-----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, HgiRm6RNxTwq75xo0z47p4by3fXrxC5UtZGBSo/n8I9YDuIr2ik8bxfuJ6zpWFLv 3cfbyAY7eOUqXrWkBkrxlA== 0000950135-94-000513.txt : 19940817 0000950135-94-000513.hdr.sgml : 19940817 ACCESSION NUMBER: 0000950135-94-000513 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19940701 FILED AS OF DATE: 19940812 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TIMBERLAND CO CENTRAL INDEX KEY: 0000814361 STANDARD INDUSTRIAL CLASSIFICATION: 3140 IRS NUMBER: 020312554 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09548 FILM NUMBER: 94543583 BUSINESS ADDRESS: STREET 1: 11 MERRILL INDUSTRIAL DR CITY: HAMPTON STATE: NH ZIP: 03842 BUSINESS PHONE: 6039261600 MAIL ADDRESS: STREET 1: 11 MERRILL INDUSTRIAL DRIVE CITY: HAMPTON STATE: NH ZIP: 03842 10-Q 1 FORM 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES --- EXCHANGE ACT OF 1934 For the quarterly period ended July 1, 1994 -------------------------- OR ___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________________ to ________________ Commission File Number 1-9548 -------------- The Timberland Company - - ---------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 02-0312554 - - ---------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification Number) incorporation or organization) 11 Merrill Industrial Drive, Hampton, New Hampshire 03843 - - ---------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (603) 926-1600 ---------------------- 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 ____ ----- On July 29, 1994, 7,653,042 shares of the registrant's Class A Common Stock were outstanding and 3,237,121 shares of the registrant's Class B Common Stock were outstanding. 2 THE TIMBERLAND COMPANY FORM 10-Q TABLE OF CONTENTS
Page(s) ------ Independent Accountants' Review Report 1 Part I Financial Information (Unaudited) ---------------------------------------- Condensed Consolidated Balance Sheets - July 1, 1994 and December 31, 1993 2 - 3 Condensed Consolidated Statements of Operations - For the three and six months ended July 1, 1994 and July 2, 1993 4 Condensed Consolidated Statements of Cash Flows - For the six months ended July 1, 1994 and July 2, 1993 5 Notes to Condensed Consolidated Financial Statements 6 - 7 Management's Discussion and Analysis of Financial Condition and Results of Operations 8 - 10 Part II Other Information 11 -------------------------
3 Form 10-Q Page 1 INDEPENDENT ACCOUNTANTS' REVIEW REPORT -------------------------------------- To the Stockholders and Board of Directors of The Timberland Company: We have reviewed the accompanying condensed consolidated balance sheet of The Timberland Company and subsidiaries as of July 1, 1994, and the related condensed consolidated statements of operations and cash flows for the three-month and six-month periods ended July 1, 1994 and July 2, 1993. These condensed consolidated financial statements are the responsibility of the Company's management. We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and of making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our reviews, 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 The Timberland Company and subsidiaries as of December 31, 1993, and the related consolidated statements of income, changes in stockholders' equity, and cash flows for the year then ended (not presented herein), and, in our report dated February 15, 1994, 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 December 31, 1993, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it was derived. Deloitte & Touche Boston, Massachusetts July 21, 1994 4 Form 10-Q Page 2 Part I Financial Information - - ---------------------------- THE TIMBERLAND COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS ASSETS (Dollars in Thousands) (Unaudited)
July 1, December 31, 1994 1993 ---------- ------------- Current assets Cash and equivalents $ 3,064 $ 3,281 Accounts receivable, net 117,928 93,226 Inventories 194,662 111,380 Prepaid expenses 11,548 7,571 Deferred and refundable income taxes 5,641 5,625 ---------- ---------- Total current assets 332,843 221,083 ---------- ---------- Property, plant and equipment, at cost 89,596 79,145 Less accumulated depreciation and amortization (39,532) (33,530) ---------- ---------- Net property, plant and equipment 50,064 45,615 ---------- ---------- Excess of cost over fair value of net assets acquired, net 24,546 18,157 Other assets, net 4,864 5,756 ---------- ---------- $ 412,317 $ 290,611 ========= ==========
See accompanying notes to condensed consolidated financial statements. 5 Form 10-Q Page 3 THE TIMBERLAND COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS LIABILITIES AND STOCKHOLDERS' EQUITY (Dollars in Thousands) (Unaudited)
July 1, December 31, 1994 1993 --------- ------------ Current liabilities Notes payable $ 53,741 $ 10,061 Current maturities of long-term obligations 719 682 Accounts payable 37,084 32,526 Accrued expenses Payroll and related 9,738 8,873 Interest and other 18,942 9,609 Income taxes payable 1,710 3,672 --------- --------- Total current liabilities 121,934 65,423 --------- --------- Long-term obligations, less current maturities 155,440 90,809 --------- --------- Deferred income taxes 6,700 6,016 --------- --------- Stockholders' equity Preferred stock, $.01 par value; 2,000,000 shares authorized; none issued - - Class A Common Stock, $.01 par value (1 vote per share); 30,000,000 shares authorized; 7,650,565 shares issued at July 1, 1994 and 7,630,556 shares at December 31, 1993 77 76 Class B Common Stock, $.01 par value (10 votes per share); 15,000,000 shares authorized; 3,237,121 shares issued and outstanding at July 1, 1994 and 3,237,598 shares at December 31, 1993 32 32 Additional paid-in capital 56,281 55,805 Retained earnings 72,632 74,106 Cumulative translation adjustment (659) (1,536) Less treasury stock at cost, 18,369 shares at July 1, 1994 and 18,513 shares at December 31, 1993 (120) (120) --------- --------- 128,243 128,363 --------- --------- $ 412,317 $ 290,611 ========= =========
See accompanying notes to condensed consolidated financial statements. 6 Form 10-Q Page 4 THE TIMBERLAND COMPANY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Amounts in Thousands, Except Per Share Data) (Unaudited)
For the For the Three Months Ended Six Months Ended ------------------ ---------------- July 1, July 2, July 1, July 2, 1994 1993 1994 1993 ------- ------- ------- ------- Net sales $126,944 $84,849 $235,037 $155,455 Cost of goods sold 86,795 54,263 162,397 97,402 -------- ------- -------- -------- Gross profit 40,149 30,586 72,640 58,053 -------- ------- -------- -------- Operating expenses Selling 27,038 17,980 49,890 33,273 General and administrative 9,667 7,560 19,624 14,351 Amortization of goodwill 250 193 444 387 -------- ------- -------- -------- Total operating expenses 36,955 25,733 69,958 48,011 -------- ------- -------- -------- Operating income 3,194 4,853 2,682 10,042 -------- ------- -------- -------- Other expense (income) Interest 3,440 1,388 5,325 2,598 Other, net (481) 477 (266) 812 -------- ------- -------- -------- Total other expense 2,959 1,865 5,059 3,410 -------- ------- -------- -------- Income (loss) before income taxes 235 2,988 (2,377) 6,632 Provision (benefit) for income taxes 90 1,076 (903) 2,388 -------- ------- -------- -------- Net income (loss) $ 145 $ 1,912 $ (1,474) $ 4,244 ======== ======= ======== ======== Earnings (loss) per share $ .01 $ .17 $ (.13) $ .38 ======== ======= ======== ======== Weighted average shares outstanding 11,201 11,139 11,216 11,110 ======== ======= ======== ========
See accompanying notes to condensed consolidated financial statements. 7 Form 10-Q Page 5 THE TIMBERLAND COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in Thousands) (Unaudited)
For the Six Months Ended ---------------- July 1, July 2, 1994 1993 --------- --------- Cash flows from operating activities: Net income (loss) $ (1,474) $ 4,244 Adjustments to reconcile net income (loss) to net cash used in operating activities: Deferred income taxes 684 10 Depreciation and amortization 7,017 4,770 Increase (decrease) in cash from changes in working capital items, net of effects of acquisition: Accounts receivable (25,977) (16,279) Inventories (76,471) (31,161) Prepaid expenses (3,077) (1,575) Accounts payable 4,459 15,072 Accrued expenses 9,835 3,036 Income taxes (1,944) (923) -------- -------- Net cash used in operating activities (86,948) (22,806) -------- -------- Cash flows from investing activities: Additions to property, plant and equipment, net (9,170) (10,585) Acquisition of Italian distributor (14,086) - Other, net 1,061 (320) -------- -------- Net cash used in investing activities (22,195) (10,905) -------- -------- Cash flows from financing activities: Net borrowings under short-term credit facilities 43,676 15,889 Proceeds from long-term obligations 65,000 20,000 Payments on long-term debt and capital lease obligations (332) (2,154) Issuance of common stock 477 288 -------- -------- Net cash provided by financing activities 108,821 34,023 -------- -------- Effect of exchange rate changes on cash 105 (32) -------- -------- Net increase (decrease) in cash and equivalents (217) 280 Cash and equivalents at beginning of period 3,281 1,220 -------- -------- Cash and equivalents at end of period $ 3,064 $ 1,500 ======== ======== Supplemental disclosures of cash flow information: Interest paid $ 4,158 $ 2,464 Income taxes paid 391 3,299
See accompanying notes to condensed consolidated financial statements. 8 Form 10-Q Page 6 THE TIMBERLAND COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain the adjustments necessary to present fairly the Company's financial position, results of operations and changes in cash flows for the interim periods presented. Such adjustments consisted of normal recurring items. The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 1993 and the current year's previously issued quarterly report on Form 10-Q for the quarter ended April 1, 1994. Certain prior period amounts have been reclassified for consistent presentation with the current period. 2. The results of operations for the six months ended July 1, 1994 are not necessarily indicative of the results to be expected for the full year. Historically, the Company's revenues have been more heavily weighted to the second half of the year. 3. Inventories consist of the following (in thousands):
July 1, 1994 December 31, 1993 ------------ ----------------- Raw materials $ 16,865 $ 11,108 Work-in-process 14,563 13,060 Finished goods 163,234 87,212 --------- --------- $ 194,662 $ 111,380 ========= =========
4. Indebtedness On April 15, 1994, the Company finalized a private placement with a group of lenders for $65 million of senior unsecured notes (the "Notes") dated April 1, 1994 and maturing on April 15, 2000. The Notes bear interest at a fixed rate of 7.16% per annum. The proceeds will be used to repay existing short-term debt and for general corporate purposes. On May 4, 1994, the Company entered into a new unsecured committed revolving credit agreement (the "Agreement"), with a group of banks. The Agreement, which replaced the Company's existing revolving credit facility, matures on May 30, 1996 and provides for revolving credit loans of up to $125 million, subject to a borrowing base formula. Under the terms of the Agreement, the Company may borrow at interest rates based upon the lender's cost of funds (4.73% at July 1, 1994). The Agreement provides for a facility fee of 3/8% per annum on the full commitment and places limitations on the payment of dividends and the incurrence of additional debt, and also contains certain other financial and operating covenants. 9 Form 10-Q Page 7 THE TIMBERLAND COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 5. Acquisition of Italian Distributor In April 1994, the Company entered into a Distributorship Termination Agreement (the "Agreement") with its Italian distributor, which terminated all distribution rights of the distributor on May 31, 1994. In accordance with the Agreement, the Company also acquired certain assets of the distributor. Effective on the termination date, Timberland assumed the distribution of its own products in Italy. This transaction has been accounted for as a purchase and, accordingly, the results of operations of the Company's Italian business has been included in the consolidated statements of operations from the termination date. The results of the Italian operations are not significant to the consolidated results of operations, and accordingly, pro forma data has been omitted. The excess of the purchase price ($6.8 million) over the fair value of net assets acquired in this transaction ($7.3 million, consisting primarily of inventory) is being amortized on a straight-line basis over 10 years. 6. Commitment Effective March 31, 1994, the Company entered into an operating lease for a 246,000 square feet facility in Stratham, New Hampshire, which will become its new corporate headquarters during the fourth quarter of 1994. The lease expires in July 1999 and has a fixed annual rental rate of $.7 million. The Company is currently reviewing various alternatives for its existing headquarters facility. 7. Litigation On June 21, 1994, the plaintiff in the stockholder lawsuit filed on February 15, 1994 against the Company and one of its officers agreed voluntarily to withdraw the action, and the case was dismissed. 10 Form 10-Q Page 8 THE TIMBERLAND COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Unaudited) RESULTS OF OPERATIONS The following table sets forth selected items in the Company's condensed consolidated statements of operations as percentages of net sales for the periods indicated.
For the For the Three Months Ended Six Months Ended ------------------ ---------------- July 1, July 2, July 1, July 2, 1994 1993 1994 1993 ------- ------- ------- ------- Net sales 100.0 % 100.0 % 100.0 % 100.0 % Cost of goods sold 68.4 64.0 69.1 62.7 ----- ----- ----- ----- Gross profit 31.6 36.0 30.9 37.3 ----- ----- ----- ----- Operating expenses Selling 21.3 21.2 21.2 21.4 General and administrative 7.6 8.9 8.3 9.2 Amortization of goodwill .2 .2 .2 .3 ----- ----- ----- ----- Total operating expenses 29.1 30.3 29.8 30.9 ----- ----- ----- ----- Operating income 2.5 5.7 1.1 6.4 ----- ----- ----- ----- Other expense (income) Interest 2.7 1.6 2.3 1.7 Other, net (.4) .6 (.1) .5 ----- ----- ----- ----- Total other expense 2.3 2.2 2.2 2.2 ----- ----- ----- ----- Income (loss) before income taxes .2 3.5 (1.0) 4.2 Provision (benefit) for income taxes .1 1.2 (.4) 1.5 ----- ----- ----- ----- Net income (loss) .1% 2.3% (.6)% 2.7% ===== ===== ===== ===== Note: Percentages may not add due to rounding
Second Quarter 1994 Compared to Second Quarter 1993 --------------------------------------------------- Net sales for the second quarter of 1994 were $126.9 million, an increase of 50% over the $84.8 million reported in the same quarter of 1993. This increase was attributable to an overall increase in the number of footwear, apparel and accessory units sold. Net sales in 1994 reflect a price reduction on certain products designed to improve the price/value proposition for the consumer. Gross profit as a percentage of net sales was 31.6% as compared to 36.0% in 1993. This decline is primarily a result of a price reduction for certain footwear and apparel lines, not fully offset by anticipated product cost reductions. The margin performance for the second quarter compares favorably to the 30.1% achieved in the first quarter of 1994. 11 Form 10-Q Page 9 Second Quarter 1994 Compared to Second Quarter 1993 (continued) --------------------------------------------------------------- While overall operating expenses increased to $37.0 million for the second quarter of 1994 from $25.7 million for the comparable period in 1993, total operating expenses as a percentage of net sales in 1994 decreased to 29.1% from 30.3% in 1993. The comparative dollar increase in spending was principally attributable to increased sales and marketing expenditures and the Company's investment in worldwide infrastructure to support sales growth. Interest expense for the second quarter of 1994 increased by $2.1 million over the comparable period in 1993, primarily as a result of increased borrowings, in support of sales growth. First Six Months 1994 Compared To First Six Months 1993 ------------------------------------------------------- Net sales for the first six months of 1994 were $235.0 million, an increase of 51% over the $155.5 million for the comparable period in 1993. This increase was attributable to an overall increase in the number of footwear, apparel and accessory units sold. Gross profit as a percentage of net sales for the first six months of 1994 was 30.9% as compared to 37.3% for the comparable period in 1993. This decline is primarily attributed to the effect of a price reduction for certain footwear and apparel lines, not fully offset by anticipated product cost reductions. Total operating expenses for the first half of 1994 increased to $70.0 million from $48.0 million for the comparable period in 1993, principally as a result of increased sales and marketing expenditures and the Company's investment in worldwide infrastructure to support sales growth. As a percentage of net sales, total operating expenses decreased to 29.8% in 1994 from 30.9% in 1993. Interest expense for the first six months of 1994 increased by $2.7 million over the comparable period in 1993, primarily as a result of increased borrowings, in support of sales growth. LIQUIDITY AND CAPITAL RESOURCES ------------------------------- The Company uses unsecured revolving and committed lines of credit as the primary sources of financing for its seasonal and other working capital requirements. In anticipation of increased financing requirements to support planned near-term growth, the Company completed a private placement in April 1994 for $65 million of senior unsecured notes, and entered into a new revolving credit agreement on May 4, 1994, which provides for revolving credit loans of up to $125 million. (See notes to condensed consolidated financial statements.) Management believes that such facilities, and the ability to obtain additional financing, together with cash flow from operations, will provide the funds necessary to support the Company's business. At July 1, 1994, the Company had working capital of $210.9 million versus $155.7 million at December 31, 1993 and $112.3 million at July 2, 1993. As a result of increased sales, accounts receivable have grown to $117.9 million at July 1, 1994 compared to $70.2 million at July 2, 1993. Days sales outstanding at July 1, 1994 were 88 days compared to 79 days at July 2, 1993. Inventories at July 1, 1994 were $194.7 million, an increase of $83.3 million since year end 1993 and of $93.3 million since July 2, 1993, in support of anticipated sales. Inventory turns were 2.0 times and 2.2 times for the six months ended July 1, 1994 and July 2, 1993, respectively. 12 Form 10-Q Page 10 The increase in the level of total borrowings since December 31, 1993, is due primarily to the inventory build up. As a result of the increase in overall borrowings, the Company's debt to capital ratio rose to 62% at July 1, 1994 compared to 44% at December 31, 1993 and July 2, 1993. The Company expects its short-term financing requirements to reach a peak during the third quarter in response to its historical seasonal pattern of demand. In April 1994, the Company entered into a Distributorship Termination Agreement (the "Agreement") with its Italian distributor, which terminated all distribution rights of the distributor on May 31, 1994. In accordance with the Agreement, the Company also acquired certain assets of the distributor. Effective on the termination date, Timberland assumed the distribution of its own products in Italy. (See notes to condensed consolidated financial statements.) 13 Form 10-Q Page 11 Part II Other Information - - ------------------------- Item 1. Legal Proceedings. In Germano v. The Timberland Company, et al, the plaintiff alleged ------- ----------------------------- material misstatements and omissions in public filings and statements made by the Company in 1993. On June 21, 1994, the plaintiff agreed voluntarily to withdraw the action, and the case was dismissed. Item 4. Submission of Matters to a Vote of Security Holders. (a) The Company held its Annual Meeting of Stockholders on May 19, 1994. (b) At such Annual Meeting proxies were solicited pursuant to Regulation 14A of the Securities Exchange Act of 1934 and all nominees for director were elected as indicated by the following schedule of votes cast for each director. The holders of Class A Common Stock elected the following directors: Total Votes for each Total Votes withheld Nominee Director from each Director ------- -------- ------------------ John F. Brennan 7,021,105 16,458 Thomas R. Schwarz 6,986,411 51,152 The holders of Class A Common Stock and Class B Common Stock voting together as a single class elected the following directors: Total Votes for each Total Votes withheld Nominee Director from each Director ------- -------- ------------------ Robert M. Agate 39,392,815 15,958 Jeffrey B. Swartz 39,357,371 51,402 Sidney W. Swartz 39,389,115 19,658 Abraham Zaleznik 39,392,315 16,458 There were no abstentions or broker non-votes with respect to the election of the director nominees. Thomas R. Schwarz resigned from the Company effective July 14, 1994. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits Exhibit Description ------- ----------- (10) Material Contracts 10.1 Sublease dated March 31, 1994 between Hewlett-Packard Company and The Timberland Company. 10.2 Note Agreements dated as of April 1, 1994 regarding $65,000,000 7.16% Senior Notes due April 15, 2000. 10.3 Amended and restated Note Agreements dated as of April 1, 1994 regarding $35,000,000 9.70% Senior Notes due December 1, 1999. 10.4 Credit Agreement dated as of May 4, 1994 among The Timberland Company, certain banks listed therein and Morgan Guaranty Trust Company of New York, as Agent. (b) Reports on Form 8-K - There were no reports on Form 8-K filed during the period covered by this report. 14 Form 10-Q Page 12 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. The Timberland Company --------------------------------- (Registrant) Date: August 12, 1994 Jeffrey B. Swartz --------------- --------------------------------- Jeffrey B. Swartz Executive Vice President, Chief Operating Officer and Director Date: August 12, 1994 Keith D. Monda --------------- --------------------------------- Keith D. Monda Senior Vice President-Finance and Administration and Chief Financial Officer (Principal Financial Officer) EX-10.1 2 SUBLEASE BETWEEN HEWLETT-PACKARD AND TIMBERLAND 1 EXHIBIT 10.1 SUBLEASE This Sublease (the "Sublease") is entered into by HEWLETT-PACKARD COMPANY, a California corporation ("Sublessor"), as successor by merger to Apollo Computer Inc., and THE TIMBERLAND COMPANY, a Delaware corporation ("Sublessee"), as of the day of , 1994. 1. PROPERTY SUBLEASED. Sublessor hereby subleases to Sublessee, and Sublessee hereby subleases from Sublessor, upon the terms and conditions set forth herein, a certain building (the "Building") situated on certain land described in Exhibit "A" hereto attached and incorporated herein by this reference, commonly referred to as 200 Domain Drive, Stratham, New Hampshire containing approximately 246,000 rentable square feet of space (determined in accordance with the BOMA Standard Method for Measuring Floor Area in Office Buildings), together with the exclusive right to use the "common areas" (as hereinafter defined) located upon said land (the Building and the land upon which it is located as described in said Exhibit "A", including, without limitation, the "common areas" (as hereinafter defined) are sometimes hereinafter referred to as the "Premises"). The term "common areas", as herein used, shall mean all areas, sidewalks, parking areas, access roads and drives, driveways, landscaped areas, truck serviceways, docks, and pedestrian walkways, facilities, equipment and signs situated on said land. Only Sublessee and those claiming under Sublessee shall have the right to use the common areas, which common areas shall be deemed a part of the Premises for purposes of this Sublease; provided, however, that Sublessee acknowledges and agrees that Master Lessor (as defined in Paragraph 3 of this Sublease) has reserved the right in the Master Lease (as defined in said Paragraph 3) to grant for itself and for others drainage and/or utilities easements in, upon and over the common areas so long as such easements and the facilities installed pursuant thereto shall not materially interfere with Sublessee's use of the common areas. To the best of Sublessor's knowledge, the Premises include all appurtenant easements and other rights that are needed by Sublessee to use the Premises for the purposes herein permitted. 2 2. PARKING. Sublessee shall have the exclusive use of the existing parking spaces delineated on the Premises. Sublessor shall have no obligation to patrol, enforce, or supervise the use of such parking spaces. Sublessee shall have the right to mark any parking spaces on the Premises as reserved by signage or otherwise. Without having made any investigation or inquiry, Sublessor has no reason to believe that the number of parking spaces on the Premises does not comply with the applicable requirements of the zoning regulations of the Town of Stratham, New Hampshire. 3. MASTER LEASE AND MASTER LESSOR. The Premises are presently leased by Sublessor from the trustees of First Altex Realty Trust ("Master Lessor"). Sublessor and Master Lessor entered into a lease for the Premises on June 19, 1984, as amended by a certain Amendment A, dated December 21, 1984, as further amended by a certain Stratham Lease Amendment, dated as of May 21, 1986, as affected by a certain letter, dated September 26, 1990, from Sublessor to the Master Lessor and as further amended by a certain Amendment to Lease of even date herewith (said lease, as amended and affected by the above-listed documents, is hereinafter referred to as the "Master Lease"). A copy of the Master Lease is attached hereto as Exhibit "B". 3 4. PREMISES SUBJECT TO CERTAIN PROVISIONS OF MASTER LEASE. This Sublease is subject to, and Sublessee shall be bound with respect to the Premises and this Sublease by, all of the terms, covenants and conditions of Articles V; VIII; XVI through XIX; XXVIII; and Exhibit "A" of the Master Lease, which are incorporated herein by this reference. Notwithstanding any obligations of the Sublessor, as the "Tenant" under the Master Lease, to the contrary, it is expressly understood and agreed that the following provisions of the Master Lease are not incorporated herein by reference and are entirely superseded and of no force or effect, as between the Sublessee, on the one hand, and the Sublessor, Master Lessor and its mortgagee, as applicable, on the other, by the provisions of this Sublease: Articles I through IV; VI and VII; IX through XV; XX through XXVII; XXIX; and Exhibit "B". To the extent that there are any inconsistencies between the terms and provisions of this Sublease and the terms and provisions of the Master Lease that are incorporated herein by reference, the terms and provisions of this Sublease shall control. Any obligations of the Sublessor, as the "Tenant" under the Master Lease, that are not expressly set forth herein as an obligation of the Sublessee under this Sublease shall remain the obligation of the Sublessor under the Master Lease. Sublessor agrees that it shall comply with the terms, covenants and conditions of the Master Lease and not act or suffer or permit anything to be done which would result in a default under the Master Lease beyond any applicable notice and cure period. In the event that the Master Lessor succeeds to the Sublessor's interest under this Sublease, Sublessee acknowledges and agrees that any obligation under this Sublease on the part of Sublessee to pay over to Sublessor any amount that Sublessor is obligated under the Master Lease to pay over to the Master Lessor shall thereupon become the direct obligation of Sublessee to pay over such amount to the Master Lessor. Sublessor agrees that it will not terminate the Master Lease without Sublessee's prior written consent, except as provided in Paragraph 14 of this Sublease. Except as provided in said Paragraph 14, if Sublessor desires to terminate the Master Lease, Sublessor shall notify Sublessee of its desire so to do, whereupon Sublessee shall either consent or not consent to such termination by giving written notice to Sublessor within twenty (20) business days after receipt of Sublessor's notice. Failure by Sublessee to give such notice within such twenty (20) business day period shall constitute irrevocable and 4 conclusive consent to such termination on the part of Sublessee. In the event that Sublessor thereafter elects to terminate the Master Lease as aforesaid, Sublessor shall notify Sublessee of such termination and this Sublease shall likewise terminate as of the effective date of the termination of the Master Lease. 5. TERM. The term of this Sublease (the "Sublease Term") shall commence on April 1, 1994 ("Commencement Date") and end on July 14, 1999 ("Expiration Date"), subject to Sublessee's right to extend the term as hereinafter provided. The Sublessee shall be entitled to install fixtures and other equipment, and do other work, prior to the Commencement Date, provided, however, that all of Sublessee's obligations hereunder (except the obligations to pay Base Rent and Operating Expenses) shall commence on the date Sublessee first enters upon the Premises to perform any such work. If this Sublease is still in full force and effect, and if Sublessee is not then in default hereunder beyond any applicable grace period, Sublessee shall have the right to exercise any one of the following options of extension: (a) the option to extend the term of this Sublease until September 30, 2000 (the "First Extension Option"), provided that Sublessee shall send written notice of its election to exercise such option to Sublessor on or before January 15, 1999, in which event the term of this Sublease shall be automatically extended until September 30, 2000, without the requirement of any further instrument, upon all of the same terms, provisions and conditions set forth in this Sublease; or (b) the option to extend the term of this Sublease until any date between and including October 14, 1999, at a minimum, and September 30, 2000, at a maximum (the "Second Extension Option"), provided that Sublessee shall send written notice of its election to exercise such option (which notice shall specify the term of the extension period) to Sublessor on or before April 15, 1999, in which event the term of this Sublease shall be automatically extended for the period of time specified in such notice (which shall in no event be for an extension period ending earlier than October 14, 1999 or later than September 30, 2000), without the requirement of any further instrument, upon all of the same terms, provisions and conditions set forth in this Sublease; or (c) the option to extend the term of this Sublease until any date between and including October 14, 1999, at a minimum, and September 30, 2000, at a maximum (the "Third Extension Option"), provided that Sublessee shall send written notice of its election to exercise such option (which notice shall specify the term of the extension period) to Sublessor on or before May 15, 1999, in which event the term of this Sublease shall be automatically extended for the period of 5 time specified in such notice (which shall in no event be for an extension period ending earlier than October 14, 1999 or later than September 30, 2000), without the requirement of any further instrument, upon all of the same terms, provisions and conditions set forth in this Sublease. Except with respect to the aforesaid options of extension, Sublessee shall have no right to extend its occupancy beyond the Expiration Date (or, if any of said options of extension is duly exercised by Sublessee, beyond the expiration of the applicable extension period) or to purchase all or any portion of the Premises except as may be agreed upon between the Sublessee and Master Lessor. Sublessor shall have no liability to Sublessee as a result of any lease entered into between Sublessee and Master Lessor, nor shall Sublessor have any liability to Master Lessor beyond that set forth in the Master Lease. 6. RENT. For and with respect to the period from July 15, 1994 through July 14, 1999, Sublessee shall pay Sublessor, as an absolute net rent for the Premises ("Base Rent"), a fixed annual rental at the rate of Six Hundred Seventy-Six Thousand Five Hundred and 00/100 Dollars ($676,500.00), which is the product arrived at by multiplying the approximate rentable area of the Premises by Two and 75/100 Dollars ($2.75), in equal monthly installments of Fifty-Six Thousand Three Hundred Seventy-Five and 00/100 Dollars ($56,375.00) each. Sublessee shall pay all the estimated Operating Expenses (as hereinafter defined) for the Premises on a monthly basis commencing on April 1, 1994 and continuing through the end of the term hereof, initial or extended. Sublessee shall pay all utilities and services associated with Sublessee's use of the Premises, including, without limitation, the share attributable to the Premises of the costs of water and sewer service provided to the Industrial Park of which the Premises are a part and of the cost of repairs and maintenance (but not the cost of replacements which are capital in nature, as determined in accordance with generally accepted accounting principles, consistently applied, which shall be Sublessor's responsibility) of the water and sewer lines serving the Premises and other portions of said Industrial Park (such utilities and services, together with Operating Expenses, are hereinafter referred to as "Additional Rent") commencing on the date Sublessee first enters upon the Premises. If Sublessee duly and timely exercises the First Extension Option, then Sublessee shall pay to Sublessor, as Base Rent for and with respect to the period from July 15, 1999 through September 30, 2000, a fixed annual rental at the rate of Seven Hundred Thirty-Eight Thousand and 00/100 Dollars ($738,000.00), which is the product arrived at by multiplying the approximate rentable area of the Premises by Three and 00/100 Dollars ($3.00), in equal monthly installments of Sixty-One Thousand Five Hundred and 00/100 Dollars ($61,500.00) each, together with Additional Rent. If Sublessee duly and timely exercises the Second Extension Option, then Sublessee shall pay to Sublessor, as Base Rent for and with respect to the applicable extension period, a fixed annual rental at the rate of One Million Four Hundred Seventy-Six Thousand and 00/100 Dollars ($1,476,000.00), which is the product arrived at by multiplying the approximate rentable area of the Premises by Six and 00/100 Dollars ($6.00), in equal monthly installments of One Hundred Twenty-Three Thousand and 00/100 Dollars ($123,000.00) each, together with Additional Rent. If Sublessee duly and timely exercises the Third Extension Option, 6 then Sublessee shall pay to Sublessor, as Base Rent for and with respect to the applicable extension period, a fixed annual rental at the rate of One Million Eight Hundred Forty-Five Thousand and 00/100 Dollars ($1,845,000.00), which is the product arrived at by multiplying the approximate rentable area of the Premises by Seven and 50/100 Dollars ($7.50), in equal monthly installments of One Hundred Fifty-Three Thousand Seven Hundred Fifty and 00/100 Dollars ($153,750.00) each, together with Additional Rent. All rents hereunder shall be payable in advance on the first day of each month, without deduction or offset and without prior notice or demand. Any rents more than 10 days past due shall bear interest at the rate of ten percent (10%) per annum or the Wall Street Journal prime rate plus one and one-half percent (1#%), whichever is greater. Rents shall be payable to the order of Sublessor and shall be tendered to Sublessor at 3000 Hanover Street, Palo Alto, California 94304, Attention: Mr. Keith Mehl, Mail Stop 20DF. 7. BUILDING SERVICES; OPERATING EXPENSES; ADJUSTMENTS TO ADDITIONAL RENT. Building Services: Sublessee shall provide, and/or shall retain a property manager and/or contractor to provide, at Sublessee's sole cost and expense, services for the Premises as are required to be provided by the "Tenant" under the Master Lease. Operating Expenses: The term "Operating Expenses" as used in this Sublease, means: (a) Real property taxes which accrue against the Premises during the term hereof, initial or extended. Real property taxes shall be deemed to include any ad valorem tax, levy, charge or assessment charged against the Premises; any tax or charge for maintenance or services provided to the Premises, or any tax that may be imposed on Sublessor's income from the Premises in lieu of ad valorem or other tax on the Premises (excluding federal or state income, franchise, inheritance or estate taxes); and (b) Insurance premiums Sublessor is required to pay or deems necessary to pay with respect to the Premises Sublessor agrees, during the term of this Sublease, initial or extended, to pay said real property taxes directly to the taxing authority of the Town of Stratham, New 7 Hampshire, and to provide Sublessee with evidence of such payment reasonably satisfactory to Sublessee (such as, for example, a copy of the tax bill stamped "paid" by said taxing authority) so that it is received on or before the date which is ten (10) days prior to the date when any payment of same would become delinquent. If Sublessor fails to pay said real property taxes and to provide Sublessee with such evidence of payment within such time, then, unless and until Sublessor actually pays said real property taxes to such taxing authority, Sublessee shall have the right, but not the obligation, to pay said real property taxes directly to such taxing authority, in which event Sublessee shall have the right to set-off the amount of such payment against any monthly payment(s) of or on account of any or all of fixed rent, Additional Rent and the Contributed Amount (as defined in Paragraph 21 hereof) otherwise due and payable from Sublessee to Sublessor under the terms of this Sublease, until the amount of such real property tax payment is fully recouped by Sublessee. Sublessee shall have the right to file an application for an abatement of real property taxes in accordance with and subject to the following terms and conditions. If at least thirty (30) days prior to the last day for filing application for such an abatement for any tax year, Sublessor shall receive notice from Sublessee that it desires to file an application for such an abatement for said tax year and, if within twenty (20) days after the receipt of said notice Sublessor shall not give notice to Sublessee that Sublessor or Master Lessor shall file such application, Sublessee shall have the right either in its own name or in the name of Sublessor, but at its own cost and expense, to file such application. If within twenty (20) days after receipt by Sublessor of such notice from Sublessee, Sublessor shall give Sublessee notice that it shall file such application, Sublessor shall file the same prior to the expiration of the time for the filing of the same at its own cost and expense. In any event, notwithstanding the foregoing, if any abatement by whomever prosecuted shall be obtained, the cost and expense of obtaining the same shall be a first charge upon said abatement. If Sublessee shall file an application for abatement pursuant to the provisions hereof, Sublessee will prosecute the same to final determination with due diligence and shall not, without Sublessor's written consent (which consent will not be unreasonably withheld or delayed), settle, compromise or discontinue the same except, however, that Sublessee may discontinue the prosecution of the same at any time after giving Sublessor and Master Lessor notice thereof and an opportunity to take over prosecution of the same. If Sublessor or Master Lessor shall file an application for an abatement for any tax year after having received notice from Sublessee that Sublessee desires to file an application for abatement for said tax year, Sublessor or Master Lessor shall prosecute the same to final determination with due diligence and shall not, without Sublessee's written consent (which consent will not be unreasonably withheld or delayed), settle, compromise or discontinue the same except, however, that Sublessor or Master Lessor may discontinue the prosecution of the same at any time after giving Sublessee notice thereof and an opportunity to take over the prosecution of the same. If any party shall prosecute an application for an abatement, the other parties will cooperate and furnish any pertinent information in either of their respective files reasonably required by the prosecuting party. 8 Adjustments to Additional Rent: A statement of current estimated Operating Expenses is attached hereto as Exhibit "C" and incorporated herein by this reference. Sublessor shall, within 180 days following the end of each calendar year of the Sublease Term, and within 180 days following the expiration of the term hereof, initial or extended, notify the Sublessee of any increases or decreases to the Additional Rent for the prior calendar year. Such notice shall include, in reasonable detail, all computations of the Additional Rent and appropriate documentation evidencing the reason for any increase or decrease thereto. In the event of an increase, Sublessee shall pay the Additional Rent due within thirty (30) days following receipt of the applicable notice and adjust the monthly payment on account of Additional Rent as reasonably estimated by Sublessor for the next calendar year. In the event of a decrease, any overpayment shall be (i) credited against Additional Rent thereafter due under this Sublease, or (ii) if no such Additional Rent is thereafter due, promptly refunded to Sublessee. "Operating Expenses" shall not include any legal fees or legal expenses payable to Master Lessor under the terms of the Master Lease, except to the extent that such fees or expenses are incurred by Master Lessor as a result of the acts or omissions of Sublessee. 8. USE. Sublessee shall use the Premises only for general office, light manufacture, research and development and related uses and such other uses as are from time to time approved in writing by Sublessor and Master Lessor. It is specifically understood and agreed that Sublessee shall have the right to use the Premises for the purposes indicated in the Sublessee's Plans (as defined in Paragraph 11 of this Sublease), including, without limitation, the use of a portion of the Premises as an employee store, provided that Sublessee obtains any and all governmental permits, licenses and other approvals as may be required under applicable law for any and all such uses. Sublessee shall not discontinue occupancy of or abandon the Premises. Notwithstanding anything to the contrary contained in this Sublease, Sublessee agrees that nothing shall be done upon the land described in Exhibit A which shall violate those certain Protective Covenants applicable to said land, a copy of which Sublessee acknowledges is in Sublessee's possession. Without having made any investigation or inquiry, Sublessor is unaware of any reason why Sublessee may not use the Premises for purposes of office, research and development and light manufacturing. Further, Sublessee covenants and agrees as follows: (a) Not to injure or deface the Premises; not to permit on the Premises any auction, sale, nuisance, objectionable vibration, noise or odor; not to permit the use of the Premises for any purpose other than those set forth herein or any use which is contrary to law or ordinance, or liable to invalidate or increase the premiums for any insurance carried by Sublessor or Master Lessor on the Premises, or liable to render necessary any structural alterations or additions to the Premises; and if such 9 insurance premiums are increased as a result of the use or occupancy of the Premises by Sublessee, Sublessee shall pay for such increase, the responsibility for the payment of which increase shall apply during each and every year of the term of this Sublease; and to use the sewer system for normal discharge of sanitary waste and not to introduce any chemical fluid, cooling water or any other substance, liquid or material into such system which may be harmful or destructive to such system; (b) Not to obstruct in any manner any portion of the common areas; and to conform to all reasonable rules and regulations now or hereafter made by Master Lessor and provided in writing to Sublessee for the care and use of the Premises, its facilities and approaches and common areas; (c) Not to store any goods, equipment or any other items outside of the Building, and not to place or empty any trash or rubbish outside of the Building (except in enclosed dumpsters), and to provide for its own rubbish or trash removal; (d) Not to move any heavy equipment or fixtures in or out of or within the Building except in such manner as Sublessor and Master Lessor shall designate after written request from Sublessee, and not to place a load on any floor of the Building which would be in violation of what is allowed by law; (e) That Sublessor, Master Lessor, or their respective agents, may enter the Premises after prior written notice to Sublessee (except in case of emergency, when no such notice need be given) to make any repairs either or both of such parties may deem necessary or any addition or alteration required to comply with governmental regulations, and with prior oral or written notice and at Sublessee's expense, to remove any alterations, signs or the like for which the prior written consent of either or both of such parties was required hereunder but not obtained by Sublessee; it being understood and agreed that such entry shall be made in such a way as to minimize interference with Sublessee's use of the Premises; (f) Subject to Sublessor's obligations to repair and maintain as set forth herein, neither Sublessor nor Master Lessor shall be responsible or liable for any defect, latent or otherwise, in the Premises or any of the equipment, machinery, utilities, appurtenances therein, nor shall Sublessor or Master Lessor be responsible or liable for any injury, loss or damage to any person or to any property of Sublessee or any other person caused by or resulting from rain, snow, ice, wind, frost, water, fire or by the bursting or leakage of windows, doors, walls, ceilings, floors, pipes, gutters or other fixtures, or the overflow of water or sewage in any part of the Premises or for any injury or damage caused by or resulting from acts of God or the elements, or for any injury or damage caused by or resulting from any defect or negligence in the occupancy, construction, 10 operation or use of the Premises, except to the extent caused by the negligence of Sublessor or Master Lessor. Sublessee shall give prompt notice to Sublessor and Master Lessor in case of fire or accidents in the Premises or of defects therein or in any fixtures or equipment; (g) To hold all personal property of Sublessee, including trade fixtures, furniture, equipment and the like of Sublessee, or of any other owner situated at the Premises, at Sublessee's own risk, and that neither Sublessor nor Master Lessor shall be liable for theft thereof or any damage thereto occasioned from any acts of any other person, except to the extent caused by the negligence of Sublessor or Master Lessor, as the case may be, and to pay when due all taxes assessed against any such personal property or leasehold interest; (h) To permit Master Lessor and its agents at reasonable times to show the Premises to prospective purchasers and mortgagees and to permit Master Lessor and Sublessor and their respective agents at reasonable times to show the Premises to prospective tenants and subtenants during the one hundred eighty (180) days preceding the expiration of the term of the Master Lease or the Sublease, as the case may be; (i) Not to suffer or permit any lien of any nature or description to be placed against the Premises or any portion thereof, and in the case of any said lien attaching by reason of the conduct of Sublessee, to immediately pay and discharge the same of record (provided, however, that Sublessee may contest the same in good faith so long as it provides a sufficient and recordable lien bond or other adequate security with respect to such lien); provided, however, that this provision shall not be interpreted as meaning that the Sublessee has any authority or power to permit any lien of any nature or description to attach to or be placed upon the title or interest of the Master Lessor or the Sublessor in the Premises or any portion thereof; (j) That the rights and remedies to which the Sublessor may be entitled under the terms of this Sublease are cumulative and are not intended to be exclusive of any other rights or remedies to which the Sublessor may be properly entitled in case of any breach or threatened breach by Sublessee of any term or provision of this Sublease; (k) That no failure of either party to exercise any power conferred to it in this Sublease or to insist upon strict compliance by the other party of any obligation, covenant or agreement and no custom or practice of the parties at variance with the terms hereof shall constitute a waiver of such party's right to demand an exact compliance with the terms hereof; (l) That, without limitation of anything else herein or in the Master Lease 11 contained, the Sublessor and the Master Lessor may enter upon the Premises and exercise and perform any and all of Sublessor's and Master Lessor's respective rights without being deemed guilty of an eviction or disturbance of Sublessee's use or possession, and without being liable in any manner to Sublessee; provided, however, that such entry shall be made in such a way as to minimize interference with Sublessee's use of the Premises; (m) To promptly comply, at the expense of Sublessee (except to the extent that Sublessor is otherwise responsible for compliance and the cost thereof as set forth in Paragraph 9 hereof), with all requirements of any governmental agency, whether the same be local, state or federal, having competent jurisdiction, which requirements are made necessary by reason of Sublessee's occupancy and use of the Premises as permitted under this Sublease (provided, however, that Sublessee may contest the same in good faith in accordance with, subject to and to the extent permitted by applicable law); (n) That if the Sublessee shall at any time breach or default in the performance of any of the obligations, covenants or agreements of Sublessee under this Sublease, and if such breach or default continues beyond the applicable grace period set forth in Paragraph 16 hereof, then Sublessor and Master Lessor shall each have the right to enter upon the Premises and to perform such obligations of the Sublessee, including the payment of money and the performance of any other act; all sums so paid by the Sublessor and/or the Master Lessor, as the case may be, and all necessary and reasonable incidental costs and expenses in connection therewith shall be deemed to be additional rent under this Sublease which shall be payable to Sublessor or Master Lessor, as the case may be, immediately upon demand; and (o) To insure the contents, equipment and improvements of Sublessee against standard extended coverage risks, in such amounts as Sublessor and Master Lessor shall reasonably approve, under a policy or policies of insurance which shall provide that such insurance shall not be cancelled without at least ten (10) days' prior written notice to Sublessor and Master Lessor. Copies of such insurance policy or policies or certificates of insurance evidencing such coverage, together with evidence of payment of premiums, shall be furnished to Sublessor and Master Lessor. 9. CONDITION OF THE PREMISES; MAINTENANCE. Sublessee has inspected the Premises prior to executing this Sublease. Upon delivery of possession of the Premises by Sublessor to Sublessee on the Commencement Date, Sublessee shall conclusively be deemed to have accepted the Premises in "as-is" condition and to have acknowledged that (a) the same are in good condition and satisfactory to Sublessee in all respects and (b) Sublessor has no obligation to make any improvements to the Premises. After receiving notice from Sublessee of any failure by Master Lessor to perform any of its obligations to maintain the Premises, as set 12 forth in the Master Lease, Sublessor agrees to use reasonable efforts to enforce any right Sublessor may have under the Master Lease to cause Master Lessor to perform any such obligation. Sublessee agrees that from and after the date that possession of the Premises is delivered to Sublessee, and until the end of the term hereof, initial or extended, it will keep neat and clean and maintain in good order, condition and repair, the Premises and every part thereof, including, without limitation, the exterior and interior portions of all doors, windows and plate glass in the Premises, all plumbing, sewage, septic, heating, air conditioning systems and mechanical equipment which serve the Premises, including all rooftop units, fixtures and interior walls, floors, ceilings, signs (including exterior signs where permitted), and all wiring, electrical systems, interior building appliances, and similar equipment within the Premises, reasonable wear and tear and damage by casualties excepted. Sublessee further agrees that the Premises shall be kept in a clean, sanitary and safe condition in accordance with the laws of the State of New Hampshire and by-laws of the Town of Stratham, and in accordance with all directions, rules and regulations of the Health Officer, Fire Marshal, Building Inspector and other proper officers of the governmental agencies having jurisdiction thereover. Sublessee shall not permit or commit any waste. Sublessee shall provide and pay for its own janitorial and cleaning services. Sublessee further agrees that it will obtain and maintain in full force and effect a heating and air conditioning equipment service contract which shall provide for the periodic maintenance of the heating and air conditioning equipment serving the Building. Said contract shall be made with a reputable contractor and shall be subject to Sublessor's and Master Lessor's approval, which approval shall not be unreasonably withheld or delayed. Copies of said contract and any renewals and/or replacements thereof shall be delivered to Sublessor and Master Lessor. Sublessee further agrees that it will obtain and maintain in full force and effect a service contract which shall provide for the periodic inspection and maintenance of each elevator within the Building. Said contract shall be made with a reputable contractor and shall be subject to Sublessor's and Master Lessor's approval, which approval shall not be unreasonably withheld or delayed. Copies of said contract and any renewals and/or replacements thereof shall be delivered to Sublessor and Master Lessor. In addition, Sublessee agrees to keep the inlets and outlets of all storm retention and drainage facilities in the common areas free of obstruction and to keep, maintain and repair all of the common areas (including, without limitation, any required patching and other maintenance of the parking lot, but excluding any replacement or repaving thereof (which shall be Sublessor's responsibility), and also excluding the maintenance, repair and replacement of water and sewer lines, for which provision is made below) in as good order, repair and condition as they were in at the commencement of the term of this Sublease, reasonable wear and tear and damage by casualty excepted, free and clear of snow, ice, refuse and obstructions and lighted at least during such hours of darkness as may be required by applicable law and/or by the requirements of 13 any insurance company which issues any policy of insurance upon the Premises. In addition, Sublessee shall be responsible for paying to Sublessor any amounts which Sublessor is obligated to pay to Master Lessor under Article VI of the Master Lease, for the cost of making any reasonable, necessary repairs to the roof of the Building (but not for the cost of replacing said roof, unless such replacement is required as a result of any negligent or willful act or omission of Sublessee). Such cost shall include any amount on account of the administrative and management charge payable by Sublessor to Master Lessor under said Article VI. Any amount required to be paid by Sublessee to Sublessor pursuant to this Paragraph shall be paid within fifteen (15) days after receipt by Sublessee of a written request from Sublessor, each such request to be accompanied by copies of bills, invoices or similar supporting data with respect to the work covered thereby. In addition, Sublessee shall pay to Sublessor any amount that Sublessor is obligated to pay to Master Lessor on account of any assessments made by the Association described in Article V of the Master Lease for the cost of maintaining the water and sewer lines which serve the Premises. Further, with respect to any obligations imposed on Sublessee by this Sublease to comply with requirements of governmental agencies or other lawful authorities having jurisdiction, Sublessor agrees that if any such requirements relate to the removal, replacement or modification of items or materials that are present in or on the Premises as of the date of this Sublease and if such removal, replacement or modification would be required even if the Premises were unused and vacant, that is to say, irrespective of the use and occupancy of the Premises by Sublessee as permitted under this Sublease, then Sublessor shall be responsible for such removal, replacement or modification and Sublessee shall have no responsibility therefor. Sublessee shall have no right or obligation to make any structural or roof repairs to, or to replace or modify any structural portion or the roof of, the Building, except as may be done in connection with the performance of the Sublessee's Work, as approved by Master Lessor and Sublessor. Except as aforesaid, said structural or roof repairs to, or replacements or modifications of structural portions or the roof of, the Building shall be the responsibility of the Master Lessor or the Sublessor as provided in the Master Lease or the Sublease. 10. UTILITIES. Sublessee agrees to pay when due, directly to the appropriate utility companies, the cost of all water, gas, electricity and other utilities used by Sublessee at the Premises, including, without limitation, all utilities necessary for heating and air conditioning the Premises and to pay the share attributable to the Premises of the costs of water and sewer service provided to the Industrial Park of which the Premises are a part and of the cost of repairs and maintenance of the water and sewer lines serving the Premises and other portions of said Industrial Park (but not the cost of any replacement of said water and sewer lines which is capital in nature, as determined in accordance with generally accepted accounting principles consistently applied, which shall be Sublessor's responsibility). Sublessee agrees that it will only discharge into the sewer system serving the Premises so-called 14 "domestic" sewage from employee washrooms and employee food service operations, and that no industrial waste will be discharged into said sewer system. Sublessee further agrees that not more than twenty thousand (20,000) gallons of water will be used by the Premises each day, and not more than twenty thousand (20,000) gallons of effluent will be discharged each day by the Premises into said sewer system. Sublessee shall provide adequate heat to the Premises to prevent the freezing and/or bursting of any pipes or duct work in the Premises. 11. CONSTRUCTION; SIGNAGE. Sublessee agrees that it will, at its sole cost and expense (subject to payment by Sublessor of Sublessor's Construction Allowance as provided in Paragraph 21 hereof) prior to commencing Sublessee's remodeling work (the "Sublessee's Work"), prepare and submit to Sublessor and Master Lessor for their respective approvals, plans and specifications for such work (the "Plans and Specifications"). Sublessor hereby approves the general scope of Sublessee's Work shown on those certain plans consisting of one "study plan" for each of the floors, dated November 15, 1993 and stamped November 18, 1993, as updated by two floor plans dated March 4, 1994; two plans (one floor and one elevation) for the front lobby entrance, stamped November 18, 1993; and a plan of the employee/cafe entrance, unstamped and undated; all of which were prepared by Schwartz/Silver Architects Inc., have been reviewed by Sublessor and are herein referred to as the "Sublessee's Plans"; provided, however, that Sublessor and Master Lessor shall each have the opportunity to review the details of the Plans and Specifications with respect thereto. Sublessee agrees to perform, at the Sublessee's sole cost and expense (subject to payment by Sublessor of Sublessor's Construction Allowance as provided in Paragraph 21 hereof), all of the Sublessee's Work described in the Plans and Specifications. All of the Sublessee's Work shall be performed in accordance with the Plans and Specifications as approved by Sublessor and Master Lessor, and shall be governed in all respects by, and be subject to, the following: A. The Sublessee's Work shall be performed in a good and workmanlike manner and shall be in good and usable condition at the date of completion thereof. B. Compliance with Laws: All the Sublessee's Work shall be performed in full compliance with and shall conform to all applicable federal, state and local laws, codes, regulations and ordinances, including, without limitation, the Americans with Disabilities Act, all applicable building and zoning codes and laws relating to the use, storage, removal, transportation or disposal of hazardous or toxic materials or oil, and all directions, rules and regulations of the Health Officer, Fire Marshal, Building Inspector and other proper officers of the governmental agencies having jurisdiction thereover, and all reasonable requirements of the Sublessor's and Master Lessor's underwriters, if any. Sublessor's and Master Lessor's approval of the Plans and Specifications shall not constitute an acknowledgment that work done in conformity therewith will so comply and conform, it being expressly 15 understood and agreed that Sublessee shall be solely responsible for ensuring such compliance and conformity and for any modifications to or corrections in the Sublessee's Work required by any governmental agency or insurance underwriters. Sublessee shall obtain and furnish to Sublessor approvals from all agencies with jurisdiction over matters relative to the performance of the Sublessee's Work, including, without limitation, electrical, gas, water, heating and cooling, and telephone work, and shall secure its own building and occupancy permits. Sublessor reserves the right to require changes in the Sublessee's Work when necessary by reason of code requirements or directives of governmental authorities having jurisdiction over the Premises. Notwithstanding anything to the contrary contained in this subparagraph B of Paragraph 11, Sublessee shall have the right to appeal adverse decisions relative to state, local or other land use laws in good faith, so long as any risk to Sublessor or Master Lessor is adequately provided against by bond or other security reasonably acceptable to Sublessor or Master Lessor or both, as the case may be. C. Insurance: Prior to commencement of the Sublessee's Work and until completion thereof, the Sublessee shall maintain, or cause to be maintained, casualty insurance in builder's risk form, covering Sublessor, Master Lessor and its mortgagee and their respective agents, employees and beneficiaries, Sublessee and Sublessee's contractor as their interests may appear, against loss or damage by fire, vandalism and malicious mischief, and such other risks as are customarily covered by the so-called "extended coverage endorsement" upon all the Sublessee's Work in place, and all materials stored at the site of the Sublessee's Work and all materials, equipment, supplies and temporary structures of all kinds incident to the Sublessee's Work and builder's machinery, tools and equipment, all while forming a part of, or contained in, such improvements or temporary structures while on the Premises or when adjacent thereto while on sidewalks, streets or alleys, all in the full insurable value thereof at all times. In addition, the Sublessee agrees to require all contractors and subcontractors engaged in the performance of the Sublessee's Work to effect and maintain and deliver to Sublessee, Sublessor and Master Lessor certificates evidencing the existence of, prior to the commencement of the Sublessee's Work and until completion thereof, the following insurance coverages: 1. Workmen's Compensation Insurance - In accordance with the laws of the State of New Hampshire, including Employer's Liability Insurance, to the limit of $100,000 each accident. 2. Comprehensive General Liability Insurance against bodily injury, including death resulting therefrom, to the limit of $3,000,000 for any one person or more than one person in any one accident and against property damage to the limit of $250,000 in each occurrence and $500,000 aggregate. 16 Prior to the commencement of the Sublessee's Work, the Sublessee shall deliver to Sublessor, Master Lessor and its mortgagee (if applicable) certificates of all required insurance, and evidence of the payment of premiums thereon (and certificates of renewal, and evidence of premium payments with reference thereto, where appropriate). All such insurance shall provide, and certificates thereof shall state, that the same is non-cancellable and materially non-amendable without ten (10) days' prior written notice to Sublessor, Master Lessor and its mortgagee (if applicable), respectively. D. Within ten (10) business days after receipt by Sublessor and Master Lessor of the Plans and Specifications from Sublessee, such parties agree to review the same, approve or disapprove the same in writing (Sublessor and Master Lessor both agreeing that such approval shall not be unreasonably withheld or delayed (except, with respect to Master Lessor's approval only, as to structural, exterior and/or roof work) and that any disapproval shall specify in reasonable detail the reasons therefor), and specify by written notice to Sublessee all fixtures and other leasehold improvements to be removed by Sublessee at the expiration or earlier termination of the Sublease Term. Master Lessor and Sublessor agree to act reasonably in designating such fixtures and leasehold improvements for removal as aforesaid. Sublessee agrees to remove the same at such time in accordance with the provisions of Paragraph 18 hereof. Failure to give such notice within such ten (10) business day period approving or disapproving the Plans and Specifications and specifying such items to be removed shall constitute approval thereof and agreement that all such items may remain in the Premises at the time of surrender thereof. Sublessee shall be entitled to install or display advertising devices, signs or other things upon the exterior walls or the windows, together with monument signs on the land portion of the Premises, as long as the same comply with applicable requirements of the zoning regulations of the Town of Stratham, New Hampshire or any other applicable laws or regulations, do not constitute a nuisance and are consistent with the exterior architectural and aesthetic appearance of the improvements located on the Premises. 12. ALTERATIONS. Notwithstanding anything to the contrary contained in the Master Lease, Sublessee shall make no alteration, addition or improvement to the Premises without the prior written consent of the Sublessor and Master Lessor, which consent shall not be unreasonably withheld or delayed (except, with respect to Master Lessor's consent only, as to structural, exterior and/or roof work). Any and all such alterations shall be made in accordance with all applicable laws and regulations, in accordance with plans and specifications therefor subject to review and approval by Master Lessor and Sublessor (Sublessor and Master Lessor both agreeing that such approval shall not be unreasonably withheld or delayed (except, with respect to Master Lessor's approval only, as to structural, exterior and/or roof work) and that any disapproval of which shall specify in reasonable detail the reasons therefor), 17 and in a good and workmanlike manner. Any request for Sublessor's and Master Lessor's consent to such alterations shall specify the commencement date and the approximate completion date thereof, and shall include the plans and specifications therefor. Notwithstanding the foregoing, Sublessor and Master Lessor agree that Sublessee may make interior, non-structural alterations within the Premises that do not affect the utility or mechanical systems thereof, without having to obtain their prior written consent, provided that, in each instance, (i) Sublessee shall first give written notice to Sublessor and Master Lessor specifying the proposed alterations, the commencement and approximate completion dates thereof and a list of all contractors who will be performing work in connection therewith, (ii) upon Sublessor's or Master Lessor's request therefor, Sublessee shall provide to such requesting party copies of plans and specifications for such alterations, (iii) such alterations shall be made in accordance with all applicable laws and regulations and in a good and workmanlike manner by licensed and insured contractors experienced in the kind and scope of the proposed work and in accordance with all of the applicable provisions of this Sublease relating to construction of improvements by Sublessee, and (iv) Sublessee shall provide Sublessor and Master Lessor with a certificate in form and substance reasonably satisfactory to Sublessor and Master Lessor stating that such alterations were constructed substantially in accordance with the plans and specifications therefor. Notwithstanding the requirement that any such alteration work not involve utility or mechanical systems, it is expressly understood and agreed that Sublessee shall have the right to alter duct work and redistribute utilities within the Premises so as to adapt the same to any alterations in the location of interior partitions and non-structural walls that are permitted by the provisions of the immediately preceding sentence. Sublessor and Master Lessor shall have the right to impose reasonable conditions upon the nature, scope or conduct of such alteration work to insure that the structure or support of the Building is not impaired and that the purposes and quality of the Building are not adversely affected. Within ten (10) business days after receipt by such parties of such notice and plans and specifications from Sublessee, such parties agree to review the same and specify by written notice to Sublessee all fixtures and other leasehold improvements to be removed by Sublessee at the expiration or earlier termination of the Sublease Term. Master Lessor and Sublessor agree to act reasonably in designating such fixtures and leasehold improvements for removal as aforesaid. Sublessee agrees to remove the same at such time in accordance with the provisions of Paragraph 18 hereof. Failure to give such notice within such ten (10) business day period specifying such items to be removed shall constitute agreement that all such items may remain in the Premises at the time of surrender thereof. Notwithstanding anything to the contrary contained in this Paragraph 12, if Sublessor fails to approve or disapprove the plans and specifications for any alteration work requiring Sublessor's approval hereunder within ten (10) business days after Sublessor receives a 18 complete set thereof, such plans and specifications shall conclusively be deemed to have been approved by Sublessor. 13. INDEMNITY AND INSURANCE. Sublessee agrees to indemnify and hold harmless Sublessor, Master Lessor and its mortgagee from and against all claims arising from any accident, injury or damage whatsoever caused to any person, or to the property of any person occurring during the term hereof in or about the Premises, where such accident, damage or injury results or is claimed to have resulted from negligence or willful misconduct on the part of Sublessee or Sublessee's contractors, licensees, agents, servants or employees, except that Sublessee shall not indemnify and hold harmless any of Sublessor, Master Lessor or its mortgagee, respectively, to the extent that any such accident, damage or injury results from the negligence or willful misconduct of such party or its contractors, licensees, agents, servants or employees. This indemnity and hold harmless agreement shall include indemnity against all reasonable costs, expenses and liabilities incurred in or in connection with any such claim or proceeding brought thereon, including, without limitation, reasonable attorneys' fees incurred in connection with the defense thereof. Sublessor agrees to indemnify and hold harmless Sublessee from and against all claims arising from any accident, injury or damage whatsoever caused to any person, or to the property of any person occurring during the term hereof in or about the Premises, where such accident, damage or injury results or is claimed to have resulted from negligence or willful misconduct on the part of Sublessor or Sublessor's contractors, licensees, agents, servants or employees, except to the extent that any such accident, damage or injury results from the negligence or willful misconduct of Sublessee or its contractors, licensees, agents, servants or employees. This indemnity and hold harmless agreement shall include indemnity against all reasonable costs, expenses and liabilities incurred in or in connection with any such claim or proceeding brought thereon, including, without limitation, reasonable attorneys' fees incurred in connection with the defense thereof. Sublessee agrees to maintain policies of comprehensive public liability insurance and insurance covering its leasehold improvements and its own fixtures, merchandise, equipment and other property contained in the Premises in such amounts as Sublessor and Master Lessor shall reasonably approve, and otherwise in accordance with and subject to the applicable provisions of the Master Lease, all as if Sublessee were the Lessee therein named. Such policies of comprehensive general liability insurance shall name Sublessor and Master Lessor and, if requested by Master Lessor, all holders of mortgages on the Premises as additional insured parties. Certificates of insurance evidencing such coverage shall be delivered to Sublessor and Master Lessor at the commencement of the Sublease Term and if any such policy requires renewal, not less than ten (10) days prior to the expiration of such policy. 19 Sublessee waives, as long as it may be permitted by Sublessee's insurer, without payment of extra premiums, and shall cause its insurance carrier to waive, its right of recovery against Sublessor, Master Lessor, all holders of mortgages on the Premises, and their employees, agents, successors and assigns, for any fire and extended coverage losses occurring to Sublessee's leasehold improvements and to property belonging to Sublessee which may be placed in or on the Premises. In consideration thereof, so long as it may be permitted by Sublessor's insurer, without payment of extra premiums, Sublessor hereby agrees to waive, and to cause its insurance carrier to waive, its right of recovery against Sublessee, its successors or assigns, for any fire and extended coverage losses to the Premises. If either party's insurance carrier shall charge extra premiums for the incorporation of the above-described waiver of subrogation in its policies, then such party shall give prompt written notice to the other of the amount of such extra premiums and shall provide evidence thereof reasonably satisfactory to the other party (such notice and evidence are hereinafter referred to as the "Extra Premium Notice"). In that event, the other party shall have the right, but not the obligation, to request that such waiver be provided by giving written notice to the other party within fifteen (15) business days after receiving the Extra Premium Notice and by paying such extra premiums to the other party upon demand. If the party requesting such waiver shall fail to pay such extra premiums as aforesaid, then the other party shall be released from its obligation to provide such waiver. 14. CASUALTY AND EMINENT DOMAIN. A. CASUALTY. If all or a substantial part of the Premises is destroyed or damaged by fire or other casualty (a substantial part of the Premises for the purposes of this Paragraph shall be deemed to be fifty percent (50%) or more of its insurable value), and if, as a result thereof, Master Lessor elects to terminate the Master Lease pursuant to the provisions of Article X thereof, then Sublessor shall notify Sublessee of such termination and this Sublease shall likewise terminate as of the effective date of the termination of the Master Lease. If Master Lessor elects under said Article X of the Master Lease to restore all or the damaged portion of the Premises, but such restoration is not substantially completed with the result that use and occupancy of substantially all of the Premises are not granted to Sublessee within one hundred eighty (180) days after the time the Premises are destroyed or damaged, Sublessee shall have the right to terminate this Sublease by giving twenty (20) business days' notice to Sublessor, unless Master Lessor substantially completes such restoration as aforesaid within such twenty (20) business day period, in which event such termination shall be null and void and of no force or effect. Sublessor agrees that it will not terminate the Master Lease pursuant to Article X thereof without Sublessee's prior written consent; except that no such consent shall be necessary if Master Lessor has failed to restore the Premises as aforesaid within three hundred sixty (360) days after the Premises are 20 destroyed or damaged and Sublessor elects to terminate the Master Lease after the expiration of such 360-day period. In such event, Sublessor shall notify Sublessee of such termination and this Sublease shall likewise terminate as of the effective date of the termination of the Master Lease. If Sublessor desires to terminate the Master Lease pursuant to the provisions of Article X thereof prior to the expiration of such 360-day period, then Sublessor shall notify Sublessee of its desire so to do, whereupon Sublessee shall either consent or not consent to such termination by giving written notice to Sublessor within twenty (20) business days after receipt of Sublessor's notice. Failure by Sublessee to give such notice within such twenty (20) business day period shall constitute irrevocable and conclusive consent to such termination on the part of Sublessee. In the event that Sublessor thereafter elects to terminate the Master Lease as aforesaid, Sublessor shall notify Sublessee of such termination and this Sublease shall likewise terminate as of the effective date of the termination of the Master Lease. Neither Master Lessor nor Sublessor shall have any obligation to Sublessee to restore the Premises or to repair or replace Sublessee's furniture, furnishings and equipment after the same are destroyed or damaged by any such fire or other casualty. If this Sublease is not terminated as aforesaid, a just proportion of the Base Rent, Additional Rent and Contributed Amount, according to the nature and extent of the damage, shall be abated until use and occupancy of substantially all of the Premises shall have been granted to Sublessee as aforesaid. B. EMINENT DOMAIN. If the Premises shall be completely taken by exercise of eminent domain, then this Sublease shall terminate as of the date of such taking. If any substantial part of the Premises shall be taken by the exercise of eminent domain or by action of any public or other authority (a substantial part of the Premises for the purposes of this Paragraph shall be deemed to be fifty percent (50%) or more of its insurable value), and if, as a result thereof, Master Lessor elects to terminate the Master Lease pursuant to the provisions of Article XI thereof, then Sublessor shall notify Sublessee of such termination and this Sublease shall likewise terminate as of the effective date of the termination of the Master Lease. If Master Lessor elects under said Article XI of the Master Lease to restore any remaining portion of the Premises, but such restoration is not substantially completed with the result that use and occupancy of substantially all of such remaining portion are not granted to Sublessee within one hundred eighty (180) days after the time of such taking, Sublessee shall have the right to terminate this Sublease by giving twenty (20) business days' notice to Sublessor, unless Master Lessor substantially completes such restoration as aforesaid within such twenty (20) business day period, in which event such termination shall be null and void and of no force or effect. Sublessor agrees that it will not terminate the Master Lease pursuant to Article XI thereof 21 without Sublessee's prior written consent. If Sublessor desires to terminate the Master Lease pursuant to the provisions of Article XI thereof, then Sublessor shall notify Sublessee of its desire so to do, whereupon Sublessee shall either consent or not consent to such termination by giving written notice to Sublessor within twenty (20) business days after receipt of Sublessor's notice. Failure by Sublessee to give such notice within such twenty (20) business day period shall constitute irrevocable and conclusive consent to such termination on the part of Sublessee. In the event that Sublessor thereafter elects to terminate the Master Lease as aforesaid, Sublessor shall notify Sublessee of such termination and this Sublease shall likewise terminate as of the effective date of the termination of the Master Lease. If this Sublease is not terminated as aforesaid, a just proportion of the Base Rent, Additional Rent and Contributed Amount, according to the nature and extent of the portion of the Premises rendered untenantable, shall be abated until use and occupancy of substantially all of the remaining portion of the Premises shall have been granted to Sublessee as aforesaid, and thereafter a just proportion of the Base Rent, according to the nature and extent of the portion of the Premises so taken, shall be abated for the balance of the term of this Sublease. Master Lessor reserves and excepts all rights to damages to the Premises, including, without limitation, the Building and the leasehold improvements therein, accrued or subsequently accruing by reason of anything lawfully done in pursuance of any public or other authority; and, by way of confirmation, Sublessee grants to Master Lessor all of Sublessee's rights to such damages, except for damages to trade fixtures and other property which Sublessee may remove from the Premises pursuant to the provisions of this Sublease, relocation expenses and any other award which would not diminish the amount of Master Lessor's said award pursuant to Article XI of the Master Lease, and covenants to execute and deliver such further instruments or assignments thereof as Master Lessor may from time to time request. 