such transactions are on terms that are at least as favorable as those that could reasonably be expected to be obtained by the Company or the relevant Subsidiary in a comparable transaction by the Company or such Subsidiary with an unrelated Person; (t) lease payments, renewals and extensions under the lease agreement, dated June 29, 1996, between the Company and Toyon Investments, a corporation controlled by Gooding, to the extent that aggregate annual lease payments do not exceed $585,000 per year, plus annual consumer price index adjustments, not to exceed 3% per annum; (u) any payments or transactions made in accordance with, or that are authorized under, the Stockholders Agreement, including the engagement or appointment of Donaldson, Lufkin & Jenrette Securities Corporation as underwriter in connection with an initial public offering; (v) the engagement or appointment by the Company of Donaldson, Lufkin & Jenrette Securities Corporation as its financial advisor, investment banking firm or arranger with respect to the New Credit Agreement, to the extent that the fees and expenses under such engagement are reasonable and customary for such engagements; (w) the exercise by Gooding of his option to purchase the Company's executive offices at 11995 El Camino Road, San Diego, California including all the leasehold improvements and fixed assets therein pursuant to the terms set forth in the resolution of the Company adopted on September 19, 1995; (x) any employment agreement entered into by the Company or any of its Subsidiaries in the ordinary course of business and consistent with the past practice of the Company or such Subsidiary; (y) transactions between or among the Company and/or its Subsidiaries; and (z) Restricted Payments that are permitted by the provisions of the Indenture described above under the caption "-- Restricted Payments." ADDITIONAL SUBSIDIARY GUARANTEES The Indenture provides that if the Company or any of its Subsidiaries shall acquire or create another Subsidiary (other than a Foreign Subsidiary) after the date of the Indenture, then such newly acquired or created Subsidiary shall execute a Subsidiary Guarantee and deliver an opinion of counsel, in accordance with the terms of the Indenture. The Indenture also provides that 100% of the Capital Stock of all Foreign Subsidiaries must be owned directly or indirectly by the Company and that the Company will not allow its Foreign Subsidiaries to acquire or create any Subsidiaries. REPORTS The Indenture provides that, whether or not required by the rules and regulations of the Securities and Exchange Commission (the "Commission"), so long as any Notes are outstanding, the Company will furnish to the Holders of Notes (i) all quarterly and annual financial information that would be required to be contained in a filing with the Commission on Forms 10-Q and 10-K if the Company were required to file such Forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" and, with respect to the annual information only, a report thereon by the Company's certified independent auditors and (ii) all current reports that would be required to be filed with the Commission on Form 8-K if the Company were required to file such reports. In addition, whether or not required by the rules and regulations of the Commission, the Company will file a copy of all such information and reports with the Commission for public availability (unless the Commission will not accept such a filing) and make such information available to securities analysts and prospective investors upon request. In addition, the Company has agreed that, for so long as any Notes remain outstanding, it will furnish to the Holders and to 72 prospective purchasers designated by such Holders, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act. MERGER, CONSOLIDATION OR SALE OF ASSETS The Indenture provides that the Company may not consolidate or merge with or into (whether or not the Company is the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions, to another corporation, Person or entity unless (i) the Company is the surviving corporation or the entity or the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made is a corporation organized or existing under the laws of the United States, any state thereof or the District of Columbia; (ii) the entity or Person formed by or surviving any such consolidation or merger (if other than the Company) or the entity or Person to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made assumes all the obligations of the Company under the Notes and the Indenture pursuant to a supplemental indenture in a form reasonably satisfactory to the Trustee; (iii) immediately after such transaction no Default or Event of Default exists; and (iv) except in the case of a merger of the Company with or into a Wholly Owned Subsidiary of the Company, the Company or the entity or Person formed by or surviving any such consolidation or merger (if other than the Company), or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made (A) will have Consolidated Net Worth immediately after the transaction equal to or greater than the Consolidated Net Worth of the Company immediately preceding the transaction and (B) will, after giving pro forma effect thereto as if such transaction had occurred at the beginning of the applicable four-quarter period, be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of the covenant described above under the caption "-- Incurrence of Indebtedness and Issuance of Preferred Stock." EVENTS OF DEFAULT AND REMEDIES The Indenture provides that each of the following constitutes an Event of Default: (i) default for 30 days in the payment when due of interest on, or Liquidated Damages with respect to, the Notes (whether or not prohibited by the subordination provisions of the Indenture); (ii) default in payment when due of the principal of or premium, if any, on the Notes (whether or not prohibited by the subordination provisions of the Indenture); (iii) failure by the Company to comply with the provisions described under the captions "-- Certain Covenants -- Change of Control," "-- Asset Sales," "-- Restricted Payments" or "-- Incurrence of Indebtedness and Issuance of Preferred Stock"; (iv) failure by the Company for 60 days after notice to comply with any of its other agreements in the Indenture or the Notes; (v) except as permitted by the Indenture, any Subsidiary Guarantee shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Subsidiary Guarantor, or any Person acing on behalf of any Subsidiary Guarantor, shall deny or disaffirm its obligations under its Subsidiary Guarantee; (vi) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Subsidiaries (or the payment of which is guaranteed by the Company or any of its Subsidiaries) whether such Indebtedness or guarantee now exists, or is created after the date of the Indenture, which default (a) is caused by a failure to pay principal when due at final stated maturity (a "Payment Default") or (b) results in the acceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $7.5 million or more; (vii) failure by the Company or any of its Subsidiaries to pay final judgments aggregating in excess of $7.5 million, which judgments are not paid, discharged or stayed for a period of 60 days; and (viii) certain events of bankruptcy or insolvency with respect to the Company or any of its Significant Subsidiaries. 73 If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable by notice in writing to the Company and the Trustee specifying the respective Event of Default and that it is a notice of acceleration (the "Acceleration Notice"), and the same (i) shall become immediately due and payable or (ii) if there are any amounts outstanding under the New Credit Agreement, shall become immediately due and payable upon the first to occur of an acceleration under the New Credit Agreement or five Business Days after receipt by the Company and the Representative under the New Credit Agreement of such Acceleration Notice but only if such Event of Default is then continuing. Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency, with respect to the Company, any Significant Subsidiary or any group of Subsidiaries that, taken together, would constitute a Significant Subsidiary, all outstanding Notes will become due and payable without further action or notice. Holders of the Notes may not enforce the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. In the event of a declaration of acceleration of the Notes because an Event of Default has occurred and is continuing as a result of the acceleration of any Indebtedness described in clause (vi) of the preceding paragraph, the declaration of acceleration of the Notes shall be automatically annulled if the holders of any Indebtedness described in clause (vi) have rescinded the declaration of acceleration in respect of such Indebtedness within 30 days of the date of such declaration and if (i) the annulment of the acceleration of the Notes would not conflict with any judgment or decree of a court of competent jurisdiction, and (ii) all existing Events of Default, except nonpayment of principal or interest or Liquidated Damages on the Notes that became due solely because of the acceleration of the Notes, have been cured or waived. The Trustee may withhold from Holders of the Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest) if it determines that withholding notice is in their interest. In the case of any Event of Default occurring by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding payment of the premium that the Company would have had to pay if the Company then had elected to redeem the Notes pursuant to the optional redemption provisions of the Indenture, an equivalent premium shall also become and be immediately due and payable to the extent permitted by law upon the acceleration of the Notes. If an Event of Default occurs prior to June 15, 2002 by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding the prohibition on redemption of the Notes prior to June 15, 2002, then the premium specified in the Indenture shall also become immediately due and payable to the extent permitted by law upon the acceleration of the Notes. The Holders of a majority in aggregate principal amount of the Notes then outstanding by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default or Event of Default and its consequences under the Indenture except a continuing Default or Event of Default in the payment of interest on, or the principal of, the Notes. The Company is required to deliver to the Trustee annually a statement regarding compliance with the Indenture, and the Company is required upon becoming aware of any Default or Event of Default, to deliver to the Trustee a statement specifying such Default or Event of Default. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS No director, officer, employee, incorporator or stockholder of the Company or any Subsidiary Guarantor, as such, shall have any liability for any obligations of the Company or any Subsidiary Guarantor under the Notes, the Indenture or any Subsidiary Guarantee or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the Commission that such a waiver is against public policy. 74 LEGAL DEFEASANCE AND COVENANT DEFEASANCE The Company may, at its option and at any time, elect to have all of its obligations discharged with respect to the outstanding Notes ("Legal Defeasance") except for (i) the rights of Holders of outstanding Notes to receive payments in respect of the principal of, premium, if any, and interest and Liquidated Damages on such Notes when such payments are due from the trust referred to below, (ii) the Company's obligations with respect to the Notes concerning issuing temporary Notes, registration of Notes, mutilated, destroyed, lost or stolen Notes and the maintenance of an office or agency for payment and money for security payments held in trust, (iii) the rights, powers, trusts, duties and immunities of the Trustee, and the Company's obligations in connection therewith and (iv) the Legal Defeasance provisions of the Indenture. In addition, the Company may, at its option and at any time, elect to have the obligations of the Company released with respect to certain covenants that are described in the Indenture ("Covenant Defeasance") and thereafter any omission to comply with such obligations shall not constitute a Default or Event of Default with respect to the Notes. In the event Covenant Defeasance occurs, certain events (not including non-payment, bankruptcy, receivership, rehabilitation and insolvency events) described under "Events of Default" will no longer constitute an Event of Default with respect to the Notes. In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders of the Notes, cash in U.S. dollars, non-callable Government Securities, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, premium, if any, and interest and Liquidated Damages on the outstanding Notes on the stated maturity or on the applicable redemption date, as the case may be, and the Company must specify whether the Notes are being defeased to maturity or to a particular redemption date; (ii) in the case of Legal Defeasance, the Company shall have delivered to the Trustee an opinion of counsel in the United States reasonably acceptable to the Trustee confirming that (A) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (B) since the date of the Indenture, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such opinion of counsel shall confirm that, the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; (iii) in the case of Covenant Defeasance, the Company shall have delivered to the Trustee an opinion of counsel in the United States reasonably acceptable to the Trustee confirming that the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (iv) no Default or Event of Default shall have occurred and be continuing on the date of such deposit (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit) or insofar as Events of Default from bankruptcy or insolvency events are concerned, at any time in the period ending on the 91st day after the date of deposit; (v) such Legal Defeasance or Covenant Defeasance will not result in a breach or violation of, or constitute a default under the New Credit Agreement or any other material agreement or instrument (other than the Indenture) to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound; (vi) the Company must deliver to the Trustee an Officers' Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders of Notes over the other creditors of the Company with the intent of defeating, hindering, delaying or defrauding creditors of the Company or others; and (vii) the Company must deliver to the Trustee an Officers' Certificate and an opinion of counsel, each stating that all conditions precedent provided for relating to the Legal Defeasance or the Covenant Defeasance have been complied with. 75 TRANSFER AND EXCHANGE A Holder may transfer or exchange Notes in accordance with the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Company is not required to transfer or exchange any Note selected for redemption. Also, the Company is not required to transfer or exchange any Note for a period of 15 days before a selection of Notes to be redeemed. The registered Holder of a Note will be treated as the owner of it for all purposes. AMENDMENT, SUPPLEMENT AND WAIVER Except as provided in the next two succeeding paragraphs, the Indenture or the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the Notes then outstanding (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, Notes), and any existing default or compliance with any provision of the Indenture or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes (including consents obtained in connection with a tender offer or exchange offer for Notes). Without the consent of each Holder affected, an amendment or waiver may not (with respect to any Notes held by a non-consenting Holder): (i) reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver, (ii) reduce the principal of or change the fixed maturity of any Note or alter the provisions with respect to the redemption of the Notes (other than provisions relating to the covenants described above under the caption "-- Certain Covenants -- Change of Control" and "-- Asset Sales"), (iii) reduce the rate of or change the time for payment of interest on any Note, (iv) waive a Default or Event of Default in the payment of principal of or premium, if any, or interest on the Notes (except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of the Notes and a waiver of the payment default that resulted from such acceleration), (v) make any Note payable in money other than that stated in the Notes, (vi) make any change in the provisions of the Indenture relating to waivers of past Defaults or the rights of Holders of Notes to receive payments of principal of or premium, if any, or interest on the Notes, (vii) waive a redemption payment with respect to any Note (other than a payment required by the covenants described above under the captions "-- Certain Covenants -- Change of Control" or "-- Asset Sales") or (viii) make any change in the foregoing amendment and waiver provisions. In addition, any amendment to the provisions of Article 10 of the Indenture (which relate to subordination) will require the consent of the Holders of at least 75% in aggregate principal amount of the Notes then outstanding if such amendment would adversely affect the rights of Holders of Notes. Notwithstanding the foregoing, without the consent of any Holder of Notes, the Company and the Trustee may amend or supplement the Indenture or the Notes to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes, to provide for the assumption of the Company's obligations to Holders of Notes in the case of a merger or consolidation, to make any change that would provide any additional rights or benefits to the Holders of Notes or that does not adversely affect the legal rights under the Indenture of any such Holder, or to comply with requirements of the Commission in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act. 76 CONCERNING THE TRUSTEE The Indenture contains certain limitations on the rights of the Trustee, should it become a creditor of the Company, to obtain payment of claims in certain cases, or to realize on certain property received in respect of any such claim as security or otherwise. The Trustee will be permitted to engage in other transactions; however, if it acquires any conflicting interest it must eliminate such conflict within 90 days, apply to the Commission for permission to continue or resign. The Holders of a majority in principal amount of the then outstanding Notes will have the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee, subject to certain exceptions. The Indenture provides that in case an Event of Default shall occur (which shall not be cured), the Trustee will be required, in the exercise of its power, to use the degree of care of a prudent man in the conduct of his own affairs. Subject to such provisions, the Trustee will be under no obligation to exercise any of its rights or powers under the Indenture at the request of any Holder of Notes, unless such Holder shall have offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense. BOOK-ENTRY, DELIVERY AND FORM The New Notes will be issued in the form of a Global Note (a "Global Note"). Each Global Note will be deposited with, or on behalf of, The Depositary Trust Company ("DTC") and registered in the name of DTC or its nominee. Except as set forth below, each Global Note may be transferred, in whole or in part, only to DTC or another nominee of DTC. Investors may hold their beneficial interest in a Global Note directly through DTC if they are participants in such system or indirectly through organizations which are participants in such system. DTC is a limited-purpose trust company that was created to hold securities for its participating organizations (collectively, the "Participants") and to facilitate the clearance and settlement of transactions in such securities between Participants through electronic book-entry changes in accounts of its Participants. The Participants include securities brokers and dealers (including the Initial Purchaser), banks and trust companies, clearing corporations and certain other organizations. Access to DTC's system is also available to other entities such as banks, brokers, dealers and trust companies (collectively, the "Indirect Participants") that clear through or maintain a custodial relationship with a Participant, either directly or indirectly. Persons who are not Participants may beneficially own securities held by or on behalf of DTC only through the Participants or Indirect Participants. Upon the issuance of the Global Notes, DTC will credit the accounts of Participants designated by the Initial Purchasers with portions of the principal amount of the Global Notes. Ownership of the Notes evidenced by the Global Notes will be shown on, and the transfer of ownership thereof will be effected only through, records maintained by DTC (with respect to the interest of Participant), the Participants and the Indirect Participants. Prospective purchasers are advised that the laws of some states require that certain persons take physical delivery in definitive form of securities they own. Consequently, the ability to transfer Notes evidenced by the Global Notes will be limited to such extent. So long as the nominee of DTC is the registered owner or holder of any Notes, such nominee will be considered the sole owner or Holder under the Indenture of any Notes evidenced by the Global Notes. Beneficial owners of Notes evidenced by a Global Note will not be considered the owners or Holders thereof under the Indenture for any purpose, including with respect to the giving of any directions, instructions or approvals to the Trustee thereunder. Neither the Company nor the Trustee will have any responsibility or liability for any aspect of the records of DTC or for maintaining, supervising or reviewing any records of DTC relating to the Notes. No beneficial owner of an interest in any Global Note will be able to transfer that interest except in accordance with DTC's procedures in addition to those provided for under the Indenture. 77 Payments in respect of the principal of, premium, if any, interest and Liquidated Damages, if any, on any Notes registered in the name of the nominee of DTC on the applicable record date will be payable by the Trustee to or at the direction of DTC or its nominee in its capacity as the registered Holder under the Indenture. Under the terms of the Indenture, the Company and the Trustee may treat the person in whose names Notes, including the Global Notes, are registered as the owners thereof for the purpose of receiving such payments. Consequently, neither the Company, the Trustee nor any paying agent of the Company has or will have any responsibility or liability for the payment of such amounts to beneficial owners of Notes (including principal, premium, if any, interest and Liquidated Damages, if any). The Company believes, however, that it is currently the policy of DTC or its nominee, to immediately credit the accounts of the relevant Participants with such payments, in amounts proportionate to their respective holdings of beneficial interests in the relevant security as shown on the records of DTC or its nominee. Payments by the Participants and the Indirect Participants to the beneficial owners of Notes will be governed by standing instructions and customary practice and will be the responsibility of the Participants or the Indirect Participants. CERTIFICATED NOTES If (i) the Company notifies the Trustee in writing that DTC or its nominee is no longer willing or able to act as a depository and the Company is unable to locate a qualified successor within 90 days or (ii) the Company, at its option, notifies the Trustee in writing that it elects to cause the issuance of Notes in the form of Certificated Securities under the Indenture, then, upon surrender by DTC or its nominee of its Global Notes, Notes in such form will be issued to each person that DTC or its nominee identify as being the beneficial owner of the corresponding Notes. Neither the Company nor the Trustee will be liable for any delay by a holder of a Global Note or DTC or its nominee in identifying the beneficial owners of Notes and the Company and the Trustee may conclusively rely on, and will be protected in relying on, instructions from DTC or its nominee for all purposes. REGISTRATION RIGHTS; LIQUIDATED DAMAGES In connection with the sale of the Old Notes, the Company and the Initial Purchaser entered into the Registration Rights Agreement on the Issue Date. Pursuant to the Registration Rights Agreement, the Company agreed to file with the SEC a registration statement on the appropriate form under the Securities Act with respect to the New Notes (the "Exchange Offer Registration Statement"). The Exchange Offer is being made to satisfy the contractual obligations of the Company under the Registration Rights Agreement and the Registration Statement of which this Prospectus forms a part in the Exchange Offer Registration Statement. If (i) the Company is not required to file the Exchange Offer Registration Statement or permitted to consummate the Exchange Offer because the Exchange Offer is not permitted by applicable law or SEC policy or (ii) any Holder of Transfer Restricted Securities notifies the Company within the specified time period that (A) it is prohibited by law or SEC policy from participating in the Exchange Offer or (B) that it may not resell the New Notes acquired by it in the Exchange Offer to the public without delivering a prospectus and the prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales or (C) that it is a broker-dealer and owns Old Notes acquired directly from the Company or an affiliate of the Company, the Company will file with the SEC a shelf registration statement (the "Shelf Registration Statement") to cover resales of the Notes by the Holders thereof who satisfy certain conditions relating to the provision of information in connection with the Shelf Registration Statement. The Company will use its best efforts to cause the applicable registration statement to be declared effective as promptly as possible by the SEC. For purposes of the foregoing, "Transfer Restricted Securities" means each Old Note until (i) the date on which such Note has been exchanged by a person other than a broker-dealer for a New Note in the Exchange Offer, (ii) following the exchange by a broker-dealer in the Exchange Offer of a Old Note for a New Note, the 78 date on which such New Note is sold to a purchaser who receives from such broker-dealer on or prior to the date of such sale a copy of this Prospectus, (iii) the date on which such Note has been effectively registered under the Securities Act and disposed of in accordance with the Shelf Registration Statement or (iv) the date on which such Note is distributed to the public pursuant to Rule 144 under the Act. The Registration Rights Agreement provides that (i) the Company will file an Exchange Offer Registration Statement with the SEC on or prior to 60 days after the Issue Date, (ii) the Company will use its best efforts to have the Exchange Offer Registration Statement declared effective by the SEC on or prior to 120 days after the Issue Date, (iii) unless the Exchange Offer would not be permitted by applicable law or SEC policy, the Company will commence the Exchange Offer and use its best efforts to issue on or prior to 45 business days after the date on which the Exchange Offer Registration Statement was declared effective by the SEC, New Notes in exchange for all Old Notes tendered prior thereto in the Exchange Offer and (iv) if obligated to file the Shelf Registration Statement, the Company will use its best efforts to file the Shelf Registration Statement with the SEC on or prior to 60 days after such filing obligation arises (and in any event within 120 days after the Issue Date) and to cause the Shelf Registration to be declared effective by the SEC on or prior to 120 days after such filing obligation arises. If (a) the Company fails to file any of the Registration Statements required by the Registration Rights Agreement on or before the date specified for such filing, (b) any of such Registration Statements is not declared effective by the SEC on or prior to the date specified for such effectiveness (the "Effectiveness Target Date"), (c) the Company fails to consummate the Exchange Offer within 45 business days of the Effectiveness Target Date with respect to the Exchange Offer Registration Statement, or (d) the Shelf Registration Statement or the Exchange Offer Registration Statement is declared effective but thereafter ceases to be effective or usable in connection with resales of Transfer Restricted Securities during the periods specified in the Registration Rights Agreement (each such event referred to in clauses (a) through (d) above a "Registration Default"), then the Company will pay Liquidated Damages to each Holder of Old Notes, with respect to the first 90-day period immediately following the occurrence of such Registration Default in an amount equal to $.05 per week per $1,000 principal amount of Old Notes held by such Holder. The amount of the Liquidated Damages will increase by an additional $.05 per week per $1,000 principal amount of Old Notes with respect to each subsequent 90-day period until all Registration Defaults have been cured, up to a maximum amount of Liquidated Damages of $.50 per week per $1,000 principal amount of Old Notes. All accrued Liquidated Damages will be paid by the Company to the Global Note Holder by wire transfer of immediately available funds or by federal funds check and to Holders of Certificated Securities by wire transfer to the accounts specified by them or by mailing checks to their registered addresses if no such accounts have been specified. Following the cure of all Registration Defaults, the accrual of Liquidated Damages will cease. Holders of Old Notes will be required to make certain representations to the Company (as described in the Registration Rights Agreement) in order to participate in the Exchange Offer and will be required to deliver information to be used in connection with the Shelf Registration Statement and to provide comments on the Shelf Registration Statement within the time periods set forth in the Registration Rights Agreement in order to have their Notes included in the Shelf Registration Statement and benefit from the provisions regarding Liquidated Damages set forth above. See "The Exchange Offer." CERTAIN DEFINITIONS Set forth below are certain defined terms used in the Indenture. Reference is made to the Indenture for a full disclosure of all such terms, as well as any other capitalized terms used herein for which no definition is provided. "ACQUIRED DEBT" means, with respect to any specified Person, (i) Indebtedness of any other Person existing at the time such other Person is merged with or into or became a Subsidiary of such specified Person, including, without limitation, Indebtedness incurred in connection with, or in contemplation of, such other Person merging with or into or becoming a Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person. 79 "AFFILIATE" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person, and in the case of the Company and its Subsidiaries, shall include Yokogawa until such time as Yokogawa has beneficial ownership of less than five percent of the Company's Capital Stock. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; PROVIDED that beneficial ownership of 10% or more of the voting securities of a Person shall be deemed to be control. "ASSET SALE" means (i) the sale, lease, conveyance or other disposition of any assets (including, without limitation, by way of a sale and leaseback) other than sales of Cash Equivalents and inventory in the ordinary course of business (PROVIDED that the sale, lease, conveyance or other disposition of all or substantially all of the assets of the Company and its Subsidiaries taken as a whole will be governed by the provisions of the Indenture described above under the caption "-- Certain Covenants -- Change of Control" and/or the provisions described above under the caption "-- Certain Covenants -- Merger, Consolidation or Sale of Assets" and not by the provisions of the Asset Sale covenant), and (ii) the issue or sale by the Company or any of its Subsidiaries of Equity Interests of any of the Company's Subsidiaries, in the case of either clause (i) or (ii), whether in a single transaction or a series of related transactions (a) that have a fair market value in excess of $2.0 million or (b) for net proceeds in excess of $2.0 million. Notwithstanding the foregoing: (i) a transfer of assets by the Company to a Wholly Owned Subsidiary or by a Wholly Owned Subsidiary to the Company or to another Wholly Owned Subsidiary, (ii) an issuance of Equity Interests by a Wholly Owned Subsidiary to the Company or to another Wholly Owned Subsidiary, and (iii) a Restricted Payment that is permitted by the covenant described above under the caption "-- Certain Covenants -- Restricted Payments" will not be deemed to be Asset Sales. "CAPITAL LEASE OBLIGATION" means, at the time any determination thereof is to be made, (i) the amount of the liability in respect of a capital lease that would at such time be required to be capitalized on a balance sheet in accordance with GAAP, or (ii) so long as the Master Lease, dated as of October 21, 1994, as amended, with respect to property in Indianapolis, Indiana, is not accounted for as a capital lease, the amount of the liability with respect thereto recorded on the Company's balance sheet. "CAPITAL STOCK" means (i) in the case of a corporation, corporate stock, (ii) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, (iii) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited) and (iv) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person. "CASH EQUIVALENTS" means (i) United States dollars or foreign currency that is readily exchangeable into United States dollars, (ii) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof having maturities of not more than 12 months from the date of acquisition, (iii) certificates of deposit and eurodollar time deposits with maturities of 12 months or less from the date of acquisition, bankers' acceptances with maturities not exceeding 12 months and overnight bank deposits, in each case with any domestic commercial bank having capital and surplus in excess of $500 million and a Keefe Bank Watch Rating of "B" or better, (iv) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (ii) and (iii) above entered into with any financial institution meeting the qualifications specified in clause (iii) above, and (v) commercial paper having the highest rating obtainable from Moody's Investors Service, Inc. or Standard & Poor's Corporation and in each case maturing within 12 months after the date of acquisition. 80 "CHANGE OF CONTROL" means the occurrence of any of the following: (i) the sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the assets of the Company and its Subsidiaries taken as a whole to any "person" (as such term is used in Section 13(d)(3) of the Exchange Act) other than the Principals or their Related Parties (as defined below), (ii) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any "person" (as defined above), other than the Principals and their Related Parties, becomes the "beneficial owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that a person shall be deemed to have "beneficial ownership" of all securities that such person has the right to acquire, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition), directly or indirectly, of more than 50% of the Voting Stock of the Company (measured by voting power rather than number of shares), (iii) the first day on which a majority of the members of the Board of Directors of the Company are not Continuing Directors, or (iv) the Company consolidates with, or merges with or into, any Person or sells, assigns, conveys, transfers, leases or otherwise disposes of all or substantially all of its assets to any Person, or any Person consolidates with, or merges with or into, the Company, in any such event pursuant to a transaction in which any of the outstanding Voting Stock of the Company is converted into or exchanged for cash, securities or other property, other than any such transaction where the majority of the members of the Board of Directors of such Person are Continuing Directors. "CONSOLIDATED CASH FLOW" means, with respect to any Person for any period, the Consolidated Net Income of such Person for such period plus (i) an amount equal to any extraordinary loss, extraordinary provision or provision for restructuring operations plus any net loss realized in connection with an Asset Sale (to the extent such losses were deducted in computing such Consolidated Net Income), plus (ii) provision for taxes based on income or profits of such Person and its Subsidiaries for such period, to the extent that such provision for taxes was included in computing such Consolidated Net Income, plus (iii) consolidated interest expense of such Person and its Subsidiaries for such period, whether paid or accrued and whether or not capitalized (including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net payments (if any) pursuant to Hedging Obligations), to the extent that any such expense was deducted in computing such Consolidated Net Income, plus (iv) depreciation, amortization (including amortization of goodwill and other intangibles but excluding amortization of prepaid cash expenses that were paid in a prior period) and other non-cash expenses (excluding any such non-cash expense to the extent that it represents an accrual of or reserve for cash expenses in any future period or amortization of a prepaid cash expense that was paid in a prior period) of such Person and its Subsidiaries for such period to the extent that such depreciation, amortization and other non-cash expenses were deducted in computing such Consolidated Net Income, minus (v) non-cash items increasing such Consolidated Net Income for such period, in each case, on a consolidated basis and determined in accordance with GAAP; PROVIDED that Consolidated Net Income shall exclude the impact of foreign currency translations. Notwithstanding the foregoing, the provision for taxes on the income or profits of, and the depreciation and amortization and other non-cash charges of, a Subsidiary of the referent Person shall be added to Consolidated Net Income to compute Consolidated Cash Flow only to the extent that a corresponding amount would be permitted at the date of determination to be dividended to the Company by such Subsidiary either (i) without prior governmental approval or (ii) with governmental approval that has been obtained or that could readily and reasonably be obtained, and without direct or indirect restriction pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to that Subsidiary or its stockholders. "CONSOLIDATED NET INCOME" means, with respect to any Person for any period, the aggregate of the Net Income of such Person and its Subsidiaries for such period, on a consolidated basis, determined in accordance with GAAP and excluding any one-time charge or expense incurred in order to consummate 81 the Recapitalization Transactions; PROVIDED that (i) the Net Income (but not loss) of any Person that is not a Subsidiary or that is accounted for by the equity method of accounting shall be included only to the extent of the amount of dividends or distributions paid in cash to the referent Person or a Wholly Owned Subsidiary thereof that is a Subsidiary Guarantor, (ii) the Net Income of any Subsidiary shall be excluded to the extent that the declaration or payment of dividends or similar distributions by that Subsidiary of that Net Income is not at the date of determination permitted without any prior governmental approval (unless such governmental approval could be readily and reasonably obtained) or, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Subsidiary or its stockholders, (iii) the Net Income of any Person acquired in a pooling of interests transaction for any period prior to the date of such acquisition shall be excluded and (iv) the cumulative effect of a change in accounting principles shall be excluded. "CONSOLIDATED NET WORTH" means, with respect to any Person as of any date, the sum of (i) the consolidated equity of the common stockholders of such Person and its consolidated Subsidiaries as of such date plus (ii) the respective amounts reported on such Person's balance sheet as of such date with respect to any series of preferred stock (other than Disqualified Stock) that by its terms is not entitled to the payment of dividends unless such dividends may be declared and paid only out of net earnings in respect of the year of such declaration and payment, but only to the extent of any cash received by such Person upon issuance of such preferred stock, less (x) all write-ups (other than write-ups resulting from foreign currency translations and write-ups of tangible assets of a going concern business made within 12 months after the acquisition of such business) subsequent to the date of the Indenture in the book value of any asset owned by such Person or a consolidated Subsidiary of such Person, (y) all investments as of such date in unconsolidated Subsidiaries and in Persons that are not Subsidiaries (except, in each case, Permitted Investments), and (z) all unamortized debt discount and expense and unamortized deferred charges, excluding goodwill and other purchased intangibles, as of such date, all of the foregoing determined in accordance with GAAP. "CONTINUING DIRECTORS" means, as of any date of determination, any member of the Board of Directors of the Company who (i) was a member of such Board of Directors on the date of the Indenture or (ii) was nominated for election or elected to such Board of Directors pursuant to the Stockholders Agreement or with the approval of a majority of the Continuing Directors who were members of such Board at the time of such nomination or election. "DEFAULT" means any event that is or with the passage of time or the giving of notice or both would be an Event of Default. "DESIGNATED SENIOR DEBT" means (i) any Indebtedness outstanding under the New Credit Agreement and (ii) any other Senior Debt permitted under the Indenture the principal amount of which is $25.0 million or more and that has been designated by the Company as "Designated Senior Debt." "DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the Holder thereof, in whole or in part, on or prior to the date that is 91 days after the date on which the Notes mature; PROVIDED, that Capital Stock issued to employees pursuant to agreements providing that the employee may require the Company to repurchase such Capital Stock in certain circumstances shall not be deemed to be Disqualified Stock if such agreements provide that the repurchase rights are subject to the limitations on such repurchases set forth in the covenant entitled "-- Restricted Payments." "EQUITY INTERESTS" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). 82 "EXISTING INDEBTEDNESS" means up to $7.0 million in aggregate principal amount of Indebtedness of the Company and its Subsidiaries (other than Indebtedness under the New Credit Agreement) in existence on the date of the Indenture after the Recapitalization Transactions, until such amounts are repaid. "FIXED CHARGES" means, with respect to any Person for any period, the sum, without duplication, of (i) the consolidated interest expense of such Person and its Subsidiaries for such period, whether paid or accrued (including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net payments (if any) pursuant to Hedging Obligations) and (ii) the consolidated interest expense of such Person and its Subsidiaries that was capitalized during such period, and (iii) any interest expense on Indebtedness of another Person that is Guaranteed by such Person or one of its Subsidiaries or secured by a Lien on assets of such Person or one of its Subsidiaries (whether or not such Guarantee or Lien is called upon) and (iv) the product of (a) all dividend payments, whether or not in cash, on any series of preferred stock of such Person or any of its Subsidiaries, other than dividend payments on Equity Interests payable solely in Equity Interests of the Company, times (b) a fraction, the numerator of which is one and the denominator of which is one minus the then current combined federal, state and local statutory tax rate of such Person, expressed as a decimal, in each case, on a consolidated basis and in accordance with GAAP. "FIXED CHARGE COVERAGE RATIO" means with respect to any Person for any period, the ratio of the Consolidated Cash Flow of such Person for such period to the Fixed Charges of such Person for such period. In the event that the Company or any of its Subsidiaries incurs, assumes, Guarantees or redeems any Indebtedness (other than revolving credit borrowings) or issues preferred stock subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated but prior to the date on which the event for which the calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to such incurrence, assumption, Guarantee or redemption of Indebtedness, or such issuance or redemption of preferred stock, as if the same had occurred at the beginning of the applicable four-quarter reference period. In addition, for purposes of making the computation referred to above, (i) acquisitions that have been made by the Company or any of its Subsidiaries, including through mergers or consolidations and including any related financing transactions, during the four-quarter reference period or subsequent to such reference period and on or prior to the Calculation Date shall be deemed to have occurred on the first day of the four-quarter reference period and Consolidated Cash Flow for such reference period shall be calculated without giving effect to clause (iii) of the proviso set forth in the definition of Consolidated Net Income, and (ii) the Consolidated Cash Flow attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, shall be excluded, and (iii) the Fixed Charges attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, shall be excluded, but only to the extent that the obligations giving rise to such Fixed Charges will not be obligations of the referent Person or any of its Subsidiaries following the Calculation Date. "FOREIGN SUBSIDIARY" means, with respect to any person, any Subsidiary of such person which is incorporated or otherwise organized under the laws of any jurisdiction other than the United States of America, any state thereof or the District of Columbia and substantially all of whose consolidated assets are located outside the United States. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect on the date of the Indenture. 83 "GOODING" means Terence J. Gooding. "GUARANTEE" means a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner (including, without limitation, letters of credit and reimbursement agreements in respect thereof), of all or any part of any Indebtedness. "HEDGING OBLIGATIONS" means, with respect to any Person, the obligations of such Person under (i) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements, (ii) other agreements or arrangements designed to protect such Person against fluctuations in interest rates or (iii) agreements or arrangements designed to protect such Person against fluctuations in foreign currency exchange rates in the conduct of its operations. "INDEBTEDNESS" means, with respect to any Person, any indebtedness of such Person, whether or not contingent, in respect of borrowed money or evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof) or banker's acceptances or representing Capital Lease Obligations or the balance deferred and unpaid of the purchase price of any property or representing any Hedging Obligations, except any such balance that constitutes an accrued expense or trade payable, if and to the extent any of the foregoing indebtedness (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of such Person prepared in accordance with GAAP, as well as all indebtedness of others secured by a Lien on any asset of such Person (whether or not such indebtedness is assumed by such Person) and, to the extent not otherwise included, the Guarantee by such Person of any indebtedness of any other Person. "INVESTMENTS" means, with respect to any Person, all investments by such Person in other Persons (including Affiliates) in the forms of direct or indirect loans (including guarantees of Indebtedness or other obligations), advances or capital contributions (excluding commission, travel and similar advances to officers and employees made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities, together with all items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. If the Company or any Subsidiary of the Company sells or otherwise disposes of any Equity Interests of any direct or indirect Subsidiary of the Company such that, after giving effect to any such sale or disposition, such Person is no longer a Subsidiary of the Company, the Company shall be deemed to have made an Investment on the date of any such sale or disposition equal to the fair market value of the Equity Interests of such Subsidiary not sold or disposed of in an amount determined as provided in the final paragraph of the covenant described above under the caption "Certain Covenants -- Restricted Payments." "LIEN" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction). "NET INCOME" means, with respect to any Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of preferred stock dividends, excluding, however, (i) any gain (but not loss), together with any related provision for taxes on such gain (but not loss), realized in connection with (a) any Asset Sale (including, without limitation, dispositions pursuant to sale and leaseback transactions) or (b) the disposition of any securities by such Person or any of its Subsidiaries or the extinguishment of any Indebtedness of such Person or any of its Subsidiaries and (ii) any extraordinary or nonrecurring gain (but not loss), together with any related provision for taxes on such extraordinary or nonrecurring gain (but not loss). "NET PROCEEDS" means the aggregate cash proceeds received by the Company or any of its Subsidiaries in respect of any Asset Sale (including, without limitation, any cash received upon the sale or other disposition of any non-cash consideration received in any Asset Sale), net of the direct costs relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees, and sales 84 commissions) and any relocation expenses incurred as a result thereof, taxes paid or payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements), amounts required to be applied to repay Indebtedness secured by such assets (other than pursuant to the New Credit Agreement) and any reserve for adjustment in respect of the sale price of such asset or assets established in accordance with GAAP. "NEW CREDIT AGREEMENT" means that certain Credit Agreement, dated as of June 11, 1997, by and among the Company and DLJ Capital Funding, Inc. and the banks named therein, for $45.0 million aggregate principal amount of term loan and revolving credit borrowings, including any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith, and in each case as amended, modified, extended, renewed, refunded, replaced or refinanced from time to time. "OBLIGATIONS" means any principal, interest, penalties, fees, indemnifications, reimbursements, costs, expenses, damages and other liabilities payable under the documentation governing any Indebtedness. "PERMITTED INVESTMENTS" means: (a) any Investment in the Company or in a Wholly Owned Subsidiary of the Company and that is engaged in the test instrumentation industry or a business reasonably related thereto; (b) any Investment in Cash Equivalents, to the extent that such Investment is not made for speculative investment purposes; (c) any Investment by the Company or any Subsidiary of the Company in a Person, if as a result of such Investment (i) such Person becomes a Wholly Owned Subsidiary of the Company that is a Subsidiary Guarantor and that is engaged in the test instrumentation industry or a business reasonably related thereto or (ii) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Company or a Wholly Owned Subsidiary of the Company that is a Subsidiary Guarantor and that is engaged in the test instrumentation industry or a business reasonably related thereto; (d) any Restricted Investment made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant to and in compliance with the covenant described above under the caption "Certain Covenants -- Asset Sales"; (e) any acquisition of assets in exchange for the issuance of Equity Interests (other than Disqualified Stock) of the Company; and (f) other Investments in any Person having an aggregate fair market value (measured on the date each such Investment was made and without giving effect to subsequent changes in value), when taken together with all other Investments made pursuant to this clause (f) that are at the time outstanding, not to exceed $5.0 million. "PERMITTED JUNIOR SECURITIES" means Equity Interests in the Company or unsecured debt securities that (i) are subordinated to all Senior Debt (and any debt securities issued in exchange for Senior Debt) on terms at least as favorable to the Senior Debt as those contained in Article 10 of the Indenture, (ii) may be guaranteed by the Subsidiary Guarantor on terms at least as favorable to the Senior Debt as those contained in the Subsidiary Guarantees, and (iii) have a final maturity and weighted average life to maturity which is the same as or greater than, the Notes. "PERMITTED LIENS" means: (i) Liens securing Senior Debt or Senior Debt of Subsidiary Guarantors that was permitted by the terms of the Indenture to be incurred; (ii) Liens in favor of the Company or any Subsidiary; (iii) Liens on property of a Person existing at the time such Person is merged into or consolidated with the Company or any Subsidiary of the Company; PROVIDED that such Liens were in existence prior to the contemplation of such merger or consolidation and do not extend to any assets other than those of the Person merged into or consolidated with the Company; (iv) Liens on property existing at the time of acquisition thereof by the Company or any Subsidiary of the Company, PROVIDED that such Liens were in existence prior to the contemplation of such acquisition; (v) Liens to secure the performance of statutory obligations, surety or appeal bonds, performance bonds or other obligations of a like nature incurred in the ordinary course of business; (vi) Liens existing on the date of the Indenture; (vii) Liens to secure Indebtedness (including Capital Lease Obligations) permitted by clause (ix) of the second paragraph of the covenant entitled "Incurrence of Indebtedness and Issuance of Preferred Stock" covering only the assets acquired with such Indebtedness and accessions, modifications, products and proceeds thereof; (viii) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are 85 being contested in good faith by appropriate proceedings promptly instituted and diligently concluded, PROVIDED that any reserve or other appropriate provision as shall be required in conformity with GAAP shall have been made therefor; and (ix) Liens incurred in the ordinary course of business of the Company or any Subsidiary of the Company with respect to obligations that do not exceed $5.0 million at any one time outstanding and that (a) are not incurred in connection with the borrowing of money or the obtaining of advances or credit (other than trade credit in the ordinary course of business) and (b) do not in the aggregate materially detract from the value of the property or materially impair the use thereof in the operation of business by the Company or such Subsidiary. "PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of the Company or any of its Subsidiaries issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund other Indebtedness of the Company or any of its Subsidiaries; PROVIDED that: (i) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount of (or accreted value, if applicable), plus accrued interest on, the Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded (plus the amount of premiums, prepayments, penalties, reasonable expenses incurred in connection therewith); (ii) such Permitted Refinancing Indebtedness has a final maturity date equal to or later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; (iii) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is subordinated in right of payment to the Notes, such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and is subordinated in right of payment to, the Notes on terms at least as favorable to the Holders of Notes as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; and (iv) such Indebtedness is incurred either by the Company or by the Subsidiary who is the obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded. "PRINCIPALS" means Gooding, DLJMB Funding II, Inc., DLJ Merchant Banking Partners II, L.P., DLJ Diversified Partners, L.P., UK Investment Plan 1997 Partners, DLJ First ESC L.L.C., DLJ Offshore Partners II, C.V, DLJ EAB Partners, L.P., DLJ Millennium Partners, L.P. and Green Equity Investors II, L.P. "PUBLIC EQUITY OFFERING" means an initial registered public offering of the Capital Stock of the Company, and any subsequent registered primary offerings of Capital Stock of the Company. "RELATED PARTY" with respect to any Principal means (A) any controlling stockholder, 80% (or more) owned Subsidiary, or spouse or immediate family member (in the case of an individual) of such Principal or (B) or trust, corporation, partnership or other entity, the beneficiaries, stockholders, partners, owners or Persons beneficially holding an 80% or more controlling interest of which consist of such Principal and/or such other Persons referred to in the immediately preceding clause (A). "REPRESENTATIVE" means (a) the administrative agent under the New Credit Agreement or (b) the indenture trustee or other trustee, agent or representative for any other Senior Debt. "RESTRICTED INVESTMENT" means an Investment other than a Permitted Investment. "SENIOR DEBT" means (i) all Obligations (including without limitation interest accruing after a filing of a petition in bankruptcy whether or not such interest is an allowable claim in such proceeding) of the Company under the New Credit Agreement, and (ii) any other Indebtedness permitted to be incurred by the Company under the terms of the Indenture, unless the instrument under which such Indebtedness is incurred expressly provides that it is on a parity with or subordinated in right of payment to the Notes. Notwithstanding anything to the contrary in the foregoing, Senior Debt will not include (v) any liability under the Master Lease, dated as of October 21, 1994, as amended, with respect to property in Indianapolis, Indiana, (w) any liability for federal, state, local or other taxes owed or owing by the 86 Company, (x) any Indebtedness of the Company to any of its Subsidiaries or other Affiliates, (y) any trade payables or (z) any Indebtedness that is incurred in violation of the Indenture. "SENIOR DEBT OF THE SUBSIDIARY GUARANTORS" means (i) all Guarantees by the Subsidiary Guarantors of Obligations (including without limitation interest accruing after a filing of a petition in bankruptcy whether or not such interest is an allowable claim in such proceeding) of the Company under the New Credit Agreement, (ii) any Indebtedness permitted to be incurred by the Subsidiary Guarantor under the terms of the Indenture, unless the instrument under which such Indebtedness is incurred expressly provides that such Guarantee is on a parity with or subordinated in right of payment to the Subsidiary Guarantees. Notwithstanding anything to the contrary in the foregoing, Senior Debt of the Subsidiary Guarantors will not include (v) any liability under the Master Lease, dated as of October 21, 1994, as amended, with respect to property in Indianapolis, Indiana, (w) any liability for federal, state, local or other taxes owed or owing by the Subsidiary Guarantor, (x) any Indebtedness of any of the Subsidiary Guarantors to the Company, any of their Subsidiaries or other Affiliates thereof, (y) any trade payables or (z) any Indebtedness that is incurred in violation of the Indenture. "SIGNIFICANT SUBSIDIARY" means any Subsidiary that would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Act, as such Regulation is in effect on the date hereof. "STATED MATURITY" means, with respect to any installment of interest or principal on any series of Indebtedness, the date on which such payment of interest or principal was scheduled to be paid in the original documentation governing such Indebtedness, and shall not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof. "STOCKHOLDERS AGREEMENT" means the Stockholders Agreement dated as of June 11, 1997 by and among certain holders of Capital Stock of the Company. "SUBSIDIARY" means, with respect to any Person, (i) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person (or a combination thereof) and (ii) any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are such Person or of one or more Subsidiaries of such Person (or any combination thereof). "SUBSIDIARY GUARANTORS" means each of (i) Wavetek U.S. Inc. and (ii) any other subsidiary that executes a Subsidiary Guarantee in accordance with the provisions of the Indenture, and their respective successors and assigns. "VOTING STOCK" of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of Directors of such Person. "WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness at any date, the number of years obtained by dividing (i) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment, by (ii) the then outstanding principal amount of such Indebtedness. "WHOLLY OWNED SUBSIDIARY" of any Person means a Subsidiary of such Person all of the outstanding Capital Stock or other ownership interests of which (other than directors' qualifying shares) shall at the time be owned by such Person or by one or more Wholly Owned Subsidiaries of such Person and one or more Wholly Owned Subsidiaries of such Person. "YOKOGAWA" means Yokogawa Electric Corporation, a corporation organized under the laws of Japan. 87 DESCRIPTION OF OTHER INDEBTEDNESS NEW CREDIT AGREEMENT In connection with the Recapitalization Transactions, the Company entered into a New Credit Agreement with Fleet National Bank, as Administrative Agent, DLJ Capital Funding, Inc. ("DLJCF"), as Syndication Agent, and the several lenders named therein. The New Credit Agreement provides for a five-year and six month term loan in the principal amount of $25.0 million and a five year and six month revolving credit facility providing for borrowings of up to $20.0 million, which includes a swingline facility. The revolving credit facility under the New Credit Agreement provides for up to an aggregate of $7.5 million of borrowings in British pounds, French francs and Deutsche marks. The Company's obligations under the New Credit Agreement constitute Senior Debt with respect to the Notes. PRINCIPAL PAYMENTS. The term loan facility is subject to quarterly amortization commencing in September 1998, in the following aggregate annual amounts for fiscal years ending September 30: 1998 -- $1.0 million; 1999 -- $4.25 million; 2000 -- $5.25 million; 2001 -- $6.25 million; 2002 -- $6.75 million; and for the three months ending December 31, 2002 -- $1.5 million. INTEREST RATE. Indebtedness under the New Credit Agreement bears interest, at the option of the Company, at either (i) the Base Rate (as defined in the New Credit Agreement) plus 1.5%, or (ii) at the reserve-adjusted Euro-Dollar Rate (as defined in the New Credit Agreement) plus 2.5%, subject to reduction upon achievement of certain performance levels and/or credit ratios. Loans under the swingline facility bear interest at the Base Rate plus 1.5%. GUARANTEES AND SECURITY. All current and future domestic subsidiaries of the Company unconditionally guarantee the obligations under the New Credit Agreement. In addition, all loans are secured by a lien on substantially all existing and after-acquired property of the Company and its current and future domestic subsidiaries, including a pledge of 100% of the stock of all domestic subsidiaries of the Company, 65% of the stock of all foreign subsidiaries of the Company and all intercompany loans from the Company to the Foreign Subsidiaries. COVENANTS. The New Credit Agreement contains various affirmative, negative and financial covenants, including, without limitation; (i) limitations on other indebtedness, liens, investments, leases and guarantees; (ii) limitations on redemptions and prepayments of the Notes and other junior debt prior to the stated maturity thereof; (iii) limitation on mergers, acquisitions and sales of assets; and (iv) a minimum EBITDA requirement, fixed charge coverage ratio requirement, a minimum net worth test and a maximum leverage ratio test. EVENTS OF DEFAULT. Events of default under the New Credit Agreement include various events of default customary for such type of agreement. Without limitation, a failure to make payments when due, noncompliance with covenants and breaches of representations and warranties, payment defaults on other debt and a change of control of the Company constitute an event of default. OTHER DEBT Wavetek U.S. Inc. had a Business Loan Agreement (the "Existing U.S. Credit Agreement") with a bank providing for revolving line of credit borrowings of up to $4.0 million through January 1998. The Existing Credit Agreement was terminated as part of the Recapitalization Transactions. The Company's subsidiaries in the United Kingdom, France, Germany and Austria have agreements with banks providing for short-term revolving advances and overdraft facilities in an aggregate total amount of approximately $6.5 million. In addition, the bank agreements with such subsidiaries also provide for issuance of letters of credit and bank guarantees in an aggregate total amount of approximately $4.0 million. At June 30, 1997, an aggregate amount of $3.4 million had been borrowed under these facilities. Revolving borrowings under these agreements bear interest at variable rates ranging from 4.2% 88 to 8.4% as of June 30, 1997. These bank agreements also provide for long-term borrowings and are generally secured by the assets of the local subsidiary and the guarantee of the Company. Most of these agreements also provide for the issuance of letters of credit and bank guarantees. At June 30, 1997, the Company and its foreign subsidiaries were contingently liable for outstanding letters of credit and bank guarantees aggregating $2.1 million. Borrowings under the Company's revolving bank agreements have been classified as "Notes payable to banks" in the Company's Consolidated Financial Statements due to the short-term nature of the revolving advances taken under these agreements. In connection with the October 1994 acquisition of its Telecom business, the Company has a promissory note payable to Schlumberger in the amount of 5.2 million French francs ($0.9 million at June 30, 1997). The note is unsecured and the full principal balance is payable in January 1998. Interest is payable quarterly at PIBOR plus 0.50% (3.871% at June 30, 1997). In fiscal 1995, the Company sold its facility in Indianapolis to a third party investor. In connection with this sale, the Company entered a master lease agreement with the buyer, under which the Company leased back the facility for a period of 20 years for an annual rent of $473,000, subject to annual adjustments based on changes in the consumer price index, not to exceed 3% per annum. In December 1994, the Company subleased a portion of this facility to a third party for five years for an annual base rent and common area expense reimbursement of $387,000. Because of the significance of the sublease in relation to the Company's master lease of the facility, generally accepted accounting principles require that the transaction be recorded as a financing transaction, whereby the building remains on the Company's balance sheet in an amount equal to the net proceeds from the sale and an offsetting long-term financing obligation has been recorded. As of June 30, 1997, this financing obligation was $4.1 million. 89 VALIDITY OF NOTES The validity of the Notes offered hereby will be passed upon for the Company by Sullivan & Cromwell, Los Angeles, California. EXPERTS The consolidated financial statements of Wavetek Corporation as of September 30, 1995 and 1996, and for each of the three years in the period ended September 30, 1996, appearing in this Prospectus and Registration Statement have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon appearing elsewhere herein, and are included in reliance upon such report given upon the authority of such firm as experts in accounting and auditing. PLAN OF DISTRIBUTION The Company is making the Exchange Offer in reliance on the position of the staff of the Division of Corporation Finance of the Commission as set forth in certain interpretive letters addressed to third parties in other transactions. Based on these interpretations by the staff of the Division of Corporation Finance, and subject to the two immediately following sentences, the Company believes that New Notes issued pursuant to this Exchange Offer in exchange for Old Notes may be offered for resale, resold and otherwise transferred by a holder thereof (other than a holder who is a broker-dealer) without further compliance with the registration and prospectus delivery requirements of the Securities Act, provided that such New Notes are acquired in the ordinary course of such holder's business and that such holder is not participating, and has no arrangement or understanding with any person to participate, in a distribution (within the meaning of the Securities Act) of such New Notes. However, any holder of Old Notes who is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act (an "Affiliate") or who intends to participate in the Exchange Offer for the purpose of distributing New Notes, or any broker- dealer who purchased Old Notes from the Company to resell pursuant to Rule 144A or any other available exemption under the Securities Act, (i) will not be able to rely on the interpretations of the staff of the Division of Corporation Finance of the Commission set forth in the above-mentioned interpretive letters, (ii) will not be permitted or entitled to tender such Old Notes in the Exchange Offer and (iii) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any sale or other transfer of such Old Notes unless such sale is made pursuant to an exemption from such requirements. In addition, as described below, broker-dealers ("Participating Broker-Dealers") must deliver a prospectus meeting the requirements of the Securities Act in connection with any resales of New Notes. Each holder of Old Notes who wishes to exchange Old Notes for New Notes in the Exchange Offer will be required to represent that (i) it is not an Affiliate, (ii) any New Notes to be received by it are being acquired in the ordinary course of its business, (iii) it has no arrangement or understanding with any person to participate in a distribution (within the meaning of the Securities Act) of such New Notes and (iv) if such holder is not a broker-dealer, such holder is not engaged in, and does not intend to engage in, a distribution (within the meaning of the Securities Act) of such New Notes. Each Participating Broker-Dealer must acknowledge that it acquired the Old Notes for its own account as the result of market-making activities or other trading activities and must agree that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such New Notes. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a Participating Broker-Dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. Based on the position taken by the staff of the Division of Corporation Finance of the Commission in the interpretive letters referred to above, the Company believes that Participating Broker-Dealers may fulfill their prospectus delivery requirements with respect to the New Notes received upon exchange of such Old Notes (other than Old Notes which represent an unsold allotment from the original sale of the Old Notes) with a prospectus meeting the requirements of the Securities Act, which may be the prospectus prepared 90 for an exchange offer so long as it contains a description of the plan of distribution with respect to the resale of such New Notes. Accordingly, this Prospectus, as it may be amended or supplemented from time to time, may be used by a Participating Broker-Dealer during the period referred to below in connection with resales of New Notes received in exchange for Old Notes where such Old Notes were acquired by such Participating Broker-Dealer for its own account as a result of market-making or other trading activities. The Company has agreed that this Prospectus, as it may be amended or supplemented from time to time, may be used by a Participating Broker-Dealer in connection with resales of such New Notes for a period ending one year from the date on which the Exchange Offer Registration Statement is declared effective (subject to extension under certain limited circumstances). Any person, including any Participating Broker-Dealer, who is an Affiliate may not rely on such interpretive letters and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. Gooding, an Affiliate of the Company, is the beneficial owner of $5,000,000 aggregate principal amount of Old Notes. This Prospectus may be used by Gooding in connection with resales of such Old Notes. In that regard, each Participating Broker-Dealer who surrenders Old Notes pursuant to the Exchange Offer will be deemed to have agreed, by execution of the Letter of Transmittal or delivery of an Agent's Message in lieu thereof, that, upon receipt of notice from the Company of the occurrence of any event or the discovery of any fact which makes any statement contained or incorporated by reference in this Prospectus untrue in any material respect or which causes this Prospectus to omit to state a material fact necessary in order to make the statements contained or incorporated by reference herein, in light of the circumstances under which they were made, not misleading or of the occurrence of certain other events specified in the Registration Rights Agreement, such Participating Broker-Dealer will forthwith discontinue the disposition of New Notes pursuant to this Prospectus until the Company has amended or supplemented this Prospectus and has furnished copies of the amended or supplemented Prospectus to such Participating Broker-Dealer, or the Company has given notice that the sale of the New Notes may be resumed, as the case may be. The Company will not receive any cash proceeds from the issuance of the New Notes offered hereby. New Notes received by broker-dealers for their own accounts may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the New Notes or a combination of such methods of resale, at market prices prevailing at the time of resale at prices related to such prevailing market prices or at negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer and/or the purchasers of any such New Notes. Any broker-dealer that resells New Notes that were received by it for its own account in connection with the Exchange Offer and any broker or dealer that participates in a distribution of such New Notes may be deemed to be an "underwriter" within the meaning of the Securities Act, and any profit on any such resale of New Notes may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. 91 INDEX TO FINANCIAL STATEMENTS
PAGE --------- Report of Ernst & Young LLP, Independent Auditors.......................................................... F-2 Consolidated Balance Sheets as of September 30, 1995 and 1996 and June 30, 1997 (Unaudited)................ F-3 Consolidated Statements of Income for each of the three years in the period ended September 30, 1996 and the nine months ended June 30, 1996 and 1997 (Unaudited)................................................. F-4 Consolidated Statements of Stockholders' Equity for each of the three years in the period ended September 30, 1996 and the nine months ended June 30, 1997 (Unaudited)............................................. F-5 Consolidated Statements of Cash Flows for each of the three years in the period ended September 30, 1996 and the nine months ended June 30, 1996 and 1997 (Unaudited)............................................. F-6 Notes to Consolidated Financial Statements................................................................. F-7
F-1 REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS The Board of Directors and Stockholders Wavetek Corporation We have audited the accompanying consolidated balance sheets of Wavetek Corporation as of September 30, 1996 and 1995, and the related consolidated statements of income, stockholders' equity and cash flows for each of the three years in the period ended September 30, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements 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 Wavetek Corporation at September 30, 1996 and 1995, and the consolidated results of its operations and its cash flows for each of the three years in the period ended September 30, 1996, in conformity with generally accepted accounting principles. ERNST & YOUNG LLP San Diego, California November 22, 1996 F-2 WAVETEK CORPORATION CONSOLIDATED BALANCE SHEETS (DOLLARS AND SHARES IN THOUSANDS)
SEPTEMBER 30, -------------------- 1995 1996 --------- --------- JUNE 30, 1997 ----------- (UNAUDITED) ASSETS Current assets: Cash and cash equivalents.................................................... $ 3,689 $ 6,126 $ 4,059 Short-term investments, available for sale................................... -- -- 3,000 Accounts receivable (less allowance for doubtful accounts of $903 in 1995, $2,023 in 1996 and $2,054 in 1997 (unaudited))............................. 23,098 20,866 25,280 Inventories.................................................................. 17,928 19,308 18,202 Deferred income taxes........................................................ 495 4,505 4,474 Other current assets......................................................... 1,492 1,188 2,226 --------- --------- ----------- Total current assets........................................................... 46,702 51,993 57,241 Property and equipment, net.................................................... 10,491 12,194 14,773 Deferred debt issuance costs, net.............................................. -- -- 4,293 Intangible assets, net......................................................... 4,451 3,867 3,424 Deferred income taxes.......................................................... 608 441 37 Other assets................................................................... 326 357 195 --------- --------- ----------- Total assets................................................................... $ 62,578 $ 68,852 $ 79,963 --------- --------- ----------- --------- --------- ----------- LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities: Notes payable to banks....................................................... $ 6,263 $ 786 $ 3,377 Trade accounts payable....................................................... 12,306 12,007 15,834 Accrued compensation......................................................... 6,134 7,468 7,162 Income taxes payable......................................................... 792 1,427 2,021 Other current liabilities.................................................... 8,560 8,747 9,095 Current maturities of long-term obligations.................................. 86 95 988 --------- --------- ----------- Total current liabilities...................................................... 34,141 30,530 38,477 Long-term obligations, less current maturities................................. 8,335 5,073 113,995 Deferred income and other liabilities.......................................... 686 561 460 Commitments and contingencies Stockholders' equity (deficit): Common stock, par value $.01; authorized, 15,000 shares; issued and outstanding, 10,974 shares in 1995 and 1996 and 4,885 shares in 1997 (unaudited)................................................................ 11 11 49 Additional paid-in capital................................................... 5,604 5,637 43,748 Retained earnings (accumulated deficit)...................................... 13,271 26,746 (116,660) Foreign currency translation adjustments..................................... 530 294 (106) --------- --------- ----------- Total stockholders' equity (deficit)........................................... 19,416 32,688 (72,969) --------- --------- ----------- Total liabilities and stockholders' equity (deficit)........................... $ 62,578 $ 68,852 $ 79,963 --------- --------- ----------- --------- --------- -----------
See accompanying notes. F-3 WAVETEK CORPORATION CONSOLIDATED STATEMENTS OF INCOME (DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
YEARS ENDED SEPTEMBER 30, NINE MONTHS ENDED JUNE 30, ----------------------------------------- ---------------------------- 1994 1995 1996 1996 1997 ------------ ------------- ------------ ------------- ------------- (UNAUDITED) Sales.................................. $ 74,815 $ 133,619 $ 150,993 $ 115,181 $ 118,700 Cost of goods sold..................... 41,373 72,649 72,364 55,779 55,479 ------------ ------------- ------------ ------------- ------------- Gross margin........................... 33,442 60,970 78,629 59,402 63,221 Operating expenses: Marketing and selling................ 16,429 32,586 36,197 26,809 27,913 Research and development............. 5,425 12,096 12,917 9,416 11,635 General and administrative........... 6,057 9,391 11,612 8,655 7,878 Stock option compensation related to recapitalization................... -- -- -- -- 7,061 Provision for restructuring operations......................... -- -- 1,832 188 -- ------------ ------------- ------------ ------------- ------------- 27,911 54,073 62,558 45,068 54,487 ------------ ------------- ------------ ------------- ------------- Operating income....................... 5,531 6,897 16,071 14,334 8,734 Non-operating income (expense): Interest income...................... 33 90 167 99 254 Interest expense..................... (645) (1,190) (762) (616) (948) Loss on sale and leaseback financing.......................... -- (1,824) -- -- -- Other, net........................... (387) (288) (1,036) (488) (861) ------------ ------------- ------------ ------------- ------------- (999) (3,212) (1,631) (1,005) (1,555) ------------ ------------- ------------ ------------- ------------- Income before provision for income taxes................................ 4,532 3,685 14,440 13,329 7,179 Provision for income taxes............. 822 616 965 893 2,728 ------------ ------------- ------------ ------------- ------------- Net income............................. $ 3,710 $ 3,069 $ 13,475 $ 12,436 $ 4,451 ------------ ------------- ------------ ------------- ------------- ------------ ------------- ------------ ------------- ------------- Net income per share................... $ .37 $ .27 $ 1.17 $ 1.08 $ .40 ------------ ------------- ------------ ------------- ------------- ------------ ------------- ------------ ------------- ------------- Shares used in computation............. 10,100 11,540 11,520 11,485 11,123 ------------ ------------- ------------ ------------- ------------- ------------ ------------- ------------ ------------- -------------
See accompanying notes. F-4 WAVETEK CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY YEARS ENDED SEPTEMBER 30, 1994, 1995 AND 1996 AND THE NINE MONTHS ENDED JUNE 30, 1997 (DOLLARS AND SHARES IN THOUSANDS)
FOREIGN COMMON STOCK ADDITIONAL CURRENCY TOTAL ---------------------- PAID-IN RETAINED TRANSLATION STOCKHOLDERS' SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENTS EQUITY --------- ----------- ----------- ----------- ------------- ------------ Balance, September 30, 1993.............. 9,940 $ 99 $ 8,081 $ 6,492 $ (80) $ 14,592 Shares issued for cash................. 40 1 49 -- -- 50 Shares repurchased for cash............ (40) (1) (51) -- -- (52) Return of capital to stockholders...... -- -- (6,958) -- -- (6,958) Net income............................. -- -- -- 3,710 -- 3,710 Foreign currency translation adjustments.......................... -- -- -- -- 295 295 --------- ----- ----------- ----------- ----- ------------ Balance, September 30, 1994.............. 9,940 99 1,121 10,202 215 11,637 Shares issued for cash................. 1,570 16 7,529 -- -- 7,545 Shares repurchased for cash............ (576) (6) (3,194) -- -- (3,200) Stock options exercised................ 40 1 49 -- -- 50 Net income............................. -- -- -- 3,069 -- 3,069 Foreign currency translation adjustments.......................... -- -- -- -- 315 315 --------- ----- ----------- ----------- ----- ------------ Balance, September 30, 1995.............. 10,974 110 5,505 13,271 530 19,416 Income tax benefit from stock options exercised............................ -- -- 33 -- -- 33 Net income............................. -- -- -- 13,475 -- 13,475 Foreign currency translation adjustments.......................... -- -- -- -- (236) (236) --------- ----- ----------- ----------- ----- ------------ Balance, September 30, 1996.............. 10,974 110 5,538 26,746 294 32,688 Shares repurchased for cash (UNAUDITED).......................... (8,517) (85) (4,608) (147,857) -- (152,550) Shares issued for cash, net of related costs of $644 (UNAUDITED)............ 2,428 24 42,832 -- -- 42,856 Stock options repurchased for cash, net of income tax benefit (UNAUDITED).... -- -- (14) -- -- (14) Net income (UNAUDITED)................. -- -- -- 4,451 -- 4,451 Foreign currency translation adjustments (UNAUDITED).............. -- -- -- -- (400) (400) --------- ----- ----------- ----------- ----- ------------ Balance, June 30, 1997 (UNAUDITED)....... 4,885 $ 49 $ 43,748 $ (116,660) $ (106) $ (72,969) --------- ----- ----------- ----------- ----- ------------ --------- ----- ----------- ----------- ----- ------------
See accompanying notes. F-5 WAVETEK CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS)
NINE MONTHS ENDED YEARS ENDED SEPTEMBER 30, JUNE 30, ------------------------------- -------------------- 1994 1995 1996 1996 1997 --------- --------- --------- --------- --------- (UNAUDITED) OPERATING ACTIVITIES Net income.......................................................... $ 3,710 $ 3,069 $ 13,475 $ 12,436 $ 4,451 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation expense.............................................. 1,333 2,493 2,453 2,031 2,102 Amortization expense.............................................. 277 554 577 435 430 Amortization of deferred debt issuance costs...................... -- -- -- -- 33 Provision for losses on accounts receivable....................... 103 561 1,542 407 252 Loss on sale of building.......................................... -- 1,824 -- -- -- Loss on disposal of property and equipment........................ 97 71 78 95 8 Deferred income................................................... (98) (98) (99) (74) (73) Deferred income taxes............................................. -- (1,103) (3,843) (2,910) 435 Changes in operating assets and liabilities, net of effect of purchased businesses: Accounts receivable............................................. 485 183 (405) (3,049) (6,948) Inventories and other assets.................................... 362 1,003 (2,166) (1,989) (335) Accounts payable and accrued expenses........................... (522) 4,059 2,809 2,687 6,136 Income taxes payable, net....................................... 700 (68) 655 362 540 --------- --------- --------- --------- --------- Net cash provided by operating activities........................... 6,447 12,548 15,076 10,431 7,031 INVESTING ACTIVITIES Purchase of business, net of seller financing....................... -- (17,685) -- -- -- Proceeds from sale of business...................................... 946 -- 338 338 -- Purchase of property and equipment.................................. (1,332) (2,920) (4,544) (3,207) (4,784) Proceeds from sale of property and equipment........................ 53 306 91 197 53 Purchase of short-term investments.................................. -- -- -- -- (3,000) Payments received on notes receivable............................... 386 33 255 165 169 Issuance of notes receivable........................................ -- (117) (90) (90) -- --------- --------- --------- --------- --------- Net cash provided by (used in) investing activities................. 53 (20,383) (3,950) (2,597) (7,562) FINANCING ACTIVITIES Issuance of common shares for cash.................................. 50 7,595 -- -- 42,856 Repurchase of common shares and stock options for cash.............. (52) (3,200) -- -- (152,564) Proceeds from sale and leaseback financing.......................... -- 4,321 -- -- -- Proceeds from revolving lines of credit and long-term obligations... 25,770 31,455 14,932 14,324 114,144 Principal payments on revolving lines of credit and long-term obligations....................................................... (25,537) (32,129) (23,575) (21,802) (1,489) Debt issuance costs................................................. -- -- -- -- (4,326) Return of capital to stockholders................................... (6,958) -- -- -- -- Proceeds of loans from stockholders................................. 4,860 -- -- -- -- Repayment of loans from stockholders................................ (4,500) (360) -- -- -- --------- --------- --------- --------- --------- Net cash provided by (used in) financing activities................. (6,367) 7,682 (8,643) (7,478) (1,379) Effect of exchange rate changes on cash and cash equivalents........ 161 35 (46) (124) (157) --------- --------- --------- --------- --------- Increase (decrease) in cash and cash equivalents.................... 294 (118) 2,437 232 (2,067) Cash and cash equivalents at beginning of period.................... 3,513 3,807 3,689 3,689 6,126 --------- --------- --------- --------- --------- Cash and cash equivalents at end of period.......................... $ 3,807 $ 3,689 $ 6,126 $ 3,921 $ 4,059 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid for interest.............................................. $ 527 $ 1,392 $ 753 $ 628 $ 440 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- Cash paid for income taxes.......................................... $ 144 $ 1,949 $ 4,133 $ 3,507 $ 1,963 --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
See accompanying notes. F-6 WAVETEK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1996 AND PERTAINING TO JUNE 30, 1997 AND THE NINE-MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED) 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION Wavetek Corporation ("the Company") is a leading global designer, manufacturer and distributor of a broad range of electronic test instruments, with a primary focus on application-specific instruments for testing voice, video and data communications equipment and networks. The Company also designs, manufactures and distributes precision instruments to calibrate and test electronic equipment and provides repair, upgrade and calibration services for its products on a worldwide basis. The accompanying consolidated financial statements include the operations of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. FOREIGN CURRENCY The accounts of foreign subsidiaries consolidated herein have been translated from their respective functional currencies into U.S. dollars at appropriate exchange rates. Cumulative translation adjustments are included as a separate component of stockholders' equity. Exchange gains and losses from foreign currency transactions are included in "Other, net" in the accompanying consolidated statements of income. 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 amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS It is the Company's policy to invest excess funds in highly liquid, short-term investments. Such investments are comprised primarily of U.S. Treasury securities, guaranteed obligations of the U.S. government or its agencies, mutual funds, which invest in U.S. Treasury securities, and money market accounts and are stated at cost, which approximates market. For purposes of financial statement presentation, the Company considers all highly liquid investments with a maturity of three months or less at date of purchase to be cash equivalents. INVENTORIES Inventories are valued at cost determined on the first-in, first-out basis, not in excess of market. PROPERTY AND EQUIPMENT Property and equipment are recorded at cost. Depreciation for financial statement purposes is computed using the straight-line method based upon the estimated useful lives of the various classes of assets which range from 3 to 35 years for buildings and improvements and from 3 to 10 years for fixtures and equipment. F-7 WAVETEK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1996 AND PERTAINING TO JUNE 30, 1997 AND THE NINE-MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED) 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) DEFERRED DEBT ISSUANCE COSTS Costs associated with the issuance of long-term debt have been deferred and are being amortized over the term of the related debt using the interest method. Amortization expense for these costs is included in interest expense in the accompanying consolidated statements of income. INTANGIBLE ASSETS Intangible assets consist of covenants not to compete and the excess of purchase price over net tangible assets of businesses acquired (goodwill) and are recorded at cost. Intangible assets are amortized over their estimated lives ranging from five to fifteen years. IMPAIRMENT OF LONG-LIVED ASSETS Effective October 1, 1995, the Company adopted Statement of Financial Accounting Standards No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF ("SFAS 121"). SFAS 121 establishes accounting standards for recording the impairment of long-lived assets, including identifiable intangibles and goodwill. The adoption of SFAS 121 did not have a material impact on the Company's financial position or the results of its operations. REVENUE AND CREDIT RISK Sales are recognized at the time of shipment. The Company grants credit to its customers based on an evaluation of the customers' financial condition, and generally, collateral is not required. Credit losses have traditionally been minimal and within management's expectations. NET INCOME PER SHARE Net income per share has been computed using the weighted average number of common shares and dilutive common stock equivalents outstanding during the periods presented. Common stock equivalents result from outstanding options to purchase common stock. In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, EARNINGS PER SHARE ("SFAS 128"), which is required to be initially adopted by the Company for its reporting period ending December 31, 1997. At that time, the Company will be required to change the method currently used to compute net income per share and to restate all prior periods. Under the new requirements for calculating primary net income per share, the dilutive effect of stock options will be excluded. The impact is expected to result in no change to reported net income per share for the fiscal year ended September 30, 1994, an increase in primary net income per share for the fiscal years ended September 30, 1995 and 1996 of $.01 and $.05 per share, respectively, and the nine month periods ended June 30, 1996 and 1997 of $.05 and $.02 per share, respectively. STOCK-BASED COMPENSATION In October 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION ("SFAS 123"), which is effective for the year F-8 WAVETEK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1996 AND PERTAINING TO JUNE 30, 1997 AND THE NINE-MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED) 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) ending September 30, 1997. SFAS 123 allows companies to either account for stock-based compensation under the new provisions of SFAS 123 or under the provisions of Accounting Principles Board Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES ("APB 25"), but requires pro forma disclosure in the footnotes to the financial statements as if the measurement provisions of SFAS 123 had been adopted. The Company has continued accounting for its stock-based compensation in accordance with the provisions of APB 25. FINANCIAL INSTRUMENTS The Company periodically uses forward exchange contracts to hedge certain transactions denominated in foreign currencies. Unrealized gains and losses on forward contracts are deferred and offset against foreign exchange gains or losses on the underlying hedged item. At September 30, 1996 and June 30, 1997, the Company had no material forward exchange contracts outstanding. 2. FINANCIAL STATEMENT DETAILS Inventories consist of the following:
SEPTEMBER 30, -------------------- JUNE 30, 1995 1996 1997 --------- --------- ----------- (DOLLARS IN THOUSANDS) Finished goods.............................................. $ 7,107 $ 7,852 $ 7,124 Work-in-progress............................................ 3,448 5,639 3,990 Materials................................................... 7,373 5,817 7,088 --------- --------- ----------- $ 17,928 $ 19,308 $ 18,202 --------- --------- ----------- --------- --------- -----------
Property and equipment consists of the following:
SEPTEMBER 30, -------------------- JUNE 30, 1995 1996 1997 --------- --------- ----------- (DOLLARS IN THOUSANDS) Building and improvements................................... $ 5,458 $ 5,324 $ 5,779 Fixtures and equipment...................................... 9,890 13,684 17,851 --------- --------- ----------- 15,348 19,008 23,630 Less: accumulated depreciation.............................. (4,857) (6,814) (8,857) --------- --------- ----------- $ 10,491 $ 12,194 $ 14,773 --------- --------- ----------- --------- --------- -----------
F-9 WAVETEK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1996 AND PERTAINING TO JUNE 30, 1997 AND THE NINE-MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED) 2. FINANCIAL STATEMENT DETAILS (CONTINUED) Intangible assets consist of the following:
SEPTEMBER 30, -------------------- JUNE 30, 1995 1996 1997 --------- --------- ----------- (DOLLARS IN THOUSANDS) Goodwill.................................................... $ 4,171 $ 4,171 $ 4,171 Covenant not to compete..................................... 1,390 1,390 1,390 --------- --------- ----------- 5,561 5,561 5,561 Less: accumulated amortization.............................. (1,110) (1,694) (2,137) --------- --------- ----------- $ 4,451 $ 3,867 $ 3,424 --------- --------- ----------- --------- --------- -----------
Other current liabilities consist of the following:
SEPTEMBER 30, -------------------- JUNE 30, 1995 1996 1997 --------- --------- ----------- (DOLLARS IN THOUSANDS) Other....................................................... $ 7,752 $ 6,553 $ 8,433 Customer deposits........................................... 808 2,194 662 --------- --------- ----------- $ 8,560 $ 8,747 $ 9,095 --------- --------- ----------- --------- --------- -----------
3. RECAPITALIZATION TRANSACTIONS On June 11, 1997, the Company completed the following transactions (the Recapitalization Transactions): (i) the Company sold an aggregate of 2,428,470 shares of its Common Stock, representing 49.7% of the Common Stock outstanding following the Recapitalization Transactions, to DLJ Merchant Banking Partners II, L.P. and its affiliates and Green Equity Investors II, L.P. and its affiliates for an aggregate purchase price of $43.5 million, less related costs of $644,000 (the New Equity Investment); (ii) the Company issued $85 million aggregate principal amount of 10 1/8% Senior Subordinated Notes maturing June 15, 2007 (the Notes) (Note 6); (iii) the Company incurred indebtedness of $25 million under a five year and six month term loan facility and entered into a five year and six month revolving credit facility providing for borrowings of up to $20 million (the New Credit Agreement) (Note 6); (iv) the Company incurred aggregate debt issuance costs of $4.3 million in connection with the issuance of the Notes and with entering the New Credit Agreement; (v) the Company used the net proceeds from the New Equity Investment, the issuance of the Notes and the New Credit Agreement to repurchase an aggregate of 8,513,610 shares of Common Stock from existing stockholders for an aggregate of $152.5 million and to make cash payments upon surrender of stock options by employees in an aggregate amount of $7.1 million (Note 9). Such existing stockholders retained 50.3% of the shares of Common Stock outstanding following the Recapitalization Transactions. 4. STRATEGIC ALLIANCE AND PURCHASE AND SALE OF BUSINESS In April 1996, the Company entered into a Strategic Alliance with Yokogawa Electric Corporation (Yokogawa), a leading Japanese process control and test and measurement company. Under terms of the Strategic Alliance, Yokogawa acquired all of the outstanding shares of the Company's Japanese subsidiary F-10 WAVETEK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1996 AND PERTAINING TO JUNE 30, 1997 AND THE NINE-MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED) 4. STRATEGIC ALLIANCE AND PURCHASE AND SALE OF BUSINESS (CONTINUED) for 10 million Japanese Yen (approximately $93,000) and 12% of the Company's Common Stock from certain of the Company's stockholders. There was no significant gain or loss on the sale of the Japanese subsidiary. Additionally, Yokogawa will distribute the Company's products in Japan and Yokogawa and the Company will collaborate to develop new products for the communications test markets worldwide. In connection with the June 1997 Recapitalization Transactions (Note 3), the Company repurchased a portion of the Common Stock owned by Yokogawa, reducing Yokogawa's ownership of the outstanding Common Stock to 5.8%. In October 1995, the Company sold its Industrial Measurement Instruments (IMI) product line to a third party for $502,000, resulting in a gain of $56,000. The Company received $310,000 cash on the closing date. The remaining proceeds were being paid under the terms of two promissory notes which were fully repaid in June 1997 ($150,000 was outstanding at September 30, 1996). Under the terms of the sale agreement, the Company is entitled to receive royalties from the buyer based on its sales of IMI products for four years following the closing date. The Company received royalties aggregating $92,000 in fiscal 1996, and $57,000 and $69,000 in the nine months ended June 30, 1996 and 1997, respectively. In October 1994, the Company acquired certain worldwide assets and liabilities of the communications test division of Schlumberger for approximately $16.1 million (the "Schlumberger Acquisition"). Of the total purchase price, $13.0 million was paid in cash on the closing date and an additional $2.1 million was paid in cash in April 1995. The remaining balance of 5,167,000 French francs (approximately $900,000 at June 30, 1997) will be paid under terms of a promissory note due in January 1998 (Note 6). The acquisition was accounted for as a purchase and the assets and liabilities of the acquired business were recorded at their estimated fair values, including goodwill of $4.2 million. Additionally, $4.2 million was accrued as an estimate of the costs that would be incurred to restructure and integrate the acquired business into the Company, of which $3.4 million had been spent as of September 30, 1996 and June 30, 1997 and $754,000 was included in other current liabilities in the accompanying balance sheet at September 30, 1996 ($739,000 as of June 30, 1997). In connection with this transaction, Schlumberger purchased 57,600 shares of the Company's Common Stock for $3.0 million in cash. The Company repurchased these shares in September 1995 for $3.2 million in cash. 5. SALE AND LEASEBACK FINANCING To raise funds for the Schlumberger Acquisition, in October 1994, the Company entered into a sale and leaseback financing whereby it sold its facility in Indianapolis to a third party investor for $4.5 million, resulting in a charge to income of $1.8 million, representing the excess of the net book value of the property over the net proceeds received. The Company simultaneously entered a Master Lease Agreement with the buyer, under which the Company leased back the facility for a period of 20 years for an annual rental $473,000, subject to annual adjustments based on the change in the consumer price index, not to exceed 3.0% per annum. In December 1994, the Company subleased a portion of this facility to a third party for five years for an annual base rental and common area expense reimbursement of $387,000. Because of the significance of the sublease in relation to the Company's master lease of the facility, generally accepted accounting principles require that the transaction be recorded as a financing transaction, whereby the building remains on the Company's balance sheet in an amount equal to the net proceeds from the sale and an offsetting long-term financing obligation has been recorded. F-11 WAVETEK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1996 AND PERTAINING TO JUNE 30, 1997 AND THE NINE-MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED) 6. CREDIT AGREEMENTS AND LONG-TERM OBLIGATIONS The Company's U.S. subsidiary had a Business Loan Agreement (Agreement) with a bank providing for revolving line of credit borrowings of up to $4.0 million. This Agreement was terminated in June 1997. The Company had no borrowings under this agreement as of September 30, 1996. The Company's subsidiaries in the United Kingdom, France, Germany and Austria also have agreements with banks providing for short-term revolving advances and overdraft facilities in an aggregate total amount of approximately $6.5 million. In addition, the bank agreements with such subsidiaries also provide for issuance of letters of credit and bank guarantees in an aggregate total amount of approximately $4.0 million. At September 30, 1996 and June 30, 1997, aggregate amounts of $786,000 and $3.4 million, respectively, had been borrowed under these facilities. Revolving borrowings under these agreements bear interest at variable rates ranging from 4.863% to 8.25% as of September 30, 1996 (4.20% to 8.40% as of June 30, 1997). These bank agreements also provide for long-term borrowings (see table below) and are generally secured by the assets of the local subsidiary and the guarantee of the Company. Most of these agreements do not have stated expiration dates, but are cancellable by the banks at any time. The Company's bank agreements also generally provide for the issuance of letters of credit and bank guarantees. At September 30, 1996 and June 30, 1997, the Company was contingently liable for outstanding letters of credit and bank guarantees aggregating $1.3 million and $2.1 million, respectively. Borrowings under the Company's revolving bank agreements have been classified as "Notes payable to banks" in the accompanying consolidated balance sheets due to the short-term nature of the revolving advances taken under these agreements. Long-term obligations are as follows:
SEPTEMBER 30, -------------------- JUNE 30, 1995 1996 1997 --------- --------- ---------- (DOLLARS IN THOUSANDS) Senior Subordinated Notes issued in connection with Recapitalization Transactions (Note 3); total principal balance due June 15, 2007; interest payable semi-annually on June 15 and December 15 at 10.125%; secured by guarantee of Company's subsidiaries in the United States.................. $ -- $ -- $ 85,000 Term Loan payable to banks obtained in connection with Recapitalization Transactions (Note 3); payable in quarterly installments commencing September 15, 1998; interest payable at optional rates (8.1875% at June 30, 1997); secured by the Company's U.S. assets and a pledge of 65% of the stock of the Company's foreign subsidiaries............................... -- -- 25,000 Unsecured promissory note issued in connection with Schlumberger Acquisition (Note 4); total principal balance due January 1998; interest payable quarterly at PIBOR plus 0.5% (4.063% at September 30, 1996 and 3.871% at June 30, 1997)........................................................ 1,050 1,003 887
F-12 WAVETEK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1996 AND PERTAINING TO JUNE 30, 1997 AND THE NINE-MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED) 6. CREDIT AGREEMENTS AND LONG-TERM OBLIGATIONS (CONTINUED)
SEPTEMBER 30, -------------------- JUNE 30, 1995 1996 1997 --------- --------- ---------- (DOLLARS IN THOUSANDS) Financing obligation recorded in connection with sale and leaseback of real property (Note 5); payable in monthly installments of $39, including interest at 9.30%, through October 2014; secured by Master Lease Agreement of manufacturing facility....................................... 4,252 4,165 4,096 Term note payable to French bank; repaid in April 1996......... 2,033 -- -- Term note payable to German bank; repaid in May 1996........... 1,086 -- -- --------- --------- ---------- 8,421 5,168 114,983 Less current maturities........................................ (86) (95) (988) --------- --------- ---------- Long-term obligations, less current maturities................. $ 8,335 $ 5,073 $ 113,995 --------- --------- ---------- --------- --------- ----------
As of September 30, 1996, the future annual principal payments on long-term obligations outstanding at September 30, 1996 were as follows for fiscal years ending September 30: 1997 -- $95,000; 1998 -- $1,106,000; 1999 -- $112,000; 2000 - -- $123,000; 2001 -- $135,000 and thereafter -- $3,597,000. In connection with the Recapitalization Transactions (Note 3), the Company issued $85 million aggregate principal amount of Senior Subordinated Notes (Notes) pursuant to an Indenture (the Indenture) between the Company and the Bank of New York, as trustee. The Notes bear interest at 10.125%, payable semi-annually on each June 15 and December 15 commencing December 15, 1997. The total principal balance of the Notes is due June 15, 2007. On or after June 15, 2002, the Notes will be redeemable at the option of the Company, in whole or in part, at the following redemption prices (expressed as percentages of principal amount) plus accrued and unpaid interest and liquidated damages, if any: 105.063% if redeemed during the twelve-month period beginning on June 15, 2002; 103.375% if redeemed during the twelve-month period beginning on June 15, 2003; 101.688% if redeemed during the twelve-month period beginning on June 15, 2004; and 100% thereafter. Notwithstanding the foregoing, during the first three years following the issue date of the Notes, the Company may redeem up to 33 1/3% of the aggregate principal amount of the Notes with the proceeds of one or more Public Equity Offerings (as defined in the Indenture) at a redemption price of 110.125% of the principal amount thereof, in each case plus accrued and unpaid interest and liquidated damages, if any. The Notes are guaranteed on a senior subordinated basis by the Company's current and future subsidiaries in the United States. The Indenture requires the Company to comply with various affirmative, negative, and financial covenants. The Company was in compliance with all such covenants at June 30, 1997. Also in connection with the Recapitalization Transactions, the Company entered into a New Credit Agreement (New Credit Agreement) with a group of five lending banks (the Lenders) including DLJ Capital Funding, Inc. as Syndication Agent and Fleet National Bank as Administrative Agent. The New Credit Agreement provided for a $25 million five year and six month term loan (Term Loan) borrowed by the Company on June 11, 1997. The Term Loan is repayable in quarterly installments on the 15th day of each September, December, March and June commencing September 15, 1998. Total principal payments due in each future fiscal year are as follows: 1998--$1,000,000; 1999--$4,250,000; 2000--$5,250,000; F-13 WAVETEK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1996 AND PERTAINING TO JUNE 30, 1997 AND THE NINE-MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED) 6. CREDIT AGREEMENTS AND LONG-TERM OBLIGATIONS (CONTINUED) 2001--$6,250,000; 2002--$6,750,000 and; 2003--$1,500,000. The Term Loan may be prepaid at any time and is subject to mandatory prepayments if the Company generates Excess Cash Flow (as defined in the New Credit Agreement). The New Credit Agreement also provides for a five year and six month revolving credit facility in the amount of $20 million, of which up to $7.5 million may be borrowed in British pounds, French francs or Deutsche marks. The Company has no borrowings outstanding under the revolving credit facility. All borrowings under the New Credit Agreement bear interest, at the option of the Company, at either (i) the Base Rate (as defined in the New Credit Agreement) plus 1.5%, or (ii) at the reserve adjusted Euro-Dollar Rate (as defined in the New Credit Agreement) plus 2.50%, subject to reduction upon the achievement of certain performance levels and/or credit ratios. The Term Loan currently bears interest at 8.1875% through August 14, 1997, with interest payable at the end of each one-month period. The New Credit Agreement is secured by all of the Company's assets in the United States (approximately $52.5 million at June 30, 1997) and the pledge of 100% of the stock of its subsidiaries in the United States and 65% of the stock of its foreign subsidiaries. The New Credit Agreement requires the Company to comply with various affirmative, negative, and financial covenants. The Company was in compliance with all such covenants at June 30, 1997. The Company incurred aggregate debt issuance costs of $4.3 million in connection with the issuance of the Notes and with entering into the New Credit Agreement. Such costs have been deferred and will be amortized over the term of the related debt using the interest method. 7. EMPLOYEE RETIREMENT SAVINGS PLAN The Company has a tax deferred retirement savings plan under Section 401(k) of the Internal Revenue Code whereby U.S. employees may defer a portion of their compensation through payroll deductions as contributions to the Plan. The Company may match a portion of the savings contribution as prescribed in the Plan. The Company's contributions may be made each year out of accumulated profits in cash, and are at the discretion of the Board of Directors. Contributions by the Company to the Plan were $211,000, $221,000 and $215,000 for the years ended September 30, 1994, 1995 and 1996, respectively, and $170,000 and $213,000 for the nine months ended June 30, 1996 and 1997, respectively. 8. LEASE COMMITMENTS The Company rents certain office and plant facilities under operating leases which expire at various dates through 2006, except for a land lease in the U.K. extending to 2103. The leases generally provide that the Company pay the taxes, insurance and maintenance expenses related to the leased property. Certain leases include renewal options and/or options to purchase the leased property. The Company also rents equipment and other facilities on a month-to-month basis. Total rent expense was $1.2 million, $2.6 million and $2.6 million for the years ended September 30, 1994, 1995 and 1996, respectively, and $2.0 million for each of the nine month periods ended June 30, 1996 and 1997, respectively. In 1991, the Company entered into a sale/leaseback arrangement for its San Diego manufacturing facility with an affiliate of a major stockholder. The lease runs through June 2006 with the minimum annual rental of $570,000, subject to annual CPI adjustments. The Company's gain on the transaction was deferred and is being amortized over the original ten-year lease term. F-14 WAVETEK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1996 AND PERTAINING TO JUNE 30, 1997 AND THE NINE-MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED) 8. LEASE COMMITMENTS (CONTINUED) At September 30, 1996, the annual future minimum lease payments under noncancellable operating leases and the future minimum annual lease receipts under noncancellable subleases are as follows:
LEASE LEASE PAYMENTS RECEIPTS ----------- ----------- (DOLLARS IN THOUSANDS) 1997................................................................... $ 2,160 $ 345 1998................................................................... 1,754 345 1999................................................................... 1,051 345 2000................................................................... 995 58 2001................................................................... 822 -- Later years............................................................ 3,704 -- ----------- ----------- Total minimum lease payments........................................... $ 10,486 $ 1,093 ----------- ----------- ----------- -----------
9. STOCKHOLDERS' EQUITY Prior to June 11, 1997, the Company had two classes of Common Stock outstanding, Common Stock and Class B Common Stock. The rights and preferences of both classes of common stock were identical, except that holders of Common Stock were entitled to one vote per share and holders of Class B Common Stock were entitled to ten votes per share. The Class B Common Stock was convertible, at the holder's option, into shares of Common Stock on a share for share basis. Total common stock authorized and issued and outstanding in each period presented in the accompanying consolidated financial statements included two million shares of Class B Common Stock through June 11, 1997. In connection with the Recapitalization Transactions (Note 3), all shares of Class B Common Stock were repurchased by the Company and the Company's Certificate of Incorporation was amended to eliminate the Class B Common Stock. The Company's Certificate of Incorporation was also amended effective June 11, 1997 to effect a ten-for-one stock split of its common stock, which was authorized by the Company's Board of Directors on May 30, 1997. All share and per share amounts and stock option data in the accompanying consolidated financial statements have been restated to retroactively reflect the stock split. In connection with Yokogawa's purchase of shares of the Company's Common Stock (Note 4), the Company and its stockholders entered certain agreements with Yokogawa which provided Yokogawa with certain rights of first refusal through April 1999 if shares of the Company's Common Stock were offered for sale in certain circumstances defined by the agreements. Yokogawa was also granted the right to appoint one member to the Company's Board of Directors. In connection with the Recapitalization Transactions (Note 3), all such preferential rights of Yokogawa were terminated effective June 11, 1997. In accordance with the Company's 1992 Nonqualified Stock Option Plan, options to purchase an aggregate of up to one million shares of Common Stock may be issued to employees at an exercise price equal to the fair value of the shares on the date of grant. At September 30, 1994, 1995, 1996 and at June 30, 1997, options to purchase 560,000, 786,000, 843,000 and 322,400 common shares, respectively, had been granted and were outstanding at exercise prices ranging from $1.25 to $12.50 per share. Options to purchase an aggregate of 116,000 shares were exercisable at September 30, 1996 at an exercise price of $1.25 per share and 139,150 shares were exercisable at June 30, 1997 at exercise prices ranging from $1.25 to $12.50 per share. All options expire on the earlier of April 28, 2002, or 90 days after termination of F-15 WAVETEK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1996 AND PERTAINING TO JUNE 30, 1997 AND THE NINE-MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED) 9. STOCKHOLDERS' EQUITY (CONTINUED) employment. Prior to the Recapitilization Transactions (Note 3), options to purchase 805,000 common shares had been issued and were outstanding. In connection with the Recapitalization Transactions, the Company accelerated the vesting of these outstanding options such that 75% of each option holders' options became fully vested and the Company offered to make cash payments to each option holder as compensation for the surrender of all or a portion of such vested options in a per share amount equal to the price paid to the selling stockholders in the Recapitalization Transactions. Such surrendering option holders were also required to pay a pro rata portion of the expenses incurred by the selling stockholders. Holders of vested options to purchase 472,100 common shares elected to surrender such options in exchange for payments aggregating approximately $6.8 million. The amount of such payments, and related employer expenses of $237,000, were recorded as compensation expense in the accompanying consolidated statement of income for the nine months ended June 30, 1997. 10. PROVISIONS FOR RESTRUCTURED OPERATIONS In fiscal year 1996, the Company initiated a plan to restructure certain corporate management functions, its European manufacturing, service and sales activities and its San Diego manufacturing activities. The restructuring costs primarily include expenses for employee severance and close down of certain manufacturing operations. The restructuring plan is expected to be completed during fiscal 1997. A provision for the restructuring of $1.8 million is included in the accompanying consolidated statement of income for fiscal 1996 ($188,000 for the nine months ended June 30, 1996). F-16 WAVETEK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1996 AND PERTAINING TO JUNE 30, 1997 AND THE NINE-MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED) 11. INCOME TAXES The provision for income taxes is comprised as follows:
YEARS ENDED SEPTEMBER 30, ------------------------------- 1994 1995 1996 --------- --------- --------- (DOLLARS IN THOUSANDS) Federal: Current.......................................................... $ -- $ 910 $ 2,677 Deferred......................................................... -- (910) (1,945) --------- --------- --------- -- -- 732 --------- --------- --------- State: Current.......................................................... 21 196 1,015 Deferred......................................................... -- (196) (498) --------- --------- --------- 21 -- 517 --------- --------- --------- Foreign: Current.......................................................... 801 613 1,117 Deferred......................................................... -- 3 (1,401) --------- --------- --------- 801 616 (284) --------- --------- --------- $ 822 $ 616 $ 965 --------- --------- --------- --------- --------- ---------
The current provisions for federal and state income tax are lower than the amounts calculated using statutory rates, as follows:
YEARS ENDED SEPTEMBER 30, ------------------------------------- 1994 1995 1996 ----------- ----------- ----------- Federal income tax at statutory rate.......................... 34.0% 34.0% 34.0% State income taxes, net of federal tax benefit................ 4.3 3.5 4.8 Foreign tax rate below federal statutory rate................. -- -- (1.4) Benefit from foreign sales corporation........................ -- (4.1) (1.0) Amortization of goodwill...................................... 2.4 2.5 0.8 Non-deductible expenses....................................... 0.3 0.5 0.3 Utilization of previously unbenefited loss carryforwards...... -- (3.0) -- ----- ----- ----- 41.0 33.4 37.5 Decrease in valuation allowance............................... (22.9) (16.7) (30.8) ----- ----- ----- Effective income tax rate..................................... 18.1% 16.7% 6.7% ----- ----- ----- ----- ----- -----
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax assets and liabilities as of September 30, 1996 and 1995 are set forth in the following table. A valuation allowance of $6.2 million was recognized at September 30, 1995 as an offset to certain of the deferred tax assets, as realization of such assets was F-17 WAVETEK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1996 AND PERTAINING TO JUNE 30, 1997 AND THE NINE-MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED) 11. INCOME TAXES (CONTINUED) uncertain. The valuation allowance was fully removed as of September 30, 1996, since it is more likely than not that the deferred tax assets will be realized. The significant components of deferred tax assets and liabilities at September 30, result from:
1995 1996 --------- --------- (DOLLARS IN THOUSANDS) Deferred tax assets: Inventories........................................................... $ 1,127 $ 1,634 Accrued and unpaid expenses........................................... 897 1,521 Deferred income....................................................... 262 217 State taxes........................................................... -- 345 U.S. net operating loss and business credit carryforwards............. 1,832 -- Foreign net operating loss carryforwards.............................. 3,483 1,400 --------- --------- Total deferred tax assets............................................... 7,601 5,117 Valuation allowance for deferred tax assets............................. (6,184) -- --------- --------- 1,417 5,117 Deferred tax liability--depreciation differences........................ (314) (171) --------- --------- Net deferred tax assets................................................. $ 1,103 $ 4,946 --------- --------- --------- ---------
As of September 30, 1996, the Company's French and German subsidiaries had net operating loss carryforwards of approximately $2.3 million and $1.0 million, respectively. The French carryforward will expire in 2000 if not previously utilized and the German carryforward can be used indefinitely. For the nine months ended June 30, 1996 and 1997, income taxes have been provided based on the estimated annual effective rate applied to the pretax income for the interim period. F-18 WAVETEK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1996 AND PERTAINING TO JUNE 30, 1997 AND THE NINE-MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED) 12. GEOGRAPHIC INFORMATION The Company operates in a single industry segment: the design, manufacture and distribution of electronic test equipment and measurement tools. In the schedule below, sales, income before provision for taxes and total assets are reported based on the location of the Company's facilities. Intercompany transfers are made at arm's length between the various geographic areas.
