-----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, Pq2xRbeZTcCCn7g1L1yRE2nkK7FNgnFuHn7onZUP3Ygb4yaxOSHecU5U6vRbP2xo oM9xm4pPE7nHuPOCcPGTxQ== 0001047469-97-003406.txt : 19971111 0001047469-97-003406.hdr.sgml : 19971111 ACCESSION NUMBER: 0001047469-97-003406 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970926 FILED AS OF DATE: 19971110 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SUNRISE MEDICAL INC CENTRAL INDEX KEY: 0000720577 STANDARD INDUSTRIAL CLASSIFICATION: ORTHOPEDIC, PROSTHETIC & SURGICAL APPLIANCES & SUPPLIES [3842] IRS NUMBER: 953836867 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-11228 FILM NUMBER: 97711665 BUSINESS ADDRESS: STREET 1: 2382 FARADAY AVENUE STE 200 CITY: CARLSBAD STATE: CA ZIP: 92008 BUSINESS PHONE: 6199301500 MAIL ADDRESS: STREET 1: 2382 FARADAY AVENUE SUITE 200 CITY: CARLSBAD STATE: CA ZIP: 92008 10-Q 1 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ============================================================================== (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 26, 1997 OR ___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________________ TO __________________ Commission File No.0-12744 SUNRISE MEDICAL INC. (Exact name of registrant as specified in its charter) Delaware 95-3836867 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2382 FARADAY AVENUE, SUITE 200 CARLSBAD, CA 92008 (Address of principal executive offices) Registrant's telephone number, including area code: (760) 930-1500 Indicate by check mark whether registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Number of shares of common stock outstanding at October 31, 1997: 19,307,854 SUNRISE MEDICAL INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) September 26, June 27, 1997 1997 ------------- -------- ASSETS (Unaudited) Current assets: Cash and cash equivalents $ 2,317 $ 2,823 Trade receivables, net 113,874 114,223 Installment receivables, net 11,546 13,351 Income tax refunds receivable 1,893 3,794 Inventories 89,521 88,757 Deferred income taxes 11,135 11,343 Other current assets 8,201 3,703 -------- -------- Total current assets $238,487 237,994 Property and equipment, net of accumulated depreciation of $86,770 and $83,420, respectively 91,954 90,852 Goodwill and other intangible assets, net 270,586 274,410 Other assets, net 6,239 7,293 -------- -------- Total assets $607,266 $610,549 -------- -------- -------- -------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current installments of long-term debt $ 4,900 $ 4,942 Trade accounts payable 43,602 47,486 Accrued compensation and other expenses 81,136 81,216 Income taxes 680 2,119 -------- -------- Total current liabilities 130,318 135,763 Long-term debt, less current installments 191,967 188,061 Deferred income taxes 7,713 7,305 Stockholders' equity: Preferred stock, $1 par. Authorized 5,000 shares; none issued -- -- Common stock, $1 par. Authorized 40,000 shares; 19,307 and 19,304 shares, respectively, issued and outstanding 19,307 19,304 Additional paid-in capital 202,400 202,379 Retained earnings 56,323 55,978 Cumulative foreign currency translation adjustment (762) 1,759 -------- -------- Total stockholders' equity 277,268 279,420 -------- -------- Total liabilities and stockholders' equity $607,266 $610,549 -------- -------- -------- -------- (See accompanying notes to condensed consolidated financial statements) 2 SUNRISE MEDICAL INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) (Unaudited) Thirteen Weeks Ended ------------------------------ September 26, September 27, 1997 1996 ------------ ------------- Net sales $151,063 $165,353 Cost of sales 102,752 110,899 -------- -------- Gross profit 48,311 54,454 -------- -------- Marketing, selling and administrative expenses 35,020 40,264 Research and development expenses 3,871 3,759 Re-engineering expenses 4,606 -- Amortization of goodwill and other intangibles 2,045 2,040 -------- -------- Corporate operating income 2,769 8,391 -------- -------- Other (expense) income: Interest expense (3,411) (4,002) Interest income 1,194 779 Other income and expense, net 156 715 -------- -------- (2,061) (2,508) -------- -------- Income before income taxes 708 5,883 Income taxes 363 2,823 -------- -------- Net income $ 345 $ 3,060 -------- -------- -------- -------- Net income per share $ .02 $ .16 -------- -------- -------- -------- Weighted average number of shares outstanding 19,438 19,023 -------- -------- -------- -------- (See accompanying notes to condensed consolidated financial statements) 3 SUNRISE MEDICAL INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (Unaudited) Thirteen Weeks Ended ---------------------------- September 26, September 27, 1997 1996 ------------ ------------ Cash flows from operating activities: Net income $ 345 $ 3,060 Non-cash charges 6,841 6,826 Changes in assets and liabilities, net of effect of acquisitions: Receivables, net 3,038 393 Inventories (764) (3,103) Prepaid expenses and other assets (5,052) (4,700) Income taxes 462 4,044 Accounts payable and other liabilities (3,964) 2,580 -------- -------- Net cash provided by operating activities 906 9,100 -------- -------- Cash flows from investing activities: Purchase of property and equipment (5,282) (3,390) -------- -------- Net cash used for investing activities (5,282) (3,390) -------- -------- Cash flows from financing activities: Borrowings of long-term debt 22,900 29,500 Repayments of long-term debt (19,036) (33,009) Proceeds from issuance of common stock 24 110 -------- -------- Net cash provided by (used for) financing activities 3,888 (3,399) -------- -------- Effect of exchange rate changes on cash (18) (1) -------- -------- Net (decrease) increase in cash and cash equivalents (506) 2,310 Cash and cash equivalents at beginning of period 2,823 1,785 -------- -------- Cash and cash equivalents at end of period $ 2,317 $ 4,095 -------- -------- -------- -------- (See accompanying notes to condensed consolidated financial statements) 4 SUNRISE MEDICAL INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Basis of Presentation The information contained in the consolidated financial statements and footnotes is condensed from that which would appear in the annual consolidated financial statements. Accordingly, the condensed consolidated financial statements included herein should be reviewed in conjunction with the consolidated financial statements and related notes thereto contained in the Annual Report on Form 10-K for the fiscal year ended June 27, 1997, filed by Sunrise Medical Inc. (the "company") with the Securities and Exchange Commission. The unaudited condensed consolidated financial statements as of September 26, 1997 and for the thirteen-week periods ended September 26, 1997 and September 27, 1996 include all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation. The results of operations for interim periods are not necessarily indicative of the results which may be expected for the entire year. 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. 2. Inventories Certain inventories are stated at the lower of last-in, first-out (LIFO) cost or market value. All other inventories are stated at the lower of the first-in, first-out (FIFO) cost or market value. Inventories consist of the following (in thousands): September 26, June 27, 1997 1997 ------- ------- Raw material $35,647 $34,501 Work-in-progress 14,156 11,570 Finished goods 39,718 42,686 ------- ------- $89,521 $88,757 ------- ------- ------- ------- Interim period inventory classifications involve a degree of estimation due to the timing of physical inventories throughout the fiscal year. 3. Subsequent Event On October 28, 1997 the company completed a private placement of $100 million of senior notes, $50 million maturing after seven years, bearing interest at 7.09% and the remaining $50 million maturing after ten years at an interest rate of 7.25%. The proceeds of this debt issuance was used to reduce the outstanding debt on the company's unsecured multi-currency credit facility. As a result of this placement, the maximum borrowing commitment under the company's multi-currency credit facility has also been reduced by $100 million to $150 million, decreasing to $135 million in January 1999 and to $115 million in January 2000 in accordance with the terms of the credit agreement. 5 3. Contingencies The Securities and Exchange Commission ("SEC") has entered a formal order of private investigation into the circumstances underlying the restatement of the company's 1995 and 1994 financial results. The company is cooperating fully with the SEC in its investigation. 6 SUNRISE MEDICAL INC. AND SUBSIDIARIES ITEM 1. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The company reports its operating results using three groupings, which reflect its operating management structure: Home Healthcare Group ("HHG"), Continuing Care Group ("CCG") (both based in North America) and Sunrise Medical Europe. RESULTS OF OPERATIONS NET SALES Net sales for the first quarter of fiscal 1998 were $151.1 million compared to $165.4 million in the comparable period of fiscal 1997, a decrease of 9%. Sales grew 1% after excluding the 6% effect of the company's divestiture of its consumer business in October 1996 and the 4% negative impact of foreign currency translation. The Home Healthcare Group's sales increased 7% in the first quarter of fiscal 1998 to $68.8 million, compared to $64.4 million in the first quarter of fiscal 1997. HHG is comprised of three divisions: Mobility Products, Personal Care Products and Respiratory Products. Increased volume in all product lines accounted for most of the growth as a competitive pricing environment continued to deter price increases. The Continuing Care Group recorded sales of $20.6 million in the first quarter of fiscal 1998, a decline of 14% from sales of $24.0 million in the comparable period of fiscal 1997. All product lines with the exception of patient lifters and slings recorded a significant decrease in unit volumes, while average selling prices decreased slightly. CCG's order backlog increased by 22% during the first quarter of fiscal 1998, indicating a positive trend for future sales. Backlog is considered a meaningful indicator for CCG, because most of its product lines require a two to three month lead time for manufacture. In Europe, sales grew 2% to $61.7 in the first quarter of fiscal 1998, after excluding the negative 10% impact from foreign currency fluctuations, compared to $67.0 million in the first quarter of fiscal 1997. The company's businesses in France, Spain, and its European distribution group all had solid sales growth, while revenues in the U.K. and Germany declined. During the first quarter of fiscal 1998, the U.K. was significantly impacted by the consolidation of four manufacturing sites into one plant. Significant relocation related turnover in the direct labor workforce caused production inefficiencies and related shipping delays resulting in a backlog increase of $3.0 million. 7 EXPENSE AND PROFIT ANALYSIS Key items as a percentage of net sales were: Thirteen Weeks Ended ------------------------------- September 26, September 27, 1997 1996 ------------ ------------ Gross profit 32.0% 32.9% Corporate operating income 1.8% 5.1% Interest expense 2.3% 2.4% Net income 0.2% 1.9% Gross profit of $48.3 million in the first quarter of fiscal 1998 was $6.2 million below the $54.5 million recorded in the comparable period of fiscal 1997. The gross margin, or gross profit as a percentage of net sales, decreased by 0.9% to 32.0%, as a result of pricing and cost pressures on certain products. In addition, negative foreign exchange rate impacts resulting primarily from the increase in the pound sterling versus other European currencies have reduced margins on Sunrise U.K. manufactured products. Marketing, selling and administrative expenses decreased by 13% in the first quarter of fiscal 1998 compared to the prior year period, and declined as a percentage of net sales to 23.2% compared to 24.4% in the first quarter of fiscal 1997. Included in the first quarter of 1997 were marketing costs of approximately $1.4 million in connection with the company's sponsorship of the 1996 Atlanta Paralympic Games and $1.6 million of expenses incurred at the company's consumer business, which was divested in October 1996. Excluding these costs, marketing, selling and administrative expenses decreased by 6% evidencing the continued results of company-wide operating cost containment. Research and development expenses increased to $3.9 million or 2.6% of net sales in the first quarter of fiscal 1998 as compared to $3.8 million or 2.3% of net sales in fiscal 1997. This increase reflects the company's renewed focus on new technologies and enhancements as facilities consolidations near completion. Re-engineering expenses were $4.6 million in the first quarter of 1998. These expenses are the costs incurred during the quarter with respect to the re-engineering and facilities consolidation program announced in fiscal 1997. Included in this amount are the expenses associated with the costs of new and upgraded management information systems, temporary duplicate U.K. facilities costs and the cost of unabsorbed overhead variances and labor inefficiencies related to the U.K. plant consolidations. Interest expense for the first quarter of fiscal 1998 was $3.4 million or 15% lower than interest expense of $4.0 million in the first quarter of the prior year, attributable to lower average borrowings and a slight decrease in interest rates. Interest and other income/expense, decreased to $1.4 million compared to $1.5 million in the first quarter of the prior year. Without the $0.7 million effect of the favorable resolution of a legal dispute in the 1997 period, interest income and other increased by $0.6 million, primarily as a result of interest related to a tax refund. 8 The effective tax rate of 51.3% in the first quarter of fiscal 1998 was higher than the rate of 48.0% in the same period of fiscal 1997 as a result of non-deductible goodwill amortization representing a greater portion of income before income taxes. Net income for the first quarter of fiscal 1998 was $0.3 million, or $0.02 per share, compared to net income of $3.1 million ($.16 per share) in the first quarter of fiscal 1997. LIQUIDITY AND CAPITAL RESOURCES During the first quarter of fiscal 1998, the company's working capital increased by $5.9 million to $108.2 million. Cash of $0.9 million was provided by operating activities during the period, compared to $9.1 million in the first quarter of fiscal 1997. Purchases of property and equipment were $5.3 million, up from $3.4 million in the 1997 period. Long-term debt increased by $3.9 million in the first quarter of fiscal 1998. At the end of fiscal 1997, the company announced it would incur approximately $13 million in costs associated with its re-engineering program in fiscal 1998. This original estimate related to planned expenses associated with the U.S. and European information systems conversions and upgrades as well as the costs associated with the consolidation of four U.K. manufacturing divisions into one plant. Due to the higher than expected costs associated with the U.K consolidation together with management's decision to accelerate the move of its Personal Care Products factory to Mexico to occur in fiscal 1998, management's estimate of costs associated with re-engineering in fiscal 1998 has been increased to $19-$21 million. The company recorded pre-tax charges from unusual items of $65.2 million in fiscal 1996. Of these charges, approximately $36.2 million required cash payments and $29.0 million represented non-cash charges. A total of $28.7 million of the cash amounts had been paid by June 27, 1997, and an additional $2.2 million was paid during the first quarter of fiscal 1998. Substantially all of the $5.3 million balance of cash charges is expected to be paid over the next twelve months. IMPACT OF INFLATION Inflation did not have any significant effect on the company's operating results in the first quarter of fiscal 1998. FORWARD-LOOKING STATEMENTS The company has made forward-looking statements in this Form 10-Q, including: (i) the expected cost of the company's ongoing worldwide re-engineering and facilities consolidation program; and (ii) the expected future improvements in revenues of the Continuing Care Group. These statements are only predictions. Actual events or results may differ materially as a result of risks and uncertainties facing the company including: (i) the impact of competitive products and activities; (ii) increased industry pricing pressures; (iii) disruptions caused by the company's consolidations of operations; (iv) the rising cost of raw materials; (v) product development, commercialization and market acceptance risks; (vi) 9 reductions in government funding for products sold by the company; (vii) unfavorable governmental regulatory actions (such as by the FDA in the U.S.); (viii) risks and uncertainties associated with the company's international activities; (ix) other factors referenced in Securities and Exchange Commission filings of the company. The company disclaims any obligation to update any such factors or to announce publicly the result of any revisions to any of the forward-looking statements contained in this Form 10-Q, or to make corrections to reflect future events or developments. 10 SUNRISE MEDICAL INC. PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Number Description -------- ----------- 3.1 Certificate of Incorporation of the company and amendments thereto. (a) 3.3 Amendment to Certificate of Incorporation of the company as set forth under the caption "Article III - Liability of Director to the Corporation." (b) 3.9 Amended and Restated Bylaws as of April 29, 1997. (c) 4.1 Amended and Restated Shareholders' Rights Agreement dated May 16, 1997. (d) 10.17 Third Amended and Restated Credit Agreement and Waiver dated as of August 28, 1997 among Sunrise Medical Inc. and certain subsidiary borrowers and guarantors, Bank of America as agent and other lenders. 10.18 Note Purchase Agreement dated as of October 1, 1997 for $50 million 7.09% Series A Senior Notes Due October 28, 2004 and for $50 million 7.25% Series B Senior Notes Due October 28, 2007. 27 Financial Data Schedule. - ------------------- (a) Incorporated herein by reference to the company's Registration Statement No. 2-86314. (b) Incorporated herein by reference to the company's 1987 Definitive Proxy Statement. (c) Incorporated herein by reference to the company's Form 10-K for the fiscal year ended June 27, 1997. (d) Incorporated herein by reference to the company's Form 8-K dated May 16, 1997. 11 (b) Reports on Form 8-K No reports on Form 8-K were filed during the quarter ended September 26, 1997. 12 SUNRISE MEDICAL INC. AND SUBSIDIARIES SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SUNRISE MEDICAL INC. Date: November 7, 1997 /s/ TED N. TARBET -------------------------------- Ted N. Tarbet Senior Vice President and Chief Financial Officer (Principal Financial Officer) Date: November 7, 1997 /s/ JOHN M. RADAK --------------------------------- John M. Radak Vice President and Controller (Principal Accounting Officer) 13 EX-10.17 2 EXHIBIT 10.17 - ----------------------------------------------------------------------------- - ----------------------------------------------------------------------------- THIRD AMENDED AND RESTATED CREDIT AGREEMENT Dated as of August 28, 1997 among SUNRISE MEDICAL, INC., THE SUBSIDIARY BORROWERS AND GUARANTORS FROM TIME TO TIME PARTY HERETO BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent and THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO Arranged By BANCAMERICA SECURITIES, INC. - ----------------------------------------------------------------------------- - ----------------------------------------------------------------------------- TABLE OF CONTENTS Section Page - ------- ---- ARTICLE I DEFINITIONS AND ACCOUNTING TERMS............................................. 1 1.01 Defined Terms....................................................... 1 1.02 Use of Defined Terms................................................ 30 1.03 Accounting Terms.................................................... 30 1.04 Exhibits and Schedules.............................................. 31 1.05 Currency Equivalents Generally...................................... 31 1.06 References to Last Day of Fiscal Period............................. 32 ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES............................................ 32 2.01 The Advances........................................................ 32 2.02 Making the Committed Advances....................................... 33 2.03 Fees................................................................ 37 2.04 Repayment of Advances............................................... 38 2.05 Interest Rate Provisions, Etc....................................... 38 2.06 Voluntary Conversions and Continuations of Committed Advances....... 44 2.07 Bid Borrowings...................................................... 46 2.08 Procedure for Bid Borrowings........................................ 47 2.09 The Swing Line...................................................... 51 2.10 Reduction of Commitments............................................ 53 2.11 Mandatory Prepayments............................................... 54 2.12 Optional Prepayments................................................ 55 2.13 Increased Costs..................................................... 55 2.14 Evidence of Debt.................................................... 57 2.15 Payments and Computations........................................... 58 2.16 Taxes............................................................... 60 2.17 Payments on Business Days........................................... 63 2.18 Sharing of Payments, Etc............................................ 64 2.19 Currency Equivalents................................................ 64 2.20 Funding Losses...................................................... 65 2.21 Use of Proceeds..................................................... 65 2.22 Funding Sources..................................................... 66 2.23 Borrower's Agent.................................................... 66 ARTICLE III AMOUNT AND TERMS OF LETTERS OF CREDIT AND PARTICIPATIONS THEREIN............. 66 3.01 Letters of Credit................................................... 66 3.02 Issuing the Letters of Credit....................................... 67 3.03 Reimbursement Obligations........................................... 67 3.04 Participations Purchased by the Lenders............................. 68 3.05 Letter of Credit Fees............................................... 70 - i - Section Page - ------- ---- 3.06 Indemnification: Nature of the Issuing Lender's Duties............ 71 3.07 Increased Costs.................................................... 72 3.08 Uniform Customs and Practice....................................... 73 ARTICLE IV CONDITIONS OF EFFECTIVENESS................................................. 73 4.01 Conditions to Initial Advances..................................... 73 4.02 Conditions Precedent to All Borrowings and All Issuances........... 75 4.03 Conditions to Effectiveness of Subsidiary Borrower Electing to Participate After the Closing Date................................. 76 ARTICLE V REPRESENTATIONS AND WARRANTIES.............................................. 77 5.01 Existence and Qualification; Power; Compliance With Laws........... 77 5.02 Authority; Compliance with Other Agreements and Instruments........ 77 5.03 No Governmental Approvals Required................................. 78 5.04 Subsidiaries of Borrower........................................... 78 5.05 Financial Statements............................................... 79 5.06 No Other Liabilities; No Material Adverse Effect................... 79 5.07 Title to Property.................................................. 79 5.08 Intangible Assets.................................................. 79 5.09 Governmental Regulation............................................ 79 5.10 Litigation......................................................... 79 5.11 Binding Obligations................................................ 80 5.12 ERISA.............................................................. 80 5.13 Regulations G and U................................................ 80 5.14 Disclosure......................................................... 81 5.15 Tax Liability...................................................... 81 5.16 Hazardous Materials................................................ 81 5.17 Employee Matters................................................... 81 5.18 Projections........................................................ 81 ARTICLE VI AFFIRMATIVE COVENANTS....................................................... 82 6.01 Financial and Business Information................................. 82 6.02 Payment of Taxes and Other Potential Liens......................... 85 6.03 Preservation of Existence.......................................... 85 6.04 Maintenance of Properties.......................................... 85 6.05 Maintenance of Insurance........................................... 86 6.06 Compliance With Laws............................................... 86 6.07 Inspection Rights.................................................. 86 6.08 Keeping of Records and Books of Account............................ 86 6.09 Compliance With Agreements......................................... 86 6.10 Hazardous Materials Laws........................................... 86 6.11 Additional Guarantors After the Closing Date....................... 87 - ii - Section Page - ------- ---- ARTICLE VII NEGATIVE COVENANTS.......................................................... 87 7.01 Disposition of Property............................................ 88 7.02 Mergers............................................................ 88 7.03 Investments and Acquisitions....................................... 89 7.04 Hostile Tender Offers.............................................. 89 7.05 ERISA.............................................................. 89 7.06 Liens; Negative Pledges; Sales and Leasebacks...................... 90 7.07 Indebtedness....................................................... 91 7.08 Conduct of Business................................................ 92 7.09 Leverage Ratio..................................................... 92 7.11 Interest Coverage Ratio............................................ 93 7.12 Contingent Obligations............................................. 93 7.13 Limitations on Restrictions Affecting Dividends and Other Payments by Subsidiaries........................................... 94 7.14 Restricted Junior Payments......................................... 94 7.15 Transactions with Affiliates....................................... 95 7.16 Subsidiaries....................................................... 95 7.17 Lease Obligations.................................................. 95 ARTICLE VIII GUARANTY.................................................................... 96 8.01 Guaranty........................................................... 96 8.02 No Impairment of Guaranties........................................ 97 8.03 Continuation and Reinstatement, Etc................................ 98 8.04 Guarantied Amount.................................................. 99 ARTICLE IX EVENTS OF DEFAULT AND REMEDIES UPON EVENTS OF DEFAULT....................... 99 9.01 Events of Default.................................................. 99 9.02 Remedies Upon Event of Default..................................... 101 ARTICLE X THE AGENT................................................................... 103 10.01 Appointment and Authorization.................................... 103 10.02 Delegation of Duties............................................. 103 10.03 Liability of Agent............................................... 104 10.04 Reliance by Agent................................................ 104 10.05 Notice of Default................................................ 105 10.06 Credit Decision.................................................. 105 10.07 Indemnification.................................................. 106 10.08 Agent in Individual Capacity..................................... 106 10.09 Successor Agent.................................................. 107 - iii - Section Page - ------- ---- ARTICLE XI MISCELLANEOUS............................................................... 107 11.01 Cumulative Remedies; No Waiver................................... 107 11.02 Amendments; Consents............................................. 108 11.03 Costs, Expenses and Taxes........................................ 108 11.04 Nature of Lender's Obligations................................... 109 11.05 Survival of Representations and Warranties....................... 110 11.06 Notices.......................................................... 110 11.07 Execution in Counterparts........................................ 110 11.08 Binding Effect; Assignment....................................... 111 11.09 Indemnity by Loan Parties........................................ 115 11.10 Hazardous Materials Indemnity.................................... 116 11.11 Nonliability of Lenders.......................................... 117 11.12 Confidentiality.................................................. 118 11.13 No Third Parties Benefited....................................... 118 11.14 Right of Setoff.................................................. 119 11.15 Judgment Currency................................................ 119 11.16 Further Assurances............................................... 119 11.17 Integration...................................................... 120 11.18 Governing Law.................................................... 120 11.19 Severability of Provisions....................................... 120 11.20 Headings......................................................... 120 11.21 Conflict in Loan Documents....................................... 120 11.22 WAIVER OF TRIAL BY JURY.......................................... 120 11.23 PURPORTED ORAL AMENDMENTS........................................ 121 11.24 Amendment and Restatement of Existing Credit Agreement........... 121 - iv - THIRD AMENDED AND RESTATED CREDIT AGREEMENT THIS THIRD AMENDED AND RESTATED CREDIT AGREEMENT ("Agreement") is entered into as of August 28, 1997 by and among Sunrise Medical, Inc., a Delaware corporation ("Sunrise" or "Borrower"), the subsidiaries of Borrower from time to time signatory to this Agreement as "Subsidiary Borrowers" or "Guarantors," Bank of America National Trust and Savings Association, a national banking association, and the other banks signatory to this Agreement together with each bank which may hereafter execute and deliver the Commitment Assignment and Acceptance herein described (collectively, the "Lenders"), and Bank of America National Trust and Savings Association, as agent for the Lenders (in such capacity, "Agent"). RECITALS A. The Borrower, the lenders party thereto, the subsidiary borrowers and guarantors thereunder and Agent entered into a Credit Agreement dated as of December 12, 1991, as amended, which agreement was amended and restated by a First Amended and Restated Credit Agreement dated as of August 17, 1994, as amended, among the Borrower, the subsidiary borrowers and guarantors thereunder, the lenders parties thereto and Agent, as further amended and restated by a Second Amended and Restated Credit Agreement dated as of September 29, 1995, as amended, among the Borrower, the subsidiary borrowers and guarantors thereunder, the lenders parties thereto and Agent (the "Existing Credit Agreement"). B. By this Agreement the Existing Credit Agreement is amended and restated on the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the parties hereto covenant and agree as follows: ARTICLE I DEFINITIONS AND ACCOUNTING TERMS 1.01 DEFINED TERMS. As used in this Agreement, the following terms shall have the meanings set forth respectively after each: - 1 - "ABSOLUTE RATE" has the meaning specified in Section 2.08(c). "ABSOLUTE RATE AUCTION" means a solicitation of Competitive Bids setting forth Absolute Rates pursuant to Section 2.08. "ABSOLUTE RATE BID ADVANCE" means a Bid Advance that bears interest at a rate determined with reference to the Absolute Rate. "ACCUMULATED FUNDING DEFICIENCY" shall mean an accumulated funding deficiency as defined in Section 302 of ERISA and Section 412 of the Code. "ACQUISITION" means any transaction, or any series of related transactions, by which a Person directly or indirectly (a) acquires any ongoing business or all or substantially all of the assets of any firm, partnership, joint venture, corporation or division thereof engaged in an ongoing business, whether through purchase of assets, merger or otherwise, (b) acquires control of at least a majority of the securities which have ordinary voting power for the election of directors of a corporation engaged in an ongoing business or (c) acquires control of a 50% or more ownership interest in any partnership or joint venture engaged in an ongoing business. "ADJUSTED CASH FLOW" means, as of the last day of any Fiscal Quarter, Consolidated Net Income for the four Fiscal Quarters then ending PLUS (a) depreciation, amortization and other non-Cash expenses (but excluding deferred taxes), non-Cash amounts relating to non-recurring items to the extent that they will not result in a future cash outflow of Borrower and its Subsidiaries for that fiscal period, PLUS (b) Interest Charges expensed during that fiscal period, MINUS (c) Capital Expenditures made by Borrower or any Subsidiary during that fiscal period net of asset dispositions in the ordinary course of business and MINUS (d) the aggregate dividends made by Borrower to its shareholders and by any Subsidiary which is not a Wholly-Owned Subsidiary to its minority shareholders, during that fiscal period. Each of the foregoing components of Adjusted Cash Flow shall be computed without duplication and, in the case of clauses (a) and (b), only to the extent included in determining Consolidated Net Income for such fiscal period. "ADJUSTED DOLLAR EQUIVALENT" means, with respect to Intangible Assets acquired in Acquisitions completed on or prior to December 29, 1995, the Dollar equivalent of such assets utilized by the Company in its books and records as of December 29, 1995; and, with respect to Intangible Assets acquired in - 2 - Acquisitions completed after December 29, 1995, the Dollar equivalent of such assets utilized by the Company in its books and records as of the date such Intangible Asset was acquired. In each case, for purposes of this Agreement, no subsequent adjustments shall be made to the Dollar equivalent of Intangible Assets as a result of subsequent fluctuations in foreign currency exchange rates used to translate Intangible Assets denominated in foreign currencies. "ADVANCE" means a Committed Advance, a Swing Line Advance or a Bid Advance. "AFFILIATE" means, as to any Person, any other Person which directly or indirectly controls, or is under common control with, or is controlled by, such Person. As used in this definition, "CONTROL" (including, with its correlative meanings, "CONTROLLED BY" and "UNDER COMMON CONTROL WITH") shall mean possession, directly or indirectly, of power to direct or cause the direction of management or policies (whether through ownership of securities or partnership or other ownership interests, by contract or otherwise); provided that, in any event, any Person which owns directly or indirectly 5% or more of the securities having ordinary voting power for the election of directors or other governing body of a corporation that has more than 300 record holders of such securities or 5% or more of the partnership or other ownership interests of any other Person that has more than 300 record holders of such interests will be deemed to control such corporation or other Person. "AGENT" means Bank of America National Trust and Savings Association, as agent for the Lenders hereunder and under the other Loan Documents, and each successor agent. "AGENT'S ACCOUNT" means, with respect to any payments to be made in Dollars, the Agent's account maintained at the office of the Agent at Bank of America, Concord, California, ABA 121-000-358, Attention: Agency Administrative Services #5596, Account No. 12339-15444 Ref.: Sunrise Medical, Inc., or such other account (located in the United States) as the Agent may from time to time specify in writing to the Borrower and the Lenders and, with respect to any payments to be made in any Alternative Currency, those accounts indicated on Schedule 1.01(a) hereto, or, in each case, such other account as the Agent may from time to time specify in writing to the Borrowers and the Lenders. "AGENT'S OFFICE" means the office of Bank of America National Trust and Savings Association set forth on Schedule 11.06 under Agent or such other office as Agent may designate in writing to the Borrower and the Lenders. - 3 - "AGENT-RELATED PERSONS" means Bank of America and any successor agent arising under Section 10.09, together with their respective Affiliates, and the officers, directors, employees, agents and attorneys-in-fact of such Persons and Affiliates. "AGREEMENT" means this Third Amended and Restated Credit Agreement, either as originally executed or as it may from time to time be supplemented, modified, amended, renewed, extended or supplanted. "ALTERNATIVE CURRENCIES" means Pounds Sterling, Canadian Dollars, Danish Krone, Deutsche Marks, Dutch Guilders, Spanish Pesetas, Swiss Francs, French Francs, Belgian Francs, Italian Lira, ECU, Swedish Krona, Norwegian Krone, Portuguese Escudo, Australian Dollars, Japanese Yen and any other freely available currency notified to Agent upon not less than 10 Business Days' notice. "ALTERNATIVE CURRENCY SUBLIMIT" means $150,000,000. "AMORTIZATION AMOUNT" means for the Amortization Date occurring on January 15, 1999, $15,000,000 (reflecting an earlier prepayment by the Borrower) and for each Amortization Date thereafter, $20,000,000; provided, however, if the Final Maturity Date is extended pursuant to Section 2.10(c), the Amortization Amount otherwise applicable for each year between the date of the effectiveness of such extension and the Final Maturity Date shall similarly be extended one year. "AMORTIZATION DATE" means, subject to Section 2.10(b), January 15, 1999 and January 15 of each year thereafter. "APPLICABLE LENDING OFFICE" means, with respect to each Lender, such Lender's Domestic Lending Office in the case of a Base Rate Advance and such Lender's Eurocurrency Lending Office in the case of a Eurocurrency Rate Advance. "APPLICABLE MARGIN" means, (a) with respect to each Eurocurrency Rate Committed Advance, the incremental percentage to be added to the quoted interest rate based on the then applicable Leverage Ratio in accordance with the following schedule, (b) with respect to the Standby Letter of Credit fees referred to in Section 3.05(a), the fee based on the then applicable Leverage Ratio in accordance with the following schedule and (c) with respect to the commitment fee referred to in Section 2.03(b), the fee based on the then applicable Leverage Ratio in accordance with the following schedule: - 4 -
- ------------------------------------------------------------------------------------------------------------- APPLICABLE MARGIN (1) (2) (3) Eurocurrency Rate Committed Advances ------------------ Leverage Standby Commitment Ratio Letter of Credit fees Fee ------------------------- (a) (b) EFFECTIVE EFFECTIVE ON UNTIL AND AFTER RECEIPT OF RECEIPT OF 6/30/98 6/30/98 COMPLIANCE COMPLIANCE CERTIFICATE CERTIFICATE - ------------------------------------------------------------------------------------------------------------- LESS THAN 1.75:1 0.450% 0.450% 0.150% - ------------------------------------------------------------------------------------------------------------- GREATER THAN OR EQUAL TO 1.75:1 but LESS THAN 2.25:1 0.550% 0.550% 0.175% - ------------------------------------------------------------------------------------------------------------- GREATER THAN OR EQUAL TO 2.25:1 but LESS THAN 2.75:1 0.625% 0.625% 0.200% - ------------------------------------------------------------------------------------------------------------- GREATER THAN OR EQUAL TO 2.75:1 but LESS THAN 3.25:1 .900% 0.750% 0.250% - ------------------------------------------------------------------------------------------------------------- GREATER THAN OR EQUAL TO 3.25:1 but LESS THAN 3.50:1 1.375% 1.000% 0.300% - ------------------------------------------------------------------------------------------------------------- GREATER THAN OR EQUAL TO 3.50:1 but LESS THAN OR EQUAL TO 3.75:1 1.750% 1.250% 0.375% - -------------------------------------------------------------------------------------------------------------
Any change in the Applicable Margin shall be effective upon receipt by the Agent from a Senior Officer of the Borrower of a Compliance Certificate demonstrating such fact; provided that, with respect to Eurocurrency Rate Committed Advances, the new Applicable Margin with respect to each such Advance shall be effective upon the earlier of (i) the termination of the then existing Interest Period with respect thereto and (ii) the next interest payment date for such Advance; and with respect to Standby Letters of Credit and the commitment fee, such change in the Applicable Margin shall be effective immediately; PROVIDED, HOWEVER, that commencing on the Closing Date until the next Applicable Margin adjustment date determined as set forth above occurring on or after the date the Agent receives the Compliance Certificate for the Fiscal Quarter ending December 31, 1997, the Applicable Margin for Eurocurrency Rate Committed Advances and fees for Standby Letters of Credit shall be no lower than 1.375% per annum, and the Applicable Margin for the commitment fee shall be no lower than 0.300% per annum. The Applicable Margin for Eurocurrency Rate Committed Advances and Standby Letter of Credit fees shall be determined by reference to Column 2(a) until the Applicable Margin adjustment date determined as set forth in the preceding paragraph occurring - 5 - on or after the date the Agent receives a Compliance Certificate for the Fiscal Quarter ending June 30, 1998. Thereafter, the Applicable Margin for Eurocurrency Rate Committed Advances and Standby Letter of Credit fees shall be determined by reference to Column 2(b). "ARRANGER" means BancAmerica Securities, Inc. "BANK OF AMERICA" means Bank of America National Trust and Savings Association in its capacity as a Lender. "BASE RATE" means a fluctuating rate per annum equal to the higher of (a) the Federal Funds Rate plus 1/2 of 1% and (b) the rate of interest publicly announced from time to time by Bank of America in San Francisco, California, as its reference rate. It is a rate set by Bank of America based upon various factors including Bank of America's costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate. "BASE RATE ADVANCE" means an Advance denominated in Dollars which bears interest as provided in Section 2.05(a). "BID ADVANCE" means an Advance by a Lender to the Borrower under Section 2.07, which may be a Eurocurrency Rate Bid Advance or an Absolute Rate Bid Advance. "BID ADVANCE NOTE" means each promissory note, substantially in the form of Exhibit B, executed and delivered by the Borrower to a Lender pursuant to Section 2.14(c). "BID BORROWING" means a Borrowing consisting of one or more Bid Advances made to the Borrower on the same day by one or more Lenders. "BORROWER" means Sunrise and its successors and permitted assigns; provided, however, as used in Article II (other than in Sections 2.07, 2.08 and 2.09), Article III and Section 11.24, "Borrowers" or a reference to "a Borrower" shall be deemed to mean and include, collectively, Sunrise and each Subsidiary Borrower. "BORROWING" means a borrowing consisting of Advances of the same Interest Type made to the Borrower on the same day by the Lenders under Article II, and may be a Committed Borrowing, a Bid Borrowing or a Swing Line Advance. "BUSINESS DAY" means a day of the year on which banks are not required or authorized to close in the City of New York, - 6 - the City of San Francisco or the City of Los Angeles and, with respect to Eurocurrency Rate Advances, a day on which dealings are carried on in the London interbank market and banks are open for business in London and in the country of issue of the currency of such Eurocurrency Rate Advance. "CAPITAL EXPENDITURE" means any expenditure that is considered a capital expenditure under Generally Accepted Accounting Principles, including any amount which is required to be treated as an asset subject to a Capital Lease. "CAPITAL LEASE" means, as to any Person, a lease of any property by that Person as lessee that is, or should be in accordance with Generally Accepted Accounting Principles (including Financial Accounting Standards Board Statement No. 13, as amended or superseded from time to time), recorded as a "capital lease" on a balance sheet of that Person prepared in accordance with Generally Accepted Accounting Principles. "CASH" means all monetary items (including currency, coin and bank demand deposits) that are treated as cash under Generally Accepted Accounting Principles. "CASH EQUIVALENTS" means, when used in connection with any Person, that Person's Investments in: (a) Government Securities due within one year of the making of the Investment; (b) direct obligations of any State of the United States of America or any political subdivision of any such State given on the date of such investment a credit rating of at least A by Moody's or A by S&P, in each case due within one year from the making of the Investment; (c) certificates of deposit issued by, deposits in, eurodollar deposits through, bankers' acceptances of, and repurchase and reverse repurchase agreements covering Government Securities executed by, (i) any Lender or (ii) any bank doing business in and incorporated under the laws of the United States of America or any State thereof whose deposits are insured through the Federal Deposit Insurance Corporation, or any successor thereto, and having on the date of such Investment combined capital, surplus and undivided profits of at least $1,000,000,000 and having a credit rating of at least A by Moody's or A by S&P, in each case due within one year after the date of the making of the Investment; - 7 - (d) certificates of deposit issued by, bank deposits in, eurodollar deposits through, banker's acceptances of and repurchase and reverse repurchase agreements covering Government Securities executed by, any branch or office located in the United States of America of (i) any Lender or (ii) any bank incorporated under the laws of any jurisdiction outside the United States of America whose deposits in the United States of America are insured through the Federal Deposit Insurance Corporation, or any successor thereto, and having on the date of such Investment combined capital, surplus and undivided profits of at least $2,000,000,000 and having a credit rating of at least A by Moody's or A by S&P, in each case due within one year after the date of the making of the Investment; (e) commercial paper of corporations doing business in and incorporated under the laws of the United States of America or any State thereof given on the date of such Investment a credit rating of at least A-1 by Moody's, P-1 by S&P or the highest available rating of any other national rating agency acceptable to the Agent, in each case due within 270 days after the making of the Investment; (f) in the case of Investments made by a Foreign Subsidiary, investment grade securities of the highest rating available in the jurisdiction in which such Investment is made; and (g) domestic money market funds as defined in rule 2a-7 under the Investment Company Act of 1940, as amended, advised and managed by an organization managing assets valued in excess of $500,000,000 and registered with the Securities and Exchange Commission as an investment advisor under the Investment Advisors Act of 1940 and investing primarily in other types of permitted Cash Equivalents; PROVIDED that any such investment requires or permits such Person, at its option, to require repayment on an overnight basis. "CERTIFICATE OF EXTENSION" means a certificate with respect to the extension of the Final Maturity Date substantially in the form of Exhibit D, signed by each Lender, and properly completed to provide all information required to be included therein. "CHANGE OF CONTROL" means the occurrence, after the date of this Agreement, of any Person or two or more Persons acting in concert acquiring beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934) (a "13D Group") but - 8 - excluding Richard Chandler or a 13D Group of which Richard Chandler is a member, directly or indirectly, of securities of the Borrower (or other securities convertible into such securities) representing, together with the securities already held by such Person or Persons, 25% or more of the combined voting power of all securities of the Borrower entitled to vote in the election of directors. "CHANGE OF OWNERSHIP" means Richard Chandler (together with the 13D Group of which Richard Chandler is a member) selling or transferring securities of the Borrower representing (in the aggregate for all such sales or transfers after the Closing Date) 25% or more of the combined voting power of all securities of the Borrower entitled to vote in the election of directors owned by such 13D Group as of the Closing Date; provided however, transfers among members of such affiliated group shall be excluded for purposes of any such determination, and PROVIDED, FURTHER, that no Change of Ownership will be deemed to occur on or after the death of Richard Chandler. "CLOSING DATE" means the time and Business Day on which the conditions set forth in Section 4.01 are satisfied or waived pursuant to Section 11.01. "CODE" means the Internal Revenue Code of 1986, as amended or replaced and as in effect from time to time. "COMMERCIAL LETTER OF CREDIT" means a commercial letter of credit in the customary form used by the Issuing Lender, issued by the Issuing Lender pursuant to Section 3.01, either as originally issued or as the same from time to time may be supplemented, modified, amended, renewed or extended. "COMMITMENT" means, at any time for any Lender, the amount set forth opposite such Lender's name on Schedule 1.01(b) hereto, as such amount may be reduced or reinstated from time to time pursuant to the terms of this Agreement. "COMMITMENT ASSIGNMENT AND ACCEPTANCE" means a Commitment Assignment and Acceptance executed by a Lender and an Eligible Assignee substantially in the form of Exhibit C and registered with the Agent pursuant to Section 11.08(e). "COMMITTED ADVANCE" means an advance by a Lender to the Borrower pursuant to Section 2.01(a), which advance may be a Base Rate Advance or a Eurocurrency Rate Committed Advance. "COMMITTED ADVANCE NOTE" means each promissory note, substantially in the form of Exhibit A, executed and delivered by - 9 - the Borrower or a Subsidiary Borrower to a Lender at the request of such Lender pursuant to Section 2.14(b). "COMMITTED BORROWING" means a borrowing consisting of Committed Advances of the same Interest Type made on the same Business Day pursuant to the provisions of Section 2.02(a). The number of Borrowings that may be outstanding at any one time is limited by Section 2.05(b) hereof. "COMPETITIVE BID" means an offer by a Lender to make a Bid Advance in accordance with Section 2.08(c). "COMPETITIVE BID REQUEST" has the meaning specified in Section 2.08(a). "COMPLIANCE CERTIFICATE" means a compliance certificate in the form of Exhibit I signed, on behalf of Borrower, by a Senior Officer of Borrower. "CONSOLIDATED EBITDA" means, for any period for the Borrower and its Subsidiaries, an amount equal to the sum of (a) Consolidated Net Income, (b) Interest Charges, (c) the amount of taxes, based on or measured by income, used or included in the determination of Consolidated Net Income and (d) the amount of depreciation and amortization expense deducted in determining Consolidated Net Income, all determined in conformity with Generally Accepted Accounting Principles. "CONSOLIDATED FUNDED INDEBTEDNESS" means, for the Borrower and its Subsidiaries on a consolidated basis, the sum of (a) the outstanding principal amount of all obligations and liabilities, whether current or long-term, for borrowed money (including extensions of credit hereunder), (b) that portion of obligations with respect to capital leases which is capitalized in the consolidated balance sheet of the Borrower and its Subsidiaries and (c) all Contingent Obligations of the Borrower and its Subsidiaries with respect to Indebtedness of Persons other than the Borrower or any of its Subsidiaries (without duplication), all determined in conformity with Generally Accepted Accounting Principles. "CONSOLIDATED NET INCOME" means, with respect to any fiscal period, the consolidated net income of the Borrower and its Subsidiaries from continuing operations after extraordinary items (excluding gains or losses from Dispositions of assets) for that period, determined in accordance with Generally Accepted Accounting Principles consistently applied. "CONSOLIDATED TANGIBLE NET WORTH" means, as of any date of determination, Shareholders' Equity of the Borrower and its - 10 - Subsidiaries on that date, EXCLUDING the cumulative translation adjustment reported for each applicable Fiscal Quarter, commencing with the Fiscal Quarter ending March 29, 1996, MINUS the Adjusted Dollar Equivalent of any Intangible Assets of Borrower and its Subsidiaries on that date PLUS the after-tax amount of up to $19,000,000 in pre-tax non-recurring charges exclusive of any portion related to the write-off of Intangible Assets incurred in the Fiscal Quarter ended June 28, 1996. "CONSOLIDATED TOTAL ASSETS" means, as of any date of determination, the consolidated total assets of the Borrower and its Subsidiaries determined in accordance with Generally Accepted Accounting Principles. "CONTINGENT OBLIGATION" means, as to any Person, any (a) direct or indirect guaranty of Indebtedness of, or other obligation performable by, any other Person, including any endorsement (other than for collection or deposit in the ordinary course of business), co-making or sale with recourse of the obligations of any other Person or (b) assurance given to an obligee with respect to the performance of an obligation by, or the financial condition of, any other Person, whether direct, indirect or contingent, including any purchase or repurchase agreement covering such obligation or any collateral security therefor, any agreement to provide funds (by means of loans, capital contributions or otherwise) to such other Person, any agreement to support the solvency or level of any balance sheet item of such other Person, or any "keep-well" or similar arrangement of whatever nature having the effect of assuring or holding harmless any obligee against loss with respect to any obligation of such other Person. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determinable amount of the related primary obligation (unless the Contingent Obligation is limited by its terms to a lesser amount, in which case to the extent of such amount) or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by the Person in good faith. "CONTINUE," "CONTINUATION" and "CONTINUED" each refer to a continuation of Committed Advances of Dollars or an Alternative Currency, as the case may be, comprising the same Committed Borrowing, as Committed Advances denominated in the same currency for a specified Interest Period. "CONTINUING LETTERS OF CREDIT" has the meaning set forth in Section 3.01. "CONTRACTUAL OBLIGATION" means, as to any Person, any obligation under any outstanding securities issued by that Person or any material agreement, instrument or undertaking to which - 11 - that Person is a party or by which it or any of its property is bound. "CONVERT," "CONVERSION" and "CONVERTED" each refers to a conversion of Committed Advances of one Interest Type into Committed Advances of another Interest Type pursuant to Section 2.06(a). "CURRENT MATURITIES OF LONG-TERM DEBT" means, as of any date of determination, all payments of principal due under the terms of any long-term Indebtedness within 12 calendar months after such date, determined in accordance with Generally Accepted Accounting Principles as reported in the Borrower's SEC filing for the period of determination; provided, however, that the current maturity of Indebtedness incurred hereunder shall, for purposes of calculating the Interest Coverage Ratio, be deemed to be $5,000,000 during the twelve months preceding the Final Maturity Date. "DEBT SERVICE" means, as of the last day of each Fiscal Quarter, Interest Charges during the four Fiscal Quarters then ending plus the Current Maturities of Long-Term Debt. "DEBTOR RELIEF LAWS" means the Bankruptcy Code of the United States of America, as amended from time to time, and all other applicable dissolution, liquidation, conservatorship, bankruptcy, moratorium, readjustment of debt, compromise, rearrangement, receivership, insolvency, reorganization or similar debtor relief laws from time to time in effect affecting the rights of creditors generally. "DEFAULT" means any event that, with the giving of any applicable notice or passage of time specified in Section 9.01, or both, would be an Event of Default. "DEFAULT RATE" means the Base Rate plus 2%. "DESIGNATED BIDDER" means (a) an Eligible Assignee or (b) a special purpose corporation that is engaged in making, purchasing or otherwise investing in commercial loans in the ordinary course of its business and that issues (or the parent of which issues) commercial paper rated at least "Prime-1" (or the then equivalent grade) by Moody's or "A-1" (or the equivalent grade) by S&P that, in either case, (x) is organized under the laws of the United States or any state thereof, (y) shall have been designated as such pursuant to Section 2.07(b) and (z) is not otherwise a Lender. "DISPOSITION" means the sale, transfer or other disposition in any single transaction or series of related - 12 - transactions of any asset, or group of related assets, of Borrower or any of its Subsidiaries, other than (a) the disposition of Cash and (b) the disposition of equipment (i) that has become obsolete or (ii) that is replaced by equipment performing substantially the same function not later than 90 days after such sale or disposition. "DOLLARS" or "$" means United States of America dollars. "DOMESTIC LENDING OFFICE" means, with respect to any Lender, the office of such Lender specified as its "Domestic Lending Office" under its name on Schedule 11.06 hereto or on Schedule I to the Commitment Assignment and Acceptance pursuant to which it became a Lender, or such other office or Affiliate of such Lender as such Lender may from time to time specify to the Borrower and the Agent. "DOMESTIC SUBSIDIARIES" means those Subsidiaries of any Borrower which are incorporated under the laws of any State of the United States and which are engaged in business primarily in the United States, other than Subsidiaries which are Subsidiaries of a Foreign Subsidiary. "ELECTION TO PARTICIPATE" means a certificate of election, in the form of Exhibit G, to be executed by a Foreign Subsidiary which is to become a Subsidiary Borrower. "ELIGIBLE ASSIGNEE" means, as of the date of any Commitment Assignment and Acceptance, (a) a commercial bank organized under the laws of the United States of America, or any State thereof, and having at that date total assets in excess of $1,000,000,000, (b) a commercial bank organized under the laws of any other country which is a member of the Organization for Economic Cooperation and Development (the "OECD"), or a political subdivision of any such country, and having at that date total assets in excess of $2,000,000,000 provided that such bank is acting through a branch, subsidiary or agency located in the United States of America, (c) the central bank of any country which is a member of the OECD, and (d) any Affiliate (other than an individual) of a bank described in any of the foregoing clauses which is engaged in the business of commercial banking. "ERISA" means the Employee Retirement Income Security Act of 1974 and any regulations issued pursuant thereto, as amended or replaced and as in effect from time to time. "ERISA AFFILIATE" means, with respect to any Person, any Person (or any trade or business, whether or not - 13 - incorporated) that is under common control with that Person within the meaning of Sections 414(b) and (c) of the Code. "EUROCURRENCY AUCTION" means a solicitation of Competitive Bids setting forth a Eurocurrency Rate Bid Margin pursuant to Section 2.08. "EUROCURRENCY LENDING OFFICE" means, with respect to any Lender, the office of such Lender specified as its "Eurocurrency Lending Office" on Schedule 11. 