15. NOTICES. Any notice given under this Sublease shall be in writing and shall be hand-delivered or mailed (by certified or registered mail, return receipt requested, postage prepaid) or by a national overnight courier service that provides for a return receipt, addressed as follows (or addressed as directed in writing by any of the following parties by subsequent notice to the other parties given in the same manner): Sublessee: THE TIMBERLAND COMPANY 200 Domain Drive Stratham, New Hampshire 03885 Attn: Chief Financial Officer with a copy to: THE TIMBERLAND COMPANY 200 Domain Drive Stratham, New Hampshire 03885 Attn: General Counsel 22 Sublessor: HEWLETT-PACKARD COMPANY 2101 Gaither Road Rockville, Maryland 20850 Attn: Corporate Real Estate Manager Master Lessor: TRUSTEES OF FIRST ALTEX REALTY TRUST c/o Altid Properties 17 Monsignor O'Brien Highway Cambridge, Massachusetts 02141-1817 Master Lessor's Mortgagee: TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA 730 Third Avenue New York, New York 10017 Any notice shall be deemed to have been given upon the earlier to occur of (a) when hand-delivered; or, if mailed, upon receipt; or, if sent by overnight courier, when delivered by such courier; or (b) whether hand-delivered, mailed or sent by overnight courier, upon the first business day on which delivery of such notice is attempted. 16. REMEDIES OF SUBLESSOR UPON DEFAULT. Any one of the following shall be deemed to be an "Event of Default" under this Sublease: A. Failure on the part of the Sublessee to make payment of or on account of Base Rent, Additional Rent, the Contributed Amount or any other monetary amount due under this Sublease within ten (10) days after the Sublessor has sent to the Sublessee notice of such default. B. With respect to a non-monetary default under this Sublease, failure of the Sublessee to cure the same within thirty (30) days after the Sublessor has sent to the Sublessee notice of such default. C. The commencement of any of the following proceedings, with such proceeding not being dismissed within sixty (60) days after it has begun: (i) the estate hereby created being taken on execution or by other process of law; (ii) the Sublessee being judicially declared bankrupt or insolvent according to law; (iii) an assignment being made of the property of the Sublessee for the benefit of creditors; (iv) a receiver, guardian, conservator, trustee in involuntary bankruptcy or other similar officer being appointed to take charge of all or any substantial part of the Sublessee's property by a court of competent jurisdiction; or (v) a petition being filed for the reorganization of the Sublessee under any provisions of the Bankruptcy Code or any federal or state law now or hereafter enacted. 23 D. The Sublessee filing a petition for reorganization or for rearrangement under, or otherwise availing itself of any provisions of, the Bankruptcy Code or any federal or state law now or hereafter enacted providing a plan or other means for a debtor to settle, satisfy or extend the time for the payment of debts. Should any Event of Default occur then, notwithstanding any license of any former breach of covenant or waiver of the benefit hereof or consent in a former instance, the Sublessor lawfully may, in addition to any remedies available to the Sublessor under applicable statutes or case law, or otherwise, immediately or at any time thereafter, and, to the maximum extent permitted by law, without demand or notice (and the Sublessee hereby expressly waives any notice to quit possession of the Premises), enter into and upon the Premises or any part thereof in the name of the whole and repossess the same as of the Sublessor's former estate, and expel the Sublessee and those claiming through or under it and remove its or their effects without being deemed guilty of any manner of trespass, and without prejudice to any remedies which might otherwise be used for arrears of rent or preceding breach of covenant and/or the Sublessor may send written notice to the Sublessee terminating the term of this Sublease; and upon the first to occur of: (i) entry as aforesaid; or (ii) the fifth (5th) day following the sending of such notice of termination, the term of this Sublease shall terminate. The Sublessee covenants and agrees, notwithstanding any termination of this Sublease as aforesaid or any entry or re-entry by the Sublessor, whether by summary proceedings, termination, or otherwise, to pay and be liable for on the days originally fixed herein for the payment thereof, amounts equal to the several installments of Base Rent, Additional Rent, the Contributed Amount and other charges reserved as they would, under the terms of this Sublease, become due if this Sublease had not been terminated or if the Sublessor had not entered or re-entered, as aforesaid, and whether the Premises be relet or remain vacant, in whole or in part, or for a period less than the remainder of the term, and for the whole thereof; but in the event the Premises be relet by the Sublessor, the Sublessee shall be entitled to a credit in the net amount of rent received by the Sublessor in reletting, after deduction of all reasonable expenses incurred in reletting the Premises (including, without limitation, remodelling costs, brokerage fees, and the like) and in collecting the rent in connection therewith. It is specifically understood and agreed that the Sublessor shall be entitled to take into account in connection with any reletting of the Premises all relevant factors which would be taken into account by a sophisticated tenant in securing a replacement subtenant for the Premises, such as, but not limited to, the type of operation proposed to be conducted by any such replacement subtenant, and the financial responsibility of any such replacement subtenant. Sublessor agrees to use reasonable efforts to relet the Premises in the event that this Sublease is terminated as aforesaid. As an alternative, at the election of the Sublessor (such election to be made within ninety (90) days of entry, 24 re-entry or termination), the Sublessee will upon such termination pay to the Sublessor, as full and complete, final, agreed upon liquidated damages for Sublessee's liability hereunder for failure to pay the Base Rent, Additional Rent and Contributed Amount from and after the date of termination (but not as such liquidated damages for any liability of Sublessee under this Sublease for failure to perform any of its other obligations specifically set forth in this Sublease, including, without limitation, liability for Sublessor's attorneys' fees and expenses and environmental and holdover liability), such a sum as at the time of such termination represents the amount of the excess, if any, of the then present value of the total Base Rent, Additional Rent, Contributed Amount and other benefits which would have accrued to the Sublessor under this Sublease for the remainder of the Sublease term if the Sublease terms had been fully complied with by the Sublessee (calculated using a discount rate of six percent (6%) over and above the then fair market cash rental value (in advance) of the Premises for the balance of the term (calculated using the same discount rate). 17. NONASSIGNMENT. Sublessee's interest in this Sublease is not assignable, whether by operation of law or otherwise. Sublessee shall have no right to sublet the Premises or to transfer any interest of Sublessee therein. As between Sublessor and Sublessee, Sublessor shall have the right to assign its interest in the Master Lease, this Sublease or both without Sublessee's consent. The provisions of this Paragraph shall not, however, be applicable to an assignment of this Sublease or subletting of the entire Premises by Sublessee to its wholly owned subsidiary or immediate controlling corporation or to a corporation or other entity under common control with Sublessee (for such period of time as such corporation remains such a subsidiary or such a controlling corporation or such a corporation or other entity under common control, respectively, it being agreed that the subsequent sale or transfer of stock or other legal or beneficial ownership interest resulting in a change in voting control, or any other transaction(s) having the overall effect that such corporation ceases to be such a subsidiary or such a controlling corporation or such a corporation or other entity under common control, respectively, of Sublessee, shall be treated as if such sale or transfer or transaction(s) were, for all purposes, an assignment of this Sublease governed by the provisions of this Paragraph), or to a corporation or other entity which acquires all or substantially all of the assets of Sublessee, provided (and it shall be a condition of the validity of any such assignment) that such wholly owned subsidiary or such immediate controlling corporation or such a corporation or other entity under common control or such acquiring corporation or entity first agree directly with the Sublessor and/or the Master Lessor, as the case may be, to be primarily liable for performing all of the obligations of Sublessee hereunder, including, without limitation, the obligation to pay the rent and other amounts provided for under this Sublease, the covenant to use the Premises only for the purposes specifically permitted under this Sublease and the covenant against further assignment and 25 subletting; but such assignment shall not relieve the Sublessee herein named of any of its obligations hereunder, and Sublessee shall remain fully and primarily liable therefor. 18. SURRENDER OF THE PREMISES. Upon the expiration of the Sublease Term or earlier termination of this Sublease, Sublessee shall remove its furniture, trade fixtures, equipment and other goods and effects, and shall also remove any of its fixtures that Sublessor or Master Lessor shall have required to be so removed in accordance with the terms and provisions of Paragraph 11 and/or 12 of this Sublease, and shall peaceably yield up the Premises, clean and in as good order, repair and condition as Sublessee is required to maintain same during the term of this Sublease, reasonable wear and tear and damage by casualties excepted, and Sublessor's or Master Lessor's failure to perform their respective repair, maintenance and replacement obligations under this Sublease or the Master Lease also excepted; and Sublessee shall repair any injury done to the Premises by the installation or removal of the Sublessee's fixtures or other property. Prior to the expiration or earlier termination of this Sublease, Sublessee shall remove any of the fixtures and other leasehold improvements originally installed and/or constructed by Sublessee that are specified for removal by any written notice given by Sublessor or Master Lessor to Sublessee pursuant to Paragraphs 11 and/or 12 hereof. 19. ATTORNEYS' FEES. Should either party commence any legal action or proceeding against the other based on this Sublease, the prevailing party shall be entitled to an award of reasonable attorneys' fees, in addition to any other relief to which such party would be entitled. 20. REAL ESTATE COMMISSION. Except for the Kane Company and Hunneman Commercial Company (the "Brokers"), whose entire commission shall be paid by Sublessor pursuant to separate written agreements between each of the Brokers, respectively, and Sublessor, each party represents and warrants to the other that it has not had any dealings with any real estate broker or other person in respect to this Sublease. Each party shall indemnify and hold harmless the other from all damages or claims that may be asserted by any person with whom the indemnifying party has purportedly dealt. 21. SUBLESSOR'S CONSTRUCTION ALLOWANCE. Sublessor agrees to contribute up to Three Million Five Hundred Thousand and 00/l00 Dollars ($3,500,000.00), as Sublessor's construction allowance ("Sublessor's Construction Allowance") toward the cost of Sublessee's Work ("Sublessee's Costs"), it being understood and agreed that the payment of Sublessor's Construction Allowance shall be made subject to the following conditions and according to the following schedule: (a) If there then exists no Event of Default under this Sublease, during the time between the date on which Sublessee commences Sublessee's Work and the date on which Sublessee's Work has been substantially completed, Sublessor agrees to make an initial partial payment (the "Initial Payment") to Sublessee of 26 Sublessor's Construction Allowance within fifteen (15) days after Sublessor's receipt of the Initial Requisition (as herein defined) and the other documents specified in clauses (ii) through (iv) of this subparagraph (a). The Initial Payment shall be paid to Sublessee or, at Sublessor's election, directly to Sublessee's contractors, subcontractors and/or vendors specified in the Initial Requisition, and shall be equal to eighty-five percent (85%) of the amount of the Initial Requisition; provided, however, that in no event shall the Initial Payment exceed fifty percent (50%) of the full amount of Sublessor's Construction Allowance. Sublessor's obligation to make the Initial Payment shall be contingent upon Sublessee's first having furnished to Sublessor the following: (i) a statement in form and substance reasonably satisfactory to Sublessor (the "Initial Requisition"), certified to be true, accurate and complete by an executive officer of Sublessee, stating the amount that has actually been paid out and that will be paid out from the proceeds of the Initial Payment on account of Sublessee's Costs actually incurred as of the date thereof (excluding reasonable retainage amounts), (ii) invoices, including receipted invoices for amounts already paid out, substantiating any and all such payments made and to be made by Sublessee on account of Sublessee's Costs actually incurred as of the date of the Initial Requisition, (iii) an affidavit of Sublessee's general contractor, in form and substance reasonably satisfactory to Sublessor, dated no later than the date of the Initial Requisition, stating that any and all amounts then due to said general contractor and all subcontractors and other parties attributable to labor and materials furnished in connection with Sublessee's Work have been paid in full or will be paid in full from the proceeds of the Initial Payment (subject to applicable retainage amounts), and (iv) executed lien waivers from said general contractor and said subcontractors and other parties, in form and substance reasonably satisfactory to Sublessor, waiving any and all liens attributable to labor and materials theretofore furnished by such parties in connection with Sublessee's Work. (b) If there then exists no Event of Default under this Sublease, after the date on which Sublessor makes the Initial Payment, but before Sublessee's Work has been finally completed, Sublessor agrees to make additional payments of Sublessor's Construction Allowance (each such payment being hereinafter referred to as an "Additional Payment"), no more frequently than once every thirty (30) days. Sublessor agrees to make each Additional Payment within fifteen (15) days after Sublessor's receipt of the applicable Additional Requisition (as herein defined) and the other documents specified in clauses (ii) through (iv) of this subparagraph (b). Each Additional Payment shall be paid to Sublessee or, at Sublessor's option, to the contractors, subcontractors and/or vendors specified in the applicable Additional Requisition, and shall be equal to eighty-five percent (85%) of Sublessee's Costs as shall have actually been 27 paid or as are payable as of the date of such Additional Requisition, less the amount of Sublessee's Costs theretofore paid by Sublessor on account of Sublessor's Construction Allowance; provided, however, that in no event shall the sum of any Additional Payment, plus the Initial Payment and all prior Additional Payments, exceed eighty-five percent (85%) of the full amount of Sublessor's Construction Allowance. Sublessor's obligation to make any Additional Payment shall be contingent upon Sublessee's furnishing to Sublessor the following: (i) a statement in form and substance reasonably satisfactory to Sublessor (an "Additional Requisition") certified to be true, accurate and complete by an executive officer of Sublessee stating the amount that Sublessee has paid out and that will be paid out from the proceeds of such Additional Payment on account of Sublessee's Costs actually incurred after the date of the Initial Requisition or the last previous Additional Requisition, as the case may be (excluding reasonable retainage amounts), (ii) invoices, including receipted invoices for amounts already paid out, substantiating any and all such payments made or to be made on account of Sublessee's Costs actually incurred after the date of the Initial Requisition or the last previous Additional Requisition, as the case may be, (iii) an affidavit of Sublessee's general contractor, in form and substance reasonably satisfactory to Sublessor, dated no later than the date of the applicable Additional Requisition, stating that any and all amounts then due to said general contractor and all subcontractors and other parties attributable to labor and materials furnished in connection with Sublessee's Work have been paid in full or will be paid in full from the proceeds of the applicable Additional Payment (subject to applicable retainage amounts), and (iv) executed lien waivers from said general contractor and said subcontractors and other parties, in form and substance reasonably satisfactory to Sublessor, waiving any and all liens attributable to labor and materials theretofore furnished by such parties in connection with Sublessee's Work. (c) If there then exists no Event of Default under this Sublease, upon or after the date on which Sublessee's Work has been finally completed, Sublessor agrees to make the final payment on account of Sublessor's Construction Allowance (the "Final Payment") within fifteen (15) days after Sublessor's receipt of the Final Requisition (as herein defined) and the other documents specified below in clauses (ii) through (vii) of this subparagraph (c). The Final Payment shall be paid to Sublessee or, at Sublessor's option, to the contractors, subcontractors and/or vendors specified in the Final Requisition, and shall be equal to so much of Sublessee's Costs as shall have actually been paid or as are payable as of the date of the Final Requisition, less the amount of Sublessee's Costs theretofore paid by Sublessor on account of Sublessor's Construction Allowance; provided, however, that in no event shall the Final Payment exceed the then balance of Sublessor's Construction 28 Allowance. Sublessor's obligation to make the Final Payment shall be contingent upon Sublessee's furnishing to Sublessor the following: (i) a statement in form and substance reasonably satisfactory to Sublessor (the "Final Requisition") certified to be true, accurate and complete by an executive officer of Sublessee stating the amount that Sublessee has paid out and that will be paid out from the proceeds of the Final Payment on account of Sublessee's Costs actually incurred after the date of the last previous Additional Requisition, (ii) invoices, including receipted invoices for amounts already paid out, substantiating any and all such payments made or to be made on account of Sublessee's Costs actually incurred after the date of the last previous Additional Requisition, (iii) an affidavit of Sublessee's general contractor, in form and substance reasonably satisfactory to Sublessor, stating that any and all amounts due to said general contractor and all subcontractors and other parties attributable to labor and materials furnished in connection with Sublessee's Work have been paid in full or will be paid in full from the proceeds of the Final Requisition, (iv) executed lien waivers from said general contractor and said subcontractors and other parties, in form and substance reasonably satisfactory to Sublessor, waiving any and all liens attributable to labor and materials theretofore furnished by such parties in connection with Sublessee's Work, (v) evidence reasonably satisfactory to Sublessor that all of Sublessee's Work and all of Sublessee's obligations with respect thereto as contained in this Sublease shall have been finally completed in all respects in accordance therewith, and (vi) copies of all governmental approvals, including, without limitation, certificate(s) of occupancy, necessary for Sublessee to occupy the Premises. Sublessee shall pay to Sublessor the total amount of all funds contributed by Sublessor on account of Sublessor's Construction Allowance as hereinabove provided (which funds shall in no event exceed Three Million Five Hundred Thousand and 00/100 Dollars ($3,500,000.00) in the aggregate and are hereinafter referred to as the "Contributed Amount"), with interest at the rate of six percent (6%) per annum, payable in sixty (60) consecutive, equal monthly payments of principal and interest commencing on July 15, 1994 and continuing on the first day of every month thereafter through and including the month of July, 1999 (the "Payment Period"). The amount of each monthly payment on account of the Contributed Amount shall be calculated so as to result in the full repayment by Sublessee of the Contributed Amount, with interest at the aforesaid rate, after payment of all such monthly payments over the aforesaid sixty (60) month period. Promptly after the amount of each monthly payment on account of the Contributed Amount shall have been determined as aforesaid, Sublessor shall prepare and the parties shall execute and deliver to each other an agreement memorializing the amount of each such payment payable by Sublessee during the Payment Period. Sublessor shall have the same 29 remedies hereunder for any failure by Sublessee to pay any payment on account of the Contributed Amount when due as Sublessor has hereunder for any failure by Sublessee to pay Base Rent and Additional Rent when due, including, without limitation, the right to terminate this Sublease. 22. PROVISIONS BINDING, ETC. Except as herein otherwise expressly provided, the terms hereof shall run with the land, be binding upon and inure to the benefit of those claiming under, by and through, respectively, Sublessor and Sublessee, including, without limitation, their respective successors and assigns. The reference contained in the preceding sentence to successors and assigns of Sublessee is not intended to and does not constitute a consent to assignment by Sublessee. As between Sublessee and Sublessor, Sublessor shall have the right to sell, assign, transfer or otherwise alienate its interest in the Premises, and upon such sale, assignment, transfer or alienation, the new holder of such interest shall succeed to and thereby assume all of Sublessor's obligations hereunder, except that Sublessor and each new holder shall only be liable for obligations accruing during its respective period of ownership, and Sublessee shall be bound to the new holder to the same extent as it was bound to Sublessor. Without limiting the generality of the foregoing, as between Sublessee and Sublessor, Sublessor shall be entirely freed and relieved of any obligation or responsibility accruing under this Sublease from and after any such sale, assignment, transfer or other alienation by Sublessor of its interest in the Premises. 23. APPLICABLE LAWS. This Sublease shall be construed and interpreted in accordance with the laws of the State of New Hampshire. 24. ENTIRE AGREEMENT. This Sublease contains the entire agreement of the parties. No representations, inducements, promises or agreements, oral or otherwise, not embodied herein shall be of any force or effect. Nothing in this Sublease shall relieve Sublessor of its primary liability for its obligations to Master Lessor under the Master Lease. Master Lessor's consent to this Sublease does not constitute consent to any future subletting or assignment, except as expressly permitted in Paragraph 17 hereof with respect to an assignment of this Sublease or subletting of the entire Premises by Sublessee to its wholly owned subsidiary or immediate controlling corporation or to a corporation or other entity under common control with Sublessee or to a corporation or other entity which acquires all or substantially all of the assets of Sublessee. 25. ENVIRONMENTAL HAZARDS 25.1 Sublessee's Use of Hazardous Material. Sublessee shall not cause or permit any hazardous material or oil to be used, stored, generated, or disposed of by Sublessee or its agents on, in or from the Premises or in connection with Sublessee's use of the Premises, except those used, stored, generated, or disposed of by Sublessee in the ordinary course of its business activities at the 30 Premises, without first obtaining Sublessor's and Master Lessor's written consent, which consent may be withheld by either party in such party's sole and absolute discretion. Any request by Sublessee for such consent by Sublessor and Master Lessor shall be in writing. Prior to the full execution and delivery of this Sublease, Sublessee shall deliver to Sublessor and Master Lessor, for their respective review and approval, which approval may be withheld by either party in such party's sole and absolute discretion, a list of all hazardous material or oil that Sublessee intends to use, store, generate, or dispose of in the ordinary course of its business activities at the Premises. 25.2 General Standards of Compliance. Sublessee shall inspect, use, store, generate, transport and dispose of all hazardous material or oil in compliance with the Environmental Requirements and shall cause its agents, employees, contractors, licensees and invitees to so comply. Sublessee shall not release, or permit to be released by its agents, on, in or from the Premises or in connection with Sublessee's use of the Premises any hazardous material or oil in violation of the Environmental Requirements. 25.3 Specific Standards of Compliance. Without limiting Sublessee's obligations under Paragraph 25.2, Sublessee shall comply, and cause its agents to comply, with the specific requirements set forth in this Paragraph 25.3. (a) Transformers. For all transformers installed by Sublessee on the Premises, Sublessee shall comply with 40 CFR Part 761. (b) Discharges to Sanitary Sewer. If required by applicable law, Sublessee shall obtain permit(s) from all governmental authorities having jurisdiction with respect to discharges to sanitary sewers and shall comply with the Federal Clean Water Act and any pretreatment or other conditions contained in the applicable sewer permit and shall cause its agents to so comply. (c) Asbestos. [Intentionally Omitted] (d) Handling Hazardous Wastes. Sublessee shall comply, and shall cause its agents to comply, with all applicable laws and regulations relating to the handling, storage, generation, transportation, and disposal of hazardous waste. If Sublessee or its agents generate hazardous waste, upon request of Sublessor or Master Lessor, Sublessee shall provide any information and copies of permits required under applicable state laws and regulations to Sublessor and Master Lessor, and shall make available upon written request of Sublessor or Master Lessor within thirty (30) days of the date of such request, copies of all manifests used for the transportation and disposal of hazardous waste. 31 (e) Inventories of Hazardous Material. Sublessee shall make available to Sublessor and Master Lessor within seven (7) days of the date of written request: (a) copies of all inventories of hazardous materials and safety plans filed with the Fire Department under the Emergency Planning and Community Right-To-Know Act, 42 U.S.C. Section 11001 et seq. and applicable New Hampshire laws, (b) copies of material safety data sheets ("MSDS") that accompany any product used or stored at the Premises, pursuant to the hazard communications standard under the Occupational Safety and Health Act ("OSHA") and evidence that the MSDSs have been made available to Sublessee's employees, and (c) all other plans and reports required to be prepared pursuant to the Environmental Requirements. 25.4 Notices. Sublessor and Sublessee shall promptly deliver to the other and to Master Lessor any notices, orders or similar documents received from any governmental agency or official affecting the Premises and concerning the alleged violation of the Environmental Requirements. Sublessee shall give notice to the Sublessor and Master Lessor of any violation or potential violation of the Environmental Requirements immediately upon becoming aware of same. Sublessor shall give notice to Sublessee and Master Lessor, within a reasonable time after receipt thereof, of any official notice received by Sublessor from any governmental agency or official affecting the Premises and concerning the alleged violation of the Environmental Requirements. 25.5 Sublessee's Obligation to pay Costs and Fines. Sublessee shall bear the full cost of, and be solely responsible for, carrying out its obligations under this Paragraph 25. Sublessee shall pay forthwith any fine assessed for any violation by Sublessee or its agents of the Environmental Requirements or shall diligently proceed to contest the same. Any cost or fine required under this Paragraph 25 to be borne by Sublessee may be paid by Sublessor or Master Lessor, at the election of either party (provided that Sublessor or Master Lessor shall not pay any such amount if Sublessee is contesting the imposition of the same, unless such payment is required under the terms of any mortgage covering the Premises, in which event payment may be made by any such party if accompanied by an acknowledgement of such contest and a statement that payment is being made without any waiver of Sublessee's rights in connection therewith), after at least thirty (30) days' notice to Sublessee, except that, in cases where such payment is necessary in order to avoid a lien against or other material adverse effect on or with respect to the Premises, such payment may be made immediately after notice, and such payment shall be reimbursed by Sublessee to Sublessor or Master Lessor, as the case may be, within 30 days of written demand therefor and may at Sublessor's election, be treated as additional rent hereunder; and Sublessor shall have the same rights and remedies for the nonpayment thereof as for the nonpayment of rent. 32 During the investigation and cleanup of any release that is the responsibility of Sublessee under this Paragraph 25 or under applicable Environmental Requirements and during any restoration, maintenance, or repair work that is the responsibility of Sublessee under this Paragraph 25 or under applicable Environmental Requirements, Sublessee shall continue to pay rent even though part or all of the Premises may be unusable. 25.6 Sublessee's Responsibility to Clean Up Any Release. Upon written demand by Sublessor or Master Lessor, if hazardous material or oil has been released in or on the Premises or has migrated to or off the Premises, by acts or negligence of Sublessee, Sublessee shall take all actions which are necessary to attain cleanup levels in accordance with the Environmental Requirements and to mitigate Environmental Damages, provided, however, to the extent the same has been expressly permitted by Sublessor and Master Lessor in writing pursuant to Paragraph 25.1 above, such actions may be postponed provided they are taken and completed prior to the expiration of the term of this Sublease and there is no violation of the Environmental Requirements. These actions include, without limitation, investigation and cleanup as may be required under CERCLA, RCRA, or applicable state laws and regulations, whichever is applicable. All such investigation and remedial work shall be performed by contractors reasonably acceptable to Sublessor and Master Lessor in accordance with the Environmental Requirements. Any such action shall be performed in a good, safe and workmanlike manner. Upon payment of the reasonable cost of copies thereof, Sublessee shall promptly provide to Sublessor and Master Lessor copies of testing results and all other reports. Following such cleanup, Sublessee shall promptly take all actions as are necessary to return the Premises and any areas outside the Premises to the condition existing prior to the release or migration of any such hazardous material or oil including the repair of any damage caused by the investigation or remediation. 25.7 Removal. Sublessee shall remove all hazardous material or oil used, stored, generated, discharged, released or disposed of by Sublessee and the containers in which such substances were ever packaged or stored from the Premises prior to the termination of this Sublease and prior to vacating; and such removal and disposal of such substances and containers shall be performed in accordance with all applicable laws and regulations. 25.8 Inspection. Upon the written request of Sublessor and/or Master Lessor, Sublessee, through a duly authorized officer and any employee responsible for the proper handling and disposal of hazardous 33 material and oil, shall give an annual certification, and a certification prior to the termination of this Sublease and prior to vacating, to the effect that the requirements in Paragraphs 25.1 through 25.8, inclusive, and any other of the Environmental Requirements for which Sublessor or Master Lessor has requested a certification have been satisfied. Sublessee grants Sublessor and Master Lessor, upon reasonable written notice, the right to inspect the Premises throughout the term of this Sublease to determine whether Sublessee is in compliance with the provisions in this Paragraph 25; and Sublessee shall provide Sublessor and Master Lessor with all information retained by Sublessee in the ordinary course of its business, or required to be retained by the Environmental Requirements, deemed by Sublessor and Master Lessor necessary for Sublessor and Master Lessor to ascertain whether Sublessee so complies. 25.9 Default. A breach of the obligations contained in this Paragraph 25 shall be deemed a breach of a material obligation of Sublessee under this Sublease which breach shall entitle Sublessor to enforce all remedies against Sublessee for breach and default. Provided, however, the notice and grace periods set forth in Paragraph 16 of this Sublease shall apply to any such breach. 25.10 Self Help. If Sublessor or Master Lessor determines that Sublessee has not proceeded diligently to cure any default within a reasonable time period, as reasonably determined by Sublessor and Master Lessor as the case may be, or in the event of an emergency as determined by Sublessor or Master Lessor in its reasonable judgment, Sublessor or Master Lessor, in addition to any other remedy under this Sublease, shall have the right, if such default continues for ten (10) days after written notice (or at any time after such notice in the event of an emergency) but not the obligation, to enter upon the Premises and to perform Sublessee's obligations hereunder, including the payment of money and the performance of any other act. All sums so paid by Sublessor or Master Lessor, as the case may be, and all reasonable incidental costs and expenses in connection therewith shall be reimbursed by Sublessee as additional rent to Sublessor within fifteen (15) days after written request from Sublessor or to Master Lessor (such written request to include invoices and other documentation evidencing in reasonable detail all costs paid by Sublessor or Master Lessor). Notwithstanding any such performances by Sublessor or Master Lessor, Sublessee shall remain liable for any violation of the provisions in this Paragraph 25. 25.11 Sublessee's and Sublessor's Indemnification. Sublessee and its successors, assigns and guarantors shall release, defend (with an attorney reasonably acceptable to Sublessor and 34 Master Lessor), indemnify and hold harmless Sublessor and Master Lessor and their respective successors and assigns and the officers, directors, stockholders, partners, beneficial owners, trustees, employees, agents, contractors and attorneys, of Sublessor and Master Lessor, or of the successors and assigns of any of the foregoing, from and against all Environmental Damages which may be asserted by Sublessee, any other person or entity, or government agency on account of the release of any hazardous material or oil upon, in or from the Premises by Sublessee or its agents, or on account of other action by Sublessee or its agents in violation of the Environmental Requirements or on account of breach of any of Sublessee's obligations under this Paragraph 25, except to the extent that any such Environmental Damages are caused by the indemnified party. The provisions of this Paragraph 25.11 shall not apply to hazardous materials or oil upon or in the Premises on the date hereof or to any migration of same upon or to the Premises from other property or caused by third parties, except to the extent caused by Sublessee or its agents, and Sublessor and its successors, assigns and guarantors shall release, defend (with an attorney reasonably acceptable to Sublessee), indemnify and hold harmless Sublessee and its successors and assigns and the officers, directors, stockholders, partners, beneficial owners, trustees, employees, agents, contractors and attorneys of Sublessee, or the successors and assigns of any of the foregoing, from and against all Environmental Damages which may be asserted by Sublessor or Master Lessor, any other person or entity, or government agency on account of the release of any hazardous material or oil upon, in or from the Premises by Sublessor or Master Lessor or their respective agents, or on account of other action by Sublessor, Master Lessor or their respective agents in violation of the Environmental Requirements, except to the extent that any such Environmental Damages are caused by Sublessee. In the event that the Master Lessor succeeds to the interest of the Sublessor under this Sublease, it is understood and agreed that (a) Master Lessor shall be liable to Sublessee under the foregoing indemnity only for Environmental Damages which may be asserted as aforesaid on account of the release of any hazardous material or oil upon, in or from the Premises by Master Lessor or its agents that first occurs from and after the date on which Master Lessor first succeeds to Sublessor's interest hereunder, or on account of other action by Master Lessor or its agents in violation of the Environmental Requirements that first occurs from and after such date (such Environmental Damages are hereinafter referred to as "After-Occurring Damages"), and (b) Sublessor shall not be liable to Sublessee under the foregoing indemnity for any After-Occurring Damages. 25.12 Definitions. The following terms as used herein shall have the meanings set forth below: "Hazardous material or oil" shall mean any substance (i) which is toxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic, mutagenic or otherwise hazardous substance which is or 35 becomes regulated by any governmental authority, agency, commission or instrumentality of the United States, the State of New Hampshire or any political subdivision thereof including city or town; or (ii) which is or becomes defined as a "hazardous substance" pursuant to Section 101 of the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601 et seq. ("CERCLA") or the Resource Conservation and Recovery Act of 1976, 42 U.S.C. Section 6901 et seq. ("RCRA"); as well as any material or substance which is or becomes defined as hazardous material or oil under applicable state laws and regulations; or (iii) which is or becomes a pollutant regulated under the Clean Air Act, 42 U.S.C. Section 7401 et seq. and 40 CFR Parts 50 to 85 or applicable state laws and regulations; or (iv) which is or becomes defined as "hazardous waste" below; or (v) the presence of which requires investigation or remediation under any present or future federal, state or local statute, regulation, ordinance, by-law, order, action, policy or common law; or (vi) which contains gasoline, diesel fuel, oil or other petroleum hydrocarbons. "Hazardous waste" shall mean any material designated as such under any applicable federal, state or local law, regulation, ordinance or by-law. "Environmental Damages" shall mean liabilities, injuries, losses, claims, damages, settlements, reasonable attorneys' and consultants' fees, penalties, interest and expenses, and costs of environmental site investigations, reports and cleanup. The costs of environmental site investigations, reports and cleanup include costs incurred in connection with any investigation or assessment of site conditions or health of Sublessee's agents or other persons using the Premises, risk assessment, monitoring, or any cleanup, remedial, removal or restoration work required by any federal, state or local governmental agency or political subdivision or recommended by Sublessor's or Master Lessor's environmental consultant (or Sublessee's environmental consultant in the event Sublessor or Master Lessor elect not to employ their own consultant) in the exercise of its reasonable professional judgment. "Environmental Requirements" shall mean all applicable laws, rules and regulations (including without limitation the laws and regulations referenced in Paragraphs 25.2 through 25.8, inclusive), and the orders of any governmental authority having jurisdiction with respect thereto, insofar as such laws, rules and regulations and orders relate to the release, maintenance, use, keeping in place, or disposal of hazardous material or oil, including those pertaining to reporting, licensing, permitting, housekeeping, upgrading of equipment, health and safety of tenant's agents and other persons, investigation, remediation, and disposal; and shall include both present and future laws and regulations and orders. "Release" shall mean any release, spill, emission, discharge or other disposal into the environment including the atmosphere, ground, building materials, sewer system, storm drainage system, or body of water. 36 25.13 Other. (a) The provisions of this Paragraph 25 shall be in addition to any other obligations and liabilities Sublessee may have to Sublessor under this Sublease or at law or in equity. (b) In the case of conflict between this Paragraph 25 and other provisions of this Sublease, the provisions imposing the most stringent requirement as to Sublessee shall control. (c) The obligations of Sublessee and Sublessor under this Paragraph 25 shall survive the expiration or termination of this Sublease and the transfer of title to the Premises. (d) Sublessee's liabilities and obligations under this Paragraph 25, including, without limitation, Sublessee's indemnification obligations, shall include liability for and obligations relating to the acts and omissions of Sublessee, anyone claiming by, through or under the Sublessee, and any and all employees, agents, contractors and subcontractors of Sublessee or any such party. Sublessor's indemnification obligations under this Paragraph 25 shall include liability for and obligations relating to the acts and omissions of Sublessor, anyone claiming by, through or under the Sublessor, and any and all employees, agents, contractors and subcontractors of Sublessor or any such party. 26. HOLDING OVER. If Sublessee remains in possession of the Premises or any part thereof beyond the Expiration Date (or, if Sublessee shall duly exercise any of the options of extension set forth in Paragraph 5 of this Sublease, beyond the expiration of the applicable extension period), Sublessee shall be deemed to be occupying the Premises from month to month, subject to such occupancy being terminated by either party upon at least thirty (30) days' written notice (except that such occupancy shall in any event automatically terminate on September 30, 2000 without the need of any such notice), at a monthly rental equal to One Hundred Eighty-Four Thousand Five Hundred and 00/100 Dollars ($184,500.00), together with Additional Rent, and subject to all of the same terms, provisions, and conditions set forth in this Sublease; it being understood and agreed that Sublessee shall have no right to and shall in no event remain in occupancy of the Premises or any part thereof beyond September 30, 2000 without having first entered into a new lease agreement relative to the Premises with Master Lessor. Sublessee shall indemnify and hold harmless Sublessor from and against any and all liability, loss, cost, damage and expense suffered by Sublessor arising out of or resulting from any failure on the part of Sublessee to yield up the Premises when and as required under this Sublease. 27. QUIET ENJOYMENT. Sublessee, subject to the terms and provisions of this Sublease, on payment of the rent and observing, keeping and performing all of the terms and provisions of this Sublease on its 37 part to be observed, kept and performed, shall lawfully, peaceably and quietly have, hold, occupy and enjoy the Premises during the term hereof without hindrance or ejection by any persons lawfully claiming under Sublessor. To the best of Sublessor's knowledge, there is no pending or overtly threatened litigation or administrative action involving the Premises that would adversely affect Sublessee's ability to lawfully, peaceably and quietly have, hold, occupy and enjoy the Premises as aforesaid. 28. OPTION TO PURCHASE. Sublessor hereby assigns to Sublessee Sublessor's option to purchase the Premises and certain other real property, as set forth in, and subject to and in accordance with the terms and conditions of, Article XXIV of the Master Lease. In the event that Sublessee exercises such option to purchase and acquires record title to the Premises and such other property, then this Sublease shall thereupon cease and determine and be of no further force and effect, without recourse to either of Sublessor or Sublessee as to matters accruing from and after the date on which Sublessee acquires record title to the Premises and such other property. 29. FORCE MAJEURE. In the event that any party hereto shall be delayed, hindered in or prevented from the performance of any act (other than the payment of Base Rent, Additional Rent or the Contributed Amount by Sublessee and the performance of restoration work by the Master Lessor in the event of a casualty or taking as provided in Paragraph 14 of this Sublease) required hereunder by reason of strikes, lock-outs, labor troubles, inability to procure materials, fuel or gas, failure of power, riots, insurrection, the act, failure to act or default of the other party, war, accidents or any other reason beyond such party's control, then performance of such act shall be excused for the period of the delay and the period for the performance of any such act shall be extended for a period equivalent to the period of such delay. 30. SUBLESSOR AND MASTER LESSOR DEFAULT AND LIABILITY. Sublessor and Master Lessor shall in no event be in default in the performance of any of their respective obligations hereunder unless and until Sublessor or Master Lessor, as the case may be, shall have failed to perform such obligations within thirty (30) days or such additional time as is reasonably required to correct any such default after notice by Sublessee to such party properly specifying wherein such party has failed to perform any such obligation. Notwithstanding anything contained herein to the contrary, in the event that any failure by Sublessor or Master Lessor to perform their respective obligations under this Sublease or the Master Lease shall prevent Sublessee from using all or a portion of the Premises for the purposes permitted under this Sublease for any period of five (5) consecutive business days or longer after the date on which Sublessor receives notice of such failure specifying in reasonable detail the particulars thereof, and if there then exists no Event of Default under this Sublease, then a just proportion of the Base Rent, Additional Rent, Contributed Amount, according to the nature and 38 extent of the portion of the Premises rendered untenantable, shall be abated until use and occupancy of substantially all of the Premises shall be restored. In the event that the Sublessee shall be prevented from using all of the Premises for the purposes permitted under this Sublease by reason of any such failure by Sublessor or Master Lessor for a period of thirty (30) consecutive days or longer after the date on which Sublessor receives notice of such failure specifying in reasonable detail the particulars thereof, and if there then exists no Event of Default under this Sublease, then Sublessee shall have the right to terminate this Sublease upon twenty (20) business days' written notice to Sublessor, in which event this Sublease shall terminate with the same effect as if the date set forth in such notice were the expiration date set forth in this Sublease. Notwithstanding anything contained herein to the contrary, Sublessee agrees that Master Lessor shall have no personal liability with respect to any of the provisions of this Sublease at any time, whether before or after Master Lessor succeeds, if at all, to Sublessor's interest hereunder, and Sublessee shall look solely to the estate and property of the Master Lessor in the Premises for the satisfaction of any of Sublessee's remedies, including, without limitation, the collection of any judgment or the enforcement of any other judicial process requiring the payment or expenditure of money by Master Lessor in the event of any default or breach by Master Lessor with respect to any of the terms and provisions of this Sublease to be observed and/or performed by Master Lessor, subject, however, to the prior rights of any holder of any mortgage covering all or part of the Premises, and no other assets of Master Lessor or any principal of Master Lessor shall be subject to levy, execution or other judicial process for the satisfaction of Sublessee's claim and in the event Sublessee obtains a judgment against Master Lessor, the judgment docket shall be so noted. Without in any way limiting the foregoing, Sublessee reserves the right to seek judicial injunctive relief to enforce any obligations of Master Lessor which have not been complied with. IN WITNESS WHEREOF, the parties have executed this Sublease, under seal, as of the date first written above. SUBLESSOR: SUBLESSEE: HEWLETT-PACKARD COMPANY THE TIMBERLAND COMPANY By: By: Its Its Hereunto duly authorized Hereunto duly authorized /4282 39 CONSENT OF MASTER LESSOR Pursuant to Article IX of the Master Lease, the undersigned Master Lessor under the Master Lease hereby consents to the subletting of the Premises in accordance with the terms and conditions of the foregoing Sublease but does not consent to any future subletting or assignment, notwithstanding anything to the contrary contained in Sections 17 and 22 of said Sublease. In connection with its consent to the Sublease, the Master Lessor hereby agrees as follows: 1. The Master Lessor hereby confirms, to the best of its knowledge, that there exists no default under the Master Lease nor any event which with the giving of notice or passage of time or both could constitute a default under the Master Lease and the Master Lessor hereby waives all rights to claim a default (a) under Article XII(f) of the Master Lease relating to any discontinuance of occupancy or abandonment of the Premises accrued or occurring prior to the date hereof or (b) under Article IX of the Master Lease relating to any assignment of the Master Lease in connection with the transfer of all of the outstanding shares of Apollo Computer, Inc. to Sublessor; 2. As between the Master Lessor and the Sublessee, to the extent there are any inconsistencies between the terms and provisions of the Sublease and the terms and provisions of the Master Lease, the terms and provisions of the Sublease shall control; 3. The Master Lessor agrees to be bound by the obligations of the Master Lessor to the Sublessee set forth in the following provisions of the Sublease: (i) Master Lessor's obligation under Paragraph 7 to prosecute tax abatement proceedings once commenced and to notify Sublessee of the discontinuance thereof; (ii) Master Lessor's obligation under Paragraph 8(e) to minimize interference with Sublessee's use of the Premises in connection with the exercise by the Master Lessor of its rights thereunder; (iii) Master Lessor's obligations under Paragraphs 8(f) and 8(g) to be liable to Sublessee for damages caused by its negligence; (iv) Master Lessor's obligation under Paragraph 8(o) to act reasonably in approving or disapproving insurance amounts; (v) Master Lessor's obligation under Paragraph 9 to act reasonably in approving or disapproving maintenance contracts; (vi) Master Lessor's obligations under Paragraph 11 to act reasonably in approving or disapproving Plans and Specifications (except as to structural, exterior and/or roof work), in designating fixtures and leasehold improvements for removal from the Premises at the expiration or earlier termination of the Sublease Term, and in acting to approve or disapprove Plans and Specifications within ten (10) business days after receipt thereof and failing such action, in being bound by the provisions thereof relative to the consequences of such failure; (vii) Master Lessor's obligations under Paragraph 12 to act reasonably in approving or disapproving subsequent alterations and the plans and specifications therefor (except as to structural, exterior and/or roof work), in designating fixtures and leasehold improvements for 40 removal from the Premises at the expiration or earlier termination of the Sublease Term, and in acting to approve or disapprove such plans and specifications within ten (10) business days after receipt thereof and failing such action, to be bound by the provisions thereof relative to the consequences of such failure; (viii) Master Lessor's obligation under Paragraph 17 to permit, without the need for Master Lessor's consent, any assignment of the Sublease or subletting of the Premises expressly therein permitted; and (ix) Master Lessor's obligation under Paragraph 25.11 to act reasonably in approving or disapproving an attorney designated by Sublessee in connection with any matter that is the subject of the indemnity therein provided. The Master Lessor hereby certifies as of the date hereof as follows: A. The Master Lease represents the entire agreement between the Master Lessor and the Sublessor, is in full force and effect and has not been assigned, modified, supplemented or amended in any way (except that Master Lessor has assigned the Master Lease to its mortgagee); a true, correct and complete copy of the Master Lease, including any and all amendments thereto (which documents consist of a lease dated June 19, 1984, as amended by a certain Amendment A, dated December 21, 1984, as further amended by a certain Stratham Lease Amendment, dated as of May 21, 1986, as affected by a certain letter, dated September 26, 1990, from Sublessor to the Master Lessor and as further amended by a certain Amendment to Lease of even date herewith), is attached as Exhibit "B" to the Sublease of which this consent is a part; and B. Rental payments under the Master Lease are being made on a current basis and have been paid through the month of April, 1994. The undersigned hereby agrees to enter into a subordination, non-disturbance and attornment agreement with Sublessee, in the form attached to the Sublease of which this consent is a part as Exhibit "SNDA", concurrently with the full execution and delivery of said Sublease. As between Master Lessor and Sublessor, nothing herein or in said Sublease shall relieve Sublessor of its obligations to Master Lessor under said Master Lease or modify any of the terms of said Master Lease. Executed under seal this day of , 1994. FIRST ALTEX REALTY TRUST By: Hereunto duly authorized, as Trustee and not individually (Signatures continued on next page) 41 By: Hereunto duly authorized, as Trustee and not individually By: Hereunto duly authorized, as Trustee and not individually 42 EXHIBIT NOT FILED EXHIBIT "A" PLAN OF PREMISES 43 EXHIBIT NOT FILED EXHIBIT "B" MASTER LEASE 44 EXHIBIT "C" ESTIMATED OPERATING EXPENSES AND OTHER COSTS 200 DOMAIN DRIVE STRATHAM, NH Estimated 1994 Operating Expenses: Real Property Taxes $0.796/r.s.f. Insurance $0.147/r.s.f. TOTAL $0.943/r.s.f. 45 EXHIBIT "SNDA" SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT THIS AGREEMENT is made as of the day of March, 1994 by and between the TRUSTEES of FIRST ALTEX REALTY TRUST, u/d/t dated as of May 15, 1984 and recorded with the Rockingham County Registry of Deeds in Book 2499, Page 1348, as amended (the "Master Lessor"), having a business address in care of Altid Properties, 17 Monsignor O'Brien Highway, Cambridge, Massachusetts 02141-1817, and THE TIMBERLAND COMPANY, a Delaware corporation ("Sublessee"), having a business address of 11 Merrill Industrial Drive, P.O. Box 5050, Hampton, New Hampshire 03842-5050. W I T N E S S E T H: WHEREAS, Master Lessor holds the lessor's interest in and to a certain lease, dated June 19, 1984, the lessee's interest in which is held by Hewlett-Packard Company (the "Sublessor"), relating to certain premises located at 200 Domain Drive in Stratham, Rockingham County, New Hampshire, as more particularly therein described (the "Premises"), as amended by a certain Amendment A, dated December 21, 1984, as further amended by a certain Stratham Lease Amendment, dated as of May 21, 1986, as affected by a certain letter, dated September 26, 1990, from Sublessor to the Master Lessor and as further amended by a certain Amendment to Lease dated March , 1994 (said lease, as amended and affected by the above-listed documents, is hereinafter referred to as the "Master Lease"); WHEREAS, Sublessor holds the sublessor's interest in and to a certain sublease, dated March , 1994, the sublessee's interest in which is held by Sublessee, relating to the Master Lease and the Premises; and WHEREAS, Master Lessor has been requested by Sublessor and Sublessee to enter into this agreement with Sublessee; NOW, THEREFORE, in consideration of the Premises and the mutual covenants herein contained, the parties hereto mutually covenant and agree as follows: 1. Subject to the terms and provisions of this agreement, the Sublease and all of the right, title and interest of Sublessee thereunder in and to the Premises are and shall be subject and subordinate to the Master Lease. 2. In the event that Master Lessor comes into possession of the Premises as a result of the termination or other enforcement of lessor's rights under the Master Lease as the result of a default by the Sublessor thereunder, as long as Sublessee is not then in default under the Sublease beyond any applicable notice 46 and cure period provided to Sublessee under the Sublease, Master Lessor will recognize Sublessee and will not disturb Sublessee in its possession of the Premises for the full term of years in the Sublease provided subject to the terms, covenants and conditions of the Sublease for any reason other than one which would entitle Sublessor to terminate the Sublease under its terms or would entitle Sublessor to dispossess Sublessee from the Premises. 3. Sublessee agrees with Master Lessor that if the interest of Sublessor in the Premises shall be held by Master Lessor by reason of termination or other proceedings brought by Master Lessor, Sublessee shall be bound to Master Lessor and Master Lessor shall be bound to Sublessee under all of the terms, covenants and conditions of the Sublease for the then balance of the term thereof and any extensions or renewals thereof which may be effected in accordance with any option therefor in the Sublease, with the same force and effect as if Master Lessor were the original holder of the sublessor's interest in and to the Sublease (except that Master Lessor shall in no event be liable for or bound by the obligations of Sublessor under Paragraph 21 of the Sublease), and the Sublease shall be a direct lease between the Master Lessor and the Sublessee, and Sublessee shall attorn to Master Lessor as its lessor, said attornment to be effective and self-operative without the execution of any further instruments on the part of Sublessor and Master Lessor immediately upon Master Lessor's succeeding to the interest of Sublessor in the Premises. 4. Sublessee agrees with Master Lessor that if Master Lessor shall succeed to the interest of Sublessor under the Sublease, Master Lessor shall not be (a) liable for any action or omission of Sublessor under the Sublease prior to such succession, or (b) subject to any offsets or defenses which Sublessee might have against Sublessor, or (c) bound by any rent or additional rent which Sublessee might have paid for more than the then current month to Sublessor, or (d) bound by any amendment or modification of the Sublease made without Master Lessor's and its mortgagee's written consent, or (e) personally liable with respect to any of the provisions of the Sublease and Sublessee shall look solely to the estate and property of the Master Lessor in the Premises for the satisfaction of any of Sublessee's remedies, including, without limitation, the collection of any judgment or the enforcement of any other judicial process requiring the payment or expenditure of money by Master Lessor in the event of any default or breach by Master Lessor with respect to any of the terms and provisions of the Sublease to be observed and/or performed by Master Lessor, subject, however, to the prior rights of any holder of any mortgage covering all or part of the Premises, and no other assets of Master Lessor or any principal of Master Lessor shall be subject to levy, execution or other judicial process for the satisfaction of Sublessee's claim and in the event Sublessee obtains a judgment against Master Lessor, the judgment docket shall be so noted. 47 5. This Agreement shall bind and inure to the benefit of Master Lessor and Sublessee and their respective successors and assigns. 6. This Agreement shall be governed by and construed in accordance with the laws of the State of New Hampshire. Executed under seal as of the date first above written. WITNESS: FIRST ALTEX REALTY TRUST By: Hereunto duly authorized, as Trustee and not individually [SIGN IN BLACK INK] By: Hereunto duly authorized, as Trustee and not individually [SIGN IN BLACK INK] By: Hereunto duly authorized, as Trustee and not individually [SIGN IN BLACK INK] ATTEST: THE TIMBERLAND COMPANY By: Secretary Its Hereunto duly authorized [SIGN IN BLACK INK] 48 STATE OF ) ) ss. COUNTY OF ) On this day of , 1994, before me personally appeared , who, being by me duly sworn, did say that he/she is of The Timberland Company, a Delaware corporation, that said instrument was signed and sealed on behalf of said corporation by authority of its Board of Directors; and said acknowledged said instrument to be the free act and deed of said corporation. Notary Public My Commission Expires: [COMPLETE AND SIGN IN BLACK INK] STATE OF ) ) ss. COUNTY OF ) On this day of , 1994, before me personally appeared , Trustee of First Altex Realty Trust as aforesaid, and acknowledged the foregoing instrument to be his/her free act and deed, as said Trustee. Notary Public My Commission Expires: [COMPLETE AND SIGN IN BLACK INK] STATE OF ) ) ss. COUNTY OF ) On this day of , 1994, before me personally appeared , Trustee of First Altex Realty Trust as aforesaid, and acknowledged the foregoing instrument to be his/her free act and deed, as said Trustee. Notary Public My Commission Expires: [COMPLETE AND SIGN IN BLACK INK] 49 STATE OF ) ) ss. COUNTY OF ) On this day of , 1994, before me personally appeared , Trustee of First Altex Realty Trust as aforesaid, and acknowledged the foregoing instrument to be his/her free act and deed, as said Trustee. Notary Public My Commission Expires: [COMPLETE AND SIGN IN BLACK INK] EX-10.2 3 NOTE AGREEMENTS 1 EXHIBIT 10.2 ================================================================================ THE TIMBERLAND COMPANY NOTE AGREEMENT Dated as of April 1, 1994 Re: $65,000,000 7.16% Senior Notes due April 15, 2000 ================================================================================ 2 TABLE OF CONTENTS (Not a part of the Agreement)
SECTION HEADING PAGE SECTION 1. DESCRIPTION OF NOTES AND COMMITMENT............................ 1 Section 1.1. Description of Notes........................................ 1 Section 1.2. Commitment, Closing Date.................................... 1 Section 1.3. Other Agreements............................................ 2 SECTION 2. PREPAYMENT OF NOTES............................................ 2 Section 2.1. No Required Prepayments..................................... 2 Section 2.2. Optional Prepayments With Premium........................... 2 Section 2.3. Prepayment on Failure of Holders to Give Certain Consents... 2 Section 2.4. Notice of Prepayments....................................... 3 Section 2.5. Allocation of Prepayments................................... 3 Section 2.6. Direct Payment.............................................. 3 SECTION 3. REPRESENTATIONS................................................ 4 Section 3.1. Representations of the Company.............................. 4 Section 3.2. Representations of the Purchaser............................ 4 SECTION 4. CLOSING CONDITIONS............................................. 5 Section 4.1. Conditions.................................................. 5 Section 4.2. Waiver of Conditions........................................ 5 SECTION 5. COMPANY COVENANTS.............................................. 6 Section 5.1. Corporate Existence, Etc.................................... 6 Section 5.2. Insurance................................................... 6 Section 5.3. Taxes, Claims for Labor and Materials, Compliance with Laws. 6 Section 5.4. Maintenance, Etc............................................ 7 Section 5.5. Nature of Business.......................................... 7 Section 5.6. Current Ratio............................................... 7 Section 5.7. Consolidated Tangible Net Worth............................. 7 Section 5.8. Limitations on Indebtedness................................. 7 Section 5.9. Fixed Charges Coverage...................................... 8 Section 5.10. Limitation on Liens......................................... 8 Section 5.11. Restricted Payments......................................... 10 Section 5.12. Sale and Leasebacks......................................... 11 Section 5.13. Mergers, Consolidations and Sales of Assets................. 11 Section 5.14. Guaranties.................................................. 14
-i- 3 Section 5.15. Repurchase of Notes......................................... 14 Section 5.16. Transactions with Affiliates................................ 14 Section 5.17. Investments................................................. 15 Section 5.18. Termination of Pension Plans................................ 16 Section 5.19. Reports and Rights of Inspection............................ 16 SECTION 6. EVENTS OF DEFAULT AND REMEDIES THEREFOR....................... 20 Section 6.1. Events of Default........................................... 20 Section 6.2. Notice to Holders........................................... 21 Section 6.3. Acceleration of Maturities.................................. 21 Section 6.4. Rescission of Acceleration.................................. 22 SECTION 7. AMENDMENTS, WAIVERS AND CONSENTS.............................. 22 Section 7.1. Consent Required............................................ 22 Section 7.2. Effect of Amendment or Waiver............................... 23 SECTION 8. INTERPRETATION OF AGREEMENT................................... 23 Section 8.1. Definitions................................................. 23 Section 8.2. Accounting Principles....................................... 32 Section 8.3. Directly or Indirectly...................................... 32 SECTION 9. MISCELLANEOUS................................................. 32 Section 9.1. Registered Notes............................................ 32 Section 9.2. Exchange of Notes........................................... 32 Section 9.3. Loss, Theft, Etc. of Notes.................................. 33 Section 9.4. Expenses, Stamp Tax Indemnity............................... 33 Section 9.5. Powers and Rights Not Waived; Remedies Cumulative........... 33 Section 9.6. Notices..................................................... 33 Section 9.7. Successors and Assigns...................................... 34 Section 9.8. Survival of Covenants and Representations................... 34 Section 9.9. Severability................................................ 34 Section 9.10. Governing Law............................................... 34 Section 9.11. Captions.................................................... 34 Signatures..................................................................... 35
-ii- 4 ATTACHMENTS TO NOTE AGREEMENT: Schedule I - Name and Address of Purchasers Exhibit A - Form of 7.16% Senior Note due April 15, 2000 Exhibit B - Closing Certificate of the Company Exhibit C - Description of Special Counsel's Closing Opinion Exhibit D - Description of Closing Opinion of Counsel to the Company -iii- 5 THE TIMBERLAND COMPANY 11 MERRILL INDUSTRIAL DRIVE HAMPTON, NEW HAMPSHIRE 03842-5050 NOTE AGREEMENT Re: $65,000,000 7.16% Senior Notes Due April 15, 2000 Dated as of April 1, 1994 To the Purchaser named In Schedule I hereto which is a signatory of this Agreement Ladies and Gentlemen: The undersigned, The Timberland Company, a Delaware corporation (the "Company"), agrees with you as follows: SECTION 1. DESCRIPTION OF NOTES AND COMMITMENT. Section 1.1. Description of Notes. The Company will authorize the issue and sale of $65,000,000 aggregate principal amount of its 7.16% Senior Notes (the "Notes") to be dated the date of issue, to bear interest from such date at the rate of 7.16% per annum, payable semiannually in arrears on the fifteenth day of each April and October in each year (commencing October 15, 1994) and at maturity and to bear interest on overdue principal (including any overdue optional prepayment of principal) and premium, if any, and (to the extent legally enforceable) on any overdue installment of interest at the rate of 9.16% per annum after maturity, whether by acceleration or otherwise, until paid, to be expressed to mature on April 15, 2000, and to be substantially in the form attached hereto as Exhibit A. Interest on the Notes shall be computed on the basis of a 360-day year of twelve 30-day months. The term "Notes" as used herein shall include each Note delivered pursuant to this Agreement and the separate agreements with the other purchasers named in Schedule I. You and the other purchasers named in Schedule I are hereinafter sometimes referred to as the "Purchasers". Section 1.2. Commitment, Closing Date. Subject to the terms and conditions hereof and on the basis of the representations and warranties hereinafter set forth, the Company agrees to issue and sell to you, and you agree to purchase from the Company, the aggregate principal amount of the Notes set forth opposite your name in Schedule I hereto, at a price of 100% of the principal amount thereof on the Closing Date hereinafter mentioned. Delivery of the Notes will be made at the offices of Chapman and Cutler, 111 West Monroe Street, Chicago, Illinois 60603, against payment therefor in Federal Reserve or 6 The Timberland Company Note Agreement other funds current and immediately available at the principal office of The Northern Trust Company, Chicago, Illinois in the amount of the purchase price at 10:00 A.M., Chicago, Illinois time, on April 15, 1994 or such earlier date as the Company shall specify by not less than five business days' prior written notice to you (the "Closing Date"). The Notes delivered to you on the Closing Date will be delivered to you in the form of registered Notes for the full amount of your purchase (unless different denominations are specified by you), registered in your name or in the name of such nominee as you may specify and in substantially the form attached hereto as Exhibit A, all as you may specify at any time prior to the date fixed for delivery. Section 1.3. Other Agreements. Simultaneously with the execution and delivery of this Agreement, the Company is entering into similar agreements with the other Purchasers under which such other Purchasers agree to purchase from the Company the principal amount of Notes set opposite such Purchasers' names in Schedule I, and your obligation and the obligations of the Company hereunder are subject to the execution and delivery of the similar agreements by the other Purchasers. This Agreement and said similar agreements with the other Purchasers are herein collectively referred to as the "Agreements". The obligations of each Purchaser shall be several and not joint and no Purchaser shall be liable or responsible for the acts of any other Purchaser. SECTION 2. PREPAYMENT OF NOTES. Section 2.1. No Required Prepayments. No mandatory prepayments of principal of the Notes are scheduled to be made prior to their expressed maturity date, and the Notes are not subject to prepayment or redemption at the option of the Company prior to their expressed maturity date except on the terms and conditions and in the amounts and with the premium, if any, set forth below in this [Section]2. Section 2.2. Optional Prepayments With Premium. Upon compliance with [Section]2.4, the Company shall have the privilege at any time and from time to time of prepaying the outstanding Notes, either in whole or in part (but if in part then in a minimum principal amount of $100,000) by payment of the principal amount of the Notes, or portion thereof to be prepaid, and accrued interest thereon to the date of such prepayment, together with a premium equal to the Make-Whole Amount with respect to such principal amount then to be prepaid. Section 2.3. Prepayment on Failure of Holders to Give Certain Consents. In the event that (i) the Company shall have determined in good faith to enter into a transaction which will result in a violation of any the provisions of [Section] 5.13, (ii) the Company shall have requested the holders of the Notes in writing (accompanied by a reasonably detailed description of the proposed transaction) to consent to such transaction, and (iii) the holders of more than 49% of the aggregate unpaid principal amount of the Notes shall have failed to consent to such transaction within 30 days from the date of such request, then and in such event the Company may upon the consummation of such transaction, within 90 days after the expiration of such 30-day period, prepay all (but not less than all) of the Notes held by such holders who have failed to consent to such transaction. Any such prepayment shall be made -2- 7 The Timberland Company Note Agreement by payment of the principal amount of the Notes being prepaid, and accrued interest thereon to the date of such prepayment, together with a premium equal to the Make-Whole Amount with respect to such principal amount then to be prepaid. Section 2.4. Notice of Prepayments. The Company will give notice of any prepayment of the Notes to each holder thereof not less than 30 days nor more than 60 days before the date fixed for such optional prepayment specifying (i) such date, (ii) the section of this Agreement under which the prepayment is to be made, (iii) the principal amount of the holder's Notes to be prepaid on such date, (iv) that a premium may be payable, (v) the date when such premium will be calculated, and (vi) the accrued interest applicable to the prepayment. Such notice of prepayment shall also certify all facts which are conditions precedent to any such prepayment. Notice of prepayment having been so given, the aggregate principal amount of the Notes specified in such notice, together with the premium, if any, and accrued interest thereon shall become due and payable on the date of consummation of the related transaction (in the case of any prepayment pursuant to [Section] 2.3) or on the date specified in the notice given pursuant to the first sentence of this [Section] 2.4 (in the case of any other prepayment). Not later than the prepayment date the Company shall provide each holder of a Note written notice of the amount of the premium payable in connection with such prepayment, whether or not any premium is payable, together with a reasonably detailed computation thereof. Section 2.5. Allocation of Prepayments. All partial prepayments, other than prepayments pursuant to [Section] 2.3, shall be applied on all outstanding Notes ratably in accordance with the unpaid principal amounts thereof. Section 2.6. Direct Payment. Notwithstanding anything to the contrary in this Agreement or the Notes, in the case of any Note owned by the Purchaser or its nominee or owned by any other institutional holder who has given written notice to the Company requesting that the provisions of this Section shall apply, the Company will promptly and punctually pay when due the principal thereof and premium, if any, and interest thereon, without any presentment thereof directly to the Purchaser or such subsequent holder at the address of the Purchaser set forth in Schedule I or at such other address as the Purchaser or such subsequent holder may from time to time designate in writing to the Company or, if a bank account is designated for the Purchaser on Schedule I hereto or in any written notice to the Company from the Purchaser or any such subsequent holder, the Company will make such payments in immediately available funds to such bank account, marked for attention as indicated, or in such other manner or to such other account of the Purchaser or such holder in any bank in the United States as the Purchaser or any such subsequent holder may from time to time direct in writing. No such notice shall be effective with respect to any payment if such notice is given to the Company less than 14 days before the date of such payment. The holder of any Notes to which this Section applies agrees that in the event it shall sell or transfer any such Notes (i) it will, prior to the delivery of such Notes (unless it has already done so), make a notation thereon of all principal, if any, prepaid on such Notes and will also note thereon the date to which interest has been paid on such Notes, and (ii) it will promptly notify the Company of the name and address of the transferee of any Notes so transferred. With respect to Notes to which this Section applies, the Company shall be 8 The Timberland Company Note Agreement entitled to presume conclusively that the original or such subsequent institutional holder as shall have requested the provisions hereof to apply to its Notes remains the holder of such Notes until (y) the Company shall have received notice from the transferor of the transfer of such Notes, and of the name and address of the transferee, or (z) such Notes shall have been presented to the Company as evidence of the transfer. SECTION 3. REPRESENTATIONS. Section 3.1. Representations of the Company. The Company represents and warrants that all representations set forth in the form of certificate attached hereto as Exhibit B are true and correct as of the date hereof and are incorporated herein by reference with the same force and effect as though herein set forth in full. Section 3.2. Representations of the Purchaser. (a) Purchase for Investment. You represent, and in entering into this Agreement the Company understands, that you are acquiring the Notes for the purpose of investment and not with a view to the resale or distribution thereof, and that you have no present intention of selling, negotiating or otherwise disposing of the Notes; provided that the disposition of your property shall at all times be and remain within your control. (b) You represent and warrant that either: (i) you are acquiring the Notes for your own account and with your general corporate assets and not with the assets of any separate account in which any employee benefit plan has any interest; or (ii) (A) you are an insurance company, and (1) a portion of the funds to be used to make your investment hereunder constitutes plan assets allocated to a separate account maintained by you, and (2) the names of each employee benefit plan whose assets in such account exceed ten percent of the total assets or are expected to exceed ten percent of the total assets of such account as of the date of such investment (for the purposes of this [Section] 3.2(b)(ii) (A)(2), all employee benefit plans maintained by the same employer or employee organization are deemed to be a single plan) have been disclosed in writing to the Company; and (B) the remaining portion of the funds used to purchase the Notes does not constitute assets allocated to any separate account maintained by you such that the application of such funds constitutes a "prohibited transaction" under Section 406 of the Employee Retirement Income Security Act of 1974, as amended. -4- 9 The Timberland Company Note Agreement (c) You acknowledge that the Notes have not been registered under the Securities Act of 1933, as amended, and you understand that the Notes must be held indefinitely unless they are subsequently registered under said Securities Act or an exemption from such registration is available. You have been advised that the Company does not contemplate registering, and is not legally required to register, the Notes under said Securities Act. SECTION 4. CLOSING CONDITIONS. Section 4.1. Conditions. Your obligation to purchase the Notes on the Closing Date shall be subject to the performance by the Company of its agreements hereunder which by the terms hereof are to be performed at or prior to the time of delivery of the Notes and to the following further