NINE MONTHS ENDED YEARS ENDED SEPTEMBER 30, JUNE 30, ------------------------------- -------------------- 1994 1995 1996 1996 1997 --------- --------- --------- --------- --------- (DOLLARS IN THOUSANDS) Sales: United States: Sales to unaffiliated domestic customers................. $ 42,981 $ 54,175 $ 62,069 $ 46,672 $ 44,925 Export sales............................................. 10,309 11,584 16,876 12,212 11,982 Interarea transfers...................................... 3,534 3,942 6,809 5,453 7,852 --------- --------- --------- --------- --------- 56,824 69,701 85,754 64,337 64,759 Europe: Sales to unaffiliated customers.......................... 21,525 67,580 70,141 54,929 60,759 Interarea transfers...................................... 4,124 19,929 24,519 17,850 19,962 --------- --------- --------- --------- --------- 25,649 87,509 94,660 72,779 80,721 Asia: Sales to unaffiliated customers.......................... -- 280 1,907 1,368 1,034 Interarea transfers...................................... -- 54 24 27 89 --------- --------- --------- --------- --------- -- 334 1,931 1,395 1,123 Eliminations............................................... (7,658) (23,925) (31,352) (23,330) (27,903) --------- --------- --------- --------- --------- Consolidated sales......................................... $ 74,815 $ 133,619 $ 150,993 $ 115,181 $ 118,700 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- Income before provision for income taxes: United States............................................ $ 2,613 $ 6,021 $ 17,711 $ 13,950 $ 10,144 Europe................................................... 3,053 (2,162) 3,033 2,986 1,958 Asia..................................................... -- (224) 724 697 (164) Corporate expenses and eliminations........................ (1,134) 50 (7,028) (4,304) (4,759) --------- --------- --------- --------- --------- Consolidated income before provision for income taxes...... $ 4,532 $ 3,685 $ 14,440 $ 13,329 $ 7,179 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- Total Assets: United States............................................ $ 40,496 $ 51,609 $ 82,415 $ 71,770 $ 83,129 Europe................................................... 11,964 34,595 34,958 35,062 41,419 Asia..................................................... 176 935 1,258 1,288 1,463 Eliminations............................................. (17,931) (24,561) (49,779) (39,827) (46,048) --------- --------- --------- --------- --------- Consolidated total assets.................................. $ 34,705 $ 62,578 $ 68,852 $ 68,293 $ 79,963 --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
F-19 WAVETEK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1996 AND PERTAINING TO JUNE 30, 1997 AND THE NINE-MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED) 13. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL DATA The Company's payment obligations under the Notes to be issued in the Recapitalization Transactions are guaranteed by all of the Company's current and future domestic subsidiaries (collectively, the "Subsidiary Guarantors"). Such guarantees are full, unconditional and joint and several. Separate financial statements of each of the Subsidiary Guarantors are not presented because the Company's management has deemed that they would not be material to investors. The following supplemental condensed consolidating financial data sets forth, on an unconsolidated basis, balance sheets, statements of income and statements of cash flows data for (i) the Company ("Wavetek Corporation"), (ii) the current Subsidiary Guarantors and (iii) the Company's current foreign subsidiaries (the "Foreign Subsidiaries"). The supplemental financial data reflects the investments of Wavetek Corporation in the Subsidiary Guarantors and the Foreign Subsidiaries using the equity method of accounting. Certain reclassifications have been made to provide for uniform disclosure of all periods presented. The reclassifications are not material. F-20 WAVETEK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1996 AND PERTAINING TO JUNE 30, 1997 AND THE NINE-MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED) 13. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL DATA (CONTINUED) CONSOLIDATING BALANCE SHEETS AS OF SEPTEMBER 30, 1995 (DOLLARS AND SHARES IN THOUSANDS)
WAVETEK SUBSIDIARY FOREIGN CORPORATION GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED ----------- ----------- ----------- ------------ ------------- ASSETS Current assets: Cash and cash equivalents................... $ -- $ 2,256 $ 1,433 $ -- $ 3,689 Accounts receivable (less allowance for doubtful accounts of $903)................ 822 10,209 18,289 (6,222) 23,098 Inventories................................. -- 7,829 10,835 (736) 17,928 Deferred income taxes....................... 187 308 -- -- 495 Other current assets........................ 46 288 1,158 -- 1,492 ----------- ----------- ----------- ------------ ------------- Total current assets.......................... 1,055 20,890 31,715 (6,958) 46,702 Property and equipment, net................... 4,391 2,608 3,492 -- 10,491 Intangible assets, net........................ 3,757 576 138 (20) 4,451 Deferred income taxes......................... 876 49 -- (317) 608 Other assets.................................. 2,420 51 160 (2,305) 326 Investment in subsidiaries.................... 15,253 -- 25 (15,278) -- ----------- ----------- ----------- ------------ ------------- Total assets.................................. $ 27,752 $ 24,174 $ 35,530 $ (24,878) $ 62,578 ----------- ----------- ----------- ------------ ------------- ----------- ----------- ----------- ------------ ------------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable to banks...................... $ -- $ 4,533 $ 1,730 $ -- $ 6,263 Trade accounts payable...................... 974 7,239 10,297 (6,204) 12,306 Accrued compensation........................ 345 1,800 3,989 -- 6,134 Income taxes payable........................ -- 40 752 -- 792 Other current liabilities................... 2,694 1,119 4,765 (18) 8,560 Current maturities of long-term obligations............................... 84 -- 2 -- 86 ----------- ----------- ----------- ------------ ------------- Total current liabilities..................... 4,097 14,731 21,535 (6,222) 34,141 Long-term obligations, less current maturities................................... 4,163 -- 6,477 (2,305) 8,335 Deferred income and other liabilities......... 76 945 3 (338) 686 Commitments and contingencies Stockholders' equity: Common stock, par value $.01; authorized, 15,000 shares; issued and outstanding, 10,974 shares............................. 11 -- -- -- 11 Additional paid-in capital.................. 5,604 2,137 12,570 (14,707) 5,604 Retained earnings........................... 13,271 6,361 (5,585) (776) 13,271 Foreign currency translation adjustments.... 530 -- 530 (530) 530 ----------- ----------- ----------- ------------ ------------- Total stockholders' equity.................... 19,416 8,498 7,515 (16,013) 19,416 ----------- ----------- ----------- ------------ ------------- Total liabilities and stockholders' equity.... $ 27,752 $ 24,174 $ 35,530 $ (24,878) $ 62,578 ----------- ----------- ----------- ------------ ------------- ----------- ----------- ----------- ------------ -------------
F-21 WAVETEK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1996 AND PERTAINING TO JUNE 30, 1997 AND THE NINE-MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED) 13. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL DATA (CONTINUED) CONSOLIDATING BALANCE SHEETS AS OF SEPTEMBER 30, 1996 (DOLLARS AND SHARES IN THOUSANDS)
WAVETEK SUBSIDIARY FOREIGN CORPORATION GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED ----------- ----------- ----------- ------------ ------------- ASSETS Current assets: Cash and cash equivalents................... $ -- $ 4,845 $ 1,281 $ -- $ 6,126 Accounts receivable (less allowance for doubtful accounts of $2,023).............. 3,042 18,657 15,123 (15,956) 20,866 Inventories................................. (479) 6,277 14,496 (986) 19,308 Deferred income taxes....................... 2,660 1,845 -- -- 4,505 Other current assets........................ 6 148 1,034 -- 1,188 ----------- ----------- ----------- ------------ ------------- Total current assets.......................... 5,229 31,772 31,934 (16,942) 51,993 Property and equipment, net................... 4,495 3,731 4,075 (107) 12,194 Intangible assets, net........................ 3,490 288 99 (10) 3,867 Deferred income taxes......................... 430 182 -- (171) 441 Other assets.................................. 281 196 83 (203) 357 Investment in subsidiaries.................... 32,492 -- 25 (32,517) -- ----------- ----------- ----------- ------------ ------------- Total assets.................................. $ 46,417 $ 36,169 $ 36,216 $ (49,950) $ 68,852 ----------- ----------- ----------- ------------ ------------- ----------- ----------- ----------- ------------ ------------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable to banks...................... $ -- $ -- $ 786 $ -- $ 786 Trade accounts payable...................... 6,168 7,027 14,701 (15,889) 12,007 Accrued compensation........................ 1,454 1,827 4,187 -- 7,468 Income taxes payable........................ -- 460 967 -- 1,427 Other current liabilities................... 1,883 1,884 5,047 (67) 8,747 Current maturities of long-term obligations............................... 93 -- 2 -- 95 ----------- ----------- ----------- ------------ ------------- Total current liabilities..................... 9,598 11,198 25,690 (15,956) 30,530 Long-term obligations, less current maturities................................... 4,069 -- 1,207 (203) 5,073 Deferred income and other liabilities......... 62 625 45 (171) 561 Commitments and contingencies Stockholders' equity: Common stock, par value $.01; authorized, 15,000 shares; issued and outstanding, 10,974 shares............................. 11 -- -- -- 11 Additional paid-in capital.................. 5,637 2,137 12,468 (14,605) 5,637 Retained earnings........................... 26,746 22,209 (3,488) (18,721) 26,746 Foreign currency translation adjustments.... 294 -- 294 (294) 294 ----------- ----------- ----------- ------------ ------------- Total stockholders' equity.................... 32,688 24,346 9,274 (33,620) 32,688 ----------- ----------- ----------- ------------ ------------- Total liabilities and stockholders' equity.... $ 46,417 $ 36,169 $ 36,216 $ (49,950) $ 68,852 ----------- ----------- ----------- ------------ ------------- ----------- ----------- ----------- ------------ -------------
F-22 WAVETEK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1996 AND PERTAINING TO JUNE 30, 1997 AND THE NINE-MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED) 13. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL DATA (CONTINUED) CONSOLIDATING BALANCE SHEETS AS OF JUNE 30, 1997 (DOLLARS AND SHARES IN THOUSANDS)
WAVETEK SUBSIDIARY FOREIGN CORPORATION GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED ----------- ----------- ----------- ------------ ------------ ASSETS Current assets: Cash and cash equivalents................... $ -- $ 3,542 $ 517 $ -- $ 4,059 Short-term investments, available for sale.. -- 3,000 -- -- 3,000 Accounts receivable (less allowance for doubtful accounts of $2,054).............. (91) 17,181 21,968 (13,778) 25,280 Inventories................................. (479) 6,516 13,532 (1,367) 18,202 Deferred income taxes....................... 2,879 1,595 -- -- 4,474 Other current assets........................ 312 189 1,725 -- 2,226 ----------- ----------- ----------- ------------ ------------ Total current assets.......................... 2,621 32,023 37,742 (15,145) 57,241 Property and equipment, net................... 5,445 4,426 4,946 (44) 14,773 Deferred debt issuance costs, net............. 4,293 -- -- -- 4,293 Intangible assets, net........................ 3,290 72 65 (3) 3,424 Deferred income taxes......................... (6) 43 -- -- 37 Other assets.................................. 230 46 104 (185) 195 Investment in subsidiaries.................... 30,646 -- 25 (30,671) -- ----------- ----------- ----------- ------------ ------------ Total assets.................................. $ 46,519 $ 36,610 $ 42,882 (46,048) $ 79,963 ----------- ----------- ----------- ------------ ------------ ----------- ----------- ----------- ------------ ------------ LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities: Notes payable to banks...................... $ -- $ -- $ 3,377 $ -- $ 3,377 Trade accounts payable...................... 2,872 10,031 16,711 (13,780) 15,834 Accrued compensation........................ 470 1,677 5,015 -- 7,162 Income taxes payable........................ (1,559) 2,008 1,572 -- 2,021 Other current liabilities................... 3,574 1,764 3,757 -- 9,095 Current maturities of long-term obligations............................... 100 -- 888 -- 988 ----------- ----------- ----------- ------------ ------------ Total current liabilities..................... 5,457 15,480 31,320 (13,780) 38,477 Long-term obligations, less current maturities................................... 113,995 -- -- -- 113,995 Deferred income and other liabilities......... 36 393 216 (185) 460 Commitments and contingencies Stockholders' equity (deficit): Common stock, par value $.01; authorized, 15,000 shares; issued and outstanding, 4,885 shares.............................. 49 -- -- -- 49 Additional paid-in capital.................. 43,748 2,137 15,064 (17,201) 43,748 Retained earnings (accumulated deficit)..... (116,660) 18,600 (3,612) (14,988) (116,660) Foreign currency translation adjustments.... (106) -- (106) 106 (106) ----------- ----------- ----------- ------------ ------------ Total stockholders' equity (deficit).......... (72,969) 20,737 11,346 (32,083) (72,969) ----------- ----------- ----------- ------------ ------------ Total liabilities and stockholders' equity (deficit).................................... $ 46,519 $ 36,610 $ 42,882 $ (46,048) $ 79,963 ----------- ----------- ----------- ------------ ------------ ----------- ----------- ----------- ------------ ------------
F-23 WAVETEK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1996 AND PERTAINING TO JUNE 30, 1997 AND THE NINE-MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED) 13. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL DATA (CONTINUED) CONSOLIDATING STATEMENTS OF INCOME FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1994 (DOLLARS IN THOUSANDS)
WAVETEK SUBSIDIARY FOREIGN CORPORATION GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED ----------- ----------- ----------- ------------- ------------ Sales......................................... $ -- $ 56,824 $ 25,649 $ (7,658) $ 74,815 Cost of goods sold............................ 11 33,711 15,386 (7,735) 41,373 ----------- ----------- ----------- ------------- ------------ Gross margin.................................. (11) 23,113 10,263 77 33,442 Operating expenses: Marketing and selling....................... -- 11,577 4,852 -- 16,429 Research and development.................... -- 4,413 1,012 -- 5,425 General and administrative.................. 941 3,905 1,222 (11) 6,057 ----------- ----------- ----------- ------------- ------------ 941 19,895 7,086 (11) 27,911 ----------- ----------- ----------- ------------- ------------ Operating income.............................. (952) 3,218 3,177 88 5,531 Non-operating income (expense): Interest income............................. 300 45 46 (358) 33 Interest expense............................ (377) (613) (13) 358 (645) Equity in net income of subsidiaries........ 4,937 -- -- (4,937) -- Other, net.................................. (198) (37) (158) 6 (387) ----------- ----------- ----------- ------------- ------------ 4,662 (605) (125) (4,931) (999) ----------- ----------- ----------- ------------- ------------ Income before provision for income taxes...... 3,710 2,613 3,052 (4,843) 4,532 Provision for income taxes.................... -- 21 801 -- 822 ----------- ----------- ----------- ------------- ------------ Net income.................................... $ 3,710 $ 2,592 $ 2,251 $ (4,843) $ 3,710 ----------- ----------- ----------- ------------- ------------ ----------- ----------- ----------- ------------- ------------
F-24 WAVETEK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1996 AND PERTAINING TO JUNE 30, 1997 AND THE NINE-MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED) 13. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL DATA (CONTINUED) CONSOLIDATING STATEMENTS OF INCOME FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1995 (DOLLARS IN THOUSANDS)
WAVETEK SUBSIDIARY FOREIGN CORPORATION GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED ----------- ----------- ----------- ------------ ------------ Sales......................................... $ -- $ 69,701 $ 87,843 $ (23,925) $ 133,619 Cost of goods sold............................ (301) 40,090 56,741 (23,881) 72,649 ----------- ----------- ----------- ------------ ------------ Gross margin.................................. 301 29,611 31,102 (44) 60,970 Operating expenses: Marketing and selling....................... (56) 14,092 18,550 -- 32,586 Research and development.................... (43) 4,193 7,946 -- 12,096 General and administrative.................. 2,066 3,192 4,143 (10) 9,391 ----------- ----------- ----------- ------------ ------------ 1,967 21,477 30,639 (10) 54,073 ----------- ----------- ----------- ------------ ------------ Operating income.............................. (1,666) 8,134 463 (34) 6,897 Non-operating income (expense): Interest income............................. 147 11 191 (259) 90 Interest expense............................ (495) (232) (722) 259 (1,190) Loss on sale and leaseback financing........ -- (1,824) -- -- (1,824) Equity in net income of subsidiaries........ 1,137 -- -- (1,137) -- Other, net.................................. 2,159 (68) (2,318) (61) (288) ----------- ----------- ----------- ------------ ------------ 2,948 (2,113) (2,849) (1,198) (3,212) ----------- ----------- ----------- ------------ ------------ Income before provision for income taxes...... 1,282 6,021 (2,386) (1,232) 3,685 Provision for income taxes.................... (1,837) 1,597 856 -- 616 ----------- ----------- ----------- ------------ ------------ Net income.................................... $ 3,119 $ 4,424 $ (3,242) $ (1,232) $ 3,069 ----------- ----------- ----------- ------------ ------------ ----------- ----------- ----------- ------------ ------------
F-25 WAVETEK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1996 AND PERTAINING TO JUNE 30, 1997 AND THE NINE-MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED) 13. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL DATA (CONTINUED) CONSOLIDATING STATEMENTS OF INCOME FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996 (DOLLARS IN THOUSANDS)
WAVETEK SUBSIDIARY FOREIGN CORPORATION GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED ----------- ----------- ----------- ------------ ------------ Sales......................................... $ -- $ 85,754 $ 96,592 $ (31,353) $ 150,993 Cost of goods sold............................ 616 42,141 60,774 (31,167) 72,364 ----------- ----------- ----------- ------------ ------------ Gross margin.................................. (616) 43,613 35,818 (186) 78,629 Operating expenses: Marketing and selling....................... 959 16,215 19,023 -- 36,197 Research and development.................... (52) 5,451 7,518 -- 12,917 General and administrative.................. 3,374 4,323 3,927 (12) 11,612 Provision for restructuring operations...... 1,832 -- -- -- 1,832 ----------- ----------- ----------- ------------ ------------ 6,113 25,989 30,468 (12) 62,558 ----------- ----------- ----------- ------------ ------------ Operating income.............................. (6,729) 17,624 5,350 (174) 16,071 Non-operating income (expense): Interest income............................. 142 76 83 (134) 167 Interest expense............................ (388) (77) (431) 134 (762) Equity in income of subsidiaries............ 17,952 -- -- (17,952) -- Other, net.................................. 483 88 (1,245) (362) (1,036) ----------- ----------- ----------- ------------ ------------ 18,189 87 (1,593) (18,314) (1,631) ----------- ----------- ----------- ------------ ------------ Income before provision for income taxes...... 11,460 17,711 3,757 (18,488) 14,440 Provision for income taxes.................... (2,015) 1,863 1,117 -- 965 ----------- ----------- ----------- ------------ ------------ Net income.................................... $ 13,475 $ 15,848 $ 2,640 $ (18,488) $ 13,475 ----------- ----------- ----------- ------------ ------------ ----------- ----------- ----------- ------------ ------------
F-26 WAVETEK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1996 AND PERTAINING TO JUNE 30, 1997 AND THE NINE-MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED) 13. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL DATA (CONTINUED) CONSOLIDATING STATEMENTS OF INCOME FOR THE NINE MONTHS ENDED JUNE 30, 1996 (DOLLARS IN THOUSANDS)
WAVETEK SUBSIDIARY FOREIGN CORPORATION GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED ----------- ----------- ----------- ------------ ------------ Sales......................................... $ -- $ 64,337 $ 74,174 $ (23,330) $ 115,181 Cost of goods sold............................ 232 32,104 46,651 (23,208) 55,779 ----------- ----------- ----------- ------------ ------------ Gross margin.................................. (232) 32,233 27,523 (122) 59,402 Operating expenses: Marketing and selling....................... 722 11,948 14,139 -- 26,809 Research and development.................... (42) 3,856 5,602 -- 9,416 General and administrative.................. 3,067 2,653 2,944 (9) 8,655 Provision for restructuring operations...... 188 -- -- -- 188 ----------- ----------- ----------- ------------ ------------ 3,935 18,457 22,685 (9) 45,068 ----------- ----------- ----------- ------------ ------------ Operating income.............................. (4,167) 13,776 4,838 (113) 14,334 Non-operating income (expense): Interest income............................. 71 38 54 (64) 99 Interest expense............................ (291) (77) (312) 64 (616) Equity in net income of subsidiaries........ 13,236 -- -- (13,236) -- Other, net.................................. 558 213 (897) (362) (488) ----------- ----------- ----------- ------------ ------------ 13,574 174 (1,155) (13,598) (1,005) ----------- ----------- ----------- ------------ ------------ Income before provision for income taxes...... 9,407 13,950 3,683 (13,711) 13,329 Provision for income taxes.................... (3,029) 3,088 834 -- 893 ----------- ----------- ----------- ------------ ------------ Net income.................................... $ 12,436 $ 10,862 $ 2,849 $ (13,711) $ 12,436 ----------- ----------- ----------- ------------ ------------ ----------- ----------- ----------- ------------ ------------
F-27 WAVETEK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1996 AND PERTAINING TO JUNE 30, 1997 AND THE NINE-MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED) 13. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL DATA (CONTINUED) CONSOLIDATING STATEMENTS OF INCOME FOR THE NINE MONTHS ENDED JUNE 30, 1997 (DOLLARS IN THOUSANDS)
WAVETEK SUBSIDIARY FOREIGN CORPORATION GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED ------------- ----------- ----------- ------------ ------------ Sales......................................... $ -- $ 64,759 $ 81,844 $ (27,903) $ 118,700 Cost of goods sold............................ (244) 29,351 53,956 (27,584) 55,479 ------ ----------- ----------- ------------ ------------ Gross margin.................................. 244 35,408 27,888 (319) 63,221 Operating expenses: Marketing and selling....................... 700 13,159 14,054 -- 27,913 Research and development.................... (36) 7,323 4,348 -- 11,635 General and administrative.................. 1,661 2,813 3,411 (7) 7,878 Stock option compensation related to recapitalization.......................... 1,926 2,318 2,817 -- 7,061 ------ ----------- ----------- ------------ ------------ 4,251 25,613 24,630 (7) 54,487 ------ ----------- ----------- ------------ ------------ Operating income.............................. (4,007) 9,795 3,258 (312) 8,734 Non-operating income (expense): Interest income............................. 76 221 32 (75) 254 Interest expense............................ (861) -- (162) 75 (948) Equity in net income of subsidiaries........ 7,259 -- -- (7,259) -- Other, net.................................. 345 128 (1,334) -- (861) ------ ----------- ----------- ------------ ------------ 6,819 349 (1,464) (7,259) (1,555) ------ ----------- ----------- ------------ ------------ Income before provision for income taxes...... 2,812 10,144 1,794 (7,571) 7,179 Provision for income taxes.................... (1,639) 3,753 614 -- 2,728 ------ ----------- ----------- ------------ ------------ Net income.................................... $ 4,451 $ 6,391 $ 1,180 $ (7,571) $ 4,451 ------ ----------- ----------- ------------ ------------ ------ ----------- ----------- ------------ ------------
F-28 WAVETEK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1996 AND PERTAINING TO JUNE 30, 1997 AND THE NINE-MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED) 13. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL DATA CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE YEAR ENDED SEPTEMBER 30, 1994 (DOLLARS IN THOUSANDS)
WAVETEK SUBSIDIARY FOREIGN CORPORATION GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED ----------- ----------- ----------- ------------ ------------ Net cash provided by (used in) operating activities................................... $ (760) $ 4,734 $ 2,473 $ -- $ 6,447 INVESTING ACTIVITIES Proceeds from sale of business................ 946 -- -- -- 946 Purchase of property and equipment............ (14) (1,038) (280) -- (1,332) Other investing activities.................... 19 172 248 -- 439 ----------- ----------- ----------- ------------ ------------ Net cash provided by (used in) investing activities................................... 951 (866) (32) -- 53 FINANCING ACTIVITIES Proceeds from revolving lines of credit and long-term obligations........................ -- 25,475 295 -- 25,770 Principal payments on revolving lines of credit and long-term obligations............. (450) (25,075) (12) -- (25,537) Return of capital to stockholders............. (6,958) -- -- -- (6,958) Return of capital from subsidiary............. 3,000 (3,000) -- -- -- Proceeds of loans from stockholders........... 860 4,000 -- -- 4,860 Repayment of loans from stockholders.......... (500) (4,000) -- -- (4,500) Loans from subsidiary to Wavetek Corporation.................................. 3,836 (3,836) -- -- -- Other financing activities.................... -- -- (2) -- (2) ----------- ----------- ----------- ------------ ------------ Net cash provided by (used in) financing activities................................... (212) (6,436) 281 -- (6,367) Effect of exchange rate changes on cash and cash equivalents............................. -- -- 161 -- 161 ----------- ----------- ----------- ------------ ------------ Increase (decrease) in cash and cash equivalents.................................. (21) (2,568) 2,883 -- 294 Cash and cash equivalents at beginning of year......................................... 3 2,886 624 -- 3,513 ----------- ----------- ----------- ------------ ------------ Cash and cash equivalents at end of year......................................... $ (18) $ 318 $ 3,507 $ -- $ 3,807 ----------- ----------- ----------- ------------ ------------ ----------- ----------- ----------- ------------ ------------
F-29 WAVETEK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1996 AND PERTAINING TO JUNE 30, 1997 AND THE NINE-MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED) 13. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL DATA (CONTINUED) CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE YEAR ENDED SEPTEMBER 30, 1995 (DOLLARS IN THOUSANDS)
WAVETEK SUBSIDIARY FOREIGN CORPORATION GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED ----------- ----------- ----------- ------------ ------------ Net cash provided by operating activities..... $ 2,248 $ 6,675 $ 3,625 $ -- $ 12,548 INVESTING ACTIVITIES Purchase of business, net of seller financing.................................... (2,057) (1,114) (14,514) -- (17,685) Purchase of property and equipment............ (132) (1,547) (1,241) -- (2,920) Other investing activities.................... (89) 30 281 -- 222 ----------- ----------- ----------- ------------ ------------ Net cash used in investing activities......... (2,278) (2,631) (15,474) -- (20,383) FINANCING ACTIVITIES Issuance of common shares for cash............ 7,595 -- -- -- 7,595 Repurchase of common shares for cash.......... (3,200) -- -- -- (3,200) Proceeds from sale and leaseback financing.... -- 4,321 -- -- 4,321 Proceeds from revolving lines of credit and long-term obligations........................ -- 24,428 7,027 -- 31,455 Principal payments on revolving lines of credit and long-term obligations............. (71) (29,395) (2,663) -- (32,129) Return of capital to stockholders............. Dividends from subsidiaries to Wavetek Corporation.................................. 7,497 (4,000) (3,497) -- -- Proceeds of loans from stockholders........... Repayment of loans from stockholders.......... (360) -- -- -- (360) Loans from Wavetek Corporation to subsidiaries................................. (2,305) -- 2,305 -- -- Capital contributions from Wavetek Corporation to subsidiaries.............................. (6,568) -- 6,568 -- -- Repayment of loans from subsidiaries to Wavetek Corporation.......................... (2,540) 2,540 -- -- -- ----------- ----------- ----------- ------------ ------------ Net cash provided by (used in) financing activities................................... 48 (2,106) 9,740 -- 7,682 Effect of exchange rate changes on cash and cash equivalents............................. -- -- 35 -- 35 ----------- ----------- ----------- ------------ ------------ Increase (decrease) in cash and cash equivalents.................................. 18 1,938 (2,074) -- (118) Cash and cash equivalents at beginning of year......................................... (18) 318 3,507 -- 3,807 ----------- ----------- ----------- ------------ ------------ Cash and cash equivalents at end of year......................................... $ -- $ 2,256 $ 1,433 $ -- $ 3,689 ----------- ----------- ----------- ------------ ------------ ----------- ----------- ----------- ------------ ------------
F-30 WAVETEK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1996 AND PERTAINING TO JUNE 30, 1997 AND THE NINE-MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED) 13. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL DATA (CONTINUED) CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE YEAR ENDED SEPTEMBER 30, 1996 (DOLLARS IN THOUSANDS)
WAVETEK SUBSIDIARY FOREIGN CORPORATION GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED ----------- ----------- ----------- ------------ ------------ Net cash provided by operating activities..... $ 1,285 $ 9,252 $ 4,539 $ -- $ 15,076 INVESTING ACTIVITIES Proceeds from sale of business................ 93 310 (65) -- 338 Purchase of property and equipment............ (236) (2,631) (1,677) -- (4,544) Other investing activities.................... 107 191 (42) -- 256 ----------- ----------- ----------- ------------ ------------ Net cash used in investing activities......... (36) (2,130) (1,784) -- (3,950) FINANCING ACTIVITIES Proceeds from revolving lines of credit and long-term obligations........................ -- 11,713 3,219 -- 14,932 Principal payments on revolving lines of credit and long-term obligations............. (85) (16,246) (7,244) -- (23,575) Dividends from subsidiaries to Wavetek Corporation.................................. 553 -- (553) -- -- Loans from Wavetek Corporation to subsidiaries................................. (3,819) -- 3,819 -- -- Repayment of loans from Wavetek Corporation to subsidiaries................................. 2,102 -- (2,102) -- -- ----------- ----------- ----------- ------------ ------------ Net cash used in financing activities......... (1,249) (4,533) (2,861) -- (8,643) Effect of exchange rate changes on cash and cash equivalents............................. -- -- (46) -- (46) ----------- ----------- ----------- ------------ ------------ Increase (decrease) in cash and cash equivalents.................................. -- 2,589 (152) -- 2,437 Cash and cash equivalents at beginning of year......................................... -- 2,256 1,433 -- 3,689 ----------- ----------- ----------- ------------ ------------ Cash and cash equivalents at end of year......................................... $ -- $ 4,845 $ 1,281 $ -- $ 6,126 ----------- ----------- ----------- ------------ ------------ ----------- ----------- ----------- ------------ ------------
F-31 WAVETEK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1996 AND PERTAINING TO JUNE 30, 1997 AND THE NINE-MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED) 13. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL DATA (CONTINUED) CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE NINE MONTHS ENDED JUNE 30, 1996 (DOLLARS IN THOUSANDS)
WAVETEK SUBSIDIARY FOREIGN CORPORATION GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED ----------- ----------- ----------- ------------ ------------ Net cash provided by (used in) operating activities................................... $ 612 $ 4,843 $ 4,976 $ -- $ 10,431 INVESTING ACTIVITIES Proceeds from sale of business................ -- 310 28 -- 338 Purchase of property and equipment............ (713) (1,522) (972) -- (3,207) Other investing activities.................... 14 216 42 -- 272 ----------- ----------- ----------- ------------ ------------ Net cash used in investing activities......... (699) (996) (902) -- (2,597) FINANCING ACTIVITIES Proceeds from revolving lines of credit and long-term obligations........................ -- 11,713 2,611 -- 14,324 Principal payments on revolving lines of credit and long-term obligations............. (63) (16,246) (5,493) -- (21,802) Loans from Waveteck Corporation to subsidiaries (2,505) -- 2,505 -- -- Repayment of loans from Wavetek Corporation to subsidiaries................................. 2,102 -- (2,102) -- -- Dividends from subsidiary to Wavetek Corporation.................................. 553 -- (553) -- -- ----------- ----------- ----------- ------------ ------------ Net cash provided by (used in) financing activities................................... 87 (4,533) (3,032) -- (7,478) Effect of exchange rate changes on cash and cash equivalents............................. -- -- (124) -- (124) ----------- ----------- ----------- ------------ ------------ Increase (decrease) in cash and cash equivalents.................................. -- (686) 918 -- 232 Cash and cash equivalents at beginning of period....................................... -- 2,256 1,433 -- 3,689 ----------- ----------- ----------- ------------ ------------ Cash and cash equivalents at end of period.... $ -- $ 1,570 $ 2,351 $ -- $ 3,921 ----------- ----------- ----------- ------------ ------------ ----------- ----------- ----------- ------------ ------------
F-32 WAVETEK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1996 AND PERTAINING TO JUNE 30, 1997 AND THE NINE-MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED) 13. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL DATA (CONTINUED) CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE NINE MONTHS ENDED JUNE 30, 1997 (DOLLARS IN THOUSANDS)
WAVETEK SUBSIDIARY FOREIGN CORPORATION GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED ----------- ----------- ----------- ------------ ------------ Net cash provided by (used in) operating activities................................... $ (7,307) $ 13,102 $ 1,236 -- $ 7,031 INVESTING ACTIVITIES Purchase of short-term investments............ -- (3,000) -- -- (3,000) Purchase of property and equipment............ (1,179) (1,565) (2,040) -- (4,784) Other investing activities.................... 25 160 37 -- 222 ----------- ----------- ----------- ------------ ------------ Net cash used in investing activities......... (1,154) (4,405) (2,003) -- (7,562) FINANCING ACTIVITIES Issuance of common shares for cash............ 42,856 -- -- -- 42,856 Repurchase of common shares and stock options for cash..................................... (152,564) -- -- -- (152,564) Proceeds from revolving lines of credit and long-term obligations........................ 110,000 -- 4,144 -- 114,144 Principal payments on revolving lines of credit and long-term obligations............. (68) -- (1,421) -- (1,489) Debt issuance costs........................... (4,326) -- -- -- (4,326) Dividends from subsidiaries to Wavetek Corporation.................................. 11,304 (10,000) (1,304) -- -- Capital contributions from Wavetek Corporation to subsidiaries.............................. (2,578) -- 2,578 -- -- Repayment of loans from Wavetek Corporation to subsidiaries................................. 3,837 -- (3,837) -- -- ----------- ----------- ----------- ------------ ------------ Net cash provided by (used in) financing activities................................... 8,461 (10,000) 160 -- (1,379) Effect of exchange rate changes on cash and cash equivalents............................. -- -- (157) -- (157) ----------- ----------- ----------- ------------ ------------ Increase (decrease) in cash and cash equivalents.................................. -- (1,303) (764) -- (2,067) Cash and cash equivalents at beginning of period....................................... -- 4,845 1,281 -- 6,126 ----------- ----------- ----------- ------------ ------------ Cash and cash equivalents at end of period.... $ -- $ 3,542 $ 517 $ -- $ 4,059 ----------- ----------- ----------- ------------ ------------ ----------- ----------- ----------- ------------ ------------
F-33 WAVETEK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (INFORMATION SUBSEQUENT TO SEPTEMBER 30, 1996 AND PERTAINING TO JUNE 30, 1997 AND THE NINE-MONTH PERIODS ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED) 14. LEGAL CONTINGENCIES The Company is subject to legal proceedings and claims which arise in the ordinary course of its business. It is management's opinion that the likely outcome of any such proceedings and claims would not have a material adverse effect on the Company's future results of operations or financial position. F-34 WAVETEK CORPORATION All tendered Old Notes, executed Letters of Transmittal, and other related documents should be directed to the Exchange Agent. Requests for assistance and for additional copies of the Prospectus, the Letter of Transmittal and other related documents should be directed to the Exchange Agent. The Exchange Agent for the Exchange Offer is THE BANK OF NEW YORK
BY MAIL: FOR INFORMATION CALL: BY HAND OR OVERNIGHT MAIL: The Bank of New York Confirm: (212) 815-5789 The Bank of New York 101 Barclay Street, 7E Facsimile: (212) 815-6339 101 Barclay Street New York, NY 10286 Corporate Trust Services Window Attn: Shilpa Privedi Ground Level Reorganization Section New York, NY 10286 Attn: Shilpa Privedi Reorganization Section
(ALTERNATE PAGE FOR MARKET-MAKING PROSPECTUS) PROSPECTUS , 1997 $85,000,000 [LOGO] WAVETEK CORPORATION 10 1/8% SENIOR SUBORDINATED NOTES DUE 2007 The 10 1/8% Senior Subordinated Notes due 2007 (the "New Notes" or the "Notes") mature on June 15, 2007. Interest on the Notes will be payable semi-annually on June 15 and December 15 of each year, commencing on December 15, 1997. The Notes will be redeemable at the option of the Company, in whole or in part, at any time on or after June 15, 2002, at the redemption prices set forth herein, plus accrued and unpaid interest and Liquidated Damages (as defined), if any, to the date of redemption. However, during the first three years after the Issue Date (as defined), the Company may redeem up to an aggregate of 33 1/3% of the aggregate principal amount of Notes originally issued in the Offering with the proceeds of one or more Public Equity Offerings (as defined) at a redemption price of 110.125% of the principal amount thereof, in each case plus accrued and unpaid interest and Liquidated Damages, if any, to the redemption date; PROVIDED, HOWEVER, that at least 66 2/3% of the aggregate principal amount of Notes originally issued remains outstanding immediately after such redemption. Upon the occurrence of a Change of Control (as defined), holders of the Notes will have the right to require the Company to purchase all or any part of their Notes at a price equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, to the date of purchase. See "Description of Notes." The Notes are subordinated in right of payment to all existing and future Senior Debt (as defined) of the Company, including borrowings under the New Credit Agreement (as defined). The Notes are guaranteed (the "Subsidiary Guarantees") by the Subsidiary Guarantors (as defined). The Subsidiary Guarantees are subordinated in right of payment to all existing and future Senior Debt of the Subsidiary Guarantors, including guarantees of the New Credit Agreement. The Notes, the Subsidiary Guarantees and borrowings under the New Credit Agreement are effectively subordinated to the indebtedness of the Company's foreign subsidiaries (as defined). The Indenture permits the Company and its Subsidiaries to incur additional Indebtedness, including Senior Debt, subject to certain limitations, and prohibits the incurrence of any Indebtedness by the Company and the Subsidiary Guarantors that is senior to the Notes or the Subsidiary Guarantees, as the case may be, and subordinated to Senior Debt of the Company or Senior Debt of the Subsidiary Guarantors, as the case may be. See "Description of Notes." SEE "RISK FACTORS" BEGINNING ON PAGE 13 FOR A DISCUSSION OF CERTAIN MATTERS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS IN CONNECTION WITH AN INVESTMENT IN THE NOTES. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. This Prospectus has been prepared for and is to be used by Donaldson, Lufkin & Jenrette Securities Corporation in connection with offers and sales of the New Notes related to market-making transactions, at prevailing market prices, at prices related thereto or at negotiated prices. The Company will not receive any of the proceeds of such sales. Donaldson, Lufkin & Jenrette Securities Corporation may act as principal or agent in such transactions. The closing of the Company's exchange offer resulting in the issue of the New Notes occurred on , 1997. See "Plan of Distribution." DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION (ALTERNATE PAGE FOR MARKET-MAKING PROSPECTUS) PLAN OF DISTRIBUTION This Prospectus may be used by DLJ in connection with offers and sales of the New Notes related to market-making transactions. DLJ may act as principal or agent in such transactions, including as agent of the New Notes for the counterparty when acting as principal or as agent for both counterparties, and may receive compensation in the form of discounts and commissions, including from both counterparties when they act as agent for both. Such sales will be made at prevailing market prices at the time of sale, at prices related thereto or at negotiated prices. For a description of certain relationship and transactions between DLJ and its affiliates and the Company, see "Management" and "Ownership of Capital Stock." DLJ has advised the Company that it currently intends to make a market in the New Notes. However, DLJ is not obligated to do so and any market-making may be discontinued at any time without notice. In addition, such market-making activity will be subject to the limits imposed by the Securities Act and the Exchange Act. There can be no assurance that an active trading market will develop or be sustained. See "Risk Factors -- Absence of Public Market for the Notes." DLJ may not confirm sales to any accounts over which it exercises discretionary authority without the prior specific written approval by the customer. The Company has agreed to indemnify DLJ against certain liabilities including liabilities under the Securities Act. (ALTERNATE PAGE FOR MARKET-MAKING PROSPECTUS) - ------------------------------------------- ------------------------------------------- - ------------------------------------------- ------------------------------------------- NO DEALER, SALESMAN OR ANY OTHER PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE INITIAL PURCHASER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES OR ANY OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCE, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF. ------------------------ TABLE OF CONTENTS
PAGE Available Information.......................... 2 Summary........................................ 3 Risk Factors................................... 13 The Recapitalization Transactions.............. 19 Use of Proceeds................................ 19 The Exchange Offer............................. 19 Unaudited Pro Forma Consolidated Financial Data......................................... 28 Selected Consolidated Financial Data........... 34 Management's Discussion and Analysis of Financial Condition and Results of Operations................................... 36 Business....................................... 43 Management..................................... 57 Ownership of Capital Stock..................... 62 Certain Relationships and Related Transactions................................. 64 Description of Notes........................... 65 Description of Other Indebtedness.............. 90 Validity of Notes.............................. 92 Independent Auditors........................... 92 Plan of Distribution........................... 92 Index to Financial Statements.................. F-1
[LOGO] WAVETEK CORPORATION $85,000,000 10 1/8% SENIOR SUBORDINATED NOTES DUE 2007 ------------------------------- PROSPECTUS ------------------------------- DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION , 1997 - ------------------------------------------- ------------------------------------------- - ------------------------------------------- ------------------------------------------- PART II INFORMATION NOT REQUIRED IN THE PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The Delaware General Corporation Law (the "DGCL") authorizes corporations to limit or eliminate the personal liability of directors to the corporation and its stockholders for monetary damages in connection with the breach of a director's fiduciary duty of care. The duty of care requires that, when acting on behalf of the corporation, directors must exercise an informed business judgment based on all material information reasonably available to them. Absent the limitation authorized by the DGCL, directors could be accountable to corporations and their stockholders for monetary damages for conduct that does not satisfy such duty of care. Although the DGCL does not change a director's duty of care, it enables corporations to limit available relief to equitable remedies such as injunction or rescission. The Company's Certificate of Incorporation contains a provision permitted under the Delaware General Corporation Law (the "DGCL") eliminating each director's personal liability for monetary damages for breach of fiduciary duty as a director, except to the extent that such exemption from liability or limitation thereof is not permitted under the DGCL as currently in effect at the time. The Company's Bylaws authorize the Company to indemnify its present and former directors, officers and employees against expenses, judgments, fines and amounts paid in settlement if such person is made a party, or is threatened to be made a party, to a legal proceeding by reason of the fact that such person is or was a director, officer, employee or agent of the Company, or was serving in such position at another company at the request of the Company. Such indemnification is mandatory in certain circumstances and permissive in others, subject to authorization by the Company's Board of Directors. In addition, the Bylaws authorize the Company to advance litigation expenses to such person prior to the final disposition of the legal proceeding. ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (a) Exhibits.
EXHIBIT NO. DESCRIPTION OF EXHIBIT - ------------- ----------------------------------------------------------------------------------------------------- 3.1 Certificate of Incorporation of Torrey Investments Inc. 3.2 Certificate of Amendment to Certificate of Incorporation of Torrey Investments Inc. dated June 25, 1991. 3.3 Certificate of Amendment of Certificate of Incorporation of Torrey Investments Inc. dated January 27, 1993. 3.4 Certificate of Amendment of Certificate of Incorporation of Torrey Investments Inc. September 21, 1995. 3.5 Certificate of Ownership and Merger of Wavetek Corporation into Torrey Investments Inc. dated September 21, 1995 (changing name of Torrey Investments Inc. to Wavetek Corporation). 3.6 Certificate of Amendment of Certificate of Incorporation of Wavetek Corporation dated June 9, 1997. 3.7 By-laws of Wavetek Corporation. 3.8 Certificate of Merger (restating the Certificate of Incorporation of Wavetek Corporation) of Torrey Wavetek Acquisition Corporation into Wavetek Corporation dated June 28, 1991. 3.9 Certificate of Amendment of Certificate of Incorporation of Wavetek Corporation dated June 28, 1991 (changing the name of Wavetek Corporation to Wavetek U.S. Inc.). 3.10 By-laws of Wavetek U.S. Inc.
II-1 4.1 Indenture, dated as of June 11, 1997, among Wavetek Corporation, Wavetek U.S. Inc. and The Bank of New York, as Trustee. 4.2 Form of Notes (see Exhibit 4.1). 4.3 Form of Subsidiary Guarantee (see Exhibit 4.1). 4.4 A/B Exchange Registration Rights Agreement, dated as of June 11, 1997, between Wavetek Corporation and Donaldson, Lufkin and Jenrette Securities Corporation. 5.1 Opinion of Sullivan & Cromwell regarding the validity of the securities being registered. 8.1 Opinion of Sullivan & Cromwell regarding certain federal income tax matters with respect to the securities being registered. 10.1 Credit Agreement, dated as of June 11, 1997, among Wavetek Corporation, DLJ Capital Funding, Inc., as Syndication Agent, Fleet National Bank, as Administrative Agent, and the lenders named therein. 10.2 Stockholders Agreement, dated as of June 11, 1997. 10.3 Stock Registration Rights Agreement, dated as of June 11, 1997. 12.1 Schedule Re: Computation of Ratio of Earnings to Fixed Charges. 23.1 Consent of Ernst & Young LLP. 23.2 Consent of Sullivan & Cromwell (included in its opinions filed as Exhibits 5.1 and 8.1 to this Registration Statement). 24.1 Powers of Attorney (set forth on the signature pages to this Registration Statement). 25.1 Statement of Eligibility under the Trust Indenture Act of 1939 on Form T-1 of The Bank of New York. 27.1 Financial Data Schedule. 99.1 Form of Letter of Transmittal. 99.2 Form of Notice of Guaranteed Delivery. 99.3 Form of Letter to Brokers, Dealers, etc. 99.4 Form of Letter to Clients and instructions thereto.
ITEM 22. UNDERTAKING. Each of the undersigned Registrants hereby undertakes: (a)(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933. (ii) To reflect in the prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement. (iii) To include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial BONA FIDE offering thereof. II-2 (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (b) That, for purposes of determining any liability under the Securities Act of 1933, each filing of the Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial BONA FIDE offering thereof. (c) To respond to requests for information that is incorporated by reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the Registration Statement through the date of responding to the request. (d) To supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the Registration Statement when it became effective. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the provisions referred to in Item 20, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction, the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. II-3 SIGNATURES Pursuant to the requirements of the Securities Act, each of the Registrants have duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Diego, State of California, on this 28th day of July, 1997. WAVETEK CORPORATION By: /s/ TERENCE J. GOODING ----------------------------------- WAVETEK U.S. INC. By: /s/ TERENCE J. GOODING ----------------------------------- POWER OF ATTORNEY Each person whose signature appears below on this Registration Statement hereby constitutes and appoints Terence J. Gooding and Vickie L. Capps, and each of them, with full power to act without the other, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, and for him and in his name, place and stead, in any and all capacities (unless revoked in writing) to sign any and all amendments (including post-effective amendments thereto) to this Registration Statement to which this power of attorney is attached, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting to such attorney-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby notifying and confirming all that such attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE - --------------------------------------------------- ------------------------------------ ---------------------- /s/ TERENCE J. GOODING Chairman of the Board, Chief July 28, 1997 ---------------------------------------- Executive Officer of Wavetek Terence J. Gooding Corporation; Chairman of the Board of Wavetek, U.S. Inc. /s/ DEREK T. MORIKAWA President, Chief Operating Officer July 28, 1997 ---------------------------------------- and Director of Wavetek Corporation Derek T. Morikawa /s/ BEN J. CONSTANTINI Executive Vice President, Sales and July 28, 1997 ---------------------------------------- Director of Wavetek Corporation Ben J. Constantini
II-4
SIGNATURE TITLE DATE - --------------------------------------------------- ------------------------------------ ---------------------- /s/ VICKIE L. CAPPS Treasurer, Secretary, Vice President July 28, 1997 ---------------------------------------- and Chief Financial Officer Vickie L. Capps (Principal Financial and Accounting Officer) of Wavetek Corporation and Wavetek U.S. Inc. /s/ KENNETH BAKER Director of Wavetek Corporation July 28, 1997 ---------------------------------------- Kenneth Baker /s/ KENNETH D. MOELIS Director of Wavetek Corporation July 28, 1997 ---------------------------------------- Kenneth D. Moelis /s/ PETER J. NOLAN Director of Wavetek Corporation July 28, 1997 ---------------------------------------- Peter J. Nolan /s/ MALCOLM R. BATES Director of Wavetek Corporation July 28, 1997 ---------------------------------------- Malcolm R. Bates /s/ DAVID B. WILSON Director of Wavetek Corporation July 28, 1997 ---------------------------------------- David B. Wilson
II-5 EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION OF EXHIBIT - ------------- ----------------------------------------------------------------------------------------------------- 3.1 Certificate of Incorporation of Torrey Investments Inc. 3.2 Certificate of Amendment to Certificate of Incorporation of Torrey Investments Inc. dated June 25, 1991. 3.3 Certificate of Amendment of Certificate of Incorporation of Torrey Investments Inc. dated January 27, 1993. 3.4 Certificate of Amendment of Certificate of Incorporation of Torrey Investments Inc. September 21, 1995. 3.5 Certificate of Ownership and Merger of Wavetek Corporation into Torrey Investments Inc. dated September 21, 1995 (changing name of Torrey Investments Inc. to Wavetek Corporation). 3.6 Certificate of Amendment of Certificate of Incorporation of Wavetek Corporation dated June 9, 1997. 3.7 By-laws of Wavetek Corporation 3.8 Certificate of Merger (restating the Certificate of Incoporation of Wavetek Corporation) of Torrey Wavetek Acquisition Corporation into Wavetek Corporation dated June 28, 1991. 3.9 Certificate of Amendment of Certificate of Incorporation of Wavetek Corporation dated June 28, 1991 (changing the name of Wavetek Corporation to Wavetek U.S. Inc.). 3.10 By-laws of Wavetek U.S. Inc. 4.1 Indenture, dated as of June 11, 1997, among Wavetek Corporation, Wavetek U.S. Inc. and The Bank of New York. 4.2 Form of Notes (see Exhibit 4.1). 4.3 Form of Subsidiary Guarantee (see Exhibit 4.1). 4.4 A/B Exchange Registration Rights Agreement, dated as of June 11, 1997, between Wavetek Corporation and Donaldson, Lufkin and Jenrette Securities Corporation. 5.1 Opinion of Sullivan & Cromwell regarding the validity of the securities being registered. 8.1 Opinion of Sullivan & Cromwell regarding certain federal income tax matters with respect to the securities being registered. 10.1 Credit Agreement, dated as of June 11, 1997, among Wavetek Corporation, DLJ Capital Funding, Inc., as Syndication Agent, Fleet National Bank, as Administrative Agent, and the lenders named therein. 10.2 Stockholders Agreement, dated as of June 11, 1997. 10.3 Stock Registration Rights Agreement, dated as of June 11, 1997. 12.1 Schedule Re: Computation of Ratio of Earnings to Fixed Charges. 23.1 Consent of Ernst & Young LLP. 23.2 Consent of Sullivan & Cromwell (included in its opinions filed as Exhibits 5.1 and 8.1 to this Registration Statement). 24.1 Powers of Attorney (set forth on the signature pages to this Registration Statement). 25.1 Statement of Eligibility under the Trust Indenture Act of 1939 on Form T-1 of The Bank of New York. 27.1 Financial Data Schedule. 99.1 Form of Letter of Transmittal. 99.2 Form of Notice of Guaranteed Delivery. 99.3 Form of Letter to Brokers, Dealers, etc. 99.4 Form of Letter to Clients and instructions thereto.
EX-3.1 2 EXHIBIT 3.1 EXHIBIT 3.1 CERTIFICATE OF INCORPORATION OF TORREY INVESTMENTS INC. FIRST. The name of the corporation is Torrey Investments Inc. SECOND. The address of the corporation's registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street in the City of Wilmington, County of New Castle. The name of its registered agent at such address is The Corporation Trust Company. THIRD. The purpose of the corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. FOURTH. The total number of shares which the corporation shall have authority to issue is 1,000 shares of Common Stock, and the par value of each of such shares is $.01. FIFTH. The name and mailing address of the incorporator is Richard R. Howe, 125 Broad Street, New York, New York 10004. SIXTH. The board of directors of the corporation is expressly authorized to adopt, amend or repeal by-laws of the corporation. SEVENTH. Elections of directors need not be by written ballot except and to the extent provided in the by-laws of the corporation. EIGHTH. Any director or the entire board of directors may be removed, with or without cause, by the holders of a majority of the shares at the time entitled to vote at an election of directors, whether or not the board of directors is classified as provided in subsection (d) of Section 141 of Title 8 of the Delaware Code. NINTH. A director of the corporation shall not be liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except to the extent that such exemption from liability or limitation thereof is not permitted under the Delaware General Corporation Law as currently in effect or as the same may hereafter be amended. No amendment, modification or repeal of this Article NINTH shall adversely affect any right or protection of a director that exists at the time of such amendment, modification or repeal. IN WITNESS WHEREOF, I have signed this certificate of incorporation this 25th day of January, 1991. /s/ Richard R. Howe ------------------------------- Richard R. Howe -2- EX-3.2 3 EXHIBIT 3.2 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF TORREY INVESTMENTS INC. Torrey Investments, Inc., a Delaware corporation, hereby certifies as follows: FIRST. The Board of Directors of said corporation duly adopted a resolution setting forth and declaring advisable the amendment of Article Fourth of the certificate of incorporation of said corporation to increase the total number of shares which the corporation shall have authority to issue, to create a new class of capital stock of the corporation to be known as Class B Common Stock and to set forth the powers, preferences and rights of the Common Stock and the Class B Common Stock of the corporation, and the qualifications, limitations or restrictions thereof, so that, as amended, said Article shall read as follows: "FOURTH. The total number of shares of all classes of stock which the corporation shall have authority to issue is 1,100 shares, of which 1,000 shares of the par value of $.01 per share shall be designated as "Common Stock" and 100 shares of the par value of $.01 per share shall be designated as "Class B Common Stock." The powers, preferences and rights of the Common Stock and the Class B Common Stock, and the qualifications, limitations or restrictions thereof, shall be identical in all respects, except as otherwise required by law and except as follows: (a) Except as otherwise required by law, the holders of the Common Stock shall be entitled to one (1) vote per share and the holders of the Class B Com- mon Stock shall be entitled to ten (10) votes per share on all matters on which stockholders are entitled to vote. Except as otherwise set forth herein the Common Stock and the Class B Common Stock shall vote together as a single class on all matters on which stockholders are entitled to vote. (b) The Common Stock and the Class B Common Stock shall each be entitled to vote separately as a class with respect to (i) amendments of this certificate of incorporation authorizing the corporation to issue additional shares of Common Stock or Class B Common Stock and (ii) other amendments of this certificate of incorporation that alter or change the powers, preferences or rights, or the qualifications, limitations or restrictions thereof, of their respective class of stock so as to affect them adversely and (iii) such other matters as may require class votes under the General Corporation Law of Delaware. (c) The holders of the Common Stock and the Class B Common Stock shall be entitled to share equally, on a per share basis, in all dividends declared from time to time by the Board of Directors of the corporation and in all distributions to stockholders upon any liquidation, dissolution or winding up of the corporation. (d) Each holder of a share of Class B Common Stock shall have the right at any time, or from time to time, to convert such share into one fully paid and nonassessable share of Common Stock. In order to exercise such conversion privilege, such holder shall surrender the certificate or certificates representing the shares of Class B Common Stock to be converted during usual business hours to the corporation at its principal office or at any office or agency of the corpora- -2- tion maintained for the transfer of the Common Stock together with a written notice of the election of such holder to convert the shares represented by such certificate or certificates or any portion thereof specified in such notice into Common Stock and stating the name(s) and address(es) in which the certificate(s) for shares of Common Stock issuable upon such conversion shall be registered. As promptly as practicable thereafter, the corporation shall issue and deliver to or upon the order of such holder a certificate or certificates for the number of shares of Common Stock issuable upon such conversion. In case any certificate for shares of Class. Common Stock shall be surrendered for conversion of only a part of the shares represented thereby, the corporation shall deliver to such holder a certificate or certificates for the number of shares of Class B Common Stock represented by such surrendered certificate which are not being converted. Upon any conversion of shares of Class B Common Stock into shares of Common Stock, any dividends or other distributions payable to holders of records of shares of Class B Common Stock prior to the date of surrender of such certificate or certificates shall remain payable to such surrendering holder, and any dividends or other distributions payable to holders of record of shares of Common Stock prior to the date of surrender of such certificate or certificates shall remain payable to such holders. (e) No holder of any share of Class B Common Stock may transfer, and the corporation shall not register the transfer of, any share of Class B Common Stock, whether by sale, assignment, gift, bequest, appointment or otherwise. In the event of any purported or attempted transfer of any share of Class B Common -3- Stock or upon the death or adjudication of bankruptcy or incompetency of the holder of any share of Class B Common Stock, such share shall be deemed to have been converted into a share of Common Stock as of the date of such death or adjudication. There shall be noted conspicuously on the face of each certificate representing shares of Class B Common Stock that transfer and registration of transfer thereof are restricted as provided in this certificate of incorporation. (f) Shares of Class B Common Stock converted into Common Stock as provided herein shall resume the status of authorized but unissued shares of Class B Common Stock but shall not thereafter be issued except upon the affirmative vote or consent of the holders of a majority of the shares of Common Stock at the time outstanding." SECOND. In lieu of a vote of stockholders, written consent to the foregoing amendment had been given by the holders of all of the outstanding stock entitled vote to thereon in accordance with the provisions of Section 228 of the General Coporation Law of Delaware, and such amendment has been duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of Delaware. IN WITNESS WHEREOF, Torrey Investments Inc. has caused this certificate to be signed by Terence J. Gooding, its President, and attested by Shirlee A. Ewell, its Secretary, on the 25th day of June, 1991. TORREY INVESTMENTS INC. Attest: By /s/ Terence J. Gooding -------------------------- Terence J. Gooding By /s/ Shirlee A. Ewell ---------------------------- Shirlee A. Ewell -4- EX-3.3 4 EXHIBIT 3.3 EXHIBIT 3.3 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF TORREY INVESTMENTS INC. Torrey Investments Inc., a Delaware corporation, hereby certifies as follows: FIRST. The Board of Directors of said corporation duly adopted a resolution setting forth and declaring advisable the amendment of Article Fourth of the certificate of incorporation of said corporation to increase the total number of shares which the corporation shall have authority to issue from 1,100 shares, of which 1,000 shares of the par value of $.01 per share are designated as "Common Stock" and 100 shares of the par value of $.01 per share are designated as "Class B Common Stock," to 11,000 shares, of which 10,000 shares of the par value of $.01 per share shall be designated as "Common Stock" and 1,00 shares of the par value of $.01 per share shall be designated as "Class B Common Stock," and to change paragraph (c) thereof to provide that dividends or distributions payable in stock of the corporation shall be distributed only in the same class of stock as that held by the stockholder, so that, as amended, the first paragraph of said Article shall read as follows: "FOURTH. The total number of shares of all classes of stock which the corporation shall have authority to issue is 11,000 shares, of which 10,000 shares of the par value of $.01 per share shall be designated as "Common Stock" and 1,000 shares of the par value of $.01 per share shall be designated as "Class B Common Stock." The powers, preferences and rights of the Common Stock and the Class B Common Stock, and the qualifications, limitations or restrictions thereof, shall be identical in all respects, except as otherwise required by law and except as follows:" and paragraph (c) of said Article shall read as follows: "(c) The holders of the Common Stock and the Class B Common Stock shall be entitled to share equally, on a per share basis, in all dividends declared from time to time by the Board of Directors of the corporation and in all distributions to stockholders upon any liquidation, dissolution or winding up of the corporation, provided that such dividends or distributions are payable in cash or property other than shares of stock of the corporation. In the event of any dividend or distribution payable in shares of stock of the corporation, only shares of Com- mon Stock shall be distributed with respect to the Common Stock and only shares of Class B Common Stock shall be distributed with respect to the Class B Common -2- Stock, in each case on an equal share-for-share basis as to all outstanding shares of each such class of stock." SECOND. The foregoing amendment was duly adopted by the favorable vote of the holders of a majority of the outstanding shares of stock entitled to vote thereon and a majority of the outstanding shares of stock of each class entitled to vote thereon as a class in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, Torrey Investments Inc. has caused this certificate to be signed by Terence J. Gooding, its President, and attested by Shirlee A. Ewell, its Secretary, on the 27th day of January, 1993. TORREY INVESTMENTS, INC. By /s/ Terence J. Gooding ------------------------------ Terence J. Gooding Attest: By /s/ Shirlee A. Ewell ------------------------------- Shirlee A. Ewell -3- EX-3.4 5 EXHIBIT 3.4 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF TORREY INVESTMENTS INC. Torrey Investments Inc., a corporation incorporated on the 28th day of January, 1991, pursuant to the provisions of the General Corporation Law of the State of Delaware: FIRST. The Board of Directors of said corporation duly adopted a resolution setting forth and declaring advisable the amendment of Article Fourth of the Certificate of Incorporation of said corporation to increase the total number of shares which the corporation shall have the authority to issue from 11,000 shares, of which 10,000 shares of the par value of $.01 per share are designated as "Common Stock" and 1,000 shares of par value of $.01 per share shall be designated as "Class B Common Stock," so that as amended, the first paragraph of said Article shall read as follows: "FOURTH. The total number of shares of all classes of stock which the corporation shall have authority to issue is 1,500,000 shares, of which 1,300,000 shares of the par value of $.01 per share shall be designated as "Common Stock" and 200,000 shares of the par value of $.01 per share shall be designated as "Class B Common Stock." The powers, preferences and rights of the Common Stock and the Class B Common Stock, and the qualifications, limitations or restrictions thereof, shall be identical in all respects, except as otherwise required by law and except as follows:" SECOND. The foregoing amendment was duly adopted pursuant to a written consent by the holder of a majority of the voting power of the outstanding shares of stock entitled to vote thereon and a majority of the voting rights of the outstanding shares of stock of each class entitled to vote thereon as a class in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, said Torrey Investments Inc. has caused this certificate to be signed by Terence J. Gooding, its President, and attested by Vickie L. Capps, its Secretary, this 21st day of September, 1995. TORREY INVESTMENTS INC. By: /s/ Terence J. Gooding ------------------------------------- President Attest: /s/ Vickie L. Capps ------------------------------------- Secretary -2- EX-3.5 6 EXHIBIT 3.5 CERTIFICATE OF OWNERSHIP AND MERGER OF WAVETEK CORPORATION INTO TORREY INVESTMENTS INC. (Pursuant to Section 253 of the General Corporation Law of Delaware) Torrey Investments Inc., a corporation incorporated on the 28th day of January, 1991, pursuant to the provisions of the General Corporation Law of the State of Delaware: DOES HEREBY CERTIFY that this corporation owns 100% of the capital stock of Wavetek Corporation, incorporated on the 12th day of June, 1991, pursuant to the provisions of the General Corporation Law of the State of Delaware, and that this corporation, by a resolution of its Board of Directors duly adopted by unanimous consent on the 19th day of September, 1995, determined to and did merge into itself said Wavetek Corporation, which resolution is in the following words to wit: WHEREAS this corporation lawfully owns 100% of the outstanding stock of Wavetek Corporation, a corporation organized and existing under the laws of the State of Delaware, and WHEREAS this corporation desires to merge into itself the said Wavetek Corporation, and to be possessed of all the estate, property, rights, privileges and franchises of said corporation, NOW, THEREFORE, BE IT RESOLVED, that this corporation merge into itself said Wavetek Corporation and assume all of its liabilities and obligations, with this corporation being the surviving corporation, and FURTHER RESOLVED, that the president or a vice-president, and the secretary or assistant secretary of this corporation be and they hereby are directed to make and execute, under the corporate seal of this corporation, a certificate of ownership setting forth a copy of the resolution to merge said Wavetek Corporation and assume its liabilities and obligations, and the date of adoption thereof, and to file the same in the office of the Secretary of the State of Delaware, and a certified copy thereof in the office of the Recorder of Deeds of Newcastle County; and FURTHER RESOLVED, that the officers of this corporation be and they hereby are authorized and directed to do all acts and things whatsoever, whether within or without the State of Delaware, which may be in any way necessary or proper to effect said merger; and FURTHER RESOLVED, that the Board of Directors of this corporation declare it advisable to amend Article First of the Certificate of Incorporation of said corporation so that as amended, said Article shall read as follows: "FIRST. The name of the corporation is Wavetek Corporation." IN WITNESS WHEREOF, said Torrey Investments Inc. has caused its corporate seal to be affixed and this certificate to be signed by Terence J. Gooding, its President and attested by Vickie L. Capps, its Secretary, this 21st day of September, 1995. TORREY INVESTMENTS INC. By: /s/ Terence J. Gooding ------------------------------- President Attest: /s/ Vickie L. Capps ------------------------------- Secretary -2- EX-3.6 7 EXHIBIT 3.6 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF WAVETEK CORPORATION Wavetek Corporation, a Delaware corporation (the "Company"), hereby certifies as follows: FIRST. The Board of Directors of the Company duly adopted a resolution setting forth and declaring advisable the amendment of Article Fourth of the Certificate of Incorporation of the Company to increase the total number of shares which the Company shall have authority to issue, to eliminate the two classes of common stock and to effect a ten-for-one stock split of common stock, so that, as amended, said Article shall read as follows: "FOURTH. The total number of shares which the corporation shall have the authority to issue is 15,000,000 shares of Common Stock, par value $.01 per share. Upon the amendment of this Article Fourth, each outstanding share of Common Stock shall be subdivided into ten shares of Common Stock." SECOND. In lieu of a vote of stockholders, written consent to the foregoing amendment has been given by the holders of a majority of the outstanding stock entitled to vote thereon in accordance with the provisions of Section 228 of the General Corporation Law of the State of Delaware (the "DGCL"); written notice will be given to those stockholders who have not consented in writing as provided in said Section 228; and such amendment has been duly adopted in accordance with the provisions of Section 242 of the DGCL. IN WITNESS WHEREOF, Wavetek Corporation has caused this certificate to be signed by Terence J. Gooding, its chairman, as attested by Vickie L. Capps, its Secretary, on this 9th day of June, 1997. By: /s/ Terence J. Gooding ---------------------- Terence J. Gooding Attest: By: /s/ Vickie L. Capps ------------------- Vickie L. Capps EX-3.7 8 EXHIBIT 3.7 BY-LAWS OF TORREY INVESTMENTS INC. ARTICLE I STOCKHOLDERS Section 1.1. ANNUAL MEETINGS. An annual meeting of stockholders shall be held for the election of directors at such date, time and place either within or without the State of Delaware as may be designated by the Board of Directors from time to time. Any other proper business may be transacted at the annual meeting. Section 1.2. SPECIAL MEETINGS. Special meetings of stockholders may be called at any time by the Chairman of the Board, if any, the Vice Chairman of the Board, if any, the President or the Board of Directors, to be held at such date, time and place either within or without the State of Delaware as may be stated in the notice of the meeting. Section 1.3. NOTICE OF MEETINGS. Whenever stockholders are required or permitted to take any action at a meeting, a written notice of the meeting shall be given which shall state the place, date and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Unless otherwise provided by law, the written notice of any meeting shall be given not less than ten nor more than sixty days before the date of the meeting to each stockholder entitled to vote at such meeting. If mailed, such notice shall be deemed to be given when deposited in the United States mail, postage prepaid, directed to the stockholder at such stockholder's address as it appears on the records of the Corporation. Section 1.4. ADJOURNMENTS. Any meeting of stockholders, annual or special, may be adjourned from time to time, to reconvene at the same or some other place, and notice need not be given of any such adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the Corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. Section 1.5. QUORUM. At each meeting of stockholders, except where otherwise provided by law or the certificate of incorporation or these by-laws, the holders of a majority of the outstanding shares of stock entitled to vote on a matter at the meeting, present in person or represented by proxy, shall constitute a quorum. In the absence of a quorum of the holders of any class of stock entitled to vote on a matter, the holders of such class so present or represented may, by majority vote, adjourn the meeting of such class from time to time in the manner provided by Section 1.4 of these by-laws until a quorum of such class shall be so present or represented. Shares of its own capital stock belonging on the record date for the meeting to the Corporation or to another corporation, if a majority of the shares entitled to vote in the election of directors of such other corporation is held, directly or indirectly, by the Corporation, shall neither be entitled to vote nor be counted for quorum purposes; provided, however, that the foregoing shall not limit the right of the Corporation to vote stock, including but not limited to its own stock, held by it in a fiduciary capacity. Section 1.6. ORGANIZATION. Meetings of stockholders shall be presided over by the Chairman of the Board, if any, or in the absence of the Chairman of the Board by the Vice Chairman of the Board, if any, or in the absence of the Vice Chairman of the Board by the President, or in the absence of the President by a Vice President, or in the absence of the foregoing persons by a chairman designated by the Board of Directors, or in the absence of such designation by a chairman chosen at the meeting. The Secretary, or in the absence of the Secretary and Assistant Secretary, shall act as secretary of the meeting, but in the absence of the Secretary an any Assistant Secretary the chairman of the meeting may appoint any person to act as secretary of the meeting. Section 1.7. VOTING; PROXIES. Unless otherwise provided in the certificate of incorporation, each stockholder entitled to vote at any meeting of stockholders shall be entitled to one vote for each share of stock held by such stockholder which has voting power upon the matter in question. Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for such stockholder by proxy, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. A duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power, regardless of whether the interest with which it is coupled is an interest in the stock itself or an interest in the Corpora- -2- tion generally. A stockholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by filing an instrument in writing revoking the proxy or another duly executed proxy bearing a later date with the Secretary of the Corporation. Voting at meetings of stockholders need not be by written ballot and need not be conducted by inspectors unless the holders of a majority of the outstanding shares of all classes of stock entitled to vote thereon present in person or represented by proxy at such meeting shall so determine. Directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors. In all other matters, unless otherwise provided by law or by the certificate of incorporation or these by-laws, the affirmative vote of the holders of a majority of the shares present in person or represented by proxy at the meeting and entitled to vote on the subject matter shall be the act of the stockholders. Where a separate vote by class or classes is required, the affirmative vote of the holders of a majority of the shares of such class or classes present in person or represented by proxy at the meeting shall be the act of such class or classes, except as otherwise provided by law or by the certificate of incorporation or these by-laws. Section 1.8. FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall not be more than sixty nor less than ten days before the date of such meeting. If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. In order that the Corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which date shall not be more than ten days after the date upon which the resolution fixing the record date is adopted by the Board of Directors. If no record date has been fixed by the Board of Directors, the record date for determining stockholders entitled to consent to corporate -3- action in writing without a meeting, when no prior action by the Board of Directors is required by law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the Board of Directors and prior action by the Board of Directors is required by law, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the day on which the Board of Directors adopts the resolution taking such prior action. In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than sixty days prior to such action . If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. Section 1.9. LIST OF STOCKHOLDERS ENTITLED TO VOTE. The Secretary shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof and may be inspected by any stockholder who is present. Section 1.10. CONSENT OF STOCKHOLDERS IN LIEU OF MEETING. Unless otherwise provided in the certificate of incorporation or by law, any action required by law to be taken at any annual or special meeting of stockholders of the Corporation, or any action which may be take at any annual or special meeting of such stockholders, may be taken without a -4- meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the Corporation by delivery to (a) its registered office in the State of Delaware by hand or by certified mail or registered mail, return receipt requested, (b) its principal place of business, or (c) an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Every written consent shall bear the date of signature of each stockholder who signs the consent and no written consent shall be effective to take the corporate action referred to therein unless, within sixty days of the earliest dated consent delivered in the manner required by this by-law to the Corporation, written consents signed by a sufficient number of holders to take action are delivered to the Corporation by delivery to (a) its registered office in the State of Delaware by hand or by certified or registered mail, return receipt requested, (b) its principal place of business, or (c) an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. ARTICLE II BOARD OF DIRECTORS Section 2.1. POWERS; NUMBER; QUALIFICATIONS. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors, except as may be otherwise provided by law or in the certificate of incorporation. The Board of Directors shall consist of one or more members, the number thereof to be determined from time to time by the Board. Directors need not be stockholders. Section 2.2. ELECTION; TERM OF OFFICE; RESIGNATION; REMOVAL; VACANCIES. Each director shall hold office until his or her successor is elected and qualified or until his or her earlier resignation or removal. Any director may resign at any time upon written notice to the Board of Directors or to the President or the Secretary of the Corporation. Such resignation shall take effect at the time specified therein, and unless otherwise specified therein no acceptance of such resignation shall be necessary to make it effective. Any director or the entire Board of Directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors. Unless otherwise provided in the certificate of incorporation or these by-laws, vacancies and newly created directorships resulting from any increase in the authorized number of direc- -5- tors elected by all of the stockholders having the right to vote as a single class or from any other cause may be filled by a majority of the directors then in office, although less than a quorum, or by the sole remaining director. Section 2.3. REGULAR MEETINGS. Regular meetings of the Board of Directors may be held at such places within or without the State of Delaware and at such times as the Board may from time to time determine, and if so determined notice thereof need not be given. Section 2.4. SPECIAL MEETINGS. Special meetings of the Board of Directors may be held at any time or place within or without the State of Delaware whenever called by the Chairman of the Board, if any, by the Vice Chairman of the Board, if any, by the President or by any two directors. Reasonable notice thereof shall be given by the person or persons calling the meeting. Section 2.5. PARTICIPATION IN MEETINGS BY CONFERENCE TELEPHONE PERMITTED. Unless otherwise restricted by the certificate of incorporation or these by-laws, members of the Board of Directors, or any committee designated by the Board, may participate in a meeting of the Board or of such committee, as the case may be, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this by-law shall constitute presence in person at such meeting. Section 2.6. QUORUM; VOTE REQUIRED FOR ACTION. At all meetings of the Board of Directors one-third of the entire Board shall constitute a quorum for the transaction of business. The vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board unless the certificate of incorporation or these by-laws shall require a vote of a greater number. In case at any meeting of the Board a quorum shall not be present, the members of the Board present may adjourn the meeting from time to time until a quorum shall be present. Section 2.7. ORGANIZATION. Meetings of the Board of Directors shall be presided over by the Chairman of the Board, if any, or in the absence of the Chairman of the Board by the Vice Chairman of the Board, if any, or in the absence of the Vice Chairman of the Board by the President, or in their absence by a chairman chosen at the meeting. The Secretary, or in the absence of the Secretary an Assistant Secretary, shall act as secretary of the meeting, but in the absence of the Secretary and any Assistant Secretary the chairman of the meeting may appoint any person to act as secretary of the meeting. -6- Section 2.8. ACTION BY DIRECTORS WITHOUT A MEETING. Unless otherwise restricted by the certificate of incorporation or these by-laws, any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting of all members of the Board or of such committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or committee. Section 2.9. COMPENSATION OF DIRECTORS. Unless otherwise restricted by the certificate of incorporation or these by-laws, the Board of Directors shall have the authority to fix the compensation of directors. ARTICLE III COMMITTEES Section 3.1. COMMITTEES. The Board of Directors may, by resolution passed by a majority of the whole Board, designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board of Directors or in these by-laws, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to amending the certificate of incorporation (except that a committee may, to the extent authorized in the resolution or resolutions providing for the issuance of shares of stock adopted by the Board of Directors, fix the designations and any of the preferences or rights of such shares relating to dividends, redemption, dissolution, any distribution of assets of the Corporation or the conversion into, or the exchange of such shares for, shares of any other class or classes or any other series of the same or any other class or classes of stock of the Corporation or fix the number of shares of any series of stock or authorize the increase or decrease of the shares of any series), adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation's property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of a -7- dissolution, removing or indemnifying directors or amending these by-laws; and, unless the resolution, these by-laws or the certificate of incorporation expressly so provides, no such committee shall have the power or authority to declare a dividend, to authorize the issuance of stock or to adopt a certificate of ownership and merger. Section 3.2. COMMITTEE RULES. Unless the Board of Directors otherwise provides, each committee designated by the Board may adopt, amend and repeal rules for the conduct of its business. In the absence of a provision by the Board or a provision in the rules of such committee to the contrary, a majority of the entire authorized number of members of such committee shall constitute a quorum for the transaction of business, the vote of a majority of the members present at a meeting at the time of such vote if a quorum is then present shall be the act of such committee, and in other respects each committee shall conduct its business in the same manner as the Board conducts its business pursuant to Article II of these by-laws. ARTICLE IV OFFICERS Section 4.1. OFFICERS; ELECTION. As soon as practicable after the annual meeting of stockholders in each year, the Board of Directors shall elect a President and a Secretary, and it may, if it so determines, elect from among its members a Chairman of the Board and a Vice Chairman of the Board. The Board may also elect one or more Vice Presidents, one or more Assistant Vice Presidents, one or more Assistant Secretaries, a Treasurer and one or more Assistant Treasurers and such other officers as the Board may deem desirable or appropriate and may give any of them such further designations or alternate titles as it considers desirable. Any number of offices may be held by the same person unless the certificate of incorporation or these by-laws otherwise provide. Section 4.2. TERM OF OFFICE; RESIGNATION; REMOVAL; VACANCIES. Unless otherwise provided in the resolution of the Board of Directors electing any officer, each officer shall hold office until his or her successor is elected and qualified or until his or her earlier resignation or removal. Any officer may resign at any time upon written notice to the Board or to the President or the Secretary of the Corporation. Such resignation shall take effect at the time specified therein, and unless otherwise specified therein no acceptance of such resignation shall be necessary to make it effective. The Board may remove any officer with or without cause at any time. Any such removal shall be without prejudice to the contractual rights of such officer, if any, with the Corporation, but the election of an officer shall not of itself create contractual rights. Any vacancy occurring in any -8- office of the Corporation by death, resignation, removal or otherwise may be filled by the Board at any regular or special meeting. Section 4.3. POWERS AND DUTIES. The officers of the Corporation shall have such powers and duties in the management of the Corporation as shall be stated in these by-laws or in a resolution of the Board of Directors which is not inconsistent with these by-laws and, to the extent not so stated, as generally pertain to their respective offices, subject to the control of the Board. The Secretary shall have the duty to record the proceedings of the meetings of the stockholders, the Board of Directors and any committees in a book to be kept for that purpose. The Board may require any officer, agent or employee to give security for the faithful performance of his or her duties. ARTICLE V STOCK Section 5.1. CERTIFICATES. Every holder of stock in the Corporation shall be entitled to have a certificate signed by or in the name of the Corporation by the Chairman or Vice Chairman of the Board of Directors, if any, or the President or a Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary, of the Corporation, representing the number of shares of stock in the Corporation owned by such holder. If such certificate is manually signed by one officer or manually countersigned by a transfer agent or by a registrar, any other signature on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue. Section 5.2. LOST, STOLEN OR DESTROYED STOCK CERTIFICATES, ISSUANCE OF NEW CERTIFICATES. The Corporation may issue a new certificate of stock in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen or destroyed certificate, or such owner's legal representative, to give the Corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate. -9- ARTICLE VI MISCELLANEOUS Section 6.1. FISCAL YEAR. The fiscal year of the Corporation shall be determined by the Board of Directors. Section 6.2. SEAL. The Corporation may have a corporate seal which shall have the name of the Corporation inscribed thereon and shall be in such form as may be approved from time to time by the Board of Directors. The corporate seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced. Section 6.3. WAIVER OF NOTICE OF MEETINGS OF STOCKHOLDERS, DIRECTORS AND COMMITTEES. Whenever notice is required to be given by law or under any provision of the certificate of incorporation or these by-laws, a written waiver thereof, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders, directors or members of a committee of directors need be specified in any written waiver of notice unless so required by the certificate of incorporation or these by-laws. Section 6.4. INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES. The Corporation shall indemnify to the full extent permitted by law any person made or threatened to be made a party to any action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that such person or such person's testator or intestate is or was a director, officer or employee of the Corporation or serves or served at the request of the Corporation any other enterprise as a director, officer or employee. Expenses, including attorneys' fees, incurred by any such person in defending any such action, suit or proceeding shall be paid or reimbursed by the Corporation promptly upon receipt by it of an undertaking of such person to repay such expenses if it shall ultimately be determined that such person is not entitled to be indemnified by the Corporation. The rights provided to any person by this by-law shall be enforceable against the Corporation by such person who shall be presumed to have relied upon it in serving or continuing to serve as a director, officer or employee as provided above. No amendment of this by-law shall impair the rights of any person arising at any time with respect to events occurring prior to such amendment. For purposes of this by-law, the term "Corporation" shall include any predecessor of the Corporation and any -10- constituent corporation (including any constituent of a constituent) absorbed by the Corporation in a consolidation or merger; the term "other enterprise" shall include any corporation, partnership, joint venture, trust or employee benefit plan; service "at the request of the Corporation" shall include service as a director, officer or employee of the Corporation which imposes duties on, or involves services by, such director, officer or employee with respect to an employee benefit plan, its participants or beneficiaries; any excise taxes assessed on a person with respect to an employee benefit plan shall be deemed to be indemnifiable expenses; and action by a person with respect to an employee benefit plan which such person reasonably believes to be in the interest of the participants and beneficiaries of such plan shall be deemed to be action not opposed to the best interests of the Corporation. Section 6.5. INTERESTED DIRECTORS; QUORUM. No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board of Directors or committee thereof which authorizes the contract or transaction, or solely because his or her or their votes are counted for such purpose, if: (1) the material facts as to his or her relationship or interest and as to the contract or transaction are disclosed or are known to the Board or the committee, and the Board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (2) the material facts as to his or her relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (3) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified, by the Board, a committee thereof or the stockholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction. Section 6.6. FORM OF RECORDS. Any records maintained by the Corporation in the regular course of its business, including its stock ledger, books of account and minute books, may be kept on, or be in the form of, punch cards, magnetic tape, photographs, microphotographs or any other information storage device, provided that the records so kept can be converted into clearly legible form within a reasonable time. The Corporation shall so convert any records so kept upon the request of any person entitled to inspect the same. -11- Section 6.7. AMENDMENT OF BY-LAWS. These by-laws may be amended or repealed, and new by-laws adopted, by the Board of Directors, but the stockholders entitled to vote may adopt additional by-laws and may amend or repeal any by-law whether or not adopted by them. -12- EX-3.8 9 EXHIBIT 3.8 EXHIBIT 3.8 CERTIFICATE OF MERGER OF TORREY WAVETEK ACQUISITION CORPORATION (a Delaware corporation) INTO WAVETEK CORPORATION (a Delaware corporation) Wavetek Corporation hereby certifies as follows: FIRST. The name and state of incorporation of each of the constituent corporations are Torrey Wavetek Acquisition Corporation, a Delaware corporation, and Wavetek Corporation, a Delaware corporation. SECOND. An agreement of merger has been approved, adopted, certified, executed and acknowledged by each of the constituent corporations in accordance with Section 251 of the General Corporation Law of the State of Delaware. THIRD. The name of the surviving corporation is Wavetek Corporation. FOURTH. The certificate of incorporation of the surviving corporation shall be amended upon the filing of this certificate of merger to read in its entirety as set forth on Exhibit A attached hereto. FIFTH. The executed agreement of merger is on file at the principal place of business of the surviving corporation, the address of which is 9145 Balboa Avenue, San Diego, California 92123. SIXTH. A copy of the agreement of merger will be furnished by the surviving corporation, on request and without cost, to any stockholder of any constituent corporation. IN WITNESS WHEREOF, the undersigned has executed this certificate of merger as of June 28, 1991. WAVETEK CORPORATION By: /s/ C. Frederick Sehnert ------------------------- C. Frederick Sehnert, President Attest: /s/ Sandra M. Walker - ---------------------- Sandra M. Walker, Secretary -2- EXHIBIT A CERTIFICATE OF INCORPORATION OF WAVETEK CORPORATION FIRST. The name of the corporation is Wavetek Corporation. SECOND. The address of the corporation's registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street in the City of Wilmington, County of New Castle. The name of its registered agent at such address is The Corporation Trust Company. THIRD. The purpose of the corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. FOURTH. The total number of shares which the corporation shall have authority to issue is 100 shares of Common Stock, and the par value of each of such shares is $1.00. FIFTH. The board of directors of the corporation is expressly authorized to adopt, amend or repeal by-laws of the corporation. SIXTH. Elections of directors need not be by written ballot except and to the extent provided in the by-laws of the corporation. SEVENTH. Any director or the entire board of directors may be removed, with or without cause, by the holders of a majority of the shares at the time entitled to vote at an election of directors, whether or not the board of directors is classified as provided in subsection (d) of Section 141 of Title 8 of the Delaware Code. EIGHTH. A director of the corporation shall not be liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except to the extent that such exemption from liability or limitation thereof is not permitted under the Delaware Gen-eral Corporation Law as currently in effect or as the same may hereafter be amended. No amendment, modification or repeal of this Article EIGHTH shall adversely affect any right or protection of a director that exists at the time of such amendment, modification or repeal. EX-3.9 10 EXHIBIT 3.9 EXHIBIT 3.9 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF WAVETEK CORPORATION Wavetek Corporation, a Delaware corporation, hereby certifies as follows: FIRST. The Board of Directors of said corporation duly adopted a resolution setting forth and declaring advisable the amendment of Article First of the certificate of incorporation of said corporation so that, as amended, said Article shall read as follows: "FIRST. The name of the corporation is Wavetek U.S. Inc." SECOND. In lieu of a vote of stockholders, written consent to the foregoing amendment has been given by the holder of all of the outstanding stock entitled to vote thereon in accordance with the provisions of Section 228 of the General Corporation Law of Delaware, and such amendment has been duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of Delaware. IN WITNESS WHEREOF, Wavetek Corporation has caused this certificate to be signed by Terence J. Gooding, its President, and attested by Shirlee A. Ewell, its Assistant Secretary, on the 28th day of June, 1991. WAVETEK CORPORATION Attest: By /s/ Terence J. Gooding ----------------------------------- Terence J. Gooding By /s/ Shirlee A. Ewell ------------------------------- Shirlee A. Ewell EX-3.10 11 EXHIBIT 3.10 EXHIBIT 3.10 BY-LAWS OF WAVETEK U.S. INC. (FORMERLY NAMED WAVETEK CORPORATION) ARTICLE I STOCKHOLDERS Section 1.1. ANNUAL MEETINGS. An annual meeting of stockholders shall be held for the election of directors at such date, time and place either within or without the State of Delaware as may be designated by the Board of Directors from time to time. Any other proper business may be transacted at the annual meeting. Section 1.2. SPECIAL MEETINGS. Special meetings of stockholders may be called at any time by the Chairman of the Board, if any, the Vice Chairman of the Board, if any, the President or the Board of Directors, to be held at such date, time and place either within or without the State of Delaware as may be stated in the notice of the meeting. Section 1.3. NOTICE OF MEETINGS. Whenever stockholders are required or permitted to take any action at a meeting, a written notice of the meeting shall be given which shall state the place, date and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Unless otherwise provided by law, the written notice of any meeting shall be given not less than ten nor more than sixty days before the date of the meeting to each stockholder entitled to vote at such meeting. If mailed, such notice shall be deemed to be given when deposited in the United States mail, postage prepaid, directed to the stockholder at such stockholder's address as it appears on the records of the Corporation. Section 1.4. ADJOURNMENTS. Any meeting of stockholders, annual or special, may be adjourned from time to time, to reconvene at the same or some other place, and notice need not be given of any such adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the Corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. Section 1.5. QUORUM. At each meeting of stockholders, except where otherwise provided by law or the certificate of incorporation or these by-laws, the holders of a majority of the outstanding shares of stock entitled to vote on a matter at the meeting, present in person or represented by proxy, shall constitute a quorum. In the absence of a quorum of the holders of any class of stock entitled to vote on a matter, the holders of such class so present or represented may, by majority vote, adjourn the meeting of such class from time to time in the manner provided by Section 1.4 of these by-laws until a quorum of such class shall be so present or represented. Shares of its own capital stock belonging on the record date for the meeting to the Corporation or to another corporation, if a majority of the shares entitled to vote in the election of directors of such other corporation is held, directly or indirectly, by the Corporation, shall neither be entitled to vote nor be counted for quorum purposes; provided, however, that the foregoing shall not limit the right of the Corporation to vote stock, including but not limited to its own stock, held by it in a fiduciary capacity. Section 1.6. ORGANIZATION. Meetings of stockholders shall be presided over by the Chairman of the Board, if any, or in the absence of the Chairman of the Board by the Vice Chairman of the Board, if any, or in the absence of the Vice Chairman of the Board by the President, or in the absence of the President by a Vice President, or in the absence of the foregoing persons by a chairman designated by the Board of Directors, or in the absence of such designation by a chairman chosen at the meeting. The Secretary, or in the absence of the Secretary and Assistant Secretary, shall act as secretary of the meeting, but in the absence of the Secretary an any Assistant Secretary the chairman of the meeting may appoint any person to act as secretary of the meeting. Section 1.7. VOTING; PROXIES. Unless otherwise provided in the certificate of incorporation, each stockholder entitled to vote at any meeting of stockholders shall be entitled to one vote for each share of stock held by such stockholder which has voting power upon the matter in question. Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for such stockholder by proxy, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. A duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power, regardless of whether the interest with which it is coupled is -2- an interest in the stock itself or an interest in the Corporation generally. A stockholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by filing an instrument in writing revoking the proxy or another duly executed proxy bearing a later date with the Secretary of the Corporation. Voting at meetings of stockholders need not be by written ballot and need not be conducted by inspectors unless the holders of a majority of the outstanding shares of all classes of stock entitled to vote thereon present in person or represented by proxy at such meeting shall so determine. Directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors. In all other matters, unless otherwise provided by law or by the certificate of incorporation or these by-laws, the affirmative vote of the holders of a majority of the shares present in person or represented by proxy at the meeting and entitled to vote on the subject matter shall be the act of the stockholders. Where a separate vote by class or classes is required, the affirmative vote of the holders of a majority of the shares of such class or classes present in person or represented by proxy at the meeting shall be the act of such class or classes, except as otherwise provided by law or by the certificate of incorporation or these by-laws. Section 1.8. FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Boardof Directors, and which record date shall not be more than sixty nor less than ten days before the date of such meeting. If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. In order that the Corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board -3- of Directors, and which date shall not be more than ten days after the date upon which the resolution fixing the record date is adopted by the Board of Directors. If no record date has been fixed by the Board of Directors, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is required by law, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the Board of Directors and prior action by the Board of Directors is required by law, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the day on which the Board of Directors adopts the resolution taking such prior action. In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than sixty days prior to such action . If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. Section 1.9. LIST OF STOCKHOLDERS ENTITLED TO VOTE. The Secretary shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the -4- whole time thereof and may be inspected by any stockholder who is present. Section 1.10. CONSENT OF STOCKHOLDERS IN LIEU OF MEETING. Unless otherwise provided in the certificate of incorporation or by law, any action required by law to be taken at any annual or special meeting of stockholders of the Corporation, or any action which may be take at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the Corporation by delivery to (a) its registered office in the State of Delaware by hand or by certified mail or registered mail, return receipt requested, (b) its principal place of business, or (c) an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Every written consent shall bear the date of signature of each stockholder who signs the consent and no written consent shall be effective to take the corporate action referred to therein unless, within sixty days of the earliest dated consent delivered in the manner required by this by-law to the Corporation, written consents signed by a sufficient number of holders to take action are delivered to the Corporation by delivery to (a) its registered office in the State of Delaware by hand or by certified or registered mail, return receipt requested, (b) its principal place of business, or (c) an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. ARTICLE II BOARD OF DIRECTORS Section 2.1. POWERS; NUMBER; QUALIFICATIONS. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors, except as may be otherwise provided by law or in the certificate of incorporation. The Board of Directors shall consist of one or more members, the number thereof to be determined from time to time by the Board. Directors need not be stockholders. Section 2.2. ELECTION; TERM OF OFFICE; RESIGNATION; REMOVAL; VACANCIES. Each director shall hold office until his -5- or her successor is elected and qualified or until his or her successor is elected and qualified or until his or her earlier resignation or removal. Any director may resign at any time upon written notice to the Board of Directors or to the President or the Secretary of the Corporation. Such resignation shall take effect at the time specified therein, and unless otherwise specified therein no acceptance of such resignation shall be necessary to make it effective. Any director or the entire Board of Directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors. Unless otherwise provided in the certificate of incorporation or these by-laws, vacancies and newly created directorships resulting from any increase in the authorized number of directors elected by all of the stockholders having the right to vote as a single class or from any other cause may be filled by a majority of the directors then in office, although less than a quorum, or by the sole remaining director. Section 2.3. REGULAR MEETINGS. Regular meetings of the Board of Directors may be held at such places within or without the State of Delaware and at such times as the Board may from time to time determine, and if so determined notice thereof need not be given. Section 2.4. SPECIAL MEETINGS. Special meetings of the Board of Directors may be held at any time or place within or without the State of Delaware whenever called by the Chairman of the Board, if any, by the Vice Chairman of the Board, if any, by the President or by any two directors. Reasonable notice thereof shall be given by the person or persons calling the meeting. Section 2.5. PARTICIPATION IN MEETINGS BY CONFERENCE TELEPHONE PERMITTED. Unless otherwise restricted by the certificate of incorporation or these by-laws, members of the Board of Directors, or any committee designated by the Board, may participate in a meeting of the Board or of such committee, as the case may be, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this by-law shall constitute presence in person at such meeting. Section 2.6. QUORUM; VOTE REQUIRED FOR ACTION. At all meetings of the Board of Directors one-third of the entire Board shall constitute a quorum for the transaction of business. The vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board unless the certificate of incorporation or these by-laws shall require a vote of a greater number. In case at any meeting of the Board a quorum shall not be present, the -6- members of the Board present may adjourn the meeting from time to time until a quorum shall be present. Section 2.7. ORGANIZATION. Meetings of the Board of Directors shall be presided over by the Chairman of the Board, if any, or in the absence of the Chairman of the Board by the Vice Chairman of the Board, if any, or in the absence of the Vice Chairman of the Board by the President, or in their absence by a chairman chosen at the meeting. The Secretary, or in the absence of the Secretary an Assistant Secretary, shall act as secretary of the meeting, but in the absence of the Secretary and any Assistant Secretary the chairman of the meeting may appoint any person to act as secretary of the meeting. Section 2.8. ACTION BY DIRECTORS WITHOUT A MEETING. Unless otherwise restricted by the certificate of incorporation or these by-laws, any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting of all members of the Board or of such committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or committee. Section 2.9. COMPENSATION OF DIRECTORS. Unless otherwise restricted by the certificate of incorporation or these by-laws, the Board of Directors shall have the authority to fix the compensation of directors. ARTICLE III COMMITTEES Section 3.1. COMMITTEES. The Board of Directors may, by resolution passed by a majority of the whole Board, designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board of Directors or in these by-laws, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business -7- and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to amending the certificate of incorporation (except that a committee may, to the extent authorized in the resolution or resolutions providing for the issuance of shares of stock adopted by the Board of Directors, fix the designations and any of the preferences or rights of such shares relating to dividends, redemption, dissolution, any distribution of assets of the Corporation or the conversion into, or the exchange of such shares for, shares of any other class or classes or any other series of the same or any other class or classes of stock of the Corporation or fix the number of shares of any series of stock or authorize the increase or decrease of the shares of any series), adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation's property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution, removing or indemnifying directors or amending these by-laws; and, unless the resolution, these by-laws or the certificate of incorporation expressly so provides, no such committee shall have the power or authority to declare a dividend, to authorize the issuance of stock or to adopt a certificate of ownership and merger. Section 3.2. COMMITTEE RULES. Unless the Board of Directors otherwise provides, each committee designated by the Board may adopt, amend and repeal rules for the conduct of its business. In the absence of a provision by the Board or a provision in the rules of such committee to the contrary, a majority of the entire authorized number of members of such committee shall constitute a quorum for the transaction of business, the vote of a majority of the members present at a meeting at the time of such vote if a quorum is then present shall be the act of such committee, and in other respects each committee shall conduct its business in the same manner as the Board conducts its business pursuant to Article II of these by-laws. ARTICLE IV OFFICERS Section 4.1. OFFICERS; ELECTION. As soon as practicable after the annual meeting of stockholders in each year, the Board of Directors shall elect a President and a Secretary, and it may, if it so determines, elect from among its members a Chairman of the Board and a Vice Chairman of the Board. The Board may also elect one or more Vice Presidents, -8- one or more Assistant Vice Presidents, one or more Assistant Secretaries, a Treasurer and one or more Assistant Treasurers and such other officers as the Board may deem desirable or appropriate and may give any of them such further designations or alternate titles as it considers desirable. Any number of offices may be held by the same person unless the certificate of incorporation or these by-laws otherwise provide. Section 4.2. TERM OF OFFICE; RESIGNATION; REMOVAL; VACANCIES. Unless otherwise provided in the resolution of the Board of Directors electing any officer, each officer shall hold office until his or her successor is elected and qualified or until his or her earlier resignation or removal. Any officer may resign at any time upon written notice to the Board or to the President or the Secretary of the Corporation. Such resignation shall take effect at the time specified therein, and unless otherwise specified therein no acceptance of such resignation shall be necessary to make it effective. The Board may remove any officer with or without cause at any time. Any such removal shall be without prejudice to the contractual rights of such officer, if any, with the Corporation, but the election of an officer shall not of itself create contractual rights. Any vacancy occurring in any office of the Corporation by death, resignation, removal or otherwise may be filled by the Board at any regular or special meeting. Section 4.3. POWERS AND DUTIES. The officers of the Corporation shall have such powers and duties in the management of the Corporation as shall be stated in these by-laws or in a resolution of the Board of Directors which is not inconsistent with these by-laws and, to the extent not so stated, as generally pertain to their respective offices, subject to the control of the Board. The Secretary shall have the duty to record the proceedings of the meetings of the stockholders, the Board of Directors and any committees in a book to be kept for that purpose. The Board may require any officer, agent or employee to give security for the faithful performance of his or her duties. ARTICLE V STOCK Section 5.1. CERTIFICATES. Every holder of stock in the Corporation shall be entitled to have a certificate signed by or in the name of the Corporation by the Chairman or Vice Chairman of the Board of Directors, if any, or the President or a Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary, of the -9- Corporation, representing the number of shares of stock in the Corporation owned by such holder. If such certificate is manually signed by one officer or manually countersigned by a transfer agent or by a registrar, any other signature on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue. Section 5.2. LOST, STOLEN OR DESTROYED STOCK CERTIFICATES, ISSUANCE OF NEW CERTIFICATES. The Corporation may issue a new certificate of stock in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen or destroyed certificate, or such owner's legal representative, to give the Corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate. ARTICLE VI MISCELLANEOUS Section 6.1. FISCAL YEAR. The fiscal year of the Corporation shall be determined by the Board of Directors. Section 6.2. SEAL. The Corporation may have a corporate seal which shall have the name of the Corporation inscribed thereon and shall be in such form as may be approved from time to time by the Board of Directors. The corporate seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced. Section 6.3. WAIVER OF NOTICE OF MEETINGS OF STOCKHOLDERS, DIRECTORS AND COMMITTEES. Whenever notice is required to be given by law or under any provision of the certificate of incorporation or these by-laws, a written waiver thereof, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be trans- -10- acted at, nor the purpose of, any regular or special meeting of the stockholders, directors or members of a committee of directors need be specified in any written waiver of notice unless so required by the certificate of incorporation or these by-laws. Section 6.4. INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES. The Corporation shall indemnify to the full extent permitted by law any person made or threatened to be made a party to any action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that such person or such person's testator or intestate is or was a director, officer or employee of the Corporation or serves or served at the request of the Corporation any other enterprise as a director, officer or employee. Expenses, including attorneys' fees, incurred by any such person in defending any such action, suit or proceeding shall be paid or reimbursed by the Corporation promptly upon receipt by it of an undertaking of such person to repay such expenses if it shall ultimately be determined that such person is not entitled to be indemnified by the Corporation. The rights provided to any person by this by-law shall be enforceable against the Corporation by such person who shall be presumed to have relied upon it in serving or continuing to serve as a director, officer or employee as provided above. No amendment of this by-law shall impair the rights of any person arising at any time with respect to events occurring prior to such amendment. For purposes of this by-law, the term "Corporation" shall include any predecessor of the Corporation and any constituent corporation (including any constituent of a constituent) absorbed by the Corporation in a consolidation or merger; the term "other enterprise" shall include any corporation, partnership, joint venture, trust or employee benefit plan; service "at the request of the Corporation" shall include service as a director, officer or employee of the Corporation which imposes duties on, or involves services by, such director, officer or employee with respect to an employee benefit plan, its participants or beneficiaries; any excise taxes assessed on a person with respect to an employee benefit plan shall be deemed to be indemnifiable expenses; and action by a person with respect to an employee benefit plan which such person reasonably believes to be in the interest of the participants and beneficiaries of such plan shall be deemed to be action not opposed to the best interests of the Corporation. Section 6.5. INTERESTED DIRECTORS; QUORUM. No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association or other organization in which one or more of its directors or officers -11- are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board of Directors or committee thereof which authorizes the contract or transaction, or solely because his or her or their votes are counted for such purpose, if: (1) the material facts as to his or her relationship or interest and as to the contract or transaction are disclosed or are known to the Board or the committee, and the Board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (2) the material facts as to his or her relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (3) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified, by the Board, a committee thereof or the stockholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction. Section 6.6. FORM OF RECORDS. Any records maintained by the Corporation in the regular course of its business, including its stock ledger, books of account and minute books, may be kept on, or be in the form of, punch cards, magnetic tape, photographs, microphotographs or any other information storage device, provided that the records so kept can be converted into clearly legible form within a reasonable time. The Corporation shall so convert any records so kept upon the request of any person entitled to inspect the same. Section 6.7. AMENDMENT OF BY-LAWS. These by-laws may be amended or repealed, and new by-laws adopted, by the Board of Directors, but the stockholders entitled to vote may adopt additional by-laws and may amend or repeal any by-law whether or not adopted by them. -12- EX-4.1 12 EXHIBIT 4.1 WAVETEK CORPORATION AND WAVETEK U.S. INC. AS GUARANTOR $85,000,000 10 1/8% SENIOR SUBORDINATED NOTES DUE JUNE 15, 2007 _____________ INDENTURE DATED AS OF JUNE 11, 1997 _____________ THE BANK OF NEW YORK AS TRUSTEE TABLE OF CONTENTS
ARTICLE 1 PAGE DEFINITIONS AND INCORPORATION BY REFERENCE Section 1.01. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Section 1.02 Other Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . 16 Section 1.03 Incorporation by Reference of Trust Indenture Act. . . . . . . . . . 17 Section 1.04 Rules of Construction. . . . . . . . . . . . . . . . . . . . . . . . 17 ARTICLE 2 THE NOTES Section 2.01 Form and Dating. . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Section 2.02 Execution and Authentication . . . . . . . . . . . . . . . . . . . . 20 Section 2.03 Registrar and Paying Agent . . . . . . . . . . . . . . . . . . . . . 21 Section 2.04 Paying Agent to Hold Money in Trust. . . . . . . . . . . . . . . . . 21 Section 2.05 Holder Lists . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Section 2.06 Transfer and Exchange. . . . . . . . . . . . . . . . . . . . . . . . 22 Section 2.07 Replacement Notes. . . . . . . . . . . . . . . . . . . . . . . . . . 32 Section 2.08 Outstanding Notes. . . . . . . . . . . . . . . . . . . . . . . . . . 32 Section 2.09 Treasury Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Section 2.10 Temporary Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Section 2.11 Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Section 2.12 Defaulted Interest . . . . . . . . . . . . . . . . . . . . . . . . . 34 ARTICLE 3 REDEMPTION Section 3.01 Notices to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . 34 Section 3.02 Selection of Notes to Be Redeemed. . . . . . . . . . . . . . . . . . 34 Section 3.03 Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . 35 Section 3.04 Effect of Notice of Redemption . . . . . . . . . . . . . . . . . . . 36 Section 3.05 Deposit of Redemption Price. . . . . . . . . . . . . . . . . . . . . 36 Section 3.06 Notes Redeemed in Part . . . . . . . . . . . . . . . . . . . . . . . 36 Section 3.07 Optional Redemption. . . . . . . . . . . . . . . . . . . . . . . . . 36 Section 3.08 Mandatory Redemption . . . . . . . . . . . . . . . . . . . . . . . . 37 ARTICLE 4 COVENANTS Section 4.01 Payment of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Section 4.02 Maintenance of Office or Agency. . . . . . . . . . . . . . . . . . . 38 Section 4.03 Compliance Certificate . . . . . . . . . . . . . . . . . . . . . . . 38 Section 4.04 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Section 4.05 Stay, Extension and Usury Laws . . . . . . . . . . . . . . . . . . . 39 Section 4.06 Change of Control. . . . . . . . . . . . . . . . . . . . . . . . . . 39 Section 4.07 Asset Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Section 4.08 Restricted Payments. . . . . . . . . . . . . . . . . . . . . . . . . 41 Section 4.09 Incurrence of Indebtedness and Issuance of Preferred Stock . . . . . 43 Section 4.10 Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Section 4.11 Dividend and Other Payment Restrictions Affecting Subsidiaries . . . 46 i PAGE Section 4.12 Limitation on Layering Debt. . . . . . . . . . . . . . . . . . . . . 47 Section 4.13 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . 47 Section 4.14 Foreign Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . 48 Section 4.15 Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Section 4.16 Additional Subsidiary Guarantees . . . . . . . . . . . . . . . . . . 49 ARTICLE 5 SUCCESSORS Section 5.01 Limitations on Merger, Consolidation or Sale of Substantially All Assets . . . . . . . . . . . . . . . . . . . . . . 49 Section 5.02 Successor Corporation Substituted. . . . . . . . . . . . . . . . . . 50 ARTICLE 6 DEFAULTS AND REMEDIES Section 6.01 Events of Default. . . . . . . . . . . . . . . . . . . . . . . . . . 50 Section 6.02 Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 Section 6.03 Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 Section 6.04 Waiver of Past Defaults. . . . . . . . . . . . . . . . . . . . . . . 53 Section 6.05 Control by Majority. . . . . . . . . . . . . . . . . . . . . . . . . 53 Section 6.06 Limitation on Suits. . . . . . . . . . . . . . . . . . . . . . . . . 53 Section 6.07 Rights of Holders to Receive Payment . . . . . . . . . . . . . . . . 54 Section 6.08 Collection Suit by Trustee . . . . . . . . . . . . . . . . . . . . . 54 Section 6.09 Trustee May File Proofs of Claim . . . . . . . . . . . . . . . . . . 54 Section 6.10 Priorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 Section 6.11 Undertaking for Costs. . . . . . . . . . . . . . . . . . . . . . . . 56 ARTICLE 7 TRUSTEE . . . . . . . . . . . . . . . . . . 56 Section 7.01 Duties of Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . 56 Section 7.02 Rights of Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . 57 Section 7.03 Individual Rights of Trustee . . . . . . . . . . . . . . . . . . . . 58 Section 7.04 Trustee's Disclaimer . . . . . . . . . . . . . . . . . . . . . . . . 58 Section 7.05 Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . . . . 59 Section 7.06 Reports by Trustee to Holders. . . . . . . . . . . . . . . . . . . . 59 Section 7.07 Compensation and Indemnity . . . . . . . . . . . . . . . . . . . . . 60 Section 7.08 Replacement of Trustee . . . . . . . . . . . . . . . . . . . . . . . 61 Section 7.09 Successor Trustee by Merger, etc.. . . . . . . . . . . . . . . . . . 62 Section 7.10 Eligibility; Disqualification. . . . . . . . . . . . . . . . . . . . 62 Section 7.11 Preferential Collection of Claims Against the Company. . . . . . . . 62 ARTICLE 8 LEGAL DEFEASANCE AND COVENANT DEFEASANCE Section 8.01 Option to Effect Legal Defeasance or Covenant Defeasance . . . . . . 62 Section 8.02. Legal Defeasance and Discharge . . . . . . . . . . . . . . . . . . . 63 Section 8.03 Covenant Defeasance. . . . . . . . . . . . . . . . . . . . . . . . . 63 Section 8.04 Conditions to Legal or Covenant Defeasance . . . . . . . . . . . . . 64 Section 8.05 Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous Provisions . . . . . . . . . . . . . . . . . . . 66 ii PAGE Section 8.06 Repayment to the Company . . . . . . . . . . . . . . . . . . . . . . 67 Section 8.07 Reinstatement. . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 ARTICLE 9 AMENDMENT, SUPPLEMENT AND WAIVER Section 9.01 Without Consent of Holders . . . . . . . . . . . . . . . . . . . . . 68 Section 9.02 With Consent of Holders. . . . . . . . . . . . . . . . . . . . . . . 68 Section 9.03 Compliance with Trust Indenture Act. . . . . . . . . . . . . . . . . 70 Section 9.04 Revocation and Effect of Consents. . . . . . . . . . . . . . . . . . 70 Section 9.05 Notation on or Exchange of Notes . . . . . . . . . . . . . . . . . . 71 Section 9.06 Trustee to Sign Amendments, etc. . . . . . . . . . . . . . . . . . . 71 ARTICLE 10 SUBSIDIARY GUARANTEES Section 10.01 Subsidiary Guarantees. . . . . . . . . . . . . . . . . . . . . . . . 71 Section 10.02 Execution and Delivery of Subsidiary Guarantees. . . . . . . . . . . 73 Section 10.03 Subsidiary Guarantors May Consolidate, etc., on Certain Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 Section 10.04 Releases Following Sale of Assets. . . . . . . . . . . . . . . . . . 75 Section 10.05 Limitation of Subsidiary Guarantor's Liability . . . . . . . . . . . 75 Section 10.06 Application of Certain Terms and Provisions to the Subsidiary Guarantors . . . . . . . . . . . . . . . . . . . . . . . 76 Section 10.07 Release of Subsidiary Guarantees . . . . . . . . . . . . . . . . . . 76 Section 10.08 Subordination of Subsidiary Guarantees . . . . . . . . . . . . . . . 76 ARTICLE 11 SUBORDINATION Section 11.01 Agreement to Subordinate . . . . . . . . . . . . . . . . . . . . . . 77 Section 11.02 Liquidation; Dissolution; Bankruptcy . . . . . . . . . . . . . . . . 77 Section 11.03 Default on Designated Senior Debt. . . . . . . . . . . . . . . . . . 78 Section 11.04 Acceleration of Notes. . . . . . . . . . . . . . . . . . . . . . . . 79 Section 11.05 When Distribution Must Be Paid Over. . . . . . . . . . . . . . . . . 79 Section 11.06 Notice by Company. . . . . . . . . . . . . . . . . . . . . . . . . . 80 Section 11.07 Subrogation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 Section 11.08 Relative Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . 80 Section 11.09 Subordination May Not Be Impaired by Company . . . . . . . . . . . . 80 Section 11.10 Distribution or Notice to Representative . . . . . . . . . . . . . . 81 Section 11.11 Rights of Trustee and Paying Agent . . . . . . . . . . . . . . . . . 82 Section 11.12 Authorization to Effect Subordination. . . . . . . . . . . . . . . . 82 Section 11.13 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 ARTICLE 12 MISCELLANEOUS Section 12.01 Trust Indenture Act Controls . . . . . . . . . . . . . . . . . . . . 83 Section 12.02 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83 Section 12.03 Communication by Holders with Other Holders. . . . . . . . . . . . . 84 Section 12.04 Certificate and Opinion as to Conditions Precedent . . . . . . . . . 84 Section 12.05 Statements Required in Certificate or Opinion. . . . . . . . . . . . 84 Section 12.06 Rules by Trustee and Agents. . . . . . . . . . . . . . . . . . . . . 85 iii PAGE Section 12.07 Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . . 85 Section 12.08 No Recourse Against Others . . . . . . . . . . . . . . . . . . . . . 85 Section 12.09 Duplicate Originals. . . . . . . . . . . . . . . . . . . . . . . . . 85 Section 12.10 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . 86 Section 12.11 No Adverse Interpretation of Other Agreements. . . . . . . . . . . . 86 Section 12.12 Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86 Section 12.13 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86 Section 12.14 Counterpart Originals. . . . . . . . . . . . . . . . . . . . . . . . 86 Section 12.15 Table of Contents, Headings, etc.. . . . . . . . . . . . . . . . . . 86 SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 EXHIBITS Exhibit A-1 Form of Note Exhibit A-2 Form of Regulation S Temporary Note Exhibit B-1 Form of Certificate for Exchange or Registration of Transfer of Rule 144A Global Note to Regulation S Global Note Exhibit B-2 Form of Certificate for Exchange or Registration of Transfer From Regulation S Global Note to Rule 144A Global Note Exhibit B-3 Form of Certificate for Exchange or Registration of Transfer of Certificated Notes Exhibit B-4 Form of Certificate for Exchange or Registration of Transfer From Rule 144A Global Note or Regulation S Permanent Global Note to Certificated Note Exhibit B-5 Form of Certificate for Exchange or Registration of Transfer From Certificated Note to Rule 144A Global Note or Regulation S Permanent Global Note
