-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CFoA/MHw+pog2w4t5z47iztqiOzZVQGWVY7A9SliWgNbErwgdP+kVGqGkfbXrxz4 758HtAPTpBTTz2QwBN96Jg== 0001035704-97-000357.txt : 19971114 0001035704-97-000357.hdr.sgml : 19971114 ACCESSION NUMBER: 0001035704-97-000357 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 13 CONFORMED PERIOD OF REPORT: 19970928 FILED AS OF DATE: 19971112 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: DII GROUP INC CENTRAL INDEX KEY: 0000899047 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPONENTS & ACCESSORIES [3670] IRS NUMBER: 841224426 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-21374 FILM NUMBER: 97714082 BUSINESS ADDRESS: STREET 1: 6273 MONARCH PARK PLACE CITY: NIWOT STATE: CO ZIP: 80503 BUSINESS PHONE: 3036522221 FORMER COMPANY: FORMER CONFORMED NAME: DOVATRON INTERNATIONAL INC DATE OF NAME CHANGE: 19930319 10-Q 1 FORM 10-Q FOR QUARTER ENDED SEPTEMBER 28, 1997 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended SEPTEMBER 28, 1997 ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 0-21374 THE DII GROUP, INC. (Exact name of registrant as specified in its charter) Delaware 84-1224426 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 6273 Monarch Park Place Suite 200 Niwot, Colorado 80503 (Address and zip code of principal executive offices) (303) 652-2221 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. [ X ] Yes [ ] No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. OUTSTANDING AT CLASS November 9, 1997 ----- ---------------- Common Stock, Par Value $0.01 25,310,631 2 PART I. FINANCIAL INFORMATION ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS THE DII GROUP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED INCOME STATEMENTS (In thousands, except earnings per share)
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED -------------------------------- ----------------------------- SEPT. 28, 1997 SEPT. 29, 1996 SEPT. 28, 1997 SEPT. 29, 1996 --------------- -------------- -------------- -------------- Net sales: Contract electronics manufacturing $ 141,503 62,248 349,089 203,271 Other 71,361 45,953 184,952 132,970 --------- --------- --------- --------- Total net sales 212,864 108,201 534,041 336,241 Cost of sales 179,562 87,753 441,880 271,104 --------- --------- --------- --------- Gross profit 33,302 20,448 92,161 65,137 Selling, general and administrative expenses 17,098 11,977 51,424 35,219 Merger costs -- 3,545 -- 4,649 Interest income (256) (379) (654) (1,362) Interest expense 2,504 1,547 5,924 4,619 Amortization of intangibles 1,033 832 2,762 2,355 Other, net 245 (465) 919 (616) --------- --------- --------- --------- Income before income taxes 12,678 3,391 31,786 20,273 Income tax expense 2,723 1,900 9,214 7,110 --------- --------- --------- --------- Net income $ 9,955 1,491 22,572 13,163 ========= ========= ========= ========= Earnings per share: Primary $ 0.38 0.06 0.87 0.52 Fully diluted $ 0.35 0.06 0.81 0.52 Weighted average number of common shares and equivalents outstanding: Primary 26,532 24,992 25,999 25,082 Fully diluted 31,203 24,992 31,014 25,082
See accompanying notes to condensed consolidated financial statements 3 THE DII GROUP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except par value data)
SEPT. 29, DECEMBER 29, 1997 1996 --------- ------------ ASSETS Current assets: Cash and cash equivalents $ 94,441 25,010 Accounts receivable, net 125,802 79,851 Inventories 78,399 47,008 Other 9,047 8,829 --------- --------- Total current assets 307,689 160,698 Property, plant and equipment, net 198,018 106,977 Intangible assets, net 77,890 66,207 Other 5,671 1,969 --------- --------- $ 589,268 335,851 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 102,604 46,748 Accrued expenses 37,693 14,729 Accrued interest payable 3,507 1,116 Current installments of long-term financing obligations 6,360 10,572 Notes payable to sellers of businesses acquired -- 826 --------- --------- Total current liabilities 150,164 73,991 Senior subordinated notes payable 150,000 -- Convertible subordinated notes payable 86,250 86,250 Long-term financing obligations, excluding current installments 8,377 12,938 Notes payable to sellers of businesses acquired 1,523 1,262 Other 1,998 2,373 Commitments and contingent liabilities Stockholders' equity: Preferred stock, $0.01 par value; 5,000,000 shares authorized; none issued -- -- Common stock, $0.01 par value; 45,000,000 shares authorized; 25,220,020 and 23,928,830 shares issued and outstanding 252 240 Additional paid-in capital 100,886 91,856 Retained earnings 97,355 74,783 Cumulative foreign currency translation adjustments (4,078) (3,849) Deferred stock compensation (3,459) (3,993) --------- --------- Total stockholders' equity 190,956 159,037 --------- --------- $ 589,268 335,851 ========= =========
See accompanying notes to condensed consolidated financial statements 4 THE DII GROUP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