conditions precedent: (a) Closing Certificate. You shall have received a certificate dated the Closing Date, signed by the President or a Vice President of the Company substantially in the form attached hereto as Exhibit B, the truth and accuracy of which shall be a condition to your obligation to purchase the Notes proposed to be sold to you. (b) Legal Opinions. You shall have received from Chapman and Cutler, who are acting as your special counsel in this transaction, and from Ropes & Gray, counsel for the Company, their respective opinions dated the Closing Date, in form and substance satisfactory to you, and covering the matters set forth in Exhibits C and D, respectively, hereto. (c) Related Transactions. The Company shall have consummated the sale of the entire principal amount of the Notes scheduled to be sold on the Closing Date pursuant to this Agreement and the other agreements referred to in [Section] 1.3. (d) Satisfactory Proceedings. All proceedings taken in connection with the transactions contemplated by this Agreement, and all documents necessary to the consummation thereof, shall be satisfactory in form and substance to you and your special counsel, and you shall have received a copy (executed or certified as may be appropriate) of all legal documents or proceedings taken in connection with the consummation of said transactions. Section 4.2. Waiver of Conditions. If on the Closing Date the Company fails to tender to you the Notes to be issued to you on such date or if the conditions specified in [Section] 4.1 have not been fulfilled, you may thereupon elect to be relieved of all further obligations under this Agreement. Without limiting the foregoing, if the conditions specified in [Section] 4.1 have not been fulfilled, you may waive compliance by the Company with any such condition to such extent as you may in your sole discretion determine. Nothing in this [Section] 4.2 shall operate to relieve the Company of any of its obligations hereunder or to waive any of your rights against the Company. -5- 10 The Timberland Company Note Agreement SECTION 5. COMPANY COVENANTS. From and after the Closing Date and continuing so long as any amount remains unpaid on any Note: Section 5.1. Corporate Existence, Etc. The Company will preserve and keep in force and effect, and will cause each Restricted Subsidiary to preserve and keep in force and effect, its corporate existence and all licenses and permits reasonably necessary to the proper conduct of its business the absence of which might materially and adversely affect the properties, business or condition of the Company or of the Company and its Restricted Subsidiaries taken as a whole, provided that the foregoing shall not prevent any transaction permitted by [Section]5.13. Section 5.2. Insurance. The Company will maintain, and will cause each Restricted Subsidiary to maintain, insurance coverage by financially sound and reputable insurers accorded a rating by A.M. Best Company, Inc. of A:XII or better at the time of the issuance of any such policy and in such forms and amounts and against such risks as are customary for corporations of established reputation engaged in the same or a similar business and owning and operating similar properties; provided, however, that if, during the term of any such insurance policy, the rating accorded the insurer shall be less than A:XII, the Company will, on the date of renewal of any such policy (or, if such change in rating shall occur within 90 days prior to such renewal date, within 90 days of the date of such change in rating), obtain such insurance policy from an insurer so rated. Section 5.3. Taxes, Claims for Labor and Materials, Compliance with Laws. The Company will promptly pay and discharge, and will cause each Restricted Subsidiary promptly to pay and discharge, all lawful taxes, assessments and governmental charges or levies imposed upon the Company or such Restricted Subsidiary, respectively, or upon or in respect of all or any part of the property or business of the Company or such Restricted Subsidiary, all trade accounts payable in accordance with usual and customary business terms, and all claims for work, labor or materials, which if unpaid might become a Lien upon any property of the Company or such Restricted Subsidiary not permitted by [Section] 5.10; provided the Company or such Restricted Subsidiary shall not be required to pay any such tax, assessment, charge, levy, account payable or claim if (i) the validity, applicability or amount thereof is being contested in good faith by appropriate actions or proceedings which will prevent the forfeiture or sale of any property of the Company or such Restricted Subsidiary or any material interference with the use thereof by the Company or such Restricted Subsidiary if such forfeiture, sale or interference might have a material adverse effect on the properties, business or condition of the Company or of the Company and its Restricted Subsidiaries taken as a whole, and (ii) the Company or such Restricted Subsidiary shall set aside on its books, reserves deemed by it to be adequate with respect thereto. The Company will promptly comply and will cause each Restricted Subsidiary to comply with all laws, ordinances or governmental rules and regulations to which it is subject, including without limitation, the Occupational Safety and Health Act of 1970, the Employee Retirement Income Security Act of 1974 and all laws, ordinances, governmental rules and regulations relating to environmental protection in all applicable jurisdictions, the violation -6- 11 The Timberland Company Note Agreement of which would materially and adversely affect the properties, business, prospects, profits or condition of the Company and its Restricted Subsidiaries or would result in any Lien upon any material property of the Company or any Restricted Subsidiary. Section 5.4. Maintenance, Etc. The Company will maintain, preserve and keep, and will cause each Restricted Subsidiary to maintain, preserve and keep, its properties which are used or useful in the conduct of its business (whether owned in fee or a leasehold interest) in good repair and working order and from time to time will make all necessary and reasonable repairs, replacements, renewals and additions so that at all times the efficiency thereof shall be maintained, unless the failure to do so would not have a material adverse effect on the properties, business or condition of the Company or of the Company and its Restricted Subsidiaries taken as a whole. Section 5.5. Nature of Business. Neither the Company nor any Restricted Subsidiary will engage in any business if, as a result, the general nature of the business, taken on a consolidated basis, which would then be engaged in by the Company and its Restricted Subsidiaries would be substantially changed from the general nature of the business engaged in by the Company and its Restricted Subsidiaries on the date of this Agreement. Section 5.6. Current Ratio. The Company will at all times keep and maintain Consolidated Current Assets at an amount not less than 125% of Consolidated Current Liabilities. Section 5.7. Consolidated Tangible Net Worth. The Company will at all times keep and maintain Consolidated Tangible Net Worth at an amount not less than (i) for the fiscal quarter of the Company ending June 30, 1994, the sum of $56,759,000 plus 25% of Consolidated Net Income for the fiscal quarter of the Company ended March 31, 1994 (but without deduction in the case of a deficit in Consolidated Net Income) and (ii) for each fiscal quarter thereafter, the sum of (x) the amount required to be maintained during the immediately preceding fiscal quarter of the Company, and (y) an amount equal to 25% of Consolidated Net Income for such preceding fiscal quarter (but without deduction in the case of a deficit in Consolidated Net Income). Section 5.8. Limitations on Indebtedness. (a) The Company will not and will not permit any Restricted Subsidiary to create, assume or incur or in any manner be or become liable in respect of any Current Debt or Funded Debt, except: (1) the Notes; (2) Current Debt and Funded Debt of the Company and its Restricted Subsidiaries outstanding as of the date of this Agreement and reflected in Annex B to Exhibit B attached hereto (including any amendment, modification, or other change to the Current Debt and Funded Debt described in such Annex B and which does not increase the principal amount thereof); -7- 12 The Timberland Company Note Agreement (3) Current Debt or Funded Debt of the Company, provided that at the time of incurrence thereof and after giving effect thereto and to the application of the proceeds thereof: (i) Total Debt will not exceed 175% of Total Equity, and (ii) Net Income Available for Interest Charges for the four immediately preceding fiscal quarters shall have been at least 200% of Pro Forma Interest Charges for such period; (4) Current Debt or Funded Debt of a Restricted Subsidiary to the Company or to aWholly-owned Restricted Subsidiary; and (5) Current Debt or Funded Debt of a Restricted Subsidiary, other than that permitted by [Section] 5.8(a)(4), provided that at the time of incurrence thereof and after giving effect thereto and to the application of the proceeds thereof, (i) Specified Debt does not exceed 20% of Consolidated Tangible Net Worth, (ii) Total Debt does not exceed 175% of Total Equity and (iii) Net Income Available for Interest Charges for the four immediately preceding fiscal quarters shall have been at least 200% of Pro Forma Interest Charges for such period. (b) Any corporation which becomes a Restricted Subsidiary after the date hereof shall for all purposes of this [Section] 5.8 be deemed to have created, assumed or incurred at the time it becomes a Restricted Subsidiary all Funded Debt and Current Debt of such corporation existing immediately after it becomes a Restricted Subsidiary. Section 5.9. Fixed Charges Coverage. The Company will keep and maintain Net Income Available for Fixed Charges for each period of four consecutive fiscal quarters at an amount which is not less than 150% of Fixed Charges for such period. Section 5.10. Limitation on Liens. The Company will not, and will not permit any Restricted Subsidiary to, create or incur, or suffer to be incurred or to exist, any Lien on its or their property or assets, whether now owned or hereafter acquired, or upon any income or profits therefrom, to secure any Indebtedness or transfer any property for the purpose of subjecting the same to the payment of obligations in priority to the payment of its or their general creditors, or acquire or agree to acquire, or permit any Restricted Subsidiary to acquire, any property or assets upon conditional sales agreements or other title retention devices, except: (a) Liens for property taxes and assessments or governmental charges or Liens securing claims or demands of mechanics and material men, provided that such claims or demands are being contested in a manner permitted by [Section] 5.3; (b) Liens of or resulting from any judgment or award, the time for the appeal or petition for rehearing of which shall not have expired, or in respect of which the Company or a Restricted Subsidiary shall at any time in good faith be -8- 13 The Timberland Company Note Agreement prosecuting an appeal or proceeding for a review and in respect of which a stay of execution pending such appeal or proceeding for review shall have been secured; (c) Liens incidental to the conduct of business or the ownership of properties and assets (including warehousemen's and attorneys' Liens and statutory landlords' Liens) and Liens to secure the performance of bids, tenders or trade contracts, or to secure statutory obligations, surety or appeal bonds or other Liens of like general nature incurred in the ordinary course of business and not in connection with the borrowing of money, provided in each case, the obligation secured is not overdue or, if overdue, is being contested in good faith by appropriate actions or proceedings; (d) Liens securing Indebtedness of a Restricted Subsidiary to the Company or to another Restricted Subsidiary; (e) Liens on property of a Restricted Subsidiary which secure Specified Debt of such Restricted Subsidiary, provided that all such Specified Debt shall have been incurred within the applicable limitations provided in [Section] 5.8; (f) Liens (including Capitalized Leases) (i) existing as of the date of this Agreement and reflected in Annex B to Exhibit B attached hereto, securing Indebtedness of the Company or any Restricted Subsidiary outstanding on such date and (ii) securing refundings, refinancings, restructurings or replacements of Indebtedness secured by Liens (including Capitalized Leases) permitted by clause (i) of this [Section] 5.10(f), provided that each such refunding, refinancing, restructuring and replacement shall not exceed the total principal amount of Indebtedness being refunded, refinanced, restructured or replaced and such Indebtedness may not be secured by any additional property of the Company and its Subsidiaries; (g) Liens incurred after the date hereof (1) given to secure the payment of the purchase price incurred in connection with the acquisition of fixed assets useful and intended to be used in carrying on the business of the Company or a Restricted Subsidiary, including Liens existing on such fixed assets at the time of acquisition thereof or at the time of acquisition by the Company or a Restricted Subsidiary of any business entity then owning such fixed assets, whether or not such existing Liens were given to secure the payment of the purchase price of the fixed assets to which they attach so long as they were not incurred, extended or renewed in contemplation of such acquisition, provided that (i) the Lien shall attach solely to the property acquired or purchased, (ii) at the time of acquisition of such fixed assets, the aggregate amount remaining unpaid on all Indebtedness secured by Liens on such fixed assets whether or not assumed by the Company or a Restricted Subsidiary shall not exceed an amount equal to 100% of the lesser of the total purchase price or fair market value at the time of acquisition of such fixed assets (as determined in good faith by the Board of Directors of the Company), and (iii) all such Indebtedness shall have been incurred within the applicable limitations provided in [Section] 5.8 and (2) given to secure refundings, refinancings, restructurings or replacements of Indebtedness secured by Liens permitted by clause (1) of this [Section] 5.10(g), provided that each such refunding, -9- 14 The Timberland Company Note Agreement refinancing, restructuring and replacement shall not exceed the total principal amount of Indebtedness being refunded, refinanced, restructured or replaced and such Indebtedness may not be secured by any additional property of the Company and its Subsidiaries; (h) Liens on documents and the underlying goods securing obligations in respect of documentary letters of credit and bankers' acceptances; (i) Liens that may arise from the sale or transfer of receivables pursuant to a Securitized Asset Transaction (as defined in [Section] 5.13(d)(3)); (j) provided that no Default or Event of Default exists at the time of creation thereof, other Liens on fixed assets (in addition to those permitted by the foregoing provisions of this [Section] 5.10) if, after giving effect thereto (and to the application of the proceeds thereof), the aggregate amount of Specified Debt would not exceed 20% of Consolidated Tangible Net Worth; and (k) other Liens securing Funded Debt or Current Debt (in addition to those permitted by the foregoing provisions of this [Section] 5.10), provided that the Notes shall be equally and ratably secured pursuant to agreements or instruments in form and substance satisfactory to the Noteholders as evidenced by their prior written consent thereto in accordance with the provisions of [Section] 7.1. Section 5.11. Restricted Payments. The Company will not, except as hereinafter provided: (a) Declare any dividends, either in cash or property, on any shares of its capital stock of any class (except dividends or other distributions payable solely in shares of capital stock of the Company); or (b) Directly or indirectly, or through any Subsidiary, purchase, redeem or retire any shares of its capital stock of any class or any warrants, rights or options to purchase or acquire any shares of its capital stock, other than purchases, redemptions or retirements of its capital stock in connection with any employee benefit plans to the extent that the aggregate amount of such purchases, redemptions and retirements during the fiscal year which includes the date of the purchase, redemption or retirement in question does not exceed the sum of (1) $100,000 plus (2) the proceeds from sales of shares of the Company's capital stock in connection with employee benefit plans during such fiscal year; or (c) Make any other payment or distribution, either directly or indirectly or through any Subsidiary, in respect of its capital stock; or (d) make, or permit any Restricted Subsidiary to make, any Restricted Investment; -10- 15 (such declarations or payments of dividends, purchases, redemptions or retirements of capital stock and warrants, rights or options, and all such other distributions and Restricted Investments being herein collectively called "Restricted Payments"), if after giving effect thereto the aggregate amount of Restricted Payments made during the period from and after December 31, 1988 to and including the date of the making of the Restricted Payment in question, would exceed the sum of (i) $33,879,500 plus (ii) 50% of Consolidated Net Income for the period from and after December 31, 1993, computed on a cumulative basis for said entire period (or if such Consolidated Net Income is a deficit figure, then minus 100% of such deficit), plus (iii) the aggregate net cash proceeds to the Company during such period from the sale of shares of its capital stock or warrants, rights or option to purchase or acquire any shares of its capital stock (other than any such sale in connection with employee benefit plans), plus (iv) the aggregate amount of net proceeds received by the Company and its Restricted Subsidiaries in connection with any sale or disposition of Restricted Investments made during such period provided that for the purposes of this [Section]5.11 the amount of proceeds from the sale or disposition of any Restricted Investment may not exceed the original amount of such Restricted Investment. The Company will not declare any dividend which constitutes a Restricted Payment payable more than 60 days after the date of declaration thereof. For the purposes of this [Section] 5.11 the amount of any Restricted Payment declared, paid or distributed in property of the Company shall be deemed to be the greater of the book value or fair market value (as determined in good faith by the Board of Directors of the Company) of such property at the time of the making of the Restricted Payment in question. Section 5.12. Sale and Leasebacks. The Company will not, and will not permit any Restricted Subsidiary to, enter into any arrangement whereby the Company or any Restricted Subsidiary shall sell or transfer any property owned by the Company or any Restricted Subsidiary to any Person other than the Company or a Restricted Subsidiary and thereupon the Company or any Restricted Subsidiary shall lease or intend to lease, as lessee, the same property unless (i) such property was constructed or installed for the Company or such Restricted Subsidiary and is sold and leased back to the Company or such Restricted Subsidiary within 18 months after such construction or installation, and (ii) such sale by the Company or such Restricted Subsidiary and leaseback to the Company or such Restricted Subsidiary would not violate the provisions of [Section] 5.8 hereof. Section 5.13. Mergers, Consolidations and Sales of Assets. (a) The Company will not, and will not permit any Restricted Subsidiary to (i) consolidate with or be a party to a merger with any other corporation or (ii) sell, lease or otherwise dispose of all or any substantial part (as defined in paragraph (d) of this Section) of the assets of the Company and its Restricted Subsidiaries, provided, however, that: (1) any Restricted Subsidiary may merge or consolidate with or into any other corporation so long as (i) in any merger or consolidation involving the Company, the Company shall be the surviving or continuing corporation and (ii) in any merger or consolidation involving a corporation other than the Company, (x) the -11- 16 The Timberland Company Note Agreement survivor shall be a Restricted Subsidiary and the Minority Interests in the surviving corporation, expressed as a percentage of the net worth of such surviving corporation after giving effect to such merger or consolidation, would not exceed the lesser of (I) 25% and (II) 10% plus the Minority Interests in such Restricted Subsidiary on the date of this Agreement or, if the Restricted Subsidiary is acquired or designated after the date of this Agreement, on the date of such acquisition or designation, and (y) aggregate Tangible Minority Interests (as defined in paragraph (d) of this Section) in all Restricted Subsidiaries after giving effect to such merger or consolidation would not exceed 10% of Consolidated Tangible Net Worth; (2) the Company may consolidate or merge with any other corporation if (i) the surviving or continuing corporation is a corporation organized under the laws of any state of the United States, (ii) at the time of such consolidation or merger and after giving effect thereto no Default or Event of Default shall have occurred and be continuing, and (iii) after giving effect to such consolidation or merger the surviving corporation would be permitted to incur at least $1.00 of additional Funded Debt under the provisions of [Section]5.8(a)(3); (3) any Restricted Subsidiary may sell, lease or otherwise dispose of all or any substantial part of its assets to the Company or any Wholly-owned Restricted Subsidiary; (4) the Company or any Restricted Subsidiary may sell, transfer or otherwise dispose of any Restricted Investment and any shares of stock in any Unrestricted Subsidiary; and (5) a Restricted Subsidiary may consolidate or merge with any other corporation in a transaction permitted under the provisions of [Section]5.13(c). (b) The Company will not permit any Restricted Subsidiary to issue or sell any shares of stock of any class (including as "stock" for the purposes of this [Section]5.13, any warrants, rights or options to purchase or otherwise acquire stock or other Securities exchangeable for or convertible into stock) of such Restricted Subsidiary to any Person other than the Company or a Wholly-owned Restricted Subsidiary, unless (i) such issue or sale does not constitute a substantial part (as hereinafter defined) of the assets of the Company and its Restricted Subsidiaries, and (ii) to the extent that (x) the Minority Interests in such Restricted Subsidiary, expressed as a percentage of the net worth of such Restricted Subsidiary after giving effect to such issuance or sale would not exceed the lesser of (I) 25% and (II) 10% plus the Minority Interests in such Restricted Subsidiary on the date of this Agreement or, if such Restricted Subsidiary is acquired or designated after the date of this Agreement, on the date of such acquisition or designation, and (y) aggregate Tangible Minority Interests in all Restricted Subsidiaries after giving effect to such issuance or sale would not exceed 10% of Consolidated Tangible Net Worth. (c) The Company will not sell, transfer or otherwise dispose of any shares of stock in any Restricted Subsidiary (except to qualify directors) or any Indebtedness of any -12- 17 The Timberland Company Note Agreement Restricted Subsidiary, and will not permit any Restricted Subsidiary to sell, transfer or otherwise dispose of (except to the Company or a Wholly-owned Restricted Subsidiary) any shares of stock or any Indebtedness of any other Restricted Subsidiary, unless: (1) either (x) such sale, transfer or disposition is made within the limitations of [Section] 5.13(b), or (y) simultaneously with such sale, transfer, or disposition, all shares of stock and all Indebtedness (excluding any trade receivables) owed by such Restricted Subsidiary at the time owned by the Company and by every other Subsidiary shall be sold, transferred or disposed of as an entirety; (2) the Board of Directors of the Company shall have determined, as evidenced by a resolution thereof, that such sale, transfer or disposition is in the best interests of the Company; (3) such stock and Indebtedness is sold, transferred or otherwise disposed of to a Person, for consideration and on terms reasonably deemed by the Board of Directors to be adequate and satisfactory, provided that (i) the amount of any non-cash consideration received by the Company or a Restricted Subsidiary shall be determined in good faith by the Board of Directors of the Company, as evidenced by a certificate of the president or any vice president of the Company setting forth in reasonable detail the basis of such determination and delivered to the Note Purchasers, which determination shall, upon the written request of the holder or holders of not less than 25% of the unpaid principal amount of the Notes, be subject to verification by an independent appraiser designated and compensated by the Company and not objected to by such holders, and (ii) any non-cash consideration will be deemed a Restricted Investment made by the Company or such Restricted Subsidiary on the date of such sale, transfer or disposition in the amount of such valuation; (4) except in the case of transactions permitted by [Section] 5.13(b), the Restricted Subsidiary being disposed of shall not have any continuing investment in the Company or any other Restricted Subsidiary not being simultaneously disposed of; and (5) such sale or other disposition does not involve a substantial part (as hereinafter defined) of the assets of the Company and its Restricted Subsidiaries. (d) As used in this [Section] 5.13: (1) A sale, lease or other disposition of assets (other than Restricted Investments and investments in Unrestricted Subsidiaries) shall be deemed to be a "substantial part" of the assets of the Company and its Restricted Subsidiaries only if the book value of such assets when added to the book value of all other assets sold, leased or otherwise disposed of by the Company and its Restricted Subsidiaries (other than Securitized Asset Transactions and other transactions in the ordinary course of business) during the same fiscal year, exceeds 15% of the Consolidated Net Tangible Assets of the Company and its Restricted Subsidiaries determined as of the end of the immediately preceding fiscal year or contributed more than 15% of Net Income -13- 18 The Timberland Company Note Agreement Available for Interest Charges, during the next preceding three fiscal years taken as a whole. Sales or other realization on delinquent receivables shall not be included in any computation of sales or other dispositions hereunder. Sales of assets shall not be included in any computations under this paragraph (d) to the extent that (x) the proceeds from such sale are applied to prepay the Notes pursuant to [Section]2.2 hereof, (y) the proceeds from such sale are applied to the voluntary prepayment of Funded Debt, or (z) the proceeds of such sale are applied, within one year of such sale, to the purchase of other property useful and to be used in the business of the Company and its Restricted Subsidiaries and, pending such application, are maintained by the Company or any Restricted Subsidiary in a separate segregated account. (2) The term "Tangible Minority Interests" shall mean, with respect to any Restricted Subsidiary, the amount that bears the same relationship to Minority Interests in such Subsidiary as the Consolidated Tangible Net Worth of such Subsidiary bears to the net worth of such Subsidiary. For purposes of this definition, the "Consolidated Tangible Net Worth" of a Restricted Subsidiary shall be determined for such Subsidiary and its Restricted Subsidiaries in accordance with the definitions set forth in [Section]8.1, mutatis mutandis. (3) "Securitized Asset Transaction" shall mean a sale or other transfer by any of the Company and its Restricted Subsidiaries of receivables which were produced in the ordinary course of business and not contingent upon any performance or product guarantee on the part of the Company or any Restricted Subsidiary, which sale or transfer does not involve the creation of any recourse obligation in respect thereof on the part of the Company or any Restricted Subsidiary (other than matters of title to, and the character of, the receivables so sold or transferred). Section 5.14. Guaranties. The Company will not and will not permit any Restricted Subsidiary to become or be liable in respect of any Guaranty except Guaranties by the Company and its Restricted Subsidiaries of the obligations of any Person so long as the Company and/or the Restricted Subsidiary guaranteeing such obligation could have incurred such obligation within the limits of this Agreement, provided that such underlying obligation shall be deemed to have been incurred by, and to be the continuing direct obligation of, the guarantor for all purposes of this Agreement. Section 5.15. Repurchase of Notes. Neither the Company nor any Restricted Subsidiary or Affiliate, directly or indirectly, may repurchase or make any offer to repurchase any Notes unless the offer has been made to repurchase Notes, pro rata, from all holders of the Notes at the same time and upon the same terms. In case the Company repurchases any Notes, such Notes shall thereafter be canceled and no Notes shall be issued in substitution therefor. Section 5.16. 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 with any Affiliate (including without limitation, the purchase from, sale to or exchange of property with, or the rendering of any service by or for, any Affiliate), except -14- 19 The Timberland Company Note Agreement in the ordinary course of and pursuant to the reasonable requirements of the Company's or such Restricted Subsidiary's business and upon fair and reasonable terms (as determined in good faith by the Board of Directors of the Company) no less favorable to the Company or such Restricted Subsidiary than would obtain in a comparable arm's-length transaction with a Person other than an Affiliate. Section 5.17. Investments. The Company will not, and will not permit any Restricted Subsidiary to, make any investments in or loans, advances or extensions of credit to, any Person, except: (a) investments, loans, advances and extensions of credit by the Company and its Restricted Subsidiaries in a corporation which, after giving effect to such investment, will be a Restricted Subsidiary; (b) investments in commercial paper maturing in 270 days or less from the date of issuance which, at the time of acquisition by the Company or any Restricted Subsidiary, is accorded a rating of P-1 by Standard & Poor's Corporation or a rating of A-1 by Moody's Investors Services, Inc.; (c) investments in direct obligations issued or guaranteed by the full faith and credit of the United States of America, maturing, except in the case of investments made with security deposits of rental customers, in twelve months or less from the date of acquisition thereof; (d) investments in certificates of deposit maturing within one year from the date of origin or other obligations (including repurchase agreements), issued by a bank or trust company organized under the laws of the United States or any state thereof, having capital, surplus and undivided profits aggregating at least $250,000,000 and a long term deposit rating of A or better from either Standard & Poor's Corporation or Moody's Investors Service, Inc.; (e) loans or advances not exceeding $1,000,000 in the aggregate in the usual and ordinary course of business to officers, directors and employees of the Company and its Restricted Subsidiaries; (f) Investments in money market preferred stock, which, at the time of acquisition by the Company or any Restricted Subsidiary, is accorded a rating of AA or better by Standard & Poor's Corporation or a rating of Aa2 or better by Moody's Investors Services, Inc.; (g) Investments in money market mutual funds having total assets aggregating at least $1,000,000,000 or which invests primarily in assets described in clauses (b), (c), (d) and (f) of this [Section] 5.17; (h) Investments in demand deposits and endorsements for collection; -15- 20 The Timberland Company Note Agreement (i) Investments to the extent that the consideration therefor consists of capital stock of the Company; and (j) Restricted Investments, subject to the limitations of [Section] 5.11. In valuing any investments, loans and advances for the purpose of applying the limitations set forth in this [Section] 5.17 and [Section] 5.11 such investments, loans and advances shall be taken at the original cost thereof, without allowance for any subsequent write-offs or appreciation or depreciation therein, but less any amount repaid or recovered on account of capital or principal. For purposes of this [Section] 5.17, at any time when a corporation becomes a Restricted Subsidiary, all investments of such corporation at such time shall be deemed to have been made by such corporation, as a Restricted Subsidiary, at such time. Section 5.18. Termination of Pension Plans. The Company will not and will not permit any Subsidiary to permit any employee benefit plan maintained by it to be terminated in a manner which could result in the imposition of a Lien on any property of the Company or any Subsidiary pursuant to Section 4068 of the Employee Retirement Income Security Act of 1974, as amended, if the incurrence of such Lien would not be permitted by [Section] 5.10. Section 5.19. Reports and Rights of Inspection. The Company will keep, and will cause each Subsidiary to keep, proper books of record and account in which full and correct entries will be made of all dealings or transactions of or in relation to the business and affairs of the Company or such Subsidiary, in accordance with generally accepted accounting principles consistently applied (except for changes disclosed in the financial statements furnished to you pursuant to this [Section] 5.19 and concurred in by the independent public accountants referred to in [Section] 5.19(b) hereof), and will furnish to you so long as you are the holder of any Note and to each other institutional holder of the then outstanding Notes (in duplicate if so specified below or otherwise requested): (a) Quarterly Statements. As soon as available and in any event within 55 days after the end of each quarterly fiscal period (except the last) of each fiscal year, duplicate copies of: (1) consolidated and consolidating balance sheets of the Company and its Restricted Subsidiaries and of the Company and its consolidated Subsidiaries as of the close of such quarter setting forth, in the case of such consolidated statements, in comparative form the amount for the end of the preceding fiscal year, (2) consolidated and consolidating statements of income of the Company and its Restricted Subsidiaries and of the Company and its consolidated Subsidiaries for such quarterly period, setting forth, in the case of such consolidated statements, in comparative form the amount for the corresponding period of the preceding fiscal year, and -16- 21 The Timberland Company Note Agreement (3) consolidated statements of cash flows of the Company and its Restricted Subsidiaries and of the Company and its consolidated Subsidiaries for the portion of the fiscal year ending with such quarter, setting forth in comparative form the amount for the corresponding period of the preceding fiscal year, all in reasonable detail and certified as complete and correct, by an authorized financial officer of the Company, provided that so long as the Company shall file a quarterly report on Form 10-Q or any similar form with the Securities and Exchange Commission or any successor agency which contains the information set forth in this paragraph (a), the requirements of this paragraph (a) shall be satisfied by forwarding Form 10-Q to the holders of the Notes within 55 days after the end of such quarterly fiscal period but, in any event, within five days of filing such Form 10-Q with the Securities and Exchange Commission, and provided, further that so long as the Unrestricted Subsidiaries of the Company taken as a whole do not constitute a Significant Subsidiary, the Company shall not be required to deliver to you financial statements of the Company and its Restricted Subsidiaries referred to in paragraphs (1), (2) and (3) of this [Section] 5.19(a); (b) Annual Statements. As soon as available and in any event within 110 days after the close of each fiscal year of the Company, duplicate copies of: (1) consolidated and consolidating balance sheets of the Company and its Restricted Subsidiaries and of the Company and its consolidated Subsidiaries as of the close of such fiscal year, and (2) consolidated and consolidating statements of income and stockholders' equity and cash flows of the Company and its Restricted Subsidiaries and of the Company and its consolidated Subsidiaries for such fiscal year, in each case setting forth in comparative form the consolidated figures for the preceding fiscal year, all in reasonable detail and accompanied by an opinion thereon of a firm of independent public accountants of recognized national standing selected by the Company to the effect that the consolidated financial statements have been prepared in accordance with generally accepted accounting principles consistently applied (except for changes in application in which such accountants concur) and present fairly the financial condition of the companies reported on and that the examination of such accountants in connection with such financial statements has been made in accordance with generally accepted auditing standards and accordingly, includes such tests of the accounting records and such other auditing procedures as were considered necessary in the circumstances, provided that so long as the Company shall file an annual report on Form 10-K or any similar form with the Securities and Exchange Commission or any successor agency which contains the information set forth in this paragraph (b), the requirements of this paragraph (b) shall be satisfied by forwarding Form 10-K to the holders of the Notes within 110 days after the end of -17- 22 The Timberland Company Note Agreement such fiscal year but, in any event, within five days of filing such Form 10-K with the Securities and Exchange Commission, and provided further that so long as the Unrestricted Subsidiaries of the Company taken as a whole do not constitute a Significant Subsidiary, the Company shall not be required to deliver to you financial statements of the Company and its Restricted Subsidiaries referred to in paragraphs (1) and (2) of this [Section] 5.19(b); (c) Audit Reports. Promptly upon receipt thereof, one copy of each interim or special audit made by independent accountants of the books of the Company or any Restricted Subsidiary and any management letter received from such accountants; (d) SEC and Other Reports. Promptly upon their becoming available, one copy of each financial statement, report, notice or proxy statement sent by the Company to stockholders generally and of each regular or periodic report, and any registration statement or prospectus filed by the Company or any Subsidiary with any securities exchange or the Securities and Exchange Commission or any successor agency, and copies of any orders in any proceedings to which the Company or any of its Subsidiaries is a party, issued by any governmental agency, Federal or state, having jurisdiction over the Company or any of its Subsidiaries; (e) Requested Information. With reasonable promptness, such other data and information as you or any such institutional holder may reasonably request, provided, that with respect to any data and information obtained by you as a result of any request pursuant to this paragraph (e), you agree that, to the extent that such data and information has not theretofore otherwise been disclosed by or as authorized by the Company in such a manner as to render such data and information no longer confidential, you will use reasonable efforts (consistent with your established procedures) to reasonably maintain (and cause persons referred to in (i) below to maintain) the confidential nature of the data and information therein contained; provided, that anything herein contained to the contrary notwithstanding, you may, to the extent necessary, disclose or disseminate such data and information to: (i) your employees, agents, attorneys, and accountants who would ordinarily have access to such data and information in the normal course of the performance of their duties; (ii) such third parties as you may, in your discretion, deem reasonably necessary or desirable in connection with or in response to (x) compliance with any law, ordinance or governmental order, regulation, rule, policy, subpoena, investigation, regulatory authority request or request, or (y) 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 of any governmental or industry agency, commission, authority, board or similar entity or (B) in connection with any proceeding, case 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; (iii) any prospective purchaser, securities broker or dealer or investment banker in connection with the resale or proposed resale by you of any portion of the Notes who shall agree in writing to accept such information subject to -18- 23 The Timberland Company Note Agreement the provisions of this paragraph (e); (iv) any Person holding your debt Securities who shall have requested to inspect such information subject to the provisions of this paragraph (e); (v) the National Association of Insurance Commissioners; and (vi) any entity utilizing such information to rate or classify your debt or equity Securities or to report to the public concerning the industry of which you are a part; and, provided further, that you shall not be liable to the Company or any other Person for damages for any failure by you, despite your reasonable efforts so to do, to comply with the provisions of this paragraph (e). (f) Officers' Certificates. Within the periods provided in paragraphs (a) and (b) above, a certificate of an authorized financial officer of the Company stating that he has reviewed the provisions of this Agreement and setting forth: (i) the information and computations (in sufficient detail) required in order to establish whether the Company was in compliance with the requirements of [Section] 5.5 through [Section] 5.18, inclusive, at the end of the period covered by the financial statements then being furnished, and (ii) whether there existed as of the date of such financial statements and whether, to the best of his knowledge, there exists on the date of the certificate or existed at any time during the period covered by such financial statements any Default or Event of Default and, if any such condition or event exists on the date of the certificate, specifying the nature and period of existence thereof and the action the Company is taking and proposes to take with respect thereto; (g) Accountant's Certificates. Within the period provided in paragraph (b) above, a certificate of the accountants who render an opinion with respect to such financial statements, stating that they have reviewed this Agreement and stating further, whether in making their audit, such accountants have become aware of any Default or Event of Default under any of the terms or provisions of [Section] 5.6 through [Section] 5.14, inclusive, [Section] 5.17 or [Section] 5.18 of this Agreement insofar as any such terms or provisions pertain to or involve accounting matters or determinations, and if any such condition or event then exists, specifying the nature and period of existence thereof; and (h) Unrestricted Subsidiaries. Within the respective periods provided in paragraph (b) above, financial statements of the character and for the dates and periods as in said paragraph (b) provided covering Unrestricted Subsidiaries on a consolidated and consolidating basis. Without limiting the foregoing, the Company will permit you, so long as you are the holder of any Note, and each institutional holder of the then outstanding Notes (or such Persons as either you or such holder may designate) to visit and inspect, under the Company's guidance, any of the properties of the Company or any Subsidiary, to examine all their 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 said accountants to discuss with you the finances and affairs of the Company and its Subsidiaries) all at such reasonable times and as often as may be reasonably requested. -19- 24 The Timberland Company Note Agreement The Company shall not be required to pay or reimburse you or any such holder for expenses which you or any such holder may incur in connection with any such visitation or inspection. SECTION 6. EVENTS OF DEFAULT AND REMEDIES THEREFOR. Section 6.1. Events of Default. Any one or more of the following shall constitute an "Event of Default" as the term is used herein: (a) Default shall occur in the payment of interest on any Note when the same shall have become due and such default shall continue for more than five days; or (b) Default shall occur in the making of any payment of the principal of any Note or the premium thereon at any date fixed for prepayment; or (c) Default shall occur in the making of any other payment of the principal of any Note or the premium thereon at the expressed or any accelerated maturity date; or (d) Default shall be made in the payment of the principal of or interest on any Indebtedness of the Company or any Restricted Subsidiary for borrowed money in an aggregate principal amount in excess of $1,000,000, as and when the same shall become due and payable by the lapse of time, by declaration, by call for redemption or otherwise, and such default shall continue beyond the period of grace, if any, allowed with respect thereto; or (e) Default or the happening of any event shall occur under any indenture, agreement, or other instrument under which any Indebtedness of the Company or any Restricted Subsidiary for borrowed money in an aggregate principal amount in excess of $1,000,000 may be issued and such default or event shall continue for a period of time sufficient to permit the acceleration of the maturity of any Indebtedness of the Company or any Restricted Subsidiary outstanding thereunder; or (f) Default shall occur in the observance or performance of any covenant or agreement contained in [Section] 5.6 through [Section] 5.15, inclusive, or [Section] 5.17 hereof; or (g) Default shall occur in the observance or performance of any other provision of this Agreement which is not remedied within 30 days after notice thereof to the Company by the holder of any Note; or (h) If any representation or warranty made by the Company herein, or made by the Company in any statement or certificate furnished by the Company in connection with the consummation of the issuance and delivery of the Notes or furnished by the Company pursuant hereto, is untrue in any material respect as of the date of the issuance or making thereof; or -20- 25 The Timberland Company Note Agreement (i) The Company or any Significant Subsidiary which is a Restricted Subsidiary becomes insolvent or bankrupt, is generally not paying its debts as they become due or makes an assignment for the benefit of creditors, or the Company or any Significant Subsidiary which is a Restricted Subsidiary causes or suffers an order for relief to be entered with respect to it under applicable Federal bankruptcy law or applies for or consents to the appointment of a custodian, trustee or receiver for the Company or such Significant Subsidiary which is a Restricted Subsidiary or for the major part of the property of either; or (j) A custodian, trustee or receiver is appointed for the Company or any Significant Subsidiary which is a Restricted Subsidiary or for the major part of the property of either and is not discharged within 30 days after such appointment; or (k) Final judgment or judgments for the payment of money aggregating in excess of $100,000 is or are outstanding against the Company or any Significant Subsidiary which is a Restricted Subsidiary or against any property or assets of either and any one of such judgments has remained unpaid, unvacated, unbonded or unstayed by appeal or otherwise for a period of 30 days from the date of its entry; or (l) Bankruptcy, reorganization, arrangement or insolvency proceedings, or other proceedings for relief under any bankruptcy or similar law or laws for the relief of debtors, are instituted by or against the Company or any Significant Subsidiary which is a Restricted Subsidiary and, if instituted against the Company or any Significant Subsidiary which is a Restricted Subsidiary, are consented to or are not dismissed within 60 days after such institution. Section 6.2. Notice to Holders. When any Event of Default described in the foregoing [Section] 6.1 has occurred, or if the holder of any Note or of any other evidence of Indebtedness of the Company gives any notice or takes any other action with respect to a claimed default, the Company agrees to give prompt notice of such event to all holders of the Notes then outstanding, such notice to be in writing and sent by registered or certified mail or by telegram. Section 6.3. Acceleration of Maturities. When any Event of Default described in paragraph (a), (b) or (c) of [Section] 6.1 has happened and is continuing, any holder of any Note may declare its Notes to be, and its 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. When any Event of Default described in paragraphs (a) through (h), inclusive, and (k) of said [Section] 6.1 has happened and is continuing, the holder or holders of 25% or more of the principal amount of Notes at the time outstanding may, by notice in writing sent by registered or certified mail to the Company, declare the entire principal and all interest accrued on all Notes to be, and all 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. When any Event of Default described in paragraphs (i), (j) and (l) of [Section] 6.1 has occurred, then all outstanding Notes shall immediately become due and payable without presentment, demand or notice of any kind. -21- 26 The Timberland Company Note Agreement Upon any or all Notes becoming due and payable as a result of any Event of Default as aforesaid, the Company will forthwith pay to the holders of such Notes the entire principal and interest accrued on such Notes and, with respect to a payment made as a result of an Event of Default described in paragraph (a), (b), (c) or (f) of [Section]6.1, and to the extent permitted by law, liquidated damages for the loss of the bargain evidenced hereby in an amount equal to the Make-Whole Amount. No course of dealing on the part of any Noteholder nor any delay or failure on the part of any Noteholder to exercise any right shall operate as a waiver of such right or otherwise prejudice such holder's rights, powers and remedies. The Company further agrees, to the extent permitted by law, to pay to the holder or holders of the Notes all costs and expenses incurred by them in the collection of any Notes upon any default hereunder or thereon, including reasonable compensation to such holder's or holders' attorneys for all services rendered in connection therewith. Section 6.4. Rescission of Acceleration. The provisions of [Section] 6.3 are subject to the condition that if the principal of and accrued interest on all or any outstanding Notes have been declared immediately due and payable by reason of the occurrence of any Event of Default described in paragraphs (a) through (h), inclusive, and (k) of [Section] 6.1, the holders of 51% in aggregate principal amount of the Notes then outstanding 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 has been entered for the payment of any monies due pursuant to the Notes or this Agreement; (b) all arrears of interest upon all the Notes and all other sums payable under the Notes and under this Agreement (except any principal, interest or premium on the Notes which has become due and payable solely by reason of such declaration under [Section] 6.3) shall have been duly paid; and (c) each and every other Default and Event of Default shall have been made good, cured or waived pursuant to [Section] 7.1; 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 thereto. SECTION 7. AMENDMENTS, WAIVERS AND CONSENTS. Section 7.1. Consent Required. (a) Any term, covenant, agreement or condition of this Agreement may, with the consent of the Company, be amended or compliance therewith may be waived (either generally or in a particular instance and either retroactively or prospectively), if the Company shall have obtained the consent in writing of the holders of at least 51% in aggregate principal amount of outstanding Notes; provided that without the written consent of the holders of all of the Notes then outstanding, no such waiver, modification, alteration or amendment shall be effective (i) which will change the time of payment of the principal of or the interest on any Note or change the principal amount thereof or change the rate of interest thereon, or (ii) which will change any of the provisions -22- 27 The Timberland Company Note Agreement with respect to optional prepayments, or (iii) which will change the percentage of holders of the Notes required to consent to any such amendment, alteration or modification or any of the provisions of this [Section] 7 or [Section] 6. (b) So long as any outstanding Notes are owned by you, the Company will not solicit, request or negotiate for or with respect to any proposed waiver or amendment of any of the provisions of this Agreement or the Notes unless each holder of the Notes (irrespective of the amount of Notes then owned by it) shall be informed thereof by the Company and shall be afforded the opportunity of considering the same and shall be supplied 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] 7.1 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 the holder or holders of the requisite percentage of outstanding Notes. The Company will not, directly or indirectly, pay or cause to be paid any remuneration, whether by way of supplemental or additional interest, fee or otherwise, to any holder of the Notes as consideration for or as an inducement to the entering into by any holder of the Notes of any waiver or amendment of any of the terms and provisions of this Agreement unless such remuneration is concurrently paid, on the same terms, ratably to the holders of all of the Notes then outstanding, provided however, that if any holder of Notes fails to consent to a transaction which will result in a violation of [Section] 5.13 hereof, and as a result of such failure the Notes of such holder are prepaid pursuant to [Section] 2.3 hereof, such holder shall not be entitled to any remuneration pursuant to this [Section] 7.1(b) in connection with the requested consent to such transaction. Section 7.2. Effect of Amendment or Waiver. Any such amendment or waiver shall apply equally to all of the holders of the Notes and shall be binding upon them, 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 not expressly amended or waived or impair any right consequent thereon. SECTION 8. INTERPRETATION OF AGREEMENT; DEFINITIONS. Section 8.1. Definitions. Unless the context otherwise requires, the terms hereinafter set forth when used herein shall have the following meanings and the following definitions shall be equally applicable to both the singular and plural forms of any of the terms herein defined: "Affiliate" shall mean any Person (other than a Restricted Subsidiary) (i) which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, the Company, (ii) which beneficially owns or holds 5% or more of any class of the Voting Stock of the Company or (iii) 5% or more of the Voting Stock (or in the case of a Person which is not a corporation, 5% or more of the equity interest) of which is beneficially owned or held by the Company or a Subsidiary. The term "control" means the possession, directly or indirectly, of the power to direct or cause the -23- 28 The Timberland Company Note Agreement direction of the management and policies of a Person, whether through the ownership of Voting Stock, by contract or otherwise. "Capitalized Lease" shall mean any lease the obligation for Rentals with respect to which is required to be capitalized on a balance sheet of the lessee in accordance with generally accepted accounting principles. "Capitalized Rentals" shall mean as of the date of any determination the amount at which the aggregate Rentals due and to become due under all Capitalized Leases under which the Company or any Restricted Subsidiary is a lessee would be reflected as a liability on a consolidated balance sheet of the Company and its Restricted Subsidiaries. "Consolidated Current Assets" and "Consolidated Current Liabilities" shall mean such assets and liabilities of the Company and its Restricted Subsidiaries on a consolidated basis as shall be determined in accordance with generally accepted accounting principles to constitute current assets and current liabilities (including in current liabilities, in any event, Guaranties of current liabilities of others), respectively. "Consolidated Net Income" for any period shall mean the gross revenues of the Company and its Restricted Subsidiaries for such period less all expenses and other proper charges (including taxes on income), determined on a consolidated basis in accordance with generally accepted accounting principles consistently applied and after eliminating earnings or losses attributable to outstanding Minority Interests, but excluding in any event: (a) any gains or losses on the sale or other disposition of investments or fixed or capital assets, to the extent any such gain or loss constitutes an "extraordinary item" under generally accepted accounting principles, and any taxes on such excluded gains and any tax deductions or credits on account of any such excluded losses; (b) the proceeds of any life insurance policy; (c) net earnings and losses of any Restricted Subsidiary accrued prior to the date it became a Restricted Subsidiary; (d) net earnings and losses of any corporation (other than a Restricted Subsidiary), substantially all the assets of which have been acquired in any manner, realized by such other corporation prior to the date of such acquisition; (e) net earnings and losses of any corporation (other than a Restricted Subsidiary) with which the Company or a Restricted Subsidiary shall have consolidated or which shall have merged into or with the Company or a Restricted Subsidiary prior to the date of such consolidation or merger; (f) net earnings of any business entity (other than a Restricted Subsidiary) in which the Company or any Restricted Subsidiary has an ownership interest unless such -24- 29 The Timberland Company Note Agreement net earnings shall have actually been received by the Company or such Subsidiary in the form of cash distributions; (g) any portion of the net earnings of any Restricted Subsidiary which for any reason is unavailable for payment of dividends to the Company or any other Restricted Subsidiary; (h) earnings resulting from any reappraisal, revaluation or write-up of assets; (i) any deferred or other credit representing any excess of the equity in any Subsidiary at the date of acquisition thereof over the amount invested in such Subsidiary; (j) any gain arising from the acquisition of any Securities of the Company or any Restricted Subsidiary; and (k) any reversal of any contingency reserve, except to the extent that provision for such contingency reserve shall have been made from income arising during such period. "Consolidated Net Tangible Assets" shall mean as of the date of any determination thereof the total amount of all Tangible Assets of the Company and its Restricted Subsidiaries after deducting all Restricted Investments and all items which in accordance with generally accepted accounting principles would be included on the liability side of a consolidated balance sheet, except deferred income taxes, deferred investment tax credits, capital stock of any class, surplus, and Funded Debt. "Consolidated Tangible Net Worth" shall mean, as of the date of any determination thereof, Consolidated Net Tangible Assets less all outstanding Funded Debt, deferred income taxes, deferred investment tax credits and Minority Interests, all determined in accordance with generally accepted accounting principles consolidating the Company and its Restricted Subsidiaries. "Current Debt" as of the date of any determination thereof shall mean (i) all Indebtedness for money borrowed other than Funded Debt, (ii) all Indebtedness with respect to documentary letters of credit and bankers' acceptances, and (iii) Guaranties of Current Debt of others. "Consolidated" when used as a prefix to any Current Debt shall mean the aggregate amount of all such Current Debt of the Company and its Restricted Subsidiaries on a consolidated basis eliminating intercompany items. "Default" shall mean any event or condition, the occurrence of which would, with the lapse of time or the giving of notice, or both, constitute an Event of Default as defined in [Section] 6.1. "Fixed Charges" for any period shall mean on a consolidated basis the sum of (i) all Rentals (other than Rentals on Capitalized Leases) payable during such period by the -25- 30 The Timberland Company Note Agreement Company and its Restricted Subsidiaries, and (ii) all Interest Charges during such period on all Indebtedness (including the interest component of Rentals on Capitalized Leases) of the Company and its Restricted Subsidiaries. "Funded Debt" of any Person shall mean (i) all Indebtedness for borrowed money or which has been incurred in connection with the acquisition of assets in each case having a final maturity of one or more than one year from the date of origin thereof (or which is renewable or extendible at the option of the obligor for a period or periods of one or more than one year from the date of origin, but excluding revolving lines of credit renewable or extendible at the option of the obligor for a period or periods of one or more than one year from the date of origin except to the extent such option shall have been exercised), including all payments in respect thereof that are required to be made within one year from the date of any determination of Funded Debt, whether or not included in Consolidated Current Liabilities, (ii) all Capitalized Rentals, and (iii) all Guaranties of Funded Debt of others. "Consolidated" when used as a prefix to any Funded Debt shall mean the aggregate amount of all such Funded Debt of the Company and its Restricted Subsidiaries on a consolidated basis eliminating intercompany items. "Guaranties" by any Person shall mean all obligations (other than endorsements in the ordinary course of business of negotiable instruments for deposit or collection) of such Person 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, all obligations incurred through an agreement, contingent or otherwise, by such Person: (i) to purchase such Indebtedness or obligation or any property or assets constituting security therefor, (ii) to advance or supply funds (x) for the purchase or payment of such Indebtedness or obligation, (y) to maintain working capital or other balance sheet condition or otherwise to advance or make available funds for the purchase or payment of such Indebtedness or obligation, or (iii) to lease property or to purchase Securities or other property or services primarily for the purpose of assuring the owner of such Indebtedness or obligation of the ability of the primary obligor to make payment of the Indebtedness or obligation, or (iv) otherwise to assure the owner of the Indebtedness or obligation of the primary obligor against loss in respect thereof. For the purposes of all computations made under this Agreement, a Guaranty in respect of any Indebtedness for borrowed money shall be deemed to be Indebtedness equal to the principal amount of such Indebtedness for borrowed money which has been guaranteed, and a Guaranty in respect of any other obligation or liability or any dividend shall be deemed to be Indebtedness equal to the maximum aggregate amount of such obligation, liability or dividend. "Indebtedness" of any Person shall mean and include all obligations of such Person which in accordance with generally accepted accounting principles shall be classified upon a balance sheet of such Person as liabilities of such Person, and in any event shall include all (i) obligations of such Person for borrowed money or which has been incurred in connection with the acquisition of property or assets, (ii) obligations secured by any Lien upon property or assets owned by such Person, even though such Person has not assumed or become liable for the payment of such obligations, (iii) obligations created or arising under -26- 31 The Timberland Company Note Agreement any conditional sale or other title retention agreement with respect to property acquired by such Person, notwithstanding the fact that the rights and remedies of the seller, lender or lessor under such agreement in the event of default are limited to repossession or sale of property, and (iv) Capitalized Rentals under any Capitalized Lease. For the purpose of computing the Indebtedness of any Person, there shall be excluded any particular Indebtedness to the extent that, upon or prior to the maturity thereof, there shall have been deposited with the proper depository in trust the necessary funds (or evidences of such Indebtedness, if permitted by the instrument creating such Indebtedness) for the payment, redemption or satisfaction of such Indebtedness; and thereafter such funds and evidences of Indebtedness so deposited shall not be included in any computation of the assets of such Person. "Interest Charges" for any period shall mean all interest and all amortization of debt discount and expense on any particular Indebtedness for which such calculations are being made. Computations of Interest Charges on a pro forma basis for Indebtedness having a variable interest rate shall be calculated at the rate in effect on the date of any determination. "Lien" shall mean any mortgage, pledge, security interest, lien, encumbrance or other charge of any kind on any kind of property or asset, whether real, personal or mixed, or tangible or intangible. "Make-Whole Amount" as at any date a payment thereof is due (the "payment date") in connection with a payment or prepayment in respect of the Notes shall mean the excess of (i) the present value as at the payment date of the remaining principal and interest payments to become due in respect of that portion of the principal amount of the Notes to be so paid or prepaid, discounted semiannually at an annual rate which is equal to the Treasury Rate plus 0.50% over (ii) the aggregate principal amount of the Notes then to be paid or prepaid plus accrued interest on such principal amount. To the extent that the Treasury Rate plus 0.50% at the time of determination of the Make-Whole Amount is equal to or higher than 7.16%, the Make-Whole Amount is zero. For purposes of any determination of the Make-Whole Amount: (a) The applicable "Treasury Rate" means the mean of the yields to maturity of customarily-issued United States Treasury obligations with a constant maturity (as compiled by and published in the United States Federal Reserve Bulletin H.15(519) or its successor publication for each of the two weeks immediately preceding the payment date) most nearly equal to the remaining Weighted Average Life to Maturity of the Notes as at the payment date. If no maturity exactly corresponding to such remaining Weighted Average Life to Maturity shall appear therein, yields for the two most closely corresponding published maturities shall be calculated pursuant to the foregoing sentence and the Treasury Rate shall be interpolated from such yields on a straight-line basis (rounding to the nearest month). If such rates shall not have been so published, the Treasury Rate in respect of such determination date shall be calculated pursuant to the next preceding sentence on the basis of the arithmetic mean of the arithmetic means of the secondary market ask rates, as of approximately 3:30 P.M., New York City time, on the last business days of each of the two weeks -27- 32 The Timberland Company Note Agreement preceding the payment date, for the actively traded U.S. Treasury security or securities with a maturity or maturities most closely corresponding to such Weighted Average Life to Maturity, as reported by three primary United States Government securities dealers in New York City of national standing selected in good faith by the Company. (b) "Weighted Average Life to Maturity" with respect to the Notes means, as at the payment date, the number of years obtained by dividing the then Remaining Dollar-years of the Notes by the outstanding principal amount of the Notes. The term "Remaining Dollar-years" of the Notes means the product obtained by (i) multiplying (A) the amount of each then remaining required principal repayment (including repayment at final maturity), by (B) the number of years (calculated to the nearest one-twelfth) which will elapse between the time of determination and the date such required repayment is due, and (ii) totaling all the products obtained in the computations described in clause (i). "Minority Interests" shall mean any shares of stock of any class of a Restricted Subsidiary (other than directors' qualifying shares as required by law, and other than shares of the Class A Stock of The Outdoor Footwear Company so long as the number of outstanding shares of such Class A Stock do not exceed 50,000 at any time and the certificate of incorporation of The Outdoor Footwear Company is not amended after the date hereof to increase the rights of the holders of Class A Stock in the event of a liquidation of The Outdoor Footwear Company) that are not owned by the Company and/or one or more of its Restricted Subsidiaries. Minority Interests shall be valued by valuing Minority Interests constituting preferred stock at the voluntary or involuntary liquidating value of such preferred stock, whichever is greater, and by valuing Minority Interests constituting common stock at the book value of capital and surplus applicable thereto adjusted, if necessary, to reflect any changes from the book value of such common stock required by the foregoing method of valuing Minority Interests in preferred stock. "Net Income Available for Fixed Charges" for any period shall mean the sum of (i) Consolidated Net Income during such period plus (to the extent deducted in determining Consolidated Net Income), (ii) all provisions for any Federal, state or other income taxes made by the Company and its Restricted Subsidiaries during such period and (iii) Fixed Charges of the Company and its Restricted Subsidiaries during such period. "Net Income Available for Interest Charges" for any period shall mean the sum of (i) Consolidated Net Income during such period plus (to the extent deducted in determining Consolidated Net Income), (ii) all provisions for any Federal, state or other income taxes made by the Company and its Restricted Subsidiaries during such period and (iii) Interest Charges during such period, determined on a pro forma basis giving effect as of the beginning of such period (x) to the disposition during such period of assets constituting a substantial part of the assets of the Company and its Restricted Subsidiaries taken as a whole, (y) to the acquisition or disposition during such period of all or substantially all of the stock or assets of an entity or assets consisting of a line of business of an entity, and (z) to the acquisition, designation or disposition during such period of a Restricted Subsidiary; -28- 33 The Timberland Company Note Agreement provided, however, that any such determination of the amount to be included in Consolidated Net Income on a pro forma basis taking into account the earnings of an entity, the stock or assets of which have been acquired by the Company or a Restricted Subsidiary, shall include only such amounts as are based on the actual historical financial results of such entity during such period, determined in accordance with generally accepted accounting principles. "Person" shall mean an individual, partnership, corporation, trust or unincorporated organization, and a government or agency or political subdivision thereof. "Pro Forma Interest Charges" for any period shall mean, as of the date of any determination thereof, the maximum aggregate amount of Interest Charges which would have become payable by the Company and its Restricted Subsidiaries in such period determined on a pro forma basis giving effect as of the beginning of such period to the incurrence of any Funded Debt (including Capitalized Rentals) and the retirement of outstanding Funded Debt or termination of any Capitalized Leases. "Rentals" shall mean and include all fixed rents (including as such all payments which the lessee is obligated to make to the lessor on termination of the lease or surrender of the property) payable by the Company or a Restricted Subsidiary, as lessee or sublessee under a lease of real or personal property, but shall be exclusive of any amounts required to be paid by the Company or a Restricted Subsidiary (whether or not designated as rents or additional rents) on account of maintenance, repairs, insurance, taxes and similar charges. Fixed rents under any so-called, "percentage leases" shall be computed solely on the basis of the minimum rents, if any, required to be paid by the lessee regardless of sales volume or gross revenues. "Restricted Investments" shall mean all investments, loans and advances existing on or made after the date of this Agreement of the Company and its Restricted Subsidiaries other than investments, loans or advances permitted by paragraphs (a) through (i), inclusive, of [Section] 5.17 hereof. The Company and its Restricted Subsidiaries shall be deemed to have made a Restricted Investment (i) to the extent of the equity of the Company and its Restricted Subsidiaries in the net assets of a Restricted Subsidiary which has become an Unrestricted Subsidiary on the date that the Restricted Subsidiary becomes an Unrestricted Subsidiary and (ii) to the extent of the value of any non-cash consideration received by the Company and its Restricted Subsidiaries in connection with a sale of stock or Indebtedness permitted by [Section] 5.13(c)(3) hereof. "Restricted Subsidiary" shall mean any Subsidiary which is designated as a Restricted Subsidiary on Annex A of the Closing Certificate or any other Subsidiary (i) which is organized under the laws of the United States or any State thereof, Canada, Cayman Islands, the Dominican Republic, France, Puerto Rico, the United Kingdom, West Germany, Australia, Austria, Belgium, Denmark, Finland, Republic of Ireland, Italy, Luxembourg, Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, and U.S. Virgin Islands; (ii) which conducts substantially all of its business and has substantially all of its assets within the United States, Canada, the Dominican Republic, France, Puerto Rico, -29- 34 The Timberland Company Note Agreement the United Kingdom, West Germany, Australia, Austria, Belgium, Denmark, Finland, Republic of Ireland, Italy, Luxembourg, Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, and U.S. Virgin Islands; (iii) of which more than 75% (by number of votes) of the Voting Stock is owned by the Company and/or one or more Restricted Subsidiaries; and (iv) which is designated a Restricted Subsidiary at the time it first becomes a Subsidiary, provided, the Board of Directors of the Company may designate any Unrestricted Subsidiary as a Restricted Subsidiary but only if (i) after giving effect to such designation the Company and its Restricted Subsidiaries could incur $1 of additional Consolidated Funded Debt and (ii) at the time of such designation and after giving effect thereto no Default or Event of Default shall have occurred and be continuing. Any Subsidiary which is designated by the Board of Directors of the Company as a Restricted Subsidiary after having been an Unrestricted Subsidiary may not be redesignated an Unrestricted Subsidiary. The Company shall give prompt notice to the Noteholders of designation of a Restricted Subsidiary. "Security" shall have the same meaning as in Section 2(1) of the Securities Act of 1933, as amended. "Significant Subsidiary" shall mean any Subsidiary which meets any of the following conditions: (1) The Company's and its other Subsidiaries' investments in and advances to the Subsidiary exceed 10 percent of the Consolidated Tangible Net Worth of the Company and its Subsidiaries as of the end of the most recently completed fiscal year; or (2) The Company's and its other Subsidiaries' proportionate share of the Consolidated Tangible Net Worth of the Subsidiary exceeds 10 percent of the Consolidated Tangible Net Worth of the Company and its Subsidiaries as of the end of the most recently completed fiscal year; or (3) The Company's and its other Subsidiaries' equity in the income from continuing operations before income taxes, extraordinary items and cumulative effect of a change in accounting principle of the Subsidiary exceeds 10 percent of such income of the Company and its Subsidiaries consolidated for the most recently completed fiscal year. "Specified Debt" shall mean, without duplication, any Indebtedness of Restricted Subsidiaries which Indebtedness is permitted by [Section] 5.8(a)(5) hereof and any Indebtedness of the Company secured by Liens permitted by [Section] 5.10(j) hereof. The term "subsidiary" shall mean, as to any particular parent corporation, any corporation of which more than 50% (by number of votes) of the Voting Stock shall be owned by such parent corporation and/or one or more corporations which are themselves subsidiaries of such parent corporation. The term "Subsidiary" shall mean a subsidiary of the Company. -30- 35 The Timberland Company Note Agreement "Tangible Assets" shall mean as of the date of any determination thereof, the total amount of all assets of the Company and its Restricted Subsidiaries (less depreciation, depletion and other properly deductible valuation reserves) after deducting good will, patents, trade names, trade marks, copyrights, franchises, experimental expense, organization expense, unamortized debt discount and expense, deferred assets other than prepaid insurance and prepaid taxes, the excess of cost of shares acquired over book value of related assets and such other assets as are properly classified as "intangible assets" in accordance with generally accepted accounting principles. "Total Debt" of the Company and its Restricted Subsidiaries as at any date shall mean the sum of (i) Consolidated Funded Debt of the Company and its Restricted Subsidiaries as at such date, plus (ii) the Average Outstanding during the applicable Low Period. For purposes of this definition: (a) "Average Outstanding" shall mean the average of the unpaid principal amounts of Consolidated Current Debt of the Company and its Restricted Subsidiaries outstanding at the close of business on each day within a period of 30 consecutive days; and (b) "Low Period" shall mean the period of 30 consecutive days for which Average Outstanding is the lowest of any period of 30 consecutive days during the period of 15 consecutive months ending with the date of determination of Total Debt. "Total Equity" as at any date shall mean stockholders' equity determined in accordance with generally accepted accounting principles consolidating the Company and its Restricted Subsidiaries. "Unrestricted Subsidiary" shall mean any Subsidiary which is not a Restricted Subsidiary; provided, that the Board of Directors may designate any Restricted Subsidiary as an Unrestricted Subsidiary but only if (i) the Subsidiary so designated shall then own no Funded Debt or capital stock of any Restricted Subsidiary, (ii) after giving effect to such designation, the Company and its Restricted Subsidiaries could issue $1 of additional Consolidated Funded Debt and (iii) at the time of such designation and after giving effect thereto no Default or Event of Default shall have occurred and be continuing. Any Subsidiary which is designated by the Board of Directors of the Company as an Unrestricted Subsidiary after having been a Restricted Subsidiary may not be redesignated a Restricted Subsidiary. The Company shall give prompt notice to the Noteholders of any designation of an Unrestricted Subsidiary. "Voting Stock" shall mean Securities of any class or classes, the holders of which are ordinarily, in the absence of contingencies, entitled to elect a majority of the corporate directors (or Persons performing similar functions). "Wholly-owned" when used in connection with any Subsidiary shall mean a Subsidiary of which all of the issued and outstanding shares of stock (except shares required as directors' qualifying shares and, in the case of The Outdoor Footwear Company, Class A -31- 36 The Timberland Company Note Agreement Stock so long as such Class A Stock is excluded from the definition of "Minority Interests") are owned by the Company and its Wholly-owned Subsidiaries. Section 8.2. Accounting Principles. Where the character or amount of any asset or liability or item of income or expense is required to be determined or any consolidation or other accounting computation is required to be made for the purposes of this Agreement, the same shall be done in accordance with generally accepted accounting principles, to the extent applicable, except where such principles are inconsistent with the requirements of this Agreement. Section 8.3. Directly or Indirectly. Where any provision in this Agreement refers to action to be taken by any Person, or which such Person is prohibited from taking, such provision shall be applicable whether the action in question is taken directly or indirectly by such Person. SECTION 9. MISCELLANEOUS. Section 9.1. Registered Notes. The Company shall cause to be kept at its principal office a register for the registration and transfer of the Notes (hereinafter called the "Note Register"), and the Company will register or transfer or cause to be registered or transferred, as hereinafter provided and under such reasonable regulations as it may prescribe, any Note issued pursuant to this Agreement. At