iv INDENTURE dated as of June 11, 1997, between Wavetek Corporation, a Delaware corporation (the "Company"), Wavetek U.S. Inc., a Delaware corporation, as guarantor, and The Bank of New York, a New York corporation, as trustee ("Trustee"). Each party agrees as follows for the benefit of each other and for the equal and ratable benefit of the Holders of the 10 1/8% Series A Senior Subordinated Notes due 2007 (the "Series A Notes") and the 10 1/8% Series B Senior Subordinated Notes due 2007 (the "Series B Notes" and, together with the Series A Notes, the "Notes") of the Company: ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01. DEFINITIONS "ACQUIRED DEBT" means, with respect to any specified Person, (i) Indebtedness of any other Person existing at the time such other Person is merged with or into or became a Subsidiary of such specified Person, including, without limitation, Indebtedness incurred in connection with, or in contemplation of, such other Person merging with or into or becoming a Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person. "AFFILIATE" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person, and in the case of the Company and its Subsidiaries, shall include Yokogawa until such time as Yokogawa has beneficial ownership of less than five percent of the Company's Capital Stock. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; PROVIDED that beneficial ownership of 10% or more of the voting securities of a Person shall be deemed to be control. "AGENT" means any Registrar, Paying Agent or co-registrar. "AGENT MEMBERS" means any member of, or participant in, the Depositary. "APPLICABLE PROCEDURES" means, with respect to any transfer or exchange of beneficial interests in a Global Note, the rules and procedures of the Depositary that are applicable to such transfer or exchange. 2 "ASSET SALE" means (i) the sale, lease, conveyance or other disposition of any assets (including, without limitation, by way of a sale and leaseback) other than sales of Cash Equivalents and inventory in the ordinary course of business (PROVIDED that the sale, lease, conveyance or other disposition of all or substantially all of the assets of the Company and its Subsidiaries taken as a whole will be governed by the provisions of Section 4.06 hereof and/or the provisions of Section 5.01 hereof and not by the provisions of Section 4.07), and (ii) the issue or sale by the Company or any of its Subsidiaries of Equity Interests of any of the Company's Subsidiaries, in the case of either clause (i) or (ii), whether in a single transaction or a series of related transactions (a) that have a fair market value in excess of $2,000,000 or (b) for net proceeds in excess of $2,000,000. Notwithstanding the foregoing: (i) a transfer of assets by the Company to a Wholly Owned Subsidiary or by a Wholly Owned Subsidiary to the Company or to another Wholly Owned Subsidiary, (ii) an issuance of Equity Interests by a Wholly Owned Subsidiary to the Company or to another Wholly Owned Subsidiary, and (iii) a Restricted Payment that is permitted by Section 4.08 hereof will not be deemed to be Asset Sales. "AUTHENTICATION ORDER" means an Officers' Certificate ordering the Trustee to authenticate Notes. "BOARD OF DIRECTORS" means the Board of Directors of the Company or any authorized committee of the Board of Directors. "BOARD RESOLUTION" means a resolution duly adopted by the Board of Directors of the Company. "BUSINESS DAY" means any day other than a Legal Holiday. "CAPITAL LEASE OBLIGATION" means, at the time any determination thereof is to be made, (i) the amount of the liability in respect of a capital lease that would at such time be required to be capitalized on a balance sheet in accordance with GAAP, or (ii) so long as the Master Lease, dated as of October 21, 1994, as amended, with respect to property in Indianapolis, Indiana, is not accounted for as a capital lease, the amount of the liability with respect thereto recorded on the Company's balance sheet. "CAPITAL STOCK" means (i) in the case of a corporation, corporate stock, (ii) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, (iii) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited) and (iv) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person. 3 "CASH EQUIVALENTS" means (i) United States dollars or foreign currency that is readily exchangeable into United States dollars, (ii) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof having maturities of not more than 12 months from the date of acquisition, (iii) certificates of deposit and eurodollar time deposits with maturities of 12 months or less from the date of acquisition, bankers' acceptances with maturities not exceeding 12 months and overnight bank deposits, in each case with any domestic commercial bank having capital and surplus in excess of $500,000,000 and a Keefe Bank Watch Rating of "B" or better, (iv) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (ii) and (iii) above entered into with any financial institution meeting the qualifications specified in clause (iii) above, and (v) commercial paper having the highest rating obtainable from Moody's Investors Service, Inc. or Standard & Poor's Corporation and in each case maturing within 12 months after the date of acquisition. "CERTIFICATED NOTES" means Notes that are in the form of the Notes attached hereto as Exhibit A-1, that do not include the information called for by footnotes 1 and 2 thereof. "CHANGE OF CONTROL" means the occurrence of any of the following: (i) the sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the assets of the Company and its Subsidiaries taken as a whole to any "person" (as such term is used in Section 13(d)(3) of the Exchange Act) other than the Principals or their Related Parties (as defined below), (ii) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any "person" (as defined above), other than the Principals and their Related Parties, becomes the "beneficial owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that a person shall be deemed to have "beneficial ownership" of all securities that such person has the right to acquire, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition), directly or indirectly, of more than 50% of the Voting Stock of the Company (measured by voting power rather than number of shares), (iii) the first day on which a majority of the members of the Board of Directors of the Company are not Continuing Directors, or (iv) the Company consolidates with, or merges with or into, any Person or sells, assigns, conveys, transfers, leases or otherwise disposes of all or substantially all of its assets to any Person, or any Person consolidates with, or merges with or into, the Company, in any such event pursuant to a transaction in which any of the outstanding Voting Stock of the Company is converted into or exchanged for cash, securities or other property, other than any such transaction where the majority of the members of the Board of Directors of such Person are Continuing Directors. 4 "CONSOLIDATED CASH FLOW" means, with respect to any Person for any period, the Consolidated Net Income of such Person for such period plus (i) an amount equal to any extraordinary loss or provision, including any provision for restructuring operations, plus any net loss realized in connection with an Asset Sale (to the extent such losses were deducted in computing such Consolidated Net Income), plus (ii) provision for taxes based on income or profits of such Person and its Subsidiaries for such period, to the extent that such provision for taxes was included in computing such Consolidated Net Income, plus (iii) consolidated interest expense of such Person and its Subsidiaries for such period, whether paid or accrued and whether or not capitalized (including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net payments (if any) pursuant to Hedging Obligations), to the extent that any such expense was deducted in computing such Consolidated Net Income, plus (iv) depreciation, amortization (including amortization of goodwill and other intangibles but excluding amortization of prepaid cash expenses that were paid in a prior period) and other non-cash expenses (excluding any such non-cash expense to the extent that it represents an accrual of or reserve for cash expenses in any future period or amortization of a prepaid cash expense that was paid in a prior period) of such Person and its Subsidiaries for such period to the extent that such depreciation, amortization and other non-cash expenses were deducted in computing such Consolidated Net Income, minus (v) non-cash items increasing such Consolidated Net Income for such period, in each case, on a consolidated basis and determined in accordance with GAAP; PROVIDED that Consolidated Net Income shall exclude the impact of foreign currency translations. Notwithstanding the foregoing, the provision for taxes on the income or profits of, and the depreciation and amortization and other non-cash charges of, a Subsidiary of the referent Person shall be added to Consolidated Net Income to compute Consolidated Cash Flow only to the extent that a corresponding amount would be permitted at the date of determination to be dividended to the Company by such Subsidiary either (i) without prior governmental approval or (ii) with governmental approval that has been obtained or that could readily and reasonably be obtained, and without direct or indirect restriction pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to that Subsidiary or its stockholders. "CONSOLIDATED NET INCOME" means, with respect to any Person for any period, the aggregate of the Net Income of such Person and its Subsidiaries for such period, on a consolidated basis, determined in accordance with GAAP and excluding any one-time charge or expense incurred in order to consummate the Recapitalization Transactions; PROVIDED that (i) the Net Income (but not loss) of any Person that is not a Subsidiary or that is accounted for by the equity method of accounting shall be included 5 only to the extent of the amount of dividends or distributions paid in cash to the referent Person or a Wholly Owned Subsidiary thereof that is a Subsidiary Guarantor, (ii) the Net Income of any Subsidiary shall be excluded to the extent that the declaration or payment of dividends or similar distributions by that Subsidiary of that Net Income is not at the date of determination permitted without any prior governmental approval (unless such governmental approval could be readily and reasonably obtained) or, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Subsidiary or its stockholders, (iii) the Net Income of any Person acquired in a pooling of interests transaction for any period prior to the date of such acquisition shall be excluded and (iv) the cumulative effect of a change in accounting principles shall be excluded. "CONSOLIDATED NET WORTH" means, with respect to any Person as of any date, the sum of (i) the consolidated equity of the common stockholders of such Person and its consolidated Subsidiaries as of such date plus (ii) the respective amounts reported on such Person's balance sheet as of such date with respect to any series of preferred stock (other than Disqualified Stock) that by its terms is not entitled to the payment of dividends unless such dividends may be declared and paid only out of net earnings in respect of the year of such declaration and payment, but only to the extent of any cash received by such Person upon issuance of such preferred stock, less (x) all write-ups (other than write-ups resulting from foreign currency translations and write-ups of tangible assets of a going concern business made within 12 months after the acquisition of such business) subsequent to the Issue Date in the book value of any asset owned by such Person or a consolidated Subsidiary of such Person, (y) all investments as of such date in unconsolidated Subsidiaries and in Persons that are not Subsidiaries (except, in each case, Permitted Investments), and (z) all unamortized debt discount and expense and unamortized deferred charges, excluding goodwill and other purchased intangibles, as of such date, all of the foregoing determined in accordance with GAAP. "CONTINUING DIRECTORS" means, as of any date of determination, any member of the Board of Directors of the Company who (i) was a member of such Board of Directors on the Issue Date or (ii) was nominated for election or elected to such Board of Directors pursuant to the Stockholders Agreement or with the approval of a majority of the Continuing Directors who were members of such Board at the time of such nomination or election. "CORPORATE TRUST OFFICE OF THE TRUSTEE" shall be at the address of the Trustee specified in Section 12.02 or such other address as the Trustee may give notice to the Company. "DEFAULT" means any event that is or with the passage of time or the giving of notice or both would be an Event of Default. 6 "DEPOSITARY" means, with respect to the Notes issuable or issued in whole or in part in global form, the Person specified in Section 2.03 hereof as the Depositary with respect to the Notes, until a successor shall have been appointed and become such Depositary pursuant to the applicable provision of this Indenture, and, thereafter, "Depositary" shall mean or include such successor. "DESIGNATED SENIOR DEBT" means (i) any Indebtedness outstanding under the New Credit Agreement and (ii) any other Senior Debt permitted under this Indenture the principal amount of which is $25,000,000 or more and that has been designated by the Company as "Designated Senior Debt." "DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the Holder thereof, in whole or in part, on or prior to the date that is 91 days after the date on which the Notes mature; PROVIDED, that Capital Stock issued to employees pursuant to agreements providing that the employee may require the Company to repurchase such Capital Stock in certain circumstances shall not be deemed to be Disqualified Stock if such agreements provide that the repurchase rights are subject to the limitations on such repurchases set forth in Section 4.08. "DOLLARS" and "$" means lawful money or currency of the United States of America. "EQUITY INTERESTS" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from time to time. "EXCHANGE OFFER" means the offer that may be made by the Company pursuant to the Registration Rights Agreement to exchange Series B Notes for Series A Notes. "EXISTING INDEBTEDNESS" means up to $7,000,000 in aggregate principal amount of Indebtedness of the Company and its Subsidiaries (other than Indebtedness under the New Credit Agreement) in existence on the Issue Date after the Recapitalization Transactions, until such amounts are repaid. 7 "FIXED CHARGES" means, with respect to any Person for any period, the sum, without duplication, of (i) the consolidated interest expense of such Person and its Subsidiaries for such period, whether paid or accrued (including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net payments (if any) pursuant to Hedging Obligations) and (ii) the consolidated interest expense of such Person and its Subsidiaries that was capitalized during such period, and (iii) any interest expense on Indebtedness of another Person that is Guaranteed by such Person or one of its Subsidiaries or secured by a Lien on assets of such Person or one of its Subsidiaries (whether or not such Guarantee or Lien is called upon) and (iv) the product of (a) all dividend payments, whether or not in cash, on any series of preferred stock of such Person or any of its Subsidiaries, other than dividend payments on Equity Interests payable solely in Equity Interests of the Company, times (b) a fraction, the numerator of which is one and the denominator of which is one minus the then current combined federal, state and local statutory tax rate of such Person, expressed as a decimal, in each case, on a consolidated basis and in accordance with GAAP. "FIXED CHARGE COVERAGE RATIO" means with respect to any Person for any period, the ratio of the Consolidated Cash Flow of such Person for such period to the Fixed Charges of such Person for such period. In the event that the Company or any of its Subsidiaries incurs, assumes, Guarantees or redeems any Indebtedness (other than revolving credit borrowings) or issues preferred stock subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated but prior to the date on which the event for which the calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to such incurrence, assumption, Guarantee or redemption of Indebtedness, or such issuance or redemption of preferred stock, as if the same had occurred at the beginning of the applicable four-quarter reference period. In addition, for purposes of making the computation referred to above, (i) acquisitions that have been made by the Company or any of its Subsidiaries, including through mergers or consolidations and including any related financing transactions, during the four-quarter reference period or subsequent to such reference period and on or prior to the Calculation Date shall be deemed to have occurred on the first day of the four-quarter reference period and Consolidated Cash Flow for such reference period shall be calculated without giving effect to clause (iii) of the proviso set forth in the definition of Consolidated Net Income, and (ii) the Consolidated Cash Flow attributable to discontinued operations, as determined in accordance with GAAP, and operations or 8 businesses disposed of prior to the Calculation Date, shall be excluded, and (iii) the Fixed Charges attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, shall be excluded, but only to the extent that the obligations giving rise to such Fixed Charges will not be obligations of the referent Person or any of its Subsidiaries following the Calculation Date. "FOREIGN SUBSIDIARY" means, with respect to any person, any Subsidiary of such person which is incorporated or otherwise organized under the laws of any jurisdiction other than the United States of America, any state thereof or the District of Columbia and substantially all of whose consolidated assets are located outside the United States. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect on the Issue Date. "GLOBAL NOTES" means, individually and collectively, the Regulation S Temporary Global Note, the Regulation S Permanent Global Note and the Rule 144A Global Note. "GOODING" means Terence J. Gooding. "GOVERNMENT SECURITIES" means direct obligations of the United States of America, or any agency or instrumentality thereof for the payment of which the full faith and credit of the United States of America is pledged. "GUARANTEE" means a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner (including, without limitation, letters of credit and reimbursement agreements in respect thereof), of all or any part of any Indebtedness. "HEDGING OBLIGATIONS" means, with respect to any Person, the obligations of such Person under (i) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements, (ii) other agreements or arrangements designed to protect such Person against fluctuations in interest rates or (iii) agreements or arrangements designed to protect such Person against fluctuations in foreign currency exchange rates in the conduct of its operations. "HOLDER" means a Person in whose name a Note is registered. 9 "INDEBTEDNESS" means, with respect to any Person, any indebtedness of such Person, whether or not contingent, in respect of borrowed money or evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof) or banker's acceptances or representing Capital Lease Obligations or the balance deferred and unpaid of the purchase price of any property or representing any Hedging Obligations, except any such balance that constitutes an accrued expense or trade payable, if and to the extent any of the foregoing indebtedness (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of such Person prepared in accordance with GAAP, as well as all indebtedness of others secured by a Lien on any asset of such Person (whether or not such indebtedness is assumed by such Person) and, to the extent not otherwise included, the Guarantee by such Person of any indebtedness of any other Person. "INDENTURE" means this Indenture as amended or supplemented from time to time. "INVESTMENTS" means, with respect to any Person, all investments by such Person in other Persons (including Affiliates) in the forms of direct or indirect loans (including guarantees of Indebtedness or other obligations), advances or capital contributions (excluding commission, travel and similar advances to officers and employees made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities, together with all items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. If the Company or any Subsidiary of the Company sells or otherwise disposes of any Equity Interests of any direct or indirect Subsidiary of the Company such that, after giving effect to any such sale or disposition, such Person is no longer a Subsidiary of the Company, the Company shall be deemed to have made an Investment on the date of any such sale or disposition equal to the fair market value of the Equity Interests of such Subsidiary not sold or disposed of in an amount determined as provided in the final paragraph of Section 4.08. "ISSUE DATE" means June 11, 1997, the date on which the Series A Notes are originally issued. "LIEN" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction). 10 "LIQUIDATED DAMAGES" means all of the liquidated damages owing pursuant to Section 5 of the Registration Rights Agreement. "NET INCOME" means, with respect to any Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of preferred stock dividends, excluding, however, (i) any gain (but not loss), together with any related provision for taxes on such gain (but not loss), realized in connection with (a) any Asset Sale (including, without limitation, dispositions pursuant to sale and leaseback transactions) or (b) the disposition of any securities by such Person or any of its Subsidiaries or the extinguishment of any Indebtedness of such Person or any of its Subsidiaries and (ii) any extraordinary or nonrecurring gain (but not loss), together with any related provision for taxes on such extraordinary or nonrecurring gain (but not loss). "NET PROCEEDS" means the aggregate cash proceeds received by the Company or any of its Subsidiaries in respect of any Asset Sale (including, without limitation, any cash received upon the sale or other disposition of any non-cash consideration received in any Asset Sale), net of the direct costs relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees, and sales commissions) and any relocation expenses incurred as a result thereof, taxes paid or payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements), amounts required to be applied to repay Indebtedness secured by such assets (other than pursuant to the New Credit Agreement) and any reserve for adjustment in respect of the sale price of such asset or assets established in accordance with GAAP. "NEW CREDIT AGREEMENT" means that certain Credit Agreement, dated as of June 11, 1997, by and among the Company and DLJ Capital Funding, Inc., and the banks named therein, for $45,000,000 aggregate principal amount of borrowings, including any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith, and in each case as amended, modified, extended, renewed, refunded, replaced or refinanced from time to time. "NOTE CUSTODIAN" means the Trustee, as custodian with respect to the Global Notes, or any successor entity thereto. "OBLIGATIONS" means any principal, interest, penalties, fees, indemnifications, reimbursements, costs, expenses, damages and other liabilities payable under the documentation governing any Indebtedness. "OFFICER" means the Chief Executive Officer, the President, the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the Secretary or any Vice President of the Company. 11 "OFFICER'S CERTIFICATE" means a certificate signed by an Officer, whom must be the principal executive officer, principal financial officer or principal accounting officer of the Company. "OPINION OF COUNSEL" means an opinion from legal counsel who is reasonably acceptable to the Trustee. Except with respect to any opinion delivered pursuant to Article 8, the counsel may be an employee of the Company. The counsel may be counsel to the Company. "PERMITTED INVESTMENTS" means: (a) any Investment in the Company or in a Wholly Owned Subsidiary of the Company and that is engaged in the test instrumentation industry or a business reasonably related thereto; (b) any Investment in Cash Equivalents, to the extent that such Investment is not made for speculative investment purposes; (c) any Investment by the Company or any Subsidiary of the Company in a Person, if as a result of such Investment (i) such Person becomes a Wholly Owned Subsidiary of the Company that is a Subsidiary Guarantor and that is engaged in the test instrumentation industry or a business reasonably related thereto or (ii) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Company or a Wholly Owned Subsidiary of the Company that is a Subsidiary Guarantor and that is engaged in the test instrumentation industry or a business reasonably related thereto; (d) any Restricted Investment made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant to and in compliance with Section 4.07; (e) any acquisition of assets in exchange for the issuance of Equity Interests (other than Disqualified Stock) of the Company; and (f) other Investments in any Person having an aggregate fair market value (measured on the date each such Investment was made and without giving effect to subsequent changes in value), when taken together with all other Investments made pursuant to this clause (f) that are at the time outstanding, not to exceed $5,000,000. "PERMITTED JUNIOR SECURITIES" means Equity Interests in the Company or unsecured debt securities that (i) are subordinated to all Senior Debt (and any debt securities issued in exchange for Senior Debt) on terms at least as favorable to the Senior Debt as those contained in Article 11 hereof, (ii) may be guaranteed by the Subsidiary Guarantor on terms at least as favorable to the Senior Debt as those contained in the Subsidiary Guarantees, and (iii) have a final maturity and weighted average life to maturity which is the same as or greater than, the Notes. "PERMITTED LIENS" means: (i) Liens securing Senior Debt or Senior Debt of Subsidiary Guarantors that was permitted by the terms hereof to be incurred; (ii) Liens in favor of the Company or any Subsidiary; (iii) Liens on property of a Person existing at the time such Person is merged into or consolidated with the Company or any Subsidiary of the Company; PROVIDED that such Liens were in existence prior to the 12 contemplation of such merger or consolidation and do not extend to any assets other than those of the Person merged into or consolidated with the Company; (iv) Liens on property existing at the time of acquisition thereof by the Company or any Subsidiary of the Company, PROVIDED that such Liens were in existence prior to the contemplation of such acquisition; (v) Liens to secure the performance of statutory obligations, surety or appeal bonds, performance bonds or other obligations of a like nature incurred in the ordinary course of business; (vi) Liens existing on the Issue Date; (vii) Liens to secure Indebtedness (including Capital Lease Obligations) permitted by clause (ix) of the second paragraph of Section 4.09 covering only the assets acquired with such Indebtedness and accessions, modifications, products and proceeds thereof; (viii) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and diligently concluded, PROVIDED that any reserve or other appropriate provision as shall be required in conformity with GAAP shall have been made therefor; and (ix) Liens incurred in the ordinary course of business of the Company or any Subsidiary of the Company with respect to obligations that do not exceed $5,000,000 at any one time outstanding and that (a) are not incurred in connection with the borrowing of money or the obtaining of advances or credit (other than trade credit in the ordinary course of business) and (b) do not in the aggregate materially detract from the value of the property or materially impair the use thereof in the operation of business by the Company or such Subsidiary. "PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of the Company or any of its Subsidiaries issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund other Indebtedness of the Company or any of its Subsidiaries; PROVIDED that: (i) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount of (or accreted value, if applicable), plus accrued interest on, the Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded (plus the amount of premiums, prepayments, penalties, reasonable expenses incurred in connection therewith); (ii) such Permitted Refinancing Indebtedness has a final maturity date equal to or later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; (iii) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is subordinated in right of payment to the Notes, such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and is subordinated in right of payment to, the Notes on terms at least as favorable to the Holders of Notes as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; and (iv) such Indebtedness is incurred either by the Company or by the Subsidiary who is the obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded. 13 "PERSON" means any individual, corporation, limited liability company, partnership, association, joint stock company, trust or trustee thereof, estate or executor thereof, unincorporated organization or joint venture. "PRINCIPALS" means Gooding, DLJMB Funding II, Inc., DLJ Merchant Banking Partners II, L.P., DLJ Diversified Partners, L.P., UK Investment Plan 1997 Partners, DLJ First ESC L.L.C., DLJ Offshore Partners II, C.V, DLJ EAB Partners, L.P., DLJ Millennium Partners, L.P. and Green Equity Investors II, L.P. "PUBLIC EQUITY OFFERING" means an initial registered public offering of the Capital Stock of the Company, and any subsequent registered primary offerings of Capital Stock of the Company. "REGISTRATION RIGHTS AGREEMENT" means the A/B Exchange Registration Rights Agreement, dated as of the Issue Date, by and among the Company and the other parties named on the signature pages thereof, as such agreement may be amended, modified or supplemented from time to time. "REGULATION S" means Regulation S promulgated under the Securities Act. "REGULATION S GLOBAL NOTE" means a Regulation S Temporary Global Note or Regulation S Permanent Global Note, as appropriate. "REGULATION S PERMANENT GLOBAL NOTE" means a permanent global note that contains the paragraph referred to in footnote 1 and the additional schedule referred to in footnote 2 to the form of the Note attached hereto as Exhibit A-1, and that is deposited with and registered in the name of the Depositary, representing the Notes sold in reliance on Regulation S. "REGULATION S TEMPORARY GLOBAL NOTE" means a single temporary global note in the form of the Note attached hereto as Exhibit A-2 that is deposited with and registered in the name of the Depositary, representing Notes sold in reliance on Regulation S. "RELATED PARTY" with respect to any Principal means (A) any controlling stockholder, 80% (or more) owned Subsidiary, or spouse or immediate family member (in the case of an individual) of such Principal or (B) or trust, corporation, partnership or other entity, the beneficiaries, stockholders, partners, owners or Persons beneficially holding an 80% or more controlling interest of which consist of such Principal and/or such other Persons referred to in the immediately preceding clause (A). 14 "REPRESENTATIVE" means (a) the administrative agent under the New Credit Agreement or (b) the indenture trustee or other trustee, agent or representative for any other Senior Debt. "RESPONSIBLE OFFICER" when used with respect to the Trustee, means any officer within the Corporate Trust Office (or any successor group of the Trustee) assigned by the Trustee to administer the Indenture in its corporate trust department. "RESTRICTED INVESTMENT" means an Investment other than a Permitted Investment. "RULE 144A" means Rule 144A promulgated under the Securities Act. "RULE 144A GLOBAL NOTE" means a permanent global note that contains the paragraph referred to in footnote 1 and the additional schedule referred to in footnote 2 to the form of the Note attached hereto as Exhibit A-1, and that is deposited with and registered in the name of the Depositary, representing Notes sold in reliance on Rule 144A. "SEC" means the Securities and Exchange Commission. "SECURITIES ACT" means the Securities Act of 1933, as amended from time to time. "SENIOR DEBT" means (i) all Obligations (including without limitation interest accruing after a filing of a petition in bankruptcy whether or not such interest is an allowable claim in such proceeding) of the Company under the New Credit Agreement, and (ii) any other Indebtedness permitted to be incurred by the Company under the terms hereof, unless the instrument under which such Indebtedness is incurred expressly provides that such Guarantee is on a parity with or subordinated in right of payment to the Subsidiary 15 the instrument under which such Indebtedness is incurred expressly provides that such Guarantee is on a parity with or subordinated in right of payment to the Subsidiary Guarantees. Notwithstanding anything to the contrary in the foregoing, Senior Debt of the Subsidiary Guarantors will not include (v) any liability under the Master Lease, dated as of October 21, 1994, as amended, with respect to property in Indianapolis, Indiana, (w) any liability for federal, state, local or other taxes owed or owing by the Subsidiary Guarantor, (x) any Indebtedness of any of the Subsidiary Guarantors to the Company, any of their Subsidiaries or other Affiliates thereof, (y) any trade payables or (z) any Indebtedness that is incurred in violation of this Indenture. "SIGNIFICANT SUBSIDIARY" means any Subsidiary that would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Act, as such Regulation is in effect on the date hereof. "STATED MATURITY" means, with respect to any installment of interest or principal on any series of Indebtedness, the date on which such payment of interest or principal was scheduled to be paid in the original documentation governing such Indebtedness, and shall not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof. "STOCKHOLDERS AGREEMENT" means the Stockholders Agreement dated as of June 11, 1997 by and among certain holders of Capital Stock of the Company. "SUBSIDIARY" means, with respect to any Person, (i) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person (or a combination thereof) and (ii) any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are such Person or of one or more Subsidiaries of such Person (or any combination thereof). "SUBSIDIARY GUARANTEES" means the guarantees executed by the Subsidiary Guarantors, substantially in the form of the guarantee attached to Exhibit A hereto. "SUBSIDIARY GUARANTORS" means each of (i) Wavetek U.S. Inc., a Delaware corporation and (ii) any other subsidiary that executes a Subsidiary Guarantee in accordance with the provisions hereof, and their respective successors and assigns. 16 "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) as in effect on the date on which this Indenture is qualified under the TIA. "TRANSFER RESTRICTED SECURITIES" means securities that bear or are required to bear the legend set forth in Section 2.06 hereof. "TRUSTEE" means the party named as such above until a successor replaces it in accordance with the applicable provisions of this Indenture and thereafter means the successor serving hereunder. "VOTING STOCK" of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of Directors of such Person. "WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness at any date, the number of years obtained by dividing (i) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment, by (ii) the then outstanding principal amount of such Indebtedness. "WHOLLY OWNED SUBSIDIARY" of any Person means a Subsidiary of such Person all of the outstanding Capital Stock or other ownership interests of which (other than directors' qualifying shares) shall at the time be owned by such Person or by one or more Wholly Owned Subsidiaries of such Person and one or more Wholly Owned Subsidiaries of such Person. "YOKOGAWA" means Yokogawa Electric Corporation, a corporation organized under the laws of Japan. SECTION 1.02 OTHER DEFINITIONS Defined in Term Section ---- ---------- "Accredited Investor".................... 2.01 "Affiliate Transaction".................. 4.12 "Asset Sale Offer"....................... 4.07 "Asset Sale Offer Period"................ 4.07 "Asset Sale Offer Purchase Date"......... 4.07 "Bankruptcy Law"......................... 6.01 17 "Benefitted Party"....................... 10.01 "Change of Control Offer"................ 4.06 "Change Of Control Offer Period"......... 4.06 "Change of Control Payment".............. 4.06 "Change of Control Purchase Date"........ 4.06 "Custodian".............................. 6.01 "DTC".................................... 2.03 "Event of Default"....................... 6.01 "Legal Holiday".......................... 12.07 "Paying Agent"........................... 2.03 "Payment Blockage Notice"................ 11.03 "QIB".................................... 2.01 "Registrar".............................. 2.03 "Restricted Payments".................... 4.08 "Transfer Restricted Security"........... 2.06
SECTION 1.03 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: "INDENTURE SECURITIES" means the Notes; "INDENTURE SECURITY HOLDER" means a Holder; "INDENTURE TO BE QUALIFIED" means this Indenture; "INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means the Trustee; "OBLIGOR" on the Notes means the Company or any successor obligor upon the Notes. All other terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule under the TIA have the meanings so assigned to them. SECTION 1.04 RULES OF CONSTRUCTION Unless the context otherwise requires: 18 (1) a term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (3) "or" is not exclusive; (4) words in the singular include the plural, and in the plural include the singular; and (5) provisions apply to successive events and transactions. ARTICLE 2 THE NOTES SECTION 2.01 FORM AND DATING The Notes and Subsidiary Guarantees and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A-1, which is part of this Indenture. The Notes may have notations, legends or endorsements required by law, stock exchange rule or usage. Each Note shall be dated the date of its authentication. The Notes shall be issued initially in denominations of $1,000 and integral multiples thereof. The terms and provisions contained in the Notes shall constitute, and are hereby expressly made, a part of this Indenture, and the Company and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. (a) RULE 144A GLOBAL NOTES. Notes offered and sold within the United States to qualified institutional buyers as defined in Rule 144A ("QIBs") in reliance on Rule 144A shall be issued initially in the form of Rule 144A Global Notes, which shall be deposited on behalf of the purchasers of the Notes represented thereby with the Depositary at its New York office, and registered in the name of the Depositary or a nominee of the Depositary, duly executed by the Company and authenticated by the Trustee as hereinafter provided. The aggregate principal amount of the Rule 144A Global Notes may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depositary or its nominee as hereinafter provided. (b) REGULATION S GLOBAL NOTES. Notes offered and sold in reliance on Regulation S shall be issued initially in the form of the Regulation S Temporary Global Note, which shall be deposited on behalf of the purchasers of the Notes represented 19 thereby with the Trustee, at its New York office, as custodian for the Depositary, and registered in the name of the Depositary or the nominee of the Depositary, duly executed by the Company and authenticated by the Trustee as hereinafter provided. The "40-day restricted period" (as defined in Regulation S) shall beterminated upon the receipt by the Trustee of (i) a written certificate from the Depositary certifying that it has received certification of non-United States beneficial ownership of 100% of the aggregate principal amount of the Regulation S Temporary Global Note (except to the extent of any beneficial owners thereof who acquired an interest therein pursuant to another exemption from registration under the Securities Act and who will take delivery of a beneficial ownership interest in a Rule 144A Global Note, all as contemplated by Section 2.06(a)(ii) hereof), and (ii) an Officers' Certificate from the Company. Following the termination of the 40-day restricted period, beneficial interests in the Regulation S Temporary Global Note shall be exchanged for beneficial interests in Regulation S Permanent Global Notes pursuant to the Applicable Procedures. Simultaneously with the authentication of Regulation S Permanent Global Notes, the Trustee shall cancel the Regulation S Temporary Global Note. The aggregate principal amount of the Regulation S Temporary Global Note and the Regulation S Permanent Global Notes may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depositary or its nominee, as the case may be, in connection with transfers of interest as hereinafter provided. (c) GLOBAL NOTES IN GENERAL. Each Global Note shall represent such of the outstanding Notes as shall be specified therein and each shall provide that it shall represent the aggregate amount of outstanding Notes from time to time endorsed thereon and that the aggregate amount of outstanding Notes represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions. Any endorsement of a Global Note to reflect the amount of any increase or decrease in the amount of outstanding Notes represented thereby shall be made by the Trustee or the Note Custodian, at the direction of the Trustee, in accordance with instructions given by the Holder thereof as required by Section 2.06 hereof. Except as set forth in Section 2.06 hereof, the Global Notes may be transferred, in whole and not in part, only to another nominee of the Depositary or to a successor of the Depositary or its nominee. (d) BOOK-ENTRY PROVISIONS. This Section 2.01(d) shall apply only to Rule 144A Global Notes and the Regulation S Permanent Global Notes deposited with or on behalf of the Depositary. The Company shall execute and the Trustee shall, in accordance with this Section 2.01(d) and Section 2.02, authenticate and deliver the Global Notes that (i) shall be registered in the name of the Depositary or the nominee of the Depositary and (ii) shall 20 be delivered by the Trustee to the Depositary or pursuant to the Depositary's instructions or held by the Trustee as custodian for the Depositary. Agent Members shall have no rights either under this Indenture with respect to any Global Note held on their behalf by the Depositary or by the Trustee as custodian for the Depositary or under such Global Note, and the Depositary may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner of such Global Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or impair, as between the Depositary and its Agent Members, the operation of customary practices of such Depositary governing the exercise of the rights of an owner of a beneficial interest in any Global Note. (e) CERTIFICATED NOTES. Notes issued to accredited investors as defined in Rule 501(a)(1), (2), (3), (4) or (7) under the Securities Act ("Accredited Investors") who are not QIBs and other Notes not issued as interests in the Global Notes will be issued in certificated form substantially in the form of Exhibit A-1 attached hereto (but without including the text referred to in footnotes 1 and 2 thereto). SECTION 2.02 EXECUTION AND AUTHENTICATION Two Officers shall sign the Notes for the Company by manual or facsimile signature. The Company's seal shall be reproduced on the Notes and may be in facsimile form. If an Officer whose signature is on a Note no longer holds that office at the time a Note is authenticated, the Note shall nevertheless be valid. A Note shall not be valid until authenticated by the manual signature of the Trustee. The signature shall be conclusive evidence that the Note has been authenticated under this Indenture. The Trustee shall, upon delivery of an Authentication Order, authenticate Notes for original issue up to the aggregate principal amount stated in paragraph 4 of the Notes. The aggregate principal amount of Notes outstanding at any time may not exceed such amount except as provided in Section 2.07 hereof. The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Notes. An authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes 21 authentication by such agent. An authenticating agent has the same rights as an Agent to deal with the Company or an Affiliate of the Company. Neither the Company nor the Trustee shall have any responsibility for any defect in the CUSIP number that appears on any Note, check, advice of payment or redemption notice, and any such document may contain a statement to the effect that CUSIP numbers have been assigned by an independent service for convenience of reference and that neither the Company nor the Trustee shall be liable for any inaccuracy in such numbers. SECTION 2.03 REGISTRAR AND PAYING AGENT The Company shall maintain in the Borough of Manhattan, the City of New York, State of New York, and in such other locations as it shall determine, (i) an office or agency where Notes may be presented for registration of transfer or for exchange ("Registrar") and (ii) an office or agency where Notes may be presented for payment ("Paying Agent"). The Registrar shall keep a register of the Notes and of their transfer and exchange. The Company may appoint one or more co-registrars and one or more additional paying agents. The term "Registrar" includes any co-registrar and the term "Paying Agent" includes any additional paying agent. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company shall notify the Trustee in writing of the name and address of any Agent not a party to this Indenture. If the Company fails to appoint or maintain another entity as Registrar or Paying Agent, the Trustee shall act as such. The Company or any of its Subsidiaries may act as Paying Agent or Registrar. The Company initially appoints The Depository Trust Company ("DTC") to act as Depositary with respect to the Global Notes. The Company initially appoints the Trustee to act as the Registrar and Paying Agent and to act as Note Custodian with respect to the Global Notes. The Company initially appoints the Trustee to act as the Registrar and Paying Agent with respect to the Certificated Notes. SECTION 2.04 PAYING AGENT TO HOLD MONEY IN TRUST The Company shall require each Paying Agent other than the Trustee to agree in writing that the Paying Agent will hold in trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment of principal, premium, if any, interest and Liquidated Damages, if any, on the Notes, and shall notify the Trustee of any default by the Company in making any such payment. While any such default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee. The Company at any time may require a Paying Agent to pay all money held 22 by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the Company or a Subsidiary) shall have no further liability for the money. If the Company or a Subsidiary acts as Paying Agent, it shall segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the Company, the Trustee shall serve as Paying Agent for the Notes. SECTION 2.05 HOLDER LISTS The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of all Holders and shall otherwise comply with TIA Section 312(a). If the Trustee is not the Registrar, the Company shall furnish to the Trustee at least seven Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of the Holders of Notes, and the Company shall otherwise comply with TIA Section 312(a). SECTION 2.06 TRANSFER AND EXCHANGE (a) TRANSFER AND EXCHANGE OF GLOBAL NOTES. The transfer and exchange of Global Notes or beneficial interests therein shall be effected through the Depositary, in accordance with this Indenture and the procedures of the Depositary therefor, which shall include restrictions on transfer comparable to those set forth herein to the extent required by the Securities Act. Beneficial interests in a Global Note may be transferred to Persons who take delivery thereof in the form of a beneficial interest in the same Global Note in accordance with the transfer restrictions set forth in the legend in subsection (g) of this Section 2.06. Transfers of beneficial interests in the Global Notes to Persons required to take delivery thereof in the form of an interest in another Global Note shall be permitted as follows: (i) RULE 144A GLOBAL NOTE TO REGULATION S GLOBAL NOTE. If, at any time, an owner of a beneficial interest in a Rule 144A Global Note deposited with the Depositary (or the Trustee as custodian for the Depositary) wishes to transfer its interest in such Rule 144A Global Note to a Person who is required or permitted to take delivery thereof in the form of an interest in a Regulation S Global Note, such owner shall, subject to the Applicable Procedures, exchange or cause the exchange of such interest for an equivalent beneficial interest in a Regulation S Global Note as provided in this Section 2.06(a)(i). Upon receipt by the Trustee of (1) written instructions given in accordance with the Applicable Procedures from an Agent Member directing the Trustee to credit or cause to be credited a beneficial interest in the Regulation S Global Note in an amount equal to the beneficial interest in the Rule 144A Global Note to be exchanged, (2) a 23 written order given in accordance with the Applicable Procedures containing information regarding the participant account of the Depositary to be credited with such increase and (3) a certificate in the form of Exhibit B-1 hereto given by the owner of such beneficial interest stating that the transfer of such interest has been made in compliance with the transfer restrictions applicable to the Global Notes and pursuant to and in accordance with Rule 903 or Rule 904 of Regulation S, then the Trustee, as Registrar, shall instruct the Depositary to reduce or cause to be reduced the aggregate principal amount at maturity of the applicable Rule 144A Global Note and to increase or cause to be increased the aggregate principal amount at maturity of the applicable Regulation S Global Note by the principal amount at maturity of the beneficial interest in the Rule 144A Global Note to be exchanged, to credit or cause to be credited to the account of the Person specified in such instructions a beneficial interest in the Regulation S Global Note equal to the reduction in the aggregate principal amount at maturity of the Rule 144A Global Note, and to debit, or cause to be debited, from the account of the Person making such exchange or transfer the beneficial interest in the Rule 144A Global Note that is being exchanged or transferred. (ii) REGULATION S GLOBAL NOTE TO RULE 144A GLOBAL NOTE. If, at any time, an owner of a beneficial interest in a Regulation S Global Note deposited with the Depositary (or with the Trustee as custodian for the Depositary) wishes to transfer its interest in such Regulation S Global Note to a Person who is required or permitted to take delivery thereof in the form of an interest in a Rule 144A Global Note, such owner shall, subject to the Applicable Procedures, exchange or cause the exchange of such interest for an equivalent beneficial interest in a Rule 144A Global Note as provided in this Section 2.06(a)(ii). Upon receipt by the Trustee of (1) written instructions from the Depositary, directing the Trustee, as Registrar, to credit or cause to be credited a beneficial interest in the Rule 144A Global Note equal to the beneficial interest in the Regulation S Global Note to be exchanged, such instructions to contain information regarding the participant account with the Depositary to be credited with such increase, (2) a written order given in accordance with the Applicable Procedures containing information regarding the participant account of the Depositary and (3) a certificate in the form of Exhibit B-2 attached hereto given by the owner of such beneficial interest stating (A) if the transfer is pursuant to Rule 144A, that the Person transferring such interest in a Regulation S Global Note reasonably believes that the Person acquiring such interest in a Rule 144A Global Note is a QIB and is obtaining such beneficial interest in a transaction meeting the requirements of Rule 144A and any applicable blue sky or securities laws of any state of the United States, (B) that the transfer complies with the requirements of Rule 144 under the Securities Act and any applicable blue sky 24 or securities laws of any state of the United States or (C) if the transfer is pursuant to any other exemption from the registration requirements of the Securities Act, that the transfer of such interest has been made in compliance with the transfer restrictions applicable to the Global Notes and pursuant to and in accordance with the requirements of the exemption claimed, such statement to be supported by an Opinion of Counsel from the transferee or the transferor in form reasonably acceptable to the Company and to the Registrar, then the Trustee, as Registrar, shall instruct the Depositary to reduce or cause to be reduced the aggregate principal amount at maturity of such Regulation S Global Note and to increase or cause to be increased the aggregate principal amount at maturity of the applicable Rule 144A Global Note by the principal amount at maturity of the beneficial interest in the Regulation S Global Note to be exchanged, and the Trustee, as Registrar, shall instruct the Depositary, concurrently with such reduction, to credit or cause to be credited to the account of the Person specified in such instructions a beneficial interest in the applicable Rule 144A Global Note equal to the reduction in the aggregate principal amount at maturity of such Regulation S Global Note and to debit or cause to be debited from the account of the Person making such transfer the beneficial interest in the Regulation S Global Note that is being transferred. (b) TRANSFER AND EXCHANGE OF CERTIFICATED NOTES. When Certificated Notes are presented by a Holder to the Registrar with a request: (x) to register the transfer of the Certificated Notes; or (y) to exchange such Certificated Notes for an equal principal amount of Certificated Notes of other authorized denominations, the Registrar shall register the transfer or make the exchange as requested; PROVIDED, HOWEVER, that the Certificated Notes presented or surrendered for register of transfer or exchange: (i) shall be duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Registrar duly executed by such Holder or by his attorney, duly authorized in writing; and (ii) in the case of a Certificated Note that is a Transfer Restricted Security, such request shall be accompanied by the following additional information and documents, as applicable: (A) if such Transfer Restricted Security is being delivered to the Registrar by a Holder for registration in the name of such Holder, 25 without transfer, or such Transfer Restricted Security is being transferred to the Company, a certification to that effect from such Holder (in substantially the form of Exhibit B-3 hereto); (B) if such Transfer Restricted Security is being transferred to a QIB in accordance with Rule 144A under the Securities Act or pursuant to an exemption from registration in accordance with Rule 144 under the Securities Act or pursuant to an effective registration statement under the Securities Act, a certification to that effect from such Holder (in substantially the form of Exhibit B-3 hereto); or (C) if such Transfer Restricted Security is being transferred in reliance on any other exemption from the registration requirements of the Securities Act (including Rule 904 thereunder), a certification to that effect from such Holder (in substantially the form of Exhibit B-3 hereto) and an Opinion of Counsel from such Holder or the transferee reasonably acceptable to the Company and to the Registrar to the effect that such transfer is in compliance with the Securities Act. (c) TRANSFER OF A BENEFICIAL INTEREST IN A RULE 144A GLOBAL NOTE OR REGULATION S PERMANENT GLOBAL NOTE FOR A CERTIFICATED NOTE (i) Any Person having a beneficial interest in a Rule 144A Global Note or Regulation S Permanent Global Note may upon request, subject to the Applicable Procedures, exchange such beneficial interest for a Certificated Note. Upon receipt by the Trustee of written instructions or such other form of instructions as is customary for the Depositary, from the Depositary or its nominee on behalf of any Person having a beneficial interest in a Rule 144A Global Note or Regulation S Permanent Global Note, and, in the case of a Transfer Restricted Security, the following additional information and documents (all of which may be submitted by facsimile): (A) if such beneficial interest is being transferred to the Person designated by the Depositary as being the beneficial owner, a certification to that effect from such Person (in substantially the form of Exhibit B-4 hereto); (B) if such beneficial interest is being transferred to a QIB in accordance with Rule 144A under the Securities Act or pursuant to an exemption from registration in accordance with Rule 144 under the Securities Act or pursuant to an effective registration statement under the 26 Securities Act, a certification to that effect from the transferor (in substantially the form of Exhibit B-4 hereto); or (C) if such beneficial interest is being transferred in reliance on any other exemption from the registration requirements of the Securities Act (including Rule 904 thereunder), a certification to that effect from the transferor (in substantially the form of Exhibit B-4 hereto) and an Opinion of Counsel from the transferee or the transferor reasonably acceptable to the Company and to the Registrar to the effect that such transfer is in compliance with the Securities Act, in which case the Trustee or the Note Custodian, at the direction of the Trustee, shall, in accordance with the standing instructions and procedures existing between the Depositary and the Note Custodian, cause the aggregate principal amount of Rule 144A Global Notes or Regulation S Permanent Global Notes, as applicable, to be reduced accordingly and, following such reduction, the Company shall execute and the Trustee shall authenticate and deliver to the transferee a Certificated Note in the appropriate principal amount. (ii) Certificated Notes issued in exchange for a beneficial interest in a Rule 144A Global Note or Regulation S Permanent Global Note, as applicable, pursuant to this Section 2.06(c) shall be registered in such names and in such authorized denominations as the Depositary, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Trustee. The Trustee shall deliver such Certificated Notes to the Persons in whose names such Notes are so registered. Following any such issuance of Certificated Notes, the Trustee, as Registrar, shall instruct the Depositary to reduce or cause to be reduced the aggregate principal amount at maturity of the applicable Global Note to reflect the transfer. (d) RESTRICTIONS ON TRANSFER AND EXCHANGE OF GLOBAL NOTES. Notwithstanding any other provision of this Indenture (other than the provisions set forth in subsection (f) of this Section 2.06), a Global Note may not be transferred as a whole except by the Depositary to a nominee of the Depositary, or by a nominee of the Depositary to the Depositary or another nominee of the Depositary, or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. (e) TRANSFER AND EXCHANGE OF A CERTIFICATED NOTE FOR A BENEFICIAL INTEREST IN A GLOBAL NOTE. Holders of Certificated Notes may offer, resell, pledge or otherwise transfer such Notes only pursuant to an effective registration statement under the Securities Act, inside the United States to a QIB in a transaction meeting the requirements of Rule 144A, in a transaction meeting the requirements of Rule 144 under the Securities 27 Act, outside the United States in a transaction meeting the requirements of Rule 904 under the Securities Act or to the Company, in each case in compliance with any applicable securities laws of any State of the United States or any other applicable jurisdiction. When Certificated Notes are presented by a Holder to the Registrar with a request (x) to register the transfer of the Certificated Notes or (y) to exchange such Certificated Notes for an equal principal amount of Certificated Notes of other authorized denominations, the Registrar shall register the transfer or make the exchange as requested if its requirements for such transactions are met; PROVIDED, HOWEVER, that the Certificated Notes presented or surrendered for register of transfer or exchange: (i) shall be duly endorsed or accompanied by a written instruction of transfer in form satisfactory to the Registrar duly executed by such Holder or by his attorney, duly authorized in writing, which instructions, if applicable, shall direct the Trustee (A) to cancel any Certificated Note being exchanged for another Certificated Note or a beneficial interest in a Global Note in accordance with Section 2.11 hereof, and (B) to make, or to direct the Registrar to make, an endorsement on the appropriate Global Note to reflect an increase in the aggregate principal amount of the Notes represented by such Global Note; and (ii) such request shall be accompanied by the following additional information and documents, as applicable: (A) if such Certificated Note is being delivered to the Registrar by a Holder for registration in the name of such Holder, without transfer, a certification to that effect from such Holder (in substantially the form of Exhibit B-5 hereto); or (B) if such Certificated Note is being transferred to a QIB in accordance with Rule 144A, pursuant to Rule 144 under the Securities Act or pursuant to an exemption from registration in accordance with Rule 904 under the Securities Act or pursuant to an effective registration statement under the Securities Act, a certification to that effect from such Holder (in substantially the form of Exhibit B-5 hereto). (f) AUTHENTICATION OF CERTIFICATED NOTES IN ABSENCE OF DEPOSITARY. If at any time: (i) the Depositary for the Notes notifies the Company that the Depositary is unwilling or unable to continue as Depositary for the Global Notes 28 and a successor Depositary for the Global Notes is not appointed by the Company within 90 days after delivery of such notice; or (ii) the Company delivers to the Trustee an Officers' Certificate notifying the Trustee that it elects to cause the issuance of Certificated Notes under this Indenture, then the Company shall execute, and the Trustee shall, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, authenticate and deliver, Certificated Notes in an aggregate principal amount equal to the principal amount of the Global Notes in exchange for such Global Notes. (g) LEGENDS (i) Except as permitted by the following paragraphs (ii), (iii) and (iv), each Note certificate evidencing Global Notes and Certificated Notes (and all Notes issued in exchange therefor or substitution thereof) shall bear a legend in substantially the following form (each a "Transfer Restricted Security"): "THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1)(a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT OR (d) IN ACCORDANCE WITH 29 ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND, IN THE CASE OF CLAUSE (b), (c) or (d), BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), (2) TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE." (ii) Upon any sale or transfer of a Transfer Restricted Security (including any Transfer Restricted Security represented by a Global Note) pursuant to Rule 144 under the Securities Act or pursuant to an effective registration statement under the Securities Act: (A) in the case of any Transfer Restricted Security that is a Certificated Note, the Registrar shall permit the Holder thereof to exchange such Transfer Restricted Security for a Certificated Note that does not bear the legend set forth in (i) above and rescind any restriction on the transfer of such Transfer Restricted Security upon receipt of a certification from the transferring Holder substantially in the form of Exhibit B-3 hereto; and (B) in the case of any Transfer Restricted Security represented by a Global Note, such Transfer Restricted Security shall not be required to bear the legend set forth in (i) above, but shall continue to be subject to the provisions of Section 2.06(a) and (b) hereof; PROVIDED, HOWEVER, that with respect to any request for an exchange of a Transfer Restricted Security that is represented by a Global Note for a Certificated Note that does not bear the legend set forth in (i) above, which request is made in reliance upon Rule 144, the Holder thereof shall certify in writing to the Registrar that such request is being made pursuant to Rule 144 (such certification to be substantially in the form of Exhibit B-4 hereto). (iii) Upon any sale or transfer of a Transfer Restricted Security (including any Transfer Restricted Security represented by a Global Note) in reliance on any exemption from the registration requirements of the Securities 30 Act (other than exemptions pursuant to Rule 144A or Rule 144 under the Securities Act) in which the Holder or the transferee provides an Opinion of Counsel to the Company and the Registrar in form and substance reasonably acceptable to the Company and the Registrar (which Opinion of Counsel shall also state that the transfer restrictions contained in the legend are no longer applicable): (A) in the case of any Transfer Restricted Security that is a Certificated Note, the Registrar shall permit the Holder thereof to exchange such Transfer Restricted Security for a Certificated Note that does not bear the legend set forth in (i) above and rescind any restriction on the transfer of such Transfer Restricted Security; and (B) in the case of any Transfer Restricted Security represented by a Global Note, such Transfer Restricted Security shall not be required to bear the legend set forth in (i) above, but shall continue to be subject to the provisions of Section 2.06(a) and (b) hereof. (iv) Notwithstanding the foregoing, upon consummation of the Exchange Offer in accordance with the Registration Rights Agreement, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02 hereof, the Trustee shall authenticate Series B Notes in exchange for Series A Notes accepted for exchange in the Exchange Offer, which Series B Notes shall not bear the legend set forth in (i) above, and the Registrar shall rescind any restriction on the transfer of such Series B Notes, in each case unless the Holder of such Series A Notes is either (A) a broker-dealer, (B) a Person participating in the distribution of the Series A Notes or (C) a Person who is an affiliate (as defined in Rule 144A) of the Company. (h) CANCELLATION AND/OR ADJUSTMENT OF GLOBAL NOTES. At such time as all beneficial interests in Global Notes have been exchanged for Certificated Notes, redeemed, repurchased or cancelled, all Global Notes shall be returned to or retained and cancelled by the Trustee in accordance with Section 2.11 hereof. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for an interest in another Global Note or for Certificated Notes, redeemed, repurchased or cancelled, the principal amount of Notes represented by such Global Note shall be reduced accordingly and an endorsement shall be made on such Global Note, by the Trustee or the Note Custodian, at the direction of the Trustee, to reflect such reduction. 31 (i) GENERAL PROVISIONS RELATING TO TRANSFERS AND EXCHANGES (i) To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Certificated Notes and Global Notes at the Registrar's request. (ii) No service charge shall be made to a Holder for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or similar governmental charge payable upon exchange or transfer pursuant to Sections 3.07, 4.06, 4.07 and 9.05 hereof). (iii) The Registrar shall not be required to register the transfer of or exchange any Note selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part. (iv) All Certificated Notes and Global Notes issued upon any registration of transfer or exchange of Certificated Notes or Global Notes shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Certificated Notes or Global Notes surrendered upon such registration of transfer or exchange. (v) The Company shall not be required: (A) to issue, to register the transfer of or to exchange Notes during a period beginning at the opening of business 15 days before the day of any selection of Notes for redemption under Section 3.02 hereof and ending at the close of business on the day of selection; or (B) to register the transfer of or to exchange any Note so selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part; or (C) to register the transfer of or to exchange a Note between a record date and the next succeeding interest payment date. (vi) Prior to due presentment for the registration of a transfer of any Note, the Trustee, any Agent and the Company may deem and treat the Person in whose name any Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of and interest and Liquidated 32 Damages, if any, on such Notes, and neither the Trustee, any Agent nor the Company shall be affected by notice to the contrary. (vii) The Trustee shall authenticate Certificated Notes and Global Notes in accordance with the provisions of Section 2.02 hereof. The Registrar may conclusively rely on inf ormation set forth in a certificate substantially in the form of Exhibit B-1, B-2, B-3, B-4 or B-5 hereto, and other certificates and opinions received pursuant to this Section 2.06 and, in the absence of receipt of such a certificate or opinion, shall not be deemed to have knowledge of a transfer of an interest in a Global Security absent actual knowledge of such transfer. SECTION 2.07 REPLACEMENT NOTES If any mutilated Note is surrendered to the Trustee, or the Company and the Trustee receives evidence to its satisfaction of the destruction, loss or theft of any Note, the Company shall issue and the Trustee, upon the written order of the Company signed by two Officers of the Company, shall authenticate a replacement Note if the Trustee's requirements are met. If required by the Trustee or the Company, an indemnity bond must be supplied by the Holder that is sufficient in the judgment of the Trustee and the Company to protect the Company, the Trustee, any Agent and any authenticating agent from any loss that any of them may suffer if a Note is replaced. The Company may charge the Holder for its expenses in replacing a Note. Every replacement Note is an additional obligation of the Company and shall be entitled to all of the benefits of this Indenture equally and proportionately with all other Notes duly issued hereunder. SECTION 2.08 OUTSTANDING NOTES The Notes outstanding at any time are all the Notes authenticated by the Trustee except for those cancelled by it, those delivered to it for cancellation, those reductions in the interest in a Global Note effected by the Trustee in accordance with the provisions hereof, and those described in this Section as not outstanding. Except as set forth in Section 2.09 hereof, a Note does not cease to be outstanding because the Company or an Affiliate of the Company holds the Note. If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note is held by a BONA FIDE purchaser. 33 If the principal amount of any Note is considered paid under Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue. If the Paying Agent (other than the Company, a Subsidiary or an Affiliate of any thereof) holds, on a redemption date or maturity date, money sufficient to pay the principal amount of any Notes due and payable on that date, then on and after that date such Notes shall be deemed to be no longer outstanding and shall cease to accrue interest. SECTION 2.09 TREASURY NOTES In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Company, or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company, shall be considered as though not outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes that the Trustee knows are so owned shall be so disregarded. SECTION 2.10 TEMPORARY NOTES Until Certificated Notes are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Notes upon a written order of the Company signed by two Officers of the Company. Temporary Notes shall be substantially in the form of Certificated Notes but may have variations that the Company considers appropriate for temporary Notes and as shall be reasonably acceptable to the Trustee. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate Certificated Notes in exchange for temporary Notes. Holders of temporary Notes shall be entitled to all of the benefits of this Indenture. SECTION 2.11 CANCELLATION The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar and Paying Agent shall forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel all Notes surrendered for registration of transfer, exchange, payment, replacement or cancellation and shall return cancelled Notes to the Company (subject to the record retention requirement of the Exchange Act). Certification of the destruction of all cancelled Notes shall be delivered to the Company. The Company may not issue new Notes to replace Notes that it has paid or that have been delivered to the Trustee for cancellation. 34 SECTION 2.12 DEFAULTED INTEREST If the Company defaults in a payment of interest on the Notes, it shall pay the defaulted interest in any lawful manner plus, to the extent lawful, interest payable on the defaulted interest, to the Persons who are Holders on a subsequent special record date, in each case at the rate provided in the Notes and in Section 4.01 hereof. The Company shall notify the Trustee in writing of the amount of defaulted interest proposed to be paid on each Note and the date of the proposed payment. The Company shall fix or cause to be fixed each such special record date and payment date; PROVIDED that no such special record date shall be less than 10 days prior to the related payment date for such defaulted interest. At least 15 days before the special record date, the Company (or, upon the written request of the Company, the Trustee in the name and at the expense of the Company) shall mail or cause to be mailed to Holders a notice that states the special record date, the related payment date and the amount of such interest to be paid. ARTICLE 3 REDEMPTION SECTION 3.01 NOTICES TO TRUSTEE If the Company elects to redeem Notes pursuant to the optional redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee, at least 45 days but not more than 60 days before a redemption date (unless a shorter notice shall be satisfactory to the Trustee), an Officers' Certificate setting forth the Section of this Indenture pursuant to which the redemption shall occur, the redemption date, the principal amount of Notes to be redeemed and the redemption price. SECTION 3.02 SELECTION OF NOTES TO BE REDEEMED If less than all of the Notes are to be redeemed, the Trustee shall select the Notes to be redeemed among the Holders of the Notes in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed or, if the Notes are not so listed, by lot or by such other method as the Trustee shall deem fair and appropriate. In the event of partial redemption by lot, the Trustee shall make the selection not less than 30 nor more than 60 days prior to the redemption date from the outstanding Notes not previously called for redemption. The Trustee shall promptly notify the Company in writing of the Notes selected for redemption and, in the case of any Note selected for partial redemption, the portion of the principal amount thereof to be redeemed. Notes and portions of them selected to be redeemed shall be in principal amounts of $1,000 or whole multiples of $1,000; 35 except that if all of the Notes of a Holder are to be redeemed, the entire outstanding amount of Notes held by such Holder, even if not a multiple of $1,000, shall be redeemed. Except as provided in the preceding sentence, provisions of this Indenture that apply to Notes called for redemption also apply to portions of Notes called for redemption. SECTION 3.03 NOTICE OF REDEMPTION At least 30 days but not more than 60 days before a redemption date, the Company shall mail, by first class mail, a notice of redemption to each Holder whose Notes are to be redeemed at its registered address. The notice shall identify the Notes to be redeemed and shall state: (1) the redemption date; (2) the redemption price; (3) if any Note is being redeemed in part, the portion of the principal amount of such Note to be redeemed and that, after the redemption date, upon surrender of such Note, a new Note or Notes in principal amount equal to the unredeemed portion will be issued; (4) the name and address of the Paying Agent; (5) that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price; (6) that, unless the Company defaults in making such redemption payment, interest on Notes called for redemption ceases to accrue on and after the redemption date; (7) the paragraph of the Notes pursuant to which the Notes called for redemption are being redeemed; and (8) that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Notes. At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at its expense. 36 SECTION 3.04 EFFECT OF NOTICE OF REDEMPTION Once notice of redemption is mailed, Notes called for redemption become irrevocably due and payable on the redemption date at the price set forth in the Note. SECTION 3.05 DEPOSIT OF REDEMPTION PRICE On or before the redemption date, the Company shall deposit with the Trustee or with the Paying Agent money sufficient to pay the redemption price of and accrued interest and Liquidated Damages, if any, on all Notes to be redeemed on that date. The Trustee or the Paying Agent shall return to the Company any money deposited with the Trustee or the Paying Agent by the Company in excess of the amounts necessary to pay the redemption price of, and accrued interest and Liquidated Damages, if any, on all Notes to be redeemed. Interest on the Notes to be redeemed will cease to accrue on the applicable redemption date, whether or not such Notes are presented for payment, if the Company makes the redemption payment. If any Note called for redemption shall not be so paid upon surrender for redemption because of the failure of the Company to comply with the preceding paragraph, interest will be paid on the unpaid principal, from the redemption date until such principal is paid, and to the extent lawful on any interest not paid on such unpaid principal, in each case at the rate provided in the Notes and in Section 4.01 hereof. Section 8.06 shall apply to any Notes not redeemed within 2 years from the redemption date. SECTION 3.06 NOTES REDEEMED IN PART Upon surrender of a Note that is redeemed in part, the Company shall issue and the Trustee shall authenticate for the Holder at the expense of the Company a new Note equal in principal amount to the unredeemed portion of the Note surrendered. SECTION 3.07 OPTIONAL REDEMPTION Except as set forth below, the Notes will not be redeemable at the Company's option prior to June 15, 2002. Thereafter, the Notes will be subject to redemption at any time at the option of the Company, in whole or in part, upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Liquidated Damages, if any, to the applicable redemption date, if redeemed during the twelve-month period beginning on June 15 of the years indicated below: 37 YEAR PERCENTAGE 2002 ........................................... 105.063% 2003 ........................................... 103.375% 2004 ........................................... 101.688% 2005 and thereafter ............................ 100.000% Notwithstanding the foregoing, during the first three years after the Issue Date, the Company may on any one or more occasions redeem up to an aggregate 33 1/3% of the principal amount of Notes originally issued at a redemption price of 110.125% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, to the redemption date, with the net cash proceeds of one or more Public Equity Offerings; PROVIDED that at least 66 2/3% of the aggregate principal amount of Notes originally issued remains outstanding immediately after such redemption; and PROVIDED, FURTHER, that such redemption shall occur within 60 days of the date of the closing of such Public Equity Offering. Any redemption pursuant to this Section 3.07 shall be made pursuant to the provisions of Sections 3.01 through 3.06 hereof. SECTION 3.08 MANDATORY REDEMPTION The Company shall have no mandatory redemption or sinking fund obligations with respect to the Notes. ARTICLE 4 COVENANTS SECTION 4.01 PAYMENT OF NOTES The Company shall pay or cause to be paid the principal of, premium, if any, and interest and Liquidated Damages, if any, on the Notes on the dates and in the manner provided in the Notes. Principal, premium, if any, and interest and Liquidated Damages, if any, shall be considered paid on the date due if the Paying Agent (other than the Company or a Subsidiary), holds at least one Business Day before that date money deposited by the Company in immediately available funds and designated for and sufficient to pay all principal, premium, if any, and interest and Liquidated Damages, if any, then due. Such Paying Agent shall return to the Company, no later than five Business Days following the due date for payment, any money (including accrued interest, if any) that exceeds such amount of principal, premium, if any, and interest and Liquidated Damages, if any, required for payment on the Notes. 38 The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal at the applicable interest rate on the Notes to the extent lawful; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest (without regard to any applicable grace period) at the same rate to the extent lawful. SECTION 4.02 MAINTENANCE OF OFFICE OR AGENCY The Company shall maintain in the Borough of Manhattan, The City of New York, an office or agency (which may be an office of the Trustee or Registrar) where Notes may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The Company shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee. The Company may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; PROVIDED, HOWEVER, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, The City of New York for such purposes. The Company shall give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. The Company hereby designates the Corporate Trust Office of the Trustee as one such office or agency of the Company in accordance with Section 2.03. SECTION 4.03 COMPLIANCE CERTIFICATE (a) The Company shall deliver to the Trustee, within 120 days after the end of each fiscal year, an Officers' Certificate stating that a review of the activities of the Company and its subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officers with a view to determining whether each has kept, observed, performed and fulfilled in all respects its obligations under this Indenture and further stating, as to each such Officer signing such certificate, that to the best of his knowledge each has kept, observed, performed and fulfilled each and every covenant contained in this Indenture and is not in any respect in default in the performance or observance of any of the terms, provisions and conditions hereof or thereof (or, if such Default or Event of Default shall have occurred, describing all such Defaults or Events 39 of Default of which he may have knowledge and what action each is taking or proposes to take with respect thereto). (b) The Company shall, so long as any of the Notes are outstanding, deliver to the Trustee, forthwith upon becoming aware of (i) any Default or Event of Default or (ii) any event of default under any other mortgage, indenture or instrument as that term is used in Section 6.01(vi) which permits an acceleration that could become an Event of Default, an Officers' Certificate specifying such Default, Event of Default or event of default and what action the Company is taking or proposes to take with respect thereto. SECTION 4.04 TAXES The Company shall, and shall cause each of its Subsidiaries to, pay prior to delinquency all material taxes, assessments, and governmental levies except as contested in good faith and by appropriate proceedings. SECTION 4.05 STAY, EXTENSION AND USURY LAWS The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it shall not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law has been enacted. SECTION 4.06 CHANGE OF CONTROL (a) Upon the occurrence of a Change of Control, each Holder of Notes shall have the right to require the Company to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the offer described below (the "Change of Control Offer") at an offer price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Liquidated Damages, if any, to the date of purchase (the "Change of Control Payment"). Within ten days following any Change of Control, the Company shall mail a notice to the Trustee and each Holder describing the transaction or transactions that constitute the Change of Control and offering to repurchase Notes on the date specified in such notice, which date shall be no earlier than 30 days and no later than 60 days from the date such notice is mailed (the "Change of Control Payment Date"), pursuant to the procedures required by this Indenture and described in such notice. The Company shall comply with the 40 requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of the Notes as a result of a Change of Control. (b) On the Change of Control Payment Date, the Company shall, to the extent lawful, (1) accept for payment all Notes or portions thereof properly tendered pursuant to the Change of Control Offer, (2) deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes or portions thereof so tendered and (3) deliver or cause to be delivered to the Trustee the Notes so accepted together with an Officers' Certificate stating the aggregate principal amount of Notes or portions thereof being purchased by the Company. The Paying Agent shall promptly mail to each Holder of Notes so tendered the Change of Control Payment for such Notes, and the Trustee shall promptly authenticate and mail (or cause to be transferred by book entry) to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any; PROVIDED that each such new Note will be in a principal amount of $1,000 or an integral multiple thereof. The Company shall publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date. (c) In the event a Change of Control occurs at a time when the Company is prohibited from purchasing Notes under the terms of any Senior Debt, then prior to the mailing of the notice to Holders pursuant to Section 4.06(a), but in any event within ten days following any Change of Control, the Company shall obtain the requisite consents, if any, under all agreements governing such Senior Debt to the purchase of Notes pursuant to a Change of Control Offer or repay any Senior Debt prohibiting such purchase of Notes. (d) The Company shall not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in this Indenture applicable to a Change of Control Offer made by the Company, including any requirement to repay in full any Senior Debt or obtain the consents of any of the Company's lenders to such Change of Control Offer, and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer. (e) The Change of Control provisions described above will be applicable whether or not any other provisions of this Indenture are applicable. SECTION 4.07 ASSET SALES The Company shall not, and shall not permit any of its Subsidiaries to, consummate an Asset Sale unless (i) the Company (or the Subsidiary, as the case may 41 be) receives consideration at the time of such Asset Sale at least equal to the fair market value (evidenced by a resolution of the Board of Directors set forth in an Officers' Certificate delivered to the Trustee) of the assets or Equity Interests issued or sold or otherwise disposed of and (ii) at least 75% of the consideration therefor received by the Company or such Subsidiary is in the form of cash; PROVIDED that the amount of (x) any liabilities (as shown on the Company's or such Subsidiary's most recent balance sheet), of the Company or any Subsidiary (other than contingent liabilities and liabilities that are by their terms subordinated to the Notes or any guarantee thereof) that are assumed by the transferee of any such assets pursuant to a customary novation agreement that releases the Company or such Subsidiary from further liability and (y) any securities, notes or other obligations received by the Company or any such Subsidiary from such transferee that are converted by the Company or such Subsidiary into cash (to the extent of the cash received), shall be deemed to be cash for purposes of this provision. Within 12 months after the receipt of any Net Proceeds from an Asset Sale, the Company may apply such Net Proceeds, at its option, (a) to repay permanently Senior Debt or Senior Debt of the Subsidiary Guarantors, or (b) to the acquisition of an interest in another business, the making of a capital expenditure or the acquisition of other long-term assets, in each case, in the test instrumentation industry or a business reasonably related thereto. Pending the final application of any such Net Proceeds, the Company may temporarily reduce revolving indebtedness under the New Credit Agreement or otherwise invest such Net Proceeds in any manner that is not prohibited by this Indenture. Any Net Proceeds from Asset Sales that are not applied or invested as provided in the first sentence of this paragraph will be deemed to constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $5,000,000, the Company shall be required to make an offer to all Holders of Notes (an "Asset Sale Offer") to purchase the maximum principal amount of Notes that may be purchased out of the Excess Proceeds, at an offer price in cash in an amount equal to 100% of the principal amount thereof plus accrued and unpaid interest and Liquidated Damages, if any, to the date of purchase, in accordance with the procedures set forth in this Indenture. If the aggregate principal amount of Notes surrendered by Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select the Notes to be purchased on a pro rata basis. Upon completion of such offer to purchase, the amount of Excess Proceeds shall be reset at zero. SECTION 4.08 RESTRICTED PAYMENTS The Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make any other payment or distribution on account of the Company's or any of its Subsidiaries' Equity Interests (including, without limitation, any payment in connection with any merger or consolidation involving the Company) or to the direct or indirect holders of the Company's or any of its 42 Subsidiaries' Equity Interests in their capacity as such (other than dividends or distributions payable in Equity Interests (other than Disqualified Stock) of the Company); (ii) purchase, redeem or otherwise acquire or retire for value (including without limitation, in connection with any merger or consolidation involving the Company) any Equity Interests of the Company or any direct or indirect parent of the Company or other Affiliate of the Company (other than any such Equity Interests owned by the Company or any Wholly Owned Subsidiary of the Company); (iii) make any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value any Indebtedness that is subordinated to the Notes, except a payment of interest or principal at Stated Maturity; or (iv) make any Restricted Investment (all such payments and other actions set forth in clauses (i) through (iv) above being collectively referred to as "Restricted Payments"), unless, at the time of and after giving effect to such Restricted Payment: (a) no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof; and (b) the Company would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the applicable four-quarter period, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of Section 4.09; and (c) such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Company and its Subsidiaries after the Issue Date (excluding Restricted Payments permitted by clauses (ii), (iii) and (iv) of the next succeeding paragraph), is less than the sum of (i) 50% of the Consolidated Net Income of the Company for the period (taken as one accounting period) from the beginning of the first fiscal quarter commencing after the Issue Date to the end of the Company's most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment (or, if such Consolidated Net Income for such period is a deficit, less 100% of such deficit), plus (ii) 100% of the aggregate net cash proceeds received by the Company from the issue or sale since the Issue Date of Equity Interests of the Company (other than Disqualified Stock) or of Disqualified Stock or debt securities of the Company that have been converted into such Equity Interests (other than Equity Interests (or Disqualified Stock or convertible debt securities) sold to a Subsidiary of the Company and other than Disqualified Stock or convertible debt securities that have been converted into Disqualified Stock), plus (iii) to the extent that any Restricted Investment that was made after the Issue Date is sold for cash or otherwise liquidated or repaid for cash, the lesser of (A) 43 the cash return of capital with respect to such Restricted Investment (less the cost of disposition, if any) and (B) the initial amount of such Restricted Investment. The foregoing provisions shall not prohibit (i) the payment of any dividend within 60 days after the date of declaration thereof, if at said date of declaration such payment would have complied with the provisions of this Indenture; (ii) the redemption, repurchase, retirement, defeasance or other acquisition of any subordinated Indebtedness or Equity Interests of the Company in exchange for, or out of the net cash proceeds of the substantially concurrent sale (other than to a Subsidiary of the Company) of, other Equity Interests of the Company (other than any Disqualified Stock); PROVIDED that the amount of any such net cash proceeds that are utilized for any such redemption, repurchase, retirement, defeasance or other acquisition shall be excluded from clause (c) (ii) of the preceding paragraph; (iii) the defeasance, redemption, repurchase or other acquisition of subordinated Indebtedness with the net cash proceeds from an incurrence of Permitted Refinancing Indebtedness; (iv) the payment of any dividend by a Subsidiary of the Company to the holders of its common Equity Interests on a pro rata basis; and (v) the repurchase, redemption or other acquisition or retirement for value of any Equity Interests of the Company or any Subsidiary of the Company held by any member of the Company's (or any of its Subsidiaries') management pursuant to any management equity subscription agreement or stock option agreement; PROVIDED that the aggregate price paid for all such repurchased, redeemed, acquired or retired Equity Interests shall not exceed $1,000,000 in any twelve-month period and $5,000,000 in total and no Default or Event of Default shall have occurred and be continuing immediately after such transaction. The amount of all Restricted Payments (other than cash) shall be the fair market value on the date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued by the Company or such Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair market value of any non-cash Restricted Payment shall be determined by the Board of Directors whose resolution with respect thereto shall be delivered to the Trustee. Not later than the date of making any Restricted Payment, the Company shall deliver to the Trustee an Officers' Certificate stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required by this Section 4.08 were computed, together with a copy of any fairness opinion required hereby. SECTION 4.09 INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK The Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively, "incur") any Indebtedness (including Acquired Debt) and that the Company shall not issue any Disqualified Stock and shall not permit any of its Subsidiaries to issue any shares of 44 preferred stock; PROVIDED, HOWEVER, that the Company may incur Indebtedness (including Acquired Debt) or issue shares of Disqualified Stock if the Fixed Charge Coverage Ratio for the Company's most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is incurred or such Disqualified Stock is issued would have been at least 2.0 to 1, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred, or the Disqualified Stock had been issued, as the case may be, at the beginning of such four-quarter period. The provisions of the first paragraph of this Section 4.09 shall not apply to the incurrence of any of the following items of Indebtedness (collectively, "Permitted Debt"): (i) the incurrence by the Company of Indebtedness and letters of credit (with letters of credit being deemed to have a principal amount equal to the maximum potential liability of the Company and its Subsidiaries thereunder) under the New Credit Agreement and the incurrence by the Subsidiary Guarantors of Guarantees thereof; PROVIDED that the aggregate principal amount of all Indebtedness outstanding under the New Credit Agreement after giving effect to such incurrence does not exceed $45,000,000 less the aggregate amount of all Net Proceeds of Asset Sales applied to permanently repay any such Indebtedness or, in the case of any such revolving Indebtedness, permanently reduce commitments therefor pursuant to Section 4.07 above; (ii) the incurrence by the Company or any of its Subsidiaries of Hedging Obligations that are incurred for the purpose of fixing or hedging interest rate risk with respect to any floating rate Indebtedness that is permitted by the terms of this Indenture to be outstanding or that are incurred by the Company or any of its Subsidiaries to protect against currency exchange rate risk in the conduct of its operations; (iii) the incurrence by the Foreign Subsidiaries of Indebtedness in an aggregate amount that, when combined with Existing Indebtedness of such Foreign Subsidiaries (other than Indebtedness described in clause (iv) below), does not exceed $6,500,000 and the incurrence by the Company of Guarantees of such Indebtedness; (iv) the incurrence by the Foreign Subsidiaries of Indebtedness in connection with the issuance of completion bonds, performance guaranties or letters of credit, and the incurrence by the Company of Guarantees thereof (with such bonds, guaranties or letters of credit being deemed to have a principal amount equal to the maximum potential liability of the Foreign Subsidiaries 45 thereunder) in an aggregate amount that, when combined with such Existing Indebtedness of such Foreign Subsidiaries (other than Indebtedness described in clause (iii) above), does not exceed $4,000,000; (v) the incurrence by the Company and its Subsidiaries of the Existing Indebtedness; (vi) the incurrence by the Company of Indebtedness represented by the Notes and the incurrence by the Subsidiary Guarantors of Indebtedness represented by the Subsidiary Guarantees; (vii) the incurrence by the Company or any of its Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which are used to refund, refinance or replace Indebtedness that was permitted by this Indenture to be incurred; (viii) the incurrence by the Company or any of its Subsidiaries of intercompany Indebtedness between or among the Company and any of its Wholly Owned Subsidiaries; PROVIDED, HOWEVER, that (i) if the Company is the obligor on such Indebtedness, such Indebtedness is expressly subordinated to the prior payment in full in cash of all Obligations with respect to the Notes and if a Subsidiary Guarantor is the obligor on such Indebtedness, such Indebtedness is expressly subordinated to the prior payment in full in cash of all Obligations with respect to the Subsidiary Guarantees and (ii)(A) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than the Company or a Wholly Owned Subsidiary and (B) any sale or other transfer of any such Indebtedness to a Person that is not either the Company or a Wholly Owned Subsidiary shall be deemed, in each case, to constitute an incurrence of such Indebtedness by the Company or such Subsidiary, as the case may be; (ix) the incurrence by the Company or any of the Subsidiary Guarantors of Indebtedness represented by Capital Lease Obligations, mortgage financings or purchase money obligations, in each case incurred for the purpose of financing all or any part of the purchase price or cost of construction or improvements of property used in the business of the Company or such Subsidiary Guarantors, in an aggregate principal amount not to exceed $5,000,000 at any time outstanding; and (x) the incurrence by the Company of additional Indebtedness in an aggregate principal amount (or accreted value, as applicable) at any time outstanding, including all Permitted Refinancing Indebtedness incurred to refund, 46 refinance or replace any other Indebtedness incurred pursuant to this clause (x), not to exceed $15,000,000. For purposes of determining compliance with this covenant, in the event that an item of Indebtedness meets the criteria of more than one of the categories of Permitted Debt described in clauses (i) through (x) above or is entitled to be incurred pursuant to the first paragraph of this covenant, the Company shall, in its sole discretion, classify such item of Indebtedness in any manner that complies with this covenant and such item of Indebtedness shall be treated as having been incurred pursuant to only one of such clauses or pursuant to the first paragraph hereof. Any Indebtedness that may be incurred pursuant to this covenant may be incurred under the New Credit Agreement. SECTION 4.10 LIENS The Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, create, incur, assume or suffer to exist any Lien on any asset now owned or hereafter acquired, or any income or profits therefrom or assign or convey any right to receive income therefrom, except Permitted Liens. SECTION 4.11 DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES The Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any Subsidiary to (i)(a) pay dividends or make any other distributions to the Company or any of its Subsidiaries (1) on its Capital Stock or (2) with respect to any other interest or participation in, or measured by, its profits, or (b) pay any indebtedness owed to the Company or any of its Subsidiaries, (ii) make loans or advances to the Company or any of its Subsidiaries or (iii) transfer any of its properties or assets to the Company or any of its Subsidiaries, except for such encumbrances or restrictions existing under or by reason of (a) Existing Indebtedness as in effect on the Issue Date, (b) the New Credit Agreement as in effect as of the Issue Date, and any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings thereof, PROVIDED that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacement or refinancings are no more restrictive in the aggregate with respect to such dividend and other payment restrictions than those contained in the New Credit Agreement as in effect on the Issue Date, (c) this Indenture, the Notes and the Subsidiary Guarantees, (d) applicable law, (e) any instrument regarding the sale, lease or purchase of any asset or governing Indebtedness or Capital Stock of a Person acquired by the Company or any of its Subsidiaries as in effect at the time of such acquisition (except to the extent such Indebtedness was incurred in connection with or in contemplation of such 47 acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired, PROVIDED that, in the case of Indebtedness, such Indebtedness was permitted by the terms of this Indenture to be incurred, (f) by reason of customary non-assignment provisions in licenses or leases entered into in the ordinary course of business and consistent with past practices, (g) purchase money obligations or Capital Lease Obligations for property acquired in the ordinary course of business that impose restrictions of the nature described in clause (iii) above on the property so acquired, or (h) Permitted Refinancing Indebtedness, PROVIDED that the restrictions contained in the agreements governing such Permitted Refinancing Indebtedness are no more restrictive in the aggregate than those contained in the agreements governing the Indebtedness being refinanced. SECTION 4.12 LIMITATION ON LAYERING DEBT The Company shall not incur, create, issue, assume, guarantee or otherwise become liable for any Indebtedness that is subordinate or junior in right of payment to any Senior Debt and senior in any respect in right of payment to the Notes. In addition, the Subsidiary Guarantors shall not incur, create, issue, assume, guarantee or otherwise become liable for any Indebtedness that is subordinate or junior in right of payment to any Senior Debt of the Subsidiary Guarantor and senior in any respect in right of payment to the Subsidiary Guarantees. SECTION 4.13 TRANSACTIONS WITH AFFILIATES The Company shall not, and shall not permit any of its Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless (i) such Affiliate Transaction is on terms that are at least as favorable as those that could reasonably be expected to be obtained by the Company or the relevant Subsidiary in a comparable transaction by the Company or such Subsidiary with an unrelated Person and (ii) the Company delivers to the Trustee (a) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $1,000,000, a resolution of the Board of Directors set forth in an Officers' Certificate certifying that such Affiliate Transaction complies with clause (i) above and that such Affiliate Transaction has been approved by a majority of the disinterested members of the Board of Directors and (b) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $5,000,000, an opinion as to the fairness to the Company of such Affiliate Transaction from a financial point of view issued by an accounting, appraisal or investment banking firm of 48 national standing; PROVIDED that the following shall not be deemed to be Affiliate Transactions: (s) transactions pursuant to the Distribution Agreement, dated April 23, 1996, and the Technical Collaboration Agreement, dated as of April 23, 1996, each between the Company or one of its Subsidiaries and Yokogawa, to the extent that such transactions are on terms that are at least as favorable as those that could reasonably be expected to be obtained by the Company or the relevant Subsidiary in a comparable transaction by the Company or such Subsidiary with an unrelated Person; (t) lease payments, renewals and extensions under the lease agreement, dated June 29, 1996, between the Company and Toyon Investments, a corporation controlled by Gooding, to the extent that aggregate annual lease payments do not exceed $585,000 per year plus annual consumer price index adjustments not to exceed three percent per annum; (u) any payments or transactions made in accordance with, or that are authorized under, the Stockholders Agreement, including the engagement or appointment of Donaldson, Lufkin & Jenrette Securities Corporation as underwriter in connection with an initial public offering; (v) the engagement or appointment by the Company of Donaldson, Lufkin & Jenrette Securities Corporation as its financial advisor, investment banking firm or arranger with respect to the New Credit Agreement, to the extent that the fees and expenses under such engagement are reasonable and customary for such engagements; (w) the exercise by Gooding of his option to purchase the Company's executive offices at 11995 El Camino Real, San Diego, California including all the leasehold improvements and fixed assets therein pursuant to the terms set forth in the resolution of the Company adopted on September 19, 1995; (x) any employment agreement entered into by the Company or any of its Subsidiaries in the ordinary course of business and consistent with the past practice of the Company or such Subsidiary; (y) transactions between or among the Company and/or its Subsidiaries; and (z) Restricted Payments that are permitted by the provisions of Section 4.08 hereof. SECTION 4.14 FOREIGN SUBSIDIARIES 100% of the Capital Stock of all Foreign Subsidiaries must be owned directly or indirectly by the Company and the Company shall not allow its Foreign Subsidiaries to acquire or create any Subsidiaries. SECTION 4.15 REPORTS Whether or not required by the rules and regulations of the Securities and Exchange Commission (the "Commission"), so long as any Notes are outstanding, the Company shall furnish to the Holders of Notes (i) all quarterly and annual financial information that would be required to be contained in a filing with the Commission on Forms 10-Q and 10-K if the Company were required to file such Forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" and, with respect to the annual information only, a report thereon by the 49 Company's certified independent auditors and (ii) all current reports that would be required to be filed with the Commission on Form 8-K if the Company were required to file such reports. In addition, whether or not required by the rules and regulations of the Commission, the Company shall file a copy of all such information and reports with the Commission for public availability (unless the Commission will not accept such a filing) and make such information available to securities analysts and prospective investors upon request. In addition, the Company has agreed that, for so long as any Notes remain outstanding, it shall furnish to the Holders and to prospective purchasers designated by such Holders, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act. SECTION 4.16 ADDITIONAL SUBSIDIARY GUARANTEES If the Company or any of its Subsidiaries shall acquire or create another Subsidiary (other than a Foreign Subsidiary) after the Issue Date, then such newly acquired or created Subsidiary shall execute a Subsidiary Guarantee and deliver an opinion of counsel, in accordance with the terms of Article 10 hereof. ARTICLE 5 SUCCESSORS SECTION 5.01 LIMITATIONS ON MERGER, CONSOLIDATION OR SALE OF SUBSTANTIALLY ALL ASSETS The Company may not consolidate or merge with or into (whether or not the Company is the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions, to another corporation, Person or entity unless (i) the Company is the surviving corporation or the entity or the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made is a corporation organized or existing under the laws of the United States, any state thereof or the District of Columbia; (ii) the entity or Person formed by or surviving any such consolidation or merger (if other than the Company) or the entity or Person to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made assumes all the obligations of the Company under the Notes and this Indenture pursuant to a supplemental indenture in a form reasonably satisfactory to the Trustee; (iii) immediately after such transaction no Default or Event of Default exists; and (iv) except in the case of a merger of the Company with or into a Wholly Owned Subsidiary of the Company, the Company or the entity or Person formed by or surviving any such consolidation or merger (if other than the Company), or to which such sale, assignment, 50 transfer, lease, conveyance or other disposition shall have been made (A) will have Consolidated Net Worth immediately after the transaction equal to or greater than the Consolidated Net Worth of the Company immediately preceding the transaction and (B) will, after giving pro forma effect thereto as if such transaction had occurred at the beginning of the applicable four-quarter period, be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of Section 4.09 above. The Company shall deliver to the Trustee prior to the consummation of the proposed transaction an Officers' Certificate to the foregoing effect and an Opinion of Counsel stating that the proposed transaction and such supplemental indenture if applicable comply with this Indenture. The Trustee shall be entitled to conclusively rely upon such Officers' Certificate and Opinion of Counsel. SECTION 5.02 SUCCESSOR CORPORATION SUBSTITUTED Upon any consolidation or merger, or any sale, lease, conveyance or other disposition of all or substantially all of the assets of the Company in accordance with Section 5.01, the successor corporation formed by such consolidation or into or with which the Company is merged or to which such sale, lease, conveyance or other disposition is made shall succeed to, and be substituted for (so that from and after the date of such consolidation, merger, sale, lease, conveyance or other disposition, the provisions of this Indenture referring to the "Company" shall refer instead to the successor corporation and not to the Company), and may exercise every right and power of the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein; PROVIDED, HOWEVER, that the Company shall not be released or discharged from the obligation to pay the principal of or interest on the Notes. ARTICLE 6 DEFAULTS AND REMEDIES SECTION 6.01 EVENTS OF DEFAULT An "Event of Default" occurs if: (i) default for 30 days in the payment when due of interest on, or Liquidated Damages with respect to, the Notes (whether or not prohibited by Article 11 hereof); (ii) default in payment when due of the principal of or premium, if any, on the Notes (whether or not prohibited by Article 11 hereof); (iii) failure by the Company to comply with the provisions of Section 4.06, 4.07, 4.08 or 4.09; (iv) failure by the Company for 60 days after notice to comply with any of its other agreements in this Indenture or the Notes; (v) except as permitted by this Indenture, 51 any Subsidiary Guarantee shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Subsidiary Guarantor, or any Person acing on behalf of any Subsidiary Guarantor, shall deny or disaffirm its obligations under its Subsidiary Guarantee; (vi) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Subsidiaries (or the payment of which is guaranteed by the Company or any of its Subsidiaries) whether such Indebtedness or guarantee now exists, or is created after the Issue Date, which default (a) is caused by a failure to pay principal when due at final stated maturity (a "Payment Default") or (b) results in the acceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $7,500,000 or more; (vii) failure by the Company or any of its Subsidiaries to pay final judgments aggregating in excess of $7,500,000, which judgments are not paid, discharged or stayed for a period of 60 days; (viii) the Company or any of its Significant Subsidiaries pursuant to or within the meaning of any Bankruptcy Law (a) commences a voluntary case, (b) consents to the entry of an order for relief against it in an involuntary case, (c) consents to the appointment of a Custodian of it or for all or substantially all of its property, (d) makes a general assignment for the benefit of its creditors, or (e) generally is unable to pay its debts as the same become due; or (ix) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that (a) is for relief against the Company or any of its Significant Subsidiaries in an involuntary case, (b) appoints a Custodian of the Company or any of its Significant Subsidiaries or for all or substantially all of their property, or (c) orders the liquidation of the Company or any of its Significant Subsidiaries, and the order or decree remains unstayed and in effect for 60 days. The term "Bankruptcy Law" means title 11, U.S. Code or any similar Federal or state law for the relief of debtors. The term "Custodian" means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law. SECTION 6.02 ACCELERATION If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable by notice in writing to the Company and the Trustee specifying the respective Event of Default and that it is a notice of acceleration (the "Acceleration Notice"), and the same (i) shall become immediately due and payable or (ii) if there are any amounts outstanding under the New Credit Agreement, shall become immediately due and payable upon the first to occur of an acceleration under the New Credit Agreement or five Business Days after receipt by the Company and the Representative 52 under the New Credit Agreement of such Acceleration Notice but only if such Event of Default is then continuing. Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency, with respect to the Company, any Significant Subsidiary or any group of Subsidiaries that, taken together, would constitute a Significant Subsidiary, all outstanding Notes will become due and payable without further action or notice. Holders of the Notes may not enforce this Indenture or the Notes except as provided herein. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. In the event of a declaration of acceleration of the Notes because an Event of Default has occurred and is continuing as a result of the acceleration of any Indebtedness described in clause (vi) of the preceding paragraph, the declaration of acceleration of the Notes shall be automatically annulled if the holders of any Indebtedness described in clause (vi) have rescinded the declaration of acceleration in respect of such Indebtedness within 30 days of the date of such declaration and if (i) the annulment of the acceleration of the Notes would not conflict with any judgment or decree of a court of competent jurisdiction, and (ii) all existing Events of Default, except nonpayment of principal or interest or Liquidated Damages on the Notes that became due solely because of the acceleration of the Notes, have been cured or waived. The Trustee may withhold from Holders of the Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest) if it determines that withholding notice is in their interest. In the case of any Event of Default occurring by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding payment of the premium that the Company would have had to pay if the Company then had elected to redeem the Notes pursuant to Section 3.07 hereof, an equivalent premium shall also become and be immediately due and payable to the extent permitted by law upon the acceleration of the Notes. If an Event of Default occurs prior to June 15, 2002 by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Company with the intention of avoiding the prohibition on redemption of the Notes prior to June 15, 2002, then the initial premium specified Section 3.07 hereof shall also become immediately due and payable to the extent permitted by law upon the acceleration of the Notes. SECTION 6.03 OTHER REMEDIES If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal or interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the 53 Trustee or any Holder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. All remedies are cumulative to the extent permitted by law. SECTION 6.04 WAIVER OF PAST DEFAULTS (1) Holders of a majority in aggregate principal amount of the Notes then outstanding by written notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default or Event of Default and its consequences under this Indenture (except a continuing Default or Event of Default in the payment of interest or premium or Liquidated Damages on, or the principal of, any Note held by a non-consenting Holder). Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon. (2) The Trustee may, without the consent of any Holders of the Notes, waive any Event of Default that relates to untimely or incomplete reports or information if the legal rights of the Holders would not be materially adversely affected thereby and may waive any other defaults the effect of which would not materially adversely affect the rights of the Holders under this Indenture. SECTION 6.05 CONTROL BY MAJORITY The Holders of a majority in principal amount of the then outstanding Notes may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on it. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture, that the Trustee determines may be unduly prejudicial to the rights of other Holders, or that may involve the Trustee in personal liability. SECTION 6.06 LIMITATION ON SUITS A Holder may pursue a remedy with respect to this Indenture or the Notes only if: (1) the Holder gives to the Trustee written notice of a continuing Event of Default; (2) the Holders of at least 25% in principal amount of the then outstanding Notes make a written request to the Trustee to pursue the remedy; 54 (3) such Holder or Holders offer and, if requested, provide to the Trustee indemnity satisfactory to the Trustee against any loss, liability or expense; (4) the Trustee does not comply with the request within 60 days after receipt of the request and the offer and, if requested, the provision of indemnity; and (5) during such 60-day period the Holders of a majority in aggregate principal amount of the then outstanding Notes do not give the Trustee a direction inconsistent with the request. A Holder may not use this Indenture to prejudice the rights of another Holder or to obtain a preference or priority over another Holder. SECTION 6.07 RIGHTS OF HOLDERS TO RECEIVE PAYMENT Notwithstanding any other provision of this Indenture, the right of any Holder of a Note to receive payment of principal, premium, if any, and interest on the Note, on or after the respective due dates expressed in the Note, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or adversely affected without the consent of the Holder. SECTION 6.08 COLLECTION SUIT BY TRUSTEE If an Event of Default specified in Section 6.01(i) or (ii) occurs and is continuing, the Trustee is authorized to recover judgment in its own name and as trustee of an express trust against the Company for the whole amount of principal and interest remaining unpaid on the Notes and interest on overdue principal and, to the extent lawful, interest and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. SECTION 6.09 TRUSTEE MAY FILE PROOFS OF CLAIM The Trustee is authorized to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders allowed in any judicial proceedings relative to the Company (or any other obligor upon the Notes), its creditors or its property and shall be entitled and empowered to collect, receive and distribute any money or other property payable or deliverable on any such claims and any custodian in 55 any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof. To the extent that the payment of any such compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof out of the estate in any such proceeding, shall be denied for any reason, payment of the same shall be secured by a Lien on, and shall be paid out of, any and all distributions, dividends, money, securities and other properties which the Holders of the Notes may be entitled to receive in such proceeding whether in liquidation or under any plan of reorganization or arrangement or otherwise. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. SECTION 6.10 PRIORITIES If the Trustee collects any money pursuant to this Article, it shall pay out the money in the following order: First: to the Trustee, its agents and attorneys for amounts due under Section 7.07, including payment of all compensation, expense and liabilities incurred, and all advances made, by the Trustee and the costs and expenses of collection; Second: to Holders for amounts due and unpaid on the Notes for principal, premium, if any, and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal, premium and interest, respectively; Third: without duplication, to Holders of Notes for any other Obligations owing to the Holders of Notes under the Notes or this Indenture; and Fourth: to the Company or to such party as a court of competent jurisdiction shall direct. The Trustee may fix a record date and payment date for any payment to Holders. 56 SECTION 6.11 UNDERTAKING FOR COSTS In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07, or a suit by Holders of more than 10% in principal amount of the then outstanding Notes. ARTICLE 7 TRUSTEE SECTION 7.01 DUTIES OF TRUSTEE (1) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of their own affairs. (2) Except during the continuance of an Event of Default: (a) The duties of the Trustee shall be determined solely by the express provisions of this Indenture and the Trustee need perform only those duties that are specifically set forth in this Indenture and no others, and no implied covenants or obligations shall be read into this Indenture against the Trustee. (b) In the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. In the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture (but need not confirm or investigate the accuracy of mathematic calculations or other facts stated therein). 57 (3) The Trustee may not be relieved from liabilities for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (a) This paragraph does not limit the effect of paragraph (2) of this Section. (b) The Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts. (c) The Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05. (4) Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (1), (2) and (3) of this Section. (5) No provision of this Indenture shall require the Trustee to expend or risk its own funds or incur any liability. The Trustee may refuse to perform any duty or exercise any right or power unless it receives indemnity satisfactory to it against any loss, liability or expense. (6) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. (7) All indemnifications and releases from liability granted herein to the Trustee shall extend to the directors, officers, employees and agents of the Trustee and to the Paying Agent and Registrar. SECTION 7.02 RIGHTS OF TRUSTEE (1) The Trustee may conclusively rely upon any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document, but the Trustee may, in its discretion, make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney. 58 (2) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may consult with counsel of its selection and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection from liability in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon. (3) The Trustee may act through agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (4) The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers conferred upon it by this Indenture. (5) Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Company shall be sufficient if signed by an Officer of the Company. (6) The permissive rights of the Trustee to do things enumerated in this Indenture shall not be construed as a duty unless so specified herein. (7) The Trustee shall not be deemed to have notice of any Default or Event of Default unless a Responsible Officer of the Trustee has actual knowledge thereof unless written notice of any event which is in fact such a Default is received by the Trustee at the Corporate Trust Office of the Trustee, and such notice references the Notes and this Indenture. SECTION 7.03 INDIVIDUAL RIGHTS OF TRUSTEE The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Company or an Affiliate with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. However, the Trustee is subject to Sections 7.10 and 7.11. Subject to the provisions of Section 310(b) of the TIA, the Trustee shall be permitted to engage in transactions with the Company and its Subsidiaries other than those contemplated by this Indenture. SECTION 7.04 TRUSTEE'S DISCLAIMER The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Company's use of the proceeds from the Notes or any money paid to the Company or 59 upon the Company or upon the Company's written direction under any provision hereof. The Trustee shall not be responsible for the use or application of any money received by any Paying Agent other than the Trustee and it shall not be responsible for any statement or recital herein or any statement in the Notes or any other document in connection with the sale of the Notes or pursuant to this Indenture other than its certificate of authentication. SECTION 7.05 NOTICE OF DEFAULTS The Trustee shall not be deemed to have notice of a Default or an Event of Default unless (i) the Trustee has received written notice thereof from the Company or any Holder or (ii) a Responsible Officer of the Trustee shall have actual knowledge thereof. Except as otherwise expressly provided herein, the Trustee shall not be bound to ascertain or inquire as to the performance or observance of any of the terms, conditions, covenants or agreements herein, or of any of the documents executed in connection with the Notes, or as to the existence of a Default or Event of Default hereunder. Subject to Section 6.04(2), if a Default or Event of Default occurs and is continuing and if it is known to a Responsible Officer of the Trustee, the Trustee shall mail to Holders a notice of the Default or Event of Default within 90 days after it obtains knowledge of the existence of such Event of Default. Except in the case of a Default or Event of Default in payment of principal, premium or interest on any Note, the Trustee may withhold the notice if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of Holders. SECTION 7.06 REPORTS BY TRUSTEE TO HOLDERS Within 60 days after each September 30 beginning with the September 30 following the Issue Date, the Trustee shall mail to Holders a brief report dated as of such reporting date that complies with TIA Section 313(a) (but if no event described in TIA Section 313(a) has occurred within the twelve months preceding the reporting date, no report need be transmitted). The Trustee also shall comply with TIA Section 313(b). The Trustee shall also transmit by mail all reports as required by TIA Section 313(c). Commencing at the time this Indenture is qualified under the TIA, a copy of each report at the time of its mailing to Holders shall be filed with the SEC and each stock exchange on which the Notes are listed. The Company shall promptly notify the Trustee when the Notes are listed on any stock exchange. 60 SECTION 7.07 COMPENSATION AND INDEMNITY The Company shall pay to the Trustee from time to time reasonable compensation, as the Company and the Trustee shall from time to time agree, for its acceptance of this Indenture and services hereunder. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee promptly upon request for all reasonable disbursements, advances and expenses incurred or made by it in addition to the compensation for its services. Such expenses shall include the reasonable compensation, disbursements and expenses of the Trustee's agents and counsel. The Company shall indemnify the Trustee or any predecessor Trustee and their agents, employees, officers and directors against any and all losses, liabilities, expenses or taxes (other than taxes based upon, measured by or determined by the income of the Trustee) incurred by it arising out of or in connection with the acceptance or administration of its duties under this Indenture, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder, except to the extent that such loss, damage, claim, liability or expense is due to its own negligence or bad faith. The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company shall not relieve the Company of its obligations hereunder. The Company shall defend the claim and the Trustee shall cooperate in the defense. The Trustee may have separate counsel and the Company shall pay the reasonable fees and expenses of such counsel. The Company need not pay for any settlement made without its consent, which consent shall not be unreasonably withheld. The Company need not reimburse any expense or indemnify against any loss or liability incurred by the Trustee through its own negligence or bad faith. The obligations of the Company under this Section 7.07 shall survive the satisfaction and discharge of this Indenture. To secure the Company's payment obligations in this Section, the Trustee shall have a Lien prior to the Notes on all money or property held or collected by the Trustee, except that held in trust to pay principal and interest on particular Notes. Such Lien shall survive the satisfaction and discharge of this Indenture. When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(viii) or (ix) occurs, the expenses and the compensation for the services are intended to constitute expenses of administration under any Bankruptcy Law. 61 SECTION 7.08 REPLACEMENT OF TRUSTEE A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section. The Trustee may resign at any time and be discharged from the trust hereby created by so notifying the Company. The Holders of a majority in principal amount of the then outstanding Notes may remove the Trustee by so notifying the Trustee and the Company. The Company may remove the Trustee if: (1) the Trustee fails to comply with Section 7.10; (2) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law; (3) a Custodian or public officer takes charge of the Trustee or its property; or (4) the Trustee becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company or the Holders of at least 10% in principal amount of the then outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee after written request by any Holder who has been a Holder for at least six months fails to comply with Section 7.10, such Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Holders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, provided all sums owing to the Trustee hereunder have been paid and subject to the Lien provided for in Section 7.07. Notwithstanding replacement of the Trustee pursuant to this Section 7.08, 62 the Company's obligations under Section 7.07 hereof shall continue for the benefit of the retiring Trustee. SECTION 7.09 SUCCESSOR TRUSTEE BY MERGER, ETC. If the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the successor corporation without any further act shall be the successor Trustee. SECTION 7.10 ELIGIBILITY; DISQUALIFICATION There shall at all times be a Trustee hereunder which shall be a corporation organized and doing business under the laws of the United States of America or of any state thereof authorized under such laws to exercise corporate trustee power, shall be subject to supervision or examination by Federal or state authority and shall have (or in the case of a corporation included in a bank holding company system, the related bank holding company shall have) a combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition. This Indenture shall always have a Trustee who satisfies the requirements of TIA Section 310(a)(1) and 310(a)(5). The Trustee is subject to TIA Section 310(b). SECTION 7.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST THE COMPANY The Trustee is subject to TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated therein. ARTICLE 8 LEGAL DEFEASANCE AND COVENANT DEFEASANCE SECTION 8.01 OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE The Company may, at the option of its Board of Directors evidenced by a resolution set forth in an Officers' Certificate, at any time, with respect to the Notes, elect to have either Section 8.02 or 8.03 be applied to all outstanding Notes upon compliance with the conditions set forth below in this Article Eight. 63 SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE Upon the Company's exercise under Section 8.01 of the option applicable to this Section 8.02 and subject to the satisfaction of the conditions contained in Section 8.04 hereof, the Company shall be deemed to have been discharged from its obligations with respect to all outstanding Notes on the date the conditions set forth below are satisfied (hereinafter, "Legal Defeasance"). For this purpose, such Legal Defeasance means that (i) the Company shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes, which shall thereafter be deemed to be "outstanding" only for the purposes of Section 8.05 and the other Sections of this Indenture referred to in (a) and (b) below, and to have satisfied all its other obligations under such Notes and this Indenture (and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging the same), and (ii) the Subsidiary Guarantors shall each be released from the Subsidiary Guarantee, except for the following which shall survive until otherwise terminated or discharged hereunder: (a) the rights of Holders of outstanding Notes to receive solely from the trust fund described in Section 8.04, and as more fully set forth in such Section, payments in respect of the principal of, premium, if any, and interest and Liquidated Damages, if any, on such Notes when such payments are due, (b) the Company's obligations with respect to such Notes under Sections 2.03, 2.05, 2.06, 2.07, 2.10 and 4.02, (c) the rights, powers, trusts, duties and immunities of the Trustee hereunder and the Company's obligations in connection therewith and (d) this Article Eight. Subject to compliance with this Article Eight, the Company may exercise its option under this Section 8.02 notwithstanding the prior exercise of its option under Section 8.03 with respect to the Notes. SECTION 8.03 COVENANT DEFEASANCE Upon the Company's exercise under Section 8.01 of the option applicable to this Section 8.03 and subject to satisfaction of the conditions contained in Section 8.04 hereof, the Company shall be released from its obligations under the covenants contained in Sections 4.03, 4.04, 4.06, 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.14 and 4.15 and Article Five with respect to the outstanding Notes on and after the date the conditions set forth below are satisfied (hereinafter, "Covenant Defeasance"), and the Notes shall thereafter be deemed not "outstanding" for the purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "outstanding" for all other purposes hereunder (it being understood that such Notes shall not be deemed outstanding for accounting purposes). For this purpose, such Covenant Defeasance means that, with respect to the outstanding Notes, the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, 64 whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 6.01(iii) or (iv), but, except as specified above, the remainder of this Indenture and such Notes shall be unaffected thereby. In addition, upon the Company's exercise under Section 8.01 of the option applicable to this Section 8.03, Sections 6.01(iii) through 6.01(vii) shall not constitute Events of Default. SECTION 8.04 CONDITIONS TO LEGAL OR COVENANT DEFEASANCE The following shall be the conditions to the application of either Section 8.02 or Section 8.03 to the outstanding Notes and Subsidiary Guarantees: (1) the Company shall irrevocably have deposited or caused to be deposited with the Trustee (or another trustee satisfying the requirements of Section 7.10 who shall agree to comply with the provisions of this Article Eight applicable to it) as trust funds in trust for the purpose of making the following payments, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of such Notes, (a) cash in U.S. Dollars in an amount, or (b) non-callable Government Securities which through the scheduled payment of principal and interest and Liquidated Damages, if any, in respect thereof in accordance with their terms will provide, not later than one day before the due date of any payment, cash in U.S. Dollars in an amount, or (c) a combination thereof, in such amounts, as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge and which shall be applied by the Trustee (or other qualifying trustee) to pay and discharge the principal of, premium, if any, and interest and Liquidated Damages, if any, on the outstanding Notes on the stated maturity or on the applicable redemption date, as the case may be, and the Company must specify whether the Notes are being defeased to maturity or to a particular redemption date of such principal or installment of principal, premium, if any, or interest; PROVIDED that the Trustee shall have been irrevocably instructed to apply such money or the proceeds of such non-callable Government Securities to said payments with respect to the Notes; (2) In the case of an election under Section 8.02, either (i) (A) the Notes will become due and payable at their stated maturity within one year after the date of such election pursuant to Section 8.02 or, within one year after the date of such election, the Notes will be redeemable at the option of the Company and will be redeemed by the Company pursuant to irrevocable instructions issued to the Trustee at the time of such election for the giving of a notice of redemption by the Trustee for such redemption and (B) the Company shall have 65 delivered to the Trustee an Opinion of Counsel in the United States reasonably satisfactory to the Trustee to the effect that the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to Federal income tax in the same amount, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred or (ii) the Company shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably satisfactory to the Trustee confirming that (A) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (B) since the date hereof, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such opinion shall confirm that, the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance has not occurred; (3) In the case of an election under Section 8.03, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably satisfactory to the Trustee to the effect that the Holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to Federal income tax in the same amount, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (4) No Default or Event of Default with respect to the Notes shall have occurred and be continuing on the date of such deposit (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit) or, in so far as Section 6.01(viii) or (ix) is concerned, at any time in the period ending on the 91st day after the date of such deposit (it being understood that this condition shall not be deemed satisfied until the expiration of such period); (5) Such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under, this Indenture or any other material agreement or instrument to which the Company or any of its Subsidiaries is a party, including the New Credit Agreement, or by which the Company or any of its Subsidiaries is bound; (6) In the case of an election under either Section 8.02 or 8.03, the Company shall have delivered to the Trustee an Officers' Certificate stating that the deposit made by the Company pursuant to its election under Section 8.02 or 66 8.03 was not made by the Company with the intent of preferring the Holders over other creditors of the Company or with the intent of defeating, hindering, delaying or defrauding creditors of the Company or others; and (7) The Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel in the United States, each stating that all conditions precedent provided for relating to either the Legal Defeasance under Section 8.02 or the Covenant Defeasance under Section 8.03 (as the case may be) have been complied with as contemplated by this Section 8.04. SECTION 8.05 DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS Subject to Section 8.06, all money and Government Securities (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 8.05, the "Trustee") pursuant to Section 8.04 in respect of the outstanding Notes shall be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as Paying Agent) as the Trustee may determine, to the Holders of such Notes of all sums due and to become due thereon in respect of principal, premium, if any, and interest, but such money need not be segregated from other funds except to the extent required by law. The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or Government Securities deposited pursuant to Section 8.04 or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the outstanding Notes. Anything in this Article Eight to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon the request of the Company any money or Government Securities held by it as provided in Section 8.04 which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee (which may be the opinion delivered under Section 8.04(1)), are in excess of the amount thereof which would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance. 67 SECTION 8.06 REPAYMENT TO THE COMPANY Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of, premium, if any, or interest on any Note and remaining unclaimed for two years after such principal, and premium, if any, or interest has become due and payable shall be paid to the Company on its request or (if then held by the Company) shall be discharged from such trust; and the Holder of such Note shall thereafter, as a creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; PROVIDED, HOWEVER, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in The Wall Street Journal (national edition), notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such notification or publication, any unclaimed balance of such money then remaining will be repaid to the Company. SECTION 8.07 REINSTATEMENT If the Trustee or Paying Agent is unable to apply any United States Dollars or Government Securities in accordance with Section 8.02 or 8.03, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Company's obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.02 or 8.03 until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 8.02 or 8.03, as the case may be; PROVIDED, HOWEVER, that, if the Company makes any payment of principal of, premium, if any, or interest on any Note following the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money held by the Trustee or Paying Agent and provided further that if such order or judgment is issued in connection with the insolvency, receivership or other similar occurrence with respect to the Trustee, upon the reinstatement of such obligations the Company shall be released from its obligations under Sections 4.03, 4.04, 4.06, 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.14 and 4.15 and Article 5. 68 ARTICLE 9 AMENDMENT, SUPPLEMENT AND WAIVER SECTION 9.01 WITHOUT CONSENT OF HOLDERS Notwithstanding Section 9.02 of this Indenture, the Company and the Trustee may amend or supplement this Indenture or the Notes without the consent of any Holder of a Note: (a) to cure any ambiguity, defect or inconsistency; (b) to provide for uncertificated Notes in addition to or in place of certificated Notes; (c) to provide for the assumption of the Company's obligations to the Holders of the Notes in the case of a merger or consolidation pursuant to Article Five hereof; (d) to provide for additional Subsidiary Guarantors as set forth in Section 4.16; (e) to make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not adversely affect the legal rights hereunder of any Holder of the Note; or (f) to comply with requirements of the SEC in order to effect or maintain the qualification of this Indenture under the TIA. Upon the request of the Company, accompanied by a resolution of its Board of Directors authorizing the execution of any such supplemental indenture, and upon receipt by the Trustee of the documents described in Section 9.06 hereof, the Trustee shall join with the Company in the execution of any supplemental indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations which may be therein contained, but the Trustee shall not be obligated to enter into such supplemental indenture which affects its own rights, duties or immunities under this Indenture or otherwise. SECTION 9.02 WITH CONSENT OF HOLDERS The Company and the Trustee may amend or supplement this Indenture or the Notes with the written consent of the Holders of at least a majority in principal amount of the then outstanding Notes (including consents obtained in connection with a tender 69 offer or exchange offer for the Notes) and any existing Default (including, without limitation, an acceleration of the Notes) or compliance with any provision of this Indenture or the Notes may be waived with the written consent of the Holders of at least a majority in principal amount of the then outstanding Notes (including consents obtained in connection with a tender offer or exchange offer for the Notes). Upon the request of the Company, accompanied by a resolution of its Board of Directors authorizing the execution of any such supplemental indenture, and upon the filing with the Trustee of evidence satisfactory to the Trustee of the consent of the Holders as aforesaid, and upon receipt by the Trustee of the documents described in Section 9.06 hereof, the Trustee shall join with the Company in the execution of such supplemental indenture unless such supplemental indenture affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such supplemental indenture. It shall not be necessary for the consent of the Holders under this Section to approve the particular form of any proposed amendment or waiver, but it shall be sufficient if such consent approves the substance thereof. After a supplement, amendment or waiver under this Section becomes effective, the Company shall mail to the Holders of each Note affected thereby a notice briefly describing the supplement, amendment or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture, amendment or waiver. Subject to Sections 6.04(1) and 6.07 hereof, the Holders of a majority in principal amount of the Notes then outstanding may waive compliance in a particular instance by the Company with any provision of this Indenture or the Notes. However, without the consent of each Holder affected, a supplement, amendment or waiver under this Section may not (with respect to any Notes held by a non-consenting Holder): (1) reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver; (2) reduce the principal of or change the fixed maturity of any Note or alter the provisions with respect to redemption of the Notes other than pursuant to Sections 4.06 and 4.07 hereof; (3) reduce the rate of or change the time for payment of interest, including default interest, or Liquidated Damages on any Note; 70 (4) waive a Default or Event of Default in the payment of principal of or premium, if any, or interest or Liquidated Damages on any Note (except a recision of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of the Notes and a waiver of the payment default that resulted from such acceleration); (5) make any Note payable in money other than that stated in the Note; (6) make any change in Section 6.04(1) or 6.07 hereof or in this sentence of this Section 9.02 or the rights of Holders of Notes to receive payments of principal of or premium, if any, or interest or Liquidated Damages on the Notes; (7) waive a redemption payment with respect to any Note (other than a payment required by the provisions of Sections 4.06 or 4.07 hereof); or (8) make any change in the foregoing amendment and waiver provisions. SECTION 9.03 COMPLIANCE WITH TRUST INDENTURE ACT Every amendment to this Indenture or the Notes shall be set forth in a supplemental indenture that complies with the TIA as then in effect. SECTION 9.04 REVOCATION AND EFFECT OF CONSENTS Until a supplement, amendment or waiver becomes effective, a consent to it by a Holder is a continuing consent by the Holder and every subsequent Holder or portion of a Note that evidences the same debt as the consenting Holder's Note, even if notation of the consent is not made on any Note. However, any such Holder or subsequent Holder may revoke the consent as to its Note if the Trustee receives written notice of revocation before the date the waiver or amendment becomes effective. An amendment or waiver becomes effective in accordance with its terms and thereafter binds every Holder. The Company may fix a record date for determining which Holders must consent to such amendment or waiver. If the Company fixes a record date, the record date shall be fixed at (i) the later of 30 days prior to the first solicitation of such consent or the date of the most recent list of Holders furnished to the Trustee prior to such solicitation pursuant to Section 2.05, or (ii) such other date as the Company shall designate. 71 SECTION 9.05 NOTATION ON OR EXCHANGE OF NOTES The Trustee may place an appropriate notation about a supplement, amendment or waiver on any Note thereafter authenticated. The Company in exchange for all Notes may issue and the Trustee shall authenticate new Notes that reflect the supplement, amendment or waiver. Failure to make the appropriate notation or issue a new Note shall not affect the validity and effect of such supplement, amendment or waiver. SECTION 9.06 TRUSTEE TO SIGN AMENDMENTS, ETC. The Trustee shall sign any amendment or supplemental indenture authorized pursuant to this Article 9 if the amendment does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may, but need not, sign it. In signing or refusing to sign such amendment or supplemental indenture, the Trustee shall be entitled to receive, if requested, an indemnity reasonably satisfactory to it and to receive and, subject to Section 7.01, shall be fully protected in relying upon, an Officers' Certificate and an Opinion of Counsel as conclusive evidence that such amendment or supplemental indenture is authorized or permitted by this Indenture, that it is not inconsistent herewith, and that it will be valid and binding upon the Company in accordance with its terms. The Company may not sign an amendment or supplemental indenture until the Board of Directors approves it. ARTICLE 10 SUBSIDIARY GUARANTEES SECTION 10.01 SUBSIDIARY GUARANTEES Subject to the provisions of this Article 10, each Subsidiary Guarantor, jointly and severally, hereby unconditionally guarantees to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, that: (a) the principal of, and premium, if any, and interest on the Notes shall be duly and punctually paid in full when due, whether at maturity, by acceleration or otherwise, and interest on overdue principal, and premium, if any, and (to the extent permitted by law) interest on any interest, if any, on the Notes and all other obligations of the Company to the Holders or the Trustee hereunder or under the Notes (including fees, expenses or other) shall be promptly paid in full or performed, all in accordance with the terms hereof; and (b) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, the same shall be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated 72 maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed or failing performance of any other obligation of the Company to the Holders, for whatever reason, each Subsidiary Guarantor shall be obligated to pay, or to perform or to cause the performance of, the same immediately. An Event of Default under this Indenture or the Notes shall constitute an event of default under this Subsidiary Guarantee, and shall entitle the Trustee or the Holders of Notes to accelerate the obligations of each Subsidiary Guarantor hereunder in the same manner and to the same extent as the obligations of the Company. Each Subsidiary Guarantor hereby agrees that its obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or this Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any thereof, the entry of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a Guarantor. Each Subsidiary Guarantor hereby waives and relinquishes: (a) any right to require the Trustee, the Holders or the Company (each, a "Benefitted Party") to proceed against the Company, the Subsidiaries or any other Person or to proceed against or exhaust any security held by a Benefitted Party at any time or to pursue any other remedy in any secured party's power before proceeding against the Subsidiary Guarantors; (b) any defense that may arise by reason of the incapacity, lack of authority, death or disability of any other Person or Persons or the failure of a Benefitted Party to file or enforce a claim against the estate (in administration, bankruptcy or any other proceeding) of any other Person or Persons; (c) demand, protest and notice of any kind (except as expressly required by this Indenture), including but not limited to notice of the existence, creation or incurring of any new or additional Indebtedness or obligation or of any action or non-action on the part of the Subsidiary Guarantors, the Company, the Subsidiaries, any Benefitted Party, any creditor of the Subsidiary Guarantors, the Company or the Subsidiaries or on the part of any other Person whomsoever in connection with any obligations the performance of which are hereby guaranteed; (d) any defense based upon an election of remedies by a Benefitted Party, including but not limited to an election to proceed against the Subsidiary Guarantors for reimbursement; (e) any defense based upon any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in other respects more burdensome than that of the principal; (f) any defense arising because of a Benefitted Party's election, in any proceeding instituted under the Bankruptcy Law, of the application of Section 1111(b)(2) of the Bankruptcy Code; and (g) any defense based on any borrowing or grant of a security interest under Section 364 of the Bankruptcy Code. The Subsidiary Guarantors hereby covenant that the Subsidiary Guarantees shall not be discharged except by payment in full of all principal, premium, if any, and interest on the Notes and all other costs provided for under this Indenture, or as provided in Section 8.02. If any Holder or the Trustee is required by any court or otherwise to return to either the Company or the Subsidiary Guarantors, or any trustee or similar official acting 73 in relation to either the Company or the Subsidiary Guarantors, any amount paid by the Company or the Subsidiary Guarantors to the Trustee or such Holder, the Subsidiary Guarantees, to the extent theretofore discharged, shall be reinstated in full force and effect. Each of the Subsidiary Guarantors agrees that it shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. Each Subsidiary Guarantor agrees that, as between it, on the one hand, and the Holders of Notes and the Trustee, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article 6 hereof for the purposes hereof, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (y) in the event of any acceleration of such obligations as provided in Article 6 hereof, such obligations (whether or not due and payable) shall forthwith become due and payable by such Subsidiary Guarantor for the purpose of the Subsidiary Guarantee. SECTION 10.02 EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEES To evidence the Subsidiary Guarantees set forth in Section 10.01 hereof, each of the Subsidiary Guarantors agrees that a notation of the Subsidiary Guarantees substantially in the form included in Exhibit A-1 hereto shall be endorsed on each Note authenticated and delivered by the Trustee and that this Indenture shall be executed on behalf of the Subsidiary Guarantors by the President or one of the Vice Presidents of the Subsidiary Guarantors, under a facsimile of its seal reproduced on this Indenture and attested to by an Officer other than the Officer executing this Indenture. Each of the Subsidiary Guarantors agree that the Subsidiary Guarantees set forth in this Article 10 will remain in full force and effect and apply to all the Notes notwithstanding any failure to endorse on each Note a notation of the Subsidiary Guarantees. If an Officer whose facsimile signature is on a Note no longer holds that office at the time the Trustee authenticates the Note on which the Subsidiary Guarantees are endorsed, the Subsidiary Guarantees shall be valid nevertheless. The delivery of any Note by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of the Subsidiary Guarantees set forth in this Indenture on behalf of the Subsidiary Guarantors. 