06 hereto or on Schedule I to the Commitment Assignment and Acceptance pursuant to which it became a Lender (or, if no such office is specified, its Domestic Lending Office), or such other office or Affiliate of such Lender as such Lender may from time to time specify to the Borrower and the Agent. "EUROCURRENCY LIABILITIES" has the meaning specified in Regulation D promulgated by the Board of Governors of the Federal Reserve System, as in effect from time to time. "EUROCURRENCY RATE" means, for each Interest Period for each Eurocurrency Rate Advance comprising part of the same Borrowing, a rate of interest per annum equal at all times during such Interest Period to the rate per annum obtained by dividing (i) the rate of interest determined solely by the Agent to be equal to the average (rounded upward to the nearest whole multiple of 1/16 of 1% per annum, if such average is not such a multiple) of the rates per annum at which deposits in Dollars (in the case of a Eurocurrency Rate Advance denominated in Dollars) or the relevant Alternative Currency (in the case of a Eurocurrency Rate Advance denominated in an Alternative Currency) are offered by Bank of America to prime banks in the London interbank market at or about 11:00 A.M. (London time) two Business Days before the first day of such Interest Period for a period equal to such Interest Period and, (A) in the case of a Committed Borrowing, in an amount approximately equal to Bank of America's Eurocurrency Rate Advance comprising part of such Committed Borrowing, and (B) in the case of a Bid Borrowing, in an amount substantially equal to the aggregate amount of such Bid Borrowing requested by the Borrower, by (ii) a percentage equal to 100% minus the Eurocurrency Rate Reserve Percentage for such Interest Period. The determination by the Agent of the Eurocurrency Rate shall be conclusive in the absence of manifest error. "EUROCURRENCY RATE ADVANCE" means an Advance denominated in Dollars which bears interest as provided in Section 2.05(d), an Advance denominated in an Alternative Currency which bears interest as provided in Section 2.05(e), or - 14 - a Bid Advance which bears interest based on the Eurocurrency Rate. "EUROCURRENCY RATE BID ADVANCE" means a Bid Advance denominated in Dollars made which bears interest based on the Eurocurrency Rate. "EUROCURRENCY RATE BID MARGIN" has the meaning specified in subsection 2.08(c)(ii)(C). "EUROCURRENCY RATE COMMITTED ADVANCE" means a Committed Advance denominated in Dollars which bears interest as provided in Section 2.05(d) or an Advance denominated in an Alternative Currency which bears interest as provided in Section 2.05(e). "EUROCURRENCY RATE RESERVE PERCENTAGE" for each Interest Period for each Eurocurrency Rate Advance means the reserve percentage applicable during such Interest Period under regulations issued from time to time by the Board of Governors of the Federal Reserve System or any successor or, in the case of Eurocurrency Rate Advances denominated in Pounds Sterling, the reserve percentage applicable during such Interest Period under regulations issued from time to time by the Lender of England or any successor or, in the case of Eurocurrency Rate Advances denominated in other foreign currencies, the reserve percentage applicable during such Interest Period under regulations issued from time to time by such other foreign central bank or any successors thereto (or, in each case, if different percentages shall be applicable during different periods within such Interest Period, the daily average of such percentages during such Interest Period) for determining the maximum reserve requirement (including, without limitation, any emergency, supplemental or other marginal reserve requirement) for the Agent with respect to liabilities or assets consisting of or including Eurocurrency Liabilities having a term equal to such Interest Period. "EVENT OF DEFAULT" has the meaning set forth for that term in Section 9.01. "EXCLUDED TAXES" has the meaning set forth for that term in Section 2.16. "EXISTING CREDIT AGREEMENT" means the Second Amended and Restated Credit Agreement dated as of September 29, 1995 among the Borrower, the subsidiary borrowers and guarantors thereunder, the lenders parties thereto and Bank of America National Trust and Savings Association, as agent, as amended. "EXTRAORDINARY CAPITAL EXPENDITURES' means Capital Expenditures actually incurred in each fiscal period set forth - 15 - below not exceeding the amount set forth opposite such fiscal period: Extraordinary Capital Fiscal Period Expenditures --------------------------------------- ------------ Fiscal Quarter ending December 26, 1996 $5,000,000 Fiscal Quarter ending March 28, 1997 $5,800,000 Fiscal Quarter ending June 27, 1997 $3,700,000 Fiscal year ending June 30, 1998 $4,600,000 "FACILITY USAGE" means, as of any date of determination, the sum of (a) the Outstanding Advances plus (b) the aggregate Letter of Credit Liability plus (c) the Restricted Commitment Amount. "FEDERAL FUNDS RATE" means, as of any date of determination, the rate per annum (rounded upwards, if necessary, to the nearest one-hundredth (1/100th) of one percent (1%)), equal to the weighted average of the rates of overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers on such date as published by the Federal Reserve Lender of San Francisco on the Business Day immediately following such date; provided, however, that: (a) if the date for which such rate is to be determined is not a Business Day, the Federal Funds Rate for such date shall be such rate on such transactions on the immediately preceding Business Day as published on the immediately following Business Day; and (b) if such rate is not published for any Business Day, the Federal Funds Rate for such date shall be the average of the quotations for such date on such transactions received by the Agent from three (3) federal funds brokers of recognized standing selected by the Agent. "FINAL MATURITY DATE" means January 14, 2001, or such later date as may then be in effect pursuant to Section 2.10(c). "FISCAL QUARTER" means each of the four 13 or 14 week fiscal quarters of Borrower ending on a Friday on or about each September 30, December 31, March 31 and June 30. "FISCAL YEAR" means the 52 or 53-week fiscal year of Borrower ending on a Friday on or about each June 30. "FOREIGN SUBSIDIARIES" means those Subsidiaries of any Borrower which are not Domestic Subsidiaries. "GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" means, as of any date of determination, accounting principles referenced as - 16 - "generally accepted" in then currently effective Statements of the Auditing Standards Board of the American Institute of Certified Public Accountants, or if such statements are not then in effect, accounting principles that are then approved by a significant segment of the accounting profession in the United States of America, including in each case, the materiality standards as generally accepted. The term "CONSISTENTLY APPLIED," as used in connection therewith, means that the accounting principles applied are consistent in all material respects to those applied for the prior period. "GOVERNMENTAL AGENCY" means (a) any international, foreign, federal, state, county or municipal government, or political subdivision thereof, (b) any governmental agency, authority, board, bureau, commission, department, or instrumentality, (c) any court or administrative tribunal, (d) any non-governmental agency or entity that is vested by a governmental agency with applicable jurisdiction over a Person, or (e) any arbitration tribunal or other non-governmental authority to whose jurisdiction a Person has given its general consent. "GOVERNMENT SECURITIES" means direct full faith and credit obligations of the United States of America or obligations unconditionally guarantied by the full faith and credit of the United States of America. "GUARANTOR" means the Borrower and each Domestic Subsidiary of the Borrower which has executed this Agreement as a "Guarantor," as identified on the signature pages hereto, and each Domestic Subsidiary of the Borrower which becomes a guarantor pursuant to Section 6.11. "GUARANTY" means the Guaranty set forth in Article VIII hereof. "HAZARDOUS MATERIALS" means substances regulated as hazardous or toxic substances or pollutants pursuant to the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. Section 9601 et seq., or under any other applicable Hazardous Materials Law, in each case as such laws are amended from time to time. "HAZARDOUS MATERIALS LAWS" means all applicable federal and state laws governing the use, disposal or remediation of Hazardous Materials. "INDEBTEDNESS" means, as to any Person (without duplication), (a) all indebtedness of such Person for borrowed money, (b) that portion of the obligations of such Person under - 17 - Capital Leases which is properly recorded as a liability on a balance sheet of such Person prepared in accordance with Generally Accepted Accounting Principles, (c) any obligation of such Person that is evidenced by a promissory note or other instrument representing an extension of credit (other than trade or other accounts payable in the ordinary course of business in accordance with customary terms) to such Person, whether or not for borrowed money, (d) any obligation of such Person for the deferred purchase price of property or services (other than trade or other accounts payable in the ordinary course of business in accordance with customary terms), (e) any obligation of any Person that is secured by a Lien on assets of such Person, whether or not that Person has assumed such obligation, but only to the extent of the fair market value of the assets so subject to the Lien, (f) obligations of such Person arising under acceptance facilities or under facilities for the discount of accounts receivable of such Person, (g) obligations of such Person for unreimbursed draws under letters of credit issued for the account of such Person, (h) any net obligation of such Person under a Swap Agreement, (i) any obligation of such Person for the unfunded portion of any pension liability arising under any Plan, (j) any obligation of such Person arising under any foreign currency hedging transactions, and (k) all preferred stock of such Person which is subject to a sinking fund payment or other mandatory redemption or payment (whether fixed or contingent). "INDEMNIFIED LIABILITIES" has the meaning given that term in Section 11.09. "INTANGIBLE ASSETS" means assets that are considered to be intangible assets under Generally Accepted Accounting Principles, including customer lists, goodwill, computer software, copyrights, trade names, trade marks, patents, unamortized deferred charges, unamortized debt discount and capitalized research and development costs. "INTERCOMPANY INDEBTEDNESS" means any indebtedness of the Borrower or any Subsidiary of the Borrower which, in the case of the Borrower, is owing to any of its Subsidiaries and which, in the case of any Subsidiary of the Borrower, is owing to the Borrower or any other Subsidiary of the Borrower. "INTEREST CHARGES" means, as of the last day of any fiscal period, the sum of (a) all interest, premium payments, fees, charges and related expenses payable by Borrower and its Subsidiaries with respect to that fiscal period to a lender in connection with borrowed money (including capitalized interest), or to a seller in connection with the deferred purchase price of assets, in each case, that is treated as interest in accordance with Generally Accepted Accounting Principles, plus (b) the - 18 - portion of rent payable by Borrower and its Subsidiaries with respect to that fiscal period under Capital Leases that should be treated as interest in accordance with Generally Accepted Accounting Principles. "INTEREST COVERAGE RATIO" means the ratio obtained by dividing Adjusted Cash Flow (excluding Extraordinary Capital Expenditures as of September 27, 1997 through March 31, 1999, inclusive) by Debt Service, calculated quarterly on a rolling four-quarter basis . "INTEREST PERIOD" means, for each Eurocurrency Rate Advance comprising part of the same Borrowing, the period commencing on the date of such Advance or, with respect to Eurocurrency Rate Committed Advances, the effective date of any Notice of Conversion/Continuance with respect to such Advance, and ending on the last day of the period selected by the Borrower or a Subsidiary Borrower pursuant to the provisions below. The duration of each such Interest Period shall be (i) in the case of a Eurocurrency Rate Committed Advance comprising part of the same Borrowing and denominated in Dollars, 1, 2, 3 or 6 months (or, with the consent of all the Lenders, other periods), (ii) in the case of a Eurocurrency Rate Bid Advance comprising part of the same Borrowing, 1, 2, 3 or 6 months, (iii) in the case of a Eurocurrency Rate Advance comprising part of the same Borrowing and denominated in an Alternative Currency, 1, 2, 3 or 6 months (or, with the consent of all the Lenders, other periods) and (iv) as to any Absolute Rate Bid Advance, a period of not less than 14 days and not more than 180 days as selected by the Borrower in the applicable Competitive Bid Request; provided, however, that: (a) Interest Periods commencing on the same date for Committed Advances comprising part of the same Borrowing shall be of the same duration; (b) the duration of any Interest Period for any Advance shall end on or prior to the Final Maturity Date; (c) the first day of an Interest Period for any Eurocurrency Rate Advance shall be either the last day of any then current Interest Period for such Eurocurrency Rate Advance, or, if there shall be no then current Interest Period for such Advance, any Business Day; and (d) whenever the last day of any Interest Period would otherwise occur on a day other than a Business Day, the last day of such Interest Period shall be extended to occur on the next succeeding Business Day, provided, in the case of any Interest Period for a Eurocurrency Rate Advance, - 19 - that if such extension would cause the last day of such Interest Period to occur in the next following month, the last day of such Interest Period shall occur on the next preceding Business Day. "INTEREST TYPE" means, (a) with respect to any Committed Advance, a Base Rate Advance or a Eurocurrency Rate Advance and (b) with respect to any Bid Advance, an Absolute Rate Bid Advance or a Eurocurrency Rate Bid Advance. "INVESTMENT" means, when used in connection with any Person, any investment by that Person, whether by means of purchase or other acquisition of capital stock or other securities of any other Person or by means of loan, advance, capital contribution, or other debt or equity participation or interest in any other Person, including any partnership or joint venture interest in any other Person. The amount of any Investment shall be the amount actually invested, without adjustment for subsequent increases or decreases in the market value or book value of such Investment. "INVITATION FOR COMPETITIVE BIDS" means a solicitation for Competitive Bids, substantially in the form of Exhibit K. "ISSUE" means, with respect to any Letter of Credit, either to issue, or to extend the expiry of, or to renew, or to increase the amount of, such Letter of Credit or, with respect to any letter of credit issued under the Existing Credit Agreement, to continue such letter of credit as a Letter of Credit under this Agreement, and the term "ISSUED" or "ISSUANCE" shall have corresponding meanings. "ISSUING LENDER" means, with respect to any Letter of Credit, Bank of America or such other Lender reasonably acceptable to the Agent as may from time to time be designated by the Borrower. "LENDERS" means the Lenders listed on the signature pages hereof and each Eligible Assignee that becomes a party hereto pursuant to Section 11.08. "LETTER OF CREDIT" means, collectively, the Commercial Letters of Credit and the Standby Letters of Credit and the letters of credit issued under the Existing Credit Agreement which are outstanding on the Closing Date. "LETTER OF CREDIT LIABILITY" means, as of any date of determination, all then existing liabilities of the Borrower to the Issuing Lender under this Agreement in respect of the Letters of Credit Issued for the account of the Borrower, whether such - 20 - liability is contingent or fixed, and shall, in each case, consist of the sum of (i) the aggregate maximum amount then available to be drawn under such Letters of Credit (the determination of such maximum amount to assume compliance with all conditions for drawing) and (ii) the aggregate amount which has then been paid by, and not been reimbursed to, the Issuing Lender under such Letters of Credit, after giving effect to all reimbursements on such date. "LEVERAGE RATIO" means, as of any date of determination, the ratio of Consolidated Funded Indebtedness to Consolidated EBITDA for the four Fiscal Quarters ending on that date. "LIEN" means any mortgage, deed of trust, pledge, hypothecation, assignment for security, security interest, encumbrance, lien or charge of any kind, sale or discount of accounts receivables, whether voluntarily incurred or arising by operation of law or otherwise, affecting any property, including any agreement to grant any of the foregoing, any conditional sale or other title retention agreement, any lease in the nature of a security interest, and/or the filing of or agreement to give any financing statement (other than a precautionary financing statement with respect to a lease that is not in the nature of a security interest) under the Uniform Commercial Code or comparable law of any jurisdiction with respect to any property. "LOAN DOCUMENTS" means, collectively, this Agreement, the Notes, the Swing Line Documents, the Letters of Credit, any Election to Participate, any Notice of Borrowing, any Request for Letter of Credit, any Request for Extension and any other agreements of any type or nature heretofore or hereafter executed and delivered by any Loan Party or any of its Affiliates in favor of the Lenders in any way relating to or in furtherance of this Agreement in each case either as originally executed or as the same may from time to time be supplemented, modified, amended, restated or extended. "LOAN PARTY" means any of the Subsidiary Borrowers, the Guarantors and the Borrower. "MAJORITY LENDERS" means Lenders at any time holding at least 51% of the then aggregate unpaid principal amount of the Committed Advances owing to the Lenders, or, if no such principal amount is at such time outstanding, Lenders having at least 51% of the Total Commitment. "MATERIAL ADVERSE EFFECT" means any set of circumstances or events which (a) has or could reasonably be expected to have any material adverse effect whatsoever upon the - 21 - validity or enforceability of any Loan Document, (b) is or could reasonably be expected to be material and adverse to the condition (financial or otherwise), business operations or prospects of Borrower and its Subsidiaries, taken as a whole, (c) materially impairs or could reasonably be expected to materially impair the ability of Borrower and its Subsidiaries, taken as a whole, to perform the Obligations or (d) materially impairs or could reasonably be expected to materially impair the ability of the Lenders to enforce their legal remedies pursuant to the Loan Documents. "MOODY'S" means Moody's Investors Service, Inc. "MORTGAGE FINANCING" means mortgage financing for a minimum term of 10 years with a minimum average life of 7 years, PROVIDED that such mortgage financing is non-recourse and is in an initial principal amount equal to not less than 60% of the appraised value of the property to be financed. "MULTIEMPLOYER PLAN" means any employee benefit plan of a type described in Section 4001(a)(3) of ERISA. "NEGATIVE PLEDGE" means a Contractual Obligation that contains a covenant binding on Borrower or any of its Subsidiaries that prohibits Liens on any of its or their property. "NOTES" means the Committed Advance Notes and the Bid Advance Notes. "NOTICE OF BORROWING" means a written notice, substantially in the form of Exhibit E hereto, delivered in accordance with, and within the period specified in, Section 2.02(a) hereof, wherein the Borrower or a Subsidiary Borrower requests a Committed Borrowing. "NOTICE OF CONVERSION/CONTINUATION" means a written notice, substantially in the form of Exhibit F hereto, delivered in accordance with, and within the period specified in, Section 2.06(a) hereof, wherein the Borrower or a Subsidiary Borrower elects to Convert Committed Advances and/or elects an Interest Period and Interest Type for such Converted Committed Advances or outstanding Committed Advances. "OBLIGATIONS" means all present and future obligations of every kind or nature of any Loan Party at any time and from time to time owed to the Agent, the Lenders or the Issuing Lender or any one or more of them under any one or more of the Loan Documents, whether due or to become due, matured or unmatured, liquidated or unliquidated, or contingent or noncontingent, - 22 - including obligations of performance as well as obligations of payment, and including, to the extent permitted by applicable Debtor Relief Laws, interest that accrues after the commencement of any proceeding under any Debtor Relief Law by or against any Loan Party or any Affiliate of any Loan Party. "OFFICER'S CERTIFICATE" means, when used with reference to any Person, a certificate signed by a Senior Officer of such Person. "OUTSTANDING ADVANCES" means, as of any date of determination, the aggregate principal amount of Advances outstanding on such date. "OUTSTANDING LETTER OF CREDIT LIABILITY" means, as of any date of determination, the aggregate amount of Letter of Credit Liability outstanding on such date, as reduced to the extent that such Letter of Credit Liability has been cash collateralized pursuant to the terms hereof. "OVERNIGHT RATE" means, for any day, the rate of interest per annum at which overnight deposits in the Alternative Currency, in an amount approximately equal to the amount with respect to which such rate is being determined, would be offered for such day by Bank of America's principal office in London to major banks in the London or other applicable offshore interbank market. "PBGC" means the Pension Benefit Guaranty Corporation or any successor thereto established under ERISA. "PENSION PLAN" or "PLAN" means any employee benefit or other plan that is subject to Title IV of ERISA and which is maintained for employees of Borrower or any of its ERISA Affiliates. "PERMITTED ACCOUNTS RECEIVABLE FINANCING" means a sale or discount of accounts receivable owned by SunMed Finance Inc. having a book value not exceeding $20,000,000 in the aggregate at any time (net of collections by the purchaser thereof); PROVIDED, HOWEVER, that in connection with any such financing arrangement (a) there is no recourse to any seller of such accounts receivable or any other Affiliate of the Borrower on account of the creditworthiness of the obligor on such accounts receivable; and (b) no negative pledge or Lien is created on any accounts receivables not actually sold or discounted. "PERMITTED ACQUISITIONS" means Acquisitions of the stock or assets of a Person engaged in business of the same general type as that of the Borrower and its Subsidiaries (a) - 23 - which do not violate Section 7.04 and (b) with respect to which no Default or Event of Default exists before and after giving effect thereto. "PERMITTED ENCUMBRANCES" means: (a) inchoate Liens incident to construction or maintenance of real property, or Liens incident to construction or maintenance of real property now or hereafter filed of record for which adequate reserves have been set aside and which are being contested in good faith by appropriate proceedings and have not proceeded to judgment, provided that, by reason of nonpayment of the obligations secured by such Liens, no such real property is subject to a material risk of loss or forfeiture prior to judgment; (b) Liens for taxes and assessments on real property which are not yet past due, or Liens for taxes and assessments on real property for which adequate reserves have been set aside and are being contested in good faith by appropriate proceedings and have not proceeded to judgment, provided that, by reason of nonpayment of the obligations secured by such Liens, no such real property is subject to a material risk of loss or forfeiture prior to judgment; (c) minor defects and irregularities in title to any real property which in the aggregate do not materially impair the fair market value or use of the real property for the purposes for which it is or may reasonably be expected to be held; (d) easements, exceptions, reservations, or other agreements for the purpose of pipelines, conduits, cables, wire communication lines, power lines and substations, streets, trails, walkways, drainage, irrigation, water, and sewerage purposes, dikes, canals, ditches, the removal of oil, gas, coal, or other minerals, and other like purposes affecting real property which in the aggregate do not materially burden or impair the fair market value or use of such real property for the purposes for which it is or may reasonably be expected to be held; (e) rights reserved to or vested in any Governmental Agency by law to control or regulate, or obligations or duties under law to any Governmental Agency with respect to, the use of any real property; (f) rights reserved to or vested in any Governmental Agency by law to control or regulate, or - 24 - obligations or duties under law to any Governmental Agency with respect to, any right, power, franchise, grant, license, or permit; (g) present or future zoning Laws or other laws restricting the occupancy, use, or enjoyment of real property; (h) non-consensual Liens imposed by law, including carrier's, mechanics, landlord's, warehouseman's or other similar Liens, other than those described in clauses (a) or (b) above, arising in the ordinary course of business with respect to obligations which are not delinquent or are being contested in good faith by appropriate proceedings, provided that, if delinquent, adequate reserves have been set aside with respect thereto and, by reason of nonpayment, no property is subject to a material risk of loss or forfeiture prior to judgment; (i) Liens consisting of pledges or deposits made in connection with obligations under workers' compensation laws or similar legislation, including Liens of judgments thereunder which are not currently dischargeable; (j) Liens consisting of security interests, pledges or deposits of property to secure performance in connection with operating leases made in the ordinary course of business to which the Borrower or any of its Subsidiaries is a party as lessee, provided the aggregate value of all such pledges and deposits in connection with any such lease does not at any time exceed 10% of the annual fixed rentals payable under such lease; (k) Liens consisting of deposits of property to secure statutory obligations of Borrower or a Subsidiary of Borrower in the ordinary course of its business, including any liens created in connection with any letter of credit; (l) Liens consisting of deposits of property to secure (or in lieu of) surety, appeal or customs bonds in proceedings to which Borrower or a Subsidiary of Borrower is a party in the ordinary course of its business in an aggregate amount not to exceed $3,000,000 at any time outstanding and provided the value of the assets subject to such Lien does not exceed 100% of the face amount of the bond so secured; and (m) Liens created by or resulting from any litigation or legal proceeding involving Borrower or a Subsidiary of Borrower in the ordinary course of its - 25 - business which is currently being contested in good faith by appropriate proceedings, provided that adequate reserves have been set aside with respect thereto and such Liens are discharged or stayed within 30 days of creation (or such longer period as may be permitted by law or otherwise binding on a judgment creditor before execution on a judgment is allowed) and no material property is subject to a material risk of loss or forfeiture prior to judgment. "PERSON" means any entity, whether an individual, trustee, corporation, general partnership, limited partnership, joint stock company, trust, estate, unincorporated organization, business association, tribe, firm, joint venture, Governmental Agency, or otherwise. "PROJECTIONS" means the financial projections prepared on behalf of Borrower and its Subsidiaries and heretofore furnished to the Lenders. "PRO RATA SHARE" means, with respect to each Lender, the percentage set forth opposite the name of that Lender on Schedule 1.01(b), as such percentage may be adjusted from time to time pursuant to an assignment under Section 2.13(c) or Section 11.08. "REGISTER" has the meaning provided for such term in Section 11.08(e). "REGULATION G" means Regulation G, as at any time amended, of the Board of Governors of the Federal Reserve System, or any other regulation in substance substituted therefor. "REGULATION U" means Regulation U, as at any time amended, of the Board of Governors of the Federal Reserve System, or any other regulation in substance substituted therefor. "REPORTABLE EVENT" means any reportable event as defined in Section 4043(b) of ERISA with respect to which the PBGC has not waived the 30-day reporting requirement. "REQUEST FOR EXTENSION" means a request for an extension of the Final Maturity Date substantially in the form of Exhibit H, signed by a Senior Officer of the Borrower, and properly completed to provide all information required to be included therein. "REQUEST FOR LETTER OF CREDIT" means a request for a Letter of Credit in the customary form of letters of credit application and reimbursement agreement used by the Issuing Lender, signed by a Senior Officer of the Borrower and properly - 26 - completed to provide all information required to be included therein; provided that such application and reimbursement agreement shall be deemed to incorporate by reference each representation of the Borrower set forth in a Notice of Borrowing. "REQUIREMENT OF LAW" means, as to any Person, (a) the articles or certificate of incorporation and by-laws or other organizational or governing documents of such Person, (b) any law applicable to such Person and (c) any judgment, award, decree, writ or determination of a Governmental Agency, applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. "RESTRICTED COMMITMENT AMOUNT" means (x) so long as the Dollar equivalent of the aggregate then outstanding Eurocurrency Rate Committed Advances denominated in Alternative Currencies is less than $75,000,000, zero, and (y) so long as such Dollar equivalent equals or exceeds $75,000,000, an amount equal to $5,000,000 plus the amount, if any, by which the Dollar equivalent of the aggregate then outstanding Eurocurrency Rate Committed Advances denominated in Alternative Currencies minus the amount of any deposits established or maintained with the Agent as cash collateral for such Advances exceeds the Alternative Currency Sublimit. The Restricted Commitment Amount shall be calculated as of the last Business Day of each week in accordance with Section 1.05. "RESTRICTED JUNIOR PAYMENT" means, as to any Person, (i) any dividend or other distribution, direct or indirect, on account of any shares of any class of stock or other ownership interest of any Loan Party 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 or other ownership interest of any Loan Party now or hereafter outstanding, (iii) any prepayment of principal of, premium, if any, or redemption, purchase, retirement, defeasance, sinking fund or similar payment with respect to, any Subordinated Debt (other than prepayments in respect of any Seller Note that is Subordinated Debt), other than refinancings thereof on substantially similar terms, and (iv) 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 any Loan Party now or hereafter outstanding. "S&P" means Standard & Poor's Ratings Group, a division of McGraw Hill, Inc. - 27 - "SEC" means the Securities and Exchange Commission and any successor commission. "SELLER NOTE" means a promissory note or other obligation to pay money (other than payments under customary indemnities) given by the Borrower or any Subsidiary of the Borrower in connection with an Acquisition, together with all security agreements, guaranties, pledge agreements or other forms of collateral or credit support given by any Person in connection therewith. "SENIOR OFFICER" means the president, the chief executive officer, the chief financial officer, vice president, general counsel, treasurer and controller, in each case whatever the title nomenclature may be, of the Person designated. "SHAREHOLDERS' EQUITY" means, as of any date of determination, shareholders' equity as of that date determined in accordance with Generally Accepted Accounting Principles; provided that there shall be excluded from Shareholders' Equity any amount attributable to capital stock that is, directly or indirectly, required by its terms to be redeemed or repurchased by the issuer thereof at a specified date or upon the occurrence of specified events or at the election of the holder thereof, if and to the extent that such date is, or such events or election could occur, prior to the Final Maturity Date. "STANDBY LETTER OF CREDIT" means a standby letter of credit in the customary form used by the Issuing Lender, issued by the Issuing Lender pursuant to Section 3.01, either as originally issued or as the same from time to time may be supplemented, modified, amended, renewed or extended. "SUBORDINATED DEBT" means Indebtedness of a Loan Party which is subordinated in right of payment to the payment of the Obligations hereunder on terms and conditions substantially similar to those set forth in Exhibit M. "SUBSIDIARY" means, as of any date of determination and with respect to any Person, any corporation, partnership or joint venture, whether now existing or hereafter organized or acquired: (a) in the case of a corporation or the foreign equivalent organization thereof, of which a majority of the securities having ordinary voting power for the election of directors or other governing body (other than securities having such power only by reason of the happening of a contingency) are at the time beneficially owned, directly or indirectly, by such Person and/or one or more Subsidiaries of such Person, or (b) in the case of a partnership or joint venture, of which such Person or a Subsidiary of such Person is a general partner or joint venturer - 28 - or of which a majority of the partnership or other ownership interests are at the time beneficially owned, directly or indirectly by such Person and/or one or more of its Subsidiaries. "SUBSIDIARY BORROWER" means any Foreign Subsidiary in which the Borrower, directly or indirectly, has at least an 80% ownership interest and which is identified on Schedule 1.01(c) or which shall have delivered to the Agent and the Lenders an Election to Participate, duly executed by such Subsidiary and the Borrower, and in respect of which the conditions set forth in Section 4.03 have been satisfied. "SUBSIDIARY BORROWER SUBLIMIT" means, for each Subsidiary which becomes a Subsidiary Borrower hereunder, the amount specified as such Subsidiary Borrower's Sublimit on Schedule 1.01(c). "SUNRISE" means Sunrise Medical, Inc., a Delaware corporation. "SWAP AGREEMENT" means one or more written agreements between a Loan Party and one or more financial institutions providing for "swap," "collar" or other interest rate protection with respect to any Indebtedness. "SWING LINE" means the revolving line of credit established by the Swing Line Lender in favor of Borrower pursuant to Section 2.09. "SWING LINE ADVANCES" means advances made by the Swing Line Lender to Borrower pursuant to Section 2.09. "SWING LINE LENDER" means Bank of America. "SWING LINE DOCUMENTS" means any promissory note and any other documents executed by Borrower as requested by the Swing Line Lender from time to time in favor of the Swing Line Lender in connection with the Swing Line. "SWING LINE OUTSTANDINGS" means, as of any date of determination, the aggregate principal Indebtedness of Borrower on all Swing Line Advances then outstanding. "TERMINATION EVENT" means (a) a Reportable Event, (b) the withdrawal of any Loan Party or any of its ERISA Affiliates from a Pension Plan during any plan year in which it was a "substantial employer" as defined in Section 4001(a)(2) of ERISA, if such withdrawal results in liability pursuant to Section 4063 of the Code, (c) the filing of a notice of intent to terminate a Pension Plan or the treatment of an amendment to a Pension Plan - 29 - as a termination thereof pursuant to Section 4041 of ERISA, (d) the institution of proceedings to terminate a Pension Plan by the PBGC or (e) any other event or condition which might reasonably be expected to constitute grounds under ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan. "TOTAL COMMITMENT" means, as of the date of determination thereof, the aggregate Commitments of all the Lenders. "TOTAL LIABILITIES" means, as of any date of determination, all liabilities that should be reflected as a liability on a consolidated balance sheet of Borrower and its Subsidiaries on such date prepared in accordance with Generally Accepted Accounting Principles. "TO THE BEST KNOWLEDGE OF" means, when modifying a representation, warranty or other statement of any Person, that such representation, warranty or statement is a representation, warranty or statement that the Person making it has no actual knowledge, after performing reasonable due diligence under the circumstances, of the inaccuracy of the matters therein stated. Where the Person making the representation, warranty or statement is not a natural Person, the aforesaid actual or constructive knowledge shall be that of any Senior Officer of that Person. "WHOLLY-OWNED SUBSIDIARY" means any Subsidiary of Borrower, whether now existing or hereafter acquired, with respect to which Borrower owns, directly or indirectly, and controls the power to vote, 100% of the capital shares, partnership or other ownership interests in such Subsidiary other than capital shares or partnership or other ownership interests which are held by certain individuals as director's qualifying shares or are otherwise held by directors of a Subsidiary in nominal amounts necessary to comply with applicable local laws. "WITHDRAWAL LIABILITY" means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA. 1.02 USE OF DEFINED TERMS. Any defined term used in the plural shall refer to all members of the relevant class, and any defined term used in the singular shall refer to any one or more of the members of the relevant class. 1.03 ACCOUNTING TERMS. All accounting terms not specifically defined in this Agreement shall be construed in conformity with, and all financial data required to be submitted - 30 - by this Agreement shall be prepared in conformity with, Generally Accepted Accounting Principles consistently applied, except as otherwise specifically prescribed herein. In the event that Generally Accepted Accounting Principles change during the term of this Agreement such that the financial covenants contained in Sections 7.09 through 7.11 would then be calculated in a different manner or with different components or would render the same not meaningful criteria for evaluating Borrower's financial condition, (a) Borrower and the Lenders agree to amend this Agreement in such respects as are necessary to conform those covenants as criteria for evaluating Borrower's financial condition to substantially the same criteria as were effective prior to such change in Generally Accepted Accounting Principles and (b) during the period pending agreement on such amendments (which may not exceed 60 days absent the mutual agreement of the Borrower and the Lenders), Borrower shall be deemed to be in compliance with the financial covenants contained in such Sections following any such change in Generally Accepted Accounting Principles if and to the extent that Borrower would have been in compliance therewith under Generally Accepted Accounting Principles as in effect immediately prior to such change. 1.04 EXHIBITS AND SCHEDULES. All Exhibits and Schedules to this Agreement, either as originally existing or as the same may from time to time be supplemented, modified, or amended, are incorporated herein by reference. A matter disclosed on any Schedule shall be deemed disclosed on all Schedules. 1.05 CURRENCY EQUIVALENTS GENERALLY. (a) For all purposes of this Agreement other than Article II (but not for purposes of the preparation of any financial statements delivered pursuant to this Agreement or any calculation to be made on the basis of any such financial statements), the equivalent in any Alternative Currency of an amount in Dollars, and the equivalent in Dollars of an amount in any Alternative Currency, shall be determined at the rate of exchange quoted by the Agent in London, England, at 11:00 A.M. (London time) on the date of determination, to prime banks in London, England for the spot purchase in the London, England foreign exchange market of such amount of Dollars with such Alternative Currency, or such amount of such Alternative Currency with such Dollars, as the case may be. (b) For purposes of determining compliance with covenants in Article VII (other than Sections 7.09, 7.10 and 7.11), Dollar equivalents of Alternative Currency amounts incurred or outstanding shall be deemed to be the Dollar - 31 - equivalent thereof at the time such Alternative Currency amount was incurred or became outstanding. 1.06 REFERENCES TO LAST DAY OF FISCAL PERIOD. If the last day of any Fiscal Year or Fiscal Quarter of the Borrower is misstated in any Loan Document, such date shall be deemed to refer to the last day of the Fiscal Year or Fiscal Quarter ending nearest to the day actually set forth. ARTICLE II AMOUNTS AND TERMS OF THE ADVANCES 2.01 THE ADVANCES. (a) COMMITTED ADVANCES. Each Lender severally agrees, on the terms and conditions hereinafter set forth, to make Committed Advances to the Borrower and the Subsidiary Borrowers, from time to time on any Business Day from the date hereof to the Final Maturity Date, in an aggregate amount (determined in Dollars) not to exceed at any time outstanding the Dollar amount of such Lender's Commitment; PROVIDED, HOWEVER, that such Lender shall not be obligated to make any Committed Advance if, after giving effect to such Committed Advance and the other Committed Advances to be made by the other Lenders as part of the same Committed Borrowing, (x) the Facility Usage shall exceed the Total Commitment or (y) in the event such Borrowing is being made by a Subsidiary Borrower, the aggregate amount of outstanding Advances to such Subsidiary Borrower shall exceed such Subsidiary Borrower's Subsidiary Borrower Sublimit; PROVIDED, FURTHER, that such Lender shall not be obligated to make any Committed Advance in an Alternative Currency if, after giving effect to such Committed Advance and the other Committed Advances to be made by the other Lenders as part of the same Committed Borrowing, the then outstanding aggregate principal amount (determined in Dollars) of all Committed Advances denominated in Alternative Currencies shall exceed the Alternative Currency Sublimit. Each Committed Borrowing under this Section 2.01(a) shall (i) be in an aggregate amount not less than $1,000,000 in the case of Base Rate Advances, $1,000,000 in the case of Eurocurrency Rate Committed Advances denominated in Dollars and $1,500,000 in the case of Eurocurrency Rate Committed Advances denominated in an Alternative Currency, (ii) be in an integral multiple of $100,000 in the case of Base Rate Advances and $500,000 in the case of each other type of Advance, and (iii) consist of Committed Advances of the same Interest Type made in the same currency on the same Business Day by the Lenders ratably according to their respective Commitments, SUBJECT, HOWEVER, to the provisions of Section 2.02(c). Within the limits of each Lender's Commitment and subject to the terms and provisions hereof, the Borrowers may - 32 - from time to time borrow under this Section 2.01(a), prepay pursuant to Section 2.12, and reborrow under this Section 2.01(a). (b) CURRENCY EQUIVALENTS. For purposes of this Section 2.01 and all other provisions of this Article II, the equivalent in Dollars of any Alternative Currency or the equivalent in any Alternative Currency of Dollars or of any other Alternative Currency shall be determined in accordance with Section 2.19. 2.02 MAKING THE COMMITTED ADVANCES. (a) COMMITTED ADVANCES. Each Committed Borrowing shall be of the same Interest Type and denominated in the same currency, and shall be made by a Notice of Borrowing received by the Agent: (x) not later than 9:30 A.M. (San Francisco time) on the date of such Committed Borrowing if such Committed Borrowing consists of Base Rate Advances; (y) not later than 10:00 A.M. (San Francisco time) on the third Business Day prior to the date of such Committed Borrowing if such Committed Borrowing consists of Eurocurrency Rate Committed Advances denominated in Dollars; and (z) not later than 10:00 A.M. (San Francisco time) on the fifth Business Day prior to the date of such Committed Borrowing if such Committed Borrowing consists of Eurocurrency Rate Committed Advances denominated in an Alternative Currency. More than one Committed Borrowing may be made on any Business Day; provided no more than one Committed Borrowing (which excludes Conversions and Continuations) may be made in any single Currency on the same Business Day. Each such Notice of Borrowing shall specify therein the (i) date of such Committed Borrowing, (ii) Interest Type of Committed Advances comprising such Committed Borrowing, (iii) in the case of a proposed Committed Borrowing comprised of Eurocurrency Rate Committed Advances, currency of such Committed Borrowing and the Dollar equivalent of Eurocurrency Rate Committed Advances denominated in Alternative Currencies as of the date of such Notice, (iv) aggregate amount and Borrower of such Committed Borrowing, (v) in the case of a proposed Committed Borrowing comprised of Eurocurrency Rate Committed Advances, initial Interest Period for each such Committed Advance and (vi) the Applicable Margin, if any, for the Advances comprising such Committed Borrowing, and shall be given - 33 - in writing or by telecopier or telephone (and if by telephone, confirmed promptly by telecopier). In the case of a proposed Committed Borrowing comprised of Eurocurrency Rate Committed Advances in an Alternative Currency, the Agent shall, at the request of the relevant Borrower, use its best efforts to notify such Borrower as to an indicative interest rate with respect to such proposed Committed Borrowing by 9:00 A.M. (San Francisco time) the fourth Business Day prior to the date of such Committed Borrowing, and such Borrower may, by notice to the Agent not later than 10:00 A.M. (San Francisco time) on the fourth Business Day preceding the date of such proposed Committed Borrowing, withdraw the Notice of Borrowing relating to such requested Committed Borrowing and if so withdrawn prior to such time, Borrower shall not be obligated to pay any costs which might otherwise be payable pursuant to Section 2.02(b) in connection with the Borrower's failure to incur such Advance; provided, however, the failure of the Agent to so notify the Borrower shall not relieve such Borrower of any of its obligations hereunder, including its obligation to borrow such Eurocurrency Rate Committed Advances on the date of Borrowing specified in such Notice of Borrowing; and provided further, notwithstanding anything to the contrary, in no event shall the Agent have any liability to any Borrower for failing to notify a Borrower of the interest rate on or prior to 9:00 A.M. (San Francisco time) such fourth Business Day preceding such date of Borrowing. If a Lender is unable to fund an Advance requested in an Alternative Currency (whether due to changes in the interbank market or changes in funding capabilities of such Lender, including, without limitation, changes due to such Lender's decision to close a funding office or not to book loans in such Alternative Currency), such Lender shall notify the Agent of such fact no later than the later of (i) 10:00 A.M. (San Francisco time) on the fourth Business Day preceding the applicable date of such Committed Borrowing and (ii) one hour after being notified by the Agent of the relevant Notice of Borrowing. The Agent shall promptly notify each other Lender and the Borrower of the Agent's receipt of any such Notice that a Lender is not going to fund a Committed Borrowing requested in an Alternative Currency and the Notice of Borrowing shall be deemed to be withdrawn. In such event, no Lender shall have any obligation to fund the Advances requested in such Notice of Borrowing and the Borrower shall not be obligated to pay any costs which might otherwise be payable pursuant to Section 2.02(b) with respect to any requested Eurocurrency Rate Committed Advances which are not funded by the Lenders under such withdrawn Notice of Borrowing. - 34 - Each Lender shall promptly notify the Agent and the Borrower if any Alternative Currency in which the Borrower has previously received Eurocurrency Rate Committed Advances is no longer available to such Lender. So long as no Default or Event of Default shall have occurred and be continuing, the Borrower may, upon receipt of such a notice, request that such Lender be replaced with another commercial bank or other financial institution which has such Alternative Currency available to it selected by the Borrower and approved in writing by the Agent (which approval shall not be unreasonably withheld or delayed). Upon any such request by the Borrower, if the Agent shall have approved the commercial bank or other financial institution selected by the Borrower, the Lender that is not able to fund in such Alternative Currency shall execute and deliver a Commitment Assignment and Acceptance to the Agent pursuant to which such Lender shall assign all of its Commitment to the commercial bank or other financial institution selected by the Borrower. If any Lender which has notified the Agent and the Borrower in accordance with this Section 2.02(a) that an Alternative Currency is no longer available to it, is not so replaced, such Lender shall promptly notify the Agent and the Borrower if such Alternative Currency subsequently becomes available to it. (b) NOTICES IRREVOCABLE, ETC. Except as otherwise provided in Section 2.02(a), each Notice of Borrowing shall be irrevocable and binding on the Borrower delivering any such notice. In the case of any Committed Borrowing which the related Notice of Borrowing specified is to be comprised of Eurocurrency Rate Committed Advances, unless such notice is withdrawn or deemed withdrawn pursuant to Section 2.02(a), such Borrower shall indemnify each Lender against any reasonable direct out-of-pocket loss, cost or expense incurred by such Lender as a result of any failure by the Borrowers to fulfill on or before the date specified in such Notice of Borrowing the applicable conditions set forth in Article IV hereof, including, without limitation, any loss or reasonable direct out-of-pocket cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by any Lender to fund the Advance to be made by such Lender as part of such Committed Borrowing when such Committed Borrowing, as a result of such failure, is not made on such date. (c) ADVANCES BY LENDERS. The Agent shall promptly (and in any event within one Business Day) give each Lender notice of each Notice of Borrowing received by it. Each Lender shall, before (i) 12:00 Noon (San Francisco time) with respect to Borrowings in U.S. Dollars, and (ii) 9:00 a.m. (local time at the Agent's Applicable Lending Office) with respect to Borrowings in Alternative Currencies, on the date of the Committed Borrowing covered by each such Notice of Borrowing, make available for the - 35 - account of its Applicable Lending Office to the Agent such Lender's ratable portion of such Committed Borrowing by depositing the amount of such portion in the applicable currency and in same day funds in the Agent's Account. Unless the Agent shall have received written notice from a Lender prior to the date of any such Committed Borrowing that such Lender will not make available to the Agent such Lender's ratable portion of such Committed Borrowing, the Agent may assume that such Lender has made such portion available to the Agent on the date of such Committed Borrowing in accordance with this Section 2.02(c) and the Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount pursuant to Section 2.02(d). If and to the extent any Lender shall not have made available to the Agent on the date of the Committed Borrowing such Lender's ratable portion of such Committed Borrowing, such Lender and the applicable Borrower agrees to pay to the Agent forthwith on demand such amount together with interest thereon, for each day from the date such amount is made available to the applicable Borrower until the date such amount is repaid to the Agent, at an interest rate equal to, in the case of a Borrower, the interest rate (plus the Applicable Margin, if any) stated in the Notice of Borrowing applicable thereto, or, in the case of a Lender, the Federal Funds Rate or, in the case of a payment in an Alternative Currency, the Overnight Rate. If such Lender shall pay to the Agent such amount, such amount so paid shall constitute such Lender's Advance as part of such Committed Borrowing for purposes of this Agreement and to such extent the Borrower shall have no further obligation under this Section 2.02(c) to repay such amount. (d) DISBURSEMENT OF ADVANCES. Upon fulfillment of the applicable conditions set forth in Article IV hereof, the Agent will make funds for any Committed Borrowing available to the applicable Borrower, to the extent of Agent's receipt of such funds from the Lenders. The funds so made available to the applicable Borrower, subject to the preceding sentence, will be same-day funds to the extent funds are received by the Agent prior to the close of business on the day received. Upon request of the applicable Borrower, the Agent will disburse such funds to such accounts as are designated by such Borrower, subject to the payment of customary wire transfer costs. (e) NATURE OF LENDER'S OBLIGATIONS. The failure of any Lender to make any Committed Advance to be made by it as part of any Committed Borrowing shall not relieve any other Lender of its obligation, if any, hereunder to make its Committed Advance on the date of such Committed Borrowing. In no event shall any Lender be responsible for the failure of any other Lender to make the Committed Advance to be made by such other Lender on the date of any Committed Borrowing. - 36 - 2.03 FEES. (a) AGENT'S AND ARRANGER'S FEES. The Borrower agrees to pay to the Agent and the Arranger, for their own accounts, the fees referred to in the letter agreement dated August 8, 1997 between the Borrower, Bank of America and the Arranger. (b) APPROVAL FEE. The Borrower agrees to pay to the Agent, for the account of each Lender approving this Agreement by August 26, 1997, (i) on the Closing Date, a fee equal to 0.075% of such Lender's Commitment and (ii) on December 31, 1997, a fee equal to 0.125% of such Lender's Pro Rata Share of any portion of the Total Commitment which is in excess of $150,000,000 on December 31, 1997. (c) COMMITMENT FEE. The Borrower agrees to pay to the Agent, for the account of each Lender, a commitment fee on the average daily unused portion of such Lender's Commitment (as calculated in accordance with Section 2.03(c)) at a rate per annum equal to the Applicable Margin as in effect from time to time for all periods on and after the Closing Date, payable quarterly on the last Business Day of each March, June, September and December in each year and on the Final Maturity Date. (d) COMMITMENT FEE CALCULATIONS. For purposes of calculating each Lender's commitment fee pursuant to Section 2.03(c), outstanding Letters of Credit shall be considered a ratable usage of such Lender's Commitment based on the Letter of Credit Liability attributable from time to time to such Letters of Credit; Swing Line Advances and Bid Advances shall not be considered usage. For purposes of determining the unused portion of each Lender's Commitment solely in order to calculate the commitment fee under Section 2.03(c), the equivalent in Dollars of each Eurocurrency Rate Committed Advance made by such Lender in an Alternative Currency as determined on the date of the making of such Advance (in accordance with the provisions of Section 2.19) shall be the amount of such Lender's Commitment used in connection with such Advance, and no further adjustments shall be made with respect to the unused portion of such Lender's Commitment based upon fluctuations thereafter in the value of the Alternative Currency of such Advance. Any change in the commitment fee because of a change in the Leverage Ratio shall be effective upon receipt by the Agent from a Senior Officer of the Borrower of a Compliance Certificate demonstrating such fact. (e) NATURE OF OBLIGATION. The Borrower's obligation hereunder to pay the fees referred to in this Section 2.03 shall be absolute and unconditional and shall survive the making and repaying of Advances and the termination of this Agreement. - 37 - 2.04 REPAYMENT OF ADVANCES. (a) The Borrower agrees to repay on the Final Maturity Date the outstanding principal amount of all Committed Advances made to the Borrower. Notwithstanding any other provision of this Agreement, if a Subsidiary Borrower shall be a party to this Agreement, the Obligations of each Borrower, in its capacity as a Borrower, shall be several and not joint and several. Except as provided in Section 2.06 (c) and (d), each Eurocurrency Rate Committed Advance denominated in an Alternative Currency, together with interest thereon as provided herein, shall be repaid in such Alternative Currency. (b) Sunrise shall repay each Bid Advance on the last day of the relevant Interest Period. 