any time and from time to time the registered holder of any Note which has been duly registered as hereinabove provided may transfer such Note upon surrender thereof at the principal office of the Company duly endorsed or accompanied by a written instrument of transfer duly executed by the registered holder of such Note or its attorney duly authorized in writing. The Person in whose name any registered Note shall be registered shall be deemed and treated as the owner and holder thereof for all purposes of this Agreement. Payment of or on account of the principal, premium, if any, and interest on any registered Note shall be made to or upon the written order of such registered holder. Section 9.2. Exchange of Notes. At any time, and from time to time, upon not less than ten days' notice to that effect given by the holder of any Note initially delivered or of any Note substituted therefor pursuant to [Section] 9.1, this [Section] 9.2 or [Section] 9.3, and, upon surrender of such Note at its office, the Company will deliver in exchange therefor, without expense to the holder, except as set forth below, Notes for the same aggregate principal amount as the then unpaid principal amount of the Note so surrendered in the denomination of $100,000 or any amount in excess thereof as such holder shall specify, dated as of the date to which interest has been paid on the Note so surrendered or, if such surrender is prior to the payment of any interest thereon, then dated as of the date of issue, payable to such Person or Persons, or order, as may be designated by such holder, and otherwise of the same form and tenor as the Notes so surrendered for exchange. The Company may require the payment of -32- 37 The Timberland Company Note Agreement a sum sufficient to cover any stamp tax or governmental charge imposed upon such exchange or transfer. Section 9.3. Loss, Theft, Etc. of Notes. Upon receipt of evidence satisfactory to the Company of the loss, theft, mutilation or destruction of any Note, and in the case of any such loss, theft or destruction upon delivery of a bond of indemnity in such form and amount as shall be reasonably satisfactory to the Company, or in the event of such mutilation upon surrender and cancellation of the Note, the Company will make and deliver without expense to the holder thereof, a new Note, of like tenor, in lieu of such lost, stolen, destroyed or mutilated Note. If the Purchaser or any subsequent institutional holder is the owner of any such lost, stolen or destroyed Note, then the affidavit of an authorized officer of such owner, setting forth the fact of loss, theft or destruction and of its ownership of the Note at the time of such loss, theft or destruction shall be accepted as satisfactory evidence thereof and no further indemnity shall be required as a condition to the execution and delivery of a new Note other than the written agreement of such owner to indemnify the Company. Section 9.4. Expenses, Stamp Tax Indemnity. Whether or not the transactions herein contemplated shall be consummated, the Company agrees to pay directly all of your reasonable out-of-pocket expenses in connection with the preparation, execution and delivery of this Agreement and the transactions contemplated hereby, including but not limited to the reasonable charges and disbursements of Chapman and Cutler, your special counsel, duplicating and printing costs and charges for shipping the Notes, adequately insured to you at your home office or at such other place as you may designate, and all such expenses relating to any amendment, waivers or consents pursuant to the provisions hereof. The Company also agrees that it will pay and save you harmless against any and all liability with respect to stamp and other taxes (other than transfer taxes or taxes on income or revenues), if any, which may be payable or which may be determined to be payable in connection with the execution and delivery of this Agreement or the Notes, whether or not any Notes are then outstanding. The Company agrees to protect and indemnify you against any liability for any and all brokerage fees and commissions payable or claimed to be payable to any Person in connection with the transactions contemplated by this Agreement. You hereby represent and warrant that you have not engaged any investment banker or broker in connection with your purchase of the Notes. Section 9.5. Powers and Rights Not Waived; Remedies Cumulative. No delay or failure on the part of the holder of any Note in the exercise of any power or right shall operate as a waiver thereof; nor shall any single or partial exercise of the same preclude any other or further exercise thereof, or the exercise of any other power or right, and the rights and remedies of the holder of any Note are cumulative to and are not exclusive of any rights or remedies any such holder would otherwise have, and no waiver or consent, given or extended pursuant to [Section] 7 hereof, shall extend to or affect any obligation or right not expressly waived or consented to. Section 9.6. Notices. All communications provided for hereunder shall be in writing and, if to you, delivered or mailed by registered or certified mail, addressed to you at your address appearing on Schedule I to this Agreement or such other address as you or -33- 38 The Timberland Company Note Agreement the subsequent holder of any Note initially issued to you, may designate to the Company in writing, and if to the Company, delivered or mailed by registered or certified mail to the Company at 11 Merrill Industrial Drive, Hampton, New Hampshire 03842-5050, Attention: Chief Financial Officer or to such other address as the Company may in writing designate to you or to a subsequent holder of the Note initially issued to you. Notice shall be effective upon the earlier of (i) three business days after such notice is sent or (ii) actual receipt of such notice. Section 9.7. Successors and Assigns. This Agreement shall be binding upon the Company and its successors and assigns and shall inure to your benefit and to the benefit of your successors and assigns, including each successive holder or holders of any Notes. Section 9.8. Survival of Covenants and Representations. All covenants, representations and warranties made by the Company herein and in any certificates delivered pursuant hereto, whether or not in connection with the Closing Date, shall survive the closing and the delivery of this Agreement and the Notes. Section 9.9. Severability. Should any part of this Agreement for any reason be declared invalid, such decision shall not affect the validity of any remaining portion, which remaining portion shall remain in force and effect as if this Agreement had been executed with the invalid portion thereof eliminated and it is hereby declared the intention of the parties hereto that they would have executed the remaining portion of this Agreement without including therein any such part, parts, or portion which may, for any reason, be hereafter declared invalid. Section 9.10. Governing Law. This Agreement and the Notes issued and sold hereunder shall be governed by and construed in accordance with Illinois law. Section 9.11. Captions. The descriptive headings of the various Sections or parts of this Agreement are for convenience only and shall not affect the meaning or construction of any of the provisions hereof. -34- 39 The Timberland Company Note Agreement The execution hereof by you shall constitute a contract between us for the uses and purposes hereinabove set forth, and this Agreement may be executed in any number of counterparts, each executed counterpart constituting an original but all together only one agreement. THE TIMBERLAND COMPANY By /s/ Carden N. Welsh ----------------------- Its Carden N. Welsh Treasurer Accepted as of April 1, 1994. PRINCIPAL MUTUAL LIFE INSURANCE COMPANY By /s/ JON C HEINY ----------------------- Its Jon C. Heiny Counsel By /s/ JON M. DAVIDSON ----------------------- Its Jon M. Davidson Assistant Director- Securities Investment 40 The Timberland Company Note Agreement The execution hereof by you shall constitute a contract between us for the uses and purposes hereinabove set forth, and this Agreement may be executed in any number of counterparts, each executed counterpart constituting an original but all together only one agreement. THE TIMBERLAND COMPANY By /s/ Carden N. Welsh ----------------------- Its Carden N. Welsh Treasurer Accepted as of April 1, 1994. GE CAPITAL ASSURANCE COMPANY TRUST By /s/ William D. Koski ----------------------- Its William D. Koski Assistant Vice President 41 7.16% Senior Notes due April 15, 2000 The Timberland Company Note Agreement The execution hereof by you shall constitute a contract between us for the uses and purposes hereinabove set forth, and this Agreement may be executed in any number of counterparts, each executed counterpart constituting an original but all together only one agreement. THE TIMBERLAND COMPANY By /s/ Carden N. Welsh ----------------------- Its Carden N. Welsh Treasurer Accepted as of April 1, 1994. SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.) By /s/ L. Brock Thomson ----------------------- Its L. Brock Thomson Treasurer 42 The Timberland Company Note Agreement The execution hereof by you shall constitute a contract between us for the uses and purposes hereinabove set forth, and this Agreement may be executed in any number of counterparts, each executed counterpart constituting an original but all together only one agreement. THE TIMBERLAND COMPANY By /s/ Carden N. Welsh ----------------------- Its Carden N. Welsh Treasurer Accepted as of April 1, 1994. NORTHERN LIFE INSURANCE COMPANY By /s/ Mark S. Jordahl ----------------------- Its Mark S. Jordahl Assistant Treasurer 43 The Timberland Company Note Agreement The execution hereof by you shall constitute a contract between us for the uses and purposes hereinabove set forth, and this Agreement may be executed in any number of counterparts, each executed counterpart constituting an original but all together only one agreement. THE TIMBERLAND COMPANY By /s/ Carden N. Welsh ----------------------- Its Carden N. Welsh Treasurer Accepted as of April 1, 1994. NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY By /s/ Mark S. Jordahl ----------------------- Its Mark S. Jordahl Authorized Representative 44 The Timberland Company Note Agreement The execution hereof by you shall constitute a contract between us for the uses and purposes hereinabove set forth, and this Agreement may be executed in any number of counterparts, each executed counterpart constituting an original but all together only one agreement. THE TIMBERLAND COMPANY By /s/ Carden N. Welsh ----------------------- Its Carden N. Welsh Treasurer Accepted as of April 1, 1994. THE NORTH ATLANTIC LIFE INSURANCE COMPANY OF AMERICA By /s/ Mark S. Jordahl ----------------------- Its Mark S. Jordahl Assistant Treasurer 45 The Timberland Company Note Agreement The execution hereof by you shall constitute a contract between us for the uses and purposes hereinabove set forth, and this Agreement may be executed in any number of counterparts, each executed counterpart constituting an original but all together only one agreement. THE TIMBERLAND COMPANY By /s/ Carden N. Welsh ----------------------- Its Carden N. Welsh Treasurer Accepted as of April 1, 1994. THE FRANKLIN LIFE INSURANCE COMPANY By /s/ Daniel C. Leimbach ----------------------- Its Daniel C. Leimbach Vice President By /s/ Elizabeth E. Arthur ----------------------- Its Elizabeth E. Arthur Assistant Secretary 46 The Timberland Company Note Agreement The execution hereof by you shall constitute a contract between us for the uses and purposes hereinabove set forth, and this Agreement may be executed in any number of counterparts, each executed counterpart constituting an original but all together only one agreement. THE TIMBERLAND COMPANY By /s/ Carden N. Welsh ----------------------- Its Carden N. Welsh Treasurer Accepted as of April 1, 1994. CENTURY LIFE OF AMERICA By Century Investment Management Company By /s/ Donald Heltner ----------------------- Its Donald Heltner Vice President 47 The Timberland Company Note Agreement The execution hereof by you shall constitute a contract between us for the uses and purposes hereinabove set forth, and this Agreement may be executed in any number of counterparts, each executed counterpart constituting an original but all together only one agreement. THE TIMBERLAND COMPANY By /s/ Carden N. Welsh ----------------------- Its Carden N. Welsh Treasurer Accepted as of April 1, 1994. CUNA MUTUAL INSURANCE SOCIETY By Century Investment Management Company By /s/ Donald Heltner ----------------------- Its Donald Heltner Vice President 48 The Timberland Company Note Agreement The execution hereof by you shall constitute a contract between us for the uses and purposes hereinabove set forth, and this Agreement may be executed in any number of counterparts, each executed counterpart constituting an original but all together only one agreement. THE TIMBERLAND COMPANY By /s/ Carden N. Welsh ----------------------- Its Carden N. Welsh Treasurer Accepted as of April 1, 1994. GUARANTEE MUTUAL LIFE COMPANY By /s/ Steven A. Scanlan ----------------------- Its Steven A. Scanlan Senior Invesment Officer - Securities 49 The Timberland Company Note Agreement The execution hereof by you shall constitute a contract between us for the uses and purposes hereinabove set forth, and this Agreement may be executed in any number of counterparts, each executed counterpart constituting an original but all together only one agreement. THE TIMBERLAND COMPANY By /s/ Carden N. Welsh ----------------------- Its Carden N. Welsh Treasurer Accepted as of April 1, 1994. TMG LIFE INSURANCE COMPANY By: THE MUTUAL GROUP, its Agent By /s/ Michael J. Carew ----------------------- Name: Michael J. Carew Title: Assistant Vice President By /s/ Robert Lapointe ----------------------- Name: Robert Lapointe Title: Vice President 50 SCHEDULE I PRINCIPAL AMOUNT NAME AND ADDRESS OF NOTES TO BE OF PURCHASERS PURCHASED PRINCIPAL MUTUAL LIFE INSURANCE COMPANY $20,000,000(1) 711 High Street Des Moines, Iowa 50392-0800 Attention: Investment Department-Securities Division Regarding Bond No. 1-B-60072 (with respect to the $18,000,000 Note) Regarding Bond No. 16-B-60072 (with respect to the $2,000,000 Note) Telefacsimile: (515) 248-2490 Confirmation: (515) 248-3495 Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "The Timberland Company, 7.16% Senior Notes due April 15, 2000, PPN 887100 B* 5, Bond No. 1-B-60072 (with respect to the $18,000,000 Note) and Bond No. 16-B-60072 (with respect to the $2,000,000 Note), principal, premium or interest") to: Norwest Bank Iowa, N.A. 7th and Walnut Streets Des Moines, Iowa 50309 ABA No. 073 000 228 for credit to: Principal Mutual Life Insurance Company Account No. 014752 (with respect to the $18,000,000 Note) Separate Account No. 032395 (with respect to the $2,000,000 Note) Notices All notices concerning payment on or in respect of the Notes, to: Principal Mutual Life Insurance Company 711 High Street Des Moines, Iowa 50392-0960 Attention: Investment Department, Accounting & Treasury _____________________ (1) In two Notes denominated as follows: (i) $18,000,000 and (ii) $2,000,000. I-1 51 All notices and communications other than those in respect to payments to be addressed as first provided above. Name of Nominee in which Notes are to be issued: None Taxpayer I.D. Number: 42-012-7290 I-2 52 SCHEDULE I PRINCIPAL AMOUNT NAME AND ADDRESS OF NOTES TO BE OF PURCHASERS PURCHASED GE CAPITAL ASSURANCE COMPANY TRUST $10,000,000 c/o GNA Corporation Two Union Square, Suite 5600 P.O. Box 490 Seattle, Washington 98111-0490 Attention: Dan Greenshields Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "The Timberland Company, 7.16% Senior Notes due April 15, 2000, PPN 887100 B* 5, principal, premium or interest") to: Bankers Trust Company 16 Wall Street New York, New York 10015 ABA 021001033 Attn: 99-911-145 Account No. 97834 Notices All notices and communications, including notices with respect to payments and written confirmation of each such payment, to be addressed as first provided above. Name of Nominee in which Notes are to be issued: SALKELD & CO Taxpayer I.D. Number: 16-1202227 I-3 53 SCHEDULE I PRINCIPAL AMOUNT NAME AND ADDRESS OF NOTES TO BE OF PURCHASERS PURCHASED SUN LIFE ASSURANCE COMPANY OF $10,000,000(2) CANADA (U.S.) One Sun Life Executive Park Wellesley Hills, Massachusetts 02181 Attention: Investment Department/Private Placements, SC [Section] 1303 Telecopier Number: (617) 431-7521 Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "The Timberland Company, 7.16% Senior Notes due April 15, 2000, PPN 887100 B* 5, principal, premium or interest") to: Chemical Bank (ABA [Section]021-000-128) 55 Water Street New York, New York 10041 for credit to the account of:Sun Life Assurance Company of Canada (U.S.) Account Number 323-023177 (with respect to the $8,000,000 Note) Account Number 323-162592 (with respect to the $2,000,000 Note) Notices All notices of payment on or in respect of the Notes and written confirmation of each such payment to: Sun Life Assurance Company of Canada (U.S.) Three Sun Life Executive Park Wellesley Hills, Massachusetts 02181 Attention: Manager, Securities Accounting SC No. 3327 All notices and communications other than those in respect to payments to be addressed as first provided above. Name of Nominee in which Notes are to be issued: None Taxpayer I.D. Number: 04-2461439 ___________________________ (2) In two Notes denominated as follows: (i) $8,000,000 and (ii) $2,000,000. I-4 54 SCHEDULE I PRINCIPAL AMOUNT NAME AND ADDRESS OF NOTES TO BE OF PURCHASERS PURCHASED NORTHERN LIFE INSURANCE COMPANY $5,500,000 c/o Washington Square Capital 100 Washington Square, Suite 800 Minneapolis, Minnesota 55401-2147 Attention: Securities Department Telecopier Number: (612) 372-5368 Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "The Timberland Company, 7.16% Senior Notes due April 15, 2000, PPN 887100 B* 5, principal, premium or interest") to: First National Bank N.A./Mpls. (ABA No. 091000022) 601 2nd Avenue South Attention: Securities Accounting for credit to: Northern Life Insurance Company Account Number 1602-3237-6105 Notices All notices and communications, including notices with respect to payments and written confirmation of each such payment, to be addressed as first provided above. Name of Nominee in which Notes are to be issued: None Taxpayer I.D. Number: 41-1295933 I-5 55 SCHEDULE I PRINCIPAL AMOUNT NAME AND ADDRESS OF NOTES TO BE OF PURCHASERS PURCHASED NORTHWESTERN NATIONAL LIFE INSURANCE $2,000,000 COMPANY c/o Washington Square Capital 100 Washington Square, Suite 800 Minneapolis, Minnesota 55401-2147 Attention: Securities Department Telecopier Number: (612) 372-5368 Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "The Timberland Company, 7.16% Senior Notes due April 15, 2000, PPN 887100 B* 5, principal, premium or interest") to: First National Bank of Minneapolis (ABA No. 091000022) 601 2nd Avenue South Minneapolis, Minnesota 55402 for credit to: Northwestern National Life Insurance Company Account Number 1102-4001-4461 Notices All notices and communications, including notices with respect to payments and written confirmation of each such payment, to be addressed as first provided above. Name of Nominee in which Notes are to be issued: None Taxpayer I.D. Number: 41-0451140 I-6 56 SCHEDULE I PRINCIPAL AMOUNT NAME AND ADDRESS OF NOTES TO BE OF PURCHASERS PURCHASED THE NORTH ATLANTIC LIFE INSURANCE $1,500,000 COMPANY OF AMERICA c/o Washington Square Capital 100 Washington Square, Suite 800 Minneapolis, Minnesota 55401-2147 Attention: Securities Department Telecopier Number: (612) 372-5368 Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "The Timberland Company, 7.16% Senior Notes due April 15, 2000, PPN 887100 B* 5, principal, premium or interest") to: Northern Trust Company (ABA No. 071-000-152) for credit to: The North Atlantic Life Insurance Company Account Number 5186041000 Notices All notices and communications to be addresses as first provided above, except notices of payments on or in respect of the Notes and written confirmation of each such payment to be addressed Attention: Securities Operations. Name of Nominee in which Notes are to be issued: None Taxpayer I.D. Number: 11-1983132 I-7 57 SCHEDULE I PRINCIPAL AMOUNT NAME AND ADDRESS OF NOTES TO BE OF PURCHASERS PURCHASED THE FRANKLIN LIFE INSURANCE COMPANY $5,000,000 Franklin Square Springfield, Illinois 62713 Attention: Investment Division Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "The Timberland Company, 7.16% Senior Notes due April 15, 2000, PPN 887100 B* 5, principal, premium or interest") to: Morgan Guaranty Trust Company of New York (ABA No. 0210-0023-8) 23 Wall Street New York, New York 10015 Attention: Money Transfer Department for credit to: The Franklin Life Insurance Company Account Number 022-05-988 Notices All notices and communications, including notices with respect to payments and written confirmation of each such payment, to be addressed as first provided above. Name of Nominee in which Notes are to be issued: None Taxpayer I.D. Number: 37-0281650 Institution Identification Number 36362 I-8 58 SCHEDULE I PRINCIPAL AMOUNT NAME AND ADDRESS OF NOTES TO BE OF PURCHASERS PURCHASED CENTURY LIFE OF AMERICA $3,000,000 c/o CUNA Mutual Insurance Group Securities Management Department 5910 Mineral Point Road Madison, Wisconsin 53705 Attention: Private Placements Telecopier Number: (608) 238-2316 Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "The Timberland Company, 7.16% Senior Notes due April 15, 2000, PPN 887100 B* 5, principal, premium or interest") to: USTRUST NYC (ABA No. 021001318) Account Number 473633 FBO Century Life of America Income Collections Department Notices All notices and communications to be addressed as first provided above, except notices with respect to payments and written confirmation of each such payment, to be addressed as follows: CUNA Mutual Insurance Group Cash Management Department P. O. Box 391 Madison, Wisconsin 53701 Attention: Kris Conway Name of Nominee in which Notes are to be issued: Atwell & Co. Taxpayer I.D. Number for Atwell: 13-6065575 I-9 59 SCHEDULE I PRINCIPAL AMOUNT NAME AND ADDRESS OF NOTES TO BE OF PURCHASERS PURCHASED CUNA MUTUAL INSURANCE SOCIETY $2,000,000 c/o CUNA Mutual Insurance Group Securities Management Department 5910 Mineral Point Road Madison, Wisconsin 53705 Attention: Private Placements Telecopier Number: (608) 238-2316 Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "The Timberland Company, 7.16% Senior Notes due April 15, 2000, PPN 887100 B* 5, principal, premium or interest") to: USTRUST NYC (ABA No. 021001318) Account Number 473633 FBO CUNA Mutual Insurance Group Income Collections Department Notices All notices and communications to be addressed as first provided above, except notices with respect to payments and written confirmation of each such payment, to be addressed as follows: CUNA Mutual Insurance Group Cash Management Department P. O. Box 391 Madison, Wisconsin 53701 Attention: Kris Conway Name of Nominee in which Notes are to be issued: Atwell & Co. Taxpayer I.D. Number for Atwell: 13-6065575 I-10 60 SCHEDULE I PRINCIPAL AMOUNT NAME AND ADDRESS OF NOTES TO BE OF PURCHASERS PURCHASED GUARANTEE MUTUAL LIFE COMPANY $3,000,000 One Guarantee Centre 8801 Indian Hills Drive Omaha, Nebraska 68114 Attention: Investment Department Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "The Timberland Company, 7.16% Senior Notes due April 15, 2000, PPN 887100 B* 5, principal, premium or interest") to: Bankers Trust Company 16 Wall Street New York, New York 10015 (ABA No. 021 001 033) for credit to: Guarantee Mutual Life Company Account Number 50-035-201 Notices All notices and communications, including notices with respect to payments and written confirmation of each such payment, to be addressed as first provided above. Name of Nominee in which Notes are to be issued: None Taxpayer I.D. Number: 47-017-9235 I-11 61 SCHEDULE I PRINCIPAL AMOUNT NAME AND ADDRESS OF NOTES TO BE OF PURCHASERS PURCHASED TMG LIFE INSURANCE COMPANY $3,000,000 401 North Executive Drive Brookfield, Wisconsin 53008-0980 Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "The Timberland Company, 7.16% Senior Notes due April 15, 2000, PPN 887100 B* 5, principal, premium or interest") to: Federal Reserve Bank Minneapolis Norwest Bank MN/Trust ABA No. 091000019 Credit Account Number: 08-40-245 For credit to: TMG Life Universal A Account Number 13075700 Contact: Michael Eiynck Notices All notices and communications, including notices with respect to payments and written confirmation of each such payment, to be addressed to: Lisa Harris The Mutual Group (U.S.) 401 North Executive Drive Brookfield, Wisconsin 53008-0980 Telephone Number: (414) 797-2305 Facsimile Number: (414) 797-3988 Name of Nominee in which Notes are to be issued: None Taxpayer I.D. Number: 45-0208990 I-12 62 THE TIMBERLAND COMPANY 7.16% Senior Note Due April 15, 2000 PPN: 887100 B* 5 No. R- _____________, 19__ THE TIMBERLAND COMPANY, a Delaware corporation (the "Company"), for value received, hereby promises to pay to or registered assigns on the fifteenth day of April, 2000 the principal amount of DOLLARS ($_______________) and to pay interest (computed on the basis of a 360-day year of twelve 30-day months) on the principal amount from time to time remaining unpaid hereon at the rate of 7.16% per annum from the date hereof until maturity, payable semiannually on the fifteenth of each April and October in each year, commencing October 15, 1994, and at maturity. The Company agrees to pay interest on overdue principal (including any overdue optional prepayment of principal) and premium, if any, and (to the extent legally enforceable) on any overdue installment of interest, at the rate of 9.16% per annum after maturity, whether by acceleration or otherwise, until paid. Both the principal hereof and interest hereon are payable at the principal office of the Company in Hampton, New Hampshire in coin or currency of the United States of America which at the time of payment shall be legal tender for the payment of public and private debts. This Note is one of the 7.16% Senior Notes due April 15, 2000 (the "Notes") of the Company in the aggregate principal amount of $65,000,000 issued or to be issued under and pursuant to the terms and provisions of the separate Note Agreements, each dated as of April 1, 1994 (the "Note Agreements"), entered into by the Company with the original purchasers therein referred to. This Note and the holder hereof are entitled equally and ratably with the holders of all other Notes outstanding under the Note Agreements to all the benefits and security provided for thereby or referred to therein. Reference is hereby made to the Note Agreements for a statement of such rights and benefits. This Note and the other Notes outstanding under the Note Agreements may be declared due prior to their expressed maturity dates, all in the events, on the terms and in the manner and amounts as provided in the Note Agreements. EXHIBIT A (to Note Agreement) 63 The Notes are not subject to prepayment or redemption at the option of the Company prior to their expressed maturity dates except on the terms and conditions and in the amounts and with the premium, if any, set forth in the Note Agreements. This Note is registered on the books of the Company and is transferable only by surrender thereof at the principal office of the Company duly endorsed or accompanied by a written instrument of transfer duly executed by the registered holder of this Note or its attorney duly authorized in writing. Payment of or on account of principal, premium, if any, and interest on this Note shall be made only to or upon the order in writing of the registered holder. THE TIMBERLAND COMPANY By -------------------------- Its A-2 64 THE TIMBERLAND COMPANY CLOSING CERTIFICATE Principal Mutual Life The North Atlantic Life Insurance Insurance Company Company of America Des Moines, Iowa c/o Washington Square Capital Minneapolis, Minnesota GE Capital Assurance Company Trust c/o GNA Corporation The Franklin Life Insurance Company Seattle, Washington Springfield, Illinois Sun Life Assurance Company of Century Life of America Canada (U.S.) Madison, Wisconsin Wellesley Hills, Massachusetts Cuna Mutual Life Insurance Society Northern Life Insurance Company Madison, Wisconsin c/o Washington Square Capital Minneapolis, Minnesota Guarantee Mutual Life Company Omaha, Nebraska Northwestern National Life Insurance Company TMG Life Insurance Company c/o Washington Square Capital Brookfield, Wisconsin Minneapolis, Minnesota
Gentlemen: This certificate is delivered to you in compliance with the requirements of the separate Note Agreements, each dated as of April 1, 1994 (the "Agreements"), entered into by the undersigned, The Timberland Company, a Delaware corporation (the "Company"), with each of you, and as an inducement to and as part of the consideration for your purchase on this date aggregating $65,000,000 principal amount of the 7.16% Senior Notes due April 15, 2000 (the "Notes") of the Company pursuant to the Agreements. The terms which are capitalized herein shall have the same meanings as in the Agreements. The Company represents and warrants to you as follows: 1. Subsidiaries. Annex A attached hereto states the name of each of the Company's Subsidiaries, its jurisdiction of incorporation and the percentage of its Voting Stock owned by the Company and/or its Subsidiaries. The Company and each Subsidiary 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 non-assessable. EXHIBIT B (to Note Agreement) 65 2. Corporate Organization and Authority. The Company, and each Subsidiary, (a) is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation; (b) has all requisite power and authority and all necessary licenses and permits 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 and permits would not have a material adverse effect on the properties, business, prospects, profits or condition (financial or otherwise) of the Company or of the Company and its Subsidiaries, taken as a whole; and (c) is duly licensed or qualified and is in good standing as a foreign corporation in each jurisdiction wherein the nature of the business transacted by it or the nature of the property owned or leased by it makes such licensing or qualification necessary, except where the failure to be so licensed or qualified in a jurisdiction would not have a material adverse effect on the properties, business, prospects, profits or condition (financial or otherwise) of the Company or of the Company and its Subsidiaries, taken as a whole. 3. Business and Property. You have heretofore been furnished with a copy of the Private Placement Offering Memorandum dated March, 1994 (the "Memorandum") prepared by J.P. Morgan Securities Inc., which generally sets forth the business conducted and proposed to be conducted by the Company and its Subsidiaries and the principal properties of the Company and its Subsidiaries. 4. Financial Statements. (a) The consolidated balance sheets of the Company and its Subsidiaries as of December 31 in each of the years 1989 to 1993 both inclusive, and the statements of income and stockholders' equity and changes in financial position or cash flows for the fiscal years ended on said dates accompanied by a report thereon containing an opinion unqualified as to scope limitations imposed by the Company and otherwise without qualification except as therein noted, by Arthur Andersen & Co. or Deloitte & Touche, have been prepared in accordance with generally accepted accounting principles consistently applied except as therein noted, are correct and complete and present fairly the financial position of the Company and its Subsidiaries as of such dates and the results of their operations and changes in their financial position for such periods. (b) Since December 31, 1993, there has been no change in the condition, financial or otherwise, of the Company and its Subsidiaries as shown on the consolidated balance sheet as of such date except changes in the ordinary course of business, none of which individually or in the aggregate has been materially adverse. 5. Indebtedness. Annex B attached hereto correctly describes all Current Debt, Funded Debt and Capitalized Leases of the Company and its Restricted B-2 66 Subsidiaries outstanding on the respective dates set forth therein (after giving effect to the application of the proceeds of the Notes). There has been no material change in the matters set forth in Annex B since the respective dates set forth therein. 6. Full Disclosure. The financial statements referred to in paragraph 4 do not, nor does the Memorandum or any other written statement furnished by the Company to you in connection with the negotiation 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 or herein not misleading. There is no fact peculiar to the Company or its Subsidiaries which the Company has not disclosed to you in writing which materially affects adversely nor, so far as the Company can now foresee, will materially affect adversely the properties, business, prospects, profits or condition (financial or otherwise) of the Company and its Subsidiaries other than the effects of general economic conditions, weather conditions or perceptions of style. The Company has no knowledge of any weather condition or perception of style which might materially affect adversely the properties, business, prospects, profits or condition (financial or otherwise) of the Company or of the Company and its Subsidiaries, taken as a whole. 7. Pending Litigation. Except as disclosed in Form 10-K of the Company for the year ended December 31, 1993 and the Memorandum, there are no proceedings 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 which involve the possibility of materially and adversely affecting the properties, business, profits or condition (financial or otherwise) of the Company and its Subsidiaries. Neither the Company nor any Subsidiary is in default with respect to any order of any court or governmental authority or arbitration board or tribunal. 8. Title to Properties. The Company, and each Subsidiary, has good and marketable title in fee simple (or its equivalent under applicable law) to all the real property and has good title to all the other property it purports to own, including that reflected in the most recent balance sheet referred to in paragraph 4 except as sold or otherwise disposed of in the ordinary course of business and except for Liens disclosed in notes to the financial statements referred to in paragraph 4 hereof or otherwise permitted by the Agreement and except where the failure to maintain such title would not have a material adverse effect on the properties, business, profits or condition (financial or otherwise) of the Company or of the Company and its Subsidiaries, taken as a whole. 9. Patents and Trademarks. The Company and each Subsidiary owns or possesses all the patents, trademarks, trade names, service marks, copyright, licenses and rights with respect to the foregoing necessary for the present and planned future conduct of its business, without any known conflict with the rights of others, except where the failure to own or possess such items would not have a material adverse B-3 67 effect on the properties, business, profits or condition (financial or otherwise) of the Company or of the Company and its Subsidiaries, taken as a whole. 10. Sale is Legal and Authorized. The sale of the Notes and compliance by the Company with all of the provisions of the Agreement and the Notes - (a) are within the corporate powers of the Company and have been duly authorized by proper corporate action on the part of the Company; and (b) will not violate any provisions of any law or any order of any court or governmental authority or agency and will not conflict with or result in any breach of any of the terms, conditions or provisions of, or constitute a default under the Articles of Incorporation or By-laws of the Company or any indenture or other agreement or instrument to which the Company is a party or by which it may be bound or result in the imposition of any Liens on any property of the Company. 11. No Defaults. No Default or Event of Default has occurred and is continuing. The Company is not in default in the payment of principal or interest on any Indebtedness for borrowed money in an aggregate principal amount in excess of $100,000 and is not in default under any instrument or instruments or agreements under and subject to which any Indebtedness for borrowed money in an aggregate principal amount in excess of $100,000 has been issued and no event has occurred and is continuing under the provisions of any such instrument or agreement which with the lapse of time or the giving of notice, or both, would constitute an event of default thereunder. 12. Governmental Consent. No approval, consent or withholding of objection on the part of any regulatory body, state, Federal or local, is necessary in connection with the execution and delivery by the Company of the Agreement or the Notes or compliance by the Company with any of the provisions of the Agreement or the Notes. 13. Taxes. All tax returns required to be filed by the Company or any Subsidiary in any jurisdiction have, in fact, been filed, and all taxes, assessments, fees and other governmental charges upon the Company or any Subsidiary or upon any of their respective properties, income or franchises, which are shown to be due and payable in such returns have been paid. The Company does not know of any proposed additional tax assessment against it for which adequate provision has not been made on its accounts. The Federal income tax liability of the Company and its Subsidiaries has been finally determined by the Internal Revenue Service and satisfied for all taxable years up to and including the taxable year ended December 31, 1985 and no material controversy in respect of additional income taxes due since said date is pending or to the knowledge of the Company threatened. The provisions for taxes on the books of the Company and each Subsidiary are adequate for all open years, and for its current fiscal period. B-4 68 14. Use of Proceeds. The net proceeds from the sale of the Notes will be used to repay certain outstanding Indebtedness, to finance manufacturing improvements and management information systems and to provide additional working capital and other corporate purposes. None of the transactions contemplated in the Agreements (including, without limitation thereof, the use of proceeds from the issuance of the Notes) will violate or result in a violation of Section 7 of the Securities Exchange Act of 1934, as amended, or any regulation issued pursuant thereto, including, without limitation, Regulations G, T and X of the Board of Governors of the Federal Reserve System, 12 C.F.R., Chapter II. Neither the Company nor any Subsidiary owns or intends to carry or purchase any "margin stock" (within the meaning of said Regulation G), with the proceeds of the Notes. None of the proceeds from the sale of the Notes will be used to purchase, or refinance any borrowing, the proceeds of which were used to purchase any "security" within the meaning of the Securities Exchange Act of 1934, as amended. 15. Private Offering. Neither the Company, directly or indirectly, nor any agent on its behalf has offered or will offer the Notes or has solicited or will solicit an offer to acquire the Notes from or has otherwise approached or negotiated or will approach or negotiate in respect of the Notes with any Person other than you and not more than 25 other institutional investors, each of whom was offered a portion of the Notes at private sale for investment. Neither the Company, directly or indirectly, nor any agent on its behalf has offered or will offer the Notes or any similar Security to, or has solicited or will solicit an offer to acquire the Notes or any similar Security from, any Person so as to bring the issuance and sale of the Notes within the provisions of Section 5 of the Securities Act of 1933, as amended. 16. Employee Retirement Income Security Act of 1974. The consummation of the transactions provided for in the agreement and compliance by the Company with the provisions thereof and the Notes issued thereunder will not involve any prohibited transaction within the meaning of the Employee Retirement Income Security Act of 1974 ("ERISA") or Section 4975 of the Internal Revenue Code. No "employee pension benefit plans", as defined in ERISA ("Plans"), maintained by the Company or any Person which is under common control with the Company within the meaning of Section 4001(b) of ERISA, nor any trusts created thereunder, have incurred any "accumulated funding deficiency" as defined in Section 302 of ERISA nor does the present value of all benefits vested under all Plans exceed, as of December 31, 1988, the last annual valuation date, the value of the assets of the Plans allocable to such vested benefits. 17. Compliance with Environmental Laws. The Company complies with all applicable Federal, state, or local laws, statutes, rules, regulations or ordinances relating to public health, safety or the environment, including, without limitation, relating to releases, discharges, emissions or disposals to air, water, land or ground water, to the withdrawal or use of ground water, to the use, handling or disposal of polychlorinated biphenyls (PCB's), asbestos or urea formaldehyde, to the treatment, storage, disposal or management of hazardous substances (including, without B-5 69 limitation, petroleum, its derivatives, by-products or other hydrocarbons), to exposure to toxic, hazardous or other controlled, prohibited or regulated substances the failure to comply with which could have a material adverse effect on the Company, its Subsidiaries, their businesses and properties, taken as a whole. Except as disclosed in a letter of the Company addressed to you and dated the date hereof, the Company does not know of any liability of the Company or any Subsidiary under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986 (42 U.S.C. Section 9601 et seq.). Dated: THE TIMBERLAND COMPANY By -------------------------------- Its 70 SUBSIDIARIES OF THE COMPANY 1. RESTRICTED SUBSIDIARIES:
PERCENTAGE OF VOTING STOCK OWNED BY COMPANY NAME OF JURISDICTION OF AND EACH OTHER SUBSIDIARY INCORPORATION SUBSIDIARY The Timberland World Trading Company Delaware 100% The Timberland World Trading GmbH Germany 100% The Outdoor Footwear Company Delaware 100% The Timberland Finance Company Delaware 100% Timberland S.A.R.L. France 100% Timberland Footwear & Clothing, Inc. Canada 100% Timberland International, Inc. Delaware 100% Timberland (UK) Limited England 99.9% Timberland Europe, Inc. (formerly Timberland Precision Instruments, Inc.) Delaware 100% The Recreational Footwear Company Cayman Islands 100% Timberland Manufacturing Company Delaware 100% Timberland Retail, Inc. Delaware 100% Timberland Scandinavia, Inc. Delaware 100% Component Footwear Dominicana, S.A. Dominican Republic 100% The Recreational Footwear Dominican Republic 100% Company (Dominicana), S.A. Timberland Aviation, Inc. Delaware 100% The Timberland Company of Australia Pty, Ltd. Australia 100% Timberland Direct Sales, Inc. Delaware 100% Timberland Espa[Section]a, S.A. Spain 99.98% Timberland Footwear & Clothing New Zealand Limited New Zealand 99% Timberland GmbH Austria 100% Timberland International Sales Corporation U.S. Virgin Islands 100%
2. SUBSIDIARIES (OTHER THAN RESTRICTED SUBSIDIARIES):
PERCENTAGE OF VOTING STOCK NAME OF JURISDICTION OF OWNED BY COMPANY AND SUBSIDIARY INCORPORATION EACH OTHER SUBSIDIARY None
ANNEX A (to Closing Certificate) 71 DESCRIPTION OF DEBT AND LEASES 1. Current Debt of the Company and its Restricted Subsidiaries outstanding on April 15, 1994 (after giving effect to the application of proceeds of the Notes) is as follows:
Effective Maturity Original Face Outstanding Date Date Amount Liability MONEY MARKET LINES LIBOR (Bank Hapoalim) 3/21/94 4/20/94 $ 9,000,000 $ 9,000,000 LIBOR (Credito Italiano) 4/14/94 4/15/94 5,000,000 5,000,000 =========== =========== $14,000,000 $14,000,000 MORGAN GUARANTY REVOLVING CREDIT AGREEMENT LIBOR 3/17/94 4/18/94 $ 3,000,000 $ 3,000,000 LIBOR 3/23/94 4/22/94 5,000,000 5,000,000 LIBOR 3/24/94 4/25/94 5,000,000 5,000,000 =========== =========== $13,000,000 $13,000,000 MISCELLANEOUS OTHER LIENS(3)* Copy Machines, Computers, Equipment and other Maximum miscellaneous - - $ 3,000,000 $ - =========== ===========
____________________________ * Secured by lien ANNEX B (to Closing Certificate) 72 2. Funded Debt of the Company and its Restricted Subsidiaries outstanding on February 25, 1994 is as follows:
Effective Maturity Original Face Outstanding Date Date Amount Liability PRIVATE PLACEMENT SENIOR NOTES Principal Mutual Life Insurance Company and other insurance companies 12/06/89 12/01/99 $35,000,000 $35,000,000 =========== =========== CHASE MANHATTAN CREDIT AGREEMENT 11/23/93 5/15/99 $50,000,000 $50,000,000 =========== =========== CAPITAL EQUIPMENT LEASES(4)* BayBanks Financing & Leasing Co. Inc. 6/90 6/95 $ 2,096,332 $ 664,194 BayBanks Financing & Leasing Co. Inc. 10/90 11/95 456,507 177,756 BayBanks Financing & Leasing Co. Inc. 12/90 12/95 459,431 195,129 =========== =========== $ 3,012,270 $ 1,037,079 INDUSTRIAL REVENUE BOND* Shawmut Bank, N.A., Trustee 12/27/84 12/2014 $ 6,680,000 $ 5,345,000
3. Capitalized Leases of the Company and its Restricted Subsidiaries outstanding on February 25, 1994 are as follows: -See Item 2 Above- ______________________________ * Secured by lien -2- 73 DESCRIPTION OF SPECIAL COUNSEL'S CLOSING OPINION The closing opinion of Chapman and Cutler, special counsel to the Purchasers, called for by [Section] 4.1 of the Agreements, shall be dated the Closing Date and addressed to the Purchasers, shall be satisfactory in form and substance to the Purchasers and shall be to the effect that: (1) The Company is a corporation, validly existing and in good standing under the laws of the State of Delaware and has the corporate power and the corporate authority to execute and deliver the Agreements and to issue the Notes. (2) Each Agreement has been duly authorized by all necessary corporate action on the part of the Company, has been duly executed and delivered by the Company and constitutes the legal, valid and binding contract of the Company enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent conveyance and similar laws affecting creditors' rights generally, and general principles of equity (regardless of whether the application of such principles is considered in a proceeding in equity or at law). (3) The Notes have been duly authorized by all necessary corporate action on the part of the Company, and the Notes being delivered on the date hereof have been duly executed and delivered by the Company and constitute the legal, valid and binding obligations of the Company enforceable in accordance with their terms, subject to bankruptcy, insolvency, fraudulent conveyance and similar laws affecting creditors' rights generally, and general principles of equity (regardless of whether the application of such principles is considered in a proceeding in equity or at law). (4) The issuance, sale and delivery of the Notes under the circumstances contemplated by the Agreements do not, under existing law, require the registration of the Notes under the Securities Act of 1933, as amended, or the qualification of an indenture under the Trust Indenture Act of 1939, as amended. The opinion of Chapman and Cutler shall also state that the opinion of Ropes & Gray is satisfactory in scope and form to Chapman and Cutler and that, in their opinion, the Purchasers are justified in relying thereon. In rendering the opinion set forth in paragraph 1 above, Chapman and Cutler may rely, as to matters referred to in paragraph 1, solely upon an examination of the Certificate of Incorporation certified by, and a certificate of good standing of the Company from, the Secretary of State of the State of Delaware, the By-laws of the Company and the General Corporation Law of the State of Delaware. The opinion of Chapman and Cutler is limited to the laws of the State of Illinois, the General Corporation Law of the State of Delaware and the Federal laws of the United States. With respect to matters of fact upon which such opinion is based, Chapman and Cutler may rely on appropriate certificates of public officials and officers of the Company and EXHIBIT C (to Note Agreement) 74 upon representations of the Company and the Purchasers delivered in connection with the issuance and sale of the Notes. C-2 75 ROPES & GRAY ONE INTERNATIONAL PLACE BOSTON, MASSACHUSETTS 02110-2624 30 Kennedy Plaza (617) 951-7000 1001 Pennsylvania Avenue, N.W. Providence, R.I. 02903 Suite 1200 South (401) 455-4400 Telecopier: (617) 951-7050 Washington, D.C. 20004 Telecopier: (401) 455-4401 (202) 626-3900 Telecopier: (202) 626-3961 April 15, 1994 To Each of the Purchasers Named in Schedule I to the Note Agreements Referred to Below Ladies and Gentlemen: This opinion is being furnished to you pursuant to Section 4.1(b) of the separate but identical (except for the name of the Purchaser and information related thereto) Note Agreements dated as of April 1, 1994 (the "Note Agreements"), each between The Timberland Company, a Delaware Corporation (the "Company"), and the Purchaser named therein relating to the issuance and sale by the Company of $65,000,000 aggregate principal amount of the Company's 7.16% Senior Notes due April 15, 2000 (the "Notes"). This opinion is being delivered to you contemporaneously with the execution and delivery of the Note Agreements and the Closing thereunder. Terms defined in the Note Agreements and not otherwise defined herein are used herein with the meanings so defined. We have acted as counsel to the Company in connection with the Note Agreements and the transactions contemplated thereby and as such are familiar with the proceedings taken by the Company in connection therewith. Please be advised, however, that, although we represent the Company on a regular basis, the scope of our representation does not include, and, except as specified herein, we have not undertaken, any special factual investigation into the business, properties, agreements or affairs of the Company and its subsidiaries for purposes of rendering the opinions expressed in paragraphs 7 and 8 below. We have anticipated in the preparation of the Note Agreements and have examined copies, executed by the Company, of the Note Agreements and each of the Notes delivered to the Purchasers on the date thereof. We have also examined such certificates, documents and records, and have made such examination of law, as we have deemed necessary to enable us to render the opinions expressed below. In addition, we have examined and relied upon representations and warranties contained in the Note Agreements and in certificates, copies of which have EXHIBIT D (to Note Agreement) 76 ROPES & GRAY Purchasers Named -2- April 15, 1994 in Schedule I been furnished to you and upon the covenants contained in the Note Agreements as to the application of the proceeds of the loans made pursuant thereto. The opinion expressed in clause (b) of paragraph 7 below assumes, without investigation, that the transactions contemplated by the Note Agreements will not result in a violation of financial ratios which are contained in covenants. We call your attention to the fact that each of the Note Agreements and each Note provides that it is to be governed by and construed in accordance with the internal laws of the State of Illinois, and we understand that you are relying on the advice of your special counsel, Chapman and Cutler, with respect to all matters of Illinois law. We are members of the bar of The Commonwealth of Massachusetts, and we are not familiar with, or qualified to express legal conclusions based upon, the laws of the State of Illinois. For purposes of rendering the opinions expressed in paragraphs 5 and 6 below, we have therefore assumed, with your permission, that the internal laws of the State of Illinois are in all respects indentical to those of The Commonwealth of Massachusetts. The opinions expressed below are limited to matters governed by the laws of the Commonwealth of Massachusetts, the General Corporation Law of the State of Delaware and the federal laws of the United States. The opinions expressed in paragraphs 2 and 4 concerning (i) the qualification and good standing of the Company as foreign corporation under the laws of Massachusetts and New Hampshire, (ii) the filing for qualification in Kentucky and (iii) the qualification and good standing of The Outdoor Footwear Company, a Delaware corporation ("TOFC"), under the laws of Puerto Rico are based solely upon certificates or other certification of the Company as a foreign corporation from officials of these jurisdictions, copies of which have been furnished to you. Based on the foregoing, we are of the opinion that: 1. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware with corporate powers adequate for the execution, delivery and performance of the Note Agreements and the issuance and sale of the Notes and for carrying on the business now conducted by it. 2. The Company is duly qualified to do business as a foreign corporation under the laws of Massachusetts and New Hampshire and has filed to qualify to do business as a foreign corporation in Kentucky. 77 ROPES & GRAY Purchasers Named -3- April 15, 1994 in Schedule I 3. TOFC is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware, with all corporate powers adequate for carrying on the business now conducted by it. 4. TOFC is duly qualified as a foreign corporation in each jurisdiction in which it owns or leases real property. 5. The Note Agreements have been duly authorized, executed and delivered by the Company and (subject to the qualifications stated in the penultimate paragraph hereof) are the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their terms. 6. The issuance and sale of the Notes being delivered to the Purchasers today and each of the Notes have been duly authorized, executed and delivered by the Company and (subject to the qualifications stated in the penultimate paragraph hereof) are the legal, valid and binding obligations of the Company enforceable against the Company in accordance with their terms. 7. The exceution and delivery of the Note Agreements and the issuance and sale of the Notes do not, and the performance by the Company of the terms thereof will not, result in any violation of, be in conflict with, constitute a default under, or result in the creation of a lien under, any term or provision of: (a) its charter or bylaws or (b) any agreement, indenture or other instrument identified in the Officer's Certificate attached hereto. 8. No approval, consent or withholding of objection on the part of, or filing, registration or qualification with any Massachusetts or federal government authority is required to be obtained or made by the Company in connection with the execution and delivery by the Company of the Note Agreements or the Notes, except for disclosure filings under the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, and other laws, rules and regulations which do not affect the enforceability of the Note Agreements or the Notes against the Company. 9. The issuance, sale and delivery of the Notes under the circumstances contemplated by the Note Agreements constitute exempt transactions under the registration provisions of the Securities Act of 1993, as amended, and do not under existing law require the registration of the Notes under said Act or the qualification of an indenture in respect thereof under the Trust Indenture Act of 1939, as amended. We express no opinion 78 ROPES & GRAY Purchasers Named -4- April 15, 1994 in Schedule I regarding the applicability of such requirements to a resale by you of the Notes. Our opinions that the Note Agreements and the Notes are the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their terms are subject to (i) bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting the rights and remedies of creditors and (ii) general principles of equity regardless of whether applied in proceedings in equity or at law. Very truly yours, /s/ Ropes & Gray Ropes & Gray 79 THE TIMBERLAND COMPANY Officer's Certificate --------------------- The undersigned, in his capacity as Chief Financial Officer of The Timberland Company, a Delaware corporation (the "Company"), hereby certifies as follows: 1. The Company owns or leases its headquarters and warehouses located in New Hampshire and warehouses located in Kentucky and Massachusetts. The Company does not own or lease any other real property in the States of the United States of America, except for store and showroom locations in the following States which represent less than 10% of the total assets and total revenues annually of the Company: California District of Columbia Georgia Illinois Maine Massachusetts New Hampshire New York Pennsylvania Rhode Island Tennessee Texas Vermont 2. The Outdoor Footwear Company leases real property only in the Commonwealth of Puerto Rico. 3. The Recreational Footwear Compan (Dominicana), S.A. and Component Footwear Dominicana, S.A. owns or leases real property only in the Dominican Republic. 4. Timberland Manufacturing Company, Inc. owns or leases real property only in North Carolina and Tennessee. 5. Each subsidiary of the Company, other than The Outdoor Footwear Company, represents less than 10% of the Total assets and total revenues annuallly of the Company. 6. The following is a list of all agreements, indentures or other instruments to which the Company or its subsidiaries are a party or are otherwise bound which prohibit or restrict the Company from incurring debt for money borrowed: 80 (i) Credit Agreement, dated as of May 13, 1993, among the Timberland Company, Morgan Guaranty Trust Company of New York, as Administrative Agent, and the Lenders as defined therein, as amended. (ii) Credit Agreement, dated as of November 15, 1993, among Chase Manhattan Bank, for itself and as Agent, and Lenders as defined therein, as amended. (iii) Amended and Restated Letter of Credit and Reimbursement Agreement, dated as of March 23, 1988, between The Timberland Company and The First National Bank of Boston, as amended. (iv) Note Agreements, dated as of September 30, 1989, among The Timberland Company and Principal Mutual Life Insurance Company, Northwestern National Life Insurance Company, Northern Life Insurance Company, Beneficial Standard Life Insurance, Farm Bureau Life Insurance Company, FB Annuity Company, Farm Bureau Mutual Insurance Company of Michigan, Sun Life Assurance Company of Canada, Sun Life Insurance and Annuity Company of New York and Guarantee Mutual Life Company, as amended. Correct and complete copies of each of the above have been previously furnished to Ropes and Gray. IN WITNESS WHEREOF, the undersigned has hereunto set his hand and the seal of the Company. /s/ Keith D. Monda --------------------------- Keith D. Monda Senior Vice President and Chief Financial Officer Dated: April 15, 1994 81 The Timberland Company Note Agreement The execution hereof by you shall constitute a contract between us for the uses and purposes hereinabove set forth, and this Agreement may be executed in any number of counterparts, each executed counterpart constituting an original but all together only one agreement. THE TIMBERLAND COMPANY By /s/ Carden N. Welsh ------------------- Its Carden N. Welsh Treasurer Accepted as of April 1, 1994. PRINCIPAL MUTUAL LIFE INSURANCE COMPANY By /s/ JON C. HEINY ------------------- Its Jon C. Heiny Counsel By /s/ JON M. DAVIDSON ------------------- Its Jon M. Davidson Assistant Director- Securities Investment 82 The Timberland Company Note Agreement The execution hereof by you shall constitute a contract between us for the uses and purposes hereinabove set forth, and this Agreement may be executed in any number of counterparts, each executed counterpart constituting an original but all together only one agreement. THE TIMBERLAND COMPANY By /s/ Carden N. Welsh ----------------------- Its Carden N. Welsh Treasurer Accepted as of April 1, 1994. GE CAPITAL ASSURANCE COMPANY TRUST By /s/ William D. Koski ----------------------- Its William D. Koski Assistant Vice President 83 The Timberland Company Note Agreement 7.16% Senior Notes due April 15, 2000 The execution hereof by you shall constitute a contract between us for the uses and purposes hereinabove set forth, and this Agreement may be executed in any number of counterparts, each executed counterpart constituting an original but all together only one agreement. THE TIMBERLAND COMPANY By /s/ Carden N. Welsh ----------------------- Its Carden N. Welsh Treasurer Accepted as of April 1, 1994. SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.) By /s/ L. Brock Thomson ----------------------- Its L. Brock Thomson Treasurer 84 The Timberland Company Note Agreement The execution hereof by you shall constitute a contract between us for the uses and purposes hereinabove set forth, and this Agreement may be executed in any number of counterparts, each executed counterpart constituting an original but all together only one agreement. THE TIMBERLAND COMPANY By /s/ Carden N. Welsh ----------------------- Its Carden N. Welsh Treasurer Accepted as of April 1, 1994. NORTHERN LIFE INSURANCE COMPANY By /s/ Mark S. Jordahl ----------------------- Its Mark S. Jordahl Assistant Treasurer 85 The Timberland Company Note Agreement The execution hereof by you shall constitute a contract between us for the uses and purposes hereinabove set forth, and this Agreement may be executed in any number of counterparts, each executed counterpart constituting an original but all together only one agreement. THE TIMBERLAND COMPANY By /s/ Carden N. Welsh ----------------------- Its Carden N. Welsh Treasurer Accepted as of April 1, 1994. NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY By /s/ Mark S. Jordahl ----------------------- Its Mark S. Jordahl Authorized Representative 86 The Timberland Company Note Agreement The execution hereof by you shall constitute a contract between us for the uses and purposes hereinabove set forth, and this Agreement may be executed in any number of counterparts, each executed counterpart constituting an original but all together only one agreement. THE TIMBERLAND COMPANY By /s/ Carden N. Welsh ----------------------- Its Carden N. Welsh Treasurer Accepted as of April 1, 1994. THE NORTH ATLANTIC LIFE INSURANCE COMPANY OF AMERICA By /s/ Mark S. Jordahl ----------------------- Its Mark S. Jordahl Assistant Treasurer 87 The Timberland Company Note Agreement The execution hereof by you shall constitute a contract between us for the uses and purposes hereinabove set forth, and this Agreement may be executed in any number of counterparts, each executed counterpart constituting an original but all together only one agreement. THE TIMBERLAND COMPANY By /s/ Carden N. Welsh ----------------------- Its Carden N. Welsh Treasurer Accepted as of April 1, 1994. THE FRANKLIN LIFE INSURANCE COMPANY By /s/ Daniel C. Leimbach ----------------------- Its Daniel C. Leimbach Vice President By /s/ Elizabeth E. Arthur ----------------------- Its Elizabeth E. Arthur Assistant Secretary 88 The Timberland Company Note Agreement The execution hereof by you shall constitute a contract between us for the uses and purposes hereinabove set forth, and this Agreement may be executed in any number of counterparts, each executed counterpart constituting an original but all together only one agreement. THE TIMBERLAND COMPANY By /s/ Carden N. Welsh ----------------------- Its Carden N. Welsh Treasurer Accepted as of April 1, 1994. CENTURY LIFE OF AMERICA By Century Investment Management Company By /s/ Donald Heltner ----------------------- Its Donald Heltner Vice President 89 The Timberland Company Note Agreement The execution hereof by you shall constitute a contract between us for the uses and purposes hereinabove set forth, and this Agreement may be executed in any number of counterparts, each executed counterpart constituting an original but all together only one agreement. THE TIMBERLAND COMPANY By /s/ Carden N. Welsh ----------------------- Its Carden N. Welsh Treasurer Accepted as of April 1, 1994. CUNA MUTUAL INSURANCE SOCIETY By Century Investment Management Company By /s/ Donald Heltner ----------------------- Its Donald Heltner Vice President 90 The Timberland Company Note Agreement The execution hereof by you shall constitute a contract between us for the uses and purposes hereinabove set forth, and this Agreement may be executed in any number of counterparts, each executed counterpart constituting an original but all together only one agreement. THE TIMBERLAND COMPANY By /s/ Carden N. Welsh ----------------------- Its Carden N. Welsh Treasurer Accepted as of April 1, 1994. GUARANTEE MUTUAL LIFE COMPANY By /s/ Steven A. Scanlan ----------------------- Its Steven A. Scanlan Senior Invesment Officer - Securities 91 The Timberland Company Note Agreement The execution hereof by you shall constitute a contract between us for the uses and purposes hereinabove set forth, and this Agreement may be executed in any number of counterparts, each executed counterpart constituting an original but all together only one agreement. THE TIMBERLAND COMPANY By /s/ Carden N. Welsh ----------------------- Its Carden N. Welsh Treasurer Accepted as of April 1, 1994. TMG LIFE INSURANCE COMPANY By: THE MUTUAL GROUP, its Agent By /s/ Michael J. Carew ----------------------- Name: Michael J. Carew Title: Assistant Vice President By /s/ Robert Lapointe ----------------------- Name: Robert Lapointe Title: Vice President EX-10.3 4 AMENDED AND RESTATED NOTE AGREEMENTS 1 EXHIBIT 10.3 =============================================================================== The Timberland Company Amended and Restated Note Agreement Dated as of April 1, 1994 Re: Note Agreements dated as of September 30, 1989 relating to the issue and sale of $35,000,000 9.70% Senior Notes due December 1, 1999 ================================================================================ 2 TABLE OF CONTENTS (Not a part of the Agreement)
SECTION HEADING PAGE ARTICLE I AMENDMENT AND RESTATEMENT OF THE ORIGINAL NOTE AGREEMENTS..................................................... 2 SECTION 1. DESCRIPTION OF NOTES AND COMMITMENT.................. 2 Section 1.1. Description of Notes.............................. 2 Section 1.2. Commitment, Closing Date.......................... 2 SECTION 2. PREPAYMENT OF NOTES.................................. 3 Section 2.1. Required Prepayments.............................. 3 Section 2.2. Optional Prepayments With Premium................. 3 Section 2.3. Prepayment on Failure of Holders to Give Certain Consents.................................. 3 Section 2.4. Notice of Prepayments............................. 4 Section 2.5. Allocation of Prepayments......................... 4 Section 2.6. Direct Payment.................................... 4 SECTION 3. REPRESENTATIONS...................................... 5 Section 3.1. Representations of the Company.................... 5 Section 3.2. Representations of the Purchaser.................. 5 SECTION 4. CLOSING CONDITIONS................................... 6 Section 4.1. Conditions........................................ 6 Section 4.2. Waiver of Conditions.............................. 6 SECTION 5. COMPANY COVENANTS.................................... 7 Section 5.1. Corporate Existence, Etc.......................... 7 Section 5.2. Insurance......................................... 7 Section 5.3. Taxes, Claims for Labor and Materials, Compliance with Laws................... 7 Section 5.4. Maintenance, Etc.................................. 8 Section 5.5. Nature of Business................................ 8 Section 5.6. Current Ratio..................................... 8 Section 5.7. Consolidated Tangible Net Worth................... 8 Section 5.8. Limitations on Indebtedness....................... 8 Section 5.9. Fixed Charges Coverage............................ 9 Section 5.10. Limitation on Liens............................... 9 Section 5.11. Restricted Payments............................... 11 Section 5.12. Sale and Leasebacks............................... 12
-i- 3 Section 5.13. Mergers, Consolidations and Sales of Assets....... 13 Section 5.14. Guaranties........................................ 16 Section 5.15. Repurchase of Notes............................... 16 Section 5.16. Transactions with Affiliates...................... 16 Section 5.17. Investments....................................... 16 Section 5.18. Termination of Pension Plans...................... 18 Section 5.19. Reports and Rights of Inspection.................. 18 SECTION 6. EVENTS OF DEFAULT AND REMEDIES THEREFOR.............. 21 Section 6.1. Events of Default................................. 21 Section 6.2. Notice to Holders................................. 23 Section 6.3. Acceleration of Maturities........................ 23 Section 6.4. Rescission of Acceleration........................ 24 SECTION 7. AMENDMENTS, WAIVERS AND CONSENTS..................... 24 Section 7.1. Consent Required.................................. 24 Section 7.2. Effect of Amendment or Waiver..................... 25 SECTION 8. INTERPRETATION OF AGREEMENT.......................... 25 Section 8.1. Definitions....................................... 25 Section 8.2. Accounting Principles............................. 34 Section 8.3. Directly or Indirectly............................ 34 SECTION 9. MISCELLANEOUS........................................ 35 Section 9.1. Registered Notes.................................. 35 Section 9.2. Exchange of Notes................................. 35 Section 9.3. Loss, Theft, Etc. of Notes........................ 35 Section 9.4. Expenses, Stamp Tax Indemnity..................... 36 Section 9.5. Powers and Rights Not Waived; Remedies Cumulative............................... 36 Section 9.6. Notices........................................... 36 Section 9.7. Successors and Assigns............................ 36 Section 9.8. Survival of Covenants and Representations......... 37 Section 9.9. Severability...................................... 37 Section 9.10. Governing Law..................................... 37 Section 9.11. Captions.......................................... 37 ARTICLE II AMENDMENTS TO EXHIBITS TO ORIGINAL NOTE AGREEMENTS............. 37 Section 2.1. Amendment to Exhibit A............................... 37 Section 2.2. Amendment to Exhibit B............................... 37 Section 2.3. Amendment to Exhibit E............................... 37 Section 2.4. Schedule I to the Original Note Agreement............ 37
-ii- 4 ARTICLE III MISCELLANEOUS................................................ 38 Section 3.1. Ratification of Original Note Agreements; Condition Precedent.................................. 38 Section 3.2. Counterparts......................................... 38 Section 3.3. Fees and Expenses.................................... 38 Section 3.4. References to Original Note Agreements............... 38 Section 3.5. Governing Law........................................ 38 Signatures................................................................ 39 ATTACHMENTS TO AMENDED AND RESTATED NOTE AGREEMENT Schedule I - List of Holders and Principal Amount of Notes Held Schedule II - Name and Addresses of Purchasers of the Notes Exhibit A - Form of 9.70% Senior Note due December 1, 1999 Exhibit B - Description of Debt and Leases