74 SECTION 10.03 SUBSIDIARY GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS (a) Nothing contained in this Indenture or in the Notes shall prevent any consolidation or merger of a Subsidiary Guarantor with or into the Company or another Subsidiary Guarantor, or shall prevent the transfer of all or substantially all of the assets of a Subsidiary Guarantor to the Company or another Subsidiary Guarantor. Upon any such consolidation, merger, transfer or sale, the Subsidiary Guarantee of such Subsidiary Guarantor shall no longer have any force or effect. (b) Except as provided in Section 10.03(a), or a transaction referred to in Section 10.04, no Subsidiary Guarantor shall, in a single transaction or series of related transactions, consolidate or merge with or into (whether or not such Subsidiary Guarantor is the surviving corporation) another corporation, Person or entity other than the Company or another Subsidiary Guarantor unless (i) subject to the provisions of Section 10.04 hereof, the entity or Person formed by or surviving any such consolidation or merger (if other than such Subsidiary Guarantor) assumes all the obligations of such Subsidiary Guarantor under its Guarantee and this Indenture pursuant to a supplemental indenture in a form reasonably satisfactory to the Trustee; (ii) immediately after such transaction no Default or Event of Default exists; (iii) the Company shall, after giving PRO FORMA effect thereto as if such transaction had occurred at the beginning of the applicable four-quarter period, be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of Section 4.09; and (iv) such Subsidiary Guarantor shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel addressed to the Trustee, each stating that such consolidation or merger and such supplemental indenture, if any, comply with this Indenture and that such supplemental indenture is enforceable. In case of any such consolidation or merger and upon the assumption by the successor corporation, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the Subsidiary Guarantees endorsed upon the Notes and the due and punctual performance of all of the covenants and conditions of this Indenture to be performed by such Guarantor, such successor corporation shall succeed to and be substituted for such Subsidiary Guarantor with the same effect as if it had been named herein as a Subsidiary Guarantor. Such successor corporation thereupon may cause to be signed any or all of the Subsidiary Guarantees to be endorsed upon all of the Notes issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee. All the Subsidiary Guarantees so issued shall in all respects have the same legal rank and benefit under this Indenture as the Subsidiary Guarantees theretofore and thereafter issued in accordance with the terms of this Indenture as though all of such Subsidiary Guarantees had been issued at the date of the execution hereof. The requirements of clause (iii) of this Section 10.03(b) shall not apply in the case of a consolidation or merger with or into the Company or any other Subsidiary Guarantor. 75 (c) The Trustee, subject to the provisions of Section 10.04 hereof, shall be entitled to receive an Officers' Certificate and an Opinion of Counsel as conclusive evidence that any such consolidation, merger, sale or conveyance, and any such assumption of Obligations, comply with the provisions of this Section 10.03. Such Officers' Certificate and Opinion of Counsel shall comply with the provisions of Section 12.05. SECTION 10.04 RELEASES FOLLOWING SALE OF ASSETS In the event of a sale or other disposition of all or substantially all of the assets of any Subsidiary Guarantor, by way of merger, consolidation or otherwise, or a sale or other disposition of all of the Capital Stock of any Subsidiary Guarantor, which sale or other disposition otherwise complies with the terms of this Indenture, then such Subsidiary Guarantor (in the event of a sale or other disposition, by way of such a merger, consolidation or otherwise, of all of the Capital Stock of such Subsidiary Guarantor) or the corporation acquiring the property (in the event of a sale or other disposition of all of the assets of such Subsidiary Guarantor) shall be released from and relieved of any obligations under its Subsidiary Guarantee; PROVIDED that the Net Proceeds from such sale or other disposition are treated in accordance with the provisions of Section 4.07 hereof. Upon delivery by the Company to the Trustee of an Officer's Certificate and Opinion of Counsel, to the effect that such sale or other disposition was made by the Company in accordance with the provisions of this Indenture, including without limitation Section 4.07 hereof, the Trustee shall execute any documents reasonably required in order to evidence the release of any such Subsidiary Guarantor from its obligations under its Subsidiary Guarantee. Any Subsidiary Guarantor not released from its obligations under its Subsidiary Guarantee shall remain liable for the full amount of principal of and interest on the Notes and for the other obligations of any Subsidiary Guarantor under this Indenture as provided in this Article 10. SECTION 10.05 LIMITATION OF SUBSIDIARY GUARANTOR'S LIABILITY Each Subsidiary Guarantor, and by its acceptance hereof each Holder, hereby confirms that it is the intention of all such parties that the guarantee by such Subsidiary Guarantor pursuant to its Subsidiary Guarantee not constitute a fraudulent transfer or conveyance for purposes of the Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar federal or state law. To effectuate the foregoing intention, the Holders and such Subsidiary Guarantor hereby irrevocably agree that the obligations of such Subsidiary Guarantor under this Article 10 shall be limited to the maximum amount as will, after giving effect to all other contingent and fixed liabilities of such Subsidiary Guarantor and after giving effect to any collections from or payments made by or on behalf of any other Subsidiary Guarantor in respect of the obligations of such other Subsidiary Guarantor under this Article 10, result in the 76 obligations of such Subsidiary Guarantor under the Subsidiary Guarantee of such Subsidiary Guarantor not constituting a fraudulent transfer or conveyance. SECTION 10.06 APPLICATION OF CERTAIN TERMS AND PROVISIONS TO THE SUBSIDIARY GUARANTORS (a) For purposes of any provision of this Indenture which provides for the delivery by any Subsidiary Guarantor of an Officers' Certificate and/or an Opinion of Counsel, the definitions of such terms in Section 1.01 shall apply to such Subsidiary Guarantor as if references therein to the Company were references to such Subsidiary Guarantor. (b) Any request, direction, order or demand which by any provision of this Indenture is to be made by any Guarantor, shall be sufficient if evidenced as described in Section 12.02 as if references therein to the Company were references to such Subsidiary Guarantor. (c) Any notice or demand which by any provision of this Indenture is required or permitted to be given or served by the Trustee or by the holders of Notes to or on any Subsidiary Guarantor may be given or served as described in Section 12.02 as if references therein to the Company were references to such Subsidiary Guarantor. (d) Upon any demand, request or application by any Subsidiary Guarantor to the Trustee to take any action under this Indenture, such Subsidiary Guarantor shall furnish to the Trustee such certificates and opinions as are required in Section 12.04 hereof as if all references therein to the Company were references to such Subsidiary Guarantor. SECTION 10.07 RELEASE OF SUBSIDIARY GUARANTEES Concurrently with the defeasance of the Notes under Section 8.02 hereof, the Subsidiary Guarantors shall be released from all of their obligations under the Subsidiary Guarantees and this Article 10. SECTION 10.08 SUBORDINATION OF SUBSIDIARY GUARANTEES The obligations of each Subsidiary Guarantor under its Subsidiary Guarantee pursuant to this Article 10 is subordinated in right of payment to the prior payment in full in cash of all Senior Debt of such Subsidiary Guarantor on the same basis as the Notes are subordinated to Senior Debt of the Company. For the purposes of the foregoing sentence, the Trustee and the Holders shall have the right to receive and/or retain payments by any of the Subsidiary Guarantors only at such times as they may receive 77 and/or retain payments in respect of Notes pursuant to this Indenture, including Article 11 hereof. In the event that the Trustee receives any Subsidiary Guarantor payment at a time when the Trustee has actual knowledge that such payment is prohibited by the foregoing sentence, such Subsidiary Guarantor payment shall be paid over and delivered to the holders of the Senior Debt of such Subsidiary Guarantor remaining unpaid, to the extent necessary to pay in full all such Senior Debt. In the event that a Holder receives any Subsidiary Guarantor payment at a time when such payment is prohibited by the foregoing sentence, such Subsidiary Guarantor payment shall be paid over and delivered to the holders of the Senior Debt of such Subsidiary Guarantor remaining unpaid, to the extent necessary to pay in full all such Senior Debt. Each Holder of a Note by its acceptance thereof (a) agrees to and shall be bound by the provisions of this Section 10.08, (b) authorizes and directs the Trustee on the Holder's behalf to take such action as may be necessary and appropriate to effectuate the subordination so provided, and (c) appoints the Trustee as the Holder's attorney-in-fact for any and all such purposes. ARTICLE 11 SUBORDINATION SECTION 11.01 AGREEMENT TO SUBORDINATE The Company agrees, and each Holder by accepting a Note agrees, that the Indebtedness evidenced by the Note (including but not limited to Liquidated Damages) is subordinated in right of payment, to the extent and in the manner provided in this Article, to the prior payment in full in cash of all Senior Debt (whether outstanding on the date hereof or hereafter created, incurred, assumed or guaranteed), and that the subordination is for the benefit of the holders of Senior Debt. SECTION 11.02 LIQUIDATION; DISSOLUTION; BANKRUPTCY Upon any payment or distribution to creditors of the Company in a liquidation or dissolution of the Company or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property, in an assignment for the benefit of creditors or any marshalling of the Company's assets and liabilities: (1) holders of Senior Debt shall be entitled to receive payment in full in cash of all Obligations due in respect of such Senior Debt (including interest after the commencement of any such proceeding at the rate specified in the applicable Senior Debt whether or not allowable as a claim in any such 78 proceeding) before Holders shall be entitled to receive any payment with respect to the Notes (except that Holders may receive (i) Permitted Junior Securities and (ii) payments and other distributions made from any defeasance trust created pursuant to Section 8.01 hereof); and (2) until all Obligations with respect to Senior Debt (as provided in subsection (1) above) are paid in full in cash, any distribution to which Holders would be entitled but for this Article shall be made to holders of Senior Debt (except that Holders may receive (i) Permitted Junior Securities and (ii) payments and other distributions made from any defeasance trust created pursuant to Section 8.01 hereof), as their interests may appear. SECTION 11.03 DEFAULT ON DESIGNATED SENIOR DEBT The Company may not make any payment or distribution to the Trustee or any Holder in respect of Obligations with respect to the Notes (other than (i) Permitted Junior Securities and (ii) payments and other distributions made from any defeasance trust created pursuant to Section 8.01 hereof) until all principal and other Obligations with respect to the Senior Debt have been paid in full if: (i) a default in the payment of any principal or other Obligations with respect to Designated Senior Debt occurs and is continuing; or (ii) a default, other than a payment default, on Designated Senior Debt occurs and is continuing that then permits holders of the Designated Senior Debt to accelerate its maturity and the Trustee receives a notice of the default (a "Payment Blockage Notice") from a Person who may give it pursuant to Section 11.11 hereof. If the Trustee receives any such Payment Blockage Notice, no subsequent Payment Blockage Notice shall be effective for purposes of this Section unless and until (i) at least 360 days shall have elapsed since the delivery of the immediately prior Payment Blockage Notice and (ii) all scheduled payments of principal, premium, if any, and interest on the Notes that have come due have been paid in full in cash. No nonpayment default that existed or was continuing on the date of delivery of any Payment Blockage Notice to the Trustee shall be, or be made, the basis for a subsequent Payment Blockage Notice. The Company may and shall resume payments on and distributions in respect of the Notes them upon the earlier of: (1) in the case of a Default referred to in Section 11.03(i) hereof, upon the date which the default is cured or waived, or 79 (2) in the case of a default referred to in Section 11.03(ii) hereof, 179 days pass after notice is received, unless a Payment Default on any Designated Senior Debt then exists. SECTION 11.04. ACCELERATION OF NOTES If payment of the Notes is accelerated because of an Event of Default, the Company shall promptly notify holders of Senior Debt of the acceleration. SECTION 11.05. WHEN DISTRIBUTION MUST BE PAID OVER In the event that the Trustee receives any payment or distribution of any Obligations with respect to the Notes at a time when the Trustee has actual knowledge that such payment is prohibited by Section 11.03 hereof, such payment or distribution shall be held by the Trustee in trust for the benefit of, and shall be paid forthwith over and delivered, upon written request, to, the holders of Senior Debt as their interests may appear or their Representative under the indenture or other agreement (if any) pursuant to which Senior Debt may have been issued, as their respective interests may appear, for application to the payment of all Obligations with respect to Senior Debt remaining unpaid to the extent necessary to pay such Obligations in full in accordance with their terms, after giving effect to any concurrent payment or distribution to or for the holders of Senior Debt. In the event that a Holder receives any payment or distribution of any Obligations with respect to the Notes at a time when such payment is prohibited by Section 11.03 hereof, such payment or distribution shall be paid forthwith over and delivered, upon written request, to, the holders of Senior Debt as their interests may appear or their Representative under the indenture or other agreement (if any) pursuant to which Senior Debt may have been issued, as their respective interests may appear, for application to the payment of all Obligations with respect to Senior Debt remaining unpaid to the extent necessary to pay such Obligations in full in accordance with their terms, after giving effect to any concurrent payment or distribution to or for the holders of Senior Debt. With respect to the holders of Senior Debt, the Trustee undertakes to perform only such obligations on the part of the Trustee as are specifically set forth in this Article 11, and no implied covenants or obligations with respect to the holders of Senior Debt shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Debt, and shall not be liable to any such holders if the Trustee shall pay over or distribute to or on behalf of Holders or the Company or any other Person money or assets to which any holders of Senior Debt shall be entitled by virtue of this Article 11, except if such payment is made as a result of the willful misconduct or gross negligence of the Trustee. 80 SECTION 11.06. NOTICE BY COMPANY. The Company shall promptly notify the Trustee and the Paying Agent of any facts known to the Company that would cause a payment of any Obligations with respect to the Notes to violate this Article, but failure to give such notice shall not affect the subordination of the Notes to the Senior Debt as provided in this Article. SECTION 11.07. SUBROGATION After all Senior Debt is paid in full in cash and until the Notes are paid in full, Holders shall be subrogated (equally and ratably with all other Indebtedness pari passu with the Notes) to the rights of holders of Senior Debt to receive distributions applicable to Senior Debt to the extent that distributions otherwise payable to the Holders have been applied to the payment of Senior Debt. A distribution made under this Article 11 to holders of Senior Debt that otherwise would have been made to Holders is not, as between the Company and Holders, a payment by the Company on the Notes. SECTION 11.08. RELATIVE RIGHTS This Article defines the relative rights of Holders and holders of Senior Debt. Nothing in this Indenture shall: (1) impair, as between the Company and Holders, the obligation of the Company, which is absolute and unconditional, to pay principal of and interest on the Notes in accordance with their terms; (2) affect the relative rights of Holders and creditors of the Company other than their rights in relation to holders of Senior Debt; or (3) prevent the Trustee or any Holder from exercising its available remedies upon a Default or Event of Default, subject to the rights of holders and owners of Senior Debt to receive distributions and payments otherwise payable to Holders. If the Company fails because of this Article to pay principal of or interest on a Note on the due date, the failure is still a Default or Event of Default. SECTION 11.09. SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY No right of any holder of Senior Debt to enforce the subordination of the Indebtedness evidenced by the Notes shall be impaired by any act or failure to act by the 81 Company or any Holder or by the failure of the Company or any Holder to comply with this Indenture. Without in any way limiting the generality of the foregoing paragraph, the holders of the Senior Debt may, at any time and from time to time, without the consent of or notice to the Trustee or Holders, without incurring responsibility to the Holders and without impairing or releasing the subordination provided in this Article 11 or the obligations hereunder of the Holders to the holders of Senior Debt, do any one or more of the following: (a) change the manner, place or terms of payment or extend the time or payment of, or renew or alter, Senior Debt or any instrument evidencing the same or any agreement under which Senior Debt is outstanding; PROVIDED, HOWEVER, that any such alteration shall not (i) increase the amount of Senior Debt outstanding in a manner prohibited by this Indenture or (ii) otherwise violate Section 4.09 hereof; (b) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Debt; (c) release any Person in any manner for the collection of Senior Debt; PROVIDED, HOWEVER, that any such sale, exchange, release or other transaction shall not violate Section 4.13 hereof; and (d) exercise or refrain from exercising any rights against the Company or any other Person; PROVIDED, HOWEVER, that in no event shall any such actions limit the right of the Holder to take any action to accelerate the maturity of the Notes in accordance with the provisions set forth in Article 6 or to pursue any rights or remedies against the parties to this Indenture under this Indenture or under applicable laws if the taking of such action does not otherwise violate the terms of this Article 11. SECTION 11.10. DISTRIBUTION OR NOTICE TO REPRESENTATIVE Whenever a distribution is to be made or a notice given to holders of Senior Debt, the distribution may be made and the notice given to their Representative. Upon any payment or distribution of assets of the Company referred to in this Article 11, the Trustee and the Holders shall be entitled to conclusively rely upon any order or decree made by any court of competent jurisdiction or upon any certificate of such Representative or of the liquidating trustee or agent or other Person making any distribution to the Trustee or to the Holders for the purpose of ascertaining the Persons entitled to participate in such distribution, the holders of the Senior Debt and other Indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article 11. Notwithstanding the foregoing, with respect only to Obligations under the New Credit Agreement, the Trustee and the Holders shall be entitled to rely only upon the order or decree made by any court of competent jurisdiction or upon a certificate of a Representative for the purpose of ascertaining the matters described in the preceding sentence. 82 SECTION 11.11. RIGHTS OF TRUSTEE AND PAYING AGENT Notwithstanding the provisions of this Article 11 or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts that would prohibit the making of any payment or distribution by the Trustee, and the Trustee and the Paying Agent may continue to make payments on the Notes, unless the Trustee shall have received at its Corporate Trust Office at least five Business Days prior to the date of such payment written notice of facts that would cause the payment of any Obligations with respect to the Notes to violate this Article. Only the Company or a Representative may give the notice. Nothing in this Article 11 shall impair the claims of, or payments to, the Trustee under or pursuant to Section 7.07 hereof. The Trustee in its individual or any other capacity may hold Senior Debt with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. SECTION 11.12. AUTHORIZATION TO EFFECT SUBORDINATION Each Holder of a Note by the Holder's acceptance thereof authorizes and directs the Trustee on the Holder's behalf to take such action as may be necessary or appropriate to effectuate the subordination as provided in this Article 11, and appoints the Trustee to act as the Holder's attorney-in-fact for any and all such purposes. If the Trustee does not file a proper proof of claim or proof of debt in the form required in any proceeding referred to in Section 6.09 hereof at least 30 days before the expiration of the time to file such claim, a Representative of Designated Senior Debt is hereby authorized to file an appropriate claim for and on behalf of the Holders of the Notes. SECTION 11.13. AMENDMENTS The provisions of this Article 11 or any related definitions shall not be amended or modified in a manner adverse to the holders of Senior Debt without the written consent of the holders of all Designated Senior Debt. 83 ARTICLE 12 MISCELLANEOUS SECTION 12.01 TRUST INDENTURE ACT CONTROLS If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by TIA Section 318(c), the duties imposed by TIA Section 318(c) shall control. SECTION 12.02 NOTICES Any notice or communication by the Company, any Subsidiary Guarantor or the Trustee to the other is duly given if in writing and delivered in Person or mailed by first-class mail, telecopier or overnight air courier guaranteeing next day delivery, to the other's address: If to the Company or a Subsidiary Guarantor: Wavetek Corporation 11995 El Camino Real, Suite 301 San Diego, CA 92130 Attention: Chief Financial Officer Telecopier No.: (619) 793-2310 If to the Trustee: The Bank of New York 101 Barclay Street 21 West New York, New York 10286 Attention: Corporate Trust Department Telecopier No.: (212) 815-5915 The Company or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications. All notices and communications (other than those sent to Holders) shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five days after being deposited in the mail, postage prepaid, if mailed; when receipt acknowledged, if telecopied; and the next Business Day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery. 84 Any notice or communication to a Holder shall be mailed by first-class mail to its address shown on the register kept by the Registrar. Any notice or communication shall also be so mailed to any Person described in TIA Section 313(c), to the extent required by the TIA. Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If a notice or communication is mailed in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it. If the Company mails a notice or communication to Holders, it shall mail a copy to the Trustee and each Agent at the same time. SECTION 12.03 COMMUNICATION BY HOLDERS WITH OTHER HOLDERS Holders may communicate pursuant to TIA Section 312(b) with other Holders with respect to their rights under this Indenture or the Notes. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA Section 312(c). SECTION 12.04 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee: (1) an Officers' Certificate in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 12.05 hereof) stating that, in the opinion of the signers, all conditions precedent and covenants, if any, provided for in this Indenture relating to the proposed action have been complied with; and (2) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 12.05 hereof) stating that, in the opinion of such counsel, all such conditions precedent and covenants have been complied with. SECTION 12.05 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than a certificate provided pursuant to TIA Section 314(a)(4)) shall include: (1) a statement that the Person making such certificate or opinion has read such covenant or condition; 85 (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of such Person, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether or not, in the opinion of such Person, such condition or covenant has been complied with. SECTION 12.06 RULES BY TRUSTEE AND AGENTS The Trustee may make reasonable rules for action by or at a meeting of Holders. The Registrar or Paying Agent may make reasonable rules and set reasonable requirements for its functions. SECTION 12.07 LEGAL HOLIDAYS A "Legal Holiday" is a Saturday, a Sunday or a day on which banking institutions in The City of New York or at a place of payment are authorized or obligated by law, regulation or executive order to remain closed. If a payment date is a Legal Holiday at a place of payment, payment may be made at that place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. SECTION 12.08 NO RECOURSE AGAINST OTHERS No director, officer, employee, incorporator or stockholder of the Company or any Subsidiary Guarantor, as such, shall have any liability for any obligations of the Company or any Subsidiary Guarantor under the Notes, this Indenture or any Subsidiary Guarantee or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. SECTION 12.09 DUPLICATE ORIGINALS The parties may sign any number of copies of this Indenture. One signed copy is enough to prove this Indenture. 86 SECTION 12.10 GOVERNING LAW The internal law of the State of New York shall govern and be used to construe this Indenture and the Notes (without regard to conflicts of law provisions). Each party hereto irrevocably submits itself to the non-exclusive jurisdiction of the state and federal courts of New York for purposes of this Indenture and agrees and consents that service of process may be made upon it in any legal proceeding relating to this Indenture by any means allowed under federal or New York law. The parties hereto hereby waive and agree not to assert, by way of motion, as a defense or otherwise, that any such proceeding is brought in an inconvenient forum or that the venue thereof is improper. SECTION 12.11 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS This Indenture may not be used to interpret another indenture, loan or debt agreement of the Company or its Subsidiaries. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. SECTION 12.12 SUCCESSORS All agreements of the Company in this Indenture, and the Notes shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successor. SECTION 12.13 SEVERABILITY In case any provision in this Indenture or the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 12.14 COUNTERPART ORIGINALS The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. SECTION 12.15 TABLE OF CONTENTS, HEADINGS, ETC. The Table of Contents, Cross-Reference Table and Headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part hereof and shall in no way modify or restrict any of the terms or provisions hereof. SIGNATURES WAVETEK CORPORATION By: /s/ Terence J. Gooding ----------------------------- Name: Title: WAVETEK U.S. INC. By: /s/ Terence J. Gooding ----------------------------- Name: Title: THE BANK OF NEW YORK, as Trustee By: /s/ Mary Jane Morrissey ----------------------------- Name: Mary Jane Morrissey Title: Vice President Exhibit A-1 (Face of Security) ___10 1/8% [Series A] [Series B] Senior Subordinated Notes due 2007 No. $__________ WAVETEK CORPORATION promises to pay to _______________________________________ or registered assigns, the principal sum of ___________________ Dollars on June 15, 2007. Interest Payment Dates: June 15 and December 15, commencing December 15, 1997 Record Dates: June 1 and December 1 (whether or not a Business Day) WAVETEK CORPORATION By: Name: Title: By: Name: Title: TRUSTEE CERTIFICATE OF AUTHENTICATION Dated: This is one of the Notes referred to in the within-mentioned Indenture THE BANK OF NEW YORK, as Trustee By: (Authorized Signature) A1-1 (Back of Security) 10 1/8% [Series A] [Series B] Senior Subordinated Notes due 2007 [Unless and until it is exchanged in whole or in part for Notes in definitive form, this Note may not be transferred except as a whole by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. Unless this certificate is presented by an authorized representative of The Depository Trust Company (55 Water Street, New York, New York) ("DTC"), to the issuer or its agent for registration of transfer, exchange or payment, and any certificate issued is registered in the name of Cede & Co. or such other name as may be requested by an authorized representative of DTC (and any payment is made to Cede & Co. or such other entity as may be requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein.](1) THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1)(a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND, IN THE CASE OF CLAUSE (b), (c) or (d), BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), (2) TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE. - ----------------------- (1.) This paragraph should be included only if the Note is issued in global form. A1-2 Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below unless otherwise indicated. 1. INTEREST. Wavetek Corporation, a Delaware corporation (the "Company"), promises to pay interest on the principal amount of this Note at the rate and in the manner specified below and shall pay the Liquidated Damages, if any, payable pursuant to Section 5 of the Registration Rights Agreement referred to below. Interest on the Notes will accrue at the rate of 10 1/8% per annum and will be payable semi-annually in arrears on June 15 and December 15, commencing on December 15, 1997, or if any such day is not a Business Day, on the next succeeding Business Day (each an "Interest Payment Date"), to Holders of record on the immediately preceding June 1 and December 1, respectively. Interest will be computed on the basis of a 360-day year of twelve 30-day months. Interest on the Notes will accrue from the most recent date to which interest has been paid or duly provided for or, if no interest has been paid or duly provided for, from the date of original issuance of the Notes. To the extent lawful, the Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal at the applicable interest rate on the Notes plus one percent; it shall pay interest on overdue installments of interest (without regard to applicable grace periods) at the same rate, to the extent lawful, (i) if payment is made during the period of five Business Days following the date on which such interest was due, to the Persons who were to receive payment on the date such interest was due or (ii) if payment is made after such period, to the Persons who are Holders on a subsequent special record date, which date shall be at the earliest practicable date but in all events at least five Business Days prior to the payment date. 2. METHOD OF PAYMENT. The Company shall pay interest on the Notes (except defaulted interest) and Liquidated Damages, if any, to the Persons who are registered Holders of Notes at the close of business on the record date next preceding the Interest Payment Date, even if such Notes are cancelled after such record date and on or before such Interest Payment Date. Principal, premium, if any, interest and Liquidated Damages, if any, on the Notes shall be payable at the office or agency of the Company maintained for such purpose within the City and State of New York, or at the option of the Company, payment of interest and Liquidated Damages, if any, may be made by check mailed to the Holders of the Notes at their respective addresses set forth in the register of Holders of Notes; PROVIDED that all payments with respect to Notes the Holders of which have given wire transfer instructions to the Company and the Trustee shall be required to be made by wire transfer of immediately available funds to the accounts specified by the Holders thereof. The Company shall pay principal, premium, if any, and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. 3. PAYING AGENT AND REGISTRAR. Initially the Trustee under the Indenture will act as Paying Agent and Registrar. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company or any of its Subsidiaries may act as Paying Agent or Registrar. 4. INDENTURE. The Company issued the Notes under an Indenture dated as of June 11, 1997 ("Indenture") among the Company, the Subsidiary Guarantors and the A1-3 Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code Sections 77aaa-77bbbb) as in effect on the date of the Indenture. The Notes are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of such terms. The terms of the Indenture shall govern any inconsistencies between the Indenture and the Notes. Terms not otherwise defined herein shall have the meanings assigned in the Indenture. The Notes are general unsecured obligations of the Company limited to $85,000,000 in aggregate principal amount. 5. OPTIONAL REDEMPTION. The Notes are not redeemable at the Company's option prior to June 15, 2002. Thereafter, the Notes will be subject to redemption at any time at the option of the Company, in whole or in part, upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and Liquidated Damages, if any, to the applicable redemption date, if redeemed during the twelve-month period beginning on June 15 of the years indicated below: YEAR PERCENTAGE 2002.................................... 105.063% 2003.................................... 103.375% 2004.................................... 101.688% 2005 and thereafter..................... 100.000% Notwithstanding the foregoing, during the first three years after the Issue Date, the Company may on any one or more occasions redeem up to an aggregate 33 1/3% of the principal amount of Notes originally issued in the Offering at a redemption price of 110.125% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, to the redemption date, with the net cash proceeds of one or more Public Equity Offerings; PROVIDED that at least 66 2/3% of the aggregate principal amount of Notes originally issued remains outstanding immediately after such redemption; and PROVIDED, FURTHER, that such redemption shall occur within 60 days of the date of the closing of such Public Equity Offering. 6. MANDATORY REDEMPTION. The Company is not required to make mandatory redemption or sinking fund payments with respect to the Notes. 7. REPURCHASE AT OPTION OF HOLDER. (a) If there is a Change of Control, the Company shall be required to offer to purchase all or any part (equal to $1,000 or an integral multiple thereof) of each Holder's Notes at a purchase price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase. Holders of Notes that are subject to an offer to purchase will receive an offer to purchase from the Company prior to any related purchase date, and may elect to have such Notes A1-4 purchased by completing the form entitled "Option of Holder to Elect Purchase" appearing below. (b) If the Company consummates any Asset Sale, the Company shall be required, under certain circumstances, to apply the Excess Proceeds thereof to an offer to all Holders of Notes to purchase the maximum principal amount of Notes that may be purchased out of the Excess Proceeds at an offer price in cash equal to 100% of the principal amount of the Notes plus accrued and unpaid interest and Liquidated Damages, if any, to the date of purchase, in accordance with the procedures set forth in the Indenture. Holders of Notes that are subject to an offer to purchase will receive an offer to purchase from the Company prior to any related purchase date, and may elect to have such Notes purchased by completing the form entitled "Option of Holder to Elect Purchase" appearing below. 8. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in face denominations of $1,000 and integral multiples of $1,000. The Notes may be transferred and exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Company need not exchange or register the transfer of any Note or portion of a Note selected for redemption. Also, it need not (i) register the transfer of or exchange any Notes during any period (a) beginning at the opening of business on a Business Day 15 days before the day of any selection of Notes for redemption and ending at the close of business on the day of selection or (b) beginning at the opening of business on a Business Day 15 days before an interest payment date and ending on the close of business on such interest payment date or (ii) register the transfer or exchange of any Note selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part. 9. SUBORDINATION. The Notes are subordinated in right of payment, to the extent and in the manner provided in Article 11 of the Indenture, to the prior payment in full of all Senior Debt. The Company agrees, and each Holder by accepting a Note consents and agrees, to the subordination provided in the Indenture and authorizes the Trustee to give it effect. 10. PERSONS DEEMED OWNERS. Prior to due presentment to the Trustee for registration of the transfer of this Note, the Trustee, any Agent and the Company may deem and treat the Person in whose name this Note is registered as its absolute owner for the purpose of receiving payment of principal of and interest on this Note and for all other purposes whatsoever, whether or not this Note is overdue, and neither the Trustee, any Agent nor the Company shall be affected by notice to the contrary. The registered holder of a Note shall be treated as its owner for all purposes. 11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the Indenture, the Notes and the Subsidiary Guarantees may be amended or supplemented with the written consent of the Holders of at least a majority in principal amount of the then outstanding Notes, and any existing Default (except a Default or Event of Default relating to the payment of principal, premium or interest) or compliance with any provision of the Indenture or the Notes may be waived with the written consent of the Holders of at least a majority in principal amount of the then outstanding Notes. Without A1-5 the consent of any Holder, the Indenture or the Notes may be amended or supplemented to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes, to provide for the assumption of the Company's obligations to Holders of the Notes in case of a merger or consolidation, to provide for additional Subsidiary Guarantors, to make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not materially adversely affect the legal rights of any such Holder under the Indenture, or to comply with the requirements of the Securities and Exchange Commission in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act. 12. DEFAULTS AND REMEDIES. Events of Default include: (i) default for 30 days in the payment when due of interest on, or Liquidated Damages with respect to, the Notes (whether or not prohibited by the subordination provisions of the Indenture); (ii) default in payment when due of the principal of or premium, if any, on the Notes (whether or not prohibited by the subordination provisions of the Indenture); (iii) failure by the Company to comply with the provisions of Section 4.06, 4.07, 4.08 or 4.09 of the Indenture; (iv) failure by the Company for 60 days after notice to comply with any of its other agreements in the Indenture or the Notes; (v) except as permitted by the Indenture, any Subsidiary Guarantee shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or any Subsidiary Guarantor, or any Person acing on behalf of any Subsidiary Guarantor, shall deny or disaffirm its obligations under its Subsidiary Guarantee; (vi) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Subsidiaries (or the payment of which is guaranteed by the Company or any of its Subsidiaries) whether such Indebtedness or guarantee now exists, or is created after the Issue Date, which default (a) is caused by a failure to pay principal when due at final stated maturity (a "Payment Default") or (b) results in the acceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $7,500,000 or more; (vii) failure by the Company or any of its Subsidiaries to pay final judgments aggregating in excess of $7,500,000, which judgments are not paid, discharged or stayed for a period of 60 days; or (viii) certain events of bankruptcy or insolvency with respect to the Company or any Significant Subsidiary. If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately. Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency, with respect to the Company or any Subsidiary, all outstanding Notes will become due and payable without further action or notice. Holders may not enforce the Indenture or the Notes except as provided in the Indenture. The Trustee may require indemnity satisfactory to it before it enforces the Indenture or the Notes. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal, premium or interest) if it determines that withholding notice is in their interest. The Company is required to deliver to the Trustee annually a statement regarding compliance with the Indenture, and the Company is required upon becoming A1-6 aware of any Default or Event of Default, to deliver to the Trustee a statement specifying such Default or Event of Default. 13. TRUSTEE DEALINGS WITH THE COMPANY. Subject to the provisions of the Indenture, the Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Company or an Affiliate with the same rights it would have if it were not Trustee. Subject to the provisions of Section 310(b) of the Trust Indenture Act, the Trustee shall be permitted to engage in transactions with the Company and its Subsidiaries other than those contemplated by the Indenture. 14. NO RECOURSE AGAINST OTHERS. No director, officer, employee, incorporator, or stockholder of the Company or any Subsidiary Guarantor, as such, shall have any liability for any obligations of the Company or any Subsidiary Guarantor under the Notes, the Indenture or any Subsidiary Guarantee or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes, by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes. 15. AUTHENTICATION. This Note shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent. 16. ABBREVIATIONS. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 17. ADDITIONAL RIGHTS OF HOLDERS OF TRANSFER RESTRICTED SECURITIES. In addition to the rights provided to Holders of Notes under the Indenture, Holders of Transferred Restricted Securities shall have all the rights set forth in the Registration Rights Agreement dated as of the date of the Indenture, between the Company and the parties named on the signature pages thereof (the "Registration Rights Agreement"). 18. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. The Company shall furnish to any Holder upon written request and without charge a copy of the Indenture. Requests may be made to: Wavetek Corporation 11995 El Camino Real Suite 301 San Diego, CA 92130 Attention: Chief Financial Officer Telecopier No.: (619) 793-2310 A1-7 SUBSIDIARY GUARANTEE The Subsidiary Guarantors listed below (hereinafter referred to as the "Subsidiary Guarantors," which term includes any successors or assigns under the Indenture (the "Indenture") and any additional Subsidiary Guarantors), have irrevocably and unconditionally guaranteed (i) the due and punctual payment of the principal of, premium, if any, and interest on the 10 1/8% Senior Subordinated Notes due January 15, 2007 (the "Notes") of Wavetek Corporation, a Delaware corporation (the "Company"), whether at stated maturity, by acceleration or otherwise, the due and punctual payment of interest on the overdue principal, and premium if any, and (to the extent permitted by law) interest on any interest, if any, on the Notes, and the due and punctual performance of all other obligations of the Company, to the Holders or the Trustee all in accordance with the terms set forth in Article 10 of the Indenture, (ii) in case of any extension of time of payment or renewal of any Notes or any such other obligations, that the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise, and (iii) the payment of any and all costs and expenses (including reasonable attorneys' fees) incurred by the Trustee or any Holder in enforcing any rights under this Subsidiary Guarantee. The obligations of each Subsidiary Guarantor to the Holder and to the Trustee pursuant to this Subsidiary Guarantee and the Indenture are expressly set forth in Article 10 of the Indenture and reference is hereby made to such Indenture for the precise terms of this Guarantee. No stockholder, officer, director, employee or incorporator, as such, past, present or future of each Subsidiary Guarantor shall have any liability by reason of his or its status as such stockholder, officer, director, employee or incorporator for any obligations of any Subsidiary Guarantor under the Notes, the Indenture or its Subsidiary Guarantee or for any claim based on, in respect of, or by reason of, such obligations or their creation. This is a continuing Guarantee and shall remain in full force and effect and shall be binding upon each Subsidiary Guarantor and its successors and assigns until full and final payment of all of the Company's obligations under the Notes and Indenture and shall inure to the benefit of the successors and assigns of the Trustee and the Holders, and, in the event of any transfer or assignment of rights by any Holder or the Trustee, the rights and privileges herein conferred upon that party shall automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions hereof. This is a Guarantee of payment and not of collectibility. This Subsidiary Guarantee shall not be valid or obligatory for any purpose until the certificate of authentication on the Note upon which this Subsidiary Guarantee is noted shall have been executed by the Trustee under the Indenture by the manual signature of one of its authorized officers. The Obligations of each Subsidiary Guarantor under its Subsidiary Guarantee shall be limited to the extent necessary to insure that it does not constitute a fraudulent conveyance under applicable law. A1-8 THE TERMS OF ARTICLE 10 OF THE INDENTURE ARE INCORPORATED HEREIN BY REFERENCE. Capitalized terms used herein have the same meanings given in the Indenture unless otherwise indicated. WAVETEK U.S. INC. By:------------------------ Name: Title: A1-9 Assignment Form To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to - ------------------------------------------------------------------------------- (Insert assignee's soc. sec. or tax I.D. no.) - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- (Print or type assignee's name, address and zip code) and irrevocably appoint________________________________________________________ agent to transfer this Note on the books of the Company. The agent may substitute another to act for him. Date:___________________ Your Signature:-------------------------- (Sign exactly as your name appears on the face of this Note) Signature Guarantee.** - ------------------------------ ** Signature(s) must be guaranteed by an eligible guarantor institution (banks, stock brockers, savings and loan associations and credit unions with membership in an approved signature guarantee medallion program) pursuant to Securities and Exchange Commission Rule 17 Ad-15 A1-10 Option of Holder to Elect Purchase If you want to elect to have all or any part of this Note purchased by the Company pursuant to Section 4.06 or 4.07 of the Indenture, check the box below: / / Section 4.06 / / Section 4.07 If you want to elect to have only part of the Note purchased by the Company pursuant to Section 4.06 or 4.07 of the Indenture, state the amount you elect to have purchased (if all, write "ALL"): $___________ Date:_____________________ Your Signature:------------------------- (Sign exactly as your name appears on the face of this Note) Tax Identification No.:_______________ Signature Guarantee.* - ------------------------------ * Signature(s) must be guaranteed by an eligible guarantor institution (banks, stock brockers, savings and loan associations and credit unions with membership in an approved signature guarantee medallion program) pursuant to Securities and Exchange Commission Rule 17 Ad-15. A1-11 SCHEDULE OF EXCHANGES FOR CERTIFICATED NOTES(2) The following exchanges of a part of this Global Note for Certificated Notes have been made:
Date of Exchange Amount of decrease in Amount of increase in Principal Amount of Signature of Principal Amount of Principal Amount of this Global Note authorized officer of this Global Note this Global Note following such decrease Trustee or Note (or increase) Custodian - --------------------------------------------------------------------------------------------------------------------
- ----------------------------- (2) TO BE INCLUDED ONLY IF THE NOTE IS ISSUED IN GLOBAL FORM. A1-12 EXHIBIT A-2 (Face of Regulation S Temporary Global Security) 10 1/8% Series A Senior Subordinated Notes due 2007 No. $ ---------- WAVETEK CORPORATION promises to pay to --------------------------------------- or registered assigns, the principal sum of ------------------- Dollars on June 15, 2007. Interest Payment Dates: June 15 and December 15, commencing December 15, 1997 Record Dates: June 1 and December 15 (whether or not a Business Day) WAVETEK CORPORATION By: ----------------------------------- Name: Title: By: ----------------------------------- Name: Title: TRUSTEE CERTIFICATE OF AUTHENTICATION Dated: This is one of the Notes referred to in the within-mentioned Indenture THE BANK OF NEW YORK, as Trustee By: --------------------------------- (Authorized Signature) A2-1 (Back of Security) 10 1/8% Series A Senior Subordinated Notes due 2007 Unless and until it is exchanged in whole or in part for Notes in definitive form, this Note may not be transferred except as a whole by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary. Unless this certificate is presented by an authorized representative of The Depository Trust Company (55 Water Street, New York, New York) ("DTC"), to the issuer or its agent for registration of transfer, exchange or payment, and any certificate issued is registered in the name of Cede & Co. or such other name as may be requested by an authorized representative of DTC (and any payment is made to Cede & Co. or such other entity as may be requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein. THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1)(a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND, IN THE CASE OF CLAUSE (b), (c) OR (d), BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), (2) TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE. THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE PAYMENT OF INTEREST THEREON. Subject to the provisions hereof, Wavetek Corporation, a Delaware corporation (the "Company"), promises to pay to ______ the principal sum of _____________ UNITED STATES DOLLARS (U.S. $ _________) on June 15, 2007, and to pay interest on the principal amount of this Note at the rate of A2-2 10 1/8% per annum. Interest on the Notes will be payable semi-annually in arrears on June 15 and December 15, commencing on December 15, 1997, or if any such day is not a Business Day, on the next succeeding Business Day (each an "Interest Payment Date"). Interest will be computed on the basis of a 360-day year of twelve 30-day months. Interest on the Notes will accrue from the most recent date to which interest has been paid or duly provided for or, if no interest has been paid or duly provided for, from the date of original issuance of this Note. This Regulation S Temporary Global Note is issued in respect of an issue of 10 1/8% Senior Subordinated Notes due 2007 (the "Notes") of the Company, limited to the aggregate principal amount of U.S. $85,000,000 issued pursuant to an Indenture (the "Indenture") dated as of June 11, 1997, among the Company, the Subsidiary Guarantors and The Bank of New York, as trustee (the "Trustee"), and is governed by the terms and conditions of the Indenture, which terms and conditions are incorporated herein by reference and, except as otherwise provided herein, shall be binding on the Company and the Holder hereof as if fully set forth herein. Unless the context otherwise requires, the terms used herein shall have the meanings specified in the Indenture. Until this Regulation S Temporary Global Note is exchanged for Regulation S Permanent Global Notes, the Holder hereof shall not be entitled to receive payments of interest hereon; until so exchanged in full, this Regulation S Temporary Global Note shall in all other respects be entitled to the same benefits as other Notes under the Indenture. This Regulation S Temporary Global Note is exchangeable in whole or in part for one or more Regulation S Permanent Global Notes or Rule 144A Global Notes only (i) on or after the termination of the 40-day restricted period (as defined in Regulation S) and (ii) upon presentation of certificates (accompanied by an Opinion of Counsel, if applicable) required by Article 2 of the Indenture. Upon exchange of all interest in this Regulation S Temporary Global Note for one or more Regulation S Permanent Global Notes or Rule 144A Global Notes, the Trustee shall cancel this Regulation S Temporary Global Note. This Regulation S Temporary Global Note shall not become valid or obligatory until the certificate of authentication hereon shall have been duly manually signed by the Trustee in accordance with the Indenture. This Regulation S Temporary Global Note shall be governed by and construed in accordance with the laws of the State of the New York. All references to "$," "Dollars," "dollars" or "U.S. $" are to such coin or currency of the United States of America as at the time shall be legal tender for the payment of public and private debts therein. A2-3 SCHEDULE OF EXCHANGES FOR GLOBAL NOTES The following exchanges of a part of this Regulation S Temporary Global Note for other Global Notes have been made:
Date of Exchange Amount of decrease in Amount of increase in Principal Amount of this Signature of Principal Amount of Principal Amount of Global Note authorized officer of this Global Note this Global Note following such decrease Trustee or Note (or increase) Custodian - ------------------------------------------------------------------------------------------------------------------------------------
A2-4 EXHIBIT B-1 FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER FROM RULE 144A GLOBAL NOTE TO REGULATION S GLOBAL NOTE (Pursuant to Section 2.06(a)(i) of the Indenture) The Bank of New York 101 Barclay Street 21 West New York, New York 10286 Attention: Corporate Trust Department Re: 10 1/8% Senior Subordinated Notes due 2007 of Wavetek Corporation Reference is hereby made to the Indenture, dated as of June 11, 1997 (the "Indenture"), among Wavetek Corporation, as issuer (the "Company"), the Subsidiary Guarantors and The Bank of New York, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. This letter relates to $______ principal amount of Notes which are evidenced by one or more Rule 144A Global Notes (CUSIP No. 944020AA4) and held with the Depositary in the name of ___________________________ (the "Transferor"). The Transferor has requested a transfer of such beneficial interest in the Notes to a Person who will take delivery thereof in the form of an equal principal amount of Notes evidenced by one or more Regulation S Global Notes (CUSIP No. USU94214AA89), which amount, immediately after such transfer, is to be held with the Depositary. In connection with such request and in respect of such Notes, the Transferor hereby certifies that such transfer has been effected in compliance with the transfer restrictions applicable to the Global Notes and pursuant to and in accordance with Rule 903 or Rule 904 under the United States Securities Act of 1933, as amended (the "Securities Act"), and accordingly the Transferor hereby further certifies that: (1) The offer of the Notes was not made to a person in the United States; (2) either: (a) at the time the buy order was originated, the transferee was outside the United States or the Transferor and any person acting on its behalf reasonably believed and believes that the transferee was outside the United States; or (b) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither the Transferor nor any person acting on its behalf knows that the transaction was prearranged with a buyer in the United States; (3) no directed selling efforts have been made in contravention of the requirements of Rule 904(b) of Regulation S; (4) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act; and B1-1 (5) upon completion of the transaction, the beneficial interest being transferred as described above is to be held with the Depositary. Upon giving effect to this request to exchange a beneficial interest in a Rule 144A Global Note for a beneficial interest in a Regulation S Global Note, the resulting beneficial interest shall be subject to the restrictions on transfer applicable to Regulation S Global Notes pursuant to the Indenture and the Securities Act and, if such transfer occurs prior to the end of the 40-day restricted period associated with the initial offering of Notes, the additional restrictions applicable to transfers of interest in the Regulation S Temporary Global Note. This certificate and the statements contained herein are made for your benefit and the benefit of the Company and Donaldson, Lufkin & Jenrette Securities Corporation, the initial purchaser of such Notes being transferred. Terms used in this certificate and not otherwise defined in the Indenture have the meanings set forth in Regulation S under the Securities Act. ------------------------------ [Insert Name of Transferor] By: --------------------------- Name: Title: Dated: ---------------------, ----- cc: Wavetek Corporation B1-2 EXHIBIT B-2 FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER FROM REGULATION S GLOBAL NOTE TO RULE 144A GLOBAL NOTE (Pursuant to Section 2.06(a)(ii) of the Indenture) The Bank of New York 101 Barclay Street 21 West New York, New York 10286 Attention: Corporate Trust Department Re: 10 1/8% Senior Subordinated Notes due 2007 of Wavetek Corporation Reference is hereby made to the Indenture, dated as of June 11, 1997 (the "Indenture"), among Wavetek Corporation, as issuer (the "Company"), the Subsidiary Guarantors and The Bank of New York, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. This letter relates to $______ principal amount of Notes which are evidenced by one or more Regulation S Global Notes (CUSIP No. USU94214AA89) and held with the Depositary in the name of ____________________________(the "Transferor"). The Transferor has requested a transfer of such beneficial interest in the Notes to a Person who will take delivery thereof in the form of an equal principal amount of Notes evidenced by one or more Rule 144A Global Notes (CUSIP No. 944020AA4), to be held with the Depositary. In connection with such request and in respect of such Notes, the Transferor hereby certifies that: [CHECK ONE] / /such transfer is being effected pursuant to and in accordance with --- Rule 144A under the United States Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, the Transferor hereby further certifies that the Notes are being transferred to a Person that the Transferor reasonably believes is purchasing the Notes for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a "qualified institutional buyer" within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A; or / /such transfer is being effected pursuant to and in accordance with --- Rule 144 under the Securities Act; or / /such transfer is being effected pursuant to an effective registration --- statement under the Securities Act; B2-1 or / /such transfer is being effected pursuant to an exemption from the --- registration requirements of the Securities Act other than Rule 144A or Rule 144, and the Transferor hereby further certifies that the Notes are being transferred in compliance with the transfer restrictions applicable to the Global Notes and in accordance with the requirements of the exemption claimed, which certification is supported by an Opinion of Counsel, provided by the transferor or the transferee (a copy of which the Transferor has attached to this certification) in form reasonably acceptable to the Company and to the Registrar, to the effect that such transfer is in compliance with the Securities Act; and such Notes are being transferred in compliance with any applicable blue sky securities laws of any state of the United States. Upon giving effect to this request to exchange a beneficial interest in Regulation S Global Notes for a beneficial interest in Rule 144A Global Notes, the resulting beneficial interest shall be subject to the restrictions on transfer applicable to Rule 144A Global Notes pursuant to the Indenture and the Securities Act. This certificate and the statements contained herein are made for your benefit and the benefit of the Company and Donaldson, Lufkin & Jenrette Securities Corporation, the initial purchaser of such Notes being transferred. Terms used in this certificate and not otherwise defined in the Indenture have the meanings set forth in Regulation S under the Securities Act. ------------------------------ [Insert Name of Transferor] By: --------------------------------- Name: Title: Dated: --------------, ---- cc: Wavetek Corporation B2-2 EXHIBIT B-3 FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER OF CERTIFICATED NOTES (Pursuant to Section 2.06(b) of the Indenture) The Bank of New York 101 Barclay Street 21 West New York, New York 10286 Attention: Corporate Trust Department Re: 10 1/8% Senior Subordinated Notes due 2007 of Wavetek Corporation Reference is hereby made to the Indenture, dated as of June 11, 1997 (the "Indenture"), among Wavetek Corporation, as issuer (the "Company"), the Subsidiary Guarantors and The Bank of New York, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. In connection with such request and in respect of the Notes surrendered to the Trustee herewith for exchange (the "Surrendered Notes"), the Holder of such Surrendered Notes hereby certifies that: [CHECK ONE] / /the Surrendered Notes are being acquired for the Transferor's own --- account, without transfer; or / /the Surrendered Notes are being transferred to the Company; --- or / /the Surrendered Notes are being transferred pursuant to and in --- accordance with Rule 144A under the United States Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, the Transferor hereby further certifies that the Surrendered Notes are being transferred to a Person that the Transferor reasonably believes is purchasing the Surrendered Notes for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a "qualified institutional buyer" within the meaning of Rule 144A, in each case in a transaction meeting the requirements of Rule 144A; or / /the Surrendered Notes are being transferred in a transaction permitted --- by Rule 144 under the Securities Act; or B3-1 / /the Surrendered Notes are being transferred pursuant to an effective --- registration statement under the Securities Act; or / /such transfer is being effected pursuant to an exemption from the --- registration requirements of the Securities Act other than Rule 144A or Rule 144, and the Transferor hereby further certifies that the Notes are being transferred in compliance with the transfer restrictions applicable to the Global Notes and in accordance with the requirements of the exemption claimed, which certification is supported by an Opinion of Counsel, provided by the transferor or the transferee (a copy of which the Transferor has attached to this certification) in form reasonably acceptable to the Company and to the Registrar, to the effect that such transfer is in compliance with the Securities Act; and the Surrendered Notes are being transferred in compliance with any applicable blue sky securities laws of any state of the United States. This certificate and the statements contained herein are made for your benefit and the benefit of the Company and Donaldson, Lufkin & Jenrette Securities Corporation, the initial purchaser of such Notes being transferred. Terms used in this certificate and not otherwise defined in the Indenture have the meanings set forth in Regulation S under the Securities Act. ------------------------------ [Insert Name of Transferor] By: ----------------------------------- Name: Title: Dated: --------------, ----- cc: Wavetek Corporation B3-2 EXHIBIT B-4 FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER FROM RULE 144A GLOBAL NOTE OR REGULATION S PERMANENT GLOBAL NOTE TO CERTIFICATED NOTE (Pursuant to Section 2.06(c) of the Indenture) The Bank of New York 101 Barclay Street 21 West New York, New York 10286 Attention: Corporate Trust Department Re: 10 1/8% Senior Subordinated Notes due 2007 of Wavetek Corporation Reference is hereby made to the Indenture, dated as of June 11, 1997 (the "Indenture"), among Wavetek Corporation, as issuer (the "Company"), the Subsidiary Guarantors and The Bank of New York, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. This letter relates to $______ principal amount of Notes which are evidenced by one or more [Rule 144A Global Notes (CUSIP No. 944020AA4)] [Regulation S Permanent Global Note (CUSIP No. USU94214AA89)] and held with the Depositary in the name of ___________________________ (the "Transferor"). The Transferor has requested a transfer of such beneficial interest in the Notes to a Person who will take delivery thereof in the form of an equal principal amount of Notes evidenced by one or more Certificated Notes (CUSIP No. 944020AB2), which Notes, immediately after such transfer, are to be delivered to the transferor at the address set forth below. In connection with such request and in respect of the Notes surrendered to the Trustee herewith for exchange (the "Surrendered Notes"), the Holder of such Surrendered Notes hereby certifies that: [CHECK ONE] / /the Surrendered Notes are being transferred to the beneficial owner of --- such Notes; or / /the Surrendered Notes are being transferred pursuant to and in --- accordance with Rule 144A under the United States Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, the Transferor hereby further certifies that the Surrendered Notes are being transferred to a Person that the Transferor reasonably believes is purchasing the Surrendered Notes for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a "qualified institutional buyer" within the meaning of Rule 144A, in each case in a transaction meeting the requirements of Rule 144A; or B4-1 / /the Surrendered Notes are being transferred in a transaction permitted --- by Rule 144 under the Securities Act; or / /the Surrendered Notes are being transferred pursuant to an effective --- registration statement under the Securities Act; or / /such transfer is being effected pursuant to an exemption from the --- registration requirements of the Securities Act other than Rule 144A or Rule 144, and the Transferor hereby further certifies that the Notes are being transferred in compliance with the transfer restrictions applicable to the Global Notes and in accordance with the requirements of the exemption claimed, which certification is supported by an Opinion of Counsel, provided by the transferor or the transferee (a copy of which the Transferor has attached to this certification) in form reasonably acceptable to the Company and to the Registrar, to the effect that such transfer is in compliance with the Securities Act; and the Surrendered Notes are being transferred in compliance with any applicable blue sky securities laws of any state of the United States. This certificate and the statements contained herein are made for your benefit and the benefit of the Company and Donaldson, Lufkin & Jenrette Securities Corporation, the initial purchaser of such Notes being transferred. Terms used in this certificate and not otherwise defined in the Indenture have the meanings set forth in Regulation S under the Securities Act. ------------------------------ [Insert Name of Transferor] By: ---------------------------------- Name: Title: Dated: -------------, ---- ------------------------------ [Address of Transferor] ------------------------------ cc: Wavetek Corporation B4-2 EXHIBIT B-5 FORM OF CERTIFICATE FOR EXCHANGE OR REGISTRATION OF TRANSFER FROM CERTIFICATED NOTE TO RULE 144A GLOBAL NOTE OR REGULATION S PERMANENT GLOBAL NOTE (Pursuant to Section 2.06(e) of the Indenture) The Bank of New York 101 Barclay Street 21 West New York, New York 10286 Attention: Corporate Trust Department Re: 10 1/8% Senior Subordinated Notes due 2007 of Wavetek Corporation Reference is hereby made to the Indenture, dated as of June 11, 1997 (the "Indenture"), among Wavetek Corporation, as issuer (the "Company"), the Subsidiary Guarantors and The Bank of New York, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. In connection with such request and in respect of the Notes surrendered to the Trustee herewith for exchange (the "Surrendered Notes"), the Holder of such Surrendered Notes hereby certifies that: [CHECK ONE] / /the Surrendered Notes are being transferred to the beneficial owner of --- such Notes; or / /the Surrendered Notes are being transferred pursuant to and in --- accordance with Rule 144A under the United States Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, the Transferor hereby further certifies that the Surrendered Notes are being transferred to a Person that the Transferor reasonably believes is purchasing the Surrendered Notes for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a "qualified institutional buyer" within the meaning of Rule 144A, in each case in a transaction meeting the requirements of Rule 144A; or / /the Surrendered Notes are being transferred in a transaction permitted --- by Rule 144 under the Securities Act; or / /the Surrendered Notes are being transferred in a transaction permitted --- by Rule 904 under the B5-1 Securities Act; or / /the Surrendered Notes are being transferred pursuant to an effective --- registration statement under the Securities Act; or / /such transfer is being effected pursuant to an exemption from the --- registration requirements of the Securities Act other than Rule 144A or Rule 144, and the Transferor hereby further certifies that the Notes are being transferred in compliance with the transfer restrictions applicable to the Global Notes and in accordance with the requirements of the exemption claimed, which certification is supported by an Opinion of Counsel, provided by the transferor or the transferee (a copy of which the Transferor has attached to this certification) in form reasonably acceptable to the Company and to the Registrar, to the effect that such transfer is in compliance with the Securities Act; and the Surrendered Notes are being transferred in compliance with any applicable blue sky securities laws of any state of the United States. This certificate and the statements contained herein are made for your benefit and the benefit of the Company and Donaldson, Lufkin & Jenrette Securities Corporation, the initial purchaser of such Notes being transferred. Terms used in this certificate and not otherwise defined in the Indenture have the meanings set forth in Rule 144 or Regulation S under the Securities Act. ------------------------------ [Insert Name of Transferor] By: --------------------------------- Name: Title: Dated: -------------, ----- cc: Wavetek Corporation B5-2 EX-4.4 13 EXHIBIT 4.4 A/B EXCHANGE REGISTRATION RIGHTS AGREEMENT Dated as of June 11, 1997 by and among WAVETEK CORPORATION and DONALDSON, LUFKIN & JENRETTE Securities Corporation This Registration Rights Agreement (this "AGREEMENT") is made and entered into as of June 11, 1997 by and between Wavetek Corporation, a Delaware corporation (the "COMPANY"), and Donaldson, Lufkin & Jenrette Securities Corporation (the "PURCHASER"), who has agreed to purchase the Company's 10 1/8% Series A Senior Subordinated Notes due 2007 (the "SERIES A NOTES") pursuant to the Purchase Agreement (as defined below). This Agreement is made pursuant to the Purchase Agreement, dated June 6, 1997 (the "PURCHASE AGREEMENT"), by and between the Company and the Purchaser. In order to induce the Purchaser to purchase the Series A Notes, the Company has agreed to provide the registration rights set forth in this Agreement. The execution and delivery of this Agreement is a condition to the obligations of the Purchaser set forth in Section 2 of the Purchase Agreement. The parties hereby agree as follows: SECTION 1. DEFINITIONS As used in this Agreement, the following capitalized terms shall have the following meanings: ACT: The Securities Act of 1933, as amended. BROKER-DEALER: Any broker or dealer registered under the Exchange Act. CLOSING DATE: The date of this Agreement. COMMISSION: The Securities and Exchange Commission. CONSUMMATE: A Registered Exchange Offer shall be deemed "Consummated" for purposes of this Agreement upon the occurrence of (i) the filing and effectiveness under the Act of the Exchange Offer Registration Statement relating to the Series B Notes to be issued in the Exchange Offer, (ii) the maintenance of such Registration Statement continuously effective and the keeping of the Exchange Offer open for a period not less than the minimum period required pursuant to Section 3(b) hereof, and (iii) the delivery by the Company to the Registrar under the Indenture of Series B Notes in the same aggregate principal amount as the aggregate principal amount of Series A Notes that were tendered by Holders thereof pursuant to the Exchange Offer. DAMAGES PAYMENT DATE: With respect to the Series A Notes, EFFECTIVENESS TARGET DATE: As defined in Section 5. EXCHANGE ACT: The Securities Exchange Act of 1934, as amended. 1 EXCHANGE OFFER: The registration by the Company under the Act of the Series B Notes pursuant to a Registration Statement pursuant to which the Company offers the Holders of all outstanding Transfer Restricted Securities the opportunity to exchange all such outstanding Transfer Restricted Securities held by such Holders for Series B Notes in an aggregate principal amount equal to the aggregate principal amount of the Transfer Restricted Securities tendered in such exchange offer by such Holders. EXCHANGE OFFER REGISTRATION STATEMENT: The Registration Statement relating to the Exchange Offer, including the related Prospectus. EXEMPT RESALES: The transactions in which the Purchaser proposes to sell the Series A Notes to certain "qualified institutional buyers," as such term is defined in Rule 144A under the Act, to certain institutional "accredited investors," as such term is defined in Rule 501(a)(1), (2), (3) and (7) of Regulation D under the Act ("ACCREDITED INSTITUTIONS"), and to "foreign persons" "outside the United States," as such terms are defined in Regulation S under the Act. HOLDERS: As defined in Section 2(b) hereof. INDEMNIFIED HOLDER: As defined in Section 8(a) hereof. INDENTURE: The Indenture, dated as of June 11, 1997, by and between the Company and The Bank of New York, as trustee (the "TRUSTEE"), pursuant to which the Notes are to be issued, as such Indenture is amended or supplemented from time to time in accordance with the terms thereof. INTEREST PAYMENT DATE: As defined in the Indenture and the Notes. NASD: National Association of Securities Dealers, Inc. NOTES: The Series A Notes and the Series B Notes. PERSON: An individual, partnership, corporation, trust or unincorporated organization, or a government or agency or political subdivision thereof. PROSPECTUS: The prospectus included in a Registration Statement, as amended or supplemented by any prospectus supplement and by all other amendments thereto, including post-effective amendments, and all material incorporated by reference into such Prospectus. PURCHASER: As defined in the preamble hereto. RECORD HOLDER: With respect to any Damages Payment Date relating to Notes, each Person who is a Holder of Notes on the record date with respect to the Interest Payment Date on which such Damages Payment Date shall occur. 2 REGISTRATION DEFAULT: As defined in Section 5 hereof. REGISTRATION STATEMENT: Any registration statement of the Company relating to (a) an offering of Series B Notes pursuant to an Exchange Offer or (b) the registration for resale of Transfer Restricted Securities pursuant to the Shelf Registration Statement, which is filed pursuant to the provisions of this Agreement, in each case, including the Prospectus included therein, all amendments and supplements thereto (including post-effective amendments) and all exhibits and material incorporated by reference therein. SERIES B NOTES: The Company's 10 1/8% Series B Senior Subordinated Notes due 2007 to be issued pursuant to the Indenture in the Exchange Offer. SHELF FILING DEADLINE: As defined in Section 4 hereof. SHELF REGISTRATION STATEMENT: As defined in Section 4 hereof. TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb) as in effect on the date of the Indenture. TRANSFER RESTRICTED SECURITIES: Each Series A Note, until the earliest to occur of (a) the date on which such Series A Note is exchanged in the Exchange Offer and entitled to be resold to the public by the Holder thereof without complying with the prospectus delivery requirements of the Act, (b) the date on which such Series A Note has been effectively registered under the Act and disposed of in accordance with a Shelf Registration Statement and (c) the date on which such Series A Note is distributed to the public pursuant to Rule 144 under the Act or by a Broker-Dealer pursuant to the "Plan of Distribution" contemplated by the Exchange Offer Registration Statement (including delivery of the Prospectus contained therein). UNDERWRITTEN REGISTRATION or UNDERWRITTEN OFFERING: A registration in which securities of the Company are sold to an underwriter for reoffering to the public. SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT (a) TRANSFER RESTRICTED SECURITIES. The securities entitled to the benefits of this Agreement are the Transfer Restricted Securities. (b) HOLDERS OF TRANSFER RESTRICTED SECURITIES. A Person is deemed to be a holder of Transfer Restricted Securities (each, a "HOLDER") whenever such Person owns Transfer Restricted Securities. 3 SECTION 3. REGISTERED EXCHANGE OFFER (a) Unless the Exchange Offer shall not be permissible under applicable law or Commission policy (after the procedures set forth in Section 6(a) below have been complied with), the Company shall (i) cause to be filed with the Commission as soon as practicable after the Closing Date, but in no event later than 60 days after the Closing Date, a Registration Statement under the Act relating to the Series B Notes and the Exchange Offer, (ii) use its best efforts to cause such Registration Statement to become effective at the earliest possible time, but in no event later than 120 days after the Closing Date, (iii) in connection with the foregoing, file (A) all pre-effective amendments to such Registration Statement as may be necessary in order to cause such Registration Statement to become effective, (B) if applicable, a post-effective amendment to such Registration Statement pursuant to Rule 430A under the Act and (C) cause all necessary filings in connection with the registration and qualification of the Series B Notes to be made under the Blue Sky laws of such jurisdictions as are necessary to permit Consummation of the Exchange Offer, and (iv) upon the effectiveness of such Registration Statement, commence the Exchange Offer. The Exchange Offer shall be on the appropriate form permitting registration of the Series B Notes to be offered in exchange for the Transfer Restricted Securities and to permit resales of Notes held by Broker-Dealers as contemplated by Section 3(c) below. (b) The Company shall cause the Exchange Offer Registration Statement to be effective continuously and shall keep the Exchange Offer open for a period of not less than the minimum period required under applicable federal and state securities laws to Consummate the Exchange Offer; PROVIDED, HOWEVER, that in no event shall such period be less than 20 business days. The Company shall cause the Exchange Offer to comply with all applicable federal and state securities laws. No securities other than the Notes shall be included in the Exchange Offer Registration Statement. The Company shall use its best efforts to cause the Exchange Offer to be Consummated on the earliest practicable date after the Exchange Offer Registration Statement has become effective, but in no event later than 45 business days thereafter. (c) The Company shall indicate in a "Plan of Distribution" section contained in the Prospectus contained in the Exchange Offer Registration Statement that any Broker-Dealer who holds Series A Notes that are Transfer Restricted Securities and that were acquired for its own account as a result of market-making activities or other trading activities (other than Transfer Restricted Securities acquired directly from the Company) may exchange such Series A Notes pursuant to the Exchange Offer; however, such Broker-Dealer may be deemed to be an "underwriter" within the meaning of the Act and must, therefore, deliver a prospectus meeting the requirements of the Act in connection with any resales of the Series B Notes received by such Broker-Dealer in the Exchange Offer, which prospectus delivery requirement may be satisfied by the delivery by such Broker-Dealer of the Prospectus contained in the Exchange Offer Registration Statement. Such "Plan of Distribution" section shall also contain all other information with respect to such resales by Broker-Dealers that the Commission may require in order to permit such resales pursuant thereto, but such "Plan of Distribution" shall not name any such Broker-Dealer or disclose the amount of Notes held by any such Broker-Dealer except to 4 the extent required by the Commission as a result of a change in policy after the date of this Agreement. The Company shall use its best efforts to keep the Exchange Offer Registration Statement continuously effective, supplemented and amended as required by the provisions of Section 6(c) below to the extent necessary to ensure that it is available for resales of Notes acquired by Broker-Dealers for their own accounts as a result of market-making activities or other trading activities, and to ensure that it conforms with the requirements of this Agreement, the Act and the policies, rules and regulations of the Commission as announced from time to time, for a period of one year from the date on which the Exchange Offer Registration Statement is declared effective. The Company shall provide sufficient copies of the latest version of such Prospectus to Broker-Dealers promptly upon request at any time during such one-year period in order to facilitate such resales. SECTION 4. SHELF REGISTRATION (a) SHELF REGISTRATION. If (i) the Company is not required to file an Exchange Offer Registration Statement or to Consummate the Exchange Offer because the Exchange Offer is not permitted by applicable law or Commission policy (after the procedures set forth in Section 6(a) below have been complied with) or (ii) if any Holder of Transfer Restricted Securities shall notify the Company within 20 business days of the Consummation of the Exchange Offer (A) that such Holder is prohibited by applicable law or Commission policy from participating in the Exchange Offer, or (B) that such Holder may not resell the Series B Notes acquired by it in the Exchange Offer to the public without delivering a prospectus and that the Prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales by such Holder, or (C) that such Holder is a Broker-Dealer and holds Series A Notes acquired directly from the Company or one of its affiliates, then the Company shall: (x) cause to be filed a shelf registration statement pursuant to Rule 415 under the Act, which may be an amendment to the Exchange Offer Registration Statement (in either event, the "SHELF REGISTRATION STATEMENT") on or prior to the earliest to occur of (1) the 60th day after the date on which the Company determines that it is not required to file the Exchange Offer Registration Statement, (2) the 60th day after the date on which the Company receives notice from a Holder of Transfer Restricted Securities as contemplated by clause (ii) above, and (3) the 120th day after the Closing Date (such earliest date being the "SHELF FILING DEADLINE"), which Shelf Registration Statement shall provide for resales of all Transfer Restricted Securities the Holders of which shall have provided the information required pursuant to Section 4(b) hereof; and (y) use its best efforts to cause such Shelf Registration to be declared effective by the Commission on or before the 60th day after the Shelf Filing Deadline. 5 The Company shall use its best efforts to keep such Shelf Registration Statement continuously effective, supplemented and amended as required by the provisions of Sections 6(b) and (c) hereof to the extent necessary to ensure that it is available for resales of Notes by the Holders of Transfer Restricted Securities entitled to the benefit of this Section 4(a), and to ensure that it conforms with the requirements of this Agreement, the Act and the policies, rules and regulations of the Commission as announced from time to time, for a period of at least two years following the Closing Date. (b) PROVISION BY HOLDERS OF CERTAIN INFORMATION IN CONNECTION WITH THE SHELF REGISTRATION STATEMENT. No Holder of Transfer Restricted Securities may include any of its Transfer Restricted Securities in any Shelf Registration Statement pursuant to this Agreement unless and until such Holder furnishes to the Company in writing, within 20 business days after receipt of a request therefor, such information as the Company may reasonably request for use in connection with any Shelf Registration Statement or Prospectus or preliminary Prospectus included therein. No Holder of Transfer Restricted Securities shall be entitled to Liquidated Damages pursuant to Section 5 hereof unless and until such Holder shall have used its best efforts to provide all such reasonably requested information. Each Holder as to which any Shelf Registration Statement is being effected agrees to furnish promptly to the Company all information required to be disclosed in order to make the information previously furnished to the Company by such Holder not materially misleading. SECTION 5. LIQUIDATED DAMAGES If (i) any of the Registration Statements required by this Agreement is not filed with the Commission on or prior to the date specified for such filing in this Agreement, (ii) any of such Registration Statements has not been declared effective by the Commission on or prior to the date specified for such effectiveness in this Agreement (the "EFFECTIVENESS TARGET DATE"), (iii) the Exchange Offer has not been Consummated within 45 business days after the Effectiveness Target Date with respect to the Exchange Offer Registration Statement or (iv) any Registration Statement required by this Agreement is filed and declared effective but shall thereafter cease to be effective or fail to be usable for its intended purpose without being succeeded immediately by a post-effective amendment to such Registration Statement that cures such failure and that is itself immediately declared effective (each such event referred to in clauses (i) through (iv), a "REGISTRATION DEFAULT"), the Company hereby agrees to pay liquidated damages to each Holder of Transfer Restricted Securities with respect to the first 90-day period immediately following the occurrence of such Registration Default, in an amount equal to $.05 per week per $1,000 principal amount of Transfer Restricted Securities held by such Holder for each week or portion thereof that the Registration Default continues. The amount of the liquidated damages shall increase by an additional $.05 per week per $1,000 in principal amount of Transfer Restricted Securities with respect to each subsequent 90-day period until all Registration Defaults have been cured, up to a maximum amount of liquidated damages of $.50 per week per $1,000 principal amount of Transfer Restricted Securities. All accrued liquidated damages shall be paid to Record Holders by the Company by wire transfer of immediately available funds or by federal 6 funds check on each Damages Payment Date, as provided in the Indenture. Following the cure of all Registration Defaults relating to any particular Transfer Restricted Securities, the accrual of liquidated damages with respect to such Transfer Restricted Securities will cease. All obligations of the Company set forth in the preceding paragraph that are outstanding with respect to any Transfer Restricted Security at the time such security ceases to be a Transfer Restricted Security shall survive until such time as all such obligations with respect to such Security shall have been satisfied in full. SECTION 6. REGISTRATION PROCEDURES (a) EXCHANGE OFFER REGISTRATION STATEMENT. In connection with the Exchange Offer, the Company shall comply with all of the provisions of Section 6(c) below, shall use its best efforts to effect such exchange to permit the sale of Transfer Restricted Securities being sold in accordance with the intended method or methods of distribution thereof, and shall comply with all of the following provisions: (i) If in the reasonable opinion of counsel to the Company there is a question as to whether the Exchange Offer is permitted by applicable law, the Company hereby agrees to seek a no-action letter or other favorable decision from the Commission allowing the Company and the Guarantor to Consummate an Exchange Offer for such Series A Notes. The Company hereby agrees to pursue the issuance of such a decision to the Commission staff level but shall not be required to take any action to effect a change of Commission policy. The Company hereby agrees, however, to (A) participate in telephonic conferences with the Commission, (B) deliver to the Commission staff an analysis prepared by counsel to the Company setting forth the legal bases, if any, upon which such counsel has concluded that such an Exchange Offer should be permitted and (C) diligently pursue a resolution (which need not be favorable) by the Commission staff of such submission. (ii) As a condition to its participation in the Exchange Offer pursuant to the terms of this Agreement, each Holder of Transfer Restricted Securities shall furnish, upon the request of the Company, prior to the Consummation thereof, a written representation to the Company (which may be contained in the letter of transmittal contemplated by the Exchange Offer Registration Statement) to the effect that (A) it is not an affiliate of the Company, (B) it is not engaged in, and does not intend to engage in, and has no arrangement or understanding with any person to participate in, a distribution of the Series B Notes to be issued in the Exchange Offer and (C) it is acquiring the Series B Notes in its ordinary course of business. In addition, all such Holders of Transfer Restricted Securities shall otherwise cooperate in the Company's preparations for the Exchange Offer. Each Holder hereby acknowledges and agrees that any Broker-Dealer and any such Holder using the Exchange Offer to participate in a distribution of the securities to be acquired in the Exchange Offer (1) could not under Commission policy as in effect on the date of this Agreement rely on the position of the Commission enunciated in MORGAN STANLEY AND CO., 7 INC. (available June 5, 1991) and EXXON CAPITAL HOLDINGS CORPORATION (available May 13, 1988), as interpreted in the Commission's letter to Shearman & Sterling dated July 2, 1993, and similar no-action letters (including any no-action letter obtained pursuant to clause (i) above), and (2) must comply with the registration and prospectus delivery requirements of the Act in connection with a secondary resale transaction and that such a secondary resale transaction should be covered by an effective registration statement containing the selling security holder information required by Item 507 or 508, as applicable, of Regulation S-K if the resales are of Series B Notes obtained by such Holder in exchange for Series A Notes acquired by such Holder directly from the Company. (iii) Prior to effectiveness of the Exchange Offer Registration Statement, the Company shall provide a supplemental letter to the Commission (A) stating that the Company is registering the Exchange Offer in reliance on the position of the Commission enunciated in EXXON CAPITAL HOLDINGS CORPORATION (available May 13, 1988), MORGAN STANLEY AND CO., INC. (available June 5, 1991) and, if applicable, any no-action letter obtained pursuant to clause (i) above and (B) including a representation that the Company has not entered into any arrangement or understanding with any Person to distribute the Series B Notes to be received in the Exchange Offer and that, to the best of the Company's information and belief, each Holder participating in the Exchange Offer is acquiring the Series B Notes in its ordinary course of business and has no arrangement or understanding with any Person to participate in the distribution of the Series B Notes received in the Exchange Offer. (b) SHELF REGISTRATION STATEMENT. In connection with the Shelf Registration Statement, the Company shall comply with all the provisions of Section 6(c) below and shall use its best efforts to effect such registration to permit the sale of the Transfer Restricted Securities being sold in accordance with the intended method or methods of distribution thereof, and pursuant thereto the Company will as expeditiously as possible prepare and file with the Commission a Registration Statement relating to the registration on any appropriate form under the Act, which form shall be available for the sale of the Transfer Restricted Securities in accordance with the intended method or methods of distribution thereof. (c) GENERAL PROVISIONS. In connection with any Registration Statement and any Prospectus required by this Agreement to permit the sale or resale of Transfer Restricted Securities (including, without limitation, any Registration Statement and the related Prospectus required to permit resales of Notes by Broker-Dealers), the Company shall: (i) use its best efforts to keep such Registration Statement continuously effective and provide all requisite financial statements (including, if required by the Act or any regulation thereunder, financial statements of any guarantor of the Notes) for the period specified in Section 3 or 4 of this Agreement, as applicable; upon the occurrence of any event that would cause any such Registration Statement or the Prospectus contained therein (A) to contain a material misstatement or omission or (B) not to be effective and usable for resale of Transfer Restricted Securities during the period required by this Agreement, the 8 Company shall file promptly an appropriate amendment to such Registration Statement, in the case of clause (A), correcting any such misstatement or omission, and, in the case of either clause (A) or (B), use its best efforts to cause such amendment to be declared effective and such Registration Statement and the related Prospectus to become usable for their intended purpose(s) as soon as practicable thereafter; (ii) prepare and file with the Commission such amendments and post-effective amendments to the Registration Statement as may be necessary to keep the Registration Statement effective for the applicable period set forth in Section 3 or 4 hereof, as applicable, or such shorter period as will terminate when all Transfer Restricted Securities covered by such Registration Statement have been sold; cause the Prospectus to be supplemented by any required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 under the Act, and to comply fully with the applicable provisions of Rules 424 and 430A under the Act in a timely manner; and comply with the provisions of the Act with respect to the disposition of all securities covered by such Registration Statement during the applicable period in accordance with the intended method or methods of distribution by the sellers thereof set forth in such Registration Statement or supplement to the Prospectus; (iii) advise the underwriter(s), if any, and selling Holders promptly and, if requested by such Persons, to confirm such advice in writing, (A) when the Prospectus or any Prospectus supplement or post-effective amendment has been filed, and, with respect to any Registration Statement or any post-effective amendment thereto, when the same has become effective, (B) of any request by the Commission for amendments to the Registration Statement or amendments or supplements to the Prospectus or for additional information relating thereto, (C) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement under the Act or of the suspension by any state securities commission of the qualification of the Transfer Restricted Securities for offering or sale in any jurisdiction, or the initiation of any proceeding for any of the preceding purposes, (D) of the existence of any fact or the happening of any event that makes any statement of a material fact made in the Registration Statement, the Prospectus, any amendment or supplement thereto, or any document incorporated by reference therein untrue, or that requires the making of any additions to or changes in the Registration Statement or the Prospectus in order to make the statements therein not misleading. If at any time the Commission shall issue any stop order suspending the effectiveness of the Registration Statement, or any state securities commission or other regulatory authority shall issue an order suspending the qualification or exemption from qualification of the Transfer Restricted Securities under state securities or Blue Sky laws, the Company shall use its best efforts to obtain the withdrawal or lifting of such order at the earliest possible time; (iv) furnish to each of the selling Holders and each of the underwriter(s), if any, before filing with the Commission, copies of any Registration Statement or any Prospectus included therein or any amendments or supplements to any such Registration Statement or Prospectus (including all documents incorporated by reference after the initial filing of such Registration Statement), which documents will be subject to the review of such Holders and 9 underwriter(s), if any, for a period of at least five business days, and the Company will not file any such Registration Statement or Prospectus or any amendment or supplement to any such Registration Statement or Prospectus (including all such documents incorporated by reference) to which a selling Holder of Transfer Restricted Securities covered by such Registration Statement or the underwriter(s), if any, shall reasonably object within five business days after the receipt thereof. A selling Holder or underwriter, if any, shall be deemed to have reasonably objected to such filing if such Registration Statement, amendment, Prospectus or supplement, as applicable, as proposed to be filed, contains a material misstatement or omission; (v) promptly prior to the filing of any document that is to be incorporated by reference into a Registration Statement or Prospectus, provide copies of such document to the selling Holders and to the underwriter(s), if any, make the Company's representatives available for discussion of such document and other customary due diligence matters, and include such information in such document prior to the filing thereof as such selling Holders or underwriter(s), if any, reasonably may request; (vi) make available at reasonable times for inspection by the selling Holders, any underwriter participating in any disposition pursuant to such Registration Statement, and any attorney or accountant retained by such selling Holders or any of the underwriter(s), all financial and other records, pertinent corporate documents and properties of the Company and any guarantor of the Notes and cause the Company's and any such guarantor's officers, directors and employees to supply all information reasonably requested by any such Holder, underwriter, attorney or accountant in connection with such Registration Statement subsequent to the filing thereof and prior to its effectiveness; (vii) if requested by any selling Holders or the underwriter(s), if any, promptly incorporate in any Registration Statement or Prospectus, pursuant to a supplement or post-effective amendment if necessary, such information as such selling Holders and underwriter(s), if any, may reasonably request to have included therein, including, without limitation, information relating to the "Plan of Distribution" of the Transfer Restricted Securities, information with respect to the principal amount of Transfer Restricted Securities being sold to such underwriter(s), the purchase price being paid therefor and any other terms of the offering of the Transfer Restricted Securities to be sold in such offering; and make all required filings of such Prospectus supplement or post-effective amendment as soon as practicable after the Company is notified of the matters to be incorporated in such Prospectus supplement or post-effective amendment; (viii) cause the Transfer Restricted Securities covered by the Registration Statement to be rated with the appropriate rating agencies, if so requested by the Holders of a majority in aggregate principal amount of Notes covered thereby or the underwriter(s), if any; 10 (ix) furnish to each selling Holder and each of the underwriter(s), if any, without charge, at least one copy of the Registration Statement, as first filed with the Commission, and of each amendment thereto, including all documents incorporated by reference therein and all exhibits (including exhibits incorporated therein by reference); (x) deliver to each selling Holder and each of the underwriter(s), if any, without charge, as many copies of the Prospectus (including each preliminary prospectus) and any amendment or supplement thereto as such Persons reasonably may request; the Company hereby consents to the use of the Prospectus and any amendment or supplement thereto by each of the selling Holders and each of the underwriter(s), if any, in connection with the offering and the sale of the Transfer Restricted Securities covered by the Prospectus or any amendment or supplement thereto; (xi) enter into such agreements (including an underwriting agreement) and make such representations and warranties, and take all such other actions in connection therewith in order to expedite or facilitate the disposition of the Transfer Restricted Securities pursuant to any Registration Statement contemplated by this Agreement, all to such extent as may be requested by the Purchaser or by any Holder of Transfer Restricted Securities or underwriter in connection with any sale or resale pursuant to any Registration Statement contemplated by this Agreement; and whether or not an underwriting agreement is entered into and whether or not the registration is an Underwritten Registration, the Company shall: (A) furnish to each selling Holder and each underwriter, if any, in such substance and scope as they may request and as are customarily made by issuers to underwriters in primary underwritten offerings, upon the date of the Consummation of the Exchange Offer and, if applicable, the effectiveness of the Shelf Registration Statement: (1) a certificate, dated the date of Consummation of the Exchange Offer or the date of effectiveness of the Shelf Registration Statement, as the case may be, signed by (y) the President or any Vice President and (z) a principal financial or accounting officer of each of the Company and any guarantor of the Notes, confirming, as of the date thereof, the matters set forth in paragraphs (a), (b), (c) and (d) of Section 9 of the Purchase Agreement and such other matters as such parties may reasonably request; (2) an opinion, dated the date of Consummation of the Exchange Offer or the date of effectiveness of the Shelf Registration Statement, as the case may be, of counsel for the Company, covering the matters set forth in paragraph (i) of Section 9 of the Purchase Agreement and such other matter as such parties may reasonably request, and in any event including a statement to the effect that such counsel has participated in conferences with officers and other representatives of the Company, representatives of the independent public accountants for the Company in connection with the preparation of such Registration Statement and the related Prospectus and have considered the matters required to be stated therein and the 11 statements contained therein, although such counsel has not independently verified the accuracy, completeness or fairness of such statements; and that such counsel advises that, on the basis of the foregoing (relying as to materiality to a large extent upon facts provided to such counsel by officers and other representatives of the Company and without independent check or verification), no facts came to such counsel's attention that caused such counsel to believe that the applicable Registration Statement, at the time such Registration Statement or any post-effective amendment thereto became effective, and, in the case of the Exchange Offer Registration Statement, as of the date of Consummation, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or that the Prospectus contained in such Registration Statement as of its date and, in the case of the opinion dated the date of Consummation of the Exchange Offer, as of the date of Consummation, contained an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Without limiting the foregoing, such counsel may state further that such counsel assumes no responsibility for, and has not independently verified, the accuracy, completeness or fairness of the financial statements, notes and schedules and other financial data included in any Registration Statement contemplated by this Agreement or the related Prospectus; and (3) a customary comfort letter, dated as of the date of Consummation of the Exchange Offer or the date of effectiveness of the Shelf Registration Statement, as the case may be, from the Company's independent accountants, in the customary form and covering matters of the type customarily covered in comfort letters by underwriters in connection with primary underwritten offerings, and affirming the matters set forth in the comfort letters delivered pursuant to Section 9(k) of the Purchase Agreement, without exception; (B) set forth in full or incorporate by reference in the underwriting agreement, if any, the indemnification provisions and procedures of Section 8 hereof with respect to all parties to be indemnified pursuant to said Section; and (C) deliver such other documents and certificates as may be reasonably requested by such parties to evidence compliance with clause (A) above and with any customary conditions contained in the underwriting agreement or other agreement entered into by the Company pursuant to this clause (xi), if any. If at any time the representations and warranties of the Company contemplated in clause (A)(1) above cease to be true and correct, the Company shall so advise the Purchaser and the underwriter(s), if any, and each selling Holder promptly and, if requested by such Persons, shall confirm such advice in writing; 12 (xii) prior to any public offering of Transfer Restricted Securities, cooperate with the selling Holders, the underwriter(s), if any, and their respective counsel in connection with the registration and qualification of the Transfer Restricted Securities under the securities or Blue Sky laws of such jurisdictions as the selling Holders or underwriter(s) may request and do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of the Transfer Restricted Securities covered by the Shelf Registration Statement; PROVIDED, HOWEVER, that the Company shall not be required to register or qualify as a foreign corporation where it is not now so qualified or to take any action that would subject it to the service of process in suits or to taxation, other than as to matters and transactions relating to the Registration Statement, in any jurisdiction where it is not now so subject; (xiii) shall issue, upon the request of any Holder of Series A Notes covered by the Shelf Registration Statement, Series B Notes, having an aggregate principal amount equal to the aggregate principal amount of Series A Notes surrendered to the Company by such Holder in exchange therefor or being sold by such Holder; such Series B Notes to be registered in the name of such Holder or in the name of the purchaser(s) of such Notes, as the case may be; in return, the Series A Notes held by such Holder shall be surrendered to the Company for cancellation; (xiv) cooperate with the selling Holders and the underwriter(s), if any, to facilitate the timely preparation and delivery of certificates representing Transfer Restricted Securities to be sold and not bearing any restrictive legends; and enable such Transfer Restricted Securities to be in such denominations and registered in such names as the Holders or the underwriter(s), if any, may request at least two business days prior to any sale of Transfer Restricted Securities made by such underwriter(s); (xv) use its best efforts to cause the Transfer Restricted Securities covered by the Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the seller or sellers thereof or the underwriter(s), if any, to consummate the disposition of such Transfer Restricted Securities, subject to the proviso contained in clause (viii) above; (xvi) if any fact or event contemplated by clause (c)(iii)(D) above shall exist or have occurred, prepare a supplement or post-effective amendment to the Registration Statement or related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of Transfer Restricted Securities, the Prospectus will not contain an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading; (xvii) provide a CUSIP number for all Transfer Restricted Securities not later than the effective date of the Registration Statement and provide the Trustee under the Indenture with printed certificates for the Transfer Restricted Securities which are in a form eligible for deposit with The Depositary Trust Company; 13 (xviii) cooperate and assist in any filings required to be made with the NASD and in the performance of any due diligence investigation by any underwriter (including any "qualified independent underwriter") that is required to be retained in accordance with the rules and regulations of the NASD, and use its reasonable best efforts to cause such Registration Statement to become effective and approved by such governmental agencies or authorities as may be necessary to enable the Holders selling Transfer Restricted Securities to consummate the disposition of such Transfer Restricted Securities; (xix) otherwise use its best efforts to comply with all applicable rules and regulations of the Commission, and make generally available to its security holders, as soon as practicable, a consolidated earnings statement meeting the requirements of Rule 158 (which need not be audited) for the twelve-month period (A) commencing at the end of any fiscal quarter in which Transfer Restricted Securities are sold to underwriters in a firm or best efforts Underwritten Offering or (B) if not sold to underwriters in such an offering, (xx) cause the Indenture to be qualified under the TIA not later than the effective date of the first Registration Statement required by this Agreement, and, in connection therewith, cooperate with the Trustee and the Holders of Notes to effect such changes to the Indenture as may be required for such Indenture to be so qualified in accordance with the terms of the TIA; and execute, and use its best efforts to cause the Trustee to execute, all documents that may be required to effect such changes and all other forms and documents required to be filed with the Commission to enable such Indenture to be so qualified in a timely manner; (xxi) cause all Transfer Restricted Securities covered by the Registration Statement to be listed on each securities exchange on which similar securities issued by the Company are then listed if requested by the Holders of a majority in aggregate principal amount of Series A Notes or the managing underwriter(s), if any; and (xxii) provide promptly to each Holder upon request each document filed with the Commission pursuant to the requirements of Section 13 and Section 15 of the Exchange Act. Each Holder agrees by acquisition of a Transfer Restricted Security that, upon receipt of any notice from the Company of the existence of any fact of the kind described in Section 6(c)(iii)(D) hereof, such Holder will forthwith discontinue disposition of Transfer Restricted Securities pursuant to the applicable Registration Statement until such Holder's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 6(c)(xvi) hereof, or until it is advised in writing (the "ADVICE") by the Company that the use of the Prospectus may be resumed, and has received copies of any additional or supplemental filings that are incorporated by reference in the Prospectus. If so directed by the Company, each Holder will deliver to the Company (at the Company's expense) all copies, other than permanent file copies 14 then in such Holder's possession, of the Prospectus covering such Transfer Restricted Securities that was current at the time of receipt of such notice. In the event the Company shall give any such notice, the time period regarding the effectiveness of such Registration Statement set forth in Section 3 or 4 hereof, as applicable, shall be extended by the number of days during the period from and including the date of the giving of such notice pursuant to Section 6(c)(iii)(D) hereof to and including the date when each selling Holder covered by such Registration Statement shall have received the copies of the supplemented or amended Prospectus contemplated by Section 6(c)(xvi) hereof or shall have received the Advice. SECTION 7. REGISTRATION EXPENSES (a) All expenses incident to the Company's performance of or compliance with this Agreement will be borne by the Company, regardless of whether a Registration Statement becomes effective, including without limitation: (i) all registration and filing fees and expenses (including filings made by the Purchaser or Holder with the NASD (and, if applicable, the fees and expenses of any "qualified independent underwriter" and its counsel that may be required by the rules and regulations of the NASD)); (ii) all fees and expenses of compliance with federal securities and state Blue Sky or securities laws; (iii) all expenses of printing (including printing certificates for the Series B Notes to be issued in the Exchange Offer and printing of Prospectuses), messenger and delivery services and telephone; (iv) all fees and disbursements of counsel for the Company and, subject to Section 7(b) below, the Holders of Transfer Restricted Securities; (v) all application and filing fees in connection with listing Notes on a national securities exchange or automated quotation system pursuant to the requirements hereof; and (vi) all fees and disbursements of independent certified public accountants of the Company and any guarantor of the Notes (including the expenses of any special audit and comfort letters required by or incident to such performance). The Company will, in any event, bear its and any guarantor's internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expenses of any annual audit and the fees and expenses of any Person, including special experts, retained by the Company. (b) In connection with any Shelf Registration Statement required by this Agreement, the Company will reimburse the Holders of Transfer Restricted Securities being registered pursuant to the Shelf Registration Statement for the reasonable fees and disbursements of not more than one counsel, who shall be Latham & Watkins or such other counsel as may be chosen by the Holders of a majority in principal amount of the Transfer Restricted Securities for whose benefit such Shelf Registration Statement is being prepared. 15 SECTION 8. INDEMNIFICATION (a) The Company agrees to indemnify and hold harmless (i) each Holder and (ii) each person, if any, who controls (within the meaning of Section 15 of the Act or Section 20 of the Exchange Act) any Holder (any of the persons referred to in this clause (ii) being hereinafter referred to as a "controlling person") and (iii) the respective officers, directors, partners, employees, representatives and agents of any Holder or any controlling person (any person referred to in clause (i), (ii) or (iii) may hereinafter be referred to as an "INDEMNIFIED HOLDER"), to the fullest extent lawful, from and against any and all losses, claims, damages, liabilities, judgments, actions and expenses (including without limitation and as incurred, reimbursement of all reasonable costs of investigating, preparing, pursuing or defending any claim or action, or any investigation or proceeding by any governmental agency or body, commenced or threatened, including the reasonable fees and expenses of counsel to any Indemnified Holder) directly or indirectly caused by, related to, based upon, arising out of or in connection with any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement or Prospectus (or any amendment or supplement thereto), or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or any act or failure to act or any alleged act or failure to act in connection with, or relating in any manner to the transactions contemplated hereby, except insofar as such losses, claims, damages, liabilities or expenses are caused by an untrue statement or omission or alleged untrue statement or omission that is made in reliance upon and in conformity with information relating to any of the Holders furnished in writing to the Company by any of the Holders expressly for use therein. In case any action or proceeding (including any governmental or regulatory investigation or proceeding) shall be brought or asserted against any of the Indemnified Holders with respect to which indemnity may be sought against the Company, such Indemnified Holder (or the Indemnified Holder controlled by such controlling person) shall promptly notify the Company in writing (PROVIDED, that the failure to give such notice shall not relieve the Company of its obligations pursuant to this Agreement). Such Indemnified Holder shall have the right to employ its own counsel in any such action and the fees and expenses of such counsel shall be paid, as incurred, by the Company (regardless of whether it is ultimately determined that an Indemnified Holder is not entitled to indemnification hereunder). The Company shall not, in connection with any one such action or proceeding or separate but substantially similar or related actions or proceedings in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys (in addition to any local counsel) at any time for such Indemnified Holders, which firm shall be designated by the Holders. The Company shall be liable for any settlement of any such action or proceeding effected with the Company's prior written consent, which consent shall not be withheld unreasonably, and the Company agrees to indemnify and hold harmless any Indemnified Holder from and against any loss, claim, damage, liability or expense by reason of any settlement of any action effected with the written consent of the Company. The Company shall not, without the prior written consent of each Indemnified Holder, settle or compromise or consent to the entry of judgment in or otherwise seek to terminate any pending or threatened 16 action, claim, litigation or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not any Indemnified Holder is a party thereto), unless such settlement, compromise, consent or termination includes an unconditional release of each Indemnified Holder from all liability arising out of such action, claim, litigation or proceeding. (b) Each Holder of Transfer Restricted Securities agrees, severally and not jointly, to indemnify and hold harmless the Company, and its directors, officers, and any person controlling (within the meaning of Section 15 of the Act or Section 20 of the Exchange Act) the Company, and the respective officers, directors, partners, employees, representatives and agents of each such person, to the same extent as the foregoing indemnity from the Company to each of the Indemnified Holders, but only with respect to claims and actions based on information relating to such Holder furnished in writing by such Holder expressly for use in any Registration Statement. In case any action or proceeding shall be brought against the Company or its directors or officers or any such controlling person in respect of which indemnity may be sought against a Holder of Transfer Restricted Securities, such Holder shall have the rights and duties given the Company and the Company or its directors or officers or such controlling person shall have the rights and duties given to each Holder by the preceding paragraph. In no event shall the liability of any selling Holder hereunder be greater in amount than the dollar amount of the proceeds received by such Holder upon the sale of the Registrable Securities giving rise to such indemnification obligation. (c) If the indemnification provided for in this Section 8 is unavailable to an indemnified party under Section 8(a) or Section 8(b) hereof (other than by reason of exceptions provided in those Sections) in respect of any losses, claims, damages, liabilities or expenses referred to therein, then each applicable indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Holders on the other hand from their sale of Transfer Restricted Securities or if such allocation is not permitted by applicable law, the relative fault of the Company on the one hand and of the Indemnified Holder on the other in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative fault of the Company on the one hand and of the Indemnified Holder on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or by the Indemnified Holder and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in the second paragraph of Section 8(a), any legal or other fees or expenses reasonably incurred by such party in connection with investigating or defending any action or claim. The Company and each Holder of Transfer Restricted Securities agree that it would not be just and equitable if contribution pursuant to this Section 8(c) were determined by pro rata 17 allocation (even if the Holders were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an indemnified party as a result of the losses, claims, damages, liabilities or expenses referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 8, none of the Holders (and its related Indemnified Holders) shall be required to contribute, in the aggregate, any amount in excess of the amount by which the total discount received by such Holder with respect to the Series A Notes exceeds the amount of any damages which such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Holders' obligations to contribute pursuant to this Section 8(c) are several in proportion to the respective principal amount of Series A Notes held by each of the Holders hereunder and not joint. SECTION 9. RULE 144A The Company hereby agrees with each Holder, for so long as any Transfer Restricted Securities remain outstanding, to make available to any Holder or beneficial owner of Transfer Restricted Securities in connection with any sale thereof and any prospective purchaser of such Transfer Restricted Securities from such Holder or beneficial owner, the information required by Rule 144A(d)(4) under the Act in order to permit resales of such Transfer Restricted Securities pursuant to Rule 144A. SECTION 10. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS No Holder may participate in any Underwritten Registration hereunder unless such Holder (a) agrees to sell such Holder's Transfer Restricted Securities on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements and (b) completes and executes all reasonable questionnaires, powers of attorney, indemnities, underwriting agreements, lock-up letters and other documents required under the terms of such underwriting arrangements. SECTION 11. SELECTION OF UNDERWRITERS The Holders of Transfer Restricted Securities covered by the Shelf Registration Statement who desire to do so may sell such Transfer Restricted Securities in an Underwritten Offering. In any such Underwritten Offering, the investment banker or investment bankers and 18 manager or managers that will administer the offering will be selected by the Holders of a majority in aggregate principal amount of the Transfer Restricted Securities included in such offering; PROVIDED, that such investment bankers and managers must be reasonably satisfactory to the Company. SECTION 12. MISCELLANEOUS (a) REMEDIES. The Company agrees that monetary damages (including the liquidated damages contemplated hereby) would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Agreement and hereby agree to waive the defense in any action for specific performance that a remedy at law would be adequate. (b) NO INCONSISTENT AGREEMENTS. The Company will not, on or after the date of this Agreement, enter into any agreement with respect to its securities that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. The Company has not previously entered into any agreement granting any registration rights with respect to its securities to any Person. The rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of the Company's securities under any agreement in effect on the date hereof. (c) ADJUSTMENTS AFFECTING THE NOTES. The Company will not take any action, or permit any change to occur, with respect to the Notes that would materially and adversely affect the ability of the Holders to Consummate any Exchange Offer. (d) AMENDMENTS AND WAIVERS. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to or departures from the provisions hereof may not be given unless the Company has obtained the written consent of Holders of a majority of the outstanding principal amount of Transfer Restricted Securities. Notwithstanding the foregoing, a waiver or consent to departure from the provisions hereof that relates exclusively to the rights of Holders whose securities are being tendered pursuant to the Exchange Offer and that does not affect directly or indirectly the rights of other Holders whose securities are not being tendered pursuant to such Exchange Offer may be given by the Holders of a majority of the outstanding principal amount of Transfer Restricted Securities being tendered or registered. (e) NOTICES. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, first-class mail (registered or certified, return receipt requested), telex, telecopier, or air courier guaranteeing overnight delivery: (i) if to a Holder, at the address set forth on the records of the Registrar under the Indenture, with a copy to the Registrar under the Indenture; and 19 (ii) if to the Company: Wavetek Corporation 11995 El Camino Real Suite 301 San Diego, California 92130 Telecopier No.: (619) 793-2310 Attention: Chief Financial Officer With a copy to: Sullivan & Cromwell 444 South Flower Street Los Angeles, California 90071 Telecopier No.: (213) 683-0457 Attention: Alison S. Ressler All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five business days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt acknowledged, if telecopied; and on the next business day, if timely delivered to an air courier guaranteeing overnight delivery. Copies of all such notices, demands or other communications shall be concurrently delivered by the Person giving the same to the Trustee at the address specified in the Indenture. (f) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, including without limitation and without the need for an express assignment, subsequent Holders of Transfer Restricted Securities; PROVIDED, HOWEVER, that this Agreement shall not inure to the benefit of or be binding upon a successor or assign of a Holder unless and to the extent such successor or assign acquired Transfer Restricted Securities from such Holder. (g) COUNTERPARTS. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (h) HEADINGS. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICT OF LAW RULES THEREOF. 20 (j) SEVERABILITY. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. (k) ENTIRE AGREEMENT. This Agreement together with the other Operative Documents (as defined in the Purchase Agreement) is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein with respect to the registration rights granted by the Company with respect to the Transfer Restricted Securities. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. 21 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. WAVETEK CORPORATION By: /s/ Vickie L. Capps ----------------------- Name: Vickie L. Capps Title: Vice President and Chief Financial Officer DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION By: /s/ Ted Iantuono --------------------- Name: Ted Iantuono Title: Vice President 22 EX-5.1 14 EXHIBIT 5.1 EXHIBIT 5.1 [SULLIVAN & CROMWELL LETTERHEAD] July 28, 1997 Wavetek Corporation, Wavetek U.S. Inc., 11995 El Camino Real, Suite 301, San Diego, CA 92130. Ladies and Gentlemen: In connection with the registration under the Securities Act of 1933 (the "Act") of $85,000,000 aggregate principal amount of 10 1/8% Senior Subordinated Notes due 2007 (the "Securities") of Wavetek Corporation, a Delaware corporation (the "Company"), and the Subsidiary Guarantee (the "Subsidiary Guarantee") of Wavetek U.S. Inc., a Delaware Corporation (the "Subsidiary Guarantor"), we, as your counsel, have examined such corporate records, certificates and other documents, and such questions of law, as we have considered necessary or appropriate for the purposes of this opinion. Upon the basis of such examination, we advise you that, in our opinion, when the Registration Statement has -2- become effective under the Act, the terms of the Securities and of their issuance and sale have been duly established in conformity with the Indenture relating to the Securities so as not to violate any applicable law or result in a default under or breach of any agreement or instrument binding upon the Company and so as to comply with any requirement or restriction imposed by any court or governmental body having jurisdiction over the Company, and the Securities and Subsidiary Guarantee have been duly executed and authenticated in accordance with the Indenture and issued and sold as contemplated in the Registration Statement, the Securities will constitute valid and legally binding obligations of the Company and the Subsidiary Guarantee will constitute the valid and legally binding obligation of the Subsidiary Guarantor, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles. The foregoing opinion is limited to the Federal laws of the United States, the laws of the State of New York and the General Corporation Law of the State of Delaware, and we are expressing no opinion as to the effect of the laws of any other jurisdiction. -3- We have relied as to certain matters on information obtained from public officials, officers of the Company and other sources believed by us to be responsible. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to us under the heading "Validity of Notes" in the Prospectus. In giving such consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Act. Very truly yours, SULLIVAN & CROMWELL EX-8.1 15 EXHIBIT 8.1 EXHIBIT 8.1 [SULLIVAN & CROMWELL LETTERHEAD] July 28, 1997 Wavetek Corporation, Wavetek U.S. Inc., 11995 El Camino Real, Suite 301, San Diego, California 92130. Ladies and Gentlemen: We have acted as your counsel in connection with the registration under the Securities Act of 1933 (the "Act") of $85,000,000 aggregate principal amount of 10 1/8% Senior Subordinated Notes due 2007 of Wavetek Corporation (the "Company") and the Subsidiary Guarantee of Wavetek U.S. Inc. (the "Subsidiary Guarantor"). We hereby confirm to you that our opinion is as set forth under the caption "The Exchange Offer--Federal Income Tax Consequences" in the prospectus, dated July 28, 1997 (the "Prospectus"), included in the related Registration Statement on Form S-4 filed by the Company and the Subsidiary Guarantor with the Securities and Exchange Commission (the "Registration Statement"). We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to us under the heading "The Exchange Offer--Federal Income Tax Consequences" in the Prospectus. In giving such consent, we do not admit that we are in the category of persons whose consent is required under Section 7 of the Act. Very truly yours, SULLIVAN & CROMWELL EX-10.1 16 EXHIBIT 10.1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- $45,000,000 CREDIT AGREEMENT DATED AS OF JUNE 11, 1997 AMONG WAVETEK CORPORATION AS BORROWER, THE LENDERS LISTED HEREIN, AS LENDERS, DLJ CAPITAL FUNDING, INC., AS SYNDICATION AGENT, AND FLEET NATIONAL BANK, AS ADMINISTRATIVE AGENT ARRANGED BY: DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- WAVETEK CORPORATION CREDIT AGREEMENT TABLE OF CONTENTS PAGE SECTION 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . 2 1.1 Certain Defined Terms . . . . . . . . . . . . . . . . . . . 2 1.2 Accounting Terms; Utilization of GAAP for Purposes of Calculations Under Agreement. . . . . . . . . . . . . . . . 35 1.3 Other Definitional Provisions and Rules of Construction . . 35 1.4 Currency Equivalents Generally. . . . . . . . . . . . . . . 36 SECTION 2. AMOUNTS AND TERMS OF COMMITMENTS AND LOANS. . . . . . . . . 36 2.1 Commitments; Making of Loans; Notes; Register; General Provisions Regarding Offshore Currency Loans. . . . . . . . 36 2.2 Interest on the Loans . . . . . . . . . . . . . . . . . . . 48 2.3 Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 2.4 Repayments, Prepayments and Reductions in Revolving Loan Commitments; General Provisions Regarding Payments. . . . . 53 2.5 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . 61 2.6 Special Provisions Governing Offshore Rate Loans. . . . . . 62 2.7 Increased Costs; Taxes; Capital Adequacy. . . . . . . . . . 65 2.8 Obligation of Lenders and Issuing Lenders to Mitigate . . . 69 2.9 DEFAULTING LENDERS. . . . . . . . . . . . . . . . . . . . . 70 SECTION 3. LETTERS OF CREDIT . . . . . . . . . . . . . . . . . . . . . 71 3.1 Issuance of Letters of Credit and Lenders' Purchase of Participations Therein. . . . . . . . . . . . . . . . . . . 71 3.2 Letter of Credit Fees . . . . . . . . . . . . . . . . . . . 74 3.3 Drawings and Reimbursement of Amounts Paid Under Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . 75 3.4 Obligations Absolute. . . . . . . . . . . . . . . . . . . . 78 3.5 Indemnification; Nature of Issuing Lenders' Duties. . . . . 79 3.6 Increased Costs and Taxes Relating to Letters of Credit . . 80 SECTION 4. CONDITIONS TO LOANS AND LETTERS OF CREDIT . . . . . . . . . 81 4.1 Conditions to Term Loans and Initial Revolving Loans, Offshore Currency Loans and Swing Line Loans. . . . . . . . 81 4.2 Conditions to All Loans . . . . . . . . . . . . . . . . . . 89 4.3 Conditions to Letters of Credit . . . . . . . . . . . . . . 90 (i) PAGE SECTION 5. COMPANY'S REPRESENTATIONS AND WARRANTIES. . . . . . . . . . 91 5.1 Organization, Powers, Qualification, Good Standing, Business and Subsidiaries . . . . . . . . . . . . . . . . . 91 5.2 Authorization of Borrowing, etc.. . . . . . . . . . . . . . 92 5.3 Financial Condition . . . . . . . . . . . . . . . . . . . . 93 5.4 No Material Adverse Change; No Restricted Junior Payments . 94 5.5 Title to Properties; Liens; Real Property . . . . . . . . . 94 5.6 Litigation; Adverse Facts . . . . . . . . . . . . . . . . . 95 5.7 Payment of Taxes. . . . . . . . . . . . . . . . . . . . . . 95 5.8 Performance of Agreements; Materially Adverse Agreements. . 96 5.9 Governmental Regulation . . . . . . . . . . . . . . . . . . 96 5.10 Securities Activities . . . . . . . . . . . . . . . . . . . 96 5.11 Employee Benefit Plans. . . . . . . . . . . . . . . . . . . 96 5.12 Certain Fees. . . . . . . . . . . . . . . . . . . . . . . . 97 5.13 Environmental Protection. . . . . . . . . . . . . . . . . . 97 5.14 Employee Matters. . . . . . . . . . . . . . . . . . . . . . 98 5.15 Solvency. . . . . . . . . . . . . . . . . . . . . . . . . . 99 5.16 Matters Relating to Collateral. . . . . . . . . . . . . . . 99 5.17 Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . 100 SECTION 6. COMPANY'S AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . 100 6.1 Financial Statements and Other Reports. . . . . . . . . . . 100 6.2 Corporate Existence, etc. . . . . . . . . . . . . . . . . . 105 6.3 Payment of Taxes and Claims; Tax Consolidation. . . . . . . 106 6.4 Maintenance of Properties; Insurance. . . . . . . . . . . . 106 6.5 Inspection Rights; Lender Meeting . . . . . . . . . . . . . 107 6.6 Compliance with Laws, etc.. . . . . . . . . . . . . . . . . 108 6.7 Environmental Review and Investigation, Disclosure, Etc.; Company's Actions Regarding Hazardous Materials Activities, Environmental Claims and Violations of Environmental Laws. . . . . . . . . . . . . . . . . . . . . 108 6.8 Execution of Subsidiary Guaranty and Personal Property Collateral Documents by Certain Subsidiaries and Future Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . 111 6.9 Conforming Leasehold Interests; Matters Relating to Additional Real Property Collateral . . . . . . . . . . . . 112 SECTION 7. COMPANY'S NEGATIVE COVENANTS. . . . . . . . . . . . . . . . 114 7.1 Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . 114 7.2 Liens and Related Matters . . . . . . . . . . . . . . . . . 116 7.3 Investments; Joint Ventures . . . . . . . . . . . . . . . . 117 7.4 Contingent Obligations. . . . . . . . . . . . . . . . . . . 118 7.5 Restricted Junior Payments. . . . . . . . . . . . . . . . . 120 7.6 Financial Covenants . . . . . . . . . . . . . . . . . . . . 120 (ii) PAGE 7.7 Restriction on Fundamental Changes; Asset Sales and Acquisitions. . . . . . . . . . . . . . . . . . . . . . . . 124 7.8 Consolidated Capital Expenditures . . . . . . . . . . . . . 126 7.9 Restriction on Leases . . . . . . . . . . . . . . . . . . . 127 7.10 Sales and Lease-Backs . . . . . . . . . . . . . . . . . . . 127 7.11 Sale or Discount of Receivables . . . . . . . . . . . . . . 127 7.12 Transactions with Shareholders and Affiliates . . . . . . . 128 7.13 Disposal of Subsidiary Stock; Restrictions on Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . 129 7.14 Conduct of Business . . . . . . . . . . . . . . . . . . . . 129 7.15 Amendments of Certain Documents; Designation of "Designated Senior Debt." . . . . . . . . . . . . . . . . . 129 SECTION 8. EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . 130 8.1 Failure to Make Payments When Due . . . . . . . . . . . . . 130 8.2 Default in Other Agreements . . . . . . . . . . . . . . . . 130 8.3 Breach of Certain Covenants . . . . . . . . . . . . . . . . 131 8.4 Breach of Warranty. . . . . . . . . . . . . . . . . . . . . 131 8.5 Other Defaults Under Loan Documents . . . . . . . . . . . . 131 8.6 Involuntary Bankruptcy; Appointment of Receiver, etc. . . . 131 8.7 Voluntary Bankruptcy; Appointment of Receiver, etc. . . . . 132 8.8 Judgments and Attachments . . . . . . . . . . . . . . . . . 132 8.9 Dissolution . . . . . . . . . . . . . . . . . . . . . . . . 133 8.10 Employee Benefit Plans. . . . . . . . . . . . . . . . . . . 133 8.11 Change of Control . . . . . . . . . . . . . . . . . . . . . 133 8.12 Invalidity of Subsidiary Guaranty . . . . . . . . . . . . . 133 8.13 Failure of Security . . . . . . . . . . . . . . . . . . . . 133 8.14 Failure to Consummate the Recapitalization Transactions . . 133 8.15 Action Under Related Financing Documents. . . . . . . . . . 134 SECTION 9. THE AGENTS. . . . . . . . . . . . . . . . . . . . . . . . . 135 9.1 Appointment . . . . . . . . . . . . . . . . . . . . . . . . 135 9.2 Powers and Duties; General Immunity . . . . . . . . . . . . 136 9.3 Representations and Warranties; No Responsibility For Appraisal of Creditworthiness . . . . . . . . . . . . . . . 138 9.4 Right to Indemnity. . . . . . . . . . . . . . . . . . . . . 139 9.5 Successor Agents, Swing Line Lender and Offshore Currency Funding Lender . . . . . . . . . . . . . . . . . . 139 9.6 Collateral Documents and Subsidiary Guaranty. . . . . . . . 141 9.7 Other Titles. . . . . . . . . . . . . . . . . . . . . . . . 142 SECTION 10. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . 142 10.1 Assignments and Participations in Loans and Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . 142 10.2 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . 145 10.3 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . 146 (iii) PAGE 10.4 Set-Off . . . . . . . . . . . . . . . . . . . . . . . . . . 147 10.5 Ratable Sharing . . . . . . . . . . . . . . . . . . . . . . 148 10.6 Amendments and Waivers. . . . . . . . . . . . . . . . . . . 148 10.7 Independence of Covenants . . . . . . . . . . . . . . . . . 150 10.8 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 150 10.9 Survival of Representations, Warranties and Agreements. . . 150 10.10 Failure or Indulgence Not Waiver; Remedies Cumulative . . . 151 10.11 Marshalling; Payments Set Aside . . . . . . . . . . . . . . 151 10.12 Severability. . . . . . . . . . . . . . . . . . . . . . . . 151 10.13 Obligations Several; Independent Nature of Lenders' Rights. 151 10.14 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . 152 10.15 Applicable Law. . . . . . . . . . . . . . . . . . . . . . . 152 10.16 Successors and Assigns. . . . . . . . . . . . . . . . . . . 152 10.17 Consent to Jurisdiction and Service of Process. . . . . . . 152 10.18 Waiver of Jury Trial. . . . . . . . . . . . . . . . . . . . 153 10.19 Judgment. . . . . . . . . . . . . . . . . . . . . . . . . . 154 10.20 Confidentiality . . . . . . . . . . . . . . . . . . . . . . 154 10.21 Counterparts; Effectiveness . . . . . . . . . . . . . . . . 155 Signature pages . . . . . . . . . . . . . . . . . . . . . . S-1 (iv) EXHIBITS I FORM OF NOTICE OF BORROWING II FORM OF NOTICE OF CONVERSION/CONTINUATION III FORM OF NOTICE OF ISSUANCE OF LETTER OF CREDIT IV FORM OF TERM NOTE V FORM OF REVOLVING NOTE VI FORM OF SWING LINE NOTE VII FORM OF COMPLIANCE CERTIFICATE VIII FORM OF OPINION OF SULLIVAN & CROMWELL IX FORMS OF OPINIONS OF LOCAL AND FOREIGN COUNSEL X FORM OF OPINION OF O'MELVENY & MYERS LLP XI FORM OF ASSIGNMENT AGREEMENT XII FORM OF COLLATERAL ACCOUNT AGREEMENT XIII FORM OF COMPANY PLEDGE AGREEMENT XIV FORM OF COMPANY SECURITY AGREEMENT XV FORM OF COMPANY PATENT COLLATERAL ASSIGNMENT AND SECURITY AGREEMENT XVI FORM OF COMPANY TRADEMARK SECURITY AGREEMENT XVII FORM OF SUBSIDIARY GUARANTY XVIII FORM OF SUBSIDIARY PLEDGE AGREEMENT XIX FORM OF SUBSIDIARY SECURITY AGREEMENT XX FORM OF SUBSIDIARY PATENT COLLATERAL ASSIGNMENT AND SECURITY AGREEMENT XXI FORM OF SUBSIDIARY TRADEMARK SECURITY AGREEMENT XXII FORM OF MORTGAGE XXIII FORM OF FINANCIAL CONDITION CERTIFICATE XXIV FORM OF AUDITOR'S LETTER XXV FORM OF OFFSHORE CURRENCY NOTE (v) SCHEDULES 1.1 LENDING OFFICES 2.1 LENDERS' COMMITMENTS AND PRO RATA SHARES 4.1E CLOSING DATE MORTGAGED PROPERTIES 5.1 SUBSIDIARIES OF COMPANY 5.5 REAL PROPERTY 5.11 CERTAIN EMPLOYEE BENEFIT PLANS 5.13 ENVIRONMENTAL MATTERS 7.1 CERTAIN EXISTING INDEBTEDNESS 7.2 CERTAIN EXISTING LIENS 7.3 CERTAIN EXISTING INVESTMENTS 7.4 CERTAIN EXISTING CONTINGENT OBLIGATIONS (vi) WAVETEK CORPORATION CREDIT AGREEMENT This CREDIT AGREEMENT is dated as of June 11, 1997 and entered into by and among WAVETEK CORPORATION, a Delaware corporation ("COMPANY"), THE LENDERS LISTED ON THE SIGNATURE PAGES HEREOF (each individually referred to herein as a "LENDER" and collectively as "LENDERS"), DLJ CAPITAL FUNDING, INC. ("DLJ"), as syndication agent hereunder for Lenders (in such capacity, "SYNDICATION AGENT"), and FLEET NATIONAL BANK, as administrative agent for Lenders (in such capacity, "ADMINISTRATIVE AGENT"). R E C I T A L S WHEREAS, Company intends to engage in certain recapitalization transactions (the "Recapitalization Transactions") whereby Company will repurchase shares of its common stock (including all shares of its outstanding Class B Common Stock) and make cash payments for the surrender of stock options from employees in an aggregate amount not to exceed $159,400,000; WHEREAS, Company will finance the Recapitalization Transactions, including the payment of related fees and expenses, from the proceeds of (i) the issuance of shares of its Common Stock (terms used herein without definition shall have the meanings set forth therefor in subsection 1.1 of this Agreement) to the New Equity Investors for an aggregate purchase price of approximately $43,500,000, which shares of Common Stock represent 49.7% of Company's outstanding Common Stock following the Recapitalization Transactions, (ii) the issuance of not less than $85,000,000 in original principal amount of Senior Subordinated Notes, (iii) cash-on-hand of Company and (iv) $25,000,000 in Term Loans and approximately $3,500,000 in Revolving Loans; WHEREAS, Company desires to secure all of its Obligations hereunder and under the other Loan Documents by granting to Administrative Agent, on behalf of Lenders, a First Priority Lien on substantially all of its property, including a pledge of all of the capital stock of each of its Domestic Subsidiaries and a pledge of sixty-five percent (65%) of the capital stock of each of its Foreign Subsidiaries; WHEREAS, all of the Domestic Subsidiaries of Company have agreed to guarantee the Obligations hereunder and under the other Loan Documents and to secure their guaranties by granting to Administrative Agent, on behalf of Lenders, a First Priority Lien on substantially all of their respective property, including a pledge of all of the capital stock of each of their respective Domestic Subsidiaries and a 1 pledge of sixty-five percent (65%) of the capital stock of each of their Foreign Subsidiaries other than any Immaterial Subsidiary; NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, Company, Lenders, Syndication Agent and Administrative Agent agree as follows: SECTION 1. DEFINITIONS 1.1 CERTAIN DEFINED TERMS. The following terms used in this Agreement shall have the following meanings: "ACQUISITION" has the meaning assigned to that term in subsection 7.7(ii). "ADDITIONAL MORTGAGE" has the meaning assigned to that term in subsection 6.9B. "ADDITIONAL MORTGAGE POLICY" has the meaning assigned to that term in subsection 6.9B. "ADDITIONAL MORTGAGED PROPERTY" has the meaning assigned to that term in subsection 6.9B. "ADJUSTED OFFSHORE RATE" means, for any Interest Rate Determination Date with respect to an Interest Period for an Offshore Rate Loan, the rate per annum obtained by (a) DIVIDING (i) the arithmetic average of the offered quotations (rounded upward to the nearest 1/16 of one percent) to first class banks in the London interbank market by Reference Lender for deposits (for delivery on the first day of such Interest Period) in the Applicable Currency of amounts comparable to the principal amount of the Offshore Rate Loans of Reference Lender for which the Adjusted Offshore Rate is then being determined with maturities comparable to such Interest Period as of approximately 11:00 a.m. (London time) on such Interest Rate Determination Date BY (ii) a percentage equal to 100% MINUS the stated maximum rate of all reserve requirements (including any marginal, emergency, supplemental, special or other reserves) applicable on such Interest Rate Determination Date to any member bank of the Federal Reserve System in respect of "Eurocurrency liabilities" as defined in Regulation D and without duplication, ADDING (b) the additional cost (expressed as a percentage per annum and rounded upwards to the nearest 1/16 of one percent) to the Lenders of complying with the relative reserve asset ratio required by the Bank of England from time to time (if any) and any analogous requirement of any central banking or financial regulatory authority imposed in 2 respect of the funding or maintenance of commitments or loans of the type contemplated hereby and applicable to a specific Offshore Currency. "ADMINISTRATIVE AGENT" has the meaning assigned to that term in the introduction to this Agreement and also means and includes any successor Administrative Agent appointed pursuant to subsection 9.5A. "AFFECTED LENDER" has the meaning assigned to that term in subsection 2.6C. "AFFILIATE," as applied to any Person, means any other Person directly or indirectly controlling, controlled by, or under common control with, that Person. For the purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as applied to any Person, means (i) the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person, whether through the ownership of voting securities or by contract or otherwise, or (ii) the ownership of more than 5% of the voting securities of that Person. Notwithstanding the foregoing, in no event shall any Lender, the Arranger or any Agent be deemed to be an Affiliate of Company for purposes of any Loan Document. "AGENTS" means, collectively, the Syndication Agent and the Administrative Agent. "AGREEMENT" means this Credit Agreement dated as of June 11, 1997, as it may be amended, supplemented or otherwise modified from time to time. "APPLICABLE BASE RATE MARGIN" means, as of any date of determination, a percentage per annum as set forth below opposite the applicable Consolidated Leverage Ratio; PROVIDED that for the period beginning on and including the Closing Date to and including August 15, 1997, the Applicable Base Rate Margin shall be 1.50% per annum: CONSOLIDATED LEVERAGE RATIO APPLICABLE BASE RATE MARGIN greater than 4.50:1.00 1.50% less than or equal to 4.50:1.00 but greater than 4.00:1.00 1.25% less than or equal to 4.00:1.00 but greater than 3.00:1.00 1.00% less than or equal to 3.00:1.00 0.75% "APPLICABLE OFFSHORE RATE MARGIN" means, as of any date of determination, a percentage per annum set forth below opposite the applicable 3 Consolidated Leverage Ratio; PROVIDED that for the period beginning on and including the Closing Date to and including August 15, 1997, the Applicable Offshore Rate Margin shall be 2.50% per annum: CONSOLIDATED LEVERAGE RATIO APPLICABLE OFFSHORE RATE MARGIN greater than 4.50:1.00 2.50% less than or equal to 4.50:1.00 but greater than 4.00:1.00 2.25% less than or equal to 4.00:1.00 but greater than 3.00:1.00 2.00% less than or equal to 3.00:1.00 1.75% "APPLICABLE CURRENCY" means, as to any particular payment, Loan or Letter of Credit, Dollars or the Offshore Currency in which it is denominated or is payable. "ARRANGER" means Donaldson, Lufkin & Jenrette Securities Corporation, as arranger of the credit facilities described herein. "ASSET SALE" means the sale, lease, assignment or other transfer (whether voluntary or involuntary) for value (collectively, a "transfer") by Company or any of its Subsidiaries to any Person other than Company or any of its wholly-owned Subsidiaries of (i) any of the stock of any of Company's Subsidiaries, (ii) substantially all of the assets of any division or line of business of Company or any of its Subsidiaries, or (iii) any other assets (whether tangible or intangible) of Company or any of its Subsidiaries (including, without limitation, the loss, damage or destruction of assets giving rise to insurance proceeds to the extent such insurance proceeds are not used to restore, repair or replace the assets so lost, damaged or destroyed within six months following the receipt of such insurance proceeds), other than (a) Inventory sold in the ordinary course of business, (b) any such transfer to the extent that the aggregate value of such assets so transferred in any Fiscal Year is equal to $250,000 or less and (c) the sale and leaseback of the manufacturing facility located in Norwich, England. "ASSIGNMENT AGREEMENT" means an Assignment Agreement in substantially the form of EXHIBIT XI annexed hereto. "AUDITOR'S LETTER" means a letter, substantially in the form of EXHIBIT XXIV annexed hereto, from Company's independent certified public accountants. "BANKRUPTCY CODE" means Title 11 of the United States Code entitled "Bankruptcy", as now and hereafter in effect, or any successor statute. 4 "BASE RATE" means, at any time, the higher of (x) the Prime Rate or (y) the rate which is 1/2 of 1% in excess of the Federal Funds Effective Rate. "BASE RATE LOANS" means Loans bearing interest at rates determined by reference to the Base Rate as provided in subsection 2.2A. "BUSINESS DAY" means (i) for all purposes other than as covered by clause (ii) and (iii) below, any day excluding Saturday, Sunday and any day which is a legal holiday under the laws of the States of New York or California or the Commonwealth of Massachusetts or is a day on which banking institutions located in any such state or commonwealth are authorized or required by law or other governmental action to close, (ii) with respect to all notices, determinations, fundings and payments in Dollars in connection with the Adjusted Offshore Rate or any Offshore Rate Loans, any day that is a Business Day described in clause (i) above and that is also a day for trading by and between banks in Dollar deposits in the London interbank market, and (iii) with respect to all notices, determinations, fundings and payments in any Offshore Currency in connection with the Adjusted Offshore Rate or any Offshore Rate Loans, any day that is a Business Day described in clause (i) above and that is also a day on which banks and foreign exchange markets are open for foreign exchange business in London, and on which banks and foreign exchange markets are also open for foreign exchange business in the principal financial center of the country of that Offshore Currency. "CAPITAL LEASE", as applied to any Person, means any lease of any property (whether real, personal or mixed) by that Person as lessee that, in conformity with GAAP, is accounted for as a capital lease on the balance sheet of that Person. "CASH" means money, currency or a credit balance in a Deposit Account. "CASH EQUIVALENTS" means, as at any date of determination, (i) marketable securities (a) issued or directly and unconditionally guaranteed as to interest and principal by the United States Government or (b) issued by any agency of the United States the obligations of which are backed by the full faith and credit of the United States, in each case maturing within one year after such date; (ii) marketable direct obligations issued by 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 after such date and having, at the time of the acquisition thereof, the highest rating obtainable from either Standard & Poor's Ratings Group ("S&P") or Moody's Investors Service, Inc. ("MOODY'S"); (iii) commercial paper maturing no more than one year from the date of creation thereof and having, at the time of the acquisition thereof, a rating of at least A-1 from S&P or at least P-1 from Moody's; (iv) certificates of deposit or bankers' acceptances maturing within one year after such date and issued or accepted by any Lender or by any commercial bank organized under the laws of the United States of America or any state thereof or the District of Columbia that (a) is at least 5 "adequately capitalized" (as defined in the regulations of its primary Federal banking regulator) and (b) has Tier 1 capital (as defined in such regulations) of not less than $100,000,000; and (v) shares of any money market mutual fund that (a) has at least 95% of its assets invested continuously in the types of investments referred to in clauses (i) and (ii) above, (b) has net assets of not less than $500,000,000, and (c) has the highest rating obtainable from either S&P or Moody's. "CERTIFICATE RE NON-BANK STATUS" means a certificate in form and substance satisfactory to Administrative Agent delivered by a Lender to Administrative Agent pursuant to subsection 2.7B(iii) pursuant to which such Lender certifies, under penalty of perjury, that it is not (i) a "bank" as such term is defined in subsection 881(c)(3) of the Internal Revenue Code; (ii) a 10 percent shareholder of Company within the meaning of Section 871(h)(3)(B) or Section 881(c)(3)(B) of the Internal Revenue Code; or (iii) a "controlled" foreign corporation related to Company within the meaning of Section 864(d)(4) of the Internal Revenue Code. "CHANGE OF CONTROL" means (i) any Person (other than a Permitted Holder) or any group (within the meaning of Section 13(d)(3) of the Exchange Act) of Persons (other than any Permitted Holders), shall have acquired beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Exchange Act), directly or indirectly, in one or more transactions, of Securities of Company (or other Securities convertible into such Securities) representing 30% or more of the combined voting power of all Securities of Company entitled to vote in the election of directors, other than Securities having such power only by reason of the happening of a contingency, (ii) the first day on which a majority of the members of the Board of Directors of Company are not Continuing Directors or (iii) any "Change of Control" as such term is defined in the Senior Subordinated Note Indenture shall have occurred. "CLOSING DATE" means June 11, 1997. "CLOSING DATE MORTGAGE" and "CLOSING DATE MORTGAGES" have the meanings assigned to those terms in subsection 4.1E(i). "CLOSING DATE MORTGAGED PROPERTY" and "CLOSING DATE MORTGAGED PROPERTIES" have the meanings assigned to those terms in subsection 4.1E(i). "COLLATERAL" means, collectively, all of the real, personal and mixed property (including capital stock) in which Liens are purported to be granted pursuant to the Collateral Documents as security for the Obligations. "COLLATERAL ACCOUNT AGREEMENT" means the Collateral Account Agreement executed and delivered by Company and Administrative Agent on the Closing Date, substantially in the form of EXHIBIT XII annexed hereto, as such 6 Collateral Account Agreement may hereafter be amended, supplemented or otherwise modified from time to time. "COLLATERAL DOCUMENTS" means the Company Pledge Agreement, the Company Security Agreement, the Company Trademark Security Agreement, the Company Patent Collateral Assignment and Security Agreement, the Collateral Account Agreement, the Subsidiary Pledge Agreements, the Subsidiary Security Agreements, the Subsidiary Trademark Security Agreements, the Subsidiary Patent Collateral Assignment and Security Agreements, the Mortgages and all other instruments or documents delivered by any Loan Party pursuant to this Agreement or any of the other Loan Documents in order to grant to Administrative Agent, on behalf of Lenders, a Lien on any real, personal or mixed property of that Loan Party as security for the Obligations. "COMMERCIAL LETTER OF CREDIT" means any letter of credit or similar instrument issued for the purpose of providing the primary payment mechanism in connection with the purchase of any materials, goods or services by Company or any of its Subsidiaries in the ordinary course of business of Company or such Subsidiary. "COMMITMENT FEE PERCENTAGE" means, as of any date of determination, a percentage per annum set forth below opposite the applicable Consolidated Leverage Ratio; PROVIDED that for the period beginning on and including the Closing Date to and including August 15, 1997, the Commitment Fee Percentage shall be .50% per annum: CONSOLIDATED LEVERAGE RATIO COMMITMENT FEE PERCENTAGE greater than 4.00:1.00 0.500% less than or equal to 4.00:1.00 but greater than 3.00:1.00 0.375% less than or equal to 3.00:1.00 0.250% "COMMITMENTS" means the commitments of Lenders to make Loans as set forth in subsection 2.1A. "COMMON STOCK" means the Common Stock of Company, par value $0.01 per share. "COMPANY" has the meaning assigned to that term in the introduction to this Agreement. "COMPANY PLEDGE AGREEMENT" means the Company Pledge Agreement executed and delivered by Company on the Closing Date, substantially in the form of EXHIBIT XIII annexed hereto, or any other pledge agreement, document or instrument 7 with a similar or comparable effect executed by Company with respect to a Foreign Subsidiary, in form and substance satisfactory to Agents, as such Company Pledge Agreement may thereafter be amended, supplemented or otherwise modified from time to time. "COMPANY SECURITY AGREEMENT" means the Company Security Agreement executed and delivered by Company on the Closing Date, substantially in the form of EXHIBIT XIV annexed hereto, as such Company Security Agreement may thereafter be amended, supplemented or otherwise modified from time to time. "COMPANY PATENT COLLATERAL ASSIGNMENT AND SECURITY AGREEMENT" means the Company Patent Collateral Assignment and Security Agreement executed and delivered by Company on the Closing Date, substantially in the form of EXHIBIT XV annexed hereto, as such Company Patent Collateral Assignment and Security Agreement may thereafter be amended, supplemented or otherwise modified from time to time. "COMPANY TRADEMARK SECURITY AGREEMENT" means the Company Trademark Security Agreement executed and delivered by Company on the Closing Date, substantially in the form of EXHIBIT XVI annexed hereto, as such Company Trademark Security Agreement may thereafter be amended, supplemented or otherwise modified from time to time. "COMPLIANCE CERTIFICATE" means a certificate substantially in the form of EXHIBIT VII annexed hereto delivered to Administrative Agent and Lenders by Company pursuant to subsection 6.1(iv). "COMPUTATION DATE" has the meaning specified in subsection 2.1F. "CONFORMING LEASEHOLD INTEREST" means any Recorded Leasehold Interest as to which the lessor has agreed in writing for the benefit of Administrative Agent (which writing has been delivered to Administrative Agent), whether under the terms of the applicable lease, under the terms of a Landlord Estoppel and Consent, or otherwise, to the matters described in the definition of "Landlord Estoppel and Consent," which interest, if a subleasehold or sub-subleasehold interest, is not subject to any contrary restrictions contained in a superior lease or sublease. "CONSOLIDATED CAPITAL EXPENDITURES" means, for any period, the aggregate of all expenditures (whether paid in cash or other consideration or accrued as a liability and including that portion of Capital Leases which is capitalized on the consolidated balance sheet of Company and its Subsidiaries) by Company and its Subsidiaries during that period that, in conformity with GAAP, are included in "additions to property, plant or equipment" or comparable items reflected in the consolidated statement of cash flows of Company and its Subsidiaries. 8 "CONSOLIDATED CURRENT ASSETS" means, as at any date of determination, the total assets of Company and its Subsidiaries on a consolidated basis which may properly be classified as current assets in conformity with GAAP, EXCLUDING Cash and Cash Equivalents. "CONSOLIDATED CURRENT LIABILITIES" means, as at any date of determination, the total liabilities of Company and its Subsidiaries on a consolidated basis which may properly be classified as current liabilities in conformity with GAAP, EXCLUDING the current portions of Consolidated Total Debt. "CONSOLIDATED EBITDA" means, for any period, Consolidated Net Income, PLUS, to the extent such items were included in such computation of Consolidated Net Income, the sum of the amounts for such period of (i) Consolidated Interest Expense, (ii) provisions for taxes based on income, (iii) total depreciation expense, (iv) total amortization expense, (v) other non-cash items reducing Consolidated Net Income and (vi) with respect to the Fiscal Year ended September 30, 1996 only, any provision for restructuring operations LESS other non-cash items increasing Consolidated Net Income, all of the foregoing as determined on a consolidated basis for Company and its Subsidiaries in conformity with GAAP; PROVIDED that Consolidated Net Income shall exclude the impact of foreign currency translations and any one-time charge or expense incurred in order to make cash payments to option holders pursuant to the Stock Purchase and Recapitalization Agreement. Notwithstanding the foregoing, the provision for taxes based on the income of, and the depreciation and amortization and other non-cash charges of, a Subsidiary of the referent Person shall be added to Consolidated Net Income to compute Consolidated EBITDA only to the extent that a corresponding amount would be permitted at the date of determination to be dividended to Company by such Subsidiary either (i) without prior governmental approval or (ii) with governmental approval that has been obtained or that could readily and reasonably be obtained, and without direct or indirect restriction pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to that Subsidiary or its stockholders. "CONSOLIDATED EXCESS CASH FLOW" means, for any period, an amount (if positive) equal to (i) the sum, without duplication, of the amounts for such period of (a) Consolidated EBITDA and (b) the Consolidated Working Capital Adjustment MINUS (ii) the sum, without duplication, of the amounts for such period of (a) voluntary and scheduled repayments of Consolidated Total Debt (excluding repayments of Revolving Loans except to the extent the Revolving Loan Commitments are permanently reduced in connection with such repayments), (b) Consolidated Capital Expenditures (without duplication, net of any proceeds of any related financings with respect to such expenditures), (c) Consolidated Interest Expense, and (d) the provision for current taxes based on income of Company and its Subsidiaries and payable in cash with respect to such period. 9 "CONSOLIDATED FIXED CHARGES" means, for any period, the sum (without duplication) of the amounts for such period of (i) Consolidated Interest Expense, (ii) provisions for taxes based on income, and (iii) scheduled principal payments in respect of Consolidated Total Debt, all of the foregoing as determined on a consolidated basis for Company and its Subsidiaries in conformity with GAAP. "CONSOLIDATED INTEREST EXPENSE" means, for any period, total interest expense (including that portion attributable to Capital Leases in accordance with GAAP and capitalized interest) of Company and its Subsidiaries on a consolidated basis with respect to all outstanding Indebtedness of Company and its Subsidiaries, including all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing and net costs under Interest Rate Agreements, but excluding, however, any amounts payable to Arranger and Administrative Agent with respect to the financings contemplated by this Agreement on or before the Closing Date. "CONSOLIDATED LEVERAGE RATIO" means as at any date of determination, the ratio of Consolidated Total Debt as of the last day of the Fiscal Quarter immediately preceding the Fiscal Quarter in which such date of determination occurs to Consolidated EBITDA for the four Fiscal Quarters ending as of such last day of such immediately preceding Fiscal Quarter. "CONSOLIDATED NET INCOME" means, for any period, the net income (or loss) of Company and its Subsidiaries on a consolidated basis for such period taken as a single accounting period determined in conformity with GAAP; PROVIDED that there shall be excluded (i) the income (or loss) of any Person (other than a Subsidiary of Company) in which any other Person (other than Company or any of its Subsidiaries) has a joint interest, except to the extent of the amount of dividends or other distributions actually paid to Company or any of its Subsidiaries by such Person during such period, (ii) the income (or loss) of any Person accrued prior to the date it becomes a Subsidiary of Company or is merged into or consolidated with Company or any of its Subsidiaries or that Person's assets are acquired by Company or any of its Subsidiaries, (iii) the income of any Subsidiary of Company to the extent that the declaration or payment of dividends or similar distributions by that Subsidiary of that income is not at the time permitted without prior governmental approval (unless such governmental approval could be readily and reasonably obtained) or, directly or indirectly, permitted by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Subsidiary or its stockholders, (iv) any after-tax gains or losses attributable to Asset Sales or returned surplus assets of any Pension Plan, and (v) (to the extent not included in clauses (i) through (iv) above) any net extraordinary gains or net non-cash extraordinary losses. "CONSOLIDATED NET WORTH" means, as at any date of determination, the sum of the capital stock and additional paid-in capital plus retained earnings (or 10 minus accumulated deficits) of Company and its Subsidiaries on a consolidated basis determined in conformity with GAAP. "CONSOLIDATED RENTAL PAYMENTS" means, for any period, the aggregate amount of all rents paid or payable by Company and its Subsidiaries on a consolidated basis during that period under all Capital Leases and Operating Leases to which Company or any of its Subsidiaries is a party as lessee. "CONSOLIDATED TOTAL DEBT" means, as at any date of determination, the aggregate stated balance sheet amount of all Indebtedness of Company and its Subsidiaries, determined on a consolidated basis in accordance with GAAP. "CONSOLIDATED WORKING CAPITAL" means, as at any date of determination, the excess (or deficit) of Consolidated Current Assets over Consolidated Current Liabilities. "CONSOLIDATED WORKING CAPITAL ADJUSTMENT" means, for any period on a consolidated basis, the amount (which may be a negative number) by which Consolidated Working Capital as of the beginning of such period exceeds (or is less than) Consolidated Working Capital as of the end of such period. "CONTINGENT OBLIGATION," as applied to any Person, means any direct or indirect liability, contingent or otherwise, of that Person (i) with respect to any Indebtedness, lease, dividend or other monetary obligation of another if the primary purpose or intent thereof by the Person incurring the Contingent Obligation is to provide assurance to the obligee of such obligation of another that such obligation of another will be paid, or that any agreements relating thereto will be complied with, or that the holders of such obligation will be protected (in whole or in part) against loss in respect thereof, (ii) with respect to any letter of credit issued for the account of that Person or as to which that Person is otherwise liable for reimbursement of drawings, or (iii) under Hedge Agreements. Contingent Obligations shall include (a) the direct or indirect guaranty, endorsement (otherwise than for collection or deposit in the ordinary course of business), co-making, discounting with recourse or sale with recourse by such Person of the obligation of another, (b) the obligation to make take-or-pay or similar payments if required regardless of non-performance by any other party or parties to an agreement, and (c) any liability of such Person for the obligation of another through any agreement (contingent or otherwise) (X) to purchase, repurchase or otherwise acquire such obligation or any security therefor, or to provide funds for the payment or discharge of such obligation (whether in the form of loans, advances, stock purchases, capital contributions or otherwise) or (Y) to maintain the solvency or any balance sheet item, level of income or financial condition of another if, in the case of any agreement described under subclauses (X) or (Y) of this sentence, the primary purpose or intent thereof is as described in the preceding sentence. The amount of any Contingent Obligation shall be equal to the 11 amount of the obligation so guaranteed or otherwise supported or, if less, the amount to which such Contingent Obligation is specifically limited. "CONTINUING DIRECTORS" means, as of any date of determination, any member of the Board of Directors of Company who (i) was a member of such Board of Directors on the Closing Date (after the consummation of the Recapitalization Transactions) or (ii) was nominated for election or elected to such Board of Directors either pursuant to the Stockholders Agreement or with the affirmative vote of a majority of the Continuing Directors who were members of such Board at the time of nomination or election. "CURRENCY AGREEMENT" means any foreign exchange contract, currency swap agreement, futures contract, option contract, synthetic cap or other similar agreement or arrangement to which Company or any of its Subsidiaries is a party designed to protect Company or any of its Subsidiaries against fluctuations in currency values with respect to known or reasonably anticipated receipts or disbursements of funds. "DEFAULT EXCESS" has the meaning assigned to that term in subsection 2.9. "DEFAULTING LENDER" has the meaning assigned to that term in subsection 2.9. "DEFAULT PERIOD" has the meaning assigned to that term in subsection 2.9. "DEFAULTED REVOLVING LOAN" has the meaning assigned to that term in subsection 2.9. "DEPOSIT ACCOUNT" means a demand, time, savings, passbook or like account with a bank, savings and loan association, credit union or like organization, other than an account evidenced by a negotiable certificate of deposit. "DLJ" has the meaning assigned to that term in the introduction to this Agreement. "DLJMB INVESTOR GROUP" means DLJ Merchant Banking Partners II, L.P., DLJ Offshore Partners II, C.V., DLJ Diversified Partners, L.P., DLJMB Funding II, Inc., UK Investment Plan 1997 Partners, DLJ First ESC L.L.C., DLJ EAB Partners, L.P. and DLJ Millenium Partners, L.P. "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 as determined by the Administrative Agent at such time on the basis of the Spot Rate for the purchase of Dollars with such Offshore Currency on the most recent Computation Date provided for in subsection 2.1F. 12 "DOLLARS" and the sign "$" mean the lawful money of the United States of America. "DOMESTIC SUBSIDIARY" means a direct or indirect Subsidiary of Company that is incorporated or organized under the laws of a state of the United States of America. "ELIGIBLE ASSIGNEE" means (A) (i) a commercial bank organized under the laws of the United States or any state thereof; (ii) a savings and loan association or savings bank organized under the laws of the United States or any state thereof; (iii) a commercial bank organized under the laws of any other country or a political subdivision thereof; PROVIDED that (x) such bank is acting through a branch or agency located in the United States or (y) such bank is organized under the laws of a country that is a member of the Organization for Economic Cooperation and Development or a political subdivision of such country; and (iv) any other entity which is an "accredited investor" (as defined in Regulation D under the Securities Act) which extends credit or buys loans as one of its businesses including insurance companies, mutual funds and lease financing companies; and (B) any Lender and any Affiliate of any Lender; PROVIDED that no Affiliate of Company shall be an Eligible Assignee. "EMPLOYEE BENEFIT PLAN" means any "employee benefit plan" as defined in Section 3(3) of ERISA which is or was maintained or contributed to by Company, any of its Subsidiaries or any of their respective ERISA Affiliates. "ENVIRONMENTAL CLAIM" means any investigation, notice, notice of violation, claim, action, suit, proceeding, demand, abatement order or other order or directive (conditional or otherwise), by any governmental authority or any other Person, arising (i) pursuant to or in connection with any actual or alleged violation of any Environmental Law, (ii) in connection with any Hazardous Materials or any actual or alleged Hazardous Materials Activity, or (iii) in connection with any actual or alleged damage, injury, threat or harm to health or safety as it relates to Hazardous Materials Activity, natural resources or the environment. "ENVIRONMENTAL LAWS" means any and all statutes, ordinances, orders, rules, regulations, guidance documents, judgments, Governmental Authorizations, or any other requirements of governmental authorities relating to (i) environmental matters, including those relating to any Hazardous Materials Activity, (ii) the generation, use, storage, transportation or disposal of Hazardous Materials, or (iii) occupational safety and health or industrial hygiene as it relates to Hazardous Materials Activity, land use or the protection of human, plant or animal health or welfare, in any manner applicable to Company or any of its Subsidiaries or any Facility, including the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. Section 9601 ET SEQ.), the Hazardous Materials Transportation Act (49 U.S.C. Section 1801 ET SEQ.), the Resource Conservation and Recovery Act (42 U.S.C. Section 6901 ET SEQ.), the Federal Water Pollution Control Act (33 U.S.C. Section 1251 ET SEQ.), 13 the Clean Air Act (42 U.S.C. Section 7401 ET SEQ.), the Toxic Substances Control Act (15 U.S.C. Section 2601 ET SEQ.), the Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C. Section 136 ET SEQ.), the Occupational Safety and Health Act (29 U.S.C. Section 651 ET SEQ.) as it relates to Hazardous Materials Activity, the Oil Pollution Act (33 U.S.C. Section 2701 ET SEQ) and the Emergency Planning and Community Right-to-Know Act (42 U.S.C. Section 11001 ET SEQ.), each as amended or supplemented, any analogous present or future state or local statutes or laws, and any regulations promulgated pursuant to any of the foregoing. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor statute, and any similar or comparable laws in a jurisdiction outside of the United States applicable to Company or any of its Subsidiaries. "ERISA AFFILIATE" means, as applied to any Person, (i) any corporation which is a member of a controlled group of corporations within the meaning of Section 414(b) of the Internal Revenue Code of which that Person is a member; (ii) any trade or business (whether or not incorporated) which is a member of a group of trades or businesses under common control within the meaning of Section 414(c) of the Internal Revenue Code of which that Person is a member; and (iii) any member of an affiliated service group within the meaning of Section 414(m) or (o) of the Internal Revenue Code of which that Person, any corporation described in clause (i) above or any trade or business described in clause (ii) above is a member. Any former ERISA Affiliate of Company or any of its Subsidiaries shall continue to be considered an ERISA Affiliate of Company or such Subsidiary within the meaning of this definition with respect to the period such entity was an ERISA Affiliate of Company or such Subsidiary and with respect to liabilities arising after such period for which Company or such Subsidiary could be liable under the Internal Revenue Code or ERISA. "ERISA EVENT" means (i) a "reportable event" within the meaning of Section 4043 of ERISA and the regulations issued thereunder with respect to any Pension Plan (excluding those for which the provision for 30-day notice to the PBGC has been waived by regulation); (ii) the failure to meet the minimum funding standard of Section 412 of the Internal Revenue Code with respect to any Pension Plan (whether or not waived in accordance with Section 412(d) of the Internal Revenue Code) or the failure to make by its due date a required installment under Section 412(m) of the Internal Revenue Code with respect to any Pension Plan or the failure to make any required contribution to a Multiemployer Plan; (iii) the provision by the administrator of any Pension Plan pursuant to Section 4041(a)(2) of ERISA of a notice of intent to terminate such plan in a distress termination described in Section 4041(c) of ERISA; (iv) the withdrawal by Company, any of its Subsidiaries or any of their respective ERISA Affiliates from any Pension Plan with two or more contributing sponsors or the termination of any such Pension Plan resulting in liability pursuant to Section 4063 or 4064 of ERISA; (v) the institution by the PBGC of 14 proceedings to terminate any Pension Plan, or the occurrence of any event or condition which constitutes grounds under ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan; (vi) the imposition of liability on Company, any of its Subsidiaries or any of their respective ERISA Affiliates pursuant to Section 4062(e) or 4069 of ERISA or by reason of the application of Section 4212(c) of ERISA; (vii) the withdrawal of Company, any of its Subsidiaries or any of their respective ERISA Affiliates in a complete or partial withdrawal (within the meaning of Sections 4203 and 4205 of ERISA) from any Multiemployer Plan if there is any potential liability therefor, or the receipt by Company, any of its Subsidiaries or any of their respective ERISA Affiliates of notice from any Multiemployer Plan that it is in reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA, or that it intends to terminate or has terminated under Section 4041A or 4042 of ERISA; (viii) the occurrence of an act or omission which could give rise to the imposition on Company, any of its Subsidiaries or any of their respective ERISA Affiliates of material fines, penalties, taxes or related charges under Chapter 43 of the Internal Revenue Code or under Section 409, Section 502(c), (i) or (l), or Section 4071 of ERISA in respect of any Employee Benefit Plan; (ix) the assertion of a material claim (other than routine claims for benefits) against any Employee Benefit Plan other than a Multiemployer Plan or the assets thereof, or against Company, any of its Subsidiaries or any of their respective ERISA Affiliates in connection with any Employee Benefit Plan; (x) receipt from the Internal Revenue Service of notice of the failure of any Pension Plan (or any other Employee Benefit Plan intended to be qualified under Section 401(a) of the Internal Revenue Code) to qualify under Section 401(a) of the Internal Revenue Code, or the failure of any trust forming part of any Pension Plan to qualify for exemption from taxation under Section 501(a) of the Internal Revenue Code; or (xi) the imposition of a Lien pursuant to Section 401(a)(29) or 412(n) of the Internal Revenue Code or pursuant to ERISA with respect to any Pension Plan. "EVENT OF DEFAULT" means each of the events set forth in Section 8. "EXCESS INTEREST" has the meaning assigned to that term in subsection 2.4C. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from time to time, and any successor statute, and any comparable or similar laws in a jurisdiction outside of the United States applicable to Company or any of its Subsidiaries. "EXISTING CREDIT AGREEMENT" means the First Amended and Restated Business Loan Agreement, dated as of August 7, 1996, as amended on February 1, 1997, between Bank of America N.T. & S.A. and Wavetek U.S. Inc. "FACILITIES" means any and all real property (including all buildings, fixtures or other improvements located thereon) now, hereafter or heretofore owned, 15 leased, operated or used by Company or any of its Subsidiaries or any of their respective predecessors or Affiliates; PROVIDED that any such real property of any Affiliate shall not be a Facility within the meaning of this definition unless such real property is in fact leased, operated or used by Company or any of its Subsidiaries. "FEDERAL FUNDS EFFECTIVE RATE" means, for any period, a fluctuating interest rate equal for each day during such period to 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 (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by Administrative Agent from three Federal funds brokers of recognized standing selected by Administrative Agent. "FINANCIAL PLAN" has the meaning assigned to that term in subsection 6.1(xiii). "FIRST PRIORITY" means, with respect to any Lien purported to be created in any Collateral pursuant to any Collateral Document, that (i) such Lien has priority over any other Lien on such Collateral (other than Permitted Encumbrances which as a matter of statutory law have priority over any other Lien irrespective of the prior perfection or filing of such other Lien) and (ii) such Lien is the only Lien (other than Permitted Encumbrances) to which such Collateral is subject. "FISCAL QUARTER" means a fiscal quarter of any Fiscal Year. "FISCAL YEAR" means the fiscal year of Company and its Subsidiaries ending on September 30 of each calendar year or such other date as may be adopted by Company. "FLEET" means Fleet National Bank. "FLOOD HAZARD PROPERTY" means a Mortgaged Property located in an area designated by the Federal Emergency Management Agency as having special flood or mud slide hazards. "FOREIGN SUBSIDIARY" means a direct or indirect Subsidiary of Company which is incorporated or organized under the laws of any government or sovereignty other than any state of the United States of America. "FUNDING AND PAYMENT OFFICE" means (i) in respect of funds or payments in Dollars to Administrative Agent (a) the office of Administrative Agent specified on Schedule 1.1 as Administrative Agent's Domestic Lending Office or (b) such other office of Administrative Agent as may from time to time hereafter be designated as 16 such in a written notice delivered by Administrative Agent to Company and each Lender, (ii) in respect of funds or payments to Swing Line Lender (a) the office of Swing Line Lender specified on Schedule 1.1 as Swing Line Lender's Lending Office or (b) such other office of Swing Line Lender as may from time to time hereafter be designated as such in a written notice delivered by Swing Line Lender to Company, Administrative Agent and each Lender and (iii) in the case of payments in any Offshore Currency, (a) the office of Offshore Currency Funding Lender specified on Schedule 1.1 as Offshore Currency Funding Lender's Offshore Lending Office or (b) such other address as the Offshore Currency Funding Lender may from time to time designate as such in a written notice delivered by Offshore Currency Funding Lender to Company, Administrative Agent and each Lender. "FUNDING DATE" means the date of the funding of a Loan. "FUNDING DEFAULT" has the meaning assigned to that term in subsection 2.9. "FX TRADING OFFICE" means the office at 75 State Street, Boston MA., 02109, Attn: Mark Morris, of Administrative Agent, or such other of Administrative Agent's offices as Administrative Agent may designate from time to time. "GAAP" means, subject to the limitations on the application thereof set forth in subsection 1.2, generally accepted accounting principles set forth in opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession, in each case as the same are applicable to the circumstances as of the date of determination. "GEI" means Green Equity Investors II, L.P. "GOODING GROUP" means Dr. Terence J. Gooding and each of his Permitted Transferees. "GOVERNMENTAL AUTHORIZATION" means any permit, license, authorization, plan, directive, consent order or consent decree of or from any federal, state or local governmental authority, agency or court. "HAZARDOUS MATERIALS" means (i) any chemical, material or substance at any time defined as or included in the definition of "hazardous substances," "hazardous wastes," "hazardous materials," "extremely hazardous waste," "acutely hazardous waste," "radioactive waste," "biohazardous waste," "pollutant," "toxic pollutant," "contaminant," "restricted hazardous waste," "infectious waste," "toxic substances," or any other term or expression intended to define, list or classify substances by reason of properties harmful to health, safety or the indoor or outdoor 17 environment (including harmful properties such as ignitability, corrosivity, reactivity, carcinogenicity, toxicity, reproductive toxicity, "TCLP toxicity" or "EP toxicity" or words of similar import under any applicable Environmental Laws); (ii) any oil, petroleum, petroleum fraction or petroleum derived substance; (iii) any drilling fluids, produced waters and other wastes associated with the exploration, development or production of crude oil, natural gas or geothermal resources; (iv) any flammable substances or explosives; (v) any radioactive materials; (vi) any asbestos-containing materials; (vii) urea formaldehyde foam insulation; (viii) electrical equipment which contains any oil or dielectric fluid containing polychlorinated biphenyls; (ix) pesticides; and (x) any other chemical, material or substance, exposure to which is prohibited, limited or regulated by any governmental authority pursuant to any Environmental Law or which may or could pose a hazard to the health and safety of the owners, occupants or any Persons in the vicinity of any Facility or to the indoor or outdoor environment. "HAZARDOUS MATERIALS ACTIVITY" means any past, current, proposed or threatened activity, event or occurrence involving any Hazardous Materials, including the use, manufacture, possession, storage, holding, presence, existence, location, Release, threatened Release, discharge, placement, generation, transportation, processing, construction, treatment, abatement, removal, remediation, disposal, disposition or handling of any Hazardous Materials, and any corrective action or response action with respect to any of the foregoing. "HEDGE AGREEMENT" means an Interest Rate Agreement or a Currency Agreement designed to hedge against fluctuations in interest rates or currency values, respectively. "IMMATERIAL SUBSIDIARY" means any Subsidiary of Company that does not engage in any significant business activity and is designated as such on SCHEDULE 5.1 annexed hereto; PROVIDED, HOWEVER, that all Immaterial Subsidiaries in the aggregate shall not own assets with an aggregate fair market value in excess of $500,000 and shall not generate aggregate annual revenues in excess of $500,000; and PROVIDED FURTHER that no Immaterial Subsidiary shall have any Subsidiary other than an Immaterial Subsidiary. "INDEBTEDNESS", as applied to any Person, means (i) all indebtedness for borrowed money, (ii) that portion of obligations with respect to Capital Leases that is properly classified as a liability on a balance sheet in conformity with GAAP, (iii) notes payable and drafts accepted representing extensions of credit whether or not representing obligations for borrowed money, (iv) any obligation owed for all or any part of the deferred purchase price of property or services (excluding any such obligations incurred under ERISA), which purchase price is (a) due more than six months from the date of incurrence of the obligation in respect thereof or (b) evidenced by a note or similar written instrument, (v) all indebtedness secured by any Lien on any property or asset owned or held by that Person regardless of whether 18 the indebtedness secured thereby shall have been assumed by that Person or is nonrecourse to the credit of that Person and (vi) any other liability that is classified as indebtedness on a balance sheet in conformity with GAAP. Obligations under Interest Rate Agreements and Currency Agreements constitute (X) in the case of Hedge Agreements, Contingent Obligations, and (Y) in all other cases, Investments, and in neither case constitute Indebtedness. "INDEMNITEE" has the meaning assigned to that term in subsection 10.3. "INTELLECTUAL PROPERTY" means all patents, trademarks, tradenames, copyrights, technology, know-how and processes used in or necessary for the conduct of the business of Company and its Subsidiaries as currently conducted that are material to the condition (financial or otherwise), business or operations of Company and its Subsidiaries, taken as a whole. "INTEREST PAYMENT DATE" means (i) with respect to any Base Rate Loan, the fifteenth day of each March, June, September and December of each year, commencing on the first such date to occur after the Closing Date, and (ii) with respect to any Offshore Rate Loan, the last day of each Interest Period applicable to such Loan; PROVIDED that in the case of each Interest Period of longer than three months "Interest Payment Date" shall also include each date that is three months, or an integral multiple thereof, after the commencement of such Interest Period. "INTEREST PERIOD" has the meaning assigned to that term in subsection 2.2B. "INTEREST RATE AGREEMENT" means any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement or other similar agreement or arrangement to which Company or any of its Subsidiaries is a party. "INTEREST RATE DETERMINATION DATE" means, with respect to any Interest Period, the second Business Day prior to the first day of such Interest Period. "INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as amended to the date hereof and from time to time hereafter, and any successor statute, and any similar or comparable laws in a jurisdiction outside of the United States applicable to Company or any of its Subsidiaries. "INVENTORY" means, with respect to any Person as of any date of determination, all goods, merchandise and other personal property which are then held by such Person for sale or lease, including raw materials and work in process. "INVESTMENT" means (i) any direct or indirect purchase or other acquisition by Company or any of its Subsidiaries of, or of a beneficial interest in, any Securities of any other Person, (ii) any direct or indirect redemption, retirement, 19 purchase or other acquisition for value, by any Subsidiary of Company from any Person other than Company or any of its wholly-owned Subsidiaries, of any equity Securities of such Subsidiary, (iii) any direct or indirect loan, advance (other than advances to employees for moving, entertainment and travel expenses, drawing accounts and similar expenditures in the ordinary course of business) or capital contribution by Company or any of its Subsidiaries to any other Person, including all indebtedness and accounts receivable from that other Person that are not current assets or did not arise from sales to that other Person in the ordinary course of business, or (iv) Interest Rate Agreements or Currency Agreements not constituting Hedge Agreements. The amount of any Investment shall be the original cost of such Investment PLUS the cost of all additions thereto, without any adjustments for increases or decreases in value, or write-ups, write-downs or write-offs with respect to such Investment. "IP COLLATERAL" means, collectively, the Collateral under the Company Patent Collateral Assignment and Security Agreement, the Company Trademark Security Agreement, the Subsidiary Patent Collateral Assignment and Security Agreement, and the Subsidiary Trademark Security Agreement. "ISSUING LENDER" means, with respect to any Letter of Credit, the Lender which is obligated to issue such Letter of Credit, determined as provided in subsection 3.1B(ii). "JOINT VENTURE" means a joint venture, partnership or other similar arrangement, whether in corporate, partnership or other legal form; PROVIDED that in no event shall any corporate Subsidiary of any Person be considered to be a Joint Venture to which such Person is a party. "LANDLORD ESTOPPEL AND CONSENT" means, with respect to any Leasehold Property, a letter, certificate or other instrument in writing from the lessor under the related lease, satisfactory in form and substance to Agents, pursuant to which such lessor agrees, for the benefit of Administrative Agent, (i) that without any further consent of such lessor or any further action on the part of the Loan Party holding such Leasehold Property, such Leasehold Property may be encumbered pursuant to a Mortgage and may be assigned to the purchaser at a foreclosure sale or in a transfer in lieu of such a sale (and to a subsequent third party assignee if any Agent, any Lender, or an Affiliate of either so acquires such Leasehold Property) and (ii) to such other matters relating to such Leasehold Property as Agents may reasonably request. "LEASEHOLD PROPERTY" means any leasehold interest of any Loan Party as lessee or sublessee under any lease of real property. "LENDER" and "LENDERS" means the persons identified as "Lenders" and listed on the signature pages of this Agreement, together with their successors and permitted assigns pursuant to subsection 10.1, and the term "Lenders" shall include 20 Swing Line Lender and Offshore Currency Funding Lender unless the context otherwise requires; PROVIDED that the term "Lenders", when used in the context of a particular Commitment, shall mean Lenders having that Commitment. "LENDING OFFICE" means, as to any Lender, the office or offices of such Lender specified as its "Domestic Lending Office" or "Offshore Lending Office," as the case may be, on SCHEDULE 1.1, or such other office or offices as to which such Lender may from time to time notify Company and Administrative Agent. "LETTER OF CREDIT" or "LETTERS OF CREDIT" means Commercial Letters of Credit and Standby Letters of Credit issued or to be issued by Issuing Lenders for the account of Company pursuant to subsection 3.1. "LETTER OF CREDIT USAGE" means, as at any date of determination, the sum of (i) the maximum aggregate Dollar Equivalent amount which is or at any time thereafter may become available for drawing under all Letters of Credit then outstanding PLUS (ii) the aggregate Dollar Equivalent amount of all drawings under Letters of Credit honored by Issuing Lenders and not theretofore reimbursed by Company. "LIEN" means any lien, mortgage, pledge, assignment, security interest, charge or encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof, and any agreement to give any security interest) and any option, trust or other preferential arrangement having the practical effect of any of the foregoing. "LOAN" or "LOANS" means one or more of the Term Loans, Revolving Loans, Offshore Currency Loans or Swing Line Loans or any combination thereof. "LOAN DOCUMENTS" means this Agreement, the Notes, the Letters of Credit (and any applications for, or reimbursement agreements or other documents or certificates executed by Company in favor of an Issuing Lender relating to, the Letters of Credit), the Subsidiary Guaranty and the Collateral Documents. "LOAN PARTY" means each of Company and any of its Subsidiaries from time to time executing a Loan Document, and "LOAN PARTIES" means all such Persons, collectively. "MARGIN DETERMINATION CERTIFICATE" means an Officer's Certificate of Company delivered with the financial statements required pursuant to subsection 6.1(ii) or 6.1(iii) setting forth the Consolidated Leverage Ratio which is applicable as of the last day of the fiscal period for which such financial statements and Officer's Certificate are being delivered. 21 "MARGIN STOCK" has the meaning assigned to that term in Regulation U of the Board of Governors of the Federal Reserve System as in effect from time to time. "MATERIAL ADVERSE EFFECT" means (i) a material adverse effect upon the business, operations or condition (financial or otherwise) of Company and its Subsidiaries taken as a whole or (ii) the impairment in any material respect of the ability of any Loan Party to perform, or of Administrative Agent or Lenders to enforce, the Obligations or any of the Loan Documents. "MATERIAL CONTRACT" means any contract or other arrangement to which Company or any of its Subsidiaries is a party (other than the Loan Documents) for which breach, nonperformance, cancellation or failure to renew could reasonably be expected to have a Material Adverse Effect. "MATERIAL LEASEHOLD PROPERTY" means a Leasehold Property reasonably determined by Agents to be of material value as Collateral or of material importance to the operations of Company or any of its Subsidiaries. "MINIMUM AMOUNT" means (i) in the case of Base Rate Loans, $100,000 or any multiple of $100,000 in excess of that amount, (ii) in the case of Offshore Rate Loans denominated in Dollars, $100,000 or any multiple of $100,000 in excess of that amount, (iii) in the case of Offshore Rate Loans denominated in British pounds sterling, L65,000 or any multiples of L65,000 in excess of that amount, (iv) in the case of Offshore Rate Loans denominated French francs, (symbol for French franc) 600,000 or any multiples of (symbol for French franc) 600,000 in excess of that amount and (v) in the case of Offshore Rate Loans denominated in Deutsche marks, DM175,000 or any multiple of DM175,000 in excess of that amount. "MORTGAGE" means (i) a security instrument (whether designated as a deed of trust, mortgage, leasehold deed of trust or leasehold mortgage or by any similar title) executed and delivered by any Loan Party, substantially in the form of EXHIBIT XXII annexed hereto or in such other form as may be approved by Agents in their sole discretion, in each case with such changes thereto as may be recommended by Administrative Agent's local counsel based on local laws or customary local mortgage or deed of trust practices, or (ii) at the option of Agents, in the case of an Additional Mortgaged Property, an amendment to an existing Mortgage, in form satisfactory to Agents, adding such Additional Mortgaged Property to the Real Property Assets encumbered by such existing Mortgage, in either case as such security instrument or amendment may be amended, supplemented or otherwise modified from time to time. "MORTGAGES" means all such instruments, including any Additional Mortgages, collectively. "MORTGAGED PROPERTY" means a Closing Date Mortgaged Property or an Additional Mortgaged Property. 22 "MULTIEMPLOYER PLAN" means any Employee Benefit Plan which is a "multiemployer plan" as defined in Section 3(37) of ERISA. "NET ASSET SALE PROCEEDS" means, with respect to any Asset Sale, Cash payments (including any Cash received by way of deferred payment pursuant to, or by monetization of, a note receivable or otherwise, but only as and when so received) or proceeds received from such Asset Sale, net of any bona fide direct costs incurred in connection with such Asset Sale, including (i) income taxes reasonably estimated to be actually payable within two years of the date of such Asset Sale as a result of any gain recognized in connection with such Asset Sale and (ii) payment of the outstanding principal amount of, premium or penalty, if any, and interest on any Indebtedness (other than the Loans) that is secured by a Lien on the stock or assets in question and that is required to be repaid under the terms thereof as a result of such Asset Sale. "NEW EQUITY INVESTORS" means the DLJMB Investor Group and GEI. "NON-US LENDER" has the meaning assigned to that term in subsection 2.7B. "NOTE OFFERING MEMORANDUM" means the Offering Memorandum dated June 6, 1997, with respect to the Senior Subordinated Notes. "NOTES" means one or more of the Term Notes, Revolving Notes , Offshore Currency Note or Swing Line Note or any combination thereof. "NOTICE OF BORROWING" means a notice substantially in the form of EXHIBIT I annexed hereto delivered by Company to Administrative Agent pursuant to subsection 2.1B with respect to a proposed borrowing. "NOTICE OF CONVERSION/CONTINUATION" means a notice substantially in the form of EXHIBIT II annexed hereto delivered by Company to Administrative Agent pursuant to subsection 2.2D with respect to a proposed conversion or continuation of the applicable basis for determining the interest rate with respect to the Loans specified therein. "NOTICE OF ISSUANCE OF LETTER OF CREDIT" means a notice substantially in the form of EXHIBIT III annexed hereto delivered by Company to Administrative Agent pursuant to subsection 3.1B(i) with respect to the proposed issuance of a Letter of Credit. "OBLIGATIONS" means all obligations of every nature of each Loan Party from time to time owed to Arranger, Agents, Lenders or any of them under the Loan Documents, whether for principal, interest, reimbursement of amounts drawn under Letters of Credit, fees, expenses, indemnification or otherwise. 23 "OFFICER'S CERTIFICATE" means, as applied to any corporation, a certificate executed on behalf of such corporation by its president or one of its executive or senior vice presidents, its chief financial officer or its treasurer; PROVIDED that every Officer's Certificate with respect to the compliance with a condition precedent to the making of any Loans hereunder shall include (i) a statement that the officer or officers making or giving such Officer's Certificate have read such condition and any definitions or other provisions contained in this Agreement relating thereto and (ii) a statement as to whether, in the opinion of the signers, such condition has been complied with. "OFFSHORE CURRENCY" means at any time British pounds sterling, French francs and Deutsche Mark. "OFFSHORE CURRENCY FUNDING LENDER" means Fleet or any Person serving as a successor Offshore Currency Funding Lender hereunder, in its capacity as Offshore Currency Funding Lender hereunder. "OFFSHORE CURRENCY LOAN" means any Offshore Rate Loan denominated in an Offshore Currency. "OFFSHORE CURRENCY LOAN COMMITMENT" means the commitment of Offshore Currency Funding Lender to make Offshore Currency Loans to Company pursuant to subsection 2.1A(iv). "OFFSHORE CURRENCY NOTE" means (i) the promissory note of Company issued pursuant to subsection 2.1D(d) on the Closing Date and (ii) any promissory note issued by Company to any successor Offshore Currency Funding Lender pursuant to the last sentence of subsection 9.5C, in each case substantially in the form of EXHIBIT XXV annexed hereto, as it may be amended, supplemented or otherwise modified from time to time. "OFFSHORE CURRENCY SUBLIMIT" means, as to all Loans or Letters of Credit denominated in Offshore Currencies, $7,500,000. "OFFSHORE RATE LOANS" means Loans bearing interest at rates determined by reference to the Adjusted Offshore Rate as provided in subsection 2.2A. "OPERATING LEASE" means, as applied to any Person, any lease (including leases that may be terminated by the lessee at any time) of any property (whether real, personal or mixed) that is not a Capital Lease in accordance with GAAP other than any such lease under which that Person is the lessor. "PBGC" means the Pension Benefit Guaranty Corporation or any successor thereto. 24 "PENSION PLAN" means any Employee Benefit Plan, other than a Multiemployer Plan, which is subject to Section 412 of the Internal Revenue Code or Section 302 of ERISA. "PERMITTED ENCUMBRANCES" means the following types of Liens (excluding any such Lien imposed pursuant to Section 401(a)(29) or 412(n) of the Internal Revenue Code or by ERISA, any such Lien relating to or imposed in connection with any Environmental Claim, and any such Lien expressly prohibited by any applicable terms of any of the Loan Documents): (i) Liens for taxes, assessments or governmental charges or claims the payment of which is not, at the time, required by subsection 6.3; (ii) statutory Liens of landlords, statutory Liens of banks and rights of set-off, statutory Liens of carriers, warehousemen, mechanics, repairmen, workmen and materialmen, and other Liens imposed by law, in each case incurred in the ordinary course of business (a) for amounts not yet overdue or (b) for amounts that are overdue and that (in the case of any such amounts overdue for a period in excess of 5 days) are being contested in good faith by appropriate proceedings, so long as (1) such reserves or other appropriate provisions, if any, as shall be required by GAAP shall have been made for any such contested amounts, and (2) in the case of a Lien with respect to any portion of the Collateral, such contest proceedings conclusively operate to stay the sale of any portion of the Collateral on account of such Lien; (iii) Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security, or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, trade contracts, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money), so long as no foreclosure, sale or similar proceedings have been commenced with respect to any portion of the Collateral on account thereof; (iv) any attachment or judgment Lien not constituting an Event of Default under subsection 8.8; (v) leases or subleases granted to third parties in accordance with any applicable terms of the Collateral Documents and not interfering in any material respect with the ordinary conduct of the business of Company or any of its Subsidiaries or resulting in a material diminution in the value of any Collateral as security for the Obligations; (vi) easements, rights-of-way, restrictions, encroachments, and other minor defects or irregularities in title, in each case which do not and will not 25 interfere in any material respect with the ordinary conduct of the business of Company or any of its Subsidiaries or result in a material diminution in the value of any Collateral as security for the Obligations; (vii) any (a) interest or title of a lessor or sublessor under any lease permitted by subsection 7.9, (b) restriction or encumbrance (so long as such restriction or encumbrance is approved by Agents in their reasonable discretion) that the interest or title of such lessor or sublessor may be subject to, or (c) subordination of the interest of the lessee or sublessee under such lease to any restriction or encumbrance referred to in the preceding clause (b), so long as the holder of such restriction or encumbrance agrees to recognize the rights of such lessee or sublessee under such lease and so long as Agents consent to the subordination; (viii) Liens arising from filing UCC financing statements relating solely to leases permitted by this Agreement; (ix) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods; (x) any zoning or similar law or right reserved to or vested in any governmental office or agency to control or regulate the use of any real property; (xi) Liens securing obligations (other than obligations representing Indebtedness for borrowed money) under operating, reciprocal easement or similar agreements entered into in the ordinary course of business of Company and its Subsidiaries; and (xii) licenses of patents, trademarks and other intellectual property rights granted by Company or any of its Subsidiaries in the ordinary course of business and not interfering in any material respect with the ordinary conduct of the business of Company or such Subsidiary. "PERMITTED HOLDER" means (i) the DLJMB Investor Group, (ii) GEI, (iii) the Gooding Group or (iv) any Permitted Transferee. "PERMITTED TRANSFEREE" means, with respect to any Person, (i) any Affiliate of such Person, (ii) the heirs, executors, administrators, testamentary trustees, legatees or beneficiaries of any such Person or (iii) a spouse, child, grandchild, stepchild or a child of a stepchild of any such Person or a trust as to which such Person or such spouse, child, grandchild, stepchild or child of a stepchild thereof exercises substantial control over the investment of the trust assets, in each case to 26 whom such Person has transferred the beneficial ownership of any Securities of Company. "PERSON" means and includes natural persons, corporations, limited partnerships, general partnerships, limited liability companies, limited liability partnerships, joint stock companies, Joint Ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts or other organizations, whether or not legal entities, and governments (whether federal, state or local, domestic or foreign, and including political subdivisions thereof) and agencies or other administrative or regulatory bodies thereof. "PLEDGED COLLATERAL" means, collectively, the "Pledged Collateral" as defined in the Company Pledge Agreement and the Subsidiary Pledge Agreements. "POTENTIAL EVENT OF DEFAULT" means a condition or event that, after notice or lapse of time or both, would constitute an Event of Default. "PRIME RATE" means the rate that Fleet announces from time to time as its base rate, as in effect from time to time. The Prime Rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer. Fleet or any other Lender may make commercial loans or other loans at rates of interest at, above or below the Prime Rate. "PRO RATA SHARE" means (i) with respect to all payments, computations and other matters relating to the Term Loan Commitment or the Term Loan of any Lender, the percentage obtained by DIVIDING (x) the Term Loan Exposure of that Lender BY (y) the aggregate Term Loan Exposure of all Lenders, (ii) with respect to all payments, computations and other matters relating to the Revolving Loan Commitment or the Revolving Loans of any Lender or any Letters of Credit issued or participations therein purchased by any Lender or any participations in any Swing Line Loans or Offshore Currency Loans purchased by any Lender, the percentage obtained by DIVIDING (x) the Revolving Loan Exposure of that Lender BY (y) the aggregate Revolving Loan Exposure of all Lenders, and (iii) for all other purposes with respect to each Lender, the percentage obtained by DIVIDING (x) the sum of the Term Loan Exposure of that Lender PLUS the Revolving Loan Exposure of that Lender BY (y) the sum of the aggregate Term Loan Exposure of all Lenders PLUS the aggregate Revolving Loan Exposure of all Lenders, in any such case as the applicable percentage may be adjusted by assignments permitted pursuant to subsection 10.1. The initial Pro Rata Share of each Lender for purposes of each of clauses (i), (ii) and (iii) of the preceding sentence is set forth opposite the name of that Lender in SCHEDULE 2.1 annexed hereto. "PTO" means the United States Patent and Trademark Office or any successor or substitute office in which filings are necessary or, in the opinion of 27 Administrative Agent, desirable in order to create or perfect Liens on any IP Collateral. "REAL PROPERTY ASSET" means, at any time of determination, any interest in any real property then owned or leased (as lessee) by any Loan Party. "RECAPITALIZATION TRANSACTIONS" has the meaning assigned to that term in the Recitals hereof. "RECORDED LEASEHOLD INTEREST" means a Leasehold Property with respect to which a Record Document (as hereinafter defined) has been recorded in all places necessary or desirable, in the reasonable judgment of Agents, to give constructive notice of such Leasehold Property to any and all third-parties. For purposes of this definition, the term "RECORD DOCUMENT" means, with respect to any Leasehold Property, (a) the lease evidencing such Leasehold Property or a memorandum thereof, executed and acknowledged by the owner of the affected real property, as lessor, and the owner of the leasehold estate, as lessee or (b) if such Leasehold Property was acquired or subleased from the holder of a Recorded Leasehold Interest, the applicable assignment or sublease document, executed and acknowledged by each party thereto, in each case in form sufficient to give such constructive notice upon recordation and otherwise in form reasonably satisfactory to Agents. "REFERENCE LENDER" means Fleet. "REGISTER" has the meaning assigned to that term in subsection 2.1E. "REFUNDED OFFSHORE CURRENCY LOANS" has the meaning assigned to that term in subsection 2.1A(iv). "REFUNDED SWING LINE LOANS" has the meaning assigned to that term in subsection 2.1A(iii). "REGISTRATION RIGHTS AGREEMENT" means that certain Registration Rights Agreement dated as of the Closing Date entered into by and among Company, the New Equity Investors, the Gooding Group and certain other stockholders of the Company, as such agreement may be amended, supplemented or otherwise modified from time to time to the extent permitted under subsection 7.15. "REGULATION D" means Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time. "REIMBURSEMENT DATE" has the meaning assigned to that term in subsection 3.3B. 28 "RELATED AGREEMENTS" means the Stock Purchase and Recapitalization Agreement, the Stockholders Agreement, the Registration Rights Agreement, the Note Offering Memorandum and the Related Financing Documents. "RELATED FINANCING DOCUMENTS" means the Senior Subordinated Note Indenture and all other agreements or instruments delivered pursuant to or in connection with any of the foregoing, including any purchase agreements or registration rights agreements. "RELEASE" means any release, spill, emission, leaking, pumping, pouring, injection, escaping, deposit, disposal, discharge, dispersal, dumping, leaching or migration of Hazardous Materials into the indoor or outdoor environment (including the abandonment or disposal of any barrels, containers or other closed receptacles containing any Hazardous Materials), including the movement of any Hazardous Materials through the air, soil, surface water or groundwater. "REQUISITE LENDERS" means Lenders (other than a Defaulting Lender) having or holding a majority of the sum of (i) the aggregate Term Loan Exposure of all Lenders PLUS (ii) the aggregate Revolving Loan Exposure of all Lenders. "RESTRICTED AGREEMENTS" has the meaning assigned to that term in subsection 7.15B. "RESTRICTED JUNIOR PAYMENT" means (i) any dividend or other distribution, direct or indirect, on account of any shares of any class of stock of Company now or hereafter outstanding, except a dividend payable solely in shares of that class of stock to the holders of that class, (ii) any redemption, retirement, sinking fund or similar payment, purchase or other acquisition for value, direct or indirect, of any shares of any class of stock of Company now or hereafter outstanding, (iii) any payment made to retire, or to obtain the surrender of, any outstanding warrants, options or other rights to acquire shares of any class of stock of Company now or hereafter outstanding, and (iv) any payment or prepayment of principal of, premium, if any, or interest on, or redemption, purchase, retirement, defeasance (including in-substance or legal defeasance), sinking fund or similar payment with respect to, any Subordinated Indebtedness. "REVOLVING LOAN COMMITMENT" means the commitment of a Lender to make Revolving Loans to Company pursuant to subsection 2.1A(ii), to purchase participations in Offshore Currency Loans pursuant to subsection 2.1A(iv), to issue and/or purchase participations in Letters of Credit pursuant to Section 3 and to purchase participations in Swing Line Loans pursuant to subsection 2.1A(iii) and "REVOLVING LOAN COMMITMENTS" means such commitments of all Lenders in the aggregate. 29 "REVOLVING LOAN COMMITMENT TERMINATION DATE" means December 15, 2002. "REVOLVING LOAN EXPOSURE" means, with respect to any Lender as of any date of determination (i) prior to the termination of the Revolving Loan Commitments, that Lender's Revolving Loan Commitment and (ii) after the termination of the Revolving Loan Commitments, the sum of (a) the aggregate outstanding principal Dollar Equivalent amount of the Revolving Loans of that Lender PLUS (b) in the event that Lender is an Issuing Lender, the aggregate Dollar Equivalent amount of the Letter of Credit Usage in respect of all Letters of Credit issued by that Lender (in each case net of the Dollar Equivalent amount of any funded participations purchased by other Lenders in such Letters of Credit or any unreimbursed drawings thereunder) PLUS (c) the aggregate Dollar Equivalent amount of all funded participations purchased by that Lender in any outstanding Letters of Credit or any unreimbursed drawings under any Letters of Credit PLUS (d) in the case of Swing Line Lender, the aggregate outstanding principal amount of all Swing Line Loans (net of any funded participations therein purchased by other Lenders) PLUS (e) the aggregate amount of all funded participations purchased by that Lender in any outstanding Swing Line Loans PLUS (f) in the case of Offshore Currency Funding Lender, the aggregate outstanding principal Dollar Equivalent amount of all Offshore Currency Loans (net of any funded participations therein purchased by other Lenders) PLUS (g) the aggregate Dollar Equivalent amount of any funded participations purchased by that Lender in any outstanding Offshore Currency Loans. "REVOLVING LOANS" means the Loans made by Lenders to Company pursuant to subsection 2.1A(ii). "REVOLVING NOTES" means (i) the promissory notes of Company issued pursuant to subsection 2.1D(b) on the Closing Date and (ii) any promissory notes issued by Company pursuant to the last sentence of subsection 10.1B(i) in connection with assignments of the Revolving Loan Commitments and Revolving Loans of any Lenders, in each case substantially in the form of EXHIBIT V annexed hereto, as they may be amended, supplemented or otherwise modified from time to time. "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 Administrative Agent to be customary in the place of disbursement or payment for the settlement of international banking transactions in the relevant Offshore Currency. "SECURITIES" means any stock, shares, partnership interests, voting trust certificates, certificates of interest or participation in any profit-sharing agreement or arrangement, options, warrants, bonds, debentures, notes, or other evidences of indebtedness, secured or unsecured, convertible, subordinated or otherwise, or in 30 general any instruments commonly known as "securities" or any certificates of interest, shares or participations in temporary or interim certificates for the purchase or acquisition of, or any right to subscribe to, purchase or acquire, any of the foregoing. "SECURITIES ACT" means the Securities Act of 1933, as amended from time to time, and any successor statute, and any comparable or similar laws in a jurisdiction outside of the United States applicable to Company or any of its Subsidiaries. "SENIOR SUBORDINATED NOTE INDENTURE" means the indenture pursuant to which the Senior Subordinated Notes are issued, as such indenture may be amended from time to time to the extent permitted under subsection 7.15. "SENIOR SUBORDINATED NOTES" means the $85,000,000 in original principal amount of 10 1/8% Senior Subordinated Notes due June 15, 2007 of Company issued pursuant to the Senior Subordinated Note Indenture. "SOLVENT" means, with respect to any Person, that as of the date of determination both (A) (i) the then fair saleable value of the property of such Person is (y) greater than the total amount of liabilities (including contingent liabilities) of such Person and (z) not less than the amount that will be required to pay the probable liabilities on such Person's then existing debts as they become absolute and matured considering all financing alternatives and potential asset sales reasonably available to such Person; (ii) such Person's capital is not unreasonably small in relation to its business or any contemplated or undertaken transaction; and (iii) such Person does not intend to incur, or believe (nor should it reasonably believe) that it will incur, debts beyond its ability to pay such debts as they become due; and (B) such Person is "solvent" within the meaning given that term and similar terms under applicable laws relating to fraudulent transfers and conveyances. For purposes of this definition, the amount of any contingent liability at any time shall be computed as the amount that, in light of all of the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability. "SPOT RATE" for a currency means the rate quoted by Administrative Agent as the spot rate for the purchase by Administrative Agent of such currency with another currency through its FX Trading Office at approximately 8:00 a.m. (New York time) on the date two Business Days prior to the date as of which the foreign exchange computation is made. "STANDBY LETTER OF CREDIT" means any standby letter of credit or similar instrument issued for the purpose of supporting (i) Indebtedness of Company or any of its Subsidiaries in respect of industrial revenue or development bonds or financings, (ii) workers' compensation liabilities of Company or any of its Subsidiaries, (iii) the obligations of third party insurers of Company or any of its Subsidiaries, 31 (iv) obligations with respect to Capital Leases or Operating Leases of Company or any of its Subsidiaries, and (v) performance, payment, deposit or surety obligations of Company or any of its Subsidiaries, in any case if required by law or governmental rule or regulation or in accordance with custom and practice in the industry; PROVIDED that Standby Letters of Credit may not be issued for the purpose of supporting (a) trade payables or (b) any Indebtedness constituting "antecedent debt" (as that term is used in Section 547 of the Bankruptcy Code). "STOCK PURCHASE AND RECAPITALIZATION AGREEMENT" means that certain Stock Purchase and Recapitalization Agreement by and among Company, the New Equity Investors, the Gooding Group and certain other stockholders of Company, dated as of May 23, 1997, and as such agreement may be amended, supplemented or otherwise modified from time to time to the extent permitted under subsection 7.15. "STOCKHOLDERS AGREEMENT" means that certain Stockholders Agreement dated as of the Closing Date entered into by and among Company, the New Equity Investors, the Gooding Group and certain other stockholders of Company, as such agreement may be amended, supplemented or otherwise modified from time to time to the extent permitted under subsection 7.15. "SUBORDINATED INDEBTEDNESS" means Indebtedness of Company subordinated in right of payment to the Obligations pursuant to documentation containing maturities, amortization schedules, covenants, defaults, remedies, subordination provisions and other material terms in form and substance satisfactory to Agents and Requisite Lenders. "SUBSIDIARY" means, with respect to any Person, any corporation, partnership, limited liability company, association, joint venture or other business entity, of which more than 50% of the total voting power of shares of stock or other ownership interests entitled (without regard to the occurrence of any contingency) to vote in the election of the Person or Persons (whether directors, managers, trustees or other Persons performing similar functions) having the power to direct or cause the direction of the management and policies thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof. "SUBSIDIARY GUARANTOR" means any Domestic Subsidiary of Company that executes and delivers a counterpart of the Subsidiary Guaranty on the Closing Date or from time to time thereafter pursuant to subsection 6.8. "SUBSIDIARY GUARANTY" means the Subsidiary Guaranty executed and delivered by existing Domestic Subsidiaries of Company on the Closing Date and to be executed and delivered by additional Domestic Subsidiaries of Company from time to time thereafter in accordance with subsection 6.8, substantially in the form of 32 EXHIBIT XVII annexed hereto, as such Subsidiary Guaranty may hereafter be amended, supplemented or otherwise modified from time to time. "SUBSIDIARY PATENT COLLATERAL ASSIGNMENT AND SECURITY AGREEMENT" means each Subsidiary Patent Collateral Assignment and Security Agreement, patent security agreement or other security agreement executed and delivered by an existing Subsidiary Guarantor on the Closing Date or executed and delivered by any additional Subsidiary Guarantor from time to time thereafter in accordance with subsection 6.8, in each case substantially in the form of EXHIBIT XX annexed hereto, as such Subsidiary Patent Collateral Assignment and Security Agreement may be amended, supplemented or otherwise modified from time to time, and "SUBSIDIARY PATENT COLLATERAL ASSIGNMENT AND SECURITY AGREEMENTS" means all such Subsidiary Patent Collateral Assignment and Security Agreements, collectively. "SUBSIDIARY PLEDGE AGREEMENT" means each Subsidiary Pledge Agreement executed and delivered by an existing Subsidiary Guarantor on the Closing Date or executed and delivered by any additional Subsidiary Guarantor from time to time thereafter in accordance with subsection 6.8, in each case substantially in the form of EXHIBIT XVIII annexed hereto, as such Subsidiary Pledge Agreement may be amended, supplemented or otherwise modified from time to time, and "SUBSIDIARY PLEDGE AGREEMENTS" means all such Subsidiary Pledge Agreements, collectively. "SUBSIDIARY SECURITY AGREEMENT" means each Subsidiary Security Agreement executed and delivered by an existing Subsidiary Guarantor on the Closing Date or executed and delivered by any additional Subsidiary Guarantor from time to time thereafter in accordance with subsection 6.8, in each case substantially in the form of EXHIBIT XIX annexed hereto, as such Subsidiary Security Agreement may be amended, supplemented or otherwise modified from time to time, and "SUBSIDIARY SECURITY AGREEMENTS" means all such Subsidiary Security Agreements, collectively. "SUBSIDIARY TRADEMARK SECURITY AGREEMENT" means each Subsidiary Trademark Security Agreement, copyright security agreement or other security agreement executed and delivered by an existing Subsidiary Guarantor on the Closing Date or executed and delivered by any additional Subsidiary Guarantor from time to time thereafter in accordance with subsection 6.8, in each case substantially in the form of EXHIBIT XXI annexed hereto, as such Subsidiary Trademark Security Agreement may be amended, supplemented or otherwise modified from time to time, and "SUBSIDIARY TRADEMARK SECURITY AGREEMENTS" means all such Subsidiary Trademark Security Agreements, collectively. "SUPPLEMENTAL COLLATERAL AGENT" has the meaning assigned to that term in subsection 9.1B. "SWING LINE LENDER" means Fleet or any Person serving as a successor Swing Line Lender hereunder, in its capacity as Swing Line Lender hereunder. 33 "SWING LINE LOAN COMMITMENT" means the commitment of Swing Line Lender to make Swing Line Loans to Company pursuant to subsection 2.1A(iii). "SWING LINE LOANS" means the Loans made by Swing Line Lender to Company pursuant to subsection 2.1A(iii). "SWING LINE NOTE" means (i) the promissory note of Company issued pursuant to subsection 2.1D(c) on the Closing Date and (ii) any promissory note issued by Company to any successor Swing Line Lender pursuant to the last sentence of subsection 9.5B, in each case substantially in the form of EXHIBIT VI annexed hereto, as it may be amended, supplemented or otherwise modified from time to time. "SYNDICATION AGENT" has the meaning assigned to that term in the introduction to this Agreement. "TAX" or "TAXES" means any present or future tax, levy, impost, duty, charge, fee, deduction or withholding of any nature and whatever called, by whomsoever, on whomsoever and wherever imposed, levied, collected, withheld or assessed; PROVIDED that "TAX ON THE OVERALL NET INCOME" of a Person shall be construed as a reference to a Tax imposed by the jurisdiction in which that Person is organized or in which that Person's principal office (and/or, in the case of a Lender, its lending office) is located or in which that Person (and/or, in the case of a Lender, its lending office) is deemed to be doing business on all or part of the net income, profits, capital, net worth, or gains (whether worldwide, or only insofar as such income, profits, capital, net worth, or gains are considered to arise in or to relate to a particular jurisdiction, or otherwise) of that Person (and/or, in the case of a Lender, its lending office). "TERM LOANS" means the Term Loans made by Lenders to Company pursuant to subsection 2.1A(i). "TERM LOAN COMMITMENT" means the commitment of a Lender to make a Term Loan to Company pursuant to subsection 2.1A(i), and "TERM LOAN COMMITMENTS" means such commitments of all Lenders in the aggregate. "TERM LOAN EXPOSURE" means, with respect to any Lender as of any date of determination (i) prior to the funding of the Term Loans, that Lender's Term Loan Commitment and (ii) after the funding of the Term Loans, the outstanding principal amount of the Term Loan of that Lender. "TERM NOTES" means (i) the promissory notes of Company issued pursuant to subsection 2.1D(a) on the Closing Date and (ii) any promissory notes issued by Company pursuant to the last sentence of subsection 10.1B(i) in connection with assignments of the Term Loan Commitments or Term Loans of any Lenders, in 34 each case substantially in the form of EXHIBIT IV annexed hereto, as they may be amended, supplemented or otherwise modified from time to time. "TOTAL UTILIZATION OF REVOLVING LOAN COMMITMENTS" means, as at any date of determination, the sum of (i) the aggregate principal Dollar Equivalent amount of all outstanding Revolving Loans PLUS (ii) the aggregate principal amount of all outstanding Swing Line Loans PLUS (iii) without duplication, the aggregate principal Dollar Equivalent amount of all outstanding Offshore Currency Loans and (iv) the Dollar Equivalent amount of all Letter of Credit Usage. "UCC" means the Uniform Commercial Code (or any similar or equivalent legislation) as in effect in any applicable jurisdiction. 1.2 ACCOUNTING TERMS; UTILIZATION OF GAAP FOR PURPOSES OF CALCULATIONS UNDER AGREEMENT. Except as otherwise expressly provided in this Agreement, all accounting terms not otherwise defined herein shall have the meanings assigned to them in conformity with GAAP. Financial statements and other information required to be delivered by Company to Lenders pursuant to clauses (i), (ii) and (iii) of subsection 6.1 shall be prepared in accordance with GAAP as in effect at the time of such preparation and the Financial Plan required to be delivered pursuant to clause (xiii) of subsection 6.1 shall be prepared on the same basis as such financial statements. Calculations in connection with the definitions, covenants and other provisions of this Agreement shall utilize accounting principles and policies in conformity with those used to prepare the financial statements referred to in subsection 5.3. 1.3 OTHER DEFINITIONAL PROVISIONS AND RULES OF CONSTRUCTION. A. Any of the terms defined herein may, unless the context otherwise requires, be used in the singular or the plural, depending on the reference. B. References to "Sections" and "subsections" shall be to Sections and subsections, respectively, of this Agreement unless otherwise specifically provided. C. The use in any of the Loan Documents of the word "include" or "including", when following any general statement, term or matter, shall not be construed to limit such statement, term or matter to the specific items or matters set forth immediately following such word or to similar items or matters, whether or not nonlimiting language (such as "without limitation" or "but not limited to" or words of similar import) is used with reference thereto, but rather shall be deemed to refer to all other items or matters that fall within the broadest possible scope of such general statement, term or matter. 35 1.4 CURRENCY EQUIVALENTS GENERALLY. For all purposes of this Agreement (but not for purposes of the preparation of any financial statements delivered pursuant hereto), the equivalent in any Offshore 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. SECTION 2. AMOUNTS AND TERMS OF COMMITMENTS AND LOANS 2.1 COMMITMENTS; MAKING OF LOANS; NOTES; REGISTER; GENERAL PROVISIONS REGARDING OFFSHORE CURRENCY LOANS. A. COMMITMENTS. Subject to the terms and conditions of this Agreement and in reliance upon the representations and warranties of Company herein set forth, the Lenders hereby severally agree to make the Loans described in subsections 2.1A(i) and 2.1A(ii), Swing Line Lender hereby agrees to make the Loans described in subsection 2.1A(iii) and Offshore Currency Funding Lender hereby agrees to make the Loans described in subsection 2.1A(iv). (i) TERM LOANS. Each Lender severally agrees to lend to Company on the Closing Date an amount in Dollars not exceeding its Pro Rata Share of the aggregate amount of the Term Loan Commitments to be used for the purposes identified in subsection 2.5A. The original amount of each Lender's Term Loan Commitment is set forth opposite its name on SCHEDULE 2.1 annexed hereto and the aggregate amount of the Term Loan Commitments is $25,000,000; PROVIDED that the Term Loan Commitments of Lenders shall be adjusted to give effect to any assignments of the Term Loan Commitments pursuant to subsection 10.1B. Each Lender's Term Loan Commitment shall expire immediately and without further action on June 30, 1997 if the Term Loans are not made on or before that date. Company may make only one borrowing under the Term Loan Commitments. Amounts borrowed under this subsection 2.1A(i) and subsequently repaid or prepaid may not be reborrowed. (ii) REVOLVING LOANS. Each Lender severally agrees, subject to the limitation set forth below with respect to the maximum amount of Revolving Loans permitted to be outstanding from time to time, to lend to Company from time to time during the period from the Closing Date to but excluding the Revolving Loan Commitment Termination Date an aggregate Dollar Equivalent amount not exceeding its Pro Rata Share of the aggregate amount of the Revolving Loan Commitments to be used for the purposes identified in subsection 2.5B. The original amount of each Lender's Revolving Loan Commitment is set forth opposite its name on SCHEDULE 2.1 annexed hereto and the aggregate original amount of the Revolving Loan Commitments is 36 $20,000,000; PROVIDED that the Revolving Loan Commitments of Lenders shall be adjusted to give effect to any assignments of the Revolving Loan Commitments pursuant to subsection 10.1B; and PROVIDED, FURTHER that the amount of the Revolving Loan Commitments shall be reduced from time to time by the amount of any reductions thereto made pursuant to subsections 2.4B(ii) and 2.4B(iii). Each Lender's Revolving Loan Commitment shall expire on the Revolving Loan Commitment Termination Date and all Revolving Loans and all other amounts owed hereunder with respect to the Revolving Loans and the Revolving Loan Commitments shall be paid in full no later than that date; PROVIDED that each Lender's Revolving Loan Commitment shall expire immediately and without further action on June 30, 1997 if the Term Loans and the initial Revolving Loans are not made on or before that date. Amounts borrowed under this subsection 2.1A(ii) may be repaid and reborrowed to but excluding the Revolving Loan Commitment Termination Date. Anything contained in this Agreement to the contrary notwithstanding, the Revolving Loans and the Revolving Loan Commitments shall be subject to the limitation that in no event shall the Total Utilization of Revolving Loan Commitments at any time exceed the Revolving Loan Commitments then in effect. (iii) SWING LINE LOANS. Swing Line Lender hereby agrees, subject to the limitation set forth below with respect to the maximum amount of Swing Line Loans permitted to be outstanding from time to time, to make a portion of the Revolving Loan Commitments available to Company from time to time during the period from the Closing Date to but excluding the Revolving Loan Commitment Termination Date by making Swing Line Loans to Company in an aggregate amount not exceeding the amount of the Swing Line Loan Commitment to be used for the purposes identified in subsection 2.5B, notwithstanding the fact that such Swing Line Loans, when aggregated with Swing Line Lender's outstanding Revolving Loans and Swing Line Lender's Pro Rata Share of the Letter of Credit Usage then in effect, may exceed Swing Line Lender's Revolving Loan Commitment. The original amount of the Swing Line Loan Commitment is $2,000,000; PROVIDED that any reduction of the Revolving Loan Commitments made pursuant to subsection 2.4B(ii) or 2.4B(iii) which reduces the aggregate Revolving Loan Commitments to an amount less than the then current amount of the Swing Line Loan Commitment shall result in an automatic corresponding reduction of the Swing Line Loan Commitment to the amount of the Revolving Loan Commitments, as so reduced, without any further action on the part of Company, Administrative Agent or Swing Line Lender. The Swing Line Loan Commitment shall expire on the Revolving Loan Commitment Termination Date and all Swing Line Loans and all other amounts owed hereunder with respect to the Swing Line Loans shall be paid in full no later than that date; PROVIDED that the Swing Line Loan Commitment 37 shall expire immediately and without further action on June 30, 1997 if the Term Loans and the initial Revolving Loans are not made on or before that date. Amounts borrowed under this subsection 2.1A(iii) may be repaid and reborrowed to but excluding the Revolving Loan Commitment Termination Date. Anything contained in this Agreement to the contrary notwithstanding, the Swing Line Loans and the Swing Line Loan Commitment shall be subject to the limitation that in no event shall the Total Utilization of Revolving Loan Commitments at any time exceed the Revolving Loan Commitments then in effect. With respect to any Swing Line Loans which have not been voluntarily prepaid by Company pursuant to subsection 2.4B(i), Swing Line Lender may, at any time in its sole and absolute discretion, deliver to Administrative Agent (with a copy to Company), no later than 10:00 A.M. (New York City time) on the proposed Funding Date, a notice (which shall be deemed to be a Notice of Borrowing given by Company) requesting Lenders to make Revolving Loans that are Base Rate Loans on such Funding Date in an amount equal to the amount of such Swing Line Loans (the "REFUNDED SWING LINE LOANS") outstanding on the date such notice is given which Swing Line Lender requests Lenders to prepay. Anything contained in this Agreement to the contrary notwithstanding, (i) the proceeds of such Revolving Loans made by Lenders other than Swing Line Lender shall be immediately delivered by Administrative Agent to Swing Line Lender (and not to Company) and applied to repay a corresponding portion of the Refunded Swing Line Loans and (ii) on the day such Revolving Loans are made, Swing Line Lender's Pro Rata Share of the Refunded Swing Line Loans shall be deemed to be paid with the proceeds of a Revolving Loan made by Swing Line Lender, and such portion of the Swing Line Loans deemed to be so paid shall no longer be outstanding as Swing Line Loans and shall no longer be due under the Swing Line Note of Swing Line Lender but shall instead constitute part of Swing Line Lender's outstanding Revolving Loans and shall be due under the Revolving Note of Swing Line Lender. Company hereby authorizes Administrative Agent and Swing Line Lender to charge Company's accounts with Administrative Agent and Swing Line Lender (up to the amount available in each such account) in order to immediately pay Swing Line Lender the amount of the Refunded Swing Line Loans to the extent the proceeds of such Revolving Loans made by Lenders, including the Revolving Loan deemed to be made by Swing Line Lender, are not sufficient to repay in full the Refunded Swing Line Loans. If any portion of any such amount paid (or deemed to be paid) to Swing Line Lender should be recovered by or on behalf of Company from Swing Line Lender in bankruptcy, by assignment for the benefit of creditors or otherwise, the loss of the amount so recovered shall be ratably shared among all Lenders in the manner contemplated by subsection 10.5. 38 Immediately upon funding of the Swing Line Loans by the Swing Line Lender, each Lender having a Revolving Loan Commitment shall be deemed to, and hereby agrees to, have purchased a participation in such outstanding Swing Line Loans in an amount equal to its Pro Rata Share of the unpaid amount of such Swing Line Loans together with accrued interest thereon. Upon notice from Swing Line Lender no later than 10:00 A.M. (New York City time) on any Business Day, each such Lender shall deliver to Swing Line Lender an amount equal to its respective participation in Same Day Funds at the Funding and Payment Office no later than 5:00 P.M. (New York City time) on such Business Day. In the event any Lender fails to make available to Swing Line Lender the amount of such Lender's participation as provided in this paragraph, Swing Line Lender shall be entitled to recover such amount on demand from such Lender together with interest thereon at the Federal Funds Effective Rate for three Business Days and thereafter at the Base Rate. In the event Swing Line Lender receives a payment of any amount in which other Lenders have purchased participations as provided in this paragraph, Swing Line Lender shall promptly distribute to each such other Lender its Pro Rata Share of such payment. Anything contained herein to the contrary notwithstanding, each Lender's obligation to make Revolving Loans for the purpose of repaying any Refunded Swing Line Loans pursuant to the second preceding paragraph and each Lender's obligation to purchase a participation in any unpaid Swing Line Loans pursuant to the immediately preceding paragraph shall be absolute and unconditional and shall not be affected by any circumstance, including (a) any set-off, counterclaim, recoupment, defense or other right which such Lender may have against Swing Line Lender, Company or any other Person for any reason whatsoever; (b) the occurrence or continuation of an Event of Default or a Potential Event of Default; (c) any adverse change in the business, operations or condition (financial or otherwise) of Company or any of its Subsidiaries; (d) any breach of this Agreement or any other Loan Document by any party thereto; or (e) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing; PROVIDED that such obligations of each Lender are subject to the satisfaction of one of the following conditions (X) Swing Line Lender shall not have received written notice that any condition under Section 4 to the making of the applicable Refunded Swing Line Loans or other unpaid Swing Line Loans, as the case may be, was unsatisfied at the time such Refunded Swing Line Loans or unpaid Swing Line Loans were made or (Y) the satisfaction of any such condition not satisfied had been waived in accordance with subsection 10.6. (iv) OFFSHORE CURRENCY LOANS. Offshore Currency Funding Lender hereby agrees, subject to the limitations set forth below with respect to the maximum Dollar Equivalent amount of Offshore Currency Loans permitted to be outstanding from time to time, to make a portion of the Revolving Loan 39 Commitments available to Company from time to time during the period from the Closing Date to but excluding the Revolving Loan Commitment Termination Date by making Offshore Currency Loans to Company in an aggregate amount not exceeding the Dollar Equivalent amount of the Offshore Currency Loan Commitment to be used for the purposes identified in subsection 2.5B, notwithstanding the fact that such Offshore Currency Loans, when aggregated with Offshore Currency Funding Lender's outstanding Revolving Loans and Swing Line Loans and Offshore Currency Funding Lender's Pro Rata Share of the Letter of Credit Usage then in effect, may exceed Offshore Currency Funding Lender's Revolving Loan Commitment. The original Dollar Equivalent amount of the Offshore Currency Loan Commitment is $7,500,000; PROVIDED that any reduction of the Revolving Loan Commitments made pursuant to subsection 2.4B(ii) or 2.4B(iii) which reduces the aggregate Revolving Loan Commitments to an amount less than the then current amount of the Offshore Currency Loan Commitment shall result in an automatic corresponding reduction of the Offshore Currency Loan Commitment to the amount of the Revolving Loan Commitments, as so reduced, without any further action on the part of Company, Administrative Agent or Offshore Currency Funding Lender. The Offshore Currency Loan Commitment shall expire on the Revolving Loan Commitment Termination Date and all Offshore Currency Loans and all other amounts owed hereunder with respect to the Offshore Currency Loans shall be paid in full no later than that date; PROVIDED that the Offshore Currency Loan Commitment shall expire immediately and without further action on June 30, 1997 if the Term Loans and the initial Revolving Loans are not made on or before that date. Amounts borrowed under this subsection 2.1A(iv) may be repaid and reborrowed to but excluding the Revolving Loan Commitment Termination Date. Anything contained in this Agreement to the contrary notwithstanding, the Offshore Currency Loans and the Offshore Currency Loan Commitment shall be subject to the following limitations: (a) in no event shall the Total Utilization of Revolving Loan Commitments at any time exceed the Revolving Loan Commitments then in effect; and (b) in no event on any Computation Date pursuant to subsection 2.1F, after giving effect to any Offshore Currency Loans then being requested, shall the aggregate principal Dollar Equivalent amount of all outstanding Offshore Currency Loans PLUS the Letter of Credit Usage for outstanding Letters of Credit denominated in Offshore Currencies, exceed the Offshore Currency Sublimit. With respect to any Offshore Currency Loans which have not been voluntarily prepaid by Company pursuant to subsection 2.4B(i), Offshore 40 Currency Funding Lender may, at any time upon the occurrence and during the continuation of a Potential Event of Default or an Event of Default, deliver to Administrative Agent (with a copy to Company), five Business Days in advance of the proposed Funding Date, a notice (which shall be deemed to be a Notice of Borrowing given by Company) requesting Lenders having a Revolving Loan Commitment to make Revolving Loans that are Offshore Currency Loans on such Funding Date in an amount equal to the amount of such Offshore Currency Loans and in the Offshore Currency in which such Offshore Currency Loans are denominated (the "REFUNDED OFFSHORE CURRENCY LOANS"). Anything contained in this Agreement to the contrary notwithstanding, (i) the proceeds of such Revolving Loans made by Lenders other than Offshore Currency Funding Lender shall be immediately delivered by Administrative Agent to Offshore Currency Funding Lender (and not to Company) and applied to repay a corresponding portion of the Refunded Offshore Currency Loans and (ii) on the day such Revolving Loans are made, Offshore Currency Funding Lender's Pro Rata Share of the Refunded Offshore Currency Loans shall be deemed to be paid with the proceeds of a Revolving Loan made by Offshore Currency Funding Lender, and such portion of the Offshore Currency Loans deemed to be so paid shall no longer be outstanding as Offshore Currency Loans but shall instead constitute part of Offshore Currency Funding Lender's outstanding Revolving Loans. Company hereby authorizes Administrative Agent and Offshore Currency Funding Lender to charge Company's accounts with Administrative Agent and Offshore Currency Funding Lender (up to the amount available in each such account) in order to immediately pay Offshore Currency Funding Lender the amount of the Offshore Currency Loans to the extent the proceeds of such Revolving Loans made by Lenders, including the Revolving Loan deemed to be made by Offshore Currency Funding Lender, are not sufficient to repay in full the Refunded Offshore Currency Loans. If any portion of any such amount paid (or deemed to be paid) to Offshore Currency Funding Lender should be recovered by or on behalf of Company from Offshore Currency Funding Lender in bankruptcy, by assignment for the benefit of creditors or otherwise, the loss of the amount so recovered shall be ratably shared among all Lenders in the manner contemplated by subsection 10.5. Immediately upon funding of the Offshore Currency Loans by the Offshore Currency Funding Lender, each Lender having a Revolving Loan Commitment shall be deemed to, and hereby agrees to, have purchased a participation in such outstanding Offshore Currency Loans in an amount equal to its Pro Rata Share of the unpaid amount of such Offshore Currency Loans together with accrued interest thereon. At any time upon the occurrence and during the continuation of a Potential Event of Default or an Event of Default and upon five Business Days' notice, Offshore Currency Funding Lender may deliver to each other Lender having a Revolving Loan Commitment a notice setting forth the amount of the outstanding Offshore Currency Loans, the 41 Applicable Currency in which such Offshore Currency Loans are denominated and the amount of such Lender's Pro Rata Share of such Offshore Currency Loans, and each such Lender shall deliver to Offshore Currency Funding Lender an amount equal to its respective participation in Same Day Funds in the Applicable Currency at the Funding and Payment Office. In the event any Lender fails to make available to Offshore Currency Funding Lender the amount of such Lender's participation as provided in this paragraph, Offshore Currency Funding Lender shall be entitled to recover such amount on demand from such Lender together with interest thereon at the Federal Funds Effective Rate for three Business Days and thereafter at the Base Rate. In the event Offshore Currency Funding Lender receives a payment of any amount in which other Lenders have purchased participations as provided in this paragraph, Offshore Currency Funding Lender shall promptly distribute to each such other Lender its Pro Rata Share of such payment. Anything contained herein to the contrary notwithstanding, each Lender's obligation to make Revolving Loans for the purpose of repaying any Refunded Offshore Currency Loans pursuant to the second preceding paragraph and each Lender's obligation to purchase a participation in any unpaid Offshore Currency Loans pursuant to the immediately preceding paragraph shall be absolute and unconditional and shall not be affected by any circumstance, including (a) any set-off, counterclaim, recoupment, defense or other right which such Lender may have against Offshore Currency Funding Lender, Company or any other Person for any reason whatsoever; (b) the occurrence or continuation of an Event of Default or a Potential Event of Default; (c) any adverse change in the business, operations or condition (financial or otherwise) of Company or any of its Subsidiaries; (d) any breach of this Agreement or any other Loan Document by any party thereto; or (e) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing; PROVIDED that such obligations of each Lender are subject to the satisfaction of one of the following conditions (X) Offshore Currency Funding Lender shall not have received written notice that any condition under Section 4 to the making of the applicable Offshore Currency Loans was unsatisfied at the time such Offshore Currency Loans were made or (Y) the satisfaction of any such condition not satisfied had been waived in accordance with subsection 10.6. B. BORROWING MECHANICS. Term Loans, Revolving Loans, or Offshore Currency Loans made on any Funding Date (other than Revolving Loans made pursuant to a request by Swing Line Lender pursuant to subsection 2.1A(iii) for the purpose of repaying any Refunded Swing Line Loans, Revolving Loans made pursuant to a request by Offshore Currency Funding Lender pursuant to subsection 2.1A(iv) for the purpose of repaying any Refunded Offshore Currency Loans or Revolving Loans made pursuant to subsection 3.3B for the purpose of reimbursing any Issuing Lender for the amount of a drawing under a Letter of Credit issued by it) 42 shall be in the applicable Minimum Amount. Swing Line Loans made on any Funding Date shall be in an aggregate minimum amount of $100,000 and integral multiples of $100,000 in excess of that amount. Whenever Company desires that Lenders make Term Loans or Revolving Loans it shall deliver to Administrative Agent a Notice of Borrowing no later than 10:00 A.M. (New York City time) at least three Business Days in advance of the proposed Funding Date (in the case of an Offshore Rate Loan denominated in Dollars) or at least one Business Day in advance of the proposed Funding Date (in the case of a Base Rate Loan). Whenever Company desires that Offshore Currency Funding Lender make Offshore Currency Loans it shall deliver to Administrative Agent a Notice of Borrowing five Business Days prior to the requested Funding Date. Whenever Company desires that Swing Line Lender make a Swing Line Loan, it shall deliver to Administrative Agent a Notice of Borrowing no later than 12:00 Noon (New York City time) on the proposed Funding Date. The Notice of Borrowing shall specify (i) the proposed Funding Date (which shall be a Business Day), (ii) the amount and type of Loans requested, (iii) in the case of Swing Line Loans and any Loans made on the Closing Date, that such Loans shall be Base Rate Loans, (iv) in the case of Revolving Loans not made on the Closing Date, whether such Loans shall be Base Rate Loans or Offshore Rate Loans denominated in Dollars, (v) in the case of any Loans requested to be made as Offshore Rate Loans, the initial Interest Period requested therefor, and (vi) in the case of any Offshore Currency Loans, the Applicable Currency. Term Loans, Revolving Loans and Offshore Currency Loans may be continued as or converted into Base Rate Loans and Offshore Rate Loans to the extent and in the manner provided in subsection 2.2D. In lieu of delivering the above-described Notice of Borrowing, Company may give Administrative Agent telephonic notice by the required time of any proposed borrowing under this subsection 2.1B; PROVIDED that such notice shall be promptly confirmed in writing by delivery of a Notice of Borrowing to Administrative Agent on or before the applicable Funding Date. Neither Administrative Agent nor any Lender shall incur any liability to Company in acting upon any telephonic notice referred to above that Administrative Agent believes in good faith to have been given by a duly authorized officer or other person authorized to borrow on behalf of Company or for otherwise acting in good faith under this subsection 2.1B, and upon funding of Loans by Lenders in accordance with this Agreement pursuant to any such telephonic notice Company shall have effected Loans hereunder. Company shall notify Administrative Agent prior to the funding of any Loans in the event that any of the matters to which Company is required to certify in the applicable Notice of Borrowing is no longer true and correct as of the applicable Funding Date, and the acceptance by Company of the proceeds of any Loans shall constitute a re-certification by Company, as of the applicable Funding Date, as to the matters to which Company is required to certify in the applicable Notice of Borrowing. 43 Except as otherwise provided in subsections 2.1F, 2.6B, 2.6C and 2.6G, a Notice of Borrowing for an Offshore Rate Loan (or telephonic notice in lieu thereof) shall be irrevocable on and after the related Interest Rate Determination Date, and Company shall be bound to make a borrowing in accordance therewith. C. DISBURSEMENT OF FUNDS. All Term Loans and Revolving Loans under this Agreement shall be made by Lenders simultaneously and proportionately to their respective Pro Rata Shares of the Commitments for the Term Loans or Revolving Loans requested, it being understood that no Lender shall be responsible for any default by any other Lender in that other Lender's obligation to make a Loan requested hereunder nor shall the Commitment of any Lender to make the particular type of Loan requested be increased or decreased as a result of a default by any other Lender in that other Lender's obligation to make a Loan requested hereunder. Promptly after receipt by Administrative Agent of a Notice of Borrowing pursuant to subsection 2.1B (or telephonic notice in lieu thereof), Administrative Agent shall notify each Lender, Offshore Currency Funding Lender or Swing Line Lender, as the case may be, of the proposed borrowing. In the case of Loans in Dollars, each Lender shall make the amount of its Loan available to Administrative Agent not later than 12:00 Noon (New York City time) on the applicable Funding Date, and Swing Line Lender shall make the amount of its Swing Line Loan available to Administrative Agent not later than 2:00 P.M.(New York City time) on the applicable Funding Date, in each case in Same Day Funds in Dollars, at the Funding and Payment Office. In the case of Offshore Currency Loans, Offshore Currency Funding Lender shall make the amount of its Loan available by such time on the applicable Funding Date as Administrative Agent may specify in Same Day Funds in the requested currency at the Funding and Payment Office. Except as provided in subsection 2.1A(iii), subsection 2.1A(iv) or subsection 3.3B with respect to Revolving Loans used to repay Refunded Swing Line Loans, to repay Refunded Offshore Currency Loans or to reimburse any Issuing Lender for the amount of a drawing under a Letter of Credit issued by it, upon satisfaction or waiver of the conditions precedent specified in subsections 4.1 (in the case of Loans made on the Closing Date) and 4.2 (in the case of all Loans), Administrative Agent shall make the proceeds of such Loans available to Company on the applicable Funding Date by causing an amount of Same Day Funds in like funds as received by Administrative Agent equal to the proceeds of all such Loans received by Administrative Agent from Lenders, Offshore Currency Funding Lender or Swing Line Lender, as the case may be, to be credited to the account of Company at the Funding and Payment Office. Unless Administrative Agent shall have been notified by any Lender prior to the Funding Date for any Loans that such Lender does not intend to make available to Administrative Agent the amount of such Lender's Loan requested on such Funding Date, Administrative Agent may assume that such Lender has made such amount available to Administrative Agent on such Funding Date and Administrative Agent may, in its sole discretion, but shall not be obligated to, make available to Company a corresponding amount on such Funding Date. If such 44 corresponding amount is not in fact made available to Administrative Agent by such Lender, Administrative Agent shall be entitled to recover such corresponding amount on demand from such Lender together with interest thereon, for each day from such Funding Date until the date such amount is paid to Administrative Agent, at the Federal Funds Effective Rate for three Business Days and thereafter at the Base Rate. If such Lender does not pay such corresponding amount forthwith upon Administrative Agent's demand therefor, Administrative Agent shall promptly notify Company and Company shall immediately pay such corresponding amount to Administrative Agent together with interest thereon, for each day from such Funding Date until the date such amount is paid to Administrative Agent, at the rate payable under this Agreement for Base Rate Loans. Nothing in this subsection 2.1C shall be deemed to relieve any Lender from its obligation to fulfill its Commitments hereunder or to prejudice any rights that Company may have against any Lender as a result of any default by such Lender hereunder. D. NOTES. Company shall execute and deliver on the Closing Date (a) to each Lender having a Term Loan Commitment (or to Administrative Agent for that Lender) a Term Note substantially in the form of EXHIBIT IV annexed hereto to evidence that Lender's Term Loan, in the principal amount of that Lender's Term Loan and with other appropriate insertions, (b) to each Lender having a Revolving Loan Commitment a Revolving Note substantially in the form of EXHIBIT V annexed hereto to evidence that Lender's Revolving Loans, in the principal amount of that Lender's Revolving Loan Commitment and with other appropriate insertions, and (c) to Swing Line Lender (or to Administrative Agent for Swing Line Lender) a Swing Line Note substantially in the form of EXHIBIT VI annexed hereto to evidence Swing Line Lender's Swing Line Loans, in the principal amount of the Swing Line Loan Commitment and with other appropriate insertions and (d) to Offshore Currency Funding Lender (or to Administrative Agent for Offshore Currency Funding Lender) an Offshore Currency Note substantially in the form of EXHIBIT XXV annexed hereto to evidence Offshore Currency Funding Lender's Offshore Currency Loans, in the principal amount of the Offshore Currency Loan Commitment and with other appropriate insertions. Each Lender shall endorse on the schedules annexed to any Note evidencing such Lender's Loan the amount and Applicable Currency of each payment of principal made by the Company with respect thereto. E. THE REGISTER. (i) Administrative Agent shall maintain, at its address referred to in subsection 10.8, a register for the recordation of the names and addresses of Lenders and the Commitments and Loans of each Lender from time to time (the "REGISTER"). The Register shall be available for inspection by Company or any Lender at any reasonable time and from time to time upon reasonable prior notice. 45 (ii) Administrative Agent shall record in the Register the Term Loan Commitment and the Revolving Loan Commitment and the Term Loans and Revolving Loans from time to time of each Lender, the Swing Line Loan Commitment and the Swing Line Loans from time to time of Swing Line Lender, the Offshore Currency Loan Commitment and Offshore Currency Loans from time to time of Offshore Currency Funding Lender and each repayment or prepayment in respect of the principal amount of the Term Loans or Revolving Loans of each Lender, the Swing Line Loans of Swing Line Lender or the Offshore Currency Loans of Offshore Currency Funding Lender. Any such recordation shall be conclusive and binding on Company and each Lender, absent manifest error; PROVIDED that failure to make any such recordation, or any error in such recordation, shall not affect any Lender's Commitments or Company's Obligations in respect of the applicable Loans. (iii) Each Lender shall record on its internal records (including, without limitation, the Notes held by such Lender) the amount of the Term Loan and each Revolving Loan made by it and each payment in respect thereof. Any such recordation shall be conclusive and binding on Company, absent manifest error; PROVIDED that failure to make any such recordation, or any error in such recordation, shall not affect any Lender's Commitments or Company's Obligations in respect of any applicable Loans; and PROVIDED, FURTHER that in the event of any inconsistency between the Register and any Lender's records, the recordations in the Register shall govern, absent manifest error. (iv) Company, Administrative Agent and Lenders shall deem and treat the Persons listed as Lenders in the Register as the holders and owners of the corresponding Commitments and Loans listed therein for all purposes hereof, and no assignment or transfer of any such Commitment or Loan shall be effective, in each case unless and until an Assignment Agreement effecting the assignment or transfer thereof shall have been accepted by Administrative Agent and recorded in the Register as provided in subsection 10.1B(ii). Prior to such recordation, all amounts owed with respect to the applicable Commitment or Loan shall be owed to the Lender listed in the Register as the owner thereof, and any request, authority or consent of any Person who, at the time of making such request or giving such authority or consent, is listed in the Register as a Lender shall be conclusive and binding on any subsequent holder, assignee or transferee of the corresponding Commitments or Loans. (v) Company hereby designates Fleet to serve as Company's agent solely for purposes of maintaining the Register as provided in this subsection 2.1E, and Company and Lenders hereby agree that, to the extent Fleet serves in such capacity, Fleet and its officers, directors, employees, agents and affiliates shall constitute Indemnitees for all purposes under subsection 10.3 and shall enjoy the general immunity provided for in subsection 9.2. 46 F. GENERAL PROVISIONS REGARDING OFFSHORE CURRENCY LOANS. Administrative Agent will determine the Dollar Equivalent amount with respect to any (i) Offshore Currency Loans as of the Interest Rate Determination Date,(ii) outstanding Offshore Currency Loans as of the last day of the applicable Interest Period, (iii) Letters of Credit denominated in an Offshore Currency as of the requested date of issuance and (iv) outstanding Letters of Credit denominated in an Offshore Currency as of the last Business Day of each month (each such date under clauses (i) through (iv) a "COMPUTATION DATE"). In the case of proposed Offshore Currency Loans, if Offshore Currency Funding Lender has determined that it cannot provide or continue to provide Loans in the requested Offshore Currency, Offshore Currency Funding Lender shall so notify Administrative Agent by 10:30 A.M. (New York time) four Business Days prior to the proposed Funding Date or the proposed date of continuation of such Loans in which event Administrative Agent will give notice to Company no later than 5:00 P.M. (New York time) on the fourth Business Day prior to the requested Funding Date or the proposed date of continuation of such Loans that the Loans in the requested Offshore Currency are not then available, and Offshore Currency Funding Lender shall be under no obligation to make or continue Offshore Currency Loans in the requested Offshore Currency. If Administrative Agent shall have so notified Company that any such Loan in a requested Offshore Currency is not then available, Company may, by notice to Administrative Agent not later than Noon (New York time) three Business Days prior to the requested Funding Date of such Loan, withdraw the Notice of Borrowing relating to such Loan. If the Company does so withdraw such Notice of Borrowing, the Loan requested therein shall not occur and Administrative Agent will promptly so notify Offshore Currency Funding Lender. If the Company does not so withdraw such Notice of Borrowing, Administrative Agent will promptly notify each Lender having a Revolving Loan Commitment and such Notice of Borrowing shall be deemed to be a Notice of Borrowing that requests Revolving Loans comprised of Base Rate Loans in an aggregate amount equal to the Dollar Equivalent amount of the originally requested Loans; and in such notice by Administrative Agent to each Lender Administrative Agent will state such aggregate amount of such Loans in Dollars and such Lender's Pro Rata Share thereof. In the case of Offshore Currency Loans as to which Administrative Agent shall have so notified Company that any such continuation of such Offshore Currency Loans is not then available, any Notice of Continuation/Conversion with respect thereto shall be deemed withdrawn and such Offshore Currency Loans shall be repaid by Company on the last day of the Interest Period with respect to such Offshore Currency Loans. The European Economic and Monetary Union (the "European Monetary Union") anticipates the introduction of a single currency and the substitution of the national currencies of the member states participating in the European Monetary Union. On the date on which any of the Offshore Currencies are replaced by the single currency, conversion into such single currency shall take effect; PROVIDED that the original currency shall be retained for so long as is legally permissible. 47 Conversion shall be based on the officially fixed rate of conversion. Neither the introduction of the single currency nor the substitution of the national currencies of the member states participating in European Monetary Union nor the fixing of the official rate of conversion nor any economic consequences that arise from any of the aforementioned events or in connection with European Monetary Union shall give rise to any right to terminate prematurely, contest, cancel, rescind, modify or renegotiate this Agreement or any of its provisions or to raise any other objections and/or exceptions or to assert any claims for compensation. 2.2 INTEREST ON THE LOANS. A. RATE OF INTEREST. Subject to the provisions of subsections 2.6 and 2.7, each Term Loan and each Revolving Loan shall bear interest on the unpaid principal amount thereof from the date made through maturity (whether by acceleration or otherwise) at a rate determined by reference to the Base Rate or the Adjusted Offshore Rate. Subject to the provisions of subsection 2.7, each Swing Line Loan shall bear interest on the unpaid principal amount thereof from the date made through maturity (whether by acceleration or otherwise) at a rate determined by reference to the Base Rate. Subject to the provisions of subsections 2.6 and 2.7, each Offshore Currency Loan shall bear interest on the unpaid principal amount thereof from the date made through maturity (whether by acceleration or otherwise) at a rate determined by reference to the Adjusted Offshore Rate. The applicable basis for determining the rate of interest with respect to any Term Loan or any Revolving Loan shall be selected by Company initially at the time a Notice of Borrowing is given with respect to such Loan pursuant to subsection 2.1B, and the basis for determining the interest rate with respect to any Term Loan or any Revolving Loan may be changed from time to time pursuant to subsection 2.2D. If on any day a Term Loan or Revolving Loan is outstanding with respect to which notice has not been delivered to Administrative Agent in accordance with the terms of this Agreement specifying the applicable basis for determining the rate of interest, then for that day that Loan shall bear interest determined by reference to the Base Rate. (i)Subject to the provisions of subsections 2.2E and 2.7, the Term Loans and the Revolving Loans shall bear interest through maturity as follows: (a) if a Base Rate Loan, then at the sum of the Base Rate PLUS the Applicable Base Rate Margin; or (b) if an Offshore Rate Loan denominated in Dollars, then at the sum of the Adjusted Offshore Rate PLUS the Applicable Offshore Rate Margin. (ii) Subject to the provisions of subsections 2.2E and 2.7, the Swing Line Loans shall bear interest through maturity at the sum of the Base Rate PLUS the Applicable Base Rate Margin MINUS the Commitment Fee Percentage. 48 (iii) Subject to the provisions of subsections 2.2E and 2.7, the Offshore Currency Loans shall bear interest through maturity at the sum of the Adjusted Offshore Rate PLUS the Applicable Offshore Rate Margin MINUS the Commitment Fee Percentage. Upon delivery of the Margin Determination Certificate by Company to Administrative Agent pursuant to subsection 6.1(xv), the Applicable Base Rate Margin and the Applicable Offshore Rate Margin shall automatically be adjusted in accordance with such Margin Determination Certificate, such adjustment to become effective, or to be retroactively effective to the extent a Margin Determination Certificate is not timely delivered pursuant to subsection 6.1(xv), on the forty-sixth day following the end of the Fiscal Quarter for which such Margin Determination Certificate is being or should have been so delivered; PROVIDED that if a Margin Determination Certificate erroneously indicates an applicable margin more favorable to Company than should be afforded by the actual calculation of the Consolidated Leverage Ratio, Company shall promptly pay additional interest and letter of credit fees to correct for such error. B. INTEREST PERIODS. In connection with each Offshore Rate Loan, Company may, pursuant to the applicable Notice of Borrowing or Notice of Conversion/ Continuation, as the case may be, select an interest period (each an "INTEREST PERIOD") to be applicable to such Loan, which Interest Period shall be, at Company's option, either a one, two, three or, with respect to Offshore Rate Loans denominated in Dollars, six month period; PROVIDED that: (i) the initial Interest Period for any Offshore Rate Loan shall commence on the Funding Date in respect of such Loan, in the case of a Loan initially made as an Offshore Rate Loan, or on the date specified in the applicable Notice of Conversion/Continuation, in the case of a Loan converted to an Offshore Rate Loan; (ii) in the case of immediately successive Interest Periods applicable to an Offshore Rate Loan continued as such pursuant to a Notice of Conversion/Continuation, each successive Interest Period shall commence on the day on which the next preceding Interest Period expires; (iii) if an Interest Period would otherwise expire on a day that is not a Business Day, such Interest Period shall expire on the next succeeding Business Day; PROVIDED that, if any Interest Period would otherwise expire on a day that is not a Business Day but is a day of the month after which no further Business Day occurs in such month, such Interest Period shall expire on the next preceding Business Day; (iv) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding 49 day in the calendar month at the end of such Interest Period) shall, subject to clause (v) of this subsection 2.2B, end on the last Business Day of a calendar month; (v) no Interest Period with respect to any portion of the Term Loans shall extend beyond December 15, 2002, and no Interest Period with respect to any portion of the Revolving Loans or Offshore Currency Loans shall extend beyond the Revolving Loan Commitment Termination Date; (vi) no Interest Period with respect to any portion of the Term Loans shall extend beyond a date on which Company is required to make a scheduled payment of principal of the Term Loans, unless the sum of (a) the aggregate principal amount of Term Loans that are Base Rate Loans PLUS (b) the aggregate principal amount of Term Loans that are Offshore Rate Loans with Interest Periods expiring on or before such date equals or exceeds the principal amount required to be paid on the Term Loans on such date; (vii) there shall be no more than 8 Interest Periods outstanding at any time; and (viii) in the event Company fails to specify an Interest Period for any Offshore Rate Loan in the applicable Notice of Borrowing or Notice of Conversion/Continuation, then Company shall be deemed to have selected an Interest Period of one month. C. INTEREST PAYMENTS. Subject to the provisions of subsection 2.2E, interest on each Loan shall be payable in arrears on and to each Interest Payment Date applicable to that Loan, upon any prepayment of that Loan (to the extent accrued on the amount being prepaid) and at maturity (including final maturity); PROVIDED that in the event any Swing Line Loans or any Revolving Loans that are Base Rate Loans are prepaid pursuant to subsection 2.4B(i), interest accrued on such Swing Line Loans or Revolving Loans through the date of such prepayment shall be payable on the next succeeding Interest Payment Date applicable to Base Rate Loans (or, if earlier, at final maturity). D. CONVERSION OR CONTINUATION. Subject to the provisions of subsection 2.6, Company shall have the option (i) to convert at any time all or any part of its outstanding Term Loans or Revolving Loans which are Base Rate Loans in an amount equal to the applicable Minimum Amount to Loans denominated in Dollars and bearing interest at a rate determined by reference to the Adjusted Offshore Rate, (ii) to convert all or any part of its outstanding Term Loans or Revolving Loans which are Offshore Rate Loans denominated in Dollars to Base Rate Loans upon the expiration of the Interest Period applicable to such Offshore Rate Loans, (iii) to continue all or any part of its outstanding Term Loans or Revolving Loans which are Offshore Rate Loans denominated in Dollars in an amount equal to the applicable 50 Minimum Amount upon the expiration of the Interest Period applicable to such Offshore Rate Loans, or (iv) upon the expiration of any Interest Period applicable to an Offshore Currency Loan, to continue all or any portion of such Loan equal to the applicable Minimum Amount as an Offshore Rate Loan denominated in the same Offshore Currency. Company shall deliver a Notice of Conversion/Continuation to Administrative Agent no later than 10:00 A.M. (New York City time) (i) in the case of a conversion to a Base Rate Loan, at least one Business Day in advance of the proposed conversion date, (ii) in the case of a conversion to, or a continuation of, an Offshore Rate Loan denominated in Dollars, at least three Business Days in advance of the proposed conversion/continuation date, and (iii) in the case of a continuation of Offshore Currency Loans, at least five Business Days in advance of the proposed continuation date. A Notice of Conversion/Continuation shall specify (i) the proposed conversion/continuation date (which shall be a Business Day), (ii) the amount and type of the Loan to be converted/continued, (iii) the nature of the proposed conversion/continuation, (iv) in the case of a conversion to, or a continuation of, an Offshore Rate Loan, the requested Interest Period, and (v) in the case of a conversion to, or a continuation of, an Offshore Rate Loan, that no Potential Event of Default or Event of Default has occurred and is continuing. In lieu of delivering the above-described Notice of Conversion/Continuation, Company may give Administrative Agent telephonic notice by the required time of any proposed conversion/continuation under this subsection 2.2D; PROVIDED that such notice shall be promptly confirmed in writing by delivery of a Notice of Conversion/ Continuation to Administrative Agent on or before the proposed conversion/ continuation date. Upon receipt of written or telephonic notice of any proposed conversion/continuation under this subsection 2.2D, Administrative Agent shall promptly transmit such notice by telefacsimile or telephone to each Lender, including, if applicable, Offshore Currency Funding Lender. Neither Administrative Agent nor any Lender shall incur any liability to Company in acting upon any telephonic notice referred to above that Administrative Agent believes in good faith to have been given by a duly authorized officer or other person authorized to act on behalf of Company or for otherwise acting in good faith under this subsection 2.2D, and upon conversion or continuation of the applicable basis for determining the interest rate with respect to any Loans in accordance with this Agreement pursuant to any such telephonic notice Company shall have effected a conversion or continuation, as the case may be, hereunder. Except as otherwise provided in subsections 2.1F, 2.6B, 2.6C and 2.6G, a Notice of Conversion/Continuation for conversion to, or continuation of, an Offshore Rate Loan (or telephonic notice in lieu thereof) shall be irrevocable on and after the related Interest Rate Determination Date, and Company shall be bound to effect a conversion or continuation in accordance therewith. 51 E. DEFAULT RATE. Upon the occurrence and during the continuation of any Event of Default, the outstanding principal amount of all Loans and, to the extent permitted by applicable law, any interest payments thereon not paid when due and any fees and other amounts then due and payable hereunder, shall thereafter bear interest (including post-petition interest in any proceeding under the Bankruptcy Code or other applicable bankruptcy laws) payable upon demand at a rate that is 2% per annum in excess of the interest rate otherwise payable under this Agreement with respect to the applicable Loans (or, in the case of any such fees and other amounts, at a rate which is 2% per annum in excess of the interest rate otherwise payable under this Agreement for Base Rate Loans); PROVIDED that, in the case of Offshore Rate Loans denominated in Dollars, upon the expiration of the Interest Period in effect at the time any such increase in interest rate is effective such Offshore Rate Loans shall thereupon become Base Rate Loans and shall thereafter bear interest payable upon demand at a rate which is 2% per annum in excess of the interest rate otherwise payable under this Agreement for Base Rate Loans. Payment or acceptance of the increased rates of interest provided for in this subsection 2.2E is not a permitted alternative to timely payment and shall not constitute a waiver of any Event of Default or otherwise prejudice or limit any rights or remedies of any Agent or any Lender. F. COMPUTATION OF INTEREST. Interest on the Loans shall be computed (i) in the case of Base Rate Loans, on the basis of a 365-day or 366-day year, as the case may be, and (ii) in the case of Offshore Rate Loans, on the basis of a 360-day year, in each case for the actual number of days elapsed in the period during which it accrues. In computing interest on any Loan, the date of the making of such Loan or the first day of an Interest Period applicable to such Loan or, with respect to a Base Rate Loan being converted from an Offshore Rate Loan, the date of conversion of such Offshore Rate Loan to such Base Rate Loan, as the case may be, shall be included, and the date of payment of such Loan or the expiration date of an Interest Period applicable to such Loan or, with respect to a Base Rate Loan being converted to an Offshore Rate Loan, the date of conversion of such Base Rate Loan to such Offshore Rate Loan, as the case may be, shall be excluded; PROVIDED that if a Loan is repaid on the same day on which it is made, one day's interest shall be paid on that Loan. Each determination of an interest rate or a Dollar Equivalent amount by Administrative Agent shall be conclusive and binding on Company and Lenders in the absence of manifest error. 2.3 FEES. Company agrees to pay to Administrative Agent, for distribution to each Lender having a Revolving Loan Commitment in proportion to that Lender's Pro Rata Share, commitment fees for the period from and including the Closing Date to and excluding the Revolving Loan Commitment Termination Date equal to the average of the daily excess of the Revolving Loan Commitments over the sum of (i) aggregate principal Dollar Equivalent amount of outstanding Revolving Loans (but 52 not including any outstanding Swing Line Loans outstanding under subsection 2.1A(iii) or Offshore Currency Loans outstanding under subsection 2.1A(iv)) plus (ii) the Letter of Credit Usage MULTIPLIED BY the then applicable Commitment Fee Percentage, such commitment fees to be calculated on the basis of a 360-day year and the actual number of days elapsed and to be payable quarterly in arrears on the fifteenth day of each March, June, September and December of each year, commencing on the first such date to occur after the Closing Date, and on the Revolving Loan Commitment Termination Date. For purposes of determining the commitment fees, the amount of any outstanding Offshore Currency Loan or any Letter of Credit denominated in an Offshore Currency on any date shall be determined based upon the Dollar Equivalent amount as of the most recent Computation Date with respect to such Offshore Currency Loan or such Letter of Credit. Upon delivery of the Margin Determination Certificate by Company to Administrative Agent pursuant to subsection 6.1(xv), the Commitment Fee Percentage shall automatically be adjusted in accordance with such Margin Determination Certificate, such adjustment to become effective, or to be retroactively effective to the extent a Margin Determination Certificate is not timely delivered pursuant to such subsection 6.1(xv), on the forty-sixth day following the end of the Fiscal Quarter for which such Margin Determination Certificate is being or should have been so delivered; PROVIDED that if a Margin Determination Certificate erroneously indicates an applicable margin more favorable to Company than should be afforded by the actual calculation of the Consolidated Leverage Ratio, Company shall promptly pay additional commitment fees to correct for such error. 