2.05 INTEREST RATE PROVISIONS, ETC. (a) BASE RATE ADVANCES. Except to the extent that the applicable Borrower shall have elected in the applicable Notice of Borrowing or Notice of Conversion/Continuation to pay interest on any Committed Advances denominated in Dollars and comprising part of the same Committed Borrowing for an Interest Period pursuant to subsection (d) of this Section 2.05, the Borrowers shall pay interest on the unpaid principal amount of each Committed Advance denominated in Dollars made to the Borrowers, from the date of such Advance until such principal amount is paid in full, payable quarterly on the last Business Day of each March, June, September and December in each year and on the Final Maturity Date, at a fluctuating interest rate per annum equal to the Base Rate in effect from time to time; PROVIDED, HOWEVER, that during any period in which an Event of Default has occurred and is continuing (but only so long as such Event of Default is continuing), the Borrower shall pay interest on the unpaid principal amount of each Base Rate Advance made to it, payable from the date such Event of Default occurs and upon written demand by the Agent on behalf of the Lenders to the Borrowers, at the Default Rate. (b) INTEREST PERIODS. Any Borrower may, pursuant to subsection (d) below, elect to have the interest on the principal amount of any Committed Advances made to it denominated in Dollars and comprised or comprising part of the same Committed Borrowing to be made to the Borrower pursuant to Section 2.02(a), or on all or any portion of the principal amount of any outstanding Committed Advances of the same Interest Type, in each case ratably according to the respective outstanding principal amounts of Committed Advances of such Interest Type owing to each Lender, determined and payable for an Interest Period in accordance with subsection (d) below; PROVIDED, HOWEVER, that the - 38 - Borrowers may not select any Interest Period that ends after the Final Maturity Date; and, PROVIDED, FURTHER, that the Borrowers may not, unless the Majority Lenders shall otherwise agree in writing, have more than an aggregate of 40 Eurocurrency Rate Committed Advances and Bid Advances from any Lender outstanding at any one time. (c) BID ADVANCES. Each Bid Advance shall bear interest on the outstanding principal amount thereof from the Borrowing date at a rate per annum equal to the Eurocurrency Rate plus (or minus) the Eurocurrency Rate Bid Margin, or at the Absolute Rate, as the case may be; PROVIDED, HOWEVER, that during any period in which an Event of Default has occurred and is continuing (but only so long as such Event of Default is continuing), the Borrower shall pay interest on the unpaid principal amount of each such Bid Advance made to it, payable from the date such Event of Default occurs and upon written demand by the Lender of such Bid Advance, at the rate of 2% per annum above the rate otherwise applicable in effect at the time of the occurrence of such Event of Default, until the last day of the then current Interest Period for such Advance, and thereafter at the Default Rate in effect from time to time. (d) EUROCURRENCY RATE COMMITTED ADVANCES DENOMINATED IN DOLLARS. Any Borrower may, from time to time and on the condition no Event of Default or Default has occurred and is continuing and subject to the provisions of subsections (f)-(k) below, elect to pay interest on each Committed Advance denominated in Dollars and comprising part of the same Committed Borrowing made to the Borrower during any Interest Period therefor at a rate per annum equal to the sum of the Eurocurrency Rate for such Interest Period PLUS the Applicable Margin, by selecting the same either in the Notice of Borrowing pursuant to which such Committed Advance was made or in a Notice of Conversion/Continuation covering such Committed Advance, each of which shall specify the Eurocurrency Rate Committed Advances and the first day and duration of such Interest Period, and which shall be delivered to the Agent as specified in Section 2.02(a), Section 2.06(a) or Section 2.06(b), as applicable. If a Borrower has made such an election for Eurocurrency Rate Committed Advances for any Interest Period, such Borrower shall, subject to subsection (1) hereof, pay interest on the unpaid principal amount of each such Eurocurrency Rate Committed Advance during such Interest Period (i) in the case of an Interest Period which is three months or less, on the last day of such Interest Period and (ii) in the case of an Interest Period which is longer than three months, on the last day of each three-month period of such Interest Period and on the last day of such Interest Period, at a rate per annum equal to the sum of the Eurocurrency Rate for such Interest Period for such Eurocurrency Rate Committed Advance PLUS - 39 - the Applicable Margin; PROVIDED, HOWEVER, that during any period in which an Event of Default has occurred and is continuing (but only so long as such Event of Default is continuing), such Borrower shall pay interest on the unpaid principal amount of each such Eurocurrency Rate Committed Advance made to it, payable from the date such Event of Default occurs and upon written demand by the Agent on behalf of the Lenders, at the rate of 2% per annum above the Eurocurrency Rate PLUS the Applicable Margin for such Eurocurrency Rate Committed Advance in effect at the time of the occurrence of such Event of Default, until the last day of the then current Interest Period for such Advance, and thereafter at the Default Rate in effect from time to time. On the last day of each Interest Period for any Eurocurrency Rate Committed Advance denominated in Dollars, the unpaid principal balance thereof shall automatically become and bear interest as a Base Rate Advance, except to the extent that the applicable Borrower of such Advance has elected to pay interest on all or any portion of such amount for a new Interest Period commencing on such day in accordance with this Section 2.05 and by timely delivering a Notice of Conversion/Continuation pursuant to Section 2.06(a). (e) EUROCURRENCY RATE COMMITTED ADVANCES DENOMINATED IN ALTERNATIVE CURRENCIES. Each Borrower shall pay interest on the unpaid principal amount of each Committed Advance made to it denominated in an Alternative Currency and comprising part of the same Committed Borrowing, from the date of such Advance until such principal amount is paid in full at a rate per annum equal to the sum of the Eurocurrency Rate, determined with regard to the applicable Alternative Currency of such Advance and the Interest Period selected by such Borrower pursuant to Section 2.02(a), 2.06(a) or 2.06(b), for such Interest Period PLUS the Applicable Margin, payable (i) in the case of an Interest Period which is one, two or three months, on the last day of such Interest Period and (ii) in the case of an Interest Period which is six months, on the last day of the third month of such Interest Period and on the last day of such Interest Period; PROVIDED, HOWEVER, that during any period in which an Event of Default has occurred and is continuing (but only so long as such Event of Default is continuing), each Borrower shall pay interest on the unpaid principal amount of each Committed Advance made to it denominated in an Alternative Currency, payable from the date such Event of Default occurs and upon written demand by the Agent on behalf of the Lenders, at the rate of 2% per annum above the Eurocurrency Rate plus the Applicable Margin for such Committed Advance in effect at the time of the occurrence of such Event of Default, until the principal amount of such Committed Advance is paid in full. On the last day of each Interest Period for any Committed Advance denominated in an Alternative Currency, so long as no Event of Default or Default has occurred and is continuing, - 40 - the unpaid principal balance thereof shall automatically become and bear interest as a Eurocurrency Rate Committed Advance denominated in the same Alternative Currency on the basis of a one month Interest Period, except to the extent that the applicable Borrower has elected to pay interest on all or any portion of such Advance for a new Interest Period commencing on such day in accordance with this Section 2.05 and by timely delivering a Notice of Conversion/Continuation pursuant to Section 2.06(a); PROVIDED, HOWEVER, that if the Agent shall have notified the Borrower on or prior to 11:00 A.M. (San Francisco time) on the fourth Business Day preceding the last day of such Interest Period that any Lender is unable to fund such Alternative Currency after the expiration of such Interest Period, all Advances denominated in such Alternative Currency maturing on the last day of such Interest Period shall, notwithstanding the foregoing, be due and payable on the last day of such Interest Period. (f) INTEREST RATE QUOTATIONS. In the event that, prior to the first day of any Interest Period for any Borrowing, the Agent shall have determined in good faith (or the Lender of any Eurocurrency Rate Bid Advance as to which the Borrower has accepted such Lender's Competitive Bid, but as to which the Borrowing Date has not arrived shall have determined and have notified the Agent) (which determination shall be conclusive and binding upon all parties hereto) that (i) Dollar or Alternative Currency deposits of the relevant amount and for the relevant Interest Period for such Advances are not available to the Lenders, or (ii) adequate and reasonable means do not exist for ascertaining the Eurocurrency Rate for any Eurocurrency Rate Committed Advances denominated in Dollars, or in an Alternative Currency then: (i) the Agent shall forthwith notify the Borrowers and the Lenders that the interest rate cannot be determined for such Eurocurrency Rate Committed Advances denominated in Dollars or in such Alternative Currency, as the case may be, (ii) each such Committed Advance denominated in Dollars will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance unless an appropriate notice is given for another Interest Type which is then available, (iii) each such Committed Advance denominated in such Alternative Currency will automatically, on the last day of the then existing Interest Period therefor, be due and payable, and - 41 - (iv) the obligation of the Lenders to make, or to Convert Advances into, Eurocurrency Rate Committed Advances, shall be suspended until the Agent shall notify the Borrowers and the Lenders that the circumstances causing such suspension no longer exist. (g) CHANGE IN CIRCUMSTANCES. If, with respect to any Eurocurrency Rate Advances, the Majority Lenders notify the Agent (or the Lender of any Eurocurrency Rate Bid Advance as to which the Borrower has accepted such Lender's Competitive Bid, but as to which the Borrowing Date has not arrived notifies the Agent) that the Eurocurrency Rate for any Interest Period for such Advances will not adequately reflect the cost to such Majority Lenders of making or maintaining their respective Eurocurrency Rate Advances for such Interest Period, the Agent shall forthwith so notify the Borrowers and the Lenders, whereupon (i) each Eurocurrency Rate Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance, and (ii) the obligation of the Lenders to make, or Convert Committed Advances into, Eurocurrency Rate Advances shall be suspended until the Agent shall notify the Borrowers and the Lenders that the circumstances causing such suspension no longer exist. (h) FAILURE TO NOTIFY. If any Borrower shall fail to select the duration of any Interest Period for any Eurocurrency Rate Committed Advances made to such Borrower in accordance with Section 2.05(d) or Section 2.06(a) or (b), the Agent will forthwith so notify such Borrower and the Lenders, and such Advances will automatically, on the last day of the then existing Interest Period therefor, Convert into Base Rate Advances; PROVIDED, HOWEVER, that if such failure to select an Interest Period relates to any Eurocurrency Rate Advance denominated in an Alternative Currency, such Advance will automatically, on the last day of the existing Interest Period for such Advance, be continued as a Eurocurrency Rate Advance denominated in such Alternate Currency with an Interest Period of one month. (i) MINIMUM AMOUNTS. On the date on which the aggregate unpaid principal amount of Committed Advances comprising any Committed Borrowing shall be reduced, by payment or prepayment (but not by reason of fluctuations in foreign currency exchange rates), to less than $1,000,000, such Advances shall, if they are Advances of an Interest Type other than Base Rate Advances, automatically Convert into Base Rate Advances, and on and after such date the right of the Borrower to Convert such Advances into Advances of an Interest Type other than Base Rate Advances shall terminate. - 42 - (j) ILLEGALITY. Notwithstanding any other provision of this Agreement, if the enactment or issuance of or any change in or in the interpretation of any law or regulation shall make it unlawful, or any central bank or other governmental authority shall assert in writing that it is unlawful, for any Lender or its Eurocurrency Lending Office to fund or maintain Eurocurrency Rate Advances denominated in Dollars or in any Alternative Currencies hereunder, then, on notice thereof by such Lender to the Borrowers through the Agent, (i) the right of the Borrowers to select such Interest Type for any Advance pursuant to subsection (d) or (e) above and pursuant to Section 2.06(a) and (b) or to accept a bid from the affected Lender pursuant to Section 2.08(e), as the case may be, shall thereupon be suspended until the Agent shall notify the Borrowers and the Lenders that the circumstances causing such suspension no longer exist (and each Lender shall promptly notify Borrower if such circumstance no longer exists), (ii) each such affected Advance denominated in Dollars shall automatically become a Base Rate Advance and (iii) the Borrowers shall forthwith prepay in full all such affected Eurocurrency Rate Advances denominated in an Alternative Currency of all Lenders then outstanding, together with interest accrued thereon. (k) QUOTED RATES. The Agent shall give prompt (and in any event within one Business Day) notice to the Borrowers and the Lenders of the applicable interest rate determined by the Agent for the purposes of Section 2.05(c), (d) or (e). (l) SWING LINE ADVANCES. The Borrower shall pay interest on the unpaid principal amount of each Swing Line Advance from the date of such Advance until such principal amount is paid in full, payable on such dates, not more frequently than monthly, as may be specified by the Swing Line Lender and in any event on the Final Maturity Date, at a fluctuating interest rate per annum equal to the Base Rate in effect from time to time; PROVIDED, HOWEVER, that during any period in which an Event of Default has occurred and is continuing (but only so long as such Event of Default is continuing), such Borrower shall pay interest on the unpaid principal amount of each Swing Line Advance made to it, payable from the date such Event of Default occurs and upon written demand by the Swing Line Lender to such Borrower, at the Default Rate. The Swing Line Lender shall be responsible for invoicing such Borrower for such interest. The interest payable on Swing Line Advances is solely for the account of the Swing Line Lender. - 43 - 2.06 VOLUNTARY CONVERSIONS AND CONTINUATIONS OF COMMITTED ADVANCES. (a) CONVERSION AND CONTINUATION. The Borrower may, from time to time and on the condition that no Default or Event of Default shall have occurred and be continuing, on any Business Day, upon delivery of a Notice of Conversion/Continuation given to the Agent not later than 10:00 A.M. (San Francisco time) on the third Business Day (or, in the case of Alternative Currency Advances, the fifth Business Day) prior to the date of the proposed Conversion or Continuation and subject to the other provisions of Section 2.05 and this Section 2.06, (i) continue Committed Advances of the same Interest Type and Interest Period and comprising the same Committed Borrowing as Committed Advances of such Interest Type or (ii) Convert such Committed Advances, if such Committed Advances are denominated in Dollars, into Committed Advances of another Interest Type denominated in Dollars; PROVIDED, HOWEVER, that any Conversion of any Eurocurrency Rate Committed Advances into Committed Advances of another Interest Type shall be made on, and only on, the last day of an Interest Period for such Eurocurrency Rate Committed Advances; and, PROVIDED, FURTHER, that Eurocurrency Rate Committed Advances denominated in an Alternative Currency may not be converted into another Alternative Currency and may only be continued as Eurocurrency Rate Committed Advances denominated in such Alternative Currency. Each such Notice of a Conversion/Continuation shall be in writing or by telecopier or telephone (and if by telephone, confirmed immediately by telecopier), and delivered or given to the Agent within the time period specified above, and shall specify (i) the date of such Conversion/Continuation, (ii) the Committed Advances to be Converted/Continued, and (iii) if such Conversion/Continuation is into Eurocurrency Rate Committed Advances, the duration of the Interest Period for each such Advance. In the case of a Notice of Conversion/Continuation relating to Eurocurrency Rate Committed Advances in an Alternative Currency, the Agent shall, at the request of the applicable Borrower, use its best efforts to notify the Borrower as to an indicative interest rate with respect to such proposed Continuation/Conversion by 9:00 A.M. (San Francisco time) the fourth Business Day prior to the date of such Continuation/Conversion, and such Borrower may, by notice to the Agent not later than 10:00 A.M. (San Francisco time) on the fourth Business Day preceding the date of such proposed Continuation/Conversion, withdraw such Notice of Continuation/ Conversion and submit a new Notice of Continuation/ Conversion not denominated in an Alternative Currency, and if so withdrawn prior to such time, Borrower shall not be obligated to pay any costs which might otherwise be payable pursuant to - 44 - Section 2.06(c) in connection with the Borrower's failure to so Continue; PROVIDED, HOWEVER, the failure of the Agent to so notify the Borrower shall not relieve such Borrower of any of its obligations hereunder, including its obligation to Continue such Eurocurrency Rate Committed Advances on the date of the Continuation specified in such Notice of Continuation/Conversion; and PROVIDED, FURTHER, notwithstanding anything to the contrary, in no event shall the Agent have any liability to any Borrower for failing to notify a Borrower of the interest rate on or prior to 9:00 A.M. such fourth Business Day preceding such date of Conversion or Continuation. In the case of a Notice of Conversion/Continuation with respect to Eurocurrency Rate Committed Advances denominated in an Alternative Currency, in the event any Lender notifies the Agent that it is no longer able to continue such Advance in an Alternative Currency (whether due to changes in the interbank market or changes in funding capabilities of such Lender, including, without limitation, changes due to such Lender's decision to close a funding office or not to book loans in such Alternative Currency), such Lender shall notify the Agent of such fact no later than the later of (x) 10:00 A.M. (San Francisco time) on the fourth Business Day preceding the requested effective date of such Continuation or (y) one hour after being notified by the Agent of the relevant Notice of Conversion/Continuation. The Agent shall promptly notify the other Lenders and the Borrower of the receipt of any such notice and the relevant Notice of Conversion/Continuation shall be deemed to be withdrawn by the relevant Borrower. The Borrower shall not be obligated to pay any costs which might otherwise be payable pursuant to Section 2.06(c) in connection with any Notice of Conversion/Continuation withdrawn or deemed withdrawn, in accordance with this paragraph. (b) NOTICES IRREVOCABLE. Except as otherwise provided herein, each notice by a Borrower under this Section 2.06 shall be irrevocable, and the Borrowers shall indemnify each Lender against any reasonable direct out-of-pocket loss, cost or expenses incurred by such Lender as a result of any failure by the Borrower to fulfill on or before the date specified by such notice the applicable conditions set forth in this Section 2.06 or Article IV. The Agent promptly (and in any event within one Business Day) will give each Lender notice of each Notice of Conversion/Continuation received by it. (c) ALTERNATIVE CURRENCY CONVERSION. Notwithstanding anything herein to the contrary, upon the occurrence and continuation of an Event of Default resulting from the failure of a Borrower to make any payment of principal or interest on any Obligation, upon notice from the Agent, all of the Advances - 45 - denominated in an Alternative Currency shall automatically be converted to Base Rate Advances in a principal amount equal to the Dollar equivalent of such Alternative Currency on the date of such conversion. Such Borrower shall be responsible for all costs associated with such conversion to the full extent of each indemnity provided herein in connection with a conversion prior to the last day of an Interest Period. 2.07 BID BORROWINGS. (a) In addition to Committed Borrowings pursuant to Section 2.02, each Lender severally agrees that Sunrise may, as set forth in Section 2.08, from time to time request the Lenders prior to the Final Maturity Date to submit offers to make Bid Advances to such Borrower; PROVIDED, HOWEVER, that the Lenders may, but shall have no obligation to, submit such offers and such Borrower may, but shall have no obligation to, accept any such offers; PROVIDED, FURTHER, that no Bid Advance shall be made if, after giving effect to such Bid Advance and the other Bid Advances to be made by the other Lenders as part of the same Bid Borrowing, (a) the Facility Usage shall exceed the Total Commitment, (b) the outstanding aggregate principal amount of all Bid Advances made by all Lenders shall exceed $137,500,000; or (c) the number of Interest Periods for Bid Advances then outstanding plus the number of Interest Periods for Committed Advances then outstanding exceeds 40. (b) Each Lender may designate one Designated Bidder to have a right to offer and make Bid Advances as a Lender pursuant to Sections 2.07 and 2.08; PROVIDED, HOWEVER, that (i) each such Lender shall retain the right to make Bid Advances as a Lender, (ii) each such designation shall be of a Designated Bidder and (iii) the parties to each such designation shall execute and deliver to the Agent, for its acceptance, an agreement and acknowledgment substantially in the form of Exhibit N hereto, whereby such Designated Bidder agrees to be bound by the terms and conditions of this Agreement as a Lender for purposes of Bid Advances. Upon the Agent accepting an appropriately completed agreement and acknowledgment, the Designated Bidder shall be deemed to be a direct party to this Agreement as a Lender for purposes of Bid Advances only, and each reference to "Lender" in Section 2.07(a) and 2.08 (and the defined terms used therein) shall be deemed to include a reference to each Designated Bidder. Except (A) that each Designated Bidder shall be solely responsible to the other parties hereto for the performance of its obligations relating to its Bid Advances, and (B) for the right of each Designated Bidder to offer and make Bid Advances (and receive notices directly from the Agent in connection therewith) and to receive payments as a Lender with respect to its Bid Advances, each Designated Bidder shall be deemed to have - 46 - only the rights of a participant in a Bid Advance hereunder, as set forth in (and limited by) Section 11.08(g) (but with no rights under Section 2.13(a), 3.07, 11.02, 11.08, 11.10 or 11.14), and the Agent shall be entitled to deal solely with the Lender designating such Designated Bidder for all matters, including voting. Upon the request of the Designated Bidder made through the Agent, Sunrise shall execute and deliver a Bid Advance Note to evidence Bid Advances made by each Designated Bidder. A Lender may revoke any designation of a Designated Bidder at any time upon written notice to the Agent, but such revocation shall not affect the rights and obligations of a Designated Bidder as to any of its Bid Advances remaining outstanding. 2.08 PROCEDURE FOR BID BORROWINGS. (a) When Sunrise wishes to request the Lenders to submit offers to make Bid Advances hereunder, it shall transmit to the Agent by telephone call followed promptly by facsimile transmission a notice in substantially the form of Exhibit J (a "Competitive Bid Request") so as to be received no later than 9:00 a.m. (San Francisco time) (x) four Business Days prior to the date of a proposed Bid Borrowing in the case of a Eurocurrency Auction, or (y) one Business Day prior to the date of a proposed Bid Borrowing in the case of an Absolute Rate Auction, specifying: (i) the date of such Bid Borrowing, which shall be a Business Day; (ii) the aggregate amount of such Bid Borrowing, which shall be a minimum amount of $5,000,000 or in multiples of $1,000,000 in excess thereof; (iii) whether the Competitive Bids requested are to be for Eurocurrency Rate Bid Advances or Absolute Rate Bid Advances or both; and (iv) the duration of the Interest Period applicable thereto, subject to the provisions of the definition of "Interest Period" herein. Subject to subsection 2.08(c), such Borrower may not request Competitive Bids for more than four Interest Periods in a single Competitive Bid Request and may not request Competitive Bids more than twice in any period of five Business Days. Sunrise shall pay to the Agent for the Agent's sole benefit a bid auction fee of $400 on the day of each Absolute Rate Auction and Eurocurrency Auction. (b) Upon receipt of a Competitive Bid Request, the Agent will promptly send to the Lenders by facsimile transmission an Invitation for Competitive Bids, which shall constitute an invitation by Sunrise to each Lender to submit Competitive Bids offering to make the Bid Advances to which such Competitive Bid Request relates in accordance with this Section 2.08. (c) (i) Each Lender may at its discretion submit a Competitive Bid containing an offer or offers to make - 47 - Bid Advances in response to any Invitation for Competitive Bids. Each Competitive Bid must comply with the requirements of this subsection 2.08(c) and must be submitted to the Agent by facsimile transmission at the Agent's office for notices set forth on Schedule 11.06 hereto not later than 7:00 a.m. (San Francisco time) (1) three Business Days prior to the proposed date of Borrowing, in the case of a Eurocurrency Auction or (2) on the proposed date of Borrowing, in the case of an Absolute Rate Auction; PROVIDED that Competitive Bids submitted by Bank of America (or any Affiliate of Bank of America) in the capacity of a Lender may be submitted, and may only be submitted, if Bank of America or such Affiliate notifies the Agent of the terms of the offer or offers contained therein not later than 6:45 a.m. (San Francisco time) (A) three Business Days prior to the proposed date of Borrowing, in the case of a Eurocurrency Auction or (B) on the proposed date of Borrowing, in the case of an Absolute Rate Auction. (ii) Each Competitive Bid shall be in substantially the form of Exhibit L, specifying therein: (A) the proposed date of Borrowing; (B) the principal amount of each Bid Advance for which such Competitive Bid is being made, which principal amount (x) may be equal to, greater than or less than the Commitment of the quoting Lender, (y) must be $5,000,000 or in multiples of $1,000,000 in excess thereof, and (z) may not exceed the principal amount of Bid Advances for which Competitive Bids were requested; (C) in case the Borrower elects a Eurocurrency Auction, the margin above or below the Eurocurrency Rate (the "Eurocurrency Rate Bid Margin") offered for each such Bid Advance, expressed as a percentage (rounded to the nearest 1/100th of 1%) to be added to or subtracted from the Eurocurrency Rate and the Interest Period applicable thereto; (D) in case the Borrower elects an Absolute Rate Auction, the rate of interest per annum (rounded upward to the nearest 1/100th of 1%) (the "Absolute Rate") offered for each such Bid Advance; and (E) the identity of the quoting Lender. A Competitive Bid may contain up to three separate offers by the quoting Lender with respect to each Interest Period specified in the related Invitation for Competitive Bids. (iii) Any Competitive Bid shall be disregarded if it: (A) is not substantially in conformity with Exhibit L or does not specify all of - 48 - the information required by subsection (c)(ii) of this Section; (B) contains qualifying, conditional or similar language; (C) proposes terms other than or in addition to those set forth in the applicable Invitation for Competitive Bids; or (D) arrives after the time set forth in subsection (c)(i). (iv) Notwithstanding anything to the contrary contained in this section, a Competitive Bid by Bank of America may contain, and will not be disregarded if it does contain, a restriction on the use of proceeds consistent with Section 2.21. (d) Promptly on receipt and not later than 7:30 a.m. (San Francisco time) (i) three Business Days prior to the proposed date of Borrowing in the case of a Eurocurrency Auction, or (ii) on the proposed date of Borrowing, in the case of an Absolute Rate Auction, the Agent will notify Sunrise of the terms (A) of any Competitive Bid submitted by a Lender that is in accordance with subsection 2.08(c), and (B) of any Competitive Bid that amends, modifies or is otherwise inconsistent with a previous Competitive Bid submitted by such Lender with respect to the same Competitive Bid Request. Any such subsequent Competitive Bid shall be disregarded by the Agent unless such subsequent Competitive Bid is submitted solely to correct a manifest error in such former Competitive Bid and only if received within the times set forth in subsection 2.08(c). The Agent's notice to the Borrower shall specify (1) the aggregate principal amount of Bid Advances for which offers have been received for each Interest Period specified in the related Competitive Bid Request; and (2) the respective principal amounts and Eurocurrency Rate Bid Margins or Absolute Rates, as the case may be, so offered. Subject only to the provisions of Sections 2.05(g), 2.05(j) and 4.02 and the provisions of this subsection (d), any Competitive Bid shall be irrevocable except with the written consent of the Agent given on the written instructions of the Borrower. (e) Not later than 8:00 a.m. (San Francisco time) (i) three Business Days prior to the proposed date of Borrowing, in the case of a Eurocurrency Auction, or (ii) on the proposed date of Borrowing, in the case of an Absolute Rate Auction, the Borrower shall notify the Agent of its acceptance or non-acceptance of the offers so notified to it pursuant to subsection 2.08(d). Such Borrower shall be under no obligation to accept any offer and may choose to reject all offers. In the case of acceptance, such notice shall specify the aggregate principal amount of offers for each Interest Period that is accepted. Such Borrower may accept any Competitive Bid in whole or in part; PROVIDED that: - 49 - (i) the aggregate principal amount of each Bid Borrowing may not exceed the applicable amount set forth in the related Competitive Bid Request; (ii) the aggregate principal amount of Bid Borrowing on each day must be $5,000,000 or in any multiple of $1,000,000 in excess thereof; (iii) acceptance of offers may only be made on the basis of ascending Eurocurrency Rate Bid Margins or Absolute Rates within each Interest Period, as the case may be; and (iv) such Borrower may not accept any offer that is described in subsection 2.08(c)(iii) or that otherwise fails to comply with the requirements of this Agreement. (f) If offers are made by two or more Lenders with the same Eurocurrency Rate Bid Margins or Absolute Rates, as the case may be, for a greater aggregate principal amount than the amount in respect of which such offers are accepted for the related Interest Period, the principal amount of Bid Advances in respect of which such offers are accepted shall be allocated by the Agent among such Lenders as nearly as possible (in such multiples, not less than $1,000,000, as the Agent may deem appropriate) in proportion to the aggregate principal amounts of such offers. Determination by the Agent of the amounts of Bid Advances shall be conclusive in the absence of manifest error. (g) (i) The Agent will promptly notify each Lender having submitted a Competitive Bid if its offer has been accepted and, if its offer has been accepted, of the amount of the Bid Advance or Bid Advances to be made by it on the date of the Bid Borrowing. (ii) Each Lender, which has received notice pursuant to subsection 2.08(g)(i) that its Competitive Bid has been accepted, shall make the amounts of such Bid Advances available to the Agent for the account of the Borrower at the Agent's Office, by 11:00 a.m. (San Francisco time) in the case of Absolute Rate Bid Advances, and by 11:00 a.m. (San Francisco time) in the case of Eurocurrency Rate Bid Advances, on such date of Bid Borrowing, in funds immediately available to the Agent for the account of such Borrower at the Agent's Office. (iii) Promptly following each Bid Borrowing, the Agent shall notify each Lender of the ranges of - 50 - bids submitted and the highest and lowest Bids accepted for each Interest Period requested by the Borrower and the aggregate amount borrowed pursuant to such Bid Borrowing. (iv) From time to time, the Borrower and the Lenders shall furnish such information to the Agent as the Agent may request relating to the making of Bid Advances, including the amounts, interest rates, dates of borrowings and maturities thereof, for purposes of the allocation of amounts received from such Borrower for payment of all amounts owing hereunder. (h) If, on or prior to the proposed date of Borrowing, the Commitments have not been terminated and if, on such proposed date of Borrowing all applicable conditions to funding referenced in Sections 4.01 and 4.02 are satisfied, the Lender or Lenders whose offers Sunrise has accepted will fund each Bid Advance so accepted. Nothing in this Section 2.08 shall be construed as a right of first offer in favor of the Lenders or to otherwise limit the ability of the Borrower to request and accept credit facilities from any Person (including any of the Lenders), provided that no Default or Event of Default would otherwise arise or exist as a result of such Borrower executing, delivering or performing under such credit facilities. (i) Each outstanding Bid Advance shall be deemed to utilize the Commitment of each lender by an amount equal to such Lender's Pro Rata Share TIMES the amount of such Bid Advance. 2.09 THE SWING LINE. (a) AVAILABILITY. The Swing Line Lender shall from time to time through the day prior to the Final Maturity Date make Swing Line Advances in Dollars to Sunrise in such amounts as Sunrise may request, PROVIDED that (i) giving effect to such Swing Line Advance, the Swing Line Outstandings shall not exceed $10,000,000 and the Facility Usage shall not exceed the Total Commitment, (ii) without the consent of the Majority Lenders, no Swing Line Advance may be made during the continuation of an Event of Default and (iii) the Swing Line Lender has not given at least twenty-four (24) hours prior notice to Sunrise that availability under the Swing Line is suspended or terminated. Sunrise may borrow, repay and reborrow under this Section. Unless notified to the contrary by the Swing Line Lender, Borrowings under the Swing Line may be made in a minimum amounts of $100,000 and multiples of $25,000 in excess thereof upon telephonic request made to the Swing Line Lender not later than 3:00 p.m., San Francisco time, on the Business Day of the requested Borrowing (which telephonic request shall be promptly - 51 - confirmed in writing by a Senior Officer of Sunrise by telecopier with telephonic notice to the Agent). Promptly after receipt of such a request for borrowing, the Swing Line Lender shall obtain telephonic verification from the Agent that, giving effect to such request, availability for Advances will exist under Section 2.01(a) (and such verification shall be promptly confirmed in writing by telecopier). Unless notified to the contrary by the Swing Line Lender, each repayment of a Swing Line Advance shall be in an amount which is an integral multiple of $25,000. If Sunrise instructs the Swing Line Lender to debit its demand deposit account at the Swing Line Lender in the amount of any payment with respect to a Swing Line Advance, or the Swing Line Lender otherwise receives repayment, after 3:00 p.m., San Francisco time, on a Business Day, such payment shall be deemed received on the next Business Day. The Swing Line Lender shall promptly notify the Agent of the Swing Advance Outstandings each time there is a change therein. The Swing Line Lender may at any time in its sole discretion notify Sunrise that availability under the Swing Line is suspended or terminated. (b) REPAYMENT OF SWING LINE ADVANCES. In the event that there are Swing Line Outstandings on five (5) consecutive Business Days, then on the next Business Day (unless Sunrise has made other arrangements acceptable to the Swing Line Lender to reduce the Swing Line Outstandings to zero), Sunrise shall request a Committed Advance pursuant to Section 2.02(a) in an amount complying with Section 2.01 and sufficient to reduce the Swing Line Outstandings to zero. The Agent shall automatically provide such amount directly to the Swing Line Lender (which the Swing Line Lender shall then apply to the Swing Line Outstandings) and credit any balance of the Committed Advance in immediately available funds as provided in Section 2.02(d). In the event that Sunrise fails to request a Committed Advance within the time specified by Section 2.02 on any such date, the Agent may, but is not required to, without notice to or the consent of Sunrise, cause Committed Advances to be made by the Lenders under the Commitments in the amount necessary to comply with Section 2.01 and sufficient to reduce the Swing Line Outstandings to $5,000,000 and, for this purpose, the conditions precedent set forth in Sections 4.01 and 4.02 shall not apply. The proceeds of such Committed Advances shall be paid to the Swing Line Lender for application to the Swing Line Outstandings. (c) PURCHASE OF PARTICIPATIONS. Upon the making of a Swing Line Advance, each Lender shall be deemed to have purchased from the Swing Line Lender a participation therein in an amount equal to that Lender's Pro Rata Share of the Commitment TIMES the amount of the Swing Line Advance. Upon demand made by the Swing Line Lender, each Lender shall, according to its Pro Rata Share of the Commitment, promptly provide to the Swing Line Lender its - 52 - purchase price therefor in an amount equal to its participation therein. The obligation of each Lender to so provide its purchase price to the Swing Line Lender shall be absolute and unconditional and shall not be affected by the occurrence of an Event of Default or any other occurrence or event. 2.10 REDUCTION OF COMMITMENTS. (a) VOLUNTARY REDUCTIONS. Sunrise shall have the right, upon written notice to the Agent not later than 10:00 A.M. (San Francisco Time) on the fifth Business Day prior thereto, to terminate in whole or reduce ratably in part the unused portions of the respective Commitments of the Lenders; PROVIDED, HOWEVER, that each partial reduction shall be in the amount of $5,000,000 or any multiple of $l,000,000 in excess thereof. At the direction of Sunrise, any voluntary reduction made pursuant to this Section 2.10(a) may be credited against the next scheduled reductions required pursuant to Section 2.10(b). (b) SCHEDULED REDUCTIONS. The Total Commitment shall automatically reduce on each Amortization Date by an amount equal to the Amortization Amount unless the Final Maturity Date is extended within the three months preceding such Amortization Date in accordance with Section 2.10(c) below, in which case each Amortization Date shall be delayed by one year. The Total Commitment shall be reduced to zero on the Final Maturity Date. (c) EXTENSION OF FINAL MATURITY DATE. Provided that there is no Default or Event of Default and Borrower has theretofore delivered to the Lenders the financial statements required under Section 6.01(b) for the immediately preceding Fiscal Year and the projected financial statements required under Section 6.01(c) for the forthcoming Fiscal Years, Borrower may by delivery of a Request for Extension to the Agent and the Lenders request that the Final Maturity Date be extended by one year. The Request for Extension shall not be delivered earlier than March 14, commencing March 14, 1996, nor later than April 15 in any year. Each Lender shall use its best efforts to respond either affirmatively or negatively (in its sole and absolute discretion) to such Request for Extension by written notice to Borrower and the Agent within thirty days after receipt thereof from Borrower. If each Lender so notifies Borrower and the Agent in writing that such Lender consents to the extension of the Final Maturity Date, then the Agent shall by written notice to Borrower and the Lenders in the form of a Certificate of Extension certify that the Final Maturity Date has been so extended and the term "Final Maturity Date" shall be deemed amended to mean the date which is the January 15 subsequent to the then effective Final Maturity Date. If any Lender, in its sole and absolute discretion, notifies Borrower and the Agent in - 53 - writing within said thirty-day period that it does not consent to such extension of the Final Maturity Date, or fails to respond in writing within said thirty-day period, the Final Maturity Date shall not be so extended. Notwithstanding the fact that the Final Maturity Date is not extended pursuant to any Request for Extension, the Borrower may nonetheless request a one-year extension the following year. 2.11 MANDATORY PREPAYMENTS. (a) REDUCTION IN COMMITMENTS. If, at any time, the Facility Usage shall exceed the then existing Commitments of the Lenders, the Borrowers shall (i) prepay at least such amount of the outstanding principal amount of Advances and/or (ii) cash collateralize at least such amount of Outstanding Letter of Credit Liability and/or Advances, as is necessary to make the then existing Facility Usage less than or equal to the then existing Commitments of the Lenders; PROVIDED, HOWEVER, that all such prepayments shall be made as specified by the applicable Borrower, and if not so specified, in the order set forth in Section 2.15(e). All prepayments of Advances pursuant to this Section 2.11(a), except in the case of prepayments of Base Rate Advances, shall be made together with accrued interest to the date of such payment on the principal amount repaid, together with any amounts payable under Section 2.20. (b) ALTERNATIVE CURRENCY EXCHANGE RATE FLUCTUATIONS. If the Dollar equivalent of the aggregate outstanding principal amount of all Committed Advances denominated in Alternative Currencies exceeds the Alternative Currency Sublimit, the Borrowers shall, as of the last day of each Interest Period with respect to an Alternative Currency which ends thereafter, repay Advances denominated in Alternative Currencies or cash collateralize such Advances in either case in an amount equal to the lesser of (i) the amount by which the Dollar equivalent of outstanding Alternative Currencies exceeds the Alternative Currency Sublimit on the last day of such Interest Period and (ii) the Dollar equivalent of the Advance with respect to which such Interest Period is expiring. (c) OTHER MANDATORY PREPAYMENTS. If the Borrowers are required to make any mandatory prepayments of Advances pursuant to Section 7.06(e), 7.06(f) or 7.12(d), the Borrowers shall prepay such advances on the required date (the "prepayment date") together with, in the case of prepayment of Eurocurrency Rate Committed Advances, (i) accrued interest to the date of such prepayment on the principal amounts prepaid and (ii) any additional amount for which the Borrowers shall be obligated pursuant to Section 2.20. Any prepayments pursuant to this section shall be applied first to Base Rate Advances then - 54 - outstanding and then to Eurocurrency Rate Committed Advances with the shortest Interest Periods remaining; PROVIDED, HOWEVER, that if any prepayment of Eurocurrency Rate Committed Advances on any prepayment date would result in the Borrowers being required to pay any amounts pursuant to Section 2.20, the Borrowers may wait to prepay such Eurocurrency Rate Committed Advances until the earlier of (x) the date the Interest Periods relating to such Eurocurrency Rate Committed Advances expires and (y) 10 days after such prepayment date. 2.12 OPTIONAL PREPAYMENTS. The Borrowers may, upon at least four Business Days' written notice to the Agent in the case of Eurocurrency Rate Committed Advances and on the date of prepayment to the Agent in the case of Base Rate Advances, stating the proposed date and aggregate principal amount of the prepayment (and if such notice is given the Borrowers shall), prepay, in whole or in part, the outstanding principal amounts of the Advances comprising the same Committed Borrowing, together with, in the case of prepayment of Eurocurrency Rate Committed Advances, (i) accrued interest to the date of such prepayment on the principal amounts prepaid and (ii) any additional amount for which the Borrowers shall be obligated pursuant to Section 2.20; PROVIDED, HOWEVER, that each partial prepayment shall be in an aggregate principal amount not less than $500,000 or any multiple of $100,000 (or the equivalent thereof in an Alternative Currency) in excess thereof, except with respect to Base Rate Advances, which shall be in an aggregate principal amount not less than $300,000 or any multiple of $100,000 in excess thereof, and if not otherwise specified by the applicable Borrower, shall be applied in accordance with Section 2.15(e); PROVIDED, FURTHER, that no partial prepayment of any Eurocurrency Rate Committed Advances denominated in an Alternative Currency and comprising part of the same Committed Borrowing shall be permitted if less than $1,500,000 Dollar equivalent principal amount of such Advances shall remain outstanding after giving effect to such prepayment. Bid Advances may not be voluntarily prepaid without the consent of the Lender making such Bid Advance. 2.13 INCREASED COSTS. (a) If, due to either (i) the enactment or issuance of or any change (including, without limitation, any change by way of imposition or increase of reserve requirements other than as provided in the definition of Eurocurrency Rate Reserve Percentage in Section 1.01) in or in the interpretation of any law or regulation by any governmental or regulatory body or agency having jurisdiction over the Lenders or (ii) the compliance by any Lender with any written guideline or request from any central bank or other governmental authority having jurisdiction, whether or not having the force of law, there shall be any increase in the cost to any Lender of agreeing to make or making, funding or maintaining Eurocurrency Rate - 55 - Committed Advances, then the Borrowers shall from time to time, upon demand by such Lender (with a copy of such demand to the Agent), promptly (and in any event within five Business Days) pay to the Agent for account of such Lender additional amounts sufficient to reimburse such Lender for such increased cost. Any Lender making a demand under this Section 2.13(a) shall promptly notify the Borrowers of the event or condition giving rise to such demand; provided however that, failure to give such notice promptly shall not relieve the Borrowers of any obligation or liability hereunder. A certificate as to the amount of such increased costs setting forth in reasonable detail the basis for the calculations of such increased costs shall be submitted to the Borrowers and the Agent by such Lender and such certificate shall be conclusive and binding for all purposes, absent manifest error. (b) If, at any time after the Closing Date, any Lender determines that compliance with any law or regulation as adopted, amended or otherwise modified after the Closing Date or with any written guideline or request from any central bank or other governmental authority having jurisdiction published after the Closing Date, whether or not having the force of law, has or would have the effect of reducing the rate of return on the capital of such Lender or any corporation controlling such Lender (whether by increasing the amount of capital required or expected to be maintained by such Lender or any corporation controlling such Lender or otherwise) as a consequence of, or with reference to, such Lender's Commitments or its making or maintaining Committed Advances below the rate that the Lender or any such other corporation, as the case may be, could have achieved but for compliance therewith (taking into account the policies of such Lender or any such corporation with regard to capital), then the Borrowers shall from time to time, upon demand by such Lender (with a copy of such demand to the Agent), promptly (and in any event within five Business Days) pay to such Lender additional amounts sufficient to compensate such Lender or any such other corporation, as the case may be, for such reduction. A certificate setting forth in reasonable detail the basis for the calculation of such amounts shall be submitted to the Borrowers and the Agent by such Lender, which certificate shall be conclusive and binding for all purposes, absent manifest error. (c) Upon any Lender (an "Affected Lender") (i) making a claim for compensation pursuant to this Section 2.13, or (ii) giving a notice under Section 2.05(f) or (g) and Section 3.07(a) and (b), the Borrower may: (A) request the Affected Lender to use its reasonable efforts to obtain a replacement bank or financial institution satisfactory to the Borrower to acquire and assume all or part of such Affected Lender's Advances and Commitment pursuant to a Commitment Assignment and Acceptance (a - 56 - "Replacement Lender"); (B) request one more of the other Lenders to acquire and assume all or part of such Affected Lender's Advances and Commitment; or (C) designate a Replacement Lender. Any such designation of a Replacement Lender under clause (A) or (C) shall be subject to the prior written consent of the Agent (which consent shall not be unreasonably withheld). This section shall not affect or limit the rights of any Affected Lender under Section 2.05(f) or 2.13 in respect of any period prior to such Lender being replaced hereunder. (d) Without prejudice to the survival of any other agreement of the Borrowers hereunder, the agreements and obligations of the Borrowers contained in this Section 2.13 shall survive the payment in full of the Obligations. 2.14 EVIDENCE OF DEBT. (a) The Committed Advances made by each Lender shall be evidenced by one or more loan accounts or records maintained by such Lender in the ordinary course of business. The loan accounts or records maintained by the Agent and each Lender shall be conclusive absent manifest error of the amount of the Committed Advances made by the Lenders to the Borrowers and the interest and payments thereon. Any failure so to record or any error in doing so shall not, however, limit or otherwise affect the obligation of the Borrowers hereunder to pay any amount owing with respect to the Committed Advances. (b) The Committed Advances made by such Lender may, at the request of a Lender, be evidenced by one or more Committed Advance Notes, instead of loan accounts. Each such Lender shall endorse on the schedules annexed to its Committed Advance Note(s) the date, amount and maturity of each Committed Advance made by it and the amount of each payment of principal made by each Borrower with respect thereto. Each such Lender is irrevocably authorized by the Borrowers to endorse its Committed Advance Note(s) and each Lender's record shall be conclusive absent manifest error; PROVIDED, HOWEVER, that the failure of a Lender to make, or an error in making, a notation thereon with respect to any Committed Advance shall not limit or otherwise affect the obligations of the Borrowers hereunder or under any such Committed Advance Note to such Lender. (c) The Bid Advances made by such Lender shall be evidenced by one or more Bid Advance Notes, instead of loan accounts. Each such Lender shall endorse on the schedules annexed to its Bid Advance Note(s) the date, amount and maturity of each Bid Advance made by it and the amount of each payment of principal made by each Borrower with respect thereto. Each such Lender is irrevocably authorized by the Borrowers to endorse its Bid Advance Note(s) and each Lender's record shall be conclusive absent manifest error; PROVIDED, HOWEVER, that the failure of a - 57 - Lender to make, or an error in making, a notation thereon with respect to any Bid Advance shall not limit or otherwise affect the obligations of the Borrowers hereunder or under any such Bid Advance Note to such Lender. (d) The Swing Line Advances shall be evidenced by one or more loan accounts maintained by the Swing Line Lender in the ordinary course of business, and such accounts shall be presumptive evidence of the principal amount owing under the Swing Line. Any failure to so record or any error in doing so shall not, however, limit or otherwise affect the obligation of the Borrower to pay any amount owing with respect to Swing Line Advances; PROVIDED, HOWEVER, that the Swing Line Lender may request such Borrower to execute and deliver a promissory note to evidence the Swing Line Advances, and such Borrower agrees to execute and deliver such a promissory note, and such other Swing Line Documents as the Swing Line Lender may from time to time reasonably request. 2.15 PAYMENTS AND COMPUTATIONS. (a) Except as provided in Section 2.16, the Borrowers shall pay all amounts due to the Agent, Lenders and the Issuing Lender hereunder or under any other Loan Document to which it is a party (except, in each case, with respect to principal of, interest on and other amounts relating to, Advances denominated in an Alternative Currency), irrespective of, and without condition or deduction for, any counterclaim, defense, recoupment or setoff, in lawful money of the United States and in same day funds delivered to the Agent not later than 12:00 noon (San Francisco time) on the day when due in Dollars by deposit of such funds to the Agent's Account maintained for payments in Dollars. The Borrowers shall make each payment due hereunder with respect to principal of, interest on and other amounts relating to Advances denominated in an Alternative Currency not later than 9:00 a.m. (local time for the city specified for such Alternative Currency on Schedule 1.01(a)) on the day when due in such Alternative Currency to the Agent in same day funds by deposit of such funds to the Agent's Account maintained for payments in such Alternative Currency. The Agent will promptly thereafter cause to be distributed like funds relating to the payment of principal (including reimbursement for payments under Letters of Credit), interest, or commitment fees, or letter of credit fees ratably (other than amounts payable to any Lender or the Issuing Lender pursuant to Section 2.03(a), 2.08, 2.09, 2.13, 2.20 or 3.07 or amounts subject to Taxes pursuant to Section 2.16) to the Lenders, for the account of their respective Applicable Lending Offices, or the Issuing Lender and like funds relating to the payment of any other amount payable to any Lender or the Issuing Lender to such Lender, for the account of its Applicable Lending Office, or to the Issuing Lender, in each case to be applied in accordance with, and - 58 - subject to, the terms of this Agreement. Upon its acceptance of a Commitment Assignment and Acceptance and recording of the information contained therein in the Register pursuant to Section 11.08, from and after the effective date specified in such Commitment Assignment and Acceptance, the Agent shall make all payments hereunder and under any other Loan Document in respect of the interest assigned thereby to the Lender assignee thereunder, and the parties to such Assignment and Acceptance shall make all appropriate adjustments in such payments for periods prior to such effective date directly between themselves. (b) Each Borrower hereby authorizes each Lender and the Issuing Lender if and to the extent payment owing to such Lender or the Issuing Lender, as the case may be, from the Borrower is not made when due hereunder to charge from time to time against any or all of such Borrower's accounts (other than any trust or segregation account maintained for the benefit of any Person that is not a Subsidiary or an Affiliate any of the Borrowers) with such Lender or the Issuing Lender, as the case may be, any amount so due. (c) All computations of interest based on the Eurocurrency Rate (other than with respect to Pound Sterling denomination) or the Federal Funds Rate and of commitment and letter of credit fees shall be made by the Agent on the basis of a year of 360 days, and computations of interest based on the Base Rate or Eurocurrency Rate with respect to Pound Sterling denominations shall be made by the Agent on the basis of a year of 365 or 366 days, in each case for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest or fees are payable. Each determination by the Agent of an interest rate hereunder shall be conclusive and binding for all purposes absent manifest error. (d) Unless the Agent shall have received notice from the applicable Borrower prior to the date on which any payment is due to the Lenders or the Issuing Lender, as the case may be, hereunder that such Borrower will not make such payment in full to the Agent, the Agent may assume that such Borrower has made such payment in full to the Agent on such date and the Agent may, in reliance upon such assumption, cause to be distributed to each Lender or the Issuing Lender, as the case may be, on such due date an amount equal to the amount then due to such Lender or the Issuing Lender, as the case may be. If and to the extent such Borrower shall not have so made such payment in full to the Agent, each Lender or the Issuing Lender, as the case may be, shall repay to the Agent forthwith on demand such amount distributed to such Lender or the Issuing Lender, as the case may be, together with interest thereon, for each day from the date such amount is distributed to such Lender or the Issuing Lender, as the case may be, until the date such Lender or the Issuing Lender, - 59 - as the case may be, repays such amount to the Agent, at the Federal Funds Rate or, in the case of a payment in an Alternative Currency, the Overnight Rate. (e) Amounts received by the Agent for application to amounts due and payable to the Agent, the Lenders or the Issuing Lender shall be applied, if not specified by the applicable Borrower or if received after the occurrence and continuance of an Event of Default, to amounts due and payable as follows: FIRST, to any amounts due and payable under Section 11.03, SECOND, to the ratable payment of any accrued interest or fees that are then due and payable, THIRD, to the payment of the outstanding Swing Line Advances, FOURTH, to the ratable payment of the outstanding Base Rate Advances, FIFTH to the ratable payment of other outstanding Advances in the order of nearest expiring Interest Periods, and SIXTH, to cash collateralize Letter of Credit Liability, together with, in the case of payment of Eurocurrency Rate Advances, any additional amount for which the Borrowers shall be obligated in respect of the payment of Eurocurrency Rate Advances pursuant to Section 2.20. Any cash collateralization of Letter of Credit Liability pursuant to this Section 2.15(e) shall be effected by documentation prepared by the Issuing Lender having terms consistent with those in documentation customarily employed by the Issuing Lender for purposes of establishing and maintaining cash collateral for letters of credit issued by the Issuing Lender. Payments for reimbursement of amounts drawn under any Letter of Credit shall be applied as set forth in Section 3.04(c). 2.16 TAXES. (a) Subject to subsection (e) below, any and all payments by the Borrowers hereunder or any other Loan Document shall be made, in accordance with Section 2.15, free and clear of and without deduction for any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, EXCLUDING, (i) in the case of each Lender, the Issuing Lender and the Agent, taxes imposed on its income, and franchise taxes imposed on it, by the jurisdiction under the laws of which such Lender, the Issuing Lender or the Agent (as the case may be) is organized or any political subdivision thereof, (ii) in the case of each Lender and the Issuing Lender, taxes imposed on its income, and franchise taxes imposed on it, by the jurisdiction of such Lender's Applicable Lending Office or of the Issuing Lender's office through which it Issues Letters of Credit, as the case may be, or any political subdivision thereof and (iii) in the case of each Lender, the Issuing Lender and the Agent, taxes imposed by the United States by means of withholding taxes if and to the extent that such withholding taxes shall be in effect and shall be applicable on the date hereof under current laws and - 60 - regulations (including judicial and administrative interpretations thereof) to payments to be made for the account of such Lender's Applicable Lending Office or to the Issuing Lender or to the Agent (all taxes described in subclauses (i), (ii) and (iii) being referred to as "EXCLUDED TAXES" and all taxes, levies, imposts, deductions, charges, withholdings and liabilities not described in subclauses (i), (ii) and (iii) being hereinafter referred to as "TAXES"). If any Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under any other Loan Document to any Lender, the Issuing Lender or the Agent, (x) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.16) such Lender, the Issuing Lender or the Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (y) such Borrower shall make such deductions and (z) such Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. (b) In addition, the Borrowers agree to pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies which arise from any payment made hereunder or under any other Loan Document or from the execution, delivery or registration or filing or recording of, or otherwise with respect to, this Agreement or any other Loan Document (including, without limitation, tangible or intangible property or ad valorem taxes) or document delivered hereunder or under any other Loan Document (hereinafter referred to as "OTHER TAXES"). (c) The Borrowers will indemnify each Lender, the Issuing Lender and the Agent for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this Section 2.16) paid by such Lender, the Issuing Lender or the Agent (as the case may be) and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted. This indemnification shall be made within 30 days from the date such Lender, the Issuing Lender or the Agent (as the case may be) makes written demand therefor, which demand shall specify in reasonable detail the basis for such demand. (d) Within 30 days after the date of any payment of Taxes by the Borrower, the Borrowers will furnish to the Agent, at its address referred to in Section 11.06, the original or a certified copy of a receipt or other evidence satisfactory to the Agent of payment thereof. - 61 - (e) Prior to the date of the initial Committed Borrowing in the case of each Lender or Issuance of the initial Letter of Credit in the case of the Issuing Lender, on the date of the Commitment Assignment and Acceptance pursuant to which it became a Lender in the case of each other Lender, or if otherwise requested from time to time by the Borrowers or the Agent, each Lender organized under the laws of a jurisdiction outside the United States and the Issuing Lender, if organized under the laws of a jurisdiction outside the United States, shall provide the Agent and the Borrowers with three counterparts of each of the forms prescribed by the Internal Revenue Service (Form 1001 or 4224, or successor form(s), as the case may be) of the United States certifying as to such Lender's or Issuing Lender's (if applicable) status for purposes of determining exemption from United States withholding taxes with respect to all payments to be made to such Lender or the Issuing Lender under any Loan Document. (f) Without affecting its rights under this Section 2.16 or any provision of this Agreement, each Lender and the Issuing Lender agree that if any Taxes or Other Taxes are imposed and required by law to be paid or to be withheld from any amount payable to such Lender or its Applicable Lending Office or the Issuing Lender, as the case may be, with respect to which any Borrower would be obligated pursuant to this Section 2.16 to increase any amounts payable to such Lender or the Issuing Lender, as the case may be, or to pay any such Taxes or Other Taxes, such Lender shall use reasonable efforts to select an alternative Applicable Lending Office and the Issuing Lender shall use reasonable efforts to select an alternative office for purposes of issuing and receiving payments in respect of Letters of Credit, as the case may be, which would not result in the imposition of such Taxes or Other Taxes; PROVIDED, however, that none of the Lenders or the Issuing Lender shall be obligated to select any such alternative office if such Lender or the Issuing Lender, as the case may be, determined that (i) as a result of such selection it would be in violation of an applicable law, regulation or treaty or (ii) such selection would result in additional costs to such Lender or the Issuing Lender, as the case may be. (g) Each Lender and the Issuing Lender agree with the Borrowers that it will take all reasonable actions by all usual means (i) to secure and maintain all benefits available to it under the provisions of any applicable tax treaty concluded to which it may be entitled, if such benefit would reduce the amount payable by the Borrowers in accordance with this Section 2.16, (ii) otherwise to cooperate with the Borrowers to minimize the amount payable by any Borrower pursuant to this Section 2.16 and (iii) to assist the Borrowers, at the expense of the Borrowers, - 62 - in contesting any such Taxes or Other Taxes; PROVIDED, HOWEVER, that none of the Lenders or the Issuing Lender, as the case may be, shall be obliged to disclose to any Borrower any information regarding its tax affairs or tax computations, to reorder its tax affairs or tax planning pursuant hereto nor to incur any cost or additional expense as a result thereof. If any Lender or the Issuing Lender makes a demand under this Section 2.16 for the payment by any Borrower of any Taxes or Other Taxes and as a result of any such payment by such Borrower, such Lender or the Issuing Lender, as the case may be, receives a direct cash benefit (either by the receipt of a refund or a reduction in the amount of taxes otherwise payable), the Lender or the Issuing Lender, as the case may be, receiving such direct cash benefit shall, to the extent permitted by applicable law, refund the amount of such cash benefit to the appropriate Borrower. (h) So long as no Default or Event of Default shall have occurred and be continuing, the Borrower may, within the 30-day period commencing on the day that any Borrower receives a demand for the payment of Taxes or Other Taxes from any Lender pursuant to this Section 2.16, or notification that Taxes or Other Taxes may become due, demand that the Lender making such demand be replaced with another commercial bank or other financial institution selected by the Borrower and approved in writing by the Agent (which approval shall not be unreasonably withheld or delayed). Upon any such demand by the Borrower, if the Agent shall have approved the commercial bank or other financial institution selected by the Borrower, the Lender that made a demand pursuant to this Section 2.16 shall execute and deliver a Commitment Assignment and Acceptance to the Agent pursuant to which such Lender shall assign all of its Commitment to the commercial bank or other financial institution selected by the Borrower. (i) Without prejudice to the survival of any other agreement of the Borrowers hereunder, the agreements and obligations of the Borrowers contained in this Section 2.16 shall survive the payment in full of the Obligations hereunder for a period expiring concurrently with the expiration of the statute of limitations applicable to claims made by the tax authorities to collect Taxes or Other Taxes. 2.17 PAYMENTS ON BUSINESS DAYS. Whenever any payment hereunder shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest or commitment fee, as the case may be; PROVIDED, HOWEVER, that if such extension would cause payment of interest on or principal of Eurocurrency Rate Advances to be made in the next following - 63 - month, such payment shall be made on the next preceding Business Day. 2.18 SHARING OF PAYMENTS, ETC. If any Lender or the Issuing Lender shall obtain any payment whether voluntary, involuntary, through the exercise of any right of setoff, or otherwise (other than amounts payable to any Lender or the Issuing Lender pursuant to Section 2.03(a), 2.08, 2.09, 2.13, 2.20 or 3.07 or amounts subject to Taxes pursuant to Section 2.16) in excess of its ratable share of payments on account of the Committed Advances or Letter of Credit Liability owing to all the Lenders, such Lender or the Issuing Lender, as the case may be, shall forthwith purchase from the other Lenders such participations in the Committed Advances or Letter of Credit Liability owing to them as shall be necessary to cause such purchasing Lender or the Issuing Lender, as the case may be, to share the excess payment ratably with each of them; PROVIDED, HOWEVER, that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender or the Issuing Lender, as the case may be, such purchase from each Lender shall be rescinded and such Lender or the Issuing Lender, as the case may be, shall repay to the purchasing Lender or the Issuing Lender, as the case may be, the purchase price to the extent of such recovery, together with an amount equal to such Lender's ratable share (according to the proportion of (i) the amount of such Lender's required repayment to (ii) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender or the Issuing Lender, as the case may be, in respect of the total amount so recovered. The Borrower agrees that any Lender or the Issuing Lender, as the case may be, purchasing a participation from another Lender pursuant to this Section 2.18, Section 3.04 or 11.08(g) may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of setoff) with respect to such participation as fully as if such Lender or the Issuing Lender, as the case may be, were the direct creditor of the Borrower in the amount of such participation. 2.19 CURRENCY EQUIVALENTS. For purposes of determining the amount of any Advance, Conversion or Continuation requested pursuant to this Article II, (i) the equivalent in Dollars of any Alternative Currency shall be determined by using the quoted spot rate at which Bank of America's principal office in London offers to exchange Dollars for such Alternative Currency in London, England at 11:00 A.M. (London time) two Business Days prior to the date on which such equivalent is to be determined, (ii) the equivalent in any Alternative Currency of any other Alternative Currency shall be determined by using the quoted spot rate at which Bank of America's principal office in London offers to exchange such Alternative Currency for such other Alternative - 64 - Currency in London, England at 11:00 A.M. (London time) two Business Days prior to the date on which such equivalent is to be determined, and (iii) the equivalent in any Alternative Currency of Dollars shall be determined by using the quoted spot rate at which Bank of America's principal office in London offers to exchange such Alternative Currency for Dollars in London, England at 11:00 A.M. (London time) two Business Days prior to the date on which such equivalent is to be determined. For purposes of determining the unused portion of each Lender's Commitment and the amount of any or all Advances outstanding on any date (except for Advances to be Converted or Continued pursuant to the Notice of Borrowing or the Notice of Continuation/Conversion, as the case may be, with respect to which any calculation is made), the calculations shall be based on the rate quoted by Bank of America's principal office in London for offers to exchange such Alternative Currency for the equivalent Dollar amount on the date of determination. 2.20 FUNDING LOSSES. Except as otherwise provided, if any payment of principal of, or any Conversion of, any Eurocurrency Rate Advance is made by any Borrower to or for the account of a Lender other than on the last day of the Interest Period for such Advance, as a result of a Conversion pursuant to Section 2.06, a prepayment pursuant to Section 2.08 or 2.09, acceleration of the maturity of the Advances pursuant to Section 9.02 or for any other reason, the applicable Borrower shall, upon demand by such Lender (with a copy of such demand to the Agent), pay to the Agent for the account of such Lender any amounts required to compensate such Lender for any additional losses, costs or expenses which it may reasonably incur as a result of such payment or Conversion, including, without limitation, any reasonable direct out-of-pocket loss, cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by any Lender to fund or maintain such Advance. 2.21 USE OF PROCEEDS. The Borrowers shall use the proceeds of Advances to continue the Borrowers' outstanding obligations under the Existing Credit Agreement and for the general working capital needs of the Borrowers and for other general corporate purposes of the Borrowers, including, without limitation, acquisitions permitted hereunder. The Borrowers shall not, directly or indirectly, use any portion of any Advance proceeds (i) knowingly to purchase Ineligible Securities from a Section 20 Subsidiary during any period in which such Section 20 Subsidiary makes a market in such Ineligible Securities, (ii) knowingly to purchase during the underwriting or placement period Ineligible Securities being underwritten or privately placed by a Section 20 Subsidiary, or (iii) to make payments of principal or interest on Ineligible Securities underwritten or privately - 65 - placed by a Section 20 Subsidiary and issued by or for the benefit of the Borrowers or any Affiliate of the Borrower. As used in this Section, "Section 20 Subsidiary" means the Subsidiary of the bank holding company controlling any Lender, which Subsidiary has been granted authority by the Federal Reserve Board to underwrite and deal in certain Ineligible Securities; and "Ineligible Securities" means securities which may not be underwritten or dealt in by member banks of the Federal Reserve System under Section 16 of the Banking Act of 1933 (as U.S.C. Section 24, Seventh), as amended. 2.22 FUNDING SOURCES. Nothing in this Agreement shall be deemed to obligate any Lender to obtain the funds for its share of any Advance in any particular place or manner or to constitute a representation by any Lender that it has obtained or will obtain the funds for its share of any Advance in any particular place or manner. 2.23 BORROWER'S AGENT. Each Subsidiary Borrower hereby authorizes Sunrise to execute and deliver on its behalf, and as its agent, any notice or request permitted by or required of a Borrower under this Article II and under Article III, and the Agent and the Lenders shall be entitled to rely on any such notice or request delivered by Sunrise as if the same had been delivered by such Subsidiary Borrower. ARTICLE III AMOUNT AND TERMS OF LETTERS OF CREDIT AND PARTICIPATIONS THEREIN 3.01 LETTERS OF CREDIT. The Issuing Lender agrees, on the terms and conditions hereinafter set forth, to Issue, including the continuance of the letter(s) of credit issued under the Existing Credit Agreement as Letters of Credit hereunder (the "Continuing Letters of Credit") for the account of any Borrower, one or more Letters of Credit from time to time during the period from the Closing Date until the date which occurs 90 days before the Final Maturity Date in an aggregate undrawn amount not to exceed at any time $25,000,000, each such Letter of Credit upon its Issuance to expire on or before the earlier of (i) the date which occurs (x) in the case of Commercial Letters of Credit, 180 days from the date of its Issuance and (y) in the case of Standby Letters of Credit, 24 months from the date of its Issuance or (ii) the Final Maturity Date; provided, however, that the Issuing Lender shall not be obligated to Issue any Letter of Credit if: - 66 - (i) after giving effect to the Issuance of such Letter of Credit, the then existing Facility Usage shall exceed the Total Commitment; or (ii) the Agent or the Majority Lenders shall have notified the Issuing Lender and the Borrower that no further Letters of Credit are to be Issued by the Issuing Lender due to a continuing failure to meet any of the applicable conditions set forth in Article IV, and such notice has not expired or been withdrawn by the Agent or the Majority Lenders. Within the limits of the obligations of the Issuing Lender set forth above, any Borrower may request the Issuing Lender to Issue one or more Letters of Credit, reimburse the Issuing Lender for payments made thereunder pursuant to Section 3.03(a), and request the Issuing Lender to Issue one or more additional Letters of Credit under this Section 3.01. 3.02 ISSUING THE LETTERS OF CREDIT. Except with respect to Continuing Letters of Credit, which letters of credit are hereby automatically incorporated herein without any further action, each Standby Letter of Credit shall be Issued on at least three Business Days' notice and each Commercial Letter of Credit shall be Issued on at least one Business Day's notice, in each case from the applicable Borrower to the Issuing Lender specifying the date, amount, expiry, and beneficiary thereof, accompanied by such application and agreement for letter of credit as the Issuing Lender may specify to the Borrower, each in form and substance satisfactory to the Issuing Lender. On the date specified by such Borrower in such notice and upon fulfillment of the applicable conditions set forth in Section 3.01 and Article IV hereof, the Issuing Lender will Issue such Letter of Credit in the form specified in such notice and such application and agreement for letter of credit and shall promptly notify the Agent thereof. 3.03 REIMBURSEMENT OBLIGATIONS. (a) Notwithstanding any provisions to the contrary in any application and agreement for letter of credit applicable to any Letter of Credit, the applicable Borrower shall: (i) pay to the Issuing Lender an amount equal to, and in reimbursement for, each amount which the Issuing Lender pays under any Letter of Credit on or before the earlier of (A) the time specified therefor in the application and agreement for letter of credit applicable to such Letter of Credit or (B) after timely notice by the Issuing Lender, the date which occurs one Business Day after - 67 - payment of such amount by the Issuing Lender under such Letter of Credit; and (ii) pay to the Issuing Lender interest on any amount remaining unpaid under clause (i) above from the date on which the Issuing Lender pays such amount under any Letter of Credit until such amount is reimbursed in full to the Issuing Lender pursuant to clause (i) above, payable on demand, at a fluctuating rate per annum equal to the Base Rate in effect from time to time, PROVIDED that any such amount which is not reimbursed to the Issuing Lender within one Business Day after notice thereof by the Issuing Lender shall thereafter bear interest, until the amount is reimbursed in full to such Issuing Lender pursuant to clause (i) above, payable on demand, at the Default Rate in effect from time to time. (b) All amounts to be reimbursed to the Issuing Lender in accordance with subsection (a) above may, subject to the limitations set forth in Section 2.01, be paid from the proceeds of Committed Advances. Each Borrower hereby authorizes the Lenders, upon notice to the Borrower, to make pursuant to Section 2.02(a) Committed Advances which are in the amounts of the reimbursement obligations of the Borrower set forth in subsection (a) above, and further authorizes the Agent (i) to give the Lenders, pursuant to Section 2.02(a), a Notice of Borrowing with respect to the Committed Borrowing comprised of such Advances (which shall be Base Rate Advances) and (ii) to distribute the proceeds of such Advances to the Issuing Lender to pay such amounts. Each Borrower agrees that all such Advances so made shall be deemed to have been requested by it, and directs that all proceeds thereof shall be used to pay such reimbursement obligations under subsection (a) above. (c) Notwithstanding any other provision of this Agreement, if a Subsidiary Borrower shall be a party to this Agreement, the Obligations of each such Borrower with respect to Letters of Credit Issued hereunder, in its capacity as a Borrower, shall be several and not joint and several. 3.04 PARTICIPATIONS PURCHASED BY THE LENDERS. (a) On the date of Issuance of each Letter of Credit (including the continuance of letters of credit issued under the Existing Credit Agreement as Letters of Credit hereunder, the Issuing Lender shall be deemed irrevocably and unconditionally to have sold and transferred to each Lender without recourse or warranty, and each Lender shall be deemed to have irrevocably and unconditionally purchased and received from such Issuing Lender, an undivided interest and participation, to the extent of such Lender's Pro Rata Share, in effect from time to time, in such Letter of Credit - 68 - and all Letter of Credit Liability relating to such Letter of Credit and all Loan Documents securing, guarantying, supporting or otherwise benefiting the payment of such Letter of Credit Liability. Promptly after the end of each calendar month, the Agent will notify each Lender of the Letters of Credit Issued during the prior month and of their dates of Issue, amounts, expiries and reference numbers. (b) In the event that any reimbursement obligation under Section 3.03(a) is not paid when due to the Issuing Lender with respect to any Letter of Credit, the Issuing Lender shall promptly notify the Agent to that effect, and the Agent shall promptly notify the Lenders of the amount of such reimbursement obligation and each Lender shall immediately pay to the Issuing Lender, in lawful money of the United States and in same day funds, an amount equal to such Lender's Pro Rata Share then in effect of the amount of such unpaid reimbursement obligation with interest at the Federal Funds Rate for each day after such notification until such amount is paid to the Issuing Lender. (c) Promptly after the Issuing Lender receives a payment on account of a reimbursement obligation with respect to any Letter of Credit, the Issuing Lender shall promptly pay to the Agent, and the Agent shall promptly pay to each Lender which funded its participation therein, in lawful money of the United States and in the kind of funds so received, an amount equal to such Lender's ratable share thereof. (d) Upon the request of any Lender, the Issuing Lender shall furnish to such Lender copies of any Letter of Credit and any application and agreement for letter of credit and other documents related thereto as may be reasonably requested by such Lender. (e) The obligation of each Lender to make payments under subsection (b) above shall be unconditional and irrevocable and shall be made under all circumstances, including, without limitation, any of the circumstances referred to in Section 3.06(b). (f) If any payment received on account of any reimbursement obligation with respect to a Letter of Credit and distributed to a Lender as a participant under Section 3.04(c) is thereafter recovered from the Issuing Lender in connection with any bankruptcy or insolvency proceeding relating to any Borrower, each Lender which received such distribution shall, upon demand by the Agent, repay to the Issuing Lender such Lender's ratable share of the amount so recovered together with an amount equal to such Lender's ratable share (according to the proportion of (i) the amount of such Lender's required repayment to (ii) the total - 69 - amount so recovered) of any interest or other amount paid or payable by the Issuing Lender in respect of the total amount so recovered. 3.05 LETTER OF CREDIT FEES. (a) The Borrowers hereby agree to pay to the Issuing Lender a standby letter of credit fee equal to the greater of $150 or 0.125% per annum of the face amount (as such amount may be reduced from time to time pursuant to the terms of such letter of credit) for the term of each Standby Letter of Credit quarterly in arrears on the last Business Day of each quarter. In addition to such standby letter of credit fee, the Borrowers hereby agree to pay to the Agent for the account of each Lender (including the Issuing Lender, if applicable), according to each Lender's Pro Rata Share, a fee equal to the Applicable Margin per annum of the face amount (as such amount may be reduced from time to time pursuant to the terms of such letter of credit) for the term of such Standby Letter of Credit, quarterly in arrears on the last Business Day of each quarter. (b) The Borrowers shall pay to the Agent for the account of each Lender (including the Issuing Lender, if applicable), according to each Lender's Pro Rata Share, and the Issuing Lender a letter of credit fee on each Commercial Letter of Credit equal to the greater of $150 or .25% of the negotiated face amount of such Commercial Letter of Credit quarterly in arrears on the last Business Day of any quarter in which there has been any negotiation thereof. Of such Commercial Letter of Credit fee, the Agent shall pay to the Issuing Lender for its own account an amount equal to the greater of $150 or 0.125% of the negotiated face amount of such Commercial Letter of Credit. (c) The Borrowers shall pay to the Issuing Lender, for its own account and on demand, sums equal to standard fees (in addition to its letter of credit fee payable pursuant to clause (a) above), charges and expenses, including origination fees, that such Issuing Lender may impose, pay or incur in connection with the Issuance, amendment, administration, transfer or cancellation of any or all Letters of Credit or in connection with any payment by such Issuing Lender thereunder. The Issuing Lender shall give the applicable Borrower notice of any change in its standard fees, charges or expenses payable by such Borrower to the Issuing Lender pursuant to this Section 3.05(c); PROVIDED, HOWEVER, that any failure by the Issuing Lender to give such notice shall not affect such Borrower's obligations under this Section 3.05(c) to pay the Issuing Lender's reasonable current standard fees, charges or expenses in accordance herewith. - 70 - (d) All fees payable in respect of Letters of Credit shall be nonrefundable. 3.06 INDEMNIFICATION: NATURE OF THE ISSUING LENDER'S DUTIES. (a) The Borrowers agree to indemnify and save harmless the Agent, the Issuing Lender and each Lender from and against any and all claims, demands, liabilities, damages, losses, costs, charges and expenses (including reasonable attorneys' fees, which the Agent, the Issuing Lender or such Lender may incur or be subject to as a consequence, direct or indirect, of (i) the Issuance of any Letter of Credit or (ii) any action or proceeding relating to a court order, injunction, or other process or decree restraining or seeking to restrain the Issuing Lender from paying any amount under any Letter of Credit. (b) The obligations of the Borrowers hereunder with respect to Letters of Credit shall be unconditional and irrevocable, and shall be paid strictly in accordance with the terms hereof under all circumstances, including, without limitation, any of the following circumstances: (i) any lack of validity or enforceability of any Letter of Credit or Loan Document or any agreement or instrument relating thereto; (ii) the existence of any claim, setoff, defense or other right which the Borrower may have at any time against the beneficiary, or any transferee, of any Letter of Credit, or the Issuing Lender, any Lender, or any other Person; (iii) any draft, certificate, 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) any lack of validity, effectiveness, or sufficiency of any instrument transferring or assigning or purporting to transfer or assign any Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part; (v) any loss or delay in the transmission or otherwise of any document required in order to make a drawing under any Letter of Credit or of the proceeds thereof; - 71 - (vi) any failure of the beneficiary of a Letter of Credit to strictly comply with the conditions required in order to draw upon any Letter of Credit; (vii) any misapplication by the beneficiary of any Letter of Credit of the proceeds of any drawing under such Letter of Credit; or (viii) any other circumstance or happening whatsoever, whether or not similar to the foregoing; PROVIDED, THAT, notwithstanding the foregoing, the Issuing Lender shall not be relieved of any liability it may otherwise have as a result of its gross negligence or willful misconduct. 3.07 INCREASED COSTS. (a) CHANGE IN LAW. If any change after the Closing Date in any law or regulation or in the interpretation thereof by any court or administrative or governmental authority charged with the administration thereof shall either (i) impose, modify or deem applicable any reserve, special deposit or similar requirement against letters of credit issued by the Issuing Lender or (ii) impose on the Issuing Lender or any Lender any other condition regarding letters of credit or, in the case of such Lender, its participation hereunder in Letters of Credit, and the result of any event referred to in the preceding clause (i) or (ii) shall be to increase the out-of-pocket cost to the Issuing Lender of Issuing or maintaining or, in the case of such Lender, having a participation in Letters of Credit, then, upon demand by the Issuing Lender or such Lender (with a copy to the Agent), the Borrower shall promptly (and in any event within five Business Days) pay to the Issuing Lender or such Lender from time to time as specified by such Issuing Lender or such Lender (with a copy to the Agent) additional amounts which shall be sufficient to compensate the Issuing Lender or such Lender for such increased cost. A certificate as to such increased cost, and amount thereof, incurred by the Issuing Lender or any Lender as a result of any event mentioned in clause (i) or (ii) above, shall be submitted by the Issuing Lender or such Lender to the Borrower and the Agent, which certificate shall set out in reasonable detail the calculation of such amounts and be conclusive and binding for all purposes, absent manifest error. (b) CAPITAL. If, at any time after the Closing Date, the Issuing Lender or any Lender determines that compliance with any law or regulation as adopted, amended or otherwise modified after the Closing Date or with any written guideline or request from any central bank or other governmental authority published after the Closing Date (a copy of which shall be sent by the Issuing Lender or such Lender, as the case may be, to the - 72 - Borrower), whether or not having the force of law, has or would have the effect of reducing the rate of return on the capital of the Issuing Lender or such Lender or any corporation controlling the Issuing Lender or such Lender (whether by increasing the amount of capital required or expected to be maintained by the Issuing Lender or such Lender or any corporation controlling the Issuing Lender or such Lender or otherwise) as a consequence of, or with reference to, such Issuing Lender's commitment to issue, the issuance of, or, with respect to such Lender's commitment, to participate in, any Letter of Credit hereunder below the rate that the Issuing Lender or such Lender or such other corporation could have achieved but for compliance therewith (taking into account the policies of the Issuing Lender, such Lender or corporation with regard to capital), then the Borrower shall from time to time, upon demand by the Issuing Lender or such Lender (with a copy of such demand to the Agent), immediately pay to the Issuing Lender or such Lender additional amounts sufficient to compensate the Issuing Lender or such Lender or other corporation for such reduction. A certificate as to such amounts shall be submitted to the Borrower and the Agent by the Issuing Lender or such Lender, as the case may be, which certificate shall be conclusive and binding for all purposes absent manifest error. (c) SURVIVAL. Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements and obligations of the Borrower contained in this Section 3.07 shall survive the payment of all Obligations. 3.08 UNIFORM CUSTOMS AND PRACTICE. The Uniform Customs and Practice for Documentary Credits as most recently published by the International Chamber of Commerce shall in all respects be deemed a part of this Article III as if incorporated herein and shall apply to the Letters of Credit. ARTICLE IV CONDITIONS OF EFFECTIVENESS 4.01 CONDITIONS TO INITIAL ADVANCES. The obligations of the Lenders to, on and after the Closing Date, continue advances outstanding under the Existing Credit Agreement as Advances hereunder, make the initial Advances hereunder and receive through the Agent the initial Competitive Bid Request and the initial Notice of Conversion/Continuation, and the obligation of the Issuing Lender to, on and after the Closing Date, continue any letter of credit outstanding under the Existing Credit Agreement as a Letter of Credit hereunder and issue any Letter of Credit hereunder, are subject to the following conditions precedent, each of which shall be satisfied prior to or on the Closing Date: - 73 - (a) The Agent shall have received all of the following in form and substance reasonably satisfactory to the Agent and legal counsel for the Agent (unless otherwise specified or unless the Agent otherwise agrees): (1) executed counterparts of this Agreement signed by the Borrower, the Agent and at least the Majority Lenders, sufficient in number for distribution to the Borrower, the Agent and each Lender; (2) with respect to each Guarantor: (i) if the certificate of incorporation of any Guarantor that was a guarantor under the Existing Credit Agreement has been amended since the date last delivered to the Agent, a copy of such certificate and the bylaws of such Guarantor as in effect on the Closing Date, certified by the Secretary or Assistant Secretary of such Guarantor as of the Closing Date; (ii) with respect to each other Guarantor, its certificate of incorporation and bylaws as in effect on the Closing Date, certified by the secretary of state of the state of its incorporation as of a recent date and by the Secretary or Assistant Secretary of such Guarantor as of the Closing Date; and (iii) a good standing certificate for each Guarantor from the secretary of state of the state of its incorporation; (3) certified copies of (i) the resolutions of the Board of Directors of the Borrower and each Guarantor approving this Agreement and each other Loan Document to which it is or is to be a party and the transactions contemplated hereby and thereby, and (ii) all documents evidencing other necessary corporate action and governmental approvals with respect to each Loan Document and the transactions contemplated thereby; (4) a certificate of the Secretary or an Assistant Secretary of the Borrower and each Guarantor certifying the names and true signatures of the officers of such Loan Party authorized to sign each Loan Document to which it is or is to be a party and the other documents to be delivered by it hereunder which certificates may be conclusively relied on by the Agent until the Agent shall receive a further certification of the - 74 - Secretary or Assistant Secretary of such Loan Party cancelling or amending the prior certificate of such Loan Party and submitting the names and signatures of the officers named in such further certificate; (5) a certificate signed by a Senior Officer of the Borrower, dated as of the Closing Date stating that: (i) the representations and warranties contained in Article V are true and correct on and as of the Closing Date; (ii) no Default or Event of Default exists on the Closing Date; and (iii) there has occurred since June 28, 1996, no event or circumstance that constitutes a Material Adverse Effect; (6) such other assurances, certificates, documents, consents or opinions as the Agent may reasonably require. (b) The Agent shall have received the fees described in Section 2.03(a) and 2.03(b) due on the Closing Date; (c) The reasonable allocated fees and expenses of Bank of America's inhouse counsel invoiced to the Closing Date, relating to the Loan Documents shall have been paid by Borrower; (d) The representations and warranties contained in Article V shall be true and correct in all material respects; (e) No Default or Event of Default shall have occurred and be continuing; and (f) Each Lender shall have satisfactorily completed its due diligence with respect to this Agreement. 4.02 CONDITIONS PRECEDENT TO ALL BORROWINGS AND ALL ISSUANCES. The obligation of each Lender to make an Advance on the occasion of any Borrowing, or any Bid Advance as to which the Borrower has accepted the relevant Competitive Bid (including the initial Borrowing) and the obligation of the Issuing Lender to issue any Letter of Credit (including the initial Letter of Credit), shall be subject to the conditions precedent that on the date of such Borrowing or Issuance (a) the following statements shall be true and each of the giving of the applicable Notice of Borrowing, Competitive Bid Request or the applicable request for Issuance (as the case may be) and the acceptance by the Borrower - 75 - of the proceeds of such Borrowing or the Issuance of such Letter of Credit shall constitute a representation and warranty by the Borrower or such Subsidiary Borrower that on the date of such Borrowing or Issuance, as the case may be, such statements are true: (i) each representation and warranty contained in Article V hereof is true and correct in all material respects on and as of the date of such Borrowing or Issuance, before and after giving effect to such Borrowing and to the application of the proceeds therefrom or to such Issuance (as the case may be), as though made on and as of such date except to the extent any such representation and warranty is made as of any other date; (ii) no event has occurred and is continuing, or would result from such Borrowing or from the application of the proceeds therefrom or from such Issuance (as the case may be) which constitutes an Event of Default or a Default; (iii) no event or circumstance shall have occurred since the Closing Date that constitutes a Material Adverse Effect; and (iv) there shall not be then pending or, to the knowledge of any Loan Party, threatened any action, suit, proceeding or investigation against or affecting Borrower or any of its Subsidiaries or any property of any of them that constitutes a Material Adverse Effect; and (b) the Agent shall have received such other approvals or documents relating to the validity or enforceability of any Loan Documents as any Lender through the Agent may reasonably request. 4.03 CONDITIONS TO EFFECTIVENESS OF SUBSIDIARY BORROWER ELECTING TO PARTICIPATE AFTER THE CLOSING DATE. It is a condition precedent to the effectiveness of any election by a Subsidiary to become a Subsidiary Borrower that each Lender receives the following: (a) a duly executed and delivered Notice of Election to Participate; (b) a Committed Advance Note duly executed by such Subsidiary Borrower in favor of any Lender requesting a promissory note in a principal amount equal to such Lender's Pro Rata Share of the Subsidiary Borrower Sublimit; (c) the documentation specified in Section 4.01(a)(5) and (6) with respect to such Subsidiary Borrower; and - 76 - (d) a favorable opinion of counsel in the jurisdiction in which such Subsidiary Borrower is incorporated confirming, among other things, that (i) such Subsidiary Borrower's obligations under this Agreement and its Notes are legal, valid, binding and enforceable against such Subsidiary Borrower, (ii) the execution, delivery and performance of the Loan Documents by such Subsidiary Borrower will not violate any law, decree or judgment or violate any material agreement to which such Subsidiary Borrower is a party or by which its assets are bound and (iii) no government approvals, consents, registrations or filings are required by the Subsidiary Borrower; PROVIDED that such opinion shall be subject to such modifications as are acceptable to the Agent in its sole discretion. ARTICLE V REPRESENTATIONS AND WARRANTIES Each Loan Party represents and warrants to the Lenders that: 5.01 EXISTENCE AND QUALIFICATION; POWER; COMPLIANCE WITH LAWS. The Borrower and each of its Subsidiaries is a corporation, partnership or joint venture duly organized and existing and in good standing under the laws of its respective jurisdiction of organization. The Borrower and each of its Subsidiaries is duly qualified and is in good standing, in each other jurisdiction in which the conduct of its business or the ownership or leasing of its properties makes such qualification necessary, except where the failure so to qualify and to be in good standing would not constitute a Material Adverse Effect. The Borrower and each of its Subsidiaries has the requisite power and authority to conduct its business as now being conducted and to own its property, and to execute and deliver each Loan Document to which it is a party and to perform its Obligations. The Borrower and each of its Subsidiaries is in compliance with all laws applicable to its business, has obtained all authorizations, consents, approvals, orders, licenses and permits from, and has accomplished all filings, registrations and qualifications with, or obtained exemptions from any of the foregoing from, any Governmental Agency that are necessary for the transaction of its business, except where the failure to do any of the foregoing would not constitute a Material Adverse Effect. 5.02 AUTHORITY; COMPLIANCE WITH OTHER AGREEMENTS AND INSTRUMENTS. The execution, delivery and performance by each - 77 - Loan Party of the Loan Documents to which it is a party have been duly authorized by all necessary action, and do not: (a) require any consent or approval not heretofore obtained of any partner, stockholder, security holder or creditor of any Loan Party; (b) violate or conflict with any provision of any Loan Party's articles or certificate of incorporation or bylaws or other equivalent instruments, as applicable; (c) result in or require the creation or imposition of any Lien upon or with respect to any property now owned or leased by any Loan Party; (d) violate any Requirement of Law applicable to such Loan Party; or (e) result in a breach of or default under, or would with the giving of notice or the lapse of time or both constitute a breach of or default under, or cause or permit the acceleration of any obligation owed under any indenture or loan or credit agreement or any other Contractual Obligation to which such Loan Party is a party or by which such Loan Party or any of its material property is bound or affected; and none of the Loan Parties is in violation of, or default under, any Requirement of Law applicable to it or Contractual Obligation applicable to it, or any indenture or credit agreement described in Section 5.02(e), in any respect that in such case constitutes a Material Adverse Effect. 5.03 NO GOVERNMENTAL APPROVALS REQUIRED. No authorization, consent, approval, order, license or permit from, or filing, registration or qualification with, any Governmental Agency is required by any Loan Party to authorize or permit under applicable laws the execution, delivery and performance by such Loan Party of the Loan Documents. 5.04 SUBSIDIARIES OF BORROWER. All of the Subsidiaries of Borrower, as of the date of this Agreement, are identified in Schedule 5.04 hereto. The capital stock of each such Subsidiary identified in Schedule 5.04 is duly authorized, validly issued, fully paid and nonassessable. Schedule 5.04 correctly sets forth the ownership interest as of the date hereof of Borrower in each of its subsidiaries. Each active Domestic Subsidiary is party hereto as a Guarantor. - 78 - 5.05 FINANCIAL STATEMENTS. Borrower has furnished to the Lenders and the Agent the audited consolidated financial statements of Borrower and its Subsidiaries as of June 28, 1996 and for the Fiscal Year then ended. Such financial statements fairly present the financial position and results of operations of Borrower and its Subsidiaries as of the dates and for the periods indicated in accordance with Generally Accepted Accounting Principles, consistently applied. 5.06 NO OTHER LIABILITIES; NO MATERIAL ADVERSE EFFECT. As of June 28, 1996, Borrower and its Subsidiaries do not have any liability or contingent liability that is material to Borrower and its Subsidiaries, taken as a whole, that is not reflected in, reserved for or against or otherwise disclosed in the financial statements described in Section 5.05, other than liabilities and contingent liabilities (x) that in accordance with Generally Accepted Accounting Principles are not required to be reflected or disclosed in such financial statements or (y) that are disclosed on any schedule to this Agreement. As of the Closing Date, no event or circumstance has occurred since June 28, 1996 that constitutes a Material Adverse Effect. 5.07 TITLE TO PROPERTY. Borrower and its Subsidiaries have good and valid title to the property reflected in the financial statements described in Section 5.05 (other than property subsequently sold or disposed of to the extent permitted under this Agreement) free and clear of all Liens, other than those permitted by Section 7.06. 5.08 INTANGIBLE ASSETS. Borrower and its Subsidiaries own, or possess the right to use to the extent necessary in their respective businesses, all trademarks, trade names, copyrights, patents, patent rights, computer software, licenses and other Intangible Assets that are used or are necessary in any material respect in the conduct of their businesses as now operated. No such Intangible Asset, to the best knowledge of any Loan Party, conflicts with the valid trademark, trade name, copyright, patent, patent right or Intangible Asset of any other Person to the extent that such conflict constitutes a Material Adverse Effect. 5.09 GOVERNMENTAL REGULATION. Neither Borrower 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, the Investment Company Act of 1940 or, to the best knowledge of the Borrower, any other law limiting or regulating its ability to incur the Obligations. 5.10 LITIGATION. Except for matters set forth in Schedule 5.10 or otherwise disclosed pursuant to Section 6.01(i), - 79 - there are no actions, suits, proceedings or investigations pending as to which Borrower or its Subsidiaries have been served or have received notice or, to the knowledge of the Borrower, threatened against or affecting Borrower or its Subsidiaries or any property of any of them before any Governmental Agency which, if determined adversely to Borrower or its Subsidiaries, could reasonably be expected to constitute a Material Adverse Effect. 5.11 BINDING OBLIGATIONS. Each of the Loan Documents to which each Loan Party is a party will, when executed and delivered by such Loan Party, constitute the legal, valid and binding obligation of such Loan Party enforceable against such Loan Party in accordance with its terms, except as enforcement may be limited by Debtor Relief Laws or equitable principles relating to the granting of specific performance and other equitable remedies as a matter of judicial discretion. 5.12 ERISA. Borrower and its Subsidiaries are in compliance in all material respects with the applicable provisions of ERISA and the Code relating to Plans except to the extent as would not have a Material Adverse Effect. No Plan is a Multiemployer Plan. As of the date hereof, neither Borrower nor any Subsidiary has, with respect to any Plan established or maintained by it, engaged in a prohibited transaction which would subject it to a tax or penalty on prohibited transactions imposed by ERISA or Section 4975 of the Code which tax or penalty would have or could reasonably be expected to have a Material Adverse Effect. To the Borrower's knowledge, no liability to the PBGC that is material is reasonably expected to be incurred with respect to the Plans and there has been no Reportable Event and no other event or condition that, in either case, presents a material risk of termination of a Plan by the PBGC. Neither Borrower nor any of its Subsidiaries has engaged in a transaction described in Section 4069 of ERISA during the last five years which would result in the incurrence of a material liability. No Accumulated Funding Deficiency, whether or not waived, exists with respect to any of the Plans, determined as of the last day of the most recently ended fiscal year of each Plan. Neither Borrower nor any of its Subsidiaries has incurred any Withdrawal Liability with respect to any Multiemployer Plan. 5.13 REGULATIONS G AND U. No part of the proceeds of any Advance hereunder will be used to purchase or carry, or to extend credit to others for the purpose of purchasing or carrying, any "margin stock" (as such term is defined in Regulations G and U) in violation of Regulation G or U. Neither Borrower nor any of its Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying any such "margin stock." - 80 - 5.14 DISCLOSURE. No written statement made by a Senior Officer of any Loan Party to the Agent or the Lenders in connection with this Agreement, or in connection with any Advance, contains any untrue statement of a material fact or omits a material fact necessary in order to make the statement made not misleading in light of all the circumstances existing at the date the statement was made. There is no fact known to any Loan Party which would constitute a Material Adverse Effect that has not been disclosed in writing to the Lenders, other than general economic conditions. 5.15 TAX LIABILITY. Borrower and its Subsidiaries have filed all material tax returns which are required to be filed, and have paid all taxes due and payable by Borrower or its Subsidiaries with respect to the periods, property or transactions covered by said returns, or pursuant to any assessment received by Borrower or any of its Subsidiaries, except such taxes, if any, as are being contested in good faith by appropriate proceedings and as to which adequate reserves have been established and maintained. 5.16 HAZARDOUS MATERIALS. To the extent that any Hazardous Materials have been, or are, used, generated or stored by Borrower or any of its Subsidiaries on any real property, or transported to or from such real property by Borrower or its Subsidiaries, such use, generation, storage and transportation have been, to the best knowledge of each Loan Party, and are in compliance in all material respects with all Hazardous Materials Laws. 5.17 EMPLOYEE MATTERS. There is no strike, work stoppage or labor dispute with any union or group of employees pending or, to the best knowledge of each Loan Party, overtly threatened involving Borrower or any of its Subsidiaries that would constitute a Material Adverse Effect. 5.18 PROJECTIONS. As of the Closing Date, to the best knowledge of the Borrower the assumptions set forth in the Projections are reasonable and consistent with each other and the Projections are reasonably based on such assumptions. Nothing in this Section 5.18 shall be construed as a representation, warranty or covenant that the Projections in fact will be achieved. - 81 - ARTICLE VI AFFIRMATIVE COVENANTS So long as any Advance remains unpaid, any Letter of Credit remains outstanding or any other Obligation remains unpaid, or any portion of the Commitment remains outstanding, Borrower shall, and shall cause each of its Subsidiaries to, unless the Agent (with the approval of the Majority Lenders) otherwise consents in writing: 6.01 FINANCIAL AND BUSINESS INFORMATION. Deliver to the Agent and the Lenders at Borrower's sole expense: (a) As soon as practicable, and in any event within 50 days after the end of each Fiscal Quarter (other than the fourth Fiscal Quarter in any Fiscal Year), (i) the consolidated and consolidating balance sheets of Borrower and its Subsidiaries as at the end of such Fiscal Quarter, and (ii) consolidated and consolidating statements of income and cash flow, in each case of Borrower and its Subsidiaries for such Fiscal Quarter and for the portion of the Fiscal Year ended with such Fiscal Quarter, all in reasonable detail sufficient to calculate compliance with financial covenants, and presented in a manner comparing such financial statements to the financial statements for the comparable fiscal periods of the prior Fiscal Year and to Borrower's budget for the current Fiscal Year. Such financial statements shall be certified by a Senior Officer of Borrower as fairly presenting the financial condition, results of operations and cash flow of Borrower and its Subsidiaries in accordance with Generally Accepted Accounting Principles (other than any requirement for footnote disclosures), consistently applied (except for those changes to which the independent public accountants of Borrower have concurred), as at such date and for such periods, subject only to normal year-end audit adjustments; (b) As soon as practicable, and in any event within 100 days after the end of each Fiscal Year, (i) the consolidated and consolidating balance sheets of Borrower and its Subsidiaries as at the end of such Fiscal Year, and (ii) consolidated and consolidating statement of income and statement of cash flow, in each case of Borrower and its Subsidiaries for such Fiscal Year, all in reasonable detail sufficient to calculate compliance with financial covenants, and presented in a manner comparing such financial statements to the financial-statements for the comparable fiscal periods of the prior Fiscal Year and to Borrower's budget for the current Fiscal Year. Such financial - 82 - statements shall be prepared in accordance with Generally Accepted Accounting Principles, consistently applied (except for those changes to which the independent public accountants of Borrower have concurred), and such consolidated financial statements shall be accompanied by a report and opinion of KPMG Peat Marwick or another of the six largest firms of independent public accountants of recognized national standing, which report and opinion shall be prepared in accordance with generally accepted auditing standards as at such date, and shall not be subject to any qualifications or exceptions as to the scope of the audit nor to any other qualification, exception or explanation which the Majority Lenders determine reflects a Material Adverse Effect; (c) Not later than 120 days after the commencement of each Fiscal Year, (i) the Borrower's business plan for such Fiscal Year, (ii) projected consolidated financial statements showing the financial condition and results of operation, by Fiscal Quarter, of Borrower and its Subsidiaries for such Fiscal Year, including pro forma compliance (or non-compliance, as the case may be) with the financial covenants set forth in this Agreement, and (iii) projected consolidated financial statements showing such financial condition and results of operation by Fiscal Year for the next five succeeding Fiscal Years, in reasonable detail and in a form reasonably satisfactory to the Agent, together with a description of the material assumptions used in preparing such projected financial statements and, as promptly as practicable after any revision thereof is approved by the chief financial officer of Borrower, a copy of such revision; (d) Promptly after receipt thereof, Borrower will make available for inspection copies of any detailed audit reports or recommendations submitted to Borrower or any of its Subsidiaries by independent accountants in connection with the accounts or books of Borrower or any of its Subsidiaries, or any audit of any of them; (e) Promptly after the same are available, and in any event within 10 days after the sending or filing thereof, copies of each annual report, proxy or financial statement or other report or communication sent to the shareholders of Borrower and copies of all annual, regular, periodic and special reports and registration statements, in each case which Borrower may file or be required to file with the SEC under the Securities Act of 1933 or the Securities Exchange Act of 1934; - 83 - (f) Promptly after request by the Agent or any Lender, copies of any other specific report or other document that was filed by Borrower or any of its Subsidiaries with any Governmental Agency; (g) Promptly upon a Senior Officer of Borrower obtaining actual knowledge, and in any event within ten (10) Business Days after he obtains actual knowledge, of the occurrence of any (i) Reportable Event, or (ii) a material non-exempt "prohibited transaction" (as such term is defined in Section 406 of ERISA or Section 4975 of the Code) in connection with any Pension Plan, other than a Multiemployer Plan, or any trust created thereunder, a written notice specifying the nature thereof, what action Borrower and any of its Subsidiaries is taking or proposes to take with respect thereto, and, when known, any action taken by the Internal Revenue Service with respect thereto; (h) Promptly after the Borrower or any Subsidiary Borrower obtains actual knowledge of the existence of any condition or event which constitutes a Default, written notice specifying the nature and period of existence thereof and specifying what action Borrower or any of its Subsidiaries are taking or propose to take with respect thereto; (i) Promptly after the Borrower or any Subsidiary Borrower obtains actual knowledge that (i) any Person has commenced a legal proceeding with respect to a claim against Borrower or any of its Subsidiaries which alleges liability equal to or greater than $1,000,000 and which is not covered by insurance (subject to standard deductibles), (ii) any creditor or lessor under a written credit agreement with respect to Indebtedness or a material lease has asserted in writing a material default thereunder on the part of Borrower or any of its Subsidiaries, (iii) any other event or circumstance occurs or exists that would constitute a Material Adverse Effect, in each case a written notice describing the pertinent facts relating thereto and what action Borrower or any of its Subsidiaries are taking or propose to take with respect thereto; (j) Such other data and information relating to the performance of the Obligations or the business, condition or affairs of Borrower and its Subsidiaries as from time to time may be reasonably requested by the Agent or any Lender; (k) Promptly after entering into any letter of intent and/or definitive contract with respect to any - 84 - proposed Acquisition, notify the Agent and, if the Borrower desires, each Lender directly of such fact; and (l) Concurrently with delivery of the financial statements referred to in Sections 6.01(a) and 6.01(b), deliver a Compliance Certificate dated as of the last day of the Fiscal Quarter or Fiscal Year, as the case may be. 6.02 PAYMENT OF TAXES AND OTHER POTENTIAL LIENS. Pay and discharge promptly all material taxes, assessments and governmental charges or levies imposed upon any of them, upon their respective property or any part thereof and upon their respective income or profits or any part thereof except that Borrower and its Subsidiaries shall not be required to pay or cause to be paid any tax, assessment, charge or levy that is not yet past due, or is being contested in good faith by appropriate proceedings, so long as Borrower or its Subsidiaries has established and maintains adequate reserves for the payment of the same and by reason of such nonpayment and contest no material item or portion of property of Borrower and its Subsidiaries, taken as a whole, is in jeopardy of being seized, levied upon or forfeited prior to judgment. 6.03 PRESERVATION OF EXISTENCE. Preserve and maintain their respective existences in the respective jurisdictions of their formation and all authorizations, rights, franchises, privileges, consents, approvals, orders, licenses, permits, or registrations from any Governmental Agency that are necessary for the transaction of their respective businesses, except where the failure to so preserve and maintain would not constitute a Material Adverse Effect; and qualify and remain qualified as a foreign corporation in each jurisdiction in which such qualification is necessary in view of their respective businesses or the ownership of their respective properties, except (a) where the failure to so qualify and remain qualified would not constitute a Material Adverse Effect and (b) that a merger permitted under Section 7.02 shall not constitute a violation of this covenant. 6.04 MAINTENANCE OF PROPERTIES. Maintain, preserve and protect all of their respective depreciable properties necessary to their operations in good order and condition, subject to wear and tear in the ordinary course of business, and not permit any waste of their respective material properties, except that the failure to maintain, preserve and protect a particular item of depreciable property that is not of significant value, either intrinsically or to the operations of Borrower and its Subsidiaries, taken as a whole, shall not constitute a violation of this covenant. - 85 - 6.05 MAINTENANCE OF INSURANCE. Maintain liability, casualty and other insurance (subject to customary deductibles and retentions) with responsible insurance companies in such amounts and against such risks as is carried by responsible companies engaged in similar businesses and owning similar assets in the general areas in which Borrower and its Subsidiaries operate. 6.06 COMPLIANCE WITH LAWS. Comply with all Requirements of Law noncompliance with which would constitute a Material Adverse Effect, except that Borrower and its Subsidiaries need not comply with a Requirement of Law then being contested by any of them in good faith by appropriate proceedings. 6.07 INSPECTION RIGHTS. Upon reasonable notice, at any mutually agreeable times during regular business hours (but not so as to materially interfere with the business of Borrower and its Subsidiaries), permit the Agent or any Lender, or any authorized employee, agent or representative thereof reasonably acceptable to Borrower, to examine, audit and make copies and abstracts from the records and books of account of, and to visit and inspect the properties of, Borrower and its Subsidiaries and to discuss the affairs, finances and accounts of Borrower and its Subsidiaries with any of their respective officers, key employees, accountants, customers and vendors. 6.08 KEEPING OF RECORDS AND BOOKS OF ACCOUNT. Make and keep books, records and accounts which reflect in reasonable detail all transactions as necessary to permit preparation of financial statements in conformity with Generally Accepted Accounting Principles. 6.09 COMPLIANCE WITH AGREEMENTS. Promptly and fully comply with all Contractual Obligations under all material agreements, indentures, leases and/or instruments to which any one or more of them is a party, whether such material agreements, indentures, leases or instruments are with the Lenders or another Person, where the failure to so comply would constitute a Material Adverse Effect. 6.10 HAZARDOUS MATERIALS LAWS. Keep and maintain the real property owned or leased by it and each portion thereof in compliance in all material respects with all Hazardous Materials Laws; promptly advise the Agent in writing of (a) any and all enforcement, cleanup, removal or other governmental or regulatory actions instituted, completed or threatened in writing pursuant to any applicable Hazardous Materials Laws, (b) any and all claims made or threatened in writing by any third party against Borrower or any Guarantor or any such real property relating to - 86 - damage, contribution, cost recovery, compensation, loss or injury resulting from any Hazardous Materials and (c) discovery by any Senior Officer of any Loan Party of any occurrence or condition on any such real property that could reasonably be expected to cause any such real property or any part thereof to be subject to any restrictions on the ownership, occupancy, transferability or use of the real property under any Hazardous Materials Laws. 6.11 ADDITIONAL GUARANTORS AFTER THE CLOSING DATE. If the Borrower or any Subsidiary of Borrower creates or otherwise acquires any active Domestic Subsidiary at any time after the Closing Date, the Borrower shall cause such Domestic Subsidiary to become a Guarantor hereunder by delivering to the Agent: (a) an instrument referring to this Agreement wherein such Guarantor agrees to be bound by all the terms and conditions applicable to a Guarantor under this Agreement as of the date thereof; (b) the documentation specified in Section 4.01(a)(5) and (6) with respect to such Guarantor; and (c) with respect to any such Guarantor whose total assets constitute at least 10% of Consolidated Total Assets at the time it becomes a Guarantor, a favorable opinion of counsel in the jurisdiction in which such Guarantor is incorporated confirming, among other things, that (i) such Subsidiary's obligations under this Agreement are legal, valid, binding and enforceable against such Subsidiary, (ii) the execution, delivery and performance of the Loan Documents by such Subsidiary will not violate any law, decree or judgment or violate any material agreement to which such Subsidiary is a party or by which its assets are bound and (iii) no government approvals, consents, registrations or filings are required by the Subsidiary; PROVIDED that such opinion shall be subject to such modifications as are acceptable to the Agent in its sole discretion. ARTICLE VII NEGATIVE COVENANTS So long as any Advance remains unpaid, any Letter of Credit remains outstanding or any other Obligation remains unpaid, or any portion of the Total Commitment remains outstanding, Borrower shall not, and shall cause each of its - 87 - Subsidiaries to not, unless the Agent (with the approval of the Majority Lenders) otherwise consents in writing: 7.01 DISPOSITION OF PROPERTY. Make any Disposition, whether now owned or hereafter acquired, other than: (a) Dispositions of inventory, machinery and equipment in the ordinary course of business; (b) Dispositions of assets, the aggregate net book value of which does not exceed in the aggregate for the Borrower and all Subsidiaries (a) $10,000,000 during Fiscal Year 1997 and (b) $15,000,000 during any Fiscal Year thereafter; (c) Dispositions in connection with a Permitted Accounts Receivable Financing; (d) Transfers of accounts receivable from Sunrise Medical CCG, Inc. and Sunrise Medical HHG, Inc. to SunMed Finance, Inc.; (e) Dispositions in connection with sale and leaseback transactions permitted by Section 7.06(e); and (f) Dispositions of assets by Guarantors to other Guarantors, and Dispositions of assets by Foreign Subsidiaries to other Foreign Subsidiaries, provided that if either of such Foreign Subsidiaries is a Subsidiary Borrower, the surviving entity will assume all such Subsidiary Borrower obligations hereunder. 7.02 MERGERS. Merge, consolidate or amalgamate with or into any Person, provided that (i) any Subsidiary of Borrower may be merged with and into Borrower (with Borrower as the surviving entity), (ii) any Domestic Subsidiary may be merged with and into another Domestic Subsidiary, so long as, if either of such Subsidiaries was a Guarantor, the surviving entity is a Guarantor, (iii) any Foreign Subsidiary may be merged with another Foreign Subsidiary, provided that if either of such Subsidiaries is a Subsidiary Borrower, the surviving entity will assume all such Subsidiary Borrower obligations hereunder and (iv) a Subsidiary may be merged with any other Person to the extent such merger is consummated to effect (x) a Disposition permitted pursuant to Section 7.01(b) or (y) an Acquisition permitted pursuant to Section 7.03. - 88 - 7.03 INVESTMENTS AND ACQUISITIONS. Make any Acquisition or enter into any agreement to make any Acquisition, or make or suffer to exist any Investment, except: (a) Investments existing on the Closing Date and disclosed in Schedule 7.03(a); (b) Investments consisting of Cash Equivalents; (c) Investments in Persons which immediately before and after giving effect to such Investment are Wholly-Owned Domestic Subsidiaries which have become Guarantors hereunder; (d) Investments in Subsidiaries in which the Borrower has at least an 80% ownership interest, PROVIDED that (i) if such Subsidiary is a partnership or a joint venture (A) the partner or joint venture entity in such Subsidiary shall be a Wholly-Owned Subsidiary of the Borrower, and (B) the Investment by the Borrower in such Wholly-Owned Subsidiary which is the partner or joint venture entity shall not exceed the amount being invested in the partnership or joint venture, and (ii) if such Subsidiary is an active Domestic Subsidiary, such Subsidiary shall have become a Guarantor hereunder and each holder of a minority ownership interest in such Subsidiary shall have executed a consent to the Guaranty; and (e) Additional Permitted Acquisitions, where the purchase price paid for, and the Indebtedness assumed in, all such Permitted Acquisitions do not exceed (i) $10,000,000 for any single Permitted Acquisition or group of related Permitted Acquisitions or (ii) $20,000,000 in the aggregate for all Permitted Acquisitions in any Fiscal Year. 7.04 HOSTILE TENDER OFFERS. Make any tender offer to purchase or acquire any outstanding capital stock of any corporation or other business entity without the prior approval of the board of directors of that corporation or business entity. 7.05 ERISA. (a) At any time, permit any Pension Plan maintained by it or by any ERISA Affiliate, to: (i) engage in any non-exempt "prohibited transaction," as such term is defined in Section 4975 of the Code, that would subject any Loan Party to a liability that may reasonably be expected to constitute a Material Adverse Effect; - 89 - (ii) incur any material Accumulated Funding Deficiency; or (iii) suffer a Termination Event to occur which may reasonably be expected to result in liability of any Loan Party or any ERISA Affiliate thereof to the Pension Plan or to the PBGC or the imposition of a Lien on the property of any Loan Party or any ERISA Affiliate thereof pursuant to Section 4068 of ERISA and such liability or Lien may reasonably be expected to constitute a Material Adverse Effect. (b) Fail, upon a Senior Officer of Borrower becoming aware thereof, promptly to notify the Agent of the occurrence of any Reportable Event, or of any material nonexempt "prohibited transaction" (as defined in Section 4975 of the Code) with respect to any Pension Plan maintained by it or any trust created thereunder. (c) At any time, permit any Pension Plan (other than a Multiemployer Plan) maintained by it to fail to comply with ERISA or other applicable Laws in any respect that constitutes a Material Adverse Effect. 7.06 LIENS; NEGATIVE PLEDGES; SALES AND LEASEBACKS. Create, incur, assume or suffer to exist any Lien of any nature upon or with respect to any of their respective properties, whether now owned or hereafter acquired; or suffer to exist any Negative Pledge; or engage in any sale and leaseback transaction with respect to its property; except: (a) Permitted Encumbrances; (b) Liens and Negative Pledges in favor of the Lenders; (c) Liens in connection with a Permitted Accounts Receivable Financing; (d) Liens on property acquired pursuant to Acquisitions permitted hereunder, provided such Liens were not incurred in contemplation of such Acquisition; (e) Sale and leaseback transactions which, together with operating leases permitted by Section 7.17(b), do not exceed in the aggregate $10,000,000 in aggregate payment obligations in any Fiscal Year, and Liens and Negative Pledges solely on assets and the proceeds thereof the subject of such transactions, provided that the Advances are prepaid in an amount equal to the net Cash proceeds received - 90 - from such transactions, concurrently upon the receipt thereof, in accordance with Section 2.11(c); (f) Negative Pledges in favor of lenders providing financing permitted under Section 7.07(f) PROVIDED that (i) the Advances are prepaid in an amount equal to the net proceeds from such financing concurrently upon receipt thereof by the Borrowers or any of their Subsidiaries in accordance with Section 2.11(c), and (ii) the Total Commitment is reduced by an amount equal to such net proceeds (whether or not the Total Commitment is fully utilized at such time); PROVIDED, FURTHER, that if any such required prepayment is postponed in accordance with the proviso to Section 2.11(c), the reduction in Total Commitment set forth in this subsection shall also be correspondingly postponed; PROVIDED, FURTHER, that any such reduction in the Total Commitment shall not be in lieu of the reductions in the Total Commitment scheduled to occur on the immediately following Amortization Dates; the Total Commitment shall continue to automatically reduce on each scheduled Amortization Date by an amount equal to the Amortization Amount pursuant to Section 2.10(b); (g) Liens in connection with transfers of accounts receivable permitted by Section 7.01(d); (h) Liens and Negative Pledges solely on assets leased in connection with leases permitted by Section 7.17; (i) Negative Pledge solely on assets of Sunrise Medical Ltd. and its Subsidiaries in connection with its European Coal and Steel Community financing; and (j) Other Liens and Negative Pledges solely on assets securing Indebtedness or incurred in connection with sale and leaseback transactions permitted by Section 7.06(e) where the obligations secured do not exceed 10% of Shareholders' Equity in the aggregate at any time. 7.07 INDEBTEDNESS. Create, incur, assume or suffer to exist any Indebtedness except: (a) Indebtedness under Swap Agreements incurred in the ordinary course of business; (b) Subordinated Debt of the Borrower or a Subsidiary incurred in connection with permitted Acquisitions; PROVIDED that Majority Lenders shall have approved the subordination provisions of any such Subordinated Debt in excess of $5,000,000; - 91 - (c) Indebtedness in respect of contracts to exchange, settle or otherwise hedge foreign currency exposure incurred in the ordinary course of business; (d) Indebtedness in respect of a Permitted Accounts Receivable Financing; (e) Indebtedness in connection with transfers of accounts receivable permitted by Section 7.01(d); and (f) Consolidated Funded Indebtedness, the creation, incurrence, assumption or existence of which would not cause the Leverage Ratio to exceed the maximum Leverage Ratio permitted under Section 7.09 after giving effect to such Indebtedness on a pro forma basis as of the date of the most recently delivered Compliance Certificate; PROVIDED, HOWEVER, that any unsecured Indebtedness of any Foreign Subsidiary shall not exceed, together with the face amount of any letters of credit issued on behalf of such Foreign Subsidiary (other than Letters of Credit), $15,000,000 for any one Foreign Subsidiary; PROVIDED, FURTHER, that all unsecured Indebtedness for all Foreign Subsidiaries, together with the face amount of all letters of credit issued on behalf of any Foreign Subsidiary (other than Letters of Credit), shall not exceed $45,000,000 in the aggregate at any one time outstanding. 7.08 CONDUCT OF BUSINESS. Engage in any business OTHER THAN businesses of the same nature as that which the Borrower and its Subsidiaries conduct as of the Closing Date; provided, however, notwithstanding any other provision of this Agreement, Borrower and its Subsidiaries may enter into foreign exchange and commodity hedging agreements so long as such arrangements are not for speculative purposes. 7.09 LEVERAGE RATIO. Permit the Leverage Ratio, as of the end of any Fiscal Quarter, to exceed the following ratio: Fiscal Quarters Ending Maximum Ratio ------------------------------ ------------- 9/26/97 through 6/30/98 3.75 to 1.00 9/30/98 through 3/31/99 3.50 to 1.00 Thereafter 3.25 to 1.00 7.10 MINIMUM CONSOLIDATED TANGIBLE NET WORTH. Permit at the end of any Fiscal Quarter Consolidated Tangible Net Worth to be less than (a) - -$16,000,000 PLUS (b) 50% of Consolidated Net Income for each Fiscal Quarter ending after June 28, 1996 (not to be reduced by any losses incurred) PLUS (c) 50% of the net proceeds from the issuance of any equity securities of the - 92 - Borrower after June 28, 1996 LESS (d) 50% of the Adjusted Dollar Equivalent of Intangible Assets related to Acquisitions completed after December 27, 1996. 7.11 INTEREST COVERAGE RATIO. Permit the Interest Coverage Ratio, as of the end of any Fiscal Quarter, to be less than the following ratio: Fiscal Quarters Ending Minimum Ratio ----------------------------- ------------- 9/26/97 through 3/31/99 1.40 to 1.00 6/30/99 1.50 to 1.00 Thereafter 1.75 to 1.00 7.12 CONTINGENT OBLIGATIONS. Create or become or be liable with respect to any Contingent Obligations except: (a) Contingent Obligations of the Borrower or any Subsidiary supporting obligations of the Borrower or a Subsidiary entered into in the ordinary course of Business; (b) Guaranties by the Borrower of operating leases and performance bonds of any Subsidiary of the Borrower; PROVIDED, that such guaranties with respect to Foreign Subsidiaries shall not exceed $12,000,000 in the aggregate outstanding at any one time; PROVIDED, FURTHER, that, for purposes of calculating the amount of a guaranty of an operating lease, such guaranty shall be deemed to be a guaranty of the next 12 months rent due under the operating lease so guarantied; (c) Guaranties by the Borrower of any obligation of any of its Subsidiaries permitted under Section 7.07(a), (b), (c) or (f); (d) Guaranties by any of Borrower's Subsidiaries of any Indebtedness of Borrowers permitted under Section 7.07(f) PROVIDED that (i) the Advances are prepaid in an amount equal to the net proceeds from such Indebtedness concurrently upon receipt thereof by the Borrowers or any of their Subsidiaries in accordance with Section 2.11(c), and (ii) the Total Commitment is reduced by an amount equal to such net proceeds (whether or not the Total Commitment is fully utilized at such time); PROVIDED, FURTHER, that if any such required prepayment is postponed in accordance with the proviso to Section 2.11(c), the reduction in Total Commitment set forth in this subsection shall also be correspondingly postponed; PROVIDED, FURTHER, that any such reduction in the Total Commitment shall not be in lieu of the reductions in the Total Commitment scheduled to occur on - 93 - the immediately following Amortization Dates; the Total Commitment shall continue to automatically reduce on each scheduled Amortization Date by an amount equal to the Amortization Amount pursuant to Section 2.10(b); (e) Guaranties by the Borrower, which are Subordinated Debt of the Borrower, of any obligation of any of its Subsidiaries permitted under Section 7.07(b); (f) Other Contingent Obligations not incurred in the ordinary course of business; PROVIDED that the maximum aggregate liability of the Borrower and its Subsidiaries in respect of all such Contingent Obligations shall at no time exceed $10,000,000 outstanding; and (g) Contingent Obligations in favor of the Lenders under this Agreement and the Letters of Credit issued hereunder. 7.13 LIMITATIONS ON RESTRICTIONS AFFECTING DIVIDENDS AND OTHER PAYMENTS BY SUBSIDIARIES. Create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any Subsidiary of Borrower to (a) pay dividends or make any other distributions on its capital stock or any other interest or participation in, or measured by, its profits, or pay any Indebtedness owed to Borrower or any of its Subsidiaries or (b) make loans or advances to Borrower or any of its Subsidiaries, except, in each case, for such encumbrances or restrictions, if any, imposed by law or by this Agreement, or (c) amend the terms of this Agreement. 7.14 RESTRICTED JUNIOR PAYMENTS. Make any Restricted Junior Payment except: (a) Restricted Junior Payments that in the aggregate do not exceed, during any 12-month period, an amount equal to the lesser of (i) 10% of Shareholders' Equity calculated as of the end of the most recently ended Fiscal Quarter and (ii) 50% of Consolidated Net Income during such period; PROVIDED, HOWEVER, that after giving effect to such Restricted Junior Payment (a) the Leverage Ratio, calculated as of the end of the most recently ended Fiscal Quarter (adjusted to give effect to such Restricted Junior Payment) shall be less than 3.25 to 1.00, and (b) no Default or Event of Default shall exist. (b) Restricted Junior Payments of the type described in clauses (i), (ii) or (iv) of the definition of Restricted Junior Payments which are made by a Subsidiary of the - 94 - Borrower with respect to shares of any class of stock or other ownership interest owned by the Borrower; and (c) Purchases and redemptions from the Borrower's shareholders of any warrants, options or other rights to acquire shares of the Borrower's stock granted to shareholders pursuant to a shareholders' rights plan; PROVIDED that (i) the repurchase and redemption provisions of such shareholders' rights plan shall be in form and substance satisfactory to the Lenders in their absolute discretion, and (ii) the aggregate amount of Restricted Junior Payments made pursuant to this clause (c) shall not exceed $200,000 during the period beginning on the Closing Date and ending on the Final Maturity Date. 7.15 TRANSACTIONS WITH AFFILIATES. Enter into any transaction of any kind with any Affiliate of Borrower other than (i) transactions between or among Borrower and its Wholly-Owned Subsidiaries or between or among its Wholly-Owned Subsidiaries and (ii) transactions on terms at least as favorable to Borrower or its Subsidiaries as would be the case in any arm's-length transaction between unrelated parties of equal knowledge respecting the subject matter thereof and equal bargaining power. 7.16 SUBSIDIARIES. Create, acquire or permit to exist any Subsidiary less than 80% of the ownership interest of which is legally and beneficially owned, directly or indirectly, by the Borrower. 7.17 LEASE OBLIGATIONS. Create or suffer to exist any obligations for the payment of rent for any property under any lease or agreement to lease, except for: (a) leases of the Borrower and of Subsidiaries in existence on June 27, 1996 and any renewal, replacement, extension or refinancing thereof; (b) additional operating leases entered into by the Borrower or any Subsidiary after June 27, 1996 in the ordinary course of business which, together with sale and leaseback transactions permitted by Section 7.06(e), do not exceed in the aggregate $10,000,000 in aggregate payment obligations in any Fiscal Year, and Liens in connection therewith; (c) leases entered into by the Borrower or any Subsidiary after June 27, 1996 pursuant to sale-leaseback transactions permitted under Section 7.06(e); and - 95 - (d) Capital Leases permitted under Section 7.07. ARTICLE VIII GUARANTY 8.01 GUARANTY. (a) Each Guarantor, jointly and severally, unconditionally and irrevocably guaranties the due and punctual payment and performance of the Obligations (including in each case interest accruing on and after the filing of any petition in bankruptcy or of reorganization of the obligor whether or not post filing interest is allowed in such proceeding). Each Guarantor further agrees that the Obligations may be extended or renewed, in whole or in part, without notice or further assent from it (except as may be otherwise required herein), and it will remain bound upon this guaranty notwithstanding any extension or renewal of any Obligation. (b) Each Guarantor waives presentation to, demand for payment from and protest to, as the case may be, the Borrower or any Subsidiary Borrower or any other guarantor, and also waives notice of protest for nonpayment. The obligations of each Guarantor hereunder shall not be affected by (i) the failure of the Agent or the Lenders to assert any claim or demand or to enforce any right or remedy against the Borrower or any Subsidiary Borrower or any other guarantor under the provisions of this Agreement or any other agreement or otherwise; (ii) any extension or renewal of any provision hereof or thereof; (iii) the failure of the Agent to obtain the consent of the Guarantors with respect to any rescission, waiver, compromise, acceleration, amendment or modification of any of the terms or provisions of this Agreement, the Notes or of any other agreement; (iv) the release, exchange, waiver or foreclosure of any security held by the Agent or the Lenders for the Obligations or any of them; (v) the failure of the Agent to exercise any right or remedy against any other guarantor of the Obligations; (vi) the release or substitution of any guarantor; (vii) any defense based upon an election of remedies (including, if available, an election to proceed by non-judicial foreclosure) by the Agent or a Lender which destroys or otherwise impairs the subrogation rights of any Guarantor or the right of any Guarantor to proceed against the Borrower or any Subsidiary Borrower for reimbursement, or both; or (viii) any rights or defenses created by the anti-deficiency statutes of the State of California. Without limiting the - 96 - generality of the foregoing or any other provision hereof, any Guarantor hereby expressly waives any and all benefits which might otherwise be available to it under California Civil Code Sections 2809, 2910, 2819, 2839, 2845, 2849, 2850, 2899 and 3433 and California Code of Civil Procedure Sections 580a, 580b, 580d and 726. (c) Each Guarantor further agrees that this guaranty constitutes a guaranty of performance and of payment when due and not just of collection, and waives any right to require that any resort be had by the Agent or the Lenders to any security held for payment of the Obligations or to any balance of any deposit, account or credit on the books of the Agent in favor of the Borrower, any Subsidiary Borrower, any other guarantor or to any other Person. (d) Each Guarantor hereby expressly assumes all responsibilities to remain informed of the financial condition of the Borrower or each Subsidiary Borrower, as the case may be, and any circumstances affecting the ability of the Borrower or any Subsidiary Borrower to perform under this Agreement. (e) Each Guarantor's guaranty shall not be affected by the genuineness, validity, regularity or enforceability of the Obligations, the Notes or any other instrument evidencing any Obligations, or by the existence, validity, enforceability, perfection, or extent of any collateral therefor or by any other circumstance relating to the Obligations which might otherwise constitute a defense to these Guaranties. The Agent makes no representation or warranty in respect to any such circumstances and has no duty or responsibility whatsoever to the Guarantors in respect to the management and maintenance of the Obligations or any collateral security for the Obligations. 8.02 NO IMPAIRMENT OF GUARANTIES. The obligations of the Guarantors hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, including, without limitation, any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense or set-off, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality of unenforceability of the Obligations or otherwise. Without limiting the generality of the foregoing, the obligations of the Guarantors hereunder shall not be discharged or impaired or otherwise affected by the failure of the Agent or the Lenders to assert any claim or demand or to enforce any remedy under this Agreement or any other agreement, by any waiver or modification - 97 - of any provision thereof, by any default, failure or modification of any provision thereof, by any default, failure or delay, willful or otherwise, in the performance of the Obligations, or by any other act or thing or omission or delay to do any other act or thing which may or might in any manner or to any extent vary the risk of the Guarantors or would otherwise operate as a discharge of the Guarantors as a matter of law, unless and until the Obligations are paid in full. 8.03 CONTINUATION AND REINSTATEMENT, ETC. (a) Each Guarantor further agrees that its guaranty hereunder shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of principal of or interest on any Obligation is rescinded or must otherwise be restored by the Agent or the Lenders upon the bankruptcy or reorganization of the Borrower, any of the Subsidiary Borrowers or the Guarantors, or otherwise. In furtherance of the provisions of this Article VIII, and not in limitation of any other right which the Agent or the Lenders may have at law or in equity against the Borrower, any Subsidiary Borrower or any Guarantor by virtue hereof, upon failure of the Borrower or any Subsidiary Borrower to pay any Obligation when and as the same becomes due, whether at maturity, by acceleration, after notice or otherwise, each Guarantor hereby promises to and will, upon receipt of written demand by the Agent on behalf of the Lenders, forthwith pay or cause to be paid to the Agent on behalf of the Lenders in cash an amount equal to the unpaid amount of all the Obligations in each case with interest thereon at a rate of interest equal to the rate specified in Article II hereof, and thereupon the Agent and the Lenders shall assign such Obligation, together with all security interests, if any, then held by the Agent or the Lenders in respect of such Obligation, to the Guarantors making such payment. (b) Upon payment by any Guarantor of any sums to the Agent for the benefit of the Lenders hereunder, all rights of such Guarantor against the Borrower or any Subsidiary Borrower, as the case may be, arising as a result thereof by way of right of subrogation or otherwise, shall in all respects be subordinate and junior in right of payment to the prior final and indefeasible payment in full of all Obligations to the Agent of the Lenders. If any amount shall be paid to such Guarantor for the account of the Borrower's or any Subsidiary Borrower's Obligations hereunder, such amount shall be held in trust for the benefit of the Agent and shall forthwith be paid to the Agent on behalf of the Lenders to be credited and applied to the Obligations, whether matured or unmatured. - 98 - 8.04 GUARANTIED AMOUNT. (a) Notwithstanding any other provision of this Article VIII, the amount guarantied by each Guarantor hereunder shall be limited to the extent, if any, required so that its obligations under this Article VIII shall not be subject to avoidance under Section 548 of the Bankruptcy Code or to being set aside or annulled under any applicable state law relating to fraud on creditors. In determining the limitations, if any, on the amount of any Guarantor's obligations hereunder pursuant to the preceding sentence, any rights of subrogation or contribution which such Guarantor may have under this Article VIII or applicable law shall be taken into account. (b) Notwithstanding any provision in this Agreement to the contrary, each Loan Party agrees that any Intercompany Indebtedness of any Guarantor shall be subordinated in right of payment to the Obligations of such Guarantor under this Guaranty and the other Loan Documents to the Lenders. ARTICLE IX EVENTS OF DEFAULT AND REMEDIES UPON EVENTS OF DEFAULT 9.01 EVENTS OF DEFAULT. The existence or occurrence of any one or more of the following events, whatever the reason therefor and under any circumstance whatsoever, shall constitute an Event of Default: (a) any Loan Party fails to pay any principal on any Obligation or any principal or interest on any Bid Advance on the date when due; or (b) any Loan Party fails to pay any interest or premium on any Obligation or any fees due to the Agent or the Lenders within five days after the date when due or fails to pay any other fee or amount payable to the Agent or the Lenders under any Loan Document, or any portion thereof, within five days after demand therefor; or (c) any Loan Party fails to perform or observe any of the covenants contained in Section 6.01(h), 6.03 or 6.06 or in Article VII; or (d) any Loan Party fails to perform or observe any of the covenants contained in Sections 6.01(a)-(c) within 5 days after the giving of written notice by the Agent of such Default; or - 99 - (e) any Loan Party fails to perform or observe any other covenant or agreement contained in any Loan Document on its part to be performed or observed within 30 days after the giving of written notice by the Agent of such Default; or (f) any representation or warranty of any Loan Party made in any Loan Document or in any certificate delivered pursuant to any Loan Document proves to have been incorrect when made or reaffirmed in any respect that is materially adverse to the interests of the Lenders; or (g) Borrower or any of its Subsidiaries (i) fails to pay the principal, or any principal installment, of any present or future Indebtedness for borrowed money in an amount exceeding $1,000,000, or any guaranty of present or future Indebtedness for borrowed money in an amount exceeding $1,000,000, on its part to be paid, when due (or within any stated grace period), whether at the stated maturity, upon acceleration, by reason of required prepayment or otherwise or (ii) fails to perform or observe any other term, covenant, or agreement on its part to be performed or observed, or suffers any event to occur in connection with any present or future Indebtedness for borrowed money in an amount exceeding $1,000,000, or of any guaranty of present or future Indebtedness for borrowed money in an amount exceeding $1,000,000, if as a result of such failure or sufferance any holder or holders thereof (or an agent or trustee on its or their behalf) has the right to declare such Indebtedness due before the date on which it otherwise would become due unless any such failure or sufferance is waived by such holders thereof (or an agent or trustee on its or their behalf); or (h) any Loan Document, at any time after its execution and delivery and for any reason other than the agreement of the Lenders or satisfaction in full of the Obligations, ceases to be in full force and effect or is declared by a court of competent jurisdiction to be null and void, invalid, or unenforceable in any respect which, in the opinion of the Majority Lenders is materially adverse to their interest; or any Loan Party thereto denies that it has any or further liability or obligation under any Loan Document or purports to revoke, terminate or rescind same; or (i) a judgment against any Loan Party is entered by a court of competent jurisdiction for the payment of money in excess of $500,000 and absent procurement of a stay of execution, such judgment remains unbonded or unsatisfied - 100 - for 30 calendar days after the date of entry of judgment or such longer period as may be permitted by law or otherwise binding on the judgment creditor before execution on such judgment is allowed, or in any event later than five days prior to the date of any proposed sale thereunder; or (j) any Loan Party institutes or consents to any proceeding under a Debtor Relief Law relating to it or to all or any material part of its property, or is unable or admits in writing its inability to pay its debts as they mature, or makes an assignment for the benefit of creditors or applies for or consents to the appointment of any receiver, trustee, custodian, conservator, liquidator, rehabilitator, or similar officer for it or for all or any part of its property; or any receiver, trustee, custodian, conservator, liquidator, rehabilitator, or similar officer is appointed without the application or consent of that Person and the appointment continues undischarged or unstayed for 30 calendar days or any proceeding under any Debtor Relief Law relating to any such Person or to all or any material part of its property is instituted without the consent of that Person and continues undismissed or unstayed for 30 calendar days or results in the entry of an order for relief; or any judgment, writ, warrant of attachment or execution, or similar process is issued or levied against all or any material part of the property of any such Person and is not released, vacated, or fully bonded within 30 calendar days after its issue or levy; or (k) the occurrence of a Termination Event with respect to any Pension Plan if the aggregate liability of Borrower and its ERISA Affiliates under ERISA as a result thereof exceeds $1,000,000; or the complete or partial withdrawal subsequent to the Closing Date by Borrower or any of its ERISA Affiliates from any Multiemployer Plan if the aggregate liability of Borrower and its ERISA Affiliates as a result thereof would constitute a Material Adverse Effect; or (l) a Change of Control or a Change of Ownership shall have occurred. 9.02 REMEDIES UPON EVENT OF DEFAULT. Without limiting any other rights or remedies of the Agent or the Lenders provided for elsewhere in this Agreement or the Loan Documents, or by applicable law, or in equity, or otherwise: (a) Upon the occurrence, and during the continuance, of any Event of Default (other than an Event of Default described in Section 9.01(j)): - 101 - (i) the Commitments and all other obligations of the Agent and the Lenders under the Loan Documents shall be suspended without notice to or demand upon any Loan Party, which are expressly waived by each Loan Party to the fullest extent permitted by applicable law, except that the Majority Lenders may waive the Event of Default or, without waiving, determine, upon terms and conditions satisfactory to the Majority Lenders, to reinstate the Commitments; (ii) the Majority Lenders may request the Issuing Lender to, and the Issuing Lender thereupon shall, demand immediate payment by each Loan Party of an amount equal to the aggregate outstanding face amount of all Letters of Credit, which amount shall be deposited into a deposit account established by or maintained with the Agent as cash collateral for any reimbursement obligations under the Letters of Credit as and when drawings are made thereunder (and each Loan Party hereby grants to the Agent and the Lenders a security interest in such account); and (iii) the Majority Lenders may request the Agent to, and the Agent thereupon shall, terminate the Commitments and declare all or any part of the unpaid principal of the Notes, all interest accrued and unpaid thereon, and all other amounts payable under the Loan Documents to be forthwith due and payable, whereupon the same shall become and be forthwith due and payable, without protest, presentment for payment, notice of dishonor, demand, or further notice of any kind, all of which are expressly waived by each Loan Party to the fullest extent permitted by applicable law. (b) Upon the occurrence of any Event of Default described in Section 9.01(j): (i) the Commitments and all other obligations of the Agent and the Lenders under the Loan Documents shall terminate without notice to or demand upon any Loan Party, which are expressly waived by each Loan Party to the fullest extent permitted by applicable law; (ii) an amount equal to the aggregate outstanding face amount of the Letters of Credit shall be forthwith due and payable to the Issuing Lender without protest, presentment, notice of dishonor, demand or further notice of any kind, all of which are - 102 - waived by each Loan Party to the fullest extent permitted by applicable law, which amount shall be deposited into a deposit account established by or maintained with the Agent as cash collateral for any reimbursement obligations under the Letters of Credit as when drawings are made thereunder (and each Loan Party hereby grants to the Agent and the Lenders a security interest in such account); and (iii) the unpaid principal of the Advances, all interest accrued and unpaid thereon and all other amounts payable under the Loan Documents shall be forthwith due and payable, without protest, presentment for payment, notice of dishonor, demand or further notice of any kind, all of which are expressly waived by each Loan Party to the fullest extent permitted by applicable law. (c) Upon the occurrence of any Event of Default, the Agent, without notice to (except as expressly provided for in any Loan Document) or demand upon each Loan Party, which are expressly waived by any Loan Party to the fullest extent permitted by applicable law, may proceed to protect, exercise, and enforce the rights and remedies of the Agent and the Lenders under the Loan Documents against each Loan Party and such other rights and remedies as are provided by law or equity. ARTICLE X THE AGENT 10.01 APPOINTMENT AND AUTHORIZATION. Each Lender hereby irrevocably appoints, designates and authorizes the Agent to take such action on its behalf under the provisions of this Agreement and each other Loan Document and to exercise such powers and perform such duties as are expressly delegated to it by the terms of this Agreement or any other Loan Document, together with such powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary contained elsewhere in this Agreement or in any other Loan Document, the Agent shall not have any duties or responsibilities, except those expressly set forth herein, nor shall the Agent have or be deemed to have any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Agent. 10.02 DELEGATION OF DUTIES. The Agent may execute any of its duties under this Agreement or any other Loan Document by - 103 - or through agents, employees or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Agent shall not be responsible for the negligence or misconduct of any agent or attorney-in-fact that it selects with reasonable care. 10.03 LIABILITY OF AGENT. None of the Agent-Related Persons shall (i) be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or any other Loan Document or the transactions contemplated hereby (except for its own gross negligence or willful misconduct), or (ii) be responsible in any manner to any of the Lenders for any recital, statement, representation or warranty made by the Borrower or any Subsidiary or Affiliate of the Borrower, or any officer thereof, contained in this Agreement or in any other Loan Document, or in any certificate, report, statement or other document referred to or provided for in, or received by the Agent under or in connection with, this Agreement or any other Loan Document, or the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document, or for any failure of the Borrower or any other party to any Loan Document to perform its obligations hereunder or thereunder. No Agent-Related Person shall be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of the Borrower or any of the Borrower's Subsidiaries or Affiliates. 10.04 RELIANCE BY AGENT. (a) The Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone message, statement or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons, and upon advice and statements of legal counsel (including counsel to the Borrower), independent accountants and other experts selected by the Agent. The Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Majority Lenders as it deems appropriate and, if it so requests, it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any other - 104 - Loan Document in accordance with a request or consent of the Majority Lenders and such request and any action taken or failure to act pursuant thereto shall be binding upon all of the Lenders. (b) For purposes of determining compliance with the conditions specified in Section 4.01, each Lender that has executed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter either sent by the Agent to such Lender for consent, approval, acceptance or satisfaction, or required thereunder to be consented to or approved by or acceptable or satisfactory to the Lender unless such Lender notifies the Agent to the contrary. 10.05 NOTICE OF DEFAULT. The Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default, except with respect to defaults in the payment of principal, interest and fees required to be paid to the Agent for the account of the Lenders, unless the Agent shall have received written notice from a Lender or the Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default". The Agent will notify the Lenders of its receipt of any such notice. The Agent shall take such action with respect to such Default or Event of Default as may be requested by the Majority Lenders in accordance with Article IX; PROVIDED, HOWEVER, that unless and until the Agent has received any such request, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable or in the best interest of the Lenders. 10.06 CREDIT DECISION. Each Lender acknowledges that none of the Agent-Related Persons has made any representation or warranty to it, and that no act by the Agent hereinafter taken, including any review of the affairs of the Borrower and its Subsidiaries, shall be deemed to constitute any representation or warranty by any Agent-Related Person to any Lender. Each Lender represents to the Agent that it has, independently and without reliance upon any Agent-Related - 105 - Person and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, prospects, operations, property, financial and other condition and creditworthiness of the Borrower and its Subsidiaries, and all applicable bank regulatory laws relating to the transactions contemplated hereby, and made its own decision to enter into this Agreement and to extend credit to the Borrower and its Subsidiaries hereunder. Each Lender also represents that it will, independently and without reliance upon any Agent-Related Person and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigations as it deems necessary to inform itself as to the business, prospects, operations, property, financial and other condition and creditworthiness of the Borrower. Except for notices, reports and other documents expressly herein required to be furnished to the Lenders by the Agent, the Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, prospects, operations, property, financial and other condition or creditworthiness of the Borrower which may come into the possession of any of the Agent-Related Persons. 10.07 INDEMNIFICATION. Whether or not the transactions contemplated hereby are consummated, the Lenders shall indemnify upon demand the Agent-Related Persons (to the extent not reimbursed by or on behalf of the Borrowers and without limiting the obligation of the Borrower to do so), pro rata, from and against any and all Indemnified Liabilities; PROVIDED, HOWEVER, that no Lender shall be liable for the payment to the Agent-Related Persons of any portion of such Indemnified Liabilities resulting solely from such Person's gross negligence or willful misconduct. Without limitation of the foregoing, each Lender shall reimburse the Agent upon demand for its ratable share of any costs or out-of-pocket expenses (including Attorney Costs) incurred by the Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any other Loan Document, or any document contemplated by or referred to herein, to the extent that the Agent is not reimbursed for such expenses by or on behalf of the Borrowers. The undertaking in this Section shall survive the payment of all Obligations hereunder and the resignation or replacement of the Agent. 10.08 AGENT IN INDIVIDUAL CAPACITY. Bank of America and its Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire equity interests in and generally engage in any kind of banking, trust, financial advisory, underwriting or other business with the Borrower and its Subsidiaries and Affiliates as though Bank of America were not the Agent hereunder and without notice to or consent of the Lenders. The Lenders acknowledge that, pursuant to such activities, Bank of America or its Affiliates may receive information regarding the Borrower or its Affiliates (including information that may be subject to confidentiality obligations in favor of the Borrower or such Subsidiary) and acknowledge that - 106 - the Agent shall be under no obligation to provide such information to them. With respect to its Advances, Bank of America shall have the same rights and powers under this Agreement as any other Lender and may exercise the same as though it were not the Agent, and the terms "Lender" and "Lenders" include Bank of America in its individual capacity. 10.09 SUCCESSOR AGENT. The Agent may, and at the request of the Majority Lenders shall, resign as Agent upon 30 days' notice to the Borrower and the Lenders. If the Agent resigns under this Agreement, the Majority Lenders shall appoint from among the Lenders a successor agent for the Lenders which successor agent shall be approved by the Borrower. If no successor agent is appointed prior to the effective date of the resignation of the Agent, the Agent may appoint, after consulting with the Lenders and approval of the Borrower, a successor agent from among the Lenders. Upon the acceptance of its appointment as successor agent hereunder, such successor agent shall succeed to all the rights, powers and duties of the retiring Agent and the term "Agent" shall mean such successor agent and the retiring Agent's appointment, powers and duties as Agent shall be terminated. After any retiring Agent's resignation hereunder as Agent, the provisions of this Article X and Sections 11.03 and 11.09 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. If no successor agent has accepted appointment as Agent by the date which is 30 days following a retiring Agent's notice of resignation, the retiring Agent's resignation shall nevertheless thereupon become effective and the Lenders shall perform all of the duties of the Agent hereunder until such time, if any, as the Majority Lenders appoint a successor agent as provided for above, with the approval of the Borrower. ARTICLE XI MISCELLANEOUS 11.01 CUMULATIVE REMEDIES; NO WAIVER. The rights, powers, privileges and remedies of the Agent or any Lender provided herein or in any Note or other Loan Document are cumulative and not exclusive of any right, power, privilege or remedy provided by law or equity. No failure or delay on the part of the Agent or any Lender in exercising any right, power, privilege or remedy may be, or may be deemed to be, a waiver thereof; nor may any single or partial exercise of any right, power, or remedy preclude any other or further exercise of any other right, power, privilege or remedy. The terms and conditions of Sections 4.01 and 4.02 hereof are inserted for the sole benefit of the Lenders and the Agent may (with the approval of the Majority Lender) waive them in whole or in part with or - 107 - without terms or conditions in respect of any Advance or Letter of Credit, without prejudicing the Lenders' rights to assert them in whole or in part in respect of any other Advance or Letter of Credit. 11.02 AMENDMENTS; CONSENTS. No amendment, modification, supplement, termination, or waiver of any provision of this Agreement or any other Loan Document, and no consent to any departure by any Loan Party therefrom, may in any event be effective unless in writing signed by the Agent with the written approval of the Majority Lender, and then only in the specific instance and for the specific purpose given; and without the approval in writing of all the Lenders, no amendment, modification, supplement, termination, waiver, or consent may be effective: (a) to amend or modify the principal of, or decrease the amount of principal prepayments or the rate of interest payable on, any Obligation or increase the amount of any of the Commitments or decrease the amount of any fee payable to any Lender; (b) to postpone any date fixed for any payment of principal of, prepayment of principal of, or any interest on, any Obligation or any fee or to extend the term of any of the Commitments; (c) to amend or modify the provisions of the definition of "Majority Lender" or of Section 11.02, 11.09 or 11.10; (d) to amend or modify any provision of Section 2.10; (e) release any Guarantor from the Guaranty unless such Guarantor is merged, consolidated or disposed of as permitted by Section 7.01 or 7.02; or (f) to amend or modify any provision of this Agreement or the Loan Documents that expressly requires the consent or approval of all the Lenders. Any amendment, modification, supplement, termination, waiver, or consent pursuant to this Section 11.02 shall apply equally to, and shall be binding upon, all the Lenders and the Agent. 11.03 COSTS, EXPENSES AND TAXES. Borrower shall pay on demand the reasonable costs and reasonable expenses of the Agent in connection with the negotiation, preparation, execution and delivery of the Loan Documents, or any amendment or waiver - 108 - thereto requested by the Borrower, including reasonable travel expenses, and other out of pocket expenses and the reasonable fees and out of pocket expenses of any legal counsel (including without limitation, the reasonable allocated fees and expenses of Agent's in-house counsel and staff), independent public accountants, and other outside experts retained by the Agent, and the reasonable costs, expenses or fees incurred or suffered by the Agent in connection with or during the course of any bankruptcy or insolvency proceedings of Borrower, or any Subsidiary of Borrower. After the occurrence and during the continuation of a Default or an Event of Default, Borrower shall pay on demand the reasonable costs and expenses of the Agent and each of the Lenders in connection with the amendment, waiver, refinancing, restructuring, reorganization (including a bankruptcy reorganization) and enforcement or attempted enforcement of any Loan Documents and any matter related thereto, including reasonable travel expenses and other out of pocket expenses and the reasonable fees and other out of pocket expenses of any legal counsel retained by or employed by any of the Lenders, including any reasonable costs, expenses or fees incurred or suffered by any of the Lenders in connection with or during the course of any bankruptcy or insolvency proceedings of Borrower, or any Subsidiary of Borrower. Borrower shall pay any and all documentary and other taxes (other than income or gross receipts taxes generally applicable to such type of lender) and all costs, expenses, fees and charges payable or determined to be payable in connection with the filing or recording of any Loan Document or any other instrument or writing to be delivered hereunder or thereunder, or in connection with any transaction pursuant hereto or thereto, and shall reimburse, hold harmless and indemnify the Agent and each Lender from and against any and all loss, liability or legal or other expense with respect to or resulting from any delay in paying or failure to pay any tax, cost, expense, fee or charge that any of them may suffer or incur by reason of the failure of any Loan Party to perform any of its Obligations. Any amount payable to the Agent or any Lender under this Section 11.03 shall be due and payable and bear interest from the date which is 10 days after the date of receipt of demand for payment at the Base Rate. 11.04 NATURE OF LENDER'S OBLIGATIONS. Each Lender's obligation to make any Advance pursuant hereto is several and not joint or joint and several. A default by any Lender will not increase the Pro Rata Share of the Commitments attributable to any other Lender. Any Lender not in default may, if it desires, assume in such proportion as the nondefaulting Lenders agree the obligations of any Lender in default, but is not obligated to do so. The Agent agrees that it will use its best efforts either to induce the other Lenders to assume the obligations of a Lender in - 109 - default or to obtain another Lender, reasonably satisfactory to Borrower, to replace such a Lender in default. 11.05 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and warranties contained herein or in any other Loan Document or in any certificate or other writing delivered by or on behalf of any one or more of the parties to any Loan Document, will survive the making of the Advances hereunder and the execution and delivery of the Notes, notwithstanding any investigation made by the Agent or any Lender or on their behalf. 11.06 NOTICES. Except as otherwise expressly provided in the Loan Documents, (a) all notices, requests, demands, directions, and other communications provided for hereunder and under any other Loan Document must be in writing and must be mailed, telegraphed, telecopied, delivered, or sent by telex, or cable to the appropriate party at the address set forth on Schedule 11.06 or other applicable Loan Document or, as to any party to any Loan Document, at any other address as may be designated by it in a written notice sent to all other parties to such Loan Document in accordance with this Section 11.06 and (b) any notice, request, demand, direction, or other communication given by telegram, telecopier, telex, or cable must be confirmed within 48 hours by letter mailed or delivered to the appropriate party at its respective address. Except as otherwise expressly provided in any Loan Document if any notice, request, demand, direction, or other communication required or permitted by any Loan Document is given by mail it will be effective on the earlier of receipt or the third calendar day after deposit in the United States mail with first class or airmail postage prepaid; if given by telegraph or cable, when delivered to the telegraph company with charges prepaid; if given by telex or telecopier, when received; or if given by personal delivery, when delivered. 11.07 EXECUTION IN COUNTERPARTS. Unless the Agent otherwise specifies with respect to any Loan Document, this Agreement and any other Loan Document may be executed in any number of counterparts and any party hereto or thereto may execute any counterpart, each of which when executed and delivered will be deemed to be an original and all of which counterparts of this Agreement or any other Loan Document, as the case may be, taken together will be deemed to be but one and the same instrument. The execution of this Agreement or any other Loan Document by any party hereto or thereto will not become effective until counterparts hereto or thereto will not become effective until counterparts hereof or thereof, as the case may be, have been executed by all the parties hereto or thereto. - 110 - 11.08 BINDING EFFECT; ASSIGNMENT. (a) This Agreement and the other Loan Documents shall be binding upon and inure to the benefit of the Borrower, each Guarantor and each Subsidiary Borrower, the Agent, each of the Lenders, and their respective successors and assigns, except that the Borrower, each Guarantor and each Subsidiary Borrower may not assign its rights hereunder or thereunder or any interest herein or therein without the prior written consent of all the Lenders, except for any such assignment resulting from any merger permitted by this Agreement. Each Lender and the Agent shall have the right to sell or transfer any participation interest in this Agreement. Each Lender and the Agent shall have the right to sell or transfer any participation interest in this Agreement, the Advances, the Notes, the Commitments and the Letters of Credit in accordance with the provisions of this Section 11.08. Each Lender represents that it is not acquiring its Notes with a view to the distribution thereof within the meaning of the Securities Act of 1933, as amended (subject to any requirement that disposition of such Notes must be within the control of such Lender). Any Lender may at any time pledge its Notes or any other instrument evidencing its rights as a Lender under this Agreement to a Federal Reserve Lender, but no such pledge shall release that Lender from its obligations hereunder. (b) From time to time each Lender may, with the prior consent of Borrower, assign to one or more Eligible Assignees a portion of its Pro Rata Share of the Commitments (including its interest in the Letters of Credit); provided that (i) such Eligible Assignee, if not then a Lender, shall be reasonably acceptable to the Agent, (ii) such assignment shall be evidenced by a Commitment Assignment and Acceptance, a copy of which shall be furnished to the Agent for registration as hereinbelow provided, (iii) the assignment shall not assign a portion of the Commitments in an amount less than $15,000,000, without the Borrower's consent, and (iv) the effective date of any such assignment shall be as specified in the Commitment Assignment and Acceptance, but not earlier than the date which is five (5) Business Days after the later of the date Borrower has consented to such assignment and the date the Agent has registered the Commitment Assignment and Acceptance in the register kept for that purpose by the Agent as described below. The prior consent of Borrower referred to in the previous sentence shall not be unreasonably withheld; provided, that it shall not be unreasonable for the Borrower to withhold consent to any assignment to an Eligible Assignee which (x) is not capable of funding in Pounds - 111 - Sterling, Canadian Dollars, Deutsche Marks, Spanish Pesetas, Swiss Francs, French Francs, Belgian Francs, Italian Lira, ECU, Swedish Krona, Norwegian Krone, Australian Dollars, Japanese Yen or such other Alternative Currency in which the Borrower has previously received Eurocurrency Rate Committed Advances and (y) is unable to enter into a funding arrangement, reasonably acceptable to the Borrower and the Agent, pursuant to which an existing Lender will fund such currencies on such Eligible Assignee's behalf. Upon the effective date of such Commitment Assignment and Acceptance, the Eligible Assignee named therein shall be a Lender for all purposes of this Agreement, with the Pro Rata Share of the Commitments therein set forth and, to the extent of such Pro Rata Share, the assigning Lender shall be released from all of its obligations under this Agreement assumed by such assignee Lender. The Borrower agrees that it shall, upon the request of the assignee Lender, execute and deliver (against delivery by the assigning Lender to such Loan Party of any Committed Advance Notes) to such assignee Lender, a Committed Advance Note evidencing that assignee Lender's Pro Rata Share of the Commitment, and to the assigning Lender, if requested by such assigning Lender, a Committed Advance Note evidencing the remaining Pro Rata Share retained by the assigning Lender. The Borrower agrees that it shall also execute and deliver (against delivery by the assigning Lender to such Borrower of its Bid Notes) to such assignee Lender, a Bid Advance Note evidencing that assignee Lender's Bid Advances, and to the assigning Lender, a Bid Advance Note evidencing the Bid Advances of the assigning Lender. (c) By executing and delivering a Commitment Assignment and Acceptance, the assigning Lender thereunder: (i) other than as provided in such Commitment Assignment and Acceptance, assigns without recourse and makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or any other Loan Document or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto; and (ii) makes no representation or warranty and assumes no responsibility with respect to the financial condition of any Loan Party or the performance or observance by any Loan Party of any of its Obligations under this Agreement or any other Loan Document or any other instrument or document furnished pursuant hereto. (d) By executing and delivering a Commitment Assignment and Acceptance, the assignee Lender or Eligible Assignee thereunder acknowledges and agrees that: (i) other - 112 - than the representation and warranty that it is the legal and beneficial owner of the Pro Rata Share of the Commitments being assigned thereby fee and clear of any adverse claim, the assigning Lender has made no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or the execution, legality, validity, enforceability, genuineness or sufficiency of this Agreement or any other Loan Document; (ii) the assigning Lender has made no representation or warranty and assumes no responsibility with respect to the financial condition of any Loan Party or the performance by any Loan Party of the Obligations; (iii) it has received a copy of this Agreement together with copies of the most recent financial statements delivered pursuant to this Agreement and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Commitment Assignment and Acceptance; (iv) it will, independently and without reliance upon the Agent, the assigning Lender or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (v) if not then a Lender, it is an Eligible Assignee; (vi) it appoints and authorizes the Agent and the Issuing Lender to take such action and to exercise such powers under this Agreement as are delegated to the Agent and the Issuing Lender by Article X and Section 3.06; and (vii) it will perform in accordance with their terms all of the obligations which by the terms of this Agreement are required to be performed by it as a Lender. (e) The Agent shall maintain at the Agent's Office a copy of each Commitment Assignment and Acceptance delivered to it and a register (the "Register") for recordation, upon payment to the Agent by the assigning Lender of a registration fee of $3,500.00, of the names and addresses of the Lenders and their respective Pro Rata Shares of the Commitments. The entries in the Register shall be conclusive for all purposes, in the absence of manifest error, and each Loan Party, the Agent and the Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement. Such Register shall be available for inspection by any Loan Party or any Lender at any reasonable time and from time to time upon reasonable prior notice. Promptly following any entry in the Register, the Agent shall provide to each Loan Party and the Lenders a revised Schedule 1.01 giving effect thereto. - 113 - (f) Upon its receipt of a Commitment Assignment and Acceptance executed by an assigning Lender and an assignee representing that it is an Eligible Assignee, the Agent shall, if such Commitment Assignment and Acceptance has been completed and is in substantially the form of Exhibit C hereto, and subject to receipt of the written consent of Borrower and the Agent, if required hereby, (i) accept such Commitment Assignment and Acceptance, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to each Loan Party. (g) Each Lender may from time to time, with the consent of Borrower (or without the consent of the Borrower in the case of granting a participation solely in a Bid Advance), grant participations to one or more Lenders or other financial institutions (or any Person, in the case of granting a participation solely in a Bid Advance) in all or a portion of its Pro Rata Share of the Commitments, including its interest in the Letters of Credit; PROVIDED, HOWEVER, that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) the participating Lenders or other entities shall not be a Lender hereunder for any purpose except, if the participation agreement so provides, for the purposes of Sections 2.13(a), 2.18, 2.20, 3.07, 11.09, 11.10 and 11.14 but only to the extent that such costs payable by each Loan Party do not exceed the cost which each Loan Party would have incurred in respect of such Lender absent the participation, (iv) each Loan Party, the Agent, the Issuing Lender and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement and (v) no Lender shall grant any participation under which the consent of the holder of the participation interest is required for amendments or waivers of provisions of the Loan Documents other than those which (A) increase the monetary amount of any of the Commitments, (B) postpone any date fixed for any scheduled payments of principal or interest with respect to the Advances or any fees or other amounts payable to such Lender hereunder in which such participant has a direct monetary interest or (C) reduce the rate of interest on the Advances, any fee or any other monetary amount payable to the Lenders in which such participant has a direct monetary interest; PROVIDED that holder of a participation in a Bid Advance shall have the right to consent only to the actions described in clauses (B) and (C), and then only if it affects such Bid Advance. The prior consent of Borrower referred to in the previous sentence shall not be unreasonably withheld. - 114 - 11.09 INDEMNITY BY LOAN PARTIES. The Borrower and each Subsidiary Borrower hereby agrees to indemnify, save, and hold harmless the Agent and each Lender and their Affiliates, directors, officers, agents, attorneys, and employees (collectively, the "Indemnitees") from and against: (a) any and all claims, demands, actions, or causes of action that are asserted against any Indemnitee by any Person (other than any Loan Party or any Lender) if the claim, demand, action, or cause of action primarily relates to a claim, demand, action, or cause of action that such Person asserts or may assert against any Loan Party, any Affiliate of any Loan Party or any officer, director or shareholder of any Loan Party; (b) any and all claims, demands, actions or causes of action that are asserted against any Indemnitee by any Person (other than any Loan Party or any Lender) if the claim, demand, action or cause of action arises out of or relates to the Commitments, the use or contemplated use of proceeds of any Advance, or the relationship of any Loan Party and the Lenders under this Agreement; (c) any administrative or investigative proceeding by any Governmental Agency arising out of or related to a claim, demand, action or cause of action described in clauses (a) or (b) above; and (d) any and all liabilities, losses, costs, or expenses (including reasonable attorneys' fees and disbursements and fees for other professional services) that any Indemnitee suffers or incurs as a result of any of the foregoing; provided, that no Indemnitee shall be entitled to indemnification for any liability, loss, cost or expense caused directly or indirectly by any Indemnitee's own gross negligence or willful misconduct (collectively the "Indemnified Liabilities"). If any claim, demand, action or cause of action is asserted against any Indemnitee and such Indemnitee intends to claim indemnification from any Loan Party under this Section, such Indemnitee shall promptly notify such Loan Party, but the failure to so promptly notify such Loan Party shall not affect such Loan Party's obligations under this Section unless such failure materially prejudices such Loan Party's right to participate in the contest of such claim, demand, action or cause of action, as hereinafter provided. Each Indemnitee may, and if requested by such Loan Party in writing shall, in good faith contest the validity, applicability and amount of such claim, demand, action or cause of action with counsel selected by such Indemnitee and reasonably acceptable to such Loan Party, and shall permit such Loan Party to participate in such contest. Any Indemnitee that proposes to settle or compromise any claim or proceeding for which such Loan Party may be liable for payment of indemnity hereunder shall obtain such Loan Party's prior written consent, which consent shall not be unreasonably withheld. In connection with any claim, demand, action or cause of action covered by this Section against more than one Indemnitee, all such Indemnitees shall be represented by the same legal counsel selected by the Indemnitees and reasonably acceptable to - 115 - Borrower; provided, that if such legal counsel determines in good faith and advises Borrower in writing that representing all such Indemnitees would or could result in a conflict of interest under laws or ethical principles applicable to such legal counsel or that a defense or counterclaim is available to an Indemnitee that is not available to all such Indemnitees, then to the extent reasonably necessary to avoid such a conflict of interest or to permit unqualified assertion of such a defense or counterclaim, each Indemnitee shall be entitled to separate representation by legal counsel selected by that Indemnitee and reasonably acceptable to Borrower. Any obligation or liability of any Loan Party to any Indemnitee under this Section shall survive the expiration or termination of this Agreement and the repayment of all Advances and the payment and performance of all other Obligations owed to the Lenders for the applicable statute of limitations period. 11.10 HAZARDOUS MATERIALS INDEMNITY. The Borrower and the Subsidiary Borrowers each hereby agree to indemnify, hold harmless and defend (by counsel reasonably satisfactory to the Agent) each of the Lenders and their respective directors, officers, employees, agents, successors and assigns from and against any and all claims, losses, damages, liabilities, fines, penalties and charges, resulting from any administrative and judicial proceedings and orders, judgments, or remedial enforcement actions of any kind, and all costs and expenses incurred in connection therewith (including but not limited to reasonable attorneys' fees and expenses to the extent that the defense of any such action has not been assumed by any Loan Party), arising directly or indirectly, in whole or in part, out of (i) the presence, any release or discharge of any Hazardous Materials on, under or from the real property and (ii) any activity carried on or undertaken on or off the real property by Borrower or any of its Subsidiaries or any of their respective predecessors in title, whether prior to or during the term of this Agreement, and whether by Borrower or any of its Subsidiaries or any of their respective predecessors in title or any employees, agents, contractors or subcontractors of Borrower or any of its Subsidiaries or any of their respective predecessors in title, or any third persons at any time occupying or present on the real property, in connection with the handling, treatment, removal, storage, decontamination, clean-up, transport or disposal of any Hazardous Materials at any time located or present on or under the real property. The foregoing indemnity shall further apply to any residual contamination on or under the real property, or affecting any natural resources, and to any contamination of any property or natural resources arising in connection with the generation, use, handling, storage, transport or disposal of any such Hazardous Materials, and irrespective of whether any of such activities were or will be undertaken in - 116 - accordance with applicable Laws, but the foregoing indemnity shall not apply to Hazardous Materials on the real property, the presence of which is directly caused by the Agent or the Lenders. 11.11 NONLIABILITY OF LENDERS. Each Loan Party acknowledges and agrees that: (a) Any inspections of any property of any Loan Party made by or through the Agent or the Lenders are for purposes of administration of the Loan Documents only and such Loan Party is not entitled to rely upon the same; (b) By accepting or approving anything required to be observed, performed, fulfilled or given to the Lenders or the Agent pursuant to the Loan Documents, neither the Lenders nor the Agent shall be deemed to have warranted or represented the sufficiency, legality, effectiveness or legal effect of the same, or of any term, provision or condition thereof, and such acceptance or approval thereof shall not constitute a warranty or representation to anyone with respect thereto by the Lenders or the Agent; (c) The relationship between the Loan Parties and the Lenders arising out of or related to this Agreement is, and shall at all times remain, solely that of a borrower and bank; neither the Agent nor any of the Lenders shall under any circumstance be construed to be a partner or a joint venturer of any Loan Party or any of their Affiliates; neither the Agent nor any of the Lenders shall under any circumstance be deemed to be in a fiduciary relationship with any Loan Party or their Affiliates in connection with this Agreement, or to owe any fiduciary duty to any Loan Party or their Affiliates in connection with this Agreement; neither the Agent nor any of the Lenders undertakes or assumes any responsibility or duty to any Loan Party or their Affiliates to select, review, inspect, supervise, pass judgment upon or inform any Loan Party or their Affiliates of any matter in connection with their property or the operations of the Loan Parties or their Affiliates; each Loan Party and its Affiliates shall rely entirely upon their own judgment with respect to such matters; and any review, inspection, supervision, exercise of judgment or supply of information undertaken or assumed by the Lenders or the Agent in connection with such matters is solely for the protection of the Agent and the Lenders and neither the Loan Parties nor any other Person is entitled to rely thereon; and (d) Neither the Agent nor any of the Lenders shall be responsible or liable to any Person for any loss, - 117 - damage, liability or claim of any kind relating to injury or death to Persons or damage to property or other loss, damage, liability or claim caused by the actions, inaction or negligence of any Loan Party and/or its Affiliates. 11.12 CONFIDENTIALITY. Each Lender agrees to hold any confidential information which it may receive from any Loan Party pursuant to or in connection with this Agreement or the exercise of any rights hereunder in confidence and to cause its officers, employees, agents and professional advisors to do likewise. The foregoing shall not, however, restrict disclosure of any such confidential information by any Lender (a) to other Lenders; (b) to legal counsel, accountants and other professional advisors to any Loan Party or that Lender retained in connection with this Agreement; (c) to regulatory officials having jurisdiction over that Lender; (d) as required by law or legal process or in connection with any legal proceeding to which that Lender and any Loan Party are adverse parties; or (e) to another financial institution in connection with a disposition or proposed disposition to that financial institution of an assignment of or a participation interest in its Commitment and/or Advances, provided that such disclosure is made subject to an appropriate written confidentiality agreement on terms substantially similar to this Section and provided further that Borrower is advised substantially concurrently with such disclosure of the identity of such financial institution. For purposes of the foregoing, "confidential information" shall mean any information respecting Borrower or its Subsidiaries designated by Borrower or any Subsidiary to be confidential, other than (i) information previously filed with any Governmental Agency and available to the public without filing a request under the Freedom of Information Act, (ii) information previously published in any public medium not furnished directly or indirectly, by that Lender and (iii) information previously disclosed by any Loan Party to any Person not associated or affiliated with any Loan Party or any of its officers, directors, agents, attorneys or employees without an appropriate confidentiality agreement and subsequently disclosed by that Person. Nothing in this Section shall be construed to create or give rise to any fiduciary duty on the part of the Agent or the Lenders to any Loan Party. 11.13 NO THIRD PARTIES BENEFITED. This Agreement is made for the purpose of defining and setting forth certain obligations, rights and duties of each Loan Party, the Agent and the Lenders with respect to the Advances, and is made for the sole benefit of each Loan Party, the Agent and the Lenders, and the Agent's and the Lenders' successors and assigns. Except as provided in Sections 11.08 and 11.10, no other Person shall have any rights of any nature hereunder or by reason hereof. - 118 - 11.14 RIGHT OF SETOFF. Upon the occurrence of an Event of Default, each Loan Party hereby specifically authorizes each Lender (subject to the approval of the Majority Lenders) in which they maintain deposit accounts (whether a general or special deposit account, other than trust accounts) or a certificate of deposit to setoff any Obligations owned to the Lenders against such deposit account or certificate of deposit without prior notice to such Loan Party (which notice is hereby waived) whether or not such deposit account or certificate of deposit has then matured. Nothing in this Section shall limit or restrict the exercise by a Lender of any right to setoff or banker's lien under applicable Law, subject to the approval of the Majority Lenders. 11.15 JUDGMENT CURRENCY. (a) If for the purposes of obtaining judgment in any court it is necessary to convert a sum due hereunder or under any instrument delivered hereunder in any currency (the "Original Currency") into another currency (the "Other Currency"), the parties hereto agree, to the fullest extent permitted by law, that the rate of exchange used shall be that at which in accordance with normal banking procedures the Agent could purchase the Original Currency with the Other Currency on the Business Day preceding that on which final judgment is given. (b) The obligation of each Loan Party in respect of any sum due from it hereunder in the Original Currency shall, notwithstanding any judgment in any Other Currency, be discharged only to the extent that on the Business Day following receipt of any sum adjudged to be so due in such Other Currency the Agent may in accordance with normal banking procedures purchase such Original Currency with such Other Currency; if the amount of the Original Currency so purchased is less than the sum originally due in the Original Currency, such Loan Party agrees, as a separate obligation and notwithstanding any such judgment, to indemnify the Lender or Person to whom such amount was owing against such loss. 11.16 FURTHER ASSURANCES. Borrower and its Subsidiaries shall do, execute, and deliver such further acts and documents as any Lender or the Agent from time to time reasonably requires for the assuring and confirming unto the Lenders or the Agent the rights hereby created or facilitating the exercise of remedies or other rights available to the Lenders under any Loan Document. - 119 - 11.17 INTEGRATION. This Agreement, together with the other Loan Documents, comprises the complete and integrated agreement of the parties on the subject matter hereof and supersedes all prior agreements, written or oral, on the subject matter hereof. Each Loan Document was drafted with the joint participation of the respective parties thereto and shall be construed neither against nor in favor of any party, but rather in accordance with the fair meaning thereof. 11.18 GOVERNING LAW. Each Loan Document shall be governed by, and construed and enforced in accordance with the laws of California without regard to conflicts of laws. 11.19 SEVERABILITY OF PROVISIONS. Any provision in any Loan Document that is held to be inoperative, unenforceable, or invalid as to any party or in any jurisdiction shall, as to that party or that jurisdiction, be inoperative, unenforceable, or invalid without affecting the remaining provisions or the operation, enforceability, or validity of that provision as to any party or in any other jurisdiction, and to this end the provisions of all Loan Documents are declared to be severable. 11.20 HEADINGS. Article and Section headings in this Agreement and the other Loan Documents are included for convenience of reference only and are not part of this Agreement or the other Loan Documents for any other purpose. 11.21 CONFLICT IN LOAN DOCUMENTS. To the extent there is any actual irreconcilable conflict between the provisions of this Agreement and any other Loan Document, the provisions of this Agreement shall prevail. 11.22 WAIVER OF TRIAL BY JURY. WITH RESPECT TO ANY PROCEEDING IN A COURT OF LAW, EACH LOAN PARTY (ON ITS BEHALF AND ON BEHALF OF ITS AFFILIATES) AND THE AGENT AND EACH OF THE LENDERS HEREBY IN ANY EVENT EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY ON ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER ANY LOAN DOCUMENT OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF SUCH PERSONS OR ANY OF THEM WITH RESPECT TO ANY LOAN DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND EACH SUCH PERSON HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY TRIAL COURT WITHOUT A JURY, AND THAT ANY OTHER PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT OF TRIAL BY JURY. - 120 - 11.23 PURPORTED ORAL AMENDMENTS. EACH LOAN PARTY EXPRESSLY ACKNOWLEDGES THAT THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS MAY ONLY BE AMENDED OR MODIFIED, OR THE PROVISIONS HEREOF OR THEREOF WAIVED OR SUPPLEMENTED, BY AN INSTRUMENT IN WRITING THAT COMPLIES WITH SECTION 11.02. EACH LOAN PARTY AGREES THAT IT WILL NOT RELY ON ANY COURSE OF DEALING, COURSE OF PERFORMANCE, OR ORAL OR WRITTEN STATEMENTS BY ANY REPRESENTATIVE OF AGENT OR ANY LENDER THAT DOES NOT COMPLY WITH SECTION 11.02 TO EFFECT AN AMENDMENT, MODIFICATION, WAIVER OR SUPPLEMENT TO THE AGREEMENT OR THE OTHER LOAN DOCUMENTS. 11.24 AMENDMENT AND RESTATEMENT OF EXISTING CREDIT AGREEMENT. (a) This Agreement amends and restates the Existing Credit Agreement, and, upon execution and delivery by at least the Majority Lenders, the Agent and the Borrower, is effective as to the Borrower, the Agent and all Lenders whether or not signed by all Lenders. Advances outstanding under the Existing Credit Agreement which are not paid or prepaid on or prior to the Closing Date ("Continuing Advances") shall be deemed to continue as Advances outstanding hereunder with the same Interest Periods hereunder, and Continuing Letters of Credit shall be deemed to continue as Letters of Credit outstanding hereunder. The Applicable Margin set forth in this Agreement with respect to Eurocurrency Rate Committed Advances, Standby Letter of Credit fees and commitment fees shall become effective immediately on the Closing Date. Continuing Advances which are Bid Advances shall continue with the same interest period and shall continue to bear interest at the existing interest rate. Any interest, fees and other amounts accrued, but unpaid under the Existing Credit Agreement shall continue to accrue and be payable hereunder on the dates set forth herein for such types of interest, fees and other amounts. (b) Sections 7.01(d) and 7.01(f) of this Agreement shall be deemed effective June 28, 1997. - 121 - IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written. BORROWER: -------- SUNRISE MEDICAL, INC., as Borrower and as a Guarantor By: --------------------------- Ted N. Tarbet Senior Vice President and Chief Financial Officer GUARANTORS ---------- SUNMED FINANCE INC. SUNRISE MARIN HOLDINGS INC. SUNRISE MEDICAL CCG INC. SUNRISE MEDICAL HHG INC. By: -------------------------- Ted N. Tarbet Treasurer BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent By: --------------------------- Charles Graber Vice President BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as a Lender By: -------------------------- Vice President (Signatures continue) - 122 - NATIONSBANK OF TEXAS, N.A. By: --------------------------- Name: Title: - 123 - ABN AMRO BANK NV Los Angeles International Branch By: --------------------------- Name: Title: By: --------------------------- Name: Title: - 124 - UNION BANK OF CALIFORNIA, N.A. By: --------------------------- Name: Title: - 125 - MORGAN GUARANTY TRUST COMPANY OF NEW YORK By: --------------------------- Name: Title: - 126 - DEUTSCHE BANK AG, New York Branch and/or Caymen Islands Branch By: --------------------------- Name: Title: By: --------------------------- Name: Title: - 127 - PNC BANK, NATIONAL ASSOCIATION By: --------------------------- Name: Title: - 128 - EX-10.18 3 EXHIBIT 10.18 - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ SUNRISE MEDICAL, INC. ---------------- NOTE PURCHASE AGREEMENT ---------------- DATED AS OF OCTOBER 1, 1997 $50,000,000 7.09% SERIES A SENIOR NOTES DUE OCTOBER 28, 2004 $50,000,000 7.25% SERIES B SENIOR NOTES DUE OCTOBER 28, 2007 - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ TABLE OF CONTENTS PAGE ---- 1. AUTHORIZATION OF NOTES . . . . . . . . . . . . . . . . . . . . . . . . 1 2. SALE AND PURCHASE OF NOTES . . . . . . . . . . . . . . . . . . . . . . 2 3. CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 4. CONDITIONS TO CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . 2 4.1 Representations and Warranties . . . . . . . . . . . . . . . . . 3 4.2 Performance; No Default. . . . . . . . . . . . . . . . . . . . . 3 4.3 Compliance Certificates. . . . . . . . . . . . . . . . . . . . . 3 4.4 Opinions of Counsel. . . . . . . . . . . . . . . . . . . . . . . 3 4.5 Purchase Permitted By Applicable Law, etc. . . . . . . . . . . . 4 4.6 Sale of Other Notes. . . . . . . . . . . . . . . . . . . . . . . 4 4.7 Payment of Special Counsel Fees. . . . . . . . . . . . . . . . . 4 4.8 Private Placement Numbers. . . . . . . . . . . . . . . . . . . . 4 4.9 Changes in Structure . . . . . . . . . . . . . . . . . . . . . . 4 4.10 Reduction of Credit Agreement Availability . . . . . . . . . . . 4 4.11 Proceedings and Documents. . . . . . . . . . . . . . . . . . . . 5 5. REPRESENTATIONS AND WARRANTIES OF THE OBLIGORS . . . . . . . . . . . . 5 5.1 Organization; Power and Authority. . . . . . . . . . . . . . . . 5 5.2 Authorization, etc.. . . . . . . . . . . . . . . . . . . . . . . 5 5.3 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 5.4 Organization and Ownership of Shares of Material Subsidiaries; Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 5.5 Financial Statements . . . . . . . . . . . . . . . . . . . . . . 8 5.6 Compliance with Laws, Other Instruments, etc.. . . . . . . . . . 8 5.7 Governmental Authorizations, etc.. . . . . . . . . . . . . . . . 8 5.8 Litigation; Observance of Agreements, Statutes and Orders. . . . 8 5.9 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 5.10 Title to Property; Leases. . . . . . . . . . . . . . . . . . . . 9 5.11 Licenses, Permits, etc.. . . . . . . . . . . . . . . . . . . . . 9 5.12 Pension Plans. . . . . . . . . . . . . . . . . . . . . . . . . . 10 5.13 Private Offering by the Company. . . . . . . . . . . . . . . . . 11 5.14 Use of Proceeds; Margin Regulations. . . . . . . . . . . . . . . 11 5.15 Existing Debt; Future Liens. . . . . . . . . . . . . . . . . . . 11 5.16 Foreign Assets Control Regulations, etc. . . . . . . . . . . . . 12 5.17 Status under Certain Statutes. . . . . . . . . . . . . . . . . . 12 5.18 Environmental Matters. . . . . . . . . . . . . . . . . . . . . . 12 5.19 Obligors Interdependent. . . . . . . . . . . . . . . . . . . . . 13 6. REPRESENTATIONS OF THE PURCHASER . . . . . . . . . . . . . . . . . . . 13 i TABLE OF CONTENTS (cont.) PAGE ---- 6.1 Purchase for Investment. . . . . . . . . . . . . . . . . . . . . 13 6.2 Source of Funds. . . . . . . . . . . . . . . . . . . . . . . . . 13 7. INFORMATION AS TO COMPANY. . . . . . . . . . . . . . . . . . . . . . . 15 7.1 Financial and Business Information . . . . . . . . . . . . . . . 15 7.2 Officer's Certificate. . . . . . . . . . . . . . . . . . . . . . 17 7.3 Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 8. PREPAYMENT OF THE NOTES. . . . . . . . . . . . . . . . . . . . . . . . 18 8.1 Required Prepayments . . . . . . . . . . . . . . . . . . . . . . 18 8.2 Optional Prepayments of Notes with Make-Whole Amount . . . . . . 18 8.3 Allocation of Note Partial Prepayments . . . . . . . . . . . . . 19 8.4 Notes; Maturity; Surrender, etc. . . . . . . . . . . . . . . . . 19 8.5 Purchase of Notes. . . . . . . . . . . . . . . . . . . . . . . . 19 8.6 Make-Whole Amount. . . . . . . . . . . . . . . . . . . . . . . . 20 9. INTEREST ON THE NOTES. . . . . . . . . . . . . . . . . . . . . . . . . 21 9.1 Series A Notes' Semi-Annual Interest Payments. . . . . . . . . . 21 9.2 Series B Notes' Semi-Annual Interest Payments. . . . . . . . . . 21 10. AFFIRMATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . 22 10.1 Compliance with Law. . . . . . . . . . . . . . . . . . . . . . . 22 10.2 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 10.3 Maintenance of Properties. . . . . . . . . . . . . . . . . . . . 22 10.4 Payment of Taxes and Claims. . . . . . . . . . . . . . . . . . . 22 10.5 Corporate Existence, etc.. . . . . . . . . . . . . . . . . . . . 23 10.6 Pari Passu Obligations . . . . . . . . . . . . . . . . . . . . . 23 10.7 Maintenance of Guaranties of Subsidiaries. . . . . . . . . . . . 23 11. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . 25 11.1 Transactions with Affiliates . . . . . . . . . . . . . . . . . . 25 11.2 Merger, Consolidation, etc . . . . . . . . . . . . . . . . . . . 25 11.3 Incurrence of Debt . . . . . . . . . . . . . . . . . . . . . . . 27 11.4 Incurrence of Priority Debt. . . . . . . . . . . . . . . . . . . 27 11.5 Consolidated Net Worth; Restricted Payments. . . . . . . . . . . 28 11.6 Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 11.7 Sale of Assets, etc. . . . . . . . . . . . . . . . . . . . . . . 31 11.8 Line of Business . . . . . . . . . . . . . . . . . . . . . . . . 34 ii TABLE OF CONTENTS (cont.) PAGE ---- 12. EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . . . 34 13. REMEDIES ON DEFAULT, ETC.. . . . . . . . . . . . . . . . . . . . . . . 36 13.1 Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . 36 13.2 Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . 37 13.3 Rescission . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 13.4 No Waivers or Election of Remedies, Expenses, etc. . . . . . . . 38 14. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES. . . . . . . . . . . . . 38 14.1 Registration of Notes. . . . . . . . . . . . . . . . . . . . . . 38 14.2 Transfer and Exchange of Notes . . . . . . . . . . . . . . . . . 38 14.3 Replacement of Notes . . . . . . . . . . . . . . . . . . . . . . 39 15. PAYMENTS ON NOTES. . . . . . . . . . . . . . . . . . . . . . . . . . . 39 15.1 Place of Payment . . . . . . . . . . . . . . . . . . . . . . . . 39 15.2 Home Office Payment. . . . . . . . . . . . . . . . . . . . . . . 39 16. EXPENSES, ETC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 16.1 Transaction Expenses . . . . . . . . . . . . . . . . . . . . . . 40 16.2 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 17. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT . . . . . 40 18. AMENDMENT AND WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . 41 18.1 Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . 41 18.2 Solicitation of Holders of Notes . . . . . . . . . . . . . . . . 41 18.3 Binding Effect, etc. . . . . . . . . . . . . . . . . . . . . . . 41 18.4 Notes held by Company, etc.. . . . . . . . . . . . . . . . . . . 42 19. NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 20. REPRODUCTION OF DOCUMENTS. . . . . . . . . . . . . . . . . . . . . . . 42 21. CONFIDENTIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . 43 22. SUBSTITUTION OF PURCHASER. . . . . . . . . . . . . . . . . . . . . . . 44 23. GUARANTEE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 23.1 Guaranteed Obligations . . . . . . . . . . . . . . . . . . . . . 45 23.2 Performance under this Agreement and the Other Agreements. . . . 45 iii TABLE OF CONTENTS (cont.) PAGE ---- 23.3 Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 23.4 Certain Waivers of Subrogation, Reimbursement and Indemnity. . . 47 23.5 Releases . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 23.6 Marshaling . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 23.7 Liability. . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 23.8 Character of Obligation. . . . . . . . . . . . . . . . . . . . . 48 23.9 Election to Perform Obligations. . . . . . . . . . . . . . . . . 50 23.10 No Election. . . . . . . . . . . . . . . . . . . . . . . . . . . 50 23.11 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . 50 23.12 Other Enforcement Rights . . . . . . . . . . . . . . . . . . . . 50 23.13 Delay or Omission; No Waiver . . . . . . . . . . . . . . . . . . 50 23.14 Restoration of Rights and Remedies . . . . . . . . . . . . . . . 51 23.15 Cumulative Remedies. . . . . . . . . . . . . . . . . . . . . . . 51 23.16 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 23.17 Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . 51 24. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 24.1 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . 52 24.2 Payments Due on Non-Business Days. . . . . . . . . . . . . . . . 52 24.3 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . 52 24.4 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . 52 24.5 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . 52 24.6 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . 53 iv SUNRISE MEDICAL, INC. 2382 FARADAY AVENUE, SUITE 200 CARLSBAD, CA 92008 $50,000,000 7.09% SERIES A SENIOR NOTES DUE OCTOBER 28, 2004 $50,000,000 7.25% SERIES B SENIOR NOTES DUE OCTOBER 28, 2007 Dated as of October 1, 1997 [Separately addressed to each of the Purchasers identified on Schedule A] Ladies and Gentlemen: SUNRISE MEDICAL, INC., a Delaware corporation (together with its permitted successors, the "COMPANY"), SUNMED FINANCE INC., a Delaware corporation (together with its permitted successors, "SUNMED"), SUNRISE MARIN HOLDINGS INC., a California corporation (together with its permitted successors, "SMH"), SUNRISE MEDICAL CCG INC., a Wisconsin corporation (together with its permitted successors, "CCG"), SUNRISE MEDICAL HHG INC., a California corporation (together with its permitted successors, "HHG" and, together with Sunmed, SMH and CCG, and each other Person becoming a Guarantor hereunder pursuant to Section 10.7, are referred to herein individually as a "GUARANTOR" and collectively as the "GUARANTORS"; the Company, together with the Guarantors, are referred to herein individually as an "OBLIGOR" and collectively as the "OBLIGORS"), hereby agree, jointly and severally, with you as follows: 1. AUTHORIZATION OF NOTES. The Company will authorize the issue and sale of (a) $50,000,000 aggregate principal amount of its 7.09% Series A Senior Notes due October 28, 2004 (the "SERIES A NOTES"), and (b) $50,000,000 aggregate principal amount of its 7.25% Series B Senior Notes due October 28, 2007 (the "SERIES B NOTES"). The term "SERIES A NOTES" as used in this Agreement shall include each Series A Note delivered pursuant to this Agreement and the Other Agreements (as hereinafter defined) and any such notes issued in substitution therefor pursuant to Section 14 of this Agreement or the Other Agreements; the term "SERIES B NOTES" as used in this Agreement shall include each Series B Note delivered pursuant to this Agreement and the Other Agreements and any such notes issued in substitution therefor pursuant to Section 14 of this Agreement or the Other Agreements. The term "NOTES" as used in this Agreement shall include each Series A Note and each Series B Note. The Series A Notes and the Series B Notes shall be substantially in the forms set out in Exhibits 1A and 1B, respectively, with such changes therefrom, if any, as may be approved by you and the Company. Certain capitalized terms used in this Agreement are defined in Schedule B; references to a "SCHEDULE" or an "EXHIBIT" are, unless otherwise specified, to a Schedule or an Exhibit attached to this Agreement. 2. SALE AND PURCHASE OF NOTES. Subject to the terms and conditions of this Agreement, the Company will issue and sell to you and you will purchase from the Company, at the Closing provided for in Section 3, Notes in the principal amount and of the Series specified below your name in Schedule A at the purchase price of 100% of the principal amount thereof. Contemporaneously with entering into this Agreement, the Company is entering into separate Note Purchase Agreements (the "OTHER AGREEMENTS") identical with this Agreement with each of the other purchasers named in Schedule A (the "OTHER PURCHASERS"), providing for the sale at such Closing to each of the Other Purchasers of Notes in the principal amount and of the Series specified below its name in Schedule A. Your obligation hereunder and the obligations of the Other Purchasers under the Other Agreements are several and not joint obligations and you shall have no obligation under any Other Agreement and no liability to any Person for the performance or non-performance by any Other Purchaser thereunder. 3. CLOSING. The sale and purchase of the Notes to be purchased by you and the Other Purchasers shall occur at the offices of 2 Orrick, Herrington & Sutcliffe LLP, 666 Fifth Avenue, New York, New York, at 10:00 a.m., local time, at a closing (the "CLOSING") on October 28, 1997 or on such other Business Day thereafter as may be agreed upon by the Company and you and the Other Purchasers. At the Closing the Company will deliver to you the Notes of the Series to be purchased by you in the form of a single Note (or such greater number of Notes in denominations of at least $500,000 as you may request), dated the date of the Closing and registered in your name (or in the name of your nominee), against delivery by you to the Company or its order of immediately available funds in the amount of the purchase price therefor by wire transfer of immediately available funds for the account of the Company as indicated on Schedule C. If at the Closing the Company shall fail to tender such Notes to you as provided above in this Section 3, or any of the conditions specified in Section 4 shall not have been fulfilled to your satisfaction, you shall, at your election, be relieved of all further obligations under this Agreement, without thereby waiving any rights you may have by reason of such failure or such nonfulfillment. 4. CONDITIONS TO CLOSING. Your obligation to purchase and pay for the Notes to be sold to you at the Closing is subject to the fulfillment to your satisfaction, prior to or at the Closing, of the following conditions: 4.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of the Obligors in this Agreement shall be correct when made and at the time of the Closing. 4.2 PERFORMANCE; NO DEFAULT. Each Obligor shall have performed and complied with all agreements and conditions contained in this Agreement required to be performed or complied with by it prior to or at the Closing and, after giving effect to the issue and sale of the Notes (and the application of the proceeds thereof as contemplated by Schedule 5.14) no Default or Event of Default shall have occurred and be continuing. Neither the Company nor any Subsidiary shall have entered into any transaction since the date of the Memorandum that would have been prohibited by Section 11.1 had such Section applied since such date. 3 4.3 COMPLIANCE CERTIFICATES. (a) OBLIGOR'S OFFICER'S CERTIFICATES. Each Obligor shall have delivered to you an Officer's Certificate, dated the date of the Closing, certifying that the conditions specified in Section 4.1, Section 4.2 and Section 4.9 have been fulfilled. (b) OBLIGOR SECRETARY'S CERTIFICATES. Each Obligor shall have delivered to you a certificate of its Secretary or one of its Assistant Secretaries, dated the date of the Closing, certifying as to the resolutions attached thereto and other proceedings relating to the authorization, execution and delivery of the Notes, this Agreement and the Other Agreements. 4.4 OPINIONS OF COUNSEL. You shall have received opinions in form and substance satisfactory to you, dated the date of the Closing, (a) from Steven Jaye, Esq., General Counsel of the Company and the Guarantors, substantially in the form set out in Exhibit 4.4(a) and covering such other matters incident to the transactions contemplated hereby as you or your counsel may reasonably request (and the Company hereby instructs its counsel to deliver such opinion to you), (b) from Hebb & Gitlin, special counsel for the Company, substantially in the form set out in Exhibit 4.4(b) and covering such other matters incident to the transactions contemplated hereby as you or your counsel may reasonably request (and the Company hereby instructs its counsel to deliver such opinion to you) and (c) from Orrick, Herrington & Sutcliffe LLP, your special counsel in connection with the transactions contemplated hereby. 4.5 PURCHASE PERMITTED BY APPLICABLE LAW, ETC. On the date of the Closing your purchase of Notes shall (a) be permitted by the laws and regulations of each jurisdiction to which you are subject, without recourse to provisions (such as section 1405(a)(8) of the New York Insurance Law) permitting limited investments by insurance companies without restriction as to the character of the 4 particular investment, (b) not violate any applicable law or regulation (including, without limitation, Regulation G, T or X of the Board of Governors of the Federal Reserve System) and (c) not subject you to any tax, penalty or liability under or pursuant to any applicable law or regulation, which law or regulation was not in effect on the date of your execution and delivery of this Agreement. If requested by you, you shall have received an Officer's Certificate certifying as to such matters of fact as you may reasonably specify to enable you to determine whether such purchase is so permitted. 4.6 SALE OF OTHER NOTES. Contemporaneously with the Closing the Company shall sell to the Other Purchasers and the Other Purchasers shall purchase the Notes to be purchased by them at the Closing as specified in Schedule A. 4.7 PAYMENT OF SPECIAL COUNSEL FEES. Without limiting the provisions of Section 16.1, the Company shall have paid on or before the Closing the fees, charges and disbursements of your special counsel referred to in Section 4.4 to the extent reflected in a statement of such counsel rendered to the Company at least one Business Day prior to the date of the Closing. 4.8 PRIVATE PLACEMENT NUMBERS. A Private Placement Number issued by Standard & Poor's CUSIP Service Bureau (in cooperation with the Securities Valuation Office of the National Association of Insurance Commissioners) shall have been obtained for each Series of the Notes. 4.9 CHANGES IN STRUCTURE. The Obligors shall not have changed their jurisdiction of incorporation or organization or been a party to any merger or consolidation and shall not have succeeded to all or any substantial part of the liabilities of any other entity, at any time following the date of the most recent financial statements referred to in Schedule 5.5. 4.10 REDUCTION OF CREDIT AGREEMENT AVAILABILITY. The Company shall have, contemporaneously with the sale of the Notes (and in conjunction with the application of the 5 proceeds of the Notes as set forth in Section 5.14), paid all of such proceeds to the agent under the Credit Agreement for application to the principal amount of the Debt outstanding thereunder and shall have, contemporaneously therewith, caused the amount of its commitment availability thereunder to be permanently reduced by $100,000,000, and you shall have received evidence reasonably satisfactory to you of all such actions. 4.11 PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings in connection with the transactions contemplated by this Agreement and all documents and instruments incident to such transactions shall be satisfactory to you and your special counsel, and you and your special counsel shall have received all such counterpart originals or certified or other copies of such documents as you or they may reasonably request. 5. REPRESENTATIONS AND WARRANTIES OF THE OBLIGORS. Each Obligor, jointly and severally, represents and warrants to you, as of the date of the Closing, that: 5.1 ORGANIZATION; POWER AND AUTHORITY. Each Obligor is a corporation, duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation, and each is duly qualified as a foreign corporation and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Each Obligor has the corporate power and authority to own or hold under lease the properties it purports to own or hold under lease, to transact the business it transacts and proposes to transact, to execute and deliver this Agreement, the Other Agreements and the Notes and to perform the provisions hereof and thereof. 5.2 AUTHORIZATION, ETC. (a) THE COMPANY. This Agreement, the Other Agreements and the Notes have been duly authorized by all necessary corporate action on the part of the Company, and this Agreement constitutes, and upon 6 execution and delivery thereof each Note will constitute, a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). (b) THE GUARANTORS. This Agreement and the Other Agreements have been duly authorized by all necessary corporate action on the part of each Guarantor, and this Agreement constitutes a legal, valid and binding obligation of each such Guarantor, enforceable against each such Guarantor in accordance with its terms, except as such enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar laws affecting the enforcement of creditors' rights generally and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). (c) SOLVENCY OF GUARANTORS. None of the Guarantors intends to incur any obligations hereunder or otherwise make any transfers in connection herewith, with actual intent to hinder, delay or defraud either present or future creditors. Before, and after giving effect to, the consummation of the transactions contemplated hereby, without limitation, the issuance of the Notes and the delivery of the Guarantees: (i) the assets of each Guarantor at a fair valuation thereof on a going concern basis will not be less than the amount that will be required to pay the probable liability with respect to its debts (including, without limitation, contingent, subordinated, unmatured and unliquidated liabilities on existing debts, as such liabilities may become absolute and matured), in each case both prior to and after giving effect to the transactions contemplated by this Agreement, (ii) no Guarantor is currently engaged in or about to engage in a business or transaction for 7 which the property remaining in its respective hands is an unreasonably small capital and (iii) each Guarantor will be able to pay its respective debts as they mature. 5.3 DISCLOSURE. (a) The Obligors, through the Placement Agents, have delivered to you and each Other Purchaser a copy of a Confidential Private Placement Memorandum, dated September 1997 (the "MEMORANDUM"), relating to the transactions contemplated hereby. The Memorandum fairly describes, in all material respects, the general nature of the business and principal properties of the Company and its Subsidiaries. Except as disclosed in Schedule 5.3, this Agreement, the Memorandum, the documents, certificates or other writings delivered to you by or on behalf of the Obligors in connection with the transactions contemplated hereby and the financial statements listed in Schedule 5.5, taken as a whole, do not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein (taken as a whole) not misleading in light of the circumstances under which they were made. Except as disclosed in the Memorandum or as expressly described in Schedule 5.3, or in one of the documents, certificates or other writings identified therein, or in the financial statements listed in Schedule 5.5, since June 27, 1997, there has been no change in the financial condition, operations, business, properties or prospects of the Obligors except changes that individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect. There is no fact known to a Senior Financial Officer that could reasonably be expected to have a Material Adverse Effect that has not been set forth herein or in the Memorandum or in the other documents, certificates and other writings delivered to you by or on behalf of the Obligors specifically for use in connection with the transactions contemplated hereby, provided that no representation is made as to general economic conditions. (b) The material assumptions used in the preparation of the projected information with respect to the Company and its Subsidiaries included in the Memorandum, taken as a whole, were made in good faith, were believed to be reasonable when made and the 8 Company believes such assumptions continue to be reasonable. All material assumptions and principles of accounting on which such projections were based are disclosed therein. Such projections were prepared in good faith, have a reasonable basis and represent the good faith opinion of the Company as to the projected results of the operations of the Company and its Subsidiaries after giving effect to the transactions contemplated hereby. The estimates of future performance and financial condition set forth in such projections, taken as a whole, are, in the Company's opinion, reasonable; however, actual events or results may differ materially from such estimates. There is no fact known to a Senior Financial Officer that has occurred since the preparation of such projections that would materially affect such projections, except such facts that the Memorandum or other written statements delivered to you disclose have occurred or may occur. 5.4 ORGANIZATION AND OWNERSHIP OF SHARES OF MATERIAL SUBSIDIARIES; AFFILIATES. (a) Schedule 5.4 contains (except as noted therein) complete and correct lists (i) of the Company's Subsidiaries, identifying the Subsidiaries that are Material Subsidiaries, showing, as to each Material Subsidiary, the correct name thereof, the jurisdiction of its organization and the percentage of shares of each class of its capital stock or similar equity interests outstanding owned by the Company and each other Subsidiary, (ii) of the Company's Affiliates, other than Subsidiaries, and (iii) of the Company's directors and senior officers. (b) All of the outstanding shares of capital stock or similar equity interests of each Material Subsidiary shown in Schedule 5.4 as being owned by the Company and its Subsidiaries have been validly issued, are fully paid and nonassessable and are owned by the Company or another Subsidiary free and clear of any Lien (except as otherwise disclosed in Schedule 5.4). (c) Each Material Subsidiary identified in Schedule 5.4 is a corporation or other legal entity duly organized, validly existing and in good standing (to the extent such concept is recognized) under the laws of its jurisdiction of organization, and is duly qualified as a foreign corporation or other legal entity and is in good standing in each jurisdiction in which such qualification is required 9 by law, other than those jurisdictions as to which the failure to be so qualified or in good standing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Each such Material Subsidiary has the corporate or other power and authority to own or hold under lease the properties it purports to own or hold under lease and to transact the business it transacts and proposes to transact. (d) No Material Subsidiary is a party to, or otherwise subject to any legal restriction or any agreement (other than this Agreement, the agreements listed on Schedule 5.4 and customary limitations imposed by corporate law statutes) restricting the ability of such Material Subsidiary to pay dividends out of profits or make any other similar distributions of profits to the Company or any of its Subsidiaries that owns outstanding shares of capital stock or similar equity interests of such Material Subsidiary. 5.5 FINANCIAL STATEMENTS. The Company has delivered to you and each Other Purchaser copies of the financial statements of the Company and its Subsidiaries listed on Schedule 5.5. All of said financial statements (including in each case the related schedules and notes) fairly present, in all material respects, the consolidated financial position of the Company and its Subsidiaries as of the respective dates specified in such Schedule and the consolidated results of their operations and cash flows for the respective periods so specified and have been prepared in accordance with GAAP consistently applied throughout the periods involved except as set forth in the notes thereto (subject, in the case of any interim financial statements, to normal year-end adjustments). 5.6 COMPLIANCE WITH LAWS, OTHER INSTRUMENTS, ETC. The execution, delivery and performance by the Company of the Notes and by the Obligors of this Agreement will not (a) contravene, result in any breach of, or constitute a default under, or result in the creation of any Lien in respect of any property of any Obligor or any Subsidiary under, any indenture, mortgage, deed of trust, loan, purchase or credit agreement, lease, corporate charter, bylaws or other constitutive document, or any other material agreement or instrument to which such 10 Obligor or such Subsidiary is bound or by which such Obligor or such Subsidiary or any of their respective properties may be bound or affected, (b) conflict with or result in a breach of any of the terms, conditions or provisions of any order, judgment, decree, or ruling of any court, arbitrator or Governmental Authority applicable to any Obligor or any Subsidiary, or (c) violate any provision of any statute or other rule or regulation of any Governmental Authority applicable to any Obligor or any Subsidiary. 5.7 GOVERNMENTAL AUTHORIZATIONS, ETC. No consent, approval or authorization of, or registration, filing or declaration with, any Governmental Authority is required in connection with the execution, delivery or performance of the Notes by the Company or this Agreement by any of the Obligors. 5.8 LITIGATION; OBSERVANCE OF AGREEMENTS, STATUTES AND ORDERS. (a) Except as disclosed in Schedule 5.8, there are no actions, suits or proceedings pending or, to the knowledge of the Obligors, threatened against or affecting the Company or any Subsidiary or any property of the Company or any Subsidiary in any court or before any arbitrator of any kind or before or by any Governmental Authority that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. (b) Neither the Company nor any Subsidiary is in default under any term of any agreement or instrument to which it is a party or by which it is bound, or any order, judgment, decree or ruling of any court, arbitrator or Governmental Authority or is in violation of any applicable law, ordinance, rule or regulation (including, without limitation, Environmental Laws) of any Governmental Authority, which default or violation, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. 11 5.9 TAXES. The Company and its Subsidiaries have filed all tax returns that are required to have been filed in any jurisdiction, and have paid all taxes shown to be due and payable on such returns and all other taxes and assessments levied upon them or their properties, assets, income or franchises, to the extent such taxes and assessments have become due and payable and before they have become delinquent, except for any taxes and assessments (a) the amount of which is not individually or in the aggregate Material or (b) the amount, applicability or validity of which is currently being contested in good faith by appropriate proceedings and with respect to which the Company, any other Obligor or any Subsidiary, as the case may be, has established adequate reserves in accordance with GAAP. The Obligors know of no basis for any other tax or assessment that could reasonably be expected to have a Material Adverse Effect. The charges, accruals and reserves on the books of the Company and its Subsidiaries in respect of Federal, state or other taxes for all fiscal periods are adequate. The Federal income tax liabilities of the Company and its Subsidiaries have been determined by the Internal Revenue Service and paid for all fiscal years up to and including the fiscal year ended June 30, 1993. 5.10 TITLE TO PROPERTY; LEASES. The Company and its Subsidiaries have good and sufficient title to their respective properties that individually or in the aggregate are Material, including all such properties reflected in the most recent audited balance sheet referred to in Section 5.5 or purported to have been acquired by the Company or any Subsidiary after said date (except as sold or otherwise disposed of in the ordinary course of business), in each case free and clear of Liens prohibited by this Agreement. All leases that individually or in the aggregate are Material are valid and subsisting and are in full force and effect in all material respects. 5.11 LICENSES, PERMITS, ETC. Except as disclosed in Schedule 5.11, (a) the Company and its Subsidiaries own or possess all licenses, permits, franchises, authorizations, patents, copyrights, service marks, trademarks and trade names, or rights thereto, that individually or in the 12 aggregate are Material, without known conflict with the rights of others; (b) to the best knowledge of the Obligors, no product or practice of the Company or any Subsidiary infringes in any material respect any license, permit, franchise, authorization, patent, copyright, service mark, trademark, trade name or other right owned by any other Person, which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect; and (c) to the best knowledge of the Obligors, there is no material violation by any Person of any right of any Obligor or any Subsidiary with respect to any patent, copyright, service mark, trademark, trade name or other right owned or used by such Person which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. 5.12 PENSION PLANS. (a) The Company and each ERISA Affiliate have operated and administered each Plan (other than any Multiemployer Plan) in compliance with all applicable laws except for such instances of noncompliance as have not resulted in and could not reasonably be expected to result in a Material Adverse Effect. Neither the Company nor any ERISA Affiliate has incurred any liability in the nature of a penalty, excise tax or fine pursuant to Title I of ERISA, any liability under Title IV of ERISA or any liability under sections 4971 through 4980E of the Code, and no event, transaction or condition has occurred or exists that could reasonably be expected to result in the incurrence of any such liability by the Company or any ERISA Affiliate, or in the imposition of any Lien on any of the rights, properties or assets of the Company or any ERISA Affiliate, in either case pursuant to Title I or IV of ERISA or pursuant to sections 4971 through 4980E of the Code or pursuant to section 401(a)(29) or 412 of the Code, other than such liabilities or Liens as would not be individually or in the aggregate Material. (b) The present value of the aggregate benefit liabilities under all of the Plans subject to Title IV of ERISA (other than Multiemployer Plans), determined as of the end of each such Plan's most recently ended plan year on the basis of the actuarial assumptions specified for 13 funding purposes in such Plan's most recent actuarial valuation report, did not exceed the aggregate current value of the assets of all such Plans by an amount that is Material. The term "BENEFIT LIABILITIES" has the meaning specified in section 4001 of ERISA and the terms "CURRENT VALUE" and "PRESENT VALUE" have the meaning specified in section 3 of ERISA. (c) The Company and its ERISA Affiliates have not incurred withdrawal liabilities (and are not subject to contingent withdrawal liabilities) under section 4201 or 4204 of ERISA in respect of Multiemployer Plans that individually or in the aggregate are Material. (d) The unfunded expected postretirement benefit obligation (determined as of the last day of the Company's most recently ended fiscal year in accordance with Financial Accounting Standards Board Statement No. 106, without regard to liabilities attributable to continuation coverage mandated by section 4980B of the Code) of the Company and its Subsidiaries is not Material. (e) The execution and delivery of this Agreement and the issuance and sale of the Notes hereunder will not involve any transaction that is subject to the prohibitions of section 406 of ERISA or in connection with which a tax could be imposed pursuant to section 4975(c)(1)(A)-(D) of the Code. The representation by the Obligors in the first sentence of this Section 5.12(e) is made in reliance upon and subject to the accuracy of your representation in Section 6.2 as to the sources of the funds used to pay the purchase price of the Notes to be purchased by you. (f) All Non-US Pension Plans have been established, operated, administered and maintained in compliance with all laws, regulations and orders applicable thereto, except where any failure to so comply would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Except where they would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, all premiums, contributions and any other amounts required to be paid pursuant to applicable Non-US Pension Plan documents or applicable laws governing such Non-US Pension Plans have been paid or accrued as required. (g) The Multiemployer Plans in respect of which any Obligor or any ERISA Affiliate makes contributions or has 14 any liability or obligation are set forth on Schedule 5.12(g). The Plans constituting "defined benefit plans" (as defined in section (3)(35) of ERISA) are set forth on Schedule 5.12(g). 5.13 PRIVATE OFFERING BY THE COMPANY. Neither the Obligors nor anyone acting on their behalf has offered the Notes or any similar securities for sale to, or solicited any offer to buy any of the same from, or otherwise approached or negotiated in respect thereof with, any Person other than you, the Other Purchasers and not more than 72 other Institutional Investors, each of which has been offered the Notes at a private sale for investment. Neither any of the Obligors nor anyone acting on their behalf has taken, or will take, any action that would subject the issuance or sale of the Notes to the registration requirements of section 5 of the Securities Act. 5.14 USE OF PROCEEDS; MARGIN REGULATIONS. The Company will apply the proceeds of the sale of the Notes as set forth in Schedule 5.14. No part of the proceeds from the sale of the Notes hereunder will be used, directly or indirectly, for the purpose of buying or carrying any margin stock within the meaning of Regulation G of the Board of Governors of the Federal Reserve System (12 CFR 207), or for the purpose of buying or carrying or trading in any securities under such circumstances as to involve the Company in a violation of Regulation X of said Board (12 CFR 224) or to involve any broker or dealer in a violation of Regulation T of said Board (12 CFR 220). Margin stock does not constitute more than 1% of the value of the consolidated assets of the Obligors and the Obligors do not have any present intention that margin stock will constitute more than 1% of the value of such assets. As used in this Section, the terms "MARGIN STOCK" and "PURPOSE OF BUYING OR CARRYING" shall have the meanings assigned to them in said Regulation G. 5.15 EXISTING DEBT; FUTURE LIENS. (a) Except as described therein, Schedule 5.15 sets forth a complete and correct list of all outstanding Debt of the Obligors and their Subsidiaries as of September 27, 1997 (other than outstanding items of Debt that individually do not exceed $1,000,000 and, in the aggregate for all such items, do not exceed $5,000,000), since which date there has been no 15 Material change in the amounts, interest rates, sinking funds, instalment payments or maturities of the Debt of the Obligors and their Subsidiaries except as described in Schedule 5.15. Neither any Obligor nor any Subsidiary is in default and no waiver of default is currently in effect, in the payment of any principal or interest on any Debt of any Obligor or such Subsidiary, and no event or condition exists with respect to any Debt of any Obligor or Subsidiary which event or condition would permit (or that with notice or the lapse of time, or both, would permit) one or more Persons to cause such Debt to become due and payable before its stated maturity or before its regularly scheduled dates of payment. (b) Except as disclosed in Schedule 5.15, no Obligor or Subsidiary has agreed or consented to cause or permit in the future (upon the happening of a contingency or otherwise) any of its property, whether now owned or hereafter acquired, to be subject to a Lien not permitted by Section 11.6. 5.16 FOREIGN ASSETS CONTROL REGULATIONS, ETC. Neither the sale of the Notes by the Company hereunder nor its use of the proceeds thereof will violate the Trading with the Enemy Act, as amended, or any of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling legislation or executive order relating thereto. 5.17 STATUS UNDER CERTAIN STATUTES. Neither the Company nor any Subsidiary is subject to regulation under the Investment Company Act of 1940, as amended, the Public Utility Holding Company Act of 1935, as amended, the Transportation Acts (49 U.S.C.), as amended, or the Federal Power Act, as amended. 5.18 ENVIRONMENTAL MATTERS. Neither the Company nor any Subsidiary has knowledge of any claim or has received any notice of any claim, and no proceeding has been instituted raising any claim against the Company or any of its Subsidiaries or any of their respective real properties now or formerly owned, leased or operated by any of them or other assets, alleging any damage to the environment or violation of any Environmental Laws, except, in each case, such as could not reasonably be expected to result 16 in a Material Adverse Effect. Except as otherwise disclosed to you in writing, (a) neither the Company nor any Subsidiary has knowledge of any facts which would give rise to any claim, public or private, of violation of Environmental Laws or damage to the environment emanating from, occurring on or in any way related to real properties now or formerly owned, leased or operated by any of them or to other assets or their use, except, in each case, such as could not reasonably be expected to result in a Material Adverse Effect; (b) neither the Company nor any of its Subsidiaries has stored any Hazardous Materials on real properties now or formerly owned, leased or operated by any of them in a manner contrary to any Environmental Laws and has not disposed of any Hazardous Materials in a manner contrary to any Environmental Laws in each case in any manner that could reasonably be expected to result in a Material Adverse Effect; and (c) all buildings on all real properties now owned, leased or operated by the Company or any of its Subsidiaries are in compliance with applicable Environmental Laws, except where failure to comply could not reasonably be expected to result in a Material Adverse Effect. 5.19 OBLIGORS INTERDEPENDENT. The Company and the Guarantors are directly dependent upon each other for and in connection with their borrowing activities. Each Guarantor will receive direct and indirect economic, financial and other benefits from the indebtedness incurred hereunder and under the Notes by the Company, and under the Guarantee of each Guarantor, and the incurrence of such indebtedness is in the best interests of the Company and each Guarantor. The Company and the Guarantors have explicitly induced the Purchasers to purchase the Notes based on and in reliance on the consolidated financial condition of the Company and the Guarantors. 6. REPRESENTATIONS OF THE PURCHASER. 6.1 PURCHASE FOR INVESTMENT. 17 You represent that you are purchasing the Notes for your own account or for one or more separate accounts maintained by you or for the account of one or more pension or trust funds (or commingled pension trust funds) or for the account of one or more "accredited investors" within the meaning of Regulation D under the Securities Act for whom you are acting as investment manager, agent or investment adviser, and not with a view to the distribution thereof, PROVIDED that the disposition of your or their property shall at all times be within your or their control. You understand that the Notes have not been registered under the Securities Act and may be resold only if registered pursuant to the provisions of the Securities Act or if an exemption from registration is available, except under circumstances where neither such registration nor such an exemption is required by law, and that the Company is not required to register the Notes. 6.2 SOURCE OF FUNDS. You represent that at least one of the following statements is an accurate representation as to each source of funds (a "SOURCE") to be used by you to pay the purchase price of the Notes to be purchased by you hereunder: (a) the Source is an "insurance company general account" as defined in Department of Labor Prohibited Transaction Exemption ("PTE") 95-60 (60 FR 35925, July 12, 1995) and in respect thereof you represent that there is no "employee benefit plan" (as defined in section 3(3) of ERISA and section 4975(e)(1) of the Code, treating as a single plan all plans maintained by the same employer or employee organization or affiliate thereof) with respect to which the amount of the general account reserves and liabilities of all contracts held by or on behalf of such plan exceed 10% of the total reserves and liabilities of such general account (exclusive of separate account liabilities) PLUS surplus, as set forth in the NAIC Annual Statement filed with your state of domicile; or (b) if you are an insurance company, the Source does not include assets allocated to any separate account maintained by you in which any employee benefit plan (or its related trust) has any interest, other than a separate account that is maintained solely in connection with your fixed contractual obligations under which the amounts payable, or credited, to such plan and to any participant or beneficiary of such plan (including any 18 annuitant) are not affected in any manner by the investment performance of the separate account; or (c) the Source is either (i) an insurance company pooled separate account, within the meaning of PTE 90-1 (issued January 29, 1990), or (ii) a bank collective investment fund, within the meaning of the PTE 91-38 (issued July 12, 1991) and, except as you have disclosed to the Company in writing pursuant to this paragraph (c), no employee benefit plan or group of plans maintained by the same employer, affiliate of such employer or employee organization beneficially owns more than 10% of all assets allocated to such pooled separate account or collective investment fund; or (d) (i) the Source constitutes assets of an "investment fund" (within the meaning of Part V of the QPAM Exemption) managed by a "qualified professional asset manager" or "QPAM" (within the meaning of Part V of the QPAM Exemption), (ii) no employee benefit plan's assets that are included in such investment fund, when combined with the assets of all other employee benefit plans established or maintained by the same employer or by an affiliate (within the meaning of Section V(c)(1) of the QPAM Exemption) of such employer or by the same employee organization and managed by such QPAM, exceed 20% of the total client assets managed by such QPAM, (iii) the conditions of Part I(c) and (g) of the QPAM Exemption are satisfied, neither the QPAM nor a person controlling or controlled by the QPAM (applying the definition of "control" in Section V(e) of the QPAM Exemption) owns a 5% or more interest in any Obligor and (iv) the identity of such QPAM and the names of all employee benefit plans whose assets are included in such investment fund have been disclosed to the Company in writing pursuant to this paragraph (d); or (e) the Source is a governmental plan; or (f) the Source is one or more employee benefit plans, or a separate account or trust fund comprised of one or more employee benefit plans, each of which has been identified to the Company in writing pursuant to this paragraph (f); or (g) the Source does not include assets of any employee benefit plan, other than a plan exempt from the coverage of ERISA. 19 As used in this Section 6.2, the terms "EMPLOYEE BENEFIT PLAN", "GOVERNMENTAL PLAN", "PARTY IN INTEREST" and "SEPARATE ACCOUNT" shall have the respective meanings assigned to such terms in section 3 of ERISA. 7. INFORMATION AS TO COMPANY. 7.1 FINANCIAL AND BUSINESS INFORMATION. The Company shall deliver to each holder of Notes that is an Institutional Investor: (A) QUARTERLY STATEMENTS -- within 60 days after the end of each quarterly fiscal period in each fiscal year of the Company (other than the last quarterly fiscal period of each such fiscal year), duplicate copies of (i) a consolidated balance sheet of the Company and its Subsidiaries as at the end of such quarter, and (ii) consolidated statements of operations, stockholders' equity and cash flows for the Company and its Subsidiaries, for such quarter and (in the case of the second and third quarters) for the portion of the fiscal year ending with such quarter, setting forth in each case in comparative form the figures for the corresponding periods in the previous fiscal year of the Company, all in reasonable detail, prepared in accordance with GAAP applicable to quarterly financial statements generally, and certified by a Senior Financial Officer as fairly presenting, in all material respects, the financial position of the companies being reported on and their results of operations and cash flows, subject to changes resulting from year-end adjustments, PROVIDED that delivery within the time period specified above of copies of the Company's Quarterly Report on Form 10-Q prepared in compliance with the requirements therefor and filed with the Securities and Exchange Commission shall be deemed to satisfy the requirements of this Section 7.1(a); 20 (b) ANNUAL STATEMENTS -- within 120 days after the end of each fiscal year of the Company, duplicate copies of (i) a consolidated balance sheet of the Company and its Subsidiaries, as at the end of such year, and (ii) consolidated statements of operations, stockholders' equity and cash flows of the Company and its Subsidiaries, for such year, setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail, prepared in accordance with GAAP, and accompanied (A) by an opinion thereon of independent certified public accountants of recognized national standing, which opinion shall state that such financial statements present fairly, in all material respects, the financial position of the companies being reported upon and the results of their operations and cash flows and have been prepared in conformity with GAAP, and that the examination of such accountants in connection with such financial statements has been made in accordance with generally accepted auditing standards, and that such audit provides a reasonable basis for such opinion in the circumstances, and (B) by a certificate of such accountants stating that they have reviewed this Agreement and stating further whether, in making their audit, they have become aware of any condition or event that then constitutes a Default or an Event of Default, and, if they are aware that any such condition or event then exists, specifying the nature and period of the existence thereof (it being understood that such accountants shall not be liable, directly or indirectly, for any failure to obtain knowledge of any Default or Event of Default unless such accountants should have obtained knowledge thereof in making an audit in accordance with generally accepted auditing standards or did not make such an audit), 21 PROVIDED that the delivery within the time period specified above of the Company's Annual Report on Form 10-K for such fiscal year (together with the Company's annual report to shareholders, if any, prepared pursuant to Rule 14a-3 under the Exchange Act) prepared in accordance with the requirements therefor and filed with the Securities and Exchange Commission, together with the accountant's certificate described in clause (B) above, shall be deemed to satisfy the requirements of this Section 7.1(b); (c) SEC AND OTHER REPORTS -- promptly upon their becoming available, one copy of (i) each financial statement, report, notice or proxy statement sent by the Company or any Subsidiary to public securities holders generally, and (ii) each regular or periodic report, each registration statement (without exhibits except as expressly requested by such holder), and each prospectus and all amendments thereto filed by the Company or any Subsidiary with the Securities and Exchange Commission and of all press releases and other statements made available generally by the Company or any Subsidiary to the public concerning developments that are Material; (d) NOTICE OF DEFAULT OR EVENT OF DEFAULT -- promptly, and in any event within 5 days after a Responsible Officer becoming aware of the existence of any Default or Event of Default or that any Person has given any notice or taken any action with respect to a claimed default hereunder or that any Person has given any notice or taken any action with respect to a claimed default of the type referred to in Section 12(f), a written notice specifying the nature and period of existence thereof and what action the Company is taking or proposes to take with respect thereto; (e) ERISA MATTERS -- promptly, and in any event within 5 days after a Responsible Officer becoming aware of any of the following, a written notice setting forth the nature thereof and the action, if any, that the Company or an ERISA Affiliate proposes to take with respect thereto: (i) with respect to any Plan, any reportable event, as defined in section 4043 of ERISA and the regulations thereunder, for which notice thereof has not been waived pursuant to such regulations as in effect from time to time; or 22 (ii) the taking by the PBGC of steps to institute, or the threatening by the PBGC of the institution of, proceedings under section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or the receipt by the Company or any ERISA Affiliate of a notice from a Multiemployer Plan that such action has been taken by the PBGC with respect to such Multiemployer Plan; or (iii) any event, transaction or condition that could result in the incurrence of any liability by the Company or any ERISA Affiliate pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans, or in the imposition of any Lien on any of the rights, properties or assets of the Company or any ERISA Affiliate pursuant to Title I or IV of ERISA or such penalty or excise tax provisions, if such liability or Lien, taken together with any other such liabilities or Liens then existing, could reasonably be expected to have a Material Adverse Effect; (f) NOTICES FROM GOVERNMENTAL AUTHORITY -- promptly, and in any event within 30 days of receipt thereof, copies of any notice to the Company or any Subsidiary from any Federal or state Governmental Authority relating to any order, ruling, statute or other law or regulation that could reasonably be expected to have a Material Adverse Effect; (g) REQUESTED INFORMATION -- with reasonable promptness, such other data and information relating to the business, operations, affairs, financial condition, assets or properties of the Company or any of its Subsidiaries or relating to the ability of the Company to perform its obligations under this Agreement, the Other Agreements and the Notes as from time to time may be reasonably requested by any such holder of Notes. 7.2 OFFICER'S CERTIFICATE. Each set of financial statements delivered to a holder of Notes pursuant to Section 7.1(a) or Section 7.1(b) hereof shall be accompanied by a certificate of a Senior Financial Officer setting forth: 23 (a) COVENANT COMPLIANCE -- the information (including detailed calculations) required in order to establish whether the Company was in compliance with the requirements of Section 11.2 through Section 11.7, inclusive, during the quarterly or annual period covered by the statements then being furnished (including with respect to each such Section, where applicable, the calculations of the maximum or minimum amount, ratio or percentage, as the case may be, permissible under the terms of such Sections, and the calculation of the amount, ratio or percentage then in existence); and (b) EVENT OF DEFAULT -- a statement that such officer has reviewed the relevant terms hereof and has made, or caused to be made, under his or her supervision, a review of the transactions and conditions of the Company and its Subsidiaries from the beginning of the quarterly or annual period covered by the statements then being furnished to the date of the certificate and that such review shall not have disclosed the existence during such period of any condition or event that constitutes a Default or an Event of Default or, if any such condition or event existed or exists (including, without limitation, any such event or condition resulting from the failure of the Company or any Subsidiary to comply with any Environmental Law), specifying the nature and period of existence thereof and what action the Company shall have taken or proposes to take with respect thereto. 7.3 INSPECTION. The Company shall permit the representatives of each holder of Notes that is an Institutional Investor: (a) NO DEFAULT -- if no Default or Event of Default then exists, at the expense of such holder and upon reasonable prior notice to the Company, to visit the principal executive office of the Company, to discuss the affairs, finances and accounts of the Company and its Subsidiaries with the Company's officers, and (with the consent of the Company, which consent will not be unreasonably withheld) its independent public accountants, and (with the consent of the Company, which consent will not be unreasonably withheld) to visit the other offices and properties of the Company and each Subsidiary, all at such reasonable times and as often as may be reasonably requested in writing; and 24 (b) DEFAULT -- if a Default or Event of Default then exists, at the expense of the Company to visit and inspect any of the offices or properties of the Company or any Subsidiary, to examine all their respective books of account, records, reports and other papers, to make copies and extracts therefrom, and to discuss their respective affairs, finances and accounts with their respective officers and independent public accountants (and by this provision the Company authorizes said accountants to discuss the affairs, finances and accounts of the Company and its Subsidiaries), all at such reasonable times and as often as may be reasonably requested. 8. PREPAYMENT OF THE NOTES. 8.1 REQUIRED PREPAYMENTS. (a) SERIES A NOTES. There shall be no scheduled principal prepayments on account of the Series A Notes. The unpaid principal amount of each Series A Note, together with accrued unpaid interest thereon, shall be due and payable on October 28, 2004. (b) SERIES B NOTES. There shall be no scheduled principal prepayments on account of the Series B Notes. The unpaid principal amount of each Series B Note, together with accrued unpaid interest thereon, shall be due and payable on October 28, 2007. 8.2 OPTIONAL PREPAYMENTS OF NOTES WITH MAKE-WHOLE AMOUNT. The Company may, at its option, upon notice as provided below, prepay at any time all, or from time to time any part of, any of the Series A Notes or the Series B Notes in an amount not less than 5% of the aggregate principal amount of the Notes of such Series then outstanding in the case of a partial prepayment, at 100% of the principal amount so prepaid and accrued interest thereon to the date of prepayment, PLUS the Make-Whole Amount determined for the prepayment date with respect to such principal amount. The Company will give each holder of Notes of any Series to be prepaid under this Section 8.2 written notice of such optional prepayment not less than 30 days and not more than 60 days prior to the date fixed for such prepayment (which shall be a Business Day). Each such notice shall specify such date, the Series of such Note, the aggregate principal amount of the Notes to be prepaid on such 25 date, the principal amount of each Note held by such holder to be prepaid (determined in accordance with Section 8.3), and the interest to be paid on the prepayment date with respect to such principal amount being prepaid, and shall be accompanied by a certificate of a Senior Financial Officer as to the estimated Make-Whole Amount due in connection with such prepayment (calculated as if the date of such notice were the date of the prepayment), setting forth the details of such computation. Two Business Days prior to such prepayment, the Company shall deliver to each holder of a Note to be optionally prepaid under this Section 8.2 a certificate of a Senior Financial Officer specifying the calculation of the Make-Whole Amount in respect of such Notes as of the specified prepayment date. For the purposes of avoidance of doubt, the Company may effect multiple partial prepayments of the Notes of any Series pursuant to, and in accordance with the terms of, this Section 8.2. 8.3 ALLOCATION OF NOTE PARTIAL PREPAYMENTS. Except as provided in the second paragraph of Section 8.4 with respect to Debt Offered Prepayment Applications accepted by any holder of Notes, in the case of each partial prepayment of Notes of any Series, the principal amount of the Notes to be prepaid shall be allocated among all of the Notes of such Series at the time outstanding in proportion, as nearly as practicable, to the respective unpaid principal amounts thereof not theretofore called for prepayment. 8.4 NOTES; MATURITY; SURRENDER, ETC. In the case of each prepayment of Notes pursuant to this Section 8, the principal amount of each such Note to be prepaid shall mature and become due and payable on the date fixed for such prepayment, together with interest on such principal amount accrued to such date and the applicable Make-Whole Amount, if any. From and after such date, unless the Company shall fail to pay such principal amount when so due and payable, together with the interest and Make-Whole Amount, if any, as aforesaid, interest on such principal amount shall cease to accrue. Any Note paid or prepaid in full shall be surrendered to the Company and cancelled and shall not be reissued, and no Note shall be issued in lieu of any prepaid principal amount of any Note. Any Debt Offered Prepayment Application in respect of the Notes shall be on terms as set forth in Section 8.2 and this Section 8.4, PROVIDED that only those holders who shall have 26 accepted any offer in respect of such Debt Offered Prepayment Application shall have their Notes prepaid, in whole or part, in connection therewith. 8.5 PURCHASE OF NOTES. The Company will not and will not permit any Affiliate to purchase, redeem, prepay or otherwise acquire, directly or indirectly, any of the outstanding Notes except upon the payment or prepayment of the Notes in accordance with the terms of this Agreement and the Notes (including, without limitation, any prepayment of the Notes contemplated in connection with a Debt Offered Prepayment Application accepted by any holder of Notes). The Company will promptly cancel all Notes acquired by it or any Affiliate pursuant to any payment, prepayment or purchase of Notes pursuant to any provision of this Agreement and no Notes may be issued in substitution or exchange for any such Notes. 8.6 MAKE-WHOLE AMOUNT. The term "MAKE-WHOLE AMOUNT" means, with respect to any Note, an amount equal to the excess, if any, of the Discounted Value with respect to the Called Principal of such Note over the amount of such Called Principal, PROVIDED that the Make-Whole Amount may in no event be less than zero. For the purposes of determining the Make-Whole Amount, the following terms have the following meanings: "CALLED PRINCIPAL" means, with respect to any Note, the principal of such Note that is to be prepaid pursuant to Section 8.2 or has become or is declared to be immediately due and payable pursuant to Section 13.1, as the context requires. "DISCOUNTED VALUE" means, with respect to the Called Principal of any Note, the amount obtained by discounting the amount of such Called Principal and interest payable in respect thereof from, in the case of the Called Principal, the maturity date in respect of such Note to the Settlement Date and, in the case of such interest, the scheduled dates of payment hereunder in respect thereof to the Settlement Date, in accordance with accepted financial practice and at a discount factor (applied on the same periodic basis as that on which interest on such Note is 27 payable) equal to the Reinvestment Yield with respect to such Called Principal. "REINVESTMENT YIELD" means, with respect to the Called Principal of any Note, the sum of (a) 0.50% PER ANNUM plus (b) the yield to maturity implied by (i) the yields reported, as of 10:00 a.m. (New York City time) on the second Business Day preceding the Settlement Date with respect to such Called Principal, on the display designated as "Page 678" on the Dow Jones Market Service (or such other display as may replace Page 678 on Dow Jones Market Service) for actively traded U.S. Treasury securities having a maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date, or (ii) if such yields are not reported as of such time or the yields reported as of such time are not ascertainable (including by interpolation), the Treasury Constant Maturity Series Yields reported, for the latest day for which such yields have been so reported as of the second Business Day preceding the Settlement Date with respect to such Called Principal, in Federal Reserve Statistical Release H.15 (519) (or any comparable successor publication) for actively traded U.S. Treasury securities having a constant maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date. Such implied yield will be determined, if necessary, by (1) converting U.S. Treasury bill quotations to bond-equivalent yields in accordance with accepted financial practice and (2) interpolating linearly between (A) the actively traded U.S. Treasury security with the maturity closest to and greater than the Remaining Average Life and (B) the actively traded U.S. Treasury security with the maturity closest to and less than the Remaining Average Life. "REMAINING AVERAGE LIFE" means, with respect to the Called Principal of any Note, the number of years (calculated to the nearest one-twelfth year) that will elapse between the Settlement Date with respect to such Called Principal and the maturity date of the Note in respect thereof. "SETTLEMENT DATE" means, with respect to the Called Principal of any Note, the date on which such Called Principal is to be prepaid pursuant to Sec- 28 tion 8.2 or has become or is declared to be immediately due and payable pursuant to Section 13.1, as the context requires. 9. INTEREST ON THE NOTES. 9.1 SERIES A NOTES' SEMI-ANNUAL INTEREST PAYMENTS. Interest (computed on the basis of a 360-day year of twelve 30-day months) shall accrue on the unpaid principal balance of the Series A Notes at 7.09% PER ANNUM from the date of each Series A Note, and shall be payable to the holders thereof semi-annually, on April 28 and October 28 in each year, commencing with the later of April 28, 1998 and the payment date next succeeding the date of such Series A Note, until the principal thereof shall have become due and payable, and to the extent permitted by law in respect of any Series A Note on any overdue payment of principal, any overdue payment of interest and any overdue payment of Make-Whole Amount with respect thereto, payable, on demand, at a rate PER ANNUM equal to the Series A Default Rate. 9.2 SERIES B NOTES' SEMI-ANNUAL INTEREST PAYMENTS. Interest (computed on the basis of a 360-day year of twelve 30-day months) shall accrue on the unpaid principal balance of the Series B Notes at 7.25% PER ANNUM from the date of each Series B Note, and shall be payable to the holders thereof semi-annually, on April 28 and October 28 in each year, commencing with the later of April 28, 1998 and the payment date next succeeding the date of such Series B Note, until the principal thereof shall have become due and payable, and to the extent permitted by law in respect of any Series B Note on any overdue payment of principal, any overdue payment of interest and any overdue payment of Make-Whole Amount with respect thereto, payable, on demand, at a rate PER ANNUM equal to the Series B Default Rate. 10. AFFIRMATIVE COVENANTS. The Company covenants that so long as any of the Notes are outstanding: 10.1 COMPLIANCE WITH LAW. The Company will and will cause each of its Subsidiaries to comply with all laws, ordinances or governmental rules or regulations to which each of them is subject, including, without 29 limitation, Environmental Laws, and will obtain and maintain in effect all licenses, certificates, permits, franchises and other governmental authorizations necessary to the ownership of their respective properties or to the conduct of their respective businesses, in each case to the extent necessary to ensure that non-compliance with such laws, ordinances or governmental rules or regulations or failures to obtain or maintain in effect such licenses, certificates, permits, franchises and other governmental authorizations could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. 10.2 INSURANCE. The Company will and will cause each of its Subsidiaries to, maintain, with financially sound and reputable insurers, insurance with respect to their respective properties and businesses against such casualties and contingencies, of such types, on such terms and in such amounts (including deductibles, co-insurance and self-insurance, if adequate reserves are maintained with respect thereto) as is customary in the case of entities of established reputations engaged in the same or a similar business and similarly situated. 10.3 MAINTENANCE OF PROPERTIES. The Company will and will cause each of its Subsidiaries to maintain and keep, or cause to be maintained and kept, their respective properties in good repair, working order and condition (other than ordinary wear and tear), so that the business carried on in connection therewith may be properly conducted at all times, PROVIDED that this Section shall not prevent the Company or any Subsidiary from discontinuing the operation and the maintenance of any of its properties if such discontinuance is desirable in the conduct of its business and the Company has concluded that such discontinuance could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. 10.4 PAYMENT OF TAXES AND CLAIMS. The Company will and will cause each of its Subsidiaries to file all tax returns required to be filed in any jurisdiction and to pay and discharge all taxes shown to be due and payable on such returns and all other taxes, assessments, governmental charges, or levies imposed on them or any of their properties, assets, income or franchises, to the extent such taxes and assessments have become due and payable and before they 30 have become delinquent and all claims for which sums have become due and payable that have or might become a Lien on properties or assets of the Company or any Subsidiary (including, without limitation, mechanic's liens or other similar construction liens), PROVIDED that neither the Company nor any Subsidiary need pay any such tax or assessment or claims if (a) the amount, applicability or validity thereof is contested by the Company or such Subsidiary on a timely basis in good faith and in appropriate proceedings, and the Company or such Subsidiary has established adequate reserves therefor in accordance with GAAP on the books of the Company or such Subsidiary or (b) the nonpayment of all such taxes and assessments and claims in the aggregate could not reasonably be expected to have a Material Adverse Effect. 10.5 CORPORATE EXISTENCE, ETC. The Company will and will cause each Guarantor to at all times preserve and keep in full force and effect its respective corporate or other entity existence. Subject to Section 11.2 and Section 11.7, the Company will at all times preserve and keep in full force and effect the corporate or other entity existence of each of its other Subsidiaries (unless merged into the Company or a Subsidiary) and all rights and franchises of the Company and its Subsidiaries unless, in the good faith judgment of the Company, the termination of or failure to preserve and keep in full force and effect such corporate existence, right or franchise could not, individually or in the aggregate, have a Material Adverse Effect. 10.6 PARI PASSU OBLIGATIONS. The Company covenants that its obligations under the Notes and the Obligors' obligations under this Agreement and the Other Agreements do and will rank at least PARI PASSU in right of payment with all their respective other present and future unsecured and unsubordinated Debt. 10.7 MAINTENANCE OF GUARANTIES OF SUBSIDIARIES. (A) ADDITIONAL DOMESTIC SUBSIDIARIES AS GUARANTORS. If the Company or any Domestic Subsidiary creates or otherwise acquires any active Domestic Subsidiary at any time after the date of Closing, the Company shall cause such Domestic Subsidiary to become a Guarantor hereunder and under the Other Agreements by delivering to each holder of Notes an instrument referring to this Agreement and the Other 31 Agreements wherein such Domestic Subsidiary agrees to be bound by all of the terms and conditions applicable to a "Guarantor" under this Agreement and the Other Agreements as of the date thereof, which instrument shall be substantially in the form of Exhibit 10.7. In connection with the delivery of such instrument, the Company shall also deliver the following to each of the holders of Notes: (i) a certificate of the secretary or assistant secretary of such Domestic Subsidiary certifying the names and true signatures of the officers of such Domestic Subsidiary authorized to execute such instrument and the proper adoption of a resolution of the board of directors or stockholders of such Subsidiary approving the execution, delivery and performance of such instrument; (ii) a certificate executed by a Senior Financial Officer, dated as of the date of such instrument, stating that (i) except as to such exceptions as shall be set forth in writing therein, the representations and warranties contained in Section 5 are true and correct on and as of the date of such instrument to the extent such representations and warranties are applicable to such Domestic Subsidiary as a "Guarantor" or "Obligor" hereunder and (ii) no Default or Event of Default exists as of the date of such instrument; and (iii) with respect to any such Domestic Subsidiary whose total assets constitute at least 10% of Consolidated Total Assets, determined as of the last day of the Group Fiscal Quarter then most recently ended, an opinion or opinions of counsel (which may be counsel employed by the Company or such Domestic Subsidiary as inside counsel) confirming that (i) such Domestic Subsidiary's obligations under such instrument and the obligations of a "Guarantor" hereunder and under the Other Agreements are legal, valid, binding and enforceable against such Domestic Subsidiary, (ii) the execution, delivery and performance of such instrument and the performance of this Agreement and the Other Agreements by such Domestic Subsidiary will not violate any law, decree or judgment or violate any material agreement to which such Domestic Subsidiary is a party or by which its assets are bound and (iii) no government approvals, consents, 32 registrations or filings are required by such Domestic Subsidiary in connection with the execution, delivery and performance of its obligations under such instrument and the performance of this Agreement and the Other Agreements, PROVIDED that such opinion or opinions shall be subject to customary exceptions and qualifications. For the avoidance of doubt, (A) if a Domestic Subsidiary is considered to be "active" under any bank credit agreement (including, without limitation, the Credit Agreement) or is otherwise required to become a guarantor, obligor or co-obligor thereunder, it shall be treated as an active Domestic Subsidiary for purposes of this clause (a) and (B) if a Domestic Subsidiary has incurred and has outstanding any Debt, possesses any material assets or conducts any material business operations, it shall be deemed to be an active Domestic Subsidiary hereunder and under the Other Agreements. (B) FOREIGN SUBSIDIARIES AS GUARANTORS. The Company will not permit any Foreign Subsidiary to become a guarantor, obligor or co-obligor in respect of any bank credit agreement of the Company (including, without limitation, the Credit Agreement) unless the Company shall have taken such reasonable action with respect to such Foreign Subsidiary such that the holders of Notes under this Agreement and the Other Agreements would have contractual rights against such Foreign Subsidiary that would be substantially equivalent, in the reasonable judgment of the Required Holders, to the contractual rights that the banks under such bank credit agreement would have against such Foreign Subsidiary by virtue of its becoming a guarantor, obligor or co-obligor. (C) RELEASE OF GUARANTEES OF DOMESTIC OR FOREIGN SUBSIDIARIES. If, with respect to any Domestic Subsidiary that is a Guarantor or any Foreign Subsidiary that becomes a Guarantor pursuant to Section 10.7(b), (i) all, or substantially all, of the assets of such Guarantor are Transferred in accordance with the requirements of Section 11.7 and such Guarantor is wound-up and terminated in accordance with the requirements of Section 10.5, 33 (ii) all of the Company's and any Subsidiary's capital stock or other equity ownership interests in such Guarantor is Transferred in accordance with the requirements of Section 11.7, or (iii) such Guarantor became a Guarantor hereunder and under the Other Agreements only pursuant to paragraph (b) of this Section 10.7 and such Guarantor has ceased to be a guarantor, obligor or co-obligor under or in respect of the bank credit agreement of the Company (including, without limitation, the Credit Agreement), then the Company may elect to cause the withdrawal of the Guarantee of such Guarantor hereunder and under the Other Agreements. Such election shall be exercised by a Senior Financial Officer informing, in writing, each holder of Notes of such election, certifying in such writing that the requirements of this Section 10.7 have been satisfied and that no Default or Event of Default exists. Thereafter, the Guarantee of such Guarantor shall be null and void and without effect and such Guarantor shall no longer be, or be deemed to be, a party to this Agreement or any of the Other Agreements, PROVIDED that, if the aforesaid requirements under this Section 10.7(c) (including, without limitation, the requirements of clause (i), clause (ii) or clause (iii), as the case may be) shall not have been satisfied (including, without limitation, the satisfaction of the requirements of Section 10.5 or Section 11.7 referred to above), then the Guarantee of such Guarantor shall continue in full force and effect and such Guarantor shall continue to be a party hereto and to the Other Agreements notwithstanding the delivery of such writing by the Company to each of the holders of Notes until all of such requirements shall have been satisfied. 11. NEGATIVE COVENANTS. The Company covenants that so long as any of the Notes are outstanding: 11.1 TRANSACTIONS WITH AFFILIATES. The Company will not and will not permit any Subsidiary to enter into directly or indirectly any transaction or Material group of related transactions (including, without limitation, the purchase, lease, sale or exchange of properties of any kind or the rendering of any service) with any Affiliate (other than the 34 Company or a Subsidiary), except in the ordinary course and pursuant to the reasonable requirements of the Company's or such Subsidiary's business and upon fair and reasonable terms no less favorable to the Company or such Subsidiary than would be obtainable in a comparable arm's-length transaction with a Person not an Affiliate, PROVIDED that, for the avoidance of doubt, nothing in this Section 11.1 shall prohibit the Company or any Subsidiary from entering into transactions and agreements with, and making payments to, its senior executive officers or former senior executive officers in respect of compensation, bonus or incentive plans (including stock option plans), welfare and benefit plans, employment agreements, consulting agreements and retirement and/or severance agreements, or the like, on the condition that such transactions, agreements and payments are made in good faith and with a bona fide business purpose. 11.2 MERGER, CONSOLIDATION, ETC. The Company will not and will not permit any of its Subsidiaries to consolidate, amalgamate or merge with or into any other Person or convey, transfer or lease all or substantially all of its assets in a single transaction or series of transactions to any Person (except that (x) any Subsidiary may consolidate, amalgamate or merge with or into, or convey, transfer or lease all or substantially all of its assets in a single transaction or series of transactions to, any Obligor, (y) any Subsidiary that is not an Obligor may consolidate, amalgamate or merge with or into, or convey, transfer or lease all or substantially all of its assets in a single transaction or series of transactions to, any Wholly-Owned Subsidiary and (z) any Subsidiary may transfer or lease all or substantially all of its assets if permitted pursuant to Section 11.7(d)), PROVIDED that the foregoing restrictions do not apply to (a) the consolidation, amalgamation or merger of any Obligor with or into, or the conveyance, transfer or lease of all or substantially all of the assets of such Obligor in a single transaction or series of transactions to, any Person so long as: (i) the successor formed by such consolidation or amalgamation or the survivor of such merger or the Person that acquires by conveyance, transfer or lease all or substantially all of the assets of such Obligor as an entirety, as the case may be (as used in this Section 11.2(a), the 35 "SUCCESSOR COMPANY"), shall be a solvent corporation organized and existing under the laws of the United States of America or any State thereof (including, without limitation, the District of Columbia); (ii) if such Obligor is not the Successor Company, such Successor Company shall have executed and delivered to each holder of any Notes its assumption of the due and punctual performance and observance of each covenant and condition of this Agreement, the Other Agreements and the Notes to which such Obligor is subject and shall have caused to be delivered to each holder of any Notes an opinion of nationally recognized independent counsel, or other independent counsel reasonably satisfactory to the Required Holders, to the effect that all agreements or instruments effecting such assumption are enforceable in accordance with their terms and comply with the terms hereof; (iii) each Guarantor (excluding any Guarantor that shall have delivered the assumption referred to in paragraph (ii) above) shall have confirmed, in writing, its Guarantee and other obligations hereunder and under the Other Agreements; (iv) immediately after giving effect to such transaction the Successor Company would be permitted by the provisions of Section 11.3(c) to incur at least $1 of additional Debt; and (v) immediately after giving effect to such transaction no Default or Event of Default would exist. (b) Except as expressly provided in Section 10.7, no such conveyance, transfer or lease of all or substantially all of the assets of any Obligor under this Section 11.2 shall have the effect of releasing the Company, any Successor Company (as such term is used in Section 11.2(a)) or any Guarantor from its liability under this Agreement, the Other Agreement or the Notes. 36 11.3 INCURRENCE OF DEBT. The Company will not and will not permit any of its Subsidiaries to directly or indirectly create, incur, assume, guarantee, or otherwise become liable with respect to, any Debt, UNLESS (a) such Debt is the Notes, (b) such Debt is outstanding on the date of the Closing and is referred to in Schedule 5.15 or is Debt which, directly or indirectly, is extending, renewing or refunding any such Debt (provided that any such extension, renewal or refunding shall not have the effect of (x) increasing the principal amount of such Debt outstanding immediately prior to such time or (y) reducing the average life of such Debt from that as determined immediately prior to such time), or (c) on the date on which the Company or such Subsidiary becomes liable with respect to such Debt and immediately after giving effect thereto and the concurrent retirement of any other Debt with the proceeds thereof, (i) no Default or Event of Default exists, and (ii) Consolidated Total Debt as of such date does not exceed 60% of Consolidated Total Capitalization as of such date. For the purposes of this Section 11.3, any Person becoming a member of the Group after the date of the Closing shall be deemed, at the time it becomes such a member, to have incurred all of its then outstanding Debt. 11.4 INCURRENCE OF PRIORITY DEBT. The Company will not and will not permit any of its Subsidiaries to directly or indirectly create, incur, assume, guarantee, or otherwise become liable in respect of (a) in the case of the Company or any Guarantor, any Debt to be incurred after the date of the Closing and secured by Liens permitted pursuant to clause (j) of Section 11.6 or (b) in the case of any Foreign Subsidiary (other than a Guarantor), any Debt (whether secured or unsecured) 37 to be incurred by such Foreign Subsidiary after the date of the Closing, unless, after giving effect to the incurrence of such Debt and the application of the proceeds thereof, the aggregate principal amount (without duplication) of (i) all Debt previously incurred in respect of clause (a) above and then outstanding (excluding, in any case, any such Debt owing to the Company, a Guarantor or a Wholly-Owned Subsidiary) and (ii) all Consolidated Foreign Subsidiary Debt then outstanding does not exceed the greater of (A) $45,000,000 and (B) 20% of Consolidated Net Worth, determined as of the then last day of the most recently ended Group Fiscal Quarter. 11.5 CONSOLIDATED NET WORTH; RESTRICTED PAYMENTS. (a) The Company will not permit at any time the difference of Consolidated Net Worth as of the end of the then most recently ended Group Fiscal Quarter MINUS the aggregate amount of Restricted Investments at such time to be less than the sum of (i) $215,000,000, PLUS (ii) an aggregate amount equal to 50% of Consolidated Net Income (but only if a positive number) for each Group Fiscal Year ended on or after June 1998. (b) The Company will not directly or indirectly make any Restricted Payment, or permit any Subsidiary to make any Restricted Payment, unless (i) immediately after giving effect to such Restricted Payment, the Company would be permitted by the provisions of Section 11.3(c) to incur at least $1 of additional Debt and (ii) immediately after giving effect to such Restricted Payment, no Default or Event of Default would exist. 11.6 LIENS. 38 The Company will not and will not permit any of its Subsidiaries to directly or indirectly create, incur, assume or permit to exist (upon the happening of a contingency or otherwise) any Lien on or with respect to any property or asset (including, without limitation, any document or instrument in respect of goods or accounts receivable) of the Company or such Subsidiary, whether now owned or held or hereafter acquired, or any income or profits therefrom or assign or otherwise convey any right to receive such income or profits (unless it makes, or causes to be made, effective provision whereby the Notes will be equally and ratably secured with any and all other obligations thereby secured, such security to be pursuant to an agreement reasonably satisfactory to the Required Holders and, in any such case, the Notes shall have the benefit, to the fullest extent that, and with such priority as, the holders of the Notes may be entitled under applicable law, of an equitable Lien on such property), PROVIDED that the foregoing restrictions and limitations shall not apply to: (a) (i) Liens for taxes, assessments or other governmental charges the payment of which is not at the time required by Section 10.4, and (ii) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen, inventory suppliers and other similar Liens, in each case, incurred in the ordinary course of business for sums not yet due or the payment of which is not at the time required by Section 10.4; (b) Liens (i) arising from judicial attachments and judgments, (ii) securing appeal bonds or supersedeas bonds, or (iii) arising in connection with court proceedings (including, without limitation, surety bonds and letters of credit or any other instrument serving a similar purpose), PROVIDED that (1) the execution or other enforcement of such Liens is effectively stayed, (2) the claims secured thereby are being actively contested in good faith and by appropriate proceedings and (3) adequate book reserves 39 shall have been established and maintained with respect thereto in accordance with GAAP; (c) Liens incurred or deposits made in the ordinary course of business (i) in connection with workers' compensation, unemployment insurance and other types of social security or retirement benefits, or (ii) to secure (or to obtain letters of credit that secure) the performance of tenders, statutory obligations, surety bonds, appeal bonds, bids, leases (other than Capital Leases), performance bonds, purchase, construction or sales contracts, leases and other similar obligations, in each case not incurred or made in connection with the borrowing of money, the obtaining of advances or credit or the payment of the deferred purchase price of property, and which Liens do not, in the aggregate, materially impair the use of the property subject thereto in the operation of the business of the Group or the value of such property for the purposes of such business; (d) leases or subleases granted to others, easements, rights-of-way, restrictions, zoning restrictions, governmental restrictions in respect of any property or property right or franchise of a member of the Group and other similar charges or encumbrances, in each case incidental to, and not interfering with, the ordinary conduct of the business of the Group, taken as a whole, PROVIDED that such charges and encumbrances do not, in the aggregate, materially detract from the value of such property; (e) Liens existing on the date of the Closing and referred to in Schedule 5.15; (f) Liens on property or assets of any member of the Group securing Debt owing to any other member of the Group; (g) Liens created to secure all or any part of the purchase price, or to secure Debt incurred or assumed to pay all or any part of the purchase price or cost of construction, of property (or any improvement thereon) acquired or constructed by any member of the Group, PROVIDED that all of the following conditions are satisfied: (i) any such Lien shall extend solely to the item or items of such property (or improvement thereon) or proceeds thereof so acquired or constructed and, 40 if required by the terms of the instrument originally creating such Lien, other property (or improvement thereon) which is an improvement to or is acquired for specific use in connection with such acquired or constructed property (or improvement thereon) or which is real property being improved by such acquired or constructed property (or improvement thereon), (ii) the principal amount of the Debt secured by any such Lien shall at no time exceed an amount equal to the lesser of (A) the cost to such member of the property (or improvement thereon) so acquired or constructed and (B) the Fair Market Value (as determined in good faith by the Board of Directors of the Company) of such property (or improvement thereon) at the time of such acquisition or construction, (iii) if such Lien secures Debt, the incurrence of such Debt shall have been permitted pursuant to Section 11.3(c), and (iv) any such Lien shall be created contemporaneously with, or within 180 days after, the acquisition or construction of such property; (h) Liens existing on property of a Person immediately prior to its being consolidated or amalgamated with or merged into any member of the Group or its becoming a Subsidiary, or any Lien existing on any property acquired by any member of the Group at the time such property is so acquired (whether or not the Debt secured thereby shall have been assumed), PROVIDED that (i) no such Lien shall have been created or assumed in contemplation of such consolidation, amalgamation or merger or such Person's becoming a Subsidiary or such acquisition of property, (ii) each such Lien shall extend solely to the item or items of property so acquired and proceeds thereof and, if required by the terms of the instrument originally creating such Lien, other property which is an improvement to or is acquired for specific use in connection with such acquired property, 41 (iii) if such Lien secures Debt, the incurrence of Debt deemed to occur upon the consolidation, amalgamation, merger, becoming a Subsidiary or acquisition of property shall have been permitted pursuant to Section 11.3(c), and (iv) the principal amount of the Debt secured by any such Lien shall at no time exceed an amount equal to the Fair Market Value (as determined in good faith by the Board of Directors of the Company) of such property (or improvement thereon) at the time of such consolidation, amalgamation, merger, becoming a Subsidiary or acquisition; and (i) Liens renewing, extending or replacing Liens permitted by clauses (a) through (h) above, PROVIDED that all of the following conditions are satisfied: (i) no such new Lien shall extend to any property of the Group other than property already encumbered by the existing Lien being so renewed, extended or replaced, (ii) the principal amount of the underlying obligation secured by such existing Lien outstanding at the time of such renewal, extension or replacement shall not be increased in connection with such renewal, extension or replacement and the average life thereof shall not be reduced, and (iii) immediately after such renewal, extension or refunding no Default or Event of Default shall have existed and the Company shall have been permitted to incur at least $1 of additional Debt under Section 11.3(c); (j) any Lien (other than a Lien permitted under clause (a) through clause (i) above) securing any Debt of any member of the Group, (i) which Debt was permitted to be incurred pursuant to Section 11.3(c), and (ii) which Debt, as of the date of the creation of such Lien, did not exceed the difference of (A) the greater of (A) $45,000,000 and (B) 20% of Consolidated Net Worth, determined as 42 of the end of the then most recently ended Group Fiscal Quarter, MINUS (B) the sum (without duplication) of (1) the aggregate principal amount of all Consolidated Foreign Subsidiary Debt outstanding as of the date of creation of such Lien PLUS (2) the total amount of all other secured Debt of the Company and the Guarantors outstanding as of the date of creation of such Lien (other than Debt owing to the Company, any Guarantor or another Subsidiary) and previously incurred under this clause (j) by the Company or any Guarantor. For the purposes of this Section 11.6, any Person becoming a member of the Group after the date of the Closing shall be deemed, at the time it becomes such a member, to have incurred all of its then existing Liens securing outstanding Debt. 11.7 SALE OF ASSETS, ETC. The Company will not and will not permit any of its Subsidiaries to make any Transfer, PROVIDED that the foregoing restriction does not apply to a Transfer if: (a) the property that is the subject of such Transfer constitutes either (i) inventory or (ii) equipment, fixtures, supplies or materials no longer required in the operation of the business of any member of the Group or that is obsolete, and, in each case, such Transfer is in the ordinary course of business; (b) such Transfer is (i) from a Subsidiary to the Company, a Guarantor or a Wholly-Owned Subsidiary, (ii) from the Company to a Guarantor or a Wholly-Owned Subsidiary or (iii) from a Guarantor to the Company or a Wholly-Owned Subsidiary; (c) such Transfer is subject to Section 11.2 and satisfies the requirements thereof; or (d) such Transfer is not a Transfer described in clause (a) through clause (c) above (each such Transfer is referred to as a "BASKET TRANSFER"), and all of the following conditions shall have been satisfied with respect to such Transfer: 43 (i) in the good faith opinion of the Board of Directors of the Company, the Transfer is in exchange for consideration with a Fair Market Value at least equal to that of the property exchanged, and is in the best interests of the Group, (ii) immediately after giving effect to such transaction no Default or Event of Default would exist and the Company would be able to incur at least $1 of additional Debt under Section 11.3(c), and (iii) immediately after giving effect to such Transfer, (A) the book value of all property that was the subject of each Basket Transfer occurring in the then current Group Fiscal Year would not exceed 15% of Consolidated Total Assets as of the end of the then most recently ended Group Fiscal Quarter, and (B) the book value of all property that was the subject of each Basket Transfer occurring on or after the date of the Closing would not exceed 30% of Consolidated Total Assets as of the end of the then most recently ended Group Fiscal Quarter. If the Net Proceeds Amount for any Basket Transfer is applied to a Debt Offered Prepayment Application and/or is applied to, or committed in writing to, a Property Reinvestment Application, in each case within 545 days after the consummation of such Transfer (and, in the case of any such commitment, such Property Reinvestment Application is actually consummated within 30 days after the expiration of such 545-day period), then such Basket Transfer shall be excluded from any calculations set forth above in subclause (iii) of this clause (d), PROVIDED that (y) if a Debt Offered Prepayment Application and/or Property Reinvestment Application in respect of all of such Net Proceeds Amount shall not have been effected within 90 days after the consummation of such Basket Transfer and such Basket Transfer (but for the paragraph to which this proviso is 44 attached) would have caused the maximum amounts permitted under subclause (iii) of this clause (d) to have been exceeded, the Company shall deliver to each holder of Notes a writing stating that (I) such Basket Transfer has caused such maximum amounts to be exceeded, (II) such Basket Transfer is excluded from the calculation of such maximum amounts subject to the Net Proceeds Amount thereof being applied to a Debt Offered Prepayment Application and/or a Property Reinvestment Application within 545 days after the consummation of such Basket Transfer and (III) the Company has decided to apply any then remaining unapplied Net Proceeds Amount of such Basket Transfer in excess of such maximum amounts to either a Debt Offered Prepayment Application or a Property Reinvestment Application (but not both; it being the intention of the parties hereto that the Company shall choose which application to utilize (such application being specified in such writing), although the Company shall not be required to specify at the time of making such choice the particular utilizations within such chosen application) and (z) for the avoidance of doubt, a Basket Transfer that would (but for the paragraph to which this proviso is attached) have caused the maximum amounts permitted under subclause (iii) of this clause (d) to be exceeded shall be excluded from such calculations unless and until such time as the Company shall have failed to comply with the requirements of such paragraph (including, without limitation, the requirements of subparagraph (y) above). For purposes of determining the book value of any property that is the subject of a Transfer, such book value shall be the book value of such property, as determined in accordance with GAAP, at the time of the consummation of 45 such Transfer, PROVIDED that, in the case of a Transfer of any capital stock or other equity interests of a Subsidiary, the book value thereof shall be deemed to be an amount equal to (A) the difference (determined after eliminating all intra-Group transactions, assets and liabilities in accordance with GAAP) of (1) the book value of the total net assets of such Subsidiary LESS (2) the liabilities of such Subsidiary TIMES (B) a percentage that is equal to the percentage of total equity interests of such Subsidiary attributable to the capital stock or other equity interest being so Transferred. 11.8 LINE OF BUSINESS. The Company will not and will not permit any of its Subsidiaries to engage in any business if, as a result, the general nature of the business in which the Obligors and their Subsidiaries, taken as a whole, would then be engaged would be substantially changed from the general nature of the business in which the Obligors and their Subsidiaries, taken as a whole, are engaged on the date of the Closing as described in the Memorandum. 12. EVENTS OF DEFAULT. An "EVENT OF DEFAULT" shall exist if any of the following conditions or events shall occur and be continuing: (a) the Company defaults in the payment of any principal or Make-Whole Amount, if any, on any Note when the same becomes due and payable, whether at maturity or at a date fixed for prepayment or by declaration or otherwise; or (b) the Company defaults in the payment of any interest on any Note for more than 5 Business Days after the same becomes due and payable; or (c) any Obligor defaults in the performance of or compliance with any term contained in any of Section 46 11.2 through Section 11.7, inclusive, or Section 7.1(d); or (d) any Obligor defaults in the performance of or compliance with any term contained herein or in any Other Agreement (other than those referred to in paragraphs (a), (b), (c) or (k) of this Section 12) and such default is not remedied within 30 days after the earlier of (i) a Responsible Officer obtaining actual knowledge of such default and (ii) the Company receiving written notice of such default from any holder of a Note (any such written notice to be identified as a "notice of default" and to refer specifically to this paragraph (d) of Section 12); or (e) any representation or warranty made in writing by or on behalf of any Obligor or by any officer of any Obligor in this Agreement, any Other Agreement or in any writing furnished in connection with the transactions contemplated hereby or thereby (including, without limitation, in any instrument delivered pursuant to Section 10.7) proves to have been false or incorrect in any material respect on the date as of which made; or (f) (i) the Company or any Subsidiary is in default (as principal or as guarantor or other surety) in the payment of any principal of or premium or make-whole amount or interest on any Debt (other than Debt under this Agreement, the Other Agreements and the Notes) beyond any period of grace provided with respect thereto, that individually or together with such other Debt as to which any such failure exists has an aggregate outstanding principal amount of at least $5,000,000 (or its equivalent in other applicable currencies), or (ii) the Company or any Subsidiary is in default in the performance of or compliance with any term of any evidence of any Debt (other than indebtedness under this Agreement, the Other Agreements and the Notes), that individually or together with such other Debt as to which any such failure exists has an aggregate outstanding principal amount of at least $5,000,000 (or its equivalent in other applicable currencies), or of compliance of any mortgage, indenture or other agreement relating thereto or any other condition exists, and as a consequence of such default or condition such Debt has become, or has 47 been declared, due and payable before its stated maturity or before its regularly scheduled dates of payment, or (iii) as a consequence of the occurrence or continuation of any event or condition (other than the passage of time or the right of the holder of Debt to convert such Debt into equity interests), (A) the Company or any Subsidiary has become obligated (other than at its election) to purchase or repay Debt before its regular maturity or before its regularly scheduled dates of payment in an aggregate outstanding principal amount of at least $5,000,000 (or its equivalent in other applicable currencies), or (B) one or more Persons have the right to require the Company or any Subsidiary to purchase or repay Debt in an aggregate outstanding principal amount of at least $5,000,000 (or its equivalent in other applicable currencies) and have exercised such right; or (g) the Company or any Subsidiary (i) is generally not paying, or admits in writing its inability to pay, its debts as they become due, (ii) files, or consents by answer or otherwise to the filing against it of, a petition for relief or reorganization or arrangement or any other petition in bankruptcy, for liquidation or to take advantage of any bankruptcy, insolvency, reorganization, moratorium or other similar law of any jurisdiction, (iii) makes an assignment for the benefit of its creditors, (iv) consents to the appointment of a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property, (v) is adjudicated as insolvent or to be liquidated, or (vi) takes corporate action for the purpose of any of the foregoing; or (h) a court or governmental authority of competent jurisdiction enters an order appointing, without consent by the Company or any Subsidiary, a custodian, receiver, trustee or other officer with similar powers with respect to the Company or any Subsidiary or with respect to any substantial part of the property of the Company or any Subsidiary, or constituting an order for relief or approving 48 a petition for relief or reorganization or any other petition in bankruptcy or for liquidation or to take advantage of any bankruptcy or insolvency law of any jurisdiction, or ordering the dissolution, winding-up or liquidation of the Company or any Subsidiary, or any such petition shall be filed against the Company or any Subsidiary and such petition shall not be dismissed within 60 days; or (i) a final judgment or judgments for the payment of money aggregating in excess of $5,000,000 (or its equivalent in other applicable currencies) are rendered against one or more of the Company and the Subsidiaries and which judgments are not, within 60 days after entry thereof, bonded, discharged or stayed pending appeal, or are not discharged within 60 days after the expiration of such stay; or (j) if (i) any Plan shall fail to satisfy the minimum funding standards of ERISA or section 412 of the Code for any plan year or part thereof or a waiver of such standards or extension of any amortization period is sought or granted under section 412 of the Code, (ii) a notice of intent to terminate any Plan shall have been or is reasonably expected to be filed with the PBGC or the PBGC shall have instituted proceedings under section 4042 of ERISA to terminate or appoint a trustee to administer any Plan or the PBGC shall have notified the Company or any ERISA Affiliate that a Plan may become a subject of any such proceedings, (iii) the aggregate "amount of unfunded benefit liabilities" (within the meaning of section 4001(a)(18) of ERISA) under all Plans subject to Title IV of ERISA, determined in accordance with Title IV of ERISA, shall exceed $5,000,000, (iv) the Company or any ERISA Affiliate shall have incurred or is reasonably expected to incur any liability in the nature of a penalty, excise tax or fine pursuant to Title I of ERISA, any liability under Title IV of ERISA or any liability under section 4971 through section 4980E of the Code, (v) the Company or any ERISA Affiliate withdraws from any Multiemployer Plan, or 49 (vi) the Company or any Domestic Subsidiary establishes or amends any employee welfare benefit plan that provides post- employment welfare benefits in a manner that would increase the liability of the Company or such Domestic Subsidiary thereunder; and any such event or events described in clauses (i) through (vi) above, either individually or together with any other such event or events, could reasonably be expected to have a Material Adverse Effect; or (k) the Guarantee in respect of any Guarantor or any provision thereof shall cease to be in full force or effect except as otherwise provided herein, or any Guarantor or any Person acting by or on behalf of such Guarantor shall deny or disaffirm such Guarantor's obligations under such Guarantee, or any Guarantor shall default in the due performance or observance of any term, covenant or agreement on its part to be performed pursuant to Section 23. As used in Section 12(j), the terms "EMPLOYEE BENEFIT PLAN" and "EMPLOYEE WELFARE BENEFIT PLAN" shall have the respective meanings assigned to such terms in section 3 of ERISA. 13. REMEDIES ON DEFAULT, ETC. 13.1 ACCELERATION. (a) If an Event of Default with respect to the Company described in paragraph (g) or paragraph (h) of Section 12 (other than an Event of Default described in clause (i) of paragraph (g) or described in clause (vi) of paragraph (g) by virtue of the fact that such clause encompasses clause (i) of paragraph (g)) has occurred, all the Notes then outstanding shall automatically become immediately due and payable. (b) If any other Event of Default has occurred and is continuing, any holder or holders of more than 50% in principal amount of the Notes at the time outstanding may at any time at its or their option, by notice or notices to the Company, declare all the Notes then outstanding to be immediately due and payable. (c) If any Event of Default described in paragraph (a) or (b) of Section 12 has occurred and is continuing, any holder or holders of Notes at the time 50 outstanding affected by such Event of Default may at any time, at its or their option, by notice or notices to the Company, declare all the Notes held by it or them to be immediately due and payable. Upon any Notes becoming due and payable under this Section 13.1, whether automatically or by declaration, such Notes will forthwith mature and the entire unpaid principal amount of such Notes, PLUS (x) all accrued and unpaid interest thereon and (y) the Make-Whole Amount determined in respect of such principal amount (to the full extent permitted by applicable law), shall all be immediately due and payable, in each and every case without presentment, demand, protest or further notice, all of which are hereby waived. The Company acknowledges, and the parties hereto agree, that each holder of a Note has the right to maintain its investment in such Note free from repayment by the Company (except as herein specifically provided for) and that the provision for payment of a Make-Whole Amount by the Company in the event that such Note is prepaid or is accelerated as a result of an Event of Default, is intended to provide compensation for the deprivation of such right under such circumstances. 13.2 OTHER REMEDIES. If any Default or Event of Default has occurred and is continuing, and irrespective of whether any Notes have become or have been declared immediately due and payable under Section 13.1, the holder of any Note at the time outstanding may proceed to protect and enforce the rights of such holder by an action at law, suit in equity or other appropriate proceeding, whether for the specific performance of any agreement contained herein or in any Note, or for an injunction against a violation of any of the terms hereof or thereof, or in aid of the exercise of any power granted hereby or thereby or by law or otherwise. 13.3 RESCISSION. At any time after any Notes have been declared due and payable pursuant to clause (b) or clause (c) of Section 13.1, the holders of more than 50% in principal amount of the Notes then outstanding, by written notice to the Company, may rescind and annul any such declaration and its consequences if (a) the Company has paid all overdue interest on the Notes, all principal due and payable on any Notes other than by reason of such declaration, and all interest on such overdue principal, if any, and any Make-Whole Amount that is due and 51 payable in respect of the Notes other than by reason of such declaration and any interest thereon and (to the extent permitted by applicable law) any overdue interest in respect of the Notes, at the applicable Default Rate, (b) all Events of Default and Defaults, other than non-payment of amounts that have become due solely by reason of such declaration, have been cured or have been waived pursuant to Section 18, and (c) no judgment or decree has been entered for the payment of any monies due pursuant hereto or to the Notes. No rescission and annulment under this Section 13.3 will extend to or affect any subsequent Event of Default or Default or impair any right consequent thereon. 13.4 NO WAIVERS OR ELECTION OF REMEDIES, EXPENSES, ETC. No course of dealing and no delay on the part of any holder of any Note in exercising any right, power or remedy shall operate as a waiver thereof or otherwise prejudice such holder's rights, powers or remedies. No right, power or remedy conferred by this Agreement or by any Note upon any holder thereof shall be exclusive of any other right, power or remedy referred to herein or therein or now or hereafter available at law, in equity, by statute or otherwise. Without limiting the obligations of the Company under Section 16, the Company will pay to the holder of each Note on demand such further amount as shall be sufficient to cover all costs and expenses of such holder incurred in any enforcement or collection under this Section 13, including, without limitation, reasonable attorneys' fees, expenses and disbursements. 14. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES. 14.1 REGISTRATION OF NOTES. The Company shall keep at its principal executive office a register for the registration and registration of transfers of Notes. The name and address of each holder of one or more Notes, each transfer thereof and the name and address of each transferee of one or more Notes shall be registered in such register. Prior to due presentment for registration of transfer, the Person in whose name any Note shall be registered shall be deemed and treated as the owner and holder thereof for all purposes hereof, and the Company shall not be affected by any notice or knowledge to the contrary. The Company shall give to any holder of a Note that is an Institutional Investor promptly upon request therefor, a 52 complete and correct copy of the names and addresses of all registered holders of Notes. 14.2 TRANSFER AND EXCHANGE OF NOTES. Upon surrender of any Note at the principal executive office of the Company for registration of transfer or exchange (and in the case of a surrender for registration of transfer, duly endorsed or accompanied by a written instrument of transfer duly executed by the registered holder of such Note or his attorney duly authorized in writing and accompanied by the address for notices of each transferee of such Note or part thereof), the Company shall execute and deliver, at the Company's expense (except as provided below), one or more new Notes (as requested by the holder thereof) in exchange therefor, in an aggregate principal amount equal to the unpaid principal amount of the surrendered Note and of the same Series as such surrendered Note. Each such new Note shall be payable to such Person as such holder may request and shall be substantially in the form of Exhibit 1A or Exhibit 1B, as the case may be. Each such new Note shall be dated and bear interest from the date to which interest shall have been paid on the surrendered Note or dated the date of the surrendered Note if no interest shall have been paid thereon. The Company may require payment of a sum sufficient to cover any stamp tax or governmental charge imposed in respect of any such transfer of Notes. Notes shall not be transferred in denominations of less than $500,000, PROVIDED that if necessary to enable the registration of transfer by a holder of its entire holding of Notes, one Note may be in a denomination of less than $500,000. Any transferee, by its acceptance of a Note registered in its name (or the name of its nominee), shall be deemed to have made the representation set forth in Section 6.2. 14.3 REPLACEMENT OF NOTES. Upon receipt by the Company of evidence reasonably satisfactory to it of the ownership of and the loss, theft, destruction or mutilation of any Note (which evidence shall be, in the case of an Institutional Investor, notice from such Institutional Investor of such ownership and such loss, theft, destruction or mutilation), and (a) in the case of loss, theft or destruction, of indemnity reasonably satisfactory to it (PROVIDED that if the holder of such Note is, or is a nominee for, an original Purchaser or another holder of a Note with a minimum net 53 worth of at least $250,000,000, such Person's own unsecured agreement of indemnity shall be deemed to be satisfactory), or (b) in the case of mutilation, upon surrender and cancellation thereof, the Company at its own expense shall execute and deliver, in lieu thereof, a new Note, of the same Series as such lost, stolen, destroyed or mutilated Note, dated and bearing interest from the date to which interest shall have been paid on such lost, stolen, destroyed or mutilated Note or dated the date of such lost, stolen, destroyed or mutilated Note if no interest shall have been paid thereon. 15. PAYMENTS ON NOTES. 15.1 PLACE OF PAYMENT. Subject to Section 15.2, payments of principal, Make-Whole Amount, if any, and interest becoming due and payable on the Notes shall be made in Carlsbad, California at the principal office of the Company in such jurisdiction. The Company may at any time, by notice to each holder of a Note, change the place of payment of the Notes so long as such place of payment shall be either a principal office of the Company in the United States of America or a principal office of a bank or trust company in the United States of America. 15.2 HOME OFFICE PAYMENT. So long as you or your nominee shall be the holder of any Note, and notwithstanding anything contained in Section 15.1 or in such Note to the contrary, the Company will pay all sums becoming due on such Note for principal, Make-Whole Amount, if any, and interest by the method and at the address specified for such purpose below your name in Schedule A, or by such other method or at such other address as you shall have from time to time specified to the Company in writing for such purpose, without the presentation or surrender of such Note or the making of any notation thereon, except that upon written request of the Company made concurrently with or reasonably promptly after payment or prepayment in full of any Note, you shall surrender such Note for cancellation, reasonably promptly after any such request, to the Company at its principal executive office or at the place of payment most recently designated by the Company pursuant to Section 15.1. Prior to any sale or other disposition of any Note held by you 54 or your nominee you will, at your election, either endorse thereon the amount of principal paid thereon and the last date to which interest has been paid thereon or surrender such Note to the Company in exchange for a new Note or Notes of the same Series as such surrendered Note pursuant to Section 14.2. The Company will afford the benefits of this Section 15.2 to any Institutional Investor that is the direct or indirect transferee of any Note purchased by you under this Agreement and that has made the same agreement relating to such Note as you have made in this Section 15.2. 16. EXPENSES, ETC. 16.1 TRANSACTION EXPENSES. Whether or not the transactions contemplated hereby are consummated, the Obligors will pay all costs and expenses (including reasonable attorneys' fees of a special counsel and, if reasonably required, local or other counsel) incurred by you and each Other Purchaser or holder of a Note in connection with such transactions and in connection with any amendments, waivers or consents under or in respect of this Agreement or the Notes (whether or not such amendment, waiver or consent becomes effective), including, without limitation: (a) the costs and expenses incurred in enforcing or defending (or determining whether or how to enforce or defend) any rights under this Agreement or the Notes or in responding to any subpoena or other legal process or informal investigative demand issued in connection with this Agreement or the Notes, or by reason of being a holder of any Note, and (b) the costs and expenses, including financial advisors' fees, incurred in connection with the insolvency or bankruptcy of the Company or any Subsidiary or in connection with any work-out or restructuring of the transactions contemplated hereby and by the Notes. The Obligors will pay, and will save you and each other holder of a Note harmless from, all claims in respect of any fees, costs or expenses if any, of brokers and finders (other than those retained by you). 16.2 SURVIVAL. The obligations of the Obligors under this Section 16 will survive the payment or transfer of any Note, the enforcement, amendment or waiver of any provision of this Agreement or the Notes and the termination of this Agreement. 55 17. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT. All representations and warranties contained herein shall survive the execution and delivery of this Agreement and the Notes, the purchase or transfer by you of any Note or portion thereof or interest therein and the payment of any Note, and may be relied upon by any subsequent holder of a Note, regardless of any investigation made at any time by or on behalf of you or any other holder of a Note. All statements contained in any certificate or other instrument delivered by or on behalf of the Obligors pursuant to this Agreement shall be deemed representations and warranties of the Obligors under this Agreement. Subject to the preceding sentence, this Agreement and the Notes embody the entire agreement and understanding between you and the Obligors and supersede all prior agreements and understandings relating to the subject matter hereof. 18. AMENDMENT AND WAIVER. 18.1 REQUIREMENTS. This Agreement and the Notes may be amended, and the observance of any term hereof or of the Notes may be waived (either retroactively or prospectively), with (and only with) the written consent of the Company and the Required Holders, except that (a) no amendment or waiver of any of the provisions of any of Sections 1, 2, 3, 4, 5, 6 and 22, or any defined term (as it is used therein), will be effective as to you unless consented to by you in writing, and (b) no such amendment or waiver may, without the written consent of the holder of each Note at the time outstanding affected thereby, (i) subject to the provisions of Section 13 relating to acceleration or rescission, change the amount or time of any prepayment or payment of principal of, or reduce the rate or change the time of payment or method of computation of interest or of the Make-Whole Amount on, the Notes, (ii) change the percentage of the principal amount of the Notes the holders of which are required to consent to any such amendment or waiver, or (iii) amend any of Sections 8, 12(a), 12(b), 13, 18, 21 and 23. No amendment or waiver provided for in this Section 18.1 shall become effective unless each Guarantor shall have consented to the same in writing and, in connection therewith, shall have reconfirmed, in writing, its obligations hereunder. 56 18.2 SOLICITATION OF HOLDERS OF NOTES. (a) SOLICITATION. The Company will provide each holder of the Notes (irrespective of the amount of Notes then owned by it) with sufficient information, sufficiently far in advance of the date a decision is required, to enable such holder to make an informed and considered decision with respect to any proposed amendment, waiver or consent in respect of any of the provisions hereof or of the Notes. The Company will deliver executed or true and correct copies of each amendment, waiver or consent effected pursuant to the provisions of this Section 18 to each holder of outstanding Notes promptly following the date on which it is executed and delivered by, or receives the consent or approval of, the requisite holders of Notes. (b) PAYMENT. The Company will not directly or indirectly pay or cause to be paid any remuneration, whether by way of supplemental or additional interest, fee or otherwise, or grant any security, to any holder of Notes as consideration for or as an inducement to the entering into by any holder of Notes or any waiver or amendment of any of the terms and provisions hereof unless such remuneration is concurrently paid, or security is concurrently granted, on the same terms, ratably to each holder of Notes then outstanding even if such holder did not consent to such waiver or amendment. 18.3 BINDING EFFECT, ETC. Any amendment or waiver consented to as provided in this Section 18 applies equally to all holders of Notes and is binding upon them and upon each future holder of any Note and upon the Obligors without regard to whether such Note has been marked to indicate such amendment or waiver. No such amendment or waiver will extend to or affect any obligation, covenant, agreement, Default or Event of Default not expressly amended or waived or impair any right consequent thereon. No course of dealing between the Company and the holder of any Note nor any delay in exercising any rights hereunder or under any Note shall operate as a waiver of any rights of any holder of such Note. As used herein, the term "THIS AGREEMENT" and references thereto shall mean this Agreement as it may from time to time be amended or supplemented. 57 18.4 NOTES HELD BY COMPANY, ETC. Solely for the purpose of determining whether the holders of the requisite percentage of the aggregate principal amount of Notes then outstanding approved or consented to any amendment, waiver or consent to be given under this Agreement or the Notes, or have directed the taking of any action provided herein or in the Notes to be taken upon the direction of the holders of a specified percentage of the aggregate principal amount of Notes then outstanding, Notes directly or indirectly owned by the Company or any of its Affiliates shall be deemed not to be outstanding. 19. NOTICES. All notices and communications provided for hereunder shall be in writing and sent (a) by telecopy if the sender on the same day sends a confirming copy of such notice by a recognized overnight delivery service (charges prepaid), or (b) by registered or certified mail with return receipt requested (postage prepaid), or (c) by a recognized overnight delivery service (with charges prepaid). Any such notice must be sent: (i) if to you or your nominee, to you or it at the address specified for such communications in Schedule A, or at such other address as you or it shall have specified to the Company in writing, (ii) if to any other holder of any Note, to such holder at such address as such other holder shall have specified to the Company in writing, (iii) if to the Company, to the Company at its address set forth at the beginning hereof to the attention of the Chief Financial Officer, telecopier: (760) 930-1580, or at such other address as the Company shall have specified to the holder of each Note in writing, or (iv) if to any Guarantor, to such Guarantor in care of the Company at its address set forth at the beginning hereof to the attention of the Chief Financial Officer, telecopier: (760) 930-1580, or at such other address as such Guarantor shall have specified to the holder of each Note in writing. Notices under this Section 19 will be deemed given only when actually received. 58 20. REPRODUCTION OF DOCUMENTS. This Agreement and all documents relating thereto, including, without limitation, (a) consents, waivers and modifications that may hereafter be executed, (b) documents received by you at the Closing (except the Notes themselves), and (c) financial statements, certificates and other information previously or hereafter furnished to you, may be reproduced by you by any photographic, photostatic, microfilm, microcard, miniature photographic or other similar process and you may destroy any original document so reproduced. The Obligors agree and stipulate that, to the extent permitted by applicable law, any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding (whether or not the original is in existence and whether or not such reproduction was made by you in the regular course of business) and any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence. This Section 20 shall not prohibit the Obligors or any other holder of Notes from contesting any such reproduction to the same extent that it could contest the original, or from introducing evidence to demonstrate the inaccuracy of any such reproduction. 21. CONFIDENTIAL INFORMATION. For the purposes of this Section 21, "CONFIDENTIAL INFORMATION" means information delivered to you by or on behalf of any Obligor and any Subsidiary of any Obligor in connection with the transactions contemplated by or otherwise pursuant to this Agreement that is proprietary in nature and that was clearly marked or labeled or otherwise adequately identified when received by you as being confidential information of the Obligors and their Subsidiaries, PROVIDED that such term does not include information that (a) was publicly known or otherwise known to you prior to the time of such disclosure, (b) subsequently becomes publicly known through no act or omission by you or any Person acting on your behalf, (c) otherwise becomes known to you other than through disclosure by any Obligor or any Subsidiary of an Obligor, or 59 (d) constitutes financial statements delivered to you under Section 7.1 that are otherwise publicly available. You will maintain the confidentiality of such Confidential Information in accordance with procedures adopted by you in good faith to protect confidential information of third parties delivered to you, PROVIDED that you may deliver or disclose Confidential Information to: (i) your directors, officers, trustees, employees, agents, attorneys and affiliates (to the extent such disclosure reasonably relates to the administration of the investment represented by your Notes), (ii) your financial advisors and other professional advisors who agree to hold confidential the Confidential Information substantially in accordance with the terms of this Section 21, (iii) any other holder of any Note other than a Competitor, (iv) any Institutional Investor to which you sell or offer to sell such Note or any part thereof or any participation therein (if such Person has agreed in writing prior to its receipt of such Confidential Information to be bound by the provisions of this Section 21), (v) any Person other than a Competitor from which you offer to purchase any security of the Company (if such Person has agreed in writing prior to its receipt of such Confidential Information to be bound by the provisions of this Section 21), (vi) any federal or state regulatory authority having jurisdiction over you, (vii) the National Association of Insurance Commissioners or any similar organization, or any nationally recognized rating agency that requires access to information about your investment portfolio or (viii) any other Person to which such delivery or disclosure may be necessary or appropriate (A) to effect compliance with any law, rule, regulation or order applicable to you, 60 (B) in response to any subpoena or other legal process, (C) in connection with any litigation to which you are a party, or (D) if an Event of Default has occurred and is continuing, to the extent you may reasonably determine such delivery and disclosure to be necessary or appropriate in the enforcement or for the protection of the rights and remedies under your Notes and this Agreement. Each holder of a Note, by its acceptance of a Note, will be deemed to have agreed to be bound by and to be entitled to the benefits of this Section 21 as though it were a party to this Agreement. On reasonable request by any Obligor in connection with the delivery to any holder of a Note of information required to be delivered to such holder under this Agreement or requested by such holder (other than a holder that is a party to this Agreement or its nominee), such holder will enter into an agreement with the Obligors embodying the provisions of this Section 21. 22. SUBSTITUTION OF PURCHASER. You shall have the right to substitute any one of your Affiliates as the purchaser of the Notes that you have agreed to purchase hereunder, by written notice to the Company, which notice shall be signed by both you and such Affiliate, shall contain such Affiliate's agreement to be bound by this Agreement and shall contain a confirmation by such Affiliate of the accuracy with respect to it of the representations set forth in Section 6. Upon receipt of such notice, wherever the word "you" is used in this Agreement (other than in this Section 22), such word shall be deemed to refer to such Affiliate in lieu of you. In the event that such Affiliate is so substituted as a purchaser hereunder and such Affiliate thereafter transfers to you all of the Notes then held by such Affiliate, upon receipt by the Company of notice of such transfer, wherever the word "you" is used in this Agreement (other than in this Section 22), such word shall no longer be deemed to refer to such Affiliate, but shall refer to you, and you shall have all the rights of an original holder of the Notes under this Agreement. 61 23. GUARANTEE. 23.1 GUARANTEED OBLIGATIONS. Each of the Guarantors hereby irrevocably, unconditionally, absolutely, jointly and severally guarantees to each holder of Notes, as and for each such Guarantor's own debt, until final and indefeasible payment has been made: (a) the due and punctual payment by the Company of the principal of, and interest (including default interest and post-petition interest), and the Make-Whole Amount (if any) on, the Notes at any time outstanding and the due and punctual payment of all other amounts payable, and all other indebtedness owing, by the Company to the holders of the Notes under this Agreement, the Other Agreements and the Notes (all such obligations so guarantied are herein collectively referred to as the "GUARANTEED OBLIGATIONS"), in each case when and as the same shall become due and payable, whether at maturity, pursuant to mandatory or optional prepayment, by acceleration or otherwise, all in accordance with the terms and provisions hereof and thereof; it being the intent of each of the Guarantors that the guarantee set forth in this Section 23 (the "GUARANTEE") shall be a guarantee of payment and not a guarantee of collection; and (b) the punctual and faithful performance, keeping, observance, and fulfillment by the Company of all duties, agreements, covenants and obligations of the Company contained in this Agreement, the Other Agreements and the Notes. 23.2 PERFORMANCE UNDER THIS AGREEMENT AND THE OTHER AGREEMENTS. In the event the Company fails to make, on or before the due date thereof, any payment of the Guaranteed Obligations, or if the Company shall fail to perform, keep, observe, or fulfill any other obligation referred to in clause (a) or clause (b) of Section 23.1 in the manner provided in this Agreement, the Other Agreements or the Notes after in each case giving effect to any applicable grace periods or cure provisions or waivers or amendments, the Guarantors shall cause forthwith to be paid the moneys, or to be performed, kept, observed, or fulfilled each of such obligations, in respect of which such failure has occurred in accordance with the terms and 62 provisions of this Agreement, the Other Agreements and the Notes. 23.3 WAIVERS. To the fullest extent permitted by law, each Guarantor does hereby waive: (a) notice of acceptance of the Guarantee; (b) notice of any purchase of the Notes under this Agreement or the Other Agreements, or the creation, existence or acquisition of any of the Guaranteed Obligations, subject to such Guarantor's right to make inquiry of each holder of Notes to ascertain the amount of the Guaranteed Obligations at any reasonable time; (c) notice of the amount of the Guaranteed Obligations, subject to such Guarantor's right to make inquiry of each holder of Notes to ascertain the amount of the Guaranteed Obligations at any reasonable time; (d) notice of adverse change in the financial condition of the Company, any other Guarantor or any Subsidiary or any other fact that might increase or expand such Guarantor's risk hereunder; (e) notice of presentment for payment, demand, protest, and notice thereof as to the Notes or any other instrument; (f) notice of any Default or Event of Default (except if such notice or demand is specifically otherwise required to be given to such Guarantor pursuant to the terms of this Agreement); (g) all other notices and demands to which such Guarantor might otherwise be entitled (except if such notice or demand is specifically otherwise required to be given to such Guarantor pursuant to the terms of this Agreement); (h) the defense of the "single action" rule or any similar right or protection (including, without limitation, any rights or defenses created by the anti-deficiency statutes of the State of California), and the right by statute or otherwise to require any holder of Notes to institute suit against the Company or any other Guarantor or to 63 exhaust its rights and remedies against the Company or any other Guarantor, such Guarantor being bound to the payment of each and all Guaranteed Obligations, whether now existing or hereafter accruing, as fully as if such Guaranteed Obligations were directly owing to the holders of Notes by such Guarantor; (i) any defense of the Company under this Agreement, the Other Agreements and the Notes other than the full and timely performance thereof; (j) any defense relating to the validity or enforceability (or absence or failure thereof) of any term of this Agreement, the Other Agreements and the Notes; (k) any defense arising by reason of any disability or other defense (other than the defense that the Guaranteed Obligations shall have been fully and finally performed and indefeasibly paid) of the Company or by reason of the cessation from any cause whatsoever of the liability of the Company in respect thereof, and any other defense that such Guarantor may otherwise have against the Company or any holder of Notes; (l) any stay (except in connection with a pending appeal), valuation, appraisal, redemption or extension law now or at any time hereafter in force which, but for this waiver, might be applicable to any sale of property of such Guarantor made under any judgment, order or decree based on this Agreement, and such Guarantor covenants that it will not at any time insist upon or plead, or in any manner claim or take the benefit or advantage of such law; and (m) any other defense which a Guarantor may have to the full and complete performance of its obligations hereunder (including, without limitation, any benefits which might otherwise be available under California Civil Code Sections 2809, 2910, 2819, 2839, 2845, 2849, 2850, 2899 and 3433 and California Code of Civil Procedure Sections 580a, 580b, 580d and 726). 23.4 CERTAIN WAIVERS OF SUBROGATION, REIMBURSEMENT AND INDEMNITY. Until all of the Guaranteed Obligations shall have been fully and finally paid, no Guarantor shall have any right of subrogation, reimbursement or indemnity whatsoever and no 64 right of recourse to or with respect to any assets or property of the Company. Nothing shall discharge or satisfy the liability of any of the Guarantors hereunder except the full and final performance and indefeasible payment of the Guaranteed Obligations. 23.5 RELEASES. Each of the Guarantors consents and agrees that, without notice to or by such Guarantor and without impairing, releasing, abating, deferring, suspending, reducing, terminating or otherwise affecting the obligations of such Guarantor hereunder, each holder of Notes, in the manner provided herein, by action or inaction, may: (a) compromise or settle, renew or extend the period of duration or the time for the payment, or discharge the performance of, or may refuse to, or otherwise not, enforce, or may, by action or inaction, release all or any one or more parties to, any one or more of this Agreement, the Other Agreements or the Notes; (b) assign, sell or transfer, or otherwise dispose of, any one or more of the Notes; (c) grant waivers, extensions, consents and other indulgences to the Company or any other Guarantor in respect of any one or more of this Agreement, the Other Agreements or the Notes; (d) amend, modify or supplement in any manner and at any time (or from time to time) any one or more of this Agreement, the Other Agreements and the Notes; (e) release or substitute any one or more of the endorsers or guarantors of the Guaranteed Obligations whether parties hereto or not; (f) sell, exchange, release or surrender any property at any time pledged or granted as security in respect of the Guaranteed Obligations, whether so pledged or granted by such Guarantor or another guarantor of the Company's obligations under this Agreement, the Other Agreements and the Notes; 65 (g) exchange, enforce, waive, or release, by action or inaction, any security for the Guaranteed Obligations or any other guarantee of any of the Notes; and (h) any other act or event which could have the effect of releasing a Guarantor from the full and complete performance of its obligations hereunder. 23.6 MARSHALING. Each Guarantor consents and agrees that: (a) each holder of Notes shall be under no obligation to marshal any assets in favor of such Guarantor or against or in payment of any or all of the Guaranteed Obligations; and (b) to the extent the Company or another Guarantor makes a payment or payments to any holder of Notes, which payment or payments or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, or required, for any of the foregoing reasons or for any other reason, to be repaid or paid over to a custodian, trustee, receiver, or any other party under any bankruptcy law, common law, or equitable cause, then to the extent of such payment or repayment, the obligation or part thereof intended to be satisfied thereby shall be revived and continued in full force and effect as if said payment or payments had not been made and such Guarantor shall be primarily liable for such obligation. 23.7 LIABILITY. Each Guarantor agrees that the liability of such Guarantor in respect of this Section 23 shall be immediate and shall not be contingent upon the exercise or enforcement by any holder of Notes of whatever remedies such holder may have against the Company or any other Guarantor or the enforcement of any Lien or realization upon any security such holder may at any time possess. 23.8 CHARACTER OF OBLIGATION. The Guarantee set forth in this Section 23 is a primary and original obligation of each Guarantor and is an absolute, unconditional, continuing and irrevocable guarantee of payment and performance (and not of collectibility) and shall 66 remain in full force and effect until the full, final and indefeasible payment of the Guaranteed Obligations without respect to future changes in conditions. The obligations of the Guarantors under this Section 23 are joint and several. The obligations of each Guarantor under this Guarantee and the rights of the holders of Notes to enforce such obligations by any proceedings, whether by action at law, suit in equity or otherwise, shall not be subject to any reduction, limitation, impairment or termination, whether by reason of any claim of any character whatsoever or otherwise, including, without limitation, claims of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense, set-off, counterclaim, recoupment or termination whatsoever. Without limiting the generality of the foregoing, the obligations of each Guarantor hereunder shall not be discharged or impaired or otherwise affected by: (a) any default, failure or delay, willful or otherwise, in the performance by the Company of any obligations of any kind or character whatsoever of the Company (including, without limitation, the obligations and undertakings of the Company hereunder or under any of the Other Agreements); (b) any creditors' rights, bankruptcy, receivership or other insolvency proceeding of the Company or any other Person or in respect of the property of the Company or any other Person or any merger, consolidation, reorganization, dissolution, liquidation or winding up of the Company or any other Person; (c) impossibility or illegality of performance on the part of the Company of its obligations hereunder, under the Other Agreements or under the Notes; (d) the validity or enforceability of this Agreement, the Other Agreements or the Notes; (e) in respect of the Company or any other Person, any change of circumstances, whether or not foreseen or foreseeable, whether or not imputable to the Company or any other Person, or other impossibility of performance through fire, explosion, accident, labor disturbance, floods, droughts, embargoes, wars (whether or not declared), civil commotions, acts of God or the public 67 enemy, delays or failure of suppliers or carriers, inability to obtain materials, action of any federal or state regulatory body or agency, change of law or any other causes affecting performance, or any other FORCE MAJEURE, whether or not beyond the control of the Company or any other Person and whether or not of the kind hereinbefore specified; (f) any attachment, claim, demand, charge, lien, order, process, encumbrance or any other happening or event or reason, similar or dissimilar to the foregoing, or any withholding or diminution at the source, by reason of any taxes, assessments, expenses, indebtedness, obligations or liabilities of any character, foreseen or unforeseen, and whether or not valid, incurred by or against any Person, or any claims, demands, charges or Liens of any nature, foreseen or unforeseen, incurred by any Person, or against any sums payable hereunder or under the Other Agreements, so that such sums would be rendered inadequate or would be unavailable to make the payments herein provided; (g) any order, judgment, decree, law, ruling or regulation (whether or not valid) of any court of any nation or of any political subdivision thereof or any body, agency, department, official or administrative or regulatory agency of any thereof or any other action, happening, event or reason whatsoever which shall delay, interfere with, hinder or prevent, or in any way adversely affect, the performance by any party of its respective obligations under any instruments; or (h) any other circumstance which might otherwise constitute a defense available to, or a discharge of, any Guarantor in respect of the obligations of such Guarantor under this Guarantee. 23.9 ELECTION TO PERFORM OBLIGATIONS. Any election by any Guarantor to pay or otherwise perform any of the obligations of the Company under this Agreement, the Other Agreements or the Notes, whether pursuant to this Section 23 or otherwise, shall not release the Company or any other Guarantor from such obligations or any of such Person's other obligations under this Agreement, the Other Agreements or the Notes. 68 23.10 NO ELECTION. Each holder of Notes shall have the right to seek recourse against each of the Guarantors to the fullest extent provided for in this Section 23 and elsewhere as provided in this Agreement, the Other Agreements and the Notes, and against the Company, to the full extent provided for in this Agreement, the Other Agreements and the Notes. No election to proceed in one form of action or proceeding, or against any party, or on any obligation, shall constitute a waiver of the right of such holder of Notes to proceed in any other form of action or proceeding or against other parties unless such holder of Notes has expressly waived such right in writing. Specifically, but without limiting the generality of the foregoing, no action or proceeding by any holder of Notes against the Company or any Guarantor under any document or instrument evidencing obligations of the Company or such Guarantor to such holder of Notes shall serve to diminish the liability of any Guarantor under this Agreement (including, without limitation, this Section 23) except to the extent that such holder of Notes finally and unconditionally shall have realized payment by such action or proceeding, notwithstanding the effect of any such action or proceeding upon such Guarantor's right of subrogation against the Company. 23.11 SEVERABILITY. Subject to Section 13 hereof, each of the rights and remedies granted under this Section 23 to the holder of Notes in respect of the Notes held by such holder may be exercised by such holder without notice by such holder to, or the consent of or any other action by, any other holder of Notes. 23.12 OTHER ENFORCEMENT RIGHTS. Each holder of Notes may proceed to protect and enforce the Guarantee under this Section 23 by suit or suits or proceedings in equity, at law or in bankruptcy, and whether for the specific performance of any covenant or agreement contained in this Section 23 or in execution or aid of any power herein granted or for the recovery of judgment for or in respect of the Guaranteed Obligations or for the enforcement of any other proper, legal or equitable remedy available under applicable law. 69 23.13 DELAY OR OMISSION; NO WAIVER. No course of dealing on the part of any holder of Notes and no delay or failure on the part of such holder to exercise any right under this Agreement, the Other Agreements or the Notes (including this Section 23) shall impair such right or operate as a waiver of such right or otherwise prejudice such holder's rights, powers and remedies hereunder. Every right and remedy given in or by this Section 23 or by law to any holder of Notes may be exercised from time to time as often as may be deemed expedient by such Person. 23.14 RESTORATION OF RIGHTS AND REMEDIES. If any holder of Notes shall have instituted any proceeding to enforce any right or remedy in this Section 23, under this Agreement or any Other Agreement or under any Note held by such holder and such proceeding shall have been discontinued or abandoned for any reason, or shall have been determined adversely to such holder, then and in every such case each such holder, the Company and each of the Guarantors shall, except as may be limited or affected by any determination in such proceeding, be restored severally and respectively to its respective former positions hereunder and thereunder, and thereafter the rights and remedies of such holder shall continue as though no such proceeding had been instituted. 23.15 CUMULATIVE REMEDIES. No remedy under this Agreement (including, without limitation, this Section 23), the Other Agreements or the Notes is intended to be exclusive of any other remedy, but each and every remedy shall be cumulative and in addition to any and every other remedy given pursuant to this Agreement (including, without limitation, this Section 23) or the Other Agreements, or pursuant to the Notes. 23.16 SURVIVAL. So long as the Guaranteed Obligations shall not have been fully and finally performed and indefeasibly paid, the obligations of each Guarantor under this Section 23 shall survive the transfer and payment of any Note and the payment in full of all the Notes. 70 23.17 MISCELLANEOUS. If an Event of Default exists, then the holders of Notes (as provided in Section 13) shall have the right to declare all of the Guaranteed Obligations to be, and such Guaranteed Obligations shall thereupon become, forthwith due and payable, without any presentment, demand, protest or other notice of any kind, all of which have been expressly waived by the Company and the Guarantors, and notwithstanding any stay, injunction or other prohibition preventing such declaration (or such Guaranteed Obligations from becoming automatically due and payable) as against the Company. In any such event, the holders of Notes shall have immediate recourse to each of the Guarantors to the fullest extent set forth herein. Notwithstanding any other provision of this Section 23, the Guaranteed Obligations of each Guarantor under this Section 23 shall be limited to the extent, if any, required so that its obligations under this Section 23 shall not be subject to avoidance under Section 548 of the Bankruptcy Code or to being set aside or annulled under any applicable state law relating to fraud on creditors. In determining the limitations, if any, on the amount of any Guarantor's obligations under this Section 23 pursuant to the preceding sentence, any rights of subrogation or contribution which such Guarantor may have under this Section 23 or applicable law shall be taken into account. Notwithstanding any provision in this Agreement or the Other Agreements to the contrary, each Obligor agrees that any indebtedness of a Guarantor owing to the Company or another Obligor shall be subordinated in right of payment to the Guaranteed Obligations of such Guarantor under this Section 23 owing to the holders of Notes. 24. MISCELLANEOUS. 24.1 SUCCESSORS AND ASSIGNS. All covenants and other agreements contained in this Agreement by or on behalf of any of the parties hereto bind and inure to the benefit of their respective successors and assigns (including, without limitation, any subsequent holder of a Note) whether so expressed or not. 71 24.2 PAYMENTS DUE ON NON-BUSINESS DAYS. Anything in this Agreement or the Notes to the contrary notwithstanding, any payment of principal of or Make-Whole Amount or interest on any Note that is due on a date other than a Business Day shall be made on the next succeeding Business Day without including the additional days elapsed in the computation of the interest payable on such next succeeding Business Day. 24.3 SEVERABILITY. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall (to the full extent permitted by law) not invalidate or render unenforceable such provision in any other jurisdiction. 24.4 CONSTRUCTION. (a) Each covenant contained herein shall be construed (absent express provision to the contrary) as being independent of each other covenant contained herein, so that compliance with any one covenant shall not (absent such an express contrary provision) be deemed to excuse compliance with any other covenant. Where any provision herein refers to action to be taken by any Person, or which such Person is prohibited from taking, such provision shall be applicable whether such action is taken directly or indirectly by such Person. (b) This Agreement and the wording contained herein have been arrived at by mutual negotiation of the parties hereto, and no provision hereof shall be interpreted or construed against one party in favor of the other party by reason of draftsmanship. 24.5 COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be an original but all of which together shall constitute one instrument. Each counterpart may consist of a number of copies hereof, each signed by less than all, but together signed by all, of the parties hereto. 72 24.6 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF THE STATE OF NEW YORK EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE. [Remainder of page intentionally blank. Next page is signature page.] 73 If you are in agreement with the foregoing, please sign the form of agreement on the accompanying counterpart of this Agreement and return it to the Company, whereupon the foregoing shall become a binding agreement between you and the Obligors. Very truly yours, SUNRISE MEDICAL, INC. By ---------------------------- Name: Title: SUNMED FINANCE INC. By ---------------------------- Name: Title: SUNRISE MARIN HOLDINGS INC. By ---------------------------- Name: Title: SUNRISE MEDICAL CCG INC. By ---------------------------- Name: Title: SUNRISE MEDICAL HHG INC. By ---------------------------- 74 Name: Title: The foregoing is hereby agreed to as of the date thereof. [PURCHASER] By ------------------------------- Name: Title: 75 EX-27 4 EXHIBIT 27 FDS
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 26, 1997 AND THE CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE QUARTER ENDED SEPTEMBER 26, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS JUN-26-1998 SEP-26-1997 2,317 0 137,921 10,608 89,521 238,487 178,724 86,770 607,266 130,318 191,967 0 0 19,307 257,961 607,266 151,063 151,063 102,752 102,752 45,542 0 3,411 708 363 345 0 0 0 345 0.02 0.02
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