-iii- 5 THE TIMBERLAND COMPANY 11 MERRILL INDUSTRIAL DRIVE HAMPTON, NEW HAMPSHIRE 03842-5050 AMENDED AND RESTATED NOTE AGREEMENT Re: Note Agreements dated as of September 30, 1989 relating to the issue and sale of $35,000,000 9.70% Senior Notes Due December 1, 1999 Dated as of April 1, 1994 To the Holder named In Schedule I hereto which is a signatory of this Agreement Ladies and Gentlemen: Reference is hereby made to (a) the separate Note Agreements dated as of September 30, 1989 (the "1989 Note Agreements"), between The Timberland Company, a Delaware corporation (the "Company"), and the Purchasers named in Schedule I thereto (the "Holders") respectively, under and pursuant to which $35,000,000 principal amount of the 9.70% Senior Notes of the Company due December 1, 1999 (the "Notes") were originally issued, as amended by those separate First Amendments dated September 15, 1993 (the "First Amendments", which together with the 1989 Note Agreements are collectively referred to herein as the "Original Note Agreements") between the Company and the Holders and (b) the separate Note Agreements dated as of April 1, 1994 (the "1994 Note Agreements"), to be executed by, and to be between, the Company and each Purchaser signatory thereto, respectively, under and pursuant to which $65,000,000 aggregate principal amount of the 7.16% Senior Notes of the Company due April 15, 2000 will be issued. In connection with the execution and delivery of the 1994 Note Agreements, the Company desires to amend and restate the Original Note Agreements in their entirety to conform to the 1994 Note Agreements by entering into separate counterparts of this Amended and Restated Note Agreement (the "Second Amendment") with each of the Holders, respectively. Pursuant to #7.1 of the Original Note Agreements, holders of at least 51% in aggregate principal amount of the outstanding Notes must consent to all such amendments. As you are the holder of the aggregate principal amount of outstanding Notes set forth opposite your name on Schedule I hereto, the Company hereby requests that you accept each of the amendments as set forth below in the manner herein provided. The Company now wishes to amend and restate the Original Note Agreements in the respects, but only in the respects, hereinafter set forth, and, by your execution hereof, you hereby agree to such amendments on the terms hereinafter set forth: 6 ARTICLE I AMENDMENT AND RESTATEMENT OF THE ORIGINAL NOTE AGREEMENTS Sections 1 through 9 of the Original Note Agreements shall be and are hereby amended and restated in their entirety to read as follows: "The undersigned, THE TIMBERLAND COMPANY, a Delaware corporation (the "Company"), agrees with you as follows: SECTION 1. DESCRIPTION OF NOTES AND COMMITMENT. Section 1.1. Description of Notes. The Company will authorize the issue and sale of $35,000,000 aggregate principal amount of its 9.70% Senior Notes (the "Notes") to be dated the date of issue, to bear interest from such date at the rate of 9.70% per annum, payable semiannually in arrears on the first day of each June and December in each year (commencing June 1, 1990) and at maturity and to bear interest on overdue principal (including any overdue required or optional prepayment of principal) and premium, if any, and (to the extent legally enforceable) on any overdue installment of interest at the rate of 11.70% per annum after maturity, whether by acceleration or otherwise, until paid, to be expressed to mature on December 1, 1999, and to be substantially in the form attached hereto as Exhibit A. Interest on the Notes shall be computed on the basis of a 360-day year of twelve 30-day months. The Notes are not subject to prepayment or redemption at the option of the Company prior to their expressed maturity dates except on the terms and conditions and in the amounts and with the premium, if any, set forth in Section 2 of this Agreement. The term "Notes" as used herein shall include each Note delivered pursuant to this Agreement and the separate agreements with the other purchasers named in Schedule I. You and the other purchasers named in Schedule I are hereinafter sometimes referred to as the "Purchasers". Section 1.2. Commitment, Closing Date. Subject to the terms and conditions hereof and on the basis of the representations and warranties hereinafter set forth, the Company agrees to issue and sell to you, and you agree to purchase from the Company, the aggregate principal amount of the Notes set forth opposite your name in Schedule I hereto, at a price of 100% of the principal amount thereof on the Closing Date hereinafter mentioned. Delivery of the Notes will be made at the offices of Chapman and Cutler, 111 West Monroe Street, Chicago, Illinois 60603, against payment therefor in Federal Reserve or other funds current and immediately available at the principal office of The First National Bank of Boston, Boston, Massachusetts in the amount of the purchase price at 10:00 A.M., Chicago, Illinois time, on December 8, 1989 or such earlier date as the Company shall specify by not less than five business days' prior written notice to you (the "Closing Date"). The Notes delivered to you on the Closing Date will be delivered to you in the form of registered Notes for the full amount of -2- 7 your purchase (unless different denominations are specified by you), registered in your name or in the name of such nominee as you may specify and in substantially the form attached hereto as Exhibit A, all as you may specify at any time prior to the date fixed for delivery. SECTION 2. PREPAYMENT OF NOTES. Section 2.1. Required Prepayments. (a) The Company agrees that on December 1, in each year commencing December 1, 1995 and ending December 1, 1998, both inclusive (herein called "Fixed Payment Dates"), it will prepay and apply and there shall become due and payable the sum of $7,000,000 on the principal indebtedness evidenced by the Notes. No premium shall be payable in connection with any required prepayment made pursuant to this [Section] 2.1. (b) Any prepayment of the Notes pursuant to the provisions of [Section] 2.2 shall be credited against the obligations of the Company to make payment at maturity and the prepayments required on the Notes in accordance with the terms of this [Section] 2.1 in the inverse order of maturity. If and to the extent that any prepayment of the Notes pursuant to the provisions of [Section]2.3 does not result in the prepayment of all Notes, the prepayments required to be made pursuant to the provisions of this [Section] 2.1 shall be reduced by an amount that bears the same relationship to the amount of the prepayment required by this [Section] 2.1 immediately prior to such partial prepayment pursuant to [Section] 2.3 as the amount of such partial prepayment pursuant to [Section] 2.3 bears to the principal amount of Notes outstanding immediately preceding such partial prepayment. Section 2.2. Optional Prepayments With Premium. Upon compliance with [Section] 2.4, the Company shall have the privilege at any time and from time to time of prepaying the outstanding Notes, either in whole or in part (but if in part then in a minimum principal amount of $100,000) by payment of the principal amount of the Notes, or portion thereof to be prepaid, and accrued interest thereon to the date of such prepayment, together with a premium equal to the Make-Whole Amount with respect to such principal amount then to be prepaid. Section 2.3. Prepayment on Failure of Holders to Give Certain Consents. In the event that (i) the Company shall have determined in good faith to enter into a transaction which will result in a violation of any the provisions of [Section] 5.13, (ii) the Company shall have requested the holders of the Notes in writing (accompanied by a reasonably detailed description of the proposed transaction) to consent to such transaction, and (iii) the holders of more than 49% of the aggregate unpaid principal amount of the Notes shall have failed to consent to such transaction within 30 days from the date of such request, then and in such event the Company may upon the consummation of such transaction, within 90 days after the expiration of such 30-day period, prepay all (but not less than all) of the Notes held by such holders who have failed to consent to such transaction. Any such prepayment shall be made by payment of the principal amount of the Notes being prepaid, and accrued interest thereon -3- 8 to the date of such prepayment, together with a premium equal to the Make-Whole Amount with respect to such principal amount then to be prepaid. Section 2.4. Notice of Prepayments. The Company will give notice of any prepayment of the Notes (other than the prepayments required by [Section] 2.1) to each holder thereof not less than 30 days nor more than 60 days before the date fixed for such optional prepayment specifying (i) such date, (ii) the section of this Agreement under which the prepayment is to be made, (iii) the principal amount of the holder's Notes to be prepaid on such date, (iv) that a premium may be payable, (v) the date when such premium will be calculated, and (vi) the accrued interest applicable to the prepayment. Such notice of prepayment shall also certify all facts which are conditions precedent to any such prepayment. Notice of prepayment having been so given, the aggregate principal amount of the Notes specified in such notice, together with the premium, if any, and accrued interest thereon shall become due and payable on the date of consummation of the related transaction (in the case of any prepayment pursuant to [Section] 2.3) or on the date specified in the notice given pursuant to the first sentence of this [Section] 2.4 (in the case of any other prepayment). Not later than the prepayment date the Company shall provide each holder of a Note written notice of the amount of the premium payable in connection with such prepayment, whether or not any premium is payable, together with a reasonably detailed computation thereof. Section 2.5. Allocation of Prepayments. All partial prepayments, other than prepayments pursuant to [Section] 2.3, shall be applied on all outstanding Notes ratably in accordance with the unpaid principal amounts thereof. Section 2.6. Direct Payment. Notwithstanding anything to the contrary in this Agreement or the Notes, in the case of any Note owned by the Purchaser or its nominee or owned by any other institutional holder who has given written notice to the Company requesting that the provisions of this Section shall apply, the Company will promptly and punctually pay when due the principal thereof and premium, if any, and interest thereon, without any presentment thereof directly to the Purchaser or such subsequent holder at the address of the Purchaser set forth in Schedule I or at such other address as the Purchaser or such subsequent holder may from time to time designate in writing to the Company or, if a bank account is designated for the Purchaser on Schedule I hereto or in any written notice to the Company from the Purchaser or any such subsequent holder, the Company will make such payments in immediately available funds to such bank account, marked for attention as indicated, or in such other manner or to such other account of the Purchaser or such holder in any bank in the United States as the Purchaser or any such subsequent holder may from time to time direct in writing. No such notice shall be effective with respect to any payment if such notice is given to the Company less than 14 days before the date of such payment. The holder of any Notes to which this Section applies agrees that in the event it shall sell or transfer any such Notes (i) it will, prior to the delivery of such Notes (unless it has already done so), make a notation thereon of all principal, if any, prepaid on such Notes and will also note thereon the date to which interest has been paid on such Notes, and (ii) it will promptly notify the Company of the name and -4- 9 address of the transferee of any Notes so transferred. With respect to Notes to which this Section applies, the Company shall be entitled to presume conclusively that the original or such subsequent institutional holder as shall have requested the provisions hereof to apply to its Notes remains the holder of such Notes until (y) the Company shall have received notice from the transferor of the transfer of such Notes, and of the name and address of the transferee, or (z) such Notes shall have been presented to the Company as evidence of the transfer. SECTION 3. REPRESENTATIONS. Section 3.1. Representations of the Company. The Company represents and warrants that all representations set forth in the form of certificate attached hereto as Exhibit B are true and correct as of the date hereof and are incorporated herein by reference with the same force and effect as though herein set forth in full. Section 3.2. Representations of the Purchaser. (a) Purchase for Investment. You represent, and in entering into this Agreement the Company understands, that you are acquiring the Notes for the purpose of investment and not with a view to the resale or distribution thereof, and that you have no present intention of selling, negotiating or otherwise disposing of the Notes; provided that the disposition of your property shall at all times be and remain within your control. (b) You represent and warrant that either: (i) you are acquiring the Notes for your own account and with your general corporate assets and not with the assets of any separate account in which any employee benefit plan has any interest; or (ii)(A)(1) you are an insurance company and a portion of the funds to be used to make your investment hereunder constitutes plan assets allocated to a separate account maintained by you, and (2) the names of each employee benefit plan whose assets in such account exceed five percent of the total assets or are expected to exceed five percent of the total assets of such account as of the date of such investment (for the purposes of this [Section] 3.2(b)(ii)(A)(2), all employee benefit plans maintained by the same employer or employee organization are deemed to be a single plan) have been disclosed in writing to the Company; and (B) the remaining portion of the funds used to purchase the Notes does not constitute assets allocated to any separate account maintained by you such that the application of such funds constitutes a "prohibited transaction" under Section 406 of the Employee Retirement Income Security Act of 1974, as amended. -5- 10 (c) You acknowledge that the Notes have not been registered under the Securities Act of 1933, as amended, and you understand that the Notes must be held indefinitely unless they are subsequently registered under said Securities Act or an exemption from such registration is available. You have been advised that the Company does not contemplate registering, and is not legally required to register, the Notes under said Securities Act. SECTION 4. CLOSING CONDITIONS Section 4.1. Conditions. Your obligation to purchase the Notes on the Closing Date shall be subject to the performance by the Company of its agreements hereunder which by the terms hereof are to be performed at or prior to the time of delivery of the Notes and to the following further conditions precedent: (a) Closing Certificate. You shall have received a certificate dated the Closing Date, signed by the President or a Vice President of the Company substantially in the form attached hereto as Exhibit B, the truth and accuracy of which shall be a condition to your obligation to purchase the Notes proposed to be sold to you. (b) Legal Opinions. You shall have received from Chapman and Cutler, who are acting as your special counsel in this transaction, and from Ropes & Gray, counsel for the Company, their respective opinions dated the Closing Date, in form and substance satisfactory to you, and covering the matters set forth in Exhibits C and D, respectively, hereto. (c) Related Transactions. The Company shall have consummated the sale of the entire principal amount of the Notes scheduled to be sold on the Closing Date pursuant to this Agreement and the other agreements referred to in [Section] 1.3. (d) Satisfactory Proceedings. All proceedings taken in connection with the transactions contemplated by this Agreement, and all documents necessary to the consummation thereof, shall be satisfactory in form and substance to you and your special counsel, and you shall have received a copy (executed or certified as may be appropriate) of all legal documents or proceedings taken in connection with the consummation of said transactions. Section 4.2. Waiver of Conditions. If on the Closing Date the Company fails to tender to you the Notes to be issued to you on such date or if the conditions specified in [Section]4.1 have not been fulfilled, you may thereupon elect to be relieved of all further obligations under this Agreement. Without limiting the foregoing, if the conditions specified in [Section] 4.1 have not been fulfilled, you may waive compliance by the Company with any such condition to such extent as you may in your sole discretion determine. Nothing in this [Section] 4.2 shall operate to relieve the Company of any of its obligations hereunder or to waive any of your rights against the Company. -6- 11 SECTION 5. COMPANY COVENANTS. From and after the Closing Date and continuing so long as any amount remains unpaid on any Note: Section 5.1.Corporate Existence, Etc. The Company will preserve and keep in force and effect, and will cause each Restricted Subsidiary to preserve and keep in force and effect, its corporate existence and all licenses and permits reasonably necessary to the proper conduct of its business the absence of which might materially and adversely affect the properties, business or condition of the Company or of the Company and its Restricted Subsidiaries taken as a whole, provided that the foregoing shall not prevent any transaction permitted by [Section] 5.13. Section 5.2. Insurance. The Company will maintain, and will cause each Restricted Subsidiary to maintain, insurance coverage by financially sound and reputable insurers accorded a rating by A.M. Best Company, Inc. of A:XII or better at the time of the issuance of any such policy and in such forms and amounts and against such risks as are customary for corporations of established reputation engaged in the same or a similar business and owning and operating similar properties; provided, however, that if, during the term of any such insurance policy, the rating accorded the insurer shall be less than A:XII, the Company will, on the date of renewal of any such policy (or, if such change in rating shall occur within 90 days prior to such renewal date, within 90 days of the date of such change in rating), obtain such insurance policy from an insurer so rated. Section 5.3. Taxes, Claims for Labor and Materials, Compliance with Laws. The Company will promptly pay and discharge, and will cause each Restricted Subsidiary promptly to pay and discharge, all lawful taxes, assessments and governmental charges or levies imposed upon the Company or such Restricted Subsidiary, respectively, or upon or in respect of all or any part of the property or business of the Company or such Restricted Subsidiary, all trade accounts payable in accordance with usual and customary business terms, and all claims for work, labor or materials, which if unpaid might become a Lien upon any property of the Company or such Restricted Subsidiary not permitted by [Section] 5.10; provided the Company or such Restricted Subsidiary shall not be required to pay any such tax, assessment, charge, levy, account payable or claim if (i) the validity, applicability or amount thereof is being contested in good faith by appropriate actions or proceedings which will prevent the forfeiture or sale of any property of the Company or such Restricted Subsidiary or any material interference with the use thereof by the Company or such Restricted Subsidiary if such forfeiture, sale or interference might have a material adverse effect on the properties, business or condition of the Company or of the Company and its Restricted Subsidiaries taken as a whole, and (ii) the Company or such Restricted Subsidiary shall set aside on its books, reserves deemed by it to be adequate with respect thereto. The Company will promptly comply and will cause each Restricted Subsidiary to comply with all laws, ordinances or governmental rules and regulations to which it is subject, including without limitation, the Occupational Safety and Health -7- 12 Act of 1970, the Employee Retirement Income Security Act of 1974 and all laws, ordinances, governmental rules and regulations relating to environmental protection in all applicable jurisdictions, the violation of which would materially and adversely affect the properties, business, prospects, profits or condition of the Company and its Restricted Subsidiaries or would result in any Lien upon any material property of the Company or any Restricted Subsidiary. Section 5.4. Maintenance, Etc. The Company will maintain, preserve and keep, and will cause each Restricted Subsidiary to maintain, preserve and keep, its properties which are used or useful in the conduct of its business (whether owned in fee or a leasehold interest) in good repair and working order and from time to time will make all necessary and reasonable repairs, replacements, renewals and additions so that at all times the efficiency thereof shall be maintained, unless the failure to do so would not have a material adverse effect on the properties, business or condition of the Company or of the Company and its Restricted Subsidiaries taken as a whole. Section 5.5. Nature of Business. Neither the Company nor any Restricted Subsidiary will engage in any business if, as a result, the general nature of the business, taken on a consolidated basis, which would then be engaged in by the Company and its Restricted Subsidiaries would be substantially changed from the general nature of the business engaged in by the Company and its Restricted Subsidiaries on the date of this Agreement. Section 5.6. Current Ratio. The Company will at all times keep and maintain Consolidated Current Assets at an amount not less than 125% of Consolidated Current Liabilities. Section 5.7. Consolidated Tangible Net Worth. The Company will at all times keep and maintain Consolidated Tangible Net Worth at an amount not less than (i) for the fiscal quarter of the Company ending June 30, 1994, the sum of $56,759,000 plus 25% of Consolidated Net Income for the fiscal quarter of the Company ended March 31, 1994 (but without deduction in the case of a deficit in Consolidated Net Income) and (ii) for each fiscal quarter thereafter, the sum of (x) the amount required to be maintained during the immediately preceding fiscal quarter of the Company, and (y) an amount equal to 25% of Consolidated Net Income for such preceding fiscal quarter (but without deduction in the case of a deficit in Consolidated Net Income). Section 5.8. Limitations on Indebtedness. (a) The Company will not and will not permit any Restricted Subsidiary to create, assume or incur or in any manner be or become liable in respect of any Current Debt or Funded Debt, except: (1) the Notes; (2) Current Debt and Funded Debt of the Company and its Restricted Subsidiaries outstanding as of the date of the Second Amendments and reflected -8- 13 in Annex B to Exhibit B attached hereto (including any amendment, modification, or other change to the Current Debt and Funded Debt described in such Annex B and which does not increase the principal amount thereof); (3) Current Debt or Funded Debt of the Company, provided that at the time of incurrence thereof and after giving effect thereto and to the application of the proceeds thereof: (i) Total Debt will not exceed 175% of Total Equity, and (ii) Net Income Available for Interest Charges for the four immediately preceding fiscal quarters shall have been at least 200% of Pro Forma Interest Charges for such period; (4) Current Debt or Funded Debt of a Restricted Subsidiary to the Company or to a Wholly-owned Restricted Subsidiary; and (5) Current Debt or Funded Debt of a Restricted Subsidiary, other than that permitted by [Section]5.8(a)(4), provided that at the time of incurrence thereof and after giving effect thereto and to the application of the proceeds thereof, (i) Specified Debt does not exceed 20% of Consolidated Tangible Net Worth, (ii) Total Debt does not exceed 175% of Total Equity and (iii) Net Income Available for Interest Charges for the four immediately preceding fiscal quarters shall have been at least 200% of Pro Forma Interest Charges for such period. (b) Any corporation which becomes a Restricted Subsidiary after the date hereof shall for all purposes of this [Section] 5.8 be deemed to have created, assumed or incurred at the time it becomes a Restricted Subsidiary all Funded Debt and Current Debt of such corporation existing immediately after it becomes a Restricted Subsidiary. Section 5.9. Fixed Charges Coverage. The Company will keep and maintain Net Income Available for Fixed Charges for each period of four consecutive fiscal quarters at an amount which is not less than 150% of Fixed Charges for such period. Section 5.10. Limitation on Liens. The Company will not, and will not permit any Restricted Subsidiary to, create or incur, or suffer to be incurred or to exist, any Lien on its or their property or assets, whether now owned or hereafter acquired, or upon any income or profits therefrom, to secure any Indebtedness or transfer any property for the purpose of subjecting the same to the payment of obligations in priority to the payment of its or their general creditors, or acquire or agree to acquire, or permit any Restricted Subsidiary to acquire, any property or assets upon conditional sales agreements or other title retention devices, except: -9- 14 (a) Liens for property taxes and assessments or governmental charges or Liens securing claims or demands of mechanics and material men, provided that such claims or demands are being contested in a manner permitted by [Section]5.3; (b) Liens of or resulting from any judgment or award, the time for the appeal or petition for rehearing of which shall not have expired, or in respect of which the Company or a Restricted Subsidiary shall at any time in good faith be prosecuting an appeal or proceeding for a review and in respect of which a stay of execution pending such appeal or proceeding for review shall have been secured; (c) Liens incidental to the conduct of business or the ownership of properties and assets (including warehousemen's and attorneys' Liens and statutory landlords' Liens) and Liens to secure the performance of bids, tenders or trade contracts, or to secure statutory obligations, surety or appeal bonds or other Liens of like general nature incurred in the ordinary course of business and not in connection with the borrowing of money, provided in each case, the obligation secured is not overdue or, if overdue, is being contested in good faith by appropriate actions or proceedings; (d) Liens securing Indebtedness of a Restricted Subsidiary to the Company or to another Restricted Subsidiary; (e) Liens on property of a Restricted Subsidiary which secure Specified Debt of such Restricted Subsidiary, provided that all such Specified Debt shall have been incurred within the applicable limitations provided in [Section] 5.8; (f) Liens (including Capitalized Leases) (i) existing as of the date of the Second Amendments and reflected in Annex B to Exhibit B attached hereto, securing Indebtedness of the Company or any Restricted Subsidiary outstanding on such date and (ii) securing refundings, refinancings, restructurings or replacements of Indebtedness secured by Liens (including Capitalized Leases) permitted by clause (i) of this [Section]5.10(f), provided that each such refunding, refinancing, restructuring and replacement shall not exceed the total principal amount of Indebtedness being refunded, refinanced, restructured or replaced and such Indebtedness may not be secured by any additional property of the Company and its Subsidiaries; (g) Liens incurred after the date hereof (1) given to secure the payment of the purchase price incurred in connection with the acquisition of fixed assets useful and intended to be used in carrying on the business of the Company or a Restricted Subsidiary, including Liens existing on such fixed assets at the time of acquisition thereof or at the time of acquisition by the Company or a Restricted Subsidiary of any business entity then owning such fixed assets, whether or not such existing Liens were given to secure the -10- 15 payment of the purchase price of the fixed assets to which they attach so long as they were not incurred, extended or renewed in contemplation of such acquisition, provided that (i) the Lien shall attach solely to the property acquired or purchased, (ii) at the time of acquisition of such fixed assets, the aggregate amount remaining unpaid on all Indebtedness secured by Liens on such fixed assets whether or not assumed by the Company or a Restricted Subsidiary shall not exceed an amount equal to 100% of the lesser of the total purchase price or fair market value at the time of acquisition of such fixed assets (as determined in good faith by the Board of Directors of the Company), and (iii) all such Indebtedness shall have been incurred within the applicable limitations provided in [Section]5.8 and (2) given to secure refundings, refinancings, restructurings or replacements of Indebtedness secured by Liens permitted by clause (1) of this [Section] 5.10(g), provided that each such refunding, refinancing, restructuring and replacement shall not exceed the total principal amount of Indebtedness being refunded, refinanced, restructured or replaced and such Indebtedness may not be secured by any additional property of the Company and its Subsidiaries; (h) Liens on documents and the underlying goods securing obligations in respect of documentary letters of credit and bankers' acceptances; (i) Liens that may arise from the sale or transfer of receivables pursuant to a Securitized Asset Transaction (as defined in [Section] 5.13(d)(3)); (j) provided that no Default or Event of Default exists at the time of creation thereof, other Liens on fixed assets (in addition to those permitted by the foregoing provisions of this [Section] 5.10) if, after giving effect thereto (and to the application of the proceeds thereof), the aggregate amount of Specified Debt would not exceed 20% of Consolidated Tangible Net Worth; and (k) other Liens securing Funded Debt or Current Debt (in addition to those permitted by the foregoing provisions of this [Section] 5.10), provided that the Notes shall be equally and ratably secured pursuant to agreements or instruments in form and substance satisfactory to the Noteholders as evidenced by their prior written consent thereto in accordance with the provisions of [Section] 7.1. Section 5.11. Restricted Payments. The Company will not, except as hereinafter provided: (a) Declare any dividends, either in cash or property, on any shares of its capital stock of any class (except dividends or other distributions payable solely in shares of capital stock of the Company); or (b) Directly or indirectly, or through any Subsidiary, purchase, redeem or retire any shares of its capital stock of any class or any warrants, -11- 16 rights or options to purchase or acquire any shares of its capital stock, other than purchases, redemptions or retirements of its capital stock in connection with any employee benefit plans to the extent that the aggregate amount of such purchases, redemptions and retirements during the fiscal year which includes the date of the purchase, redemption or retirement in question does not exceed the sum of (1) $100,000 plus (2) the proceeds from sales of shares of the Company's capital stock in connection with employee benefit plans during such fiscal year; or (c) Make any other payment or distribution, either directly or indirectly or through any Subsidiary, in respect of its capital stock; or (d) make, or permit any Restricted Subsidiary to make, any Restricted Investment; (such declarations or payments of dividends, purchases, redemptions or retirements of capital stock and warrants, rights or options, and all such other distributions and Restricted Investments being herein collectively called "Restricted Payments"), if after giving effect thereto the aggregate amount of Restricted Payments made during the period from and after December 31, 1988 to and including the date of the making of the Restricted Payment in question, would exceed the sum of (i) $33,879,500 plus (ii) 50% of Consolidated Net Income for the period from and after December 31, 1993, computed on a cumulative basis for said entire period (or if such Consolidated Net Income is a deficit figure, then minus 100% of such deficit), plus (iii) the aggregate net cash proceeds to the Company during such period from the sale of shares of its capital stock or warrants, rights or option to purchase or acquire any shares of its capital stock (other than any such sale in connection with employee benefit plans), plus (iv) the aggregate amount of net proceeds received by the Company and its Restricted Subsidiaries in connection with any sale or disposition of Restricted Investments made during such period provided that for the purposes of this [Section] 5.11 the amount of proceeds from the sale or disposition of any Restricted Investment may not exceed the original amount of such Restricted Investment. The Company will not declare any dividend which constitutes a Restricted Payment payable more than 60 days after the date of declaration thereof. For the purposes of this [Section]5.11 the amount of any Restricted Payment declared, paid or distributed in property of the Company shall be deemed to be the greater of the book value or fair market value (as determined in good faith by the Board of Directors of the Company) of such property at the time of the making of the Restricted Payment in question. Section 5.12. Sale and Leasebacks. The Company will not, and will not permit any Restricted Subsidiary to, enter into any arrangement whereby the Company or any Restricted Subsidiary shall sell or transfer any property owned by the Company or any Restricted Subsidiary to any Person other than the Company or a Restricted -12- 17 Subsidiary and thereupon the Company or any Restricted Subsidiary shall lease or intend to lease, as lessee, the same property unless (i) such property was constructed or installed for the Company or such Restricted Subsidiary and is sold and leased back to the Company or such Restricted Subsidiary within 18 months after such construction or installation, and (ii) such sale by the Company or such Restricted Subsidiary and leaseback to the Company or such Restricted Subsidiary would not violate the provisions of [Section] 5.8 hereof. Section 5.13. Mergers, Consolidations and Sales of Assets. (a) The Company will not, and will not permit any Restricted Subsidiary to (i) consolidate with or be a party to a merger with any other corporation or (ii) sell, lease or otherwise dispose of all or any substantial part (as defined in paragraph (d) of this Section) of the assets of the Company and its Restricted Subsidiaries, provided, however, that: (1) any Restricted Subsidiary may merge or consolidate with or into any other corporation so long as (i) in any merger or consolidation involving the Company, the Company shall be the surviving or continuing corporation and (ii) in any merger or consolidation involving a corporation other than the Company, (x) the survivor shall be a Restricted Subsidiary and the Minority Interests in the surviving corporation, expressed as a percentage of the net worth of such surviving corporation after giving effect to such merger or consolidation, would not exceed the lesser of (I) 25% and (II) 10% plus the Minority Interests in such Restricted Subsidiary on the date of this Agreement or, if the Restricted Subsidiary is acquired or designated after the date of this Agreement, on the date of such acquisition or designation, and (y) aggregate Tangible Minority Interests (as defined in paragraph (d) of this Section) in all Restricted Subsidiaries after giving effect to such merger or consolidation would not exceed 10% of Consolidated Tangible Net Worth; (2) the Company may consolidate or merge with any other corporation if (i) the surviving or continuing corporation is a corporation organized under the laws of any state of the United States, (ii) at the time of such consolidation or merger and after giving effect thereto no Default or Event of Default shall have occurred and be continuing, and (iii) after giving effect to such consolidation or merger the surviving corporation would be permitted to incur at least $1.00 of additional Funded Debt under the provisions of [Section] 5.8(a)(3); (3) any Restricted Subsidiary may sell, lease or otherwise dispose of all or any substantial part of its assets to the Company or any Wholly-owned Restricted Subsidiary; (4) the Company or any Restricted Subsidiary may sell, transfer or otherwise dispose of any Restricted Investment and any shares of stock in any Unrestricted Subsidiary; and -13- 18 (5) a Restricted Subsidiary may consolidate or merge with any other corporation in a transaction permitted under the provisions of [Section] 5.13(c). (b) The Company will not permit any Restricted Subsidiary to issue or sell any shares of stock of any class (including as "stock" for the purposes of this [Section]5.13, any warrants, rights or options to purchase or otherwise acquire stock or other Securities exchangeable for or convertible into stock) of such Restricted Subsidiary to any Person other than the Company or a Wholly-owned Restricted Subsidiary, unless (i) such issue or sale does not constitute a substantial part (as hereinafter defined) of the assets of the Company and its Restricted Subsidiaries, and (ii) to the extent that (x) the Minority Interests in such Restricted Subsidiary, expressed as a percentage of the net worth of such Restricted Subsidiary after giving effect to such issuance or sale would not exceed the lesser of (I) 25% and (II) 10% plus the Minority Interests in such Restricted Subsidiary on the date of this Agreement or, if such Restricted Subsidiary is acquired or designated after the date of this Agreement, on the date of such acquisition or designation, and (y) aggregate Tangible Minority Interests in all Restricted Subsidiaries after giving effect to such issuance or sale would not exceed 10% of Consolidated Tangible Net Worth. (c) The Company will not sell, transfer or otherwise dispose of any shares of stock in any Restricted Subsidiary (except to qualify directors) or any Indebtedness of any Restricted Subsidiary, and will not permit any Restricted Subsidiary to sell, transfer or otherwise dispose of (except to the Company or a Wholly-owned Restricted Subsidiary) any shares of stock or any Indebtedness of any other Restricted Subsidiary, unless: (1) either (x) such sale, transfer or disposition is made within the limitations of [Section]5.13(b), or (y) simultaneously with such sale, transfer, or disposition, all shares of stock and all Indebtedness (excluding any trade receivables) owed by such Restricted Subsidiary at the time owned by the Company and by every other Subsidiary shall be sold, transferred or disposed of as an entirety; (2) the Board of Directors of the Company shall have determined, as evidenced by a resolution thereof, that such sale, transfer or disposition is in the best interests of the Company; (3) such stock and Indebtedness is sold, transferred or otherwise disposed of to a Person, for consideration and on terms reasonably deemed by the Board of Directors to be adequate and satisfactory, provided that (i) the amount of any non-cash consideration received by the Company or a Restricted Subsidiary shall be determined in good faith by the Board of Directors of the Company, as evidenced by a certificate of the president or any vice president of the Company setting forth in reasonable detail the basis of such determination and delivered to the Note Purchasers, which determination shall, upon the written request of the holder or holders of not less than 25% of the unpaid -14- 19 principal amount of the Notes, be subject to verification by an independent appraiser designated and compensated by the Company and not objected to by such holders, and (ii) any non-cash consideration will be deemed a Restricted Investment made by the Company or such Restricted Subsidiary on the date of such sale, transfer or disposition in the amount of such valuation; (4) except in the case of transactions permitted by [Section]5.13(b), the Restricted Subsidiary being disposed of shall not have any continuing investment in the Company or any other Restricted Subsidiary not being simultaneously disposed of; and (5) such sale or other disposition does not involve a substantial part (as hereinafter defined) of the assets of the Company and its Restricted Subsidiaries. (d) As used in this [Section]5.13: (1) A sale, lease or other disposition of assets (other than Restricted Investments and investments in Unrestricted Subsidiaries) shall be deemed to be a "substantial part" of the assets of the Company and its Restricted Subsidiaries only if the book value of such assets when added to the book value of all other assets sold, leased or otherwise disposed of by the Company and its Restricted Subsidiaries (other than Securitized Asset Transactions and other transactions in the ordinary course of business) during the same fiscal year, exceeds 15% of the Consolidated Net Tangible Assets of the Company and its Restricted Subsidiaries determined as of the end of the immediately preceding fiscal year or contributed more than 15% of Net Income Available for Interest Charges, during the next preceding three fiscal years taken as a whole. Sales or other realization on delinquent receivables shall not be included in any computation of sales or other dispositions hereunder. Sales of assets shall not be included in any computations under this paragraph (d) to the extent that (x) the proceeds from such sale are applied to prepay the Notes pursuant to [Section] 2.2 hereof, (y) the proceeds from such sale are applied to the voluntary prepayment of Funded Debt, or (z) the proceeds of such sale are applied, within one year of such sale, to the purchase of other property useful and to be used in the business of the Company and its Restricted Subsidiaries and, pending such application, are maintained by the Company or any Restricted Subsidiary in a separate segregated account. (2) The term "Tangible Minority Interests" shall mean, with respect to any Restricted Subsidiary, the amount that bears the same relationship to Minority Interests in such Subsidiary as the Consolidated Tangible Net Worth of such Subsidiary bears to the net worth of such Subsidiary. For purposes of this definition, the "Consolidated Tangible Net Worth" of a Restricted Subsidiary shall be determined for such Subsidiary and its Restricted Subsidiaries in accordance with the definitions set forth in [Section] 8.1, mutatis mutandis. -15- 20 (3) "Securitized Asset Transaction" shall mean a sale or other transfer by any of the Company and its Restricted Subsidiaries of receivables which were produced in the ordinary course of business and not contingent upon any performance or product guarantee on the part of the Company or any Restricted Subsidiary, which sale or transfer does not involve the creation of any recourse obligation in respect thereof on the part of the Company or any Restricted Subsidiary (other than matters of title to, and the character of, the receivables so sold or transferred). Section 5.14. Guaranties. The Company will not and will not permit any Restricted Subsidiary to become or be liable in respect of any Guaranty except Guaranties by the Company and its Restricted Subsidiaries of the obligations of any Person so long as the Company and/or the Restricted Subsidiary guaranteeing such obligation could have incurred such obligation within the limits of this Agreement, provided that such underlying obligation shall be deemed to have been incurred by, and to be the continuing direct obligation of, the guarantor for all purposes of this Agreement. Section 5.15. Repurchase of Notes. Neither the Company nor any Restricted Subsidiary or Affiliate, directly or indirectly, may repurchase or make any offer to repurchase any Notes unless the offer has been made to repurchase Notes, pro rata, from all holders of the Notes at the same time and upon the same terms. In case the Company repurchases any Notes, such Notes shall thereafter be canceled and no Notes shall be issued in substitution therefor. Section 5.16. 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 with any Affiliate (including without limitation, the purchase from, sale to or exchange of property with, or the rendering of any service by or for, any Affiliate), except in the ordinary course of and pursuant to the reasonable requirements of the Company's or such Restricted Subsidiary's business and upon fair and reasonable terms (as determined in good faith by the Board of Directors of the Company) no less favorable to the Company or such Restricted Subsidiary than would obtain in a comparable arm's-length transaction with a Person other than an Affiliate. Section 5.17. Investments. The Company will not, and will not permit any Restricted Subsidiary to, make any investments in or loans, advances or extensions of credit to, any Person, except: (a) investments, loans, advances and extensions of credit by the Company and its Restricted Subsidiaries in a corporation which, after giving effect to such investment, will be a Restricted Subsidiary; (b) investments in commercial paper maturing in 270 days or less from the date of issuance which, at the time of acquisition by the Company or any -16- 21 Restricted Subsidiary, is accorded a rating of P-1 by Standard & Poor's Corporation or a rating of A-1 by Moody's Investors Services, Inc.; (c)investments in direct obligations issued or guaranteed by the full faith and credit of the United States of America, maturing, except in the case of investments made with security deposits of rental customers, in twelve months or less from the date of acquisition thereof; (d) investments in certificates of deposit maturing within one year from the date of origin or other obligations (including repurchase agreements), issued by a bank or trust company organized under the laws of the United States or any state thereof, having capital, surplus and undivided profits aggregating at least $250,000,000 and a long term deposit rating of A or better from either Standard & Poor's Corporation or Moody's Investors Service, Inc.; (e) loans or advances not exceeding $1,000,000 in the aggregate in the usual and ordinary course of business to officers, directors and employees of the Company and its Restricted Subsidiaries; (f) Investments in money market preferred stock, which, at the time of acquisition by the Company or any Restricted Subsidiary, is accorded a rating of AA or better by Standard & Poor's Corporation or a rating of Aa2 or better by Moody's Investors Services, Inc.; (g) Investments in money market mutual funds having total assets aggregating at least $1,000,000,000 or which invests primarily in assets described in clauses (b), (c), (d) and (f) of this [Section] 5.17; (h) Investments in demand deposits and endorsements for collection; (i) Investments to the extent that the consideration therefor consists of capital stock of the Company; and (j) Restricted Investments, subject to the limitations of [Section] 5.11. In valuing any investments, loans and advances for the purpose of applying the limitations set forth in this [Section] 5.17 and [Section] 5.11 such investments, loans and advances shall be taken at the original cost thereof, without allowance for any subsequent write-offs or appreciation or depreciation therein, but less any amount repaid or recovered on account of capital or principal. For purposes of this [Section] 5.17, at any time when a corporation becomes a Restricted Subsidiary, all investments of such corporation at such time shall be deemed to have been made by such corporation, as a Restricted Subsidiary, at such time. -17- 22 Section 5.18. Termination of Pension Plans. The Company will not and will not permit any Subsidiary to permit any employee benefit plan maintained by it to be terminated in a manner which could result in the imposition of a Lien on any property of the Company or any Subsidiary pursuant to Section 4068 of the Employee Retirement Income Security Act of 1974, as amended, if the incurrence of such Lien would not be permitted by [Section] 5.10. Section 5.19. Reports and Rights of Inspection. The Company will keep, and will cause each Subsidiary to keep, proper books of record and account in which full and correct entries will be made of all dealings or transactions of or in relation to the business and affairs of the Company or such Subsidiary, in accordance with generally accepted accounting principles consistently applied (except for changes disclosed in the financial statements furnished to you pursuant to this [Section]5.19 and concurred in by the independent public accountants referred to in [Section] 5.19(b) hereof), and will furnish to you so long as you are the holder of any Note and to each other institutional holder of the then outstanding Notes (in duplicate if so specified below or otherwise requested): (a) Quarterly Statements. As soon as available and in any event within 55 days after the end of each quarterly fiscal period (except the last) of each fiscal year, duplicate copies of: (1) consolidated and consolidating balance sheets of the Company and its Restricted Subsidiaries and of the Company and its consolidated Subsidiaries as of the close of such quarter setting forth, in the case of such consolidated statements, in comparative form the amount for the end of the preceding fiscal year, (2) consolidated and consolidating statements of income of the Company and its Restricted Subsidiaries and of the Company and its consolidated Subsidiaries for such quarterly period, setting forth, in the case of such consolidated statements, in comparative form the amount for the corresponding period of the preceding fiscal year, and (3) consolidated statements of cash flows of the Company and its Restricted Subsidiaries and of the Company and its consolidated Subsidiaries for the portion of the fiscal year ending with such quarter, setting forth in comparative form the amount for the corresponding period of the preceding fiscal year, all in reasonable detail and certified as complete and correct, by an authorized financial officer of the Company, provided that so long as the Company shall file a quarterly report on Form 10-Q or any similar form with the Securities and Exchange Commission or any successor agency which contains the information set forth in this paragraph (a), the requirements of this paragraph (a) shall be satisfied by forwarding Form 10-Q to the holders of the Notes within 55 days after the end of such quarterly fiscal period but, in any event, within five days of filing such Form 10-Q with the -18- 23 Securities and Exchange Commission, and provided, further that so long as the Unrestricted Subsidiaries of the Company taken as a whole do not constitute a Significant Subsidiary, the Company shall not be required to deliver to you financial statements of the Company and its Restricted Subsidiaries referred to in paragraphs (1), (2) and (3) of this [Section] 5.19(a); (b) Annual Statements. As soon as available and in any event within 110 days after the close of each fiscal year of the Company, duplicate copies of: (1) consolidated and consolidating balance sheets of the Company and its Restricted Subsidiaries and of the Company and its consolidated Subsidiaries as of the close of such fiscal year, and (2) consolidated and consolidating statements of income and stockholders' equity and cash flows of the Company and its Restricted Subsidiaries and of the Company and its consolidated Subsidiaries for such fiscal year, in each case setting forth in comparative form the consolidated figures for the preceding fiscal year, all in reasonable detail and accompanied by an opinion thereon of a firm of independent public accountants of recognized national standing selected by the Company to the effect that the consolidated financial statements have been prepared in accordance with generally accepted accounting principles consistently applied (except for changes in application in which such accountants concur) and present fairly the financial condition of the companies reported on and that the examination of such accountants in connection with such financial statements has been made in accordance with generally accepted auditing standards and accordingly, includes such tests of the accounting records and such other auditing procedures as were considered necessary in the circumstances, provided that so long as the Company shall file an annual report on Form 10-K or any similar form with the Securities and Exchange Commission or any successor agency which contains the information set forth in this paragraph (b), the requirements of this paragraph (b) shall be satisfied by forwarding Form 10-K to the holders of the Notes within 110 days after the end of such fiscal year but, in any event, within five days of filing such Form 10-K with the Securities and Exchange Commission, and provided further that so long as the Unrestricted Subsidiaries of the Company taken as a whole do not constitute a Significant Subsidiary, the Company shall not be required to deliver to you financial statements of the Company and its Restricted Subsidiaries referred to in paragraphs (1) and (2) of this [Section] 5.19(b). (c) Audit Reports. Promptly upon receipt thereof, one copy of each interim or special audit made by independent accountants of the books of the Company or any Restricted Subsidiary and any management letter received from such accountants; -19- 24 (d) SEC and Other Reports. Promptly upon their becoming available, one copy of each financial statement, report, notice or proxy statement sent by the Company to stockholders generally and of each regular or periodic report, and any registration statement or prospectus filed by the Company or any Subsidiary with any securities exchange or the Securities and Exchange Commission or any successor agency, and copies of any orders in any proceedings to which the Company or any of its Subsidiaries is a party, issued by any governmental agency, Federal or state, having jurisdiction over the Company or any of its Subsidiaries; (e) Requested Information. With reasonable promptness, such other data and information as you or any such institutional holder may reasonably request, provided, that with respect to any data and information obtained by you as a result of any request pursuant to this paragraph (e), you agree that, to the extent that such data and information has not theretofore otherwise been disclosed by or as authorized by the Company in such a manner as to render such data and information no longer confidential, you will use reasonable efforts (consistent with your established procedures) to reasonably maintain (and cause persons referred to in (i) below to maintain) the confidential nature of the data and information therein contained; provided, that anything herein contained to the contrary notwithstanding, you may, to the extent necessary, disclose or disseminate such data and information to: (i) your employees, agents, attorneys, and accountants who would ordinarily have access to such data and information in the normal course of the performance of their duties; (ii) such third parties as you may, in your discretion, deem reasonably necessary or desirable in connection with or in response to (x) compliance with any law, ordinance or governmental order, regulation, rule, policy, subpoena, investigation, regulatory authority request or request, or (y) 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 of any governmental or industry agency, commission, authority, board or similar entity or (B) in connection with any proceeding, case 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; (iii) any prospective purchaser, securities broker or dealer or investment banker in connection with the resale or proposed resale by you of any portion of the Notes who shall agree in writing to accept such information subject to the provisions of this paragraph (e); (iv) any Person holding your debt Securities who shall have requested to inspect such information subject to the provisions of this paragraph (e); (v) the National Association of Insurance Commissioners; and (vi) any entity utilizing such information to rate or classify your debt or equity Securities or to report to the public concerning the industry of which you are a part; and, provided further, that you shall not be liable to the Company or any other Person for damages for any failure by you, despite your reasonable efforts so to do, to comply with the provisions of this paragraph (e). -20- 25 (f) Officers' Certificates. Within the periods provided in paragraphs (a) and (b) above, a certificate of an authorized financial officer of the Company stating that he has reviewed the provisions of this Agreement and setting forth: (i) the information and computations (in sufficient detail) required in order to establish whether the Company was in compliance with the requirements of [Section] 5.5 through [Section] 5.18, inclusive, at the end of the period covered by the financial statements then being furnished, and (ii) whether there existed as of the date of such financial statements and whether, to the best of his knowledge, there exists on the date of the certificate or existed at any time during the period covered by such financial statements any Default or Event of Default and, if any such condition or event exists on the date of the certificate, specifying the nature and period of existence thereof and the action the Company is taking and proposes to take with respect thereto; (g) Accountant's Certificates. Within the period provided in paragraph (b) above, a certificate of the accountants who render an opinion with respect to such financial statements, stating that they have reviewed this Agreement and stating further, whether in making their audit, such accountants have become aware of any Default or Event of Default under any of the terms or provisions of [Section] 5.6 through [Section] 5.14, inclusive, [Section]5.17 or [Section] 5.18 of this Agreement insofar as any such terms or provisions pertain to or involve accounting matters or determinations, and if any such condition or event then exists, specifying the nature and period of existence thereof; and (h) Unrestricted Subsidiaries. Within the respective periods provided in paragraph (b) above, financial statements of the character and for the dates and periods as in said paragraph (b) provided covering Unrestricted Subsidiaries on a consolidated and consolidating basis. Without limiting the foregoing, the Company will permit you, so long as you are the holder of any Note, and each institutional holder of the then outstanding Notes (or such Persons as either you or such holder may designate) to visit and inspect, under the Company's guidance, any of the properties of the Company or any Subsidiary, to examine all their 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 said accountants to discuss with you the finances and affairs of the Company and its Subsidiaries) all at such reasonable times and as often as may be reasonably requested. The Company shall not be required to pay or reimburse you or any such holder for expenses which you or any such holder may incur in connection with any such visitation or inspection. SECTION 6. EVENTS OF DEFAULT AND REMEDIES THEREFOR. Section 6.1. Events of Default. Any one or more of the following shall constitute an "Event of Default" as the term is used herein: -21- 26 (a) Default shall occur in the payment of interest on any Note when the same shall have become due and such default shall continue for more than five days; or (b) Default shall occur in the making of any required prepayment on any of the Notes as provided in [Section] 2.1; or (c) Default shall occur in the making of any other payment of the principal of any Note or the premium thereon at the expressed or any accelerated maturity date or at any date fixed for prepayment; or (d) Default shall be made in the payment of the principal of or interest on any Indebtedness of the Company or any Restricted Subsidiary for borrowed money in an aggregate principal amount in excess of $1,000,000, as and when the same shall become due and payable by the lapse of time, by declaration, by call for redemption or otherwise, and such default shall continue beyond the period of grace, if any, allowed with respect thereto; or (e) Default or the happening of any event shall occur under any indenture, agreement, or other instrument under which any Indebtedness of the Company or any Restricted Subsidiary for borrowed money in an aggregate principal amount in excess of $1,000,000 may be issued and such default or event shall continue for a period of time sufficient to permit the acceleration of the maturity of any Indebtedness of the Company or any Restricted Subsidiary outstanding thereunder; or (f) Default shall occur in the observance or performance of any covenant or agreement contained in [Section]5.6 through [Section] 5.15, inclusive, or [Section] 5.17 hereof; or (g) Default shall occur in the observance or performance of any other provision of this Agreement which is not remedied within 30 days after notice thereof to the Company by the holder of any Note; or (h) If any representation or warranty made by the Company herein, or made by the Company in any statement or certificate furnished by the Company in connection with the consummation of the issuance and delivery of the Notes or furnished by the Company pursuant hereto, is untrue in any material respect as of the date of the issuance or making thereof; or (i) The Company or any Significant Subsidiary which is a Restricted Subsidiary becomes insolvent or bankrupt, is generally not paying its debts as they become due or makes an assignment for the benefit of creditors, or the Company or any Significant Subsidiary which is a Restricted Subsidiary causes or suffers an order for relief to be entered with respect to it under applicable Federal bankruptcy law or applies for or consents to the appointment of a -22- 27 custodian, trustee or receiver for the Company or such Significant Subsidiary which is a Restricted Subsidiary or for the major part of the property of either; or (j) A custodian, trustee or receiver is appointed for the Company or any Significant Subsidiary which is a Restricted Subsidiary or for the major part of the property of either and is not discharged within 30 days after such appointment; or (k) Final judgment or judgments for the payment of money aggregating in excess of $100,000 is or are outstanding against the Company or any Significant Subsidiary which is a Restricted Subsidiary or against any property or assets of either and any one of such judgments has remained unpaid, unvacated, unbonded or unstayed by appeal or otherwise for a period of 30 days from the date of its entry; or (l) Bankruptcy, reorganization, arrangement or insolvency proceedings, or other proceedings for relief under any bankruptcy or similar law or laws for the relief of debtors, are instituted by or against the Company or any Significant Subsidiary which is a Restricted Subsidiary and, if instituted against the Company or any Significant Subsidiary which is a Restricted Subsidiary, are consented to or are not dismissed within 60 days after such institution. Section 6.2. Notice to Holders. When any Event of Default described in the foregoing [Section] 6.1 has occurred, or if the holder of any Note or of any other evidence of Indebtedness of the Company gives any notice or takes any other action with respect to a claimed default, the Company agrees to give prompt notice of such event to all holders of the Notes then outstanding, such notice to be in writing and sent by registered or certified mail or by telegram. Section 6.3. Acceleration of Maturities. When any Event of Default described in paragraph (a), (b) or (c) of [Section]6.1 has happened and is continuing, any holder of any Note may declare its Notes to be, and its 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. When any Event of Default described in paragraphs (a) through (h), inclusive, and (k) of said [Section] 6.1 has happened and is continuing, the holder or holders of 25% or more of the principal amount of Notes at the time outstanding may, by notice in writing sent by registered or certified mail to the Company, declare the entire principal and all interest accrued on all Notes to be, and all 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. When any Event of Default described in paragraphs (i), (j) and (l) of [Section] 6.1 has occurred, then all outstanding Notes shall immediately become due and payable without presentment, demand or notice of any kind. Upon any or all Notes becoming due and payable as a result of any Event of Default as aforesaid, the -23- 28 Company will forthwith pay to the holders of such Notes the entire principal and interest accrued on such Notes and, with respect to a payment made as a result of an Event of Default described in paragraph (a), (b), (c) or (f) of [Section] 6.1, and to the extent permitted by law, liquidated damages for the loss of the bargain evidenced hereby in an amount equal to the Make-Whole Amount. No course of dealing on the part of any Noteholder nor any delay or failure on the part of any Noteholder to exercise any right shall operate as a waiver of such right or otherwise prejudice such holder's rights, powers and remedies. The Company further agrees, to the extent permitted by law, to pay to the holder or holders of the Notes all costs and expenses incurred by them in the collection of any Notes upon any default hereunder or thereon, including reasonable compensation to such holder's or holders' attorneys for all services rendered in connection therewith. Section 6.4. Rescission of Acceleration. The provisions of [Section] 6.3 are subject to the condition that if the principal of and accrued interest on all or any outstanding Notes have been declared immediately due and payable by reason of the occurrence of any Event of Default described in paragraphs (a) through (h), inclusive, and (k) of [Section] 6.1, the holders of 51% in aggregate principal amount of the Notes then outstanding 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 has been entered for the payment of any monies due pursuant to the Notes or this Agreement; (b) all arrears of interest upon all the Notes and all other sums payable under the Notes and under this Agreement (except any principal, interest or premium on the Notes which has become due and payable solely by reason of such declaration under [Section] 6.3) shall have been duly paid; and (c) each and every other Default and Event of Default shall have been made good, cured or waived pursuant to [Section] 7.1; 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 thereto. SECTION 7. AMENDMENTS, WAIVERS AND CONSENTS. Section 7.1. Consent Required. (a) Any term, covenant, agreement or condition of this Agreement may, with the consent of the Company, be amended or compliance therewith may be waived (either generally or in a particular instance and either retroactively or prospectively), if the Company shall have obtained the consent in writing of the holders of at least 51% in aggregate principal amount of outstanding Notes; provided that without the written consent of the holders of all of the Notes then outstanding, no such waiver, modification, alteration or amendment shall be effective (i) which will change the time of payment (including any prepayment required by -24- 29 [Section] 2.1) of the principal of or the interest on any Note or change the principal amount thereof or change the rate of interest thereon, or (ii) which will change any of the provisions with respect to optional prepayments, or (iii) which will change the percentage of holders of the Notes required to consent to any such amendment, alteration or modification or any of the provisions of this [Section] 7 or [Section] 6. (b) So long as any outstanding Notes are owned by you, the Company will not solicit, request or negotiate for or with respect to any proposed waiver or amendment of any of the provisions of this Agreement or the Notes unless each holder of the Notes (irrespective of the amount of Notes then owned by it) shall be informed thereof by the Company and shall be afforded the opportunity of considering the same and shall be supplied 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]7.1 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 the holder or holders of the requisite percentage of outstanding Notes. The Company will not, directly or indirectly, pay or cause to be paid any remuneration, whether by way of supplemental or additional interest, fee or otherwise, to any holder of the Notes as consideration for or as an inducement to the entering into by any holder of the Notes of any waiver or amendment of any of the terms and provisions of this Agreement unless such remuneration is concurrently paid, on the same terms, ratably to the holders of all of the Notes then outstanding, provided however, that if any holder of Notes fails to consent to a transaction which will result in a violation of [Section] 5.13 hereof, and as a result of such failure the Notes of such holder are prepaid pursuant to [Section] 2.3 hereof, such holder shall not be entitled to any remuneration pursuant to this [Section] 7.1(b) in connection with the requested consent to such transaction. Section 7.2. Effect of Amendment or Waiver. Any such amendment or waiver shall apply equally to all of the holders of the Notes and shall be binding upon them, 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 not expressly amended or waived or impair any right consequent thereon. SECTION 8. INTERPRETATION OF AGREEMENT; DEFINITIONS. Section 8.1. Definitions. Unless the context otherwise requires, the terms hereinafter set forth when used herein shall have the following meanings and the following definitions shall be equally applicable to both the singular and plural forms of any of the terms herein defined: "Affiliate" shall mean any Person (other than a Restricted Subsidiary) (i) which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, the Company, (ii) which beneficially owns or holds 5% or more of any class of the Voting Stock of the Company or (iii) 5% or -25- 30 more of the Voting Stock (or in the case of a Person which is not a corporation, 5% or more of the equity interest) of which is beneficially owned or held by the Company or a Subsidiary. The term "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 Stock, by contract or otherwise. "Capitalized Lease" shall mean any lease the obligation for Rentals with respect to which is required to be capitalized on a balance sheet of the lessee in accordance with generally accepted accounting principles. "Capitalized Rentals" shall mean as of the date of any determination the amount at which the aggregate Rentals due and to become due under all Capitalized Leases under which the Company or any Restricted Subsidiary is a lessee would be reflected as a liability on a consolidated balance sheet of the Company and its Restricted Subsidiaries. "Consolidated Current Assets" and "Consolidated Current Liabilities" shall mean such assets and liabilities of the Company and its Restricted Subsidiaries on a consolidated basis as shall be determined in accordance with generally accepted accounting principles to constitute current assets and current liabilities (including in current liabilities, in any event, Guaranties of current liabilities of others), respectively. "Consolidated Net Income" for any period shall mean the gross revenues of the Company and its Restricted Subsidiaries for such period less all expenses and other proper charges (including taxes on income), determined on a consolidated basis in accordance with generally accepted accounting principles consistently applied and after eliminating earnings or losses attributable to outstanding Minority Interests, but excluding in any event: (a) any gains or losses on the sale or other disposition of investments or fixed or capital assets, to the extent any such gain or loss constitutes an "extraordinary item" under generally accepted accounting principles, and any taxes on such excluded gains and any tax deductions or credits on account of any such excluded losses; (b) the proceeds of any life insurance policy; (c) net earnings and losses of any Restricted Subsidiary accrued prior to the date it became a Restricted Subsidiary; (d) net earnings and losses of any corporation (other than a Restricted Subsidiary), substantially all the assets of which have been acquired in any manner, realized by such other corporation prior to the date of such acquisition; -26- 31 (e) net earnings and losses of any corporation (other than a Restricted Subsidiary) with which the Company or a Restricted Subsidiary shall have consolidated or which shall have merged into or with the Company or a Restricted Subsidiary prior to the date of such consolidation or merger; (f) net earnings of any business entity (other than a Restricted Subsidiary) in which the Company or any Restricted Subsidiary has an ownership interest unless such net earnings shall have actually been received by the Company or such Subsidiary in the form of cash distributions; (g) any portion of the net earnings of any Restricted Subsidiary which for any reason is unavailable for payment of dividends to the Company or any other Restricted Subsidiary; (h) earnings resulting from any reappraisal, revaluation or write-up of assets; (i) any deferred or other credit representing any excess of the equity in any Subsidiary at the date of acquisition thereof over the amount invested in such Subsidiary; (j) any gain arising from the acquisition of any Securities of the Company or any Restricted Subsidiary; and (k) any reversal of any contingency reserve, except to the extent that provision for such contingency reserve shall have been made from income arising during such period. "Consolidated Net Tangible Assets" shall mean as of the date of any determination thereof the total amount of all Tangible Assets of the Company and its Restricted Subsidiaries after deducting all Restricted Investments and all items which in accordance with generally accepted accounting principles would be included on the liability side of a consolidated balance sheet, except deferred income taxes, deferred investment tax credits, capital stock of any class, surplus, and Funded Debt. "Consolidated Tangible Net Worth" shall mean, as of the date of any determination thereof, Consolidated Net Tangible Assets less all outstanding Funded Debt, deferred income taxes, deferred investment tax credits and Minority Interests, all determined in accordance with generally accepted accounting principles consolidating the Company and its Restricted Subsidiaries. "Current Debt" as of the date of any determination thereof shall mean (i) all Indebtedness for money borrowed other than Funded Debt, (ii) all Indebtedness with respect to documentary letters of credit and bankers' acceptances, and (iii) Guaranties of Current Debt of others. "Consolidated" when used as a prefix to any Current Debt -27- 32 shall mean the aggregate amount of all such Current Debt of the Company and its Restricted Subsidiaries on a consolidated basis eliminating intercompany items. "Default" shall mean any event or condition, the occurrence of which would, with the lapse of time or the giving of notice, or both, constitute an Event of Default as defined in [Section] 6.1. "Fixed Charges" for any period shall mean on a consolidated basis the sum of (i) all Rentals (other than Rentals on Capitalized Leases) payable during such period by the Company and its Restricted Subsidiaries, and (ii) all Interest Charges during such period on all Indebtedness (including the interest component of Rentals on Capitalized Leases) of the Company and its Restricted Subsidiaries. "Funded Debt" of any Person shall mean (i) all Indebtedness for borrowed money or which has been incurred in connection with the acquisition of assets in each case having a final maturity of one or more than one year from the date of origin thereof (or which is renewable or extendible at the option of the obligor for a period or periods of one or more than one year from the date of origin, but excluding revolving lines of credit renewable or extendible at the option of the obligor for a period or periods of one or more than one year from the date of origin except to the extent such option shall have been exercised), including all payments in respect thereof that are required to be made within one year from the date of any determination of Funded Debt, whether or not included in Consolidated Current Liabilities, (ii) all Capitalized Rentals, and (iii) all Guaranties of Funded Debt of others. "Consolidated" when used as a prefix to any Funded Debt shall mean the aggregate amount of all such Funded Debt of the Company and its Restricted Subsidiaries on a consolidated basis eliminating intercompany items. "Guaranties" by any Person shall mean all obligations (other than endorsements in the ordinary course of business of negotiable instruments for deposit or collection) of such Person 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, all obligations incurred through an agreement, contingent or otherwise, by such Person: (i) to purchase such Indebtedness or obligation or any property or assets constituting security therefor, (ii) to advance or supply funds (x) for the purchase or payment of such Indebtedness or obligation, (y) to maintain working capital or other balance sheet condition or otherwise to advance or make available funds for the purchase or payment of such Indebtedness or obligation, or (iii) to lease property or to purchase Securities or other property or services primarily for the purpose of assuring the owner of such Indebtedness or obligation of the ability of the primary obligor to make payment of the Indebtedness or obligation, or (iv) otherwise to assure the owner of the Indebtedness or obligation of the primary obligor against loss in respect thereof. For the purposes of all computations made under this Agreement, a Guaranty in respect of any Indebtedness for borrowed money shall be deemed to be Indebtedness equal to the principal amount of such Indebtedness for borrowed money which has been -28- 33 guaranteed, and a Guaranty in respect of any other obligation or liability or any dividend shall be deemed to be Indebtedness equal to the maximum aggregate amount of such obligation, liability or dividend. "Indebtedness" of any Person shall mean and include all obligations of such Person which in accordance with generally accepted accounting principles shall be classified upon a balance sheet of such Person as liabilities of such Person, and in any event shall include all (i) obligations of such Person for borrowed money or which has been incurred in connection with the acquisition of property or assets, (ii) obligations secured by any Lien upon property or assets owned by such Person, even though such Person has not assumed or become liable for the payment of such obligations, (iii) obligations created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person,notwithstanding the fact that the rights and remedies of the seller, lender or lessor under such agreement in the event of default are limited to repossession or sale of property, and (iv) Capitalized Rentals under any Capitalized Lease. For the purpose of computing the Indebtedness of any Person, there shall be excluded any particular Indebtedness to the extent that, upon or prior to the maturity thereof, there shall have been deposited with the proper depository in trust the necessary funds (or evidences of such Indebtedness, if permitted by the instrument creating such Indebtedness) for the payment, redemption or satisfaction of such Indebtedness; and thereafter such funds and evidences of Indebtedness so deposited shall not be included in any computation of the assets of such Person. "Interest Charges" for any period shall mean all interest and all amortization of debt discount and expense on any particular Indebtedness for which such calculations are being made. Computations of Interest Charges on a pro forma basis for Indebtedness having a variable interest rate shall be calculated at the rate in effect on the date of any determination. "Lien" shall mean any mortgage, pledge, security interest, lien, encumbrance or other charge of any kind on any kind of property or asset, whether real, personal or mixed, or tangible or intangible. "Make-Whole Amount" as at any date a payment thereof is due (the "payment date") in connection with a payment or prepayment in respect of the Notes shall mean the excess of (i) the present value as at the payment date of the remaining principal and interest payments to become due in respect of that portion of the principal amount of the Notes to be so paid or prepaid, discounted semiannually at an annual rate which is equal to the Treasury Rate plus 0.50% over (ii) the aggregate principal amount of the Notes then to be paid or prepaid plus accrued interest on such principal amount. To the extent that the Treasury Rate plus 0.50% at the time of determination of the Make-Whole Amount is equal to or higher than 9.70%, the Make-Whole Amount is zero. For purposes of any determination of the Make-Whole Amount: -29- 34 (a) The applicable "Treasury Rate" means the mean of the yields to maturity of customarily-issued United States Treasury obligations with a constant maturity (as compiled by and published in the United States Federal Reserve Bulletin H.15(519) or its successor publication for each of the two weeks immediately preceding the payment date) most nearly equal to the remaining Weighted Average Life to Maturity of the Notes as at the payment date. If no maturity exactly corresponding to such remaining Weighted Average Life to Maturity shall appear therein, yields for the two most closely corresponding published maturities shall be calculated pursuant to the foregoing sentence and the Treasury Rate shall be interpolated from such yields on a straight-line basis (rounding to the nearest month). If such rates shall not have been so published, the Treasury Rate in respect of such determination date shall be calculated pursuant to the next preceding sentence on the basis of the arithmetic mean of the arithmetic means of the secondary market ask rates, as of approximately 3:30 P.M., New York City time, on the last business days of each of the two weeks preceding the payment date, for the actively traded U.S. Treasury security or securities with a maturity or maturities most closely corresponding to such Weighted Average Life to Maturity, as reported by three primary United States Government securities dealers in New York City of national standing selected in good faith by the Company. (b) "Weighted Average Life to Maturity" with respect to the Notes means, as at the payment date, the number of years obtained by dividing the then Remaining Dollar-years of the Notes by the outstanding principal amount of the Notes. The term "Remaining Dollar-years" of the Notes means the product obtained by (i) multiplying (A) the amount of each then remaining required principal repayment (including repayment at final maturity), by (B) the number of years (calculated to the nearest one-twelfth) which will elapse between the time of determination and the date such required repayment is due, and (ii) totaling all the products obtained in the computations described in clause (i). "Minority Interests" shall mean any shares of stock of any class of a Restricted Subsidiary (other than directors' qualifying shares as required by law, and other than shares of the Class A Stock of The Outdoor Footwear Company so long as the number of outstanding shares of such Class A Stock do not exceed 50,000 at any time and the certificate of incorporation of The Outdoor Footwear Company is not amended after the date hereof to increase the rights of the holders of Class A Stock in the event of a liquidation of The Outdoor Footwear Company) that are not owned by the Company and/or one or more of its Restricted Subsidiaries. Minority Interests shall be valued by valuing Minority Interests constituting preferred stock at the voluntary or involuntary liquidating value of such preferred stock, whichever is greater, and by valuing Minority Interests constituting common stock at the book value of capital and surplus applicable thereto adjusted, if necessary, to reflect any changes from the book value of such common stock required by the foregoing method of valuing Minority Interests in preferred stock. -30- 35 "Net Income Available for Fixed Charges" for any period shall mean the sum of (i) Consolidated Net Income during such period plus (to the extent deducted in determining Consolidated Net Income), (ii) all provisions for any Federal, state or other income taxes made by the Company and its Restricted Subsidiaries during such period and (iii) Fixed Charges of the Company and its Restricted Subsidiaries during such period. "Net Income Available for Interest Charges" for any period shall mean the sum of (i) Consolidated Net Income during such period plus (to the extent deducted in determining Consolidated Net Income), (ii) all provisions for any Federal, state or other income taxes made by the Company and its Restricted Subsidiaries during such period and (iii) Interest Charges during such period, determined on a pro forma basis giving effect as of the beginning of such period (x) to the disposition during such period of assets constituting a substantial part of the assets of the Company and its Restricted Subsidiaries taken as a whole, (y) to the acquisition or disposition during such period of all or substantially all of the stock or assets of an entity or assets consisting of a line of business of an entity, and (z) to the acquisition, designation or disposition during such period of a Restricted Subsidiary; provided, however, that any such determination of the amount to be included in Consolidated Net Income on a pro forma basis taking into account the earnings of an entity, the stock or assets of which have been acquired by the Company or a Restricted Subsidiary, shall include only such amounts as are based on the actual historical financial results of such entity during such period, determined in accordance with generally accepted accounting principles. "Person" shall mean an individual, partnership, corporation, trust or unincorporated organization, and a government or agency or political subdivision thereof. "Pro Forma Interest Charges" for any period shall mean, as of the date of any determination thereof, the maximum aggregate amount of Interest Charges which would have become payable by the Company and its Restricted Subsidiaries in such period determined on a pro forma basis giving effect as of the beginning of such period to the incurrence of any Funded Debt (including Capitalized Rentals) and the retirement of outstanding Funded Debt or termination of any Capitalized Leases. "Rentals" shall mean and include all fixed rents (including as such all payments which the lessee is obligated to make to the lessor on termination of the lease or surrender of the property) payable by the Company or a Restricted Subsidiary, as lessee or sublessee under a lease of real or personal property, but shall be exclusive of any amounts required to be paid by the Company or a Restricted Subsidiary (whether or not designated as rents or additional rents) on account of maintenance, repairs, insurance, taxes and similar charges. Fixed rents under any so-called, "percentage leases" shall be computed solely on the basis of the minimum rents, if any, required to be paid by the lessee regardless of sales volume or gross revenues. -31- 36 "Restricted Investments" shall mean all investments, loans and advances existing on or made after the date of this Agreement of the Company and its Restricted Subsidiaries other than investments, loans or advances permitted by paragraphs (a) through (i), inclusive, of [Section]5.17 hereof. The Company and its Restricted Subsidiaries shall be deemed to have made a Restricted Investment (i) to the extent of the equity of the Company and its Restricted Subsidiaries in the net assets of a Restricted Subsidiary which has become an Unrestricted Subsidiary on the date that the Restricted Subsidiary becomes an Unrestricted Subsidiary and (ii) to the extent of the value of any non-cash consideration received by the Company and its Restricted Subsidiaries in connection with a sale of stock or Indebtedness permitted by [Section] 5.13(c)(3) hereof. "Restricted Subsidiary" shall mean any Subsidiary which is designated as a Restricted Subsidiary on Annex A of the Closing Certificate or any other Subsidiary (i) which is organized under the laws of the United States or any State thereof, Canada, Cayman Islands, the Dominican Republic, France, Puerto Rico, the United Kingdom, West Germany, Australia, Austria, Belgium, Denmark, Finland, Republic of Ireland, Italy, Luxembourg, Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, and U.S. Virgin Islands; (ii) which conducts substantially all of its business and has substantially all of its assets within the United States, Canada, the Dominican Republic, France, Puerto Rico, the United Kingdom, West Germany, Australia, Austria, Belgium, Denmark, Finland, Republic of Ireland, Italy, Luxembourg, Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, and U.S. Virgin Islands; (iii) of which more than 75% (by number of votes) of the Voting Stock is owned by the Company and/or one or more Restricted Subsidiaries; and (iv) which is designated a Restricted Subsidiary at the time it first becomes a Subsidiary, provided, the Board of Directors of the Company may designate any Unrestricted Subsidiary as a Restricted Subsidiary but only if (i) after giving effect to such designation the Company and its Restricted Subsidiaries could incur $1 of additional Consolidated Funded Debt and (ii) at the time of such designation and after giving effect thereto no Default or Event of Default shall have occurred and be continuing. Any Subsidiary which is designated by the Board of Directors of the Company as a Restricted Subsidiary after having been an Unrestricted Subsidiary may not be redesignated an Unrestricted Subsidiary. The Company shall give prompt notice to the Noteholders of designation of a Restricted Subsidiary. "Second Amendments" shall mean collectively, the separate Amended and Restated Note Agreements dated as of April 1, 1994 between the Company and the holders signatory thereto relating to the amending and restating of this Agreement. "Security" shall have the same meaning as in Section 2(1) of the Securities Act of 1933, as amended. "Significant Subsidiary" shall mean any Subsidiary which meets any of the following conditions: -32- 37 (1) The Company's and its other Subsidiaries' investments in and advances to the Subsidiary exceed 10 percent of the Consolidated Tangible Net Worth of the Company and its Subsidiaries as of the end of the most recently completed fiscal year; or (2) The Company's and its other Subsidiaries' proportionate share of the Consolidated Tangible Net Worth of the Subsidiary exceeds 10 percent of the Consolidated Tangible Net Worth of the Company and its Subsidiaries as of the end of the most recently completed fiscal year; or (3) The Company's and its other Subsidiaries' equity in the income from continuing operations before income taxes, extraordinary items and cumulative effect of a change in accounting principle of the Subsidiary exceeds 10 percent of such income of the Company and its Subsidiaries consolidated for the most recently completed fiscal year. "Specified Debt" shall mean, without duplication, any Indebtedness of Restricted Subsidiaries which Indebtedness is permitted by [Section] 5.8(a)(5) hereof and any Indebtedness of the Company secured by Liens permitted by [Section] 5.10(j) hereof. The term "subsidiary" shall mean, as to any particular parent corporation, any corporation of which more than 50% (by number of votes) of the Voting Stock shall be owned by such parent corporation and/or one or more corporations which are themselves subsidiaries of such parent corporation. The term "Subsidiary" shall mean a subsidiary of the Company. "Tangible Assets" shall mean as of the date of any determination thereof, the total amount of all assets of the Company and its Restricted Subsidiaries (less depreciation, depletion and other properly deductible valuation reserves) after deducting good will, patents, trade names, trade marks, copyrights, franchises, experimental expense, organization expense, unamortized debt discount and expense, deferred assets other than prepaid insurance and prepaid taxes, the excess of cost of shares acquired over book value of related assets and such other assets as are properly classified as "intangible assets" in accordance with generally accepted accounting principles. "Total Debt" of the Company and its Restricted Subsidiaries as at any date shall mean the sum of (i) Consolidated Funded Debt of the Company and its Restricted Subsidiaries as at such date, plus (ii) the Average Outstanding during the applicable Low Period. For purposes of this definition: (a) "Average Outstanding" shall mean the average of the unpaid principal amounts of Consolidated Current Debt of the Company and its Restricted Subsidiaries outstanding at the close of business on each