2.4 REPAYMENTS, PREPAYMENTS AND REDUCTIONS IN REVOLVING LOAN COMMITMENTS; GENERAL PROVISIONS REGARDING PAYMENTS. A. SCHEDULED PAYMENTS OF TERM LOANS. Company shall make principal payments on the Term Loans in installments on the dates and in the amounts set forth below: Scheduled Repayment Date of Term Loans ------ ----------------------- September 15, 1998 $1,000,000 December 15, 1998 1,000,000 March 15, 1999 1,000,000 June 15, 1999 1,000,000 September 15, 1999 1,250,000 December 15, 1999 1,250,000 53 March 15, 2000 1,250,000 June 15, 2000 1,250,000 September 15, 2000 1,500,000 December 15, 2000 1,500,000 March 15, 2001 1,500,000 June 15, 2001 1,500,000 September 15, 2001 1,750,000 December 15, 2001 1,750,000 March 15, 2002 1,750,000 June 15, 2002 1,750,000 September 15, 2002 1,500,000 December 15, 2002 1,500,000 ----------- Total $25,000,000 ; PROVIDED that the scheduled installments of principal of the Term Loans set forth above shall be reduced in connection with any voluntary or mandatory prepayments of the Term Loans in accordance with subsection 2.4B(iv); and PROVIDED, FURTHER that the Term Loans and all other amounts owed hereunder with respect to the Term Loans shall be paid in full no later than December 15, 2002, and the final installment payable by Company in respect of the Term Loans on such date shall be in an amount, if such amount is different from that specified above, sufficient to repay all amounts owing by Company under this Agreement with respect to the Term Loans. B. PREPAYMENTS AND UNSCHEDULED REDUCTIONS IN REVOLVING LOAN COMMITMENTS. (i) VOLUNTARY PREPAYMENTS. Company may, upon written or telephonic notice to Administrative Agent on or prior to 12:00 Noon (New York City time) on the date of prepayment, which notice, if telephonic, shall be promptly confirmed in writing, at any time and from time to time prepay any Swing Line Loan on any Business Day in whole or in part in an aggregate minimum amount of $100,000 and integral multiples of $100,000 in excess of that amount. Company may, upon not less than one Business Day's prior written or telephonic notice, in the case of Base Rate Loans, three Business Days' prior written or telephonic notice, in the case of Offshore Rate Loans denominated in Dollars, and five Business' Days prior written or telephonic notice, in the case of Offshore Currency Loans, in each case given to Administrative Agent by 12:00 Noon (New York City time) on the date required and, if given by telephone, promptly confirmed in writing to Administrative Agent (which original written or telephonic notice Administrative Agent will promptly transmit by telefacsimile or telephone to each Lender, including, if applicable, Offshore Currency Funding Lender), at 54 any time and from time to time prepay any Term Loans, Revolving Loans or Offshore Currency Loans on any Business Day in whole or in part in the applicable Minimum Amount; PROVIDED, HOWEVER, that an Offshore Rate Loan may only be prepaid on the expiration of the Interest Period applicable thereto unless Company complies with subsection 2.6D with respect to any breakage costs resulting from such prepayment being made on a date prior to the expiration of the applicable Interest Period. Notice of prepayment having been given as aforesaid, the principal amount of the Loans specified in such notice shall become due and payable on the prepayment date specified therein. Any such voluntary prepayment shall be applied as specified in subsection 2.4B(iv). (ii) VOLUNTARY REDUCTIONS OF REVOLVING LOAN COMMITMENTS. Company may, upon not less than three Business Days' prior written or telephonic notice confirmed in writing to Administrative Agent (which original written or telephonic notice Administrative Agent will promptly transmit by telefacsimile or telephone to each Lender), at any time and from time to time terminate in whole or permanently reduce in part, without premium or penalty, the Revolving Loan Commitments in an amount up to the amount by which the Revolving Loan Commitments exceed the Total Utilization of Revolving Loan Commitments at the time of such proposed termination or reduction; PROVIDED that any such partial reduction of the Revolving Loan Commitments shall be in an aggregate minimum amount of $500,000 and integral multiples of $100,000 in excess of that amount. Company's notice to Administrative Agent shall designate the date (which shall be a Business Day) of such termination or reduction and the amount of any partial reduction, and such termination or reduction of the Revolving Loan Commitments shall be effective on the date specified in Company's notice and shall reduce the Revolving Loan Commitment of each Lender proportionately to its Pro Rata Share. (iii) MANDATORY PREPAYMENTS AND MANDATORY REDUCTIONS OF REVOLVING LOAN COMMITMENTS. The Loans shall be prepaid and/or the Revolving Loan Commitments shall be permanently reduced in the amounts and under the circumstances set forth below, all such prepayments and/or reductions to be applied as set forth below or as more specifically provided in subsection 2.4B(iv): (a) PREPAYMENTS AND REDUCTIONS FROM NET ASSET SALE PROCEEDS. Company shall prepay the Loans and/or the Revolving Loan Commitments shall be permanently reduced in an aggregate amount equal to any Net Asset Sale Proceeds received by Company or any of its Subsidiaries, such prepayment or reduction to be made no later than the earlier to occur of (i) the second Business Day following the date of receipt, or if Company would incur breakage costs under subsection 2.6D as a result of a prepayment on such date, on the earlier to occur of the first such date thereafter on which no such breakage costs are 55 incurred or 90 days after such date of receipt, by Company or any of its Subsidiaries of any Net Asset Sale Proceeds in an amount in excess of $150,000, (ii) the date of the occurrence of any Event of Default, or (iii) the forty-fifth day following the end of each Fiscal Quarter in which Net Asset Sale Proceeds were received in respect of any Asset Sale. If, following the receipt by Company or any of its Subsidiaries of Net Asset Sale Proceeds, Company is required to apply or cause to be applied any portion of such Net Asset Sale Proceeds to prepay any Indebtedness evidenced by any of the Related Financing Documents pursuant to the applicable Related Financing Document, then, notwithstanding anything contained in this subsection 2.4B(iii)(a), Company shall prepay the Loans and/or reduce the Revolving Loan Commitments in the order set forth in this subsection 2.4B(iii)(a) so as to eliminate any obligation to prepay such Indebtedness. (b) PREPAYMENTS AND REDUCTIONS DUE TO ISSUANCE OF EQUITY SECURITIES. On the second Business Day following the date of receipt by Company or any of its Subsidiaries of the Cash proceeds (any such proceeds, net of underwriting discounts and commissions and other reasonable costs and expenses associated therewith, including reasonable legal fees and expenses, being "NET EQUITY PROCEEDS") from the issuance of equity Securities of Company or any of its Subsidiaries after the Closing Date (other than issuances of equity to employees pursuant to stock plans permitted under subsection 7.12), Company shall prepay the Loans and/or the Revolving Loan Commitments shall be permanently reduced in an aggregate amount equal to 50% of such Net Equity Proceeds. (c) PREPAYMENTS AND REDUCTIONS DUE TO ISSUANCE OF DEBT SECURITIES. On the second Business Day following the date of receipt by Company or any of its Subsidiaries of the Cash proceeds (any such proceeds, net of underwriting discounts and commissions and other reasonable costs and expenses associated therewith, including reasonable legal fees and expenses, being "NET DEBT PROCEEDS") from the issuance of debt Securities (other than in respect of Indebtedness permitted pursuant to subsection 7.1(i)-(viii)) of Company or any of its Subsidiaries after the Closing Date, Company shall prepay the Loans and/or the Revolving Loan Commitments shall be permanently reduced in an aggregate amount equal to 100% of such Net Debt Proceeds. (d) PREPAYMENTS AND REDUCTIONS FROM CONSOLIDATED EXCESS CASH FLOW. In the event that there shall be Consolidated Excess Cash Flow for any Fiscal Year (commencing with the Fiscal Year beginning October 1, 1997), Company shall, no later than 90 days after the end of 56 such Fiscal Year, prepay the Loans and/or the Revolving Loan Commitments shall be permanently reduced in an aggregate amount equal to 50% of such Consolidated Excess Cash Flow. (e) CALCULATIONS OF NET PROCEEDS AMOUNTS; ADDITIONAL PREPAYMENTS AND REDUCTIONS BASED ON SUBSEQUENT CALCULATIONS. Concurrently with any prepayment of the Loans and/or reduction of the Revolving Loan Commitments pursuant to subsections 2.4B(iii)(a)-(d), Company shall deliver to Agents an Officer's Certificate demonstrating the calculation of the amount (the "NET PROCEEDS AMOUNT") of the applicable Net Asset Sale Proceeds, Net Equity Proceeds or Net Debt Proceeds (as such terms are defined in subsections 2.4B(iii)(b) and (c)), or the applicable Consolidated Excess Cash Flow, as the case may be, that gave rise to such prepayment and/or reduction. In the event that Company shall subsequently determine that the actual Net Proceeds Amount was greater than the amount set forth in such Officer's Certificate, Company shall promptly make an additional prepayment of the Loans (and/or, if applicable, the Revolving Loan Commitments shall be permanently reduced) in an amount equal to the amount of such excess, and Company shall concurrently therewith deliver to Agents an Officer's Certificate demonstrating the derivation of the additional Net Proceeds Amount resulting in such excess. (f) PREPAYMENTS DUE TO REDUCTIONS OR RESTRICTIONS OF REVOLVING LOAN COMMITMENTS. Company shall from time to time prepay FIRST the Swing Line Loans, SECOND the Offshore Currency Loans and THIRD the Revolving Loans to the extent necessary (1) so that the Total Utilization of Revolving Loan Commitments shall not at any time exceed the Revolving Loan Commitments then in effect and (2) to give effect to the limitations set forth in clause (b) of the second paragraph of subsection 2.1A(iv). (iv) APPLICATION OF PREPAYMENTS. (a) APPLICATION OF VOLUNTARY PREPAYMENTS BY TYPE OF LOANS AND ORDER OF MATURITY. Any voluntary prepayments pursuant to subsection 2.4B(i) shall be applied to Term Loans, Revolving Loans, Offshore Currency Loans and Swing Line Loans as specified by Company in the applicable notice of prepayment; PROVIDED that in the event Company fails to specify the Loans to which any such prepayment shall be applied, such prepayment shall be applied FIRST to repay outstanding Swing Line Loans to the full extent thereof, SECOND to repay outstanding Term Loans to the full extent thereof, THIRD to repay outstanding Offshore Currency Loans to the full extent thereof, and FOURTH to repay outstanding Revolving Loans to the full extent thereof. 57 Any voluntary prepayments of the Term Loans pursuant to subsection 2.4B(i) shall be applied first to amortization payments scheduled within six months of the prepayment in forward order of maturity, and second to the remaining scheduled amortization payments of the Term Loans on a pro rata basis. (b) APPLICATION OF MANDATORY PREPAYMENTS BY TYPE OF LOANS. Any amount (the "APPLIED AMOUNT") required to be applied as a mandatory prepayment of the Loans and/or a reduction of the Revolving Loan Commitments pursuant to subsections 2.4B(iii)(a)-(d) shall be applied FIRST to prepay the Term Loans to the full extent thereof, SECOND, to the extent of any remaining portion of the Applied Amount, to prepay the Swing Line Loans to the full extent thereof and to permanently reduce the Revolving Loan Commitments by the amount of such prepayment, THIRD to the extent of any remaining portion of the Applied Amount, to prepay the Offshore Currency Loans to the full extent thereof and to permanently reduce the Revolving Loan Commitments by the amount of such prepayment, FOURTH to the extent of any remaining portion of the Applied Amount, to prepay the Revolving Loans to the full extent thereof and to further permanently reduce the Revolving Loan Commitments by the amount of such prepayment, FIFTH, to the extent of any remaining portion of the Applied Amount, to cash collateralize any outstanding Letters of Credit, and SIXTH, to the extent of any remaining portion of the Applied Amount, to further permanently reduce the Revolving Loan Commitments to the full extent thereof. (c) APPLICATION OF MANDATORY PREPAYMENTS OF TERM LOANS BY ORDER OF MATURITY. Any mandatory prepayments of the Term Loans pursuant to subsection 2.4B(iii) shall be applied on a pro rata basis to the remaining scheduled installments of principal of the Term Loans set forth in subsection 2.4A. (d) APPLICATION OF PREPAYMENTS TO BASE RATE LOANS AND OFFSHORE RATE LOANS. Considering Term Loans and Revolving Loans being prepaid separately, any prepayment thereof shall be applied first to Base Rate Loans to the full extent thereof before application to Offshore Rate Loans, in each case in a manner which minimizes the amount of any payments required to be made by Company pursuant to subsection 2.6D. C. GENERAL PROVISIONS REGARDING PAYMENTS. (i) MANNER AND TIME OF PAYMENT. Except for principal of, interest on, and any other amounts relating to any Offshore Currency Loan which shall be made in Same Day Funds in the Offshore Currency in which such Loan is 58 denominated or payable, all payments by Company of principal, interest, fees and other Obligations hereunder and under the Notes shall be made in Dollars in Same Day Funds. Payments relating to any Loan shall be made without defense, setoff or counterclaim, free of any restriction or condition, and delivered to Administrative Agent not later than 12:00 Noon (New York City time) in the case of any Dollar payments, and not later than such time as may be determined by the Administrative Agent and notified to Company to be necessary for such payment to be credited on such date in accordance with normal banking procedures in the place of payment, on the date due at the Funding and Payment Office for the account of Lenders; funds received by Administrative Agent after that time on such due date shall be deemed to have been paid by Company on the next succeeding Business Day. (ii) APPLICATION OF PAYMENTS TO PRINCIPAL AND INTEREST. Except as provided in subsection 2.2C, all payments in respect of the principal amount of any Loan shall include payment of accrued interest on the principal amount being repaid or prepaid, and all such payments (and, in any event, any payments in respect of any Loan on a date when interest is due and payable with respect to such Loan) shall be applied to the payment of interest before application to principal. (iii) APPORTIONMENT OF PAYMENTS. Aggregate principal and interest payments in respect of Term Loans and Revolving Loans shall be apportioned among all outstanding Loans to which such payments relate, in each case proportionately to Lenders' respective Pro Rata Shares. Administrative Agent shall promptly distribute to each Lender, at its Lending Office or at such other address as such Lender may request, its Pro Rata Share of all such payments received by Administrative Agent and the commitment fees of such Lender when received by Administrative Agent pursuant to subsection 2.3. Notwithstanding the foregoing provisions of this subsection 2.4C(iii), if, pursuant to the provisions of subsection 2.6C, any Notice of Conversion/Continuation is withdrawn as to any Affected Lender or if any Affected Lender makes Base Rate Loans in lieu of its Pro Rata Share of any Offshore Rate Loans, Administrative Agent shall give effect thereto in apportioning payments received thereafter. (iv) PAYMENTS ON BUSINESS DAYS. Whenever any payment to be made hereunder shall be stated to be due on a day that is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of the payment of interest hereunder or of the commitment fees hereunder, as the case may be. (v) INTEREST LAWS. Notwithstanding any provision to the contrary contained in this Agreement or the other Loan Documents, Company shall not be required to pay, and neither Administrative Agent nor any Lender shall 59 collect, any amount of interest in excess of the maximum amount of interest permitted by law ("EXCESS INTEREST") to be paid to such Lender. If any Excess Interest is provided for or determined by a court of competent jurisdiction to have been provided for in this Agreement or in any of the other Loan Documents to be paid to any Lender, then in such event: (1) the provisions of this subsection shall govern and control; (2) neither Company nor any Loan Party shall be obligated to pay any Excess Interest; (3) any Excess Interest that any Lender may have received hereunder shall be, at such Lender's option, (a) applied as a credit against the outstanding principal balance of the Obligations or accrued and unpaid interest (not to exceed the maximum amount permitted by law) owing to such Lender, (b) refunded to the payor thereof, or (c) any combination of the foregoing; (4) the interest rate(s) provided for herein with respect to such Lender shall be automatically reduced to the maximum lawful rate allowed from time to time under applicable law (the "Maximum Rate"), and this Agreement and the other Loan Documents shall be deemed to have been and shall be, reformed and modified to reflect such reduction; and (5) neither Company nor any Loan Party shall have any action against such Lender for any damages arising out of the payment or collection of any Excess Interest. Notwithstanding the foregoing, if for any period of time interest on any Obligations owing to any Lender is calculated at the Maximum Rate rather than the applicable rate under this Agreement, and thereafter such applicable rate becomes less than the Maximum Rate, the rate of interest payable on such Obligations shall remain at the Maximum Rate until such Lender shall have received the amount of interest which such Lender would have received during such period on such Obligations had the rate of interest not been limited to the Maximum Rate during such period. D. APPLICATION OF PROCEEDS OF COLLATERAL AND PAYMENTS UNDER SUBSIDIARY GUARANTY. (i) APPLICATION OF PROCEEDS OF COLLATERAL. Except as provided in subsection 2.4B(iii)(a) with respect to prepayments from Net Asset Sale Proceeds, all proceeds received by Administrative Agent in respect of any sale of, collection from, or other realization upon all or any part of the Collateral under any Collateral Document may, in the discretion of Administrative Agent, be held by Administrative Agent as Collateral for, and/or (then or at any time thereafter) applied in full or in part by Administrative Agent against, the applicable Secured Obligations (as defined in such Collateral Document) in the following order of priority: (a) To the payment of all costs and expenses of such sale, collection or other realization, including Administrative Agent's agents and counsel, and all other expenses, liabilities and advances made or incurred by Administrative Agent in connection therewith, and all amounts for which Administrative Agent is entitled to indemnification 60 under such Collateral Document and all advances made by Administrative Agent thereunder for the account of the applicable Loan Party, and to the payment of all costs and expenses paid or incurred by Administrative Agent in connection with the exercise of any right or remedy under such Collateral Document, all in accordance with the terms of this Agreement and such Collateral Document; (b) thereafter, to the extent of any excess such proceeds, to the payment of all other such Secured Obligations for the ratable benefit of the holders thereof; and (c) thereafter, to the extent of any excess such proceeds, to the payment to or upon the order of such Loan Party or to whosoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct. (ii) APPLICATION OF PAYMENTS UNDER SUBSIDIARY GUARANTY. All payments received by Administrative Agent under the Subsidiary Guaranty shall be applied promptly from time to time by Administrative Agent in the following order of priority: (a) To the payment of the costs and expenses of any collection or other realization under the Subsidiary Guaranty, including Administrative Agent's agents and counsel, and all expenses, liabilities and advances made or incurred by Administrative Agent in connection therewith, all in accordance with the terms of this Agreement and the Subsidiary Guaranty; (b) thereafter, to the extent of any excess such payments, to the payment of all other Guarantied Obligations (as defined in the Subsidiary Guaranty) for the ratable benefit of the holders thereof; and (c) thereafter, to the extent of any excess such payments, to the payment to the applicable Subsidiary Guarantor or to whosoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct. 2.5 USE OF PROCEEDS. A. TERM LOANS. The proceeds of the Term Loans, together with the proceeds of (i) the issuance of shares of its Common Stock to the New Equity Investors for an aggregate purchase price of approximately $43,500,000, (ii) the issuance for cash of not less than $85,000,000 in original principal amount of Senior Subordinated Notes, (iii) cash-on-hand of Company and (iv) approximately $3,500,000 of Revolving Loans on the Closing Date, shall be applied by Company (i) to 61 repurchase shares of the outstanding Common Stock of Company (including all shares of its outstanding Class B Common Stock) and make cash payments for employee stock options in an aggregate amount not to exceed $159,400,000, and (ii) to pay fees and expenses incurred in connection with the Recapitalization Transactions in an approximate aggregate amount not to exceed $4,800,000. B. REVOLVING LOANS; SWING LINE LOANS; OFFSHORE CURRENCY LOANS. The proceeds of the Revolving Loans made on the Closing Date shall be applied by the Company as provided in subsection 2.5A. The proceeds of any other Revolving Loans, Offshore Currency Loans and any Swing Line Loans shall be applied by Company for working capital requirements and general corporate purposes of the Company and its Subsidiaries. C. MARGIN REGULATIONS. No portion of the proceeds of any borrowing under this Agreement shall be used by Company or any of its Subsidiaries in any manner that might cause the borrowing or the application of such proceeds to violate Regulation G, Regulation U, Regulation T or Regulation X of the Board of Governors of the Federal Reserve System or any other regulation of such Board or to violate the Exchange Act, in each case as in effect on the date or dates of such borrowing and such use of proceeds. 2.6 SPECIAL PROVISIONS GOVERNING OFFSHORE RATE LOANS. Notwithstanding any other provision of this Agreement to the contrary, the following provisions shall govern with respect to Offshore Rate Loans as to the matters covered: A. DETERMINATION OF APPLICABLE INTEREST RATE. As soon as practicable after 11:00 A.M. (London time) on each Interest Rate Determination Date, Administrative Agent shall determine (which determination shall, absent manifest error, be conclusive and binding upon all parties) the interest rate that shall apply to the Offshore Rate Loans for which an interest rate is then being determined for the applicable Interest Period and shall promptly give notice thereof (in writing or by telephone confirmed in writing) to Company and each Lender funding such Offshore Rate Loan. B. INABILITY TO DETERMINE APPLICABLE INTEREST RATE. In the event that Administrative Agent shall have determined (which determination shall be conclusive and binding upon all parties hereto), on any Interest Rate Determination Date with respect to any Offshore Rate Loans, that by reason of circumstances affecting the London interbank market adequate and fair means do not exist for ascertaining the interest rate applicable to such Loans on the basis provided for in the definition of Adjusted Offshore Rate, Administrative Agent shall on such date give notice (by telefacsimile or by telephone confirmed in writing) to Company and each Lender funding such Offshore Rate Loan of such determination, whereupon (i) no Loans may 62 be made as, or converted to, such Offshore Rate Loans until such time as Administrative Agent notifies Company and such Lenders that the circumstances giving rise to such notice no longer exist and (ii) any Notice of Borrowing or Notice of Conversion/Continuation given by Company with respect to the Loans in respect of which such determination was made shall be deemed to be rescinded by Company. C. ILLEGALITY OR IMPRACTICABILITY OF OFFSHORE RATE LOANS. In the event that on any date any Lender shall reasonably determine (which determination shall be conclusive and binding upon all parties hereto but shall be made only after consultation with Company and Administrative Agent) that the making, maintaining or continuation of its Offshore Rate Loans (i) has become unlawful as a result of compliance by such Lender or its applicable Lending Office in good faith with any law, treaty, governmental rule, regulation, guideline or order (or would conflict with any such treaty, governmental rule, regulation, guideline or order not having the force of law even though the failure to comply therewith would not be unlawful) or (ii) has become impracticable, or would cause such Lender or its applicable Lending Office material hardship, as a result of contingencies occurring after the date of this Agreement which materially and adversely affect the London interbank market or the position of such Lender or its applicable Lending Office in that market, then, and in any such event, such Lender shall be an "AFFECTED LENDER" and it shall on that day give notice (by telefacsimile or by telephone confirmed in writing) to Company and Administrative Agent of such determination (which notice Administrative Agent shall promptly transmit to each other Lender). Thereafter (a) the obligation of the Affected Lender to make Loans as, or to convert Loans to, Offshore Rate Loans shall be suspended until such notice shall be withdrawn by the Affected Lender, (b) to the extent such determination by the Affected Lender relates to an Offshore Rate Loan then being requested by Company pursuant to a Notice of Borrowing or a Notice of Conversion/Continuation, the Affected Lender shall make such Loan as (or convert such Loan to, as the case may be) a Base Rate Loan, (c) the Affected Lender's obligation to maintain its outstanding Offshore Rate Loans (the "AFFECTED LOANS") shall be terminated at the earlier to occur of the expiration of the Interest Period then in effect with respect to the Affected Loans or when required by law, and (d) the Affected Loans shall automatically convert into Base Rate Loans on the date of such termination. Notwithstanding the foregoing, to the extent a determination by an Affected Lender as described above relates to an Offshore Rate Loan then being requested by Company pursuant to a Notice of Borrowing or a Notice of Conversion/ Continuation, Company shall have the option, subject to the provisions of subsection 2.6D, to rescind such Notice of Borrowing or Notice of Conversion/ Continuation as to all Lenders by giving notice (by telefacsimile or by telephone confirmed in writing) to Administrative Agent of such rescission on the date on which the Affected Lender gives notice of its determination as described above (which notice of rescission Administrative Agent shall promptly transmit to each other Lender). Except as provided in the immediately preceding sentence, nothing in this subsection 2.6C shall affect the obligation of any Lender other than an Affected Lender to make or 63 maintain Loans as, or to convert Loans to, Offshore Rate Loans in accordance with the terms of this Agreement. D. COMPENSATION FOR BREAKAGE OR NON-COMMENCEMENT OF INTEREST PERIODS. Company shall compensate each Lender, upon written request by that Lender (which request shall set forth the basis for requesting such amounts), for all reasonable losses, expenses and liabilities (including any interest paid by that Lender to lenders of funds borrowed by it to make or carry its Offshore Rate Loans and any loss, expense or liability sustained by that Lender in connection with the liquidation or re-employment of such funds or from fees payable to terminate the deposits from which such funds were obtained or from charges relating to any Offshore Currency Loans) which that Lender may sustain: (i) if for any reason (other than a default by that Lender) a borrowing of any Offshore Rate Loan does not occur on a date specified therefor in a Notice of Borrowing or a telephonic request for borrowing, or a conversion to or continuation of any Offshore Rate Loan does not occur on a date specified therefor in a Notice of Conversion/Continuation or a telephonic request for conversion or continuation, (ii) if any prepayment (including any prepayment pursuant to subsection 2.4B(i)) or other principal payment or any conversion of any of its Offshore Rate Loans occurs on a date prior to the last day of an Interest Period applicable to that Loan, (iii) if any prepayment of any of its Offshore Rate Loans is not made on any date specified in a notice of prepayment given by Company, or (iv) as a consequence of any other default by Company in the repayment of its Offshore Rate Loans when required by the terms of this Agreement. E. BOOKING OF OFFSHORE RATE LOANS. Any Lender may make, carry or transfer Offshore Rate Loans at, to, or for the account of any of its branch offices or the office of an Affiliate of that Lender. F. ASSUMPTIONS CONCERNING FUNDING OF OFFSHORE RATE LOANS. Calculation of all amounts payable to a Lender under this subsection 2.6 and under subsection 2.7A shall be made as though that Lender had actually funded each of its relevant Offshore Rate Loans through the purchase of a deposit in the Applicable Currency bearing interest at the rate obtained pursuant to clause (i) of the definition of Adjusted Offshore Rate in an amount equal to the amount of such Offshore Rate Loan and having a maturity comparable to the relevant Interest Period and through the transfer of such deposit from an offshore office of that Lender to a domestic office of that Lender in the United States of America; PROVIDED, HOWEVER, that each Lender may fund each of its Offshore Rate Loans in any manner it sees fit and the foregoing assumptions shall be utilized only for the purposes of calculating amounts payable under this subsection 2.6 and under subsection 2.7A. G. OFFSHORE RATE LOANS AFTER DEFAULT. After the occurrence of and during the continuation of a Potential Event of Default or an Event of Default, Company may not elect to have a Loan be made or maintained as, or converted to, an Offshore Rate Loan after the expiration of any Interest Period then in effect for that Loan and 64 subject to the provisions of subsection 2.6D, any Notice of Borrowing or Notice of Conversion/Continuation given by Company with respect to a requested borrowing or conversion/continuation that has not yet occurred shall be deemed to be rescinded by Company. 2.7 INCREASED COSTS; TAXES; CAPITAL ADEQUACY. A. COMPENSATION FOR INCREASED COSTS AND TAXES. Subject to the provisions of subsection 2.7B (which shall be controlling with respect to the matters covered thereby), in the event that any Lender shall reasonably determine (which determination shall be conclusive and binding upon all parties hereto) that any law, treaty or governmental rule, regulation or order, or any change therein or in the interpretation, administration or application thereof (including the introduction of any new law, treaty or governmental rule, regulation or order), or any determination of a court or governmental authority, in each case that becomes effective after the date hereof, or compliance by such Lender or its applicable Lending Office or any corporation controlling the Lender with any guideline, request or directive issued or made after the date hereof by any central bank, the National Association of Insurance Commissioners ("NAIC") or other governmental or quasi-governmental authority (whether or not having the force of law): (i) subjects such Lender (or its applicable Lending Office) to any additional Tax (other than any Tax on the overall net income of such Lender) with respect to this Agreement or any of its obligations hereunder or any payments to such Lender (or its applicable Lending Office) of principal, interest, fees or any other amount payable hereunder; (ii) imposes, modifies or holds applicable any reserve (including any marginal, emergency, supplemental, special or other reserve), special deposit, compulsory loan, FDIC insurance or similar requirement against assets held by, or deposits or other liabilities in or for the account of, or advances or loans by, or other credit extended by, or any other acquisition of funds by, any office of such Lender (other than any such reserve or other requirements with respect to Offshore Rate Loans that are reflected in the definition of Adjusted Offshore Rate); or (iii) imposes any other condition (other than with respect to a Tax matter) on or affecting such Lender (or its applicable Lending Office) or its obligations hereunder; and the result of any of the foregoing is to increase the cost to such Lender of agreeing to make, making or maintaining Loans hereunder or to reduce any amount received or receivable by such Lender (or its applicable Lending Office) with respect thereto; then, in any such case, Company shall promptly pay to such Lender, upon receipt of the statement referred to in the next sentence, such additional amount or 65 amounts (in the form of an increased rate of, or a different method of calculating, interest or otherwise as such Lender in its sole discretion shall determine) as may be necessary to compensate such Lender for any such increased cost or reduction in amounts received or receivable hereunder. Such Lender shall deliver to Company (with a copy to Administrative Agent) a written statement, setting forth in reasonable detail the basis for calculating the additional amounts owed to such Lender under this subsection 2.7A, which statement shall be conclusive and binding upon all parties hereto absent manifest error. B. WITHHOLDING OF TAXES. (i) PAYMENTS TO BE FREE AND CLEAR. All sums payable by Company under this Agreement and the other Loan Documents shall (except to the extent required by law) be paid free and clear of, and without any deduction or withholding on account of, any Tax (other than a Tax on the overall net income of any Lender) imposed, levied, collected, withheld or assessed by or within the United States of America or any political subdivision in or of the United States of America or any other jurisdiction from or to which a payment is made by or on behalf of Company or by any federation or organization of which the United States of America or any such jurisdiction is a member at the time of payment. (ii) GROSSING-UP OF PAYMENTS. If Company or any other Person is required by law to make any deduction or withholding on account of any such Tax from any sum paid or payable by Company to Administrative Agent or any Lender under any of the Loan Documents: (a) Company shall notify Administrative Agent of any such requirement or any change in any such requirement as soon as Company becomes aware of it; (b) Company shall pay any such Tax before the date on which penalties attach thereto, such payment to be made (if the liability to pay is imposed on Company) for its own account or (if that liability is imposed on Administrative Agent or such Lender, as the case may be) on behalf of and in the name of Administrative Agent or such Lender; (c) the sum payable by Company in respect of which the relevant deduction, withholding or payment is required shall be increased to the extent necessary to ensure that, after the making of that deduction, withholding or payment, Administrative Agent or such Lender, as the case may be, receives on the due date a net sum equal to what it would have received had no such deduction, withholding or payment been required or made; and 66 (d) within 30 days after paying any sum from which it is required by law to make any deduction or withholding, and within 30 days after the due date of payment of any Tax which it is required by clause (b) above to pay, Company shall deliver to Administrative Agent evidence satisfactory to the other affected parties of such deduction, withholding or payment and of the remittance thereof to the relevant taxing or other authority; PROVIDED that no such additional amount shall be required to be paid to any Lender under clause (c) above except to the extent that any change after the date hereof (in the case of each Lender listed on the signature pages hereof) or after the date of the Assignment Agreement pursuant to which such Lender became a Lender (in the case of each other Lender) in any such requirement for a deduction, withholding or payment as is mentioned therein shall result in an increase in the rate of such deduction, withholding or payment from that in effect at the date of this Agreement or at the date of such Assignment Agreement, as the case may be, in respect of payments to such Lender. (iii) EVIDENCE OF EXEMPTION FROM U.S. WITHHOLDING TAX. (a) Each Lender that is organized under the laws of any jurisdiction other than the United States or any state or other political subdivision thereof (for purposes of this subsection 2.7B(iii), a "NON-US LENDER") shall deliver to Administrative Agent for transmission to Company, on or prior to the Closing Date (in the case of each Lender listed on the signature pages hereof) or on or prior to the date of the Assignment Agreement pursuant to which it becomes a Lender (in the case of each other Lender), and at such other times as may be necessary in the determination of Company or Administrative Agent (each in the reasonable exercise of its discretion), (1) two original copies of Internal Revenue Service Form 1001 or 4224 (or any successor forms), properly completed and duly executed by such Lender, together with any other certificate or statement of exemption required under the Internal Revenue Code or the regulations issued thereunder to establish that such Lender is not subject to deduction or withholding of United States federal income tax with respect to any payments to such Lender of principal, interest, fees or other amounts payable under any of the Loan Documents or (2) if such Lender is not a "bank" or other Person described in Section 881(c)(3) of the Internal Revenue Code and cannot deliver either Internal Revenue Service Form 1001 or 4224 pursuant to clause (1) above, a Certificate re Non-Bank Status together with two original copies of Internal Revenue Service Form W-8 (or any successor form), properly completed and duly executed by such Lender, together with any other certificate or statement of exemption required under the Internal Revenue Code or the regulations issued thereunder to establish 67 that such Lender is not subject to deduction or withholding of United States federal income tax with respect to any payments to such Lender of interest payable under any of the Loan Documents. (b) Each Lender required to deliver any forms, certificates or other evidence with respect to United States federal income tax withholding matters pursuant to subsection 2.7B(iii)(a) hereby agrees, from time to time after the initial delivery by such Lender of such forms, certificates or other evidence, whenever a lapse in time or change in circumstances renders such forms, certificates or other evidence obsolete or inaccurate in any material respect, that such Lender shall promptly (1) deliver to Administrative Agent for transmission to Company two new original copies of Internal Revenue Service Form 1001 or 4224, or a Certificate re Non-Bank Status and two original copies of Internal Revenue Service Form W-8, as the case may be, properly completed and duly executed by such Lender, together with any other certificate or statement of exemption required in order to confirm or establish that such Lender is not subject to deduction or withholding of United States federal income tax with respect to payments to such Lender under the Loan Documents or (2) notify Administrative Agent and Company of its inability to deliver any such forms, certificates or other evidence. (c) Company shall not be required to pay any additional amount to any Non-US Lender under clause (c) of subsection 2.7B(ii) if such Lender shall have failed to satisfy the requirements of clause (a) or (b)(1) of this subsection 2.7B(iii); PROVIDED that if such Lender shall have satisfied the requirements of subsection 2.7B(iii)(a) on the Closing Date (in the case of each Lender listed on the signature pages hereof) or on the date of the Assignment Agreement pursuant to which it became a Lender (in the case of each other Lender), nothing in this subsection 2.7B(iii)(c) shall relieve Company of its obligation to pay any additional amounts pursuant to clause (c) of subsection 2.7B(ii) in the event that, as a result of any change in any applicable law, treaty or governmental rule, regulation or order, or any change in the interpretation, administration or application thereof, such Lender is no longer properly entitled to deliver forms, certificates or other evidence at a subsequent date establishing the fact that such Lender is not subject to withholding as described in subsection 2.7B(iii)(a). C. CAPITAL ADEQUACY ADJUSTMENT. If any Lender or Issuing Lender shall have determined that the adoption, effectiveness, phase-in or applicability after the date hereof of any law, rule or regulation (or any provision thereof) regarding capital adequacy, or any change therein or in the interpretation or administration thereof by any governmental authority, central bank, the NAIC or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender or 68 Issuing Lender (or its applicable Lending Office) with any guideline, request or directive regarding capital adequacy (whether or not having the force of law) of any such governmental authority, central bank, the NAIC or comparable agency, has or would have the effect of reducing the rate of return on the capital of such Lender or Issuing Lender or any corporation controlling such Lender or Issuing Lender as a consequence of, or with reference to, such Lender's or Issuing Lender's Loans or Commitments or Letters of Credit or participations therein or other obligations hereunder with respect to the Loans or the Letters of Credit to a level below that which such Lender or Issuing Lender or such controlling corporation could have achieved but for such adoption, effectiveness, phase-in, applicability, change or compliance (taking into consideration the policies of such Lender or Issuing Lender or such controlling corporation with regard to capital adequacy), then from time to time, within five Business Days after receipt by Company from such Lender or Issuing Lender of the statement referred to in the next sentence, Company shall pay to such Lender or Issuing Lender such additional amount or amounts as will compensate such Lender or Issuing Lender or such controlling corporation on an after-tax basis for such reduction. Such Lender or Issuing Lender shall deliver to Company (with a copy to Administrative Agent) a written statement, setting forth in reasonable detail the basis of the calculation of such additional amounts, which statement shall be conclusive and binding upon all parties hereto absent manifest error. 2.8 OBLIGATION OF LENDERS AND ISSUING LENDERS TO MITIGATE. Each Lender and Issuing Lender agrees that, as promptly as practicable after the officer of such Lender or Issuing Lender responsible for administering the Loans or Letters of Credit of such Lender or Issuing Lender, as the case may be, becomes aware of the occurrence of an event or the existence of a condition that would cause such Lender to become an Affected Lender or that would entitle such Lender or Issuing Lender to receive payments under subsection 2.7 or subsection 3.6, it will, to the extent not inconsistent with the internal policies of such Lender or Issuing Lender and any applicable legal or regulatory restrictions, use reasonable efforts (i) to make, issue, fund or maintain the Commitments of such Lender or the affected Loans or Letters of Credit of such Lender or Issuing Lender through another Lending Office of such Lender or Issuing Lender, or (ii) take such other measures as such Lender or Issuing Lender may deem reasonable, if as a result thereof the circumstances which would cause such Lender to be an Affected Lender would cease to exist or the additional amounts which would otherwise be required to be paid to such Lender or Issuing Lender pursuant to subsection 2.7 or subsection 3.6 would be materially reduced and if, as determined by such Lender or Issuing Lender in its sole discretion, the making, issuing, funding or maintaining of such Commitments or Loans or Letters of Credit through such other Lending Office or in accordance with such other measures, as the case may be, would not otherwise materially adversely affect such Commitments or Loans or Letters of Credit or the interests of such Lender or Issuing Lender; PROVIDED that such Lender or Issuing Lender will not be obligated to utilize such other Lending Office pursuant to this subsection 2.8 unless Company 69 agrees to pay all incremental expenses incurred by such Lender or Issuing Lender as a result of utilizing such other Lending Office as described in clause (i) above. A certificate as to the amount of any such expenses payable by Company pursuant to this subsection 2.8 (setting forth in reasonable detail the basis for requesting such amount) submitted by such Lender or Issuing Lender to Company (with a copy to Administrative Agent) shall be conclusive absent manifest error. 2.9 DEFAULTING LENDERS. Anything contained herein to the contrary notwithstanding, in the event that any Lender having a Revolving Loan Commitment (a "DEFAULTING LENDER") defaults (a "FUNDING DEFAULT") in its obligation to fund any Revolving Loan (a "DEFAULTED REVOLVING LOAN") in accordance with subsection 2.1, then (i) during any Default Period (as defined below) with respect to such Defaulting Lender, the Revolving Loan Exposure of such Defaulting Lender shall be determined as though the Revolving Loan Commitments of such Lender have been terminated (but such Commitments shall not actually be terminated) for purposes of voting on any matters (including without limitation the granting of any consents or waivers) with respect to any of the Loan Documents; (ii) until such time as the Default Excess (as defined below) with respect to such Defaulting Lender shall have been reduced to zero (a) any voluntary prepayment of the Revolving Loans pursuant to subsection 2.4B(i) shall be applied to the Revolving Loans of other Lenders as if such Defaulting Lender had no Revolving Loans outstanding and the Revolving Loan Exposure of such Defaulting Lender were zero and (b) any mandatory prepayment of the Revolving Loans pursuant to subsection 2.4B(iii) shall be applied to the Revolving Loans of other Lenders (but not to the Revolving Loans of such Defaulting Lender) as if such Defaulting Lender had funded all Defaulted Revolving Loans of such Defaulting Lender, it being understood and agreed that Company shall be entitled to retain any portion of any mandatory prepayment of the Revolving Loans that is not paid to such Defaulting Lender solely as a result of the operation of the provisions of this clause (b); PROVIDED that the provisions of this clause (b) shall not affect any mandatory reductions of the Revolving Loan Commitment of such Defaulting Lender pursuant to subsection 2.4B(iii); (iii) such Defaulting Lender's Revolving Loan Commitment and outstanding Revolving Loans and such Defaulting Lender's Pro Rata Share of the Letter of Credit Usage in respect of Letters of Credit shall be excluded for purposes of calculating the commitment fee payable to Lenders having Revolving Loan Commitments pursuant to subsection 2.3 in respect of any day during any Default Period with respect to such Defaulting Lender, and such Defaulting Lender shall not be entitled to receive any commitment fee pursuant to subsection 2.3 with respect to such Defaulting Lender's Revolving Loan Commitment in respect of any Default Period with respect to such Defaulting Lender; and (iv) the Total Utilization of Revolving Loan Commitments as at any date of determination shall be calculated as if such Defaulting Lender had funded all Defaulted Revolving Loans of such Defaulting Lender. 70 For purposes of this Agreement (A) "DEFAULT PERIOD" means, with respect to any Defaulting Lender, the period commencing on the date of the applicable Funding Default and ending on the earliest of the following dates: (a) the date on which all Revolving Loan Commitments are cancelled or terminated and/or the Obligations are declared or become immediately due and payable, (b) the date on which (1) the Default Excess with respect to such Defaulting Lender shall have been reduced to zero (whether by the funding by such Defaulting Lender of any Defaulted Revolving Loans of such Defaulting Lender or by the non-pro rata application of any voluntary or mandatory prepayments of the Revolving Loans in accordance with the terms of this subsection 2.9 or by a combination thereof) and (2) such Defaulting Lender shall have delivered to Company and Administrative Agent a written reaffirmation of its intention to honor its obligations under this Agreement with respect to its Revolving Loan Commitment, and (c) the date on which Company, Administrative Agent and Requisite Lenders waive all Funding Defaults of such Defaulting Lender in writing, and (B) "DEFAULT EXCESS" means, with respect to any Defaulting Lender, the excess, if any, of such Defaulting Lender's Pro Rata Share of the aggregate outstanding principal amount of Revolving Loans of all Lenders (calculated as if all Defaulting Lenders (other than such Defaulting Lender) had funded all of their respective Defaulting Revolving Loans) over the aggregate outstanding principal amount of Revolving Loans of such Defaulting Lender. No Commitment of any Lender shall be increased or otherwise affected, and, except as otherwise expressly provided in this subsection 2.9, performance by Company of its obligations under this Agreement and the other Loan Documents shall not be excused or otherwise modified, as a result of any Funding Default or the operation of this subsection 2.9. SECTION 3. LETTERS OF CREDIT 3.1 ISSUANCE OF LETTERS OF CREDIT AND LENDERS' PURCHASE OF PARTICIPATIONS THEREIN. A. LETTERS OF CREDIT. In addition to Company requesting that Lenders having a Revolving Loan Commitment make Revolving Loans pursuant to subsection 2.1A(ii), that Swing Line Lender make Swing Line Loans pursuant to subsection 2.1A(iii) and that Offshore Currency Funding Lender make Offshore Currency Loans pursuant to subsection 2.1A(iv), Company may request, in accordance with the provisions of this subsection 3.1, from time to time during the period from the Closing Date to but excluding the Revolving Loan Commitment Termination Date, that Administrative Agent issue Letters of Credit for the account of Company for the purposes specified in the definitions of Commercial Letters of Credit and Standby Letters of Credit; PROVIDED that Company shall not request that Administrative Agent issue: 71 (i) any Letter of Credit if, after giving effect to such issuance, the Total Utilization of Revolving Loan Commitments would exceed the Revolving Loan Commitments then in effect; (ii) any Letter of Credit if, after giving effect to such issuance, the Letter of Credit Usage would exceed $5,000,000; (iii) any Standby Letter of Credit having a final expiration date later than the earlier of (a) the date which is 30 days prior to the Revolving Loan Commitment Termination Date and (b) the date which is 18 months from the date of issuance of such Standby Letter of Credit; PROVIDED that the immediately preceding clause (b) shall not prevent any Issuing Lender from agreeing that a Standby Letter of Credit will automatically be extended for one or more successive periods not to exceed 18 months each unless such Issuing Lender elects not to extend for any such additional period; and PROVIDED, FURTHER that such Issuing Lender shall elect not to extend such Standby Letter of Credit if it has received written notice that an Event of Default has occurred and is continuing (and has not been waived in accordance with subsection 10.6); (iv) any Commercial Letter of Credit having an expiration date (a) later than the earlier of (X) the date which is 30 days prior to the Revolving Loan Commitment Termination Date and (Y) the date which is 180 days from the date of issuance of such Commercial Letter of Credit or (b) that is otherwise unacceptable to the applicable Issuing Lender in its reasonable discretion; (v) any Letter of Credit denominated in a currency other than Dollars or an Offshore Currency; and (vi) any Letter of Credit denominated in an Offshore Currency if the Dollar Equivalent amount of all outstanding Offshore Currency Loans PLUS the Letter of Credit Usage for outstanding Letters of Credit denominated in Offshore Currencies exceed the Offshore Currency Sublimit. B. MECHANICS OF ISSUANCE. (i) NOTICE OF ISSUANCE. Whenever Company desires the issuance of a Letter of Credit, it shall deliver to Administrative Agent a Notice of Issuance of Letter of Credit substantially in the form of EXHIBIT III annexed hereto no later than 12:00 Noon (New York City time) at least three Business Days (in the case of Standby Letters of Credit) or five Business Days (in the case of Commercial Letters of Credit and Letters of Credit denominated in an Offshore Currency), or in each case such shorter period as may be agreed to by the Issuing Lender in any particular instance, in advance of the proposed date 72 of issuance. The Notice of Issuance of Letter of Credit shall specify (a) the proposed date of issuance (which shall be a Business Day), (b) whether the Letter of Credit is to be a Standby Letter of Credit or a Commercial Letter of Credit, (c) the face amount of the Letter of Credit, (d) in the case of a Letter of Credit which Company requests to be denominated in an Offshore Currency, the Applicable Currency in which Company requests such Letter of Credit to be issued, (e) the expiration date of the Letter of Credit, (f) the name and address of the beneficiary, and (g) either the verbatim text of the proposed Letter of Credit or the proposed terms and conditions thereof, including a precise description of any documents to be presented by the beneficiary which, if presented by the beneficiary prior to the expiration date of the Letter of Credit, would require the Issuing Lender to make payment under the Letter of Credit; PROVIDED that the Issuing Lender, in its reasonable discretion, may require changes in the text of the proposed Letter of Credit or any such documents; and PROVIDED, FURTHER that no Letter of Credit shall require payment against a conforming draft to be made thereunder on the same business day (under the laws of the jurisdiction in which the office of the Issuing Lender to which such draft is required to be presented is located) that such draft is presented if such presentation is made after 10:00 A.M. (in the time zone of such office of the Issuing Lender) on such business day. Company shall notify the Administrative Agent prior to the issuance of any Letter of Credit in the event that any of the matters to which Company is required to certify in the applicable Notice of Issuance of Letter of Credit is no longer true and correct as of the proposed date of issuance of such Letter of Credit, and upon the issuance of any Letter of Credit Company shall be deemed to have re-certified, as of the date of such issuance, as to the matters to which Company is required to certify in the applicable Notice of Issuance of Letter of Credit. (ii) DETERMINATION OF ISSUING LENDER. Upon receipt by Administrative Agent of a Notice of Issuance of Letter of Credit pursuant to subsection 3.1B(i) requesting the issuance of a Letter of Credit, Administrative Agent shall be the Issuing Lender with respect thereto, notwithstanding the fact that the Letter of Credit Usage with respect to such Letter of Credit and with respect to all other Letters of Credit issued by Administrative Agent, when aggregated with Administrative Agent's outstanding Revolving Loans, Offshore Currency Loans and Swing Line Loans, may exceed Administrative Agent's Revolving Loan Commitment then in effect. (iii) ISSUANCE OF LETTER OF CREDIT. Upon satisfaction or waiver (in accordance with subsection 10.6) of the conditions set forth in subsection 4.3, the Issuing Lender shall issue the requested Letter of Credit in accordance with the Issuing Lender's standard operating procedures. 73 (iv) NOTIFICATION TO LENDERS. Upon the issuance of any Letter of Credit the Administrative Agent shall promptly notify each other Lender of such issuance, which notice shall be accompanied by a copy of such Letter of Credit. Together with such notice, Administrative Agent shall notify each Lender of the amount of such Lender's respective participation in such Letter of Credit, determined in accordance with subsection 3.1C. (v) REPORTS TO LENDERS. Within 15 days after the end of each calendar quarter ending after the Closing Date, so long as any Letter of Credit shall have been outstanding during such calendar quarter, Administrative Agent shall deliver to each other Lender a report setting forth for such calendar quarter the daily aggregate Dollar Equivalent amount available to be drawn under the Letters of Credit that were outstanding during such calendar quarter. C. LENDERS' PURCHASE OF PARTICIPATIONS IN LETTERS OF CREDIT. Immediately upon the issuance of each Letter of Credit, each Lender having a Revolving Loan Commitment shall be deemed to, and hereby agrees to, have irrevocably purchased from the Issuing Lender a participation in such Letter of Credit and any drawings honored thereunder in an amount equal to such Lender's Pro Rata Share of the maximum Dollar Equivalent amount which is or at any time may become available to be drawn thereunder. 3.2 LETTER OF CREDIT FEES. Company agrees to pay to Administrative Agent the following amounts with respect to Letters of Credit issued hereunder: (i) with respect to each Standby Letter of Credit, a letter of credit fee equal to the Applicable Offshore Rate Margin MULTIPLIED BY the daily maximum Dollar Equivalent amount available to be drawn under such Standby Letter of Credit (whether or not conditions to drawing thereunder could be met), payable in arrears on and to (but excluding) the fifteenth day of each March, June, September and December of each year and computed on the basis of a 360-day year for the actual number of days elapsed; (ii) with respect to each Commercial Letter of Credit, a letter of credit fee equal to (x) the Applicable Offshore Rate Margin MINUS 1.00% per annum PROVIDED that in no event shall the amount utilized under this clause (x) be less than 1.00% per annum MULTIPLIED BY (y) the daily maximum Dollar Equivalent amount available to be drawn under such Commercial Letter of Credit (whether or not conditions to drawing thereunder could be met), payable in arrears on and to (but excluding) the fifteenth day of each March, June, September and December of each year and computed on the basis of a 360-day year for the actual number of days elapsed; and 74 (iii) with respect to the issuance, amendment or transfer of each Letter of Credit and each payment of a drawing made thereunder (without duplication of the fees payable under clauses (i) and (ii) above), documentary and processing charges payable directly to the applicable Issuing Lender for its own account in accordance with such Issuing Lender's standard schedule for such charges in effect at the time of such issuance, amendment, transfer or payment, as the case may be. For purposes of calculating any fees payable under clauses (i) and (ii) of this subsection 3.2, the daily amount or the daily maximum amount available to be drawn under any Letter of Credit shall be determined as of the close of business on any date of determination and the Dollar Equivalent amount of any Letter of Credit denominated in an Offshore Currency shall be determined based on the Dollar Equivalent amount as of the most recent Computation Date for such Letter of Credit. Upon receipt by Administrative Agent of any amount described in clause (i) or (ii) of this subsection 3.2, Administrative Agent shall retain an amount equal to 0.25% per annum of the daily Dollar Equivalent amount available to be drawn under such Letter of Credit for its own account as a fronting fee and Administrative Agent shall promptly distribute to each Lender having a Revolving Loan Commitment its Pro Rata Share of the remaining portion of such Letter of Credit fees. 3.3 DRAWINGS AND REIMBURSEMENT OF AMOUNTS PAID UNDER LETTERS OF CREDIT. A. RESPONSIBILITY OF ISSUING LENDER WITH RESPECT TO DRAWINGS. In determining whether to honor any drawing under any Letter of Credit by the beneficiary thereof, the Issuing Lender shall be responsible only to examine the documents delivered under such Letter of Credit with reasonable care so as to ascertain whether they appear on their face to be in accordance with the terms and conditions of such Letter of Credit. B. REIMBURSEMENT BY COMPANY OF AMOUNTS PAID UNDER LETTERS OF CREDIT. In the event an Issuing Lender has determined to honor a drawing under a Letter of Credit issued by it, such Issuing Lender shall promptly notify Company and Administrative Agent, and Company shall reimburse such Issuing Lender on or before the Business Day immediately following the date on which such drawing is honored (the "REIMBURSEMENT DATE") in an amount in the Applicable Currency and in Same Day Funds equal to the amount of such honored drawing; PROVIDED that, anything contained in this Agreement to the contrary notwithstanding, (i) unless Company shall have notified Administrative Agent and such Issuing Lender prior to 10:00 A.M. (New York City time) on the date such drawing is honored that Company intends to reimburse such Issuing Lender for the amount of such honored drawing with funds other than the proceeds of Revolving Loans, Company shall be deemed to have given a timely Notice of Borrowing to Administrative Agent requesting Lenders to make Revolving Loans that are Base Rate Loans or in the case of Letters of Credit denominated in an Offshore Currency, to make Revolving Loans that are Offshore 75 Rate Loans in the Applicable Currency on the Reimbursement Date in an amount equal to the amount of such honored drawing and (ii) subject to satisfaction or waiver of the conditions specified in subsection 4.2B, Lenders shall, on the Reimbursement Date, make Revolving Loans that are Base Rate Loans or Revolving Loans that are Offshore Rate Loans in the Applicable Currency in the amount of such honored drawing, the proceeds of which shall be applied directly by Administrative Agent to reimburse such Issuing Lender for the amount of such honored drawing; and PROVIDED, FURTHER that if for any reason proceeds of Revolving Loans are not received by such Issuing Lender on the Reimbursement Date in an amount equal to the amount of such honored drawing, Company shall reimburse such Issuing Lender, on demand, in an amount in Same Day Funds and in the Applicable Currency equal to the excess of the amount of such honored drawing over the aggregate amount of such Revolving Loans, if any, which are so received. Nothing in this subsection 3.3B shall be deemed to relieve any Lender from its obligation to make Revolving Loans on the terms and conditions set forth in this Agreement, and Company shall retain any and all rights it may have against any Lender resulting from the failure of such Lender to make such Revolving Loans under this subsection 3.3B. C. PAYMENT BY LENDERS OF UNREIMBURSED AMOUNTS PAID UNDER LETTERS OF CREDIT. (i) PAYMENT BY LENDERS. In the event that Company shall fail for any reason to reimburse any Issuing Lender as provided in subsection 3.3B in an amount equal to the amount of any drawing honored by such Issuing Lender under a Letter of Credit issued by it, such Issuing Lender shall promptly notify each other Lender having a Revolving Loan Commitment of the unreimbursed amount of such honored drawing and of such other Lender's respective participation therein based on such Lender's Pro Rata Share. Each Lender shall make available to such Issuing Lender an amount equal to its respective participation, in the Applicable Currency and in Same Day Funds, at the office of such Issuing Lender specified in such notice, not later than 12:00 Noon (New York City time) on the first business day (under the laws of the jurisdiction in which such office of such Issuing Lender is located) after the date notified by such Issuing Lender. In the event that any Lender fails to make available to such Issuing Lender on such business day the amount of such Lender's participation in such Letter of Credit as provided in this subsection 3.3C, such Issuing Lender shall be entitled to recover such amount on demand from such Lender together with interest thereon at the Federal Funds Effective Rate for three Business Days and thereafter at the Base Rate. Nothing in this subsection 3.3C shall be deemed to prejudice the right of any Lender to recover from any Issuing Lender any amounts made available by such Lender to such Issuing Lender pursuant to this subsection 3.3C in the event that it is determined by the final judgment of a court of competent jurisdiction that the payment with respect to a Letter of Credit by such Issuing Lender in respect of 76 which payment was made by such Lender constituted gross negligence or willful misconduct on the part of such Issuing Lender. (ii) DISTRIBUTION TO LENDERS OF REIMBURSEMENTS RECEIVED FROM COMPANY. In the event any Issuing Lender shall have been reimbursed by other Lenders pursuant to subsection 3.3C(i) for all or any portion of any drawing honored by such Issuing Lender under a Letter of Credit issued by it, such Issuing Lender shall distribute to each other Lender which has paid all amounts payable by it under subsection 3.3C(i) with respect to such honored drawing such other Lender's Pro Rata Share of all payments subsequently received by such Issuing Lender from Company in reimbursement of such honored drawing when such payments are received. Any such distribution shall be made to a Lender in the Applicable Currency at its Lending Office or at such other address as such Lender may request. D. INTEREST ON AMOUNTS PAID UNDER LETTERS OF CREDIT. (i) PAYMENT OF INTEREST BY COMPANY. Company agrees to pay in the Applicable Currency to each Issuing Lender, with respect to drawings honored under any Letters of Credit issued by it, interest on the amount paid by such Issuing Lender in respect of each such honored drawing from the date such drawing is honored to but excluding the date such amount is reimbursed by Company (including any such reimbursement out of the proceeds of Revolving Loans pursuant to subsection 3.3B) at a rate equal to (a) for the period from the date such drawing is honored to but excluding the Reimbursement Date, the rate then in effect under this Agreement with respect to Revolving Loans that are Base Rate Loans and (b) thereafter, a rate which is 2% per annum in excess of the rate of interest otherwise payable under this Agreement with respect to Revolving Loans that are Base Rate Loans. Interest payable pursuant to this subsection 3.3D(i) shall be computed on the basis of a 360-day year for the actual number of days elapsed in the period during which it accrues and shall be payable on demand or, if no demand is made, on the date on which the related drawing under a Letter of Credit is reimbursed in full. (ii) DISTRIBUTION OF INTEREST PAYMENTS BY ISSUING LENDER. Promptly upon receipt by any Issuing Lender of any payment of interest pursuant to subsection 3.3D(i) with respect to a drawing honored under a Letter of Credit issued by it, (a) such Issuing Lender shall distribute to each other Lender, out of the interest received by such Issuing Lender in respect of the period from the date such drawing is honored to but excluding the date on which such Issuing Lender is reimbursed for the amount of such drawing (including any such reimbursement out of the proceeds of Revolving Loans pursuant to subsection 3.3B), the amount that such other Lender would have been entitled to receive in respect of the letter of credit fee that would have been payable in respect of such Letter of Credit for such period pursuant to subsection 3.2 if no 77 drawing had been honored under such Letter of Credit, and (b) in the event such Issuing Lender shall have been reimbursed by other Lenders pursuant to subsection 3.3C(i) for all or any portion of such honored drawing, such Issuing Lender shall distribute to each other Lender which has paid all amounts payable by it under subsection 3.3C(i) with respect to such honored drawing such other Lender's Pro Rata Share of any interest received by such Issuing Lender in respect of that portion of such honored drawing so reimbursed by other Lenders for the period from the date on which such Issuing Lender was so reimbursed by other Lenders to but excluding the date on which such portion of such honored drawing is reimbursed by Company. Any such distribution shall be made to a Lender at its primary address set forth below its name on the appropriate signature page hereof or at such other address as such Lender may request. 3.4 OBLIGATIONS ABSOLUTE. The obligation of Company to reimburse each Issuing Lender for drawings honored under the Letters of Credit issued by it and to repay any Revolving Loans made by Lenders pursuant to subsection 3.3B and the obligations of Lenders under subsection 3.3C(i) shall be unconditional and irrevocable and shall be paid strictly in accordance with the terms of this Agreement under all circumstances including any of the following circumstances: (i) any lack of validity or enforceability of any Letter of Credit; (ii) the existence of any claim, set-off, defense or other right which Company or any Lender may have at any time against a beneficiary or any transferee of any Letter of Credit (or any Persons for whom any such transferee may be acting), any Issuing Lender or other Lender or any other Person or, in the case of a Lender, against Company, whether in connection with this Agreement, the transactions contemplated herein or any unrelated transaction (including any underlying transaction between Company or one of its Subsidiaries and the beneficiary for which any Letter of Credit was procured); (iii) any draft or other document presented under any Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; (iv) payment by the applicable Issuing Lender under any Letter of Credit against presentation of a draft or other document which does not substantially comply with the terms of such Letter of Credit; 78 (v) any adverse change in the business, operations, properties, assets, condition (financial or otherwise) or prospects of Company or any of its Subsidiaries; (vi) any breach of this Agreement or any other Loan Document by any party thereto; (vii) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing; or (viii) the fact that an Event of Default or a Potential Event of Default shall have occurred and be continuing; PROVIDED, in each case, that payment by the applicable Issuing Lender under the applicable Letter of Credit shall not have constituted gross negligence or willful misconduct of such Issuing Lender under the circumstances in question (as determined by a final judgment of a court of competent jurisdiction). 3.5 INDEMNIFICATION; NATURE OF ISSUING LENDERS' DUTIES. A. INDEMNIFICATION. In addition to amounts payable as provided in subsection 3.6, Company hereby agrees to protect, indemnify, pay and save harmless each Issuing Lender from and against any and all claims, demands, liabilities, damages, losses, costs, charges and expenses (including reasonable fees, expenses and disbursements of counsel and allocated costs of internal counsel) which such Issuing Lender may incur or be subject to as a consequence, direct or indirect, of (i) the issuance of any Letter of Credit by such Issuing Lender, other than as a result of (a) the gross negligence or willful misconduct of such Issuing Lender as determined by a final judgment of a court of competent jurisdiction or (b) subject to the following clause (ii), the wrongful dishonor by such Issuing Lender of a proper demand for payment made under any Letter of Credit issued by it or (ii) the failure of such Issuing Lender to honor a drawing under any such Letter of Credit as a result of any act or omission, whether rightful or wrongful, of any present or future de jure or de facto government or governmental authority (all such acts or omissions herein called "GOVERNMENTAL ACTS"). B. NATURE OF ISSUING LENDERS' DUTIES. As between Company and any Issuing Lender, Company assumes all risks of the acts and omissions of, or misuse of the Letters of Credit issued by such Issuing Lender by, the respective beneficiaries of such Letters of Credit. In furtherance and not in limitation of the foregoing, such Issuing Lender shall not be responsible for: (i) the form, validity, sufficiency, accuracy, genuineness or legal effect of any document submitted by any party in connection with the application for and issuance of any such Letter of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (ii) the validity or sufficiency of any instrument transferring or 79 assigning or purporting to transfer or assign any such Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason; (iii) failure of the beneficiary of any such Letter of Credit to comply fully with any conditions required in order to draw upon such Letter of Credit; (iv) errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise, whether or not they be in cipher; (v) errors in interpretation of technical terms; (vi) any loss or delay in the transmission or otherwise of any document required in order to make a drawing under any such Letter of Credit or of the proceeds thereof; (vii) the misapplication by the beneficiary of any such Letter of Credit of the proceeds of any drawing under such Letter of Credit; or (viii) any consequences arising from causes beyond the control of such Issuing Lender, including any Governmental Acts, and none of the above shall affect or impair, or prevent the vesting of, any of such Issuing Lender's rights or powers hereunder. In furtherance and extension and not in limitation of the specific provisions set forth in the first paragraph of this subsection 3.5B, any action taken or omitted by any Issuing Lender under or in connection with the Letters of Credit issued by it or any documents and certificates delivered thereunder, if taken or omitted in good faith, shall not put such Issuing Lender under any resulting liability to Company. Notwithstanding anything to the contrary contained in this subsection 3.5, Company shall retain any and all rights it may have against any Issuing Lender for any liability arising solely out of the gross negligence or willful misconduct of such Issuing Lender, as determined by a final judgment of a court of competent jurisdiction. 3.6 INCREASED COSTS AND TAXES RELATING TO LETTERS OF CREDIT. Subject to the provisions of subsection 2.7B (which shall be controlling with respect to the matters covered thereby), in the event that any Issuing Lender or Lender having a Revolving Loan Commitment shall reasonably determine (which determination shall be conclusive and binding upon all parties hereto) that any law, treaty or governmental rule, regulation or order, or any change therein or in the interpretation, administration or application thereof (including the introduction of any new law, treaty or governmental rule, regulation or order), or any determination of a court or governmental authority, in each case that becomes effective after the date hereof, or compliance by any Issuing Lender or Lender or its applicable Lending Office with any guideline, request or directive issued or made after the date hereof by any central bank, the NAIC or other governmental or quasi-governmental authority (whether or not having the force of law): (i) subjects such Issuing Lender or Lender (or its applicable Lending Office) to any additional Tax (other than any Tax on the overall net income of 80 such Issuing Lender or Lender) with respect to the issuing or maintaining of any Letters of Credit or the purchasing or maintaining of any participations therein or any other obligations under this Section 3, whether directly or by such being imposed on or suffered by any particular Issuing Lender (or its applicable Lending Office); (ii) imposes, modifies or holds applicable any reserve (including any marginal, emergency, supplemental, special or other reserve), special deposit, compulsory loan, FDIC insurance or similar requirement in respect of any Letters of Credit issued by any Issuing Lender or participations therein purchased by any Lender (or its applicable Lending Office); or (iii) imposes any other condition (other than with respect to a Tax matter) on or affecting such Issuing Lender or Lender (or its applicable Lending Office) regarding this Section 3 or any Letter of Credit or any participation therein; and the result of any of the foregoing is to increase the cost to such Issuing Lender or Lender of agreeing to issue, issuing or maintaining any Letter of Credit or agreeing to purchase, purchasing or maintaining any participation therein or to reduce any amount received or receivable by such Issuing Lender or Lender (or its applicable Lending Office) with respect thereto; then, in any case, Company shall promptly pay to such Issuing Lender or Lender, upon receipt of the statement referred to in the next sentence, such additional amount or amounts as may be necessary to compensate such Issuing Lender or Lender for any such increased cost or reduction in amounts received or receivable hereunder. Such Issuing Lender or Lender shall deliver to Company a written statement, setting forth in reasonable detail the basis for calculating the additional amounts owed to such Issuing Lender or Lender under this subsection 3.6, which statement shall be conclusive and binding upon all parties hereto absent manifest error. SECTION 4. CONDITIONS TO LOANS AND LETTERS OF CREDIT The obligations of Lenders to make Loans and the issuance of Letters of Credit hereunder are subject to the satisfaction of the following conditions. 4.1 CONDITIONS TO TERM LOANS AND INITIAL REVOLVING LOANS, OFFSHORE CURRENCY LOANS AND SWING LINE LOANS. The obligations of Lenders to make the Term Loans and any Revolving Loans, Offshore Currency Loans and Swing Line Loans to be made on the Closing Date are, in addition to the conditions precedent specified in subsection 4.2, subject to prior or concurrent satisfaction of the following conditions: 81 A. LOAN PARTY DOCUMENTS. On or before the Closing Date, Company shall, and shall cause each other Loan Party to, deliver to Lenders (or to Agents for Lenders with sufficient originally executed copies, where appropriate, for each Lender and its counsel) the following with respect to Company or such Loan Party, as the case may be, each, unless otherwise noted, dated the Closing Date: (i) Certified copies of the Certificate or Articles of Incorporation of such Person, together with a good standing certificate from the Secretary of State of its jurisdiction of incorporation and each other state in which such Person is qualified as a foreign corporation to do business and, to the extent generally available, a certificate or other evidence of good standing as to payment of any applicable franchise or similar taxes from the appropriate taxing authority of each of such jurisdictions, each dated a recent date prior to the Closing Date; (ii) Copies of the Bylaws of such Person, certified as of the Closing Date by such Person's corporate secretary or an assistant secretary; (iii) Resolutions of the Board of Directors of such Person approving and authorizing the execution, delivery and performance of the Loan Documents to which it is a party, certified as of the Closing Date by the corporate secretary or an assistant secretary of such Person as being in full force and effect without modification or amendment; (iv) Signature and incumbency certificates of the officers of such Person executing the Loan Documents to which it is a party; (v) Executed originals of the Loan Documents to which such Person is a party; and (vi) Such other documents as Agents may reasonably request. B. NO MATERIAL ADVERSE EFFECT. Since September 30, 1996, no Material Adverse Effect (in the sole opinion of Arranger and Agents) shall have occurred. C. CORPORATE AND CAPITAL STRUCTURE, OWNERSHIP, MANAGEMENT, ETC. (i) CORPORATE STRUCTURE. The organization structure of Company and its Subsidiaries, both before and after giving effect to the Recapitalization Transactions, shall be as set forth on SCHEDULE 5.1 annexed hereto and be satisfactory to Agents, Arranger and Lenders. (ii) CAPITAL STRUCTURE AND OWNERSHIP. The capital structure and ownership of Company, both before and after giving effect to the 82 Recapitalization Transactions, shall be as described in the Note Offering Materials and be satisfactory to Agents, Arranger and Lenders. (iii) MANAGEMENT. The management structure of Company, after giving effect to the Recapitalization Transactions, shall be as described in the Note Offering Memorandum and be satisfactory to Agents and Arranger. (iv) RELATED AGREEMENTS. Each of the Related Agreements shall be satisfactory in form and substance to Agents and Arranger. Agents shall have received a fully executed or conformed copy of each Related Agreement and any documents executed in connection therewith, and each Related Agreement shall be in full force and effect and no provision thereof shall have been modified or waived in any respect determined by Agents to be material, in each case without the consent of Agents and Arranger. Any existing stockholders or similar agreements shall have been terminated. (v) STOCK PURCHASE AND RECAPITALIZATION AGREEMENT. The Stock Purchase and Recapitalization Agreement shall be in full force and effect and shall not have been modified or waived in any material respect without the consent of Agents and Arranger. All conditions to the Recapitalization Transactions shall have been satisfied in all material respects or the fulfillment of any such conditions shall have been waived with the consent of Agents and Arranger. D. DEBT AND EQUITY CAPITALIZATION OF COMPANY. (i) COMMON STOCK. On or prior to the Closing Date, Company shall have authorized such amendments to its Certificate of Incorporation as may be required to permit the Recapitalization Transactions to occur as described in the Note Offering Memorandum, including without limitation eliminating its Class B Common Stock, shall have obtained the requisite approval of its shareholders thereto, and shall have filed its amended Certificate of Incorporation with the Secretary of State of the State of Delaware. The terms of such Company's Common Stock, as so amended on or prior to the Closing Date, shall be satisfactory to Agents and Arranger and a copy of its Certificate of Incorporation, as filed with the Secretary of State of the State of Delaware, shall have been delivered to Agents. (ii) ISSUANCE OF EQUITY SECURITIES TO NEW EQUITY INVESTORS. On or prior to the Closing Date, Company shall have issued approximately $43,500,000 of shares of its Common Stock to the New Equity Investors for Cash, which shares shall represent 49.7% of Company's outstanding Common Stock on a fully-diluted basis following the Recapitalization Transactions. 83 (iii) REPURCHASE OF COMMON STOCK. On or prior to the Closing Date, Company shall have repurchased approximately 651,361 shares of Common Stock and all of its outstanding Class B Common Stock for an aggregate purchase amount not exceeding $159,400,000. Upon consummation of the Recapitalization Transactions, the shares of Company's Common Stock owned by the Gooding Group shall represent not less than 31.3% of the Company's outstanding Common Stock, and the shares of Company's Common Stock owned by all Persons owning shares of Company's common stock immediately prior to the effectiveness of the Recapitalization Transactions shall represent not less than 50.3% of the Company's outstanding Common Stock. (iv) SENIOR SUBORDINATED NOTES. On or prior to the Closing Date, Company shall have issued not less than $85,000,000 in original principal amount of Senior Subordinated Notes. The terms and conditions of the Senior Subordinated Notes shall be substantially as described in the Note Offering Memorandum and shall be satisfactory to Agents, Arranger and Lenders, PROVIDED that the Senior Subordinated Notes shall be unsecured and shall not mature or provide for any scheduled principal payments prior to the tenth anniversary of the Closing Date; PROVIDED FURTHER that the negative covenants and default provisions shall be less restrictive than those contained in this Agreement. Company shall have delivered to Administrative Agent a fully executed or conformed copy of the Senior Subordinated Note Indenture. E. CLOSING DATE MORTGAGES. Administrative Agent shall have received from Company and each applicable Subsidiary Guarantor: (i) CLOSING DATE MORTGAGES. Fully executed and notarized Mortgages (each a "CLOSING DATE MORTGAGE" and, collectively, the "CLOSING DATE MORTGAGES") in proper form for recording in all appropriate places in all applicable jurisdictions, encumbering each Real Property Asset listed in SCHEDULE 4.1E annexed hereto (each a "CLOSING DATE MORTGAGED PROPERTY" and, collectively, the "CLOSING DATE MORTGAGED PROPERTIES"); (ii) OPINIONS OF LOCAL COUNSEL. An opinion of counsel (which counsel shall be reasonably satisfactory to Agents) in each state in which a Closing Date Mortgaged Property is located with respect to the enforceability of the form(s) of Closing Date Mortgages to be recorded in such state and such other matters as Agents may reasonably request, in each case substantially in the form of Exhibit IX attached hereto; (iii) LANDLORD ESTOPPELS AND CONSENTS. In the case of each Leasehold Property of Company or such Subsidiary constituting a Closing Date Mortgaged Property, a Landlord Estoppel and Consent from the landlords of such real property. 84 (iv) MATTERS RELATING TO FLOOD HAZARD PROPERTIES. (a) Evidence, which may be in the form of a letter from an insurance broker or a municipal engineer, as to whether (1) any Closing Date Mortgaged Property is a Flood Hazard Property and (2) the community in which any such Flood Hazard Property is located is participating in the National Flood Insurance Program, (b) if there are any such Flood Hazard Properties, such Loan Party's written acknowledgement of receipt of written notification from Administrative Agent (1) as to the existence of each such Flood Hazard Property and (2) as to whether the community in which each such Flood Hazard Property is located is participating in the National Flood Insurance Program, and (c) in the event any such Flood Hazard Property is located in a community that participates in the National Flood Insurance Program, evidence that Company has obtained flood insurance in respect of such Flood Hazard Property to the extent required under the applicable regulations of the Board of Governors of the Federal Reserve System; and F. SECURITY INTERESTS IN PERSONAL AND MIXED PROPERTY. To the extent not otherwise satisfied pursuant to subsection 4.1E, Agents shall have received evidence satisfactory to each of them that Company and Subsidiary Guarantors shall have taken or caused to be taken all such actions, executed and delivered or caused to be executed and delivered all such agreements, documents and instruments, and made or caused to be made all such filings and recordings (other than the filing or recording of items described in clauses (iii), (iv) and (v) below) that may be necessary or, in the opinion of Agents, desirable in order to create in favor of Administrative Agent, for the benefit of Lenders, a valid and (upon such filing and recording) perfected First Priority security interest in the entire personal and mixed property Collateral. Such actions shall include the following: (i) SCHEDULES TO COLLATERAL DOCUMENTS. Delivery to Agents of accurate and complete schedules to all of the applicable Collateral Documents. (ii) STOCK CERTIFICATES AND INSTRUMENTS. Delivery to Administrative Agent of (a) certificates (which certificates shall be accompanied by irrevocable undated stock powers, duly endorsed in blank and otherwise satisfactory in form and substance to Agents) representing all capital stock of Company's Subsidiaries other than any Immaterial Subsidiary pledged pursuant to the Company Pledge Agreement and the Subsidiary Pledge Agreements and (b) all promissory notes or other instruments (duly endorsed, where appropriate, in a manner satisfactory to Agents) evidencing any Collateral; (iii) LIEN SEARCHES AND UCC TERMINATION STATEMENTS. Delivery to Agents of (a) the results of a recent search, by a Person satisfactory to Agents, of all effective UCC financing statements and fixture filings and all judgment and tax lien filings which may have been made with respect to any personal or mixed property of any Loan Party, together with copies of all such filings 85 disclosed by such search, and (b) UCC termination statements duly executed by all applicable Persons for filing in all applicable jurisdictions as may be necessary to terminate any effective UCC financing statements or fixture filings disclosed in such search (other than any such financing statements or fixture filings in respect of Liens permitted to remain outstanding pursuant to the terms of this Agreement). (iv) UCC FINANCING STATEMENTS. Delivery to Administrative Agent of UCC financing statements, duly executed by each applicable Loan Party with respect to all personal property Collateral of such Loan Party, for filing in all jurisdictions as may be necessary or, in the opinion of Agents, desirable to perfect the security interests created in such Collateral pursuant to the Collateral Documents; (v) PTO COVER SHEETS, ETC. Delivery to Administrative Agent of all cover sheets or other documents or instruments required to be filed with the PTO in order to create or perfect Liens in respect of any IP Collateral; (vi) OPINIONS OF LOCAL AND FOREIGN COUNSEL. Delivery to Agents of an opinion of counsel (which counsel shall be reasonably satisfactory to Agents) under the laws of each jurisdiction in which any Loan Party or any personal or mixed property Collateral is located, including without limitation each such jurisdiction in which a Foreign Subsidiary is located the stock of which will be pledged to secure the Obligations, with respect to the creation and perfection of the security interests in favor of Administrative Agent in such Collateral and such other matters governed by the laws of such jurisdiction regarding such security interests as Agents may reasonably request, in each case in form and substance reasonably satisfactory to Agents dated as of the Closing Date and setting forth substantially the matters in the forms of opinion annexed hereto as EXHIBIT IX and as to such other matters as Agents may reasonably require. G. MATTERS RELATING TO EXISTING INDEBTEDNESS OF COMPANY AND ITS SUBSIDIARIES. (i) TERMINATION OF EXISTING CREDIT AGREEMENT AND RELATED LIENS. On the Closing Date, Company and its Subsidiaries shall have (a) repaid in full all Indebtedness outstanding under the Existing Credit Agreement, (b) terminated any commitments to lend or make other extensions of credit thereunder, and (c) delivered to Agents all documents or instruments necessary to release all Liens securing Indebtedness or other obligations of Company and its Subsidiaries thereunder. (ii) EXISTING INDEBTEDNESS TO REMAIN OUTSTANDING. Agents shall have received an Officer's Certificate of Company stating that, after giving effect to the transactions described in this subsection 4.1G, the Indebtedness of 86 Company and its Subsidiaries (other than Indebtedness under the Loan Documents and the Senior Subordinated Notes) shall consist only of the Indebtedness described on Schedule 7.1 hereto and Indebtedness permitted pursuant to subsection 7.1(iv) and (vii). Company shall be in compliance with its obligations under such existing Indebtedness and Company shall have delivered to Agents a fully-executed or conformed copy of each of the agreements or documents setting forth the terms and conditions of such existing Indebtedness. The terms and conditions of all such Indebtedness shall be in form and in substance satisfactory to Arrangers and Agents. H. EVIDENCE OF INSURANCE. Administrative Agent shall have received a certificate from Company's insurance broker or other evidence satisfactory to it that all insurance required to be maintained pursuant to subsection 6.4 is in full force and effect and that Administrative Agent on behalf of Lenders has been named as additional insured and/or loss payee thereunder to the extent required under subsection 6.4. I. OPINIONS OF COUNSEL TO LOAN PARTIES. Lenders and their respective counsel shall have received originally executed copies of one or more favorable written opinions of Sullivan & Cromwell, counsel for Loan Parties, in form and substance reasonably satisfactory to Agents and their counsel, dated as of the Closing Date and setting forth substantially the matters in the opinions designated in EXHIBIT VIII annexed hereto and as to such other matters as Agents acting on behalf of Lenders may reasonably request. J. OPINIONS OF SYNDICATION AGENT'S COUNSEL. Lenders shall have received originally executed copies of one or more favorable written opinions of O'Melveny & Myers LLP, counsel to Syndication Agent, dated as of the Closing Date, substantially in the form of EXHIBIT X annexed hereto and as to such other matters as Syndication Agent acting on behalf of Lenders may reasonably request. K. FEES. Company shall have paid to Agents and Arranger the fees payable on the Closing Date with respect to the financings contemplated by this Agreement. L. REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF AGREEMENTS. Company shall have delivered to Agents an Officer's Certificate, in form and substance satisfactory to Agents, to the effect that the representations and warranties in Section 5 hereof are true, correct and complete in all material respects on and as of the Closing Date to the same extent as though made on and as of that date (or, to the extent such representations and warranties specifically relate to an earlier date, that such representations and warranties were true, correct and complete in all material respects on and as of such earlier date) and that Company shall have performed in all material respects all agreements and satisfied all conditions which this Agreement provides shall be performed or satisfied by it on or before the Closing Date except as otherwise disclosed to and agreed to in writing by Agents and Requisite Lenders. 87 M. NECESSARY GOVERNMENTAL AUTHORIZATIONS AND CONSENTS; EXPIRATION OF WAITING PERIODS, ETC. Company shall have obtained all Governmental Authorizations and all consents of other Persons, in each case that are necessary or advisable in connection with the Recapitalization Transactions and each of the foregoing shall be in full force and effect, in each case other than those the failure to obtain or maintain which, either individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect. All applicable waiting periods shall have expired without any action being taken or threatened by any competent authority which would restrain, prevent or otherwise impose adverse conditions on the Recapitalization Transactions. No action, request for stay, petition for review or rehearing, reconsideration, or appeal with respect to any of the foregoing shall be pending, and the time for any applicable agency to take action to set aside its consent on its own motion shall have expired. N. OPINIONS OF COUNSEL UNDER RELATED AGREEMENTS. Agents shall have received copies of each of the opinions of counsel delivered on behalf of or to any Loan Party, under the Related Agreements, together with a letter from each such counsel authorizing Lenders to rely on such opinion to the same extent as though it were addressed to Lenders. O. FINANCIAL STATEMENTS; PRO FORMA CONSOLIDATED BALANCE SHEET. On or before the Closing Date, Lenders shall have received from Company (i) audited financial statements of Company and its Subsidiaries for Fiscal Years 1995 and 1996, consisting of balance sheets and the related consolidated statements of income, stockholders' equity and cash flows for such Fiscal Years, (ii) unaudited financial statements of Company and its Subsidiaries as at April 30, 1997 consisting of a balance sheet and the related consolidated statement of income for the one-month period ending on such date, all in reasonable detail and certified by the chief financial officer of Company that they fairly present the financial condition of Company and its Subsidiaries as at the date indicated and the results of their operations for the period indicated, subject to changes resulting from audit and normal year-end adjustments, (iii) unaudited financial statements of Company and its Subsidiaries as at March 31, 1997, consisting of a balance sheet and the related consolidated statement of income, stockholders' equity and cash flows for the six-month period ending on such date, all in reasonable detail and certified by the chief financial officer of Company that they fairly present the financial condition of Company and its Subsidiaries as at the dates indicated and the results of their operations and their cash flows for the periods indicated, subject to changes resulting from audit and normal year-end adjustments, and (iv) pro forma consolidated balance sheet of Company and its Subsidiaries as at March 31, 1997, prepared in accordance with GAAP and giving effect to the consummation of the Recapitalization Transactions, the related financings and the other transactions contemplated by the Loan Documents and the Related Agreements, which pro forma financial statements shall be in form and substance satisfactory to Lenders. 88 P. SOLVENCY ASSURANCES. On the Closing Date, Agents, Arranger, and Lenders shall have received a Financial Condition Certificate dated the Closing Date, substantially in the form of EXHIBIT XXIII annexed hereto and with appropriate attachments, certifying that, after giving effect to the consummation of the Recapitalization Transactions, the related financings and the other transactions contemplated by the Loan Documents, Company will be Solvent. Q. LETTER TO AUDITOR. Agents shall have received an executed copy of a letter to be delivered to Ernst & Young LLP with respect to Lenders' reliance on Company's audited consolidated financial statements for the Fiscal Year ended September 30, 1996. R. COMPLETION OF PROCEEDINGS. All corporate and other proceedings taken or to be taken in connection with the transactions contemplated hereby and all documents incidental thereto not previously found acceptable by each Agent, acting on behalf of Lenders, and its counsel shall be satisfactory in form and substance to Agents and such counsel, and Agents and such counsel shall have received all such counterpart originals or certified copies of such documents as Agents may reasonably request. S. LENDER APPROVAL. Each Lender hereby agrees that by its execution and delivery of its signature page hereto and by the funding of its Loans to be made on the Closing Date, such Lender approves of and consents to each of the matters set forth in this subsection 4.1 which must be approved by, or which must be satisfactory to, all or Requisite Lenders; PROVIDED that in the case of any agreement or document which must be approved by, or which must be satisfactory to, all or Requisite Lenders, Agent or Company shall have delivered a copy of such agreement or document in substantially the form in which executed or delivered to such Lender on or prior to the Closing Date. 4.2 CONDITIONS TO ALL LOANS. The obligations of Lenders to make Loans on each Funding Date are subject to the following further conditions precedent: A. Administrative Agent shall have received before that Funding Date, in accordance with the provisions of subsection 2.1B, an originally executed Notice of Borrowing, in each case signed by the chief executive officer, the chief financial officer or the treasurer of Company or by any executive officer of Company designated by any of the above-described officers on behalf of Company in a writing delivered to Administrative Agent. 89 B. As of that Funding Date: (i) The representations and warranties contained herein and in the other Loan Documents shall be true, correct and complete in all material respects on and as of that Funding Date to the same extent as though made on and as of that date, except to the extent such representations and warranties specifically relate to an earlier date, in which case such representations and warranties shall have been true, correct and complete in all material respects on and as of such earlier date; (ii) No event shall have occurred and be continuing or would result from the consummation of the borrowing contemplated by such Notice of Borrowing that would constitute an Event of Default or a Potential Event of Default; (iii) Each Loan Party shall have performed in all material respects all agreements and satisfied all conditions which this Agreement provides shall be performed or satisfied by it on or before that Funding Date; (iv) No order, judgment or decree of any court, arbitrator or governmental authority shall purport to enjoin or restrain any Lender from making the Loans to be made by it on that Funding Date; (v) The making of the Loans requested on such Funding Date shall not violate any law including Regulation G, Regulation T, Regulation U or Regulation X of the Board of Governors of the Federal Reserve System or any other comparable or similar law of any Governmental Authority applicable to the Loans; and (vi) There shall not be pending or, to the knowledge of Company, threatened, any action, suit, proceeding, governmental investigation or arbitration against or affecting Company or any of its Subsidiaries or any property of Company or any of its Subsidiaries that has not been disclosed by Company in writing pursuant to subsection 5.6 or 6.1(x) prior to the making of the last preceding Loans (or, in the case of the initial Loans, prior to the execution of this Agreement), and there shall have occurred no development not so disclosed in any such action, suit, proceeding, governmental investigation or arbitration so disclosed, that, in either event, in the opinion of Agents or of Requisite Lenders, would be expected to have a Material Adverse Effect. 4.3 CONDITIONS TO LETTERS OF CREDIT. The issuance of any Letter of Credit hereunder (whether or not the applicable Issuing Lender is obligated to issue such Letter of Credit) is subject to the following conditions precedent: 90 A. On or before the date of issuance of the initial Letter of Credit pursuant to this Agreement, the initial Loans shall have been made. B. On or before the date of issuance of such Letter of Credit, Administrative Agent shall have received, in accordance with the provisions of subsection 3.1B(i), an originally executed Notice of Issuance of Letter of Credit, in each case signed by the chief executive officer, the chief financial officer or the treasurer of Company or by any executive officer of Company designated by any of the above-described officers on behalf of Company in a writing delivered to Administrative Agent, together with all other information specified in subsection 3.1B(i) and such other documents or information as the applicable Issuing Lender may reasonably require in connection with the issuance of such Letter of Credit. C. On the date of issuance of such Letter of Credit, all conditions precedent described in subsection 4.2B shall be satisfied to the same extent as if the issuance of such Letter of Credit were the making of a Loan and the date of issuance of such Letter of Credit were a Funding Date. SECTION 5. COMPANY'S REPRESENTATIONS AND WARRANTIES In order to induce Lenders and the Agents to enter into this Agreement and to make the Loans, to induce Issuing Lenders to issue Letters of Credit and to induce other Lenders to purchase participations therein, Company represents and warrants to each Lender and the Agents, on the date of this Agreement, on each Funding Date and on the date of issuance of each Letter of Credit, that the following statements are true, correct and complete: 5.1 ORGANIZATION, POWERS, QUALIFICATION, GOOD STANDING, BUSINESS AND SUBSIDIARIES. A. ORGANIZATION AND POWERS. Each Loan Party is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation as specified in SCHEDULE 5.1 annexed hereto. Each Loan Party has all requisite corporate power and authority to own and operate its properties, to carry on its business as now conducted and as proposed to be conducted, to enter into the Loan Documents to which it is a party and to carry out the transactions contemplated thereby. B. QUALIFICATION AND GOOD STANDING. Each Loan Party is qualified to do business and in good standing in every jurisdiction where its assets are located and wherever necessary to carry out its business and operations, except in jurisdictions where the failure to be so qualified or in good standing has not had and could not reasonably be expected to have a Material Adverse Effect. 91 C. CONDUCT OF BUSINESS. Company and its Subsidiaries are engaged only in the businesses permitted to be engaged in pursuant to subsection 7.14. D. SUBSIDIARIES. All of the Subsidiaries of Company are identified in SCHEDULE 5.1 annexed hereto, as said SCHEDULE 5.1 may be supplemented from time to time pursuant to the provisions of subsection 6.1(xiv). The capital stock of each of the Subsidiaries of Company identified in SCHEDULE 5.1 annexed hereto (as so supplemented) is duly authorized, validly issued, fully paid and nonassessable and none of such capital stock constitutes Margin Stock. Each of the Subsidiaries of Company identified in SCHEDULE 5.1 annexed hereto (as so supplemented) is a corporation duly organized, validly existing and in good standing under the laws of its respective jurisdiction of incorporation set forth therein, has all requisite corporate power and authority to own and operate its properties and to carry on its business as now conducted and as proposed to be conducted, and is qualified to do business and in good standing in every jurisdiction where its assets are located and wherever necessary to carry out its business and operations, in each case except where failure to be so qualified or in good standing or a lack of such corporate power and authority has not had and could not reasonably be expected to have a Material Adverse Effect. SCHEDULE 5.1 annexed hereto (as so supplemented) correctly sets forth the ownership interest of Company and each of its Subsidiaries in each of the Subsidiaries of Company identified therein. 5.2 AUTHORIZATION OF BORROWING, ETC. A. AUTHORIZATION OF BORROWING. The execution, delivery and performance of the Loan Documents have been duly authorized by all necessary corporate action on the part of each Loan Party that is a party thereto. B. NO CONFLICT. The execution, delivery and performance by Loan Parties of the Loan Documents and the consummation of the transactions contemplated by the Loan Documents do not and will not (i) violate any provision of any law or any governmental rule or regulation applicable to Company or any of its Subsidiaries, the Certificate or Articles of Incorporation or Bylaws of Company or any of its Subsidiaries or any order, judgment or decree of any court or other agency of government binding on Company or any of its Subsidiaries, (ii) conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any Material Contract of Company or any of its Subsidiaries, (iii) result in or require the creation or imposition of any Lien upon any of the properties or assets of Company or any of its Subsidiaries (other than any Liens created under any of the Loan Documents in favor of Administrative Agent on behalf of Lenders), or (iv) require any approval of stockholders or any approval or consent of any Person under any Material Contract of Company or any of its Subsidiaries, except for such approvals or consents which will be obtained on or before the Closing Date. 92 C. GOVERNMENTAL CONSENTS. The execution, delivery and performance by Loan Parties of the Loan Documents and the consummation of the transactions contemplated by the Loan Documents do not and will not require any registration with, consent or approval of, or notice to, or other action to, with or by, any federal, state or other governmental authority or regulatory body except for filings and recordings required in connection with the perfection of the security interests granted pursuant to the Loan Documents. D. BINDING OBLIGATION. Each of the Loan Documents has been duly executed and delivered by each Loan Party that is a party thereto and is the legally valid and binding obligation of such Loan Party, enforceable against such Loan Party in accordance with its respective terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles relating to enforceability. E. VALID ISSUANCE OF COMMON STOCK AND SENIOR SUBORDINATED NOTES. (i) COMMON STOCK. The Common Stock issued to the New Equity Investors in the Recapitalization Transactions is, or when issued and delivered will be, duly and validly issued, fully paid and nonassessable. No stockholder of Company has any preemptive rights to subscribe for any additional equity Securities of Company except pursuant to the Related Agreements. The issuance and sale of Company's Common Stock in the Recapitalization Transactions, upon such issuance and sale, will either (a) have been registered or qualified under applicable federal and state securities laws or (b) be exempt therefrom. (ii) SENIOR SUBORDINATED NOTES . Company has the corporate power and authority to issue the Senior Subordinated Notes. The Senior Subordinated Notes, when issued and paid for, will be the legally valid and binding obligations of Company, enforceable against Company in accordance with their respective terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors' rights generally or by equitable principles relating to enforceability. The subordination provisions of the Senior Subordinated Notes will be enforceable against the holders thereof and the Loans and all other monetary Obligations hereunder are and will be within the definition of "Senior Indebtedness" included in such provisions. Senior Subordinated Notes, when issued and sold, will either (a) have been registered or qualified under applicable federal and state securities laws or (b) be exempt therefrom. 5.3 FINANCIAL CONDITION. Company has heretofore delivered to Lenders, at Lenders' request, the following financial statements and information: (i) the audited consolidated balance 93 sheets of Company and its Subsidiaries as at September 30, 1996 and September 30, 1995 and the related consolidated statements of income, stockholders' equity and cash flows of Company and its Subsidiaries for the Fiscal Years then ended, (ii) the unaudited consolidated balance sheets of Company and its Subsidiaries as at March 31, 1997 and the related unaudited consolidated statements of income, stockholders' equity and cash flows of Company and its Subsidiaries for the six months then ended and (iii) the unaudited consolidated balance sheet of Company and its Subsidiaries as at April 30, 1997 and the related unaudited consolidated statement of income of Company and its Subsidiaries for the one month then ended. All such statements in (i) and (ii) were prepared in conformity with GAAP and all such statements fairly present, in all material respects, the financial position (on a consolidated basis) of the entities described in such financial statements as at the respective dates thereof and the results of operations and cash flows (on a consolidated basis) of the entities described therein for each of the periods then ended, subject, in the case of any such unaudited financial statements, to changes resulting from normal year-end adjustments. Company does not (and will not following the funding of the initial Loans) have any Contingent Obligation, contingent liability or liability for taxes, long-term lease or unusual forward or long-term commitment that is not reflected in the foregoing financial statements or the notes thereto or, if not so reflected, is material in relation to the business, operations or condition (financial or otherwise) of Company or any of its Subsidiaries. 5.4 NO MATERIAL ADVERSE CHANGE; NO RESTRICTED JUNIOR PAYMENTS. Since September 30, 1996, no event or change has occurred that has caused or evidences, either in any case or in the aggregate, a Material Adverse Effect. Since September 30, 1996, neither Company nor any of its Subsidiaries has directly or indirectly declared, ordered, paid or made, or set apart any sum or property for, any Restricted Junior Payment or agreed to do so except as permitted by subsection 7.5, in the ordinary course of business consistent with past practices or as described in the Note Offering Memorandum. 5.5 TITLE TO PROPERTIES; LIENS; REAL PROPERTY. A. TITLE TO PROPERTIES; LIENS. Company and its Subsidiaries have (i) good, sufficient and legal title to (in the case of fee interests in real property), (ii) valid leasehold interests in (in the case of leasehold interests in real or personal property), or (iii) good title to (in the case of all other personal property), all of their respective properties and assets reflected in the financial statements referred to in subsection 5.3 or in the most recent financial statements delivered pursuant to subsection 6.1, in each case except for assets disposed of since the date of such financial statements in the ordinary course of business or as otherwise permitted under subsection 7.7. Except as permitted by this Agreement, all such properties and assets are free and clear of Liens. 94 B. REAL PROPERTY. As of the Closing Date, SCHEDULE 5.5 annexed hereto contains a true, accurate and complete list of (i) all real property owned by Company or any Subsidiary and (ii) all leases, subleases or assignments of leases (together with all amendments, modifications, supplements, renewals or extensions of any thereof) affecting each Real Property Asset of any Loan Party, regardless of whether such Loan Party is the landlord or tenant (whether directly or as an assignee or successor in interest) under such lease, sublease or assignment. Except as specified in SCHEDULE 5.5 annexed hereto, each agreement listed in clause (ii) of the immediately preceding sentence is in full force and effect and Company does not have knowledge of any material default that has occurred and is continuing thereunder, and each such agreement constitutes the legally valid and binding obligation of each applicable Loan Party, enforceable against such Loan Party 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 or by equitable principles. 5.6 LITIGATION; ADVERSE FACTS. There are no actions, suits, proceedings, arbitrations or governmental investigations (whether or not purportedly on behalf of Company or any of its Subsidiaries) at law or in equity, or before or by any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign (including any Environmental Claims) that are pending or, to the knowledge of Company, threatened against or affecting Company or any of its Subsidiaries or any property of Company or any of its Subsidiaries and that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. Neither Company nor any of its Subsidiaries (i) is in violation of any applicable laws (including Environmental Laws) that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect, or (ii) is subject to or in default with respect to any final judgments, writs, injunctions, decrees, rules or regulations of any court or any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. 5.7 PAYMENT OF TAXES. Except to the extent permitted by subsection 6.3, all tax returns that could reasonably be expected to have a Material Adverse Effect on Company or its Subsidiaries if not filed, and reports of Company and its Subsidiaries required to be filed by any of them, have been timely filed, and all taxes shown on such tax returns to be due and payable and all assessments, fees and other governmental charges upon Company and its Subsidiaries and upon their respective properties, assets, income, businesses and franchises which are due and payable have been paid when due and payable. Company knows of no proposed tax assessment against Company or any of 95 its Subsidiaries which is not in the ordinary course of business or being actively contested by Company or such Subsidiary in good faith and by appropriate proceedings; PROVIDED that such reserves or other appropriate provisions, if any, as shall be required in conformity with GAAP shall have been made or provided therefor. 5.8 PERFORMANCE OF AGREEMENTS; MATERIALLY ADVERSE AGREEMENTS. A. Neither Company nor any of its Subsidiaries is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any of its securities, indentures, mortgages, deeds of trust, contracts, undertakings, agreements or other instruments, and no condition exists that, with the giving of notice or the lapse of time or both, would constitute such a default, except where the consequences, direct or indirect, of such default or defaults, if any, would not have a Material Adverse Effect. B. Neither Company nor any of its Subsidiaries is a party to or is otherwise subject to any agreements or instruments or any charter or other internal restrictions which, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. 5.9 GOVERNMENTAL REGULATION. Neither Company nor any of its Subsidiaries is subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act or the Investment Company Act of 1940 or under any other federal or state statute or regulation or under any other comparable or similar laws of any governmental authority which may limit its ability to incur Indebtedness or which may otherwise render all or any portion of the Obligations unenforceable. 5.10 SECURITIES ACTIVITIES. A. Neither Company 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 Stock. B. Following application of the proceeds of each Loan, not more than 25% of the value of the assets (either of Company only or of Company and its Subsidiaries on a consolidated basis) subject to the provisions of subsection 7.2 or 7.7 or subject to any restriction contained in any agreement or instrument, between Company and any Lender or any Affiliate of any Lender, relating to Indebtedness and within the scope of subsection 8.2, will be Margin Stock. 96 5.11 EMPLOYEE BENEFIT PLANS. A. Company, each of its Subsidiaries and each of their respective ERISA Affiliates are in substantial compliance with all applicable provisions and requirements of ERISA and the regulations and published interpretations thereunder with respect to each Employee Benefit Plan, and have performed all their material obligations under each Employee Benefit Plan. To the best knowledge of Company, each Employee Benefit Plan which is intended to qualify under Section 401(a) of the Internal Revenue Code is so qualified. B. No ERISA Event has occurred or is reasonably expected to occur that could be reasonably expected to subject Company, any of its Subsidiaries or their respective ERISA Affiliates to a liability in excess of $500,000. C. Except as disclosed on SCHEDULE 5.11, and except to the extent required under Section 4980B of the Internal Revenue Code or Part 6 of Subtitle B of Title I of ERISA, no "employee welfare benefit plan" (within the meaning of Section 3(1) of ERISA) of Company provides benefits to any retired or former employee of Company, any of its Subsidiaries or any of their respective ERISA Affiliates in excess of $500,000. D. As of the most recent valuation date for any Pension Plan, the amount of unfunded benefit liabilities (as defined in Section 4001(a)(18) of ERISA), individually or in the aggregate for all Pension Plans (excluding for purposes of such computation any Pension Plans with respect to which assets exceed benefit liabilities), does not exceed $500,000. E. As of the most recent valuation date for each Multiemployer Plan for which the actuarial report is available to Company, the potential liability of Company, its Subsidiaries and their respective ERISA Affiliates for a complete withdrawal from such Multiemployer Plan (within the meaning of Section 4203 of ERISA), when aggregated with such potential liability for a complete withdrawal from all Multiemployer Plans, based on information available pursuant to Section 4221(e) of ERISA, does not exceed $500,000 in the aggregate for all such benefits. 5.12 CERTAIN FEES. Other than as disclosed in the Note Offering Memorandum, no broker's or finder's fee or commission will be payable with respect to this Agreement or any of the transactions contemplated hereby, and Company hereby indemnifies Lenders against, and agrees that it will hold Lenders harmless from, any claim, demand or liability for any such broker's or finder's fees alleged to have been incurred in connection herewith or therewith and any expenses (including reasonable fees, expenses and disbursements of counsel) arising in connection with any such claim, demand or liability. 97 5.13 ENVIRONMENTAL PROTECTION. Except as set forth in SCHEDULE 5.13 annexed hereto: (i) neither Company nor any of its Subsidiaries nor any of their respective Facilities or operations are subject to any outstanding written order, consent decree or settlement agreement with any Person relating to (a) any Environmental Law, (b) any Environmental Claim, or (c) any Hazardous Materials Activity; (ii) neither Company nor any of its Subsidiaries has received any letter or request for information under Section 104 of the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. Section 9604) or any comparable state law with respect to a matter which could reasonably be expected to have a Material Adverse Effect on Company; (iii) there are and, to Company's knowledge, have been no conditions, occurrences, or Hazardous Materials Activities which could reasonably be expected to form the basis of an Environmental Claim against Company or any of its Subsidiaries reasonably likely to have a Material Adverse Effect; (iv) neither Company nor any of its Subsidiaries nor, to Company's knowledge, any predecessor of Company or any of its Subsidiaries has filed any notice under any Environmental Law indicating past or present treatment of Hazardous Materials at any Facility, and none of Company' or any of its Subsidiaries' operations involves the generation, transportation, treatment, storage or disposal of hazardous waste, as defined under 40 C.F.R. Parts 260-270 or any state equivalent; and (v) compliance with all Environmental Laws will not, individually or in the aggregate, have a reasonable likelihood of giving rise to a Material Adverse Effect. Notwithstanding anything in this subsection 5.13 to the contrary, no event or condition has occurred or is occurring with respect to Company or any of its Subsidiaries relating to any Environmental Law, any Release of Hazardous Materials, or any Hazardous Materials Activity, including any matter disclosed on SCHEDULE 5.13 annexed hereto, which individually or in the aggregate has had or could reasonably be expected to have a Material Adverse Effect. 98 5.14 EMPLOYEE MATTERS. There is no strike or work stoppage in existence or, to Company's knowledge, threatened involving Company or any of its Subsidiaries that could reasonably be expected to have a Material Adverse Effect. 5.15 SOLVENCY. Each Loan Party is and, upon the incurrence of any Obligations by such Loan Party on any date on which this representation is made, will be, Solvent. 5.16 MATTERS RELATING TO COLLATERAL. A. CREATION, PERFECTION AND PRIORITY OF LIENS. The execution and delivery of the Collateral Documents by Loan Parties, together with (i) the actions taken on or prior to the date hereof pursuant to subsections 4.1E, 4.1F, 6.8 and 6.9 and (ii) the delivery to Administrative Agent of any Pledged Collateral not delivered to Administrative Agent at the time of execution and delivery of the applicable Collateral Document (all of which Pledged Collateral has been so delivered) are effective to create in favor of Administrative Agent for the benefit of Lenders, as security for the respective Secured Obligations (as defined in the applicable Collateral Document in respect of any Collateral), a valid and perfected First Priority Lien on all of the Collateral, and all filings and other actions necessary or desirable to perfect and maintain the perfection and First Priority status of such Liens have been duly made or taken and remain in full force and effect, other than the filing of any UCC financing statements delivered to Administrative Agent for filing (but not yet filed) and the periodic filing of UCC continuation statements in respect of UCC financing statements filed by or on behalf of Administrative Agent. B. GOVERNMENTAL AUTHORIZATIONS. No authorization, approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for either (i) the pledge or grant by any Loan Party of the Liens purported to be created in favor of Administrative Agent pursuant to any of the Collateral Documents or (ii) the exercise by Administrative Agent of any rights or remedies in respect of any Collateral (whether specifically granted or created pursuant to any of the Collateral Documents or created or provided for by applicable law), except for filings or recordings contemplated by subsection 5.16A and except as may be required, in connection with the disposition of any Pledged Collateral, by laws generally affecting the offering and sale of securities. C. ABSENCE OF THIRD-PARTY FILINGS. Except such as may have been filed in favor of Administrative Agent as contemplated by subsection 5.16A, (i) no effective UCC financing statement, fixture filing or other instrument similar in effect covering all or any part of the Collateral is on file in any filing or recording office and (ii) no effective filing covering all or any part of the IP Collateral is on file in the PTO. 99 D. MARGIN REGULATIONS. The pledge of the Pledged Collateral pursuant to the Collateral Documents does not violate Regulation G, T, U or X of the Board of Governors of the Federal Reserve System. 5.17 DISCLOSURE. No information contained in the Loan Documents or in any other document, certificate or written statement furnished to Lenders by or on behalf of Company or any of its Subsidiaries for use in connection with the transactions contemplated by this Agreement is inaccurate, incomplete, untrue or misleading in any material respect. Any projections and pro forma financial information contained in such materials are based upon good faith estimates and assumptions believed by Company to be reasonable at the time made, it being recognized by Lenders that such projections as to future events are not to be viewed as facts and that actual results during the period or periods covered by any such projections may differ from the projected results. There are no facts known (or which should upon the reasonable exercise of diligence be known) to Company (other than matters of a general economic nature) that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect and that have not been disclosed herein or in such other documents, certificates and statements furnished to Lenders for use in connection with the transactions contemplated hereby. SECTION 6. COMPANY'S AFFIRMATIVE COVENANTS Company covenants and agrees that, so long as any of the Commitments hereunder shall remain in effect and until payment in full of all of the Loans and other Obligations and the cancellation or expiration of all Letters of Credit, unless Requisite Lenders shall otherwise give prior written consent, Company shall perform, and shall cause each of its Subsidiaries to perform, all covenants in this Section 6. 6.1 FINANCIAL STATEMENTS AND OTHER REPORTS. Company will maintain, and cause each of its Subsidiaries to maintain, a system of accounting established and administered in accordance with sound business practices to permit preparation of financial statements in conformity with GAAP. Company will deliver to Agents and Lenders: (i) MONTHLY FINANCIALS: as soon as available and in any event within 30 days after the end of each month ending after the Closing Date, the consolidated statement of income of Company and its Subsidiaries as at the end of such month and for the period from the beginning of the then current Fiscal Year to the end of such month, setting forth in each case in comparative form the corresponding figures for the corresponding periods of the previous Fiscal Year, to the extent prepared on a monthly basis and in the form 100 prepared for internal reporting purposes, all in reasonable detail and certified by the chief financial officer, chief accounting officer or controller of Company that they fairly present the financial condition of Company and its Subsidiaries as at the dates indicated and the results of their operations for the periods indicated, subject to changes resulting from audit and normal year-end adjustments; (ii) QUARTERLY FINANCIALS: as soon as available and in any event within 45 days after the end of each Fiscal Quarter, (a) the consolidated balance sheet of Company and its Subsidiaries as at the end of such Fiscal Quarter and the related consolidated statements of income, stockholders' equity and cash flows of Company and its Subsidiaries for such Fiscal Quarter and for the period from the beginning of the then current Fiscal Year to the end of such Fiscal Quarter, setting forth in each case in comparative form the corresponding figures for the corresponding periods of the previous Fiscal Year and, if available, the corresponding figures from the Financial Plan for the current Fiscal Year, (b) sales, gross profit, operating income and EBITDA figures on a business unit basis for such Fiscal Quarter and for the period from the beginning of the then current Fiscal Year to the end of such Fiscal Quarter and prepared on a basis consistent with the financial statements delivered pursuant to subsection 4.1O, all in reasonable detail and certified by the chief financial officer of Company that they fairly present the financial condition of Company and its Subsidiaries as at the dates indicated and the results of their operations and their cash flows for the periods indicated, subject to changes resulting from audit and normal year-end adjustments, and (c) a narrative report describing the operations of Company and its Subsidiaries in the form prepared for presentation to senior management for such Fiscal Quarter and for the period from the beginning of the then current Fiscal Year to the end of such Fiscal Quarter; PROVIDED that delivery of the financial statements and narrative required pursuant to the foregoing clause (a) and (c) may be satisfied by delivery of Company's Quarterly Report on Form 10-Q as filed with the Securities and Exchange Commission; (iii) YEAR-END FINANCIALS: as soon as available and in any event within 90 days after the end of each Fiscal Year, (a) the consolidated balance sheet of Company and its Subsidiaries as at the end of such Fiscal Year and the related consolidated statements of income, stockholders' equity and cash flows of Company and its Subsidiaries for such Fiscal Year, setting forth in each case in comparative form the corresponding figures for the previous Fiscal Year and, if available, the corresponding figures from the Financial Plan for the Fiscal Year covered by such financial statements, (b) sales, gross profit, operating income and EBITDA figures on a business unit basis for such Fiscal Year and for the period from the beginning of the then current Fiscal Year to the end of such Fiscal Year and prepared on a basis consistent with the financial statements delivered pursuant to subsection 4.1O, all in reasonable 101 detail and certified by the chief financial officer, chief accounting officer or controller of Company that they fairly present the financial condition of Company and its Subsidiaries as at the dates indicated and the results of their operations and their cash flows for the periods indicated, (c) a narrative report describing the operations of Company and its Subsidiaries in the form prepared for presentation to senior management for such Fiscal Year, and (d) in the case of such consolidated financial statements, (1) a report thereon of Ernst & Young LLP, or other independent certified public accountants of recognized national standing selected by Company and satisfactory to Agents, which report shall be unqualified as to scope of audit, shall express no doubts about the ability of Company and its Subsidiaries to continue as a going concern, and shall state that such consolidated financial statements fairly present the consolidated financial position of Company and its Subsidiaries as at the dates indicated and the results of their operations and their cash flows for the periods indicated in conformity with GAAP applied on a basis consistent with prior years (except as otherwise disclosed in such financial statements) and that the examination by such accountants in connection with such consolidated financial statements has been made in accordance with generally accepted auditing standards, and (2) a copy of an Auditor's Letter substantially in the form of EXHIBIT XXIV from Ernst & Young LLP or other independent certified public accountants to Company with respect to such audited consolidated financial statements; PROVIDED that delivery of the financial statements and narrative required pursuant to the foregoing clause (a) and (c) may be satisfied by delivery of Company's Annual Report on Form 10-K as filed with the Securities and Exchange Commission; (iv) OFFICER'S AND COMPLIANCE CERTIFICATES: together with each delivery of financial statements of Company and its Subsidiaries pursuant to subdivisions (i), (ii) and (iii) above, (a) an Officer's Certificate of Company stating that the signers do not have knowledge of the existence as at the date of such Officer's Certificate, of any condition or event that constitutes an Event of Default or Potential Event of Default, or, if any such condition or event existed or exists, specifying the nature and period of existence thereof and what action Company has taken, is taking and proposes to take with respect thereto; and (b) a Compliance Certificate demonstrating in reasonable detail compliance during and at the end of the applicable accounting periods with the restrictions contained in Section 7, in each case to the extent compliance with such restrictions is required to be tested at the end of the applicable accounting period; (v) CERTAIN ACCOUNTING CHANGES: if, as a result of any change in accounting principles and policies from those used in the preparation of the audited financial statements referred to in subsection 5.3, the consolidated financial statements of Company and its Subsidiaries delivered pursuant to subdivisions (i), (ii), (iii) or (xiii) of this subsection 6.1 will differ in any 102 material respect from the consolidated financial statements that would have been delivered pursuant to such subdivisions had no such change in accounting principles and policies been made or, if as a result of any change in Company's Fiscal Year-end, the numbers set forth in the financial covenants or other covenants set forth herein do not measure Company's compliance with such covenants in the same manner as before such change, then (a) Company shall promptly notify Administrative Agent of any such change and Company and Lenders will negotiate in good faith to amend Sections 1, 6 and 7 hereof so that the criteria for evaluating Company's financial condition and performance shall be the same as they were prior to such changes, and (b) together with each delivery of financial statements pursuant to subdivision (i), (ii), (iii) or (xiii) of this subsection 6.1 following such change until such time as Company and Lenders have agreed on such amendments to Sections 1, 6 and 7, a written statement of the chief accounting officer or chief financial officer of Company setting forth the differences (including any differences that would affect any calculations relating to the financial covenants set forth in subsection 7.6) which would have resulted if such financial statements had been prepared, or compliance with such covenants had been measured, without giving effect to such change; (vi) ACCOUNTANTS' CERTIFICATION: together with each delivery of consolidated financial statements of Company and its Subsidiaries pursuant to subdivision (iii) above, a written statement by the independent certified public accountants giving the report thereon (a) stating that their audit examination has included a review of the terms of Section 7 of this Agreement as they relate to accounting matters, (b) stating whether, in connection with their audit examination, any condition or event that constitutes an Event of Default or Potential Event of Default has come to their attention and, if such a condition or event has come to their attention, specifying the nature and period of existence thereof; PROVIDED that such accountants shall not be liable by reason of any failure to obtain knowledge of any such Event of Default or Potential Event of Default that would not be disclosed in the course of their audit examination, and (c) stating that based on their audit examination nothing has come to their attention that causes them to believe either or both that the information contained in the certificates delivered therewith pursuant to subdivision (iv) above is not correct or that the matters set forth in the Compliance Certificates delivered therewith pursuant to clause (b) of subdivision (iv) above for the applicable Fiscal Year are not stated in accordance with the terms of this Agreement; (vii) ACCOUNTANTS' REPORTS: promptly upon receipt thereof (unless restricted by applicable professional standards), copies of any comment letter submitted by such accountants to management in connection with their annual audit; 103 (viii) SEC FILINGS AND PRESS RELEASES: promptly upon their becoming available, copies of (a) all financial statements, reports, notices and proxy statements sent or made available generally by Company to its security holders or by any Subsidiary of Company to its security holders other than Company or another Subsidiary of Company, and (b) all regular and periodic reports and all registration statements (other than on Form S-8 or a similar form) and prospectuses, if any, filed by Company or any of its Subsidiaries with any securities exchange or with the Securities and Exchange Commission or any governmental or regulatory authority; (ix) EVENTS OF DEFAULT, ETC.: promptly upon any officer of Company obtaining knowledge (a) of any condition or event that constitutes an Event of Default or Potential Event of Default, or becoming aware that any Lender has given any notice (other than to Administrative Agent) or taken any other action with respect to a claimed Event of Default or Potential Event of Default, (b) that any Person has given any notice to Company or any of its Subsidiaries or taken any other action with respect to a claimed default or event or condition of the type referred to in subsection 8.2, (c) of any condition or event that would be required to be disclosed in a current report filed by Company with the Securities and Exchange Commission on Form 8-K (Items 1, 2, 4, 5 and 6 of such Form as in effect on the date hereof) if Company were required to file such reports under the Exchange Act, or (d) of the occurrence of any event or change that has caused or evidences, either in any case or in the aggregate, a Material Adverse Effect, an Officer's Certificate specifying the nature and period of existence of such condition, event or change, or specifying the notice given or action taken by any such Person and the nature of such claimed Event of Default, Potential Event of Default, default, event or condition, and what action Company has taken, is taking and proposes to take with respect thereto; (x) LITIGATION OR OTHER PROCEEDINGS: promptly upon any officer of Company obtaining knowledge of (X) the institution of, or written threat of, any action, suit, proceeding (whether administrative, judicial or otherwise), governmental investigation or arbitration against or affecting Company or any of its Subsidiaries or any property of Company or any of its Subsidiaries (collectively, "PROCEEDINGS") not previously disclosed in writing by Company to Lenders or (Y) any material development in any Proceeding that, in any case: (1) if adversely determined, could reasonably be expected to give rise to a Material Adverse Effect; or (2) seeks to enjoin or otherwise prevent the consummation of, or to recover any damages or obtain relief as a result of, the transactions contemplated hereby; 104 written notice thereof; (xi) ERISA EVENTS: promptly upon becoming aware of the occurrence of or forthcoming occurrence of any ERISA Event that individually or in the aggregate could reasonably be expected to result in a material liability to Company, a written notice specifying the nature thereof, what action Company, any of its Subsidiaries or any of their respective ERISA Affiliates has taken, is taking or proposes to take with respect thereto and, when known, any action taken or threatened in writing by the Internal Revenue Service, the Department of Labor or the PBGC with respect thereto; (xii) FISCAL YEAR: promptly upon any decision by Company to change Company's Fiscal Year, written notice of such new Fiscal Year-end; (xiii) FINANCIAL PLANS: at such time as prepared by Company, a consolidated plan and financial forecast for such Fiscal Year or for at least the six month period succeeding the delivery of such plan and financial forecast (the "FINANCIAL PLAN") as customarily prepared by Company, including without limitation (a) forecasted balance sheets and forecasted statements of income and cash flows of Company and its Subsidiaries on a consolidated basis, together with an explanation of the assumptions on which such forecasts are based and (b) forecasted statements of income and cash flows of Company and its Subsidiaries on a consolidated basis for each Fiscal Period of such Fiscal Year, together with an explanation of the assumptions on which such forecasts are based; PROVIDED that at all times Administrative Agent and Lenders shall have a Financial Plan effective for at least the next succeeding month; (xiv) NEW SUBSIDIARIES: promptly upon any Person becoming a Subsidiary of Company, a written notice setting forth with respect to such Person (a) the date on which such Person became a Subsidiary of Company and (b) all of the data required to be set forth in SCHEDULE 5.1 annexed hereto with respect to all Subsidiaries of Company (it being understood that such written notice shall be deemed to supplement SCHEDULE 5.1 annexed hereto for all purposes of this Agreement); (xv) MARGIN DETERMINATION CERTIFICATE: concurrently with the delivery of the financial statements required under subsections 6.1(ii) and 6.1(iii), Company shall deliver a Margin Determination Certificate; (xvi) INSURANCE: as soon as practicable and in any event by the last day of each Fiscal Year, an Officer's Certificate or other report or certificates of insurance outlining all material insurance coverage maintained as of the date of such report or certificate by Company and its Subsidiaries; and 105 (xvii) OTHER INFORMATION: with reasonable promptness, such other information and data with respect to Company or any of its Subsidiaries as from time to time may be reasonably requested by any Lender. 6.2 CORPORATE EXISTENCE, ETC. Except as permitted under subsection 7.7, Company will, and will cause each of its Subsidiaries to, at all times preserve and keep in full force and effect its corporate existence and all rights and franchises material to its business; PROVIDED, HOWEVER that neither Company nor any of its Subsidiaries shall be required to preserve any such right or franchise if the Board of Directors of Company or such Subsidiary shall determine that the preservation thereof is no longer desirable in the conduct of the business of Company or such Subsidiary, as the case may be, and that the loss thereof is not disadvantageous in any material respect to Company, such Subsidiary or Lenders. 6.3 PAYMENT OF TAXES AND CLAIMS; TAX CONSOLIDATION. A. Company will, and will cause each of its Subsidiaries to, pay all taxes that could reasonably be expected to have a Material Adverse Effect on Company or its Subsidiaries if not paid, assessments and other governmental charges, imposed upon it or any of its properties or assets or in respect of any of its income, businesses or franchises, and all claims (including claims for labor, services, materials and supplies) for sums that have become due and payable and that by law have or may become a Lien upon any of its properties or assets, prior to the time when any penalty or fine shall be incurred with respect thereto; PROVIDED that no such charge or claim need be paid if it is being contested in good faith by appropriate proceedings promptly instituted and diligently conducted, so long as (1) such reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made therefor and (2) in the case of a charge or claim which has or may become a Lien against any of the Collateral, such contest proceedings conclusively operate to stay the sale of any portion of the Collateral to satisfy such charge or claim. B. Company will not, nor will it permit any of its Subsidiaries to, file or consent to the filing of any consolidated income tax return with any Person (other than Company or any of its Subsidiaries). 6.4 MAINTENANCE OF PROPERTIES; INSURANCE. A. MAINTENANCE OF PROPERTIES. Company will, and will cause each of its Subsidiaries to, maintain or cause to be maintained in good repair, working order and condition, ordinary wear and tear excepted, all material properties used in the business of Company and its Subsidiaries (including all Intellectual Property) and from time to time will make or cause to be made all appropriate repairs, renewals 106 and replacements thereof; PROVIDED, HOWEVER that neither Company nor any of its Subsidiaries shall be required to maintain any such property if the Board of Directors of Company or such Subsidiary shall determine that the maintenance thereof is no longer desirable in the conduct of the business of Company or such Subsidiary, as the case may be, and that the loss thereof is not disadvantageous in any material respect to Company, such Subsidiary or Lenders. B. INSURANCE. Company will maintain or cause to be maintained, with financially sound and reputable insurers, such public liability insurance, third party property damage insurance, business interruption insurance and casualty insurance with respect to liabilities, losses or damage in respect of the assets, properties and businesses of Company and its Subsidiaries as may customarily be carried or maintained under similar circumstances by corporations of established reputation engaged in similar businesses, in each case in such amounts (giving effect to self-insurance), with such deductibles, covering such risks and otherwise on such terms and conditions as shall be customary for corporations similarly situated in the industry. Without limiting the generality of the foregoing, Company will maintain or cause to be maintained (i) flood insurance with respect to each Flood Hazard Property that is located in a community that participates in the National Flood Insurance Program, in each case in compliance with any applicable regulations of the Board of Governors of the Federal Reserve System, and (ii) replacement value property insurance on the Collateral. Each such policy of insurance shall (a) name Administrative Agent for the benefit of Lenders as an additional insured thereunder as its interests may appear and (b) in the case of each business interruption and casualty insurance policy, contain a loss payable clause or endorsement, satisfactory in form and substance to Agents, that names Administrative Agent for the benefit of Lenders as the loss payee thereunder for any covered loss in excess of $500,000 and provides for at least 30 days prior written notice to Agents of any modification or cancellation of such policy. 