FOR THE NINE MONTHS ENDED -------------------------------- SEPT. 28, 1997 SEPT. 29, 1996 -------------- -------------- Net cash provided by operating activities $ 41,660 17,746 --------- --------- Cash flows from investing activities: Payments for business acquisitions, net of cash acquired (7,939) (2,056) Additions to property, plant and equipment (106,103) (20,026) Proceeds from sales of equipment 2,578 181 --------- --------- Net cash used by investing activities (111,464) (21,901) --------- --------- Cash flows from financing activities: Debt issuance costs (4,934) (314) Repayments of long-term financing obligations (10,973) (4,039) Proceeds from long-term financing obligations -- 1,260 Proceeds from line-of-credit borrowings 84,430 -- Repayments of line-of-credit borrowings (84,430) -- Repayments of notes payable to sellers of businesses acquired (826) (16,836) Proceeds from senior subordinated notes payable 150,000 -- Proceeds from notes receivable -- 1,000 Proceeds from stock issued under stock plans 6,064 1,384 --------- --------- Net cash provided (used) by financing activities 139,331 (17,545) --------- --------- Effect of exchange rate changes on cash (96) (3) --------- --------- Net increase (decrease) in cash and cash equivalents 69,431 (21,703) Cash and cash equivalents at beginning of period 25,010 55,533 --------- --------- Cash and cash equivalents at end of period $ 94,441 33,830 ========= =========
See accompanying notes to condensed consolidated financial statements 5 THE DII GROUP, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) (1) BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Financial information as of December 29, 1996 has been derived from the audited consolidated financial statements of The DII Group, Inc. and subsidiaries (the "Company" or "DII"). The condensed consolidated financial statements do not include all information and notes required by generally accepted accounting principles for complete financial statements. However, except as disclosed herein, there has been no material change in the information disclosed in the notes to the consolidated financial statements as of and for the year ended December 29, 1996 included in the annual report on Form 10-K previously filed with the Securities and Exchange Commission (the "SEC"). In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included in the accompanying condensed consolidated financial statements. Operating results for the nine-month period ended September 28, 1997 are not necessarily indicative of the results that may be expected for the year ending December 28, 1997. On August 22, 1996, the DII Group changed its fiscal year end from December 31 to the Sunday nearest to December 31, beginning with the fiscal year ended December 29, 1996. Accordingly, fiscal 1996 and 1997 each comprise 52 weeks and end on December 29, 1996 and December 28, 1997, respectively. The accompanying condensed consolidated financial statements are therefore presented as of and for the three and nine-month periods ended September 28, 1997 and September 29, 1996. (2) INVENTORIES Inventories consisted of the following:
SEPT. 28, DECEMBER 29, 1997 1996 -------- ------------ Raw materials $ 59,352 34,099 Work in process 23,557 15,721 Finished goods 2,926 2,580 -------- -------- 85,835 52,400 Allowance for inventory (7,436) (5,392) -------- -------- $ 78,399 47,008 ======== ========
The Company made provisions to the allowance for inventory impairment of $2,676 and $653 during the nine months ended September 28, 1997 and September 29, 1996, respectively. (3) PROPERTY, PLANT AND EQUIPMENT On August 18, 1997, the Company acquired International Business Machine's ("IBMs") printed circuit board fabrication facility, and its related production equipment, inventory and intellectual property for approximately $46,064. 6 THE DII GROUP, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) (4) ACQUISITIONS During the second quarter of 1997, the Company acquired Design Solutions, Inc. ("DSI") and Process Control Technologies, Inc. ("PCT"). DSI provides custom design and engineering services for printed circuit assemblies to original equipment manufacturers. PCT is a manufacturer of solutions to automate the transfer of bare printed circuit boards and assembled circuits through the entire manufacturing process including final box-build assembly. The cash purchase price, net of cash acquired, for these acquisitions was $7,939. The fair value of the assets acquired and liabilities assumed from these acquisitions were immaterial. The cost in excess of net assets acquired through these acquisitions amounted to $6,812. In April 1996, the Company acquired Chemtech Limited, a quick-turn manufacturer of surface mount printed circuit board solder cream stencils located in the United Kingdom. The cash purchase price, net of cash acquired, was $2,056. The fair value of the assets acquired and liabilities assumed were immaterial. The cost in excess of net assets acquired amounted to $3,658. These acquisitions were accounted for as