day within a period of 30 consecutive days; and -33- 38 (b) "Low Period" shall mean the period of 30 consecutive days for which Average Outstanding is the lowest of any period of 30 consecutive days during the period of 15 consecutive months ending with the date of determination of Total Debt. "Total Equity" as at any date shall mean stockholders' equity determined in accordance with generally accepted accounting principles consolidating the Company and its Restricted Subsidiaries. "Unrestricted Subsidiary" shall mean any Subsidiary which is not a Restricted Subsidiary; provided, that the Board of Directors may designate any Restricted Subsidiary as an Unrestricted Subsidiary but only if (i) the Subsidiary so designated shall then own no Funded Debt or capital stock of any Restricted Subsidiary, (ii) after giving effect to such designation, the Company and its Restricted Subsidiaries could issue $1 of additional Consolidated Funded Debt and (iii) at the time of such designation and after giving effect thereto no Default or Event of Default shall have occurred and be continuing. Any Subsidiary which is designated by the Board of Directors of the Company as an Unrestricted Subsidiary after having been a Restricted Subsidiary may not be redesignated a Restricted Subsidiary. The Company shall give prompt notice to the Noteholders of any designation of an Unrestricted Subsidiary. "Voting Stock" shall mean Securities of any class or classes, the holders of which are ordinarily, in the absence of contingencies, entitled to elect a majority of the corporate directors (or Persons performing similar functions). "Wholly-owned" when used in connection with any Subsidiary shall mean a Subsidiary of which all of the issued and outstanding shares of stock (except shares required as directors' qualifying shares and, in the case of The Outdoor Footwear Company, Class A Stock so long as such Class A Stock is excluded from the definition of "Minority Interests") are owned by the Company and its Wholly-owned Subsidiaries. Section 8.2. Accounting Principles. Where the character or amount of any asset or liability or item of income or expense is required to be determined or any consolidation or other accounting computation is required to be made for the purposes of this Agreement, the same shall be done in accordance with generally accepted accounting principles, to the extent applicable, except where such principles are inconsistent with the requirements of this Agreement. Section 8.3. Directly or Indirectly. Where any provision in this Agreement refers to action to be taken by any Person, or which such Person is prohibited from taking, such provision shall be applicable whether the action in question is taken directly or indirectly by such Person. -34- 39 SECTION 9. MISCELLANEOUS. Section 9.1. Registered Notes. The Company shall cause to be kept at its principal office a register for the registration and transfer of the Notes (hereinafter called the "Note Register"), and the Company will register or transfer or cause to be registered or transferred, as hereinafter provided and under such reasonable regulations as it may prescribe, any Note issued pursuant to this Agreement. At any time and from time to time the registered holder of any Note which has been duly registered as hereinabove provided may transfer such Note upon surrender thereof at the principal office of the Company duly endorsed or accompanied by a written instrument of transfer duly executed by the registered holder of such Note or its attorney duly authorized in writing. The Person in whose name any registered Note shall be registered shall be deemed and treated as the owner and holder thereof for all purposes of this Agreement. Payment of or on account of the principal, premium, if any, and interest on any registered Note shall be made to or upon the written order of such registered holder. Section 9.2. Exchange of Notes. At any time, and from time to time, upon not less than ten days' notice to that effect given by the holder of any Note initially delivered or of any Note substituted therefor pursuant to [Section] 9.1, this [Section] 9.2 or [Section] 9.3, and, upon surrender of such Note at its office, the Company will deliver in exchange therefor, without expense to the holder, except as set forth below, Notes for the same aggregate principal amount as the then unpaid principal amount of the Note so surrendered, in the denomination of $100,000 or any amount in excess thereof as such holder shall specify, dated as of the date to which interest has been paid on the Note so surrendered or, if such surrender is prior to the payment of any interest thereon, then dated as of the date of issue, payable to such Person or Persons, or order, as may be designated by such holder, and otherwise of the same form and tenor as the Notes so surrendered for exchange. The Company may require the payment of a sum sufficient to cover any stamp tax or governmental charge imposed upon such exchange or transfer. Section 9.3. Loss, Theft, Etc. of Notes. Upon receipt of evidence satisfactory to the Company of the loss, theft, mutilation or destruction of any Note, and in the case of any such loss, theft or destruction upon delivery of a bond of indemnity in such form and amount as shall be reasonably satisfactory to the Company, or in the event of such mutilation upon surrender and cancellation of the Note, the Company will make and deliver without expense to the holder thereof, a new Note, of like tenor, in lieu of such lost, stolen, destroyed or mutilated Note. If the Purchaser or any subsequent institutional holder is the owner of any such lost, stolen or destroyed Note, then the affidavit of an authorized officer of such owner, setting forth the fact of loss, theft or destruction and of its ownership of the Note at the time of such loss, theft or destruction shall be accepted as satisfactory evidence thereof and no further -35- 40 indemnity shall be required as a condition to the execution and delivery of a new Note other than the written agreement of such owner to indemnify the Company. Section 9.4. Expenses, Stamp Tax Indemnity. Whether or not the transactions herein contemplated shall be consummated, the Company agrees to pay directly all of your reasonable out-of-pocket expenses in connection with the preparation, execution and delivery of this Agreement and the transactions contemplated hereby, including but not limited to the reasonable charges and disbursements of Chapman and Cutler, your special counsel, duplicating and printing costs and charges for shipping the Notes, adequately insured to you at your home office or at such other place as you may designate, and all such expenses relating to any amendment, waivers or consents pursuant to the provisions hereof. The Company also agrees that it will pay and save you harmless against any and all liability with respect to stamp and other taxes (other than transfer taxes or taxes on income or revenues), if any, which may be payable or which may be determined to be payable in connection with the execution and delivery of this Agreement or the Notes, whether or not any Notes are then outstanding. The Company agrees to protect and indemnify you against any liability for any and all brokerage fees and commissions payable or claimed to be payable to any Person in connection with the transactions contemplated by this Agreement. You hereby represent and warrant that you have not engaged any investment banker or broker in connection with your purchase of the Notes. Section 9.5. Powers and Rights Not Waived; Remedies Cumulative. No delay or failure on the part of the holder of any Note in the exercise of any power or right shall operate as a waiver thereof; nor shall any single or partial exercise of the same preclude any other or further exercise thereof, or the exercise of any other power or right, and the rights and remedies of the holder of any Note are cumulative to and are not exclusive of any rights or remedies any such holder would otherwise have, and no waiver or consent, given or extended pursuant to [Section]7 hereof, shall extend to or affect any obligation or right not expressly waived or consented to. Section 9.6. Notices. All communications provided for hereunder shall be in writing and, if to you, delivered or mailed by registered or certified mail, addressed to you at your address appearing on Schedule I to this Agreement or such other address as you or the subsequent holder of any Note initially issued to you, may designate to the Company in writing, and if to the Company, delivered or mailed by registered or certified mail to the Company at 11 Merrill Industrial Drive, Hampton, New Hampshire 03842-5050, Attention: Chief Financial Officer or to such other address as the Company may in writing designate to you or to a subsequent holder of the Note initially issued to you. Notice shall be effective upon the earlier of (i) three business days after such notice is sent or (ii) actual receipt of such notice. Section 9.7. Successors and Assigns. This Agreement shall be binding upon the Company and its successors and assigns and shall inure to your benefit and to the benefit of your successors and assigns, including each successive holder or holders of any Notes. -36- 41 Section 9.8. Survival of Covenants and Representations. All covenants, representations and warranties made by the Company herein and in any certificates delivered pursuant hereto, whether or not in connection with the Closing Date, shall survive the closing and the delivery of this Agreement and the Notes. Section 9.9. Severability. Should any part of this Agreement for any reason be declared invalid, such decision shall not affect the validity of any remaining portion, which remaining portion shall remain in force and effect as if this Agreement had been executed with the invalid portion thereof eliminated and it is hereby declared the intention of the parties hereto that they would have executed the remaining portion of this Agreement without including therein any such part, parts, or portion which may, for any reason, be hereafter declared invalid. Section 9.10. Governing Law. This Agreement and the Notes issued and sold hereunder shall be governed by and construed in accordance with Illinois law. Section 9.11. Captions. The descriptive headings of the various Sections or parts of this Agreement are for convenience only and shall not affect the meaning or construction of any of the provisions hereof." ARTICLE II AMENDMENTS TO EXHIBITS TO ORIGINAL NOTE AGREEMENTS Section 2.1. Amendment to Exhibit A. Exhibit A to the Original Note Agreements is hereby amended in its entirety so that the same shall henceforth read as provided in Exhibit A attached hereto. You covenant and agree that prior to transfer of any Note you will either (i) surrender the same to the Company in exchange for a new Note of the same tenor and dated as provided in Section 9.2 of the Original Note Agreements as amended and restated by this Second Amendment but reflecting in the text thereof the modifications effected by this [Section]2.1 or (ii) cause such Note to be endorsed with a legend reflecting the modifications effected by this [Section] 2.1. Section 2.2. Amendment to Exhibit B. Annex B to Exhibit B to the Original Note Agreements is hereby amended in its entirety so that the same shall henceforth read as provided in Exhibit B attached hereto. Section 2.3. Amendment to Exhibit E. Exhibit E to the Original Note Agreements is hereby deleted in its entirety. Section 2.4. Schedule I to the Original Note Agreement. Schedule I to the Original Note Agreements is hereby attached hereto as Schedule II. -37- 42 ARTICLE III MISCELLANEOUS Section 3.1. Ratification of Original Note Agreements; Condition Precedent. Except as amended and restated herein, the terms and provisions of the Original Note Agreements and the Notes are hereby ratified, confirmed and approved in all respects. If the 1994 Note Agreements and the 7.16% Senior Notes due April 15, 2000 are not executed and delivered as set forth above, this Second Amendment shall be null and void. Section 3.2. Counterparts. This Second Amendment may be executed in any number of counterparts, each executed counterpart constituting an original but altogether one and the same instrument. Section 3.3. Fees and Expenses. The Company agrees to pay all reasonable fees and expenses of you and your special counsel connected with the preparation of this Second Amendment. Section 3.4. References to Original Note Agreements. Any and all notices, requests, certificates and any other instruments, including the Notes, may refer to the Original Note Agreements or the Note Agreements dated as of September 30, 1989 without making specific reference to this Second Amendment, but nevertheless all such references shall be deemed to include this Second Amendment unless the context shall otherwise require. Section 3.5. Governing Law. This Second Amendment shall be construed in accordance with and governed by the laws of the State of Illinois. -38- 43 The Timberland Company Second Amendment Upon the acceptance of this Second Amendment by Holders holding at least 51% in aggregate unpaid principal amount of all outstanding Notes, this agreement shall become effective and the Original Note Agreements shall be amended as herein set forth, such amendment to be effective as of April 15, 1994 THE TIMBERLAND COMPANY By /s/ Carden N. Welsh ------------------------------- Its Carden N. Welsh --------------------------- Treasurer Accepted as of April 1, 1994 PRINCIPAL MUTUAL LIFE INSURANCE COMPANY By /s/ Jon C. Heiny ------------------------------- Its Jon C. Heiny --------------------------- Counsel By /s/ Jon M. Davidson ------------------------------- Its Jon M. Davidson --------------------------- Assistant Director Securities Investment Holding the unpaid principal amount of the Notes set out opposite its name in Schedule I hereto 44 The Timberland Company Second Amendment Upon the acceptance of this Second Amendment by Holders holding at least 51% in aggregate unpaid principal amount of all outstanding Notes, this agreement shall become effective and the Original Note Agreements shall be amended as herein set forth, such amendment to be effective as of April 15, 1994 THE TIMBERLAND COMPANY By /s/ Carden N. Welsh ------------------------------- Its Carden N. Welsh --------------------------- Treasurer Accepted as of April 1, 1994 NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY By /s/ Mark S. Jordahl ------------------------------- Its Mark S. Jordahl --------------------------- Authorized Representative Holding the unpaid principal amount of the Notes set out opposite its name in Schedule I hereto 45 The Timberland Company Second Amendment Upon the acceptance of this Second Amendment by Holders holding at least 51% in aggregate unpaid principal amount of all outstanding Notes, this agreement shall become effective and the Original Note Agreements shall be amended as herein set forth, such amendment to be effective as of April 15, 1994 THE TIMBERLAND COMPANY By /s/ Carden N. Welsh ------------------------------- Its Carden N. Welsh --------------------------- Treasurer Accepted as of April 1, 1994 NORTHERN LIFE INSURANCE COMPANY By /s/ Mark S. Jordahl ------------------------------- Its Mark S. Jordahl --------------------------- Assistant Treasurer Holding the unpaid principal amount of the Notes set out opposite its name in Schedule I hereto 46 The Timberland Company Second Amendment Upon the acceptance of this Second Amendment by Holders holding at least 51% in aggregate unpaid principal amount of all outstanding Notes, this agreement shall become effective and the Original Note Agreements shall be amended as herein set forth, such amendment to be effective as of April 15, 1994 THE TIMBERLAND COMPANY By /s/ Carden N. Welsh ------------------------------- Its Carden N. Welsh --------------------------- Treasurer Accepted as of April 1, 1994 BENEFICIAL STANDARD LIFE INSURANCE COMPANY By /s/ ------------------------------- Its --------------------------- By ------------------------------- Its --------------------------- Holding the unpaid principal amount of the Notes set out opposite its name in Schedule I hereto 47 The Timberland Company Second Amendment Upon the acceptance of this Second Amendment by Holders holding at least 51% in aggregate unpaid principal amount of all outstanding Notes, this agreement shall become effective and the Original Note Agreements shall be amended as herein set forth, such amendment to be effective as of April 15, 1994 THE TIMBERLAND COMPANY By /s/ Carden N. Welsh ------------------------------- Its Carden N. Welsh --------------------------- Treasurer Accepted as of April 1, 1994 FARM BUREAU LIFE INSURANCE COMPANY By /s/ ------------------------------- Its --------------------------- Holding the unpaid principal amount of the Notes set out opposite its name in Schedule I hereto 48 The Timberland Company Second Amendment Upon the acceptance of this Second Amendment by Holders holding at least 51% in aggregate unpaid principal amount of all outstanding Notes, this agreement shall become effective and the Original Note Agreements shall be amended as herein set forth, such amendment to be effective as of April 15, 1994 THE TIMBERLAND COMPANY By /s/ Carden N. Welsh ------------------------------- Its Carden N. Welsh --------------------------- Treasurer Accepted as of April 1, 1994 FB ANNUITY COMPANY By /s/ ------------------------------- Its --------------------------- Holding the unpaid principal amount of the Notes set out opposite its name in Schedule I hereto 49 The Timberland Company Second Amendment Upon the acceptance of this Second Amendment by Holders holding at least 51% in aggregate unpaid principal amount of all outstanding Notes, this agreement shall become effective and the Original Note Agreements shall be amended as herein set forth, such amendment to be effective as of April 15, 1994 THE TIMBERLAND COMPANY By /s/ Carden N. Welsh ------------------------------- Its Carden N. Welsh --------------------------- Treasurer Accepted as of April 1, 1994 FARM BUREAU MUTUAL INSURANCE COMPANY OF MICHIGAN By /s/ ------------------------------- Its --------------------------- Holding the unpaid principal amount of the Notes set out opposite its name in Schedule I hereto 50 The Timberland Company Second Amendment 9.70% Senior Notes due December 1, 1999 Upon the acceptance of this Second Amendment by Holders holding at least 51% in aggregate unpaid principal amount of all outstanding Notes, this agreement shall become effective and the Original Note Agreements shall be amended as herein set forth, such amendment to be effective as of April 15, 1994 THE TIMBERLAND COMPANY By /s/ Carden N. Welsh ------------------------------- Its Carden N. Welsh --------------------------- Treasurer Accepted as of April 1, 1994 SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.) By /s/ L. Brock Thomson ------------------------------- Its L. Brock Thomson, Treasurer --------------------------- Holding the unpaid principal amount of the Notes set out opposite its name in Schedule I hereto 51 The Timberland Company Second Amendment 9.70% Senior Notes due December 1, 1999 Upon the acceptance of this Second Amendment by Holders holding at least 51% in aggregate unpaid principal amount of all outstanding Notes, this agreement shall become effective and the Original Note Agreements shall be amended as herein set forth, such amendment to be effective as of April 15, 1994 THE TIMBERLAND COMPANY By /s/ Carden N. Welsh ------------------------------- Its Carden N. Welsh --------------------------- Treasurer Accepted as of April 1, 1994 SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK By /s/ L. Brock Thomson ------------------------------- Its L. Brock Thomson, Treasurer --------------------------- Holding the unpaid principal amount of the Notes set out opposite its name in Schedule I hereto 52 The Timberland Company Second Amendment Upon the acceptance of this Second Amendment by Holders holding at least 51% in aggregate unpaid principal amount of all outstanding Notes, this agreement shall become effective and the Original Note Agreements shall be amended as herein set forth, such amendment to be effective as of April 15, 1994 THE TIMBERLAND COMPANY By /s/ Carden N. Welsh ------------------------------- Its Carden N. Welsh --------------------------- Treasurer Accepted as of April 1, 1994 GUARANTEE MUTUAL LIFE COMPANY By /s/ Steven A. Scanlan ------------------------------- Its Steven A. Scanlan --------------------------- Senior Investment Officer - Securities Holding the unpaid principal amount of the Notes set out opposite its name in Schedule I hereto 53 SCHEDULE I PRINCIPAL HOLDERS AMOUNT PRINCIPAL MUTUAL LIFE INSURANCE COMPANY $16,000,000 711 High Street Des Moines, Iowa 50392-0800 Attention: Investment Department Securities Division NORTHWESTERN NATIONAL LIFE INSURANCE $4,500,000 COMPANY c/o Washington Square Capital, Inc. Private Placement Servicing 100 Washington Square Suite 800, Route 3070 Minneapolis, Minnesota 55401-2147 Attention: Kathy Gunderson NORTHERN LIFE INSURANCE COMPANY $2,000,000 c/o Washington Square Capital, Inc. Private Placement Servicing 100 Washington Square Suite 800, Route 3070 Minneapolis, Minnesota 55401-2147 Attention: Kathy Gunderson BENEFICIAL STANDARD LIFE INSURANCE COMPANY $3,000,000 c/o CONSECO, INC. 11825 N. Pennsylvania Street Carmel, Indiana 46032 Attention: Nora Bamman FARM BUREAU LIFE INSURANCE COMPANY $1,000,000 c/o Farm Bureau Insurance Group Investment Division 7373 West Saginaw, P.O. Box 30400 Lansing, Michigan 48917 Attention: Steven Harkness, Portfolio Manager 54 FB ANNUITY COMPANY $1,000,000 c/o Farm Bureau Insurance Group Investment Division 7373 West Saginaw, P.O. Box 30400 Lansing, Michigan 48917 Attention: Steven Harkness, Portfolio Manager FARM BUREAU MUTUAL INSURANCE COMPANY OF MICHIGAN $500,000 c/o Farm Bureau Insurance Group Investment Division 7373 West Saginaw, P.O. Box 30400 Lansing, Michigan 48917 Attention: Steven Harkness, Portfolio Manager SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.) $4,000,000 One Sun Life Executive Park Wellesley Hills, Massachusetts 02181-0001 Attention: Investment Department Private Placement Section SUN LIFE INSURANCE AND ANNUITY COMPANY OF $1,000,000 NEW YORK One Sun Life Executive Park Wellesley Hills, Massachusetts 02181-0001 Attention: Investment Department Private Placement Section #1303 GUARANTEE MUTUAL LIFE COMPANY $2,000,000 1 Guarantee Center 8801 Indian Hills Drive Omaha, Nebraska 68114 Attention: Investment Division I-2 55 SCHEDULE II PRINCIPAL AMOUNT NAME AND ADDRESSES OF NOTES TO BE OF PURCHASERS PURCHASED PRINCIPAL MUTUAL LIFE INSURANCE COMPANY $16,000,000 711 High Street (Two Notes, No. Des Moines, Iowa 50309 R-1 for $13,000,000 Attention: Investment Department, and No. R-2 for Securities Division, $3,000,000) Regarding Note No. R-1 or No. R-2 PAYMENTS All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "The Timberland Company, 9.70% Senior Note due December 1, 1999, [in the case of Note No. R-1, "Bond No. 1-B-22948" or in the case of Note No. R-2, "Bond No. 16-B-22948"], principal or interest") to: Norwest Bank Des Moines, N.A. Seventh and Walnut Streets Des Moines, Iowa 50304 (a) in the case of payments on Note No. R-1: for credit to Principal Mutual Life Insurance Company's General Account No. 014752 (b) in the case of payments on Note No. R-2: for credit to Principal Mutual Life Insurance Company's Account No. 032395 56 NOTICES All notices and communications, including notices with respect to payments, and written confirmation of each such payment, to be addressed as first provided above. Name of Nominee in which Notes are to be issued: None II-2 57 SCHEDULE II PRINCIPAL AMOUNT NAME AND ADDRESSES OF NOTES TO BE OF PURCHASERS PURCHASED NORTHWESTERN NATIONAL LIFE INSURANCE $3,500,000 Company c/o Washington Square Capital, Inc. 1500 Northstar West 625 Marquette Avenue South Minneapolis, Minnesota 55402 Attention: Robert Corrick PAYMENTS All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "The Timberland Company, 9.70% Senior Note due December 1, 1999, principal or interest") to: First National Bank of Minneapolis 120 South Sixth Street Minneapolis, Minnesota (ABA No. 091000022) for credit to Northwestern National Life Insurance Company's Account No. 102-4001-446 NOTICES All notices and communications, including notices with respect to payments and written confirmation of each such payment, to be addressed as first provided above. Name of Nominee in which Notes are to be issued: None II-3 58 SCHEDULE II PRINCIPAL AMOUNT NAME AND ADDRESSES OF NOTES TO BE OF PURCHASERS PURCHASED AMERICAN INVESTORS LIFE INSURANCE $3,000,000 COMPANY 415 Southwest 8th Avenue Topeka, Kansas 66603 Attn: Lynn Hammes, Vice President-Comptroller PAYMENTS All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "The Timberland Company, 9.70% Senior Note due December 1, 1999, principal or interest") to: Commerce Bank/Topeka ABA No. 101100728 reference AIL Trust No. 567 Account No. 04-565-9 NOTICES Only financial statements, compliance certificates and notices of payments, on or in respect of the Notes, and written confirmation of each such payment to be addressed as first provided above. All other notices and communications, including waiver requests and special communications concerning the financial condition of the Company, to: II-4 59 Washington Square Capital, Inc. 1500 Northstar West 625 Marquette Avenue South Minneapolis, Minnesota 55402 Attention: Robert Corrick Name of Nominee in which Notes are to be issued: AIL & Co. II-5 60 SCHEDULE II PRINCIPAL AMOUNT NAME AND ADDRESSES OF NOTES TO BE OF PURCHASERS PURCHASED BENEFICIAL STANDARD LIFE INSURANCE $3,000,000 COMPANY 5700 Wilshire Boulevard Suite 307D Los Angeles, California 90036 Attention: Donna M. Coogan PAYMENTS All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "The Timberland Company, 9.70% Senior Note due December 1, 1999, principal or interest") to: Security Pacific National Bank (ABA No. 122000043) SPSTC Business Services - Pasadena No. 0956 DDA No. 0014-043-543 Attention: Special Assets reference Beneficial Standard Life Insurance Company's Account No. 337-201-970 NOTICES Only financial statements, compliance certificates and notices of payments, on or in respect of the Notes, and written confirmation of each such payment to be addressed as first provided above. All other notices and communications, including waiver requests and special communications concerning the financial condition of the Company, to: II-6 61 Washington Square Capital, Inc. 1500 Northstar West 625 Marquette Avenue South Minneapolis, Minnesota 55402 Attention: Robert Corrick Name of Nominee in which Notes are to be issued: EBENCO II-7 62 SCHEDULE II PRINCIPAL AMOUNT NAME AND ADDRESSES OF NOTES TO BE OF PURCHASERS PURCHASED FARM BUREAU LIFE INSURANCE COMPANY $1,000,000 c/o Farm Bureau Insurance Group Investment Division 7373 West Saginaw P.O. Box 30400 Lansing, Michigan 48917 Attention: Steven Harkness, Portfolio Manager PAYMENTS All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "The Timberland Company, 9.70% Senior Note due December 1, 1999, principal or interest") to: MFRS/Detroit No. 072000339, F/A/O: Farm Bureau Insurance Attention: Sue Blanchette, Department 530 Trust Account, Income Unit (Combine wire payment with other payments to Farm Bureau group participants) NOTICES Only financial statements, compliance certificates and notices of payments, on or in respect of the Notes, and written confirmation of each such payment to be addressed as first provided above. All other notices and communications, including waiver requests and special communications concerning the financial condition of the Company, to: II-8 63 Washington Square Capital, Inc. 1500 Northstar West 625 Marquette Avenue South Minneapolis, Minnesota 55402 Attention: Robert Corrick Name of Nominee in which Notes are to be issued: None II-9 64 SCHEDULE II PRINCIPAL AMOUNT NAME AND ADDRESSES OF NOTES TO BE OF PURCHASERS PURCHASED FB ANNUITY COMPANY $1,000,00 c/o Farm Bureau Insurance Group Investment Division 7373 West Saginaw P.O. Box 30400 Lansing, Michigan 48917 Attention: Steven Harkness, Portfolio Manager PAYMENTS All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "The Timberland Company, 9.70% Senior Note due December 1, 1999, principal or interest") to: MFRS/Detroit No. 072000339, F/A/O: Farm Bureau Insurance Attention: Sue Blanchette, Department 530 Trust Account, Income Unit (Combine wire payment with other payments to Farm Bureau group participants) NOTICES Only financial statements, compliance certificates and notices of payments, on or in respect of the Notes, and written confirmation of each such payment to be addressed as first provided above. All other notices and communications, including waiver requests and special communications concerning the financial condition of the Company, to: II-10 65 Washington Square Capital, Inc. 1500 Northstar West 625 Marquette Avenue South Minneapolis, Minnesota 55402 Attention: Robert Corrick Name of Nominee in which Notes are to be issued: None II-11 66 SCHEDULE II PRINCIPAL AMOUNT NAME AND ADDRESSES OF NOTES TO BE OF PURCHASERS PURCHASED FARM BUREAU MUTUAL INSURANCE COMPANY $500,000 OF MICHIGAN c/o Farm Bureau Insurance Group Investment Division 7373 West Saginaw P.O. Box 30400 Lansing, Michigan 48917 Attention: Steven Harkness, Portfolio Manager PAYMENTS All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "The Timberland Company, 9.70% Senior Note due December 1, 1999, principal or interest") to: MFRS/Detroit No. 072000339, F/A/O: Farm Bureau Insurance Attention: Sue Blanchette, Department 530 Trust Account, Income Unit (Combine wire payment with other payments to Farm Bureau group participants) NOTICES Only financial statements, compliance certificates and notices of payments, on or in respect of the Notes, and written confirmation of each such payment to be addressed as first provided above. All other notices and communications, including waiver requests and special communications concerning the financial condition of the Company, to: II-12 67 Washington Square Capital, Inc. 1500 Northstar West 625 Marquette Avenue South Minneapolis, Minnesota 55402 Attention: Robert Corrick Name of Nominee in which Notes are to be issued: None II-13 68 SCHEDULE II PRINCIPAL AMOUNT NAME AND ADDRESSES OF NOTES TO BE OF PURCHASERS PURCHASED SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.) $4,000,000 One Sun Life Executive Park Wellesley Hills, Massachusetts 02181 Attention: Investment Department Private Placement SC [Section]1303 PAYMENTS All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "The Timberland Company, 9.70% Senior Note due December 1, 1999, principal or interest") to: Chemical Bank (ABA No. 021-000-128) 55 Water Street New York, New York 10041 for credit to Sun Life Assurance Company of Canada (U.S.) Account No. 323-023177 NOTICES All notices of payments, on or in respect of the Notes and written confirmation of each such payment to: Sun Life Assurance Company of Canada (U.S.) Three Sun Life Executive Park Wellesley Hills, Massachusetts 02181 Attention: Manager, Investment Accounting SC #3327 All notices and communications, other than those with respect to payments to be addressed as first provided above. Name of Nominee in which Notes are to be issued: None II-14 69 SCHEDULE II PRINCIPAL AMOUNT NAME AND ADDRESSES OF NOTES TO BE OF PURCHASERS PURCHASED SUN LIFE INSURANCE AND ANNUITY COMPANY $1,000,000 OF NEW YORK One Sun Life Executive Park Wellesley Hills, Massachusetts 02181-0001 Attention: Investment Department Private Placement Section PAYMENTS All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "The Timberland Company, 9.70% Senior Note due December 1, 1999, principal or interest") to: Chemical Bank (ABA No. 021-000-128) 55 Water Street New York, New York 10041 for credit to Sun Life Insurance and Annuity Company of New York Account No. 322-022703 NOTICES All notices of payments, on or in respect of the Notes and written confirmation of each such payment to: Sun Life Insurance and Annuity Company of New York Three Sun Life Executive Park Wellesley Hills, Massachusetts 02181 Attention: Manager, Investment Accounting SC #3327 All notices and communications, other than those with respect to payments to be addressed as first provided above. Name of Nominee in which Notes are to be issued: None II-15 70 SCHEDULE II PRINCIPAL AMOUNT NAME AND ADDRESSES OF NOTES TO BE OF PURCHASERS PURCHASED GUARANTEE MUTUAL LIFE COMPANY $2,000,000 1 Guarantee Center 8801 Indian Hills Drive Omaha, Nebraska 68114 Attention: Investment Division PAYMENTS All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "The Timberland Company, 9.70% Senior Note due December 1, 1999, principal or interest") to: Bankers Trust Company New York, New York for credit to Guarantee Mutual Life Company's Account No. 50-035-201 NOTICES All notices and communications, including notices with respect to payments and written confirmation of each such payment, to be addressed as first provided above. Name of Nominee in which Notes are to be issued: None II-16 71 THE TIMBERLAND COMPANY 9.70% Senior Note Due December 1, 1999 PPN: 887100 A# 2 NO. R- _____________, 19__ THE TIMBERLAND COMPANY, a Delaware corporation (the "Company"), for value received, hereby promises to pay to or registered assigns on the first day of December, 1999 the principal amount of DOLLARS ($_______________) and to pay interest (computed on the basis of a 360-day year of twelve 30-day months) on the principal amount from time to time remaining unpaid hereon at the rate of 9.70% per annum from the date hereof until maturity, payable semiannually on the first of each June and December in each year commencing June 1, 1990, and at maturity. The Company agrees to pay interest on overdue principal (including any overdue required or optional prepayment of principal) and premium, if any, and (to the extent legally enforceable) on any overdue installment of interest, at the rate of 11.70% per annum after maturity, whether by acceleration or otherwise, until paid. Both the principal hereof and interest hereon are payable at the principal office of the Company in Hampton, New Hampshire in coin or currency of the United States of America which at the time of payment shall be legal tender for the payment of public and private debts. This Note is one of the 9.70% Senior Notes due December 1, 1999 (the "Notes") of the Company in the aggregate principal amount of $35,000,000 issued or to be issued under and pursuant to the terms and provisions of the separate Note Agreements, each dated as of September 30, 1989 (the "Original Note Agreements"), entered into by the Company with the original purchaser therein referred to, each as amended and restated pursuant to the separate Amended and Restated Note Agreements dated as of April 1, 1994 entered into by the Company with the Holder therein referred to (the Original Note Agreements as amended and restated by the Amended and Restated Note Agreements being referred to herein as the "Note Agreements"). This Note and the holder hereof are entitled equally and ratably with the holders of all other Notes outstanding under the Note Agreements to all the benefits and security provided for thereby or referred to therein. Reference is hereby made to the Note Agreements for a statement of such rights and benefits. This Note and the other Notes outstanding under the Note Agreements may be declared due prior to their expressed maturity dates and certain prepayments are required to EXHIBIT A (to Second Amendment) 72 be made thereon, all in the events, on the terms and in the manner and amounts as provided in the Note Agreements. The Notes are not subject to prepayment or redemption at the option of the Company prior to their expressed maturity dates except on the terms and conditions and in the amounts and with the premium, if any, set forth in the Note Agreements. This Note is registered on the books of the Company and is transferable only by surrender thereof at the principal office of the Company duly endorsed or accompanied by a written instrument of transfer duly executed by the registered holder of this Note or its attorney duly authorized in writing. Payment of or on account of principal, premium, if any, and interest on this note shall be made only to or upon the order in writing of the registered holder. THE TIMBERLAND COMPANY By ___________________________ Its A-2 73 DESCRIPTION OF DEBT AND LEASES 1. Current Debt of the Company and its Restricted Subsidiaries outstanding on April 15, 1994 is as follows:
Effective Maturity Original Face Outstanding Date Date Amount Liability MONEY MARKET LINES LIBOR (Bank Hapoalim) 3/21/94 4/20/94 $ 9,000,000 $ 9,000,000 LIBOR (Credito Italiano) 4/14/94 4/15/94 5,000,000 5,000,000 =========== =========== $14,000,000 $14,000,000 MORGAN GUARANTY REVOLVING CREDIT AGREEMENT LIBOR 3/17/94 4/18/94 $ 3,000,000 $ 3,000,000 LIBOR 3/23/94 4/22/94 5,000,000 5,000,000 LIBOR 3/24/94 4/25/94 5,000,000 5,000,000 =========== =========== $13,000,000 $13,000,000 MISCELLANEOUS OTHER LIENS(1)* Copy Machines, Computers, Equipment and other Maximum miscellaneous - - $ 3,000,000 $ - =========== =========== _____________________________ * Secured by lien
EXHIBIT B (to Second Amendment) 74 2. Funded Debt of the Company and its Restricted Subsidiaries outstanding on February 25, 1994 is as follows:
Effective Maturity Original Face Outstanding Date Date Amount Liability PRIVATE PLACEMENT SENIOR NOTES Principal Mutual Life Insurance Company and other insurance companies 12/06/89 12/01/99 $35,000,000 $35,000,000 =========== =========== CHASE MANHATTAN CREDIT AGREEMENT 11/23/93 5/15/99 $50,000,000 $50,000,000 =========== =========== CAPITAL EQUIPMENT LEASES(2)* BayBanks Financing & Leasing Co. Inc. 6/90 6/95 $ 2,096,332 $ 664,194 BayBanks Financing & Leasing Co. Inc. 10/90 11/95 456,507 177,756 BayBanks Financing & Leasing Co. Inc. 12/90 12/95 459,431 195,129 =========== =========== $ 3,012,270 $ 1,037,079 INDUSTRIAL REVENUE BOND* Shawmut Bank, N.A., Trustee 12/27/84 12/2014 $ 6,680,000 $ 5,345,000
3. Capitalized Leases of the Company and its Restricted Subsidiaries outstanding on February 25, 1994 are as follows: -See Item 2 Above- [FN] _________________________ * Secured by lien B-2 75 The Timberland Company Second Amendment Upon the acceptance of this Second Amendment by Holders holding at least 51% in aggregate unpaid principal amount of all outstanding Notes, this agreement shall become effective and the Original Note Agreements shall be amended as herein set forth, such amendment to be effective as of April 15, 1994 THE TIMBERLAND COMPANY By /s/ Carden N. Welsh ------------------------------- Its Carden N. Welsh --------------------------- Treasurer Accepted as of April 1, 1994 PRINCIPAL MUTUAL LIFE INSURANCE COMPANY By /s/ Jon C. Heiny ------------------------------- Its Jon C. Heiny --------------------------- Counsel By /s/ Jon M. Davidson ------------------------------- Its Jon M. Davidson --------------------------- Assistant Director Securities Investment Holding the unpaid principal amount of the Notes set out opposite its name in Schedule I hereto 76 The Timberland Company Second Amendment Upon the acceptance of this Second Amendment by Holders holding at least 51% in aggregate unpaid principal amount of all outstanding Notes, this agreement shall become effective and the Original Note Agreements shall be amended as herein set forth, such amendment to be effective as of April 15, 1994 THE TIMBERLAND COMPANY By /s/ Carden N. Welsh ------------------------------- Its Carden N. Welsh --------------------------- Treasurer Accepted as of April 1, 1994 NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY By /s/ Mark S. Jordahl ------------------------------- Its Mark S. Jordahl --------------------------- Authorized Representative Holding the unpaid principal amount of the Notes set out opposite its name in Schedule I hereto 77 The Timberland Company Second Amendment Upon the acceptance of this Second Amendment by Holders holding at least 51% in aggregate unpaid principal amount of all outstanding Notes, this agreement shall become effective and the Original Note Agreements shall be amended as herein set forth, such amendment to be effective as of April 15, 1994 THE TIMBERLAND COMPANY By /s/ Carden N. Welsh ------------------------------- Its Carden N. Welsh --------------------------- Treasurer Accepted as of April 1, 1994 NORTHERN LIFE INSURANCE COMPANY By /s/ Mark S. Jordahl ------------------------------- Its Mark S. Jordahl --------------------------- Assistant Treasurer Holding the unpaid principal amount of the Notes set out opposite its name in Schedule I hereto 78 The Timberland Company Second Amendment Upon the acceptance of this Second Amendment by Holders holding at least 51% in aggregate unpaid principal amount of all outstanding Notes, this agreement shall become effective and the Original Note Agreements shall be amended as herein set forth, such amendment to be effective as of April 15, 1994 THE TIMBERLAND COMPANY By /s/ Carden N. Welsh ------------------------------- Its Carden N. Welsh --------------------------- Treasurer Accepted as of April 1, 1994 BENEFICIAL STANDARD LIFE INSURANCE COMPANY By /s/ ------------------------------- Its --------------------------- By ------------------------------- Its --------------------------- Holding the unpaid principal amount of the Notes set out opposite its name in Schedule I hereto 79 The Timberland Company Second Amendment Upon the acceptance of this Second Amendment by Holders holding at least 51% in aggregate unpaid principal amount of all outstanding Notes, this agreement shall become effective and the Original Note Agreements shall be amended as herein set forth, such amendment to be effective as of April 15, 1994 THE TIMBERLAND COMPANY By /s/ Carden N. Welsh ------------------------------- Its Carden N. Welsh --------------------------- Treasurer Accepted as of April 1, 1994 FARM BUREAU LIFE INSURANCE COMPANY By /s/ ------------------------------- Its --------------------------- Holding the unpaid principal amount of the Notes set out opposite its name in Schedule I hereto 80 The Timberland Company Second Amendment Upon the acceptance of this Second Amendment by Holders holding at least 51% in aggregate unpaid principal amount of all outstanding Notes, this agreement shall become effective and the Original Note Agreements shall be amended as herein set forth, such amendment to be effective as of April 15, 1994 THE TIMBERLAND COMPANY By /s/ Carden N. Welsh ------------------------------- Its Carden N. Welsh --------------------------- Treasurer Accepted as of April 1, 1994 FB ANNUITY COMPANY By /s/ ------------------------------- Its --------------------------- Holding the unpaid principal amount of the Notes set out opposite its name in Schedule I hereto 81 The Timberland Company Second Amendment Upon the acceptance of this Second Amendment by Holders holding at least 51% in aggregate unpaid principal amount of all outstanding Notes, this agreement shall become effective and the Original Note Agreements shall be amended as herein set forth, such amendment to be effective as of April 15, 1994 THE TIMBERLAND COMPANY By /s/ Carden N. Welsh ------------------------------- Its Carden N. Welsh --------------------------- Treasurer Accepted as of April 1, 1994 FARM BUREAU MUTUAL INSURANCE COMPANY OF MICHIGAN By /s/ ------------------------------- Its --------------------------- Holding the unpaid principal amount of the Notes set out opposite its name in Schedule I hereto 82 The Timberland Company Second Amendment 9.70% Senior Notes due December 1, 1999 Upon the acceptance of this Second Amendment by Holders holding at least 51% in aggregate unpaid principal amount of all outstanding Notes, this agreement shall become effective and the Original Note Agreements shall be amended as herein set forth, such amendment to be effective as of April 15, 1994 THE TIMBERLAND COMPANY By /s/ Carden N. Welsh ------------------------------- Its Carden N. Welsh --------------------------- Treasurer Accepted as of April 1, 1994 SUN LIFE ASSURANCE COMPANY OF CANADA (U.S.) By /s/ L. Brock Thomson ------------------------------- Its L. Brock Thomson, Treasurer --------------------------- Holding the unpaid principal amount of the Notes set out opposite its name in Schedule I hereto 83 The Timberland Company Second Amendment 9.70% Senior Notes due December 1, 1999 Upon the acceptance of this Second Amendment by Holders holding at least 51% in aggregate unpaid principal amount of all outstanding Notes, this agreement shall become effective and the Original Note Agreements shall be amended as herein set forth, such amendment to be effective as of April 15, 1994 THE TIMBERLAND COMPANY By /s/ Carden N. Welsh ------------------------------- Its Carden N. Welsh --------------------------- Treasurer Accepted as of April 1, 1994 SUN LIFE INSURANCE AND ANNUITY COMPANY OF NEW YORK By /s/ L. Brock Thomson ------------------------------- Its L. Brock Thomson, Treasurer --------------------------- Holding the unpaid principal amount of the Notes set out opposite its name in Schedule I hereto 84 The Timberland Company Second Amendment Upon the acceptance of this Second Amendment by Holders holding at least 51% in aggregate unpaid principal amount of all outstanding Notes, this agreement shall become effective and the Original Note Agreements shall be amended as herein set forth, such amendment to be effective as of April 15, 1994 THE TIMBERLAND COMPANY By /s/ Carden N. Welsh ------------------------------- Its Carden N. Welsh --------------------------- Treasurer Accepted as of April 1, 1994 GUARANTEE MUTUAL LIFE COMPANY By /s/ Steven A. Scanlan ------------------------------- Its Steven A. Scanlan --------------------------- Senior Investment Officer - Securities Holding the unpaid principal amount of the Notes set out opposite its name in Schedule I hereto EX-10.4 5 CREDIT AGREEMENT 1 EXHIBIT 10.4 EXECUTION COPY -------------- $125,000,000 CREDIT AGREEMENT dated as of May 4, 1994 among The Timberland Company The Banks Listed Herein and Morgan Guaranty Trust Company of New York, as Agent 2 TABLE OF CONTENTS*
Page ---- ARTICLE I DEFINITIONS SECTION 1.01 Definitions . . . . . . . . . . . . . 1 1.02 Accounting Terms and Determinations . 20 1.03 Types of Borrowings . . . . . . . . . 20 ARTICLE II THE CREDITS SECTION 2.01 Commitments to Lend . . . . . . . . . 21 2.02 Notice of Committed Borrowings . . . . 21 2.03 Money Market Borrowings . . . . . . . 22 2.04 Notice to Banks; Funding of Loans . . 25 2.05 Notes . . . . . . . . . . . . . . . . 26 2.06 Maturity of Loans . . . . . . . . . . 27 2.07 Method of Electing Interest Rates . . 27 2.08 Interest Rates . . . . . . . . . . . . 29 2.09 Facility Fees . . . . . . . . . . . . 33 2.10 Mandatory Termination or Reduction of Commitments . . . . . . 33 2.11 Optional Termination or Reduction of Commitments . . . . . . 34 2.12 Optional Prepayments . . . . . . . . . 34 2.13 Mandatory Prepayments . . . . . . . . 34 2.14 General Provisions as to Payments . . 35 2.15 Funding Losses . . . . . . . . . . . . 36 2.16 Computation of Interest and Fees . . . 36 2.17 Judgment Currency . . . . . . . . . . 37 2.18 Foreign Subsidiary Costs . . . . . . . 37 ARTICLE III CONDITIONS SECTION 3.01 Closing . . . . . . . . . . . . . . . 38 3.02 Borrowings . . . . . . . . . . . . . . 39 3.03 First Borrowing by Each Eligible Subsidiary . . . . . . . . 39 __________________________ *The Table of Contents is not a part of this Agreement.
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Page ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY SECTION 4.01 Corporate Existence and Power . . . . 40 4.02 Corporate and Governmental Authorization; No Contravention . . 40 4.03 Binding Effect . . . . . . . . . . . . 41 4.04 Financial Information . . . . . . . . 41 4.05 Litigation . . . . . . . . . . . . . . 41 4.06 Compliance with ERISA . . . . . . . . 41 4.07 Environmental Matters . . . . . . . . 42 4.08 Taxes . . . . . . . . . . . . . . . . 42 4.09 Subsidiaries . . . . . . . . . . . . . 42 4.10 Not an Investment Company . . . . . . 43 4.11 Full Disclosure . . . . . . . . . . . 43 ARTICLE V COVENANTS SECTION 5.01 Information . . . . . . . . . . . . . 43 5.02 Payment of Obligations . . . . . . . . 46 5.03 Maintenance of Property; Insurance . . 47 5.04 Conduct of Business and Maintenance of Existence . . . . . . 47 5.05 Compliance with Laws . . . . . . . . . 47 5.06 Inspection of Property, Books and Records . . . . . . . . . 48 5.07 Fixed Charge Coverage Ratio . . . . . 48 5.08 Debt . . . . . . . . . . . . . . . . . 48 5.09 Minimum Consolidated Tangible Net Worth . . . . . . . . . . . . . 49 5.10 Restricted Payments . . . . . . . . . 50 5.11 Investments . . . . . . . . . . . . . 50 5.12 Maintenance of Ownership of Subsidiaries . . . . . . . . . . . . 51 5.13 Negative Pledge . . . . . . . . . . . 51 5.14 Consolidations, Mergers and Sales of Assets . . . . . . . . . . 52 5.15 Restrictions on Prepayments of and Amendments to Certain Debt . . . . . 52 5.16 Transactions With Affiliates . . . . . 53 5.17 Use of Proceeds . . . . . . . . . . . 54
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Page ARTICLE VI DEFAULTS SECTION 6.01 Events of Default . . . . . . . . . . 54 6.02 Notice of Default . . . . . . . . . . 57 ARTICLE VII THE Agent SECTION 7.01 Appointment and Authorization . . . . 57 7.02 Agent and Affiliates. . . . . . . . . 57 7.03 Action by Agent . . . . . . . . . . . 58 7.04 Consultation with Experts . . . . . . 58 7.05 Liability of Agent . . . . . . . . . . 58 7.06 Indemnification . . . . . . . . . . . 58 7.07 Credit Decision . . . . . . . . . . . 59 7.08 Successor Agent . . . . . . . . . . . 59 7.09 Agent's Fee . . . . . . . . . . . . . 59 ARTICLE VIII CHANGE IN CIRCUMSTANCES SECTION 8.01 Basis for Determining Interest Rate Inadequate or Unfair . . . . . 60 8.02 Illegality . . . . . . . . . . . . . . 60 8.03 Increased Cost and Reduced Return . . 61 8.04 Taxes . . . . . . . . . . . . . . . . 63 8.05 Base Rate Loans Substituted for Affected Fixed Rate Loans . . . . . 65 ARTICLE IX REPRESENTATIONS AND WARRANTIES OF ELIGIBLE SUBSIDIARIES SECTION 9.01 Corporate Existence and Power . . . . . 66 9.02 Corporate and Governmental Authorization; Contravention . . . . 66 9.03 Binding Effect . . . . . . . . . . . . 66 9.04 Taxes . . . . . . . . . . . . . . . . . 66
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Page ARTICLE X GUARANTY SECTION 10.01 The Guaranty . . . . . . . . . . . . . 67 10.02 Guaranty Unconditional . . . . . . . . 67 10.03 Discharge Only Upon Payment In Full; Reinstatement in Certain Circumstances . . . . . . . 68 10.04 Waiver by the Company . . . . . . . . 68 10.05 Waiver of Subrogation . . . . . . . . 68 10.06 Stay of Acceleration . . . . . . . . . 69 ARTICLE XI MISCELLANEOUS SECTION 11.01 Notices . . . . . . . . . . . . . . . 69 11.02 No Waivers . . . . . . . . . . . . . . 69 11.03 Expenses; Documentary Taxes; Indemnification . . . . . . . . . . 70 11.04 Sharing of Set-Offs . . . . . . . . . 70 11.05 Amendments and Waivers . . . . . . . . 71 11.06 Successors and Assigns . . . . . . . . 71 11.07 Collateral . . . . . . . . . . . . . . 73 11.08 Confidentiality . . . . . . . . . . . 73 11.09 Governing Law; Submission to Jurisdiction . . . . . . . . . . . . 74 11.10 Counterparts; Integration; Effectiveness . . . . . . . . . . . 74 11.11 WAIVER OF JURY TRIAL . . . . . . . . . 74
iv 6 Schedule I - Existing Debt and Liens Schedule II - Subsidiaries Schedule III - Approved Foreign Distributors Exhibit A - Note Exhibit B - Notice of Committed Borrowing Exhibit C - Money Market Quote Invitation Exhibit D - Money Market Quote Exhibit E - Opinion of Counsel for the Company Exhibit F - Opinion of Special Counsel for the Agent Exhibit G - Form of Election to Participate Exhibit H - Form of Election to Terminate Exhibit I - Opinion of Counsel for the Borrower Exhibit J - Form of Assignment and Assumption Agreement v 7 CREDIT AGREEMENT AGREEMENT dated as of May 4, 1994 among THE TIMBERLAND COMPANY, the BANKS listed on the signature pages hereof and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent. WHEREAS, the Company wishes to be able to borrow or cause eligible subsidiaries to borrow under its guaranty up to $125,000,000 on a revolving credit basis; and WHEREAS, the Banks are willing to make such loans on the terms and conditions set forth herein; NOW, THEREFORE, the parties hereto agree as follows: ARTICLE I DEFINITIONS SECTION 1.01. DEFINITIONS . The following terms, as used herein, have the following meanings: "Absolute Rate Auction" means a solicitation of Money Market Quotes setting forth Money Market Absolute Rates pursuant to Section 2.03. "Additional Permitted Long-Term Debt" means Permitted Long-Term Debt other than (i) the first $25,000,000 aggregate principal amount of Permitted Long- Term Debt incurred by the Company and its Subsidiaries after the date hereof and (ii) any refinancings, extensions or renewals thereof or of Permitted Long-Term Debt outstanding on the date hereof. "Adjusted CD Rate" has the meaning set forth in Section 2.08(b). "Adjusted Interbank Offered Rate" has the meaning set forth in Section 2.08(c). "Administrative Questionnaire" means, with respect to each Bank, an administrative questionnaire in 8 the form prepared by the Agent and submitted to the Agent (with a copy to the Company) duly completed by such Bank. "Affiliate" means (i) any Person that directly, or indirectly through one or more intermediaries, controls the Company (a "Controlling Person") or (ii) any Person (other than the Company or a Subsidiary) which is controlled by or is under common control with a Controlling Person. As used herein, the term "control" means possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise. "Agent" means Morgan Guaranty Trust Company of New York in its capacity as agent for the Banks hereunder, and its successors in such capacity. "Applicable Certificate" means, for any day, the certificate that, as of the date two days prior to such day, was most recently required to be delivered pursuant to Section 5.01(e). "Applicable Lending Office" means, with respect to any Bank, (i) in the case of its Domestic Loans, its Domestic Lending Office, (ii) in the case of its Euro-Dollar Loans, its Euro-Dollar Lending Office and (iii) in the case of its Money Market Loans, its Money Market Lending Office. "Applicable Percentage" means (i) for any day on or prior to July 1, 1994, 100%, (ii) for any day after July 1, 1994 and on or prior to December 31, 1994, 95%, (iii) for any day after December 31, 1994 and on or prior to September 29, 1995, 85% and (iv) for any day after September 29, 1995, 75%. "April 1994 Private Placement Debt" means Debt in respect of the Company's 7.16% Senior Unsecured Notes due April 2000 issued in April 1994. "Assessment Rate" has the meaning set forth in Section 2.08(b). "Assignee" has the meaning set forth in Section 11.06(c). "Available Amount" means, on any day, the lesser of (i) the aggregate amount of the Commitments on such day and (ii) the Borrowing Base for such day. 2 9 "Bank" means each bank listed on the signature pages hereof, each Assignee which becomes a Bank pursuant to Section 11.06(c), and their respective successors. "Base Rate" means, for any day, a rate per annum equal to the higher of (i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus the Federal Funds Rate for such day. "Base Rate Loan" means (i) a Committed Loan which bears interest at a rate determined on the basis of the Base Rate pursuant to the applicable Notice of Committed Borrowing or Notice of Interest Rate Election or the provisions of Article VIII or (ii) an overdue amount which was a Base Rate Loan immediately before it became overdue. "Benefit Arrangement" means at any time an employee benefit plan within the meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan and which is maintained or otherwise contributed to by any member of the ERISA Group. "Borrower" means the Company or any Eligible Subsidiary, as the context may require, and their respective successors, and "Borrowers" means all of the foregoing. "Borrowing" has the meaning set forth in Section 1.03. "Borrowing Base" means, for any day, an amount equal to (i) 85% of the aggregate amount of Eligible Receivables set forth in the Applicable Certificate for such day plus (ii) if such day is in the period, if any, designated by the Company by not less than two days prior notice to the Agent, of two consecutive Borrowing Base Periods in the period of six consecutive Borrowing Base Periods beginning in March and ending in September of each year, inclusive, 20% of the Footwear Inventory Component set forth in the Applicable Certificate for such day less (iii) the sum of (A) the aggregate principal amount of Permitted Long-Term Debt incurred on or after the Effective Date and outstanding on such day, to the extent that such aggregate principal amount exceeds $25,000,000 and (B) the aggregate principal amount of Permitted Short- Term Debt outstanding on such day. "Borrowing Base Period" means a period beginning on the second day after the Company is required to deliver a certificate pursuant to Section 5.01(e) in any month and ending on the day after the Company is so required to 3 10 deliver such a certificate in the succeeding calendar month. "Calculation Period" means, with respect to any day, the period of four consecutive fiscal quarters of the Company ending on the last day of the most recently ended fiscal quarter of the Company as to which the Company shall have delivered a certificate pursuant to Section 5.01(c). "CD Base Rate" has the meaning set forth in Section 2.08(b). "CD Loan" means (i) a Committed Loan which bears interest at a CD Rate pursuant to the applicable Notice of Committed Borrowing or Notice of Interest Rate Election or (ii) an overdue amount which was a CD Loan immediately before it became overdue. "CD Margin" has the meaning set forth in Section 2.08(b). "CD Rate" means a rate of interest determined pursuant to Section 2.08(b) on the basis of an Adjusted CD Rate. "CD Reference Banks" means ABN AMRO Bank N.V., The First National Bank of Boston and Morgan Guaranty Trust Company of New York. "Chase Credit Agreement" means the Credit Agreement dated as of November 15, 1993 among the Company, the banks listed on the signature pages thereof and The Chase Manhattan Bank, N.A., as agent for such banks, as the same may, subject to Section 5.15, be amended, modified or supplemented from time to time. "Closing Date" means the date on or after the Effective Date on which the Agent shall have received the documents specified in or pursuant to Section 3.01. "Commitment" means, with respect to each Bank, the amount set forth opposite the name of such Bank on the signature pages hereof, as such amount may be reduced from time to time pursuant to Sections 2.10 and 2.11. "Committed Loan" means a loan made by a Bank pursuant to Section 2.01; PROVIDED that, if any such loan or loans (or portions thereof) are combined or subdivided pursuant to a Notice of Interest Rate Election, the term "Committed Loan" shall refer to the combined principal amount resulting from such combination or to each of the 4 11 separate principal amounts resulting from each such subdivision, as the case may be. "Company" means The Timberland Company, a Delaware corporation, and its successors. "Company's 1993 Form 10-K" means the Company's annual report on Form 10-K for 1993 as filed with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934. "Consolidated Debt" means at any date the Debt of the Company and its Consolidated Subsidiaries, determined on a consolidated basis as of such date. "Consolidated EBITR" means, for any period, the sum of (i) consolidated net income of the Company and its Consolidated Subsidiaries for such period plus (ii) to the extent deducted in determining such consolidated net income, the sum of (A) Consolidated Interest Expense, (B) Consolidated Rental Expense and (C) consolidated taxes of the Company and its Consolidated Subsidiaries for such period. "Consolidated Interest Expense" means, for any period, the interest expense of the Company and its Consolidated Subsidiaries determined on a consolidated basis for such period. "Consolidated Net Worth" means at any date the consolidated stockholders' equity of the Company and its Consolidated Subsidiaries (without giving effect to any write-ups or write-downs resulting from foreign currency translations after December 31, 1993) as of such date. "Consolidated Rental Expense" means, for any period, the rental expense of the Company and its Consolidated Subsidiaries (other than with respect to capital leases) determined on a consolidated basis for such period. "Consolidated Subsidiary" means at any date any Subsidiary or other entity the accounts of which would be consolidated with those of the Company in its consolidated financial statements if such statements were prepared as of such date. "Consolidated Tangible Net Worth" means at any date Consolidated Net Worth less the consolidated Intangible Assets of the Company and its Consolidated Subsidiaries, all determined as of such date. For purposes of this definition "Intangible Assets" means the amount (to the extent reflected in determining such 5 12 Consolidated Net Worth) of (i) all write-ups (other than write-ups of assets of a going concern business made within twelve months after the acquisition of such business) subsequent to December 31, 1993 in the book value of any asset owned by the Company or a Consolidated Subsidiary, (ii) all Investments in unconsolidated Subsidiaries and all equity investments in Persons which are not Subsidiaries and (iii) all unamortized debt discount and expense, unamortized deferred charges, goodwill, patents, trademarks, service marks, trade names, anticipated future benefit of tax loss carry-forwards, copyrights, organization or developmental expenses and other intangible assets. "Debt" of any Person means at any date, without duplication, (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such Person to pay the deferred purchase price of property or services, except trade accounts payable arising in the ordinary course of business, (iv) all obligations of such Person as lessee which are capitalized in accordance with generally accepted accounting principles, (v) all non-contingent obligations (and, for purposes of Section 5.13 and the definitions of Material Debt and Material Financial Obligations, all contingent obligations) of such Person to reimburse or prepay any bank or other Person in respect of amounts paid under a letter of credit, banker's acceptance or similar instrument, whether drawn or undrawn, (vi) all Debt of others secured by a Lien on any asset of such Person, whether or not such Debt is assumed by such Person, and (vii) all Debt of others Guaranteed by such Person. "Default" means any condition or event which constitutes an Event of Default or which with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default. "Derivatives Obligations" of any Person means all obligations of such Person in respect of any rate swap transaction, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of the foregoing transactions) or any combination of the foregoing transactions. 6 13 "Domestic Business Day" means any day except a Saturday, Sunday or other day on which commercial banks in New York City or Boston are authorized by law to close. "Domestic Lending Office" means, as to each Bank, its office located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Domestic Lending Office) or such other office as such Bank may hereafter designate as its Domestic Lending Office by notice to the Company and the Agent; PROVIDED that any Bank may so designate separate Domestic Lending Offices for its Base Rate Loans, on the one hand, and its CD Loans, on the other hand, in which case all references herein to the Domestic Lending Office of such Bank shall be deemed to refer to either or both of such offices, as the context may require. "Domestic Loans" means CD Loans or Base Rate Loans or both. "Domestic Reserve Percentage" has the meaning set forth in Section 2.08(b). "Effective Date" means the date this Agreement becomes effective in accordance with Section 11.10. "Election to Participate" means an Election to Participate substantially in the form of Exhibit G hereto. "Election to Terminate" means an Election to Terminate substantially in the form of Exhibit H hereto. "Eligible Receivables" means, at any date, the aggregate of the unpaid portions at such date of assets ("Receivables") which were or would have been included as accounts receivable on the consolidated balance sheet referred to in Section 4.04(a), net of any credits, rebates, offsets or other adjustments to such Receivables owed to any of the account debtors from which such Receivables are due and also net of any commissions payable to third parties which are adjustments to such Receivables, and excluding the following (determined without duplication): (a) any Receivable as to which there is any unresolved dispute with the account debtor (including any offset or counterclaim by the account debtor), but only to the extent of such dispute, (b) (i) any Receivable which, at the date of the original issuance of the invoice 7 14 therefor, was payable more than 90 days (or, in the case of a Receivable that represents the purchase price of boots sold by the Company or any of its Subsidiaries, 270 days) from such date or (ii) any Receivable which remains unpaid more than 60 days after the due date for payment specified at the time of the original issuance of the invoice therefor, and (c) unless in any of the following cases the relevant account debtor has previously been approved by the Required Banks (through the Agent) as an eligible account debtor for purposes of this Agreement, all Receivables due from any account debtor (i) which is a distributor organized outside the United States of America or whose principal place of business is located outside the United States of America, unless (A) such Receivable is insured under policies of insurance issued by insurance companies with an A.M. Best policyholders ratings of not less than B+, but only to the extent of such insurance and less any deductible or similar amount, (B) to the extent, but only to the extent, such Receivable is fully backed by a letter of credit, in form and substance satisfactory to the Required Banks and issued by (1) a Bank, (2) a bank or other Person the long-term senior unsecured debt of which is rated A or higher by Standard & Poor's Corporation or A or higher by Moody's Investor Service, Inc. and is not rated lower than A by Standard & Poor's Corporation or A by Moody's Investor Service, Inc., or (3) a bank or other Person that is reasonably satisfactory to the Required Banks or (C) such distributor is listed on Schedule III hereto, (ii) which is a Subsidiary or Affiliate, (iii) which is the subject of bankruptcy, insolvency or similar proceedings, (iv) which the Required Banks (through the Agent) have notified the Company does not have a satisfactory credit standing (as reasonably determined in good faith by the Required Banks), or (v) that, at the time such Receivable arose, was not in compliance with the credit guidelines, standards and procedures of the Company as in effect on the date hereof. "Eligible Subsidiary" means any Wholly-Owned Consolidated Subsidiary of the Company as to which an Election to Participate shall have been delivered to the Agent and as to which an Election to Terminate shall not have been delivered to the Agent. Each such Election to 8 15 Participate and Election to Terminate shall be duly executed on behalf of such Wholly-Owned Consolidated Subsidiary and the Company in such number of copies as the Agent may request. The delivery of an Election to Terminate shall not affect any obligation of an Eligible Subsidiary theretofore incurred. The Agent shall promptly give notice to the Banks of the receipt of any Election to Participate or Election to Terminate. "Environmental Laws" means any and all federal, state, local and foreign statutes, laws, judicial decisions, regulations, ordinances, rules, judgments, orders, decrees, injunctions, permits, concessions, grants, franchises, licenses, agreements and other governmental restrictions relating to the environment, the effect of the environment on human health or to emissions, discharges or releases of pollutants, contaminants, Hazardous Substances or wastes into the environment, including, without limitation, ambient air, surface water, ground water or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, Hazardous Substances or wastes or the clean-up or other remediation thereof. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, or any successor statute. "ERISA Group" means the Company, any Subsidiary and all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Company or any Subsidiary, are treated as a single employer under Section 414 of the Internal Revenue Code. "Euro-Dollar Business Day" means any Domestic Business Day on which commercial banks are open for international business (including dealings in dollar deposits) in London. "Euro-Dollar Lending Office" means, as to each Bank, its office, branch or affiliate located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Euro-Dollar Lending Office) or such other office, branch or affiliate of such Bank as it may hereafter designate as its Euro-Dollar Lending Office by notice to the Company and the Agent. "Euro-Dollar Loan" means (i) a Committed Loan which bears interest at a Euro-Dollar Rate pursuant to the applicable Notice of Committed Borrowing or Notice of 9 16 Interest Rate Election or (ii) an overdue amount which was a Euro-Dollar Loan immediately before it became overdue. "Euro-Dollar Margin" has the meaning set forth in Section 2.08(c). "Euro-Dollar Rate" means a rate of interest determined pursuant to Section 2.08(c) on the basis of an Adjusted Interbank Offered Rate. "Euro-Dollar Reference Banks" means the principal London offices of ABN AMRO Bank N.V., The First National Bank of Boston and Morgan Guaranty Trust Company of New York. "Euro-Dollar Reserve Percentage" has the meaning set forth in Section 2.08(c). "Event of Default" has the meaning set forth in Section 6.01. "Existing Credit Agreement" means the Credit Agreement dated as of May 13, 1993 among the Company, the banks listed on the signature pages thereof and Morgan Guaranty Trust Company of New York, as Administrative Agent, as the same shall have been amended, modified or supplemented as of the date hereof. "Factorable Receivables" means Receivables of the Company and its Subsidiaries (i) that are produced in the ordinary course of business, (ii) that are not contingent upon any further performance, or any product guarantee, by the Company or any of its Subsidiaries, (iii) arising from sales of inventory outside the United States and (iv) the account debtors with respect to which have their principal places of business outside the United States of America. "Federal Funds Rate" means, for any day, the rate per annum (rounded upward, if necessary, to the nearest 1/100 of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Domestic Business Day next succeeding such day; provided that (i) if such day is not a Domestic Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Domestic Business Day as so published on the next succeeding Domestic Business Day, and (ii) if no such rate is so published on such next succeeding Domestic Business Day, the Federal Funds Rate for such day shall be the average rate quoted to Morgan Guaranty Trust Company 10 17 of New York on such day on such transactions as determined by the Agent. "Fixed Charge Coverage Ratio" means, for any period, the ratio of (i) Consolidated EBITR for such period to (ii) the sum of (A) Consolidated Interest Expense for such period, (B) Consolidated Rental Expense for such period and (C) dividends on preferred stock of the Company and its Consolidated Subsidiaries for such period (other than any such dividends paid to the Company or its Consolidated Subsidiaries). "Fixed Rate Loans" means CD Loans, Euro-Dollar Loans or Money Market Loans (excluding Money Market LIBOR Loans bearing interest at the Base Rate pursuant to Section 8.01(a)) or any combination of the foregoing. "Footwear Inventory Component" means, at any date, the aggregate amount of footwear inventories at such date that (i) are current or next season inventories (determined on a basis consistent with the Company's existing inventory accounting system) and (ii) were or would have been identified as finished goods in the notes to the consolidated financial statements referred to in Section 4.04(a). "Group of Loans" means at any time a group of Committed Loans to the same Borrower consisting of (i) all such Committed Loans which are Base Rate Loans at such time or (ii) all such Committed Loans which are Fixed Rate Loans having the same Interest Period at such time; PROVIDED that, if a Committed Loan of any particular Bank is converted to or made as a Base Rate Loan pursuant to Section 8.02 or 8.05, such Loan shall be included in the same Group or Groups of Loans from time to time as it would have been in if it had not been so converted or made. "Guarantee" by any Person means any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Debt or other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or other obligation (whether arising by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise) or (ii) entered into for the purpose of assuring in any other manner the obligee of such Debt or other obligation of the payment thereof or to protect such obligee against loss in respect 11 18 thereof (in whole or in part); PROVIDED that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning. "Hazardous Substances" means any toxic, radioactive, caustic or otherwise hazardous substance, including petroleum, its derivatives, by-products and other hydro-carbons, or any substance having any constituent elements displaying any of the foregoing characteristics. "Indemnitee" has the meaning set forth in Section 11.03. "Interbank Offered Rate" has the meaning set forth in Section 2.08(c). "Interest Period" means: (1) with respect to each Euro-Dollar Loan, a period commencing on the date of borrowing specified in the applicable Notice of Committed Borrowing or on the date specified in the applicable Notice of Interest Rate Election and ending one, two, three or six months thereafter, as the Borrower may elect in the applicable notice; PROVIDED that: (a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Euro-Dollar Business Day; (b) any Interest Period which begins on the last Euro-Dollar 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, subject to clause (c) below, end on the last Euro-Dollar Business Day of a calendar month; and (c) any Interest Period which would otherwise end after the Termination Date shall end on the Termination Date; (2) with respect to each CD Loan, a period commencing on the date of borrowing specified in the applicable Notice of Committed Borrowing or on the date specified in the applicable Notice of Interest Rate Election and ending 30, 12 19 60 or 90 days thereafter, as the Borrower may elect in the applicable notice; PROVIDED that: (a) any Interest Period (other than an Interest Period determined pursuant to clause (b) below) which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day; and (b) any Interest Period which would other- wise end after the Termination Date shall end on the Termination Date; (3) with respect to each Money Market LIBOR Loan, the period commencing on the date of borrowing specified in the applicable Notice of Money Market Borrowing and ending such whole number of months thereafter (or periods of not less than seven days, if available) as the Borrower may elect in accordance with Section 2.03; PROVIDED that: (a) any Interest Period which would other- wise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Euro- Dollar Business Day; (b) any Interest Period which begins on the last Euro-Dollar 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, subject to clause (c) below, end on the last Euro-Dollar Business Day of a calendar month; and (c) any Interest Period which would other- wise end after the Termination Date shall end on the Termination Date; and (4) with respect to each Money Market Absolute Rate Loan, the period commencing on the date of borrowing specified in the applicable Notice of Money Market Borrowing and ending such number of days thereafter (but not less than seven days) as the Borrower may elect in accordance with Section 2.03; PROVIDED that: (a) any Interest Period which would other- wise end on a day which is not a Euro-Dollar 13 20 Business Day shall be extended to the next succeeding Euro-Dollar Business Day; and (b) any Interest Period which would other- wise end after the Termination Date shall end on the Termination Date. "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended, or any successor statute. "Investment" means any investment in any Person, whether by means of share purchase, capital contribution, loan, time deposit or otherwise. "LIBOR Auction" means a solicitation of Money Market Quotes setting forth Money Market Margins based on the Interbank Offered Rate pursuant to Section 2.03. "Level I Status" exists on any date if (i) the Fixed Charge Coverage Ratio for the Calculation Period with respect to such date is greater than 3.5 to 1.0 and (ii) the Leverage Ratio as of the last day of each fiscal quarter included in the Calculation Period with respect to such date is less than 0.75 to 1.0. "Level II Status" exists on any date if (i) Level I Status does not exist, (ii) the Fixed Charge Coverage Ratio for the Calculation Period with respect to such date is greater than 3.2 to 1.0 and (iii) the Leverage Ratio as of the last day of each fiscal quarter included in the Calculation Period with respect to such date is less than 0.85 to 1.0. "Level III Status" exists on any date if neither Level I Status nor Level II Status exists. "Leverage Ratio" means, for any date, the ratio of (i) Consolidated Debt on such date to (ii) Consolidated Net Worth on such date. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind, or any other type of preferential arrangement that has the practical effect of creating a security interest, in respect of such asset. For the purposes of this Agreement, the Company or any Subsidiary shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset. 14 21 "Loan" means a Domestic Loan, a Euro-Dollar Loan or a Money Market Loan and "Loans" means Domestic Loans, Euro-Dollar Loans or Money Market Loans or any combination of the foregoing. "Material Debt" means Debt (other than the Loans) of the Company and/or one or more of its Subsidiaries, arising in one or more related or unrelated transactions, in an aggregate principal amount exceeding $1,000,000. "Material Financial Obligations" means a principal or face amount of Debt and/or payment obligations in respect of Derivatives Obligations of the Company and/or one or more of its Subsidiaries, arising in one or more related or unrelated transactions, exceeding in the aggregate $2,500,000 (or, in the case of foreign exchange transactions, $5,000,000). "Material Plan" means at any time a Plan or Plans having aggregate Unfunded Liabilities in excess of $500,000. "Money Market Absolute Rate" has the meaning set forth in Section 2.03(c). "Money Market Absolute Rate Loan" means a loan to be made by a Bank pursuant to an Absolute Rate Auction. "Money Market Lending Office" means, as to each Bank, its Domestic Lending Office or such other office, branch or affiliate of such Bank as it may hereafter designate as its Money Market Lending Office by notice to the Company and the Agent; PROVIDED that any Bank may from time to time by notice to the Company and the Agent designate separate Money Market Lending Offices for its Money Market LIBOR Loans, on the one hand, and its Money Market Absolute Rate Loans, on the other hand, in which case all references herein to the Money Market Lending Office of such Bank shall be deemed to refer to either or both of such offices, as the context may require. "Money Market LIBOR Loan" means a loan to be made by a Bank pursuant to a LIBOR Auction (including such a loan bearing interest at the Base Rate pursuant to Section 8.01(a)). "Money Market Loan" means a Money Market LIBOR Loan or a Money Market Absolute Rate Loan. "Money Market Margin" has the meaning set forth in Section 2.03(c). 15 22 "Money Market Quote" means an offer by a Bank to make a Money Market Loan in accordance with Section 2.03. "Multiemployer Plan" means at any time an employee pension benefit plan within the meaning of Section 4001(a)(3) of ERISA to which any member of the ERISA Group is then making or accruing an obligation to make contributions or has within the preceding five plan years made contributions, including for these purposes any Person which ceased to be a member of the ERISA Group during such five year period. "Note Agreement" has the meaning set forth in Section 5.15. "Notes" means promissory notes of a Borrower, substantially in the form of Exhibit A hereto, evidencing the obligation of such Borrower to repay the Loans made by it, and "Note" means any one of such promissory notes issued hereunder. "Notice of Borrowing" means a Notice of Committed Borrowing (as defined in Section 2.02) or a Notice of Money Market Borrowing (as defined in Section 2.03(d)). "Notice of Interest Rate Election" has the meaning set forth in Section 2.07(a). "Parent" means, with respect to any Bank, any Person controlling such Bank. "Participant" has the meaning set forth in Section 11.06(b). "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. "Permitted Factoring Transaction" means any sale or other transfer by the Company or any of its Subsidiaries of Factorable Receivables, which sale or transfer does not involve the creation of any recourse obligation in respect thereof on the part of the Company or any of its Subsidiaries (other than with respect to matters of title to, and the character (other than the collectability) of, the Factorable Receivables so sold or transferred); PROVIDED that the aggregate principal amount of Factorable Receivables that may be sold or transferred pursuant to such sales or transfers during any fiscal year of the Company may not exceed $15,000,000. 16 23 "Permitted Long-Term Debt" means (i) Debt outstanding under the Chase Credit Agreement and (ii) Debt (other than Debt permitted under Section 5.08(b)) of the Company or any of its Subsidiaries that (A) does not mature or have any required sinking fund or other required payments of principal (other than (1) principal and interest on a standard mortgage basis for mortgages with terms, at the time such mortgages are entered into, of greater than 15 years and (2) the principal component of rental payments with respect to not more than $5,000,000 of capitalized leases, the terms of which are not, at the time such leases are entered into, less than five years), any mandatory redemptions or redemptions at the option of the holder thereof or any required increases in the rate of interest payable with respect thereto, in any such case prior to the first anniversary of the Termination Date or (B) consists of conventional construction loans incurred to finance the construction of real property improvements of the Company and its Subsidiaries. "Permitted Short-Term Debt" means Debt (other than Loans or Debt permitted under Section 5.08(h)) of the Company or any of its Subsidiaries having a maturity, at the time such Debt is incurred, of not more than one year from the date such Debt is incurred. "Person" means an individual, a corporation, a partnership, an association, a trust or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. "Plan" means at any time an employee pension benefit plan (other than a Multiemployer Plan) which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Internal Revenue Code and either (i) is maintained, or contributed to, by any member of the ERISA Group for employees of any member of the ERISA Group or (ii) has at any time within the preceding five years been maintained, or contributed to, by any Person which was at such time a member of the ERISA Group for employees of any Person which was at such time a member of the ERISA Group. "Prime Rate" means the rate of interest publicly announced by Morgan Guaranty Trust Company of New York in New York City from time to time as its Prime Rate. "Quarterly Date" means the last Euro-Dollar Business Day of each March, June, September and December. "Reference Banks" means the CD Reference Banks or the Euro-Dollar Reference Banks, as the context may 17 24 require, and "Reference Bank" means any one of such Reference Banks. "Regulation U" means Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time. "Required Banks" means at any time Banks having more than 50% of the aggregate amount of the Commitments or, if the Commitments shall have been terminated, holding Notes evidencing more than 50% of the aggregate unpaid principal amount of the Loans. "Restricted Payment" means (i) any dividend or other distribution on any shares of the Company's capital stock (except dividends payable solely in shares of its capital stock) or (ii) any payment (other than payments for the repurchase of shares of the Company's common stock from employees or former employees of the Company or any of its Subsidiaries pursuant to the 1987 Employee Stock Purchase Plan, the 1991 Employee Stock Purchase Plan or the 1987 Employee Stock Option Plan, in each case as in effect on the date hereof (or any successor plans with substantially similar provisions), in an aggregate amount not to exceed the proceeds received by the Company after the date hereof of sales of shares of the Company's common stock to employees of the Company and its Subsidiaries) on account of the purchase, redemption, retirement or acquisition of (a) any shares of the Company's capital stock or (b) any option, warrant or other right to acquire shares of the Company's capital stock. "Subsidiary" means, as to any Person, any corporation or other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by such Person; unless otherwise specified, "Subsidiary" means a Subsidiary of the Company. "Swartz Family" means Sidney W. Swartz, his estate, his spouse, his lineal descendants, trusts established for his, her or their benefit, the Swartz Family Charitable Trust and The Sidney W. Swartz 1982 Family Trust. "Temporary Cash Investment" means any Investment in (i) direct obligations of the United States or any agency thereof, or obligations guaranteed by the United States or any agency thereof, (ii) commercial paper rated at least A-1 by Standard & Poor's Corporation or P-1 by Moody's Investors Service, Inc. and not rated lower than A-1 by Standard & Poor's Corporation or P-1 by Moody's 18 25 Investors Service, Inc., (iii) time deposits with, including certificates of deposit issued by, (x) any office located in the United States of (A) any bank or trust company which is organized under the laws of the United States or any state thereof and has capital, surplus and undivided profits aggregating at least $100,000,000 or (B) any Bank or (y) in the case of Investments made by a Subsidiary of the Company whose principal place of business is located outside the United States, any office located outside the United States of (A) any bank or trust company the long-term unsecured senior debt of which is rated AA or higher by Standard & Poor's Corporation or Aa or higher by Moody's Investors Service, Inc. and is not rated lower than AA by Standard & Poor's Corporation or Aa by Moody's Investors Service, Inc. or (B) any Bank, (iv) money market funds which invest only in securities described in clauses (i), (ii) and (iii)(x) above or (v) repurchase agreements with respect to securities described in clause (i) above entered into with an office of a bank or trust company meeting the criteria specified in clause (iii) above; PROVIDED in each case that such Investment matures within one year from the date of acquisition thereof by the Company or a Subsidiary. "Termination Date" means May 30, 1996 or, if such day is not a Euro-Dollar Business Day, the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case the Termination Date shall be the next preceding Euro-Dollar Business Day. "Unfunded Liabilities" means, with respect to any Plan at any time, the amount (if any) by which (i) the value of all benefit liabilities under such Plan, determined on a plan termination basis using the assumptions prescribed by the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the fair market value of all Plan assets allocable to such liabilities under Title IV of ERISA (excluding any accrued but unpaid contributions), but only to the extent that such excess represents a potential liability of a member of the ERISA Group to the PBGC or any other Person under Title IV of ERISA. "United States" means the United States of America, including the States and the District of Columbia, but excluding its territories and possessions. "Wholly-Owned Subsidiary" means any Consolidated Subsidiary all of the shares of capital stock or other ownership interests of which (except directors' qualifying shares and, in the case of The Outdoor Footwear Company, shares of non-voting common stock of The Outdoor Footwear 19 26 Company issued to employees thereof under arrangements consistent with past practice) are at the time directly or indirectly owned by the Company. SECTION 1.02. ACCOUNTING TERMS AND DETERMINATIONS . Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared in accordance with generally accepted accounting principles as in effect from time to time, applied on a basis consistent (except for changes concurred in by the Company's independent public accountants) with the most recent audited consolidated financial statements of the Company and its Consolidated Subsidiaries delivered to the Banks; PROVIDED that, if the Company notifies the Agent that the Company wishes to amend any covenant in Article V to eliminate the effect of any change in generally accepted accounting principles on the operation of such covenant (or if the Agent notifies the Company that the Required Banks wish to amend Article V for such purpose), then the Company's compliance with such covenant shall be determined on the basis of generally accepted accounting principles in effect immediately before the relevant change in generally accepted accounting principles became effective, until either such notice is withdrawn or such covenant is amended in a manner satisfactory to the Company and the Required Banks. SECTION 1.03. TYPES OF BORROWINGS . The term "Borrowing" denotes the aggregation of Loans of one or more Banks to be made to a single Borrower pursuant to Article II on the same date, all of which Loans are of the same type (subject to Article VIII) and, except in the case of Base Rate Loans, have the same Interest Period or initial Interest Period. Borrowings are classified for purposes of this Agreement either by reference to the pricing of Loans comprising such Borrowing ( E.G. , a "Euro-Dollar Borrowing" is a Borrowing comprised of Euro-Dollar Loans) or by reference to the provisions of Article II under which participation therein is determined ( I.E ., a "Committed Borrowing" is a Borrowing under Section 2.01 in which all Banks participate in proportion to their Commitments, while a "Money Market Borrowing" is a Borrowing under Section 2.03 in which the Bank participants are determined on the basis of their bids in accordance therewith). 20 27 ARTICLE II THE CREDITS SECTION 2.01. COMMITMENTS TO LEND. Each Bank severally agrees, on the terms and conditions set forth in this Agreement, to make loans to the Company or any Eligible Subsidiary pursuant to this Section from time to time before the Termination Date in amounts such that the aggregate principal amount of Committed Loans by such Bank outstanding shall not exceed the amount of its Commitment. Each Borrowing under this Section shall be in an aggregate principal amount of (i) $500,000 or any larger multiple of $100,000, in the case of a Base Rate Borrowing, and (ii) $1,000,000 or any larger multiple of $100,000, in the case of a Fixed Rate Borrowing (except that any such Borrowing may be in the aggregate amount available in accordance with Section 3.02(c)) and shall be made from the several Banks ratably in proportion to their respective Commitments. Within the foregoing limits, a Borrower may borrow under this Section, prepay Loans to the extent permitted by Section 2.12, and reborrow at any time before the Termination Date under this Section. The Commitments shall terminate on the Termination Date. SECTION 2.02. NOTICE OF COMMITTED BORROWINGS. The applicable Borrower shall give the Agent notice, substantially in the form of Exhibit B hereto (a "Notice of Committed Borrowing"), not later than 11:30 A.M. (New York City time) on (x) the date of each Base Rate Borrowing, (y) the second Domestic Business Day before each CD Borrowing and (z) the third Euro-Dollar Business Day before each Euro-Dollar Borrowing, specifying: (i) the date of such Borrowing, which shall be a Domestic Business Day in the case of a Domestic Borrowing or a Euro-Dollar Business Day in the case of a Euro-Dollar Borrowing, (ii) the aggregate amount of such Borrowing, (iii) whether the Loans comprising such Borrowing are to bear interest initially at the Base Rate, at a CD Rate or at a Euro-Dollar Rate, and (iv) in the case of a Fixed Rate Borrowing, the duration of the initial Interest Period applicable thereto, subject to the provisions of the definition of Interest Period. 21 28 SECTION 2.03. MONEY MARKET BORROWINGS. (a) THE MONEY MARKET OPTION. In addition to Committed Borrowings pursuant to Section 2.01, any Borrower may, as set forth in this Section, request the Banks prior to the Termination Date to make offers to make Money Market Loans to the Borrower. The Banks may, but shall have no obligation to, make such offers and the Borrower may, but shall have no obligation to, accept any such offers in the manner set forth in this Section. (b) INVITATION FOR MONEY MARKET QUOTES. When a Borrower wishes to request offers to make Money Market Loans under this Section, it shall transmit to the Banks by telex or facsimile transmission an Invitation for Money Market Quotes substantially in the form of Exhibit C hereto so as to be received no later than 11:00 A.M. (New York City time) on (x) the fourth Euro-Dollar Business Day prior to the date of Borrowing proposed therein, in the case of a LIBOR Auction or (y) the Domestic Business Day next preceding the date of Borrowing proposed therein, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the Company and the Agent shall have mutually agreed and shall have notified to the Banks not later than the date of the Invitation for Money Market Quotes for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective) specifying: (i) the proposed date of Borrowing, which shall be a Euro-Dollar Business Day in the case of a LIBOR Auction or a Domestic Business Day in the case of an Absolute Rate Auction, (ii) the aggregate amount of such Borrowing, which shall be $1,000,000 or a larger multiple of $100,000, PROVIDED that the sum of (A) the aggregate principal amount of all Money Market Loans outstanding and (B) the aggregate principal amount of all Permitted Short-Term Debt outstanding shall at no time exceed $35,000,000, (iii) the duration of the Interest Period applicable thereto, subject to the provisions of the definition of Interest Period, and (iv) whether the Money Market Quotes requested are to set forth a Money Market Margin or a Money Market Absolute Rate. The Borrower may request offers to make Money Market Loans for more than one Interest Period in a single Invitation 22 29 for Money Market Quotes. No Invitation for Money Market Quotes shall be given within five Euro-Dollar Business Days (or such other number of days as the Company and the Agent may agree) of any other Invitation for Money Market Quotes. (c) SUBMISSION AND CONTENTS OF MONEY MARKET QUOTES. (i) Each Bank may submit a Money Market Quote containing an offer or offers to make Money Market Loans in response to any Invitation for Money Market Quotes. Each Money Market Quote must comply with the requirements of this subsection (c) and must be submitted to the Borrower by telex or facsimile transmission at its offices specified in or pursuant to Section 11.01 not later than (x) 2:00 P.M. (New York City time) on the third Euro- Dollar Business Day prior to the proposed date of Borrowing, in the case of a LIBOR Auction or (y) 9:15 A.M. (New York City time) on the proposed date of Borrowing, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the Company and the Agent shall have mutually agreed and shall have notified to the Banks not later than the date of the Invitation for Money Market Quotes for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective). Subject to Articles III and VI, any Money Market Quote so made shall be irrevocable except with the written consent of the Borrower. (ii) Each Money Market Quote shall be in substantially the form of Exhibit D hereto and shall in any case specify: (A) the proposed date of Borrowing, which shall be the proposed date of Borrowing set forth in the corresponding Invitation for Money Market Quotes, (B) the principal amount of the Money Market Loan for which each such offer is being made, which principal amount (w) may be greater than or less than the Commitment of the quoting Bank, (x) must be $500,000 or a larger multiple of $100,000, (y) may not exceed the principal amount of Money Market Loans for which offers were requested and (z) may be subject to an aggregate limitation as to the principal amount of Money Market Loans for which offers being made by such quoting Bank may be accepted, (C) in the case of a LIBOR Auction, the margin above or below the applicable Interbank Offered Rate (the "Money Market Margin") offered for each such Money Market Loan, expressed as a 23 30 percentage (specified to the nearest 1/10,000 of 1%) to be added to or subtracted from such base rate, (D) in the case of an Absolute Rate Auction, the rate of interest per annum (specified to the nearest 1/10,000 of 1%) (the "Money Market Absolute Rate") offered for each such Money Market Loan, and (E) the identity of the quoting Bank. A Money Market Quote may set forth up to five separate offers by the quoting Bank with respect to each Interest Period specified in the related Invitation for Money Market Quotes. (iii) Any Money Market Quote shall be disregarded if it: (A) is not substantially in conformity with Exhibit D hereto or does not specify all of the information required by subsection (c)(ii), (B) contains qualifying, conditional or similar language, (C) proposes terms other than or in addition to those set forth in the applicable Invitation for Money Market Quotes, or (D) arrives after the time set forth in subsection (c)(i). (d) ACCEPTANCE AND NOTICE BY BORROWER. Not later than 11:00 A.M. (New York City time) on (x) the third Euro-Dollar Business Day prior to the proposed date of Borrowing, in the case of a LIBOR Auction, or (y) the proposed date of Borrowing, in the case of an Absolute Rate Auction (or, in either case, such other time or date as the Company and the Agent shall have mutually agreed and shall have notified the Banks not later than the date of the Invitation for Money Market Quotes for the first LIBOR Auction or Absolute Rate Auction for which such change is to be effective), the Borrower shall notify each Bank from which it has received a Money Market Quote of its acceptance or non-acceptance of the offers contained in such Money Market Quote; PROVIDED that if the Borrower shall have failed to give such notice to any such Bank with respect to any Money Market Quote at or prior to such time, the offers contained in such Money Market Quote shall be deemed to have been rejected by such Borrower. In the case of acceptance, such notice (a "Notice of Money 24 31 Market Borrowing"), a copy of which shall be sent by telex or telecopy to the Agent, shall specify the aggregate principal amount of offers for each Interest Period that are accepted from each Bank. The Borrower may accept any Money Market Quote in whole or in part; provided that: (i) the aggregate principal amount of each Money Market Borrowing may not exceed the applicable amount set forth in the related Invitation for Money Market Quotes, (ii) the principal amount of each Money Market Borrowing must be $1,000,000 or a larger multiple of $100,000, (iii) acceptance of offers may only be made on the basis of ascending Money Market Margins or Money Market Absolute Rates, as the case may be, (iv) immediately after the making of the Money Market Loans to be made pursuant to all accepted Money Market Quotes, the sum of (A) the aggregate principal amount of all Money Market Loans outstanding and (B) the aggregate principal amount of all Permitted Short-Term Debt outstanding shall not exceed $35,000,000, and (v) the Borrower may not accept any offer that is described in subsection (c)(iii) or that otherwise fails to comply with the requirements of this Agreement. (e) ALLOCATION BY BORROWER. If offers are made by two or more Banks with the same Money Market Margins or Money Market Absolute Rates, as the case may be, for a greater aggregate principal amount than the amount in respect of which such offers are accepted for the related Interest Period, the principal amount of Money Market Loans in respect of which such offers are accepted shall be allocated by the Borrower among such Banks as nearly as possible (in multiples of $100,000, as the Borrower may deem appropriate) in proportion to the aggregate principal amounts of such offers. SECTION 2.04. NOTICE TO BANKS; FUNDING OF LOANS. (a) Upon receipt of a Notice of Borrowing, the Agent shall promptly notify each Bank of the contents thereof and of such Bank's share, if any, of such 25 32 Borrowing and such Notice of Borrowing shall not thereafter be revocable by the Borrower. (b) Not later than 1:30 P.M. (New York City time) on the date of each Borrowing, each Bank participating therein shall make available its share of such Borrowing, in Federal or other funds immediately available in New York City, to the Agent at its address specified in or pursuant to Section 11.01. Unless the Agent determines that any applicable condition specified in Article III has not been satisfied, the Agent will make the funds so received from the Banks available to the Borrower at the Agent's aforesaid address. (c) Unless the Agent shall have received notice from a Bank prior to the date of any Borrowing that such Bank will not make available to the Agent such Bank's share of such Borrowing, the Agent may assume that such Bank has made such share available to the Agent on the date of such Borrowing in accordance with subsection (b) of this Section 2.04 and the Agent may, in reliance upon such assumption, make available to the applicable Borrower on such date a corresponding amount. If and to the extent that such Bank shall not have so made such share available to the Agent, such Bank and the applicable Borrower severally agree to repay to the Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the applicable Borrower until the date such amount is repaid to the Agent, at (i) in the case of the applicable Borrower, a rate per annum equal to the higher of the Federal Funds Rate and the interest rate applicable thereto pursuant to Section 2.08 and (ii) in the case of such Bank, the Federal Funds Rate. If such Bank shall repay to the Agent such corresponding amount, such amount so repaid shall constitute such Bank's Loan included in such Borrowing for purposes of this Agreement. SECTION 2.05. NOTES. (a) The Loans of each Bank to each Borrower shall be evidenced by a single Note of such Borrower payable to the order of such Bank for the account of its Applicable Lending Office in an amount equal to the aggregate unpaid principal amount of such Bank's Loans to such Borrower. (b) Each Bank may, by notice to a Borrower and the Agent, request that its Loans of a particular type to such Borrower be evidenced by a separate Note of such Borrower in an amount equal to the aggregate unpaid principal amount of such Loans. Each such Note shall be in substantially the form of Exhibit A hereto with appropriate modifications to reflect the fact that it evidences solely Loans of the relevant type. Each 26 33 reference in this Agreement to a "Note" or the "Notes" of such Bank shall be deemed to refer to and include any or all of such Notes, as the context may require. (c) Upon receipt of each Bank's Note pursuant to Section 3.01(a) or 3.03(a), the Agent shall forward such Note to such Bank. Each Bank shall record the date, amount and type of each Loan made by it to each Borrower and the date and amount of each payment of principal made with respect thereto, and may, if such Bank so elects in connection with any transfer or enforcement of its Note of any Borrower, endorse on the schedule forming a part thereof appropriate notations to evidence the foregoing information with respect to each such Loan to such Borrower then outstanding; PROVIDED that the failure of any Bank to make any such recordation or endorsement shall not affect the obligations of any Borrower hereunder or under the Notes. Each Bank is hereby irrevocably authorized by each Borrower so to endorse its Notes and to attach to and make a part of any Note a continuation of any such schedule as and when required. SECTION 2.06. MATURITY OF LOANS. (a) Each Committed Loan shall mature, and the principal amount thereof shall be due and payable, on the Termination Date. (b) Each Money Market Loan included in any Money Market Borrowing shall mature, and the principal amount thereof shall be due and payable, on the last day of the Interest Period applicable to such Borrowing. SECTION 2.07. METHOD OF ELECTING INTEREST RATES. (a) The Loans included in each Committed Borrowing shall bear interest initially at the type of rate specified by the applicable Borrower in the applicable Notice of Borrowing. Thereafter, the applicable Borrower may from time to time elect to change or continue the type of interest rate borne by each Group of Loans (subject in each case to the provisions of Article VIII), as follows: (i) if such Loans are Base Rate Loans, the applicable Borrower may elect to convert such Loans to CD Loans as of any Domestic Business Day or to Euro-Dollar Loans as of any Euro-Dollar Business Day; (ii) if such Loans are CD Loans, the applicable Borrower may elect to convert such Loans to Base Rate Loans or Euro-Dollar Loans or elect to continue such Loans as CD Loans for an additional Interest Period, in each case effective on the last day of the then current Interest Period applicable to such Loans; and 27 34 (iii) if such Loans are Euro-Dollar Loans, the applicable Borrower may elect to convert such Loans to Base Rate Loans or CD Loans or elect to continue such Loans as Euro-Dollar Loans for an additional Interest Period, in each case effective on the last day of the then current Interest Period applicable to such Loans. Each such election shall be made by delivering a notice (a "Notice of Interest Rate Election") to the Agent at least three Euro-Dollar Business Days before the conversion or continuation selected in such Notice is to be effective (unless all of the relevant Loans are to be converted to or continued as Domestic Loans, in which case such Notice shall be delivered to the Agent at least two Domestic Business Days before such conversion or continuation is to be effective). A Notice of Interest Rate Election may, if it so specifies, apply to only a portion of the aggregate principal amount of the relevant Group of Loans; PROVIDED that (i) such portion is allocated ratably among the Loans comprising such Group, (ii) the portion to which such Notice applies, and the remaining portion to which it does not apply, are (x) in the case of any portion that is to be converted to or continued as Fixed Rate Loans, at least $1,000,000 and (y) in the case of any portion that is to be converted to or continued as Base Rate Loans, at least $500,000 and (iii) no more than one of such portions is other than a multiple of $100,000. (b) Each Notice of Interest Rate Election shall specify: (i) the Group of Loans (or portion thereof) to which such Notice applies; (ii) the date on which the conversion or continuation selected in such Notice is to be effective, which shall comply with the applicable clause of subsection (a) above; (iii) if the Loans comprising such Group are to be converted, the new type of Loans and if, after such conversion, such Loans are to be Fixed Rate Loans, the duration of the initial Interest Period applicable thereto; and (iv) if such Loans are to be continued as CD Loans or Euro-Dollar Loans for an additional Interest Period, the duration of such additional Interest Period. 28 35 Each Interest Period specified in a Notice of Interest Rate Election shall comply with the provisions of the definition of Interest Period. (c) Upon receipt of a Notice of Interest Rate Election from the applicable Borrower pursuant to subsection (a) above, the Agent shall promptly notify each Bank of the contents thereof and such Notice shall not thereafter be revocable by the Company or the applicable Borrower. If the applicable Borrower fails to deliver a timely Notice of Interest Rate Election to the Agent for any Group of Fixed Rate Loans, such Loans shall be converted into Base Rate Loans on the last day of the then current Interest Period applicable thereto. SECTION 2.08. INTEREST RATES. (a) Each Base Rate Loan shall bear interest on the outstanding principal amount thereof, for each day from the date such Loan is made until it becomes due, at a rate per annum equal to the Base Rate for such day. Such interest shall be payable quarterly in arrears on each Quarterly Date and, with respect to the principal amount of any Base Rate Loan converted to a Fixed Rate Loan, on each date a Base Rate Loan is so converted. Any overdue principal of or interest on any Base Rate Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 2% plus the Base Rate for such day. (b) Each CD Loan shall bear interest on the outstanding principal amount thereof, for each day during each Interest Period applicable thereto, at a rate per annum equal to the sum of the CD Margin for such day plus the Adjusted CD Rate applicable to such Interest Period; PROVIDED that if any CD Loan shall, as a result of clause (2)(b) of the definition of Interest Period, have an Interest Period of less than 30 days, such CD Loan shall bear interest during such Interest Period at the rate applicable to Base Rate Loans during such period. Such interest shall be payable for each Interest Period on the last day thereof. Any overdue principal of or interest on any CD Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 2% plus the higher of (i) the sum of the CD Margin for such day plus the Adjusted CD Rate applicable to such Loan at the date such payment was due and (ii) the rate applicable to Base Rate Loans for such day. "CD Margin" means, for any day, (i) if Level I Status exists on such day, 5/8 of 1%, (ii) if Level II Status exists on such day, 3/4 of 1% and (iii) if Level III Status exists on such day, 7/8 of 1%. 29 36 The "Adjusted CD Rate" applicable to any Interest Period means a rate per annum determined pursuant to the following formula: [ CDBR ]* ACDR = [ ---------- ] + AR [ 1.00 - DRP ] ACDR = Adjusted CD Rate CDBR = CD Base Rate DRP = Domestic Reserve Percentage AR = Assessment Rate __________ * The amount in brackets being rounded upward, if necessary, to the next higher 1/100 of 1% The "CD Base Rate" applicable to any Interest Period is the rate of interest determined by the Agent to be the average (rounded upward, if necessary, to the next higher 1/100 of 1%) of the prevailing rates per annum bid at 10:00 A.M. (New York City time) (or as soon thereafter as practicable) on the first day of such Interest Period by two or more New York certificate of deposit dealers of recognized standing for the purchase at face value from each CD Reference Bank of its certificates of deposit in an amount comparable to the principal amount of the CD Loan of such CD Reference Bank to which such Interest Period applies and having a maturity comparable to such Interest Period. "Domestic Reserve Percentage" means for any day that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, without limitation, any basic, supplemental or emergency reserves) for a member bank of the Federal Reserve System in New York City with deposits exceeding five billion dollars in respect of new non-personal time deposits in dollars in New York City having a maturity comparable to the related Interest Period and in an amount of $100,000 or more. The Adjusted CD Rate shall be adjusted automatically on and as of the effective date of any change in the Domestic Reserve Percentage. "Assessment Rate" means for any day the annual assessment rate in effect on such day which is payable by a member of the Bank Insurance Fund classified as adequately capitalized and within supervisory subgroup "A" (or a comparable successor assessment risk classification) within the meaning of 12 C.F.R. # 327.3(d) (or any successor provision) to the Federal Deposit Insurance 30 37 Corporation (or any successor) for such Corporation's (or such successor's) insuring time deposits at offices of such institution in the United States. The Adjusted CD Rate shall be adjusted automatically on and as of the effective date of any change in the Assessment Rate. (c) Each Euro-Dollar Loan shall bear interest on the outstanding principal amount thereof, for each day during each Interest Period applicable thereto, at a rate per annum equal to the sum of the Euro-Dollar Margin for such day plus the Adjusted Interbank Offered Rate applicable to such Interest Period. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than three months, at intervals of three months after the first day thereof. "Euro-Dollar Margin" means, for any day, (i) if Level I Status exists on such day, 1/2 of 1%, (ii) if Level II Status exists on such day, 5/8 of 1% and (iii) if Level III Status exists on such day, 3/4 of 1%. The "Adjusted Interbank Offered Rate" applicable to any Interest Period means a rate per annum equal to the quotient obtained (rounded upward, if necessary, to the next higher 1/100 of 1%) by dividing (i) the applicable Interbank Offered Rate by (ii) 1.00 minus the Euro-Dollar Reserve Percentage. The "Interbank Offered Rate" applicable to any Interest Period means the average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the respective rates per annum at which deposits in dollars are offered to each of the Euro-Dollar Reference Banks in the London or, in the case of any Reference Bank that does not accept interbank deposits in London, New York interbank market at approximately 11:00 A.M. (London or New York time, as the case may be) two Euro-Dollar Business Days before the first day of such Interest Period in an amount approximately equal to the principal amount of the Euro-Dollar Loan of such Euro-Dollar Reference Bank to which such Interest Period is to apply and for a period of time comparable to such Interest Period. "Euro-Dollar Reserve Percentage" means for any day that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement for a member bank of the Federal Reserve System in New York City with deposits exceeding five billion dollars in respect of "Eurocurrency liabilities" (or in respect of any other category of liabilities which includes deposits by 31 38 reference to which the interest rate on Euro-Dollar Loans is determined or any category of extensions of credit or other assets which includes loans by a non-United States office of any Bank to United States residents). The Adjusted Interbank Offered Rate shall be adjusted automatically on and as of the effective date of any change in the Euro-Dollar Reserve Percentage. (d) Any overdue principal of or interest on any Euro-Dollar Loan shall bear interest, payable on demand, for each day from and including the date payment thereof was due to but excluding the date of actual payment, at a rate per annum equal to the sum of 2% plus the higher of (i) the Euro-Dollar Margin for such day plus the quotient obtained (rounded upward, if necessary, to the next higher 1/100 of 1%) by dividing (x) the average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the respective rates per annum at which one day (or, if such amount due remains unpaid more than three Euro-Dollar Business Days, then for such other period of time not longer than six months as the Agent may select) deposits in dollars in an amount approximately equal to such overdue payment due to each of the Euro-Dollar Reference Banks are offered to such Euro-Dollar Reference Bank in the London or, in the case of any Reference Bank that does not accept interbank deposits in London, New York interbank market for the applicable period determined as provided above by (y) 1.00 minus the Euro-Dollar Reserve Percentage (or, if the circumstances described in clause (a) or (b) of Section 8.01 shall exist, the rate applicable to Base Rate Loans for such day) and (ii) the sum of the Euro-Dollar Margin for such day plus the Adjusted Interbank Offered Rate applicable to such Loan at the date such payment was due. (e) Subject to Section 8.01(a), each Money Market LIBOR Loan shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the sum of the Interbank Offered Rate for such Interest Period (determined in accordance with Section 2.08(c) as if the related Money Market LIBOR Borrowing were a Committed Euro-Dollar Borrowing) plus (or minus) the Money Market Margin quoted by the Bank making such Loan in accordance with Section 2.03. Each Money Market Absolute Rate Loan shall bear interest on the outstanding principal amount thereof, for the Interest Period applicable thereto, at a rate per annum equal to the Money Market Absolute Rate quoted by the Bank making such Loan in accordance with Section 2.03. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than three months, at intervals of three months after the first day thereof. Any overdue 32 39 principal of or interest on any Money Market Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 2% plus the Base Rate for such day. (f) The Agent shall determine each interest rate applicable to the Loans hereunder. The Agent shall give prompt notice to the Borrower and the participating Banks by facsimile transmission, telex or cable of each rate of interest so determined, and its determination thereof shall be conclusive in the absence of manifest error. (g) Each Reference Bank agrees to use its best efforts to furnish quotations to the Agent as contemplated by this Section. If any Reference Bank does not furnish a timely quotation, the Agent shall determine the relevant interest rate on the basis of the quotation or quotations furnished by the remaining Reference Bank or Banks or, if none of such quotations is available on a timely basis, the provisions of Section 8.01 shall apply. SECTION 2.09. FACILITY FEES. The Company shall pay to the Agent for the account of the Banks ratably in proportion to their Commitments (or, for any day on or after the date upon which the Commitments shall have terminated in their entirety, in proportion to the daily average of the aggregate outstanding principal amount of their Loans) a facility fee at the rate of 3/8 of 1% per annum. Such facility fee shall accrue (i) from and including the Effective Date to but excluding the Termination Date (or earlier date of termination of the Commitments in their entirety), on the daily average aggregate amount of the Commitments (whether used or unused) and (ii) from and including such Termination Date or earlier date of termination to but excluding the date the Loans shall be repaid in their entirety, on the daily average of the aggregate outstanding principal amount of the Loans. Accrued fees under this Section shall be payable quarterly on each Quarterly Date and upon the date of termination of the Commitments in their entirety and, if later, the date the Loans shall be repaid in their entirety. SECTION 2.10. MANDATORY TERMINATION OR REDUCTION OF COMMITMENTS. (a) The Commitments shall terminate in their entirety on the Termination Date. (b) Upon the incurrence by the Company or any of its Subsidiaries of any Additional Permitted Long-Term Debt, the Commitments of the several Banks shall be reduced ratably by an aggregate amount equal to the 33 40 aggregate principal amount of the Additional Permitted Long-Term Debt so incurred. SECTION 2.11. OPTIONAL TERMINATION OR REDUCTION OF COMMITMENTS. The Company may, upon at least three Domestic Business Days' notice to the Agent, (i) terminate the Commitments at any time, if no Loans are outstanding at such time, or (ii) ratably reduce the Commitments from time to time by an aggregate amount of at least $5,000,000 so long as, immediately after any such reduction the aggregate principal amount of Loans outstanding shall not exceed the Available Amount. SECTION 2.12. OPTIONAL PREPAYMENTS. (a) Subject in the case of any Fixed Rate Borrowing to Section 2.15, any Borrower may, upon notice to the Agent (i) not later than 11:30 A.M. (New York City time) on the date of prepayment, in the case of a Group of Base Rate Loans of such Borrower (or any Money Market Borrowing of such Borrower bearing interest at the Base Rate pursuant to Section 8.01(a)), (ii) at least two Domestic Business Days prior to the date of prepayment, in the case of a Group of CD Loans of such Borrower and (iii) at least three Euro- Dollar Business Days prior to the date of prepayment, in the case of a Group of Euro-Dollar Loans of such Borrower, prepay a Group of Loans of such Borrower in whole at any time, or from time to time in part in amounts aggregating (x) $500,000 or any larger multiple of $100,000, in the case of a Group of Base Rate Loans or such a Money Market Borrowing or (y) $1,000,000 or a larger multiple of $100,000, in the case of a Group of CD Loans or Euro- Dollar Loans, by paying the principal amount to be prepaid together with accrued interest thereon to the date of prepayment. Each such optional prepayment shall be applied to prepay ratably the Loans of the several Banks included in such Group or Borrowing. (b) Except as provided in subsection (a) above, Section 2.13 or Article VI or VIII, no Borrower may prepay all or any portion of the principal amount of any Money Market Loan prior to the maturity thereof. (c) Upon receipt of a notice of prepayment pursuant to this Section, the Agent shall promptly notify each Bank of the contents thereof and of such Bank's ratable share, if any, of such prepayment and such notice shall not thereafter be revocable by the applicable Borrower. SECTION 2.13. MANDATORY PREPAYMENTS. (a) If the aggregate principal amount of Loans outstanding on any day shall exceed the Available Amount for such day, the Borrowers shall prepay Committed Loans (and, if, but only 34 41 if, after all Committed Loans shall have been prepaid, the aggregate principal amount of Loans outstanding shall continue to exceed such Available Amount, Money Market Loans), together with accrued interest thereon, to the extent necessary to cause the aggregate principal amount of Loans outstanding immediately after such prepayment to be less than or equal to such Available Amount. (b) Each prepayment of Loans required by this Section 2.13 shall be made with respect to such Group or Groups of Loans and (subject to the limitations set forth in subsection (a) above) such Money Market Borrowing or Borrowings as the Borrowers may specify by notice to the Agent at or before the time of such prepayment and shall be applied to prepay Loans comprising each such Group of Loans or Loans comprising each such Money Market Borrowing pro rata; PROVIDED that (i) subject to the limitations set forth in subsection (a) above, the Borrowers shall specify Groups of Loans and Money Market Borrowings for prepayment so as to minimize the amounts payable by the Borrowers pursuant to Section 2.15 with respect to such prepayment and (ii) if no such timely specification is given by the Borrowers, such prepayment shall be allocated first to Base Rate Loans, if any, second to such Group or Groups of Fixed Rate Loans as the Agent may determine, until all such Groups of Fixed Rate Loans shall have been repaid in full, and third to such Money Market Borrowing or Borrowings as the Agent may determine. SECTION 2.14. GENERAL PROVISIONS AS TO PAYMENTS. (a) The Borrowers shall make each payment of principal of, and interest on, the Loans and of fees hereunder, not later than 12:00 Noon (New York City time) on the date when due, in Federal or other funds immediately available in New York City, to the Agent at its address referred to in Section 11.01. The Agent will promptly distribute to each Bank its ratable share of each such payment received by the Agent for the account of the Banks. Whenever any payment of principal of, or interest on, the Domestic Loans or of fees shall be due on a day which is not a Domestic Business Day, the date for payment thereof shall be extended to the next succeeding Domestic Business Day. Whenever any payment of principal of, or interest on, the Euro-Dollar Loans shall be due on a day which is not a Euro-Dollar Business Day, the date for payment thereof shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case the date for payment thereof shall be the next preceding Euro-Dollar Business Day. Whenever any payment of principal of, or interest on, the Money Market Loans shall be due on a day which is not a Euro-Dollar Business Day, the date for payment thereof shall be extended to the next 35 42 succeeding Euro-Dollar Business Day. If the date for any payment of principal is extended by operation of law or otherwise, interest thereon shall be payable for such extended time. (b) Unless the Agent shall have received notice from a Borrower prior to the date on which any payment is due from such Borrower to the Banks hereunder that such Borrower will not make such payment in full, the Agent may assume that such Borrower has made such payment in full to the Agent on such date and the Agent may, in reliance upon such assumption, cause to be distributed to each Bank on such due date an amount equal to the amount then due such Bank. If and to the extent that such Borrower shall not have so made such payment, each Bank shall repay to the Agent forthwith on demand such amount distributed to such Bank together with interest thereon, for each day from the date such amount is distributed to such Bank until the date such Bank repays such amount to the Agent, at the Federal Funds Rate. SECTION 2.15. FUNDING LOSSES. If a Borrower makes any payment of principal with respect to any Fixed Rate Loan or any Fixed Rate Loan is converted to a Base Rate Loan (pursuant to Article II, VI or VIII or otherwise) on any day other than the last day of an Interest Period applicable thereto, or the last day of an applicable period fixed pursuant to Section 2.08(d), or if a Borrower fails to borrow or prepay any Fixed Rate Loans after notice has been given to any Bank in accordance with Section 2.04(a) or 2.12(b), the Company shall reimburse each Bank within 15 days after demand for any resulting loss or expense incurred by it (or by an existing or prospective Participant in the related Loan), including (without limitation) any such loss incurred in obtaining, liquidating or employing deposits from third parties, but excluding loss of margin for the period after any such payment or conversion or failure to borrow or prepay, PROVIDED that such Bank shall have delivered to the Company a certificate as to the amount of such loss or expense, which certificate shall be conclusive in the absence of manifest error. SECTION 2.16. COMPUTATION OF INTEREST AND FEES. Interest based on the Prime Rate hereunder shall be computed on the basis of a year of 365 days (or 366 days in a leap year) and paid for the actual number of days elapsed (including the first day but excluding the last day). All other interest and fees shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed (including the first day but excluding the last day). 36 43 SECTION 2.17. JUDGMENT CURRENCY. If for the purpose of obtaining judgment in any court it is necessary to convert a sum due from any Borrower hereunder or under any of the Notes in United States dollars ("dollars") into another currency, the parties hereto agree, to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures the Agent could purchase dollars with such other currency at the Agent's New York office on the Domestic Business Day preceding that on which final judgment is given. The obligations of each Borrower in respect of any sum due to any Bank or the Agent hereunder or under any Note shall, notwithstanding any judgment in a currency other than dollars, be discharged only to the extent that on the Domestic Business Day following receipt by such Bank or the Agent (as the case may be) of any sum adjudged to be so due in such other currency such Bank or the Agent (as the case may be) may in accordance with normal banking procedures purchase dollars with such other currency; if the amount of dollars so purchased is less than the sum originally due to such Bank or the Agent, as the case may be, in dollars, each Borrower agrees, to the fullest extent that it may effectively do so, as a separate obligation and notwithstanding any such judgment, to indemnify such Bank or the Agent, as the case may be, against such deficiency, and if the amount of dollars so purchased exceeds (a) the sum originally due to any Bank or the Agent, as the case may be, and (b) any amounts shared with other Banks as a result of allocations of such excess as a disproportionate payment to such Bank under Section 11.04, such Bank or the Agent, as the case may be, agrees to remit such excess to the appropriate Borrower. SECTION 2.18. FOREIGN SUBSIDIARY COSTS. (a) If the cost to any Bank of making or maintaining any Loan to an Eligible Subsidiary is increased, or the amount of any sum received or receivable by any Bank (or its Applicable Lending Office) is reduced by an amount deemed by such Bank to be material, by reason of the fact that such Eligible Subsidiary is incorporated in, or conducts business in, a jurisdiction outside the United States of America, the Company shall indemnify such Bank for such increased cost or reduction within 15 days after demand by such Bank (with a copy to the Agent). A certificate of such Bank claiming compensation under this subsection (a) and setting forth the additional amount or amounts to be paid to it hereunder shall be conclusive in the absence of manifest error. (b) Each Bank will promptly notify the Company and the Agent of any event of which it has knowledge that will entitle such Bank to additional interest or payments pursuant to subsection (a) and will designate a different 37 44 Applicable Lending Office, if, in the judgment of such Bank, such designation will avoid the need for, or reduce the amount of, such compensation and will not be otherwise disadvantageous to such Bank. ARTICLE III CONDITIONS SECTION 3.01. CLOSING. The closing hereunder shall occur upon receipt by the Agent of the following, each dated the Closing Date unless otherwise indicated: (a) a duly executed Note of the Company for the account of each Bank dated on or before the Closing Date complying with the provisions of Section 2.05; (b) an opinion of Ropes & Gray, counsel for the Company, substantially in the form of Exhibit E hereto and covering such additional matters relating to the transactions contemplated hereby as the Required Banks may reasonably request; (c) an opinion of Davis Polk & Wardwell, special counsel for the Agent, substantially in the form of Exhibit F hereto and covering such additional matters relating to the transactions contemplated hereby as the Required Banks may reasonably request; (d) evidence satisfactory to the Agent that all "Loans" and "Acceptances" (in each case as defined in the Existing Credit Agreement) outstanding under the Existing Credit Agreement and all other amounts payable by the Company or any "Borrower" (as so defined) thereunder shall have been paid in full and that the Commitments (as so defined) thereunder shall have been terminated in their entirety; (e) evidence satisfactory to the Required Banks that the Chase Credit Agreement shall have been amended, in a manner satisfactory in form and substance to the Agent and the Required Banks, so as to permit the Company and the Eligible Subsidiaries to enter into this Agreement and to borrow hereunder, and to modify the covenants, events of default and other terms and conditions of the Chase Credit Agreement in a manner satisfactory to the Required Banks; and (f) all documents the Agent may reasonably request relating to the existence of the Company, the corporate authority for and the validity of this Agreement 38 45 and the Notes, and any other matters relevant hereto, all in form and substance satisfactory to the Agent. The Agent shall promptly notify the Company and the Banks of the Closing Date, and such notice shall be conclusive and binding on all parties hereto. SECTION 3.02. BORROWINGS. The obligation of any Bank to make a Loan on the occasion of any Borrowing is subject to the satisfaction of the following conditions: (a) the fact that the Closing Date shall have occurred on or prior to June 30, 1994; (b) receipt by the Agent of a Notice of Borrowing as required by Section 2.02 or 2.03, as the case may be; (c) the fact that, immediately before and after such Borrowing, the aggregate outstanding principal amount of the Loans shall not exceed the Available Amount; (d) the fact that, immediately before and after such Borrowing, no Default shall have occurred and be continuing; and (e) the fact that the representations and warranties of the Borrowers contained in this Agreement shall be true on and as of the date of such Borrowing. Each Borrowing hereunder shall be deemed to be a representation and warranty by the Borrowers on the date of such Borrowing as to the facts specified in clauses (c), (d) and (e) of this Section. SECTION 3.03. FIRST BORROWING BY EACH ELIGIBLE SUBSIDIARY. The obligation of each Bank to make a Loan on the occasion of the first Borrowing by each Eligible Subsidiary is subject to the satisfaction of the following further conditions: (a) receipt by the Agent for the account of each Bank of a duly executed Note of such Eligible Subsidiary dated on or before the date of such Borrowing complying with the provisions of Section 2.05; (b) receipt by the Agent of an opinion of counsel for such Eligible Subsidiary acceptable to the Agent, substantially in the form of 39 46 Exhibit I hereto and covering such additional matters relating to the transactions contemplated hereby as the Required Banks may reasonably request; and (c) receipt by the Agent of all documents which it may reasonably request relating to the existence of such Eligible Subsidiary, the corporate authority for and the validity of the Election to Participate of such Eligible Subsidiary, this Agreement and the Notes of such Eligible Subsidiary, and any other matters relevant thereto, all in form and substance satisfactory to the Agent. The opinion referred to in clause (b) above shall be dated no more than five Euro-Dollar Business Days before the date of the first Borrowing by such Eligible Subsidiary hereunder. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company represents and warrants that: SECTION 4.01. CORPORATE EXISTENCE AND POWER. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware, and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted. SECTION 4.02. CORPORATE AND GOVERNMENTAL AUTHORIZATION; NO CONTRAVENTION. The execution, delivery and performance by the Company of this Agreement and its Notes are within the Company's corporate powers, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any governmental body, agency or official (other than disclosure, if any, thereof, and filing, if any, of a copy hereof with the Securities and Exchange Commission, required by the Securities Act of 1933 or the Securities Exchange Act of 1934, in each case as amended) and do not contravene, or constitute a default under, any provision of applicable law or regulation or of the certificate of incorporation or by-laws of the Company or of any agreement, judgment, injunction, order, decree or other instrument binding upon the Company or result in the 40 47 creation or imposition of any Lien on any asset of the Company or any of its Subsidiaries. SECTION 4.03. BINDING EFFECT. This Agreement constitutes a valid and binding agreement of the Company and its Notes, when executed and delivered in accordance with this Agreement, will constitute valid and binding obligations of the Company. SECTION 4.04. FINANCIAL INFORMATION. (a) The consolidated balance sheet of the Company and its Consolidated Subsidiaries as of December 31, 1993 and the related consolidated statements of operations, changes in stockholders' equity and cash flow for the fiscal year then ended, reported on by Deloitte & Touche and set forth in the Company's 1993 Form 10-K, a copy of which has been delivered to each of the Banks, fairly presented, in conformity with generally accepted accounting principles, the consolidated financial position of the Company and its Consolidated Subsidiaries as of such date and their consolidated results of operations and cash flows for such fiscal year. (b) Since December 31, 1993 there has been no material adverse change in the business, financial position or results of operations of the Company and its Consolidated Subsidiaries, considered as a whole. SECTION 4.05. LITIGATION. There is no action, suit or proceeding pending against, or to the knowledge of the Company threatened against or affecting, the Company or any of its Subsidiaries before any court or arbitrator or any governmental body, agency or official in which there is a reasonable possibility of an adverse decision which could materially adversely affect the business, consolidated financial position or consolidated results of operations of the Company and its Consolidated Subsidiaries, considered as a whole, or which in any manner draws into question the validity of this Agreement or the Notes. SECTION 4.06. COMPLIANCE WITH ERISA. Each member of the ERISA Group has fulfilled its obligations under the minimum funding standards of ERISA and the Internal Revenue Code with respect to each Plan and is in compliance in all material respects with the currently applicable provisions of ERISA and the Internal Revenue Code with respect to each Plan. No member of the ERISA Group has (i) sought a waiver of the minimum funding standard under Section 412 of the Internal Revenue Code in respect of any Plan, (ii) failed to make any contribution or payment to any Plan or Multiemployer Plan or in respect 41 48 of any Benefit Arrangement, or made any amendment to any Plan or Benefit Arrangement, which has resulted or could result in the imposition of a Lien or the posting of a bond or other security under ERISA or the Internal Revenue Code or (iii) incurred any liability under Title IV of ERISA other than a liability to the PBGC for premiums under Section 4007 of ERISA. SECTION 4.07. ENVIRONMENTAL MATTERS . In the ordinary course of its business, the Company conducts an ongoing review of the effect of Environmental Laws on the business, operations and properties of the Company and its Subsidiaries, in the course of which it identifies and evaluates associated liabilities and costs (including, without limitation, any capital or operating expenditures required for clean-up or closure of properties presently or previously owned, any capital or operating expenditures required to achieve or maintain compliance with environmental protection standards imposed by law or as a condition of any license, permit or contract, any related constraints on operating activities, including any periodic or permanent shutdown of any facility or reduction in the level of or change in the nature of operations conducted thereat, any costs or liabilities in connection with off-site disposal of wastes or Hazardous Substances, and any actual or potential liabilities to third parties, including employees, and any related costs and expenses). On the basis of this review, the Company has reasonably concluded that such associated liabilities and costs, including the costs of compliance with Environmental Laws, are unlikely to have a material adverse effect on the business, financial condition, results of operations or prospects of the Company and its Consolidated Subsidiaries, considered as a whole. SECTION 4.08. TAXES. United States Federal income tax returns of the Company and its Subsidiaries have been closed through the fiscal year ended December 31, 1989. The Company and its Subsidiaries have filed all United States Federal income tax returns and all other material tax returns which are required to be filed by them and have paid all taxes due pursuant to such returns or pursuant to any assessment received by the Company or any Subsidiary, except for any such taxes being diligently contested in good faith by appropriate proceedings. The charges, accruals and reserves on the books of the Company and its Subsidiaries in respect of taxes or other governmental charges are, in the opinion of the Company, adequate. SECTION 4.09. SUBSIDIARIES. Each of the Company's Subsidiaries is duly organized, validly existing and in good standing under the laws of its jurisdiction of 42 49 organization, and has all corporate or other powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted. SECTION 4.10. NOT AN INVESTMENT COMPANY. The Company is not an "investment company" within the meaning of the Investment Company Act of 1940, as amended. SECTION 4.11. FULL DISCLOSURE. All information heretofore furnished by the Company to the Agent or any Bank for purposes of or in connection with this Agreement or any transaction contemplated hereby is, and all such information hereafter furnished by the Company to the Agent or any Bank will be, true and accurate in all material respects on the date as of which such information is stated or certified. The Company has disclosed to the Banks in writing any and all facts, other than general economic conditions, which materially and adversely affect or may affect (to the extent the Company can now reasonably foresee) the business, operations or financial condition of the Company and its Consolidated Subsidiaries, considered as a whole, or the ability of the Company to perform its obligations under this Agreement and the Notes. ARTICLE V COVENANTS The Company agrees that, so long as any Bank has any Commitment hereunder or any amount payable under any Note remains unpaid: SECTION 5.01. INFORMATION. The Company will deliver to each of the Banks: (a) as soon as available and in any event within 90 days after the end of each fiscal year of the Company, consolidated and consolidating balance sheets of the Company and its Consolidated Subsidiaries as of the end of such fiscal year and the related consolidated and consolidating statements of operations and consolidated statements of changes in stockholders' equity and cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, (x) in the case of the consolidated statements, all reported on in a manner acceptable to the Securities and Exchange 43 50 Commission by Deloitte & Touche or other independent public accountants of nationally recognized standing, and (y) in the case of the consolidating statements, all certified as to fairness of presentation, generally accepted accounting principles and consistency by the chief financial officer or the chief accounting officer of the Company; (b) as soon as available and in any event within 45 days after the end of each of the first three quarters of each fiscal year of the Company, consolidated and consolidating balance sheets of the Company and its Consolidated Subsidiaries as of the end of such quarter and the related consolidated and consolidating statements of operations and consolidated statements of changes in stockholders' equity and cash flows for such quarter and for the portion of the Company's fiscal year ended at the end of such quarter, setting forth in each case in comparative form the figures for the corresponding quarter and the corresponding portion of the Company's previous fiscal year, all certified (subject to normal year-end adjustments and the non-inclusion of notes permitted by the applicable regulations of the Securities and Exchange Commission to be excluded from quarterly reports filed on Form 10-Q) as to fairness of presentation, generally accepted accounting principles and consistency by the chief financial officer or the chief accounting officer of the Company; (c) simultaneously with the delivery of each set of financial statements referred to in clauses (a) and (b) above, a certificate of the chief financial officer, treasurer or the chief accounting officer of the Company (i) setting forth in reasonable detail the calculations required to establish whether the Company was in compliance with the requirements of Sections 5.07 through 5.11, inclusive, and Sections 5.13 and 5.15 on the date of such financial statements, (ii) setting forth in reasonable detail the calculations of the Borrowing Base and the Available Amount as of the date of such financial statements and whether the Company is thereby required to take or cause to be taken any action to comply with Section 2.13 and (iii) stating whether any Default exists on the date of such certificate and, if any Default then exists, setting forth the details thereof and 44 51 the action which the Company is taking or proposes to take with respect thereto; (d) simultaneously with the delivery of each set of financial statements referred to in clause (a) above, a certificate of the firm of independent public accountants which reported on such statements (i) whether anything has come to their attention to cause them to believe that any Default existed on the date of such statements and (ii) confirming the calculations set forth in the officer's certificate delivered simultaneously therewith pursuant to clause (c) above; (e) within 21 days after the end of each monthly accounting period of the Company, a certificate of the chief financial officer, treasurer or the chief accounting officer of the Company setting forth calculations in reasonable detail of the Company's best estimate of the Borrowing Base and the Available Amount as of the end of such month and whether the Company is required to take or cause to be taken any action to comply with Section 2.13; (f) within five days after any officer of the Company obtains knowledge of any Default, if such Default is then continuing, a certificate of the chief financial officer or the chief accounting officer of the Company setting forth the details thereof and the action which the Company is taking or proposes to take with respect thereto; (g) promptly upon the mailing thereof to the shareholders of the Company generally, copies of all financial statements, reports and proxy statements so mailed; (h) promptly upon the filing thereof, copies of all registration statements (other than the exhibits thereto and any registration statements on Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or their equivalents) which the Company shall have filed with the Securities and Exchange Commission; (i) if and when any member of the ERISA Group (i) gives or is required to give notice to the PBGC of any "reportable event" (as defined in Section 4043 of ERISA) with respect to any Plan which might constitute grounds for a 45 52 termination of such Plan under Title IV of ERISA, or knows that the plan administrator of any Plan has given or is required to give notice of any such reportable event, a copy of the notice of such reportable event given or required to be given to the PBGC; (ii) receives notice of complete or partial withdrawal liability under Title IV of ERISA or notice that any Multiemployer Plan is in reorganization, is insolvent or has been terminated, a copy of such notice; (iii) receives notice from the PBGC under Title IV of ERISA of an intent to terminate, impose liability (other than for premiums under Section 4007 of ERISA) in respect of, or appoint a trustee to administer any Plan, a copy of such notice; (iv) applies for a waiver of the minimum funding standard under Section 412 of the Internal Revenue Code, a copy of such application; (v) gives notice of intent to terminate any Plan under Section 4041(c) of ERISA, a copy of such notice and other information filed with the PBGC; (vi) gives notice of withdrawal from any Plan pursuant to Section 4063 of ERISA, a copy of such notice; or (vii) fails to make any payment or contribution to any Plan or Multiemployer Plan or in respect of any Benefit Arrangement or makes any amendment to any Plan or Benefit Arrangement which has resulted or could result in the imposition of a Lien or the posting of a bond or other security, a certificate of the chief financial officer or the chief accounting officer of the Company setting forth details as to such occurrence and action, if any, which the Company or applicable member of the ERISA Group is required or proposes to take; and (j) from time to time such additional information regarding the financial position or business of the Company and its Subsidiaries as the Agent, at the request of any Bank, may reasonably request. SECTION 5.02. PAYMENT OF OBLIGATIONS. The Company will pay and discharge, and will cause each Subsidiary to pay and discharge, at or before maturity or in accordance with customary trade practices, all their respective material obligations and liabilities, including, without limitation, tax liabilities, except where the same may be contested in good faith by appropriate proceedings, and will maintain, and will cause each Subsidiary to maintain, in accordance with generally 46 53 accepted accounting principles, appropriate reserves for the accrual of any of the same. SECTION 5.03. MAINTENANCE OF PROPERTY; INSURANCE. (a) The Company will maintain, and will cause each Subsidiary to maintain, all property useful and necessary in its business in good working order and condition, ordinary wear and tear excepted. (b) The Company will, and will cause each of its Subsidiaries to, maintain (either in the name of the Company or in such Subsidiary's own name) with financially sound and responsible insurance companies, insurance on all their respective properties in at least such amounts and against at least such risks (and with such risk retention) as are (i) insured against under the policies of insurance of the Company and its Subsidiaries set forth on the schedule previously provided by the Company to the Banks or (ii) usually insured against in the same general area by companies of established repute engaged in the same or a similar business; and will furnish to the Banks, upon request from the Agent, information presented in reasonable detail as to the insurance so carried. SECTION 5.04. CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. The Company will continue, and will cause each Subsidiary to continue, to engage in business of the same general type as now conducted by the Company and its Subsidiaries, and will preserve, renew and keep in full force and effect, and will cause each Subsidiary to preserve, renew and keep in full force and effect their respective corporate existence and their respective rights, privileges and franchises necessary or desirable in the normal conduct of business; PROVIDED that nothing in this Section 5.04 shall prohibit (i) the merger or consolidation of a Subsidiary with or into another Person if the corporation surviving such consolidation or merger is a Wholly-Owned Subsidiary or the merger of a Subsidiary into the Company if, in each case, after giving effect thereto, no Default shall have occurred and be continuing, (ii) the termination of the corporate existence of any Subsidiary if such termination is not materially disadvantageous to the Banks and the Company in good faith determines that such termination is in the best interest of the Company or (iii) a sale of capital stock of a Subsidiary permitted under Section 5.12(ii). SECTION 5.05. COMPLIANCE WITH LAWS. The Company will comply, and cause each Subsidiary to comply, in all material respects with all applicable laws, ordinances, rules, regulations and requirements of governmental authorities (including, without limitation, Environmental Laws and ERISA and the rules and regulations 47 54 thereunder) except where the necessity of compliance therewith is contested in good faith by appropriate proceedings. SECTION 5.06. INSPECTION OF PROPERTY, BOOKS AND RECORDS. The Company will keep, and will cause each Subsidiary to keep, proper books of record and account in which full, true and correct entries shall be made of all dealings and transactions in relation to its business and activities; and will permit, and will cause each Subsidiary to permit, representatives of any Bank at such Bank's expense to visit and inspect any of their respective properties, to examine and make abstracts from any of their respective books and records and to discuss their respective affairs, finances and accounts with their respective officers, employees and independent public accountants, all at such reasonable times, upon reasonable notice and as often as may reasonably be desired. SECTION 5.07. FIXED CHARGE COVERAGE RATIO. The Fixed Charge Coverage Ratio for any period of four consecutive fiscal quarters will not be less than (a) 2.0 to 1.0 for any such period ending on or prior to September 30, 1994 and (ii) 2.25 to 1.0 for any such period ending thereafter. SECTION 5.08. DEBT. The Company will not, and will not permit any of its Subsidiaries to, incur or at any time be liable with respect to any Debt except: (a) Debt outstanding under this Agreement and the Notes, PROVIDED that the aggregate outstanding principal amount of all Loans to Eligible Subsidiaries shall at no time exceed $20,000,000; (b) Debt of the Company outstanding on May 13, 1993 and identified on Schedule I and extensions, renewals and refinancings thereof, PROVIDED that no such extension, renewal or refinancing shall increase the principal amount of such Debt, shorten the maturity thereof or accelerate the amortization thereof; (c) Debt of any of the Company's Subsidiaries owing to the Company or any of its Wholly-Owned Subsidiaries permitted by Section 5.11; (d) Debt of the Company owing to Wholly-Owned Subsidiaries of the Company; 48 55 (e) Guarantees by the Company or any of its Subsidiaries of Debt of employees of the Company or any of its Wholly-Owned Subsidiaries, in an aggregate principal amount at any time outstanding not to exceed $1,000,000; (f) Debt of the Company or any of its Wholly- Owned Subsidiaries owing to a Subsidiary of the Company incurred as a result of the transfer of funds from an account under the control of such Subsidiary to an account under the control of the Company or such Wholly-Owned Subsidiary in connection with the Company's cash management program; (g) Permitted Short-Term Debt of the Company in an aggregate principal amount at any time outstanding not to exceed $20,000,000; (h) Debt denominated in currencies other than United States dollars and having a maturity, at the time such Debt is incurred, of not more than one year from the date such Debt is incurred in an aggregate principal amount at the time of incurrence of any such Debt (the dollar equivalent of all Debt outstanding at the time of any such incurrence being recalculated as of the time of such incurrence on the basis of exchange rates then in effect) not to exceed the equivalent of $18,000,000; (i) Permitted Long-Term Debt of the Company in an aggregate principal amount at any time outstanding not to exceed the Applicable Percentage of Consolidated Net Worth; and (j) Debt not otherwise permitted under the foregoing clauses of this Section in an aggregate principal amount not to exceed $5,000,000 at any time outstanding. SECTION 5.09. MINIMUM CONSOLIDATED TANGIBLE NET WORTH. Consolidated Tangible Net Worth will at no time be less than the sum of (i) $88,000,000 and (ii) 80% of the sum of (A) Aggregate Positive Consolidated Net Income and (B) the net cash proceeds of all issuances by the Company of shares of its common stock after the date hereof. For purposes of this Section, "Aggregate Positive Consolidated Net Income" means the aggregate amount of consolidated net income for each fiscal quarter commencing on or after December 31, 1993 and ending on or prior to the date as of which compliance with this Section 5.09 is determined (with no deduction for consolidated net losses for any such fiscal quarter). 49 56 SECTION 5.10. RESTRICTED PAYMENTS. Neither the Company nor any Subsidiary will declare or make any Restricted Payment unless, after giving effect thereto, the aggregate of all Restricted Payments declared or made subsequent to December 31, 1990 does not exceed 25% of consolidated net income (less consolidated net loss, if any) of the Company and its Consolidated Subsidiaries for the period from January 1, 1991 through the end of the Company's then most recent fiscal quarter (treated for this purpose as a single accounting period). Nothing in this Section 5.10 shall prohibit the payment of any dividend or distribution within 60 days after the declaration thereof if such declaration was not prohibited by this Section 5.10. SECTION 5.11. INVESTMENTS. Neither the Company nor any Subsidiary will make or acquire any Investment in any Person other than: (a) Investments in Persons which immediately before and after giving effect to such Investment are Subsidiaries of the Company, if, immediately thereafter, the aggregate amount of all such Investments made after the date hereof does not exceed $25,000,000 at any one time outstanding; (b) Temporary Cash Investments; (c) loans or advances to current employees of the Company or such Consolidated Subsidiary having a maturity of less than one year in an aggregate principal amount at any time outstanding not to exceed $1,000,000; (d) Investments the sole consideration for which is newly issued common stock of the Company or newly issued preferred stock of the Company that is not subject to mandatory redemption or redemption at the option of the holder before the fourth anniversary of the date of issuance thereof; (e) Investments consisting of Debt permitted under Section 5.08(d) or 5.08(f); and (f) any Investment not otherwise permitted by the foregoing clauses of this Section if, immediately after such Investment is made or acquired, the aggregate amount of all Investments permitted by this clause (f) does not exceed $10,000,000 at any one time outstanding. 50 57 The amount of any Investment shall be the original cost of such Investment plus the cost of all additions thereto, without adjustments for increases or decreases in value, write-ups, write-downs or write-offs with respect to such Investment. SECTION 5.12. MAINTENANCE OF OWNERSHIP OF SUBSIDIARIES. The Company will at all times maintain direct or indirect legal and beneficial ownership of the percentage of outstanding shares of each class of capital stock set forth on Schedule II of each of its Subsidiaries, except as modified by (i) sales by Subsidiaries of directors' qualifying shares, (ii) mergers and liquidations permitted pursuant to the proviso to Section 5.14 and (iii) grants or sales by The Outdoor Footwear Company of shares of its non-voting common stock to its employees consistent with past practice. SECTION 5.13. NEGATIVE PLEDGE. Neither the Company nor any Subsidiary will create, assume or suffer to exist any Lien on any asset now owned or hereafter acquired by it, except: (a) Liens existing on the date of this Agreement securing Debt outstanding on the date of this Agreement in an aggregate principal amount not exceeding $15,000,000 and identified on Schedule I; (b) any Lien existing on any asset of any corporation at the time such corporation becomes a Subsidiary and not created in contemplation of such event; (c) any Lien on any asset securing Debt incurred or assumed for the purpose of financing all or any part of the cost of acquiring or constructing such asset, PROVIDED that such Lien attaches to such asset concurrently with or within 90 days after the acquisition or construction thereof; (d) any Lien on any asset of any corporation existing at the time such corporation is merged or consolidated with or into the Company or a Subsidiary and not created in contemplation of such event; (e) any Lien existing on any asset prior to the acquisition thereof by the Company or a Subsidiary and not created in contemplation of such acquisition; 51 58 (f) any Lien arising out of the refinancing, extension, renewal or refunding of any Debt secured by any Lien permitted by any of the foregoing clauses of this Section 5.13, PROVIDED that such Debt is not increased and is not secured by any additional assets; (g) Liens arising in the ordinary course of its business which (i) do not secure Debt or Derivative Obligations, (ii) do not secure any obligation in an amount exceeding $10,000,000 and (iii) do not in the aggregate materially detract from the value of its assets or materially impair the use thereof in the operation of its business; (h) Liens on assets of Subsidiaries securing Debt owing to the Company or to Wholly- Owned Subsidiaries permitted by Section 5.08; (i) Liens on cash and cash equivalents securing Derivative Obligations, PROVIDED that the aggregate amount of cash and cash equivalents subject to such Liens may at no time exceed $5,000,000; (j) Liens on Factorable Receivables arising in connection with and as part of the sale or transfer of such Factorable Receivables pursuant to Permitted Factoring Transactions; and (k) Liens not otherwise permitted by the foregoing clauses of this Section securing Debt in an aggregate principal or face amount at any time outstanding not to exceed $5,000,000. SECTION 5.14. CONSOLIDATIONS, MERGERS AND SALES OF ASSETS. The Company will not (i) consolidate or merge with or into any other Person or (ii) sell, lease or otherwise transfer, directly or indirectly in one transaction or a series of related transactions, all or any substantial part of the assets of the Company and its Subsidiaries, taken as a whole, to any other Person; PROVIDED that a Subsidiary of the Company may merge with or liquidate into the Company or a Wholly-Owned Subsidiary of the Company if (A) the Company or such Wholly-Owned Subsidiary, as the case may be, is the corporation surviving such merger or liquidation and (B) immediately after giving effect to such merger, no Default shall have occurred and be continuing. SECTION 5.15. RESTRICTIONS ON PREPAYMENTS OF AND AMENDMENTS TO CERTAIN DEBT. (a) Except with the 52 59 proceeds of the issuance by the Company of (i) Permitted Long-Term Debt the average-life-to maturity of which is greater than that of the Debt being repaid or prepaid, (ii) shares of its common stock or (iii) in the case of Debt outstanding under any of the Note Agreements, each dated as of September 30, 1989 and between the Company and the Purchaser named in Schedule I thereto (each a "Note Agreement"), refinancing thereof permitted under Section 5.08(b), the Company will not, and will not permit any of its Subsidiaries to, voluntarily repay or prepay (A) any Debt outstanding under any Note Agreement, (B) any April 1994 Private Placement Debt or (C) any Debt outstanding under the Chase Credit Agreement, PROVIDED that the Company may voluntarily repay or prepay Debt outstanding under the Chase Credit Agreement in a cumulative aggregate amount not in excess of $5,000,000 without regard to the source of funds used for such repayment or prepayment so long as, immediately before and after any such repayment or prepayment, there shall be no Loans outstanding hereunder. (b) The Company will not consent to (i) any amendment of the amount or date of any required repayment or prepayment of any Debt outstanding under any Note Agreement or the Chase Credit Agreement or of any April 1994 Private Placement Debt, except for an amendment of any such date to a date on or after the earlier of (A) the date of such required repayment or prepayment as in effect prior to such amendment and (B) the first anniversary of the Termination Date or (ii) any amendment, modification, supplement or waiver of the covenants or events of default contained in the Chase Credit Agreement in any manner that (A) causes such covenants or events of default to include greater or more stringent restrictions on the Company and (B) could adversely affect the Banks. SECTION 5.16. TRANSACTIONS WITH AFFILIATES. The Company will not, and will not permit any Subsidiary to, directly or indirectly, pay any funds to or for the account of, make any investment (whether by acquisition of stock or indebtedness, by loan, advance, transfer of property, guarantee or other agreement to pay, purchase or service, directly or indirectly, any Debt, or otherwise) in, lease, sell, transfer or otherwise dispose of any assets, tangible or intangible, to, or participate in, or effect any transaction in connection with any joint enterprise or other joint arrangement with, any Affiliate; PROVIDED, HOWEVER, that the foregoing provisions of this Section 5.16 shall not prohibit (a) the Company from declaring or paying any lawful dividend so long as, after giving effect thereto, no Default shall have occurred and be continuing, (b) the Company or any Subsidiary from making sales to or purchases from any Affiliate and, in 53 60 connection therewith, extending credit or making payments, or from making payments for services rendered by any Affiliate, if such sales or purchases are made or such services are rendered in the ordinary course of business and on terms and conditions at least as favorable to the Company or such Subsidiary as the terms and conditions which would apply in a similar transaction with a Person not an Affiliate, (c) the Company or any Subsidiary from making payments of principal, interest and premium on any Debt of the Company or such Subsidiary held by an Affiliate if the terms of such Debt are substantially as favorable to the Company or such Subsidiary as the terms which could have been obtained at the time of the creation of such Debt from a lender which was not an Affiliate and (d) the Company or any Subsidiary from participating in, or effecting any transaction in connection with, any joint enterprise or other joint arrangement with any Affiliate if the Company or such Subsidiary participates in the ordinary course of its business and on a basis no less advantageous than the basis on which such Affiliate participates. SECTION 5.17. USE OF PROCEEDS. The proceeds of the Loans made under this Agreement will be used by the Borrowers for general corporate purposes, including working capital. None of such proceeds will be used, directly or indirectly, for the purpose, whether immediate, incidental or ultimate, of buying or carrying any "margin stock" within the meaning of Regulation U. ARTICLE VI DEFAULTS SECTION 6.01. EVENTS OF DEFAULT. If one or more of the following events ("Events of Default") shall have occurred and be continuing: (a) any principal of any Loan shall not be paid when due, or any interest, any fees or any other amount payable hereunder shall not be paid within two Domestic Business Days of the due date thereof; (b) the Company shall fail to observe or perform any covenant contained in Sections 5.07 to 5.15, inclusive, and 5.17; (c) any Borrower shall fail to observe or perform any covenant or agreement contained in this Agreement (other than those covered by 54 61 clause (a) or (b) above) for 30 days after written notice thereof has been given to the Company by the Agent at the request of any Bank; (d) any representation, warranty, certification or statement made by any Borrower in this Agreement or in any certificate, financial statement or other document delivered pursuant to this Agreement shall prove to have been incorrect in any material respect when made (or deemed made); (e) the Company or any Subsidiary shall fail to make any payment in respect of any Material Financial Obligation when due or within any applicable grace period; (f) any event or condition shall occur which results in the acceleration of the maturity of any Material Debt or enables (or, with the giving of notice or lapse of time or both, would enable) the holder of such Debt or any Person acting on such holder's behalf to accelerate the maturity thereof; (g) the Company or any Subsidiary shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due, or shall take any corporate action to authorize any of the foregoing; (h) an involuntary case or other proceeding shall be commenced against the Company or any Subsidiary seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other 55 62 proceeding shall remain undismissed and unstayed for a period of 60 days; or an order for relief shall be entered against the Company or any Subsidiary under the federal bankruptcy laws as now or hereafter in effect; (i) any member of the ERISA Group shall fail to pay when due an amount or amounts aggregating in excess of $500,000 which it shall have become liable to pay under Title IV of ERISA; or notice of intent to terminate a Material Plan shall be filed under Title IV of ERISA by any member of the ERISA Group, any plan administrator or any combination of the foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to terminate, to impose liability (other than for premiums under Section 4007 of ERISA) in respect of, or to cause a trustee to be appointed to administer any Material Plan; or a condition shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that any Material Plan must be terminated; or there shall occur a complete or partial withdrawal from, or a default, within the meaning of Section 4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans which could cause one or more members of the ERISA Group to incur a current payment obligation in excess of $500,000; (j) a judgment or order for the payment of money in excess of $1,000,000 shall be rendered against the Company or any Subsidiary and such judgment or order shall continue unsatisfied and unstayed for a period of (i) in the case of a judgment or order rendered by a court, arbitrator or governmental authority located in the United States, 10 days or (ii) in the case of a judgment or order rendered by a court, arbitrator or governmental authority located outside the United States, 30 days; or (k) any person or group of persons (within the meaning of Section 13 or 14 of the Securities Exchange Act of 1934, as amended) (other than the Swartz Family) shall have acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated by the Securities and Exchange Commission under said Act) of 50% or more of the outstanding shares of common stock of the Company or 20% or more of the voting power to elect a majority of the 56 63 board of directors of the Company; or the Swartz Family shall cease to have beneficial ownership of 50% of the outstanding shares of common stock of the Company and 51% of the ordinary voting power to elect a majority of the board of directors of the Company; or during any period of twelve consecutive calendar months, individuals who were directors of the Company on the first day of such period shall cease to constitute a majority of the board of the directors of the Company; then, and in every such event, the Agent shall (i) if requested by Banks having more than 50% in aggregate amount of the Commitments, by notice to the Company terminate the Commitments and they shall thereupon terminate, and (ii) if requested by Banks holding Notes evidencing more than 50% in aggregate principal amount of the Loans, by notice to the Company declare the Notes (together with accrued interest thereon) to be, and the Notes shall thereupon become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by each Borrower; PROVIDED that in the case of any of the Events of Default specified in clause (g) or (h) above with respect to any Borrower, without any notice to any Borrower or any other act by the Agent or the Banks, the Commitments shall thereupon terminate and the Notes (together with accrued interest thereon) shall become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by each Borrower. SECTION 6.02. NOTICE OF DEFAULT. The Agent shall give notice to the Company under Section 6.01(c) promptly upon being requested to do so by any Bank and shall thereupon notify all the Banks thereof. ARTICLE VII THE AGENT SECTION 7.01. APPOINTMENT AND AUTHORIZATION. Each Bank irrevocably appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under this Agreement and the Notes as are delegated to the Agent by the terms hereof or thereof, together with all such powers as are reasonably incidental thereto. SECTION 7.02. AGENT AND AFFILIATES. Morgan Guaranty Trust Company of New York shall have the same 57 64 rights and powers under this Agreement as any other Bank and may exercise or refrain from exercising the same as though it were not the Agent, and Morgan Guaranty Trust Company of New York and its affiliates may accept deposits from, lend money to, and generally engage in any kind of business with any Borrower or any Subsidiary or affiliate of any Borrower as if it were not the Agent hereunder. SECTION 7.03. ACTION BY AGENT. The obligations of the Agent hereunder are only those expressly set forth herein. Without limiting the generality of the foregoing, the Agent shall not be required to take any action with respect to any Default, except as expressly provided in Article VI. SECTION 7.04. CONSULTATION WITH EXPERTS. The Agent may consult with legal counsel (who may be counsel for any Borrower), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the advice of such counsel, accountants or experts. SECTION 7.05. LIABILITY OF AGENT. Neither the Agent nor any of its affiliates or any of their respective directors, officers, agents or employees shall be liable for any action taken or not taken by it in connection herewith (i) with the consent or at the request of the Required Banks or (ii) in the absence of its own gross negligence or willful misconduct. Neither the Agent nor any of its affiliates or any of their respective directors, officers, agents or employees shall be responsible for or have any duty to ascertain, inquire into or verify (i) any statement, warranty or representation made in connection with this Agreement or any Borrowing hereunder; (ii) the performance or observance of any of the covenants or agreements of any Borrower; (iii) the satisfaction of any condition specified in Article III, except receipt of items required to be delivered to the Agent; or (iv) the validity, effectiveness or genuineness of this Agreement, the Notes or any other instrument or writing furnished in connection herewith. The Agent shall not incur any liability by acting in reliance upon any notice, consent, certificate, statement or other writing (which may be a bank wire, facsimile transmission, telex or similar writing) believed by it to be genuine or to be signed by the proper party or parties. SECTION 7.06. INDEMNIFICATION. Each Bank shall, ratably in accordance with its Commitment, indemnify the Agent, its affiliates and their respective directors, officers, agents and employees (to the extent 58 65 not reimbursed by the Borrowers) against any cost, expense (including counsel fees and disbursements), claim, demand, action, loss or liability (except such as result from such indemnitees' gross negligence or willful misconduct) that such indemnitees may suffer or incur in connection with this Agreement or any action taken or omitted by such indemnitees hereunder. SECTION 7.07. CREDIT DECISION. Each Bank acknowledges that it has, independently and without reliance upon the Agent or any other Bank, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Bank also acknowledges that it will, independently and without reliance upon the Agent or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking any action under this Agreement. SECTION 7.08. SUCCESSOR AGENT. The Agent may resign at any time by giving written notice thereof to the Banks and the Company. Upon any such resignation, the Required Banks shall have the right to appoint a successor Agent with the consent of the Borrower, which consent shall not be unreasonably withheld. If no successor Agent shall have been so appointed by the Required Banks, and shall have accepted such appointment, within 30 days after the retiring Agent gives notice of resignation, then the retiring Agent may, on behalf of the Banks and without the consent of the Borrower, appoint a successor Agent, which shall be a commercial bank organized or licensed under the laws of the United States of America or of any State thereof and having a combined capital and surplus of at least $100,000,000. Upon the acceptance of its appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. After any retiring Agent's resignation hereunder as Agent, the provisions of this Article shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent. SECTION 7.09. AGENT'S FEE. The Company shall pay to the Agent for its own account fees in the amounts and at the times previously agreed upon between the Company and the Agent. 59 66 ARTICLE VIII CHANGE IN CIRCUMSTANCES SECTION 8.01. BASIS FOR DETERMINING INTEREST RATE INADEQUATE OR UNFAIR. If on or prior to the first day of any Interest Period for any Fixed Rate Borrowing: (a) the Agent is advised by the Reference Banks that deposits in dollars (in the applicable amounts) are not being offered to the Reference Banks in the relevant market for such Interest Period, or (b) in the case of a Committed Borrowing, Banks having 50% or more of the aggregate amount of the Commitments advise the Agent that the Adjusted CD Rate or the Adjusted Interbank Offered Rate, as the case may be, as determined by the Agent, will not adequately and fairly reflect the cost to such Banks of funding their CD Loans or Euro-Dollar Loans, as the case may be, for such Interest Period, the Agent shall forthwith give notice thereof to the Company and the Banks, whereupon until the Agent notifies the Company that the circumstances giving rise to such suspension no longer exist, (i) the obligations of the Banks to make CD Loans or Euro-Dollar Loans, as the case may be, shall be suspended, and (ii) each outstanding CD Loan or Euro-Dollar Loan, as the case may be, shall be converted into a Base Rate Loan on the last day of the then current Interest Period applicable thereto. If the applicable Borrower shall have received such a notice from the Agent, unless the applicable Borrower notifies the Agent at least two Domestic Business Days before the date of any Fixed Rate Borrowing for which a Notice of Borrowing has previously been given that it elects not to borrow on such date, (i) if such Fixed Rate Borrowing is a Committed Borrowing, such Borrowing shall instead be made as a Base Rate Borrowing, and (ii) if such Fixed Rate Borrowing is a Money Market LIBOR Borrowing, the Money Market LIBOR Loans comprising such Borrowing shall bear interest for each day from and including the first day to but excluding the last day of the Interest Period applicable thereto at the Base Rate for such day. SECTION 8.02. ILLEGALITY. If, on or after the date of this Agreement, the adoption of any applicable law, rule or regulation, or any change in any applicable law, rule or regulation, or any change in the interpretation or administration thereof by any 60 67 governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank (or its Applicable Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall make it unlawful or impossible for any Bank (or such Applicable Lending Office) to make, maintain or fund its Euro-Dollar Loans or Money Market LIBOR Loans to any Borrower pursuant to this Agreement and such Bank shall so notify the Agent, the Agent shall forthwith give notice thereof to the other Banks and the Company, whereupon until such Bank notifies the Company and the Agent that the circumstances giving rise to such suspension no longer exist, the obligation of such Bank to make Euro-Dollar Loans or to convert outstanding Loans into Euro-Dollar Loans, as the case may be, shall be suspended. Before giving any notice with respect to Euro-Dollar Loans or Money Market LIBOR Loans to the Agent pursuant to this Section, such Bank shall designate a different Euro-Dollar Lending Office or Money Market Lending Office if such designation will avoid the need for giving such notice and will not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. If such notice is given with respect to Euro-Dollar Loans or Money Market LIBOR Loans, each Euro-Dollar Loan or, in the circumstances described in clause (b) below, Money Market LIBOR Loan of such Bank then outstanding shall be converted to a Base Rate Loan either (a) in the case of Euro-Dollar Loans only, on the last day of the then current Interest Period applicable to such Euro-Dollar Loan, if such Bank may lawfully continue to maintain and fund such Loan to such day, or (b) immediately, if such Bank shall determine that it may not lawfully continue to maintain and fund such Euro-Dollar Loan or Money Market LIBOR Loan to such day. SECTION 8.03. INCREASED COST AND REDUCED RETURN. (a) If on or after (x) the date hereof, in the case of any Committed Loan or any obligation to make Committed Loans or (y) the date of the related Money Market Quote, in the case of a Money Market Loan, the adoption of any applicable law, rule or regulation, or any change in any applicable law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank (or its Applicable Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency, shall impose, modify or deem applicable any reserve (including, without limitation, any such requirement imposed by the Board of Governors of the Federal Reserve System, but excluding (i) 61 68 with respect to any CD Loan any such requirement included in an applicable Domestic Reserve Percentage and (ii) with respect to any Euro-Dollar Loan any such requirement included in an applicable Euro-Dollar Reserve Percentage), special deposit, insurance assessment (excluding, with respect to any CD Loan, any such requirement reflected in an applicable Assessment Rate) or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Bank (or its Applicable Lending Office) or shall impose on any Bank (or its Applicable Lending Office) or on the United States market for certificates of deposit or the London interbank market any other condition affecting its Fixed Rate Loans, its Notes or its obligation to make Fixed Rate Loans and the result of any of the foregoing is to increase the cost to such Bank (or its Applicable Lending Office) of making or maintaining any Fixed Rate Loan, or to reduce the amount of any sum received or receivable by such Bank (or its Applicable Lending Office) under this Agreement or under its Notes with respect thereto, by an amount deemed by such Bank to be material, then within 15 days after demand by such Bank (with a copy to the Agent), the Company shall pay to such Bank such additional amount or amounts as will compensate such Bank for such increased cost or reduction. (b) If any Bank shall have determined that, after the date hereof, the adoption of any applicable law, rule or regulation regarding capital adequacy, or any change in any such law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on capital of such Bank (or its Parent) as a consequence of such Bank's obligations hereunder to a level below that which such Bank (or its Parent) could have achieved but for such adoption, change, request or directive (taking into consideration its policies with respect to capital adequacy) by an amount deemed by such Bank to be material, then from time to time, within 15 days after demand by such Bank (with a copy to the Agent), the Company shall pay to such Bank such additional amount or amounts as will compensate such Bank (or its Parent) for such reduction. (c) Each Bank will promptly notify the Company and the Agent of any event of which it has knowledge, occurring after the date hereof, which will entitle such Bank to compensation pursuant to this Section and will designate a different Applicable Lending Office if such designation will avoid the need for, or reduce the amount 62 69 of, such compensation and will not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. A certificate of any Bank claiming compensation under this Section 8.03 and setting forth the additional amount or amounts to be paid to it hereunder shall be conclusive in the absence of manifest error. In determining such amount, such Bank may use any reasonable averaging and attribution methods. SECTION 8.04. TAXES. (a) Any and all payments by any Borrower to or for the account of any Bank or the Agent hereunder or under any Note shall be made free and clear of and without deduction for any and all present or future taxes, duties, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, EXCLUDING, in the case of each Bank and the Agent, taxes imposed on its income, and franchise taxes imposed on it, by the jurisdiction under the laws of which such Bank or the Agent (as the case may be) is organized or any political subdivision thereof and, in the case of each Bank, taxes imposed on its income, and franchise or similar taxes imposed on it, by the jurisdiction of such Bank's Applicable Lending Office or any political subdivision thereof (all such non-excluded taxes, duties, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "Taxes"). If any Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under any Note to any Bank or the Agent, (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 8.04) such Bank or the Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) such Borrower shall make such deductions, (iii) such Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law and (iv) such Borrower shall furnish to the Agent, at its address referred to in Section 11.01, the original or a certified copy of a receipt evidencing payment thereof. (b) In addition, the Company agrees to pay any present or future stamp or documentary taxes and any other excise taxes, or charges or similar levies, or any future property taxes, which arise from any payment made hereunder or under any Note or from the execution or delivery of, or otherwise with respect to, this Agreement, any Election to Participate or Election to Terminate or any Note (hereinafter referred to as "Other Taxes"). (c) The Company agrees to indemnify each Bank and the Agent for the full amount of Taxes or Other Taxes 63 70 (including, without limitation, any Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts payable under this Section 8.04) paid by such Bank or the Agent (as the case may be) and any liability (including penalties, interest and expenses, other than penalties, interest or expenses arising solely from such Bank's gross negligence or willful misconduct) arising therefrom or with respect thereto. This indemnification shall be made within 15 days from the date such Bank or the Agent (as the case may be) makes demand therefor. (d) Each Bank organized under the laws of a jurisdiction outside the United States, on or prior to the date of its execution and delivery of this Agreement in the case of each Bank listed on the signature pages hereof and on or prior to the date on which it becomes a Bank in the case of each other Bank, and from time to time thereafter if requested in writing by the Company (but only so long as such Bank remains lawfully able to do so), shall provide the Company and the Agent with Internal Revenue Service form 1001 or 4224, as appropriate, or any successor form prescribed by the Internal Revenue Service, certifying that such Bank is entitled to benefits under an income tax treaty to which the United States is a party which reduces the rate of withholding tax on payments of interest or certifying that the income receivable pursuant to this Agreement is effectively connected with the conduct of a trade or business in the United States. If the form provided by a Bank at the time such Bank first becomes a party to this Agreement indicates a United States interest withholding tax rate in excess of zero, withholding tax at such rate shall be considered excluded from "Taxes" as defined in Section 8.04(a). (e) For any period with respect to which a Bank has failed to provide the Company with the appropriate form pursuant to Section 8.04(d) (unless such failure is due to a change in treaty, law or regulation occurring subsequent to the date on which a form originally was required to be provided), such Bank shall not be entitled to indemnification under Section 8.04(a) with respect to Taxes imposed by the United States; PROVIDED that should a Bank, which is otherwise exempt from or subject to a reduced rate of withholding tax, become subject to Taxes because of its failure to deliver a form required hereunder, each Borrower shall take such steps as such Bank shall reasonably request to assist such Bank to recover such Taxes. (f) If any Borrower is required to pay additional amounts to or for the account of any Bank pursuant to this Section 8.04, then such Bank will change the jurisdiction of its Applicable Lending Office so as to 64 71 eliminate or reduce any such additional payment which may thereafter accrue if such change, in the judgment of such Bank, is not otherwise disadvantageous to such Bank. SECTION 8.05. BASE RATE LOANS SUBSTITUTED FOR AFFECTED FIXED RATE LOANS. If (i) the obligation of any Bank to make Euro-Dollar Loans to any Borrower pursuant to this Agreement has been suspended pursuant to Section 8.02 or (ii) any Bank has demanded compensation under Section 8.03 or 8.04 with respect to its CD Loans or Euro-Dollar Loans to any Borrower and the Company shall, by at least five Euro-Dollar Business Days' prior notice to such Bank through the Agent, have elected that the provisions of this Section 8.05 shall apply to such Bank, then, unless and until such Bank notifies the Company that the circumstances giving rise to such suspension or demand for compensation no longer exist: (a) all Loans to such Borrower which would otherwise be made by such Bank as (or continued as or converted into) CD Loans or Euro-Dollar Loans, as the case may be, shall instead be Base Rate Loans (on which interest and principal shall be payable contemporaneously with the related Fixed Rate Loans of the other Banks), and (b) if Base Rate Loans are substituted for Fixed Rate Loans, after each of its CD Loans or Euro-Dollar Loans, as the case may be, to such Borrower has been repaid (or converted to a Base Rate Loan), all payments of principal which would otherwise be applied to repay such Fixed Rate Loans shall be applied to repay its Base Rate Loans instead. If such Bank notifies the Company that the circumstances giving rise to such notice no longer apply, the principal amount of each such Base Rate Loan which was substituted for a Fixed Rate Loan shall be converted into a CD Loan or Euro-Dollar Loan, as the case may be, on the first day of the next succeeding Interest Period applicable to the related CD Loans or Euro-Dollar Loans of the other Banks. 65 72 ARTICLE IX REPRESENTATIONS AND WARRANTIES OF ELIGIBLE SUBSIDIARIES Each Eligible Subsidiary shall be deemed by the execution and delivery of its Election to Participate to have represented and warranted as of the date thereof that: SECTION 9.01. CORPORATE EXISTENCE AND POWER. It is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation and is a Wholly-Owned Consolidated Subsidiary of the Company. SECTION 9.02. CORPORATE AND GOVERNMENTAL AUTHORIZATION; CONTRAVENTION. The execution and delivery by it of its Election to Participate and its the performance by it of this Agreement and its Notes, are within its corporate powers, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any governmental body, agency or official and do not contravene, or constitute a default under, any provision of applicable law or regulation or of its certificate of incorporation or by-laws or of any agreement, judgment, injunction, order, decree or other instrument binding upon the Company or such Eligible Subsidiary or result in the creation or imposition of any Lien on any asset of the Company or any of its Subsidiaries. SECTION 9.03. BINDING EFFECT. This Agreement constitutes a valid and binding agreement of such Eligible Subsidiary and its Notes, when executed and delivered in accordance with this Agreement, will constitute valid and binding obligations of such Eligible Subsidiary. SECTION 9.04. TAXES. Except as disclosed in such Election to Participate, there is no income, stamp or other tax of any country, or any taxing authority thereof or therein, imposed by or in the nature of withholding or otherwise, which is imposed on any payment to be made by such Eligible Subsidiary pursuant hereto or on its Notes, or is imposed on or by virtue of the execution, delivery or enforcement of its Election to Participate or its Notes. 66 73 ARTICLE X GUARANTY SECTION 10.01. THE GUARANTY . The Company hereby unconditionally guarantees the full and punctual payment (whether at stated maturity, upon acceleration or otherwise) of the principal of and interest on each Note issued by any Eligible Subsidiary pursuant to this Agreement and the full and punctual payment of all other amounts payable by any Eligible Subsidiary under this Agreement. Upon failure by any Eligible Subsidiary to pay punctually any such amount, the Company shall forthwith on demand pay the amount not so paid at the place and in the manner specified in this Agreement. SECTION 10.02. GUARANTY UNCONDITIONAL. The obligations of the Company hereunder shall be unconditional and absolute and, without limiting the generality of the foregoing, shall not be released, discharged or otherwise affected by: (i) any extension, renewal, settlement, compromise, waiver or release in respect of any obligation of any Eligible Subsidiary under this Agreement or any Note, by operation of law or otherwise; (ii) any modification or amendment of or supplement to this Agreement or any Note; (iii) any release, non-perfection or invalidity of any direct or indirect security for any obligation of any Eligible Subsidiary under this Agreement or any Note; (iv) any change in the corporate existence, structure or ownership of any Eligible Subsidiary, or any insolvency, bankruptcy, reorganization or other similar proceeding affecting any Eligible Subsidiary or its assets or any resulting release or discharge of any obligation of any Eligible Subsidiary contained in this Agreement or any Note; (v) the existence of any claim, set-off or other rights which the Company may have at any time against any Eligible Subsidiary, the Agent, any Bank or any other Person, whether in connection herewith or with any unrelated transactions, PROVIDED that nothing herein shall 67 74 prevent the assertion of any such claim by separate suit or compulsory counterclaim; (vi) any invalidity or unenforceability relating to or against any Eligible Subsidiary for any reason of this Agreement or any Note, or any provision of applicable law or regulation purporting to prohibit the payment by any Eligible Subsidiary of the principal of or interest on any Note or any other amount payable by it under this Agreement; or (vii) any other act or omission to act or delay of any kind by any Eligible Subsidiary, the Agent, any Bank or any other Person or any other circumstance whatsoever which might, but for the provisions of this paragraph, constitute a legal or equitable discharge of the Company's obligations hereunder. SECTION 10.03. DISCHARGE ONLY UPON PAYMENT IN FULL; REINSTATEMENT IN CERTAIN CIRCUMSTANCES. The Company's obligations hereunder shall remain in full force and effect until the Commitments shall have terminated and the principal of and interest on the Notes and all other amounts payable by the Company and each Eligible Subsidiary under this Agreement shall have been paid in full. If at any time any payment of the principal of or interest on any Note or any other amount payable by any Eligible Subsidiary under this Agreement is rescinded or must be otherwise restored or returned upon the insolvency, bankruptcy or reorganization of any Eligible Subsidiary or otherwise, the Company's obligations hereunder with respect to such payment shall be reinstated at such time as though such payment had been due but not made at such time. SECTION 10.04. WAIVER BY THE COMPANY. The Company irrevocably waives acceptance hereof, presentment, demand, protest and any notice not provided for herein, as well as any requirement that at any time any action be taken by any Person against any Eligible Subsidiary or any other Person. SECTION 10.05. WAIVER OF SUBROGATION. The Company irrevocably waives any and all rights to which it may be entitled, by operation of law or otherwise, upon making any payment hereunder to be subrogated to the rights of the payee against an Eligible Subsidiary with respect to such payment or otherwise to be reimbursed, indemnified or exonerated by an Eligible Subsidiary in respect thereof. 68 75 SECTION 10.06. STAY OF ACCELERATION. In the event that acceleration of the time for payment of any amount payable by any Eligible Subsidiary under this Agreement or its Notes is stayed upon insolvency, bankruptcy or reorganization of such Eligible Subsidiary, all such amounts otherwise subject to acceleration under the terms of this Agreement shall nonetheless be payable by the Company hereunder forthwith on demand by the Agent made at the request of the Required Banks. ARTICLE XI MISCELLANEOUS SECTION 11.01. NOTICES . All notices, requests and other communications to any party hereunder shall be in writing (including bank wire, telex, facsimile transmission or similar writing) and shall be given to such party: (x) in the case of any Borrower or the Agent, at its address or telex or facsimile transmission number set forth on the signature pages hereof (or, in the case of an Eligible Subsidiary, its Election to Participate), (y) in the case of any Bank, at its address or telex or facsimile transmission number set forth in its Administrative Questionnaire or (z) in the case of any party, at such other address or telex or facsimile transmission number as such party may hereafter specify for the purpose by notice to the Agent and the Company. Each such notice, request or other communication shall be effective (i) if given by telex, when such telex is transmitted to the number specified in or pursuant to this Section and the appropriate answerback is received, (ii) if given by certified mail, return receipt requested, three Domestic Business Days after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid or (iii) if given by any other means, when delivered at the address specified in or pursuant to this Section; PROVIDED that notices to the Agent under Article II or Article VIII shall not be effective until received. SECTION 11.02. NO WAIVERS . No failure or delay by the Agent or any Bank in exercising any right, power or privilege hereunder or under any Note shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. 69 76 SECTION 11.03. EXPENSES; DOCUMENTARY TAXES; INDEMNIFICATION. (a) The Company shall pay (i) all direct out-of-pocket expenses (not to include in any event any indirect or overhead charges) of the Agent, including reasonable fees and disbursements of special counsel for the Agent, in connection with the preparation and administration of this Agreement and the Notes, any waiver or consent hereunder or any amendment hereof or any Default or alleged Default hereunder and (ii) if an Event of Default occurs, all direct out-of-pocket expenses (not to include in any event any indirect or overhead charges) incurred by the Agent and each Bank, including fees and disbursements of counsel, in connection with such Event of Default and collection, bankruptcy, insolvency and other enforcement proceedings resulting therefrom. (b) The Company agrees to indemnify the Agent and each Bank, their respective affiliates and the respective directors, officers, agents and employees of the foregoing (each an "Indemnitee") and hold each Indemnitee harmless from and against any and all liabilities, losses, damages, costs and expenses of any kind, including, without limitation, the reasonable fees and disbursements of counsel, which may be incurred by such Indemnitee in connection with any investigative, administrative or judicial proceeding (whether or not such Indemnitee shall be designated a party thereto) brought or threatened relating to or arising out of this Agreement or any actual or proposed use of proceeds of Loans hereunder; PROVIDED that no Indemnitee shall have the right to be indemnified hereunder for such Indemnitee's own gross negligence or willful misconduct as determined by a court of competent jurisdiction. SECTION 11.04. SHARING OF SET-OFFS. Each Bank agrees that if it shall, by exercising any right of set-off or counterclaim or otherwise, receive payment of a proportion of the aggregate amount of principal and interest due with respect to any Note held by it which is greater than the proportion received by any other Bank in respect of the aggregate amount of principal and interest due with respect to any Note held by such other Bank, the Bank receiving such proportionately greater payment shall purchase such participations in the Notes held by the other Banks, and such other adjustments shall be made, as may be required so that all such payments of principal and interest with respect to the Notes held by the Banks shall be shared by the Banks pro rata; PROVIDED that nothing in this Section shall impair the right of any Bank to exercise any right of set-off or counterclaim it may have and to apply the amount subject to such exercise to the payment of indebtedness of a Borrower other than its indebtedness hereunder. Each Borrower agrees, to the 70 77 fullest extent it may effectively do so under applicable law, that any holder of a participation in a Note, whether or not acquired pursuant to the foregoing arrangements, may exercise rights of set-off or counterclaim and other rights with respect to such participation as fully as if such holder of a participation were a direct creditor of such Borrower in the amount of such participation. SECTION 11.05. AMENDMENTS AND WAIVERS. Any provision of this Agreement or the Notes may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by the Company and the Required Banks (and, if the rights or duties of the Agent are affected thereby, by the Agent); PROVIDED that no such amendment or waiver shall, unless signed by all the Banks, (i) increase or decrease the Commitment of any Bank (except for a ratable decrease in the Commitments of all Banks) or subject any Bank to any additional obligation, (ii) reduce the principal of or rate of interest on any Loan or any fees hereunder, (iii) postpone the date fixed for any payment of principal of or interest on any Loan or any fees hereunder or for any reduction or termination of any Commitment, (iv) release the Company from all or substantially all of its obligations under Article X, or (v) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Loans, or the number of Banks, which shall be required for the Banks or any of them to take any action under this Section 11.05 or any other provision of this Agreement; and PROVIDED , FURTHER, that no such amendment, waiver or modification shall, unless signed by an Eligible Subsidiary, (w) subject such Eligible Subsidiary to any additional obligation, (x) increase the principal of or rate of interest on any outstanding Loan of such Eligible Subsidiary, (y) accelerate the stated maturity of any outstanding Loan of such Eligible Subsidiary or (z) change this proviso. SECTION 11.06. SUCCESSORS AND ASSIGNS. (a) 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 no Borrower may assign or otherwise transfer any of its rights under this Agreement without the prior written consent of all Banks. (b) Any Bank may at any time, upon (except in the case of grants of participating interests in Money Market Loans only) notice to the Company and the Agent, grant to one or more banks or other institutions (each a "Participant") participating interests in its Commitment or any or all of its Loans. In the event of any such grant by a Bank of a participating interest to a 71 78 Participant, whether or not upon notice to the Borrowers and the Agent, such Bank shall remain responsible for the performance of its obligations hereunder, and the Borrowers and the Agent shall continue to deal solely and directly with such Bank in connection with such Bank's rights and obligations under this Agreement. Any agreement pursuant to which any Bank may grant such a participating interest shall provide that such Bank shall retain the sole right and responsibility to enforce the obligations of the Borrowers hereunder including, without limitation, the right to approve any amendment, modification or waiver of any provision of this Agreement; PROVIDED that such participation agreement may provide that such Bank will not agree to any modification, amendment or waiver of this Agreement described in clause (i), (ii) or (iii) of Section 11.05 without the consent of the Participant. The Borrowers agree that each Participant shall, to the extent provided in its participation agreement, be entitled to the benefits of Section 2.18 and Article VIII with respect to its participating interest. An assignment or other transfer which is not permitted by subsection (c) or (d) below shall be given effect for purposes of this Agreement only to the extent of a participating interest granted in accordance with this subsection (b). (c) Any Bank may at any time assign to one or more banks or other institutions (each an "Assignee") all, or a proportionate part of all, of its rights and obligations under this Agreement and the Notes, and such Assignee shall assume such rights and obligations, pursuant to an Assignment and Assumption Agreement in substantially the form of Exhibit J hereto executed by such Assignee and such transferor Bank, with (and subject to) the subscribed consent of the Company and the Agent; PROVIDED that (i) any such assignment must be in an amount of at least $5,000,000, (ii) if an Assignee is an affiliate of such transferor Bank, no such consent shall be required and (iii) such assignment may, but need not, include rights of the transferor Bank in respect of outstanding Money Market Loans. Upon execution and delivery of such instrument and payment by such Assignee to such transferor Bank of an amount equal to the purchase price agreed between such transferor Bank and such Assignee, such Assignee shall be a Bank party to this Agreement and shall have all the rights and obligations of a Bank with a Commitment as set forth in such instrument of assumption, and the transferor Bank shall be released from its obligations hereunder to a corresponding extent, and no further consent or action by any party shall be required. Upon the consummation of any assignment pursuant to this subsection (c), the transferor Bank, the Agent and the Borrowers shall make appropriate 72 79 arrangements so that, if required, new Notes are issued to the Assignee. In connection with any such assignment, the transferor Bank shall pay to the Agent an administrative fee for processing such assignment in the amount of $2,500. If the Assignee is not incorporated under the laws of the United States of America or a state thereof, it shall, prior to the first date on which interest or fees are payable hereunder for its account, deliver to the Company and the Agent certification as to exemption from deduction or withholding of any United States federal income taxes in accordance with Section 8.04. (d) Any Bank may at any time assign all or any portion of its rights under this Agreement and its Notes to a Federal Reserve Bank. No such assignment shall release the transferor Bank from its obligations hereunder. (e) No Assignee, Participant or other transferee of any Bank's rights shall be entitled to receive any greater payment under Section 8.03 or 8.04 than such Bank would have been entitled to receive with respect to the rights transferred, unless such transfer is made with the Company's prior written consent or by reason of the provisions of Section 8.02, 8.03 or 8.04 requiring such Bank to designate a different Applicable Lending Office under certain circumstances or at a time when the circumstances giving rise to such greater payment did not exist. SECTION 11.07. COLLATERAL . Each of the Banks represents to the Agent and each of the other Banks that it in good faith is not relying upon any "margin stock" (as defined in Regulation U) as collateral in the extension or maintenance of the credit provided for in this Agreement. SECTION 11.08. CONFIDENTIALITY. The Agent and each Bank shall keep confidential any information provided by any Borrower and clearly identified as confidential; PROVIDED that nothing herein shall prevent the Agent or any Bank from disclosing such information (i) to its officers, directors, employees, agents, attorneys and accountants in connection with the entry into and administration of this Agreement and the extensions of credit hereunder, (ii) upon the order of a court or administrative agency, (iii) upon the request or demand of any regulatory agency or authority having jurisdiction over such party, (iv) which has become publicly available without breach of any agreement among the parties hereto, (v) as necessary for the exercise of any remedy hereunder or under any Note or (vi) subject to provisions similar to 73 80 those contained in this Section, to any prospective Participant or Assignee. SECTION 11.09. GOVERNING LAW; SUBMISSION TO JURISDICTION. This Agreement and each Note shall be governed by and construed in accordance with the laws of the State of New York. Each Borrower hereby submits to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York and of any New York State court sitting in New York City for purposes of all legal proceedings arising out of or relating to this Agreement or the transactions contemplated hereby. Each Borrower irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. SECTION 11.10. COUNTERPARTS; INTEGRATION; EFFECTIVENESS. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement constitutes the entire agreement and understanding among the parties hereto and supersedes any and all prior agreements and understandings, oral or written, relating to the subject matter hereof. This Agreement shall become effective upon receipt by the Agent of counterparts hereof signed by each of the parties hereto (or, in the case of any party as to which an executed counterpart shall not have been received, receipt by the Agent in form satisfactory to it of telegraphic, telex, facsimile or other written confirmation from such party of execution of a counterpart hereof by such party). SECTION 11.11. WAIVER OF JURY TRIAL . EACH OF THE BORROWERS, THE AGENT AND THE BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. 74 81 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. THE TIMBERLAND COMPANY By /s/ ????????????? ----------------------- Title: Treasurer 11 Merrill Industrial Drive P.O. Box 5050 Hampton, N.H. 03842-5050 Attention: Nancy A. Wels Facsimile transmission number: 603-929-1788 75 82 Commitments - - ----------- $25,000,000 MORGAN GUARANTY TRUST COMPANY OF NEW YORK By /s/ ???????????? ------------------------- Title: $25,000,000 ABN AMRO BANK N.V. By /s/ ???????????? ------------------------- Title: By /s/ ???????????? ------------------------- Title: $25,000,000 THE FIRST NATIONAL BANK OF BOSTON By /s/ ???????????? ------------------------- Title: $15,000,000 BARCLAYS BANK PLC By /s/ ???????????? ------------------------- Title: $15,000,000 CHEMICAL BANK By /s/ ???????????? ------------------------- Title: 76 83 $15,000,000 THE NORTHERN TRUST COMPANY By /s/ ????????????? -------------------------- Title: Vice President $ 5,000,000 BANK HAPOALIM B.M. By /s/ ????????????? -------------------------- Title: Vice President By /s/ ????????????? -------------------------- Title: Vice President _________________ Total Commitments $ 125,000,000 ================= 77 84 MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent By /s/ ????????????? ---------------------- Title: 60 Wall Street New York, New York 10260-0060 Attention: Charles Pardue Telex number: 177615 Facsimile transmission number: (212) 648-5018 78 85 Schedule I DESCRIPTION OF EXISTING DEBT AND LIENS May 13, 1993
Original Effective Maturity Face Outstanding Date Date Amount Liability Money Market Lines LIBOR 4/14/93 5/14/93 $ 5,000,000 $ 5,000,000 LIBOR 4/27/93 5/27/93 5,000,000 5,000,000 ------------ ------------ $ 10,000,000 $ 10,000,000 ============ ============ Revolving Credit Agreement BASE -- -- $ 16,700,000 $ 16,700,000 ============ ============ Foreign Currency Credit Facilities First National Bank of Boston, London [POUNDS] 2,000,000 [POUNDS] -- First National Bank of Boston, Paris [FRANCS] 10,000,000 [FRANCS] 1,157,619 ============ ============ Private Placement Senior Note Principal Mutual Life Insurance Company and other insurance companies 12/06/89 12/1/99 $ 35,000,000 $ 35,000,000 ============ ============ Capital Equipment Leases* Banc New England Leasing Group 10/88 12/93 $ 1,700,000 $ 216,975 Pitney Bowes Credit Corp. 7/88 5/93 1,244,630 77,384 JCM Sales & Leasing, Inc. 5/90 7/93 96,000 1,000 BayBanks Financing & Leasing Co. Inc. 6/90 6/95 2,096,332 1,034,687 BayBanks Financing & Leasing Co. Inc. 10/90 11/95 456,507 255,673 BayBanks Financing & Leasing Co. Inc. 12/90 12/95 459,431 272,191 ------------ ------------ $ 6,052,900 $ 1,857,910 ============ ============ Industrial Revenue Bond* Shawmut Bank N.A. 12/27/84 12/2014 $ 6,680,000 $ 5,345,000 Miscellaneous Other Liens* Maximum Copy Machines, Computers --- --- $ 3,000,000 $ --- Equipment, and other miscellaneous ============ ============ *Secured by lien INTERCOMPANY DEBT BETWEEN COMPANY AND SUBSIDIARIES Intercompany Debt: Timberland World Trading GMBH DM 3,686,000 Intercompany Payables $ 39,713,554 The Outdoor Footwear Company 1,703,226 ------------- Timberland International Sales Corporation $ 41,416,780 =============
86 SUBSIDIARIES OF THE TIMBERLAND COMPANY ("TIMBERLAND")
JURISDICTION OF OWNERSHIP NAME OF SUBSIDIARY ORGANIZATION SUBSIDIARIES Component Footwear Dominicana, S.A. Dominican Republic 99.4% owned by Timberland; .1% owned by each of: (formerly Timberland Dominicana, S.A.) Timberland S.A.R.L. Timberland (UK) Limited Timberland Europe, Inc. The Timberland World Trading Company The Outdoor Footwear Company Timberland Espana, S.A. (formerly The Timberland World Trading Company, S.A.) Outdoor Footwear Company, The Delaware 100% of voting stock owned by Timberland Recreational Footwear Company, The Cayman Islands 100% owned by Timberland Recreational Footwear Company Dominican Republic 99.4% owned by Timberland; .1% owned by each of: (Dominicana), S.A., The Timberland S.A.R.L. Timberland (UK) Limited Timberland Europe, Inc. The Timberland World Trading Company The Outdoor Footwear Company Timberland Espana, S.A. (formerly The Timberland World Trading Company, S.A.) Timberland (UK) Limited England 99.9% owned by Timberland; S. Swartz beneficially holding .1% Timberland Aviation, Inc. Delaware 100% owned by Timberland Timberland Company of Australia Pty. Australia 66-2/3% owned by Timberland; Ltd., The S. Swartz beneficially holding 33-1/3% Timberland Direct Sales, Inc. Delaware 100% owned by Timberland Timberland Espana, S.A. Spain 99.98% owned by Timberland ; .01% owned by each S. Swartz and J. Swartz Timberland Europe, Inc. Delaware 100% owned by Timberland (formerly Precision Instruments, Inc.) Timberland Finance Company, The Delaware 100% owned by The Outdoor Footwear Company Timberland Footwear & Clothing Inc. Canada 100% owned by Timberland (Les Vetements & Chaussures Timberland Inc.)
87
JURISDICTION OF OWNERSHIP NAME OF SUBSIDIARY ORGANIZATION SUBSIDIARIES Timberland Footwear & Clothing New Zealand 99% owned by Timberland;S. Swartz beneficially holding 1% New Zealand Limited Timberland GmbH Austria 100% owned by Timberland Timberland International, Inc. Delaware 100% owned by Timberland Timberland International Sales U.S. Virgin Islands 100% owned by Timberland Corporation Timberland Manufacturing Company Delaware 100% owned by Timberland Timberland Retail, Inc. (formerly Delaware 100% owned by Timberland Timberland Overseas Company) Timberland S.A.R.L. France .01% owned by The Outdoor Footwear Company and 99.9% owned by Timberland Timberland Scandinavia, Inc. Delaware 100% owned by Timberland Timberland World Trading Company, The Delaware 100% owned by Timberland Timberland World Trading GmbH, The Federal Republic of 100% owned by The Timberland World Trading Company Germany
88 DISTRIBUTORS - Nozaki America, Inc. and Subsidiaries - Inchcape PLC and Subsidiaries - Ridenco S.A. and Subsidiaries 89 EXHIBIT A FORM OF NOTE New York, New York ________ __, 199_ For value received, [NAME OF BORROWER], a [jurisdiction of incorporation] corporation (the "Borrower"), promises to pay to the order of [NAME OF BANK] (the "Bank"), for the account of its Applicable Lending Office, the unpaid principal amount of each Loan made by the Bank to the Borrower pursuant to the Credit Agreement referred to below on the Termination Date provided for in the Credit Agreement. The Borrower promises to pay interest on the unpaid principal amount of each such Loan on the dates and at the rate or rates provided for in the Credit Agreement. All such payments of principal and interest shall be made in lawful money of the United States in Federal or other immediately available funds at the office of Morgan Guaranty Trust Company of New York, 60 Wall Street, New York, New York. All Loans made by the Bank, the respective types thereof and all repayments of the principal thereof shall be recorded by the Bank and, if the Bank so elects in connection with any transfer or enforcement hereof, appropriate notations to evidence the foregoing information with respect to each such Loan then outstanding may be endorsed by the Bank on the schedule attached hereto, or on a continuation of such schedule attached to and made a part hereof; PROVIDED that the failure of the Bank to make any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Credit Agreement. This note is one of the Notes referred to in the Credit Agreement dated as of May 4, 1994 among The Timberland Company, the banks listed on the signature pages thereof and Morgan Guaranty Trust Company of New York, as Agent (as the same may be amended from time to time, the "Credit Agreement"). Terms defined in the Credit Agreement are used herein with the same meanings. Reference is made 1 90 to the Credit Agreement for provisions for the prepayment hereof and the acceleration of the maturity hereof. [The Timberland Company has, pursuant to the provisions of the Credit Agreement, unconditionally guaranteed the payment in full of the principal of and interest on this note.]* [NAME OF BORROWER] By ____________________ Title: _________________ * To be deleted in case of Notes executed and delivered by the Company. 2 91 LOANS AND PAYMENTS OF PRINCIPAL ________________________________________________________________________________ Type Amount Amount of of of Principal Notation Date Loan Loan Repaid Made By ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ 3 92 EXHIBIT B FORM OF NOTICE OF COMMITTED BORROWING ------------------------------------- Morgan Guaranty Trust Company of New York, as Agent under the Credit Agreement referred to below 60 Wall Street New York, New York 10260-0060 Attention: Credit Administration Re: $125,000,000 Credit Agreement dated as of May 4, 1994 among The Timberland Company, the Banks listed on the signature pages thereof and Morgan Guaranty Trust Company of New York, as Agent (the "Credit Agreement") ----------------------------------------------- Ladies and Gentlemen: We, [name of Borrower] (the "Borrower"), refer to the Credit Agreement and hereby give notice pursuant to Section 2.02 of the Credit Agreement that we wish to make a Committed Borrowing as set forth below: Date of Borrowing: __________* Aggregate Principal Amount of Borrowing: __________** Type of Borrowing (choose one): [Base Rate]/[CD]/[Euro-Dollar] Initial Interest Period: __________*** ____________________ *Not earlier than the third Euro-Dollar Business Day after the date of the Notice of Committed Borrowing, in the case of a Euro-Dollar Borrowing; not earlier than the second Domestic Business Day after the date of the Notice of Committed Borrowing, in the case of a CD Borrowing; may be the same day as the Notice of Committed Borrowing, in the case of a Base Rate Borrowing. **Must be a multiple of $100,000 and, for a Base Rate Borrowing, at least $500,000 and, for a CD Borrowing or Euro-Dollar Borrowing, at least $1,000,000. ***One, two, three or six months, for a Euro-Dollar Borrowing; 30, 60 or 90 days, for a CD Borrowing; does not apply for a Base Rate Borrowing. 1 93 Dated: __________ __, 199_ Very truly yours, [BORROWER] By: ________________________ Title:**** ______________________________ ****For the Company, the President, the Executive Vice President, the Senior Vice President - Finance and Administration, the Vice President - Finance or the Treasurer only. 2 94 EXHIBIT C FORM OF INVITATION FOR MONEY MARKET QUOTES To: [Name of Bank] From: [Name of Borrower] (the "Borrower") Re: $125,000,000 Credit Agreement dated as of May 4, 1994 among The Timberland Company, the Banks listed on the signature pages thereof and Morgan Guaranty Trust Company of New York, as Agent (the "Credit Agreement") Pursuant to Section 2.03 of the Credit Agreement we are pleased to invite you to submit Money Market Quotes to us for the following proposed Money Market Borrowing(s): Date of Borrowing: __________________* Principal Amount ** Interest Period *** $ __________________ *Must be at least four Euro-Dollar Business Days after the date of the Invitation, for a LIBOR Auction, or one Domestic Business Day after the date of the Invitation, for an Absolute Rate Auction. **Amount must be $1,000,000 or a larger multiple of $100,000. ***Not less than one month (or not less than 7 days, if available) (LIBOR Auction) or 7 days (Absolute Rate Auction), subject to the provisions of the definition of Interest Period. 1 95 Such Money Market Quotes should offer a Money Market [Margin]**** [Absolute Rate].***** [The applicable base rate is the Interbank Offered Rate.]**** Please respond to this invitation by no later than [2:00 P.M.]**** [9:15 A.M.]***** (New York City time) on [date].****** [NAME OF BORROWER] By______________________ Authorized Officer******* ___________________ ****To be included for LIBOR Auctions only. *****To be included for Absolute Rate Auctions only. ******The fourth Euro-Dollar Business Day prior to the Date of Borrowing, for a LIBOR Auction, or the Date of Borrowing, for an Absolute Rate Auction. *******For the Company, the President, the Executive Vice President, the Senior Vice President - Finance and Administration, the Vice President - Finance or the Treasurer only. 2 96 EXHIBIT D FORM OF MONEY MARKET QUOTE To: [Name of Borrower] (the "Borrower") Re: Money Market Quote to the Borrower In response to your invitation dated _____________, 19__, we hereby make the following Money Market Quote on the following terms: 1. Quoting Bank: ________________________________ 2. Person to contact at Quoting Bank: _____________________________ 3. Date of Borrowing: ____________________* 4. We hereby offer to make Money Market Loan(s) in the following principal amounts, for the following Interest Periods and at the following rates:
Principal Interest Money Market Amount ** Period *** [Margin ****] [Absolute Rate ***** ] --------- ---------- ------------------------------------ $ $
_____________________ *As specified in the related Invitation. **Principal amount bid for each Interest Period may not exceed principal amount requested. Specify aggregate limitation if the sum of the individual offers exceeds the amount the Bank is willing to lend. Bids must be made for $500,000 or a larger multiple of $100,000. ***Not less than one month (LIBOR Auction) or not less than 30 days (Absolute Rate Auction), as specified in the related Invitation. No more than five bids are permitted for each Interest Period. ****Margin over or under the Interbank Offered Rate determined for the applicable Interest Period. Specify percentage (to the nearest 1/10,000 of 1%) and specify whether "PLUS" or "MINUS". *****Specify rate of interest per annum (to the nearest 1/10,000th of 1%). 1 97 [Provided, that the aggregate principal amount of Money Market Loans for which the above offers may be accepted shall not exceed $____________.]** We understand and agree that the offer(s) set forth above, subject to the satisfaction of the applicable conditions set forth in the Credit Agreement dated as of May 4, 1994 among The Timberland Company, the Banks listed on the signature pages thereof and Morgan Guaranty Trust Company of New York, as Agent, irrevocably obligates us to make the Money Market Loan(s) for which any offer(s) are accepted, in whole or in part. Very truly yours, [NAME OF BANK] Dated:_______________ By:__________________________ Authorized Officer 2 98 EXHIBIT E OPINION OF COUNSEL FOR THE COMPANY ----------------------- [Closing Date] To the Banks and the Agent Referred to Below c/o Morgan Guaranty Trust Company of New York, as Agent 60 Wall Street New York, New York 10260-0060 Ladies and Gentlemen: This opinion is being furnished to you pursuant to Section 3.01(b) of the Credit Agreement dated as of May 4, 1994 (the "Credit Agreement") among The Timberland Company, a Delaware corporation (the "Company"), the banks listed on the signature pages thereof and Morgan Guaranty Trust Company of New York, as Agent, in connection with the closing held this day under the Credit Agreement. Terms defined in the Credit Agreement and not otherwise defined herein are used herein with the meanings so defined. We have acted as counsel to the Company in connection with the Credit Agreement and the transactions contemplated thereby and as such are familiar with the proceedings taken by the Company in connection therewith. Please be advised, however, that, although we represent the Company on a regular basis, the scope of our representation does not include, and, except as specified herein, we have not undertaken, any special factual investigation into the business, properties, agreements or affairs of the Company and its Subsidiaries for purposes of rendering the opinions expressed in paragraphs 9, 10 and 11 below. We have participated in the preparation of the Credit Agreement and have examined copies, executed by the Company, of the Credit Agreement and each of the Notes delivered to the Banks on the date hereof. 1 99 We have also examined such certificates, documents and records, and have made such examination of law, as we have deemed necessary to enable us to render the opinions expressed below. In addition, we have examined and relied upon representations and warranties contained in the Credit Agreement and in certificates delivered to you in connection therewith as to matters of fact (other than facts constituting conclusions of law) and upon the covenants contained in the Credit Agreement as to the application of the proceeds of the loans made pursuant thereto. The opinion expressed in clause (c) of paragraph 11 below assumes, without investigation, that the transactions contemplated by the Credit Agreement will not result in a violation of financial ratios which are contained in covenants. We call your attention to the fact that the Credit Agreement and the Notes provide that they are to be governed by and construed in accordance with the internal laws of the State of New York and we understand that you are relying on the advice of your own counsel with respect to all matters of New York law. We are of the opinion that a Massachusetts court or a federal court sitting in Massachusetts would, under conflict of laws principles observed by the courts of Massachusetts, give effect to such provision. For purposes of rendering the opinions expressed in paragraphs 6 and 8 below, we have assumed that the Credit Agreement and each Note provides that it is to be governed by and construed in accordance with the internal laws of The Commonwealth of Massachusetts. The opinions expressed below are limited to matters governed by the laws of The Commonwealth of Massachusetts, the General Corporation Law of the State of Delaware and the federal laws of the United States. With respect to the opinions expressed in paragraphs 2 and 4 below concerning (i) the qualification and good standing of the Company as a foreign corporation under the laws of New Hampshire and Tennessee and (ii) the qualification and good standing of The Outdoor Footwear Company, a Delaware corporation ("TOFC"), as a foreign corporation under the laws of Puerto Rico, such opinions are based solely upon certificates from officials of such jurisdictions, copies of which have been furnished to you. Based on the foregoing, we are of the opinion that: 1. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware with corporate powers adequate for the execution, delivery and performance of the 2 100 Credit Agreement and the Notes and for carrying on the business now conducted by it. 2. The Company is duly qualified to do business as a foreign corporation under the laws of New Hampshire and Tennessee. 3. TOFC is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware with corporate powers adequate for carrying on the business now conducted by it. 4. TOFC is duly qualified to do business as a foreign corporation under the laws of Puerto Rico. 5. The Credit Agreement has been duly authorized, executed and delivered by the Company. 6. Subject to the qualifications stated in the penultimate paragraph hereof, the Credit Agreement constitutes the legal, valid and binding obligation of the Company and is enforceable against the Company in accordance with its terms. 7. The Notes being delivered to the Banks today have been duly authorized, executed and delivered by the Company. 8. Subject to the qualifications stated in the penultimate paragraph hereof, the Notes being delivered to the Banks today constitute the legal, valid and binding obligations of the Company and are enforceable against the Company in accordance with the terms thereof. 9. The execution and delivery of the Credit Agreement do not, and the performance by the Company of the terms thereof applicable to it will not, result in any violation of, or be in conflict with, constitute a default under or result in the creation of a lien under, any term or provision of: (a) its charter or bylaws, (b) any presently existing federal or Massachusetts law, statute or governmental regulation or the General Corporation Law of the State of Delaware, or (c) any agreement, indenture or other instrument listed in paragraph (4) of Exhibit A hereto. 10. Under existing provisions of law, no approval of, or authorization or other action by, or filing with, any federal or Massachusetts governmental authority, and no approval, authorization or other action or filing under the General Corporation Law of the State of Delaware, is required to be obtained or made by the Company in connection with the execution, delivery or performance of the Credit 3 101 Agreement or the Notes, except for such filings as do not affect the validity or enforceability of the Credit Agreement and the Notes. 11. To the best of our knowledge after having made due inquiry of officers of the Company, but without having investigated any governmental records or court dockets, there is no governmental action or proceeding and no litigation pending against the Company or any of its Subsidiaries which places in question the validity or enforceability of the Credit Agreement or the Notes. [We call your attention to the fact that John E. Beard is the Secretary of the Company. Our opinions expressed herein do not include matters which may have come to the attention of John E. Beard in that capacity and which have not been referred to us for substantive legal advice.] Our opinions that the Credit Agreement and the Notes being delivered to the Banks today are legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their terms are subject to (i) bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting the rights and remedies of creditors and (ii) general principles of equity, regardless of whether applied in proceedings in equity or at law. Such opinions are also subject to the following qualifications: (a) the enforceability of the provisions of the Credit Agreement providing for indemnification may be affected by public policy considerations or court decisions which may limit the right of the indemnified party to obtain indemnification; (b) we express no opinion as to the enforceability of any provision of the Credit Agreement which purports to grant the right of setoff to a purchaser of a participation in the obligations of the Company under the Credit Agreement and the Notes from a bank party to the Credit Agreement; and (c) we express no opinion as to the enforceability of any provision of the Credit Agreement to the extent it requires the Company to indemnify any of you or any other party against loss in obtaining the currency due under the Credit Agreement from a court judgment, order, award or decision in another currency. In addition, we call your attention to the fact that certain waivers contained in the Credit Agreement may be 4 102 unenforceable in whole or in part by reason of certain laws or judicial decisions; however, the inclusion of such waivers in the Credit Agreement does not affect the validity of any of the other provisions of the Credit Agreement. The foregoing opinion is solely for your benefit and may not be relied on by any other person. Very truly yours, 5 103 EXHIBIT F OPINION OF DAVIS POLK & WARDWELL, SPECIAL COUNSEL FOR THE AGENT -------------------------------------- [Closing Date] To the Banks and the Agent Referred to Below c/o Morgan Guaranty Trust Company of New York, as Agent 60 Wall Street New York, New York 10260-0060 Ladies and Gentlemen: We have participated in the preparation of the Credit Agreement (the "Credit Agreement") dated as of May 4, 1994, among The Timberland Company, a Delaware corporation (the "Company"), the banks listed on the signature pages thereof (the "Banks") and Morgan Guaranty Trust Company of New York, as Agent (the "Agent"), and have acted as special counsel for the Agent for the purpose of rendering this opinion pursuant to Section 3.01(c) of the Credit Agreement. Terms defined in the Credit Agreement are used herein as therein defined. We have examined originals or copies, certified or otherwise identified to our satisfaction, of such documents, corporate records, certificates of public officials and other instruments and have conducted such other investigations of fact and law as we have deemed necessary or advisable for purposes of this opinion. Upon the basis of the foregoing, we are of the opinion that: 1. The execution, delivery and performance by the Company of the Credit Agreement and its Notes are within the Company's corporate powers and have been duly authorized by all necessary corporate action. 1 104 2. The Credit Agreement constitutes a valid and binding agreement of the Company and its Notes constitute valid and binding obligations of the Company. We are members of the Bar of the State of New York and the foregoing opinion is limited to the laws of the State of New York, the federal laws of the United States of America and the General Corporation Law of the State of Delaware. In giving the foregoing opinion, we express no opinion as to the effect (if any) of any law of any jurisdiction (except the State of New York) in which any Bank is located which limits the rate of interest that such Bank may charge or collect. This opinion is rendered solely to you in connection with the above matter. This opinion may not be relied upon by you for any other purpose or relied upon by any other person without our prior written consent. Very truly yours, 2 105 EXHIBIT G FORM OF ELECTION TO PARTICIPATE ------------------------------- , 19 MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent for the Banks named in the Credit Agreement dated as of May 4, 1994 among The Timberland Company, such Banks and such Agent (the "Credit Agreement") Ladies and Gentlemen: Reference is made to the Credit Agreement described above. Terms not defined herein which are defined in the Credit Agreement shall have for the purposes hereof the meaning provided therein. The undersigned, [name of Eligible Subsidiary], a [jurisdiction of incorporation] corporation, hereby elects to be an Eligible Subsidiary for purposes of the Credit Agreement, effective from the date hereof until an Election to Terminate shall have been delivered on behalf of the undersigned in accordance with the Credit Agreement. The undersigned confirms that the representations and warranties set forth in Article IX of the Credit Agreement are true and correct as to the undersigned as of the date hereof, and the undersigned hereby agrees to perform all the obligations of an Eligible Subsidiary under, and to be bound in all respects by the terms of, the Credit Agreement, including without limitation Section 11.09 thereof, as if the undersigned were a signatory party thereto. [Tax disclosure pursuant to Section 9.04] 1 106 The address to which all notices to the undersigned under the Credit Agreement should be directed is: . This instrument shall be construed in accordance with and governed by the laws of the State of New York. Very truly yours, [NAME OF ELIGIBLE SUBSIDIARY] By_________________________________ Title: The undersigned hereby confirms that [name of Eligible Subsidiary] is an Eligible Subsidiary for purposes of the Credit Agreement described above. THE TIMBERLAND COMPANY By_________________________________ Title: Receipt of the above Election to Participate is hereby acknowledged on and as of the date set forth above. MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent By_________________________________ Title: 2 107 EXHIBIT H FORM OF ELECTION TO TERMINATE ----------------------------- , 19 MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent for the Banks named in the Credit Agreement dated as of May 4, 1994 among The Timberland Company, such Banks and such Agent (the "Credit Agreement") Ladies and Gentlemen: Reference is made to the Credit Agreement described above. Terms not defined herein which are defined in the Credit Agreement shall have for the purposes hereof the meaning provided therein. The undersigned, [name of Eligible Subsidiary], a [jurisdiction of incorporation] corporation, hereby elects to terminate its status as an Eligible Subsidiary for purposes of the Credit Agreement, effective as of the date hereof. The undersigned hereby represents and warrants that all principal and interest on all Notes of the undersigned and all other amounts payable by the undersigned pursuant to the Credit Agreement have been paid in full on or prior to the date hereof. Notwithstanding the foregoing, this Election to Terminate shall not affect any obligation of the undersigned under the Credit Agreement or under any Note heretofore incurred. 1 108 This instrument shall be construed in accordance with and governed by the laws of the State of New York. Very truly yours, [NAME OF ELIGIBLE SUBSIDIARY] By____________________________ Title: The undersigned hereby confirms that the status of [name of Eligible Subsidiary] as an Eligible Subsidiary for purposes of the Credit Agreement described above is termi- nated as of the date hereof. THE TIMBERLAND COMPANY By____________________________ Title: Receipt of the above Election to Terminate is hereby acknowledged on and as of the date set forth above. MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent By__________________________ Title: 2 109 EXHIBIT I OPINION OF COUNSEL FOR THE BORROWER (BORROWINGS BY ELIGIBLE SUBSIDIARIES) ------------------------------------- [Dated as provided in Section 3.03 of the Credit Agreement] To the Banks and the Agent Referred to Below c/o Morgan Guaranty Trust Company of New York, as Agent 9 West 57th Street New York, New York 10019 Ladies and Gentlemen: I am counsel to [name of Eligible Subsidiary], a [jurisdiction of incorporation] corporation (the "Borrower"), and give this opinion pursuant to Section 3.03(b) of the Credit Agreement (the "Credit Agreement") dated as of May 4, 1994 among The Timberland Company (the "Company"), the banks listed on the signature pages thereof and Morgan Guaranty Trust Company of New York, as Agent. Terms defined in the Credit Agreement are used herein as therein defined. I have examined originals or copies, certified or otherwise identified to my satisfaction, of such documents, corporate records, certificates of public officials and other instruments and have conducted such other investigations of fact and law as I have deemed necessary or advisable for purposes of this opinion. Upon the basis of the foregoing, I am of the opinion that: 1. The Borrower is a corporation duly incorporated, validly existing and in good standing under the laws of [jurisdiction of incorporation], and is a Wholly-Owned Consolidated Subsidiary of the Company. 1 110 2. The execution and delivery by the Borrower of its Election to Participate and its Notes and the performance by the Borrower of the Credit Agreement and its Notes are within the Borrower's corporate powers, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any governmental body, agency or official and do not contravene, or constitute a default under, any provision of applicable law or regulation or of the certificate of incorporation or by-laws of the Borrower or of any agreement, judgment, injunction, order, decree or other instrument binding upon the Company or the Borrower or result in the creation or imposition of any Lien on any asset of the Company or any of its Subsidiaries. 3. The Credit Agreement constitutes a valid and binding agreement of the Borrower and its Notes constitute valid and binding obligations of the Borrower. 4. Except as disclosed in the Borrower's Election to Participate, there is no income, stamp or other tax of [jurisdiction of incorporation and, if different, principal place of business], or any taxing authority thereof or therein, imposed by or in the nature of withholding or otherwise, which is imposed on any payment to be made by the Borrower pursuant to the Credit Agreement or its Notes, or is imposed on or by virtue of the execution, delivery or enforcement of its Election to Participate or of its Notes. Very truly yours, 2 111 EXHIBIT J FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT ------------------------------------------- AGREEMENT dated as of _________, 19__ among [ASSIGNOR] (the "Assignor"), [ASSIGNEE] (the "Assignee"), THE TIMBERLAND COMPANY (the "Company") and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent (the "Agent"). W I T N E S S E T H WHEREAS, this Assignment and Assumption Agreement (the "Agreement") relates to the Credit Agreement dated as of May 4, 1994 among the Company, the Assignor and the other Banks party thereto, as Banks, and the Agent (the "Credit Agreement"); WHEREAS, as provided under the Credit Agreement, the Assignor has a Commitment to make Loans in an aggregate amount at any time outstanding not to exceed $__________; WHEREAS, Committed Loans made by the Assignor under the Credit Agreement in the aggregate principal amount of $__________ are outstanding at the date hereof; and WHEREAS, the Assignor proposes to assign to the Assignee all of the rights of the Assignor under the Credit Agreement in respect of a portion of its Commitment thereunder in an amount equal to $__________ (the "Assigned Amount"), together with a corresponding portion of its outstanding Committed Loans, and the Assignee proposes to accept assignment of such rights and assume the corresponding obligations from the Assignor on such terms; NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein, the parties hereto agree as follows: SECTION 1. DEFINITIONS. All capitalized terms not otherwise defined herein shall have the respective meanings set forth in the Credit Agreement. SECTION 2. ASSIGNMENT. The Assignor hereby assigns and sells to the Assignee all of the rights of the Assignor under the Credit Agreement to the extent of the Assigned Amount, and the Assignee hereby accepts such assignment from the Assignor and assumes all of the 1 112 obligations of the Assignor under the Credit Agreement to the extent of the Assigned Amount, including the purchase from the Assignor of the corresponding portion of the principal amount of the Committed Loans made by the Assignor outstanding at the date hereof. Upon the execution and delivery hereof by the Assignor, the Assignee, the Company and the Agent and the payment of the amounts specified in Section 3 required to be paid on the date hereof (i) the Assignee shall, as of the date hereof, succeed to the rights and be obligated to perform the obligations of a Bank under the Credit Agreement with a Commitment in an amount equal to the Assigned Amount, and (ii) the Commitment of the Assignor shall, as of the date hereof, be reduced by a like amount and the Assignor released from its obligations under the Credit Agreement to the extent such obligations have been assumed by the Assignee. The assignment provided for herein shall be without recourse to the Assignor. SECTION 3. PAYMENTS. As consideration for the assignment and sale contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the date hereof in Federal funds an amount heretofore agreed between them.* It is understood that facility fees with respect to the Assigned Amount accrued to the date hereof are for the account of the Assignor and such fees accruing from and including the date hereof are for the account of the Assignee. Each of the Assignor and the Assignee hereby agrees that if it receives any amount under the Credit Agreement which is for the account of the other party hereto, it shall receive the same for the account of such other party to the extent of such other party's interest therein and shall promptly pay the same to such other party. SECTION 4. CONSENT OF THE COMPANY AND THE AGENT. This Agreement is conditioned upon the consent of the Company and the Agent pursuant to Section 11.06(c) of the Credit Agreement. The execution of this Agreement by the Company and the Agent is evidence of this consent. Pursuant to Section 11.06(c) the Company agrees to execute and deliver a Note, and to cause each Eligible Subsidiary, if any, to execute and deliver a Note, payable to the order of the Assignee to evidence the assignment and assumption provided for herein. _____________________ *Amount should combine principal together with accrued interest and breakage compensation, if any, to be paid by the Assignee, net of any portion of any upfront fee to be paid by the Assignor to the Assignee. It may be preferable in an appropriate case to specify these amounts generically or by formula rather than as a fixed sum. 2 113 SECTION 5. NON-RELIANCE ON ASSIGNOR. The Assignor makes no representation or warranty in connection with, and shall have no responsibility with respect to, the solvency, financial condition, or statements of any Borrower, or the validity and enforceability of the obligations of any Borrower in respect of the Credit Agreement or any Note. The Assignee acknowledges that it has, independently and without reliance on the Assignor, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and will continue to be responsible for making its own independent appraisal of the business, affairs and financial condition of the Borrowers. SECTION 6. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. SECTION 7. COUNTERPARTS. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first above written. [ASSIGNOR] By____________________________ Title: [ASSIGNEE] By____________________________ Title: THE TIMBERLAND COMPANY By____________________________ Title: 3 114 MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent By____________________________ Title: 4 -----END PRIVACY-ENHANCED MESSAGE-----