6.5 INSPECTION RIGHTS; LENDER MEETING. A. INSPECTION RIGHTS. Company shall, and shall cause each of its Subsidiaries to, permit any authorized representatives designated by any Lender to visit and inspect any of the properties of Company or of any of its Subsidiaries, to inspect, copy and take extracts from its and their financial and accounting records, and to discuss its and their affairs, finances and accounts with its and their officers and independent public accountants (provided that Company may, if it so chooses, be present at or participate in any such discussion), all upon reasonable notice and at such reasonable times during normal business hours and as often as may reasonably be requested and for all such purposes as are reasonably related to this Agreement or the extensions of credit hereunder. B. LENDER MEETING. Company will, upon the request of Agents or Requisite Lenders, participate in a meeting of Agents and Lenders once during each 107 Fiscal Year to be held at Company's corporate offices (or at such other location as may be agreed to by Company and Agents) at such time as may be agreed to by Company and Agents. 6.6 COMPLIANCE WITH LAWS, ETC. Company shall comply, and shall cause each of its Subsidiaries to comply, and shall use its best efforts to cause all other Persons on or occupying any Facilities to comply, with the requirements of all applicable laws, rules, regulations and orders of any governmental authority (including all Environmental Laws), noncompliance with which could reasonably be expected to cause, individually or in the aggregate, a Material Adverse Effect. 6.7 ENVIRONMENTAL REVIEW AND INVESTIGATION, DISCLOSURE, ETC.; COMPANY'S ACTIONS REGARDING HAZARDOUS MATERIALS ACTIVITIES, ENVIRONMENTAL CLAIMS AND VIOLATIONS OF ENVIRONMENTAL LAWS. A. ENVIRONMENTAL REVIEW AND INVESTIGATION. Company agrees that Agents may, if an Event of Default has occurred and is continuing, or if Administrative Agent has received information indicating a Release, Environmental Claim or other environmental liability at a Facility having a reasonable possibility of causing a Material Adverse Effect, and to the extent permitted by any lease or other third party agreement governing activities at such Facility, (i) retain, at Company's expense, an independent professional consultant to review any environmental audits, investigations, analyses and reports relating to Hazardous Materials prepared by or for Company and (ii) conduct its own investigation of any such Facility; PROVIDED that, in the case of any Facility no longer owned, leased, operated or used by Company or any of its Subsidiaries, Company shall only be obligated to use its reasonable efforts to obtain permission for Agents' professional consultant to conduct an investigation of such Facility. For purposes of conducting such a review and/or investigation, Company hereby grants to Agents and their respective agents, employees, consultants and contractors the right to enter into or onto any Facilities currently owned, leased, operated or used by Company or any of its Subsidiaries and to perform such tests on such property (including taking samples of soil, groundwater and suspected asbestos-containing materials) as are reasonably necessary in connection therewith. Any such investigation of any Facility shall be conducted in compliance with all Environmental Laws and any lease or other third party document governing activities at such Facility, unless otherwise agreed to by Company and Agents, during normal business hours and, to the extent reasonably practicable, shall be conducted so as not to interfere with the ongoing operations at such Facility or to cause any damage or loss to any property at such Facility. Company and Agents hereby acknowledge and agree that any report of any investigation conducted at the request of Agents pursuant to this subsection 6.7A will be obtained and shall be used by Agents and Lenders for the purposes of Lenders' internal credit decisions, to monitor and police the Loans and to protect Lenders' security interests, if any, created by the Loan Documents, and any 108 other purpose required by law. Agents agree to deliver a copy of any such report, subject to any contractual obligations restricting or prohibiting such delivery, to Company with the understanding that Company acknowledges and agrees that neither of the Agents nor any Lender makes any representation or warranty with respect to such report, and (z) by delivering such report to Company, neither of the Agents nor any Lender is requiring or recommending the implementation of any suggestions or recommendations contained in such report. B. ENVIRONMENTAL DISCLOSURE. Company will deliver to Agents and Lenders: (i) ENVIRONMENTAL AUDITS AND REPORTS. As soon as practicable following receipt thereof, copies of all material environmental audits, investigations, analyses and reports of any kind or character under its control, whether prepared by personnel of Company or any of its Subsidiaries or by independent consultants, governmental authorities or any other Persons, with respect to significant environmental matters at any Facility; (ii) NOTICE OF CERTAIN RELEASES, REMEDIAL ACTIONS, ETC. As soon as practicable upon the occurrence thereof, written notice describing in reasonable detail (a) any Release required to be reported to any federal, state or local governmental or regulatory agency under any applicable Environmental Laws, (b) any remedial action taken by Company or any other Person in response to (1) any Hazardous Materials Activities the existence of which has a reasonable possibility of resulting in one or more Environmental Claims having, individually or in the aggregate, a Material Adverse Effect, or (2) any Environmental Claims that, individually or in the aggregate, have a reasonable likelihood of resulting in a Material Adverse Effect, and (c) Company's discovery of any occurrence or condition on any real property adjoining or in the vicinity of any Facility that could cause such Facility or any part thereof to be subject to any material restrictions on the ownership, occupancy, transferability or use thereof under any Environmental Laws reasonably likely to have a Material Adverse Effect on Company. (iii) WRITTEN COMMUNICATIONS REGARDING ENVIRONMENTAL CLAIMS, RELEASES, ETC. As soon as practicable following the sending or receipt thereof by Company or any of its Subsidiaries, a copy of any and all written communications with respect to (a) any Environmental Claims that, individually or in the aggregate, have a reasonable possibility of giving rise to a Material Adverse Effect, (b) any Release required to be reported to any federal, state or local governmental or regulatory agency, and (c) any request for information from any governmental agency that suggests such agency is investigating whether Company or any of its Subsidiaries may be potentially responsible for any Hazardous Materials Activity. 109 (iv) NOTICE OF CERTAIN PROPOSED ACTIONS HAVING ENVIRONMENTAL IMPACT. Prompt written notice describing in reasonable detail (a) any proposed acquisition of stock, assets, or property by Company or any of its Subsidiaries that could reasonably be expected to (1) expose Company or any of its Subsidiaries to, or result in, Environmental Claims that could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect or (2) impair the ability of Company or any of its Subsidiaries to maintain in full force and effect all material Governmental Authorizations required under any Environmental Laws for their respective operations and (b) any proposed action to be taken by Company or any of its Subsidiaries to commence manufacturing or other industrial operations or to modify current operations in a manner that could reasonably be expected to subject Company or any of its Subsidiaries to any additional material obligations or requirements under any Environmental Laws. (v) OTHER INFORMATION. With reasonable promptness, such other documents and information as from time to time may be reasonably requested by Agents in relation to any matters disclosed pursuant to this subsection 6.7. C. COMPANY'S ACTIONS REGARDING HAZARDOUS MATERIALS ACTIVITIES, ENVIRONMENTAL CLAIMS AND VIOLATIONS OF ENVIRONMENTAL LAWS. (i) REMEDIAL ACTIONS RELATING TO HAZARDOUS MATERIALS ACTIVITIES. Company shall promptly undertake, and shall cause each of its Subsidiaries promptly to undertake, any and all investigations, studies, sampling, testing, abatement, cleanup, removal, remediation or other response actions necessary to remove, remediate, clean up or abate any Hazardous Materials Activity on, under or about any Facility that puts Company or any Subsidiary in violation of any Environmental Laws or that presents a material risk of giving rise to an Environmental Claim against Company or any Subsidiary. In the event Company or any of its Subsidiaries undertakes any such action with respect to any Hazardous Materials, Company or such Subsidiary shall conduct and complete such action in compliance with all applicable Environmental Laws and in accordance with the policies, orders and directives of all federal, state and local governmental authorities except when, and only to the extent that, Company's or such Subsidiary's liability with respect to such Hazardous Materials Activity is being contested in good faith by Company or such Subsidiary. (ii) ACTIONS WITH RESPECT TO ENVIRONMENTAL CLAIMS AND VIOLATIONS OF ENVIRONMENTAL LAWS. Company shall promptly take, and shall cause each of its Subsidiaries promptly to take, any and all actions necessary to (i) cure any violation of applicable Environmental Laws by Company or its Subsidiaries and (ii) make an appropriate response to any Environmental Claim against 110 Company or any of its Subsidiaries and discharge any obligations it may have to any Person thereunder. 6.8 EXECUTION OF SUBSIDIARY GUARANTY, PERSONAL PROPERTY COLLATERAL DOCUMENTS BY CERTAIN SUBSIDIARIES, FUTURE SUBSIDIARIES AND COMPANY PLEDGE AGREEMENTS. A. EXECUTION OF SUBSIDIARY GUARANTY AND PERSONAL PROPERTY COLLATERAL DOCUMENTS. In the event that any Person becomes a Subsidiary of Company after the date hereof, Company will promptly notify Administrative Agent of that fact and cause such Subsidiary which is a Domestic Subsidiary to execute and deliver to Administrative Agent a counterpart of the Subsidiary Guaranty, and, as appropriate, a Subsidiary Pledge Agreement, a Subsidiary Security Agreement, Additional Mortgages, a Subsidiary Patent Collateral Assignment and Security Agreement and a Subsidiary Trademark Security Agreement, and to take all such further actions and execute all such further documents and instruments (including actions, documents and instruments comparable to those described in subsection 4.1E) as may be necessary or, in the opinion of Agents, desirable to create in favor of Administrative Agent, for the benefit of Lenders, a valid and perfected First Priority Lien on all of the personal and mixed property assets of such Subsidiary described in the applicable forms of Collateral Documents. With respect to any such Domestic Subsidiary, Company shall also deliver to Administrative Agent a pledge amendment to the Company Pledge Agreement or the applicable Subsidiary Pledge Agreement, as appropriate, granting to Administrative Agent on behalf of Lenders a first priority security interest in 100% of the capital stock of such Domestic Subsidiary. B. SUBSIDIARY CHARTER DOCUMENTS, LEGAL OPINIONS, ETC. Company shall deliver to Administrative Agent, together with such Loan Documents, (i) certified copies of such Subsidiary's Certificate or Articles of Incorporation, together with a good standing certificate from the Secretary of State of the jurisdiction of its incorporation and each other state in which such Person is qualified as a foreign corporation to do business and, to the extent generally available, a certificate or other evidence of good standing as to payment of any applicable franchise or similar taxes from the appropriate taxing authority of each of such jurisdictions, each to be dated a recent date prior to their delivery to Administrative Agent, (ii) a copy of such Subsidiary's Bylaws, certified by its corporate secretary or an assistant secretary as of a recent date prior to their delivery to Administrative Agent, (iii) a certificate executed by the secretary or an assistant secretary of such Subsidiary as to (a) the fact that the attached resolutions of the Board of Directors of such Subsidiary approving and authorizing the execution, delivery and performance of such Loan Documents are in full force and effect and have not been modified or amended and (b) the incumbency and signatures of the officers of such Subsidiary executing such Loan Documents, and (iv) a favorable opinion of counsel to such Subsidiary, in form and substance satisfactory to Agents and their respective counsel, as to (a) the due organization and good standing of such Subsidiary, (b) the due authorization, 111 execution and delivery by such Subsidiary of such Loan Documents, (c) the enforceability of such Loan Documents against such Subsidiary, (d) such other matters (including matters relating to the creation and perfection of Liens in any Collateral pursuant to such Loan Documents) as Agents may reasonably request, all of the foregoing to be satisfactory in form and substance to Agents and their respective counsel. C. FUTURE FOREIGN SUBSIDIARIES. In the event that any Person becomes a Subsidiary of Company after the date hereof and such Subsidiary is a Foreign Subsidiary which is not an Immaterial Subsidiary, with respect to any such Foreign Subsidiary, Company shall deliver to Administrative Agent a pledge amendment to the Company Pledge Agreement or shall execute a Company Pledge Agreement under the laws of the jurisdiction of organization or incorporation of such Foreign Subsidiary, in each case granting to Administrative Agent on behalf of Lenders a first priority security interest in 65% of the capital stock of such Foreign Subsidiary, and, in each case, Company shall take, or cause to be taken, all such other actions as Administrative Agent shall deem necessary or desirable to perfect such security interest. D. COMPANY PLEDGE AGREEMENTS. To the extent not delivered to Administrative Agent on the Closing Date, by June 20, 1997, Administrative Agent shall have received executed originals of all Company Pledge Agreements, in each case in form and substance satisfactory to Administrative Agent, with respect to the pledge of 65% of the capital stock of each Foreign Subsidiary that is a direct Subsidiary of Company, together with evidence satisfactory to Administrative Agent that all filings, recordings and other actions that Administrative Agent deems necessary or advisable to establish, preserve and protect the Liens granted to Administrative Agent on behalf of Lenders with respect to such Foreign Subsidiary stock under the Collateral Documents shall have been made. 6.9 CONFORMING LEASEHOLD INTERESTS; MATTERS RELATING TO ADDITIONAL REAL PROPERTY COLLATERAL. A. CONFORMING LEASEHOLD INTERESTS. If Company or any of its Subsidiaries acquires any Leasehold Property, Company shall, or shall cause such Subsidiary to, cause such Leasehold Property to be a Conforming Leasehold Interest. B. ADDITIONAL MORTGAGES, ETC. From and after the Closing Date, in the event that (i) Company or any Subsidiary Guarantor acquires any fee interest in real property or any Material Leasehold Property or (ii) at the time any Person becomes a Subsidiary Guarantor, such Person owns or holds any fee interest in real property or any Material Leasehold Property, in either case excluding any such Real Property Asset the encumbrancing of which requires the consent of any applicable lessor or (in the case of clause (ii) above) then-existing senior lienholder, where Company and its Subsidiaries are unable to obtain such lessor's or senior lienholder's consent (any such 112 non-excluded Real Property Asset described in the foregoing clause (i) or (ii) being an "ADDITIONAL MORTGAGED PROPERTY"), Company or such Subsidiary Guarantor shall deliver to Administrative Agent, as soon as practicable after such Person acquires such Additional Mortgaged Property or becomes a Subsidiary Guarantor, as the case may be, the following: (i) ADDITIONAL MORTGAGE. A fully executed and notarized Mortgage (an "ADDITIONAL MORTGAGE"), duly recorded in all appropriate places in all applicable jurisdictions, encumbering the interest of such Loan Party in such Additional Mortgaged Property; (ii) OPINIONS OF COUNSEL. (a) A favorable opinion of counsel to such Loan Party, in form and substance satisfactory to Agents and their respective counsel, as to the due authorization, execution and delivery by such Loan Party of such Additional Mortgage and such other matters as Agents may reasonably request, and (b) if required by Agents, an opinion of counsel (which counsel shall be reasonably satisfactory to Agents) in the state in which such Additional Mortgaged Property is located with respect to the enforceability of the form of Additional Mortgage recorded in such state and such other matters (including any matters governed by the laws of such state regarding personal property security interests in respect of any Collateral) as Agents may reasonably request, in each case in form and substance reasonably satisfactory to Agents; (iii) LANDLORD ESTOPPEL AND CONSENT; RECORDED LEASEHOLD INTEREST. In the case of an Additional Mortgaged Property consisting of a Leasehold Property, (a) a Landlord Estoppel and Consent and (b) evidence that such Leasehold Property is a Recorded Leasehold Interest; (iv) TITLE INSURANCE. (a) If required by Agents with respect to fee interests in real property owned by Company or any Subsidiary Guarantor, an ALTA mortgagee title insurance policy or an unconditional commitment therefor (an "ADDITIONAL MORTGAGE POLICY") issued by a reputable title company with respect to such Additional Mortgaged Property, in an amount satisfactory to Agents, insuring fee simple title to, or a valid leasehold interest in, such Additional Mortgaged Property vested in such Loan Party and assuring Agents that such Additional Mortgage creates a valid and enforceable First Priority mortgage Lien on such Additional Mortgaged Property, subject only to a standard survey exception, which Additional Mortgage Policy (1) shall include an endorsement for mechanics' liens, for future advances under this Agreement and for any other matters reasonably requested by Agents and (2) shall provide for affirmative insurance and such reinsurance as Agents may reasonably request, all of the foregoing in form and substance reasonably satisfactory to Agents; and (b) evidence satisfactory to Agents that such Loan Party has (i) delivered to such title company all certificates and affidavits required by such title company in connection with the issuance of the Additional Mortgage 113 Policy and (ii) paid to such title company or to the appropriate governmental authorities all expenses and premiums of such title company in connection with the issuance of the Additional Mortgage Policy and all recording and stamp taxes (including mortgage recording and intangible taxes) payable in connection with recording the Additional Mortgage in the appropriate real estate records; (v) TITLE REPORT. If no Additional Mortgage Policy is required with respect to such Additional Mortgaged Property, a title report issued by such title company with respect thereto, dated not more than 30 days prior to the date such Additional Mortgage is to be recorded and satisfactory in form and substance to Agents; (vi) COPIES OF DOCUMENTS RELATING TO TITLE EXCEPTIONS. Copies of all recorded documents listed as exceptions to title or otherwise referred to in the Additional Mortgage Policy or title report delivered pursuant to clause (iv) or (v) above; (vii) MATTERS RELATING TO FLOOD HAZARD PROPERTIES. (a) Evidence, which may be in the form of a letter from an insurance broker or a municipal engineer, as to (1) whether such Additional Mortgaged Property is a Flood Hazard Property and (2) if so, whether the community in which such Flood Hazard Property is located is participating in the National Flood Insurance Program, (b) if such Additional Mortgaged Property is a Flood Hazard Property, such Loan Party's written acknowledgement of receipt of written notification from Administrative Agent (1) that such Additional Mortgaged Property is a Flood Hazard Property and (2) as to whether the community in which such Flood Hazard Property is located is participating in the National Flood Insurance Program, and (c) in the event such Additional Mortgaged Property is a Flood Hazard Property that is located in a community that participates in the National Flood Insurance Program, evidence that Company has obtained flood insurance in respect of such Flood Hazard Property to the extent required under the applicable regulations of the Board of Governors of the Federal Reserve System; and (viii) ENVIRONMENTAL AUDIT. If required by Agents, reports and other information, in form, scope and substance satisfactory to Agents and prepared by environmental consultants satisfactory to Agents, concerning any environmental hazards or liabilities to which Company or any of its Subsidiaries may be subject with respect to such Additional Mortgaged Property. 114 SECTION 7. COMPANY'S NEGATIVE COVENANTS Company covenants and agrees that, so long as any of the Commitments hereunder shall remain in effect and until payment in full of all of the Loans and other Obligations and the cancellation or expiration of all Letters of Credit, unless Requisite Lenders shall otherwise give prior written consent, Company shall perform, and shall cause each of its Subsidiaries to perform, all covenants in this Section 7. 7.1 INDEBTEDNESS. Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, create, incur, assume or guaranty, or otherwise become or remain directly or indirectly liable with respect to, any Indebtedness, except: (i) Company may become and remain liable with respect to the Obligations; (ii) Company and its Subsidiaries may become and remain liable with respect to Contingent Obligations permitted by subsection 7.4 and, upon any matured obligations actually arising pursuant thereto, the Indebtedness corresponding to the Contingent Obligations so extinguished; (iii) Company and its Subsidiaries may become and remain liable with respect to Indebtedness in respect of Capital Leases, mortgage financings or purchase money obligations; PROVIDED that such Capital Leases, mortgage financings or purchase money obligations are incurred for the purpose of financing all or any part of the purchase price or cost of construction or improvements of property used in the business of the Company or its Subsidiaries, in an aggregate principal amount not to exceed $4,000,000 at any time outstanding; (iv) Company may become and remain liable with respect to Indebtedness to any of its wholly-owned Subsidiaries, and any wholly-owned Subsidiary of Company may become and remain liable with respect to Indebtedness to Company or any other wholly-owned Subsidiary of Company; PROVIDED that (a) all such intercompany Indebtedness shall be evidenced by promissory notes which promissory notes (other than notes issued and payable to Foreign Subsidiaries) are pledged to Administrative Agent pursuant to the terms of the applicable Collateral Documents, (b) all such intercompany Indebtedness owed by Company or by any guarantor Subsidiary to Company or to any of Company's Subsidiaries shall be subordinated in right of payment to the payment in full of the Obligations pursuant to the terms of the applicable promissory notes or an intercompany subordination agreement, in each case in form and substance satisfactory to Administrative Agent, and (c) any payment by any Subsidiary of Company under any guaranty of the Obligations shall 115 result in a PRO TANTO reduction of the amount of any intercompany Indebtedness owed by such Subsidiary to Company or to any of its Subsidiaries for whose benefit such payment is made; (v) Company and its Subsidiaries, as applicable, may remain liable with respect to the existing Indebtedness described in SCHEDULE 7.1 annexed hereto and any Indebtedness incurred to refinance such existing Indebtedness; PROVIDED that after giving effect to such refinancing Indebtedness and the repayment of the corresponding existing Indebtedness with the proceeds thereof, (a) the aggregate principal amount of the refinancing Indebtedness and the corresponding existing Indebtedness so refinanced shall not be greater than the outstanding principal amount of such existing Indebtedness immediately prior to such refinancing, (b) the weighted average life to maturity of such refinancing Indebtedness shall be no shorter than the existing Indebtedness being refinanced and (c) such refinancing Indebtedness shall not be secured by any additional property than that which secures the existing Indebtedness being refinanced; PROVIDED FURTHER that with respect to Foreign Subsidiaries, such Indebtedness is permitted pursuant to subsection 7.1(vii); (vi) Company and its Subsidiaries may become and remain liable with respect to Indebtedness evidenced by the Senior Subordinated Notes in an aggregate principal amount not to exceed $85,000,000; (vii) Company's Foreign Subsidiaries may become and remain liable with respect to committed or uncommitted lines of credit for loans to, or for the sale with recourse or discounting of notes or accounts receivable of, such Foreign Subsidiaries, such lines of credit to be in form and substance satisfactory to Administrative Agent, including without limitation existing lines of credit described on Schedule 7.1 annexed hereto, in an aggregate amount for all such lines of credit of up to $6,500,000; PROVIDED HOWEVER that the aggregate amount outstanding and drawn under all such lines of credit, together with the aggregate amount of any liabilities or Indebtedness which is outstanding and drawn with respect to the Contingent Obligations permitted under subsection 7.4(iii), does not exceed $6,500,000 at any time; and (viii) Company and its Subsidiaries may become and remain liable with respect to other Indebtedness in an aggregate principal amount not to exceed $2,500,000 at any time outstanding. 7.2 LIENS AND RELATED MATTERS. A. PROHIBITION ON LIENS. Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, create, incur, assume or permit to exist any Lien on or with respect to any property or asset of any kind (including any document or instrument in respect of goods or accounts receivable) of Company or any of its 116 Subsidiaries, whether now owned or hereafter acquired, or any income or profits therefrom, or file or permit the filing of, or permit to remain in effect, any financing statement or other similar notice of any Lien with respect to any such property, asset, income or profits under the Uniform Commercial Code of any State or under any similar recording or notice statute, except: (i) Permitted Encumbrances; (ii) Liens granted pursuant to the Collateral Documents, including Liens securing its obligations to Lenders or Affiliates of Lenders as Interest Rate Exchangers or Currency Exchangers (as such terms are defined in the Collateral Documents); (iii) Existing Liens described in SCHEDULE 7.2 annexed hereto; (iv) Liens on the assets of Company's Foreign Subsidiaries securing the Indebtedness permitted under subsection 7.1(vii) and the Contingent Obligations under subsection 7.4(iii); (v) Liens securing Indebtedness permitted under subsection 7.1(iii); PROVIDED that such Liens extend only to the property or asset so financed and the proceeds thereof; and (vi) Other Liens on assets other than Collateral securing Indebtedness in an aggregate amount not to exceed $2,500,000 at any time outstanding. B. EQUITABLE LIEN IN FAVOR OF LENDERS. If Company or any of its Subsidiaries shall create or assume any Lien upon any of its properties or assets, whether now owned or hereafter acquired, other than Liens excepted by the provisions of subsection 7.2A, it shall make or cause to be made effective provision whereby the Obligations will be secured by such Lien equally and ratably with any and all other Indebtedness secured thereby as long as any such Indebtedness shall be so secured; PROVIDED that, notwithstanding the foregoing, this covenant shall not be construed as a consent by Requisite Lenders to the creation or assumption of any such Lien not permitted by the provisions of subsection 7.2A. C. NO FURTHER NEGATIVE PLEDGES. Except with respect to specific property encumbered to secure payment of particular Indebtedness or to be sold pursuant to an executed agreement with respect to an Asset Sale, neither Company nor any of its Subsidiaries shall enter into any agreement (other than the Senior Subordinated Note Indenture or any other agreement prohibiting only the creation of Liens securing Subordinated Indebtedness) prohibiting the creation or assumption of any Lien upon any of its properties or assets, whether now owned or hereafter acquired. 117 7.3 INVESTMENTS; JOINT VENTURES. Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, make or own any Investment in any Person, including any Joint Venture, except: (i) Company and its Subsidiaries may make and own Investments in Cash Equivalents; (ii) Company and its Subsidiaries may make and own Investments in any wholly-owned Subsidiaries of Company that is engaged in the test instrumentation business or a business reasonably related thereto; (iii) Company and its wholly-owned Subsidiaries may make intercompany loans to the extent permitted under subsection 7.1(iv); (iv) Company and its wholly-owned Domestic Subsidiaries may make and own Investments in Persons that, as a result of such Investments, become additional wholly-owned Domestic Subsidiaries, and Company may make and own Investments in Persons that, as a result of such Investments, become additional direct wholly-owned Foreign Subsidiaries, in each case to the extent such Investments are permitted under subsection 7.7(ii); (v) Company and its Subsidiaries may continue to own the existing Investments owned by them and described in SCHEDULE 7.3 annexed hereto; (vi) Company may make loans to its employees for the purposes of purchasing Common Stock from Company in connection with the exercise of stock options granted pursuant to a stock option plan approved by Company's Board of Directors; PROVIDED that the aggregate principal amount of such loans shall not exceed $2,000,000 at any time outstanding; (vii) Company and its Subsidiaries may accept promissory notes received in consideration of any Asset Sale to the extent permitted pursuant to subsection 7.7(vi); PROVIDED that any such promissory notes so accepted shall be pledged as security for the Obligations pursuant to the applicable Collateral Documents; and (viii) Company and its Subsidiaries may make and own other Investments in an aggregate amount not to exceed at any time $2,500,000. 7.4 CONTINGENT OBLIGATIONS. 118 Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, create or become or remain liable with respect to any Contingent Obligation, except: (i) Subsidiaries of Company may become and remain liable with respect to Contingent Obligations in respect of the Subsidiary Guaranty, including Contingent Obligations thereunder for the benefit of Lenders or Affiliates of Lenders as Interest Rate Exchangers or Currency Exchangers (as such terms are defined in the Subsidiary Guaranty); (ii) Company and its Subsidiaries may become and remain liable with respect to Contingent Obligations in respect of Letters of Credit; (iii) Foreign Subsidiaries of Company may become and remain liable with respect to Contingent Obligations in respect of letters of credit, performance, completion or surety bonds or guaranties or other similar Contingent Obligations, including without limitation existing Contingent Obligations described on Schedule 7.4 annexed hereto, in an aggregate amount for all such Contingent Obligations of up to $4,000,000; PROVIDED that the aggregate amount of any liabilities or Indebtedness which is outstanding and drawn with respect to such Contingent Obligations, together with the aggregate amount outstanding and drawn under the lines of credit permitted under subsection 7.1(vii), does not exceed $6,500,000 at any time; and Company may become and remain liable with respect to guarantees of the Foreign Subsidiaries' Contingent Obligations permitted under this subsection 7.4(iii) and with respect to guarantees of the Foreign Subsidiaries' Indebtedness permitted under subsection 7.1(vii); (iv) Company and its Subsidiaries may become and remain liable with respect to Contingent Obligations under Currency Agreements entered into in the ordinary course of business with a Lender or an Affiliate of a Lender in a notional amount not to exceed $10,000,000 for all such Currency Agreements; (v) Company and its Subsidiaries may become and remain liable with respect to Contingent Obligations under guarantees in the ordinary course of business of the obligations of suppliers, customers, franchisees and licensees of Company and its Subsidiaries in an aggregate amount not to exceed at any time $2,500,000; (vi) Company and its Subsidiaries may become and remain liable with respect to Contingent Obligations in respect of any Indebtedness of Company or any of its Subsidiaries permitted by subsection 7.1 and Company may become and remain liable with respect to Contingent Obligations in respect of any other liabilities or obligations or any of its Subsidiaries not prohibited under this Agreement; 119 (vii) Company and its Subsidiaries, as applicable, may remain liable with respect to existing Contingent Obligations described in SCHEDULE 7.4 annexed hereto; PROVIDED that with respect to Foreign Subsidiaries, such Contingent Obligations are permitted pursuant to subsection 7.4(iii); (viii) Subsidiary Guarantors may become and remain liable with respect to Contingent Obligations arising under their subordinated guaranties of the Senior Subordinated Notes as set forth in the Senior Subordinated Note Indenture as in effect on the Closing Date; and (ix) Company and its Domestic Subsidiaries may become and remain liable with respect to other Contingent Obligations; PROVIDED that the maximum aggregate liability, contingent or otherwise, of Company and its Domestic Subsidiaries in respect of all such Contingent Obligations shall at no time exceed $2,500,000. 7.5 RESTRICTED JUNIOR PAYMENTS. Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, declare, order, pay, make or set apart any sum for any Restricted Junior Payment; PROVIDED that, so long as no Event of Default or Potential Event of Default shall have occurred and be continuing or occurs as a result thereof: (i) on the Closing Date, Company may purchase for cash up to approximately 651,361 shares in aggregate of Company's Common Stock (including stock options) and all of its outstanding shares of Class B Common Stock for an aggregate price not exceeding $159,400,000; (ii) Company may make regularly scheduled payments of interest in respect of the Senior Subordinated Notes in accordance with the terms of, and only to the extent required by, and subject to the subordination provisions contained in, the Senior Subordinated Note Indenture; (iii) Company may make Restricted Junior Payments in an aggregate amount not to exceed $1,000,000 in any Fiscal Year or $5,000,000 during the term of this Agreement to repurchase shares of its common stock from officers and employees of Company; PROVIDED that after the date of this Agreement such repurchases shall be pursuant to stock plans permitted under subsection 7.12; and (iv) Company and any Subsidiary may make Restricted Junior Payments on Indebtedness permitted pursuant to Section 7.1(iv) subject to the subordination provisions contained in the notes or agreements governing such Indebtedness. Neither Company nor any of its Subsidiaries will directly or indirectly declare, order, pay or make, or set apart any sum or property for, any Restricted Junior Payment or agree to do so except as permitted by this subsection 7.5. 7.6 FINANCIAL COVENANTS. With respect to the calculation of the financial covenants contained in this subsection 7.6, to the extent that during the period for which compliance is being determined, Company or any Subsidiary of Company has made an Acquisition 120 permitted under subsection 7.7(ii) or has disposed of any assets or operations in an amount for any such transaction or series of related transactions exceeding $1,000,000, such calculations shall be made as if such Acquisition or such disposition took place on the first day of such period on a PRO FORMA basis for the portion of such period prior to the date of such Acquisition or after the date of such disposition and on an actual basis for the portion of such period after the date of such Acquisition or before the date of such disposition, and such calculations shall be made after giving effect to the incurrence, assumption or repayment of any Indebtedness made in connection with such acquisition or disposition. With respect to any such Acquisition, such PRO FORMA calculations shall be based on the audited or reviewed financial results delivered in compliance with clause (c)(3) of subsection 7.7(ii). A. MINIMUM FIXED CHARGE COVERAGE RATIO. Company shall not permit the ratio of (i) Consolidated EBITDA to (ii) Consolidated Fixed Charges for any consecutive four-Fiscal Quarter period ending on the dates set forth below to be less than the correlative ratio indicated: MINIMUM FIXED CHARGE FISCAL QUARTER ENDING DATE COVERAGE RATIO -------------------------- -------------------- 06/30/1997 1.30:1.00 09/30/1997 1.36:1.00 12/31/1997 1.27:1.00 03/31/1998 1.30:1.00 06/30/1998 1.34:1.00 09/30/1998 1.34:1.00 12/31/1998 1.37:1.00 03/31/1999 1.40:1.00 06/30/1999 1.40:1.00 09/30/1999 1.43:1.00 12/31/1999 1.46:1.00 03/31/2000 1.48:1.00 06/30/2000 1.48:1.00 09/30/2000 1.50:1.00 12/31/2000 1.50:1.00 03/31/2001 1.50:1.00 06/30/2001 1.50:1.00 09/30/2001 1.51:1.00 12/31/2001 1.51:1.00 03/31/2002 1.51:1.00 06/30/2002 1.52:1.00 09/30/2002 1.53:1.00 12/31/2002 1.53:1.00 121 B. MAXIMUM LEVERAGE RATIO. Company shall not permit the Consolidated Leverage Ratio at any time during any of the periods set forth below to exceed the correlative ratio indicated: MAXIMUM PERIOD LEVERAGE RATIO ------ -------------------- 06/30/1997 5.9:1.00 09/30/1997 5.7:1.00 12/31/1997 5.7:1.00 03/31/1998 5.4:1.00 06/30/1998 4.5:1.00 09/30/1998 4.3:1.00 12/31/1998 4.0:1.00 03/31/1999 3.6:1.00 06/30/1999 3.3:1.00 09/30/1999 3.0:1.00 12/31/1999 2.9:1.00 03/31/2000 2.7:1.00 06/30/2000 2.6:1.00 09/30/2000 2.5:1.00 12/31/2000 2.5:1.00 03/31/2001 2.4:1.00 06/30/2001 2.4:1.00 09/30/2001 2.3:1.00 12/31/2001 2.3:1.00 03/31/2002 2.2:1.00 06/30/2002 2.2:1.00 09/30/2002 2.1:1.00 12/31/2002 2.1:1.00 C. MINIMUM CONSOLIDATED EBITDA. Company shall not permit Consolidated EBITDA for the consecutive four-Fiscal Quarter period ending on the date indicated below to be less than the correlative amount indicated: MINIMUM CONSOLIDATED EBITDA ------------------------- PERIOD ($ in millions) ------ 06/30/1997 $20.7 09/30/1997 21.7 122 MINIMUM CONSOLIDATED EBITDA ------------------------- PERIOD ($ in millions) ------ 12/31/1997 20.8 03/31/1998 21.8 06/30/1998 25.2 09/30/1998 26.2 12/31/1998 27.4 03/31/1999 28.9 06/30/1999 30.3 09/30/1999 31.8 12/31/1999 32.7 03/31/2000 33.9 06/30/2000 34.8 09/30/2000 36.0 12/31/2000 36.0 03/31/2001 37.0 06/30/2001 38.2 09/30/2001 39.3 12/31/2001 39.9 03/31/2002 40.7 06/30/2002 41.7 09/30/2002 42.5 12/31/2002 42.5 D. MINIMUM CONSOLIDATED NET WORTH. Company shall not permit Consolidated Net Worth at any time during the period ending on the dates set forth below to be less than the correlative amount indicated: MINIMUM PERIOD ENDING CONSOLIDATED NET WORTH ------------- ---------------------- ($ in millions) 06/30/1997 ($76.7) 09/30/1997 (76.6) 12/31/1997 (75.7) 03/31/1998 (73.3) 06/30/1998 (70.5) 09/30/1998 (68.1) 123 MINIMUM PERIOD ENDING CONSOLIDATED NET WORTH ------------- ---------------------- ($ in millions) 12/31/1998 (65.3) 03/31/1999 (60.4) 06/30/1999 (56.2) 09/30/1999 (51.4) 12/31/1999 (47.7) 03/31/2000 (43.6) 06/30/2000 (39.0) 09/30/2000 (35.4) 12/31/2000 (32.0) 03/31/2001 (27.4) 06/30/2001 (21.8) 09/30/2001 (18.3) 12/31/2001 (14.2) 03/31/2002 (9.0) 06/30/2002 (2.4) 09/30/2002 1.9 12/31/2002 1.9 7.7 RESTRICTION ON FUNDAMENTAL CHANGES; ASSET SALES AND ACQUISITIONS. Company shall not, and shall not permit any of Company's Subsidiaries to, enter into any transaction of merger or consolidation, or liquidate, wind-up or dissolve itself (or suffer any liquidation or dissolution), or convey, sell, lease or sub-lease (as lessor or sublessor), transfer or otherwise dispose of, in one transaction or a series of transactions, all or any part of its business, property or assets, whether now owned or hereafter acquired, or acquire by purchase or otherwise all or substantially all the business, property or fixed assets of, or stock or other evidence of beneficial ownership of, any Person or any division or line of business of any Person, except: (i) any Subsidiary of Company may be merged with or into Company or any wholly-owned Subsidiary Guarantor, or be liquidated, wound up or dissolved, or all or any part of its business, property or assets may be conveyed, sold, leased, transferred or otherwise disposed of, in one transaction or a series of transactions, to Company or any wholly-owned Subsidiary Guarantor; PROVIDED that, in the case of such a merger, Company or such wholly-owned Subsidiary Guarantor shall be the continuing or surviving corporation; (ii) Company and its wholly-owned Subsidiaries may acquire all or substantially all the business, property or fixed assets of, or stock or other 124 evidence of beneficial ownership of, any Person, or any division or line of business of any Person, in each case in the test instrumentation business or a business reasonably related thereto (collectively, an "Acquisition"); PROVIDED that (a) such Person becomes a wholly-owned Subsidiary of Company, or such business, property or other assets are acquired by Company or a wholly-owned Subsidiary of Company, and any such wholly-owned Subsidiary which is a Foreign Subsidiary shall be a direct Subsidiary of Company; (b) the aggregate consideration paid by Company or any of its Subsidiaries in connection with all such Acquisitions, including without limitation, the fair market value of all Cash (including without limitation earn outs or deferred compensation or non-competition arrangements), Common Stock or other property so paid or transferred, and the amount of all Indebtedness or other liabilities assumed or incurred by Company or any of its Subsidiaries, shall not exceed $25,000,000 or, in the event that Company's Consolidated Leverage Ratio as of the last day of each of the two immediately preceding Fiscal Quarters is less than or equal to 3.50:1.00, $35,000,000; PROVIDED that with respect to such aggregate consideration, the aggregate Cash consideration paid by Company or any of its Subsidiaries, including the amount of all Indebtedness or other liabilities so assumed or incurred, shall not exceed (x) for all Acquisitions of Foreign Subsidiaries or of businesses, properties or other assets not located in the United States the lesser of (I) the amount permitted therefor under the Senior Subordinated Note Indenture or (II) $7,500,000 or, in the event that Company's Consolidated Leverage Ratio as of the last day of each of the two immediately preceding Fiscal Quarters is less than or equal to 3.50:1.00, the lesser of (I) the amount permitted therefor under the Senior Subordinated Note Indenture or (II) $15,000,000, and (y) for all Acquisitions $10,000,000 or, in the event that Company's Consolidated Leverage Ratio as of the last day of each of the two immediately preceding Fiscal Quarters is less than or equal to 3.50:1.00, $20,000,000; (c) prior to the consummation of such Acquisition, Company shall deliver to Agents an Officer's Certificate (1) certifying that no Potential Event of Default or Event of Default under this Agreement or under the Senior Subordinated Note Indenture shall then exist or shall occur as a result of such Acquisition, (2) demonstrating that after giving effect to such Acquisition and to all Indebtedness to be incurred or assumed or repaid in connection with or as consideration for such Acquisition, that Company is in PRO FORMA compliance with the financial covenants referred to in subsection 7.6 for the four consecutive Fiscal Quarter period ending immediately prior to the date of the proposed Acquisition and that, giving effect to such Acquisition, Company is in compliance with the clause (b) of this subsection 7.7(ii) on a cumulative basis for all Acquisitions, and (3) delivering a copy, prepared in conformity with GAAP, of (i) financial statements of the Person or business so acquired for the immediately preceding four consecutive Fiscal Quarter period corresponding to the calculation period for the financial covenants in the immediately preceding clause, and (ii) audited financial statements of the Person or business so acquired for the fiscal year ended within such period; 125 (d) concurrently with the consummation of such Acquisition, Company shall, and shall cause its Subsidiaries to, comply with the requirements of subsections 6.8 and 6.9 with respect to such Acquisitions; and (e) the earnings before interest, income taxes, depreciation and amortization of the Person or business so acquired for the preceding twelve-month period shall exceed zero. (iii) Company and its Subsidiaries may dispose of obsolete, worn out or surplus property in the ordinary course of business; (iv) Company and its Subsidiaries may sell or otherwise dispose of assets in transactions that do not constitute Asset Sales; PROVIDED that the consideration received for such assets shall be in an amount at least equal to the fair market value thereof; (v) Company and its Subsidiaries may sell and leaseback the facility located in Norwich, England for a consideration at least equal to the fair market value thereof; PROVIDED that the proceeds thereof shall be applied as required by subsection 2.4B(iii)(a), shall be utilized to make Consolidated Capital Expenditures or shall be used to make an acquisition of a business permitted under subsection 7.7(ii); and (vi) Company and its Subsidiaries may make Asset Sales of assets having a fair market value not in excess of $1,000,000 in any Fiscal Year; PROVIDED that (x) the consideration received for such assets shall be in an amount at least equal to the fair market value thereof; (y) at least 75% of the consideration received therefor is in the form of cash (PROVIDED that any liabilities which are assumed by the transferee of such Assets pursuant to a customary novation agreement that releases Company or such Subsidiary from further liability, and any promissory notes received that are converted into cash, shall be deemed to be cash for purposes of this provision); and (z) the proceeds of such Asset Sales shall be applied as required by subsection 2.4B(iii)(a). 7.8 CONSOLIDATED CAPITAL EXPENDITURES. Company shall not, and shall not permit its Subsidiaries to, make or incur Consolidated Capital Expenditures, in any Fiscal Year indicated below, in an aggregate amount in excess of the corresponding amount set forth below opposite such Fiscal Year: 126 MAXIMUM CONSOLIDATED FISCAL YEAR CAPITAL EXPENDITURES ------------------------- -------------------- 1997 $7,500,000 1998 $6,500,000 1999 $6,500,000 2000 $7,000,000 2001 $7,000,000 2002 $7,000,000 PROVIDED, HOWEVER, to the extent that any expenditures of Company or any of its Subsidiaries constitute an Acquisition permitted under subsection 7.7(ii), then for purposes of this subsection 7.8 such expenditures shall not constitute or be deemed to be Consolidated Capital Expenditures under this subsection 7.8. 7.9 RESTRICTION ON LEASES. Company shall not, and shall not permit any of its Subsidiaries to, become liable in any way, whether directly or by assignment or as a guarantor or other surety, for the obligations of the lessee under any lease, whether an Operating Lease or a Capital Lease (other than intercompany leases between Company and its wholly-owned Subsidiaries), unless, immediately after giving effect to the incurrence of liability with respect to such lease, the Consolidated Rental Payments at the time in effect during the then current Fiscal Year shall not exceed the corresponding amount set forth below opposite such Fiscal Year: MAXIMUM CONSOLIDATED FISCAL YEAR RENTAL PAYMENTS ------------------------- -------------------- 1997 $4,500,000 1998 $5,000,000 1999 $5,500,000 2000 $6,000,000 2001 $6,500,000 2002 $7,000,000 7.10 SALES AND LEASE-BACKS. Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, become liable as lessee or as a guarantor or other surety with respect to any lease, whether an Operating Lease or a Capital Lease, of any property (whether real, personal or mixed), whether now owned or hereafter acquired, (i) which Company or any of its Subsidiaries has sold or transferred or is to sell or transfer to any other Person (other than Company or any of its Subsidiaries) or 127 (ii) which Company or any of its Subsidiaries intends to use for substantially the same purpose as any other property which has been or is to be sold or transferred by Company or any of its Subsidiaries to any Person (other than Company or any of its Subsidiaries) in connection with such lease; PROVIDED that Company and its Subsidiaries may become liable as lessee, guarantor or other surety with respect to any such lease if and to the extent that Company or any of its Subsidiaries would be permitted to enter into, and remain liable under, such lease under subsection 7.9. 7.11 SALE OR DISCOUNT OF RECEIVABLES. Other than as permitted pursuant to subsection 7.1(vii) with respect to Company's Foreign Subsidiaries, Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, sell with recourse, or discount or otherwise sell for less than the face value thereof, any of its notes or accounts receivable. 7.12 TRANSACTIONS WITH SHAREHOLDERS AND AFFILIATES. Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, enter into or permit to exist any transaction (including the purchase, sale, lease or exchange of any property or the rendering of any service) with any holder of 5% or more of any class of equity Securities of Company or with any Affiliate of Company or of any such holder, on terms that are less favorable to Company or that Subsidiary, as the case may be, than those that might be obtained at the time from Persons who are not such a holder or Affiliate; PROVIDED that the foregoing restriction shall not apply to (i) any transaction between Company and any of its wholly-owned Subsidiaries or between any of its wholly-owned Subsidiaries, (ii) reasonable and customary fees paid to members of the Boards of Directors of Company and its Subsidiaries, (iii) issuances of stock, payments of bonuses and other transactions pursuant to employment or compensation agreements, stock option agreements, indemnification agreements, severance agreements and other arrangements, in each case as in effect as of the Closing Date, and such substantially similar agreements as may hereafter become effective, in each case with officers or directors who are Affiliates of Company or any of its Subsidiaries, (iv) payment of customary consulting and other fees and expenses to Arranger and its Affiliates in connection with the Recapitalization Transactions, including without limitation under this Agreement or in connection with the Senior Subordinated Notes, (v) transactions pursuant to the Distribution Agreement, dated April 23, 1996, and the Technical Collaboration Agreement, dated as of April 23, 1996, each between Company or one of its Subsidiaries and Yokogawa Electric Corporation, to the extent that such transactions are on terms that are at least as favorable as those that could reasonably be expected to be obtained by Company or the relevant Subsidiary in a comparable transaction by Company or such Subsidiary with an unrelated Person, (vi) lease payments, renewals and extensions under the lease agreement, dated June 29, 1996, between Company and Toyon Investments, a corporation controlled by Gooding, to the extent that aggregate annual lease payments do not exceed $585,000 per year, plus 128 annual consumer price index adjustments, not to exceed 3% per annum, (vii) the exercise by Gooding of his option to purchase Company's executive offices at 11995 El Camino Road, San Diego, California, including all the leasehold improvements and fixed assets therein pursuant to the terms set forth in the resolution of Company adopted on September 19, 1995 and (viii) Restricted Junior Payments permitted pursuant to subsection 7.5. 7.13 DISPOSAL OF SUBSIDIARY STOCK; RESTRICTIONS ON SUBSIDIARIES. A. DISPOSAL OF STOCK. Except for any sale of 100% of the capital stock or other equity Securities of any of its Subsidiaries in compliance with the provisions of subsection 7.7(vi), Company shall not: (i) directly or indirectly sell, assign, pledge or otherwise encumber or dispose of any shares of capital stock or other equity Securities of any of its Subsidiaries, except to qualify directors if required by applicable law; or (ii) permit any of its Subsidiaries directly or indirectly to sell, assign, pledge or otherwise encumber or dispose of any shares of capital stock or other equity Securities of any of its Subsidiaries (including such Subsidiary), except to Company, another wholly-owned Domestic Subsidiary of Company, or to qualify directors if required by applicable law. B. NO RESTRICTIONS ON SUBSIDIARY DISTRIBUTIONS TO COMPANY OR OTHER SUBSIDIARIES. Except as provided herein or in the Subordinated Note Indenture, Company will not, and will not permit any of its Subsidiaries to, create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction of any kind on the ability of any such Subsidiary to (i) pay dividends or make any other distributions on any of such Subsidiary's capital stock owned by Company or any other Subsidiary of Company, (ii) repay or prepay any Indebtedness owed by such Subsidiary to Company or any other Subsidiary of Company, (iii) make loans or advances to Company or any other Subsidiary of Company, or (iv) transfer any of its property or assets to Company or any other Subsidiary of Company. 7.14 CONDUCT OF BUSINESS. From and after the Closing Date, Company shall not, and shall not permit any of its Subsidiaries to, engage in any business other than (i) the test instrumentation business engaged in by Company and its Subsidiaries on the Closing Date and businesses reasonably related thereto and (ii) such other lines of business as may be consented to by Requisite Lenders. 129 7.15 AMENDMENTS OF CERTAIN DOCUMENTS; DESIGNATION OF "DESIGNATED SENIOR DEBT." A. AMENDMENTS OR WAIVERS OF CERTAIN RELATED AGREEMENTS. Company shall not, and shall not permit any of its Subsidiaries to, amend, waive any of its rights under, or otherwise change the terms of any of the Related Agreements (other than the Related Financing Documents) in each case as in effect on the Closing Date, without the prior written consent of the Requisite Lenders, if such amendment, waiver or change would increase materially the obligations of Company or any of its Subsidiaries or confer additional rights on any other party to any such agreement which would be adverse in any material respect to Company or any of its Subsidiaries or to the Lenders. B. AMENDMENTS OF DOCUMENTS RELATING TO SUBORDINATED INDEBTEDNESS. Company shall not, and shall not permit any of its Subsidiaries to, amend or otherwise change the terms of any of the Senior Subordinated Notes or the Senior Subordinated Note Indenture (collectively, "RESTRICTED AGREEMENTS"), or make any payment consistent with an amendment thereof or change thereto, if the effect of such amendment or change is to increase the interest rate on any such Restricted Agreements, change any dates upon which payments of principal or interest are due thereon, change any of the covenants with respect thereto in a manner which is more restrictive to Company or any of its Subsidiaries, change any event of default or condition to an event of default with respect thereto, change the redemption, prepayment or defeasance provisions thereof, change the subordination provisions thereof (or of any guaranty thereof), or if the effect of such amendment or change, together with all other amendments or changes made, is to increase the obligations of the obligor thereunder or to confer any additional rights on the holders of any such Restricted Agreements (or a trustee or other representative on their behalf) which would be adverse to any Loan Party or Lenders. C. DESIGNATION OF "DESIGNATED SENIOR DEBT." Company shall not designate any Indebtedness as "Designated Senior Debt" (as defined in the Senior Subordinated Note Indenture) for purposes of the Senior Subordinated Note Indenture without the prior written consent of Requisite Lenders. SECTION 8. EVENTS OF DEFAULT If any of the following conditions or events ("Events of Default") shall occur: 8.1 FAILURE TO MAKE PAYMENTS WHEN DUE. Failure by Company to pay any installment of principal of any Loan when due, whether at stated maturity, by acceleration, by notice of voluntary prepayment, by mandatory prepayment or otherwise; failure by Company to pay when due any amount payable to an Issuing Lender in reimbursement of any drawing under 130 a Letter of Credit; or failure by Company to pay any interest on any Loan or any fee or any other amount due under this Agreement within five days after the date due; or 8.2 DEFAULT IN OTHER AGREEMENTS. (i) Failure of Company or any of its Subsidiaries to pay when due any principal of or interest on or any other amount payable in respect of one or more items of Indebtedness (other than Indebtedness referred to in subsection 8.1) or Contingent Obligations with respect to any Indebtedness in either an individual or an aggregate principal amount of $5,000,000 or more, in each case beyond the end of any grace period provided therefor; or (ii) breach or default by Company or any of its Subsidiaries with respect to any other material term of (a) one or more items of Indebtedness or Contingent Obligations with respect to any Indebtedness in the individual or aggregate principal amounts referred to in clause (i) above or (b) any loan agreement, mortgage, indenture or other agreement relating to such item(s) of Indebtedness or Contingent Obligation(s), if the effect of such breach or default is to cause, or to permit the holder or holders of that Indebtedness or Contingent Obligation(s) (or a trustee on behalf of such holder or holders) to cause, that Indebtedness or Contingent Obligation(s) to become or be declared due and payable prior to its stated maturity or the stated maturity of any underlying obligation, as the case may be (upon the giving or receiving of notice, lapse of time, both, or otherwise); or 8.3 BREACH OF CERTAIN COVENANTS. Failure of Company to perform or comply with any term or condition contained in subsection 2.5 or 6.2 or Section 7 of this Agreement; or 8.4 BREACH OF WARRANTY. Any representation, warranty, certification or other statement made by Company or any of its Subsidiaries in any Loan Document or in any statement or certificate at any time given by Company or any of its Subsidiaries in writing pursuant hereto or thereto or in connection herewith or therewith shall be false in any material respect on the date as of which made; or 8.5 OTHER DEFAULTS UNDER LOAN DOCUMENTS. Any Loan Party shall default in the performance of or compliance with any term contained in this Agreement or any of the other Loan Documents, other than any such term referred to in any other subsection of this Section 8, and such default shall not have been remedied or waived within twenty Business Days after the earlier of (i) an officer of Company or such Loan Party becoming aware of such default or (ii) receipt by Company and such Loan Party of notice from any Agent or any Lender of such default; or 131 8.6 INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. (i) A court having jurisdiction in the premises shall enter a decree or order for relief in respect of Company or any of its Subsidiaries (other than an Immaterial Subsidiary) in an involuntary case under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect, which decree or order is not stayed; or any other similar relief shall be granted under any applicable federal or state law; or (ii) an involuntary case shall be commenced against Company or any of its Subsidiaries (other than an Immaterial Subsidiary) under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect; or a decree or order of a court having jurisdiction in the premises for the appointment of a receiver, liquidator, sequestrator, trustee, custodian or other officer having similar powers over Company or any of its Subsidiaries (other than an Immaterial Subsidiary), or over all or a substantial part of its property, shall have been entered; or there shall have occurred the involuntary appointment of an interim receiver, trustee or other custodian of Company or any of its Subsidiaries (other than an Immaterial Subsidiary) for all or a substantial part of its property; or a warrant of attachment, execution or similar process shall have been issued against any substantial part of the property of Company or any of its Subsidiaries (other than an Immaterial Subsidiary), and any such event described in this clause (ii) shall continue for 60 days unless dismissed, bonded or discharged; or 8.7 VOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. (i) Company or any of its Subsidiaries (other than an Immaterial Subsidiary) shall have an order for relief entered with respect to it or commence a voluntary case under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect, or shall consent to the entry of an order for relief in an involuntary case, or to the conversion of an involuntary case to a voluntary case, under any such law, or shall consent to the appointment of or taking possession by a receiver, trustee or other custodian for all or a substantial part of its property; or Company or any of its Subsidiaries (other than an Immaterial Subsidiary) shall make any assignment for the benefit of creditors; or (ii) Company or any of its Subsidiaries (other than an Immaterial Subsidiary) shall be unable, or shall fail generally, or shall admit in writing its inability, to pay its debts as such debts become due; or the Board of Directors of Company or any of its Subsidiaries (other than an Immaterial Subsidiary) (or any committee thereof) shall adopt any resolution or otherwise authorize any action to approve any of the actions referred to in clause (i) above or this clause (ii); or 8.8 JUDGMENTS AND ATTACHMENTS. Any money judgment, writ or warrant of attachment or similar process involving either in any individual case or in the aggregate at any time an amount in excess of $5,000,000 (in either case not adequately covered by insurance as to which a 132 solvent and unaffiliated insurance company has acknowledged coverage) shall be entered or filed against Company or any of its Subsidiaries or any of their respective assets and shall remain undischarged, unvacated, unbonded or unstayed for a period of 60 days (or in any event later than five days prior to the date of any proposed sale thereunder); or 8.9 DISSOLUTION. Any order, judgment or decree shall be entered against Company or any of its Subsidiaries (other than an Immaterial Subsidiary) decreeing the dissolution or split up of Company or that Subsidiary and such order shall remain undischarged or unstayed for a period in excess of 30 days; or 8.10 EMPLOYEE BENEFIT PLANS. There shall occur one or more ERISA Events which individually or in the aggregate results in or might reasonably be expected to result in liability of Company, any of its Subsidiaries or any of their respective ERISA Affiliates in excess of $500,000 during the term of this Agreement; or there shall exist an amount of unfunded benefit liabilities (as defined in Section 4001(a)(18) of ERISA), individually or in the aggregate for all Pension Plans (excluding for purposes of such computation any Pension Plans with respect to which assets exceed benefit liabilities), which exceeds $500,000; or 8.11 CHANGE OF CONTROL. A Change of Control shall have occurred; or 8.12 INVALIDITY OF SUBSIDIARY GUARANTY. Upon execution and delivery thereof, the Subsidiary Guaranty for any reason, other than the satisfaction in full of all Obligations, ceases to be in full force and effect (other than in accordance with its terms) or is declared to be null and void, or any Loan Party denies that it has any further liability, including without limitation with respect to future advances by Lenders, under any Loan Document to which it is a party, or gives notice to such effect; or 8.13 FAILURE OF SECURITY. Any Collateral Document shall, at any time, cease to be in full force and effect (other than by reason of a release of Collateral in accordance with the terms thereof) or shall be declared null and void, or the validity or enforceability thereof shall be contested by any Loan Party, or Agent shall not have or cease to have a valid and perfected first priority security interest in any significant part of the Collateral 133 (other than as a direct result of a breach by Agent of any obligation imposed on Agent under the Collateral Documents); or 8.14 FAILURE TO CONSUMMATE THE RECAPITALIZATION TRANSACTIONS. The Recapitalization Transactions (i) shall not be consummated in accordance with the Loan Documents and the Related Agreements prior to or concurrently with or immediately after the making of the initial Loans (and in any event on the Closing Date), or (ii) shall be unwound, reversed or otherwise rescinded or modified in whole or in part for any reason; or 8.15 ACTION UNDER RELATED FINANCING DOCUMENTS. Any holder of any Indebtedness evidenced by the Related Financing Documents shall file an action seeking the rescission thereof or damages or injunctive relief relating thereto; or any event shall occur which, under the terms of any Related Financing Documents, shall require Company or any of its Subsidiaries to purchase, redeem or otherwise acquire or offer to purchase, redeem or otherwise acquire all or any portion of any Indebtedness evidenced by the Related Financing Documents; or Company or any of its Subsidiaries shall for any other reason purchase, redeem or otherwise acquire or offer to purchase, redeem or otherwise acquire, or make any other payments in respect of, all or any portion of any Indebtedness evidenced by the Related Financing Documents, except to the extent expressly permitted by subsection 7.5: THEN (i) upon the occurrence of any Event of Default described in subsection 8.6 or 8.7, each of (a) the unpaid principal amount of and accrued interest on the Loans, (b) an amount equal to the maximum amount that may at any time be drawn under all Letters of Credit then outstanding (whether or not any beneficiary under any such Letter of Credit shall have presented, or shall be entitled at such time to present, the drafts or other documents or certificates required to draw under such Letter of Credit), and (c) all other Obligations shall automatically become immediately due and payable, without presentment, demand, protest or other requirements of any kind, all of which are hereby expressly waived by Company, and the obligation of each Lender to make any Loan (including the obligation of Swing Line Lender to make any Swing Line Loans and of Offshore Currency Funding Lender to make any Offshore Currency Loans), the obligation of Administrative Agent to issue any Letter of Credit hereunder shall thereupon terminate, and (ii) upon the occurrence and during the continuation of any other Event of Default, Administrative Agent shall, upon the written request or with the written consent of Requisite Lenders, by written notice to Company, declare all or any portion of the amounts described in clauses (a) through (c) above to be, and the same shall forthwith become, immediately due and payable, and the obligation of each Lender to make any Loan (including the obligation of Swing Line Lender to make any Swing Line Loans and of Offshore Currency Funding Lender to make any Offshore Currency Loans), the obligation of Administrative 134 Agent to issue any Letter of Credit hereunder shall thereupon terminate; PROVIDED that the foregoing shall not affect in any way the obligations of Revolving Lenders to purchase participations in Letters of Credit as provided in subsection 3.3C or the obligations of Lenders to purchase participations in any unpaid Swing Line Loans as provided in subsection 2.1A(iii) or any unpaid Offshore Currency Loans as provided in subsection 2.1A(iv). Any amounts described in clause (b) above, when received by Administrative Agent, shall be held by Administrative Agent pursuant to the terms of the Collateral Account Agreement and shall be applied as therein provided. Notwithstanding anything contained in the second preceding paragraph, if at any time within 60 days after an acceleration of the Loans pursuant to such paragraph Company shall pay all arrears of interest and all payments on account of principal which shall have become due otherwise than as a result of such acceleration (with interest on principal and, to the extent permitted by law, on overdue interest, at the rates specified in this Agreement) and all Events of Default and Potential Events of Default (other than non-payment of the principal of and accrued interest on the Loans, in each case which is due and payable solely by virtue of acceleration) shall be remedied or waived pursuant to subsection 10.6, then Requisite Lenders, by written notice to Company, may at their option rescind and annul such acceleration and its consequences; but such action shall not affect any subsequent Event of Default or Potential Event of Default or impair any right consequent thereon. The provisions of this paragraph are intended merely to bind Lenders to a decision which may be made at the election of Requisite Lenders and are not intended to benefit Company and do not grant Company the right to require Lenders to rescind or annul any acceleration hereunder, even if the conditions set forth herein are met. SECTION 9. THE AGENTS 9.1 APPOINTMENT. A. APPOINTMENT OF AGENTS. Fleet is hereby appointed Administrative Agent hereunder and under the other Loan Documents and each Lender hereby authorizes Administrative Agent to act as its agent in accordance with the terms of this Agreement and the other Loan Documents. DLJ is hereby appointed Syndication Agent hereunder and under the other Loan Documents and each Lender hereby authorizes Syndication Agent to act as its agent in accordance with the terms of this Agreement and the other Loan Documents. Each of Syndication Agent and Administrative Agent agrees to act upon the express conditions contained in this Agreement and the other Loan Documents, as applicable. The provisions of this Section 9 are solely for the benefit of each of Syndication Agent and Administrative Agent, and Lenders and Company shall have no rights as a third party beneficiary of any of the provisions thereof. In performing its functions and duties under this 135 Agreement, each of Syndication Agent and Administrative Agent shall act solely as an agent of Lenders and does not assume and shall not be deemed to have assumed any obligation towards or relationship of agency or trust with or for Company or any of its Subsidiaries. B. APPOINTMENT OF SUPPLEMENTAL COLLATERAL AGENTS. It is the purpose of this Agreement and the other Loan Documents that there shall be no violation of any law of any jurisdiction denying or restricting the right of banking corporations or associations to transact business as agent or trustee in such jurisdiction. It is recognized that in case of litigation under this Agreement or any of the other Loan Documents, and in particular in case of the enforcement of any of the Loan Documents, or in case Administrative Agent deems that by reason of any present or future law of any jurisdiction it may not exercise any of the rights, powers or remedies granted herein or in any of the other Loan Documents or take any other action which may be desirable or necessary in connection therewith, it may be necessary that Administrative Agent appoint an additional individual or institution as a separate trustee, co-trustee, collateral agent or collateral co-agent (any such additional individual or institution being referred to herein individually as a "SUPPLEMENTAL COLLATERAL AGENT" and collectively as "SUPPLEMENTAL COLLATERAL AGENTS"). In the event that Administrative Agent appoints a Supplemental Collateral Agent with respect to any Collateral, (i) each and every right, power, privilege or duty expressed or intended by this Agreement or any of the other Loan Documents to be exercised by or vested in or conveyed to Administrative Agent with respect to such Collateral shall be exercisable by and vest in such Supplemental Collateral Agent to the extent, and only to the extent, necessary to enable such Supplemental Collateral Agent to exercise such rights, powers and privileges with respect to such Collateral and to perform such duties with respect to such Collateral, and every covenant and obligation contained in the Loan Documents and necessary to the exercise or performance thereof by such Supplemental Collateral Agent shall run to and be enforceable by either Administrative Agent or such Supplemental Collateral Agent, and (ii) the provisions of this Section 9 and of subsections 10.2 and 10.3 that refer to Administrative Agent shall inure to the benefit of such Supplemental Collateral Agent and all references therein to Administrative Agent shall be deemed to be references to Administrative Agent and/or such Supplemental Collateral Agent, as the context may require. Should any instrument in writing from Company or any other Loan Party be required by any Supplemental Collateral Agent so appointed by Administrative Agent for more fully and certainly vesting in and confirming to him or it such rights, powers, privileges and duties, Company shall, or shall cause such Loan Party to, execute, acknowledge and deliver any and all such instruments promptly upon request by Administrative Agent. In case any Supplemental Collateral Agent, or a successor thereto, shall die, become incapable of acting, resign or be removed, all the rights, powers, privileges and duties of such Supplemental Collateral Agent, to the extent 136 permitted by law, shall vest in and be exercised by Administrative Agent until the appointment of a new Supplemental Collateral Agent. 9.2 POWERS AND DUTIES; GENERAL IMMUNITY. A. POWERS; DUTIES SPECIFIED. Each Lender irrevocably authorizes each Agent to take such action on such Lender's behalf and to exercise such powers, rights and remedies hereunder and under the other Loan Documents as are specifically delegated or granted to such Agent by the terms hereof and thereof, together with such powers, rights and remedies as are reasonably incidental thereto. Each Agent shall have only those duties and responsibilities that are expressly specified in this Agreement and the other Loan Documents. Each Agent may exercise such powers, rights and remedies and perform such duties by or through its agents or employees. No Agent shall have, by reason of this Agreement or any of the other Loan Documents, a fiduciary relationship in respect of any Lender; and nothing in this Agreement or any of the other Loan Documents, expressed or implied, is intended to or shall be so construed as to impose upon any Agent any obligations in respect of this Agreement or any of the other Loan Documents except as expressly set forth herein or therein. B. NO RESPONSIBILITY FOR CERTAIN MATTERS. No Agent shall be responsible to any Lender for the execution, effectiveness, genuineness, validity, enforceability, collectibility, perfection or sufficiency of this Agreement or any other Loan Document or for any representations, warranties, recitals or statements made herein or therein or made in any written or oral statements or in any financial or other statements, instruments, reports or certificates or any other documents furnished or made by such Agent to Lenders or by or on behalf of Company to such Agent or any Lender in connection with the Loan Documents and the transactions contemplated thereby or for the financial condition or business affairs of Company or any other Person liable for the payment of any Obligations, nor shall such Agent be required to ascertain or inquire as to the performance or observance of any of the terms, conditions, provisions, covenants or agreements contained in any of the Loan Documents or as to the use of the proceeds of the Loans or the use of the Letters of Credit or as to the existence or possible existence of any Event of Default or Potential Event of Default. Anything contained in this Agreement to the contrary notwithstanding, Administrative Agent shall not have any liability arising from confirmations of the amount of outstanding Loans or the Letter of Credit Usage or the component amounts thereof. C. EXCULPATORY PROVISIONS. Neither of the Agents nor any of their respective officers, directors, employees or agents shall be liable to Lenders for any action taken or omitted by any such Agent under or in connection with any of the Loan Documents except to the extent caused by such Agent's gross negligence or willful misconduct. Each Agent shall be entitled to refrain from any act or the taking of any action (including the failure to take an action) in connection with this Agreement or any of the other Loan Documents or from the exercise of any power, 137 discretion or authority vested in it hereunder or thereunder unless and until such Agent shall have received instructions in respect thereof from Requisite Lenders (or such other Lenders as may be required to give such instructions under subsection 10.6) and, upon receipt of such instructions from Requisite Lenders (or such other Lenders, as the case may be), such Agent shall be entitled to act or (where so instructed) refrain from acting, or to exercise such power, discretion or authority, in accordance with such instructions. Without prejudice to the generality of the foregoing, (i) each Agent shall be entitled to rely, and shall be fully protected in relying, upon any communication, instrument or document believed by it to be genuine and correct and to have been signed or sent by the proper person or persons, and shall be entitled to rely and shall be protected in relying on opinions and judgments of attorneys (who may be attorneys for Company and its Subsidiaries), accountants, experts and other professional advisors selected by it; and (ii) no Lender shall have any right of action whatsoever against any Agent as a result of such Agent acting or (where so instructed) refraining from acting under this Agreement or any of the other Loan Documents in accordance with the instructions of Requisite Lenders (or such other Lenders as may be required to give such instructions under subsection 10.6). D. AGENTS ENTITLED TO ACT AS LENDER. The agency hereby created shall in no way impair or affect any of the rights and powers of, or impose any duties or obligations upon, any Agent in its individual capacity as a Lender hereunder. With respect to its participation in the Loans and the Letters of Credit, each Agent shall have the same rights and powers hereunder as any other Lender and may exercise the same as though it were not performing the duties and functions delegated to it hereunder, and the term "Lender" or "Lenders" or any similar term shall, unless the context clearly otherwise indicates, include such Agent in its individual capacity. Any Agent and its Affiliates may accept deposits from, lend money to and generally engage in any kind of banking, trust, financial advisory or other business with Company or any of its Affiliates as if it were not performing the duties specified herein, and may accept fees and other consideration from Company for services in connection with this Agreement and otherwise without having to account for the same to Lenders. 9.3 REPRESENTATIONS AND WARRANTIES; NO RESPONSIBILITY FOR APPRAISAL OF CREDITWORTHINESS. Each Lender represents and warrants that it has made its own independent investigation of the financial condition and affairs of Company and its Subsidiaries in connection with the making of the Loans and the issuance of Letters of Credit hereunder and that it has made and shall continue to make its own appraisal of the creditworthiness of Company and its Subsidiaries. No Agent shall have any duty or responsibility, either initially or on a continuing basis, to make any such investigation or any such appraisal on behalf of Lenders or to provide any Lender with any credit or other information with respect thereto, whether coming into 138 its possession before the making of the Loans or at any time or times thereafter, and no Agent shall have any responsibility with respect to the accuracy of or the completeness of any information provided to Lenders. 9.4 RIGHT TO INDEMNITY. Each Lender, in proportion to its Pro Rata Share, severally agrees to indemnify each Agent, to the extent that such Agent shall not have been reimbursed by Company, for and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including counsel fees and disbursements) or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against such Agent in exercising its powers, rights and remedies or performing its duties hereunder or under the other Loan Documents or otherwise in its capacity as Administrative Agent or Syndication Agent, as the case may be, in any way relating to or arising out of this Agreement or the other Loan Documents; PROVIDED that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from any Agent's gross negligence or willful misconduct as determined by a court of competent jurisdiction. If any indemnity furnished to any Agent for any purpose shall, in the opinion of such Agent, be insufficient or become impaired, such Agent may call for additional indemnity and cease, or not commence, to do the acts indemnified against until such additional indemnity is furnished. 9.5 SUCCESSOR AGENTS, SWING LINE LENDER AND OFFSHORE CURRENCY FUNDING LENDER. A. SUCCESSOR AGENTS. The Syndication Agent may resign at any time upon one Business Days' prior notice thereof to Company and Administrative Agent. Administrative Agent may resign at any time by giving 30 days' prior written notice thereof to Syndication Agent, Lenders and Company, and Administrative Agent may be removed at any time with or without cause by an instrument or concurrent instruments in writing delivered to Company and Administrative Agent and signed by Requisite Lenders. Upon any such notice of resignation of Syndication Agent or Administrative Agent or any such removal of Administrative Agent, Requisite Lenders shall have the right, upon five Business Days' notice to Company, to appoint a successor Syndication Agent or Administrative Agent, as the case may be. Upon the acceptance of any appointment as Administrative Agent or Syndication Agent, as the case may be, hereunder by a successor Administrative Agent or Syndication Agent, as the case may be, that successor Administrative Agent or Syndication Agent, as the case may be, shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring or removed Administrative Agent or Syndication Agent, as the case may be, and the retiring or removed Administrative Agent or Syndication Agent, as the case may be, shall be discharged from its duties and obligations under this Agreement. After any retiring or removed Administrative Agent's or Syndication Agent's resignation or removal hereunder as Administrative Agent or Syndication Agent, as the case may be, the provisions of this Section 9 shall 139 inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent or Syndication Agent, as the case may be, under this Agreement. B. SUCCESSOR SWING LINE LENDER. The Swing Line Lender may resign at any time upon one Business Days' prior notice thereof to Company, Lenders and Administrative Agent, and Swing Line Lender may be removed at any time with or without cause by an instrument or concurrent instruments in writing delivered to Company and Swing Line Lender and signed by Requisite Lenders. Upon any such notice of resignation of Swing Line Lender or any such removal of Swing Line Lender, Requisite Lenders shall have the right, upon five Business Days' notice to Company, to appoint a successor Swing Line Lender. After any retiring or removed Swing Line Lender's resignation or removal hereunder, the provisions of this Section 9 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Swing Line Lender under this Agreement. Upon the acceptance of any appointment as Swing Line Lender hereunder by a successor Swing Line Lender, that successor Swing Line Lender shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring or removed Swing Line Lender, and the retiring or removed Swing Line Lender shall be discharged from its duties and obligations under this Agreement. In such event (i) Company shall prepay any outstanding Swing Line Loans made by the retiring or removed Swing Line Lender in its capacity as Swing Line Lender, (ii) upon such prepayment, the retiring or removed Swing Line Lender shall surrender the Swing Line Note held by it to Company for cancellation, and (iii) Company shall issue a new Swing Line Note to the successor Swing Line Lender substantially in the form of EXHIBIT VI annexed hereto, in the principal amount of the Swing Line Loan Commitment then in effect and with other appropriate insertions. C. SUCCESSOR OFFSHORE CURRENCY FUNDING LENDER. The Offshore Currency Funding Lender may resign at any time upon one Business Days' prior notice thereof to Company, Lenders and Administrative Agent, and Offshore Currency Funding Lender may be removed at any time with or without cause by an instrument or concurrent instruments in writing delivered to Company and Offshore Currency Funding Lender and signed by Requisite Lenders. Upon any such notice of resignation of Offshore Currency Funding Lender or any such removal of Offshore Currency Funding Lender, Requisite Lenders shall have the right, upon five Business Days' notice to Company, to appoint a successor Offshore Currency Funding Lender. After any retiring or removed Offshore Currency Funding Lender's resignation or removal hereunder, the provisions of this Section 9 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Offshore Currency Funding Lender under this Agreement. Upon the acceptance of any appointment as Offshore Currency Funding Lender hereunder by a successor Offshore Currency Funding Lender, that successor Offshore Currency Funding Lender shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring or removed Offshore Currency Funding Lender, and the retiring or removed Offshore 140 Currency Funding Lender shall be discharged from its duties and obligations under this Agreement. In such event (i) Company shall prepay any outstanding Offshore Currency Loans made by the retiring or removed Offshore Currency Funding Lender, (ii) upon such prepayment, the retiring or removed Offshore Currency Funding Lender shall surrender the Offshore Currency Note held by it to Company for cancellation, and (iii) Company shall issue a new Offshore Currency Note to the successor Offshore Currency Funding Lender substantially in the form of EXHIBIT XXV annexed hereto, in the principal amount of the Offshore Currency Loan Commitment then in effect and with other appropriate insertions. 9.6 COLLATERAL DOCUMENTS AND SUBSIDIARY GUARANTY. Each Lender hereby further authorizes Administrative Agent, on behalf of and for the benefit of Lenders, to enter into each Collateral Document as secured party and to be the agent for and representative of Lenders under each Guaranty, and each Lender agrees to be bound by the terms of each Collateral Document and Guaranty; PROVIDED that Administrative Agent shall not (i) enter into or consent to any material amendment, modification, termination or waiver of any provision contained in any Collateral Document or Guaranty or (ii) release any Collateral (except as otherwise expressly permitted or required pursuant to the terms of this Agreement or the applicable Collateral Document), in each case without the prior consent of Requisite Lenders (or, if required pursuant to subsection 10.6, all Lenders); PROVIDED FURTHER, HOWEVER, that, without further written consent or authorization from Lenders, Administrative Agent may execute any documents or instruments necessary to (a) release any Lien encumbering any item of Collateral that is the subject of a sale or other disposition of assets permitted by this Agreement or to which Requisite Lenders have otherwise consented or (b) release any Subsidiary Guarantor from the Subsidiary Guaranty if all of the capital stock of such Subsidiary Guarantor is sold to any Person (other than an Affiliate of Company) pursuant to a sale or other disposition permitted hereunder or to which Requisite Lenders have otherwise consented. Anything contained in any of the Loan Documents to the contrary notwithstanding, Company, each Agent and each Lender hereby agree that (X) no Lender shall have any right individually to realize upon any of the Collateral under any Collateral Document or to enforce any Guaranty, it being understood and agreed that all rights and remedies under the Collateral Documents and the Subsidiary Guaranty may be exercised solely by Administrative Agent for the benefit of Lenders in accordance with the terms thereof, and (Y) in the event of a foreclosure by Administrative Agent on any of the Collateral pursuant to a public or private sale, any Agent or any Lender may be the purchaser of any or all of such Collateral at any such sale and Administrative Agent, as agent for and representative of Lenders (but not any Lender or Lenders in its or their respective individual capacities unless Requisite Lenders shall otherwise agree in writing) shall be entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Collateral sold at any such public sale, to use and apply 141 any of the Obligations as a credit on account of the purchase price for any collateral payable by Administrative Agent at such sale. 9.7 OTHER TITLES. None of the Lenders identified on the facing page or signature pages of this Agreement as a "syndication agent," "co-agent", "lead manager" or "arranger" or other similar title or capacity shall have any right, power, obligation, liability, responsibility or duty under this Agreement other than those applicable to all Lenders as such. Without limiting the foregoing, none of the Lenders so identified as a "syndication agent," "co-agent", "lead manager" or "arranger" or other similar title or capacity shall have or be deemed to have any fiduciary relationship with any Lender. Each Lender acknowledges that it has not relied, and will not rely, on any of the Lenders so identified in deciding to enter into this Agreement or in taking or not taking action hereunder. SECTION 10. MISCELLANEOUS 10.1 ASSIGNMENTS AND PARTICIPATIONS IN LOANS AND LETTERS OF CREDIT. A. GENERAL. Subject to subsection 10.1B, each Lender shall have the right at any time to (i) sell, assign or transfer to any Eligible Assignee, or (ii) sell participations to any Person in, all or any part of its Commitments or any Loan or Loans made by it or its Letters of Credit or participations therein or any other interest herein or in any other Obligations owed to it; PROVIDED that no such sale, assignment, transfer or participation shall, without the consent of Company, require Company to file a registration statement with the Securities and Exchange Commission or apply to qualify such sale, assignment, transfer or participation under the securities laws of any state; PROVIDED, FURTHER that no such sale, assignment or transfer described in clause (i) above shall be effective unless and until an Assignment Agreement effecting such sale, assignment or transfer shall have been accepted by Agent and recorded in the Register as provided in subsection 10.1B(ii); PROVIDED, FURTHER that no such sale, assignment, transfer or participation of any Letter of Credit or any participation therein may be made separately from a sale, assignment, transfer or participation of a corresponding interest in the same percentage in the Revolving Loan Commitment and the Revolving Loans of the Lender effecting such sale, assignment, transfer or participation; and PROVIDED, FURTHER that, anything contained herein to the contrary notwithstanding, the Swing Line Loan Commitment and the Swing Line Loans of Swing Line Lender and the Offshore Currency Loan Commitment and the Offshore Currency Loans of Offshore Currency Funding Lender may not be sold, assigned or transferred as described in clause (i) above to any Person other than a successor Swing Line Lender or Offshore Currency Funding Lender to the extent contemplated by subsection 9.5. Except as otherwise provided in this subsection 10.1, no Lender shall, as between Company and such 142 Lender, be relieved of any of its obligations hereunder as a result of any sale, assignment or transfer of, or any granting of participations in, all or any part of its Commitments or the Loans, the Letters of Credit or participations therein, or the other Obligations owed to such Lender. B. ASSIGNMENTS. (i) AMOUNTS AND TERMS OF ASSIGNMENTS. Each Commitment, Loan, Letter of Credit or participation therein, or other Obligation may (a) be assigned in any amount to another Lender, or to an Affiliate of the assigning Lender or another Lender, with the giving of notice to Company and Administrative Agent or (b) be assigned in an aggregate amount of not less than $5,000,000 in the case of Lenders other than DLJ and $3,000,000 in the case of DLJ (or in either case such lesser amount as shall constitute the aggregate amount of the Commitments, Loans, Letters of Credit and participations therein, and other Obligations of the assigning Lender or as may be consented to by Company and Agents) to any other Eligible Assignee with the consent of Company (which consent shall only be required so long as no Event of Default has occurred and is continuing) and, with respect to all Lenders other than DLJ, Syndication Agent and Administrative Agent (which consent of Company, Syndication Agent and Administrative Agent shall not be unreasonably withheld or delayed). To the extent of any such assignment in accordance with either clause (a) or (b) above, the assigning Lender shall be relieved of its obligations with respect to its Commitments, Loans, Letters of Credit or participations therein, or other Obligations or the portion thereof so assigned. The parties to each such assignment shall execute and deliver to Administrative Agent, for its acceptance and recording in the Register, an Assignment Agreement, together with a processing and recordation fee of $3,500 (to be assessed at Administrative Agent's election) and such forms, certificates or other evidence, if any, with respect to United States federal income tax withholding matters as the assignee under such Assignment Agreement may be required to deliver to Administrative Agent pursuant to subsection 2.7B(iii)(a). Upon such execution, delivery, acceptance and recordation from and after the effective date specified in such Assignment Agreement, (y) the assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment Agreement, shall have the rights and obligations of a Lender hereunder and (z) the assigning Lender thereunder shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such Assignment Agreement, relinquish its rights (other than any rights which survive the termination of this Agreement under subsection 10.9B) and be released from its obligations under this Agreement (and, in the case of an Assignment Agreement covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto; PROVIDED that, anything contained in any of the Loan 143 Documents to the contrary notwithstanding, if such Lender is the Issuing Lender with respect to any outstanding Letters of Credit such Lender shall continue to have all rights and obligations of an Issuing Lender with respect to such Letters of Credit until the cancellation or expiration of such Letters of Credit and the reimbursement of any amounts drawn thereunder). The Commitments hereunder shall be modified to reflect the Commitment of such assignee and any remaining Commitment of such assigning Lender and, if any such assignment occurs after the issuance of the Notes hereunder, the assigning Lender shall, upon the effectiveness of such assignment or as promptly thereafter as practicable, surrender its applicable Notes to Administrative Agent for cancellation, and thereupon new Notes shall be issued to the assignee and to the assigning Lender, substantially in the form of EXHIBIT IV, EXHIBIT V, EXHIBIT VI or EXHIBIT XXV annexed hereto, as the case may be, with appropriate insertions, to reflect the new Commitments and/or outstanding Term Loans, as the case may be, of the assignee and the assigning Lender. (ii) ACCEPTANCE BY ADMINISTRATIVE AGENT; RECORDATION IN REGISTER. Upon its receipt of an Assignment Agreement executed by an assigning Lender and an assignee representing that it is an Eligible Assignee, together with the processing and recordation fee referred to in subsection 10.1B(i) and any forms, certificates or other evidence with respect to United States federal income tax withholding matters that such assignee may be required to deliver to Administrative Agent pursuant to subsection 2.7B(iii)(a), Administrative Agent shall, if Agents and Company have consented to the assignment evidenced thereby (in each case to the extent such consent is required pursuant to subsection 10.1B(i)), (a) accept such Assignment Agreement by executing a counterpart thereof as provided therein (which acceptance shall evidence any required consent of Administrative Agent to such assignment), (b) record the information contained therein in the Register and (c) give prompt notice thereof to Company. Administrative Agent shall maintain a copy of each Assignment Agreement delivered to and accepted by it as provided in this subsection 10.1B(ii). C. PARTICIPATIONS. The holder of any participation, other than an Affiliate of the Lender granting such participation, shall not be entitled to require such Lender to take or omit to take any action hereunder except action directly affecting (i) the extension of the scheduled final maturity date of any Loan allocated to such participation or (ii) a reduction of the principal amount of or the rate of interest payable on any Loan allocated to such participation, and all amounts payable by Company hereunder (including amounts payable to such Lender pursuant to subsections 2.6D, 2.7 and 3.6) shall be determined as if such Lender had not sold such participation. Company and each Lender hereby acknowledge and agree that, solely for purposes of subsections 10.4 and 10.5, (a) any participation will give rise to a 144 direct obligation of Company to the participant and (b) the participant shall be considered to be a "Lender". D. ASSIGNMENTS TO FEDERAL RESERVE BANKS. In addition to the assignments and participations permitted under the foregoing provisions of this subsection 10.1, any Lender may assign and pledge all or any portion of its Loans, the other Obligations owed to such Lender, and its Notes to any Federal Reserve Bank as collateral security pursuant to Regulation A of the Board of Governors of the Federal Reserve System and any operating circular issued by such Federal Reserve Bank; PROVIDED that (i) no Lender shall, as between Company and such Lender, be relieved of any of its obligations hereunder as a result of any such assignment and pledge and (ii) in no event shall such Federal Reserve Bank be considered to be a "Lender" or be entitled to require the assigning Lender to take or omit to take any action hereunder. E. INFORMATION. Each Lender may furnish any information concerning Company and its Subsidiaries in the possession of that Lender from time to time to assignees and participants (including prospective assignees and participants), subject to subsection 10.20. F. REPRESENTATIONS OF LENDERS. Each Lender listed on the signature pages hereof hereby represents and warrants (i) that it is an Eligible Assignee described in clause (A) of the definition thereof; (ii) that it has experience and expertise in the making of loans such as the Loans; and (iii) that it will make its Loans for its own account in the ordinary course of its business and without a view to distribution of such Loans within the meaning of the Securities Act or the Exchange Act or other federal securities laws (it being understood that, subject to the provisions of this subsection 10.1, the disposition of such Loans or any interests therein shall at all times remain within its exclusive control). Each Lender that becomes a party hereto pursuant to an Assignment Agreement shall be deemed to agree that the representations and warranties of such Lender contained in Section 2(c) of such Assignment Agreement are incorporated herein by this reference. 10.2 EXPENSES. Whether or not the transactions contemplated hereby shall be consummated, Company agrees to pay promptly (i) all the actual and reasonable costs and expenses of preparation of the Loan Documents and any consents, amendments, waivers or other modifications thereto; (ii) all the costs of furnishing all opinions by counsel for Company (including any opinions requested by Agents or Lenders as to any legal matters arising hereunder) and of Company's performance of and compliance with all agreements and conditions on its part to be performed or complied with under this Agreement and the other Loan Documents including with respect to confirming compliance with environmental, insurance and solvency requirements; (iii) the reasonable fees, expenses and disbursements of counsel to Arranger and Syndication Agent (including allocated costs of internal counsel) in 145 connection with the negotiation, preparation and execution of the Loan Documents and after the Closing Date, the reasonable fees, expenses and disbursements of counsel to Agents in connection with the administration of the Loan Documents and with respect to any consents, amendments, waivers or other modifications to the Loan Documents and any other documents or matters requested by Company; (iv) all the actual costs and reasonable expenses of creating and perfecting Liens in favor of Administrative Agent on behalf of Lenders pursuant to any Collateral Document, including filing and recording fees, expenses and taxes, stamp or documentary taxes, search fees, title insurance premiums, and reasonable fees, expenses and disbursements of counsel to each of Syndication Agent and Administrative Agent and of counsel providing any opinions that Syndication Agent, Administrative Agent or Requisite Lenders may request in respect of the Collateral Documents or the Liens created pursuant thereto; (v) all the actual costs and reasonable expenses (including the reasonable fees, expenses and disbursements of any auditors, accountants or appraisers and any environmental or other consultants, advisors and agents employed or retained by Syndication Agent, Administrative Agent or their respective counsel) of obtaining and reviewing any environmental audits or reports provided for under subsection 6.9B(viii); (vi) the custody or preservation of any of the Collateral; (vii) all other actual and reasonable costs and expenses incurred by Arranger, Syndication Agent or Administrative Agent in connection with the syndication of the Commitments and the negotiation, preparation and execution of the Loan Documents and any consents, amendments, waivers or other modifications thereto and the transactions contemplated thereby; and (viii) after the occurrence of an Event of Default, all costs and expenses, including reasonable attorneys' fees (including allocated costs of internal counsel) and costs of settlement, incurred by Agents and Lenders in enforcing any Obligations of or in collecting any payments due from any Loan Party hereunder or under the other Loan Documents by reason of such Event of Default (including in connection with the sale of, collection from, or other realization upon any of the Collateral or the enforcement of the Subsidiary Guaranty) or in connection with any refinancing or restructuring of the credit arrangements provided under this Agreement in the nature of a "work-out" or pursuant to any insolvency or bankruptcy proceedings. 10.3 INDEMNITY. In addition to the payment of expenses pursuant to subsection 10.2, whether or not the transactions contemplated hereby shall be consummated, Company agrees to defend (subject to Indemnitees' selection of counsel), indemnify, pay and hold harmless Arranger, Agents and Lenders, and the officers, directors, trustees, employees, agents and affiliates of Arranger, Agents and Lenders (collectively called the "INDEMNITEES"), from and against any and all Indemnified Liabilities (as hereinafter defined); PROVIDED that Company shall not have any obligation to any Indemnitee hereunder with respect to any Indemnified Liabilities to the extent such Indemnified Liabilities arise solely from the gross negligence or willful misconduct of 146 that Indemnitee as determined by a final judgment of a court of competent jurisdiction. As used herein, "INDEMNIFIED LIABILITIES" means, collectively, any and all liabilities, obligations, losses, damages (including natural resource damages), penalties, actions, judgments, suits, claims (including Environmental Claims), costs (including the costs of any investigation, study, sampling, testing, abatement, cleanup, removal, remediation or other response action necessary to remove, remediate, clean up or abate any Hazardous Materials Activity), expenses and disbursements of any kind or nature whatsoever (including the reasonable fees and disbursements of counsel for Indemnitees in connection with any investigative, administrative or judicial proceeding commenced or threatened by any Person, whether or not any such Indemnitee shall be designated as a party or a potential party thereto, and any fees or expenses incurred by Indemnitees in enforcing this indemnity), whether direct, indirect or consequential and whether based on any federal, state or foreign laws, statutes, rules or regulations (including securities and commercial laws, statutes, rules or regulations and Environmental Laws), on common law or equitable cause or on contract or otherwise, that may be imposed on, incurred by, or asserted against any such Indemnitee, in any manner relating to or arising out of (i) this Agreement or the other Loan Documents or the transactions contemplated hereby or thereby (including Lenders' agreement to make the Loans hereunder or the use or intended use of the proceeds thereof or the issuance of Letters of Credit hereunder or the use or intended use of any thereof, or any enforcement of any of the Loan Documents (including any sale of, collection from, or other realization upon any of the Collateral or the enforcement of the Subsidiary Guaranty), (ii) the statements contained in the commitment letter delivered by any Lender to Company with respect thereto, or (iii) any Environmental Claim or any Hazardous Materials Activity relating to or arising from, directly or indirectly, any past or present activity, operation, land ownership, or practice of Company or any of its Subsidiaries. To the extent that the undertakings to defend, indemnify, pay and hold harmless set forth in this subsection 10.3 may be unenforceable in whole or in part because they are violative of any law or public policy, Company shall contribute the maximum portion that it is permitted to pay and satisfy under applicable law to the payment and satisfaction of all Indemnified Liabilities incurred by Indemnitees or any of them. 10.4 SET-OFF. In addition to any rights now or hereafter granted under applicable law and not by way of limitation of any such rights, upon the occurrence of any Event of Default each Lender is hereby authorized by Company at any time or from time to time, without notice to Company or to any other Person, any such notice being hereby expressly waived, to set off and to appropriate and to apply any and all deposits (general or special, including Indebtedness evidenced by certificates of deposit, 147 whether matured or unmatured, but not including trust accounts) and any other Indebtedness at any time held or owing by that Lender to or for the credit or the account of Company against and on account of the obligations and liabilities of Company to that Lender under this Agreement, the Letters of Credit and participations therein and the other Loan Documents, including all claims of any nature or description arising out of or connected with this Agreement, the Letters of Credit and participations therein or any other Loan Document, irrespective of whether or not (i) that Lender shall have made any demand hereunder or (ii) the principal of or the interest on the Loans or any amounts in respect of the Letters of Credit or any other amounts due hereunder shall have become due and payable pursuant to Section 8 and although said obligations and liabilities, or any of them, may be contingent or unmatured. 10.5 RATABLE SHARING. Lenders hereby agree among themselves that if any of them shall, whether by voluntary payment (other than a voluntary prepayment of Loans made and applied in accordance with the terms of this Agreement), by realization upon security, through the exercise of any right of set-off or banker's lien, by counterclaim or cross action or by the enforcement of any right under the Loan Documents or otherwise, or as adequate protection of a deposit treated as cash collateral under the Bankruptcy Code, receive payment or reduction of a proportion of the aggregate amount of principal, interest, amounts payable in respect of Letters of Credit, fees and other amounts then due and owing to that Lender hereunder or under the other Loan Documents (collectively, the "AGGREGATE AMOUNTS DUE" to such Lender) which is greater than the proportion received by any other Lender in respect of the Aggregate Amounts Due to such other Lender, then the Lender receiving such proportionately greater payment shall (i) notify Administrative Agent and each other Lender of the receipt of such payment and (ii) apply a portion of such payment to purchase participations (which it shall be deemed to have purchased from each seller of a participation simultaneously upon the receipt by such seller of its portion of such payment) in the Aggregate Amounts Due to the other Lenders so that all such recoveries of Aggregate Amounts Due shall be shared by all Lenders in proportion to the Aggregate Amounts Due to them; PROVIDED that if all or part of such proportionately greater payment received by such purchasing Lender is thereafter recovered from such Lender upon the bankruptcy or reorganization of Company or otherwise, those purchases shall be rescinded and the purchase prices paid for such participations shall be returned to such purchasing Lender ratably to the extent of such recovery, but without interest. Company expressly consents to the foregoing arrangement and agrees that any holder of a participation so purchased may exercise any and all rights of banker's lien, set-off or counterclaim with respect to any and all monies owing by Company to that holder with respect thereto as fully as if that holder were owed the amount of the participation held by that holder. 148 10.6 AMENDMENTS AND WAIVERS. No amendment, modification, termination or waiver of any provision of this Agreement or of the Notes, and no consent to any departure by Company therefrom, shall in any event be effective without the written concurrence of Requisite Lenders; PROVIDED that any such amendment, modification, termination, waiver or consent which: increases the amount of any of the Commitments or reduces the principal amount of any of the Loans; increases the maximum amount of Letters of Credit or of Commercial Letters of Credit or Standby Letters of Credit; changes in any manner the definition of "Pro Rata Share" or the definition of "Requisite Lenders"; changes in any manner any provision of this Agreement which, by its terms, expressly requires the approval or concurrence of all Lenders; postpones the scheduled final maturity date (but not the date of any scheduled installment of principal) of any of the Loans; postpones the date on which any interest or any fees are payable; decreases the interest rate borne by any of the Loans (other than any waiver of any increase in the interest rate applicable to any of the Loans pursuant to subsection 2.2E) or the amount of any fees payable hereunder; increases the maximum duration of Interest Periods permitted hereunder; reduces the amount or postpones the due date of any amount payable in respect of, or extends the required expiration date of, any Letter of Credit; changes in any manner the obligations of Lenders relating to the purchase of participations in Letters of Credit; releases any Lien granted in favor of Administrative Agent with respect to 25% or more in aggregate fair market value of the Collateral, other than in accordance with the Loan Documents; releases any Subsidiary Guarantor from its obligations under the Subsidiary Guaranty, in each case other than in accordance with the terms of the Loan Documents; or changes in any manner the provisions contained in subsection 8.1 or this subsection 10.6 shall be effective only if evidenced by a writing signed by or on behalf of all Lenders. In addition, (i) any amendment, modification, termination or waiver of any of the provisions contained in Section 4 shall be effective only if evidenced by a writing signed by or on behalf of Agents and Requisite Lenders, (ii) no amendment, modification, termination or waiver of any provision of any Note shall be effective without the written concurrence of the Lender which is the holder of that Note, (iii) no amendment, modification, termination or waiver of any provision of subsection 2.1A(iv) or of any other provision of this Agreement relating to the Offshore Currency Loan Commitment or the Offshore Currency Loans shall be effective without the written concurrence of the Offshore Currency Funding Lender, (iv) no amendment, modification, termination or waiver of any provision of subsection 2.1A(iii) or of any other provision of this Agreement relating to the Swing Line Loan Commitment or the Swing Line Loans shall be effective without the written concurrence of Swing Line Lender, and (v) no amendment, modification, termination or waiver of any provision of Section 9 or of any other provision of this Agreement which, by its terms, expressly requires the approval or concurrence of Agents shall be effective without the written concurrence of Agents. Administrative Agent may, but shall have no obligation to, with the concurrence of any Lender, execute amendments, modifications, waivers or consents on behalf of that Lender. Any waiver or consent 149 shall be effective only in the specific instance and for the specific purpose for which it was given. No notice to or demand on Company in any case shall entitle Company to any other or further notice or demand in similar or other circumstances. Any amendment, modification, termination, waiver or consent effected in accordance with this subsection 10.6 shall be binding upon each Lender at the time outstanding, each future Lender and, if signed by Company, on Company. 10.7 INDEPENDENCE OF COVENANTS. All covenants hereunder shall be given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that it would be permitted by an exception to, or would otherwise be within the limitations of, another covenant shall not avoid the occurrence of an Event of Default or Potential Event of Default if such action is taken or condition exists. 10.8 NOTICES. Unless otherwise specifically provided herein, any notice or other communication herein required or permitted to be given shall be in writing and may be personally served or sent by telefacsimile or United States mail or courier service, to the address or number, as the case may be, specified on SCHEDULE 1.1, and shall be deemed to have been given when delivered in person or by courier service, upon receipt of telefacsimile, or three Business Days after depositing it in the United States mail with postage prepaid and properly addressed; PROVIDED that notices to Agents shall not be effective until received; PROVIDED FURTHER that any matter transmitted by Company by telefacsimile (i) shall be immediately confirmed by a telephone call to the recipient at the number specified on SCHEDULE 1.1, and (ii) shall be followed promptly by delivery of a hard copy original thereof. For the purposes hereof, the address of each party hereto shall be as set forth under such party's name on the signature pages hereof, on Schedule 1.1 annexed hereto or (i) as to Company and Agents, such other address as shall be designated by such Person in a written notice delivered to the other parties hereto and (ii) as to each other party, such other address as shall be designated by such party in a written notice delivered to Administrative Agent. 10.9 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. A. All representations, warranties and agreements made herein shall survive the execution and delivery of this Agreement and the making of the Loans and the issuance of the Letters of Credit hereunder. B. Notwithstanding anything in this Agreement or implied by law to the contrary, the agreements of Company set forth in subsections 2.6D, 2.7, 3.5A, 3.6, 10.2, 10.3 and 10.4 and the agreements of Lenders set forth in subsections 9.2C, 9.4 and 10.5 shall survive the payment of the Loans, the cancellation or expiration of the 150 Letters of Credit and the reimbursement of any amounts drawn thereunder, and the termination of this Agreement. 10.10 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No failure or delay on the part of any Agent or any Lender in the exercise of any power, right or privilege hereunder or under any other Loan Document shall impair such power, right or privilege or be construed to be a waiver of any default or acquiescence therein, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other power, right or privilege. All rights and remedies existing under this Agreement and the other Loan Documents are cumulative to, and not exclusive of, any rights or remedies otherwise available. 10.11 MARSHALLING; PAYMENTS SET ASIDE. None of Agents or Lenders shall be under any obligation to marshal any assets in favor of Company or any other party or against or in payment of any or all of the Obligations. To the extent that Company makes a payment or payments to Administrative Agent or Lenders (or to Administrative Agent for the benefit of Lenders), or any of Agents or Lenders enforce any security interests or exercise their rights of setoff, and such payment or payments or the proceeds of such enforcement or setoff or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, any other state or federal law, common law or any equitable cause, then, to the extent of such recovery, the obligation or part thereof originally intended to be satisfied, and all Liens, rights and remedies therefor or related thereto, shall be revived and continued in full force and effect as if such payment or payments had not been made or such enforcement or setoff had not occurred. 10.12 SEVERABILITY. In case any provision in or obligation under this Agreement or the Notes shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby. 10.13 OBLIGATIONS SEVERAL; INDEPENDENT NATURE OF LENDERS' RIGHTS. The obligations of Lenders hereunder are several and no Lender shall be responsible for the obligations or Commitments of any other Lender hereunder. Nothing contained herein or in any other Loan Document, and no action taken by Lenders pursuant hereto or thereto, shall be deemed to constitute Lenders as a 151 partnership, an association, a joint venture or any other kind of entity. The amounts payable at any time hereunder to each Lender shall be a separate and independent debt, and each Lender shall be entitled to protect and enforce its rights arising out of this Agreement and it shall not be necessary for any other Lender to be joined as an additional party in any proceeding for such purpose. 10.14 HEADINGS. Section and subsection headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose or be given any substantive effect. 10.15 APPLICABLE LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. 10.16 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the parties hereto and their respective successors and assigns and shall inure to the benefit of the parties hereto and the successors and assigns of Lenders (it being understood that Lenders' rights of assignment are subject to subsection 10.1). Neither Company's rights or obligations hereunder nor any interest therein may be assigned or delegated by Company without the prior written consent of all Lenders. 10.17 CONSENT TO JURISDICTION AND SERVICE OF PROCESS. ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST COMPANY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY OBLIGATIONS THEREUNDER, MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK. BY EXECUTING AND DELIVERING THIS AGREEMENT, COMPANY, FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY (I) ACCEPTS GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS; (II) WAIVES ANY DEFENSE OF FORUM NON CONVENIENS; 152 (III) AGREES THAT SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO COMPANY AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH SUBSECTION 10.8; (IV) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER COMPANY IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT; (V) AGREES THAT LENDERS RETAIN THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST COMPANY IN THE COURTS OF ANY OTHER JURISDICTION; AND (VI) AGREES THAT THE PROVISIONS OF THIS SUBSECTION 10.17 RELATING TO JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE FULLEST EXTENT PERMISSIBLE UNDER NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1402 OR OTHERWISE. 10.18 WAIVER OF JURY TRIAL. EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS LOAN TRANSACTION OR THE LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED. The scope of this waiver is intended to be all-encompassing of any and all disputes that may be filed in any court and that relate to the subject matter of this transaction, including contract claims, tort claims, breach of duty claims and all other common law and statutory claims. Each party hereto acknowledges that this waiver is a material inducement to enter into a business relationship, that each has already relied on this waiver in entering into this Agreement, and that each will continue to rely on this waiver in their related future dealings. Each party hereto further warrants and represents that it has reviewed this waiver with its legal counsel and that it knowingly and voluntarily waives its jury trial rights following consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS SUBSECTION 10.18 AND EXECUTED BY EACH OF THE PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, 153 RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS MADE HEREUNDER. In the event of litigation, this Agreement may be filed as a written consent to a trial by the court. 10.19 JUDGMENT. 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 Administrative Agent could purchase the first currency with such other currency on the Business Day preceding that on which final judgment is given. The obligation of Company in respect of any such sum due from it to Administrative 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 the Business Day following receipt by Administrative Agent of any sum adjudged to be so due in the Judgment Currency, Administrative 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 Administrative Agent in the Agreement Currency, Company agrees, as a separate obligation and notwithstanding any such judgment, to indemnify Administrative 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 Administrative Agent in such currency, Administrative Agent agrees to return the amount of any excess to Company (or to any other Person who may be entitled thereto under applicable law). 10.20 CONFIDENTIALITY. Each Lender shall hold all non-public information obtained pursuant to the requirements of this Agreement which has been identified as confidential by Company in accordance with such Lender's customary procedures for handling confidential information of this nature and in accordance with safe and sound banking practices, it being understood and agreed by Company that in any event a Lender may make disclosures to Affiliates and professional advisors of such Lender or disclosures reasonably required by (a) any bona fide assignee, transferee or participant in connection with the contemplated assignment or transfer by such Lender of any Loans or any participations therein or (b) by any direct or indirect contractual counterparties in swap agreements or such contractual counterparties' professional advisors provided that such contractual counterparty or professional advisor to such contractual counterparty agrees in writing to keep such information confidential to the same extent required of the Lenders hereunder, or disclosures 154 required or requested by any governmental agency or representative thereof or pursuant to legal process; PROVIDED that, unless specifically prohibited by applicable law or court order, each Lender shall notify Company of any request by any governmental agency or representative thereof (other than any such request in connection with any examination of the financial condition of such Lender by such governmental agency) for disclosure of any such non-public information prior to disclosure of such information; and PROVIDED, FURTHER that in no event shall any Lender be obligated or required to return any materials furnished by Company or any of its Subsidiaries. 10.21 COUNTERPARTS; EFFECTIVENESS. This Agreement and any amendments, waivers, consents or supplements hereto or in connection herewith may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document. This Agreement shall become effective upon the execution of a counterpart hereof by each of the parties hereto and receipt by Company and Agents of written or telephonic notification of such execution and authorization of delivery thereof. [Remainder of page intentionally left blank] 155 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above. COMPANY: WAVETEK CORPORATION By: /s/ Vickie L. Capps -------------------------------------- Name: Vickie L. Capps -------------------------------- Title: Chief Financial Officer ------------------------------- Notice Address: 11995 El Camino Real Suite 301 San Diego, CA 92130 Tel: (619) 793-2300 Fax: (619) 793-2310 S-1 LENDERS: DLJ CAPITAL FUNDING, INC., individually and as Syndication Agent By: /s/ Eric Swanson ---------------------------------------- Title: Managing Director ---------------------------------------- Notice Address: 2121 Avenue of the Stars Los Angeles, CA 90067-5014 Attention: Eric Swanson Tel: (310) 282-7447 Fax: (310) 282-6178 S-2 FLEET NATIONAL BANK individually and as Administrative Agent By: /s/ Eric Van Der Mel ------------------------------------------ Title: Vice President ------------------------------------------ Notice Address: One Federal Street Boston, MA 02110 Attention: Eric Van der Mel Tel: (617) 346-4853 Fax: (617) 346-4806 S-3 IMPERIAL BANK By: /s/ John Farrace -------------------------------------- Title: Senior Vice President -------------------------------------- Notice Address: 9920 S. La Cienega Los Angeles, CA 90301 Attention: John Farrace Tel: (310) 417-5676 Fax: (310) 417-5997 S-4 UNION BANK OF CALIFORNIA By: /s/ Richard Petrie ------------------------------------- Title: Vice President ------------------------------------- Notice Address: 530 B Street, 4th Floor San Diego, CA 92101 Attention: Dick Petrie Tel: (619) 230-3754 Fax: (619) 230-3766 S-5 CREDITANSTALT BANKVEREIN By: /s/ Patrick J. Rounds ------------------------------------- Title: Vice President ------------------------------------- By: /s/ Martin Mittag ------------------------------------- Title: Deputy Chief Executive Officer ------------------------------------- Notice Address: 4 Embarcadero Center Suite 630 San Francisco, CA 94111 Attention: Pat Rounds Tel: (415) 788-1371 Fax: (415) 781-0622 S-6 EX-10.2 17 EXHIBIT 10.2 STOCKHOLDERS AGREEMENT THIS STOCKHOLDERS AGREEMENT, dated as of this 11th day of June, 1997, is by and among Wavetek Corporation, a Delaware corporation (the "COMPANY"), DLJ Merchant Banking Partners II, L.P. ("DLJMB"), DLJ Offshore Partners II, C.V., DLJ Diversified Partners, L.P., DLJMB Funding II, Inc., UK Investment Plan 1997 Partners, DLJ First ESC L.L.C, DLJ EAB Partners, L.P. and DLJ Millennium Partners, L.P. (collectively, and together with DLJMB, the "DLJ INVESTORS"), Green Equity Investors II, L.P. ("GEI"), Schroder UK Venture Fund III, L.P., Schroder UK Venture Fund III, L.P.2, Schroder UK Venture Fund III Trust (collectively, "SCHRODER"), Yokogawa Electric Corporation ("YOKOGAWA", and together with the DLJ Investors, GEI and Schroder, the "INSTITUTIONAL INVESTORS"), Dr. Terence J. Gooding ("GOODING"), and the management Stockholders listed on Schedule I hereto (the "MANAGEMENT STOCKHOLDERS" and together with the Institutional Investors and Gooding, the "STOCKHOLDERS"). RECITALS A. WHEREAS, pursuant to the terms of the Stock Purchase and Recapitalization Agreement dated as of May 23, 1997 (the "RECAPITALIZATION AGREEMENT") by and among the Company, the DLJ Investors, GEI, and certain stockholders of the Company, the DLJ Investors and GEI will purchase from the Company 1,674,810 and 753,660 shares, respectively, of Common Stock (as defined below) representing 34.28% and 15.43%, respectively, of the outstanding shares of Common Stock immediately after the transactions contemplated by the Recapitalization Agreement. B. WHEREAS, the Company and the Stockholders are concurrently entering into a Registration Rights Agreement to provide for piggy-back and demand registration rights for the benefit of the Stockholders (the "REGISTRATION RIGHTS AGREEMENT"). C. WHEREAS, the Company and the Stockholders desire to enter into this Agreement for the purpose of regulating certain aspects of the Stockholders' relationships with regard to each other and the Company. AGREEMENT NOW THEREFORE, in consideration of the mutual covenants herein contained and for other good and valuable consideration, the parties agree as follows: ARTICLE 1 DEFINITIONS As used herein, the terms below shall have the following meanings. Any such term, unless the context otherwise requires, may be used in the singular or plural, depending upon reference. "ACT" shall mean the Securities Act of 1933, as amended. "AFFILIATE" shall mean, with respect to any Person, any Person directly or indirectly controlling or controlled by or under direct or indirect common control with such Person. For purposes of this definition, ownership of 10% or more of the voting common equity of a Person shall be deemed to be control of such Person. "COMMISSION" shall mean the Securities and Exchange Commission. "COMMON STOCK" shall mean the Common Stock, $.01 par value per share, of the Company. "DLJSC" shall mean Donaldson, Lufkin & Jenrette Securities Corporation. "EXEMPT TRANSFER" shall mean (i) transfers by a Stockholder to its Permitted Transferees; or (ii) transfers by a Stockholder who is an employee of the Company of his or her Shares to the Company in connection with the termination of employment by such employee; PROVIDED, HOWEVER, that no such transfer pursuant to the foregoing clause (i) shall be an Exempt Transfer unless the transferee agrees in writing to be bound by this Agreement as if such transferee were a Stockholder with respect to such transferred Shares, after which such transferee shall be deemed a "Stockholder" for all purposes under this Agreement. "PERMITTED TRANSFEREE" means any of the following who agrees to be bound by and become a party to this Agreement: (i) with respect to transfers by the Institutional Investors, any Affiliates thereof, and (ii) with respect to transfers by Gooding or the Management Stockholders, a spouse, child, grandchild, stepchild or a child of a stepchild thereof or a trust as to which Gooding, the Management Stockholder or such spouse, child, grandchild, stepchild or child of a stepchild thereof exercises substantial control over the investment of the trust assets. Upon (i) execution and delivery by a Permitted Transferee of this Agreement and (ii) receipt of Shares of Common Stock from the transferring Stockholder, the Permitted Transferee shall be deemed to be a "Stockholder" for all purposes under this Agreement. "PERSON" shall be construed broadly and shall include an individual, a partnership, a corporation, an association, a joint stock company, a limited liability company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof. "PROPOSED SALE" shall have the meaning set forth in Section 4.1. 2 "QUALIFIED IPO" shall mean the initial underwritten offering by the Company of Common Stock registered with the Commission under the Act (i) after which the Common Stock is included for quotation on the Nasdaq National Market or listed on a national securities exchange and (ii) having an aggregate offering price to the public (before underwriters' discounts and commissions) of at least $20,000,000. "SELLING STOCKHOLDER" shall have the meaning set forth in Section 4.1. "SECURITIES" shall have the meaning set forth in Section 4.3. "SHARES" shall mean the shares of Common Stock now owned and hereafter acquired by the Stockholders. "STOCKHOLDER'S PERCENTAGE SHARE" shall mean, as applied to any transaction covered by Section 4.1, a fraction, the numerator of which is the number of shares of Common Stock held by such Stockholder, and the denominator of which is the number of shares of Common Stock held by all Stockholders other than the Stockholder(s) participating in the transaction which gave rise to the first-offer right contained in Section 4.1. "TAG-ALONG NOTICE" shall have the meaning set forth in Section 4.2. "TAG-ALONG RIGHT" shall have the meaning set forth in Section 4.2. "TAG-ALONG STOCKHOLDERS" shall have the meaning set forth in Section 4.2. ARTICLE 2 GOVERNANCE 2.1 BOARD OF DIRECTORS. (a) The Stockholders hereby agree to take, at any time and from time to time, all action necessary (including, without limitation, voting the Shares owned by them, calling special meetings of stockholders and executing and delivering written consents) such that the Board of Directors of the Company shall consist of up to nine directors, who shall be designated as follows: (i) two (or three if an additional director is designated pursuant to the last sentence of this Section 2.1(a)) of such members shall be persons designated by DLJMB for as long as the DLJ Investors and/or their Permitted Transferees shall own at least 20% of the outstanding Common Stock of the Company; (ii) one of such members shall be a person designated by GEI for as long as GEI and/or its Permitted Transferees shall own at least 5% of the outstanding Common Stock of the Company; (iii) three (or four if an additional director is designated pursuant to the last sentence of this Section 2.1(a)) of such members shall be persons designated by Gooding for as long as Gooding and/or his Permitted Transferees shall own at least 10% of the outstanding Common Stock of the Company; and (iv) one of such members shall be a person designated by Gooding for as long as Gooding and/or his Permitted Transferees shall own at 3 least 10% of the outstanding Common Stock of the Company, subject to approval by DLJMB for as long as the DLJ Investors and/or their Permitted Transferees own at least 20% of the outstanding Common Stock of the Company. It is agreed that, as of the effective date of this Agreement, the directors initially designated in clause (i) shall be Kenneth D. Moelis and David B. Wilson; the director initially designated in clause (ii) shall be Peter J. Nolan; the directors initially designated in clause (iii) shall be Gooding, Derek T. Morikawa and Ben J. Constantini; and the director initially designated in clause (iv) shall be Kenneth Baker. In the event the DLJ Investors and/or their Permitted Transferees own at least 10% but less than 20% of the outstanding Common Stock of the Company, DLJMB shall have the right to appoint only two directors. In the event the DLJ Investors and/or their Permitted Transferees own at least 5% but less than 10% of the outstanding Common Stock of the Company, DLJMB shall have the right to appoint only one director. In the event Gooding and/or his Permitted Transferees own at least 5% but less than 10% of the outstanding Common Stock of the Company, Gooding shall have the right to appoint only two directors. Prior to a Qualified IPO, each of DLJMB and Gooding may designate an additional director pursuant to clause (i) or (iii) above. (b) Upon the consummation of a Qualified IPO, the parties hereto agree that the size of the Board of Directors shall consist of nine members, at least two of which shall be "independent directors" (or the legal equivalent) under the rules and regulations of the New York Stock Exchange, Inc. or other principal securities exchange on which the Common Stock is listed or traded. (c) If a director has been designated by a Stockholder and elected pursuant to this Section 2.1 and if such Stockholder requests that such director be removed (with or without cause) by written notice thereof to the other Stockholders of the Company, then such director shall be removed, upon the affirmative vote of holders of a majority of the outstanding shares of Common Stock, and each Stockholder hereby agrees to vote all Shares owned or held of record by such persons or entities to effect such removal upon such request. (d) In the event a vacancy is created on the Board of Directors at any time by the death, disability, retirement, resignation or removal of a director or otherwise, the Stockholder who originally designated such director shall nominate a replacement director, and each Stockholder agrees to cause the director(s) designated by such Stockholder to vote for such nominated individual to fill such vacancy. (e) If neither DLJMB, GEI nor Gooding has the right to designate any one of the directors, the right to designate such director shall devolve on all holders of the Common Stock. 2.2 APPROVAL OF CERTAIN TRANSACTIONS. In addition to any approval of the Board of Directors required by applicable law, the following transactions shall require the specific approval of (i) DLJMB for as long as the DLJ Investors and/or their Permitted Transferees shall own at least 20% of the outstanding Common Stock of the Company and (ii) Gooding for as long as Gooding and/or his Permitted Transferees shall own at least 20% of the outstanding Common Stock of the Company: 4 (a) any direct or indirect investment by the Company in, or purchase or other acquisition by the Company of, in one or a series of transactions, any business, assets, securities or other property of another person, which transaction or series of transactions has an aggregate value in excess of $10,000,000; (b) any sale, lease, exchange or other disposition of any material asset or assets of the Company having an aggregate fair market value in excess of $10,000,000; (c) any merger, consolidation or sale of all, or substantially all, of the assets of the Company; (d) any incurrence by the Company or its subsidiaries of indebtedness in excess of $10,000,000 other than the incurrence of debt to finance working capital in the ordinary course of business and other than refinancing of indebtedness existing at the date of this Agreement; (e) any issuance by the Company of equity securities other than (i) pursuant to agreements in existence as of the date of this Agreement (ii) pursuant to any stock option or other incentive-based plan for employees of the Company and (iii) in connection with a transaction described in clause (a) or (b) above with a value of $10,000,000 or less; (f) the engagement of any investment banking firm by the Company in connection with an offering of securities or any other transaction; (g) any significant change in or expansion of the Company's business outside of the test instrument industry or any business reasonably related thereto; (h) the appointment of any chief executive officer who succeeds Gooding to such position; (i) any agreement or transaction between the Company and any Affiliate of the Company involving the transfer of any consideration (whether cash, securities, property or otherwise) between the Company and such Affiliate; PROVIDED, HOWEVER, that the foregoing shall not restrict (A) transactions between the Company and any of its subsidiaries, or among any of such subsidiaries, (B) payments or advances to employees of the Company or its subsidiaries in the ordinary course of business, (C) transactions pursuant to any stock option or other incentive-based plan for employees of the Company or its subsidiaries that is approved by the Board of Directors, (D) transactions contemplated by this Agreement or agreements entered into in connection with the closing of the Recapitalization Agreement and (E) transactions pursuant to any arrangements existing on the date hereof; and (j) any action to amend or repeal any provision of the Company's Articles of Incorporation or By-laws. 2.3 QUORUM. For so long as DLJMB shall have the right under this Agreement to designate any directors, in regard to a meeting of the Board of Directors, a quorum of the Board 5 shall not be deemed to exist unless there is a majority of the members of the Board of Directors present and at least one director designated by DLJMB is a part of such quorum; PROVIDED, HOWEVER, if there would have otherwise been a quorum but for the absence of all of the directors designated by DLJMB, a majority of directors present for such meeting may adjourn the meeting and send a special notice to the directors designated by DLJMB and the other directors not in attendance at the meeting setting a date for reconvening the meeting of the Board of Directors at least three business days after the meeting as to which no quorum existed by virtue of the absence of all of the directors designated by DLJMB was adjourned, and the Board of Directors may reconvene at such time and conduct business if a quorum is otherwise present, regardless of whether a director designated by DLJMB is in attendance. 2.4 NOTICE. The Stockholders agree to cause the Bylaws of the Company to provide that the Board of Directors will not take any action at a meeting unless notice of such meeting shall have been given to each director at least ten days prior thereto. ARTICLE 3 TRANSFER RESTRICTIONS 3.1 FIRST YEAR ANNIVERSARY. Prior to the earlier of the first anniversary of this Agreement and the consummation of a Qualified IPO, no Stockholder may transfer or pledge any Shares other than in connection with an Exempt Transfer. 3.2 SECOND THROUGH FIFTH YEAR ANNIVERSARIES. From and after the first anniversary of this Agreement until the earlier of the fifth year anniversary of this Agreement and the consummation of a Qualified IPO: (a) the Institutional Investors may transfer their Shares subject to the other Stockholders' rights of first offer under Section 4.1 and Tag-Along Rights under Section 4.2; (b) the Management Stockholders (other than Gooding) may transfer their Shares only pursuant to exercise of the Tag-Along Rights granted to them in Sections 4.2; (c) Gooding may transfer (i) such number of Shares of Common Stock such that, after such transfer, Gooding owns Shares representing not less than 20% of the number of Shares outstanding at the time of this Agreement, subject to the other Stockholders' rights of first offer under Section 4.1 and Tag-Along Rights under Section 4.2 and (ii) the remainder of his Shares only pursuant to exercise of the Tag-Along Rights granted to him in Sections 4.2; PROVIDED, HOWEVER, that in the event Gooding is no longer the chief executive officer of the Company, Gooding may transfer all of his Shares of Common Stock pursuant to clause (i) of this Section 3.2(c); and (d) any Stockholder may transfer its Shares in an Exempt Transfer. 3.3 FIFTH THROUGH TENTH YEAR ANNIVERSARIES. From and after the fifth anniversary of this Agreement until the earlier of the tenth year anniversary of this and the consummation of 6 a Qualified IPO, any Stockholder may transfer its Shares subject to the other Stockholders' rights of first offer under Section 4.1 and Tag-Along Rights under Section 4.2. 3.4 RELEASE OF TRANSFER RESTRICTIONS IN CONNECTION WITH QUALIFIED IPO. In addition, Stockholders may transfer Shares in connection with a Qualified IPO in accordance with the following provisions: (a) If the Company elects to offer Common Stock pursuant to a Qualified IPO or is required to make a registration that would constitute a Qualified IPO, the Board of Directors shall deliver a written notice to each of the Stockholders at least 30 days prior to the filing of the initial registration statement in connection with such Qualified IPO (the "IPO Notice"). Within 10 days of receipt of such notice, the DLJ Investors may elect to participate in such Qualified IPO as a selling Stockholder by delivering to the Company and each other Stockholder, a notice stating (i) the DLJ Investors' bona fide intention of participating in such Qualified IPO and (ii) and the number of Shares the DLJ Investors wish to sell in such Qualified IPO. The number of Shares that the DLJ Investors may include in the Qualified IPO will be determined in accordance with the Registration Rights Agreement. (b) If the DLJ Investors elect to participate in the Qualified IPO in accordance with Section 3.4(a) above, the other Institutional Investors may also elect to participate in such Qualified IPO by delivering a notice to the Company and each of the other Stockholders within 20 days of receipt of the IPO Notice, which notice shall state (i) such Stockholder's bona fide intention of participating in such Qualified IPO and (ii) and the number of Shares such Stockholder wishes to sell in such Qualified IPO; PROVIDED, HOWEVER, that the maximum number of Shares a Stockholder may sell in a Qualified IPO is the total number of Shares owned by such Stockholder MULTIPLIED BY a fraction, the numerator of which is the number of Shares to be sold by the DLJ Investors in the Qualified IPO and the denominator of which is the total number of Shares owned by the DLJ Investors, subject to the provisions of Sections 2(d) and 3(b) of the Registration Rights Agreement (the "IPO PORTION"). (c) If the DLJ Investors elect to participate in the Qualified IPO in accordance with Section 3.4(a) above, Gooding and the Management Stockholders may sell such number of Shares, if any, in the Qualified IPO as the managing underwriter for such Qualified IPO approve; PROVIDED, HOWEVER, that the maximum number of Shares Gooding and each Management Stockholder may sell in a Qualified IPO is such Stockholder's IPO Portion; PROVIDED, further, that if Gooding is no longer Chief Executive Officer of the Company, he shall have the rights of an Institutional Investor pursuant to Section 3.4(b) above. (d) If the DLJ Investors do not elect to participate in a Qualified IPO, no other Stockholder may participate in the offering unless such Qualified IPO has been demanded by the Stockholders holding at least 40% of the outstanding Common Stock of the Company in accordance with the provisions of Section 2(c) of the Registration Rights Agreement. If the Offering has been demanded in accordance with such provisions of the Registration Rights Agreement, the Stockholders demanding such registration shall have the right to participate in the Qualified IPO. 7 3.5 NO FURTHER TRANSFER RESTRICTIONS. The Stockholders shall no longer be bound by the transfer restrictions of this Article III following the first to occur of (i) the consummation of a Qualified IPO, (ii) the later of the date upon which the DLJ Investors and their Permitted Transferees own less than 5% of the outstanding Shares of Common Stock or the date on which Gooding and his Permitted Transferees own less than 5% of the outstanding shares of Common Stock, or (iii) the ten year anniversary of this Agreement. ARTICLE 4 RIGHT OF FIRST OFFER; TAG-ALONG RIGHTS; CERTAIN PURCHASE RIGHTS; SHARES SUBJECT TO THIS AGREEMENT 4.1. RIGHT OF FIRST OFFER. (a) GENERAL. If, prior to the consummation of a Qualified IPO, a Stockholder ("Selling Stockholder") proposes to sell Shares to a third party other than pursuant to an Exempt Transfer (a "PROPOSED SALE"), the Selling Stockholder must first comply with the procedures set forth in this Section 4.1 and in Section 4.2. (i) The consideration for the Proposed Sale shall consist solely of cash. (ii) The Selling Stockholder shall deliver a notice (the "OFFERING NOTICE") to the Company and to each of the Stockholders stating (1) the Selling Stockholder's bona fide intention to sell Shares in the Proposed Sale; (2) the number of Shares it proposes to sell; and (3) the price and terms of the Proposed Sale. (iii) Within 20 days after the Offering Notice is given, the Company may elect by written notice to the Selling Stockholder to purchase from the Selling Stockholder, at the price and on the terms specified in the Offering Notice, any or all of the Shares proposed to be sold in the Proposed Sale; PROVIDED, HOWEVER, that in the event the Company elects to purchase some but not all of the Shares proposed to be sold in the Proposed Sale, the Company's right to purchase such Shares will be conditioned upon the purchase of the remainder of such Shares by the Stockholders pursuant to Section 4.1(a)(v) and (vi). (iv) Subject to Subsection 4.1(a)(vi), the purchase of such Shares by the Company shall take place within 20 days after the date of the Company's notice. (v) In the event the Company does not elect to purchase all of the Shares offered in the Offering Notice, the Company shall give written notice to each of the Stockholders (the "REOFFER NOTICE"), of the number of Shares available for purchase (the "REOFFERED SHARES") on or before the final day of such 20-day period and the right to purchase such Reoffered Shares shall pass automatically to each of such Stockholders. Each such Stockholder shall initially 8 be entitled to purchase such Stockholder's Percentage Share of the Reoffered Shares. In the event that any Shares remain after such allocation and Stockholders remain who desire to purchase additional Shares in excess of their Stockholder's Percentage Share, all of the remaining Shares which such Stockholders have elected to purchase shall be allocated to them PRO RATA based on the number of Shares held by them, or otherwise as agreed to among such remaining Stockholders. Each Stockholder will have 20 days from receipt of the Reoffer Notice to exercise its purchase rights under this Section 4.1 by written notice to the Selling Stockholder and to the Company. The closing of any purchase and sale under this subsection shall be held within 20 days following the exercise by such Stockholder of the purchase rights hereunder. (vi) Such purchase rights shall only apply if the Company and the Stockholders, collectively, acquire all, but not less than all, of the Shares proposed to be sold in the Offering Notice. In the event the Company elects to acquire some but not all of the Shares proposed to be sold in the Offer Notice, the Company's purchase of Shares shall occur simultaneously with the purchase of Shares by the Stockholders. (vii) In the event that the rights of first offer set forth in Section 4.1 are not exercised, and the Selling Stockholder, to the extent applicable, has complied with Section 4.2 below, the Selling Stockholder may sell, at any time within 120 days from the date of the Reoffer Notice, the number of Shares it proposed to sell in the Proposed Sale on price and terms no less favorable to the purchaser than those of the Proposed Sale, provided that the Selling Stockholder may not sell such Shares to a Person if the Board of Directors has determined that such Person is reasonably likely to be a competitor of the Company or a person whose interests would be adverse to the Company. 4.2. TAG-ALONG RIGHT. In the event that the rights of first offer set forth in Section 4.1 are not exercised, each of the other Stockholders (the "TAG-ALONG STOCKHOLDERS") shall have the right (the "TAG-ALONG RIGHT") to include up to the following number of its Shares in the Proposed Sale: the total number of Shares proposed to be sold by the Selling Stockholder in the Proposed Sale MULTIPLIED BY a fraction the numerator of which is the number of Shares owned by such Tag-Along Stockholder and the denominator of which is the aggregate number of Shares owned by such Selling Stockholder and by all Tag-Along Stockholders exercising their Tag-Along Rights hereunder. Any Shares purchased from such Stockholders pursuant to this Section 4.2 shall be at the same price per Share and upon the same terms and conditions as such Proposed Sale. The Selling Stockholder shall, not less than 30 days prior to each Proposed Sale, notify, or cause to be notified, each Stockholder in writing of each such Proposed Sale. Such notice shall set forth: (A) the name of the Selling Stockholder and the number of Shares proposed to be sold, (B) the name and address of the proposed purchaser, (C) the proposed per share purchase price (which must be payable in cash) and the terms and conditions of payment offered by such proposed purchaser, and (D) that the proposed purchaser has been informed of the Tag-Along Right provided for in this Section 4.2 and has agreed to purchase Shares in accordance with the terms hereof. 9 The Tag-Along Right may be exercised by any Stockholder by delivery of a written notice to the Selling Stockholder (the "TAG-ALONG NOTICE") within 15 business days following its receipt of the notice specified in the last sentence of the preceding paragraph. The Tag-Along Notice shall state the number of Shares that such Stockholder proposes to include in such transfer to the proposed purchaser determined as aforesaid. The Company agrees not to effect any transfer of Shares by any Stockholder until it has received evidence reasonably satisfactory to it that the Tag-Along Right, if applicable to such transfer, has been complied with. Notwithstanding the foregoing, (i) only GEI is entitled to exercise Tag-Along Rights with respect to the first 335,000 Shares transferred by the DLJ Investors and (ii) only the DLJ Investors are entitled to exercise Tag-Along Rights with respect to the first 150,000 Shares transferred by GEI. 4.3. CERTAIN PREEMPTIVE RIGHTS. If prior to a Qualified IPO the Company proposes to issue, sell, or grant securities convertible into shares of Common Stock (collectively, the "Securities"), then the Company shall, no later than 30 days prior to the consummation of such issuance, give written notice to all Stockholders of such proposed issuance. Such notice shall describe the proposed issuance, and contain an offer to each of the Stockholders to sell to such Stockholder, at the same price and for the same consideration to be paid by the proposed purchasers, such Stockholder's pro rata portion (which shall be a percentage equal to the percentage of the outstanding Common Stock held by such Stockholder before such proposed issuance; PROVIDED, HOWEVER, that if the use of proceeds of such Securities issuance shall include the repurchase of Common Stock, then such percentage shall be calculated assuming the consummation of such repurchase) of the Securities to be sold. If any such Stockholder fails to accept such offer by written notice within 25 days after its receipt of the Company's notice, the Company may proceed with such proposed issuance, free of any right on the part of such Stockholder under this Section 4.3 in respect thereof. This Section 4.3 shall not apply to: (i) issuances to employees or pursuant to employee benefit or stock option plans which shall not exceed 10% in the aggregate of the shares of capital stock of the Company, on a fully diluted basis; (ii) Securities distributed or set aside to all holders of Common Stock on a per share equivalent basis; (iii) any other issuance of Securities pursuant to or as a result of the transactions contemplated by the Recapitalization Agreement or issuance of Securities upon the conversion, exercise or exchange of such Securities or (iv) Securities issued in a business combination or acquisition approved pursuant to Section 2.2. 4.4 SHARES SUBJECT TO THIS AGREEMENT. If, prior to a Qualified IPO, the Company shall issue any Securities in a transaction as to which the rights under Section 4.3 apply, or any Stockholder shall transfer Shares in a transaction subject to Sections 4.1 and 4.2, the purchaser of such Securities shall execute a copy of this Agreement and such purchaser shall be subject to this Agreement. 10 ARTICLE 5 MISCELLANEOUS 5.1 LEGEND. The certificates representing the Common Stock to be purchased by each of the Stockholders shall bear the following legend: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF (A "TRANSFER") EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF A STOCKHOLDERS AGREEMENT DATED AS OF JUNE 11, 1997. SUCH SECURITIES ARE ALSO SUBJECT TO A REGISTRATION RIGHTS AGREEMENT DATED JUNE 11, 1997. ANY TRANSFEREE OF THESE SECURITIES TAKES SUBJECT TO THE TERMS OF SUCH AGREEMENTS, COPIES OF WHICH ARE ON FILE WITH THE COMPANY. "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR UNDER ANY STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EXEMPTION THEREFROM UNDER THE ACT OR LAW OR THE RULES AND REGULATIONS PROMULGATED THEREUNDER." Each of the parties hereto agrees that it will not transfer any Shares without complying with each of the restrictions set forth herein and agrees that in connection with any such transfer it will, if requested by the Company, deliver at its expense to the Company an opinion of counsel (including in-house or special counsel), in form and substance reasonably satisfactory to the Company and counsel for the Company, that such transfer is not in violation of the securities laws of the United States of America or any state thereof; PROVIDED, HOWEVER, that in case of any sale or other transfer of Shares to any person or entity who is an "accredited investor" (as such term is defined and used in Rule 501 of Regulation D under the Act), no opinion of counsel shall be required if the transferor obtains a representation from such person or entity that it is an accredited investor and is acquiring such Shares for its own account and with no intention of distributing or reselling said Shares or any part thereof, or interest therein, in any transaction that would violate the securities laws of the United States of America or any state thereof, without prejudice, however, to such person's or entity's right at all times to sell or otherwise dispose of all or any part of said Shares pursuant to an effective registration statement under the Act or any exemption from such registration available under the Act, and subject, nevertheless, to such person's or entity's disposition of its property being at all times within its control. 5.2 TERMINATION OF SUCCESSION PLAN. Upon the effective date of this Agreement, the succession plan in the event of Gooding's death adopted by the Company pursuant to a Board resolution dated as of June 27, 1994 shall terminate and be of no further effect. 11 5.3 SUCCESSORS, ASSIGNS AND TRANSFEREES. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective legal representatives, heirs, legatees, successors and assigns including any party to which any Stockholder has transferred or sold his or its Shares. Except as provided herein, each transferee of Shares from a party hereto or a Permitted Transferee thereof shall take such Shares subject to the same restrictions as existed in the hands of the transferor; PROVIDED that if Gooding or an Institutional Investor transfers Shares, the transferee shall only have rights as a Stockholder hereunder and not the rights of Gooding or such Institutional Investor. 5.4 NOTICES. All notices, requests, demands and other communications which are required or may be given under this Agreement shall be in writing and shall be deemed to have been duly given when received if personally delivered; when transmitted if transmitted by telecopy, electronic or digital transmission method; the day after it is sent, if sent for next day delivery to a domestic address by recognized overnight delivery service (E.G., Federal Express); and upon receipt, if sent by certified or registered mail, return receipt requested. In each case notice shall be sent to: If to the Company addressed to: Wavetek Corporation 11995 El Camino Real, Suite 301 San Diego, California 92130 Telecopy No.: (619) 793-2310 Attention: Chief Executive Officer If to any Stockholder to such Stockholder at the address indicated on Schedule II hereto. 5.5 RECAPITALIZATIONS, ETC. The provisions of this Agreement shall apply, to the full extent set forth herein with respect to the Shares, to any and all shares of capital stock of the Company or any capital stock, partnership units or any other security evidencing ownership interests in any successor or assign of the Company (whether by merger, consolidation, sale of assets or otherwise) that may be issued in respect of, in exchange for, or in substitution of the Common Stock by reason of any stock dividend, split, reverse split, combination, recapitalization, liquidation, reclassification, merger, consolidation or otherwise. 5.6 LEAD UNDERWRITER. As long as the DLJ Investors own 5% or more of the outstanding Shares, DLJSC shall have the right but not the obligation to act as the lead underwriter in a Qualified IPO. If requested, the Stockholders agree to vote in favor of such engagement. 5.7 INSPECTION AND COMPLIANCE WITH LAW. Copies of this Agreement will be available for inspection or copying by any Stockholder at the offices of the Company through the Secretary of the Company. 12 5.8 CHOICE OF LAW. THIS AGREEMENT SHALL BE CONSTRUED, INTERPRETED AND THE RIGHTS OF THE PARTIES DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE (WITHOUT REFERENCE TO THE CHOICE OF LAW PROVISIONS OF DELAWARE LAW). 5.9 ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS. This Agreement constitutes the entire agreement among the parties pertaining to the subject matter hereof and supersedes all prior agreements, understandings, negotiations and discussions, whether oral or written, of the parties. This Agreement may not be amended except by an instrument in writing signed on behalf of the Stockholders holding at least two-thirds of the outstanding Shares. However, no amendment, supplement, modification or waiver of this Agreement diminishing a Stockholder's right of first offer pursuant to Section 4.1 or Tag-Along Rights pursuant to Section 4.2 hereof shall be binding unless executed in writing by each such Stockholder affected. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar), nor shall such waiver constitute a continuing waiver unless otherwise expressly provided. 5.10 MULTIPLE COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 5.11 INVALIDITY. In the event that any one or more of the provisions contained in this Agreement shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, then to the maximum extent permitted by law, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement. 5.12 TITLES. The titles, captions or headings of the Articles and Sections herein are for convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement. 5.13 CUMULATIVE REMEDIES. All rights and remedies of either party hereto are cumulative of each other and of every other right or remedy such party may otherwise have at law or in equity, and the exercise of one or more rights or remedies shall not prejudice or impair the concurrent or subsequent exercise of other rights or remedies. 5.14 WAIVER OF JURY TRIAL. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW WHICH CANNOT BE WAIVED, EACH OF THE PARTIES HERETO HEREBY WAIVES, AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT, OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE, CLAIM, DEMAND, CAUSE OF ACTION, ACTION, SUIT OR PROCEEDING ARISING OUT OF OR BASED UPON THIS AGREEMENT OR THE SUBJECT MATTER HEREOF, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER IN CONTRACT OR TORT OR OTHERWISE. ANY OF THE PARTIES HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 5.13 WITH ANY COURT AS WRITTEN 13 EVIDENCE OF THE CONSENT OF EACH OF THE PARTIES HERETO TO THE WAIVER OF HIS OR ITS RIGHT TO TRIAL BY JURY. 5.15 ASSUMPTION OF THIS AGREEMENT. In the event any Stockholder sells, transfers or otherwise disposes of any of his or its Shares to a Permitted Transferee such transferee shall execute an assumption agreement in the form of Exhibit A hereto pursuant to which such transferee agrees to assume the rights and obligations of such transfer pursuant to this Agreement. In addition, in the event any Stockholder or any of his or its Permitted Transferees sells, transfers or otherwise disposes of his or its Shares to a person or entity other than a Permitted Transferee, such person or entity shall execute an assumption agreement pursuant to which such person or entity agrees to assume the obligations of such or such Permitted Transferee. 5.16 TERM. Unless earlier terminated by mutual agreement among the parties hereto, the provisions of Articles 3 and 4 shall terminate upon the earlier to occur of a Qualified IPO or upon the tenth year anniversary of this Agreement and all other provisions of this Agreement shall terminate upon the tenth year anniversary of this Agreement. Notwithstanding the foregoing, this Agreement shall in any event terminate with respect to any Stockholder and its Permitted Transferees when such Stockholder and its Permitted Transferees no longer own any shares of Registrable Securities (except if such shares are transferred in violation of this Agreement). 5.17 TERMINATION OF OLD STOCKHOLDERS AGREEMENTS. This Agreement supersedes and replaces the following agreements, which as of this date shall be deemed null and void and without further effect: (i) the Stockholders' Agreement dated April 23, 1996 and the Supplemental Stockholders' Agreement dated April 23, 1996 with Yokogawa Electric Corporation and (ii) the Stock Purchase Agreement dated June 26, 1991, the Supplemental Stockholders' Agreement dated October 25, 1994 and Addenda Number One to the Stockholders Agreement dated April 23, 1996 with Schroder UK Venture Fund III L.P., Schroder UK Venture Fund III L.P. 2 and Schroder UK Venture Fund III Trust. 14 IN WITNESS WHEREOF, the parties hereto have executed this Stockholders Agreement as of the date first written above. WAVETEK CORPORATION By: /s/ Terence J. Gooding --------------------------------------------- Name: Dr. Terence J. Gooding Title: Chief Executive Officer DLJ MERCHANT BANKING PARTNERS II, L.P. By: DLJ Merchant Banking II, Inc. Managing General Partner By: /s/ David B. Wilson --------------------------------------------- Name: Title: DLJ OFFSHORE PARTNERS II, C.V. By: DLJ Merchant Banking II, L.P. Managing General Partner By: /s/ David B. Wilson --------------------------------------------- Name: Title: DLJ DIVERSIFIED PARTNERS, L.P. By: DLJ Diversified Partners, Inc. By: /s/ David B. Wilson --------------------------------------------- Name: Title: 15 DLJMB FUNDING II, INC. By: /s/ David B. Wilson --------------------------------------------- Name: Title: UK INVESTMENT PLAN 1997 PARTNERS By: Donaldson, Lufkin & Jenrette, Inc. General Partner By: /s/ David B. Wilson --------------------------------------------- Name: Title: DLJ FIRST ESC L.L.C. By: DLJ LBO Plans Management Corporation As Manager By: /s/ David B. Wilson --------------------------------------------- Name: Title: DLJ EAB PARTNERS, L.P. By: DLJ Merchant Banking II, Inc. Managing General Partner By: /s/ David B. Wilson --------------------------------------------- Name: Title: 16 DLJ MILLENNIUM PARTNERS, L.P. By: DLJ Merchant Banking II, Inc. Managing General Partner By: /s/ David B. Wilson --------------------------------------------- Name: Title: GREEN EQUITY INVESTORS II, L.P. By: Grand Avenue Capital Partners, L.P. Grand Avenue Capital Corporation, its general partner By: /s/ Peter Nolan --------------------------------------------- Name: Title: DR. TERENCE J. GOODING /s/ Terence J. Gooding ------------------------------------------------- Dr. Terence J. Gooding SCHRODER UK VENTURE FUND III A Group consisting of three entities: Schroder UK Venture Fund III Trust Schroder UK Venture Fund III L.P. Schroder UK Venture Fund III L.P. 2 By: SCHRODER VENTURE MANAGERS LIMITED, Manager By: /s/ Peter L. Everson --------------------------- Peter L. Everson, Director of the Manager of each of the three entities comprising the Fund 17 YOKOGAWA ELECTRIC CORPORATION By: /s/ Tetsuji Ishizuka --------------------------------------------- Name: Tetsuji Ishizuka Title: General Counsel BARBARA A. GOODING TERENCE J. AND BARABARA A. GOODING CRUT TERENCE J. GOODING GRAT 1 TERENCE J. GOODING GRAT 2 BARBARA A. GOODING GRAT GOODING FAMILY FOUNDATION GOODING INVESTMENTS, INC. ANTHONY P. GOODING ANTHONY P. GOODING CRUT TERENCE J. GOODING, JR. TERENCE J. GOODING, JR. CRUT PAUL L. GOODING PAUL L. GOODING CRUT KATHRYN A. VALVERDE KATHRYN A. VALVERDE CRUT MATTHEW T. LONDON MATTHEW T. LONDON CRUT REBECCA J. BELLATI REBECCA J. BELLATI CRUT VICTORIA L. GOODING VICTORIA L. GOODING CRUT KYLE L. GOODING INTER VIVOS TRUST AMANDA L. GOODING INTER VIVOS TRUST PATRICK A. GOODING INTER VIVOS TRUST AMANDA N. MCPHERSON INTER VIVOS TRUST CODY C. MCPHERSON INTER VIVOS TRUST TERENCE M. LONDON INTER VIVOS TRUST TERENCE J. GOODING 1994 TRUST BARBARA A. GOODING 1994 TRUST IVERNA REDMOND MAUREEN WISCHHUSEN MARGARET GOODING MARY J. OLSON YVONNE DUGGER DARREL WEBLEY DUANE WEBLEY DEBORAH SPARKS SNOW HILL TRUSTEES RICHARD J. BERRY 18 GERALDINE MARY BERRY PAUL STEVENSON SUZANNE EVE STEVENSON PHILIP J. COOKE By: /s/ Terence J. Gooding ---------------------------------------- Terence J. Gooding, as Attorney-in-Fact BEN J. CONSTANTINI By: /s/ Ben J. Constantini ---------------------------------------- Ben J. Constantini DEREK T. MORIKAWA /s/ Derek T. Morikawa ----------------------------- Derek T. Morikawa MEGAN MORIKAWA INTER VIVOS TRUST EVAN MORIKAWA INTER VIVOS TRUST By: /s/ Derek T. Morikawa ------------------------------------------- Derek T. Morikawa, Attorney-in-Fact ROD BALLARD KEITH BARGROFF RICHARD BERRY PAT BONFILS JOSEPH A. BUDANO VICKIE L. CAPPS CHARLES CITRON BEN J. CONSTANTINI DANIEL FISH BRUCE GOULD MICHAEL HUFF RICHARD JAWORSKI RONALD JENT BARRY KITAEN MICHAEL LATHAM ANN LITTLE JOSEPH MATIBAG NORMAN MILLER DEREK T. MORIKAWA ERNEY NIKOU JEFFREY PERRIN 19 MICHAEL RICHARDSON MICHAEL SCIULLI BRYAN WHATLEY PAUL ASHTIANI ANTHON EDWARD BAYLY DAVID COOPER PAUL ROBERTS RICHARD RODDIS PAUL STEVENSON DAVID WALKER STEVEN MANNING KOON ENG TAN YONG CHANG YANG ULRICH DIEHL ROL KAINDL WINFRIED LENNE PETER MASSAM JOUKE RIJPSTRA KLAUS ROMANEK SOREN SCHNAPKA DIETER SCHWEISTHAL NORBERT STADHOUDERS WIELAND WEIGLER MICHEL BOUQUAIN ENZO DI LUIGI OLIVIER MASSELIN FRANCOIS PLAZANET FREDERICK TROJANI LUKA RADOMIROV By: /s/ Terence J. Gooding ----------------------------------------------- Terence J. Gooding, as Attorney-in-Fact 20 EX-10.3 18 EXHIBIT 10.3 REGISTRATION RIGHTS AGREEMENT THIS REGISTRATION RIGHTS AGREEMENT (the "AGREEMENT"), dated as of June 11, 1997, is by and among Wavetek Corporation, a Delaware corporation (the "COMPANY"), DLJ Merchant Banking Partners II, L.P., DLJ Offshore Partners II, C.V., DLJ Diversified Partners, L.P., DLJMB Funding II, Inc., UK Investment Plan 1997 Partners, DLJ First ESC L.L.C., DLJ EAB Partners, L.P., DLJ Millennium Partners, L.P. (collectively, the "DLJ INVESTORS"), Green Equity Investors II, L.P. ("GEI") and the other Stockholders (as defined below). RECITALS A. WHEREAS, pursuant to the terms of the Stock Purchase and Recapitalization Agreement dated as of May 23, 1997 (the "RECAPITALIZATION AGREEMENT") by and among the Company, the DLJ Investors, GEI and certain stockholders of the Company, the DLJ Investors and GEI will purchase from the Company 1,674,810 and 753,660 shares, respectively, of Common Stock (as defined below) representing 34.28% and 15.43%, respectively, of the outstanding shares of Common Stock immediately after the transactions contemplated by the Recapitalization Agreement. B. WHEREAS, the Company and the Stockholders are concurrently entering into a Stockholders Agreement (the "STOCKHOLDERS AGREEMENT") for the purpose of regulating certain aspects of the Stockholders' relationships with regard to each other and the Company. C. WHEREAS, the Stockholders own or have the right to purchase or otherwise acquire shares of the Common Stock of the Company. The Company and the Stockholders (as defined below) deem it to be in their respective best interests to enter into this Agreement to set forth the rights of the Stockholders in connection with public offerings and sales of the Common Stock. AGREEMENT NOW THEREFORE, in consideration of the mutual covenants herein contained and for other good and valuable consideration, the Company and the Stockholders hereby agree as follows: 1. DEFINITIONS. As used in this Agreement, the following terms have the following meanings: "AFFILIATE" shall mean with respect to any Person, any Person directly or indirectly controlling or controlled by or under direct or indirect common control with such Person. For purposes of this definition, ownership of 10% or more of the voting common equity of a person or entity shall be deemed to be control of such person or entity. "BOARD" means the Board of Directors of the Company. "BUSINESS DAY" means any day that is not a Saturday, Sunday or a day on which banking institutions in New York, New York are not required to be open. "COMMISSION" means the Securities and Exchange Commission or any other governmental body or agency succeeding to the functions thereof. "COMMON STOCK" means the common stock, $.01 par value, of the Company. "DEMAND REGISTRATION" means a registration requested by a Stockholder or group of stockholders pursuant to Section 2. "EXCHANGE ACT" means the Securities Exchange Act of 1934 or any successor federal statute, and the rules and regulations of the Commission promulgated thereunder, all as the same shall be in effect from time to time. "INSTITUTIONAL STOCKHOLDERS" means the DLJ Investors, GEI, Schroder UK Venture Fund III L.P., Schroder UK Venture Fund III L.P.2, Schroder UK Venture Fund III Trust (collectively, "Schroder"), Yokogawa Electric Corporation ("Yokogawa") and Gooding if he is not the Chief Executive Officer of the Company. "MAJORITY OF REGISTERING STOCKHOLDERS" means, with respect to a registration that includes Registrable Shares, those Stockholders who, at the time in question, hold at least a majority of the Registrable Shares included or proposed to be included in such registration. "MATERIAL TRANSACTION" means any material transaction in which the Company or any of its Subsidiaries proposes to engage or is engaged, including a purchase or sale of assets or securities, financing, merger, consolidation, tender offer, or other material corporate development, and with respect to which the Board reasonably has determined in good faith that compliance with this Agreement may reasonably be expected to either materially interfere with the Company's or such Subsidiary's ability to consummate such transaction in a timely fashion or require the Company to disclose material, non-public information or such material corporate development prior to such time as it would otherwise be required to be disclosed. "OTHER SECURITIES" means at any time shares of Common Stock (or other securities convertible into, or exchangeable for, shares of Common Stock) which do not constitute Registrable Shares and which are owned by Persons who are entitled to registration rights under other agreements. "PERMITTED TRANSFEREE" means any of the following who agrees to be bound by and become a party to the Stockholders Agreement: (i) with respect to transfers by the Institutional Stockholders, any Affiliates thereof and (ii) with respect to transfers by Gooding or 2 the Management Stockholders, a spouse, child, grandchild, stepchild or a child of a stepchild thereof or a trust as to which Gooding, the Management Stockholder or such spouse, child, grandchild, stepchild or child of a stepchild thereof exercises substantial control over the investment of the trust assets. Upon (i) execution and delivery by a Permitted Transferee of the Stockholders Agreement and (ii) receipt of shares of Common Stock from the transferring Stockholder, the Permitted Transferee shall be deemed to be a "Stockholder" for all purposes under this Agreement. "PERSON" shall be construed broadly and shall include an individual, a partnership, a corporation, an association, a joint stock company, a limited liability company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof. "PRIMARY SHARES" means at any time the authorized but unissued shares of Common Stock and shares of Common Stock held by the Company in its treasury or any security convertible into or exchangeable for unissued shares of Common Stock. "PROSPECTUS" means the prospectus included in a Registration Statement, including any prospectus subject to completion, and any such prospectus as amended or supplemented by any prospectus supplement with respect to the terms of the offering of any portion of the Registrable Shares and, in each case, by all other amendments and supplements to such prospectus, including post-effective amendments, and in each case including all material incorporated by reference therein. "PUBLIC OFFERING" means the closing of a public offering of Common Stock pursuant to a Registration Statement declared effective under the Securities Act, except that a Public Offering shall not include an offering of securities to be issued as consideration in connection with a business acquisition or an offering of securities issuable pursuant to an employee benefit plan. "QUALIFIED IPO" means the initial underwritten Public Offering by the Company of Common Stock registered with the Commission under the Act (i) after which the Common Stock is included for quotation on the Nasdaq National Market or listed on a national securities exchange and (ii) having an aggregate offering price to the public (before underwriters' discounts and commissions) of at least $20,000,000. "REGISTRABLE SHARES" means Restricted Shares that constitute Common Stock. "REGISTRABLE DATE" means the date upon which the Registration Statement pursuant to which the Company shall have initially registered shares of Common Stock under the Securities Act for sale in a Public Offering shall have been declared effective by the Commission. "REGISTRATION STATEMENT" shall mean any registration statement of the Company which covers any of the Registrable Shares and all amendments and supplements to any such Registration Statement, including post-effective amendments, in each case including the 3 Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "RESTRICTED SHARES" means shares of Common Stock held by the Stockholders, including (i) shares of Common Stock which may be issued as a dividend or distribution, (ii) any other securities which by their terms are exercisable or exchangeable for or convertible into Common Stock, and (iii) any securities received in respect of such shares of Common Stock (including securities described in Section 13). Restricted Shares shall cease to be Restricted Shares when (A) they have been registered under the Securities Act, the Registration Statement in connection therewith has been declared effective and they have been disposed of pursuant to and in the manner described in such effective Registration Statement, (B) they are sold or distributed pursuant to Rule 144 or may be sold or distributed by the holder thereof pursuant to Rule 144(k), (C) they may be sold or distributed pursuant to Rule 144 by such Stockholder within a three-month period, (D) they have been otherwise transferred and new certificates or other evidences of ownership for them not bearing a restrictive legend and not subject to any stop transfer order or other restriction on transfer have been delivered by the Company or the issuer of other securities issued in exchange for the Restricted Shares, or (E) they have ceased to be outstanding. "RULE 144" means Rule 144 promulgated under the Securities Act or any successor rule thereto or any complementary rule thereto. "SECURITIES ACT" means the Securities Act of 1933 or any successor federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect from time to time. "STOCKHOLDERS" means the DLJ Investors, the Institutional Stockholders, Dr. Terence J. Gooding ("Gooding"), and the members of management who own shares in the Company ("the Management Stockholders"), and each of their respective Permitted Transferees. "STOCKHOLDERS AGREEMENT" means the Stockholders Agreement dated as of June 11, 1997, among the Company and the Stockholders named therein, as the same may be amended, supplemented, modified or restated. "SUBSIDIARY" means, with respect to any Person, any other Person of which the securities having a majority of the ordinary voting power in electing the board of directors (or other governing body), at the time as of which any determination is being made, are owned by such first Person either directly or through one or more of its Subsidiaries. 2. DEMAND REGISTRATION. (a) From and after the one year anniversary of the date of the Stockholders Agreement, if the Company shall be requested by the DLJ Investors or their Permitted Transferees at any time to effect the registration under the Securities Act of all or a portion of their Registrable Shares, the Company shall use its best efforts promptly to effect such registration in accordance with the provisions of 4 this Agreement. The number of shares required to be registered must, in the good faith judgment of the DLJ Investors, have a fair market value of at least $20,000,000 if the Demand Registration would constitute a Qualified IPO, and a market value of $10,000,000 in all other cases. The DLJ Investors shall have the right to request three such Demand Registrations. (b) After the consummation of a Qualified IPO, (i) any Stockholder other than the DLJ Investors or their Permitted Transferrees holding 10% or more of the outstanding Common Stock shall have the right to request two Demand Registrations from the Company, and (ii) any other Stockholder shall have the right to request one Demand Registration from the Company; PROVIDED in each case that the number of Registrable Shares to be registered must have, in the reasonable opinion of the proposed managing underwriter, a fair market value of at least $10,000,000. (c) From and after the two year anniversary of this Agreement, Stockholders holding in the aggregate 40% or more of the outstanding Common Stock shall have the right jointly to request one Demand Registration from the Company at any time, if such registration would constitute a Qualified IPO. (d) If such Demand Registration pursuant to Section 2(a), 2(b) or 2(c) above would constitute a Qualified IPO, the provisions of the Stockholders' Agreement would govern. Promptly after receiving request for a Demand Registration that does not constitute a Qualified IPO pursuant to Section 2(a), 2(b) or 2(c) above, the Company shall provide written notice thereof to all Stockholders. Any Stockholder who has the right at such time to transfer shares of Common Stock under Article III of the Stockholders Agreement may, within 15 Business Days of the receipt of the notice from the Company, give written notice to the Company that such Stockholder wishes to participate in the proposed Demand Registration, which notice shall specify the number of Registrable Shares such Stockholder desires to, and under the Stockholders Agreement is permitted to, include in such registration. (e) Anything contained in Section 2(a), 2(b) or 2(c) to the contrary notwithstanding, the Company shall not be obligated to effect any Demand Registration under the Securities Act pursuant to Section 2(a), 2(b) or 2(c), except in accordance with the following provisions: (i) the Company shall not be obligated to use its best efforts to file and cause to become effective any Registration Statement during any period in which any other Registration Statement (other than on Form S-4 or Form S-8 promulgated under the Securities Act or any successor forms thereto) pursuant to which Primary Shares are to be or were sold has been 5 filed and not withdrawn or has been declared effective within the prior 180 days; (ii) the Company may delay the filing or effectiveness of any Registration Statement for a period of up to 180 days after the date of a request for registration pursuant to this Section 2 if a Material Transaction exists at such time; (iii) at any time prior to the effectiveness of a Registration Statement, the Company may, in its sole discretion, convert a Demand Registration pursuant to Section 2 into a registration pursuant to Section 3, in which case the provisions (including those governing inclusion of shares) set forth in Section 3 shall apply and such registration so converted will not count as a Demand Registration pursuant to this Section 2; (iv) with respect to any Demand Registration pursuant to this Section 2, the Company may include in such registration any Primary Shares, Other Securities and/or other securities; PROVIDED, HOWEVER, that if the managing underwriter advises the Company that the inclusion of all Registrable Shares, Primary Shares, Other Securities and/or other securities proposed to be included in such registration would interfere with the successful marketing (including pricing) of the Registrable Shares that are the subject of such Demand Registration, then the number of Registrable Shares, Primary Shares, Other Securities and/or other securities proposed to be included in such registration shall be included in the following order: (A) FIRST, all Registrable Shares requested to be included in such Demand Registration by the Stockholders who requested such registration pursuant to Section 2(a), 2(b) or 2(c) and all Registrable Shares requested to be included by other Stockholders pursuant to Section 2(d), PRO RATA among all such Stockholders based on the number of Registrable Shares owned. (B) SECOND, the Primary Shares; and (C) THIRD, the Other Securities. (v) at any time before the Registration Statement covering Registrable Shares becomes effective, the Stockholder or group of Stockholders which requested such registration pursuant to this Section may request the Company to withdraw or not to file the Registration Statement; and (vi) the Company may, at its sole option, elect to satisfy a request for a Demand Registration pursuant to this Section on Form S-2 or Form S-3 6 promulgated under the Securities Act (or any successor forms thereto), if such forms are then available to the Company. (f) The Company will not be required to effect more than one Demand Registration in any twelve-month period. 3. PIGGYBACK REGISTRATION. (a) If the Company at any time proposes for any reason to register (whether for itself or others or whether pursuant to a conversion of a Demand Registration under Section 2(d)(iii)) any of its securities under the Securities Act (other than (i) on Form S-4 or Form S-8 promulgated under the Securities Act or any successor forms thereto or (ii) in connection with a Qualified IPO, in which case the provisions of the Stockholders' Agreement shall govern), it shall promptly give written notice to the Stockholders of its intention to so register such securities. (b) Any Stockholder who may transfer shares of Common Stock under the Stockholders Agreement may deliver to the Company within 20 Business Days after delivery of such notice of the proposed offering by the Company, a written request to include in the registration all or a portion of such Stockholder's Registrable Shares (which request shall specify the number of Registrable Shares proposed to be included in such registration). The Company shall use its best efforts to cause all such Registrable Shares to be included in such registration on the same terms and conditions as the securities otherwise being sold in such registration; PROVIDED, HOWEVER, that if the managing underwriter advises the Company that the inclusion of any or all Registrable Shares and the Other Securities other securities requested to be included in such registration would materially interfere with the successful marketing (including pricing) of the Primary Shares or other securities proposed to be registered by the Company, then the number of Primary Shares, Registrable Shares, Other Securities and other securities proposed to be included in such registration shall be included in the following order: (i) FIRST, the Primary Shares proposed by the Company to be sold for its own account, (ii) SECOND, (A) in the case of a Demand Registration converted by the Company pursuant to 2(e)(iii), the Registrable Shares requested to be registered by the requesting Stockholder; and (B) such Registrable Shares requested by Stockholders to be included in such registration pursuant to this Section 3, PRO RATA among the Stockholders referred to in this paragraph 3(b)(ii) based on the number of Registrable Shares owned; and 7 (iii) THIRD, the Other Securities. The Company shall have the right to withdraw a registration initially proposed by it, in which case all related requests for Piggyback Registration will be terminated. 4. HOLDBACK AGREEMENT. (a) If the Company at any time shall register its securities under the Securities Act for sale to the public pursuant to an underwritten offering to the extent the following restrictions are legally permitted, the Stockholders and their respective Permitted Transferees shall not sell publicly, make any short sale of, grant any option for the purchase of, or otherwise dispose publicly of, any securities of the Company similar to those being registered (other than securities included in such registration) without the prior written consent of the Company, for a period designated by the Company in writing to the Stockholders, which period shall not begin earlier than 14 days prior to the effectiveness of the Registration Statement pursuant to which such public offering shall be made and shall not last more than (i) 180 days, or (ii) a shorter period agreed upon by the Company and the managing underwriters of an underwritten offering, in each case after the closing of the sale of securities pursuant to such Registration Statement. The Company shall obtain the agreement of any Person (other than a Stockholder) permitted to sell securities in a registration to be bound by and to comply with this Section 4 with respect to such registration as if such Person was a Stockholder hereunder. 5. PREPARATION AND FILING. (a) If and whenever the Company is under an obligation pursuant to the provisions of this Agreement to use its best efforts to effect the registration of, and keep effective a Registration Statement for, any Registrable Shares, the Company shall, as expeditiously as practicable: (i) use its best efforts to cause a Registration Statement that registers such Registrable Shares to become and remain effective for a period of 90 days (extended for such period of time as the Stockholders are required to discontinue disposition of Registrable Shares pursuant to Section 5(b) below) or until all of such Registrable Shares have been disposed of (if earlier); (ii) furnish, at least five Business Days before the initial filing of a Registration Statement that relates to the registration of such Registrable Shares, to one counsel (the "Stockholders' Counsel") selected by a Majority of Registering Stockholders, copies of all such documents proposed to be filed (it being understood that such five-Business-Day period need not apply to a Prospectus relating thereto or any amendments or supplements relating to such a Registration Statement or Prospectus, proposed to be filed so long as such drafts are supplied to the 8 Stockholders' Counsel in advance of the proposed filing by a period of time that is customary and reasonable under the circumstances); (iii) notify the Stockholders whose Registrable Shares are included therein of the effectiveness of such Registration Statement and prepare and promptly file with the Commission such amendments and supplements to such Registration Statement and the Prospectus used in connection therewith as may be necessary to (A) keep such Registration Statement effective for at least a period of 90 days (extended for such period of time as Stockholders are required to discontinue disposition of Registrable Shares pursuant to Section 5(b) below) or until all of such Registrable Shares have been disposed of (if earlier), (B) correct any statements or omissions if any event with respect to the Company shall have occurred as a result of which any such Registration Statement or Prospectus as then in effect would include an untrue statement of material fact or omit to state any material fact necessary to make the statements therein not misleading, and (C) comply with the provisions of the Securities Act with respect to the sale or other disposition of such Registrable Shares; (iv) notify in writing the Stockholders' Counsel, and the Stockholders whose Registrable Shares may be included in such Registration Statement, promptly of (A) the receipt by the Company of any notification with respect to any comments by the Commission with respect to such Registration Statement or Prospectus or any amendment or supplement thereto or any request by the Commission for the amending or supplementing thereof or for additional information with respect thereto, (B) the receipt by the Company of any notification or written information with respect to the issuance or threatened issuance by the Commission of any stop order suspending the effectiveness of such Registration Statement or Prospectus or any amendment or supplement thereto or the initiation or threatening of any proceeding for that purpose (and the Company shall use its best efforts to prevent the issuance thereof or, if issued, to obtain its withdrawal) and (C) the receipt by the Company of any notification with respect to the suspension of the qualification of such Registrable Shares for sale in any jurisdiction or the initiation or threatening of any proceeding for such purposes; (v) use its best efforts to register or qualify such Registrable Shares under such other securities or blue sky laws of such jurisdictions as the Stockholders reasonably request and do any and all other acts and things which may be reasonably necessary or advisable to enable the Stockholders to consummate the disposition in such jurisdictions of the Registrable Shares owned by the Stockholders; PROVIDED, HOWEVER, that the Company will not be required to qualify generally to do business, subject itself to general taxation or consent to general service of process in any 9 jurisdiction where it would not otherwise be required to do so but for this clause (v) or to provide any material undertaking or make any changes in its By-laws or Certificate of Incorporation which the Board determines to be contrary to the best interests of the Company; (vi) furnish to the Stockholders holding such Registrable Shares such number of copies of a summary Prospectus, if any, or any other Prospectus, including a Preliminary Prospectus, in conformity with the requirements of the Securities Act, and such other documents as such Stockholders may legally require and may reasonably request in order to facilitate the public sale or other disposition of such Registrable Shares; (vii) use its best efforts to cause such Registrable Shares to be registered with or approved by such other governmental agencies or authorities as may be necessary by virtue of the business and operations of the Company to enable the Stockholders holding such Registrable Shares to consummate the disposition of such Registrable Shares; (viii) notify the Stockholders holding such Registrable Shares on a timely basis at any time when a Prospectus relating to such Registrable Shares is required to be delivered under the Securities Act within the appropriate period mentioned in clause (i) of this Section 5(a), of the happening of any event as a result of which the Prospectus included in such Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and prepare and furnish to such Stockholders a reasonable number of copies of, and file with the Commission, a supplement to or an amendment of such Prospectus as may be necessary so that, as thereafter delivered to the offerees of such shares, such Prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (ix) subject to the execution of confidentiality agreements in form and substance satisfactory to the Company, make available upon reasonable notice and during normal business hours, for inspection by the Stockholders holding Registrable Shares requested to be included in such registration, any underwriter participating in any disposition pursuant to such Registration Statement and any attorney, accountant or other agent retained by the Stockholders or underwriter (collectively the "Inspectors"), all pertinent financial and other records, pertinent corporate documents and properties of the Company (collectively, the "Records"), and cause the Company's officers, directors an employees to supply all information 10 (together with the Records, the "Information") reasonably requested by any such Inspector, in each case as shall be reasonably necessary to enable them to exercise their due diligence responsibility in connection with such Registration Statement; PROVIDED, HOWEVER, that any of the Information that the Company determines in good faith to be confidential, and of which determination the Inspectors are so notified, shall not be disclosed by the Inspector unless (A) the disclosure of such Information is necessary to avoid or correct a misstatement or omission in the Registration Statement or Prospectus, (B) the release of such Information is ordered pursuant to a subpoena or other order from a court of competent jurisdiction or, upon the written advice of counsel, is otherwise required by law, or (C) such Information has been made generally available to the public, and the Stockholders agree that they will, upon learning that disclosure of such Information is sought in a court or competent jurisdiction, give notice to the Company and allow the Company, at the Company's expense, to undertake appropriate action to prevent disclosure of the Information deemed confidential; (x) use its best efforts to obtain from its independent certified public accountants "cold comfort" letters in customary form and at customary times and covering matters of the type customarily covered by cold comfort letters; (xi) use its best efforts to obtain from its counsel an opinion or opinions in customary form naming the Stockholders as additional addressees or parties who may rely thereon; (xii) provide a transfer agent and registrar (which may be the same entity and which may be the Company) for such Registrable Shares; (xiii) issue to any underwriter to which the Stockholders holding such Registrable Shares may sell shares in such offering certificates evidencing such Registrable Shares; (xiv) list such Registrable Shares on any national securities exchange on which any shares of the Common Stock are listed or, if the Common Stock is not listed on a national securities exchange, use its best efforts to qualify such Registrable Shares for inclusion on the Nasdaq National Market; (xv) otherwise use its best efforts to comply with all applicable rules and regulations of the Commission and make available to its securityholders, as soon as reasonably practicable, earning statements (which need not be audited) covering a period of 12 months beginning within three months after the effective date of the Registration Statement, which earning statements shall satisfy the provisions of Section 11(a) of the Securities Act; and 11 (xvi) use its best efforts to take all other steps to necessary to effect the registration of, and maintain an effective Registration Statement with respect to, such Registrable Shares contemplated hereby. (b) Each holder of the Registrable Shares, upon receipt of any notice from the Company of any event of the kind described in Section 5(a)(viii) or Section 6 hereof, shall forthwith discontinue disposition of the Registrable Shares pursuant to the Registration Statement covering such Registrable Shares until such holder's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 5(a)(viii) hereof, and, if so directed by the Company, such holder shall deliver to the Company all copies, other than permanent file copies then in such holder's possession, of the most recent Prospectus covering such Registrable Shares at the time of the receipt of such notice. 6. SUSPENSION. Anything contained in this Agreement to the contrary notwithstanding, the Company may, by notice in writing to each holder of Registrable Shares to which a Prospectus relates, require such holder to suspend, for up to 90 days (the "Suspension Period"), the use of any Prospectus included in a Registration Statement filed under Section 2 or 3 hereof if a Material Transaction exists that would require an amendment to such Registration Statement or supplement to such Prospectus (including any amendment or supplement made through incorporation by reference to a report filed under the Exchange Act). The Company may (but shall not be obligated to) withdraw the effectiveness of any Registration Statement subject to this provision. 7. EXPENSES. All expenses (other than underwriting discounts and commissions relating to the Registrable Shares, as provided in the last sentence of this Section 7) incurred by the Company in complying with Section 5, including, without limitation, all registration and filing fees (including all expenses incident to filings with the National Association of Securities Dealers, Inc.), fees and expenses of complying with securities and blue sky laws, printing expenses, fees and expenses of the Company's counsel and accountants and fees and expenses of the Stockholders' Counsel (up to a maximum of $25,000), shall be paid by the Company; PROVIDED, HOWEVER, that all underwriting discounts and selling commissions applicable to the Registrable Shares and Other Shares shall be borne by the holders selling such Registrable Shares and Other Shares, in proportion to the number of Registrable Shares and Other Shares sold by each such holder. 8. INDEMNIFICATION. (a) In connection with any registration of any Registrable Shares under the Securities Act pursuant to this Agreement, the Company shall indemnify and hold harmless, to the fullest extent permitted by law, each holder of Registrable Shares, each underwriter, broker or any other Person acting on behalf of the holders of Registrable Shares and each other Person, if any, who controls any of the 12 foregoing Persons within the meaning of the Securities Act (each such indemnified Person being referred to herein as an "Indemnified Person") against any losses, claims, damages or liabilities, joint or several (or actions in respect thereof), to which any of the foregoing Persons may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or allegedly untrue statement of a material fact contained in or incorporated by reference in the Registration Statement under which such Registrable Shares were registered under the Securities Act, any preliminary Prospectus or final Prospectus contained therein or otherwise filed with the Commission, any amendment or supplement thereto or any document incident to registration or qualification of any Registrable Shares, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading or, with respect to any Prospectus, necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, or any violation by the Company of the Securities Act or state securities or blue sky laws applicable to the Company and relating to action or inaction required of the Company in connection with such registration or qualification under such state securities or blue laws; and shall promptly reimburse the Indemnified Persons for any legal or other expenses reasonably incurred by any of them in connection with investigating or defending any such loss, claim, damage, liability or action; PROVIDED, HOWEVER, that the Company shall not be liable in any such case to any such Indemnified Person to the extent that any such loss, claim, damage, liability or action (including any legal or other expenses incurred) arises out of or is based upon an untrue statement or allegedly untrue statement or omission or alleged omission made in said Registration Statement, preliminary Prospectus, final Prospectus, amendment, supplement or document incident to registration or qualification of any Registrable Shares in reliance upon and in conformity with written information furnished to the Company by or on behalf of such Indemnified Person specifically for use in the preparation thereof; PROVIDED FURTHER, HOWEVER, that the foregoing indemnity agreement is subject to the condition that, insofar as it relates to any untrue statement, allegedly untrue statement, omission or alleged omission made in any preliminary Prospectus but eliminated or remedied in the final Prospectus (filed pursuant to Rule 424 of the Securities Act), such indemnity agreement shall not inure to the benefit of the any Indemnified Person from whom the Person asserting any loss, claim, damage, liability or expense purchased the Restricted Shares which are the subject thereof, if a copy of such final Prospectus had been made available to such Indemnified Person and such final Prospectus was not delivered to such Person with or prior to the written confirmation of the sale of such Registrable Shares to such Person. (b) In connection with any registration of Registrable Shares under the Securities Act pursuant to this Agreement, each holder of Registrable Shares being registered shall, severally and not jointly, to the fullest extent permitted by law, indemnify 13 and hold harmless (in the same manner and to the same extent as set forth in Section 8(a) above) the Company, each director of the Company, each officer of the Company who shall have signed such Registration Statement, each agent, underwriter, broker or other Person acting on behalf of the Company, each other holder of Registrable Shares or Other Shares and each Person who controls any of the foregoing Persons within the meaning of the Securities Act with respect to any statement or omission from such Registration Statement, any preliminary Prospectus or final Prospectus contained therein or otherwise filed with the Commission, any amendment or supplement thereto or any document incident to registration or qualification of any Registrable Shares, if such statement or omission was made in reliance upon and in conformity with written information furnished to the Company or such underwriter by or on behalf of such holder specifically for use in connection with the preparation of such Registration Statement, preliminary Prospectus, final Prospectus, amendment, supplement or document; PROVIDED, HOWEVER, that the maximum amount of liability in respect of such indemnification shall be limited, in the case of each holder of Registrable Shares, to an amount equal to the net proceeds actually received by such holder from the sale of Registrable Shares effected pursuant to such registration. (c) Promptly after receipt by an indemnified party of notice of the commencement of any action involving a claim referred to in Section 8(a) or (b), such indemnified party will, if a claim in respect thereof is made against an indemnifying party, give written notice to the latter of the commencement of such action; PROVIDED, HOWEVER, that the indemnified party's failure to give such notice shall not release, relieve or in any way affect the indemnifying party's obligation hereunder to indemnify the indemnified party unless and to the extent that the rights of the indemnifying party are prejudiced thereby. In case any such action is brought against an indemnified party, the indemnifying party will be entitled to participate in and to assume the defense thereof, jointly with any other indemnifying party similarly notified to the extent that it may wish, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be responsible for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof; PROVIDED, HOWEVER, that if any indemnified party shall have reasonably concluded (based on the written advice of counsel) that there may be a conflict of interest between the indemnified party and the indemnifying party, or that such claim or litigation involves or could have an effect upon matters beyond the scope of the indemnity agreement provided in this Section 8, the indemnifying party shall not have the right to assume the defense of such action on behalf of such indemnified party and such indemnifying party shall reimburse such indemnified party and any Person controlling such indemnified party for that portion of the fees and expenses of any counsel retained by the indemnified party which is reasonably related to the matters covered by the indemnity agreement provided in this Section 8. 14 (d) If the indemnification provided for in this Section 8 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, claim, damage, liability or action referred to herein (other than as a result of the applicability of the two provisos in Section 8(a)), then the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amounts paid or payable by such indemnified party as a result of such loss, claim, damage, liability or action in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnifying party on the other in connection with the statements or omissions which resulted in such loss, claim, damage, liability or action as well as any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. 9. UNDERWRITING AGREEMENT. (a) Notwithstanding the provisions of Sections 4, 5, 7 and 8, to the extent that the Company and at least the Majority of Registering Stockholders shall enter into an underwriting or similar agreement that contains provisions which conflict with any provision of any such Sections, the provisions contained in such agreement shall control with respect to such underwritten offering. (b) If any registration pursuant to Section 2 is requested to be an underwritten offering, the Company shall negotiate in good faith to enter into a reasonable and customary underwriting agreement with the underwriters thereof. The Company shall be entitled to receive indemnities from lead institutions, underwriters, selling brokers, dealer managers and similar securities industry professionals participating in the distribution, to the same extent as provided above with respect to information so furnished in writing by such Persons specifically for inclusion in any Prospectus or Registration Statement and to the extent customarily given their role in such distribution. (c) No Stockholder may participate in any registration hereunder that is underwritten unless such Stockholder agrees to (i) sell such Stockholder's Registrable Shares proposed to be included therein on the basis provided in any underwriting arrangements approved by the Company and the Majority of Registering Stockholders (which approval shall not be unreasonably withheld by such Stockholders) and (ii) as expeditiously as possible, notify the Company of the occurrence of any event concerning such Stockholder as a result of which the Prospectus relating to such registration contains an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to 15 make the statements therein, in light of the circumstances under which they were made, not misleading. 10. NOMINEES FOR BENEFICIAL OWNERS. In the event that any Registrable Shares are held by a nominee for the beneficial owner thereof, the beneficial owner thereof may, at its election by written notice to the Company effective upon receipt by the Company, be treated as a Stockholder for purposes of any request or other action by any Stockholder pursuant to this Agreement or any determination of any number or percentage of shares of Registrable Shares held by any Stockholder contemplated by this Agreement. If the beneficial owner of any Registrable Shares so elects, the Company may require assurances reasonably satisfactory to it of such owner's beneficial ownership of such Registrable Shares. Prior to receipt by the Company of written notice contemplated hereby, any action taken by any nominee shall be binding upon any such beneficial owner. 11. INFORMATION BY HOLDER. The Stockholders shall furnish to the Company such written information regarding the Stockholders and the distribution proposed by the Stockholders as the Company may reasonably request in writing and as shall be reasonably required in connection with any registration, qualification or compliance referred to in this Agreement. 12. EXCHANGE ACT COMPLIANCE. From the Registration Date or such earlier date as a Registration Statement filed by the Company pursuant to the Exchange Act relating to any class of the Company's securities shall have become effective, the Company shall comply with all of the reporting requirements of the Exchange Act applicable to it and shall comply with all other public information reporting requirements of the Commission which are conditions to the availability of Rule 144 for the sale of the Common Stock. The Company shall cooperate with the Stockholders in supplying such information as may be necessary for the Stockholders to complete and file an information reporting forms presently or hereafter required by the Commission as a condition to the availability of Rule 144. 13. MERGERS, ETC. The Company shall not, directly or indirectly, enter into any merger, consolidation, or reorganization in which the Company shall not be the surviving corporation unless the surviving corporation shall, prior to such merger, consolidation or reorganization, agree in writing to assume the obligations of the Company under this Agreement, and for that purpose references hereunder to "Registrable Shares" shall be deemed to include the shares of common stock, if any, that the Stockholders would be entitled to receive in exchange for Common Stock under any such merger, consolidation or reorganization; PROVIDED, HOWEVER, that, to the extent the Stockholders receive securities that are by their terms convertible into shares of common stock of the issuer thereof, then only such shares of common stock as are issued or 16 issuable upon conversion of said convertible securities shall be included within the definition of "Registrable Securities." 14. NEW CERTIFICATES. As expeditiously as possible after the effectiveness of any Registration Statement filed pursuant to this Agreement, the Company will deliver in exchange for any legended certificate evidencing Restricted Shares so registered, new stock certificates not bearing any restrictive legends, PROVIDED that in the event less than all of the Restricted Shares evidenced by such legended certificate are registered, the holder thereof agrees that a new certificate evidencing such unregistered shares will be issued bearing the appropriate restrictive legend. 15. SELECTION OF UNDERWRITER. The Company shall not, at any time after the date hereof, grant any registration rights that conflict with, or have any priority over, the registration rights granted hereby. The DLJ Investors will have the right to select the underwriters in any public offering resulting from an exercise by it of a Demand Registration. 16. TERMINATION. This Agreement shall terminate and be of no further force or effect when there shall no longer be any Registrable Shares outstanding. 17. MISCELLANEOUS. (a) SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to the benefit of the Company and the Stockholders and, subject to Section 17(b), the respective successors and assigns of the Company and the Stockholders. Except as otherwise expressly provided in Sections 2, 3 and 4, this Agreement is not intended to create any third party beneficiaries. (b) ASSIGNMENT. Each Stockholder may assign its rights hereunder to any Permitted Transferee of Registrable Shares; PROVIDED, HOWEVER, that such Permitted Transferee shall, as a condition to the effectiveness of such assignment, be required to execute a counterpart to this Agreement agreeing to be treated as a Stockholder, whereupon such Permitted Transferee shall have the benefits of and shall be subject to the restrictions contained in this Agreement as if such Permitted Transferee was originally included in the definition of a Stockholder and had originally been a party hereto. (c) SEVERABILITY. It is the desire and intent of the parties hereto that the provisions of this Agreement be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. Accordingly, if any particular provision of this Agreement shall be adjudicated by a court of competent jurisdiction to be invalid, prohibited or 17 unenforceable for any reason, such provision, as to such jurisdiction, shall be ineffective, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. Notwithstanding the foregoing, if such provision could be more narrowly drawn so as not to be invalid, prohibited or unenforceable in such jurisdiction, it shall, as to such jurisdiction, be so narrowly drawn, without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction. (d) ENTIRE AGREEMENT. This Agreement and the other writings referred to herein or delivered pursuant hereto contain the entire agreement among the parties with respect to the subject matter hereof and thereof and supersede all prior and contemporaneous arrangements or understandings with respect hereto and thereto. (e) NOTICES. All communications hereunder to any party shall be deemed to be sufficient if contained in a written instrument delivered in person or sent by telecopy, nationally-recognized overnight courier guaranteeing next day delivery or first class registered or certified mail, return receipt requested, postage prepaid, addressed to such party at its address below or such other address as such party may hereafter designate in writing: if to the Company to: Wavetek Corporation 11995 El Camino Real, Suite 301 San Diego, CA 92130 Attention: Chief Executive Officer Telecopier: (619) 793-2310 if to any Stockholder, to such Stockholder at the address indicated on SCHEDULE I hereto. All such notices, requests, consents, and other communications shall be deemed to have been given and received (i) in the case of personal delivery or delivery by telecopy, on the date of such delivery, (ii) in the case of dispatch by nationally-recognized overnight courier, on the next Business Day following such dispatch and (iii) in the case of mailing, on the fifth Business Day after the posting thereof. (f) MODIFICATIONS; AMENDMENTS; WAIVERS. The terms and provisions of this Agreement may not be modified or amended, nor may any provision be waived, except pursuant to a writing signed by the Company and the Stockholders holding at least 85% of the outstanding Registrable Shares; PROVIDED, HOWEVER, that no such modification, amendment or waiver that would treat any Stockholder in a non-ratable, discriminatory manner shall be made without the prior written 18 consent of such Stockholder. The failure of any party to enforce any of the provisions of this Agreement shall in no way be construed as a waiver of such provisions and shall not affect the right of such party thereafter to enforce each and every provision of this Agreement in accordance with its terms. The Stockholders, to the fullest extent permitted by applicable laws, release the members of the Board from any and all claims for breach of fiduciary duty arising out of the application of this Section 17(f). (g) COUNTERPARTS. This Agreement may be executed in any number of counterparts, and each such counterpart hereof shall be deemed to be an original instrument, but all such counterparts shall constitute but one agreement. (h) HEADINGS. The headings of the various sections of this Agreement have been inserted for convenience of reference only and shall not be deemed to be a part of this Agreement. (i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICTING PROVISION OR RULE THAT WOULD CAUSE THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF NEW YORK TO BE APPLIED. IN FURTHERANCE OF THE FOREGOING, THE INTERNAL LAWS OF THE STATE OF NEW YORK WILL CONTROL THE INTERPRETATION AND CONSTRUCTION OF THIS AGREEMENT, EVEN IF UNDER SUCH JURISDICTION'S CHOICE OF LAW OR CONFLICT OF LAW ANALYSIS, THE SUBSTANTIVE LAW OF SOME OTHER JURISDICTION WOULD ORDINARILY APPLY. (j) WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT. (k) NOUNS AND PRONOUNS. Whenever the context may require, any pronouns used herein shall include the corresponding masculine, feminine or neuter forms and the singular form of nouns and pronouns shall include the plural and vice-versa. CONSTRUCTION. Where specific language is used to clarify by example a general statement contained herein, such specific language shall not be deemed to modify, limit, or restrict in any manner the construction of the general statement to which it relates. The language used in this Agreement shall be deemed to be the language chosen by the parties to express their mutual intent, and no rule of strict construction shall be applied against any party. 19 IN WITNESS WHEREOF, the parties hereto have executed this Registration Rights Agreement on the date first written above. WAVETEK CORPORATION By: /s/ Terence J. Gooding --------------------------------- Name: Dr. Terence J. Gooding Title: Chief Executive Officer DLJ MERCHANT BANKING PARTNERS II, L.P. By: DLJ Merchant Banking II, Inc. Managing General Partner By: /s/ David B. Wilson --------------------------------- Name: David B. Wilson Title: DLJ OFFSHORE PARTNERS II, C.V. By: DLJ Merchant Banking II, Inc. Managing General Partner By: /s/ David B. Wilson --------------------------------- Name: Title: DLJ DIVERSIFIED PARTNERS, L.P. By: DLJ Diversified Partners, Inc. By: /s/ David B. Wilson --------------------------------- Name: Title: 20 DLJMB FUNDING II, INC. By: /s/ David B. Wilson --------------------------------- Name: Title: UK INVESTMENT PLAN 1997 PARTNERS By: Donaldson, Lufkin & Jenrette, Inc. General Partner By: /s/ David B. Wilson --------------------------------- Name: Title: DLJ FIRST ESC L.L.C. By: DLJ LBO Plans Management Corporation As Manager By: /s/ David B. Wilson --------------------------------- Name: Title: DLJ EAB PARTNERS, L.P. By: DLJ Merchant Banking II, Inc. Managing General Partner By: /s/ David B. Wilson --------------------------------- Name: Title: 21 DLJ MILLENNIUM PARTNERS, L.P. By: DLJ Merchant Banking II, Inc. Managing General Partner By: /s/ David B. Wilson --------------------------------- Name: Title: GREEN EQUITY INVESTORS II, L.P. By: Grand Avenue Capital Partners, L.P. By: Grand Avenue Capital Corporation, its general partner By: /s/ Peter Nolan --------------------------------- Name: Title: DR. TERENCE J. GOODING By: /s/ Terence J. Gooding --------------------------------- Dr. Terence J. Gooding SCHRODER UK VENTURE FUND III A Group consisting of three entities: Schroder UK Venture Fund III Trust Schroder UK Venture Fund III L.P. Schroder UK Venture Fund III L.P. 2 By: SCHRODER VENTURE MANAGERS LIMITED, Manager By: /s/ Peter L. Everson ---------------------------- Peter L. Everson, Director of the Manager of each of the three entities comprising the Fund Title: 22 YOKOGAWA ELECTRIC CORPORATION By: /s/ Tetsuji Ishizuka --------------------------------- Name: Tetsuji Ishizuka Title: General Counsel BARBARA A. GOODING TERENCE J. AND BARBARA A. GOODING CRUT TERENCE J. GOODING GRAT 1 TERENCE J. GOODING GRAT 2 BARBARA A. GOODING GRAT GOODING FAMILY FOUNDATION GOODING INVESTMENTS, INC. ANTHONY P. GOODING ANTHONY P. GOODING CRUT TERENCE J. GOODING, JR. TERENCE J. GOODING, JR. CRUT PAUL L. GOODING PAUL L. GOODING CRUT KATHRYN A. VALVERDE KATHRYN A. VALVERDE CRUT MATTHEW T. LONDON MATTHEW T. LONDON CRUT REBECCA J. BELLATI REBECCA J. BELLATI CRUT VICTORIA L. GOODING VICTORIA L. GOODING CRUT KYLE L. GOODING INTER VIVOS TRUST AMANDA L. GOODING INTER VIVOS TRUST PATRICK A GOODING INTER VIVOS TRUST AMANDA N. MCPHERSON INTER VIVOS TRUST CODY C. MCPHERSON INTER VIVOS TRUST TERENCE M. LONDON INTER VIVOS TRUST TERENCE J. GOODING 1994 TRUST BARBARA A. GOODING 1994 TRUST IVERNA REDMOND MAUREEN WISCHHUSEN MARGARET GOODING MARY J. OLSON YVONNE DUGGER DARREL WEBLEY DUANE WEBLEY 23 DEBORAH SPARKS SNOW HILL TRUSTEES RICHARD J. BERRY GERALDINE MARY BERRY PAUL STEVENSON SUSAN EVE STEVENSON PHILIP J. COOKE By: /s/ Terence J. Gooding ------------------------------------------ Terence J. Gooding as Attorney-in-Fact BEN J. CONSTANTINI By: /s/ Ben J. Constantini --------------------------------- Ben J. Constantini DEREK T. MORIKAWA By: /s/ Derek T. Morikawa --------------------------------- Derek T. Morikawa MEGAN MORIKAWA INTER VIVOS TRUST EVAN MORIKAWA INTER VIVOS TRUST By: /s/ Derek T. Morikawa ---------------------------------- Derek T. Morikawa, as Attorney-in-Fact ROD BALLARD KEITH BARGROFF RICHARD BERRY PAT BONFILS JOSEPH A. BUDANO VICKIE L. CAPPS CHARLES CITRON BEN J. CONSTANTINI DANIEL FISH 24 BRUCE GOULD MICHAEL HUFF RICHARD JAWORSKI RONALD JENT BARRY KITAEN MICHAEL LATHAM ANN LITTLE JOSEPH MATIBAG NORMAN MILLER DEREK T. MORIKAWA ERNEY NIKOU JEFFREY PERRIN MICHAEL RICHARDSON MICHAEL SCIULLI BRYAN WHATLEY PAUL ASHTIANI ANTHONY EDWARD BAYLY DAVID COOPER PAUL ROBERTS RICHARD RODDIS PAUL STEVENSON DAVID WALKER STEVEN MANNING KOON ENG TAN YONG CHANG YANG ULRICH DIEHL ROLF KAINDL WINFRIED LENNE PETER MASSAM JOUKE RIJPSTRA KLAUS ROMANEK SOREN SCHNAPKA DIETER SCHWEISTHAL NORBERT STADHOUDERS WIELAND WEIGLER MICHEL BOUQUAIN ENZO DI LUIGI OLIVER MASSELIN FRANCOIS PLAZANET FREDERICK TROJANI LUKA RADOMIROV By: /s/ Terence J. Gooding ------------------------------------------- Terence J. Gooding, as Attorney-in-Fact 25 EX-12.1 19 EXHIBIT 12.1
EXHIBIT 12.1 SCHEDULE RE: COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (dollars in thousands) Pro Forma Twelve Twelve Nine Months Ended Months Months Fiscal Years Ended September 30, June 30, Ended Ended --------------------------------------- ----------------- June 30, June 30, 1992 1993 1994 1995 1996 1996 1997 1997 1997 ----- ----- ----- ----- ------ ------ ----- ------ ------ Income before provision for income taxes 2,952 3,794 4,532 3,685 14,440 13,329 7,179 8,290 (2,308) Interest expense, including amortization of debt issuance costs 966 676 645 1,190 762 616 948 1,094 11,692 Interest portion of rental expense 410 355 400 867 867 663 678 882 882 ---------------------------------------- --------------- ----------------- Earnings 4,328 4,825 5,577 5,742 16,069 14,608 8,805 10,266 10,266 ---------------------------------------- --------------- ----------------- ---------------------------------------- --------------- ----------------- Interest expense, including amortization of debt issuance costs 966 676 645 1,190 762 616 948 1,094 11,692 Interest portion of rental expense 410 355 400 867 867 663 678 882 882 ---------------------------------------- --------------- ----------------- Fixed Charges 1,376 1,031 1,045 2,057 1,629 1,279 1,626 1,976 12,574 ---------------------------------------- --------------- ----------------- ---------------------------------------- --------------- ----------------- Ratio of Earnings to Fixed Charges 3.15 4.68 5.34 2.79 9.86 11.42 5.42 5.20 0.82
EX-23.1 20 EXHIBIT 23.1 EXHIBIT 23.1 CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS We consent to the reference to our firm under the caption "Experts" and to the use of our report dated November 22, 1996, in the Registration Statement (Form S-4) and related Prospectus of Wavetek Corporation and Wavetek U.S. Inc. ERNST & YOUNG LLP San Diego, California July 23, 1997 EX-25.1 21 EXHIBIT 25.1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ----------------------- FORM T-1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) ____________ ---------------------- THE BANK OF NEW YORK (Exact name of trustee as specified in its charter) New York 13-5160382 (Jurisdiction of incorporation (I.R.S. employer if not a U.S. national bank) identification no.) 48 Wall Street, New York, New York 10286 (Address of principal executive offices) (Zip Code) WAVETEK CORPORATION and WAVETEK U.S. INC. (Exact name of obligor as specified in its charter) Delaware 33-0457664 (Wavetek Corporation) 95-2263080 (Wavetek U.S. Inc.) (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 11995 El Camino Real, Suite 301 San Diego, CA 92130 (Address of principal executive offices) (Zip Code) ------------------------- 10 1/8% Senior Subordinated Notes due 2007, of Wavetek Corporation Subsidiary Guarantee of Wavetek U.S. Inc. (Title of the indenture securities) GENERAL ITEM 1. General Information. Furnish the following information as to the Trustee: (a) Name and address of each examining or supervising authority to which it is subject. Superintendent of Banks of the 2 Rector Street, New York, N.Y. 10006, State of New York and Albany, N.Y. 12203 Federal Reserve Bank of New York 33 Liberty Plaza, New York, N.Y. 10045 Federal Deposit Insurance Corporation Washington, D.C. 20549 New York Clearing House Association New York, N.Y. (b) Whether it is authorized to exercise corporate trust powers: Yes. ITEM 2. Affiliations with Obligor If the obligor is an affiliate of the trustee, describe each such affiliation. None. (See Note on page 2.) ----------------------------- ITEM 16. List of Exhibits: Exhibits identified in parentheses below, on file with the Commission, are incorporated herein by reference as an exhibit hereto, pursuant to Rule 7a-29 under the Trust Indenture Act of 1939 (the "Act") and Rule 24 of the Commission's Rules of Practice. 1. - A copy of the Organization Certificate of The Bank of New York (formerly Irving Trust Company) as now in effect, which contains the authority to commence business and a grant of powers to exercise corporate trust powers. (See Exhibit 1 to Amendment No. 1 to Form T-1 filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1 to Form T-1 filed with Registration Statement No. 33-29637.) 4. - A copy of the existing By-laws of the Trustee. (See Exhibit 4 to Form T-1 filed with Registration Statement No. 33-31019.) 6. - The consent of the Trustee required by Section 321(b) of the Act. (See Exhibit 6 to Form T-1, Registration Statement No. 33-44051.) 7. - A copy of the latest report of condition of the Trustee published pursuant to law or to the requirements of its supervising or examining authority. (See Exhibit 7 to Form T-1, Registration Statement No. 33- 55379.) 1 NOTE Inasmuch as this Form T-1 is filed prior to the ascertainment by the Trustee of all facts on which to base responsive answer to Item 2, the answer to said Item is based on incomplete information. Item 2 may, however, be considered as correct unless amended by an amendment to this Form T-1. --------------------------- SIGNATURE Pursuant to the requirements of the Act, the Trustee, The Bank of New York, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in The City of New York, and State of New York, on the 24th day of July, 1997. The Bank of New York By: /s/ MaryBeth A. Lewicki --------------------------- MaryBeth A. Lewicki Assistant Vice President 2 Consolidated Report of Condition of THE BANK OF NEW YORK of 48 Wall Street, New York, NY 10286 And Foreign and Domestic Subsidiaries, a member of the Federal Reserve System at the close of business March 31, 1997, published in accordance with a call made by the Federal Reserve Bank of this District pursuant to the provisions of the Federal Reserve Act. Dollar Amounts ASSETS in Thousands Cash and balances due from depository institutions: Noninterest bearing balances and currency and coin......... $8,249,820 Interest-bearing balances................................... 1,031,026 Securities: Held-to-maturity securities................................. 1,118,463 Available-for-sale securities............................... 3,005,838 Federal Funds sold and Securities purchased under agreements to resell......................................... 3,100,281 Loans and lease financing receivables: Loans and leases, net unearned income.............32,895,077 LESS: Allowance for loan and lease losses............633,877 LESS: Allocated transfer risk reserve...................429 Loans and leases, net of unearned income, allowance and reserve...................................... 32,260,771 Assets held in trading accounts............................. 1,715,214 Premises and fixed assets (including capitalized leases).... 684,704 Other real estate owned..................................... 21,738 Investments in unconsolidated subsidiaries and associated companies................................................... 195,761 Customers' liability to this bank on acceptances outstanding 1,152,899 Intangible assets........................................... 683,503 Other assets................................................ 1,526,113 --------- Total assets................................................ $54,746,131 ----------- ----------- LIABILITIES Deposits: In domestic offices..................................................... 25,614,961 Noninterest-bearing..............................10,564,652 Interest-bearing.................................15,050,309 In foreign offices, Edge and Agreement subsidiaries, and IBFs................................................... 15,103,615 Noninterest-bearing.................................560,944 Interestbearing..................................14,542,671 Federal Funds purchased and Securities sold under agreements to repurchase.................................... 2,093,286 Demand notes issued to the U.S. Treasury.................... 239,354 Trading liabilities......................................... 1,399,064 Other borrowed money: With remaining maturity of one year or less................ 2,075,092 With remaining maturity of more than one year.............. 20,679 Bank's liability on acceptances executed and outstanding.... 1,160,012 Subordinated notes and debentures........................... 1,014,400 Other liabilities........................................... 1,840,245 --------- Total liablities............................................ 50,560,708 ---------- EQUITY CAPITAL Common Stock................................................ 942,284 Surplus..................................................... 731,319 Undivided profits and capital reserves...................... 2,544,303 Net unrealized holding gains (losses) on available-for-sale securities............................... (19,449) Cumulative foreign currency translation adjustments......... (13,034) ------- Total equity capital........................................ 4,185,423 --------- Total liabilities and equity capital........................ $54,746,131 ----------- -----------
I, Robert E. Keilman, Senior Vice President and Comptroller of the above-named bank do hereby declare that is Report of Condition has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true to the best of my knowledge and belief. Robert E. Keilman We, the undersigned directors, attest to the correctness of this Report of Condition and declare that it has been examined by us and to the best of our knowledge and belief has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true and correct. Alan R. Griffith } J. Carter Bacot }Directors Thomas A. Renyi } EX-27.1 22 EXHIBIT 27.1 WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE REGISTRANT'S CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED SEPTEMBER 30, 1996 AND AS OF AND FOR THE NINE MONTHS ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR 9-MOS SEP-30-1996 SEP-30-1997 SEP-30-1996 JUN-30-1997 6,126 4,059 0 3,000 22,889 27,334 2,023 2,054 19,308 18,202 51,993 57,241 19,008 23,630 6,814 8,857 68,852 79,963 30,530 38,477 5,073 113,995 0 0 0 0 11 49 5,637 43,748 68,852 79,963 150,993 118,700 150,993 118,700 72,364 55,479 134,922 109,966 1,036 861 1,542 252 762 948 14,440 7,179 965 2,728 13,475 4,451 0 0 0 0 0 0 13,475 4,451 1.17 0.40 1.17 0.40
EX-99.1 23 LETTER OF TRANSMITTAL EXHIBIT 99.1 LETTER OF TRANSMITTAL WAVETEK CORPORATION OFFER TO EXCHANGE ITS 10 1/8% SENIOR SUBORDINATED NOTES DUE 2007, WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, FOR ITS OUTSTANDING 10 1/8% SENIOR SUBORDINATED NOTES DUE 2007, PURSUANT TO THE PROSPECTUS DATED , 1997 - -------------------------------------------------------------------------------- THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 1997, UNLESS EXTENDED. - -------------------------------------------------------------------------------- THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS: THE BANK OF NEW YORK TO: THE BANK OF NEW YORK, AS EXCHANGE AGENT BY MAIL: FOR INFORMATION CALL: BY HAND OR OVERNIGHT MAIL: The Bank of New York Confirm: (212) 815-5789 The Bank of New York 101 Barclay Street, 7E Facsimile: (212) 101 Barclay Street New York, NY 10286 815-6339 Corporate Trust Services Window Attn: Shilpa Privedi Ground Level Reorganization Section New York, NY 10286 Attn: Shilpa Privedi Reorganization Section
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF THIS LETTER OF TRANSMITTAL VIA FACSIMILE TO A NUMBER OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. Capitalized terms used but not defined herein shall have the same meaning given them in the Prospectus (as defined below). This Letter of Transmittal is to be completed by holders of Old Notes (as defined below) if either (i) Old Notes are to be forwarded herewith or (ii) tenders of Old Notes are to be made by book-entry transfer to an account maintained by The Bank of New York (the "Exchange Agent") at The Depository Trust Company ("DTC") pursuant to the procedures set forth under "The Exchange Offer--Procedures for Tendering Old Notes" in the Prospectus and an Agent's Message (as defined herein) is not delivered. Holders of Old Notes whose certificates (the "Certificates") for such Old Notes are not immediately available or who cannot deliver their Certificates and all other required documents to the Exchange Agent on or prior to the Expiration Date (as defined in the Prospectus) or who cannot complete the procedures for book-entry transfer on or prior to the Expiration Date, must tender their Old Notes according to the guaranteed delivery procedures set forth in "The Exchange Offer--Procedures for Tendering Old Notes--Guaranteed Delivery" in the Prospectus. DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH DTC'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT. NOTE: SIGNATURES MUST BE PROVIDED BELOW PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY The undersigned has completed the appropriate boxes below and signed this Letter of Transmittal to indicate the action the undersigned desires to take with respect to the Exchange Offer. 2
---------------------------------------------------------------------------------------------------- DESCRIPTION OF OLD NOTES TENDERED ---------------------------------------------------------------------------------------------------- PRINCIPAL PRINCIPAL AMOUNT OF OLD AMOUNT NOTES TENDERED OF OLD NOTES (IF LESS THAN NAME AND ADDRESS OF TENDERED (IF ALL REGISTERED HOLDER (PLEASE CERTIFICATE ALL ARE ARE FILL IN IF BLANK) NUMBERS* TENDERED) TENDERED)** - ------------------------------------------------------------------------------------------------------ ---------------------------------------------- ---------------------------------------------- ---------------------------------------------- $ $ ---------------------------------------------- TOTAL AMOUNT TENDERED: $ $ - -------------------------------------------------------------------------------------- * NEED NOT BE COMPLETED BY BOOK-ENTRY HOLDERS. - ------------------------------------------------------------------------------------------------------
(BOXES BELOW TO BE CHECKED BY ELIGIBLE INSTITUTIONS (defined in Instruction 1) ONLY) / / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND COMPLETE THE FOLLOWING: Name of Tendering Institution: _____________________________________________ DTC Account Number: ________________________________________________________ Transaction Code Number: ___________________________________________________ / / CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING: Name of Registered Holder: _________________________________________________ Window Ticket Number (if any): _____________________________________________ Date of Execution of Notice of Guaranteed Delivery: ________________________ Name of Institution which Guaranteed Delivery: _____________________________ If Guaranteed Delivery is to be made By Book-Entry Transfer: Name of Tendering Institution: _____________________________________________ DTC Account Number: ________________________________________________________ Transaction Code Number: ___________________________________________________ / / CHECK HERE IF OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER AND NON- EXCHANGED OR UNTENDERED OLD NOTES ARE TO BE RETURNED BY CREDITING THE DTC ACCOUNT NUMBER SET FORTH ABOVE. / / CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED THE OLD NOTES FOR ITS OWN ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER TRADING ACTIVITIES (A "PARTICIPATING BROKER-DEALER") AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. Name: ______________________________________________________________________ Address: ___________________________________________________________________ Area Code and Telephone Number: ____________________________________________ 3 Ladies and Gentlemen: The undersigned hereby tenders to Wavetek Corporation (the "Company") the above-described principal amount of the Company's 10 1/8% Subordinated Notes due 2007 (the "Old Notes") in exchange for a like principal amount of the Company's 10 1/8% Subordinated Notes due 2007 (the "New Notes" and together with the Old Notes, the "Notes"), which have been registered under the Securities Act of 1933, as amended (the "Securities Act"), upon the terms and subject to the conditions set forth in the Prospectus dated , 1997 (as the same may be amended or supplemented from time to time, the "Prospectus"), receipt of which is acknowledged, and in this Letter of Transmittal (which together with the Prospectus constitute the "Exchange Offer"). Subject to and effective upon the acceptance for exchange of all or any portion of the Old Notes tendered herewith in accordance with the terms and conditions of the Exchange Offer (including, if the Exchange Offer is extended or amended, the terms and conditions of any such extension or amendment), the undersigned hereby exchanges, assigns and transfers to or upon the order of the Company all right, title and interest in and to such Old Notes as are being tendered herewith. The undersigned hereby irrevocably constitutes and appoints the Exchange Agent as its agent and attorney-in-fact (with full knowledge that the Exchange Agent is also acting as agent of the Company in connection with the Exchange Offer) with respect to the tendered Old Notes, with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest), subject only to the right of withdrawal described in the Prospectus, to (i) deliver Certificates for Old Notes to the Company together with all accompanying evidences of transfer and authenticity to, or upon the order of, the Company, upon receipt by the Exchange Agent, as the undersigned's agent, of the New Notes to be issued in exchange for such Old Notes, (ii) present Certificates for such Old Notes for transfer, and transfer the Old Notes on the books of the company, and (iii) receive for the account of the Company all benefits and otherwise exercise all rights of beneficial ownership of such Old Notes, all in accordance with the terms and conditions of the Exchange Offer. THE UNDERSIGNED HEREBY REPRESENTS AND WARRANTS THAT THE UNDERSIGNED HAS FULL POWER AND AUTHORITY TO TENDER, EXCHANGE, SELL, ASSIGN AND TRANSFER THE OLD NOTES TENDERED HEREBY AND THAT, WHEN THE SAME ARE ACCEPTED FOR EXCHANGE, THE COMPANY WILL ACQUIRE GOOD, MARKETABLE AND UNENCUMBERED TITLE THERETO, FREE AND CLEAR OF ALL LIENS, RESTRICTIONS, CHARGES AND ENCUMBRANCES, AND THAT THE OLD NOTES TENDERED HEREBY ARE NOT SUBJECT TO ANY ADVERSE CLAIMS. THE UNDERSIGNED WILL, UPON REQUEST, EXECUTE AND DELIVER ANY ADDITIONAL DOCUMENTS DEEMED BY THE COMPANY OR THE EXCHANGE AGENT TO BE NECESSARY OR DESIRABLE TO COMPLETE THE EXCHANGE, ASSIGNMENT AND TRANSFER OF THE OLD NOTES TENDERED HEREBY, AND THE UNDERSIGNED WILL COMPLY WITH ANY OBLIGATIONS IT MAY HAVE UNDER THE REGISTRATION RIGHTS AGREEMENT. THE UNDERSIGNED HAS READ AND AGREES TO ALL OF THE TERMS OF THE EXCHANGE OFFER. The name and address of the registered holder of the Old Notes tendered hereby should be printed above, if they are not already set forth above, as they appear on the certificates representing such Old Notes. The certificate numbers and the principal amount of the Old Notes that the undersigned wishes to tender should be indicated in the appropriate boxes above. If any tendered Old Notes are not exchanged pursuant to the Exchange Offer for any reason, or if certificates are submitted for more Old Notes than are tendered or accepted for exchange, certificates for such nonexchanged or nontendered Old Notes will be returned (or, in the case of Old Notes tendered by book-entry transfer, such Old Notes will be credited to an account maintained at DTC), without expense to the tendering holder, promptly following the expiration or termination of the Exchange Offer. The undersigned understands that tenders of Old Notes pursuant to any one of the procedures described under "The Exchange Offer--Procedures for Tendering Old Notes" in the Prospectus and in the instructions herein will, upon the Company's acceptance for exchange of such tendered Old Notes, constitute a binding agreement among the undersigned and the Company upon the terms and subject to the conditions of the Exchange Offer. The undersigned 4 recognizes that, under certain circumstances set forth in the Prospectus, the Company may not be required to accept for exchange any of the Old Notes tendered hereby. Unless otherwise indicated herein in the box entitled "Special Issuance Instructions" below, the undersigned hereby directs that the New Notes be issued in the name of the undersigned or, in the case of a book-entry transfer of Old Notes, that such New Notes be credited to the account indicated above maintained at DTC. If applicable, substitute certificates representing Old Notes not exchanged or not accepted for exchange will be issued to the undersigned or, in the case of a book-entry transfer of Old Notes, will be credited to the account indicated above maintained at DTC. Similarly, unless otherwise indicated under "Special Delivery Instructions" below, please deliver New Notes to the undersigned at the address shown below the undersigned's signature. BY TENDERING OLD NOTES AND EXECUTING THIS LETTER OF TRANSMITTAL, THE UNDERSIGNED HEREBY REPRESENTS AND AGREES THAT (I) THE UNDERSIGNED IS NOT AN "AFFILIATE" OF THE COMPANY WITHIN THE MEANING OF RULE 405 UNDER THE SECURITIES ACT, (II) ANY NEW NOTES TO BE RECEIVED BY THE UNDERSIGNED ARE BEING ACQUIRED IN THE ORDINARY COURSE OF ITS BUSINESS, (III) THE UNDERSIGNED HAS NO ARRANGEMENT OR UNDERSTANDING WITH ANY PERSON TO PARTICIPATE IN A DISTRIBUTION (WITHIN THE MEANING OF THE SECURITIES ACT) OF NEW NOTES TO BE RECEIVED IN THE EXCHANGE OFFER, AND (IV) IF THE UNDERSIGNED IS NOT A BROKER-DEALER, THE UNDERSIGNED IS NOT ENGAGED IN, AND DOES NOT INTEND TO ENGAGE IN, A DISTRIBUTION (WITHIN THE MEANING OF THE SECURITIES ACT) OF SUCH NEW NOTES. BY TENDERING OLD NOTES PURSUANT TO THE EXCHANGE OFFER AND EXECUTING THIS LETTER OF TRANSMITTAL, A HOLDER OF OLD NOTES WHICH IS A BROKER-DEALER REPRESENTS AND AGREES, CONSISTENT WITH CERTAIN INTERPRETIVE LETTERS ISSUED BY THE STAFF OF THE DIVISION OF CORPORATION FINANCE OF THE SECURITIES AND EXCHANGE COMMISSION TO THIRD PARTIES, THAT (A) SUCH OLD NOTES HELD BY THE BROKER-DEALER ARE HELD ONLY AS A NOMINEE, OR (B) SUCH OLD NOTES WERE ACQUIRED BY SUCH BROKER-DEALER FOR ITS OWN ACCOUNT AS A RESULT OF MARKET-MAKING ACTIVITIES OR OTHER TRADING ACTIVITIES AND IT WILL DELIVER A PROSPECTUS (AS AMENDED OR SUPPLEMENTED FROM TIME TO TIME) MEETING THE REQUIREMENTS OF THE SECURITIES ACT IN CONNECTION WITH ANY RESALE OF SUCH NEW NOTES (PROVIDED THAT, BY SO ACKNOWLEDGING AND BY DELIVERING A PROSPECTUS, SUCH BROKER-DEALER WILL NOT BE DEEMED TO ADMIT THAT IT IS AN "UNDERWRITER" WITHIN THE MEANING OF THE SECURITIES ACT). THE COMPANY HAS AGREED THAT, SUBJECT TO THE PROVISIONS OF THE REGISTRATION RIGHTS AGREEMENT, THE PROSPECTUS, AS IT MAY BE AMENDED OR SUPPLEMENTED FROM TIME TO TIME, MAY BE USED BY A PARTICIPATING BROKER-DEALER IN CONNECTION WITH RESALES OF NEW NOTES RECEIVED IN EXCHANGE FOR OLD NOTES, WHERE SUCH OLD NOTES WERE ACQUIRED BY SUCH PARTICIPATING BROKER-DEALER FOR ITS OWN ACCOUNT AS A RESULT OF MARKET-MAKING ACTIVITIES OR OTHER TRADING ACTIVITIES, FOR A PERIOD ENDING ONE YEAR FROM THE DATE ON WHICH THE EXCHANGE OFFER REGISTRATION STATEMENT IS DECLARED EFFECTIVE (SUBJECT TO EXTENSION UNDER CERTAIN LIMITED CIRCUMSTANCES). IN THAT REGARD, EACH PARTICIPATING BROKER-DEALER WHO ACQUIRED OLD NOTES FOR ITS OWN ACCOUNT AS A RESULT OF MARKET-MAKING OR OTHER TRADING ACTIVITIES, BY TENDERING SUCH OLD NOTES AND EXECUTING THIS LETTER OF TRANSMITTAL, AGREES THAT, UPON RECEIPT OF NOTICE FROM THE COMPANY OF THE OCCURRENCE OF ANY EVENT OR THE DISCOVERY OF ANY FACT WHICH MAKES ANY STATEMENT CONTAINED OR INCORPORATED BY REFERENCE IN THE PROSPECTUS UNTRUE IN ANY MATERIAL RESPECT OR WHICH CAUSES THE PROSPECTUS TO OMIT TO STATE A MATERIAL FACT NECESSARY IN ORDER TO MAKE THE STATEMENTS CONTAINED OR INCORPORATED BY REFERENCE THEREIN, IN LIGHT OF THE CIRCUMSTANCES UNDER WHICH THEY WERE MADE, NOT MISLEADING OR OF THE OCCURRENCE OF 5 CERTAIN OTHER EVENTS SPECIFIED IN THE REGISTRATION RIGHTS AGREEMENT, SUCH PARTICIPATING BROKER-DEALER WILL SUSPEND THE SALE OF NEW NOTES PURSUANT TO THE PROSPECTUS UNTIL THE COMPANY HAS SUPPLEMENTED OR AMENDED THE PROSPECTUS AND HAS FURNISHED COPIES OF THE AMENDED OR SUPPLEMENTED PROSPECTUS TO THE PARTICIPATING BROKER-DEALER OR THE COMPANY HAS GIVEN NOTICE THAT THE SALE OF THE NEW NOTES MAY BE RESUMED, AS THE CASE MAY BE. The New Notes will bear interest from and including their respective dates of issuance. Holders whose Old Notes are accepted for exchange will receive accrued interest thereon to, but not including, the date of issuance of the New Notes, such interest to be payable with the first interest payment on the New Notes, but will not receive any payment in respect of interest on the Old Notes accrued after the issuance of the New Notes. The undersigned will, upon request, execute and deliver any additional documents deemed by to be necessary or desirable to complete the sale, assignment and transfer of the Old Notes tendered hereby. All authority herein conferred or agreed to be conferred in this Letter of Transmittal shall survive the death or incapacity of the undersigned and any obligation of the undersigned hereunder shall be binding upon the heirs, executors, administrators, personal representatives, trustees in bankruptcy, legal representatives, successors and assigns of the undersigned. Except as stated in the Prospectus, this tender is irrevocable. THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OLD NOTES TENDERED" ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE OLD NOTES AS SET FORTH IN SUCH BOX. 6 - -------------------------------------------------------------------------------- HOLDERS SIGN HERE (SEE INSTRUCTIONS 2, 5 AND 6) (PLEASE COMPLETE SUBSTITUTE FORM W-9 ON PAGE 14) (NOTE: SIGNATURES MUST BE GUARANTEED IF REQUIRED BY INSTRUCTION 2) Must be signed by registered holder exactly as name appears on certificates for the Old Notes hereby tendered or on a security position listing, or by any person authorized to become the registered holder by endorsements and documents transmitted herewith (including such opinions of counsel, certifications and other information as may be required by the Company or the Exchange Agent to comply with the restrictions on transfer applicable to the Old Notes). If signature is by an attorney-in-fact, executor, administrator, trustee, guardian, officer of a corporation or another acting in a fiduciary capacity or representative capacity, please set forth the signer's full title. See Instruction 5. ____________________________________________________________________________ ____________________________________________________________________________ (SIGNATURE OF HOLDER) Date: ______________, 1997 Name: ______________________________________________________________________ (PLEASE PRINT) Capacity (full title): _____________________________________________________ Address: ___________________________________________________________________ ____________________________________________________________________________ ____________________________________________________________________________ (INCLUDE ZIP CODE) Area Code and Telephone Number: ____________________________________________ Tax Identification or Social Security Number: ______________________________ GUARANTEE OF SIGNATURE (SEE INSTRUCTIONS 2 AND 5) ____________________________________________________________________________ (AUTHORIZED SIGNATURE) Date: ______________, 1997 Name of Firm: ______________________________________________________________ Capacity (full title): _____________________________________________________ (PLEASE PRINT) Address: ___________________________________________________________________ ____________________________________________________________________________ ____________________________________________________________________________ (INCLUDE ZIP CODE) Area Code and Telephone Number: ____________________________________________ ---------------------------------------------------------------------------- 7 ---------------------------------------------------- SPECIAL ISSUANCE INSTRUCTIONS (SEE INSTRUCTIONS 1, 5 AND 6) To be completed ONLY if the New Notes and/or any Old Notes that are not tendered are to be issued in the name of someone other than the registered holder of the Old Notes whose name appears above. Issue / / New Notes / / Old Notes not tendered to: Name: ______________________________________________________________________ Address: ___________________________________________________________________ ____________________________________________________________________________ ____________________________________________________________________________ (INCLUDE ZIP CODE) Area Code and Telephone Number: ____________________________________________ Tax Identification or Social Security Number: ____________________________________________________ - ------------------------------------------------ - ------------------------------------------------ SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 1, 5 AND 6) To be completed ONLY if the New Notes and/or any Old Notes that are not tendered are to be sent to someone other than the registered holder of the Old Notes whose name appears above, or to such registered holder at an address other than that shown above. Mail / / New Notes / / Old Notes not tendered to: Name: ______________________________________________________________________ Address: ___________________________________________________________________ ____________________________________________________________________________ ____________________________________________________________________________ (INCLUDE ZIP CODE) Area Code and Telephone Number: ____________________________________________ Tax Identification or Social Security Number: ____________________________________________________ - ------------------------------------------ 8 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER 1. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED DELIVERY PROCEDURES. This Letter of Transmittal is to be completed either if (a) Certificates are to be forwarded herewith or (b) tenders are to be made pursuant to the procedures for tender by book-entry transfer set forth under "The Exchange Offer--Procedures for Tendering Old Notes" in the Prospectus and an Agent's Message is not delivered. Certificates, or book-entry confirmation of a book-entry transfer of such Old Notes into the Exchange Agent's account at DTC, as well as this Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees, and any other documents required by this Letter of Transmittal, must be received by the Exchange Agent at its address set forth herein on or prior to the Expiration Date. Tenders by book-entry transfer may also be made by delivering an Agent's Message in lieu of this Letter of Transmittal. The term "book-entry confirmation" means a timely confirmation of book-entry transfer of Old Notes into the Exchange Agent's account at DTC. The term "Agent's Message" means a message, transmitted by DTC to and received by the Exchange Agent and forming a part of a book-entry confirmation, which states that DTC has received an express acknowledgment from the tendering participant, which acknowledgment states that such participant has received and agrees to be bound by the Letter of Transmittal (including the representations contained herein) and that the Company may enforce the Letter of Transmittal against such participant. Holders who wish to tender their Old Notes and (i) whose Old Notes are not immediately available or (ii) who cannot deliver their Old Notes, this Letter of Transmittal and all other required documents to the Exchange Agent on or prior to the Expiration Date or (iii) who cannot complete the procedures for delivery by book-entry transfer on or prior to the Expiration Date, may tender their Old Notes by properly completing and duly executing a Notice of Guaranteed Delivery pursuant to the guaranteed delivery procedures set forth under "The Exchange Offer-- Procedures for Tendering Old Notes--Guaranteed Delivery" in the Prospectus. Pursuant to such procedures: (i) such tender must be made by or through an Eligible Institution (as defined below); (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form accompanying this letter of Transmittal, must be received by the Exchange Agent on or prior to the Expiration Date; and (iii) the certificates (or a book-entry confirmation (as defined in the Prospectus)) representing all tendered Old Notes, in proper form for transfer, together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof), with any required signature guarantees and any other documents required by this Letter of Transmittal, must be received by the Exchange Agent within three New York Stock Exchange Inc. trading days after the date of execution of such Notice of Guaranteed Delivery, all as provided in "The Exchange Offer--Procedures for Tendering Old Notes--Guaranteed Delivery" in the Prospectus. The Notice of Guaranteed Delivery may be delivered by hand or transmitted by facsimile or mail to the Exchange Agent, and must include a guarantee by an Eligible Institution in the form set forth in such Notice. For Old Notes to be properly tendered pursuant to the guaranteed delivery procedure, the Exchange Agent must receive a Notice of Guaranteed Delivery on or prior to the Expiration Date. As used herein and in the Prospectus, "Eligible Institution" means a firm or other entity identified in Rule 17Ad-15 under the Exchange Act as "an eligible guarantor institution," including (as such terms are defined therein) (i) a bank; (ii) a broker, dealer, municipal securities broker or dealer or government securities broker or dealer; (iii) a credit union; (iv) a national securities exchange, registered securities association or clearing agency; or (v) a savings association that is a participant in a Securities Transfer Association. THE METHOD OF DELIVERY OF THE NOTES, THIS LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING HOLDER AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, OR OVERNIGHT DELIVERY SERVICE IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE DELIVERY ON OR PRIOR TO THE EXPIRATION DATE. 9 The Company will not accept any alternative, conditional or contingent tenders. Each tendering holder, by execution of a Letter of Transmittal (or facsimile thereof), waives any right to receive any notice of the acceptance of such tender. 2. GUARANTEE OF SIGNATURES. No signature guarantee on this Letter of Transmittal is required if: (i) this Letter of Transmittal is signed by the registered holder (which term, for purposes of this document, shall include any participant in DTC whose name appears on a security position listing as the owner of the Old Notes) of Old Notes tendered herewith, unless such holder has completed either the box entitled "Special Issuance Instructions" or the box entitled "Special Delivery Instructions" above, or (ii) such Old Notes are tendered for the account of a firm that is an Eligible Institution. In all other cases, an Eligible Institution must guarantee the signature on this Letter of Transmittal. See Instruction 5. 3. INADEQUATE SPACE. If the space provided in the box captioned "Description of Old Notes" is inadequate, the certificate numbers and/or the principal amount of Old Notes and any other required information should be listed on a separate signed schedule which is attached to this Letter of Transmittal. 4. PARTIAL TENDERS AND WITHDRAWAL RIGHTS. If less than all the Old Notes evidenced by any Certificate submitted are to be tendered, fill in the principal amount of Old Notes which are to be tendered in the box entitled "principal amount of Old Notes Tendered (If Less than All are Tendered)." In such case, a new certificate for the remainder of the Old Notes that were evidenced by your old certificate will be sent to the holder of the Old Notes, promptly after the Expiration Date unless the appropriate boxes on this Letter of Transmittal are completed. All Old Notes represented by certificates delivered to the Exchange Agent will be deemed to have been tendered unless otherwise indicated. Except as otherwise provided herein, tenders of Old Notes may be withdrawn at any time on or prior to the Expiration Date. In order for a withdrawal to be effective, a written, telegraphic, telex or facsimile transmission of such notice of withdrawal must be received by the Exchange Agent at its address set forth above or in the Prospectus on or prior to the Expiration Date. Any such notice of withdrawal must specify the name of the person who tendered the Old Notes to be withdrawn, the aggregate principal amount of Old Notes to be withdrawn, and (if certificates for Old Notes have been tendered) the name of the registered holder of the Old Notes as set forth on the certificates for the Old Notes, if different from that of the person who tendered such Old Notes. If certificates for the Old Notes have been delivered or otherwise identified to the Exchange Agent, then prior to the physical release of such certificates for the Old Notes, the tendering holder must submit the serial numbers shown on the particular certificates for the Old Notes to be withdrawn and the signature on the notice of withdrawal must be guaranteed by an Eligible Institution, except in the case of Old Notes tendered for the account of an Eligible Institution. If Old Notes have been tendered pursuant to the procedures for book-entry transfer set forth in the Prospectus under "The Exchange Offer-- Procedures for Tendering Old Notes," the notice of withdrawal must specify the name and number of the account at DTC to be credited with the withdrawal of Old Notes, in which case a notice of withdrawal will be effective if delivered to the Exchange Agent by written, telegraphic, telex or facsimile transmission on or prior to the Expiration Date. Withdrawals of tenders of Old Notes may not be rescinded and Old Notes properly withdrawn will not be deemed validly tendered for purposes of the Exchange Offer, but may be retendered at any subsequent time on or prior to the Expiration Date by following any of the procedures described in the Prospectus under "The Exchange Offer--Procedures for Tendering Old Notes." All questions as to the validity, form and eligibility (including time of receipt) of such withdrawal notices will be determined by the Company, in its sole discretion, whose determination shall be final and binding on all parties. Neither the Company, any affiliates or assigns of the Company, or the Exchange Agent nor any other person shall be under any duty to give any notification of any irregularities in any notice of withdrawal or incur any liability for failure to give any such notification. Any Old Notes which have been tendered but which are withdrawn on or prior to the Expiration Date will be returned to the holder thereof without cost to such holder promptly after withdrawal. 10 5. SIGNATURES ON LETTER OF TRANSMITTAL, ASSIGNMENTS AND ENDORSEMENTS. If this Letter of Transmittal is signed by the registered holder of the Old Notes tendered hereby, the signature must correspond exactly with the name as written on the face of the certificates without alteration, enlargement or any change whatsoever. If any of the Old Notes tendered hereby are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal. If any tendered Old Notes are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate Letters of Transmittal (or facsimiles thereof) as there are different registrations of certificates. If this Letter of Transmittal or any certificates or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing and must submit proper evidence satisfactory to the Company, in its sole discretion, of such persons' authority so to act. When this Letter of Transmittal is signed by the registered holder of the Old Notes listed and transmitted hereby, no endorsement of certificates or separate bond powers are required unless New Notes are to be issued in the name of a person other than the registered holder. Signatures on such certificates or bond powers must be guaranteed by an Eligible Institution. If this Letter of Transmittal is signed by a person other than the registered holder of the Old Notes listed, the certificates must be endorsed or accompanied by appropriate bond powers, signed exactly as the name of the registered holder appears on the certificates, and also must be accompanied by such opinions of counsel, certifications and other information as the Company or the Exchange Agent may require in accordance with the restrictions on transfer applicable to the Old Notes. Signatures on such certificates or bond powers must be guaranteed by an Eligible Institution. 6. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. If New Notes are to be issued in the name of a person other than the registered holder, or if New Notes are to be sent to someone other than the registered holder or to an address other than that shown above, the appropriate boxes on this Letter of Transmittal should be completed. Certificates for Old Notes not exchanged will be returned by mail or, if tendered by book-entry transfer, by crediting the account indicated above maintained at DTC unless the appropriate boxes on this Letter of Transmittal are completed. See Instruction 4. 7. IRREGULARITIES. The Company will determine, in its sole discretion, all questions as to the form of documents, validity, eligibility (including time of receipt) and acceptance for exchange of any tender of Old Notes, which determination shall be final and binding on all parties. The Company reserves the absolute right to reject any and all tenders determined by either of them not to be in proper form or the acceptance of which, or exchange for, may, in the view of counsel to the company, be unlawful. The Company also reserves the absolute right, subject to applicable law, to waive any of the conditions of the Exchange Offer set forth in the Prospectus under "The Exchange Offer--Conditions to the Exchange Offer" or any conditions or irregularity in any tender of Old Notes of any particular holder whether or not similar conditions or irregularities are waived in the case of other holders. The Company's interpretation of the terms and conditions of the Exchange Offer (including this Letter of Transmittal and the instructions hereto) will be final and binding. No tender of Old Notes will be deemed to have been validly made until all irregularities with respect to such tender have been cured or waived. Neither the Company, any affiliates or assigns of the Company or the Exchange Agent nor any other person shall be under any duty to give notification of any irregularities in tenders or incur any liability for failure to give such notification. 8. QUESTIONS, REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES. Questions and requests for assistance may be directed to the Exchange Agent at its address and telephone number set forth on the front of this Letter of Transmittal. Additional copies of the Prospectus, the Notice of Guaranteed Delivery and the Letter of Transmittal may be obtained from the Exchange Agent or from your broker, dealer, commercial bank, trust company or other nominee. 11 9. 31% BACKUP WITHHOLDING; SUBSTITUTE FORM W-9. Under U.S. Federal income tax law, a holder whose tendered Old Notes are accepted for exchange is required to provide the Exchange Agent with such holder's correct taxpayer identification number ("TIN") on the Substitute Form W-9 below. If the Exchange Agent is not provided with the correct TIN, the Internal Revenue Service (the "IRS") may subject the holder or other payee to a $50 penalty. In addition, payments to such holders or other payees with respect to Old Notes exchanged pursuant to the Exchange Offer may be subject to 31% backup withholding. The box in Part 2 of the Substitute Form W-9 may be checked if the tendering holder has not been issued a TIN and has applied for a TIN or intends to apply for a TIN in the near future. If the box in Part 2 is checked, the holder or other payee must also complete the Certificate of Awaiting Taxpayer Identification Number below in order to avoid backup withholding. Notwithstanding that the box in Part 2 is checked and the Certificate of Awaiting Taxpayer Identification Number is completed, the Exchange Agent will withhold 31% of all payments made prior to the time a properly certified TIN is provided to the Exchange Agent. The Exchange Agent will retain such amounts withheld during the 60 day period following the date of the Substitute Form W-9. If the holder furnishes the Exchange Agent with its TIN within 60 days after the date of the Substitute Form W-9, the amounts retained during the 60 day period will be remitted to the holder and no further amounts shall be retained or withheld from payments made to the holder thereafter. If, however, the holder has not provided the Exchange Agent with its TIN within such 60 day period, amounts withheld will be remitted to the IRS as backup withholding. In addition, 31% of all payments made thereafter will be withheld and remitted to the IRS until a correct TIN is provided. The holder is required to give the Exchange Agent the TIN (e.g., social security number or employer identification number) of the registered owner of the Old Notes or of the last transferee appearing on the transfers attached to, or endorsed on, the Old Notes. If the Old Notes are registered in more than one name or are not in the name of the actual owner, consult the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for additional guidance on which number to report. Certain holders (including, among others, corporations, financial institutions and certain foreign persons) may not be subject to these backup withholding and reporting requirements. Such holders should nevertheless complete the attached Substitute Form W-9 below, and write "exempt" on the face thereof, to avoid possible erroneous backup withholding. A foreign person may qualify as an exempt recipient by submitting a properly completed IRS Form W-8, signed under penalties of perjury, attesting to that holder's exempt status. Please consult the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for additional guidance on which holders are exempt from backup withholding. Backup withholding is not an additional U.S. Federal income tax. Rather, the U.S. Federal income tax liability of a person subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained. 10. LOST, DESTROYED OR STOLEN CERTIFICATES. If any certificates representing Old Notes have been lost, destroyed or stolen, the holder should promptly notify the Exchange Agent. The holder will then be instructed as to the steps that must be taken in order to replace the certificates. This Letter of Transmittal and related documents cannot be processed until the procedures for replacing lost, destroyed or stolen certificates have been followed. 11. SECURITY TRANSFER TAXES. Holders who tender their Old Notes for exchange will not be obligated to pay any transfer taxes in connection therewith. If, however, New Notes are to be delivered to, or are to be issued in the name of, any person other than the registered holder of the Old Notes tendered, or if a transfer tax is imposed for any reason other than the exchange of Old Notes in connection with the Exchange Offer, then the amount of any such transfer tax (whether imposed on the registered holder or any other persons) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted with the Letter of Transmittal, the amount of such transfer taxes will be billed directly to such tendering holder. IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE THEREOF) AND ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE EXCHANGE AGENT ON OR PRIOR TO THE EXPIRATION DATE. 12 PAYER'S NAME: THE BANK OF NEW YORK - -------------------------------------------------------------------------------------------------- SUBSTITUTE Part 1--PLEASE PROVIDE YOUR TIN Social security number OR Employer FORM W-9 IN THE BOX AT RIGHT AND CERTIFY identification number BY SIGNING AND DATING BELOW. ------------------------------------- ------------------------------------------------------------------------ DEPARTMENT OF THE TREASURY Part 2]CERTIFICATION Under penalties of perjury, I certify that: INTERNAL REVENUE SERVICE (1) The number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a number to be issued to me) and PAYER'S REQUEST FOR (2) I am not subject to backup withholding either because: (a) I am TAXPAYER IDENTIFICATION exempt from backup withholding, or (b) I have not been notified by the NUMBER (TIN) Internal Revenue Service (the "IRS") that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding. ------------------------------------------------------------------------ CERTIFICATION INSTRUCTIONS--You must cross out item (2) above if you have been notified by the IRS that you are currently subject to backup withholding because of underreporting interest or dividends on your tax return. However, if after being notified by the IRS that you are subject to backup withholding, you received another notification from the IRS that you are no longer subject to backup withholding, do not cross out such item (2). PART 3-- AWAITING TIN / / THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION OF THIS DOCUMENT OTHER THAN THE CERTIFICATIONS REQUIRED TO AVOID BACKUP WITHHOLDING. SIGNATURE --------------------DATE --------- NAME (Please Print) ADDRESS (Please Print) - --------------------------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF SUBSTITUTE FORM W-9. 13 CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (1) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (2) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number by the time of payment, 31% of all reportable payments made to me will be withheld, but that such amounts will be refunded to me if I then provide a Taxpayer Identification Number within sixty (60) days. Signature - --------------------------------------------------------- Date - ------------------------- Name (Please Print) - -------------------------------------------------------------------------------- Address (Please Print) - -------------------------------------------------------------------------------- 14 EX-99.2 24 EXHIBIT 99.2 EXHIBIT 99.2 NOTICE OF GUARANTEED DELIVERY FOR TENDER OF 10 1/8% SENIOR SUBORDINATED NOTES DUE 2007 OF WAVETEK CORPORATION This Notice of Guaranteed Delivery, or one substantially equivalent to this form, must be used to accept the Exchange Offer (as defined below) if (i) certificates for the Company's (as defined below) 10 1/8% Senior Subordinated Notes due 2007 (the "Old Notes") are not immediately available, (ii) Old Notes, the Letter of Transmittal and all other required documents cannot be delivered to The Bank of New York (the "Exchange Agent") on or prior to the Expiration Date (as defined in the Prospectus referred to below) or (iii) the procedures for delivery by book-entry transfer cannot be completed on or prior to the Expiration Date. This Notice of Guaranteed Delivery may be delivered by hand, overnight courier or mail, or transmitted by facsimile transmission, to the Exchange Agent on or prior to the Expiration Date. See "The Exchange Offer--Procedures for Tendering Old Notes" in the Prospectus. THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS: THE BANK OF NEW YORK TO: THE BANK OF NEW YORK, AS EXCHANGE AGENT BY MAIL: FOR INFORMATION CALL: BY HAND OR OVERNIGHT MAIL: The Bank of New York Confirm: (212) 815-5789 The Bank of New York 101 Barclay Street, 7E Facsimile: (212) 101 Barclay Street New York, NY 10286 815-6339 Corporate Trust Services Window Attn: Shilpa Privedi Ground Level Reorganization Section New York, NY 10286 Attn: Shilpa Privedi Reorganization Section
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF THIS NOTICE OF GUARANTEED DELIVERY VIA FACSIMILE TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN "ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE SIGNATURE BOX ON THE LETTER OF TRANSMITTAL. Ladies and Gentlemen: The undersigned hereby tenders to Wavetek Corporation, upon the terms and subject to the conditions set forth in the Prospectus dated , 1997 (as the same may be amended or supplemented from time to time, the "Prospectus"), and the related Letter of Transmittal (which together constitute the "Exchange Offer"), receipt of which is hereby acknowledged, the aggregate principal amount of Old Notes set forth below pursuant to the guaranteed delivery procedures set forth in the Prospectus under the caption "The Exchange Offer--Procedures for Tendering Old Notes." Aggregate Principal Name of Amount Tendered: ---------------------- Registered Holder: --------------------- Certificate Nos. Address: ------------------------------ (if available): --------------------------------------- - -------------------------- Area Code and Telephone Number: ---------------------
If Old Notes will be tendered by book-entry transfer, provide the following information: Signature: - -------------------------------------------------------------------------------- DTC Account Number: - --------------------------------------------------------------------- Date: - -------------------------------------------------------------------------------- THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED 2 GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a firm or other entity identified in Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended, as an "eligible guarantor institition," including (as such terms are defined therein): (i) a bank; (ii) a broker, dealer, municipal securities broker, municipal securities dealer, government securities broker, government securities dealer; (iii) a credit union; (iv) a national securities exchange, registered securities association or clearing agency; or (v) a savings association that is a participant in a Securities Transfer Association recognized program (each of the foregoing being referred to as an "Eligible Institution"), hereby guarantees to deliver to the Exchange Agent, at one of its addresses set forth above, either the Old Notes tendered hereby in proper form for transfer, or confirmation of the book-entry transfer of such Old Notes to the Exchange Agent's account at The Depository Trust Company ("DTC"), pursuant to the procedures for book-entry transfer set forth in the Prospectus, in either case together with one or more properly completed and duly executed Letters of Transmittal (or facsimile thereof) and any other required documents within three business days after the date of execution of this Notice of Guaranteed Delivery. The undersigned acknowledges that it must deliver the Letters of Transmittal and the Old Notes tendered hereby to the Exchange Agent within the time period set forth above and that failure to do so could result in a financial loss to the undersigned. Name of Firm - ------------------------------------------------------------------------------ (Authorized Signature) - ----------------------------------------------------------------------- (Title) Address - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (INCLUDE ZIP CODE) Area Code and Telephone Number - ------------------------------------------------------------ Date - --------------------------------- NOTE: DO NOT SEND OLD NOTES WITH THIS NOTICE OF GUARANTEED DELIVERY. ACTUAL SURRENDER OF OLD NOTES MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, A PROPERLY COMPLETED AND DULY EXECUTED LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS. 3 EX-99.3 25 EXHIBIT 99.3 EXHIBIT 99.3 WAVETEK CORPORATION OFFER TO EXCHANGE ITS 10 1/8% SENIOR SUBORDINATED NOTES DUE 2007, WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, FOR ITS OUTSTANDING 10 1/8% SENIOR SUBORDINATED NOTES DUE 2007. THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 1997, UNLESS EXTENDED. To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees: Wavetek Corporation (the "Company") is offering, upon the terms and subject to the conditions set forth in the Prospectus dated , 1997 (the "Prospectus") and the accompanying Letter of Transmittal enclosed herewith (which together constitute the "Exchange Offer"), to exchange its 10 1/8% Senior Subordinated Notes due 2007 (the "New Notes") for a like principal amount of its outstanding 10 1/8% Senior Subordinated Notes due 2007 (the "Old Notes"). As set forth in the Prospectus, the terms of the New Notes are identical in all material respects to the Old Notes, except that the New Notes have been registered under the Securities Act of 1933, as amended, and therefore will not be subject to certain restrictions on their transfer and will not be entitled to registration rights. THE EXCHANGE OFFER IS SUBJECT TO CERTAIN CONDITIONS. SEE "THE EXCHANGE OFFER--CONDITIONS TO THE EXCHANGE OFFER" IN THE PROSPECTUS. Enclosed herewith for your information and forwarding to your clients are copies of the following documents: 1. the Prospectus, dated , 1997; 2. the Letter of Transmittal for your use and for the information of your clients (facsimile copies of the Letter of Transmittal may be used to tender Old Notes); 3. a form of letter which may be sent to your clients for whose accounts you hold Old Notes registered in your name or in the name of your nominee, with space provided for obtaining such clients' instructions with regard to the Exchange Offer; 4. a Notice of Guaranteed Delivery; and 5. a return envelope addressed to The Bank of New York, the Exchange Agent. YOUR PROMPT ACTION IS REQUESTED, PLEASE NOTE THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 1997, UNLESS EXTENDED. PLEASE FURNISH COPIES OF THE ENCLOSED MATERIALS TO THOSE OF YOUR CLIENTS FOR WHOM YOU HOLD OLD NOTES REGISTERED IN YOUR NAME OR IN THE NAME OF YOUR NOMINEE AS QUICKLY AS POSSIBLE. In all cases, exchanges of Old Notes accepted for exchange pursuant to the Exchange Offer will be made only after timely receipt by the Exchange Agent of (a) certificates representing such Old Notes, or a book-entry confirmation (as defined in the Prospectus), as the case may be, (b) the Letter of Transmittal (or facsimile thereof), properly completed and duly executed, or an Agent's Message (as defined in the Prospectus) and (c) any other required documents. Holders who wish to tender their Old Notes and (i) whose Old Notes are not immediately available or (ii) who cannot deliver their Old Notes, the Letter of Transmittal or an Agent's Message and any other documents required by the Letter of Transmittal to the Exchange Agent prior to the Expiration Date must tender their Old Notes according to the guaranteed delivery procedures set forth under the caption "The Exchange Offer--Procedures for Tendering Old Notes--Guaranteed Delivery" in the Prospectus. The Exchange Offer is not being made to, nor will tenders be accepted from or on behalf of, holders of Old Notes residing in any jurisdiction in which the making of the Exchange Offer or acceptance thereof would not be in compliance with the laws of such jurisdiction. The Company will not make any payments to brokers, dealers or other persons for soliciting acceptances of the Exchange Offer. The Company will, however, upon request, reimburse you for customary clerical and mailing expenses incurred by you in forwarding any of the enclosed materials to your clients. The Company will pay or cause to be paid any transfer taxes payable on the transfer of Old Notes to it, except as otherwise provided in Instruction 11 of the Letter of Transmittal. Questions and requests for assistance with respect to the Exchange Offer or for copies of the Prospectus and Letter of Transmittal may be directed to the Exchange Agent at its address set forth in the Prospectus or at 1-(212) 815-6333. Very truly yours, WAVETEK CORPORATION NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY OTHER PERSON THE AGENT OF THE COMPANY OR ANY AFFILIATE THEREOF, OR AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENTS OR USE ANY DOCUMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE EXCHANGE OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN. EX-99.4 26 EXHIBIT 99.4 EXHIBIT 99.4 WAVETEK CORPORATION OFFER TO EXCHANGE ITS 10 1/8% SENIOR SUBORDINATED NOTES WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, DUE 2007, FOR ITS OUTSTANDING 10 1/8% SENIOR SUBORDINATED NOTES DUE 2007. THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 1997, UNLESS EXTENDED. To Our Clients: Enclosed for your consideration is a Prospectus dated , 1997 (the "Prospectus") and a Letter of Transmittal (which together constitute the "Exchange Offer") relating to the offer by Wavetek Corporation (the "Company") to exchange its 10 1/8% Senior Subordinated Notes due 2007, which have been registered under the Securities Act of 1933 (the "New Notes"), for a like principal amount of its outstanding 10 1/8% Senior Subordinated Notes due 2007 (the "Old Notes"). As set forth in the Prospectus, the terms of the New Notes are identical in all material respects to the Old Notes, except that the New Notes have been registered under the Securities Act of 1933, as amended, and therefore will not be subject to certain restrictions on their transfer and will not be entitled to registration rights. The enclosed material is being forwarded to you as the beneficial owner of Old Notes held by us for your account or benefit but not registered in your name. An exchange of any Old Notes may only be made by us as the registered holder and pursuant to your instructions. Therefore, the Company urges beneficial owners of Old Notes registered in the name of a broker, dealer, commercial bank, trust company or other nominee to contact such holder promptly if they wish to exchange Old Notes in the Exchange Offer. Accordingly, we request instructions as to whether you wish us to exchange any or all such Old Notes held by us for your account or benefit, pursuant to the terms and conditions set forth in the Prospectus and Letter of Transmittal. We urge you to read carefully the Prospectus and Letter of Transmittal before instructing us to exchange your Old Notes. Your instructions to us should be forwarded as promptly as possible in order to permit us to exchange Old notes on your behalf in accordance with the provisions of the Exchange Offer. The Exchange Offer expires at 5:00 p.m., New York City time, on , 1997, unless extended. The term "Expiration Date" shall mean 5:00 p.m., New York City time, on , 1997, unless the Exchange Offer is extended as provided in the Prospectus, in which case the term "Expiration Date" shall mean the latest date and time to which the Exchange Offer is extended. A tender of Old Notes may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date. Your attention is directed to the following: 1. The Exchange Offer is for the exchange of New Notes for Old Notes. $85,000,000 aggregate principal amount of the Old Notes was outstanding as of , 1997. 2. THE EXCHANGE OFFER IS SUBJECT TO CERTAIN CONDITIONS. SEE "THE EXCHANGE OFFER--CONDITIONS TO THE EXCHANGE OFFER" IN THE PROSPECTUS. 3. The Exchange Offer and withdrawal rights will expire at 5:00 p.m., New York City time, on , 1997, unless extended. 4. The company has agreed to pay certain of the expenses of the Exchange Offer. Any transfer taxes incident to the transfer of Old Notes from the tendering holder to the Company will be paid by the Company, except as provided in the Prospectus and the Letter of Transmittal. See "The Exchange Offer--Fees and Expenses" in the Prospectus. The Exchange Offer is not being made to, nor will tenders be accepted from or on behalf of, holders of New Notes residing in any jurisdiction in which the making of the Exchange Offer or the acceptance thereof would not be in compliance with the laws of such jurisdiction. If you wish us to tender any or all of your Old Notes held by us for your account or benefit, please so instruct us by completing, executing and returning to us the attached instruction form. THE ACCOMPANYING LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR INFORMATIONAL PURPOSES ONLY AND MAY NOT BE USED BY YOU TO EXCHANGE OLD NOTES HELD BY US AND REGISTERED IN OUR NAME FOR YOUR ACCOUNT OR BENEFIT. INSTRUCTIONS The undersigned acknowledge(s) receipt of your letter and the enclosed material referred to therein relating to the Exchange Offer of Wavetek Corporation. This will instruct you to tender for exchange the aggregate principal amount of Old Notes indicated below (or, if no aggregate principal amount is indicated below, all Old Notes) held by you for the account or benefit of the undersigned, pursuant to the terms of and conditions set forth in the Prospectus and the Letter of Transmittal. Aggregate principal amount of Old Notes to be tendered for exchange $___________________ *I (we) understand that if I (we) sign this instruction form without indicating an aggregate principal amount of Old Notes in the space above, all Old Notes held by you for my (our) account will be tendered for exchange. -------------------------------------- -------------------------------------- Signature(s) -------------------------------------- Capacity (full title), if signing in a fiduciary or representative capacity -------------------------------------- -------------------------------------- -------------------------------------- -------------------------------------- Name(s) and address, including zip code Date: -------------------------------------- -------------------------------------- Area Code and Telephone Number -------------------------------------- Taxpayer Identification or Social Security No. -----END PRIVACY-ENHANCED MESSAGE-----