purchases with the results of operations from the acquired businesses included in the Company's results of operations from the acquisition dates forward. Pro forma results of operations would not be materially different from the historical results reported. The costs of these acquisitions have been allocated on the basis of the estimated fair value of the assets acquired and the liabilities assumed. (5) SENIOR SUBORDINATED NOTES In September 1997, the Company issued $150,000 of 8.50% senior subordinated notes. Interest is payable on March 15 and September 15 of each year and the notes mature on September 15, 2007. The Company may redeem the notes on or after September 15, 2002. The indenture contains certain covenants that, among other things, limit the ability of the Company and certain of its subsidiaries to (i) incur additional debt, (ii) issue or sell capital stock of certain subsidiaries, (iii) engage in asset sales, (iv) incur layered debt, (v) create liens on its properties and assets, and (vi) make distributions or pay dividends. The covenants are subject to a number of significant exceptions and qualifications. (6) COMMITMENTS AND CONTINGENCIES The Company is involved in certain litigation and environmental matters described in the Company's Annual Report on Form 10-K for the fiscal year ended December 29, 1996. The ultimate outcome of these matters cannot, at this time, be predicted in light of the uncertainties inherent in these matters. Based upon the facts and circumstances currently known, management cannot estimate the most likely loss or the maximum loss for these matters. The Company has accrued the minimum estimated costs associated with these matters in the accompanying condensed consolidated financial statements. The total amounts accrued for these matters are immaterial. 7 THE DII GROUP, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) (6) COMMITMENTS AND CONTINGENCIES, CONTINUED The Company determines the amount of its accruals for environmental matters by analyzing and estimating the range of possible costs in light of information currently available. The imposition of more stringent standards or requirements under environmental laws or regulations, the results of future testing and analysis undertaken by the Company at its operating facilities, or a determination that the Company is potentially responsible for the release of hazardous substances at other sites, could result in expenditures in excess of amounts currently estimated to be required for such matters. No assurance can be given that actual costs will not exceed amounts accrued or that costs will not be incurred with respect to sites as to which no problem is currently known. Further, there can be no assurance that additional environmental matters will not arise in the future. The Company has approximately $8,900 of capital commitments as of September 28, 1997. The Company has a senior secured revolving line-of-credit which was amended in August 1997 to increase the maximum borrowing capability to $80,000 and extend the expiration date to June 2002. This credit facility is secured by substantially all of the Company's assets and requires compliance with certain financial covenants and contains certain restrictions on the Company's ability to (i) incur certain debt, (ii) create certain liens on its properties and assets, (iii) make certain investments in businesses outside the Company's industry, (iv) merge or consolidate with other certain entities, (v) pay certain dividends or make distributions, (vi) repurchase or redeem certain common stock, and (vii) dispose of certain assets. As of September 28, 1997, there were no borrowings outstanding under the line-of-credit, and the Company was in compliance with all financial covenants. (7) COMMON STOCK SPLIT On July 29, 1997, the Company's Board of Directors declared a two-for-one stock split of the Company's common stock effected in the form of a stock dividend which was distributed to shareholders on September 2, 1997 to shareholders of record as of August 15, 1997. This increased the number of shares outstanding to approximately 25.2 million from 12.6 million. The Company transferred $126 from additional paid-in capital to the common stock par account to reflect the stock split. All share and per share data included in this report have been retroactively restated to reflect the split. 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Dollars in thousands) CERTAIN FORWARD-LOOKING INFORMATION: This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements include, but are not limited to, statements regarding contingencies, litigation, environmental matters, liquidity and capital expenditures herein under "Part I Financial Information Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations." Actual results could differ materially from those projected in the forward-looking statements as a result of the risk factors set forth below. A. OVERVIEW The Company is a leading provider of electronics design and manufacturing services which operates through a global network of independent business units. These business units are uniquely linked to provide the following related products and services to OEM customers: custom microelectronics design and manufacturing; design and manufacturing of printed circuit boards; assembly of printed circuit boards; process tooling; machine tools; in-circuit and functional test hardware and software; and final system configuration. By offering comprehensive and integrated design and manufacturing services, the Company believes it is better able to develop long-term relationships with its customers, expand into new markets and enhance its profitability. The Company provides the following related products and services to the global electronics manufacturing industry: Custom Microelectronics--Through Orbit Semiconductor ("Orbit"), the Company provides semiconductor design, manufacturing and engineering support services to its OEM customers. Orbit provides cost-effective gate array conversion services, mixed-signal design and production capabilities as well as high-reliability manufacturing and quick-turn and low-volume manufacturing services, utilizing a combination of its internal fabrication capabilities and its external foundry suppliers, thereby using a "fab/fabless" manufacturing approach. Interconnect Technologies--The Company provides design and engineering services for printed circuit assemblies through Design Solutions, Inc. ("DSI") and manufactures high density, complex multilayer printed circuit boards on a quick-turn and high-volume production basis through Multilayer Technology ("Multek"). Systems Assembly--The Company assembles complex electronic circuits and final system configuration (contract electronics manufacturing or "CEM") on a high and low volume contract basis through Dovatron International ("Dovatron"). Process Technologies--The Company manufactures surface mount printed circuit board solder cream stencils on a quick-turn basis through IRI International ("IRI") and Chemtech Limited ("Chemtech"); designs and manufactures in-circuit and functional test software and hardware on a quick-turn basis through TTI Testron; manufactures depaneling systems that route individual printed circuit boards from an assembled master panel in the final step of the electronics assembly process through Cencorp; and manufactures automation solutions for the transfer of bare printed circuit boards and assembled circuits through the entire manufacturing process including final box-build assembly, through Process Control Technologies, Inc. ("PCT"). 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Dollars in thousands) A. OVERVIEW, CONTINUED The Company has the ability to provide customers with a total design and manufacturing outsourcing solution. The Company's ability to offer fully integrated solutions with value-added front- and back-end product and process development capabilities coupled with global volume assembly capabilities provides customers with significant speed-to-market and product cost improvements. Operating results may be affected by a number of factors including the economic conditions in the markets the Company serves; price and product competition; the level of volume and the timing of orders; product mix; the amount of automation existing on specific manufacturing projects; efficiencies achieved by inventory management; fixed asset utilization; the level of experience in manufacturing a particular product; customer product delivery requirements; shortages of components or experienced labor; the integration of acquired businesses; start-up costs associated with adding new geographical locations; expenditures required for research and development; and failure to introduce, or lack of market acceptance of, new processes, services, technologies and products on a timely basis. In addition, the level of sales can greatly shift based on whether certain projects are contracted on a turnkey basis where the Company purchases materials, versus a consignment basis where the customer provides materials. A majority of the Company's sales are to customers in the electronics industry, which is subject to rapid technological change, product obsolescence and price competition. In addition, the electronics industry, and especially the semiconductor sector, has historically been cyclical and subject to significant economic downturns at various times, characterized by diminished product demand, accelerated erosion of average selling prices and overcapacity. These factors, which may affect the electronics industry in general, or any of the Company's major customers, in particular, could have a material adverse affect on the Company's operating results. There can be no assurance that the Company will be able to successfully integrate newly-acquired businesses including Orbit's transition from its 4-inch, 1.2 micron fabrication facility to its 6-inch, 0.6 micron fabrication facility, or Multek's acquisition of the Austin high-volume printed circuit board fabrication facility. Such failure could have a material adverse effect on the Company's business, financial condition and results of operations. The future success of the Company's businesses will depend largely upon its ability to enhance its existing products and services or to acquire new products and manufacturing processes in order to keep pace with changing technology and industry standards and meet the changing needs of customers. There can be no assurance that the Company will be able to keep pace with the rapidly changing technology trends. The introduction by competitors of new technologies or the emergence of new industry standards and customer requirements could render the Company's existing products and processes obsolete, unmarketable or no longer competitive. The Company seeks a well-balanced customer profile across most sectors of the electronics industry in order to reduce exposure due to a downturn in any particular sector. The primary sectors within the electronics industry served by the Company are data communications, office automation, computer and peripherals, telecommunications, industrial, instrumentation, and medical. Although management believes the Company serves a diverse range of customers and markets, the Company's contracts generally do not provide the Company with firm long-term volume purchase commitments. In addition, from time to time, some of the Company's customers have terminated their manufacturing arrangements with the Company, and other customers have significantly reduced or delayed the volume of design, engineering and manufacturing services from the Company. Any such termination of a manufacturing relationship or change, reduction or delay in orders could have a material adverse affect on the Company's operating results. 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Dollars in thousands) A. OVERVIEW, CONTINUED At any given time, certain customers may account for significant portions of the Company's business. Hewlett Packard Company accounted for 16% of net sales during the nine months ending September 28, 1997. No other customer accounted for more than 10% of net sales during the nine months ended September 28, 1997. No customer accounted for more than 10% of net sales during the nine months ended September 29, 1996. The Company's top ten customers accounted for 49% and 43% of net sales for the nine months ended September 28, 1997 and September 29, 1996, respectively. The percentage of the Company's sales to its major customers may fluctuate from period to period. Significant reductions in sales to any of these customers could have a material adverse effect on the Company's operating results. The Company has actively pursued acquisitions in furtherance of its strategy to be the fastest and most comprehensive provider of custom electronics design and manufacturing services, ranging from microelectronics fabrication through the final assembly of finished products for OEM customers. The Company's acquisitions have enabled the Company to provide more integrated outsourcing technology solutions with time-to-market and lower cost advantages. Acquisitions have also played an important part in expanding the Company's presence in the global electronics marketplace. By enhancing the Company's capability to provide a wide range of related electronics design and manufacturing services to a global market that is increasingly dependent on outsourcing providers, these acquisitions have enabled the Company to enhance its competitive position as a leading provider of comprehensive outsourcing technology solutions. Acquisitions involve numerous risks including difficulties in assimilating the operations, technologies, and products and services of the acquired companies, the diversion of management's attention from other business concerns, risks of entering markets in which the DII Group has no or limited direct prior experience and where competitors in such markets have stronger market positions, and the potential loss of key employees of the acquired company. There can be no assurance that the Company will be able to successfully integrate newly acquired businesses. Such failures could have a material adverse effect on the Company's business, financial condition and results of operations. The Company also continues to experience rapid internal growth and expansion, and with continued expansion, it may become more difficult for the Company's management to manage geographically dispersed operations. The Company's failure to effectively manage growth could have a material adverse effect on the Company's results of operations. B. RESULTS OF OPERATIONS Total net sales for the three months ended September 28, 1997 increased $104,663 (97%) to $212,864 from $108,201 for the comparable period in 1996. Total net sales for the nine months ended September 28, 1997 increased $197,800 (59%) to $534,041 from $336,241 for the comparable period in 1996. