-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, rbTPf9wsTJ8heDBLsPhaVX1Ea/g0lToHLJR0c8gjKSHSIdSiI3ocS8+BZnKCW4yh nlAo1OC9Bx68exvNjgamJA== 0000074697-94-000002.txt : 19940922 0000074697-94-000002.hdr.sgml : 19940922 ACCESSION NUMBER: 0000074697-94-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19940731 FILED AS OF DATE: 19940914 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: OPTICAL COATING LABORATORY INC CENTRAL INDEX KEY: 0000074697 STANDARD INDUSTRIAL CLASSIFICATION: 3827 IRS NUMBER: 680164244 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-02537 FILM NUMBER: 94549042 BUSINESS ADDRESS: STREET 1: 2789 NORTHPOINT PKWY CITY: SANTA ROSA STATE: CA ZIP: 95407 BUSINESS PHONE: 7075456440 MAIL ADDRESS: STREET 1: 2789 NORTHPOINT PARKWAY CITY: SANTA ROSA STATE: CA ZIP: 95407-7397 10-Q 1 3RD Q 1994 FORM 10-Q UNITED STATES 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 JULY 31, 1994 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 0-2537 OPTICAL COATING LABORATORY, INC. (Exact name of registrant as specified in its charter) DELAWARE (State Or Other Jurisdiction Of Incorporation Or Organization) 68-0164244 (I.R.S. Employer Identification No.) 2789 NORTHPOINT PARKWAY, SANTA ROSA, CA 95407-7397 (Address Of Principal Executive Offices) (707) 545-6440 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No APPLICABLE ONLY TO CORPORATE ISSUERS Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Classes of Common Stock COMMON STOCK, $.01 PAR VALUE Outstanding at August 31, 1994: 8,977,794 This document contains 18 pages. The Exhibit listing appears on Page 16. PART I. FINANCIAL INFORMATION Item 1. Financial Statements OPTICAL COATING LABORATORY, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in thousands) (Unaudited) July 31, October 31, 1994 1993 ASSETS Current Assets: Cash and short-term investments $ 16,458 $ 2,284 Accounts receivable, net of allowance for doubtful accounts of $1,617 and $1,817 22,342 19,850 Inventories 9,435 11,605 Income tax receivable 2,043 Deferred income tax assets 4,297 4,510 Other current assets 2,380 1,061 TOTAL CURRENT ASSETS 54,912 41,353 Other Assets and Investments 9,190 8,949 Property, Plant and Equipment: Land and improvements 8,525 8,380 Buildings and improvements 26,870 26,317 Machinery and equipment 76,358 72,429 Construction-in-progress 3,806 3,470 115,559 110,596 Less accumulated depreciation (65,277) (61,672) PROPERTY, PLANT AND EQUIPMENT - NET 50,282 48,924 $114,384 $ 99,226 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $ 4,303 $ 4,243 Accrued expenses 7,458 7,694 Accrued compensation expenses 4,809 5,309 Income taxes payable 188 Current maturities on long-term debt 4,751 6,702 Notes payable 582 490 Deferred revenue 677 664 TOTAL CURRENT LIABILITIES 22,768 25,102 Accrued postretirement health benefits and pension liabilities 1,841 1,767 Deferred income tax liabilities 2,024 2,112 Long-term debt 37,817 23,110 Stockholders' Equity: Common stock, $.01 par value; authorized 30,000,000 shares; issued and outstanding 8,978,000 and 8,972,000 shares 90 90 Paid-in capital 39,967 39,930 Retained earnings 10,809 8,526 Cumulative foreign currency translation adjustment (932) (1,411) TOTAL STOCKHOLDERS' EQUITY 49,934 47,135 $114,384 $ 99,226 See Notes to Consolidated Financial Statements OPTICAL COATING LABORATORY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS Three and Nine Months Ended July 31, 1994 and 1993 (Dollars in thousands, except per share amounts) (Unaudited) Three Months Ended Nine Months Ended July 31, July 31, 1994 1993 1994 1993 Net sales and other revenues $33,403 $31,497 $97,038 $91,900 COSTS AND EXPENSES: Cost of sales 22,039 23,428 61,600 60,815 Research and development 1,434 1,769 3,889 4,690 Selling and administrative 7,402 7,664 23,086 22,121 Restructuring charges 8,637 8,637 Amortization of intangibles 173 138 489 322 Total costs and expenses 31,048 41,636 89,064 96,585 Earnings (loss) from operations 2,355 (10,139) 7,974 (4,685) OTHER INCOME (EXPENSE): Interest income 113 33 131 111 Interest expense (899) (795) (2,313) (2,265) Earnings (loss) before income taxes 1,569 (10,901) 5,792 (6,839) Income taxes (credit) 659 (4,079) 2,433 (2,455) Net earnings (loss) $ 910 $(6,822) $3,359 $(4,384) Net earnings (loss) per share $ .10 $ (.77) $ .37 $ (.50) See Notes to Consolidated Financial Statements OPTICAL COATING LABORATORY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY Nine Months Ended July 31, 1994 (Amounts in thousands) (Unaudited) FOREIGN COMMON STOCK PAID IN RETAINED CURRENCY SHARES AMOUNT CAPITAL EARNINGS TRANSLATION Balance at November 1, 1993 8,972 $90 $39,930 $8,526 $(1,411) Exercise of stock options, including tax benefit and shares issued to directors 6 37 Foreign currency translation 479 adjustment for the period Net earnings for the period 3,359 Dividend on common stock (1,076) Balance at July 31, 1994 8,978 $ 90 $39,967 $10,809 $ (932) See Notes to Consolidated Financial Statements OPTICAL COATING LABORATORY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the Three and Nine Months ended July 31, 1994 and 1993 (Amounts in thousands) (Unaudited) Three Months Ended Nine Months Ended July 31, July 31, 1994 1993 1994 1993 CASH FLOWS FROM OPERATING ACTIVITIES: Cash received from customers $35,244 $34,511 $98,052 $95,664 Interest received 90 5 103 88 Cash paid to suppliers and employees (31,516) (28,161) (86,042) (84,049) Cash paid to ESOP+ (266) (660) Interest paid (640) (1,114) (1,882) (2,041) Income taxes paid, net of refunds 209 (1,044) (194) (3,348) Net cash provided by operating activities 3,121 4,197 9,377 6,314 CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of plant and equipment (2,196) (2,608) (5,974) (6,761) Cash portion of payment for purchase of MMG, net of cash acquired (3,443) Net cash used for investing activities (2,196) (2,608) (5,974) (10,204) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from notes payable 160 683 342 1,958 Proceeds from exercise of stock options 223 16 1,834 Proceeds from debt borrowings 18,000 22,000 1,260 Payment of long-term debt (6,678) (645) (10,294) (3,969) Payment of notes payable (10) (217) (291) (1,862) Payment of dividend on common stock (538) (534) (1,076) (1,043) Net cash provided by (used for) financing activities 10,934 (490) 10,697 (1,822) Effect of exchange rate changes on cash 36 (99) 74 (186) Net increase (decrease) in cash and cash equivalents 11,895 1,000 14,174 (5,898) Cash and cash equivalents at beginning of period 4,563 2,284 3,160 10,058 Cash and cash equivalents at end of period $16,458 $4,160 $16,458 $ 4,160 OPTICAL COATING LABORATORY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Three and Nine Months Ended July 31, 1994 and 1993 (Amounts in thousands) (Unaudited) Three Months Ended Nine Months Ended July 31, July 31, 1994 1993 1994 1993 RECONCILIATION OF NET EARNINGS (LOSS) TO CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings (loss) $ 910 $(6,822) $3,359 $(4,384) Adjustments to reconcile net earnings (loss) to net cash provided by (used for) operating activities: Depreciation and 1,974 1,919 5,577 5,607 amortization Loss on disposal or abandonment of equipment 327 4,686 545 4,981 Other non-cash adjustments to net earnings (53) (47) (74) 376 (Increase) decrease in accounts receivable (134) 3,413 (1,856) 2,433 (Increase) decrease in inventories 1,647 1,777 2,424 1,855 (Increase) decrease in income tax recoverable (2,784) 2,044 (2,784) (Increase) decrease in deferred income tax assets 236 (434) 213 (434) (Increase) decrease in other current assets and other assets and investments (959) (239) (1,609) (1,659) Increase (decrease) in accounts payable, accrued expenses and accrued compensation expenses (986) 4,610 (1,309) 2,662 Increase (decrease) in deferred revenue 93 90 13 150 Increase (decrease) in accrued postretirement health benefits and pension liabilities 31 20 55 60 Increase (decrease) in deferred income tax liabilities (132) (1,725) (182) (1,708) Increase (decrease) in income taxes payable 167 (267) 177 (841) Total adjustments 2,211 11,019 6,018 10,698 Net cash provided by operating activities $3,121 $4,197 $9,377 $6,314 Supplemental Schedule of Non-Cash Investing and Financing Activities: Effective December 31, 1992, the Company acquired MMG Glastechnik GmbH (MMG) for approximately $3.4 million in cash and approximately $9.3 million of notes payable to the sellers. Cash and noncash components of the acquisition were as follows: Fair value of assets acquired, including intangibles $ 22,865 Cash acquired (16) Liabilities assumed (10,141) Notes payable to sellers (9,265) Net cash paid $ 3,443 See Notes to Consolidated Financial Statements OPTICAL COATING LABORATORY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Three and Nine Months Ended July 31, 1994 and 1993 (Unaudited) 1. GENERAL The Consolidated Balance Sheet as of July 31, 1994, the Consolidated Statements of Operations for the three and nine month periods ended July 31, 1994 and 1993, the Consolidated Statement of Stockholders' Equity for the nine month period ended July 31, 1994 and the Consolidated Statements of Cash Flows for the three and nine month periods ended July 31, 1994 and 1993 have been prepared by the Company without audit. In the opinion of management, all adjustments, consisting of normal recurring accruals, necessary to present fairly the financial position, results of operations and cash flows at July 31, 1994 and for the periods presented have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report to Stockholders for fiscal 1993. Certain amounts in the 1993 consolidated financial statements have been reclassified to conform with the presentation in the 1994 consolidated financial statements. The results of operations for the period ended July 31, 1994 are not necessarily indicative of the operating results anticipated for the full year. 2. INVENTORIES Inventories consisted of the following: July 31, October 31, 1994 1993 (Amounts in thousands) Raw materials and supplies $ 3,788 $ 5,730 Work-in-process and finished goods 5,647 5,875 $ 9,435 $11,605 3. ACCRUED EXPENSES Accrued expenses consisted of the following: July 31, October 31, 1994 1993 (Amounts in thousands) Workers' compensation reserve $ 1,612 $ 1,897 Ground water remediation reserve 1,201 1,433 Other accrued liabilities 4,645 4,364 $ 7,458 $ 7,694 4. DEBT Long-term debt consisted of: July 31, October 31, 1994 1993 (Amounts in thousands) Unsecured Senior Notes Interest at 8.71% payable semiannually. Principal payable in annual installments of $3.6 million from 1998 through 2002. $18,000 Unsecured bank term loan, amortized in twelve equal quarterly installments commencing October 31,1994 and ending July 31, 1997. Interest atapproximately 9.7% payable quarterly. 6,000 $6,000 Term loan. Balance paid in March 1994. 2,750 Unsecured borrowings under bank line of credit. Balance paid in 1994. 2,500 Land improvement assessment, at an average rate of 6.75% interest, principal and interest payable in semiannual installments of $77,000 through 1998. 518 627 Scottish Development Agency (SDA) building loan, at 12%, with semiannual payments of approximately $357,000, each comprising principal and interest through 2006. Collateralized by the land and building of the Company's Scottish subsidiary. 4,147 4,050 Notes payable to private parties in connection with the purchase of MMG. Principal and interest at 8% payable over ten years in quarterly installments of approximately $400,000 through 2003. 8,032 8,187 Bank loans of MMG with interest rates from 4.5% to 9.75%. Payable in annual and semiannual installments through 2014. Partly secured by mortgages on MMG land and buildings and liens on equipment. 4,985 4,630 Present value of obligations of MMG under capital leases at an assumed interest rate of 7.5% payable in monthly installments through 2004. 693 789 European Coal and Steel Community loan to Scottish subsidiary at 8.2%, with semiannual payments of approximately $93,000, comprising principal and interest through 1995. 193 279 42,568 29,812 Less current maturities (4,751) (6,702) $ 37,817 $23,110 The Company has a $10 million credit facility with a bank carrying a commitment fee of 1/2% per annum. $6.0 million of the credit commitment is allocated to a term loan and becomes available under the revolving credit segment as the term loan is repaid on a quarterly basis over three years. The facility expires on June 30, 1997. Additionally, the credit facility covers a bank guarantee of approximately $4.0 million to secure 50% of the notes payable arising from the purchase of MMG. This guarantee facility carries a fee of 1.25% per annum. The Company's subsidiary in Scotland has a credit arrangement of up to approximately $450,000 with interest payable at market rates. There were no borrowings under this credit arrangement in 1993 or 1994. On May 27, 1994, the Company completed the issuance of $18 million of unsecured Senior Notes, due in annual installments of $3.6 million from June 1, 1998 through June 1, 2002, to a group of insurance companies in a private placement. The notes bear interest at 8.71%. $6.5 million of proceeds were used to pay back the outstanding borrowings under the bank line of credit. At July 31, 1994, the Company had outstanding letters of credit in the amount of $1.9 million to meet the requirements under the Company's workers' compensation self insurance plans, and the Company's subsidiary in Scotland had outstanding letters of credit of approximately $300,000 to guarantee payment of import duty. 5. ACQUISITION OF MMG Effective December 31, 1992, the Company acquired MMG MinnahYtte Maschinelle Glasbearbeitung GmbH, renamed MMG Glastechnik GmbH (MMG), a precision glass fabricating company in Germany. This acquisition was accounted for as a purchase. Payment consisted of approximately $3.4 million in cash and $9.3 million in ten year notes due the sellers which are payable in equal quarterly installments of principal plus interest at 8% per annum. In connection with the acquisition, the Company assumed approximately $5.3 million of long-term debt of MMG. At July 31, 1994, other assets and investments includes $7.3 million of intangibles, principally goodwill, resulting from the purchase of MMG, which are being amortized over 15 years. 6. STOCK OPTIONS During the nine months ended July 31, 1994, the Company, under its incentive compensation and employee stock option plans, granted options to purchase 319,900 shares of the Company's common stock at a price equal to 100% of the market price on the date of grant. The Company canceled and regranted stock options totaling 500,000 shares to one officer, the effect of which was to extend the expiration dates of the options. These options were not repriced and remain at or above the market price of the CompanyOs common stock on the date of regrant. At July 31, 1994, 1,344,095 shares are subject to outstanding options, of which 930,120 options are exercisable. Options to purchase 155,213 shares of common stock are available for future grants under the plans. PART I. FINANCIAL INFORMATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF MATERIAL CHANGES IN RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS Net sales and other revenues for the third quarter of 1994 were $33.4 million, up 6% over net sales and other revenues of $31.5 million for the third quarter of 1993. Net sales and other revenues for the first nine months of 1994 were $97.0 million, up 6% over net sales and other revenues of $91.9 million for the same period of 1993. The increase in net sales and other revenues for the third quarter and first nine months of 1994 over comparative periods of 1993 was primarily due to increased demand for the Company's fabricated mirror and glass products for the office automation market. During the third quarter and first nine months of 1994, the Company estimates that it experienced price declines of approximately 2%-4% in its OEM display product line and 8%-10% in its fabricated glass product line. These price declines were substantially offset by incremental volume in both product areas. There were no other significant price changes in the remainder of the Company's products during the third quarter or the first nine months of 1994. Cost of sales as a percent of sales was 66.0% for the third quarter of 1994 and 74.4% for the third quarter of 1993 and was 63.5% for the first nine months of 1994 and 66.2% for the first nine months of 1993. These cost of sales percentages exceed the Company's recent historical cost of sales percentages which have approximated 60-62%. The third quarter 1994 cost of sales percentage reflects process start-up costs in the Company's plastic display products area and low gross margins in the Company's European technical products area due to low volume. The third quarter of 1993 cost of sales percentage reflects increased costs which included inventory valuation provisions, above normal workers' compensation expense and accrual for facility reorganization expense. Research and development expenditures in the third quarter of 1994 decreased $335,000, or 19%, compared to the third quarter of 1993 and for the first nine months of 1994 decreased $801,000, or 17%, compared to the first nine months of 1993. This reduction in research and development is primarily attributable to management's decision to assign more of the Company's technical resources to support improved manufacturing activities. Selling and administrative expenses for the third quarter of 1994, were $262,000 (3%) lower than in the third quarter of 1993. For the first nine months of 1994, selling and administrative expenses were $965,000 (4%) higher compared to the same period of 1993, primarily as a result of increased sales staffing in the Company's Glare/Guard computer filter products area and the establishment of regional sales offices for the Santa Rosa Division. During the third quarter of 1993, the Company recorded $8.6 million of restructuring charges. These restructuring charges reflected staff reductions and abandonment and reduction of the carrying value of certain equipment, inventory and other assets. Interest income in the third quarter of 1994 was up $80,000 from the third quarter of 1993 and, for the first nine months of 1994, increased $20,000 from the same period of 1993. These increases reflect the higher short-term investment balances on hand in the current year periods. Interest expense for the third quarter of 1994 increased $104,000, or 13%, from the third quarter of 1993, and for the first nine months of 1994 increased $48,000, or 2%, over the same period of 1993. Increased interest expense in the third quarter of 1993 reflects the increase in the Company's long-term debt. As a result of the foregoing, the Company reported earnings before income taxes of $1.6 million in the third quarter of 1994, compared to a loss before income taxes of $10.9 million, including $8.6 of restructuring charges, in the third quarter of 1993. For the first nine months of 1994, the Company reported earnings before income taxes of $5.8 million, compared to a loss before income taxes of $6.8 million, including $8.6 million of restructuring charges, for the same period of 1993. The effective income tax rate applied against the earnings of the third quarter and the first nine months of 1994 was 42.0%; while the effective income tax rate relating to the loss for the same periods of 1993 were 37.4% and 35.9%, because tax benefits were not available to offset certain foreign losses. As a result of the foregoing, the Company reported net earnings of $910,000 in the third quarter of 1994, compared to a net loss of $6.8 million in the third quarter of 1993. For the first nine months of 1994, the Company reported net earnings of $3.4 million, compared to a net loss of $4.4 million for the first nine months of 1993. FINANCIAL CONDITION During the three months ended July 31, 1994, the Company's operating activities provided $3.1 million in cash flow of which $2.2 million was utilized to purchase plant and equipment. As part of its financing activities during this period, the Company issued $18.0 million in unsecured Senior Notes and on a net basis repaid $6.7 million of debt. As a result of its operating and financing activities, the Company increased its cash and short-term investment position by $11.9 million during the three month period. During the third quarter of 1994, the Company completed the issuance of $18 million of unsecured Senior Notes in a private placement. $6.5 million of the proceeds from this debt offering were used to pay back outstanding borrowings under the Company's bank line of credit. The borrowing was primarily to restructure the Company's debt at a favorable interest rate and provide the Company with additional liquidity for general corporate purposes. The Senior Notes carry an interest rate of 8.71%, payable semiannually beginning in December 1994, with principal repayment of $3.6 million per year from 1998 to 2002. Also during the quarter, the Company renegotiated its bank credit line arrangement. The available credit commitment under this new credit line is $10 million, of which $6 million is allocated to a term loan and becomes available under the revolving credit segment as the term loan is repaid on a quarterly basis over three years. The bank line of credit arrangement also covers an approximate $4 million bank guarantee. The bank line of credit arrangement expires on June 30, 1997. Management believes that the cash on hand at July 31, 1994, and cash anticipated to be generated from future operations and the available credit from revolving credit arrangements will be sufficient for the Company to meet its near-term working capital needs, capital expenditures, debt service requirements and payments of dividends as declared. INDEPENDENT ACCOUNTANTS' REVIEW The July 31,1994 consolidated financial statements included in this filing on Form 10-Q have been reviewed by Deloitte & Touche, independent accountants, in accordance with established professional standards and procedures for such a review. The report of Deloitte & Touche LLP commenting on their review follows. INDEPENDENT ACCOUNTANTS' REPORT To The Board of Directors and Stockholders of Optical Coating Laboratory, Inc. Santa Rosa, California We have reviewed the accompanying condensed consolidated balance sheet of Optical Coating Laboratory, Inc. and subsidiaries as of July 31, 1994, and the related condensed consolidated statements of operations and cash flows for the three-month and nine-month periods ended July 31, 1994 and 1993 and the related condensed consolidated statement of stockholders' equity for the nine-month period ended July 31, 1994. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists of applying analytical review procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to such condensed consolidated financial statements for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of Optical Coating Laboratory, Inc. and subsidiaries as of October 31, 1993, and the related consolidated statements of operations, stockholders' equity, and cash flows for the year then ended (not presented herein); and in our report dated December 17, 1993, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of October 31, 1993 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. /s/ Deloitte & Touche LLP August 17, 1994 PART II. OTHER INFORMATION Item 1. Legal Proceedings During the quarter, the Company successfully defended a motion for summary judgment in the ongoing patent litigation with Applied Visions Limited. There were no other material developments in legal proceedings since the report filed on Form 10-Q for the quarter ended April 30, 1994. Item 2. Changes In Securities None Item 3. Defaults upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders None Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K (a) The following are filed as Exhibits to this Quarterly Report. The numbers refer to the Exhibit Table of Item 601 of Regulation S-K. (2) None (4)(a) Note Purchase Agreement(s) dated as of May 27, 1994 for the private placement of $18,000,000 of 8.71% Senior Notes due June 1, 2002 between the Registrant and Connecticut Mutual Life Insurance Company, Modern Woodman of America and American Life and Casualty Insurance Company. (4)(b) Amended and Restated Credit Agreement dated as of June 30, 1994 between the Registrant and Bank of America NT&SA. (10) None (11) Computation of per share earnings (loss) for the three and nine month periods ended July 31, 1994 and 1993. (15) Letter of Deloitte & Touche LLP regarding unaudited interim financial information. (18) None (19) None (22) None (23) None (24) None (27) Financial Data Schedule for the nine months ended July 31, 1994. (b) Reports on Form 8-K filed for the three months ended July 31, 1994. The Company filed a report on Form 8-K dated May 27, 1994 which reported the private placement of $18,000,000 of 8.71% Senior Notes due June 1, 2002. 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. DATE: September 14, 1994 OPTICAL COATING LABORATORY, INC. (Registrant) By: /s/ Herbert M. Dwight, Jr. President and Chief Financial Officer (Principal Financial Officer) EX-4 2 4078534.04 AMENDED AND RESTATED CREDIT AGREEMENT Dated as of June 30, 1994 between OPTICAL COATING LABORATORY, INC. and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION TABLE OF CONTENTS Page ARTICLE I DEFINITIONS 1 1.01 Certain Defined Terms 1 1.02 Other Interpretive Provisions 16 1.03 Accounting Principles and Periods 17 ARTICLE II THE CREDIT 17 2.01 Amount and Terms of Commitment 17 (a) The Term Credit 17 (b) The Revolving Credit 17 2.02 Loan Accounts 18 2.03 Procedure for Borrowing 18 2.04 Conversion and Continuation Elections 18 2.05 Voluntary Termination or Reduction of Commitment 19 2.06 Optional Prepayments 20 2.07 Repayment 20 (a) The Term Credit 20 (b) The Revolving Credit 20 2.08 Interest 20 2.09 Fees 21 (a) Upfront Fee 21 (b) Commitment Fee 21 2.10 Computation of Fees and Interest 21 2.11 Payments by the Company 22 2.12 Prior Credit Agreements 22 ARTICLE III THE LETTERS OF CREDIT; THE BIRCKHAHN GUARANTY 22 3.01 The Letter of Credit Subfacility. 22 3.02 Issuance, Amendment and Renewal of Letters of Credit 23 3.03 Existing Letter of Credit 25 3.04 Uniform Customs and Practice 25 3.05 Drawings and Reimbursements 25 3.06 The Birckhahn Guaranty 26 3.07 Obligations Absolute 26 3.08 Cash Collateral Pledge 26 3.09 Letter of Credit and Birckhahn Guaranty Fees 26 ARTICLE IV TAXES, YIELD PROTECTION AND ILLEGALITY 27 4.01 Taxes. 27 4.02 Illegality 28 4.03 Increased Costs and Reduction of Return 28 4.04 Funding Losses 29 4.05 Inability to Determine Rates 29 4.06 Survival 30 ARTICLE V CONDITIONS PRECEDENT 30 5.01 Conditions of Initial Loan 30 (a) Credit Agreement 30 (b) Resolutions; Incumbency 30 (c) Organization Documents; Good Standing 30 (d) Payment of Fees 30 (e) Certificate 30 (f) Legal Opinion 31 (g) Private Placement 31 (h) Other Documents 31 5.02 Conditions to All Credit Extensions 31 (a) Notice of Borrowing 31 (b) Continuation of Representations and Warranties 31 (c) No Existing Default 31 ARTICLE VI REPRESENTATIONS AND WARRANTIES 32 6.01 Corporate Existence and Power 32 6.02 Corporate Authorization; No Contravention 32 6.03 Governmental Authorization 32 6.04 Binding Effect 33 6.05 Litigation 33 6.06 No Default 33 6.07 ERISA Compliance 33 6.08 Use of Proceeds; Margin Regulations 34 6.09 Title to Properties 34 6.10 Taxes 34 6.11 Financial Condition 34 6.12 Environmental Matters 35 6.13 Regulated Entities 35 6.14 No Burdensome Restrictions 35 6.15 Copyrights, Patents, Trademarks and Licenses, etc. 35 6.16 Subsidiaries 36 6.17 Insurance 36 6.18 Full Disclosure 36 ARTICLE VII AFFIRMATIVE COVENANTS 36 7.01 Financial Statements 36 7.02 Certificates; Other Information 37 7.03 Notices 38 7.04 Preservation of Corporate Existence, Etc 39 7.05 Maintenance of Property 39 7.06 Insurance 39 7.07 Payment of Obligations 39 7.08 Compliance with Laws 39 7.09 Inspection of Property and Books and Records 39 7.10 Environmental Laws 40 7.11 Use of Proceeds 40 ARTICLE VIII NEGATIVE COVENANTS 40 8.01 Limitation on Liens 40 8.02 Disposition of Assets 43 8.03 Consolidations and Mergers 43 8.04 Loans and Investments 44 8.05 Limitation on Indebtedness 46 8.06 Transactions with Affiliates 47 8.07 Use of Proceeds 47 8.08 Use of Proceeds - Ineligible Securities 47 8.09 Contingent Obligations 48 8.10 Lease Obligations 48 8.11 Restricted Payments 48 8.12 Tangible Net Worth 49 8.13 Fixed Charge Coverage Ratio 49 8.14 Leverage Ratio 49 8.15 Capital Expenditures 50 8.16 Change in Business 50 8.17 Accounting Changes 50 ARTICLE IX EVENTS OF DEFAULT 50 9.01 Event of Default 50 (a) Non-Payment 50 (b) Representation or Warranty 50 (c) Specific Defaults 51 (d) Other Defaults 51 (e) Cross-Default 51 (f) Insolvency; Voluntary Proceedings 51 (g) Involuntary Proceedings 52 (h) ERISA 52 (i) Monetary Judgments 52 (j) Non-Monetary Judgments 52 (k) Change of Control 52 (l) Adverse Change 53 9.02 Remedies 53 9.03 Rights Not Exclusive 53 ARTICLE X MISCELLANEOUS 53 10.01 Amendments and Waivers 53 10.02 Notices 54 10.03 No Waiver; Cumulative Remedies 54 10.04 Costs and Expenses 54 10.05 Indemnity 55 10.06 Payments Set Aside 55 10.07 Successors and Assigns 56 10.08 Assignments, Participations, etc. 56 10.09 Set-off 57 10.10 Automatic Debits of Fees 57 10.11 Counterparts 57 10.12 Severability 58 10.13 No Third Parties Benefited 58 10.14 Governing Law and Jurisdiction 58 10.15 Waiver of Jury Trial 58 10.16 Entire Agreement 59 Exhibits Exhibit A Notice of Borrowing Exhibit B Notice of Conversion/Continuation Exhibit C Compliance Certificate Exhibit D Form of Legal Opinion Schedules Schedule 6.05 Litigation Schedule 6.16 Subsidiaries and Equity Investments Schedule 8.01 Permitted Liens Schedule 8.04(p) Investment Policies Schedule 8.04(q) Existing Investments Schedule 8.05 Existing Indebtedness Schedule 8.09 Existing Contingent Obligations AMENDED AND RESTATED CREDIT AGREEMENT This AMENDED AND RESTATED CREDIT AGREEMENT is entered into as of June 30, 1994, between Optical Coating Laboratory, Inc., a Delaware corporation (the "Company"), and Bank of America National Trust and Savings Association (the "Bank"). WHEREAS, the Company and the Bank are parties to that certain Credit Agreement dated as of July 31, 1991, as amended by a (i) First Amendment to Credit Agreement dated as of February 26, 1993, (ii) Second Amendment to Credit Agreement dated as of October 29, 1993, and (iii) a Third Amendment to Credit Agreement dated as of March 31, 1994 (as so amended, the "Credit Agreement"), pursuant to which the Bank has extended certain credit facilities to the Company. WHEREAS, the Company and the Bank wish to amend and restate the Credit Agreement in its entirety on and subject to the terms and conditions hereof. NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained herein, the parties agree as follows: ARTICLE I DEFINITIONS 1.01 Certain Defined Terms. The following terms have the following meanings: "Acceptable Bank" means any commercial bank: (a) that is organized under the laws of the United States or any state thereof; (b) that has capital, surplus and undivided profits aggregating at least $100,000,000; and (c) whose long-term unsecured debt obligations (or the long-term unsecured debt obligations of the bank holding company owning all of the capital stock of such bank) shall have been rated "A" or higher by Standard & Poor's or "A2" or higher by Moody's. "Acquisition" means any transaction or series of related transactions for the purpose of or resulting, directly or indirectly, in (a) the acquisition of all or substantially all of the assets of a Person, or of any business or division of a Person, (b) the acquisition of in excess of 50% of the capital stock, partnership interests or equity of any Person, or otherwise causing any Person to become a Subsidiary, or (c) a merger or consolidation or any other combination with another Person (other than a Person that is a Subsidiary) provided that the Company or the Subsidiary is the surviving entity. "Affiliate" means, as to any Person, any other Person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. A Person shall be deemed to control another Person if the controlling Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of the other Person, whether through the ownership of voting securities, by contract, or otherwise. "Agreement" means this Credit Agreement. "Applicable Margin" means (i) with respect to Base Rate Loans, 0.00%; and (ii) with respect to Offshore Rate Loans, 1.50%. "Assignee" has the meaning specified in subsection 10.08(a). "Attorney Costs" means and includes all fees and disbursements of any law firm or other external counsel, the allocated cost of internal legal services and all disbursements of internal counsel. "Bank" has the meaning specified in the introductory clause hereto. "Bankruptcy Code" means the Federal Bankruptcy Reform Act of 1978 (11 U.S.C. 101, et seq.). "Base Rate" means, for any day, the higher of: (a) 0.50% per annum above the latest Federal Funds Rate and (b) the rate of interest in effect for such day as publicly announced from time to time by the Bank in San Francisco, California, as its "reference rate." (The reference rate is a rate set by the Bank based upon various factors including the Bank'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.) Any change in the reference rate announced by the Bank shall take effect at the opening of business on the day specified in the public announcement of such change. "Base Rate Loan" means a Loan that bears interest based on the Base Rate. "Birckhahn Guaranty" means the Guaranty 6019GT020948/92 issued by the Bank through its Frankfurt/Main branch as of December 29, 1992, in favor of Henning von Birckhahn and guaranteeing (in an amount not exceeding DM 7,500,000) certain obligations of the Company to Henning von Birckhahn. "Birckhahn Guaranty Documents" means the Birckhahn Guaranty and any other document, instrument, or agreement executed or delivered by the Company in connection with the Bank's issuance of the Birckhahn Guaranty. "Birckhahn Guaranty Outstanding Amount" means, at any time, the amount guaranteed pursuant the Birckhahn Guaranty but not disbursed thereunder at such time, plus all amounts paid under the Birckhahn Guaranty by the Bank (including through its Frankfurt/Main branch or other branch, office or Affiliate) which have not yet been reimbursed, plus any other obligation or liability of the Company to the Bank (including any branch, office or Affiliate thereof) with respect to the Birckhahn Guaranty. "Borrowing" means a borrowing hereunder consisting of a Revolving Loan or a Term Loan of a single Type made to the Company on a given day by the Bank under Article II, and, other than in the case of Base Rate Loans, having a single Interest Period. "Borrowing Date" means any date on which a Borrowing occurs under Section 2.03. "Business Day" means any day other than a Saturday, Sunday or other day on which commercial banks in New York or San Francisco are authorized or required by law to close and, if the applicable Business Day relates to any Offshore Rate Loan, means such a day on which dealings are carried on in the applicable offshore dollar interbank market. "Capital Adequacy Regulation" means any guideline, request or directive of any central bank or other Governmental Authority, or any other law, rule or regulation, whether or not having the force of law, in each case, regarding capital adequacy of the Bank or of any corporation controlling the Bank. "Closing Date" means the date on which all conditions precedent set forth in Section 4.01 are satisfied or waived by the Bank (or, in the case of subsection 4.01(e), waived by the Person entitled to receive such payment). "Code" means the Internal Revenue Code of 1986, and regulations promulgated thereunder. "Commitment" has the meaning specified in Section 2.01. "Compliance Certificate" means a certificate substantially in the form of Exhibit C. "Contingent Obligation" means, as to any Person, any direct or indirect liability of that Person, whether or not contingent, with or without recourse, (a) with respect to any Indebtedness, lease, dividend, letter of credit or other obligation (the "primary obligations") of another Person (the "primary obligor"), including any obligation of that Person (i) to purchase, repurchase or otherwise acquire such primary obligations or any security therefor, (ii) to advance or provide funds for the payment or discharge of any such primary obligation, or to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency or any balance sheet item, level of income or financial condition of the primary obligor, (iii) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation, or (iv) otherwise to assure or hold harmless the holder of any such primary obligation against loss in respect thereof (each, a "Guaranty Obligation"); (b) with respect to any Surety Instrument issued for the account of that Person or as to which that Person is otherwise liable for reimbursement of drawings or payments; (c) to purchase any materials, supplies or other property from, or to obtain the services of, another Person if the relevant contract or other related document or obligation requires that payment for such materials, supplies or other property, or for such services, shall be made regardless of whether delivery of such materials, supplies or other property is ever made or tendered, or such services are ever performed or tendered, or (d) in respect of any Swap Contract. "Contractual Obligation" means, as to any Person, any provision of any security issued by such Person or of any agreement, undertaking, contract, indenture, mortgage, deed of trust or other instrument, document or agreement to which such Person is a party or by which it or any of its property is bound. "Conversion/Continuation Date" means any date on which, under Section 2.04, the Company (a) converts a Loan of one Type to another Type, or (b) continues as a Loan of the same Type, but with a new Interest Period, a Loan having an Interest Period expiring on such date. "Credit Extension" means and includes (a) the making of any Loans hereunder, and (b) the Issuance of any Letters of Credit hereunder. "Default" means any event or circumstance which, with the giving of notice, the lapse of time, or both, would (if not cured or otherwise remedied during such time) constitute an Event of Default. "Designated Subsidiaries" means OCLI Optical Coatings Limited, a corporation organized under the laws of Scotland, and OCLI Foreign Sales Corporation, a corporation organized under the laws of Guam. "Distribution" means, without duplication, with respect to any corporation: (a) any dividend or other distribution, direct or indirect, on account of any shares of capital stock of such corporation now or hereafter outstanding, whether in cash or other property, except a dividend or other distribution payable solely in shares of stock of such corporation; and (b) any redemption, retirement, purchase or other acquisition, direct or indirect, of any shares of capital stock of such corporation now or hereafter outstanding, including, without limitation, any deferred payment made by such corporation in connection with the acquisition of its capital stock, or of any warrants, rights or options to acquire any shares of such stock. "Dollars", "dollars" and "$" each mean lawful money of the United States. "Effective Amount" means (i) with respect to any Loans on any date, the aggregate outstanding principal amount thereof after giving effect to any Loans made and prepayments or repayments of Loans occurring on such date, and (ii) with respect to any outstanding L/C Obligations on any date, the amount of such L/C Obligations on such date after giving effect to any Issuances of Letters of Credit occurring on such date and any other changes in the aggregate amount of the L/C Obligations as of such date, including as a result of any reimbursements of outstanding unpaid drawings under any Letters of Credit or any reductions in the maximum amount available for drawing under Letters of Credit taking effect on such date. "Environmental Claims" means all claims, however asserted, by any Governmental Authority or other Person alleging potential liability or responsibility for violation of any Environmental Law, or for release or injury to the environment. "Environmental Laws" means all federal, state or local laws, statutes, common law duties, rules, regulations, ordinances and codes, together with all administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authorities, in each case relating to environmental, health, safety and land use matters. "Equivalent Amount" means the equivalent of dollars in a foreign currency calculated at the spot rate for the purchase of such foreign currency with dollars as quoted by the Bank through its Foreign Exchange Trading Center #5193, San Francisco, California, or such other of the Bank's offices as it may designate from time to time, at approximately 8 a.m. (San Francisco time) two banking days (as such days are determined by the Bank with respect to such currency) prior to the relevant date. "ERISA" means the Employee Retirement Income Security Act of 1974, and regulations promulgated thereunder. "ERISA Event" means (a) a Reportable Event with respect to a Pension Plan; (b) a withdrawal by the Company from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations which is treated as such a withdrawal under Section 4062(e) of ERISA; (c) the filing of a notice of intent to terminate, the treatment of a plan amendment as a termination under Section 4041 or 4041A of ERISA or the commencement of proceedings by the PBGC to terminate a Pension Plan subject to Title IV of ERISA; (d) a failure by the Company to make required contributions to a Pension Plan or other Plan subject to Section 412 of the Code; (e) an event or condition which might reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan; (f) the imposition of any liability under Title IV of ERISA, other than PBGC premiums due but not delinquent under Section 4007 of ERISA, upon the Company; or (g) an application for a funding waiver or an extension of any amortization period pursuant to Section 412 of the Code with respect to any Pension Plan. "Event of Default" means any of the events or circumstances specified in Section 9.01. "Exchange Act" means the Securities and Exchange Act of 1934, and regulations promulgated thereunder. "Existing Letter of Credit" means that certain letter of credit #119323 in the face amount of $1,907,157 issued by the Bank for the account of the Company. "FDIC" means the Federal Deposit Insurance Corporation, and any Governmental Authority succeeding to any of its principal functions. "Federal Funds Rate" means, for any day, the rate set forth in the weekly statistical release designated as H.15(519), or any successor publication, published by the Federal Reserve Bank of New York (including any such successor, "H.15(519)") on the preceding Business Day opposite the caption "Federal Funds (Effective)"; or, if such rate is not so published on any such preceding Business Day, the rate for such day will be the arithmetic mean as determined by the Bank of the rates for the last transaction in overnight Federal funds arranged prior to 9:00 a.m. (New York City time) on that day by each of three leading brokers of Federal funds transactions in New York City selected by the Bank. "Fixed Charge Coverage Ratio" means, in respect of the Company and the Designated Subsidiaries on a combined basis, calculated as of the last day of each fiscal quarter, the ratio of (a) the sum of the Company's and the Designated Subsidiaries' combined net income, accrued U.S. and foreign income and franchise taxes, interest expense, and operating lease expense (in each case, for the four fiscal quarter period ending on such day) to (b) the sum of interest expense and operating lease expense for the Company and the Designated Subsidiaries for such four fiscal quarter period. "FRB" means the Board of Governors of the Federal Reserve System, and any Governmental Authority succeeding to any of its principal functions. "GAAP" means generally accepted accounting principles set forth from time to time in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the U.S. accounting profession), which are applicable to the circumstances as of the date of determination. "Governmental Authority" means any nation or government, any state or other political subdivision thereof, any central bank (or similar monetary or regulatory authority) thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, and any corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing. "Guaranty Obligation" has the meaning specified in the definition of "Contingent Obligation." "Indebtedness" of any Person means, without duplication, (a) all indebtedness for borrowed money; (b) all obligations issued, undertaken or assumed as the deferred purchase price of property or services (other than trade payables entered into in the ordinary course of business on ordinary terms); (c) all reimbursement or payment obligations (contingent or otherwise) with respect to Surety Instruments; (d) all obligations evidenced by notes, bonds, debentures or similar instruments, including obligations so evidenced incurred in connection with the acquisition of property, assets or businesses; (e) all indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to property acquired by the Person (even though the rights and remedies of the seller or bank under such agreement in the event of default are limited to repossession or sale of such property); (f) all obligations with respect to capital leases; (g) all net obligations with respect to Swap Contracts; (h) all indebtedness referred to in clauses (a) through (g) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon or in property (including accounts and contracts rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such Indebtedness; and (i) all Guaranty Obligations in respect of indebtedness or obligations of others of the kinds referred to in clauses (a) through (g) above. "Indemnified Liabilities" has the meaning specified in Section 10.05. "Indemnified Person" has the meaning specified in Section 10.05. "Independent Auditor" has the meaning specified in subsection 7.01(a). "Insolvency Proceeding" means (a) any case, action or proceeding before any court or other Governmental Authority relating to bankruptcy, reorganization, insolvency, liquidation, receivership, dissolution, winding-up or relief of debtors, or (b) any general assignment for the benefit of creditors, composition, marshalling of assets for creditors, or other, similar arrangement in respect of its creditors generally or any substantial portion of its creditors; undertaken under U.S. Federal, state or foreign law, including the Bankruptcy Code. "Interest Payment Date" means, as to any Offshore Rate Loan, the last day of each Interest Period applicable to such Loan and, as to any Base Rate Loan, the last Business Day of each calendar quarter and each date such Loan is converted into another Type of Loan, provided, however, that if any Interest Period for an Offshore Rate Loan exceeds three months, the date that falls three months after the beginning of such Interest Period and after each Interest Payment Date thereafter is also an Interest Payment Date. "Interest Period" means, as to any Offshore Rate Loan, the period commencing on the Borrowing Date of such Loan or on the Conversion/Continuation Date on which the Loan is converted into or continued as an Offshore Rate Loan, and ending on the date one, two, three or six months thereafter as selected by the Company in its Notice of Borrowing or Notice of Conversion/Continuation; provided that: (i) if any Interest Period would otherwise end on a day that is not a Business Day, that Interest Period shall be extended to the following Business Day unless, in the case of an Offshore Rate Loan, the result of such extension would be to carry such Interest Period into another calendar month, in which event such Interest Period shall end on the preceding Business Day; (ii) any Interest Period pertaining to an Offshore Rate Loan that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period; and (iii) no Interest Period for any portion of the Term Loan shall extend beyond July 31, 1997 and no Interest Period for any Revolving Loan shall extend beyond June 30, 1997; and (iv) no Interest Period applicable to the Term Loan or portion thereof shall extend beyond any date upon which is due any scheduled principal payment in respect of the Term Loan unless the aggregate principal amount of the Term Loan represented by Base Rate Loans, or by Offshore Rate Loans having Interest Periods that will expire on or before such date, equals or exceeds the amount of such principal payment. "IRS" means the Internal Revenue Service, and any Governmental Authority succeeding to any of its principal functions. "Issue" means, with respect to any Letter of Credit, to issue or to extend the expiry of, or to renew or increase the amount of, such Letter of Credit; and the terms "Issued", "Issuing" and "Issuance" have corresponding meanings. "Joint Venture" means a single-purpose corporation, partnership, joint venture or other similar legal arrangement (whether created by contract or conducted through a separate legal entity) now or hereafter formed by the Company or any of its Subsidiaries with another Person in order to conduct a common venture or enterprise with such Person. "L/C Amendment Application" means an application form for amendment of outstanding standby letters of credit as shall at any time be in use by the Bank. "L/C Application" means an application form for issuance of standby letters of credit as shall at any time be in use by the Bank. "L/C Borrowing" means an extension of credit resulting from a drawing under any Letter of Credit which shall not have been reimbursed on the date when made nor converted into a Borrowing of Revolving Loans under subsection 3.05. "L/C Commitment" means the commitment of the Bank to issue Letters of Credit in an aggregate amount outstanding not to exceed on any date $2,500,000, which commitment is a component of (and not an addition to) the Commitment. "L/C Obligations" means at any time the sum of (a) the aggregate undrawn amount of all Letters of Credit then outstanding, plus (b) the amount of all unreimbursed drawings under all Letters of Credit. "L/C-Related Documents" means the Letters of Credit, the L/C Applications, the L/C Amendment Applications and any other document relating to any Letter of Credit. "Letter of Credit" means any standby letter of credit issued by the Bank pursuant to Article III. "Lien" means any security interest, mortgage, deed of trust, pledge, hypothecation, assignment, charge or deposit arrangement, encumbrance, lien (statutory or other) or preferential arrangement of any kind or nature whatsoever in respect of any property (including those created by, arising under or evidenced by any conditional sale or other title retention agreement, the interest of a lessor under a capital lease, any financing lease having substantially the same economic effect as any of the foregoing, or the filing of any financing statement naming the owner of the asset to which such lien relates as debtor, under the Uniform Commercial Code or any comparable law) and any contingent or other agreement to provide any of the foregoing, but not including the interest of a lessor under an operating lease. "Loan" means an extension of credit by the Bank to the Company under Article II or Article III, and may be a Base Rate Loan or an Offshore Rate Loan (each, a "Type" of Loan, and includes any Revolving Loan or L/C Borrowing or the Term Loan or any portion of the Term Loan. "Loan Documents" means this Agreement, the L/C-Related Documents, the Birckhahn Guaranty Documents, the letter agreement referred to in subsection 2.09(a) and all other documents delivered to the Bank in connection herewith. "Margin Stock" means "margin stock" as such term is defined in Regulation G, T, U or X of the FRB. "Material Adverse Effect" means (a) a material adverse change in, or a material adverse effect upon, the operations, business, properties, condition (financial or otherwise) or prospects of the Company or the Company and its Subsidiaries taken as a whole; (b) a material impairment of the ability of the Company to perform under any Loan Document and to avoid any Event of Default; or (c) a material adverse effect upon the legality, validity, binding effect or enforceability against the Company of any Loan Document. "Moody's" means Moody's Investors Service, Inc. "Notice of Borrowing" means a notice in substantially the form of Exhibit A. "Notice of Conversion/Continuation" means a notice in substantially the form of Exhibit B. "Obligations" means all advances, debts, liabilities, obligations, covenants and duties arising under any Loan Document owing by the Company to the Bank, or any Indemnified Person, whether direct or indirect (including those acquired by assignment), absolute or contingent, due or to become due, now existing or hereafter arising. "Offshore Rate" means, for any Interest Period, with respect to any Offshore Rate Loan comprising part of the same Borrowing, the rate of interest per annum (rounded upward to the next 1/16th of 1%) determined by the Bank as follows: Offshore Rate = IBOR 1.00 - Eurodollar Reserve Percentage Where, "Eurodollar Reserve Percentage" means for any day for any Interest Period the maximum reserve percentage (expressed as a decimal, rounded upward to the next 1/100th of 1%) in effect on such day (whether or not applicable to the Bank) under regulations issued from time to time by the FRB for determining the maximum reserve requirement (including any emergency, supplemental or other marginal reserve requirement) with respect to Eurocurrency funding (currently referred to as "Eurocurrency liabilities") having a term comparable to such Interest Period, it being understood that as of the date hereof the Eurodollar Reserve Percentage is zero; and "IBOR" means the rate of interest per annum determined by the Bank as the rate at which dollar deposits in the approximate amount of the Bank's Offshore Rate Loan for such Interest Period would be offered by the Bank's Grand Cayman Branch, Grand Cayman B.W.I. (or such other office as may be designated for such purpose by the Bank), to major banks in the offshore dollar interbank market at their request at approximately 11:00 a.m. (New York City time) two Business Days prior to the commencement of such Interest Period. The Offshore Rate shall be adjusted automatically as to all Offshore Rate Loans then outstanding as of the effective date of any change in the Eurodollar Reserve Percentage. "Offshore Rate Loan" means a Revolving Loan that bears interest based on the Offshore Rate. "Organization Documents" means, for any corporation, the certificate or articles of incorporation, the bylaws, any certificate of determination or instrument relating to the rights of preferred shareholders of such corporation, any shareholder rights agreement, and all applicable resolutions of the board of directors (or any committee thereof) of such corporation. "Participant" has the meaning specified in subsection 10.08(d). "PBGC" means the Pension Benefit Guaranty Corporation, or any Governmental Authority succeeding to any of its principal functions under ERISA. "Pension Plan" means a pension plan (as defined in Section 3(2) of ERISA) subject to Title IV of ERISA which the Company sponsors, maintains, or to which it makes, is making, or is obligated to make contributions, or in the case of a multiple employer plan (as described in Section 4064(a) of ERISA) has made contributions at any time during the immediately preceding five (5) plan years. "Permitted Liens" has the meaning specified in Section 8.01. "Permitted Repurchase Agreement" means any written agreement: (a) that provides for (i) the transfer of one or more United States Governmental Securities to the Company or a Subsidiary from an Acceptable Bank against a transfer of funds (the "transfer price") by the Company or such Subsidiary to such Acceptable Bank, and (ii) a simultaneous agreement by the Company or such Subsidiary, in connection with such transfer of funds, to transfer to such Acceptable Bank the same or substantially similar United States Governmental Securities for a price not less than the transfer price plus a reasonable return thereon at a date certain not later than one year after such transfer of funds; and (b) in respect of which the Company or such Subsidiary shall have the right, whether by contract or pursuant to applicable law, to liquidate such repurchase agreement upon the occurrence of any default thereunder. "Person" means an individual, partnership, corporation, business trust, joint stock company, trust, unincorporated association, joint venture or Governmental Authority. "Plan" means an employee benefit plan (as defined in Section 3(3) of ERISA) which the Company sponsors or maintains or to which the Company makes, is making, or is obligated to make contributions and includes any Pension Plan. "Prior Credit Agreement" means that certain Credit Agreement dated as of March 11, 1988 between the Company and the Bank, as the same has been amended from time to time. "Redeemable Stock" means, with respect to any Person, each share of such Person's capital stock that is: (a) redeemable, payable or required to be purchased or otherwise retired or extinguished, or convertible into indebtedness of such Person (i) at a fixed or determinable date, whether by operation of a sinking fund or otherwise, (ii) at the option of any Person other than such Person, or (iii) upon the occurrence of a condition not solely within the control of such Person; or (b) convertible into other Redeemable Stock. "Reportable Event" means, any of the events set forth in Section 4043(b) of ERISA or the regulations thereunder, other than any such event for which the 30-day notice requirement under ERISA has been waived in regulations issued by the PBGC. "Requirement of Law" means, as to any Person, any law (statutory or common), treaty, rule or regulation or determination of an arbitrator or of a Governmental Authority, in each case applicable to or binding upon the Person or any of its property or to which the Person or any of its property is subject. "Responsible Officer" means the chief executive officer or the president of the Company, or any other officer having substantially the same authority and responsibility; or, with respect to compliance with financial covenants, the chief financial officer or the treasurer of the Company, or any other officer having substantially the same authority and responsibility. "Restricted Payment" means any Distribution (other than on account of capital stock of a Subsidiary owned legally and beneficially by the Company or a Designated Subsidiary), including, without limitation, any Distribution resulting in the acquisition by the Company of securities which would constitute treasury stock. "Revolving Loan" has the meaning specified in Section 2.01. "Revolving Termination Date" means the earlier to occur of: (a) June 30, 1997; and (b) the date on which the Commitment terminates in accordance with the provisions of this Agreement. "SEC" means the Securities and Exchange Commission, or any Governmental Authority succeeding to any of its principal functions. "Senior Note Agreement" means, collectively, those certain separate Note Purchase Agreements dated as of May 27, 1994, each containing identical terms and provisions, entered into by the Company with Connecticut Mutual Life Insurance Company, Modern Woodmen of America and American Life and Casualty Insurance Company. "Senior Notes" means those certain Senior Notes in the aggregate principal amount of $18,000,000 dated May 27, 1994 issued pursuant to the Senior Note Agreement. "Standard & Poor's" means Standard & Poor's Corporation. "Subsidiary" of a Person means any corporation, association, partnership, joint venture or other business entity of which more than 50% of the voting stock or other equity interests (in the case of Persons other than corporations) is owned or controlled directly or indirectly by the Person, or one or more of the Subsidiaries of the Person, or a combination thereof. Unless the context otherwise clearly requires, references herein to a "Subsidiary" refer to a Subsidiary of the Company. "Surety Instruments" means all letters of credit (including standby and commercial), banker's acceptances, bank guaranties, shipside bonds, surety bonds and similar instruments. "Swap Contracts" means swap agreements (as such term is defined in Section 101 of the Bankruptcy Code) and any other agreements or arrangements designed to provide protection against fluctuations in interest or currency exchange rates or commodity prices. "Tangible Net Worth" means the gross book value of the assets of the Company and its Subsidiaries on a consolidated basis (exclusive of goodwill, organization expense, treasury stock, unamortized debt discount and expense, deferred charges, and other like intangibles, but not including (i) intangibles of the Company and its Subsidiaries existing on the Closing Date as would appear on a consolidated balance sheet for such Persons on the Closing Date prepared in accordance with GAAP, and (ii) all intangibles of the Company and its Subsidiaries in respect of prepaid royalties, patents, copyrights, trademarks, trade names, service marks and brand names not in existence on the Closing Date, as would appear on the consolidated balance sheet for such Persons at such time prepared in accordance with GAAP) less (a) reserves applicable thereto, and (b) all liabilities (including accrued and deferred income taxes). "Term Commitment" means $6,000,000. "Term Loan" has the meaning specified in Section 2.01. "Type" has the meaning specified in the definition of "Loan." "Unfunded Pension Liability" means the excess of a Plan's benefit liabilities under Section 4001(a)(16) of ERISA, over the current value of that Plan's assets, determined in accordance with the assumptions used for funding the Pension Plan pursuant to Section 412 of the Code for the applicable plan year. "United States" and "U.S." each mean the United States of America. "United States Governmental Securities" means any direct obligation of, or obligation guaranteed by, the United States, or any agency controlled or supervised by or acting as an instrumentality of the United States pursuant to authority granted by the Congress of the United States, in respect of the payment of which obligation or guarantee the full faith and credit of the United States, pursuant to authority granted by the Congress of the United States, shall have been pledged. "Wholly-Owned Subsidiary" means any corporation in which (other than directors' qualifying shares required by law) 100% of the capital stock of each class having ordinary voting power, and 100% of the capital stock of every other class, in each case, at the time as of which any determination is being made, is owned, beneficially and of record, by the Company, or by one or more of the other Wholly- Owned Subsidiaries, or both. 1.02 Other Interpretive Provisions. (a) The meanings of defined terms are equally applicable to the singular and plural forms of the defined terms. (b) The words "hereof", "herein", "hereunder" and similar words refer to this Agreement as a whole and not to any particular provision of this Agreement; and subsection, Section, Schedule and Exhibit references are to this Agreement unless otherwise specified. The term "documents" includes any and all instruments, documents, agreements, certificates, indentures, notices and other writings, however evidenced. The term "including" is not limiting and means "including without limitation." In the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including"; the words "to" and "until" each mean "to but excluding", and the word "through" means "to and including." (c) Unless otherwise expressly provided herein, (i) references to agreements (including this Agreement) and other contractual instruments shall be deemed to include all subsequent amendments and other modifications thereto, but only to the extent such amendments and other modifications are not prohibited by the terms of any Loan Document, and (ii) references to any statute or regulation are to be construed as including all statutory and regulatory provisions consolidating, amending, replacing, supplementing or interpreting the statute or regulation. (d) The captions and headings of this Agreement are for convenience of reference only and shall not affect the interpretation of this Agreement. This Agreement and the other Loan Documents are the result of negotiations among and has been reviewed by counsel to the Bank and the Company, and are the products of both parties. Accordingly, they shall not be construed against the Bank merely because of the Bank's involvement in their preparation. 1.03 Accounting Principles and Periods. Unless the context otherwise clearly requires, all accounting terms not expressly defined herein shall be construed, and all financial computations required under this Agreement shall be made, in accordance with GAAP, consistently applied. References herein to "fiscal year" and "fiscal quarter" refer to such fiscal periods of the Company. ARTICLE II THE CREDIT 2.01 Amount and Terms of Commitment. (a) The Term Credit. The Bank agrees, on the terms and conditions set forth herein, to make a single loan to the Company (the "Term Loan") on the Closing Date in an amount not to exceed the Term Commitment. The Term Loan shall be deemed funded by converting, on the Closing Date, all amounts outstanding under Tranche B of the Credit Agreement to the Term Loan. Amounts borrowed as the Term Loan which are repaid or prepaid by the Company may not be reborrowed. The Term Loan shall be comprised of portions. The interest rate for each portion of the Term Loan shall be based on the Base Rate or the Offshore Rate. Different portions of the Term Loan may have a different interest rate basis and different Interest Periods. (b) The Revolving Credit. The Bank agrees, on the terms and conditions set forth herein, to make loans to the Company (each such loan, a "Revolving Loan") from time to time on any Business Day during the period from the Closing Date to the Revolving Termination Date, in an aggregate amount not to exceed at any time outstanding, together with the principal amount of the Term Loan outstanding at such time, $10,000,000 (such amount, as the same may be reduced under Section 2.05 or as a result of one or more assignments under Section 10.08, the "Commitment"); provided, however, that after giving effect to any Borrowing of Revolving Loans, the Effective Amount of all outstanding Revolving Loans, together with the principal amount of the Term Loan outstanding at such time and the Effective Amount of all L/C Obligations, shall not exceed at any time the Commitment. Within the limits of the Commitment, and subject to the other terms and conditions hereof, the Company may borrow under this subsection 2.01(b), prepay under Section 2.06 and reborrow under this subsection 2.01(b). 2.02 Loan Accounts. The Loans made by the Bank shall be evidenced by one or more loan accounts or records maintained by the Bank in the ordinary course of business. The loan accounts or records maintained by the Bank shall be conclusive absent manifest error of the amount of the Loans made by the Bank to the Company 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 Company hereunder to pay any amount owing with respect to the Loans. 2.03 Procedure for Borrowing. Each Borrowing shall be made upon the Company's irrevocable written notice delivered to the Bank in the form of a Notice of Borrowing (which notice must be received by the Bank prior to 9:00 a.m. (San Francisco time) (a) three Business Days prior to the requested Borrowing Date, in the case of Offshore Rate Loans, and (b) on the requested Borrowing Date, in the case of Base Rate Loans, specifying: (i) the amount of the Borrowing, which shall be in an aggregate minimum amount of $1,000,000 or any multiple of $1,000,000 in excess thereof; (ii) the requested Borrowing Date, which shall be a Business Day; (iii) the Type of Loans comprising the Borrowing; and (iv) the duration of the Interest Period applicable to such Loans included in such notice. If the Notice of Borrowing fails to specify the duration of the Interest Period for any Borrowing comprised of Offshore Rate Loans, such Interest Period shall be three months. 2.04 Conversion and Continuation Elections. (a) The Company may, upon irrevocable written notice to the Bank in accordance with subsection 2.04(b): (i) elect, as of any Business Day, in the case of Base Rate Loans, or as of the last day of the applicable Interest Period, in the case of Offshore Rate Loans, to convert any such Revolving Loans or a portion of the Term Loan (or any part thereof in an amount not less than $1,000,000, or that is in an integral multiple of $1,000,000 in excess thereof) into Revolving Loans or a portion of the Term Loan of any other Type; or (ii) elect, as of the last day of the applicable Interest Period, to continue any Revolving Loan or a portion of the Term Loan having an Interest Period expiring on such day (or any part thereof in an amount not less than $1,000,000, or that is in an integral multiple of $1,000,000 in excess thereof); provided, that if at any time the aggregate amount of any Offshore Rate Loan is reduced, by payment, prepayment, or conversion of part thereof to be less than $1,000,000, such Offshore Rate Loan shall automatically convert into a Base Rate Loan, and on and after such date the right of the Company to continue such Loan as, and convert such Loan into an Offshore Rate Loan shall terminate. (b) The Company shall deliver a Notice of Conversion/Continuation to be received by the Bank not later than 9:00 a.m. (San Francisco time) at least (i) three Business Days in advance of the Conversion/Continuation Date, if any Loan is to be converted into or continued as an Offshore Rate Loan; and (ii) on the Conversion/Continuation Date, if any Loan is to be converted into a Base Rate Loan, specifying: (A) the proposed Conversion/Continuation Date; (B) the amount of the Loan to be converted or continued; (C) the Type of Loan resulting from the proposed conversion or continuation; and (D) other than in the case of conversions into Base Rate Loans, the duration of the requested Interest Period. (c) If upon the expiration of any Interest Period applicable to any Offshore Rate Loan the Company has failed to select timely a new Interest Period to be applicable to such Loan, or if any Default or Event of Default then exists, the Company shall be deemed to have elected to convert such Loan into a Base Rate Loan effective as of the expiration date of such Interest Period. (d) Unless the Bank otherwise agrees in writing, during the existence of a Default or Event of Default, the Company may not elect to have a Loan converted into or continued as an Offshore Rate Loan. 2.05 Voluntary Termination or Reduction of Commitment. The Company may, upon not less than five Business Days' prior notice to the Bank, terminate the Commitment, or permanently reduce the Commitment by an aggregate minimum amount of $1,000,000; unless, after giving effect thereto and to any prepayments of Loans made on the effective date thereof, (a) the Effective Amount of all Revolving Loans, the Term Loan and L/C Obligations together would exceed the amount of the Commitment then in effect, or (b) the Effective Amount of all L/C Obligations then outstanding would exceed the L/C Commitment. If and to the extent specified by the Company in the notice to the Bank, some or all of the reduction in the Commitment shall be applied to reduce the L/C Commitment. Once reduced in accordance with this Section, the Commitment may not be increased. All accrued commitment fees to, but not including the effective date of any reduction or termination of Commitment, shall be paid on the effective date of such reduction or termination. 2.06 Optional Prepayments. Subject to Section 4.04, the Company may, at any time or from time to time, upon not less than three Business Days' irrevocable notice to the Bank, prepay Loans in whole or in part in an amount not less than $1,000,000. Such notice of prepayment shall specify the date and amount of such prepayment and the Type(s) of Loans to be prepaid. If such notice is given by the Company, the Company shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein, together with accrued interest to each such date on the amount prepaid and any amounts required pursuant to Section 4.04. Optional prepayments of the Term Loan or any portion thereof shall be applied in inverse order of maturity. 2.07 Repayment. (a) The Term Credit. The Company shall repay the principal amount of the Term Loan in 12 equal installments commencing on October 31, 1994 and on the last day of each successive quarter thereafter, until July 31, 1997, on which day the entire balance of principal and interest on the Term Loan then unpaid shall be due and payable. (b) The Revolving Credit. The Company shall repay to the Bank on the Revolving Termination Date the principal amount of Revolving Loans outstanding on such date. 2.08 Interest. (a) Each Revolving Loan and each portion of the Term Loan shall bear interest on the outstanding principal amount thereof from the applicable Borrowing Date at a rate per annum equal to the Offshore Rate or the Base Rate, as the case may be (and subject to the Company's right to convert to other Types of Loans under Section 2.04), plus the Applicable Margin. (b) Interest on each Revolving Loan and each portion of the Term Loan shall be paid in arrears on each Interest Payment Date. Interest shall also be paid on the date of any prepayment of Loans under Section 2.06 for the portion of the Loans so prepaid and upon payment (including prepayment) in full thereof and, during the existence of any Event of Default, interest shall be paid on demand of the Bank. (c) Notwithstanding subsection (a) of this Section, while any Event of Default exists or after acceleration, the Company shall pay interest (after as well as before entry of judgment thereon to the extent permitted by law) on the principal amount of all outstanding Loans, at a rate per annum which is determined by adding 2% per annum to the Applicable Margin then in effect for such Loans; provided, however, that, on and after the expiration of any Interest Period applicable to any Offshore Rate Loan outstanding on the date of occurrence of such Event of Default or acceleration, the principal amount of such Loan shall, during the continuation of such Event of Default or after acceleration, bear interest at a rate per annum equal to the Base Rate plus 2%. (d) Anything herein to the contrary notwithstanding, the obligations of the Company to the Bank hereunder shall be subject to the limitation that payments of interest shall not be required for any period for which interest is computed hereunder, to the extent (but only to the extent) that contracting for or receiving such payment by the Bank would be contrary to the provisions of any law applicable to the Bank limiting the highest rate of interest that may be lawfully contracted for, charged or received by the Bank, and in such event the Company shall pay the Bank interest at the highest rate permitted by applicable law. 2.09 Fees. (a) Upfront Fee. The Company shall pay an upfront fee to the Bank on the Closing Date in an amount as set forth in a letter agreement between the parties dated June 30, 1994. (b) Commitment Fee. The Company shall pay to the Bank a commitment fee on the average daily unused portion of the Commitment, computed on a quarterly basis in arrears on the last Business Day of each calendar quarter based upon the daily utilization for that quarter as calculated by the Bank, equal to 0.50% percent per annum. Such commitment fee shall accrue from the Closing Date to the Revolving Termination Date and shall be due and payable quarterly in arrears on the last Business Day of each quarter commencing on the Closing Date through the Revolving Termination Date, with the final payment to be made on the Revolving Termination Date. For purposes of calculating utilization under this subsection, the Commitment shall be deemed used to the extent of the Effective Amount of Revolving Loans and the Term Loan then outstanding plus the Effective Amount of L/C Obligations then outstanding. The commitment fee provided in this subsection shall accrue at all times after the above- mentioned commencement date, including at any time during which one or more conditions in Article V are not met. 2.10 Computation of Fees and Interest. All computations of interest for Base Rate Loans when the Base Rate is determined by the Bank's "reference rate" shall be made on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed. All other computations of fees and interest shall be made on the basis of a 360-day year and actual days elapsed (which results in more interest being paid than if computed on the basis of a 365-day year). Interest and fees shall accrue during each period during which interest or such fees are computed from the first day thereof to the last day thereof. Each determination of an interest rate by the Bank shall be conclusive and binding on the Company in the absence of manifest error. 2.11 Payments by the Company. All payments to be made by the Company shall be made without set-off, recoupment or counterclaim. Except as otherwise expressly provided herein, all payments by the Company shall be made to the Bank at the address from time to time specified by the Bank for such purpose, and shall be made in dollars and in immediately available funds, no later than 3:00 p.m. (San Francisco time) on the date specified herein. Any payment received by the Bank later than 3:00 p.m. (San Francisco time) shall be deemed to have been received on the following Business Day and any applicable interest or fee shall continue to accrue. Subject to the provisions set forth in the definition of "Interest Period" herein, whenever any payment is due on a day other than a Business Day, such payment shall be made on the following Business Day, and such extension of time shall in such case be included in the computation of interest or fees, as the case may be. 2.12 Prior Credit Agreements. The Company acknowledges and agrees that the Bank's obligations and commitments to lend under the Prior Credit Agreement are irrevocably terminated. ARTICLE III THE LETTERS OF CREDIT; THE BIRCKHAHN GUARANTY 3.01 The Letter of Credit Subfacility. (a) On the terms and conditions set forth herein, the Bank agrees (i) from time to time on any Business Day during the period from the Closing Date to the Revolving Termination Date to issue Letters of Credit for the account of the Company, and to amend or renew Letters of Credit previously issued by it, in accordance with subsection 3.02(b), and (ii) to honor drafts under the Letters of Credit; provided, that the Bank shall not be obligated to Issue any Letter of Credit if as of the date of Issuance of such Letter of Credit (A) the Effective Amount of all L/C Obligations plus the Effective Amount of all Loans shall exceed the Commitment, or (B) the Effective Amount of all L/C Obligations shall exceed the L/C Commitment. Within the foregoing limits, and subject to the other terms and conditions hereof, the Company's ability to obtain Letters of Credit shall be fully revolving, and, accordingly, the Company may, during the foregoing period, obtain Letters of Credit to replace Letters of Credit which have expired or which have been drawn upon and reimbursed. (b) The Bank shall be under no obligation to Issue any Letter of Credit if: (i) any order, judgment or decree of any Governmental Authority or arbitrator shall by its terms purport to enjoin or restrain the Bank from Issuing such Letter of Credit, or any Requirement of Law applicable to the Bank or any request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over the Bank shall prohibit, or request that the Bank refrain from, the Issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon the Bank with respect to such Letter of Credit any restriction, reserve or capital requirement (for which the Bank is not otherwise compensated hereunder) not in effect on the Closing Date, or shall impose upon the Bank any unreimbursed loss, cost or expense which was not applicable on the Closing Date and which the Bank in good faith deems material to it; (ii) one or more of the applicable conditions contained in Article V is not then satisfied; (iii) the expiry date of any requested Letter of Credit is (A) more than 360 days after the date of Issuance, or (B) after the Revolving Termination Date; (iv) any requested Letter of Credit does not provide for drafts, or is not otherwise in form and substance acceptable to the Bank, or the Issuance of a Letter of Credit shall violate any applicable policies of the Bank; (v) any Letter of Credit is to be used for any purpose other than for supporting workers compensation obligations of the Company in the ordinary course of business or for supporting other obligations of the Company incurred in the ordinary course of business (which shall not include obligations of the Company in connection with any Acquisition or any obligations of the Company in respect of Indebtedness); or (vi) any Letter of Credit is denominated in a currency other than Dollars. 3.02 Issuance, Amendment and Renewal of Letters of Credit. (a) Each Letter of Credit shall be issued upon the irrevocable written request of the Company received by the Bank at least five days prior to the proposed date of issuance. Each such request for issuance of a Letter of Credit shall be by facsimile, confirmed immediately in an original writing, in the form of an L/C Application, and shall specify in form and detail satisfactory to the Bank: (i) the proposed date of issuance of the Letter of Credit (which shall be a Business Day); (ii) the face amount of the Letter of Credit; (iii) the expiry date of the Letter of Credit; (iv) the name and address of the beneficiary thereof; (v) the documents to be presented by the beneficiary of the Letter of Credit in case of any drawing thereunder; (vi) the full text of any certificate to be presented by the beneficiary in case of any drawing thereunder; and (vii) such other matters as the Bank may require. (b) From time to time while a Letter of Credit is outstanding and prior to the Revolving Termination Date, the Bank will, upon the written request of the Company received by the Bank at least five days prior to the proposed date of amendment, amend any Letter of Credit issued by it. Each such request for amendment of a Letter of Credit shall be made by facsimile, confirmed immediately in an original writing, made in the form of an L/C Amendment Application and shall specify in form and detail satisfactory to the Bank: (i) the Letter of Credit to be amended; (ii) the proposed date of amendment of the Letter of Credit (which shall be a Business Day); (iii) the nature of the proposed amendment; and (iv) such other matters as the Bank may require. The Bank shall be under no obligation to amend any Letter of Credit if: (A) the Bank would have no obligation at such time to issue such Letter of Credit in its amended form under the terms of this Agreement; or (B) the beneficiary of any such Letter of Credit does not accept the proposed amendment to the Letter of Credit. (c) While a Letter of Credit is outstanding and prior to the Revolving Termination Date, at the option of the Company and upon the written request of the Company received by the Bank at least five days prior to the proposed date of notification of renewal, the Bank shall authorize the automatic renewal of any Letter of Credit. Each such request for renewal of a Letter of Credit shall be made by facsimile, confirmed immediately in an original writing, in the form of an L/C Amendment Application, and shall specify in form and detail satisfactory to the Bank: (i) the Letter of Credit to be renewed; (ii) the proposed date of notification of renewal of the Letter of Credit (which shall be a Business Day); (iii) the revised expiry date of the Letter of Credit; and (iv) such other matters as the Bank may require. The Bank shall be under no obligation so to renew any Letter of Credit if: (A) the Bank would have no obligation at such time to issue or amend such Letter of Credit in its renewed form under the terms of this Agreement; or (B) the beneficiary of any such Letter of Credit does not accept the proposed renewal of the Letter of Credit. If any outstanding Letter of Credit shall provide that it shall be automatically renewed unless the beneficiary thereof receives notice from the Bank that such Letter of Credit shall not be renewed, and if at the time of renewal the Bank shall not have received any L/C Amendment Application from the Company with respect to such renewal or other written direction by the Company with respect thereto, the Bank shall nonetheless be permitted (but not obliged) to allow such Letter of Credit to renew, and the Company hereby authorizes such renewal, and, accordingly, the Bank shall be deemed to have received an L/C Amendment Application from the Company requesting such renewal. (d) The Bank may, at its election, deliver any notices of termination or other communications to any Letter of Credit beneficiary or transferee, and take any other action as necessary or appropriate, at any time and from time to time, in order to cause the expiry date of such Letter of Credit to be a date not later than the Revolving Termination Date. (e) This Agreement shall control in the event of any conflict with any L/C-Related Document (other than any Letter of Credit). 3.03 Existing Letter of Credit. On and after the Closing Date, the Existing Letter of Credit shall be deemed for all purposes, including for purposes of the fees to be collected pursuant to subsections 3.09(a) and 3.09(c), and reimbursement of costs and expenses to the extent provided herein, a Letter of Credit outstanding under this Agreement and entitled to the benefits of this Agreement and the other Loan Documents, and shall be governed by the applications and agreements pertaining thereto and by this Agreement. For purposes of this Agreement, the Existing Letter of Credit shall be deemed be a utilization of the Commitment and the L/C Commitment. 3.04 Uniform Customs and Practice. The Uniform Customs and Practice for Documentary Credits as most recently published by the International Chamber of Commerce prior to issuance of the Letter of Credit ("UCP") shall in all respects be deemed a part of this Article III as if incorporated herein and (unless otherwise expressly provided in the Letter of Credit) shall apply to such Letter of Credit. 3.05 Drawings and Reimbursements. In the event of any request for a drawing under a Letter of Credit by the beneficiary or transferee thereof, the Bank will promptly notify the Company. The Company shall reimburse the Bank prior to 11:00 a.m. (San Francisco time), on each date that any amount is paid by the Bank under any Letter of Credit, in an amount equal to the amount so paid by the Bank. If the Company fails to reimburse the Bank for the full amount of any drawing under any Letter of Credit by 11:00 a.m. (San Francisco time) on such date, the Company shall be deemed to have requested that a Base Rate Loan be made by the Bank to be disbursed on such date under such Letter of Credit, subject to the amount of the unutilized portion of the Commitment and subject to the conditions set forth in Section 5.02. With respect to any unreimbursed drawing that is not converted into a Revolving Loan consisting of a Base Rate Loan to the Company in whole or in part, because of the Company's failure to satisfy the conditions set forth in Section 5.02 or for any other reason, the Company shall be deemed to have incurred from the Bank an L/C Borrowing in the amount of such drawing, which L/C Borrowing shall be due and payable on demand (together with interest) and shall bear interest at a rate per annum equal to the Base Rate plus 2% per annum. 3.06 The Birckhahn Guaranty. The Bank (through its Frankfurt/Main branch) has issued the Birckhahn Guaranty on behalf of the Company. The Company agrees that, except to the extent explicitly provided to the contrary in the Birckhahn Guaranty Documents, the Company shall immediately reimburse the Bank for all sums paid by the Bank (including through its Frankfurt/Main branch or any other branch, office or Affiliate) under the Birckhahn Guaranty, and such reimbursement shall be in Deutsche Marks or the Equivalent Amount in Dollars, as requested by the Bank. This Agreement shall control in the event of any conflict with any Birckhahn Guaranty Document (other than the Birckhahn Guaranty). Any reimbursement not made when due shall bear interest at a rate per annum equal to the Base Rate plus 2% per annum. 3.07 Obligations Absolute. The obligations of the Company under this Agreement and any L/C-Related Document or Birckhahn Guaranty Document to reimburse the Bank for a drawing under a Letter of Credit or the Birckhahn Guaranty, shall be unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement and each such other L/C-Related Document or Birckhahn Guaranty Document under all circumstances. 3.08 Cash Collateral Pledge. Upon the request of the Bank, (i) if, as of the Revolving Termination Date, any Letters of Credit may for any reason remain outstanding and partially or wholly undrawn, or (ii) if, as of June 30, 1997, the Birckhahn Guaranty may for any reason remain outstanding and partially or wholly undrawn, or (iii) in addition to any other rights or remedies which the Bank may have under this Agreement or otherwise, upon the occurrence of an Event of Default, then, the Company shall immediately provide to the Bank cash collateral in an amount equal to the L/C Obligations or the Birckhahn Guaranty Outstanding Amount, as applicable. 3.09 Letter of Credit and Birckhahn Guaranty Fees. (a) The Company shall pay to the Bank a letter of credit and bank guaranty fee with respect to the Letters of Credit and the Birckhahn Guaranty equal to 1.25% per annum of the average daily maximum amount available to be drawn on the outstanding Letters of Credit and the Birckhahn Guaranty, computed on a quarterly basis in arrears on the last Business Day of each calendar quarter based upon Letters of Credit outstanding for that quarter and the Equivalent Amount of the outstanding amount of the Birckhahn Guaranty for that quarter, as calculated by the Bank. Such letter of credit and bank guaranty fee shall be due and payable quarterly in arrears on the last Business Day of each calendar quarter during which Letters of Credit or the Birckhahn Guaranty are outstanding, commencing on the first such quarterly date to occur after the Closing Date, through the Revolving Termination Date (or such later date upon which the outstanding Letters of Credit or the Birckhahn Guaranty shall expire), with the final payment to be made on the Revolving Termination Date (or such later expiration date). (b) The Company shall pay to the Bank from time to time on demand the normal issuance, presentation, amendment and other processing fees, and other standard costs and charges, of the Bank relating to letters of credit as from time to time in effect. ARTICLE IV TAXES, YIELD PROTECTION AND ILLEGALITY 4.01 Taxes. (a) (i) If any taxes (other than taxes on net income (A) imposed by the country or any subdivision of the country in which the Bank's principal office or actual lending office is located and (B) measured by the United States taxable income the Bank would have received if all payments under or in respect of this Agreement and any instrument or agreement required hereunder were exempt from taxes levied by the Company's country) are at any time imposed on any payments under or in respect of this Agreement or any instrument or agreement required hereunder including, but not limited to, payments made pursuant to this Section, the Company shall pay all such taxes and shall also pay to the Bank, at the time interest is paid, all additional amounts which the Bank specifies as necessary to preserve the after-tax yield the Bank would have received if such taxes had not been imposed. (ii) The additional amounts necessary to preserve the after-tax yield the Bank would have received if such taxes had not been imposed shall be calculated pursuant to the formula: (w)(t)(i) y = ----------- 1-w-t where the terms are defined as follows: y = additional payment to be made to the Bank w = withholding tax rate levied by foreign government t = the Bank's combined Federal and state tax rate i = amount of interest to be paid on credit (computed by using the base rate plus quoted spread) 1 = one (b) The Company will provide the Bank with original tax receipts, notarized copies of tax receipts, or such other documentation as will prove payment of tax in a court of law applying the United States Federal Rules of Evidence, for all taxes paid by the Company pursuant to subsection (a) above. The Company will deliver receipts to the Bank within 30 days after the due date for the related tax. 4.02 Illegality. (a) If the Bank determines that the introduction of any Requirement of Law, or any change in any Requirement of Law, or in the interpretation or administration of any Requirement of Law, has made it unlawful, or that any central bank or other Governmental Authority has asserted that it is unlawful, for the Bank or any applicable lending office of the Bank to make Offshore Rate Loans, then, on notice thereof by the Bank to the Company, any obligation of the Bank to make Offshore Rate Loans shall be suspended until the Bank notifies the Company that the circumstances giving rise to such determination no longer exist. (b) If the Bank determines that it is unlawful to maintain Offshore Rate Loans, the Company shall, upon its receipt of notice of such fact and demand from the Bank, prepay in full all Offshore Rate Loans then outstanding, together with interest accrued thereon and amounts required under Section 4.04, either on the last day of the Interest Period thereof, if the Bank may lawfully continue to maintain Offshore Rate Loans to such day, or immediately, if the Bank may not lawfully continue to maintain Offshore Rate Loans. If the Company is required to so prepay any Offshore Rate Loan, then concurrently with such prepayment, the Company shall borrow from the Bank, in the amount of such repayment, a Base Rate Loan. 4.03 Increased Costs and Reduction of Return. (a) If the Bank determines that, due to either (i) the introduction of or any change in or in the interpretation of any law or regulation or (ii) the compliance by the Bank with any guideline or request from any central bank or other Governmental Authority (whether or not having the force of law), there shall be any increase in the cost to the Bank of agreeing to make or making, funding or maintaining any Offshore Rate Loan or other credit hereunder, then the Company shall be liable for, and shall from time to time, upon demand, pay to the Bank, additional amounts as are sufficient to compensate the Bank for such increased costs. (b) If the Bank shall have determined that (i) the introduction of any Capital Adequacy Regulation, (ii) any change in any Capital Adequacy Regulation, (iii) any change in the interpretation or administration of any Capital Adequacy Regulation by any central bank or other Governmental Authority charged with the interpretation or administration thereof, or (iv) compliance by the Bank (or any applicable lending office of the Bank) or any corporation controlling the Bank with any Capital Adequacy Regulation, affects or would affect the amount of capital required or expected to be maintained by the Bank or any corporation controlling the Bank and (taking into consideration the Bank's or such corporation's policies with respect to capital adequacy and the Bank's desired return on capital) determines that the amount of such capital is increased as a consequence of its Commitment, loans, letters of credit, bank guaranty, or obligations under this Agreement, then, upon demand of the Bank to the Company, the Company shall pay to the Bank, from time to time as specified by the Bank, additional amounts sufficient to compensate the Bank for such increase. 4.04 Funding Losses. The Company shall reimburse the Bank and hold the Bank harmless from any loss or expense which the Bank may sustain or incur as a consequence of: (a) the failure of the Company to make on a timely basis any payment of principal of any Offshore Rate Loan; (b) the failure of the Company to borrow, continue or convert a Loan after the Company has given (or is deemed to have given) a Notice of Borrowing or a Notice of Conversion/Continuation; (c) the failure of the Company to make any prepayment in accordance with any notice delivered under Section 2.06; (d) the prepayment or other payment (including after acceleration thereof) of an Offshore Rate Loan on a day that is not the last day of the relevant Interest Period; or (e) the automatic conversion under Section 2.04 of any Offshore Rate Loan to a Base Rate Loan on a day that is not the last day of the relevant Interest Period; including any such loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain its Offshore Rate Loans or from fees payable to terminate the deposits from which such funds were obtained. 4.05 Inability to Determine Rates. If the Bank determines that for any reason adequate and reasonable means do not exist for determining the Offshore Rate for any requested Interest Period with respect to a proposed Offshore Rate Loan, or that the Offshore Rate applicable pursuant to subsection 2.08(a) for any requested Interest Period with respect to a proposed Offshore Rate Loan does not adequately and fairly reflect the cost to the Bank of funding such Loan, the Bank will promptly so notify the Company. Thereafter, the obligation of the Bank to make or maintain Offshore Rate Loans hereunder shall be suspended until the Bank revokes such notice in writing. Upon receipt of such notice, the Company may revoke any Notice of Borrowing or Notice of Conversion/Continuation then submitted by it. If the Company does not revoke such Notice, the Bank shall make, convert or continue the Loans, as proposed by the Company, in the amount specified in the applicable notice submitted by the Company, but such Loans shall be made, converted or continued as Base Rate Loans instead of Offshore Rate Loans. 4.06 Survival. The agreements and obligations of the Company in this Article IV shall survive the payment of all other Obligations. ARTICLE V CONDITIONS PRECEDENT 5.01 Conditions of Initial Loan. The obligation of the Bank to make the initial Credit Extension hereunder is subject to the condition that the Bank have received on or before the Closing Date all of the following, in form and substance satisfactory to the Bank: (a) Credit Agreement. This Agreement executed by the Company; (b) Resolutions; Incumbency. (i) Copies of the resolutions of the board of directors of the Company authorizing the transactions contemplated hereby, certified as of the Closing Date by the Secretary of the Company; and (ii) A certificate of the Secretary of the Company certifying the names and true signatures of the officers of the Company authorized to execute, deliver and perform, as applicable, this Agreement, and all other Loan Documents to be delivered by it hereunder; (c) Organization Documents; Good Standing. Each of the following documents: (i) the articles or certificate of incorporation and the bylaws of the Company as in effect on the Closing Date, certified by the Secretary of the Company as of the Closing Date; and (ii) a good standing and tax good standing certificate for the Company from the Secretary of State (or similar, applicable Governmental Authority) of its state of incorporation and each state where the Company is qualified to do business as a foreign corporation as of a recent date; (d) Payment of Fees. Evidence of payment by the Company of all accrued and unpaid fees, costs and expenses to the extent then due and payable on the Closing Date, together with Attorney Costs of the Bank to the extent invoiced prior to or on the Closing Date, plus such additional amounts of Attorney Costs as shall constitute the Bank's reasonable estimate of Attorney Costs incurred or to be incurred by it through the closing proceedings (provided that such estimate shall not thereafter preclude final settling of accounts between the Company and the Bank); including any such costs, fees and expenses arising under or referenced in Sections 2.09 and 10.04; (e) Certificate. A certificate signed by a Responsible Officer, dated as of the Closing Date, stating that: (i) the representations and warranties contained in Article VI are true and correct on and as of such date, as though made on and as of such date; (ii) no Default or Event of Default exists or would result from the execution and delivery of this Agreement; (iii) there has occurred since January 31, 1994, no event or circumstance that has resulted or could reasonably be expected to result in a Material Adverse Effect; and (iv) the Company has furnished to the Bank a complete and correct copy of the Senior Note Agreement and the Senior Notes, as in effect as of the Closing Date; (f) Legal Opinion. An opinion of Collette & Erickson, counsel to the Company and addressed to the Bank, substantially in the form of Exhibit D; (g) Private Placement. Evidence satisfactory to the Bank that the Company has issued no less than $18,000,000 in principal amount of Senior Notes; and (h) Other Documents. Such other approvals, opinions, documents or materials as the Bank may reasonably request. 5.02 Conditions to All Credit Extensions. The obligation of the Bank to make any Credit Extension (including the initial Credit Extension) is subject to the satisfaction of the following conditions precedent on the relevant Borrowing Date or date of Issuance of any Letter of Credit ("Issuance Date"): (a) Notice of Borrowing. The Bank shall have received a Notice of Borrowing or in the case of any Issuance of any Letter of Credit, an L/C Application or L/C Amendment Application; (b) Continuation of Representations and Warranties. The representations and warranties in Article VI shall be true and correct on and as of such Borrowing Date with the same effect as if made on and as of such Borrowing Date or Issuance Date (except to the extent such representations and warranties expressly refer to an earlier date, in which case they shall be true and correct as of such earlier date); and (c) No Existing Default. No Default or Event of Default shall exist or shall result from such Borrowing or Issuance. Each Notice of Borrowing and L/C Application or L/C Amendment Application submitted by the Company hereunder shall constitute a representation and warranty by the Company hereunder, as of the date of each such notice and as of each Borrowing Date or Issuance Date, as applicable, that the conditions in Section 5.02 are satisfied. ARTICLE VI REPRESENTATIONS AND WARRANTIES The Company represents and warrants to the Bank that: 6.01 Corporate Existence and Power. Each of the Company and its Subsidiaries: (a) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation; (b) has the power and authority and all governmental licenses, authorizations, consents and approvals to own its assets, carry on its business and to execute, deliver, and perform its obligations under the Loan Documents; (c) is duly qualified as a foreign corporation and is licensed and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification or license; and (d) is in compliance with all Requirements of Law; except, in each case referred to in clause (c) or clause (d), to the extent that the failure to do so could not reasonably be expected to have a Material Adverse Effect. 6.02 Corporate Authorization; No Contravention. The execution, delivery and performance by the Company of this Agreement and each other Loan Document to which the Company is party, have been duly authorized by all necessary corporate action, and do not and will not: (a) contravene the terms of any of the Company's Organization Documents; (b) conflict with or result in any breach or contravention of, or the creation of any Lien under, any document evidencing any Contractual Obligation to which the Company is a party or any order, injunction, writ or decree of any Governmental Authority to which the Company or its property is subject; or (c) violate any Requirement of Law. 6.03 Governmental Authorization. No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority is necessary or required in connection with the execution, delivery or performance by, or enforcement against, the Company or any of its Subsidiaries of the Agreement or any other Loan Document. In providing the representations and warranties in this Section 6.03, the Company has assumed that, other than the Company and its Subsidiaries, no party to the Agreement or any of the other Loan Documents is subject to any statute, rule or regulation, or to any impediment to which contracting parties are generally not subject, which requires the Company, any of its Subsidiaries or any other Person to obtain approval, consent, exemption, authorization or other action by, or to provide notice to, or filing with, any Governmental Authority in connection with the execution, delivery or performance by, or enforcement against, the Company or any of its Subsidiaries of the Agreement or any other Loan Document. 6.04 Binding Effect. This Agreement and each other Loan Document to which the Company is a party constitute the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, or similar laws affecting the enforcement of creditors' rights generally or by equitable principles relating to enforceability. 6.05 Litigation. Except as disclosed on Schedule 6.05, there are no actions, suits, proceedings, claims or disputes pending, or to the best knowledge of the Company, threatened or contemplated, at law, in equity, in arbitration or before any Governmental Authority, against the Company, or its Subsidiaries or any of their respective properties which: (a) purport to affect or pertain to this Agreement or any other Loan Document, or any of the transactions contemplated hereby or thereby; or (b) if determined adversely to the Company or its Subsidiaries, would reasonably be expected to have a Material Adverse Effect. No injunction, writ, temporary restraining order or any order of any nature has been issued by any court or other Governmental Authority purporting to enjoin or restrain the execution, delivery or performance of this Agreement or any other Loan Document, or directing that the transactions provided for herein or therein not be consummated as herein or therein provided. 6.06 No Default. No Default or Event of Default exists or would result from the incurring of any Obligations by the Company. As of the Closing Date, neither the Company nor any Subsidiary is in default under or with respect to any Contractual Obligation in any respect which, individually or together with all such defaults, could reasonably be expected to have a Material Adverse Effect, or that would, if such default had occurred after the Closing Date, create an Event of Default under subsection 9.01(e). 6.07 ERISA Compliance. (a) Each Plan is in compliance in all material respects with the applicable provisions of ERISA, the Code and other federal or state law. Each Plan which is intended to qualify under Section 401(a) of the Code has received a favorable determination letter from the IRS and to the best knowledge of the Company, nothing has occurred which would cause the loss of such qualification. (b) There are no pending, or to the best knowledge of Company, threatened claims, actions or lawsuits, or action by any Governmental Authority, with respect to any Plan which has resulted or could reasonably be expected to result in a Material Adverse Effect. There has been no prohibited transaction or other violation of the fiduciary responsibility rule with respect to any Plan which could reasonably result in a Material Adverse Effect. (c) No ERISA Event has occurred or is reasonably expected to occur with respect to any Pension Plan. (d) No Pension Plan has any Unfunded Pension Liability. (e) The Company has not incurred, nor does it reasonably expect to incur, any liability under Title IV of ERISA with respect to any Pension Plan (other than premiums due and not delinquent under Section 4007 of ERISA). (f) The Company has not transferred any Unfunded Pension Liability to any Person or otherwise engaged in a transaction that could be subject to Section 4069 of ERISA. (g) No trade or business (whether or not incorporated under common control with the Company within the meaning of Section 414(b), (c), (m) or (o) of the Code) maintains or contributes to any Pension Plan or other Plan subject to Section 412 of the Code. Neither the Company nor any Person under common control with the Company (as defined in the preceding sentence) has ever contributed to any multiemployer plan within the meaning of Section 4001(a)(3) of ERISA. 6.08 Use of Proceeds; Margin Regulations. The proceeds of the Loans are to be used solely for the purposes set forth in and permitted by Section 7.11 and for purposes not prohibited by Sections 8.07 and 8.08. Neither the Company nor any Subsidiary is generally engaged in the business of purchasing or selling Margin Stock or extending credit for the purpose of purchasing or carrying Margin Stock. 6.09 Title to Properties. The Company and each Subsidiary have good record and marketable title in fee simple to, or valid leasehold interests in, all real property necessary or used in the ordinary conduct of their respective businesses, except for such defects in title as could not, individually or in the aggregate, have a Material Adverse Effect. As of the Closing Date, the property of the Company and its Subsidiaries is subject to no Liens, other than Permitted Liens. 6.10 Taxes. The Company and its Subsidiaries have filed all Federal and other material tax returns and reports required to be filed, and have paid all Federal and other material taxes, assessments, fees and other governmental charges levied or imposed upon them or their properties, income or assets otherwise due and payable, except those which are being contested in good faith by appropriate proceedings and for which adequate reserves have been provided in accordance with GAAP. There is no proposed tax assessment against the Company or any Subsidiary that would, if made, have a Material Adverse Effect. 6.11 Financial Condition. (a) The unaudited consolidated financial statements of the Company and its Subsidiaries dated January 31, 1994, and the related consolidated statements of income or operations, shareholders' equity and cash flows for the fiscal quarter ended on that date: (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein, subject to ordinary, good faith year end audit adjustments; (ii) fairly present the financial condition of the Company and its Subsidiaries as of the date thereof and results of operations for the period covered thereby; and (iii) show all material indebtedness and other liabilities, direct or contingent, of the Company and its consolidated Subsidiaries as of the date thereof, including liabilities for taxes, material commitments and Contingent Obligations. (b) Since January 31, 1994, there has been no Material Adverse Effect. 6.12 Environmental Matters. The Company conducts in the ordinary course of business a review of the effect of existing Environmental Laws and existing Environmental Claims on its business, operations and properties, and as a result thereof the Company has reasonably concluded that, such Environmental Laws and Environmental Claims could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. 6.13 Regulated Entities. None of the Company, any Person controlling the Company, or any Subsidiary, is an "Investment Company" within the meaning of the Investment Company Act of 1940. The Company is not subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act, any state public utilities code, or any other Federal or state statute or regulation limiting its ability to incur Indebtedness. 6.14 No Burdensome Restrictions. Neither the Company nor any Subsidiary is a party to or bound by any Contractual Obligation, or subject to any restriction in any Organization Document, or any Requirement of Law, which could reasonably be expected to have a Material Adverse Effect. 6.15 Copyrights, Patents, Trademarks and Licenses, etc. The Company or its Subsidiaries own or are licensed or otherwise have the right to use all of the patents, trademarks, service marks, trade names, copyrights, contractual franchises, authorizations and other rights that are reasonably necessary for the operation of their respective businesses, without conflict with the rights of any other Person. To the best knowledge of the Company, no slogan or other advertising device, product, process, method, substance, part or other material now employed, or now contemplated to be employed, by the Company or any Subsidiary infringes upon any rights held by any other Person. No claim or litigation regarding any of the foregoing is pending or threatened, and no patent, invention, device, application, principle or any statute, law, rule, regulation, standard or code is pending or, to the knowledge of the Company, proposed, which, in either case, could reasonably be expected to have a Material Adverse Effect. 6.16 Subsidiaries. As of the Closing Date, the Company has no Subsidiaries other than those specifically disclosed in part (a) of Schedule 6.16 hereto and has no equity investments in any other corporation or entity other than those specifically disclosed in part (b) of Schedule 6.16. 6.17 Insurance. The properties of the Company and its Subsidiaries are insured with financially sound and reputable insurance companies not Affiliates of the Company, in such amounts, with such deductibles and covering such risks as are customarily carried by companies engaged in similar businesses and owning similar properties in localities where the Company or such Subsidiary operates. 6.18 Full Disclosure. None of the representations or warranties made by the Company or any Subsidiary in the Loan Documents as of the date such representations and warranties are made or deemed made, and none of the statements contained in any exhibit, report, statement or certificate furnished by or on behalf of the Company or any Subsidiary in connection with the Loan Documents (including the offering and disclosure materials delivered by or on behalf of the Company to the Bank prior to the Closing Date), contains any untrue statement of a material fact or omits any material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they are made, not misleading as of the time when made or delivered. ARTICLE VII AFFIRMATIVE COVENANTS So long as the Bank shall have any Commitment hereunder, or any Loan or other Obligation shall remain unpaid or unsatisfied, or any Letter of Credit or the Birckhahn Guaranty shall remain outstanding, unless the Bank waives compliance in writing: 7.01 Financial Statements. The Company shall deliver to the Bank, in form and detail satisfactory to the Bank: (a) as soon as available, but not later than 90 days after the end of each fiscal year, a copy of the audited consolidated balance sheet of the Company and its Subsidiaries as at the end of such year and the related consolidated statements of income or operations, shareholders' equity and cash flows for such year, setting forth in each case in comparative form the figures for the previous fiscal year, and accompanied by the opinion of Deloitte & Touche or another nationally-recognized independent public accounting firm ("Independent Auditor") which opinion shall state that such consolidated financial statements present fairly the financial position for the periods indicated in conformity with GAAP applied on a basis consistent with prior years. Such opinion shall not be qualified or limited because of a restricted or limited examination by the Independent Auditor of any material portion of the Company's or any Subsidiary's records or any other reason; and (b) as soon as available, but not later than 45 days after the end of each of the first three fiscal quarters of each fiscal year, a copy of the unaudited consolidated balance sheet of the Company and its Subsidiaries as of the end of such quarter and the related consolidated statements of income, shareholders' equity and cash flows for the period commencing on the first day and ending on the last day of such quarter and commencing on the first day of the fiscal year and ending on the last day of such quarter, and certified by a Responsible Officer as fairly presenting, in accordance with GAAP (subject to ordinary, good faith audit adjustments and the absence of notes to such financial statements), the financial position and the results of operations of the Company and the Subsidiaries. 7.02 Certificates; Other Information. The Company shall furnish to the Bank: (a) concurrently with the delivery of the financial statements referred to in subsection 7.01(a), a certificate of the Independent Auditor stating that during the examination there was observed no Default or Event of Default of the kind which would normally be revealed by such an examination, or a statement of such Default or Event of Default if any is found whether or not the same shall have been cured; (b) concurrently with the delivery of the financial statements referred to in subsections 7.01(a) and (b), a Compliance Certificate executed by a Responsible Officer; (b) annually not later than 45 days after the commencement of each fiscal year, the consolidated operating budget of the Company and its Subsidiaries for the coming fiscal year; (c) promptly, copies of all financial statements and reports that the Company sends to its shareholders, and copies of all financial statements and regular, periodical or special reports (including Forms 10K, 10Q and 8K) that the Company or any Subsidiary may make to, or file with, the SEC; and (d) promptly, such additional information regarding the business, financial or corporate affairs of the Company or any Subsidiary as the Bank may from time to time request. 7.03 Notices. The Company shall promptly notify the Bank: (a) of the occurrence of any Default or Event of Default, and of the occurrence or existence of any event or circumstance that foreseeably will become a Default or Event of Default; (b) of any matter that has resulted or may result in a Material Adverse Effect, including (i) breach or non-performance of, or any default under, a Contractual Obligation of the Company or any Subsidiary; (ii) any dispute, litigation, investigation, proceeding or suspension between the Company or any Subsidiary and any Governmental Authority; or (iii) the commencement of, or any material development in, any litigation or proceeding affecting the Company or any Subsidiary; including pursuant to any applicable Environmental Laws; (c) of any of the following events affecting the Company, together with a copy of any notice with respect to such event that may be required to be filed with a Governmental Authority and any notice delivered by a Governmental Authority to the Company with respect to such event: (i) an ERISA Event; (ii) if any of the representations and warranties in Section 6.07 ceases to be true and correct; (iii) the adoption of any new Pension Plan or other Plan subject to Section 412 of the Code; (iv) the adoption of any amendment to a Pension Plan or other Plan subject to Section 412 of the Code, if such amendment results in a material increase in contributions or Unfunded Pension Liability; or (v) the commencement of contributions to any Pension Plan or other Plan subject to Section 412 of the Code; and (d) of any material change in accounting policies or financial reporting practices by the Company or any of its consolidated Subsidiaries. Each notice under this Section shall be accompanied by a written statement by a Responsible Officer setting forth details of the occurrence referred to therein, and stating what action the Company or any affected Subsidiary proposes to take with respect thereto and at what time. Each notice under subsection 7.03(a) shall describe with particularity any and all clauses or provisions of this Agreement or other Loan Document that have been (or foreseeably will be) breached or violated. 7.04 Preservation of Corporate Existence, Etc. The Company shall, and shall cause each Subsidiary (except where the failure so to cause any such Subsidiary could not be reasonably expected to have a Material Adverse Effect) to: (a) preserve and maintain in full force and effect its corporate existence and good standing under the laws of its state or jurisdiction of incorporation; (b) preserve and maintain in full force and effect all governmental rights, privileges, qualifications, permits, licenses and franchises necessary or desirable in the normal conduct of its business except in connection with transactions permitted by Section 8.03 and sales of assets permitted by Section 8.02; (c) use reasonable efforts, in the ordinary course of business, to preserve its business organization and goodwill; and (d) preserve or renew, to the extent legally possible, all of its registered patents, trademarks, trade names and service marks, the non-preservation of which could reasonably be expected to have a Material Adverse Effect. 7.05 Maintenance of Property. The Company shall maintain, and shall cause each Subsidiary to maintain, and preserve all its property which is used or useful in its business in good working order and condition, ordinary wear and tear excepted. 7.06 Insurance. The Company shall maintain, and shall cause each Subsidiary to maintain, with financially sound and reputable independent insurers, insurance with respect to its properties and business against loss or damage of the kinds customarily insured against by Persons engaged in the same or similar business, of such types and in such amounts as are customarily carried under similar circumstances by such other Persons. 7.07 Payment of Obligations. The Company shall, and shall cause each Subsidiary to, pay and discharge as the same shall become due and payable, all their respective obligations and liabilities, including: (a) all tax liabilities, assessments and governmental charges or levies upon it or its properties or assets, unless the same are being contested in good faith by appropriate proceedings and adequate reserves in accordance with GAAP are being maintained by the Company or such Subsidiary; (b) all lawful claims which, if unpaid, would by law become a Lien upon its property; and (c) all Indebtedness, as and when due and payable, but subject to any subordination provisions contained in any instrument or agreement evidencing such Indebtedness. 7.08 Compliance with Laws. The Company shall comply, and shall cause each Subsidiary to comply, in all material respects with all Requirements of Law of any Governmental Authority having jurisdiction over it or its business (including the Federal Fair Labor Standards Act), except such as may be contested in good faith or as to which a bona fide dispute may exist. 7.09 Inspection of Property and Books and Records. The Company shall maintain and shall cause each Subsidiary to maintain proper books of record and account, in which full, true and correct entries in conformity with GAAP consistently applied shall be made of all financial transactions and matters involving the assets and business of the Company and such Subsidiary. The Company shall permit, and shall cause each Subsidiary to permit, representatives and independent contractors of the Bank to visit and inspect any of their respective properties, to examine their respective corporate, financial and operating records, and make copies thereof or abstracts therefrom, and to discuss their respective affairs, finances and accounts with their respective directors, officers, and independent public accountants, all at such reasonable times during normal business hours and as often as may be reasonably desired, upon reasonable advance notice to the Company; provided, however, when an Event of Default exists the Bank may do any of the foregoing at the expense of the Company at any time during normal business hours and without advance notice. 7.10 Environmental Laws. The Company shall, and shall cause each Subsidiary to, conduct its operations and keep and maintain its property substantially in compliance with all Environmental Laws. 7.11 Use of Proceeds. The Company shall use the proceeds of the Loans for working capital and other general corporate purposes not in contravention of any Requirement of Law or of any Loan Document. ARTICLE VIII NEGATIVE COVENANTS So long as the Bank shall have any Commitment hereunder, or any Loan or other Obligation shall remain unpaid or unsatisfied, or any Letter of Credit or the Birckhahn Guaranty shall remain outstanding, unless the Bank waives compliance in writing: 8.01 Limitation on Liens. The Company shall not, and shall not suffer or permit any Subsidiary to, directly or indirectly, make, create, incur, assume or suffer to exist any Lien upon or with respect to any part of its property, whether now owned or hereafter acquired, other than the following ("Permitted Liens"): (a) any Lien existing on property of the Company or any Subsidiary on the Closing Date and set forth in Schedule 8.01 securing Indebtedness outstanding on such date; (b) any Lien created under any Loan Document; (c) Liens for taxes, fees, assessments or other governmental charges which are not delinquent or remain payable without penalty, or to the extent that non-payment thereof is permitted by Section 7.07; (d) carriers', warehousemen's, mechanics', landlords', materialmen's, repairmen's or other similar Liens arising in the ordinary course of business which are not delinquent or remain payable without penalty or which are being contested in good faith and by appropriate proceedings, which proceedings have the effect of preventing the forfeiture or sale of the property subject thereto; (e) Liens (other than any Lien imposed by ERISA) consisting of pledges or deposits required in the ordinary course of business in connection with workers' compensation, unemployment insurance and other social security legislation; (f) Liens on the property of the Company or its Subsidiary securing (i) the non-delinquent performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, (ii) contingent obligations on surety, and appeal bonds, and (iii) other non-delinquent obligations of a like nature; in each case, incurred in the ordinary course of business as presently conducted; (g) Liens consisting of judgment or judicial attachment liens, provided that the enforcement of such Liens is effectively stayed, the claims secured thereby are being actively contested in good faith and by appropriate proceedings, adequate book reserves shall have been established and maintained and shall exist with respect thereto, and all such liens in the aggregate at any time outstanding for the Company and its Subsidiaries do not exceed $5,000,000; (h) easements, rights-of-way, restrictions and other similar encumbrances incurred in the ordinary course of business which, in the aggregate, are not substantial in amount, and which do not in any case materially detract from the value of the property subject thereto or interfere with the ordinary conduct of the businesses of the Company and its Subsidiaries; (i) Liens on assets of corporations which become Subsidiaries after the date of this Agreement, provided, however, that such Liens existed at the time the respective corporations became Subsidiaries and were not created in anticipation thereof; (j) purchase money security interests on any property acquired or held by the Company or its Subsidiaries in the ordinary course of business, securing Indebtedness incurred or assumed for the purpose of financing all or any part of the cost of acquiring such property; provided that (i) any such Lien attaches to such property concurrently with or within 20 days after the acquisition thereof, and (ii) such Lien attaches solely to the property so acquired in such transaction; (k) Liens securing obligations in respect of capital leases on assets subject to such leases, provided that such capital leases are otherwise permitted hereunder; (l) Liens arising solely by virtue of any statutory or common law provision relating to banker's liens, rights of set- off or similar rights and remedies as to deposit accounts or other funds maintained with a creditor depository institution; provided that (i) such deposit account is not a dedicated cash collateral account and is not subject to restrictions against access by the Company in excess of those set forth by regulations promulgated by the FRB, and (ii) such deposit account is not intended by the Company or any Subsidiary to provide collateral to the depository institution; (m) Liens consisting of pledges of cash collateral or government securities to secure obligations under Swap Contracts entered into in the ordinary course of business as bona fide hedging transactions, provided that the counterparty to such Swap Contract is under a similar requirement to deliver similar collateral from time to time to the Company or the Subsidiary party thereto; (n) Liens not otherwise permitted pursuant to clauses (a) through (m), inclusive, of this Section 8.01; provided, that: (i) the Indebtedness or other obligations secured thereby shall have been incurred, or shall be permitted to be outstanding, in accordance with the provisions of Section 8.05 of this Agreement; and (ii) immediately prior to, and after giving effect to the incurrence, assumption or creation thereof and to any concurrent application of the proceeds of any Indebtedness or other obligation secured thereby, (A) the aggregate amount of all Indebtedness and other obligations secured by such Liens at such time would not exceed $5,000,000, and (B) no Default or Event of Default would exist; and (o) Liens securing renewals, extensions (as to time) and refinancings of Indebtedness secured by the Liens described in clauses (a) through (n) of this Section 8.01, provided, that: (i) the amount of Indebtedness or other obligations secured by each such Lien is not increased in excess of the amount of such Indebtedness or other obligations outstanding on the date of such renewal, extension or refinancing; (ii) none of such Liens is extended to encumber or otherwise relate to or cover any additional property of the Company or any Subsidiary; and (iii) immediately prior to , and immediately after the consummation of such renewal, extension or refinancing, and after giving effect thereto, no Default or Event of Default exists or would exist. 8.02 Disposition of Assets. The Company shall not, and shall not suffer or permit any Subsidiary to, directly or indirectly, sell, assign, lease, convey, transfer or otherwise dispose of (whether in one or a series of transactions) any property (including accounts and notes receivable, with or without recourse and shares in any Subsidiary) or enter into any agreement to do any of the foregoing, except: (a) dispositions of inventory, or used, worn-out or surplus equipment, all in the ordinary course of business; (b) the sale of equipment to the extent that such equipment is exchanged for credit against the purchase price of similar replacement equipment, or the proceeds of such sale are reasonably promptly applied to the purchase price of such replacement equipment; (c) dispositions of inventory, equipment or other property by the Company or any Subsidiary to the Company or any Subsidiary pursuant to reasonable business requirements; and (d) dispositions (but not including any disposition of any fixed or capital assets or any shares in any Subsidiary) not otherwise permitted under this Section which are made for fair market value; provided, that (i) at the time of any disposition, no Event of Default shall exist or shall result from such disposition, (ii) the aggregate sales price from such disposition shall be paid in cash, and (iii) the aggregate value of all assets so sold by the Company and its Subsidiaries, together, shall not exceed in any fiscal year 5% of the gross book value of the assets of the Company and its Subsidiaries on a consolidated basis (exclusive of goodwill, patents, trademarks, trade names, organization expense, treasury stock, unamortized debt discount and expense, deferred charges, and other like intangibles) less reserves applicable thereto. 8.03 Consolidations and Mergers. The Company shall not, and shall not suffer or permit any Subsidiary to, merge, consolidate with or into, or convey, transfer, lease or otherwise dispose of (whether in one transaction or in a series of transactions all or substantially all of its assets (whether now owned or hereafter acquired) to or in favor of any Person, except: (a) any Subsidiary may merge with the Company, provided that the Company shall be the continuing or surviving corporation, or with any one or more Subsidiaries, provided that if any transaction shall be between a Subsidiary and a Wholly-Owned Subsidiary, the Wholly-Owned Subsidiary shall be the continuing or surviving corporation; and (b) any Subsidiary may sell all or substantially all of its assets (upon voluntary liquidation or otherwise), to the Company or another Wholly-Owned Subsidiary. 8.04 Loans and Investments. The Company shall not purchase or acquire, or suffer or permit any Subsidiary to purchase or acquire, or make any commitment therefor, any capital stock, equity interest, or any obligations or other securities of, or any interest in, any Person, or make or commit to make any Acquisitions, or make or commit to make any advance, loan, extension of credit or capital contribution to or any other investment in, any Person including any Affiliate of the Company, except for: (a) subject to Section 8.15, investments in property to be used in the ordinary course of business of the Company and its Subsidiaries; (b) investments in trade accounts receivable arising from the sale of goods and services in the ordinary course of business of the Company and its Subsidiaries; (c) investments in United States Governmental Securities, provided that such obligations mature within three years from the date of acquisition thereof; (d) investments in one or more Designated Subsidiaries; (e) investments in commercial paper given either of the two highest ratings by either Standard & Poor's or Moody's, provided that such obligations mature within 270 days from the date of creation thereof; (f) investments constituting loans and advances to employees, including travel advances and relocation loans, made in the ordinary course of and furtherance of the business of the Company or any Subsidiary; (g) investments in demand deposit accounts maintained with one or more local commercial banks, which qualify as Acceptable Banks, as operating funds accounts used in the ordinary course of business of the Company and the Subsidiaries; (h) investments in publicly-traded shares in any open-end mutual fund that invests solely in Investments of the type described in clause (c), clause (e), clause (j) or clause (k) of this Section 8.04 and has total assets in excess of $1,000,000,000, provided that such Investments are classified as current assets in accordance with GAAP; (i) investments in money market preferred stock of corporations organized under the laws of the United States or any state thereof that (i) is commonly referred to by the terms "Dutch-Auction Preferred," "Capital Market Preferred," "Remarketed Preferred," "Variable Rate Preferred" or similar terms, and (ii) has been given, at the time of acquisition, one of the two highest ratings by either Standard & Poor's or Moody's; (j) investments in certificates of deposit or banker's acceptances issued by an Acceptable Bank, provided that such obligations mature within one year from the date of acquisition thereof; (k) investments in Permitted Repurchase Agreements; (l) investments in Dollar-denominated deposits with (i) a bank organized under the laws of a country that is a member of the European Community (or any political subdivision of such country) having a combined capital and surplus of not less than $100,000,000 and given an issuer rating of "A" by Thomson BankWatch, Inc. (or a comparable rating by another nationally-recognized rating agency of similar standing if Thomson BankWatch, Inc. is not then in the business of rating commercial banks), or (ii) a foreign branch of an Acceptable Bank; (m) investments in tax-exempt obligations of any state of the United States, or any municipality of any such state, given either of the two highest ratings by either Standard & Poor's or Moody's, provided that such obligations mature within three years from the date of acquisition thereof; (n) investments in joint ventures, provided that the aggregate book value of all such investments shall not at any time exceed 10% of consolidated total assets of the Company and its Subsidiaries determined at such time; (o) investments in federally insured money market deposit accounts maintained with one or more Acceptable Banks; (p) other investments in securities for cash management purposes, made in accordance with the Company's investment policies as in effect on the Closing Date and as more particularly set forth in Schedule 8.04(p) hereto, maturing within one year from the date of acquisition thereof, provided that the aggregate book value of all such investments shall not at any time exceed 2.50% of the consolidated total assets of the Company and its Subsidiaries determined at such time; (q) investments in existence on the Closing Date described in Schedule 8.04(q); and (r) any other investment not otherwise permitted under clauses (a) through (p) hereof; provided, that: (i) immediately after, and after giving effect to, any such investment, the sum of the aggregate amount of (x) all Restricted Payments declared or made during the period from and after the Closing Date to and including the date such investment is made, plus (y) all such investments made pursuant to this subsection 8.05(r) held at such time by the Company and its Subsidiaries would not exceed the sum of: (A) $5,000,000, plus (B) the sum of 50% (or minus 100% if a deficit) of the cumulative consolidated net income of the Company and its Subsidiaries for the period commencing on and including October 31, 1993 and ending on and including the date such investment is made, plus (C) the aggregate amount of cash proceeds (net of all costs and out-of-pocket expenses in connection therewith, including, without limitation, placement, underwriting and brokerage fees and expenses) received by the Company and its Subsidiaries after the Closing Date and prior to such time from the issuance and sale of (I) capital stock (other than Redeemable Stock) of the Company (either directly or through the exercise of warrants, rights or other options or the exercise of any rights of the holder of any Indebtedness of the Company to convert such Indebtedness to capital stock (other than Redeemable Stock)) or (II) any warrants, rights or other options to purchase such capital stock; and (ii) immediately before, and after giving effect to, such investment, no Default or Event of Default exists or would exist. 8.05 Limitation on Indebtedness. The Company shall not, and shall not suffer or permit any Subsidiary to, create, incur, assume, suffer to exist, or otherwise become or remain directly or indirectly liable with respect to, any Indebtedness, except: (a) Indebtedness incurred pursuant to this Agreement; (b) Indebtedness consisting of Contingent Obligations permitted pursuant to Section 8.09; (c) Indebtedness existing on the Closing Date and set forth in Schedule 8.05; (d) Indebtedness secured by Liens permitted by subsection 8.01(i), (j), (m) and (n) in an aggregate amount outstanding not to exceed $5,000,000; (e) Indebtedness incurred in connection with leases permitted pursuant to Section 8.10; (f) Indebtedness evidenced by the Senior Notes, not to exceed $18,000,000 in aggregate principal amount; and (g) Additional unsecured Indebtedness not otherwise permitted under this Section 8.05 in aggregate amount outstanding at any time not to exceed $1,000,000. 8.06 Transactions with Affiliates. The Company shall not, and shall not suffer or permit any Subsidiary to, enter into any transaction with any Affiliate of the Company, except upon fair and reasonable terms no less favorable to the Company or such Subsidiary than would obtain in a comparable arm's-length transaction with a Person not an Affiliate of the Company or such Subsidiary. 8.07 Use of Proceeds. The Company shall not, and shall not suffer or permit any Subsidiary to, use any portion of the Loan proceeds, directly or indirectly, (i) to purchase or carry Margin Stock, (ii) to repay or otherwise refinance indebtedness of the Company or others incurred to purchase or carry Margin Stock, (iii) to extend credit for the purpose of purchasing or carrying any Margin Stock, or (iv) to acquire any security in any transaction that is subject to Section 13 or 14 of the Exchange Act. 8.08 Use of Proceeds - Ineligible Securities. The Company shall not, directly or indirectly, use any portion of the Loan proceeds or any Letter of Credit (i) knowingly to purchase Ineligible Securities from BA Securities, Inc. (the "Arranger") during any period in which the Arranger 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 the Arranger, or (iii) to make payments of principal or interest on Ineligible Securities underwritten or privately placed by the Arranger and issued by or for the benefit of the Company or any Affiliate of the Company. The Arranger is a registered broker-dealer and permitted 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 (12 U.S.C. 24, Seventh), as amended. 8.09 Contingent Obligations. The Company shall not, and shall not suffer or permit any Subsidiary to, create, incur, assume or suffer to exist any Contingent Obligations except: (a) endorsements for collection or deposit in the ordinary course of business; (b) Swap Contracts entered into in the ordinary course of business; and (c) Contingent Obligations of the Company and its Subsidiaries existing as of the Closing Date and listed in Schedule 8.09. 8.10 Lease Obligations. The Company shall not, and shall not suffer or permit any Subsidiary to, create or suffer to exist any obligations for the payment of rent for any property under lease or agreement to lease, except for: (a) leases of the Company and of Subsidiaries in existence on the Closing Date and any renewal, extension or refinancing thereof; (b) operating leases entered into by the Company or any Subsidiary after the Closing Date in the ordinary course of business; (c) leases entered into by the Company or any Subsidiary after the Closing Date pursuant to sale-leaseback transactions permitted under subsection 8.02(d); (d) subject to Section 8.15, capital leases other than those permitted under clauses (a) and (c) of this Section, entered into by the Company or any Subsidiary after the Closing Date to finance the acquisition of equipment; provided that the aggregate annual rental payments for all such capital leases shall not exceed in any fiscal year $1,000,000. 8.11 Restricted Payments. (a) The Company shall not, and shall not suffer or permit any Subsidiary to, declare or make any Restricted Payment unless: (i) immediately after, and after giving effect to, such Restricted Payment, the sum of the aggregate amount of (x) all Restricted Payments declared or made during the period from and after the Closing Date to and including the date such Restricted Payment or is made, plus (y) all investments made pursuant to Subsection 8.05(r), held at such time by the Company and its Subsidiaries would not exceed the sum of (A) $5,000,000 plus (B) the sum of 50% (or minus 100% in the case of a deficit) of the cumulative consolidated net income of the Company and its Subsidiaries for the period commencing on and including October 31, 1993 and ending on and including the date such Restricted Payment is declared or made, plus (C) the aggregate amount of cash proceeds (net of all costs and out-of-pocket expenses in connection therewith, including, without limitation, placement, underwriting and brokerage fees and expenses) received by the Company and its Subsidiaries after the Closing Date and prior to such time from the issuance and sale of (I) capital stock (other than Redeemable Stock) of the Company (either directly or through the exercise of warrants, rights or other options or the exercise of any rights of the holder of any Indebtedness of the Company to convert such Indebtedness to capital stock (other than Redeemable Stock)) or (II) any warrants, rights or other options to purchase such capital stock; and (ii) at the time of such declaration and immediately before, and after giving effect to, such Restricted Payment, no Default or Event of Default exists or would exist. (b) Time of Payment. The Company shall not authorize a Distribution on any class of its capital stock that is not payable within 90 days of authorization. 8.12 Tangible Net Worth. The Company shall not permit at any time on a consolidated basis its Tangible Net Worth to be less than $44,000,000 plus 50% of consolidated net income after income taxes (but without giving effect to any net losses) earned in any quarterly accounting period commencing after October 31, 1993. 8.13 Fixed Charge Coverage Ratio. The Company shall not permit its Fixed Charge Coverage Ratio as determined as of the last day of any fiscal quarter to be less than 1.50 to 1.00. The foregoing and the definition of Fixed Charge Coverage Ratio notwithstanding, the determination of the Fixed Charge Coverage Ratio for the quarter ending April 30, 1994 shall be based only on the immediately preceding two fiscal quarters, and for the quarter ending on July 31, 1994, shall be based only on the immediately preceding three consecutive fiscal quarters. 8.14 Leverage Ratio. The Company shall not permit at any time on a consolidated basis, the ratio of total liabilities to Tangible Net Worth to exceed the ratio indicated for each of the periods set forth below: Period Ratio From the date hereof through October 31, 1995 1.55 to 1.00 November 1, 1995 through October 31, 1996 1.40 to 1.00 November 1, 1996 and thereafter 1.30 to 1.00 8.15 Capital Expenditures. The Company and its consolidated Subsidiaries shall not make or commit to make capital expenditures and expenditures for research and development during any fiscal year set forth below in excess, in the aggregate, of the amount set forth below with respect to such fiscal year: Capital and Research Fiscal Year Ending and Development Expenditures October 31, 1994 $18,000,000 October 31, 1995 $20,000,000 October 31, 1996 $22,000,000 October 31, 1997 $22,000,000 8.16 Change in Business. The Company shall not, and shall not suffer or permit any Subsidiary to, engage in any material line of business substantially different from those lines of business carried on by the Company and its Subsidiaries on the date hereof. 8.17 Accounting Changes. The Company shall not, and shall not suffer or permit any Subsidiary to, make any significant change in accounting treatment or reporting practices, except as required by GAAP, or change the fiscal year of the Company or of any Subsidiary. ARTICLE IX EVENTS OF DEFAULT 9.01 Event of Default. Any of the following shall constitute an "Event of Default": (a) Non-Payment. The Company fails to pay, (i) when and as required to be paid herein, any amount of principal of any Loan, or (ii) within five days after the same becomes due, any interest, fee or any other amount payable hereunder or under any other Loan Document; or (b) Representation or Warranty. Any representation or warranty by the Company or any Subsidiary made or deemed made herein, in any other Loan Document, or which is contained in any certificate, document or financial or other statement by the Company, any Subsidiary, or any Responsible Officer, furnished at any time under this Agreement, or in or under any other Loan Document, is incorrect in any material respect on or as of the date made or deemed made; or (c) Specific Defaults. The Company fails to perform or observe any term, covenant or agreement contained in any of Sections 7.01, 7.02, 7.03 or 7.09 or in Article VIII, and, in the case of any term, covenant or agreement contained in any of Sections 7.01 or 7.02, such default shall continue unremedied for a period of ten days after the occurrence thereof; or (d) Other Defaults. The Company fails to perform or observe any other term or covenant contained in this Agreement or any other Loan Document, and such default shall continue unremedied for a period of 20 days after the earlier of (i) the date upon which a Responsible Officer knew or reasonably should have known of such failure or (ii) the date upon which written notice thereof is given to the Company by the Bank; or (e) Cross-Default. The Company or any Subsidiary (i) fails to make any payment in respect of any Indebtedness or Contingent Obligation having an aggregate principal amount (including undrawn committed or available amounts and including amounts owing to all creditors under any combined or syndicated credit arrangement) of more than $1,000,000 when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) and such failure continues after the applicable grace or notice period, if any, specified in the relevant document on the date of such failure; or (ii) fails to perform or observe any other condition or covenant, or any other event shall occur or condition exist, under any agreement or instrument relating to any such Indebtedness or Contingent Obligation, and such failure continues after the applicable grace or notice period, if any, specified in the relevant document on the date of such failure if the effect of such failure, event or condition is to cause, or to permit the holder or holders of such Indebtedness or beneficiary or beneficiaries of such Indebtedness (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause such Indebtedness to be declared to be due and payable prior to its stated maturity, or such Contingent Obligation to become payable or cash collateral in respect thereof to be demanded; or (f) Insolvency; Voluntary Proceedings. The Company or any Subsidiary (i) ceases or fails to be solvent, or generally fails to pay, or admits in writing its inability to pay, its debts as they become due, subject to applicable grace periods, if any, whether at stated maturity or otherwise; (ii) voluntarily ceases to conduct its business in the ordinary course; (iii) commences any Insolvency Proceeding with respect to itself; or (iv) takes any action to effectuate or authorize any of the foregoing; or (g) Involuntary Proceedings. (i) Any involuntary Insolvency Proceeding is commenced or filed against the Company or any Subsidiary, or any writ, judgment, warrant of attachment, execution or similar process, is issued or levied against a substantial part of the Company's or any Subsidiary's properties, and any such proceeding or petition shall not be dismissed, or such writ, judgment, warrant of attachment, execution or similar process shall not be released, vacated or fully bonded within 60 days after commencement, filing or levy; (ii) the Company or any Subsidiary admits the material allegations of a petition against it in any Insolvency Proceeding, or an order for relief (or similar order under non-U.S. law) is ordered in any Insolvency Proceeding; or (iii) the Company or any Subsidiary acquiesces in the appointment of a receiver, trustee, custodian, conservator, liquidator, mortgagee in possession (or agent therefor), or other similar Person for itself or a substantial portion of its property or business; or (h) ERISA. (i) An ERISA Event occurs with respect to a Pension Plan which has resulted or could reasonably be expected to result in liability of the Company under Title IV of ERISA to the Pension Plan or the PBGC in an aggregate amount in excess of $1,000,000; or (ii) the commencement or increase of contributions to, or the adoption of or the amendment of a Pension Plan by the Company which has resulted or could reasonably be expected to result in an increase in Unfunded Pension Liability among all Pension Plans in an aggregate amount in excess of $1,000,000; or (i) Monetary Judgments. One or more non-interlocutory judgments, non-interlocutory orders, decrees or arbitration awards is entered against the Company or any Subsidiary involving in the aggregate a liability (to the extent not covered by independent third-party insurance as to which the insurer does not dispute coverage) as to any single or related series of transactions, incidents or conditions, of $5,000,000 or more, and the same shall remain unvacated and unstayed pending appeal for a period of 20 days after the entry thereof; or (j) Non-Monetary Judgments. Any non-monetary judgment, order or decree is entered against the Company or any Subsidiary which does or would reasonably be expected to have a Material Adverse Effect, and there shall be any period of 10 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or (k) Change of Control. More than 50% of the Company's issued and outstanding common stock is owned as a block by a Person or Persons acting in concert with Persons other than the Persons who own the Company's stock on the date of this Agreement, if such change of control continues for a period of 30 days from the earlier of (i) the date the Company advises Bank of such change of control or (ii) the date Bank advises the Company that such change of control will be an Event of Default upon the lapse of such 30-day period; or (l) Adverse Change. There occurs a Material Adverse Effect. 9.02 Remedies. If any Event of Default occurs, the Bank may: (a) declare the commitment of the Bank to make Loans to be terminated, whereupon such commitment shall be terminated; (b) declare an amount equal to the maximum aggregate amount that is or at any time thereafter may become available for drawing under any outstanding Letters of Credit or the Birckhahn Guaranty (whether or not any beneficiary shall have presented, or shall be entitled at such time to present, the drafts or other documents required to draw under such Letters of Credit or the Birckhahn Guaranty shall have been drawn upon, as applicable) to be immediately due and payable, and declare the unpaid principal amount of all outstanding Loans, all interest accrued and unpaid thereon, and all other amounts owing or payable hereunder or under any other Loan Document to be immediately due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Company; and (c) exercise all rights and remedies available to it under the Loan Documents or applicable law; provided, however, that upon the occurrence of any event specified in subsection (f) or (g) of Section 9.01 (in the case of clause (i) of subsection (g) upon the expiration of the 60-day period mentioned therein), the obligation of the Bank to make Loans and to Issue Letters of Credit shall automatically terminate and the unpaid principal amount of all outstanding Loans and all interest and other amounts as aforesaid shall automatically become due and payable without further act of the Bank. 9.03 Rights Not Exclusive. The rights provided for in this Agreement and the other Loan Documents are cumulative and are not exclusive of any other rights, powers, privileges or remedies provided by law or in equity, or under any other instrument, document or agreement now existing or hereafter arising. ARTICLE X MISCELLANEOUS 10.01 Amendments and Waivers. No amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent with respect to any departure by the Company therefrom, shall be effective unless the same shall be in writing and signed by the Bank and the Company, and then any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given 10.02 Notices. (a) All notices, requests and other communications shall be in writing (including, unless the context expressly otherwise provides, by facsimile transmission, provided that any matter transmitted by the Company by facsimile (i) shall be immediately confirmed by a telephone call to the recipient at the number specified on the signature page hereof with respect to such Person, and (ii) shall be followed promptly by delivery of a hard copy original thereof) and mailed, telecopied or delivered, to the address or facsimile number specified for notices on the signature page hereof with respect to such Person; or, as directed to the Company or the Bank, to such other address as shall be designated by such party in a written notice to the other parties, and as directed to any other party, at such other address as shall be designated by such party in a written notice to the Company and the Bank. (b) All such notices, requests and communications shall, when transmitted by overnight delivery, or faxed, be effective when delivered for overnight (next-day) delivery, or transmitted in legible form by facsimile machine, respectively, or if mailed, upon the third Business Day after the date deposited into the U.S. mail, or if delivered, upon delivery; except that notices pursuant to Article II or Article III shall not be effective until actually received by the Bank. (c) Any agreement of the Bank herein to receive certain notices by telephone or facsimile is solely for the convenience and at the request of the Company. The Bank shall be entitled to rely on the authority of any Person purporting to be a Person authorized by the Company to give such notice and the Bank shall not have any liability to the Company or other Person on account of any action taken or not taken by the Bank in reliance upon such telephonic or facsimile notice. The obligation of the Company to repay the Loans shall not be affected in any way or to any extent by any failure by the Bank to receive written confirmation of any telephonic or facsimile notice or the receipt by the Bank of a confirmation which is at variance with the terms understood by the Bank to be contained in the telephonic or facsimile notice. 10.03 No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of the Bank, any right, remedy, power or privilege hereunder, shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. 10.04 Costs and Expenses. The Company shall, whether or not the transactions contemplated hereby are consummated, pay or reimburse the Bank within five Business Days after demand (subject to subsection 5.01(d)) for all costs and expenses (including Attorney Costs) incurred by the Bank in connection with (a) the development, preparation, delivery, administration and execution of, and any amendment, supplement, waiver or modification to (in each case, whether or not consummated), this Agreement, any Loan Document and any other documents prepared in connection herewith or therewith, and the consummation of the transactions contemplated hereby and thereby, and (b) the enforcement, attempted enforcement, or preservation of any rights or remedies under this Agreement or any other Loan Document (including in connection with any "workout" or restructuring regarding the Loans, and including in any Insolvency Proceeding or appellate proceeding). 10.05 Indemnity. Whether or not the transactions contemplated hereby are consummated, the Company shall indemnify and hold the Bank and each of its officers, directors, employees, counsel, agents and attorneys-in-fact (each, an "Indemnified Person") harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, charges, expenses and disbursements (including Attorney Costs) of any kind or nature whatsoever which may at any time (including at any time following repayment of the Loans) be imposed on, incurred by or asserted against any such Person in any way relating to or arising out of this Agreement or any document contemplated by or referred to herein, or the transactions contemplated hereby, or any action taken or omitted by any such Person under or in connection with any of the foregoing, including with respect to any investigation, litigation or proceeding (including any Insolvency Proceeding or appellate proceeding) related to or arising out of this Agreement or the Loans or the use of the proceeds thereof, whether or not any Indemnified Person is a party thereto (all the foregoing, collectively, the "Indemnified Liabilities"); provided, that the Company shall have no obligation hereunder to any Indemnified Person with respect to Indemnified Liabilities resulting solely from the gross negligence or willful misconduct of such Indemnified Person. The agreements in this Section shall survive payment of all other Obligations. 10.06 Payments Set Aside. To the extent that the Company makes a payment to the Bank, or the Bank exercises its right of set-off, and such payment or the proceeds of such set-off or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by the Bank in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any Insolvency Proceeding or otherwise, then to the extent of such recovery the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such set-off had not occurred. 10.07 Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that the Company may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of the Bank. 10.08 Assignments, Participations, etc. (a) The Bank may at any time, with the prior consent of the Company (other than any time after acceleration of the Loans), which consent shall not be unreasonably withheld, assign and delegate to one or more commercial banks (each an "Assignee") all, or any part of all, of the Loans, the Commitment and the other rights and obligations of the Bank hereunder, in a minimum amount of $1,000,000; provided, however, that the Company may continue to deal solely and directly with the Bank in connection with the interest so assigned to an Assignee until written notice of such assignment, together with payment instructions, addresses and related information with respect to the Assignee, shall have been given to the Company by the Bank and the Assignee. (b) The Bank may at any time, without notice to or consent of the Company, sell to one or more commercial banks or other Persons (a "Participant") participating interests in any Loans, the Commitment of that Bank and the other interests of that Bank (the "originating Bank") hereunder and under the other Loan Documents. (c) The Bank agrees to take normal and reasonable precautions and exercise due care to maintain the confidentiality of all information identified as "confidential" or "secret" by the Company and provided to it by the Company under this Agreement, and neither it nor any of its Affiliates shall use any such information other than in connection with or in enforcement of this Agreement; except to the extent such information (i) was or becomes generally available to the public other than as a result of disclosure by the Bank, or (ii) was or becomes available on a non-confidential basis from a source other than the Company, provided that such source is not bound by a confidentiality agreement with the Company known to the Bank; provided, however, that the Bank may disclose such information (A) at the request or pursuant to any requirement of any Governmental Authority to which the Bank is subject or in connection with an examination of the Bank by any such authority; (B) pursuant to subpoena or other court process; (C) when required to do so in accordance with the provisions of any applicable Requirement of Law; (D) to the extent reasonably required in connection with any litigation or proceeding to which the Bank or its Affiliates may be party, (E) to the extent reasonably required in connection with the exercise of any remedy hereunder or under any other Loan Document, (F) to the Bank's independent auditors and other professional advisors, (G) to any Participant or Assignee, actual or potential, provided that such Person agrees in writing to keep such information confidential to the same extent required of the Bank hereunder, and (H) as expressly permitted under the terms of any other document or agreement regarding confidentiality to which the Company is party or is deemed party with the Bank. (d) Notwithstanding any other provision in this Agreement, the Bank may at any time create a security interest in, or pledge, all or any portion of its rights under this Agreement in favor of any Federal Reserve Bank in accordance with Regulation A of the FRB or 31 CFR 203.15, and such Federal Reserve Bank may enforce such pledge or security interest in any manner permitted under applicable law. 10.09 Set-off. In addition to any rights and remedies of the Bank provided by law, if an Event of Default exists or the Loans have been accelerated, the Bank is authorized at any time and from time to time, without prior notice to the Company, any such notice being waived by the Company to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held by, and other indebtedness at any time owing by, the Bank to or for the credit or the account of the Company against any and all Obligations owing to the Bank, now or hereafter existing, irrespective of whether or not the Bank shall have made demand under this Agreement or any Loan Document and although such Obligations may be contingent or unmatured. The Bank agrees promptly to notify the Company after any such set-off and application made by the Bank; provided, however, that the failure to give such notice shall not affect the validity of such set-off and application. 10.10 Automatic Debits of Fees. With respect to any commitment fee, arrangement fee, or other fee, or any other cost or expense (including Attorney Costs) due and payable to the Bank under the Loan Documents, the Company hereby irrevocably authorizes the Bank to debit any deposit account of the Company with the Bank in an amount such that the aggregate amount debited from all such deposit accounts does not exceed such fee or other cost or expense. If there are insufficient funds in such deposit accounts to cover the amount of the fee or other cost or expense then due, such debits will be reversed (in whole or in part, in the Bank's sole discretion) and such amount not debited shall be deemed to be unpaid. No such debit under this Section shall be deemed a setoff. 10.11 Counterparts. This Agreement may be executed in any number of separate counterparts, each of which, when so executed, shall be deemed an original, and all of said counterparts taken together shall be deemed to constitute but one and the same instrument. 10.12 Severability. The illegality or unenforceability of any provision of this Agreement or any instrument or agreement required hereunder shall not in any way affect or impair the legality or enforceability of the remaining provisions of this Agreement or any instrument or agreement required hereunder. 10.13 No Third Parties Benefited. This Agreement is made and entered into for the sole protection and legal benefit of the Company, the Bank and their permitted successors and assigns, and no other Person shall be a direct or indirect legal beneficiary of, or have any direct or indirect cause of action or claim in connection with, this Agreement or any of the other Loan Documents. 10.14 Governing Law and Jurisdiction. (a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF CALIFORNIA; PROVIDED THAT THE BANK SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW. (b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF CALIFORNIA OR OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF CALIFORNIA, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE COMPANY AND THE BANK CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE COMPANY AND THE BANK IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. THE COMPANY AND THE BANK EACH WAIVE PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY CALIFORNIA LAW. 10.15 Waiver of Jury Trial. THE COMPANY AND THE BANK EACH WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR PARTIES, PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE COMPANY AND THE BANK EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS. 10.16 Entire Agreement. This Agreement, together with the other Loan Documents, embodies the entire agreement and understanding among the Company and the Bank, and supersedes all prior or contemporaneous agreements and understandings of such Persons, verbal or written, relating to the subject matter hereof and thereof. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered in San Francisco, California by their proper and duly authorized officers as of the day and year first above written. OPTICAL COATING LABORATORY, INC. By: Title: Vice President and Corporate Controller By: Title: Vice President and Secretary Address for Notices: 2789 Northpoint Parkway Santa Rosa, CA 95407-7397 Attention: Josef Wally, Vice President and Corporate Controller Joseph C. Zils, Vice President and Secretary Telephone: (707) 545-6440 Facsimile: (707) 525-6840 BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By: Title: Vice President Notices (other than Notices of Borrowing and Notices of Conversion/Continuation): Bank of America National Trust and Savings Association 555 California St., 41st Floor San Francisco, California 94104 Attention: Michael J. Dasher, Vice President, #3838 Telephone: (415) 622-2126 Facsimile: (415) 622-4585 Domestic and Offshore Lending Office: 1850 Gateway Boulevard Fourth Floor Concord, California 94520 Attention: Global Payment Operations #5693 Telephone: (510) 675-7777 Facsimile: (510) 675-7531 EXHIBIT A NOTICE OF BORROWING Date: , 199 To: Bank of America National Trust and Savings Association Ladies and Gentlemen: The undersigned, Optical Coating Laboratory, Inc. (the "Company"), refers to the Credit Agreement (the "Credit Agreement") dated as of June 30, 1994 between the Company and Bank of America National Trust and Savings Association (the "Bank"), the terms defined therein being used herein as therein defined, and hereby gives you notice irrevocably, pursuant to Section 2.03 of the Credit Agreement, of the Borrowing specified herein: 1. The Business Day of the proposed Borrowing is , 19 . 2. The aggregate amount of the proposed Borrowing is $ . 3. The Borrowing is to be comprised of $ of [Base Rate] [Offshore Rate] Loans. 4. The duration of the Interest Period for the Offshore Rate Loans included in the Borrowing shall be _____ months. The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date of the proposed Borrowing, before and after giving effect thereto and to the application of the proceeds therefrom: (a) the representations and warranties of the Company contained in Article VI of the Credit Agreement are true and correct as though made on and as of such date (except to the extent such representations and warranties relate to an earlier date, in which case they are true and correct as of such date); (b) no Default or Event of Default has occurred and is continuing, or would result from such proposed Borrowing; and (c) The proposed Borrowing will not cause the aggregate principal amount of all outstanding Revolving Loans plus the aggregate amount available for drawing under all outstanding Letters of Credit plus the aggregate principal amount of all outstanding L/C Borrowings plus the outstanding principal amount of the Term Loan to exceed the Commitment. OPTICAL COATING LABORATORY, INC. By: Title: By: Title: EXHIBIT B NOTICE OF CONVERSION/CONTINUATION Date: , 199 To: Bank of America National Trust and Savings Association Ladies and Gentlemen: The undersigned, Optical Coating Laboratory, Inc. (the "Company"), refers to the Credit Agreement (the "Credit Agreement") dated as of June 30, 1994 between the Company and Bank of America National Trust and Savings Association (the "Bank"), the terms defined therein being used herein as therein defined, and hereby gives you notice irrevocably, pursuant to Section 2.04 of the Credit Agreement, of the [conversion] [continuation] of the Loans specified herein, that: 1. The Conversion/Continuation Date is , 19 . 2. The aggregate amount of the Loans to be [converted] [continued] is $ . 3. The Loans are to be [converted into] [continued as] [Offshore Rate] [Base Rate] Loans. 4. [If applicable:] The duration of the Interest Period for the Loans included in the [conversion] [continuation] shall be [ months]. 5. The Loan[s] to be [converted] [continued] are/is [Revolving Loans] [a portion of the Term Loan]. OPTICAL COATING LABORATORY, INC. By: Title: By: Title: EXHIBIT C OPTICAL COATING LABORATORY, INC. COMPLIANCE CERTIFICATE Date: Reference is made to that certain Credit Agreement (the "Credit Agreement") dated as of June 30, 1994 between Optical Coating Laboratory, Inc. (the "Company") and Bank of America National Trust and Savings Association (the "Bank"). Unless otherwise defined herein, capitalized terms used herein have the respective meanings assigned to them in the Credit Agreement. The undersigned Responsible Officer of Optical Coating Laboratory, Inc., hereby certifies as of the date hereof that he/she is the of the Company, and that, as such, he/she is authorized to execute and deliver this Certificate to the Bank on the behalf of the Company and its consolidated Subsidiaries and not as an individual, and that: [Use the following paragraph if this Certificate is delivered in connection with the financial statements required by subsection [7.01(a)] of the Credit Agreement.] 1. Attached as Schedule 1 hereto are (a) a true and correct copy of the audited consolidated balance sheet of the Company and its Subsidiaries as at the end of the fiscal year ended _______________, 199__ and (b) the related consolidated statements of income or operations, shareholders' equity and cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, and accompanied by the unqualified opinion of [Deloitte & Touche or another nationally-recognized certified independent public accounting firm] (the "Independent Auditor"). Such opinion is not qualified or limited because of a restricted or limited examination by the Independent Auditor of any material portion of the Company's or any Subsidiary's records or for any other reason. Such opinion is accompanied by a certificate of the Independent Auditor stating that in making the examination necessary for its opinion no knowledge was obtained of any default or Event of Default, except as specified in such certificate. The attached financial statements are complete and correct, and have been prepared in accordance with GAAP, fairly present, in all material respects, the financial position of the Company and its consolidated Subsidiaries for the periods indicated and on a basis consistent with prior periods and fairly state the financial condition and results of operations of the Company and its consolidated Subsidiaries in all material respects. or [Use the following paragraph if this Certificate is delivered in connection with the financial statements required by subsection [7.01(b)] of the Credit Agreement.] 1. Attached as Schedule 1 hereto is (a) a true and correct copy of the unaudited consolidated balance sheet of the Company and its Subsidiaries as of the end of such quarter ended __________, 199__, and (b) the related unaudited consolidated statements of income, shareholders' equity and cash flows for the period commencing on the first day and ending on the last day of such quarter and commencing on the first day of the fiscal year and ending on the last day of such quarter, setting forth in each case in comparative form the figures for the previous year subject only to ordinary, good faith audit adjustments and the absence of footnotes. The attached financial statements are complete and correct, and have been prepared in accordance with GAAP, fairly present, in all material respects, the financial position of the Company and its consolidated Subsidiaries for the periods indicated and on a basis consistent with prior periods and fairly state the financial condition and results of operations of the Company and its consolidated Subsidiaries in all material respects. 2. The undersigned has reviewed and is familiar with the terms of the Credit Agreement and has made, or has caused to be made under his/her supervision, a detailed review of the transactions and conditions (financial or otherwise) of the Company during the accounting period covered by the attached financial statements. 3. To the best of the undersigned's knowledge, the Company, during such period, has observed, performed or satisfied all of its covenants and other agreements, and satisfied every condition in the Credit Agreement to be observed, performed or satisfied by the Company, and the undersigned has no knowledge of any Default or Event of Default. 4. The following financial covenant analyses and information set forth on Schedule 2 attached hereto are true and accurate on and as of the date of this Certificate. IN WITNESS WHEREOF, the undersigned has executed this Certificate as of , 199 . OPTICAL COATING LABORATORY, INC. By: Title: Date: ______________, 199__ For the fiscal quarter/year ended ______________, 199__ SCHEDULE 2 to the Compliance Certificate ($ in 000's) Attach detailed computations of compliance with Sections 8.12, 8.13, 8.14, and 8.15 of the Credit Agreement. June 30, 1994 Bank of America National Trust & Savings Association 555 California Street , 41st Floor, #3838 San Francisco, California 94104 Re: $10,000,000 Credit Facility by Bank of America National Trust & Savings Association to Optical Coating Laboratory, Inc. Ladies and Gentlemen: We have acted as counsel to Optical Coating Laboratory, Inc., a Delaware corporation (the "Company"), in connection with the execution and delivery by the Company of that certain Amended and Restated Credit Agreement dated as of June 30, 1994 (the "Agreement") by and between the Company and you providing for a term and revolving credit facility from you to the Company of up to $10,000,000 (the "Loan"). This firm also represents the Company on a regular basis, although our engagement has been limited to specific matters as to which we have been consulted by the Company. We are delivering this opinion to you pursuant to Section 5.01(f) of the Agreement. All capitalized terms used and not expressly defined herein shall have the meaning given to them in the Agreement. In connection with the foregoing we have been furnished with originals or copies certified to our satisfaction of such corporate or other records of the Company, with such certificates of officers and representatives of the Company, and with such other documents, and we have made such other examinations, investigations and inquiries of the Company and its officers, as we have deemed necessary as a basis for the opinions expressed below. In connection with this opinion, we have examined and relied upon originals, or copies certified or otherwise identified to our satisfaction as being true copies, of the following, each dated this date unless otherwise indicated: A. The Agreement; B. The Loan Documents; C. A Certificate of the Secretary of the Company certifying as to (i) the Certificate of Incorporation of the Company, (ii) the Bylaws of the Company and (iii) resolutions adopted by the Board of Directors of the Company; D. A certificate executed by Herbert M. Dwight, President, Chief Executive Officer and Chief Financial Officer of the Company, Joseph C. Zils, Vice President, General Counsel and Secretary of the Company, and Josef Wally, Vice President and Corporate Controller of the Company (the "Company's Certificate"), stating that aside from certain outstanding indentures and loan, credit, guaranty or lease agreements, all of which are identified in said certificate, no other agreements or instruments or orders, writs, judgments, awards, injunctions and decrees, affect or purport to affect the right of the Company to borrow money or to undertake and perform obligations of the Company under the Agreement; E. A certificate of the Secretary of State of Delaware, dated June 22, 1994, attesting to the continued corporate existence and good standing of, and current payment of franchise taxes by, the Company in that state; F. A certificate of the Secretary of State of California, dated June 21, 1994, attesting that the Company is qualified to transact business as a foreign corporation in that state; G. A certificate of the Franchise Tax Board of California, dated June 22, 1994, attesting to the good standing of the Company with that agency; and H. Originals, or copies certified or otherwise identified to our satisfaction, of such other documents, records, instruments and certificates of public officials as we have deemed necessary or appropriate to enable us to render this opinion. We have also examined originals or copies of the documents listed in the Company's Certificate. In conducting our examination we have assumed, without investigation, the genuineness of all signatures, the correctness of all certificates, the authenticity of all certificates and documents submitted to us as originals, the conformity to original documents of all documents submitted to us as certified or photostatic copies and the authenticity of the originals of such copies, and the accuracy and completeness of all records made available to us by the Company. We have also assumed, without investigation, the accuracy of the representations and warranties as to factual matters made by any party in the Agreement and the accuracy of the representations and statements made to us by officers or employees of the Company and by public officials. In making our examination of documents and instruments executed by any person or entity, we have assumed, without investigation, that each such person or entity has (i) the power, capacity, right and legal authority to enter into and perform all of its obligations under such documents and instruments, (ii) duly authorized all requisite action with respect to such documents and instruments, and (iii) duly executed and delivered such documents and instruments. We have not, however, made the assumptions set forth in the immediately preceding sentence with respect to the Company or its power, capacity, right, authority, authorization or execution of documents and instruments. Whenever a statement below is qualified by the phrases "known to us" or "to our knowledge," it is intended to indicate that during the course of our representation of the Company, no information that would give us actual knowledge of, or a reasonable belief concerning, the inaccuracy of such statement has come to the attention of those attorneys in this firm who have rendered legal services to the Company. Except as otherwise expressly indicated, we have not undertaken any independent investigation to determine the accuracy of such statement, and any limited inquiry undertaken by us during the preparation of this opinion letter should not be regarded as such an investigation. No inference as to our knowledge of any matters bearing on the accuracy of any such statement should be drawn from the fact of our representation of the Company. In rendering the opinions hereinafter expressed, we have also assumed, without investigation, that the following facts are true: You will enforce your rights under the Agreement in circumstances and in a manner in which it is commercially reasonable to do so, and in accordance with all procedural requirements under applicable law. Other than the Company, no party to the Agreement or to any of the other Loan Documents or any agreement relating thereto is subject to any statute, rule, or regulation, or to any impediment to which contracting parties are generally not subject, which requires the Company or any other person or party to obtain the consent of or to make a declaration or filing with any governmental authority or other person or entity. We assume that you are exempt from the usury laws of the State of California. The opinions expressed below are subject to the following qualifications: Our opinions below are subject to the following: (a) the effect of bankruptcy, insolvency, fraudulent conveyance, reorganization, arrangement, moratorium and other similar laws now or hereafter in effect relating to or affecting the rights of creditors generally; (b) the limitations imposed by California law, federal law, or equitable or public policy principles upon the performance or enforceability of any of the remedies, covenants, or other provisions of the Agreement and upon the availability of injunctive relief or other equitable remedies, including, without limitation, the effect of California and federal court decisions invoking statutes or principles of equity or of public policy, which have held that certain covenants and provisions of agreements are unenforceable where: (i) the breach of such covenants or provisions imposes restrictions or burdens upon the debtor, including acceleration or the imposition of late payment charges or increased interest rates upon delinquency in the payment of indebtedness due under debt instruments, and it cannot be demonstrated that the enforcement of such restrictions or burdens is reasonably necessary for the protection of the creditor, or (ii) the creditor's enforcement of such covenants or provisions under the circumstances would violate the creditor's implied covenant of good faith and fair dealing; and (c) the limitations upon the ability of the Company or any other party to the Agreement to waive any rights, claims or defenses available to such party at law or in equity pursuant to statute or otherwise. With respect to subclause (i) of clause (b) above, but without limiting the generality of the foregoing, we note that certain cases have held that imposition of increased interest or late charges were, under the circumstances, punitive and invalid. See Garrett v. Coast and Southern Federal Savings & Loan, 9 Cal.3d 731 (1973). 2. In expressing our opinions below, we note that your right to enforce certain remedies set forth in the Agreement may be subject to various notice and procedural limitations imposed by California law. 3. We are members of the Bar of the State of California and do not hold ourselves out as experts on the law of any other state. Consequently, our opinions below are limited to the effect of the laws of the State of California and of the federal laws of the United States. Accordingly, we express no opinion with respect to the laws of any other jurisdiction, or the effect thereof, on the transactions contemplated by the Agreement. 4. Our opinions below are limited to matters expressly set forth in this opinion letter, and no opinion is to be implied or may be inferred beyond the matters expressly so stated. 5. We call your attention to the fact that no opinion is expressed with regard to any financial or similar covenants contained in the Agreement. 6. We call your attention to the fact that no opinion is expressed with regard to usury laws as would apply to you or any of your Assignees or any Participants. Based upon and subject to the foregoing, we are of the opinion that: The Company (i) is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and is qualified to do business as a foreign corporation in the State of California and (ii) is duly qualified as a foreign corporation and in good standing in each state where its ownership, lease or operation of property or the conduct of its business requires such qualification, except, in the case of clause (ii), to the extent that the failure to do so could not reasonably be expected to have a Material Adverse Effect. The Company has the power and authority to execute and deliver, and to perform and observe the provisions of, each of the Loan Documents. The execution, delivery and performance by the Company of the Loan Documents have been duly authorized by all necessary corporate action. The Loan Documents have been duly executed and delivered by the Company. To our knowledge, no approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority is necessary or required in connection with the execution, delivery or performance by, or enforcement against, the Company of the Agreement or any other Loan Document. The Agreement and each other Loan Document to which the Company is a party constitute the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms. Neither the Company nor any Subsidiary of the Company is an "Investment Company" or a company "controlled" by an Investment Company within the meaning of the Investment Company Act of 1940. The Company is not subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act, or, to our knowledge, any other Federal or state statute or regulation limiting its ability to incur Indebtedness. Without limiting any qualification or assumption set forth in this letter, we note that our opinion in this Paragraph (g) is based solely upon the Company's Certificate and we have made no independent investigation of the status of the Company, any Person controlling the Company or any Subsidiary of the Company as an "Investment Company" or as to whether the Company is subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act, or any other Federal or state statute or regulation limiting its ability to incur Indebtedness. To our knowledge, no registration with, consent or approval of, notice to, or other action by, any Governmental Authority is required on the part of the Company for the execution, delivery or performance by the Company of the Loan Documents. The execution, delivery and performance of the Loan Documents by the Company are not in violation of the Certificate of Incorporation or Bylaws of the Company or, to our knowledge, any Requirement of Law. To our knowledge after due inquiry of officers of the Company, the execution, delivery and performance of the Loan Documents by the Company will not violate or result in a breach of any of the terms of or constitute a default under or result in the creation of any Lien on any property or assets of the Company pursuant to the terms of any agreement or instrument to which the Company is a party and which is listed in the Company's Certificate, or any order, injunction, writ or decree of any Governmental Authority to which the Company or its property is subject. The execution delivery and performance of the Loan Documents will not conflict with or contravene any of Regulations G, T, U and X promulgated by the Federal Reserve Board. To our knowledge and except with respect to those matters identified on Schedule 6.05 to the Agreement, there are no actions, suits, proceedings, claims or disputes pending or threatened against the Company or its Subsidiaries or any of their respective properties before any court, regulatory body, administrative agency, at law, in equity, in arbitration or before any Governmental Authority which (a) purport to affect or pertain to the Loan Documents, or any of the transactions contemplated thereby, or (b) if determined adversely to the Company or its Subsidiaries, would reasonably be expected to have a Material Adverse Effect. This opinion letter is rendered solely for your benefit in connection with the transaction described in the Loan Documents. Without our prior written consent, this opinion letter may not be (a) relied upon by any other person or entity or used for any other purpose; (b) quoted in whole or in part or otherwise referred to in any report or document; or (c) furnished (the original or copies thereof) to any person or entity except in connection with the enforcement of the Loan Documents by you or to regulatory authorities to which you are subject. Very truly yours, Collette & Erickson JGP:lf OCLI 1.721 EX-4 3 [COMPOSITE CONFORMED COPY WITH SUBSTANTIALLY ALL EXHIBITS CONFORMED AS EXECUTED] OPTICAL COATING LABORATORY, INC. Note Purchase Agreement Dated as of May 27, 1994 $18,000,000 8.71% Senior Notes Due June 1, 2002 TABLE OF CONTENTS (Not a Part of the Agreement) PAGE 1. PURCHASE AND SALE OF NOTES . . . . . . . . . . . . . . . . . . . 1 1.1 Issuance of Notes. . . . . . . . . . . . . . . . . . . . . 1 1.2 The Closing. . . . . . . . . . . . . . . . . . . . . . . . 1 1.3 Representations of Purchasers. . . . . . . . . . . . . . . 2 1.4 Failure to Tender, Failure of Conditions.. . . . . . . . . 3 1.5 Expenses.. . . . . . . . . . . . . . . . . . . . . . . . . 4 2. WARRANTIES AND REPRESENTATIONS . . . . . . . . . . . . . . . . . 4 2.1 Nature of Business.. . . . . . . . . . . . . . . . . . . . 4 2.2 Financial Statements; Indebtedness; Material Adverse Change.. . . . . . . . . . . . . . . . . . . . . . 5 2.3 Subsidiaries and Affiliates. . . . . . . . . . . . . . . . 5 2.4 Title to Properties; Leases; Patents, Trademarks, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.5 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2.6 Pending Litigation.. . . . . . . . . . . . . . . . . . . . 7 2.7 Full Disclosure. . . . . . . . . . . . . . . . . . . . . . 7 2.8 Corporate Organization and Authority.. . . . . . . . . . . 8 2.9 Charter Instruments, Other Agreements. . . . . . . . . . . 8 2.10 Restrictions on Company and Subsidiaries.. . . . . . . . . 8 2.11 Compliance with Law. . . . . . . . . . . . . . . . . . . . 9 2.12 ERISA; Foreign Pension Plans.. . . . . . . . . . . . . . . 9 2.13 Environmental Compliance.. . . . . . . . . . . . . . . . . 11 2.14 Sale of Notes is Legal and Authorized; Obligations are Enforceable. . . . . . . . . . . . . . . . . . . . . . 11 2.15 Governmental Consent; Certain Laws.. . . . . . . . . . . . 12 2.16 Private Offering of Notes. . . . . . . . . . . . . . . . . 12 2.17 No Defaults; Transactions Prior to Closing Date, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 2.18 Use of Proceeds of Notes.. . . . . . . . . . . . . . . . . 13 3. CLOSING CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . 13 3.1 Opinions of Counsel. . . . . . . . . . . . . . . . . . . . 13 3.2 Warranties and Representations True. . . . . . . . . . . . 14 3.3 Officers' Certificates.. . . . . . . . . . . . . . . . . . 14 3.4 Legality.. . . . . . . . . . . . . . . . . . . . . . . . . 14 3.5 Private Placement Number.. . . . . . . . . . . . . . . . . 14 3.6 Expenses.. . . . . . . . . . . . . . . . . . . . . . . . . 14 3.7 Consent and Waiver.. . . . . . . . . . . . . . . . . . . . 14 3.8 Other Purchasers.. . . . . . . . . . . . . . . . . . . . . 14 3.9 Compliance with this Agreement.. . . . . . . . . . . . . . 15 3.10 Proceedings Satisfactory.. . . . . . . . . . . . . . . . . 15 4. PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 4.1 Interest.. . . . . . . . . . . . . . . . . . . . . . . . . 15 4.2 Required Principal Prepayments.. . . . . . . . . . . . . . 15 4.3 Optional Prepayments.. . . . . . . . . . . . . . . . . . . 15 4.4 Pro Rata Payments. . . . . . . . . . . . . . . . . . . . . 16 4.5 Notation of Notes on Prepayment. . . . . . . . . . . . . . 17 4.6 No Other Optional Prepayments. . . . . . . . . . . . . . . 17 5. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES. . . . . . . . . . 17 5.1 Registration of Notes. . . . . . . . . . . . . . . . . . . 17 5.2 Exchange of Notes. . . . . . . . . . . . . . . . . . . . . 18 5.3 Replacement of Notes.. . . . . . . . . . . . . . . . . . . 18 5.4 Issuance Taxes.. . . . . . . . . . . . . . . . . . . . . . 19 6. COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 6.1 Payment of Taxes and Claims. . . . . . . . . . . . . . . . 19 6.2 Maintenance of Properties; Corporate Existence; etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 6.3 Payment of Notes and Maintenance of Office.. . . . . . . . 21 6.4 Fixed Charge Coverage. . . . . . . . . . . . . . . . . . . 21 6.5 Limitation on Consolidated Funded Debt.. . . . . . . . . . 21 6.6 Limitations on Restricted Subsidiary Indebtedness and Intercompany Indebtedness. . . . . . . . . . . . . . . 22 6.7 Consolidated Adjusted Net Worth. . . . . . . . . . . . . . 23 6.8 Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . 23 6.9 Restricted Payments and Restricted Investments.. . . . . . 26 6.10 Transfers of Property. . . . . . . . . . . . . . . . . . . 27 6.11 Merger, Consolidation, etc.. . . . . . . . . . . . . . . . 30 6.12 Nature of Business.. . . . . . . . . . . . . . . . . . . . 31 6.13 Transactions with Affiliates.. . . . . . . . . . . . . . . 31 6.14 ERISA; Foreign Pension Plans.. . . . . . . . . . . . . . . 31 6.15 Private Offering.. . . . . . . . . . . . . . . . . . . . . 33 6.16 Designation of Subsidiaries. . . . . . . . . . . . . . . . 33 6.17 Pro-Rata Offers. . . . . . . . . . . . . . . . . . . . . . 34 7. INFORMATION AS TO COMPANY. . . . . . . . . . . . . . . . . . . . 34 7.1 Financial and Business Information.. . . . . . . . . . . . 34 7.2 Officers' Certificates.. . . . . . . . . . . . . . . . . . 38 7.3 Accountants' Certificates. . . . . . . . . . . . . . . . . 38 7.4 Inspection.. . . . . . . . . . . . . . . . . . . . . . . . 38 7.5 Confidential Information.. . . . . . . . . . . . . . . . . 39 8. EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . 40 8.1 Nature of Events.. . . . . . . . . . . . . . . . . . . . . 40 8.2 Default Remedies.. . . . . . . . . . . . . . . . . . . . . 42 8.3 Annulment of Acceleration of Notes.. . . . . . . . . . . . 44 9. INTERPRETATION OF THIS AGREEMENT . . . . . . . . . . . . . . . . 44 9.1 Terms Defined. . . . . . . . . . . . . . . . . . . . . . . 44 9.2 GAAP.. . . . . . . . . . . . . . . . . . . . . . . . . . . 65 9.3 Directly or Indirectly.. . . . . . . . . . . . . . . . . . 66 9.4 Section Headings and Table of Contents and Construction.. . . . . . . . . . . . . . . . . . . . . . . 66 9.5 Governing Law. . . . . . . . . . . . . . . . . . . . . . . 66 9.6 Payments in Excess of Legal Rate of Interest.. . . . . . . 66 10. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . 66 10.1 Communications.. . . . . . . . . . . . . . . . . . . . . . 66 10.2 Reproduction of Documents. . . . . . . . . . . . . . . . . 67 10.3 Survival.. . . . . . . . . . . . . . . . . . . . . . . . . 68 10.4 Successors and Assigns.. . . . . . . . . . . . . . . . . . 68 10.5 Amendment and Waiver.. . . . . . . . . . . . . . . . . . . 68 10.6 Expenses.. . . . . . . . . . . . . . . . . . . . . . . . . 70 10.7 Payments on Notes. . . . . . . . . . . . . . . . . . . . . 70 10.8 Entire Agreement.. . . . . . . . . . . . . . . . . . . . . 71 10.9 Duplicate Originals, Execution in Counterpart. . . . . . . 71 Annex 1 -- Information as to Purchasers Annex 2 -- Payment Instructions at Closing Annex 3 -- Information as to Company and Subsidiaries Exhibit A -- Form of 8.71% Senior Note Due June 1, 2002 Exhibit B1 -- Form of Closing Opinion of Counsel to the Company Exhibit B2 -- Form of Closing Opinion of Special Counsel to the Purchasers Exhibit C -- Form of Officers' Certificate Exhibit D -- Form of Secretary's Certificate OPTICAL COATING LABORATORY, INC. 2789 Northpoint Parkway Santa Rosa, California 95407-7397 NOTE PURCHASE AGREEMENT $18,000,000 8.71% Senior Notes Due June 1, 2002 Dated as of May 27, 1994 [Separately Addressed to Each of the Purchasers Listed on Annex 1 Hereto] Ladies and Gentlemen: OPTICAL COATING LABORATORY, INC. (together with its successors and assigns, the "Company"), a Delaware corporation, hereby agrees with you as follows: 1. PURCHASE AND SALE OF NOTES 1.1 Issuance of Notes. The Company will authorize the issuance of Eighteen Million Dollars ($18,000,000) in aggregate principal amount of its 8.71% Senior Notes Due June 1, 2002 (the "Notes"). The Notes shall be in the form of Exhibit A hereto, and shall have the terms as herein and therein provided, and the terms therein provided are incorporated herein by reference as if set forth herein in full. The term "Notes" as used herein shall include each Note delivered pursuant to this Agreement or the Other Note Purchase Agreements referred to in Section 1.2(c) hereof and each Note delivered in substitution or exchange for any such Note pursuant to Section 5.2 or Section 5.3 of this Agreement or any such Other Note Purchase Agreement. 1.2 The Closing. (a) Purchase and Sale of Notes. The Company hereby agrees to sell to you and you hereby agree to purchase from the Company, in accordance with the provisions hereof, the aggregate principal amount of Notes set forth below your name on Annex 1 hereto, in the amount or amounts set forth therein, at one hundred percent (100%) of the principal amount thereof. (b) The Closing. The closing (the "Closing") of the Company's sale of Notes will be held on May 27, 1994 (the "Closing Date") at 10:00 a.m., local time, at the office of your special counsel, Hebb & Gitlin, a Professional Corporation, One State Street, Hartford, Connecticut 06103. At the Closing, the Company will deliver to you one or more Notes (as set forth below your name on Annex 1 hereto), in the denominations indicated on Annex 1 hereto, in the aggregate principal amount of your purchase, dated the Closing Date and payable to you or payable as indicated on Annex 1 hereto, against payment by federal funds wire transfer in immediately available funds of the purchase price thereof, as directed by the Company on Annex 2 hereto. (c) Other Purchasers. Contemporaneously with the execution and delivery of this Agreement, the Company is entering into a separate Note Purchase Agreement identical (except for the name and signature of the purchaser) hereto (individually, an "Other Note Purchase Agreement," and, collectively, the "Other Note Purchase Agreements;" this Agreement and the Other Note Purchase Agreements, collectively, the "Note Purchase Agreements") with each other purchaser (collectively, the "Other Purchasers") listed on Annex 1 hereto, providing for the sale to each Other Purchaser of Notes in the aggregate principal amount set forth below its name on such Annex 1. The sales of the Notes to you and to each Other Purchaser are to be separate sales. 1.3 Representations of Purchasers. (a) Purchase for Investment. You represent to the Company that you are purchasing the Notes listed on Annex 1 hereto below your name for your own account for investment and with no present intention of distributing the Notes or any part thereof, but without prejudice to your right at all times to: (i) sell or otherwise dispose of all or any part of the Notes under a registration statement filed under the Securities Act, or in a transaction exempt from the registration requirements of the Securities Act; and (ii) have control over the disposition of all of your assets to the fullest extent required by any applicable insurance law. It is understood that, in making the representations set out in Section 2.14(a) and Section 2.15(a) of this Agreement, the Company is relying, to the extent applicable, upon your representation in the immediately preceding sentence. (b) ERISA. You represent, with respect to the funds with which you are acquiring the Notes, that all of such funds are from or attributable to one or more of: (i) General Account -- your general account assets or assets of one or more segments of such general account, as the case may be; (ii) Separate Account -- a "separate account" (as defined in section 3 of ERISA), (A) 10% Pooled Separate Account -- in respect of which all requirements for an exemption under DOL Prohibited Transaction Class Exemption 90-1 are met with respect to the use of such funds to purchase the Notes, (B) Identified Plan Assets -- that is comprised of employee benefit plans identified by you in writing and with respect to which the Company hereby warrants and represents that, as of the Closing Date, neither the Company nor any ERISA Affiliate is a "party in interest" (as defined in section 3 of ERISA) or a "disqualified person" (as defined in section 4975 of the IRC) with respect to any plan so identified, or (C) Guaranteed Separate Account -- that is maintained solely in connection with fixed contractual obligations of an insurance company, under which any amounts payable, or credited, to any employee benefit plan having an interest in such account and to any participant or beneficiary of such plan (including an annuitant) are not affected in any manner by the investment performance of the separate account (as provided by 29 C.F.R. 2510.3-101(h)(1)(iii)); (iii) Qualified Professional Asset Manager -- an "investment fund" managed by a "qualified professional asset manager" (as such terms are defined in Part V of DOL Prohibited Transaction Class Exemption 84-14) and all requirements for an exemption under such Exemption are met with respect to the use of such funds to purchase the Notes; or (iv) Excluded Plan -- an employee benefit plan that is excluded from the provisions of section 406 of ERISA by virtue of section 4(b) of ERISA. (c) Accredited Investor. You represent to the Company that you are an Accredited Investor. (d) No Brokers. You represent to the Company that you have not retained any broker or agreed to any broker's or finder's fee for which you would have liability for or on account of this Agreement or for the purchase of the Notes contemplated hereby. 1.4 Failure to Tender, Failure of Conditions. If at the Closing the Company fails to tender to you the Notes to be purchased by you at the Closing, or if the conditions specified in Section 3 hereof to be fulfilled at the Closing have not been fulfilled, you may thereupon elect to be relieved of all further obligations hereunder. Nothing in this Section 1.4 shall operate to relieve the Company from any of its obligations hereunder or to waive any of your rights against the Company. Notwithstanding the foregoing, the Company shall not be obligated to issue and sell to you any Notes if any Other Purchaser shall have failed to execute and deliver a Note Purchase Agreement or to accept delivery of, or to make payments for, the Notes to be purchased by it on the Closing Date. 1.5 Expenses. (a) Generally. Whether or not the Notes are sold, the Company will promptly (and in any event within thirty (30) days of receiving any statement or invoice therefor) pay all fees, expenses and costs relating hereto, including, but not limited to: (i) the reasonable cost of reproducing this Agreement, the Notes and the other documents delivered in connection with the Closing; (ii) the reasonable fees and disbursements of your special counsel incurred in connection herewith; (iii) the reasonable cost of delivering to your home office or custodian bank, insured to your satisfaction, the Notes purchased by you at the Closing; (iv) the reasonable fees, expenses and costs incurred in complying with each of the conditions to Closing set forth in Section 3 hereof; and (v) the cost of obtaining a private placement number for the Notes from Standard & Poor's. (b) Counsel. Without limiting the generality of the foregoing, it is agreed and understood that the Company will pay, at the Closing, the statement for fees and disbursements of your special counsel presented at the Closing and the Company will also pay, upon receipt of any statement therefor, each additional statement for fees and disbursements of your special counsel rendered after the Closing in connection with the issuance of the Notes or the matters referred to in Section 1.5(a) hereof. (c) Survival. The obligations of the Company under this Section 1.5, Section 8.2(e) and Section 10.6 of this Agreement shall survive the payment of the Notes and the termination hereof. 2. WARRANTIES AND REPRESENTATIONS To induce you to enter into this Agreement and to purchase the Notes listed on Annex 1 hereto below your name, the Company warrants and represents, as of the date hereof, as follows: 2.1 Nature of Business. The Placement Memorandum (a copy of which previously has been delivered to you) correctly describes the general nature of the business and principal Properties of the Company and the Subsidiaries as of the Closing Date. 2.2 Financial Statements; Indebtedness; Material Adverse Change. (a) Financial Statements. The Company has provided you with its financial statements described in Part 2.2(a) of Annex 3 hereto. Such financial statements have been prepared in accordance with GAAP consistently applied, and present fairly, in all material respects, the financial position of the Company and its consolidated subsidiaries as of such dates and the results of their operations and cash flows for such periods. Except as set forth in Part 2.2(a) of Annex 3 hereto, all such financial statements include the accounts of all subsidiaries of the Company for the respective periods during which a subsidiary relationship has existed. All Restricted Subsidiaries were subsidiaries during all of the periods covered by such financial statements. (b) Indebtedness. Part 2.2(b) of Annex 3 hereto lists all Indebtedness of the Company and the Restricted Subsidiaries as of April 30, 1994, and provides the following information with respect to each item of such Indebtedness: (i) the holder thereof, (ii) the outstanding amount, as of April 30, 1994, (iii) the portion which is classified as current under GAAP, and (iv) the collateral securing such Indebtedness, if any. The Company has not incurred more than Two Million Dollars ($2,000,000) of additional Indebtedness since April 30, 1994. (c) Material Adverse Change. Since October 31, 1993, there has been no change in the business, prospects, profits, Properties or condition (financial or otherwise) of the Company or any of the Restricted Subsidiaries, except changes in the ordinary course of business that, in the aggregate for all such changes, could not reasonably be expected to have a Material Adverse Effect. 2.3 Subsidiaries and Affiliates. Part 2.3 of Annex 3 hereto sets forth: (a) the name of each of the Subsidiaries, its jurisdiction of incorporation and the percentage of its Voting Stock owned by the Company and each other Subsidiary, (b) the name of each Restricted Subsidiary, and (c) a description of the Affiliates (other than individuals) and the nature of their affiliation. Each of the Company and the Subsidiaries has good and marketable title to all of the shares it purports to own of the stock of each Subsidiary, free and clear in each case of any Lien. All such shares have been duly issued and are fully paid and nonassessable, except with respect to the quota issued by MMG where the failure of such quota to be fully paid would not (i) have a Material Adverse Effect or (ii) materially adversely affect the rights of the holder or holders of such quota. 2.4 Title to Properties; Leases; Patents, Trademarks, etc. (a) Title to Properties. Each of the Company and the Subsidiaries (i) has good and marketable title to all of the real Property, and good title to all of the other Property, that it purports to own, and (ii) holds a valid leasehold interest in all Property subject to any Capital Lease, in each case as reflected in the most recent balance sheet referred to in Part 2.2(a) of Annex 3 hereto (except as sold or otherwise disposed of in the ordinary course of business), except where the failure to have such good and marketable title or valid leasehold interest, as the case may be, (A) is immaterial to such financial statements, and (B) could not reasonably be expected to have a Material Adverse Effect. All such Property is free from Liens not permitted by Section 6.8 hereof. (b) Leases. Each of the Company and the Subsidiaries has complied with all material obligations under all leases to which it is a party, except where the failure to so comply could not reasonably be expected to have a Material Adverse Effect. All such leases are in full force and effect and each of the Company and the Subsidiaries enjoys peaceful and undisturbed possession under all such leases. (c) Patents, Trademarks, etc. Each of the Company and the Subsidiaries owns, possesses or has the right to use all of the patents, trademarks, service marks, trade names, copyrights and licenses, and rights with respect thereto, necessary for the present conduct of its business, without any known conflict with the rights of others, except for such failures to own, possess, or have the right to use, that, in the aggregate for all such failures, could not reasonably be expected to have a Material Adverse Effect. 2.5 Taxes. (a) Returns Filed; Taxes Paid. (i) All tax returns required to be filed by each of the Company and each Subsidiary and any other Person with which the Company or any Subsidiary files or has filed a consolidated return in any jurisdiction have been filed on a timely basis, and all taxes, assessments, fees and other governmental charges upon each of the Company, such Subsidiary and any such Person, and upon any of their respective Properties, income or franchises, that are due and payable have been paid or have been fully reserved and reflected as liabilities on the most recent balance sheet referred to in Part 2.2(a) of Annex 3 hereto, except for such tax returns and such tax payments which are being contested in good faith and which could not, in the aggregate for all such tax returns and payments, reasonably be expected to have a Material Adverse Effect. (ii) All liabilities of each of the Company, the Subsidiaries and the other Persons referred to in the preceding clause (i) with respect to federal income taxes have been finally determined except for the fiscal years 1990 through 1992, inclusive, the only years not closed by the completion of an audit or the expiration of the statute of limitations. (b) Book Provisions Adequate. (i) The amount of the liability for taxes reflected in each of the balance sheets referred to in Part 2.2(a) of Annex 3 hereto is in each case an adequate provision for taxes as of the dates of such balance sheets (including, without limitation, any payment due pursuant to any tax sharing agreement) as are or may become payable by any one or more of the Company and the other Persons consolidated with the Company in such financial statements in respect of all tax periods ending on or prior to such dates except in such cases where the liability for taxes not so provided for could not reasonably be expected to have a Material Adverse Effect. (ii) The Company does not know of any proposed additional tax assessment against it or any such Person that is not reflected in full in the most recent balance sheet referred to in Part 2.2(a) of Annex 3 hereto. 2.6 Pending Litigation. (a) Proceedings. There are no proceedings, actions or investigations pending or, to the knowledge of the Company, threatened against or affecting the Company or any Subsidiary in any court or before any Governmental Authority or arbitration board or tribunal that, in the aggregate for all such proceedings, actions and investigations, could reasonably be expected to have a Material Adverse Effect. (b) Defaults. Neither the Company nor any Subsidiary is in default with respect to any judgment, order, writ, injunction or decree of any court, Governmental Authority, arbitration board or tribunal that, in the aggregate for all such defaults, could reasonably be expected to have a Material Adverse Effect. 2.7 Full Disclosure. The financial statements referred to in Part 2.2(a) of Annex 3 hereto do not, nor does this Agreement, the Placement Memorandum or any statement furnished by or on behalf of the Company to you in connection with the negotiation or the closing of the sale of the Notes, contain any untrue statement of a material fact or omit a material fact necessary to make the statements contained therein and herein not misleading. There is no fact that the Company has not disclosed to you in writing that has had or, so far as the Company can now reasonably foresee, could reasonably be expected to have a Material Adverse Effect. 2.8 Corporate Organization and Authority. Each of the Company and the Subsidiaries: (a) is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation; (b) has all legal and corporate power and authority to own and operate its Properties and to carry on its business as now conducted and as presently proposed to be conducted; (c) has all licenses, certificates, permits, franchises and other governmental authorizations necessary to own and operate its Properties and to carry on its business as now conducted and as presently proposed to be conducted, except where the failure to have such licenses, certificates, permits, franchises and other governmental authorizations, in the aggregate for all such failures, could not reasonably be expected to have a Material Adverse Effect; and (d) has duly qualified or has been duly licensed, and is authorized to do business and is in good standing, as a foreign corporation, in each state (each of which states is listed in Part 2.8(d) of Annex 3 hereto) where the failure to be so qualified or licensed and authorized and in good standing, in the aggregate for all such failures, could reasonably be expected to have a Material Adverse Effect. 2.9 Charter Instruments, Other Agreements. (a) Charter Instruments. Neither the Company nor any Subsidiary is in violation in any respect of any term of any charter instrument or bylaw. (b) Agreements Relating to Indebtedness. Neither the Company nor any Subsidiary is in violation of any term in, and no default or event of default exists under, any agreement or other instrument to which it is a party or by which it or any of its Properties may be bound relating to, or providing the terms of, any Indebtedness specified in Part 2.2(b) of Annex 3 hereto. (c) Other Agreements. Neither the Company nor any Subsidiary is in violation of any term in, and no default or event of default exists under, any agreement or other instrument to which it is a party or by which it or any of its Properties may be bound (other than the agreements and other instruments specified in clause (b) of this Section 2.9), which, in the aggregate for all such violations, defaults or events of default could reasonably be expected to have a Material Adverse Effect. 2.10 Restrictions on Company and Subsidiaries. Neither the Company nor any Subsidiary: (a) is, to the best knowledge of the Company, a party to any contract or agreement, or subject to any charter or other corporate restriction that, in the aggregate for all such contracts, agreements, charters and corporate restrictions, could reasonably be expected to have a Material Adverse Effect; (b) is a party to any contract or agreement that restricts the right or ability of such corporation to incur Indebtedness, other than this Agreement and the agreements listed in Part 2.10(b) of Annex 3 hereto, none of which restricts the issuance and sale of the Notes or the performance by the Company of its obligations under this Agreement or under the Notes; or E\O 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 6.8 hereof. True, correct and complete copies of each of the agreements listed in Part 2.10(b) of Annex 3 hereto have been provided to you or your special counsel. 2.11 Compliance with Law. Neither the Company nor any Subsidiary is in violation of any law, ordinance, governmental rule or regulation to which it is subject, which violations, in the aggregate, could reasonably be expected to have a Material Adverse Effect. 2.12 ERISA; Foreign Pension Plans. (a) Prohibited Transactions. (i) Neither the execution of this Agreement nor the purchase of the Notes by you will constitute a "prohibited transaction" (as such term is defined in section 406 of ERISA or section 4975 of the IRC). The representation by the Company in the preceding sentence is made in reliance upon and subject to the accuracy of the representations in Section 1.3(b) hereof as to the source of funds used by you. (ii) Part 2.12(a) of Annex 3 hereto (A) completely lists all ERISA Affiliates and all employee benefit plans with respect to which the Company, or any "affiliate" (as such term is hereinafter defined), is a "party-in- interest" (as such term is hereinafter defined) or in respect of which the Notes could constitute an "employer security" (as such term is hereinafter defined), and (B) specifically identifies on such list all employee benefit plans and plans and trusts maintained by each of the Company and each ERISA Affiliate whose assets, in whole or in part, are currently managed or invested by any one or more of the Purchasers. As used in this Section 2.12(a), the terms "employee benefit plan" and "party-in-interest" have the meanings specified in section 3 of ERISA and "affiliate" and "employer security" have the meanings specified in section 407(d) of ERISA. (b) Pension Plans. (i) Compliance with ERISA. The Company and the ERISA Affiliates are in compliance with ERISA, except for such failures to comply that, in the aggregate for all such failures, could not reasonably be expected to have a Material Adverse Effect. (ii) Funding Status; Relationship of Vested Benefits to Pension Plan Assets. (A) No "accumulated funding deficiency" (as defined in section 302 of ERISA and section 412 of the IRC), whether or not waived, exists with respect to any Pension Plan. (B) The present value of all benefits, determined as of the most recent valuation date for such benefits as provided in Section 6.14 hereof, vested under each Pension Plan does not exceed the value of the assets of such Pension Plan allocable to such vested benefits, determined as of such date as provided in Section 6.14 hereof. (iii) PBGC. No liability to the PBGC has been or is expected to be incurred by the Company or any ERISA Affiliate with respect to any Pension Plan that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. No circumstance exists that constitutes grounds under section 4042 of ERISA entitling the PBGC to institute proceedings to terminate, or appoint a trustee to administer, any Pension Plan or trust created thereunder, nor has the PBGC instituted any such proceeding. (iv) Multiemployer Plans. Neither the Company nor any ERISA Affiliate has incurred or presently expects to incur any withdrawal liability under Title IV of ERISA with respect to any Multiemployer Plan. There have been no "reportable events" (as such term is defined in section 4043 of ERISA) with respect to any Multiemployer Plan that could result in the termination of such Multiemployer Plan and give rise to a liability of the Company or any ERISA Affiliate in respect thereof. (v) Foreign Pension Plans. The present value of all benefits vested under each Foreign Pension Plan, determined as of the most recent valuation date in respect thereof, does not exceed the value of the assets of such Foreign Pension Plan, and all required payments in respect of funding each such Foreign Pension Plan have been made, except that, with respect to the contributory defined pension plan maintained by OCLI Optical Coatings Ltd. (Scotland), the present value of all benefits vested under such plan may exceed the value of such plan's assets by an amount not in excess of Two Hundred Fifty Thousand Dollars ($250,000). 2.13 Environmental Compliance. (a) Compliance. Each of the Company and the Subsidiaries is in compliance with all Environmental Protection Laws in effect in each jurisdiction where it is presently doing business and in which the failure so to comply, in the aggregate for all such failures, could reasonably be expected to have a Material Adverse Effect. (b) Liability. Neither the Company nor any Subsidiary is subject to any liability under any Environmental Protection Laws that, in the aggregate for all such liabilities, could reasonably be expected to have a Material Adverse Effect. (c) Notices. Neither the Company nor any Subsidiary has received any: (i) notice from any Governmental Authority by which any of its present or previously-owned or leased Properties has been identified in any manner by any Governmental Authority as a hazardous substance disposal or removal site, "Super Fund" clean-up site or candidate for removal or closure pursuant to any Environmental Protection Law; (ii) notice of any Lien arising under or in connection with any Environmental Protection Law that has attached to any revenues of, or to, any of its owned or leased Properties; or (iii) any communication, written or oral, from any Governmental Authority concerning any action or omission by the Company or such Subsidiary in connection with its ownership or leasing of any Property resulting in the release of any Hazardous Substance resulting in any violation of any Environmental Protection Law; where the effect of which, in the aggregate for all such notices and communications, could reasonably be expected to have a Material Adverse Effect. 2.14 Sale of Notes is Legal and Authorized; Obligations are Enforceable. (a) Sale of Notes is Legal and Authorized. Each of the issuance, sale and delivery of the Notes by the Company, the execution and delivery of this Agreement by the Company and compliance by the Company with all of the provisions of this Agreement and of the Notes: (i) is within the corporate powers of the Company; and (ii) is legal and does not conflict with, result in any breach of any of the provisions of, constitute a default under, or result in the creation of any Lien upon any Property of the Company or any Subsidiary under the provisions of, any agreement, charter instrument, bylaw or other instrument to which it is a party or by which it or any of its Properties may be bound. (b) Obligations are Enforceable. Each of this Agreement and the Notes has been duly authorized by all necessary action on the part of the Company, has been duly executed and delivered by authorized officers of the Company and constitutes a legal, valid and binding obligation of the Company, enforceable in accordance with its terms, except that the enforceability of this Agreement and of the Notes may be: (i) limited by applicable bankruptcy, reorganization, arrangement, insolvency, moratorium or other similar laws affecting the enforceability of creditors' rights generally; and (ii) subject to the availability of equitable remedies. 2.15 Governmental Consent; Certain Laws. (a) Governmental Consent. Neither the nature of the Company or any Subsidiary, or of any of their respective businesses or Properties, nor any relationship between the Company or any Subsidiary and any other Person, nor any circumstance in connection with the offer, issuance, sale or delivery of the Notes and the execution and delivery of this Agreement, is such as to require a consent, approval or authorization of, or filing, registration or qualification with, any Governmental Authority on the part of the Company as a condition to the execution and delivery of this Agreement or the offer, issuance, sale or delivery of the Notes. (b) Certain Laws. Neither the Company nor any Subsidiary is subject to regulation under, or otherwise required to comply with any filing, registration or notice provisions of, (i) the Investment Company Act of 1940, as amended, (ii) the Public Utility Holding Company Act of 1935, as amended, (iii) the Interstate Commerce Act, as amended, or (iv) the Federal Power Act, as amended. (c) Security Clearances. The Company and each of the Subsidiaries has obtained all necessary security clearances from the Department of Defense of the United States of America and each other Governmental Authority with respect to the facilities, officers and employees of the Company and each such Subsidiary which are necessary for the present conduct of the business of the Company and the Subsidiaries, except where the failure to have or maintain any such security clearance, in the aggregate for all such failures, could not reasonably be expected to have a Material Adverse Effect. 2.16 Private Offering of Notes. Neither the Company nor the Placement Agent (the only Person authorized or employed by the Company as agent, broker, dealer or otherwise in connection with the offering or sale of the Notes or any similar Security of the Company, other than employees of the Company) has offered any of the Notes or any similar Security of the Company for sale to, or solicited offers to buy any thereof from, or otherwise approached or negotiated with respect thereto with, any prospective purchaser, other than the Purchasers and not more than seventy (70) other Institutional Investors, each of whom was offered all or a portion of the Notes at private sale for investment. 2.17 No Defaults; Transactions Prior to Closing Date, etc. (a) No event has occurred and no condition exists that, upon the execution and delivery of this Agreement and the issuance of the Notes, would constitute a Default or an Event of Default. (b) Neither the Company nor any Restricted Subsidiary has entered into any transaction since the date of the most recent balance sheet referred to in Part 2.2(a) of Annex 3 hereto that would have been prohibited by Section 6.6, Section 6.8 through Section 6.11, inclusive, or Section 6.13 hereof had such Sections applied since such date. 2.18 Use of Proceeds of Notes. (a) Use of Proceeds. The Company will apply the proceeds from the sale of the Notes in the manner specified in Part 2.18(a) of Annex 3 hereto. (b) Margin Securities. None of the transactions contemplated herein and in the Notes (including, without limitation, the use of the proceeds from the sale of the Notes) violates, will violate or will result in a violation of section 7 of the Exchange Act or any regulations issued pursuant thereto, including, without limitation, Regulations G, T, U and X of the Board of Governors of the Federal Reserve System, 12 C.F.R., Chapter II. The obligations of the Company under this Agreement and the Notes are not and will not be directly or indirectly secured (within the meaning of such Regulation G) by any Margin Security, and no Notes are being sold on the basis of any such collateral. (c) Absence of Foreign or Enemy Status. Neither the sale of the Notes nor the use of proceeds from the sale thereof will result in a violation of any of the foreign assets control regulations of the United States Treasury Department (31 C.F.R., Subtitle B, Chapter V, as amended), or any ruling issued thereunder or any enabling legislation or Presidential Executive Order in connection therewith. 3. CLOSING CONDITIONS Your obligation to purchase and pay for the Notes to be delivered to you at the Closing is subject to the following conditions precedent: 3.1 Opinions of Counsel. You shall have received from (a) Collette & Erickson, counsel for the Company, and (b) Hebb & Gitlin, a Professional Corporation, your special counsel, closing opinions, each dated as of the Closing Date, substantially in the respective forms set forth in Exhibit B1 and Exhibit B2 hereto and as to such other matters as you may reasonably request. This Section 3.1 shall constitute direction by the Company to such counsel named in the foregoing clause (a) to deliver such closing opinion to you. 3.2 Warranties and Representations True. The warranties and representations contained in Section 2 hereof shall be true on the Closing Date with the same effect as though made on and as of that date. 3.3 Officers' Certificates. You shall have received: (a) a certificate dated the Closing Date and signed by two Senior Officers, substantially in the form of Exhibit C hereto; and (b) a certificate dated the Closing Date and signed by the Secretary or an Assistant Secretary of the Company, substantially in the form of Exhibit D hereto. 3.4 Legality. The Notes shall on the Closing Date qualify as a legal investment for you under applicable insurance law (without regard to any "basket" or "leeway" provisions), and such acquisition shall not subject you to any penalty or other onerous condition contained in or pursuant to any such law or regulation, and you shall have received such evidence as you may reasonably request to establish compliance with this condition. 3.5 Private Placement Number. The Company shall have obtained or caused to be obtained a private placement number for the Notes from the CUSIP Service Bureau of Standard & Poor's and you shall have been informed of such private placement number. 3.6 Expenses. All fees and disbursements required to be paid pursuant to Section 1.5(b) hereof shall have been paid in full. 3.7 Consent and Waiver. The Company shall have received a consent and waiver from Bank of America in respect of the Bank Credit Agreement, which consent and waiver shall be satisfactory in form, scope and substance to you and your special counsel. 3.8 Other Purchasers. None of the Other Purchasers shall have failed to execute and deliver a Note Purchase Agreement or to accept delivery of or make payment for the Notes to be purchased by it on the Closing Date. 3.9 Compliance with this Agreement. Each of the Company and the Subsidiaries shall have performed and complied with all agreements and conditions contained herein that are required to be performed or complied with by the Company and the Subsidiaries on or prior to the Closing Date, and such performance and compliance shall remain in effect on the Closing Date. 3.10 Proceedings Satisfactory. All proceedings taken in connection with the issuance and sale of the Notes and all documents and papers relating thereto shall be satisfactory to you and your special counsel. You and your special counsel shall have received copies of such documents and papers as you or they may reasonably request in connection therewith or in connection with your special counsel's closing opinion, all in form and substance satisfactory to you and your special counsel. 4. PAYMENTS 4.1 Interest. Interest shall accrue on the unpaid principal balance of the Notes on the basis of a 360-day year of twelve 30-day months at the rate of eight and seventy-one one hundredths percent (8.71%) per annum and shall be payable, in arrears, semi-annually on the first (1st) day of each June and December in each year, commencing on December 1, 1994, until the principal amount of the Notes in respect of which such interest shall have accrued shall become due and payable, and interest shall accrue on any such overdue principal (including any overdue prepayment of principal) and Make- Whole Amount, if any, and (to the extent permitted by applicable law) on any overdue installment of interest, at a rate equal to the lesser of (a) the highest rate allowed by applicable law, and (b) nine and seventy-one one hundredths percent (9.71%) per annum. 4.2 Required Principal Prepayments. The Company shall pay, and there shall become due and payable, Three Million Six Hundred Thousand Dollars ($3,600,000) in principal amount of the Notes on June 1 in each of 1998, 1999, 2000, 2001 and 2002, inclusive (each, a "Required Principal Prepayment"). Each Required Principal Prepayment shall be at one hundred percent (100%) of the principal amount paid, together with interest accrued thereon to the date of payment. Without limitation of the foregoing, all of the principal of the Notes remaining outstanding on June 1, 2002 (if any), together with interest accrued thereon, shall become due and payable on June 1, 2002. 4.3 Optional Prepayments. (a) Optional Prepayments. The Company may, at any time and from time to time, prepay the principal amount of the Notes in part, in integral multiples of One Million Dollars ($1,000,000), or in whole, in each case together with: (i) an amount equal to the Make-Whole Amount, if any, on such date in respect of the principal amount of the Notes being so prepaid; and (ii) interest on such principal amount then being prepaid accrued to the prepayment date. (b) Notice of Optional Prepayment. The Company will give notice, in writing, of any optional prepayment of the Notes to each holder of Notes not less than thirty (30) days or more than sixty (60) days before the date fixed for prepayment, specifying: (i) such date; (ii) that such prepayment is to be made pursuant to Section 4.3 of this Agreement; (iii) the principal amount of each Note to be prepaid on such date; (iv) the interest to be paid on each such Note, accrued to the date fixed for payment; and (v) the calculation of an estimated Make-Whole Amount, if any (calculated as if the date of such notice was the date of prepayment), due in connection with such prepayment, accompanied by a copy of any applicable documentation used in connection with determining the Make-Whole Discount Rate in respect of such prepayment. Notice of prepayment having been so given, the aggregate principal amount of the Notes to be prepaid specified in such notice, together with the Make-Whole Amount as of the date of prepayment specified in such notice, if any, and accrued interest thereon shall become due and payable on such specified date of prepayment. Two (2) Business Days prior to the making of such prepayment, the Company shall deliver to each holder of Notes by facsimile transmission a certificate of a Senior Financial Officer specifying the details of the calculation of such Make-Whole Amount as of such specified date of prepayment, accompanied by a copy of any applicable documentation used in connection with determining the Make- Whole Discount Rate in respect of such prepayment. (c) Application of Prepayments to Required Prepayments. Each partial prepayment of the principal of the Notes made pursuant to this Section 4.3 shall be applied against and reduce each of the then remaining Required Principal Prepayments by a percentage equal to the aggregate principal amount of the Notes so prepaid divided by the aggregate principal amount of the Notes outstanding immediately prior to such prepayment. 4.4 Pro Rata Payments. (a) Required Principal Prepayments. If at the time any Required Principal Prepayment under Section 4.2 hereof is due and there is more than one Note outstanding, the aggregate principal amount of such Required Principal Prepayment shall be allocated among the Notes at the time outstanding in proportion, as nearly as practicable, to the respective unpaid principal amounts of the Notes then outstanding, with adjustments, to the extent practicable, to equalize for any prior prepayments not in such proportion. (b) Optional Prepayments. If at the time any optional prepayment under Section 4.3 hereof is due and there is more than one Note outstanding, the aggregate principal amount of such optional prepayment of the Notes shall be allocated among the Notes at the time outstanding in proportion, as nearly as practicable, to the respective unpaid principal amounts of the Notes then outstanding, with adjustments, to the extent practicable, to equalize for any prior prepayments not in such proportion. 4.5 Notation of Notes on Prepayment. Upon any partial prepayment of a Note, such Note may, at the option of the holder thereof, be (but shall not be required to be): (a) surrendered to the Company pursuant to Section 5.2 hereof in exchange for a new Note in a principal amount equal to the principal amount remaining unpaid on the surrendered Note; (b) made available to the Company for notation thereon of the portion of the principal so prepaid; or (c) marked by such holder with a notation thereon of the portion of the principal so prepaid. In case the entire principal amount of any Note has been paid, such Note shall be surrendered to the Company for cancellation and shall not be reissued, and no Note shall be issued in lieu of the paid principal amount of any Note. 4.6 No Other Optional Prepayments. Except for prepayments made in accordance with this Section 4 or in connection with an offer made in compliance with Section 6.17 hereof, the Company may not make any prepayment of principal in respect of, or otherwise acquire or make any offer to acquire, or permit any Subsidiary or any Affiliate to acquire or make any offer to acquire, directly or indirectly, any of the Notes. 5. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES 5.1 Registration of Notes. The Company will cause to be kept at its office maintained pursuant to Section 6.3(b) hereof a register for the registration and transfer of Notes. The name and address of each holder of one or more Notes, the outstanding principal amount of each such Note, each transfer thereof and the name and address of each transferee of one or more Notes shall be registered in such register. 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. 5.2 Exchange of Notes. (a) Upon surrender of any Note at the office of the Company maintained pursuant to Section 6.3(b) hereof duly endorsed or accompanied by a written instrument of transfer duly executed by the registered holder of such Note or such holder's attorney duly authorized in writing, the Company will execute and deliver, at the Company's expense (except as provided below), new Notes in exchange therefor, in denominations of at least One Hundred Thousand Dollars ($100,000) (except as may be necessary to reflect any principal amount not evenly divisible by One Hundred Thousand Dollars ($100,000)), in an aggregate principal amount equal to the unpaid principal amount of the 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 A hereto. 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. (b) The Company will pay the cost of delivering to or from such holder's home office or custodian bank from or to the Company, insured to the reasonable satisfaction of such holder, the surrendered Note and any Note issued in substitution or replacement for the surrendered Note. (c) Each holder of Notes agrees that, in the event it shall sell or transfer any Note without surrendering such Note to the Company as set forth in Section 5.2(a) hereof, it shall: (i) prior to the delivery of such Note, make a notation thereon of all principal, if any, paid on such Note and shall also indicate thereon the date to which interest shall have been paid on such Note; and (ii) promptly notify the Company of the name and address of the transferee of any such Note so transferred and the effective date of such transfer. 5.3 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 (or of ownership by such Institutional Investor's nominee) and of such loss, theft, destruction or mutilation), and (a) in the case of loss, theft or destruction, of indemnity reasonably satisfactory to the Company (provided that if the holder of such Note is an Institutional Investor or a nominee of such Institutional Investor, such Institutional Investor's own unsecured agreement of indemnity shall be deemed to be satisfactory for such purpose), or (b) in the case of mutilation, upon surrender and cancellation thereof, the Company at its own expense will execute and deliver, in lieu thereof, a new 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. 5.4 Issuance Taxes. Except as provided in Section 5.2 hereof, the Company will pay all taxes (if any) due in connection with and as the result of the initial issuance and sale of the Notes and in connection with any modification of this Agreement or the Notes and shall save each holder of Notes harmless without limitation as to time against any and all liabilities with respect to all such taxes. The obligations of the Company under this Section 5.4 shall survive the payment or prepayment of the Notes and the termination of this Agreement. 6. COVENANTS The Company covenants that on and after the Closing Date and so long as any of the Notes shall be outstanding: 6.1 Payment of Taxes and Claims. (a) Payment of Taxes and Claims. The Company will, and will cause each Subsidiary to, pay before they become delinquent: (i) all taxes, assessments and governmental charges or levies imposed upon it or its Property; and (ii) all claims or demands of materialmen, mechanics, carriers, warehousemen, vendors, landlords and other like Persons that, if unpaid, might result in the creation of a Lien upon its Property; provided, that items of the foregoing description need not be paid (A) while being actively contested in good faith and by appropriate proceedings as long as adequate book reserves have been established and maintained and exist with respect thereto, and (B) so long as the title of the Company or the Subsidiary, as the case may be, to, and its right to use, such Property is not materially adversely affected thereby. (b) Opinions. In the case of any such item being contested as described in Section 6.1(a) hereof involving in excess of One Million Dollars ($1,000,000), the existence of, and the appropriateness of the forum for, the proceedings will be acknowledged in writing by the independent counsel responsible for such proceedings and the adequacy of such reserves will be supported by an opinion of the independent accountants of the Company or such Subsidiary (which documents will be delivered to the holders of Notes as provided in Section 7.1(c) hereof), provided that, if the aggregate amount of all such items shall at any time exceed Two Million Dollars ($2,000,000), regardless of the amount of any individual item, the adequacy of the reserves for all such items will be supported by opinions of the independent accountants of the Company or such Subsidiary (which opinions will be delivered to the holders of the Notes as provided in Section 7.1(c) hereof). 6.2 Maintenance of Properties; Corporate Existence; etc. The Company will, and will cause each Subsidiary to: (a) Property -- maintain, in all material respects, its Property in good condition and working order, ordinary wear and tear excepted, and make all necessary renewals, replacements, additions, betterments and improvements thereto; (b) Insurance -- maintain, with financially sound and reputable insurers, insurance with respect to its Property and business against such casualties and contingencies, of such types (including, without limitation, insurance with respect to losses arising out of Property loss or damage, public liability, business interruption, larceny, workers' compensation, embezzlement or other criminal misappropriation) and in such amounts as is customary in accordance with sound business practices in the case of corporations of established reputations engaged in the same or a similar business and similarly situated, provided, that, in lieu of any such insurance in respect of worker's compensation or employee healthcare, the Company or any Subsidiary may maintain programs of self-insurance with respect to workers' compensation and employee healthcare so long as each such program is established in accordance with sound financial practices and applicable law and each such program shall maintain adequate reserves in accordance with GAAP and in accordance with sound actuarial and insurance principles; (c) Financial Records -- keep accurate and complete books of records and accounts in which accurate and complete entries shall be made of all its business transactions and that will permit the provision of accurate and complete financial statements in accordance with GAAP; (d) Corporate Existence and Rights -- (i) do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence, rights (charter and statutory) and franchises, except where the failure to do so, in the aggregate, could not reasonably be expected to have a Material Adverse Effect, and (ii) maintain each Restricted Subsidiary as a Restricted Subsidiary, in each case except as permitted by Section 6.10(b) and Section 6.11 hereof; and (e) Compliance with Law -- not be in violation of any law, ordinance or governmental rule or regulation to which it is subject (including, without limitation, any Environmental Protection Law) and not fail to obtain any license, certificate, permit, franchise or other governmental authorization necessary to the ownership of its Properties or to the conduct of its business if such violations or failures to obtain, in the aggregate, could reasonably be expected to have (i) a Material Adverse Effect or (ii) a material adverse effect on the ability of the Company or any Subsidiary to conduct in the future the business it conducts at the time of such violation or failure to obtain. 6.3 Payment of Notes and Maintenance of Office. (a) Payment of Notes. The Company will punctually pay, or cause to be paid, the principal of and interest (and Make- Whole Amount, if any) on the Notes, as and when the same shall become due according to the terms of this Agreement and of the Notes. (b) Maintenance of Office. The Company will maintain an office at the address of the Company set forth in Section 10.1 hereof where notices, presentations and demands in respect of this Agreement or of the Notes may be made upon it. Such office will be maintained at such address until such time as the Company shall notify the holders of the Notes of any change of location of such office, which will in any event be located within the United States of America. 6.4 Fixed Charge Coverage. (a) Prior to July 31, 1994. The Company will not, at any time prior to July 31, 1994, permit Consolidated Net Income Available for Fixed Charges for the period of two (2) consecutive fiscal quarters of the Company most recently ended at such time to be less than one hundred fifty percent (150%) of Consolidated Fixed Charges for such period. (b) July 31, 1994 to October 31, 1994. The Company will not, at any time on or after July 31, 1994 and prior to October 31, 1994, permit Consolidated Net Income Available for Fixed Charges for the period of three (3) consecutive fiscal quarters of the Company most recently ended at such time to be less than one hundred fifty percent (150%) of Consolidated Fixed Charges for such period. (c) October 31, 1994 and Thereafter. The Company will not, at any time on or after October 31, 1994, permit Consolidated Net Income Available for Fixed Charges for the period of four (4) consecutive fiscal quarters of the Company most recently ended at such time to be less than one hundred fifty percent (150%) of Consolidated Fixed Charges for such period. 6.5 Limitation on Consolidated Funded Debt. The Company will not at any time permit Consolidated Funded Debt to exceed sixty percent (60%) of Consolidated Total Capitalization, in each case determined at such time. 6.6 Limitations on Restricted Subsidiary Indebtedness and Intercompany Indebtedness. (a) Limit on Restricted Subsidiary Indebtedness. The Company will not permit any Restricted Subsidiary to incur, issue, assume or in any other manner become liable in respect of any Indebtedness unless (i) such Indebtedness is Excluded Restricted Subsidiary Indebtedness and immediately prior to the creation thereof, and after giving effect thereto and to any concurrent application of the proceeds of such Indebtedness, no Default or Event of Default would exist, (ii) such Indebtedness is not Excluded Restricted Subsidiary Indebtedness and immediately prior to the creation thereof, and after giving effect thereto and to any concurrent application of the proceeds of such Indebtedness, (A) the sum of (I) Total Restricted Subsidiary Indebtedness outstanding at such time, plus (II) the aggregate amount of Indebtedness and other obligations secured by Liens permitted pursuant to Section 6.8(a)(viii) hereof at such time, would not exceed ten percent (10%) of Consolidated Total Assets at such time, and (B) no Default or Event of Default would exist, or (iii) such Indebtedness is a renewal, extension (as to time) or refunding of Indebtedness previously incurred in accordance with clause (i) or clause (ii) hereof, and (A) the principal amount of the Indebtedness being so renewed, extended or refunded which is outstanding at the time of such renewal, extension or refunding is not increased, and (B) immediately prior to such renewal, extension or refunding, and after giving effect thereto, no Default or Event of Default would exist. (b) No Restrictions on Distributions. The Company shall not permit any Restricted Subsidiary to become obligated in respect of any Indebtedness after the Closing Date if any agreement, note or other instrument executed in connection with, or as a condition to obtaining the funds constituting, such Indebtedness contains any limitation or restriction on the ability of such Restricted Subsidiary to declare or make Distributions in respect of its capital stock. (c) Disposition of Restricted Subsidiary Indebtedness. Each Restricted Subsidiary any of whose outstanding Indebtedness is at any time sold, transferred or otherwise disposed of by the Company or a Restricted Subsidiary shall be deemed to have incurred all such Indebtedness, and all Liens securing such Indebtedness (if any), at the time of such sale, transfer or other disposition. (d) Limitation on Intercompany Indebtedness. The Company will not at any time incur, issue, assume or in any other manner become liable in respect of any Indebtedness owing to any Subsidiary unless (i) such Subsidiary is a Wholly-Owned Restricted Subsidiary, and (ii) all of the Company's obligations in respect of such Indebtedness are subordinated in right of payment and security to the Company's obligations under the Notes on terms and conditions satisfactory in form, scope and substance to the Majority Holders. 6.7 Consolidated Adjusted Net Worth. The Company will not at any time permit Consolidated Adjusted Net Worth to be less than Forty Million Dollars ($40,000,000). 6.8 Liens. (a) Negative Pledge. The Company will not, and will not permit any Restricted Subsidiary to, cause or permit to exist, or agree or consent to cause or permit to exist in the future (upon the happening of a contingency or otherwise), any of their Property, whether now owned or hereafter acquired, to be subject to any Lien except: (i) Taxes, etc. -- Liens securing Property taxes, assessments or governmental charges or levies or the claims or demands of materialmen, mechanics, carriers, warehousemen, vendors, landlords and other like Persons, so long as the payment thereof is not at the time required by Section 6.1 hereof; (ii) Judicial Liens -- Liens (A) arising from judicial attachments and judgments, (B) securing appeal bonds or supersedeas bonds, and (C) 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) any such attachments or judgments relating thereto have been stayed, bonded or discharged within sixty (60) days of the entry thereof and the execution or other enforcement of such Liens is otherwise effectively stayed, (2) the claims secured thereby are being actively contested in good faith and by appropriate proceedings, (3) adequate book reserves shall have been established and maintained and shall exist with respect thereto and (4) the aggregate amount so secured shall not at any time exceed the greater of (x) Five Million Dollars ($5,000,000) or (y) ten percent (10%) of Consolidated Adjusted Net Worth at such time; (iii) Ordinary Course Business Liens -- Liens incurred or deposits made in the ordinary course of business (A) in connection with workers' compensation, unemployment insurance, social security and other like laws to secure statutory or public obligations of the Company or such Restricted Subsidiary in respect thereof, and (B) to secure the performance of letters of credit, bids, tenders, sales contracts, leases, statutory obligations, surety and performance bonds (of a type other than set forth in Section 6.8(a)(ii)) hereof) and other similar obligations not incurred in connection with the borrowing of money, the obtaining of advances or the payment of the deferred purchase price of Property; provided, however, that all such Liens do not, in the aggregate, materially detract from the value of such Property or materially interfere with the use of such Property in the ordinary conduct of the business of the Company and the Restricted Subsidiaries, taken as a whole; (iv) Certain Encumbrances -- Liens in the nature of reservations, exceptions, encroachments, easements, rights-of-way, covenants, conditions, restrictions, leases and other similar title exceptions or encumbrances affecting real Property, provided that such exceptions and encumbrances do not in the aggregate materially detract from the value of such Properties or materially interfere with the use of such Property in the ordinary conduct of the business of the Company and the Restricted Subsidiaries, taken as a whole; (v) Intercompany Liens -- Liens on Property of a Restricted Subsidiary, provided that such Liens secure only Indebtedness or other obligations owing to the Company; (vi) Closing Date Liens -- Liens in existence on the Closing Date securing Indebtedness, provided that such Liens and the Indebtedness secured thereby are described in Part 6.8(a)(vi) of Annex 3 hereto; (vii) Purchase Money Liens -- Purchase Money Liens, if, after giving effect thereto and to any concurrent transactions, each such Purchase Money Lien secures Indebtedness in an amount not exceeding the lesser of (A) the cost of acquisition or construction, or (B) the Fair Market Value of the particular Property to which such Indebtedness relates; (viii) Other Liens -- other Liens on Property of the Company or the Restricted Subsidiaries not otherwise permitted pursuant to clause (i) through clause (vii), inclusive, of this Section 6.8(a), provided that, (A) the Indebtedness or other obligations secured thereby shall have been incurred, or shall be permitted to be outstanding, in accordance with the provisions of Section 6.5 and Section 6.6 hereof; (B) immediately prior to, and after giving effect to the incurrence, assumption or creation thereof and to any concurrent application of the proceeds of any Indebtedness or other obligation secured thereby, (I) the sum of (1) the aggregate amount of all Indebtedness and other obligations secured by such Liens at such time, plus, (2) the aggregate amount of Total Restricted Subsidiary Indebtedness outstanding at such time, would not exceed ten percent (10%) of Consolidated Total Assets at such time, and (II) no Default or Event of Default would exist; and (ix) Refinancings, Extensions, etc. -- Liens securing renewals, extensions (as to time) and refinancings of Indebtedness secured by the Liens described in clause (i) through clause (viii) of this Section 6.8(a), provided that (A) the amount of Indebtedness or other obligations secured by each such Lien is not increased in excess of the amount of such Indebtedness or other obligations outstanding on the date of such renewal, extension or refinancing, (B) none of such Liens is extended to encumber or otherwise relate to or cover any additional Property of the Company or any Restricted Subsidiary, and (C) immediately prior to, and immediately after the consummation of such renewal, extension or refinancing, and after giving effect thereto, no Default or Event of Default exists or would exist. (b) Equal and Ratable Lien; Equitable Lien. In case any Property shall be subjected to a Lien in violation of this Section 6.8, the Company will forthwith make or cause to be made, to the fullest extent permitted by applicable law, provision whereby the Notes will be secured equally and ratably with all other obligations secured thereby pursuant to such agreements and instruments as shall be approved by the Majority Holders, and the Company will cause to be delivered to each holder of Notes an opinion of independent counsel (selected by the Company and reasonably satisfactory to the Majority Holders) to the effect that such agreements and instruments are enforceable in accordance with their terms. Regardless of whether the Company complies with the provisions of the immediately preceding sentence, in case any Property shall be subjected to a Lien in violation of this Section 6.8, the Notes shall have the benefit, to the fullest extent that, and with such priority as, the holders of Notes may be entitled thereto under applicable law, of an equitable Lien on such Property securing the Notes. A violation of this Section 6.8 will constitute an Event of Default, whether or not any such provision is made or action is taken pursuant to this Section 6.8(b). (c) Financing Statements. The Company will not, and will not permit any Restricted Subsidiary to, sign or file a financing statement under the Uniform Commercial Code of any jurisdiction that names the Company or such Restricted Subsidiary as debtor, or sign any security agreement authorizing any secured party thereunder to file any such financing statement, except, in any such case, a financing statement filed or to be filed to perfect or protect a security interest that the Company or such Restricted Subsidiary is entitled to create, assume or incur, or permit to exist, under the foregoing provisions of this Section 6.8 or to evidence for informational purposes a lessor's interest in Property leased to the Company or any such Restricted Subsidiary. 6.9 Restricted Payments and Restricted Investments. (a) Limit on Restricted Payments and Restricted Investments. The Company will not at any time, and will not at any time permit any Restricted Subsidiary to, declare or make any Restricted Payment or make any Restricted Investment unless: (i) immediately after, and after giving effect to, such Restricted Payment or such Restricted Investment, the sum of the aggregate amount of (x) all Restricted Payments declared or made during the period from and after the Closing Date to and including the date such Restricted Payment or Restricted Investment is made, plus (y) all Restricted Investments held at such time by the Company and the Restricted Subsidiaries would not exceed the sum of (A) Five Million Dollars ($5,000,000), plus (B) the sum of fifty percent (50%) (or minus one hundred percent (100%) in the case of a deficit) of Consolidated Net Income for the period commencing on and including October 31, 1993 and ending on and including the date such Restricted Payment is declared or made or such Restricted Investment is made, plus (C) the aggregate amount of cash proceeds (net of all costs and out-of-pocket expenses in connection therewith, including, without limitation, placement, underwriting and brokerage fees and expenses) received by the Company and the Restricted Subsidiaries after the Closing Date and prior to such time from the issuance and sale of (I) capital stock (other than Redeemable Stock) of the Company (either directly or through the exercise of warrants, rights or other options or the exercise of any rights of the holder of any Indebtedness of the Company to convert such Indebtedness to capital stock (other than Redeemable Stock)) or (II) any warrants, rights or other options to purchase such capital stock; and (ii) at the time of such declaration and immediately before, and after giving effect to, such Restricted Payment or such Restricted Investment, no Default or Event of Default exists or would exist. (b) Time of Payment. The Company shall not authorize a Distribution on any class of its capital stock that is not payable within ninety (90) days of authorization. (c) New Restricted Subsidiaries. Any Subsidiary which becomes a Restricted Subsidiary after the Closing Date shall be deemed to have made, at the time such Subsidiary becomes a Restricted Subsidiary, all Restricted Investments of such Subsidiary existing immediately after such Subsidiary shall have become a Restricted Subsidiary. 6.10 Transfers of Property; Restricted Subsidiary Stock. (a) Transfers of Property. The Company will not, and will not permit any Restricted Subsidiary to, sell, lease as lessor, transfer or otherwise dispose of any Property (collectively, "Transfers"), except: (i) Transfers of inventory and of obsolete or worn- out Property, in each case in the ordinary course of business of the Company or such Restricted Subsidiary; (ii) Transfers from the Company to a Wholly-Owned Restricted Subsidiary, and Transfers from a Restricted Subsidiary to the Company or to a Wholly-Owned Restricted Subsidiary; (iii) Transfers of miscellaneous items of Property having an individual current book value of less than One Million Dollars ($1,000,000), so long as the aggregate book value of all Property subject to Transfers during any fiscal year of the Company pursuant to this clause (iii) does not exceed Two Million Dollars ($2,000,000) for such fiscal year; (iv) Transfers of Property in connection with an exchange of Property by the Company or a Restricted Subsidiary with another Person, so long as the Property received by the Company or such Restricted Subsidiary in such exchange shall have a substantially similar business use as, and a Fair Market Value equal to or greater than the Fair Market Value of, the Property subject to such Transfer; and (v) any other Transfer of Property at any time to a Person, other than an Affiliate, for Acceptable Consideration if: (A) the sum of (1) the current book value of such Property, plus (2) the aggregate book value of all other Property of the Company and the Restricted Subsidiaries previously subjected to Transfers (other than Transfers referred to in the foregoing clause (i) through clause (iv), inclusive, (collectively, "Excluded Transfers")) during the then-current fiscal year of the Company, would not exceed ten percent (10%) of Consolidated Total Assets determined as of the last day of the fiscal year of the Company ended immediately prior to the time of such Transfer (such amount in respect of the fiscal year in which such Transfer is proposed to be made is herein referred to as the "Specified Asset Percentage"); and (B) immediately prior to, and immediately after the consummation of such Transfer, and after giving effect thereto, no Default or Event of Default exists or would exist. (b) Transfers of Restricted Subsidiary Stock. The Company will not, and will not permit any Restricted Subsidiary to, Transfer any shares of the stock (or any warrants, rights or options to purchase stock or other Securities exchangeable for or convertible into stock) of a Restricted Subsidiary (such stock, warrants, rights, options and other Securities herein called "Restricted Subsidiary Stock"), nor will the Company permit any Restricted Subsidiary to issue, sell or otherwise dispose of any shares of its own Restricted Subsidiary Stock, provided that the foregoing restrictions do not apply to: (i) the issuance by a Restricted Subsidiary of shares of its own Restricted Subsidiary Stock to the Company or a Wholly-Owned Restricted Subsidiary; (ii) Transfers (other than leases) of shares of Restricted Subsidiary Stock by the Company to a Wholly- Owned Restricted Subsidiary or by a Restricted Subsidiary to the Company or to a Wholly-Owned Restricted Subsidiary; (iii) the issuance by a Restricted Subsidiary of directors' qualifying shares; and (iv) the Transfer of all of the Restricted Subsidiary Stock of a Restricted Subsidiary owned by the Company and the other Restricted Subsidiaries if: (A) such Transfer satisfies the requirements of Section 6.10(a)(v) hereof; (B) in connection with such Transfer the entire Investment (whether represented by stock, Indebtedness, claims or otherwise) of the Company and the other Restricted Subsidiaries in such Restricted Subsidiary is sold, transferred or otherwise disposed of to a Person other than the Company or a Restricted Subsidiary not being simultaneously disposed of; (C) the Restricted Subsidiary being disposed of has no continuing Investment in any other Restricted Subsidiary not being simultaneously disposed of or in the Company; and (D) immediately prior to, and immediately after the consummation of such Transfer, and after giving effect thereto, no Default or Event of Default would exist. (c) Transfers of Property and Mergers of Restricted Subsidiaries. (i) Determination of Book Value. For purposes of determining the book value of Property constituting Restricted Subsidiary Stock subject to any Transfer as provided in clause (iv) of Section 6.10(b) hereof, such book value shall be deemed to be the aggregate book value of the Property of the Restricted Subsidiary that shall have issued such Restricted Subsidiary Stock. (ii) Mergers of Restricted Subsidiaries. The merger or consolidation of a Restricted Subsidiary into or with another corporation, as contemplated in clause (iii) of Section 6.11(a) hereof, shall be deemed to be a Transfer of all of the Property of such Restricted Subsidiary at the net book value thereof, as determined at the time of such merger or consolidation. (d) Transfers in Excess of the Specified Asset Percentage. (i) Application of Excess Proceeds Amount. Notwithstanding the provisions of Section 6.10(a)(v) and Section 6.10(b)(iv) hereof, the Company may, and may permit a Restricted Subsidiary to, Transfer, in any fiscal year of the Company, Property having an aggregate book value in excess of the Specified Asset Percentage for such fiscal year of the Company if: (A) the Excess Proceeds Amount shall have been applied by the Company or such Restricted Subsidiary to a Qualified Proceeds Application within three hundred sixty-five (365) days of the receipt thereof by the Company or such Restricted Subsidiary; (B) immediately before and after the consummation of each such Transfer, and after giving effect thereto, no Default or Event of Default exists or would exist; and (C) prior to or contemporaneously with the application of all or any portion of such Excess Proceeds Amount, the Company shall have delivered a certificate of a Senior Officer to each holder of Notes providing a detailed description of such application and certifying that the conditions set forth in subclause (A) and subclause (B) hereof have been satisfied. (ii) Failure to Apply Proceeds. If, notwithstanding the provisions of this Section 6.10(d), the Company shall fail to comply with any of the requirements of Section 6.10(d)(i) hereof, then such failure to comply with any such provisions as of such date shall be deemed to be an Event of Default. 6.11 Merger, Consolidation, etc. (a) Merger and Consolidation. The Company will not, and will not permit any Restricted Subsidiary to, merge with or into, consolidate with, or sell, lease, transfer or otherwise dispose of all or substantially all of its assets to, any other Person, or permit any other Person to merge or consolidate with or into it, provided that the foregoing restriction does not apply to (i) the merger or consolidation of the Company into or with, or the sale by the Company of all or substantially all of its assets to, another corporation, if: (A) the corporation that results from such merger or consolidation or that acquires all or substantially all of such assets (the "Surviving Corporation") is organized under the laws of the United States of America, any state thereof or the District of Columbia; (B) the due and punctual payment of the principal of and Make-Whole Amount, if any, and interest on all of the Notes, according to their tenor, and the due and punctual performance and observance of all the covenants in the Notes and this Agreement to be performed or observed by the Company, are expressly assumed by the Surviving Corporation pursuant to such agreements and instruments as shall be approved by the Majority Holders, and the Company causes to be delivered to each holder of Notes an opinion of independent counsel reasonably acceptable to the Majority Holders to the effect that such agreements and instruments are enforceable in accordance with their terms (subject to customary qualifications); and (C) immediately prior to, and immediately after the consummation of the transaction, and after giving effect thereto, no Default or Event of Default exists or would exist; (ii) a merger of a Restricted Subsidiary into, or a consolidation of a Restricted Subsidiary with, the Company (so long as the Company is the surviving entity) or a Wholly-Owned Restricted Subsidiary (so long as such Wholly-Owned Restricted Subsidiary is the surviving entity) or the sale or other disposition by a Restricted Subsidiary of all or substantially all of its assets to the Company or a Wholly-Owned Restricted Subsidiary; and (iii) the merger of a Restricted Subsidiary into, or consolidation of a Restricted Subsidiary with, or the sale or other disposition by a Restricted Subsidiary of all or substantially all of its assets to, another corporation (which shall not be an Affiliate or a Restricted Subsidiary), if (A) such transaction complies, in all respects, with the provisions of Section 6.10(a)(v) of this Agreement, and (B) immediately prior to, and immediately after the consummation of the transaction, and after giving effect thereto, no Default or Event of Default exists or would exist. (b) Acquisition of Stock, etc. The Company will not, and will not permit any Restricted Subsidiary to, acquire any stock of any corporation if upon completion of such acquisition such corporation would be a Restricted Subsidiary, or acquire all of the Property of, or such of the Property as would permit the transferee to continue any one or more integral business operations of, any Person unless, immediately prior to, and immediately after the consummation of such acquisition, and after giving effect thereto, no Default or Event of Default exists or would exist. 6.12 Nature of Business. The Company will not, and will not permit any Restricted Subsidiary to, engage in any business if, as a result thereof, the principal businesses of the Company and the Restricted Subsidiaries, taken as a whole, would be changed from the businesses thereof described in the Placement Memorandum. 6.13 Transactions with Affiliates. The Company will not, and will not permit any Restricted Subsidiary to, enter into or be a party to any transaction or arrangement (other than Immaterial Transactions), including, without limitation, the purchase, sale or exchange of Property or the rendering of any service, with any Affiliate, except in the ordinary course of and pursuant to the reasonable requirements of the business of the Company or such Restricted Subsidiary and upon fair and reasonable terms no less favorable to the Company or such Restricted Subsidiary than would obtain in a comparable arm's- length transaction with a Person not an Affiliate. 6.14 ERISA; Foreign Pension Plans. (a) Compliance. The Company will, and will cause each ERISA Affiliate to, at all times with respect to each Pension Plan, make timely payment of contributions required to meet the minimum funding standard set forth in ERISA or the IRC with respect thereto, and to comply with all other applicable provisions of ERISA. (b) Relationship of Vested Benefits to Pension Plan Assets. The Company will not at any time permit the present value of all employee benefits vested under each Pension Plan to exceed the assets of such Pension Plan allocable to such vested benefits at such time, in each case determined pursuant to Section 6.14(c) hereof. (c) Valuations. All assumptions and methods used to determine the actuarial valuation of vested employee benefits under Pension Plans and the present value of assets of Pension Plans will be reasonable in the good faith judgment of the Company and will comply with all requirements of law. (d) Prohibited Actions. The Company will not, and will not permit any ERISA Affiliate to: (i) engage in any "prohibited transaction" (as such term is defined in section 406 of ERISA or section 4975 of the IRC) that would result in the imposition of a material tax or penalty; (ii) incur with respect to any Pension Plan any "accumulated funding deficiency" (as such term is defined in section 302 of ERISA), whether or not waived; (iii) terminate any Pension Plan in a manner that could result in (A) the imposition of a Lien on the Property of the Company or any Subsidiary pursuant to section 4068 of ERISA, or (B) the creation of any liability under section 4062 of ERISA; (iv) fail to make any payment required by section 515 of ERISA; or (v) at any time be an "employer" (as such term is defined in section 3(5) of ERISA) required to contribute to any Multiemployer Plan if, at such time, it could reasonably be expected that the Company or any Subsidiary will incur withdrawal liability in respect of such Multiemployer Plan and such liability, if incurred, together with the aggregate amount of all other withdrawal liability as to which there is a reasonable expectation of incurrence by the Company or any Subsidiary under any one or more Multiemployer Plans, could reasonably be expected to have a Material Adverse Effect. (e) Foreign Pension Plans. The Company will, and will cause each Subsidiary to, make all required payments in respect of funding any Foreign Pension Plan applicable to such Person and otherwise fully comply with all applicable laws, statutes, rules and regulations governing or affecting such Foreign Pension Plan if the failure to make such payments or to so comply could reasonably be expected to have a Material Adverse Effect. 6.15 Private Offering. The Company will not, and will not permit any Person acting on its behalf to, offer the Notes or any part thereof or any similar Securities for issuance or sale to, or solicit any offer to acquire any of the same from, any Person so as to bring the issuance and sale of the Notes within the provisions of section 5 of the Securities Act. 6.16 Designation of Subsidiaries. (a) Right of Designation. Subject to the satisfaction of the requirements of Section 6.16(c) hereof, the Company shall have the right to designate each Subsidiary as a Restricted Subsidiary or an Unrestricted Subsidiary by delivering to each holder of Notes a writing, signed by a Senior Officer, certifying that the Board of Directors shall have so designated such Subsidiary within thirty (30) days of the acquisition by the Company or any Subsidiary of the necessary percentages of Voting Stock and other equity interests of such Subsidiary as set forth in the definition of "Subsidiary" contained in Section 9.1 of this Agreement. Any such Subsidiary not so designated within such thirty (30) day period shall be deemed, on and after such date and without any further action by the Company or any holder of Notes, to have been designated by the Company as an Unrestricted Subsidiary. Each Subsidiary designated as a Restricted Subsidiary in Part 2.3 of Annex 3 hereto shall be a Restricted Subsidiary on and after the Closing Date and all other Subsidiaries, if any, listed in such Part 2.3 of Annex 3 shall, subject to Section 6.16(b) hereof, be Unrestricted Subsidiaries on and after the Closing Date. (b) Right of Redesignation. Subject to the satisfaction of the requirements of Section 6.16(c) hereof, the Company may at any time designate any Unrestricted Subsidiary as a Restricted Subsidiary by delivering to each holder of Notes a written notice, signed by a Senior Officer, certifying that the Board of Directors shall have so designated such Subsidiary. No Restricted Subsidiary shall at any time be designated as an Unrestricted Subsidiary. (c) Designation Criteria. No Subsidiary shall at any time after the Closing Date be designated as a Restricted Subsidiary unless immediately before and after, and after giving effect to such designation, and assuming that all obligations, liabilities and Investments of, and all Liens on the Property of, such Subsidiary being so designated were incurred or made contemporaneously with such designation, (i) no Default or Event of Default exists or would exist, and (ii) the Company would be permitted by the provisions of Section 6.5 hereof to have outstanding at least One Dollar ($1.00) of additional Consolidated Funded Debt. (d) Effectiveness. Other than as set forth in the last two sentences of Section 6.16(a) hereof, any designation under this Section 6.16 that satisfies all of the conditions set forth in this Section 6.16 shall become effective, for purposes of this Agreement, on the day that notice thereof shall have been delivered by the Company and received by each holder of Notes in accordance with the provisions of Section 10.1 hereof. (e) Covenant Compliance. Each notice required by Section 6.16(d) hereof shall be accompanied by a certificate of a Senior Officer and a Senior Financial Officer setting forth the information (including detailed calculations) required in order to establish whether the Company is in compliance with the requirements of Section 6.4 through Section 6.11 hereof, inclusive, at the time of such designation, and immediately after giving effect thereto (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 amounts, ratio or percentage at such times). 6.17 Pro-Rata Offers. The Company will not, nor will it permit any Subsidiary or any Affiliate to, directly or indirectly, acquire or make any offer to acquire any Notes unless the Company or such Subsidiary or Affiliate shall have offered to acquire all of the Notes from all holders of the Notes and upon the same terms. In case the Company, any Subsidiary or any Affiliate acquires any Notes, such Notes will thereafter be cancelled and no Notes will be issued in substitution therefor. 7. INFORMATION AS TO COMPANY 7.1 Financial and Business Information. The Company will deliver to each holder of Notes: (a) Quarterly Statements -- within ninety (90) 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) consolidated and consolidating balance sheets of the Company and its consolidated subsidiaries, and of the Company and the Restricted Subsidiaries, as at the end of such quarter, and (ii) consolidated and consolidating statements of operations, cash flows and stockholders' equity of the Company and its consolidated subsidiaries, and the Company and the Restricted 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, all in reasonable detail, prepared in accordance with GAAP applicable to quarterly financial statements generally and certified as complete and correct, subject to changes resulting from year- end adjustments, by a Senior Financial Officer, and accompanied by the certificate required by Section 7.2 hereof; (b) Annual Statements -- within one hundred twenty (120) days after the end of each fiscal year of the Company duplicate copies of (i) consolidated and consolidating balance sheets of the Company and its consolidated subsidiaries, and of the Company and the Restricted Subsidiaries, as at the end of such year, and (ii) consolidated and consolidating statements of operations, cash flows and stockholders' equity of the Company and its consolidated subsidiaries, and the Company and the Restricted 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 by (A) in the case of such consolidated financial statements in respect of the Company and its consolidated subsidiaries, an opinion of independent certified public accountants of recognized national standing, which opinion shall, without qualification (including, without limitation, qualifications related to (I) the scope of the audit or (II) the ability of the Company or any Subsidiary to continue as a going concern), state that such financial statements present fairly, in all material respects, the financial position of the companies being reported upon and their results of 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, (B) in the case of such consolidating financial statements, a statement of such independent certified public accountants which states that (I) such consolidating financial statements are fairly stated, in all material respects, in relation to the consolidated financial statements of the Company and its consolidated subsidiaries and (II) such consolidating statements were prepared using the same work papers as were used in the preparation of such consolidated statements, (C) a certification by a Senior Financial Officer that such consolidated and consolidating financial statements are complete and correct, and (D) the certificates required by Section 7.2 and Section 7.3 hereof; (c) Written Acknowledgment of Counsel and Opinions of Independent Accountants -- within one hundred twenty (120) days after the end of each fiscal year of the Company, duplicate copies of all written acknowledgements of counsel and opinions of independent accountants required pursuant to Section 6.1(b) hereof; (d) Audit Reports -- promptly upon receipt thereof, a copy of each other report submitted to the Company or any Subsidiary by independent accountants in connection with any annual, interim or special audit made by them of the books of the Company or any Subsidiary; (e) SEC and Other Reports -- promptly upon their becoming available (and in any event no later than the time of filing or sending thereof, as the case may be), one (1) copy, without duplication, 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 (including, without limitation, each Annual Report on Form 10-K, each Quarterly Report on Form 10-Q and each Current Report on Form 8-K), each registration statement (other than any registration statement on Form S-8) which shall have become effective, and each final prospectus, and each amendment to any of the foregoing, in respect thereof filed by the Company or any Subsidiary with the National Association of Securities Dealers, any securities exchange or the Securities and Exchange Commission or any successor agency; (f) ERISA -- (i) immediately upon becoming aware of the occurrence of any (A) "reportable event" (as such term is defined in section 4043 of ERISA), or (B) "prohibited transaction" (as such term is defined in section 406 of ERISA or section 4975 of the IRC), in connection with any Pension Plan or any trust created thereunder, a written notice specifying the nature thereof, what action the Company is taking or proposes to take with respect thereto and, when known, any action taken by the IRS, the Department of Labor or the PBGC with respect thereto; and (ii) prompt written notice of and, where applicable, a description of (A) any notice from the PBGC in respect of the commencement of any proceedings pursuant to section 4042 of ERISA to terminate any Pension Plan or for the appointment of a trustee to administer any Pension Plan, (B) any distress termination notice delivered to the PBGC under section 4041 of ERISA in respect of any Pension Plan, and any determination of the PBGC in respect thereof, (C) the placement of any Multiemployer Plan in reorganization status under Title IV of ERISA, (D) any Multiemployer Plan becoming "insolvent" (as such term is defined in section 4245 of ERISA) under Title IV of ERISA, (E) the whole or partial withdrawal of the Company or any ERISA Affiliate from any Multiemployer Plan and the withdrawal liability incurred in connection therewith, and (F) any material increase in contingent liabilities of the Company or any Subsidiary in respect of any post-retirement employee welfare benefits. (g) Actions, Proceedings -- promptly after the commencement thereof, written notice of any action or proceeding relating to the Company or any Subsidiary in any court or before any Governmental Authority or arbitration board or tribunal as to which there is a reasonable possibility of an adverse determination and that, if adversely determined, is reasonably likely to have a Material Adverse Effect; (h) Certain Environmental Matters -- prompt written notice of and a description of any event or circumstance that, had such event or circumstance occurred or existed immediately prior to the Closing Date, would have been required to be disclosed as an exception to any statement set forth in Section 2.13 hereof; (i) Notice of Default or Event of Default -- promptly upon becoming aware (and in any event within five (5) Business Days thereafter) of the existence of any condition or event that constitutes a Default or an Event of Default, 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; (j) Notice of Claimed Default -- promptly upon becoming aware (and in any event within five (5) Business Days thereafter) that the holder of (i) any Note, (ii) any other Indebtedness having an outstanding principal amount in excess of One Million Dollars ($1,000,000) or (iii) any other Security of the Company or any Subsidiary shall have given notice or taken any other action with respect to a claimed Default, Event of Default, default or event of default, a written notice specifying the notice given or action taken by such holder and the nature of the claimed Default, Event of Default, default or event of default and what action the Company is taking or proposes to take with respect thereto; and (k) Requested Information -- promptly, and in any event within fifteen (15) Business Days of any request therefor, such other data and information as from time to time may be requested by any holder of Notes, including, without limitation, (i) promptly after the furnishing thereof, copies of any statement, report or certificate furnished to any holder of Indebtedness of the Company or any Subsidiary, TE\O information requested to comply with 17 C.F.R. 230.144A, as amended from time to time, and (iii) information necessary to comply with any request of the National Association of Insurance Commissioners in respect of the designation of the Notes. 7.2 Officers' Certificates. Each set of financial statements delivered to each holder of Notes pursuant to Section 7.1(a) or Section 7.1(b) hereof shall be accompanied by a certificate of a Senior Officer and a Senior Financial Officer setting forth: (a) Covenant Compliance -- the information (including detailed calculations) required in order to establish whether the Company was in compliance with the requirements of Section 6.4 through Section 6.11 hereof, inclusive, during the period covered by the income statement 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 amounts, ratio or percentage then in existence); and (b) Event of Default -- a statement that the signers have reviewed the relevant terms hereof and have made, or caused to be made, under their supervision, a review of the transactions and conditions of the Company and the Subsidiaries from the beginning of the accounting period covered by the income statements being delivered therewith 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, 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 Accountants' Certificates. Each set of annual financial statements delivered pursuant to Section 7.1(b) shall be accompanied by a certificate of the independent certified public accountants who certify such financial statements stating that they have reviewed the provisions of Section 6.4 through Section 6.7, inclusive, and Section 6.9 through Section 6.11, inclusive, of this Agreement (as such Sections relate to financial or accounting matters) and stating further, whether, in making their audit, such accountants have become aware of any failure by the Company or any Subsidiary to comply with any of the terms, covenants, provisions or conditions thereof and, if such accountants are aware that any such failure then exists, specifying the nature and period of existence thereof. 7.4 Inspection. The Company will permit, upon reasonable prior notice to the Company, the representatives of each holder of Notes (at the expense of the Company at any time when a Default or an Event of Default has occurred and is in existence, and otherwise at the expense of such holder) to visit and inspect any of the 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, employees and independent public accountants (and by this provision the Company authorizes such accountants to discuss the finances and affairs of the Company and the Subsidiaries), all at such reasonable times and as often as may be reasonably requested. 7.5 Confidential Information. Each holder of Notes will employ reasonable procedures and standards designed to maintain the confidential nature of all Proprietary Business Information that has been or in the future is furnished to or obtained by such holder in connection with this Agreement and the Notes (provided that any such holder shall be deemed to have complied with the foregoing requirement if in respect of such Proprietary Business Information such holder shall employ its customary business practices as used respecting such holder's own proprietary business records) and that has been clearly marked in writing as confidential, except such Proprietary Business Information that was or is available to the public or was not or is not treated as confidential by any one or more of the Company, the Subsidiaries or the Affiliates. Notwithstanding the foregoing, any such holder may disclose any Proprietary Business Information furnished to or obtained by it in connection with this Agreement: (a) the disclosure of which is, in such holder's sole good faith business and/or legal judgment, appropriate or required in connection with regulatory requirements (including, without limitation, the requirements of the National Association of Insurance Commissioners) or other legal requirements related to such holder's affairs, including, without limitation, the disclosure of such Proprietary Business Information in connection with or in response to (i) compliance with any law, ordinance or governmental order, regulation, rule, policy, subpoena, investigation or request (including, without limitation, any informal investigative request by any Governmental Authority or other regulatory body), or (ii) any order, decree, judgment, subpoena, notice of discovery or similar ruling, or pleading issued, filed, served or purported on its face to be issued, filed or served (A) by or under authority of any court, tribunal, arbitration board or any governmental agency, commission, authority, board or similar entity or (B) in connection with any proceeding (including, without limitation, any proceeding to enforce the obligations of the Company under this Agreement and the Notes), cause or matter pending (or on its face purported to be pending) before any court, tribunal, arbitration board or any governmental agency, commission, authority, board or similar entity, provided that in any such case such holder shall promptly send written notice (unless prohibited by law) to the Company, in accordance with Section 10.1 hereof, of any such requirement of disclosure of any Proprietary Business Information; (b) to any one or more of such holder's employees, officers, directors, agents, attorneys, accountants or professional consultants who would have access to such Proprietary Business Information in the normal course of the performance of such Person's duties for it, so long as such holder employs reasonable procedures and standards designed to maintain the confidential nature of all such Proprietary Business Information that is disclosed to such Persons (provided that such holder shall be deemed to have complied with the foregoing requirement if in respect of such Proprietary Business Information it shall employ its customary business practices as used respecting its own proprietary business records); (c) to the National Association of Insurance Commissioners, and to Moody's, Standard & Poor's or any other nationally recognized financial rating service that is reviewing the credit rating of any holder of Notes or is rating or reviewing the rating of the Notes; and (d) to any prospective purchaser, securities broker or dealer or investment banker in connection with the resale or proposed resale of all or any portion of the Notes by such holder (so long as you shall have notified each such Person of the confidential nature of such information and each such Person has agreed in writing to be bound by the terms and conditions of this Section 7.5). No holder of Notes will be liable for the breach of this Section 7.5 by any other holder of Notes or by any Person to which any Proprietary Business Information shall be delivered in accordance with this Section 7.5. 8. EVENTS OF DEFAULT 8.1 Nature of Events. An "Event of Default" shall exist if any of the following occurs and is continuing: (a) Principal or Make-Whole Amount Payments -- the Company shall fail to make any payment of principal or Make- Whole Amount on any Note on or before the date such payment is due; (b) Interest Payments -- the Company shall fail to make any payment of interest on any Note on or before five (5) Business Days after the date such payment is due; (c) Particular Covenant Defaults -- the Company or any Subsidiary shall fail to perform or observe any covenant contained in Section 6.4 through Section 6.11 hereof, inclusive, in Section 6.13 through Section 6.15 hereof, or in Section 7.1(i) or Section 7.1(j) hereof; (d) Other Defaults -- the Company or any Subsidiary shall fail to comply in any material respect with any provision hereof, other than as specified in Section 8.1(a), Section 8.1(b) and Section 8.1(c) hereof, and such failure continues for more than thirty (30) days after such failure shall first become known to any officer of the Company; (e) Warranties or Representations -- any warranty, representation or other statement by or on behalf of the Company contained herein or in any certificate or instrument furnished in compliance with or in reference hereto shall have been false or misleading in any material respect when made; (f) Default on Debt or Security -- any event shall occur or any condition shall exist in respect of any Indebtedness or any Security of the Company or any Restricted Subsidiary, or under any agreement securing or relating to any such Indebtedness or Security, that has caused (i) such Indebtedness or Security, or a portion thereof, to become due prior to its stated maturity or prior to its regularly scheduled date or dates of payment; or (ii) any one or more of the holders thereof or a trustee therefor to require the Company or any Restricted Subsidiary to repurchase such Indebtedness or Security from the holders thereof; provided that the aggregate amount of all obligations in respect of such Indebtedness and Securities exceeds at such time One Million Dollars ($1,000,000); (g) Involuntary Bankruptcy Proceedings -- (i) a receiver, liquidator, custodian or trustee of the Company or any Restricted Subsidiary, or of all or any part of the Property of either, shall be appointed by court order and such order shall remain in effect for more than sixty (60) days, or an order for relief shall be entered with respect to the Company or any Restricted Subsidiary, or the Company or any Restricted Subsidiary shall be adjudicated a bankrupt or insolvent; (ii) any of the Property of the Company or any Restricted Subsidiary shall be sequestered by court order and such order shall remain in effect for more than sixty (60) days; or (iii) a petition shall be filed against the Company or any Restricted Subsidiary under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation law of any jurisdiction, whether now or hereafter in effect, and shall not be dismissed within sixty (60) days after such filing; (h) Voluntary Petitions -- the Company or any Restricted Subsidiary shall file a petition in voluntary bankruptcy or seeking relief under any provision of any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation law of any jurisdiction, whether now or hereafter in effect, or shall consent to the filing of any petition against it under any such law (except, in each case, in connection with a Permitted Reorganization of such Person); (i) Assignments for Benefit of Creditors, etc. -- the Company or any Restricted Subsidiary shall make an assignment for the benefit of its creditors, or shall admit in writing its inability, or shall fail, to pay its debts generally as they become due, or shall consent to the appointment of a receiver, liquidator or trustee of the Company or any Restricted Subsidiary or of all or any part of the Property of either (except, in each case, in connection with a Permitted Reorganization of such Person); or (j) Undischarged Final Judgments -- a final, nonappealable judgment or final, nonappealable judgments for the payment of money aggregating in excess of One Million Dollars ($1,000,000) (exclusive of any insurance coverage applicable thereto for which the insurance company issuing such coverage shall have acknowledged (in writing) coverage with respect thereto and shall not have indicated that a defense, exclusion or exemption to the payment of the related insurance exists) is or are outstanding against any one or more of the Company and the Restricted Subsidiaries and any one of such judgments shall have been outstanding for more than sixty (60) days from the date of its entry and shall not have been discharged in full, stayed or bonded. If any action, condition, event or other matter would, at any time, constitute an Event of Default under any provision of this Section 8.1, then an Event of Default shall exist, regardless of whether the same or a similar action, condition, event or other matter is addressed in a different provision of this Section 8.1 and would not constitute an Event of Default at such time under such different provision. 8.2 Default Remedies. (a) Acceleration on Event of Default. (i) If an Event of Default specified in clause (g), clause (h) or clause (i) of Section 8.1 hereof shall exist, all of the Notes at the time outstanding shall automatically become immediately due and payable together with interest accrued thereon and the Make-Whole Amount (if any) in respect thereof, in each case without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived, and the Company shall forthwith pay to the holder or holders of all the Notes then outstanding the entire principal of and interest accrued on the Notes and, to the extent permitted by law, the Make-Whole Amount at such time with respect to the Notes, and all other amounts owing under the Note Purchase Agreements. (ii) If an Event of Default other than those specified in clause (g), clause (h) or clause (i) of Section 8.1 hereof shall exist, the Required Holders may exercise any right, power or remedy permitted to such holder or holders by law and shall have, in particular, without limiting the generality of the foregoing, the right to declare the entire principal of, and all interest accrued on and Make-Whole Amount (if any) in respect of, all the Notes then outstanding to be, and such Notes shall thereupon become, forthwith due and payable, without any presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived, and the Company shall forthwith pay to the holder or holders of all the Notes then outstanding the entire principal of and interest accrued on such Notes and, to the extent permitted by law, the Make-Whole Amount at such time with respect to such principal amount of the Notes, and all other amounts owing under the Note Purchase Agreements to such holder. (b) Acceleration on Payment Default. During the existence of an Event of Default described in Section 8.1(a) or Section 8.1(b) hereof, and irrespective of whether the Notes then outstanding shall have been declared to be due and payable pursuant to Section 8.2(a)(ii) hereof, any holder of Notes that shall have not consented to any waiver with respect to such Event of Default may, at such holder's option, by notice in writing to the Company, declare the Notes then held by such holder to be, and such Notes shall thereupon become, forthwith due and payable together with all interest accrued thereon, and Make-Whole Amount (if any) in respect thereof, without any presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived, and the Company shall forthwith pay to such holder the entire principal of and interest accrued on such Notes and, to the extent permitted by law, the Make-Whole Amount at such time with respect to such principal amount of such Notes, and all other amounts owing under the Note Purchase Agreements to such holder. (c) Valuable Rights. The Company acknowledges, and the parties hereto agree, that the right of each holder to maintain its investment in the Notes free from repayment by the Company (except as herein specifically provided for) is a valuable right and that the provision for payment of a Make- Whole Amount by the Company, in the event that the Notes are prepaid or are accelerated as a result of an Event of Default under certain circumstances, is intended to provide compensation for the deprivation of such right under such circumstances. (d) Other Remedies; Remedies Cumulative; Nonwaiver. During the existence of an Event of Default and irrespective of whether the Notes then outstanding shall have been declared to be due and payable pursuant to Section 8.2(a)(ii) hereof and irrespective of whether any holder of Notes then outstanding shall otherwise have pursued or be pursuing any other rights or remedies, any holder of Notes may proceed to protect and enforce its rights hereunder and under such Notes by exercising such remedies as are available to such holder in respect thereof under applicable law, either by suit in equity or by action at law, or both, whether for specific performance of any agreement contained herein or in aid of the exercise of any power granted herein, provided that the maturity of such holder's Notes may be accelerated only in accordance with Section 8.2(a) and Section 8.2(b) hereof. All rights and remedies of each holder of Notes are cumulative to, and not exclusive of, any rights or remedies any such holder of Notes would otherwise have. No course of dealing on the part of any holder of Notes nor any delay or failure on the part of any holder of Notes to exercise any right shall operate as a waiver of such right or otherwise prejudice such holder's rights, powers and remedies. (e) Expenses. If the Company shall fail to pay when due any principal of, or Make-Whole Amount or interest on, any Note, or shall fail to comply with any other provision hereof, the Company shall pay to each holder of Notes, to the extent permitted by law, such further amounts as shall be sufficient to cover the costs and expenses (including, but not limited to, reasonable attorneys' fees) incurred by such holder in collecting any sums due on such Notes or in otherwise assessing, analyzing or enforcing any rights or remedies that are or may be available to it. 8.3 Annulment of Acceleration of Notes. If a declaration is made pursuant to Section 8.2(a)(ii) hereof, then and in every such case, the Required Holders may, by written instrument filed with the Company, rescind and annul such declaration and the consequences thereof, provided that at the time such declaration is annulled and rescinded: (a) no judgment or decree shall have been entered for the payment of any moneys due on or pursuant hereto or the Notes; (b) all arrears of interest upon all the Notes and all other sums payable hereunder and under the Notes (except any principal of, or interest or Make-Whole Amount on, the Notes that shall have become due and payable by reason of such declaration under Section 8.2(a)(ii) hereof) shall have been duly paid; and (c) each and every other Default and Event of Default shall have been waived pursuant to Section 10.5 hereof or otherwise made good or cured; and provided further that no such rescission and annulment shall extend to or affect any subsequent Default or Event of Default or impair any right consequent thereon. 9. INTERPRETATION OF THIS AGREEMENT 9.1 Terms Defined. As used herein, the following terms have the respective meanings set forth below or set forth in the Section of this Agreement following such term: Acceptable Consideration -- means, with respect to any Transfer of any Property of the Company or a Restricted Subsidiary, cash consideration, promissory notes or such other consideration (or any combination of the foregoing) received by such Person in connection with such Transfer as is, in each case, determined by the Board of Directors of the Company or such Restricted Subsidiary, as the case may be, in its good faith opinion, to be in the best interests of the Company or such Restricted Subsidiary, as the case may be, and to reflect the Fair Market Value of such Property. Accredited Investor -- means an "accredited investor," as such term is defined in Section 2(15) of the Securities Act. Affiliate -- means, at any time, a Person (other than a Restricted Subsidiary) (a) that directly or indirectly through one or more intermediaries Controls, or is Controlled by, or is under common Control with, the Company, (b) that beneficially owns or holds five percent (5%) or more of any class of the Voting Stock of the Company, (c) five percent (5%) or more of the Voting Stock (or in the case of a Person that is not a corporation, five percent (5%) or more of the equity interest) of which is beneficially owned or held by the Company or a Subsidiary, or (d) that is an officer or director (or a member of the immediate family of an officer or director) of the Company or any Subsidiary, at such time. As used in this definition: Control -- means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. Agreement, this -- means this Note Purchase Agreement, as it may be amended and restated from time to time. Bank Credit Agreement -- means the Credit Agreement, dated as of July 31, 1991, between the Company and Bank of America, as amended from time to time. Bank of America -- means Bank of America National Trust and Savings Association. Board of Directors -- means the board of directors of the Company or a Restricted Subsidiary, as applicable, or any committee thereof that, in the instance, shall have the lawful power to exercise the power and authority of such board of directors. Business Day -- means, at any time, a day other than a Saturday, a Sunday or a day on which the bank designated by the holder of a Note to receive (for such holder's account) payments on such Note is required by law (other than a general banking moratorium or holiday for a period exceeding four (4) consecutive days) to be closed. Capital Lease -- means, at any time, a lease with respect to which the lessee is required to recognize the acquisition of an asset and the incurrence of a liability at such time in accordance with GAAP. Capitalized Lease Obligation -- means, at any time, the capitalized amount of rental commitment under a Capital Lease which is required to be reflected on the balance sheet of the lessee at such time pursuant to GAAP. Closing -- Section 1.2(b). Closing Date -- Section 1.2(b). Company -- has the meaning assigned to such term in the introductory sentence hereof. Consolidated Adjusted Net Worth -- means, at any time, (a) the sum of (i) the par value (or value stated on the books of the corporation) at such time of the capital stock of the Company plus (or minus in the case of a deficit), (ii) the amount of the paid-in surplus of the Company at such time, plus (or minus in the case of a deficit), (iii) the amount of the retained earnings of the Company at such time; minus (b) the net book value at such time (after deducting related depreciation, obsolescence, amortization, valuation and other proper reserves) of all Intangible Assets of the Company and the Restricted Subsidiaries, other than Excluded Intangible Assets, in each case, as would appear on a consolidated balance sheet for the Company and the Restricted Subsidiaries at such time prepared in accordance with GAAP. As used in this definition: Intangible Assets -- with respect to any Person, at any time, means the following: (a) deferred assets, other than prepaid expenses which are refundable (including, without limitation, insurance and prepaid taxes); (b) patents, copyrights, trademarks, trade names, service marks, brand names, franchises, goodwill, experimental expenses and other similar intangibles; (c) unamortized debt discount and expense; (d) lease rights; and (e) all other Property which would be considered to be intangible under GAAP. Excluded Intangible Assets -- means, at any time, (a) all Intangible Assets of the Company and the Restricted Subsidiaries existing on the Closing Date as would appear on a consolidated balance sheet for such Persons on the Closing Date prepared in accordance with GAAP, and (b) all Intangible Assets of the Company and the Restricted Subsidiaries in respect of prepaid royalties, patents, copyrights, trademarks, trade names, service marks and brand names not in existence on the Closing Date, as would appear on a consolidated balance sheet for such Persons at such time prepared in accordance with GAAP. Consolidated Fixed Charges -- means, for any period, the sum of (a) Consolidated Interest Expense, plus (b) Consolidated Operating Rental Expense, in each case, determined for such period. Consolidated Funded Debt -- means, at any time, the aggregate amount of Funded Debt of the Company and the Restricted Subsidiaries, determined on a consolidated basis for such Persons at such time in accordance with GAAP. Consolidated Indebtedness -- means, at any time, the aggregate amount of Indebtedness of the Company and the Restricted Subsidiaries, determined on a consolidated basis for such Persons at such time in accordance with GAAP. Consolidated Interest Expense -- means, for any period, the aggregate amount of interest accrued or capitalized on, or with respect to, Consolidated Indebtedness for such period, including, without limitation, amortization of debt discount, imputed interest on Capital Leases and interest on the Notes. Consolidated Net Income -- means, for any period, net earnings (or loss) after income taxes of the Company and the Restricted Subsidiaries, determined on a consolidated basis for such Persons in accordance with GAAP, but excluding: (a) net earnings (or loss) of any Person accrued prior to the date such Person became a Restricted Subsidiary or was merged into or consolidated with the Company or a Restricted Subsidiary; (b) any extraordinary, unusual or nonrecurring gains or losses; (c) any gain arising from any reappraisal or write-up of assets; (d) any portion of the net earnings of any Restricted Subsidiary that, by reason of any contract, charter restriction, applicable law or regulation, is unavailable for payment of dividends to the Company or a Restricted Subsidiary; (e) any gain or loss (net of tax effects applicable thereto) during such period resulting from the receipt of any proceeds of any insurance policy, other than Permitted Insurance Proceeds; (f) any earnings of any Person acquired by the Company or any Restricted Subsidiary through purchase, merger or consolidation or otherwise, or earnings of any Person substantially all of whose assets have been acquired by the Company or any Restricted Subsidiary, for any period prior to the date of acquisition; (g) net earnings of any Person (other than a Restricted Subsidiary) in which the Company or any Restricted Subsidiary shall have an ownership interest unless such net earnings shall have actually been received by the Company or such Restricted Subsidiary in the form of cash distributions; (h) any gain or loss arising from the acquisition of any Securities of the Company or any Restricted Subsidiary; (i) any portion of the net earnings of the Company and the Restricted Subsidiaries that cannot be freely converted into Dollars; and (j) any gain or loss reflected in such net earnings for such period that results solely from adjustments to net earnings from prior periods due to the cumulative effect of changes in any accounting principles required by GAAP. Consolidated Net Income Available for Fixed Charges -- means, for any period, the sum of (a) Consolidated Net Income, plus (b) the aggregate amount of (i) income taxes, and (ii) Consolidated Fixed Charges, (to the extent, and only to the extent, that such aggregate amount was deducted in the computation of Consolidated Net Income), in each case accrued for such period by the Company and the Restricted Subsidiaries, determined on a consolidated basis for such Persons. Consolidated Operating Rental Expense -- means, with respect to any period, the aggregate amount of Operating Rentals accrued for such period on, or with respect to, Long-Term Operating Leases of the Company and the Restricted Subsidiaries (other than Long- Term Operating Leases between the Company and any Restricted Subsidiary or between Restricted Subsidiaries), determined on a consolidated basis for such Persons for such period in accordance with GAAP. As used in this definition: Excluded Lease -- means (a) any Capital Lease, and (b) any lease (whether or not a Capital Lease) of word processing, data, communications, computer and office equipment. Long-Term Operating Lease -- means any Operating Lease with an original term of more than three (3) years (including any extension of such term at the option of the lessor) and that is not cancelable during such term at the option of the lessee without incurrence by the lessee of a cancellation charge or similar liability. Operating Lease -- means any lease other than an Excluded Lease. Operating Rentals -- means all payments that the lessee is required to make by the terms of any Operating Lease, including, without limitation, additional rentals (in excess of fixed minimums) based upon a percentage of gross receipts and amounts required to be paid in respect of maintenance, repairs, income taxes, Property taxes, insurance, assessments and other similar charges. Consolidated Total Assets -- means, at any time, the total amount of all assets of the Company and the Restricted Subsidiaries, determined on a consolidated basis for such Persons at such time in accordance with GAAP. Consolidated Total Capitalization -- means, at any time, the sum of (a) Consolidated Funded Debt, plus (b) Consolidated Adjusted Net Worth, in each case, determined at such time. Default -- means an event or condition the occurrence of which would, with the lapse of time or the giving of notice or both, become an Event of Default. Distribution -- means, without duplication, with respect to any corporation: (a) any dividend or other distribution, direct or indirect, on account of any shares of capital stock of such corporation now or hereafter outstanding, whether in cash or other Property, except a dividend or other distribution payable solely in shares of stock of such Person; and (b) any redemption, retirement, purchase or other acquisition, direct or indirect, of any shares of capital stock of such corporation now or hereafter outstanding, including, without limitation, any deferred payment made by such corporation in connection with the acquisition of its capital stock, or of any warrants, rights or options to acquire any shares of such stock. Dollars or $ -- means United States of America dollars. Environmental Protection Law -- means any federal, state, county, regional or local law, statute or regulation (including, without limitation, CERCLA, RCRA and SARA) enacted in connection with or relating to the protection or regulation of the environment, including, without limitation, those laws, statutes and regulations regulating the disposal, removal, production, storing, refining, handling, transferring, processing or transporting of Hazardous Substances, and any regulations issued or promulgated in connection with such statutes by any Governmental Authority, and any orders, decrees or judgments issued by any court of competent jurisdiction in connection with any of the foregoing. As used in this definition: CERCLA -- means the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended from time to time (by SARA or otherwise), and all rules and regulations promulgated in connection therewith. RCRA -- means the Resource Conservation and Recovery Act of 1976, as amended from time to time, and all rules and regulations promulgated in connection therewith. SARA -- means the Superfund Amendments and Reauthorization Act of 1986, as amended from time to time, and all rules and regulations promulgated in connection therewith. ERISA -- means the Employee Retirement Income Security Act of 1974, as amended from time to time. ERISA Affiliate -- means any corporation or trade or business that: (a) is a member of the same "controlled group of corporations" (within the meaning of section 414(b) of the IRC) as the Company; or (b) is under "common control" (within the meaning of section 414(c) of the IRC) with the Company. Event of Default -- Section 8.1. Excess Proceeds Amount -- means, in respect of any fiscal year, an aggregate amount equal to (x) one hundred percent (100%) of the Net Proceeds Amount in respect of all Transfers of Property by the Company and the Restricted Subsidiaries during such fiscal year, minus (y) an amount, expressed in Dollars, equal to the Specified Asset Percentage in respect of such fiscal year. Exchange Act -- means the Securities Exchange Act of 1934, as amended from time to time. Excluded Restricted Subsidiary Indebtedness -- means at any time (without duplication): (a) Indebtedness of a Restricted Subsidiary owing to the Company or to a Wholly-Owned Restricted Subsidiary, (b) Indebtedness of a Restricted Subsidiary outstanding on the Closing Date and identified on Part 9.1 of Annex 3 hereto under the caption "Existing Restricted Subsidiary Indebtedness," (c) Indebtedness of a Restricted Subsidiary secured by, and in respect of, Liens permitted pursuant to, and created in accordance with, the provisions of Section 6.8(a)(vii) hereof, and (d) Indebtedness of a Restricted Subsidiary incurred by any Person prior to the date on which such Person shall have become a Restricted Subsidiary or shall have been merged with or into, or consolidated with, a Restricted Subsidiary, so long as such Indebtedness was not incurred in contemplation of such Person becoming, merging with or into or consolidating with, a Restricted Subsidiary, in each case, at such time. Excluded Transfers -- Section 6.10(a). Fair Market Value -- means, at any time, with respect to any Property, the sale value of such Property that would be realized in an arm's-length sale at such time between an informed and willing buyer and an informed and willing seller under no compulsion to buy or sell, respectively. Foreign Pension Plan -- means any plan, fund or other similar program that is (a) established or maintained outside of the United States of America by any one or more of the Company or the Subsidiaries primarily for the benefit of the employees (substantially all of whom are aliens not residing in the United States of America) of the Company or such Subsidiaries which plan, fund or other similar program provides for retirement income for such employees or results in a deferral of income for such employees in contemplation of retirement, and (b) not otherwise subject to ERISA. Funded Debt -- means, at any time of determination, with respect to any Person, all Indebtedness of such Person that is expressed to mature more than one (1) year from the date of the creation thereof or that is extendible or renewable at the option of such Person to a time more than one (1) year after the date of the creation thereof, including, without limitation, payments on Indebtedness that, although payable within one (1) year, constitute payments required to be made on account of principal of Indebtedness expressed to mature more than one (1) year from such time. GAAP -- means accounting principles as promulgated from time to time in statements, opinions and pronouncements by the American Institute of Certified Public Accountants and the Financial Accounting Standards Board and in such statements, opinions and pronouncements of such other entities with respect to financial accounting of for-profit entities as shall be accepted by a substantial segment of the accounting profession in the United States of America. Governmental Authority -- means: (a) the government of (i) the United States of America and any state or other political subdivision thereof, or (ii) any other jurisdiction (A) in which the Company or any Subsidiary conducts all or any part of its business or (B) that asserts jurisdiction over the conduct of the affairs or Properties of the Company or any Subsidiary; and (b) any entity exercising executive, legislative, judicial, regulatory or administrative functions of, or pertaining to, any such government. Guaranty -- means, with respect to any Person (for the purposes of this definition, the "Guarantor"), any obligation (except the endorsement in the ordinary course of business of negotiable instruments for deposit or collection) of the Guarantor guaranteeing or in effect guaranteeing any indebtedness, dividend or other obligation of any other Person (the "Primary Obligor") in any manner, whether directly or indirectly, including, without limitation, obligations incurred through an agreement, contingent or otherwise, by the Guarantor: (a) to purchase such indebtedness or obligation or any Property constituting security therefor; (b) to advance or supply funds (i) for the purpose of payment of such indebtedness, dividend or other obligation, or (ii) to maintain working capital or other balance sheet condition or any income statement condition of the Primary Obligor or otherwise to advance or make available funds for the purchase or payment of such indebtedness, dividend or other obligation; (c) to lease Property or to purchase Securities or other Property or services primarily for the purpose of assuring the owner or payee of such indebtedness, dividend or other obligation of the ability of the Primary Obligor to make payment of the indebtedness, dividend or other obligation; or (d) otherwise to assure the owner or payee of the indebtedness, dividend or other obligation of the Primary Obligor against loss in respect thereof. For purposes of computing the amount of any Guaranty in connection with any computation of indebtedness or other liability, it shall be assumed that the indebtedness or other liabilities that are the subject of such Guaranty are direct obligations of the issuer of such Guaranty. Hazardous Substances -- means any and all pollutants, contaminants, toxic or hazardous wastes and any other substances that might pose a hazard to health or safety, the removal of which is required or the generation, manufacture, refining, production, processing, treatment, storage, handling, transportation, transfer, use, disposal, release, discharge, spillage, seepage or filtration of which is, in each of the foregoing cases, restricted, prohibited or penalized by any applicable law. Immaterial Transaction -- means any transaction or arrangement between the Company or any Restricted Subsidiary on the one hand, and any Affiliate on the other hand, that is incidental and, when considered in relation to, and together with, all transactions and arrangements between the Company and the Restricted Subsidiaries on the one hand, and such Affiliate on the other hand, is insignificant and immaterial in relation to the business, affairs and finances of the Company or the Restricted Subsidiary entering into such transaction or arrangement. Indebtedness -- means, with respect to any Person at any time, without duplication: (a) its liabilities for borrowed money (whether or not evidenced by a Security); (b) its obligations in respect of Redeemable Stock; (c) any liabilities secured by any Lien existing on Property owned by such Person (whether or not such liabilities have been assumed); (d) its Capitalized Lease Obligations; (e) the present value of all payments due under any arrangement for retention of title or any conditional sale agreement (other than a Capital Lease), in each case discounted in accordance with GAAP; (f) obligations of such Person in respect of letters of credit, acceptances, performance bonds or instruments serving a similar function issued or accepted by banks or other financial institutions for the account of such Person (other than obligations in respect of any such instruments relating to, or in support of, trade payables of such Person); and (g) its Guaranties (other than Excluded Guaranties) of any liabilities of another Person constituting liabilities of a type set forth in clause (a) through clause (f), inclusive; in each case, at such time, provided that trade accounts payable incurred by such Person in the ordinary course of business shall not constitute "Indebtedness." As used in this definition: Excluded Guaranty -- means any Guaranty in effect on the Closing Date and described in Part 9.1 of Annex 3 hereto under the caption "Existing Guaranties," and any renewal or extension (as to time) in respect of any such Guaranty, provided that the aggregate amount of the obligations of the Company or any Restricted Subsidiary thereunder is not increased above the maximum amount of the liquidated and contingent obligations of the Company and the Restricted Subsidiaries thereunder immediately prior to such renewal or extension. Institutional Investor -- means the Purchasers, any affiliate of any of the Purchasers and any holder or beneficial owner of Notes that is an "accredited investor" as defined in section 2(15) of the Securities Act. Investment -- means any investment, made in cash or by delivery of Property, by the Company or any Restricted Subsidiary: (a) in any Person, whether by acquisition of stock, indebtedness or other obligation or Security, or by loan, Guaranty, advance, capital contribution or otherwise; or (b) in any Property. IRC -- means the Internal Revenue Code of 1986, together with all rules and regulations promulgated pursuant thereto, as amended from time to time. IRS -- means the Internal Revenue Service and any successor agency. Joint Venture -- means a corporation, limited liability company or Partnership formed, or invested in, by the Company or any Restricted Subsidiary, in the ordinary course of such Person's business, with other Persons, provided that (a) such corporation, limited liability company or Partnership is in the same line of business as the Company or such Restricted Subsidiary, (b) such corporation, limited liability company or Partnership has substantially all of its operations and assets in a jurisdiction which is not a Sanctioned Jurisdiction, and (c) the Company or such Restricted Subsidiary exercises significant influence over the operating and financial policies of such corporation, limited liability company or Partnership. As used in this definition: Sanctioned Jurisdiction -- means each and every jurisdiction which by law, regulation or executive order of the United States of America is specified as a jurisdiction where citizens or businesses of the United States of America are prohibited from investing in or doing business in without special permission from the government of the United States of America. Lien -- means any interest in Property securing an obligation owed to, or a claim by, a Person other than the owner of the Property, whether such interest is based on the common law, statute or contract, and including, but not limited to, the security interest lien arising from a mortgage, encumbrance, pledge, conditional sale, sale with recourse or a trust receipt, or a lease, consignment or bailment for security purposes. The term "Lien" includes, without limitation, reservations, exceptions, encroachments, easements, rights-of-way, covenants, conditions, restrictions, leases and other title exceptions and encumbrances affecting real Property and includes, without limitation, with respect to stock, stockholder agreements, voting trust agreements, buy-back agreements and all similar arrangements. For the purposes hereof, the Company and each Subsidiary shall be deemed to be the owner of any Property that it shall have acquired or holds subject to a conditional sale agreement, Capital Lease or other arrangement pursuant to which title to the Property has been retained by or vested in some other Person for security purposes, and such retention or vesting is deemed a Lien. The term "Lien" does not include negative pledge clauses in agreements relating to the borrowing of money. Majority Holders -- means, at any time, the holders of more than fifty percent (50%) in principal amount of the Notes at the time outstanding (exclusive of Notes then owned by any one or more of the Company, any Subsidiary and any Affiliate). Make-Whole Amount -- means, with respect to any portion of the principal amount of Indebtedness (such portion, the "Prepaid Principal") paid for any reason on a date (the "Prepayment Date"), the excess (if any) of (x) the amount of the Present Value of the Prepaid Cash Flows determined with respect thereto minus (y) the amount of such Prepaid Principal. As used in this definition, Present Value of the Prepaid Cash Flows -- means, with respect to any Prepaid Principal, the Indebtedness in respect of which such Prepaid Principal was paid, and any Prepayment Date in respect thereof, the sum of the present values of the then remaining scheduled payments of principal and interest that would have been payable in respect of such Indebtedness but for the payment of such Prepaid Principal and that are no longer payable as a result of such payment. In determining such present values, (i) the amount of interest accrued on such Prepaid Principal since the scheduled interest payment date immediately preceding such Prepayment Date shall be deducted from the first of such payments of interest, and (ii) a discount rate equal to the Make-Whole Discount Rate determined with respect to such Prepaid Principal and such Prepayment Date divided by two (2), and a discount period of six (6) months of thirty (30) days each, shall be used. Applicable H.15 -- means, at any time, United States Federal Reserve Statistical Release H.15(519) then most recently published and available to the public, or if such publication is not available, then any other source of current information in respect of interest rates on securities of the United States of America that is generally available and, in the judgment of the Required Holders, provides information reasonably comparable to the H.15(519) report. Applicable H.15 Rate -- means, with respect to any Prepaid Principal and Prepayment Date thereof, the then most current annual yield to maturity of the hypothetical United States Treasury obligation listed in the Applicable H.15 with a Treasury Constant Maturity (as such term is defined in such Applicable H.15) equal to the Weighted Average Life to Maturity of such Prepaid Principal. If no such United States Treasury obligation with a Treasury Constant Maturity corresponding exactly to such Weighted Average Life to Maturity is listed, then the yields for the two (2) then most current hypothetical United States Treasury obligations with Treasury Constant Maturities most closely corresponding to such Weighted Average Life to Maturity (one (1) with a longer maturity and one (1) with a shorter maturity, if available) shall be calculated pursuant to the immediately preceding sentence and the Make-Whole Discount Rate shall be interpolated or extrapolated from such yields on a straight- line basis. Telerate Rate -- means, with respect to any Prepaid Principal and any Prepayment Date in respect thereof, the per annum yield reported on the Telerate Service at 10:00 a.m. (New York time) on any on the second (2nd) Business Day preceding such Prepayment Date for United States government Securities having a maturity (rounded to the nearest month) corresponding to the Weighted Average Life to Maturity of such Prepaid Principal. Page 678 shall be used as the source of such yields, or if not then available, such other screen available on the Telerate Service as shall, in the opinion of the Required Holders, provide equivalent information. Make-Whole Discount Rate -- means, with respect to any Prepaid Principal and Prepayment Date, fifty one-hundredths percent (0.50%) per annum plus the per annum percentage rate (rounded to the nearest three decimal (3) places) equal to the bond equivalent yield to maturity derived from the Telerate Rate, or if the Telerate Rate is not then available, the Applicable H.15 Rate, determined in respect thereof. Remaining Dollar-Years -- means, with respect to any Prepaid Principal, the Indebtedness in respect of which such Prepaid Principal was paid, and the Prepayment Date in respect thereof, the result obtained by (a) multiplying, in the case of each then remaining scheduled payment of principal that would have been payable in respect of such Indebtedness but for the payment of such Prepaid Principal and that is no longer payable as a result of such payment, (i) an amount equal to such required payment of principal, by (ii) the number of years (calculated to the nearest one-twelfth) that will elapse between such Prepayment Date and the date such required principal payment would be due if such Prepaid Principal had not been so prepaid, and (b) calculating the sum of each of the products obtained in the preceding subsection (a). Weighted Average Life to Maturity -- means, with respect to any Prepaid Principal and Prepayment Date thereof, the number of years obtained by dividing the Remaining Dollar- Years of such Prepaid Principal determined on such Prepayment Date by such Prepaid Principal. Make-Whole Discount Rate -- has the meaning ascribed to such term in the definition of "Make-Whole Amount" in this Section 9.1. Margin Security -- means "margin stock" within the meaning of Regulations G, T and X of the Board of Governors of the Federal Reserve System, 12 C.F.R., Chapter II, as amended from time to time. Material Adverse Effect -- means a material adverse effect on (a) the business, prospects, profits, Properties or condition (financial or otherwise) of the Company and the Restricted Subsidiaries, taken as a whole, (b) the ability of the Company to perform its obligations set forth in this Agreement and in the Notes, or (c) the validity or enforceability of any of the terms or provisions of this Agreement or the Notes. MMG -- means MMG Glastechnik GmbH, a limited liability company organized under the laws of the Federal Republic of Germany. Moody's -- means Moody's Investors Service, Inc. Multiemployer Plan -- means any "multiemployer plan" (as defined in section 3(37) of ERISA) in respect of which the Company or any ERISA Affiliate is an "employer" (as such term is defined in section 3 of ERISA). Net Proceeds Amount -- means, with respect to any Transfer of Property, the aggregate proceeds received by the Company or any Restricted Subsidiary, as the case may be, in respect of such Transfer, after deducting therefrom all reasonable costs and expenses of such Transfer (including, without limitation, all taxes payable in respect of such Transfer). Note Purchase Agreements -- Section 1.2(c). Notes -- Section 1.1. Other Note Purchase Agreements -- Section 1.2(c). Other Purchasers -- Section 1.2(c). Partnership -- means a limited partnership, a general partnership and any other business venture in the nature of a partnership where the Properties used in such venture are jointly owned (as tenants in common or other similar status) and the affairs of such business venture are governed by one or more contracts among the Persons jointly owning such Properties. PBGC -- means the Pension Benefit Guaranty Corporation and any successor corporation or governmental agency. Pension Plan -- means, at any time, any "employee pension benefit plan" (as such term is defined in section 3 of ERISA) maintained at such time by the Company or any ERISA Affiliate for employees of the Company or such ERISA Affiliate, excluding any Multiemployer Plan. Permitted Insurance Proceeds -- means with respect to any period, (i) proceeds of insurance received during such period from business interruption coverage, and (ii) proceeds of any insurance received during such period as a settlement of any Property loss or a reimbursement of any expenses related thereto in an amount not in excess of the amount of such loss or expenses that is required to be reflected as a loss in the net earnings of the Company and the Restricted Subsidiaries, determined on a consolidated basis for such Persons in accordance with GAAP, provided that such insurance proceeds were received within four (4) fiscal quarters of the time such loss or expenses, as the case may be, were reflected in such net earnings. Permitted Reorganization -- means, with respect to the Company or any Restricted Subsidiary, any voluntary reconstruction, merger, consolidation or reorganization of such corporation on a solvent basis, or any liquidation or winding up of such corporation on a solvent basis, which, in each case, has been approved in writing prior thereto by the Majority Holders. Person -- means an individual, sole proprietorship, partnership, corporation, trust, joint venture, limited liability company, unincorporated organization, or a government or agency or political subdivision thereof. Placement Agent -- means BA Securities, Inc. Placement Memorandum -- means the Private Placement Memorandum, dated February 1994, prepared by the Placement Agent, together with all exhibits, annexes, amendments and supplements thereto. Preferred Stock -- means any class of capital stock of a corporation that is preferred over any other class of capital stock of such corporation as to the payment of dividends or the payment of any amount upon liquidation or dissolution of such corporation. Property -- means any interest in any kind of property or asset, whether real, personal or mixed, and whether tangible or intangible. Proprietary Business Information -- means any technology or "trade secrets," customer lists, pricing information and cost data of the Company or any Subsidiary. Purchase Money Lien -- means: (a) a Lien (including, without limitation, a Lien arising in connection with a Capital Lease) held by any Person (whether or not the seller of such Property) on Property acquired, constructed or improved by the Company or any Restricted Subsidiary, which Lien secures all or a portion of the related purchase price or construction costs of such Property, provided that (i) such Lien (A) is created contemporaneously with, or within two hundred seventy (270) days of, such acquisition or improvement, or the completion of such construction, (B) encumbers only Property purchased, constructed or improved after the Closing Date and acquired, constructed or improved with the proceeds of the Indebtedness secured thereby, and (C) is not thereafter extended to any other Property; and (ii) after giving effect to the creation of such Lien, and to any concurrent transactions, no Default or Event of Default would exist; (b) Liens existing on Property acquired by the Company or a Restricted Subsidiary after the Closing Date which Liens existed at the time of such acquisition, provided that (i) such Liens (A) were not placed on such Property, and do not secure Indebtedness created, incurred, issued or assumed, contemporaneously with or in any manner in contemplation of, the acquisition of such Property by the Company or such Restricted Subsidiary, and (B) do not extend to any other Property of the Company or any Restricted Subsidiary after such acquisition, and (ii) after giving effect to such acquisition, and to any concurrent transactions, no Default or Event of Default would exist; and (c) Liens existing on the Property, capital stock or Indebtedness of a Person at the time such Person becomes a Restricted Subsidiary or is merged into or consolidated with the Company or a Restricted Subsidiary, or all or substantially all of the Property, capital stock or Indebtedness of such Person is sold, leased or otherwise disposed of to the Company or another Restricted Subsidiary, provided that (i) such Lien shall only extend to or cover any Property owned by such Person, or capital stock or Indebtedness issued or created by such Person, prior to the time such Person became a Restricted Subsidiary, or prior to such merger, consolidation, sale or other disposition, (ii) such Lien was not created in contemplation of any such transaction, and (iii) after giving effect to such transaction, and to any concurrent transactions, no Default or Event of Default would exist. Purchasers -- means you and the Other Purchasers. Qualified Proceeds Application -- means the application by the Company or a Restricted Subsidiary of the Excess Proceeds Amount with respect to Transfers described in Section 6.10(d) hereof to either (or both) of the following: (a) the acquisition of operating assets of the Company or any Restricted Subsidiary of a similar nature to be used in the ordinary course of business of such Person described in Section 6.12 (as determined in the good faith opinion of the Board of Directors of the Company or such Restricted Subsidiary, as the case may be); or (b) to pay the outstanding principal of, and the applicable premium (if any) on, Senior Debt of the Company or any Restricted Subsidiary (other than Senior Debt held by the Company, any Restricted Subsidiary or any Affiliate or Senior Debt in respect of any revolving credit or similar credit facility providing the Company or any Restricted Subsidiary with the right to obtain loans or other extensions of credit from time to time, except to the extent that in connection with such payment of Senior Debt the availability of credit under such credit facility is permanently reduced by an amount not less than the amount of such proceeds applied to the payment of such Senior Debt). To the extent that any such proceeds are applied as provided in clause (b) of this definition and such Senior Debt to be repaid is Senior Debt evidenced by the Notes, the Company shall comply with the provisions of Section 4.3 hereof in respect of such prepayment. Redeemable Stock -- means, with respect to any Person, each share of such Person's capital stock that is: (a) redeemable, payable or required to be purchased or otherwise retired or extinguished, or convertible into indebtedness of such Person (i) at a fixed or determinable date, whether by operation of a sinking fund or otherwise, (ii) at the option of any Person other than such Person, or (iii) upon the occurrence of a condition not solely within the control of such Person; or (b) convertible into other Redeemable Stock. Required Holders -- means, at any time, the holders of at least sixty-six and two-thirds percent (66-2/3%) in principal amount of the Notes at the time outstanding (exclusive of Notes then owned by any one or more of the Company, any Subsidiary and any Affiliate). Required Principal Prepayment -- Section 4.2. Restricted Investments -- means, at any time, all Investments except the following: (a) Investments in Property to be used in the ordinary course of business of the Company and the Restricted Subsidiaries; (b) Investments in trade accounts receivable arising from the sale of goods and services in the ordinary course of business of the Company and the Restricted Subsidiaries; (c) Investments in United States Governmental Securities, provided that such obligations mature within three (3) years from the date of acquisition thereof; (d) Investments in one or more Restricted Subsidiaries or any corporation that concurrently with such Investment becomes a Restricted Subsidiary; (e) Investments in commercial paper given either of the two (2) highest ratings by either Standard & Poor's or Moody's, provided that such obligations mature within two hundred seventy (270) days from the date of creation thereof; (f) Investments constituting loans and advances to employees, including travel advances and relocation loans, made in the ordinary course of and furtherance of the business of the Company or any Restricted Subsidiary; (g) Investments in demand deposit accounts maintained with one or more local commercial banks, which qualify as Acceptable Banks, as operating funds accounts used in the ordinary course of business of the Company and the Restricted Subsidiaries; (h) Investments in publicly-traded shares in any open- end mutual fund that invests solely in Investments of the type described in clause (c), clause (e), clause (j) or clause (k) of this definition and has total assets in excess of One Billion Dollars ($1,000,000,000), provided that such Investments are classified as current assets in accordance with GAAP; (i) Investments in money market preferred stock of corporations organized under the laws of the United States of America or any state thereof that (i) is commonly referred to by the terms "Dutch-Auction Preferred," "Capital Market Preferred," "Remarketed Preferred," "Variable Rate Preferred" or similar terms, and (ii) has been given, at the time of acquisition, one of the two (2) highest ratings by either Standard & Poor's or Moody's; (j) Investments in certificates of deposit or banker's acceptances issued by an Acceptable Bank, provided that such obligations mature within one (1) year from the date of acquisition thereof; (k) Investments in Permitted Repurchase Agreements; (l) Investments in Dollar-denominated deposits with (i) a bank organized under the laws of a country that is a member of the European Community (or any political subdivision of such country) having a combined capital and surplus of not less than One Hundred Million Dollars ($100,000,000) and given an issuer rating of "A" by Thomson BankWatch, Inc. (or a comparable rating by another nationally-recognized rating agency of similar standing if Thomson BankWatch, Inc. is not then in the business of rating commercial banks), or (ii) a foreign branch of an Acceptable Bank; (m) Investments in tax-exempt obligations of any state of the United States of America, or any municipality of any such state, given either of the two (2) highest ratings by either Standard & Poor's or Moody's, provided that such obligations mature within three (3) years from the date of acquisition thereof; (n) Investments in Joint Ventures, provided that the aggregate book value of all such Investments shall not at any time exceed ten percent (10%) of Consolidated Total Assets determined at such time; (o) Investments in federally insured money market deposit accounts maintained with one or more Acceptable Banks; (p) other Investments in Securities for cash management purposes, made in accordance with the Company's investment policies as in effect on the Closing Date and as more particularly set forth in Part 9.1 of Annex 3 hereto under the caption "Investment Policies," maturing within one (1) year from the date of acquisition thereof, provided that the aggregate book value of all such Investments shall not at any time exceed two and fifty one-hundredths percent (2.50%) of Consolidated Total Assets determined at such time; (q) Investments in existence on the Closing Date in Subsidiaries that are designated as Unrestricted Subsidiaries on the Closing Date, as set forth in Part 2.3 of Annex 3 hereto; and (r) other Investments, in existence on the Closing Date, provided that such Investments are described in Part 9.1 of Annex 3 hereto under the caption "Existing Investments." Investments, for purposes of this Agreement, shall be valued at cost less any net return of capital through the sale or liquidation thereof or other return of capital thereon, in any case without giving effect to any write-down in the value thereof. As used in this definition: Acceptable Bank -- means any commercial bank: (a) that is organized under the laws of the United States of America or any state thereof; (b) that has capital, surplus and undivided profits aggregating at least One Hundred Million Dollars ($100,000,000); and (c) whose long-term unsecured debt obligations (or the long-term unsecured debt obligations of the bank holding company owning all of the capital stock of such bank) shall have been rated "A" or higher by Standard & Poor's or "A2" or higher by Moody's. Permitted Repurchase Agreement -- means any written agreement: (a) that provides for (i) the transfer of one or more United States Governmental Securities to the Company or a Restricted Subsidiary from an Acceptable Bank against a transfer of funds (the "transfer price") by the Company or such Restricted Subsidiary to such Acceptable Bank, and (ii) a simultaneous agreement by the Company or such Restricted Subsidiary, in connection with such transfer of funds, to transfer to such Acceptable Bank the same or substantially similar United States Governmental Securities for a price not less than the transfer price plus a reasonable return thereon at a date certain not later than one (1) year after such transfer of funds; and (b) in respect of which the Company or such Restricted Subsidiary shall have the right, whether by contract or pursuant to applicable law, to liquidate such repurchase agreement upon the occurrence of any default thereunder. Restricted Payment -- means any Distribution (other than on account of capital stock of a Subsidiary owned legally and beneficially by the Company or a Restricted Subsidiary), including, without limitation, any Distribution resulting in the acquisition by the Company of Securities which would constitute treasury stock. Restricted Subsidiary -- at any time means a Subsidiary which (a) as of the Closing Date has been designated as a "Restricted Subsidiary" in Part 2.3 of Annex 3 hereto, or (b) after the Closing Date, and in accordance with Section 6.16 hereof, has been designated as a "Restricted Subsidiary." Restricted Subsidiary Stock -- Section 6.10(b). Securities Act -- means the Securities Act of 1933, as amended from time to time. Security -- means "security" as defined in section 2(1) of the Securities Act. Senior Debt -- means any Indebtedness of the Company or a Restricted Subsidiary which is not Subordinated Debt. Senior Financial Officer -- means the chief financial officer, the principal accounting officer, the treasurer or the comptroller of the Company. Senior Officer -- means the chief executive officer, the chief operating officer, the president or the chief financial officer of the Company. Specified Asset Percentage -- Section 6.10(a). Standard & Poor's -- means Standard & Poor's Corporation. Subordinated Debt -- means, at any time, any unsecured Indebtedness of the Company or a Restricted Subsidiary that is in any respect subordinate or junior in right of payment or otherwise to the Indebtedness evidenced by the Notes or to any other Indebtedness of the Company or any Restricted Subsidiary. Subsidiary -- means, at any time, a corporation, limited liability company or a Partnership (a) of which the Company owns, directly or indirectly, more than fifty percent (50%) (by number of votes) of each class of the Voting Stock or more than fifty percent (50%) of the other equity interests, as the case may be, at such time, and (b) whose financial statements and results are required to be consolidated with the financial statements and results of the Company in accordance with GAAP. Surviving Corporation -- Section 6.11(a). Total Restricted Subsidiary Indebtedness -- means, at any time, (without duplication) (a) the aggregate Indebtedness of all Restricted Subsidiaries outstanding at such time, and (b) the aggregate amount of claims (whether or not contingent or liquidated at such time) in respect of (including, without limitation, accumulated, unpaid dividends on) all Preferred Stock (and other equity Securities and all other Securities convertible into, exchangeable for, or representing the right to purchase, Preferred Stock) of all Restricted Subsidiaries outstanding at such time (whether or not any right of redemption or conversion is exercisable by the holder thereof at such time), determined, in each case, on a combined basis for such Persons, but excluding from such calculation (i) all Excluded Restricted Subsidiary Indebtedness at such time and (ii) all such Preferred Stock and other equity Securities which are legally and beneficially owned by the Company or any Wholly-Owned Restricted Subsidiary. Transfers -- Section 6.10(a). United States Governmental Securities -- means any direct obligation of, or obligation guaranteed by, the United States of America, or any agency controlled or supervised by or acting as an instrumentality of the United States of America pursuant to authority granted by the Congress of the United States of America, in respect of the payment of which obligation or guarantee the full faith and credit of the United States of America, pursuant to authority granted by the Congress of the United States of America, shall have been pledged. Unrestricted Subsidiary -- at any time means a Subsidiary which (a) as of the Closing Date is not a Restricted Subsidiary, (b) after the Closing Date and in accordance with Section 6.16 hereof, has been designated as, or deemed designated as, an "Unrestricted Subsidiary," or (c) otherwise does not satisfy the criteria for a Restricted Subsidiary set forth in the definition of "Restricted Subsidiary" contained in Section 9.1 hereof. Voting Stock -- means capital stock of any class or classes of a corporation the holders of which are ordinarily, in the absence of contingencies, entitled to elect corporate directors (or Persons performing similar functions). Wholly-Owned Restricted Subsidiary -- means, at any time, any Restricted Subsidiary one hundred percent (100%) of all of the equity Securities (except directors' qualifying shares) and voting Securities of which are owned by, and all of the Indebtedness of which is held by, any one or more of the Company and the other Wholly-Owned Restricted Subsidiaries at such time. 9.2 GAAP. Unless otherwise provided herein, all financial statements delivered in connection herewith will be prepared in accordance with GAAP as in effect on the date of, or during the period covered by, such financial statement. Where the character or amount of any asset or liability or item of income or expense, or any consolidation or other accounting computation is required to be made for any purpose hereunder, it shall be done in accordance with GAAP as in effect on the date of, or at the end of the period covered by, the financial statements from which such asset, liability, item of income, or item of expense is derived, or, in the case of any such computation, as in effect on the date as of which such computation is required to be determined, provided, that if any term defined herein includes or excludes amounts, items or concepts that would not be included in or excluded from such term if such term were defined with reference solely to GAAP, such term will be deemed to include or exclude such amounts, items or concepts as set forth herein. Whenever a calculation based on the consolidated financial position or consolidated results of operations of a group of Persons is required hereby, investments by members of the group in Persons which are excluded hereby from such group shall be accounted for using the cost method. 9.3 Directly or Indirectly. Where any provision herein refers to action to be taken by any Person, or that such Person is prohibited from taking, such provision shall be applicable whether such action is taken directly or indirectly by such Person, including actions taken by or on behalf of any partnership in which such Person is a general partner. LST Section Headings and Table of Contents and Construction. (a) Section Headings and Table of Contents, etc. The titles of the Sections of this Agreement and the Table of Contents of this Agreement appear as a matter of convenience only, do not constitute a part of this Agreement and shall not affect the construction hereof. The words "herein," "hereof," "hereunder" and "hereto" refer to this Agreement as a whole and not to any particular Section or other subdivision. (b) Construction. Each covenant contained herein shall be construed (absent an express contrary provision herein) as being independent of each other covenant contained herein, and compliance with any one covenant shall not (absent such an express contrary provision) be deemed to excuse compliance with one or more other covenants. 9.5 Governing Law. THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, INTERNAL CONNECTICUT LAW. 9.6 Payments in Excess of Legal Rate of Interest. In the event the Company pays interest on the Notes and it is determined that the interest rate in effect under the Notes was in excess of the then legal maximum rate (after giving effect to any exemptions available under applicable law), then that portion of the interest payment representing an amount in excess of the then legal maximum rate shall be deemed a payment of principal and shall be applied first, to the principal amount due on the maturity date of the Notes and second, to the Required Principal Prepayments due pursuant to Section 4.2 of this Agreement, in the inverse order of the maturity thereof. 10. MISCELLANEOUS 10.1 Communications. (a) Method; Address. All communications hereunder or under the Notes shall be in writing, shall be hand delivered, deposited into the United States mail (registered or certified mail), postage prepaid, sent by overnight courier or sent by facsimile transmission (confirmed by delivery by overnight courier) and shall be addressed, (i) if to the Company, Optical Coating Laboratory, Inc. 2789 Northpoint Parkway Santa Rosa, California 95407-7397 Attention: Mr. Josef Wally, Vice President and Corporate Controller and Joseph C. Zils, Esq. Vice President and Corporate Counsel Phone: (707) 545-6440 Facsimile: (707) 525-6840 with a copy to: John V. Erickson, Esq. Collette & Erickson 555 California Street, Suite 4350 San Francisco, California 94104 Phone: (415) 788-4646 Facsimile: (415) 788-6929 or at such other address as the Company shall have furnished in writing to all holders of the Notes at the time outstanding, and (ii) if to any of the holders of the Notes, (A) if such holders are the Purchasers, at their respective addresses set forth on Annex 1 hereto, and further including any parties referred to on such Annex 1 that are required to receive notices in addition to such holders of the Notes, and (B) if such holders are not the Purchasers, at their respective addresses set forth in the register for the registration and transfer of Notes maintained pursuant to Section 5.1 hereof, or to any such party at such other address as such party may designate by notice duly given in accordance with this Section 10.1 to the Company (which other address shall be entered in such register). (b) When Given. Any communication properly addressed and sent in accordance with Section 10.1(a) hereof shall be deemed to be received when actually presented for delivery at the address of the addressee. 10.2 Reproduction of Documents. This Agreement and all documents relating hereto, including, without limitation, (a) consents, waivers and modifications that may hereafter be executed, (b) documents received by you at the closing of your purchase of the Notes (except the Notes themselves), and (c) financial statements, certificates and other information previously or hereafter furnished to you or any other holder of Notes, may be reproduced by any holder of Notes by any photographic, photostatic, microfilm, micro-card, miniature photographic, digital or other similar process and each holder of Notes may destroy any original document so reproduced. The Company agrees and stipulates that 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 such holder of Notes in the regular course of business) and that any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence. Nothing in this Section 10.2 shall prohibit the Company or any holder of Notes from contesting the validity or the accuracy of any such reproduction. 10.3 Survival. All warranties, representations, certifications and covenants made by the Company herein or in any certificate or other instrument delivered by it or on its behalf hereunder shall be considered to have been relied upon by you and shall survive the delivery to you of the Notes regardless of any investigation made by you or on your behalf. All statements in any such certificate or other instrument shall constitute warranties and representations by the Company hereunder. 10.4 Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties hereto. The provisions hereof are intended to be for the benefit of all holders, from time to time, of Notes, and shall be enforceable by any such holder, whether or not an express assignment to such holder of rights hereunder shall have been made by you or your successor or assign. 10.5 Amendment and Waiver. (a) Requirements. This Agreement may be amended, and the observance of any term hereof may be waived, with (and only with) the written consent of the Company and the Majority Holders; provided that no such amendment or waiver of any of the provisions of Section 1 through Section 3 hereof, inclusive, or any defined term used therein, shall be effective as to any holder of Notes unless consented to by such holder in writing; and provided further that no such amendment or waiver shall, without the written consent of the holders of all Notes (exclusive of Notes held by the Company, any Subsidiary or any Affiliate) at the time outstanding, (i) subject to Section 8 hereof, change the amount or time of any prepayment or payment of principal or Make-Whole Amount or the rate or time of payment of interest, (ii) amend Section 4 or Section 8 hereof, (iii) amend the definition of "Required Holders" or the definition of "Majority Holders," or (iv) amend this Section 10.5. (b) Solicitation of Noteholders. (i) Solicitation. The Company shall not solicit, request or negotiate for or with respect to any proposed waiver or amendment of any of the provisions hereof or the Notes unless each holder of the Notes (irrespective of the amount of Notes then owned by it) shall be provided by the Company with sufficient information to enable it to make an informed decision with respect thereto. Executed or true and correct copies of any waiver or consent effected pursuant to the provisions of this Section 10.5 shall be delivered by the Company to each holder of outstanding Notes forthwith following the date on which the same shall have been executed and delivered by all holders of outstanding Notes required to consent or agree to such waiver or consent for such waiver or consent to become effective. (ii) Payment. The Company shall 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 of any waiver or amendment of any of the terms and provisions hereof unless such remuneration is concurrently paid, or security is concurrently granted, ratably to the holders of all Notes then outstanding. (iii) Scope of Consent. Any consent made pursuant to this Section 10.5 by a holder of Notes that has transferred or has agreed to transfer its Notes to the Company, any Subsidiary or any Affiliate and has provided or has agreed to provide such written consent as a condition to such transfer shall be void and of no force and effect except solely as to such holder, and any amendments effected or waivers granted or to be effected or granted that would not have been or would not be so effected or granted but for such consent (and the consents of all other holders of Notes that were acquired under the same or similar conditions) shall be void and of no force and effect, retroactive to the date such amendment or waiver initially took or takes effect, except solely as to such holder. (c) Binding Effect. Except as provided in Section 10.5(a) and Section 10.5(b)(iii) hereof, any amendment or waiver consented to as provided in this Section 10.5 shall apply equally to all holders of Notes and shall be binding upon them and upon each future holder of any Note and upon the Company whether or not such Note shall have been marked to indicate such amendment or waiver. No such amendment or waiver shall extend to or affect any obligation, covenant, agreement, Default or Event of Default not expressly amended or waived or impair any right consequent thereon. 10.6 Expenses. The Company shall pay when billed (a) all expenses incurred by any holder of Notes in connection with the enforcement of any rights under this Agreement and the Notes (including, without limitation, all fees and expenses of such holder's special counsel and the allocated cost of such holder's counsel who are its employees or its affiliates' employees), and (b) all expenses relating to the consideration, negotiation, preparation or execution of any amendments, waivers or consents pursuant to Section 10.5 and the other terms and provisions hereof (including, without limitation, all fees and expenses of your special counsel and the allocated cost of your counsel who are your employees or your affiliates' employees), whether or not any such amendments, waivers or consents are executed, including, without limitation any amendments, waivers or consents resulting from any work-out, restructuring or similar proceedings relating to the performance by the Company of its obligations under the Note Purchase Agreements or the Notes. 10.7 Payments on Notes. (a) Manner of Payment. The Company shall pay all amounts payable with respect to each Note (without any presentment of such Notes and without any notation of such payment being made thereon) by crediting, by federal funds bank wire transfer, the account of the holder thereof in any bank in the United States of America as may be designated in writing by such holder, or in such other manner as may be reasonably directed or to such other address in the United States of America as may be reasonably designated in writing by such holder. Annex 1 hereto shall be deemed to constitute notice, direction or designation (as appropriate) to the Company with respect to payments as aforesaid. In the absence of such written direction, all amounts payable with respect to each Note shall be paid by check mailed and addressed to the registered holder of such Note at the address shown in the register maintained by the Company pursuant to Section 5.1 hereof. (b) Payments Due on Holidays. If any payment due on, or with respect to, any Note shall fall due on a day other than a Business Day, then such payment shall be made on the first Business Day following the day on which such payment shall have so fallen due; provided that if all or any portion of such payment shall consist of a payment of interest, for purposes of calculating such interest, such payment shall be deemed to have been originally due on such first following Business Day, such interest shall accrue and be payable to (but not including) the actual date of payment, and the amount of the next succeeding interest payment shall be adjusted accordingly. If any payment is to be made on the first Business Day following the day on which the same shall have fallen due, as provided in this paragraph, and is not so paid on such first Business Day, interest shall accrue thereon (to the extent permitted by applicable law) with respect to each Note at the rate provided in such Note on overdue payments of principal from (in each case) the originally scheduled day of its payment. (c) Payments, When Received. Any payment to be made to the holders of Notes hereunder or under the Notes shall be deemed to have been made on the Business Day such payment actually becomes available to such holder at such holder's bank prior to 1:00 p.m. (local time of such bank). 10.8 Entire Agreement. This Agreement constitutes the final written expression of all of the terms hereof and is a complete and exclusive statement of those terms. 10.9 Duplicate Originals, Execution in Counterpart. Two (2) or more duplicate originals hereof may be signed by the parties, each of which shall be an original but all of which together shall constitute one and the same instrument. This Agreement may be executed in one or more counterparts and shall be effective when at least one counterpart shall have been executed by each party hereto, and each set of counterparts that, collectively, show execution by each party hereto shall constitute one duplicate original. [Remainder of page intentionally blank; next page is signature page.] If this Agreement is satisfactory to you, please so indicate by signing the acceptance at the foot of a counterpart hereof and returning such counterpart to the Company, whereupon this Agreement shall become binding between us in accordance with its terms. Very truly yours, OPTICAL COATING LABORATORY, INC. By /s/ Herbert M. Dwight, Jr. Name: Herbert M. Dwight, Jr. Title: Chairman of the Board, President and Chief Executive Officer [Separately Executed by Each of the Following Purchasers] Accepted: CONNECTICUT MUTUAL LIFE INSURANCE COMPANY By /s/ Lawrence D. Stillman Name: Lawrence D. Stillman Title: Senior Investment Officer MODERN WOODMEN OF AMERICA By /s/ G. E. Stoefen Name: G. E. Stoefen Title: Director, Treasurer & Investment Manager AMERICAN LIFE AND CASUALTY INSURANCE COMPANY By: /s/ John F. Williamson Name: John F. Williamson Title: Vice President By: /s/ Vince Otto Name: Vince Otto Title: Vice President ANNEX 1 INFORMATION AS TO PURCHASERS Purchaser Name CONNECTICUT MUTUAL LIFE INSURANCE COMPANY Name in which to register Note(s) Connecticut Mutual Life Insurance Company Note registration numbers; Principal amounts R-1 -- $5,000,000 R-2 -- $5,000,000 Payment on account of Note(s) Method Account information Federal Funds Wire Transfer The Bank of New York ABA #021000018 BNF:IOC566 Attn: P & I Department FOR: Connecticut Mutual Life Insurance Company Accompanying information Name of Company: OPTICAL COATING LABORATORY, INC. Description of Security: 8.71% Senior Notes Due June 1, 2002 PPN: 683829 A 6 Due Date and Application (as among principal, premium and interest) of the payment being made (and indicating whether such payment is a final payment). Address for notices related to payments Connecticut Mutual Life Insurance Company c/o The Bank of New York P.O. Box 19266 Attn: P & I Department Newark, NJ 07195 with a copy to: Connecticut Mutual Life Insurance Company 140 Garden Street Hartford, Connecticut 06154 Attn: Securities Accounting/ Carol Vojtila Address for all other notices Connecticut Mutual Life Insurance Company 140 Garden Street Hartford, Connecticut 06154 Attn: Private Placements, MS 272 with a copy to: Connecticut Mutual Life Insurance Company c/o The Bank of New York P.O. Box 19266 Attn: P & I Department Newark, NJ 07195 Tax identification number 06-0304620 Purchaser Name MODERN WOODMEN OF AMERICA Name in which to register Note(s) Modern Woodmen of America Note registration number; Principal amount R-3 $5,000,000 Payment on account of Note(s) Method Account information Federal Funds Wire Transfer Harris Trust & Savings Bank 111 West Monroe Street Chicago, IL 60690 ABA # 071-000-288 For the account of Modern Woodmen of America Account # 347-904-5 Accompanying information Name of Company: OPTICAL COATING LABORATORY, INC. Description of Security: 8.71% Senior Notes Due June 1, 2002 PPN: 683829 A 6 Due Date and Application (as among principal, premium and interest) of the payment being made (and indicating whether such payment is a final payment). Address for notices related to payments Modern Woodmen of America 1701 1st Avenue Rock Island, IL 61201 Attention: Investment Department Address for all other notices Modern Woodmen of America 1701 1st Avenue Rock Island, IL 61201 Attention: Investment Department Telecopy: (309) 786-1701 Tax identification number 36-1493430 Purchaser Name AMERICAN LIFE AND CASUALTY INSURANCE COMPANY Name in which to register Note(s) Auer & Co. Note registration number; Principal amount R-4 $3,000,000 Payment on account of Note(s) Method Account information Federal Funds Wire Transfer Care of Banker's Trust ABA #021001033 Account No. 92558 Attention: 99-911-145 Accompanyinginformation Name of Company: OPTICAL COATING LABORATORY, INC. Description of Security: 8.71% Senior Notes Due June 1, 2002 PPN: 683829 A 6 Due Date and Application (as among principal, premium and interest) of the payment being made (and indicating whether such payment is a final payment). Address for notices related to payments Banker's Trust Company Insurance Unit P.O. Box 998 Bowling Green Station New York, New York 10274 Address for all other notices American Life and Casualty Insurance Company 405 6th Avenue Des Moines, Iowa 50309 Tax identification number 13-606441 ANNEX 2 PAYMENT INSTRUCTIONS AT CLOSING In accordance with Section 1.2(b) of this Agreement, the Company directs you to make payment for the Note or Notes being purchased by you by payment by federal funds wire transfer in immediately available funds of the purchase price thereof to: Bank of America ABA No.: 121000358 For the account of: Optical Coating Laboratory, Inc. Account No.: 14980-00084 Name and telephone number of person at bank to contact with any questions: Paula Canchola (510) 675-7132 ANNEX 3 INFORMATION AS TO COMPANY [INFORMATION TO BE SUPPLIED BY COMPANY] 2.2(a). Financial Statements. 1. The consolidated balance sheets of the Company and its consolidated subsidiaries as of October 31 in each of 1993, 1992, and 1991, and the related consolidated statements of operations, cash flows and stockholders' equity for the fiscal years ended on such dates, all accompanied by opinions thereon by Deloitte & Touche, independent certified public accountants. 2. The unaudited consolidated balance sheet of the Company and its consolidated subsidiaries as of January 31, 1994, and the related unaudited consolidated statements of operations, cash flows and stockholders' equity for the three (3) month period ended on such date. 2.2(b). Indebtedness. [To be provided by the Company]. 2.3. Subsidiaries and Affiliates. (a) Subsidiaries and Affiliates [To be provided by the Company]. (b) Restricted Subsidiaries [To be provided by the Company]. (c) Unrestricted Subsidiaries [To be provided by the Company]. 2.8(d). Foreign Jurisdictions. [To be provided by the Company]. 2.10(b). Restrictions on Company and Subsidiaries. [To be provided by the Company]. 2.12(a). ERISA Affiliates and Employee Benefit Plans. [To be provided by the Company]. 2.18(a). Use of Proceeds. The Company will use the proceeds from the sale of the Notes to refinance outstanding Indebtedness and for general corporate purposes. 6.8(a)(vi). Existing Liens. [To be provided by the Company]. Part 9.1. (a) Existing Guaranties [To be provided by the Company]. (b) Existing Restricted Subsidiary Indebtedness [To be provided by the Company]. (c) Existing Investments [To be provided by the Company]. (d) Investment Policies [To be provided by the Company]. EX-11 4 EXHIBIT 11. COMPUTATION OF EARNINGS PER SHARE (Dollars in thousands, except per share data) (Unaudited) Three Months Ended Nine Months Ended July 31, July 31, 1994 1993 1994 1993 PRIMARY SHARES: Average common shares outstanding 8,976 8,912 8,974 8,743 Common equivalent shares outstanding 40 54 9,016 8,912 9,028 8,743 Net earnings (loss) $ 910 $(6,822) $ 3,359 $(4,384) Net earnings (loss) per share, primary $ .10 $ (.77) $ .37 $ (.50) FULLY DILUTED SHARES: Average common shares outstanding 8,976 8,912 8,974 8,743 Common equivalent shares outstanding 115 194 84 376 9,091 9,106 9,058 9,119 Net earnings (loss) for calculation of fully diluted earnings per share $ 910 $(6,822) $ 3,359 $(4,384) Net earnings (loss), fully diluted $ .10 $ (.75) $ .37 $ (.48) Fully diluted earnings per common and common equivalent share are the same as primary earnings per share or are antidilutive and are, therefore, not separately presented in the consolidated statements of operations. EX-15 5 1 EXHIBIT 15 To the Board of Directors and Stockholders of Optical Coating Laboratory, Inc. Santa Rosa, California We have reviewed, in accordance with standards established by the American Institute of Certified Public Accountants, the unaudited interim financial information of Optical Coating Laboratory, Inc. and subsidiaries for the periods ended July 31, 1994 and 1993 as indicated in our report dated August 17, 1994; because we did not perform an audit, we expressed no opinion on that information. We are aware that our report referred to above, which is included in your Quarterly Report on Form 10-Q for the quarter ended July 31, 1994, is incorporated by reference in Registration Statements No. 33-41050, No. 33-26271, No. 33- 12276, No. 33-48808 and No. 33-65132 on Forms S-8 and Registration Statement No. 2-97482 on Form S-3. We are also aware that the aforementioned report, pursuant to Rule 436(c) under the Securities Act, is not considered a part of the Registration Statement prepared or certified by an accountant or a report prepared or certified by an accountant within the meaning of Sections 7 and 11 of that Act. /s/ Deloitte & Touche LLP September 10, 1994 EX-27 6
5 9-MOS OCT-31-1994 JUL-31-1994 16,458 0 25,776 3,434 9,435 54,912 115,559 65,277 114,384 22,768 0 90 0 0 49,844 114,384 97,038 97,038 61,600 61,600 27,464 0 2,313 5,792 2,433 3,359 0 0 0 3,357 .37 .37
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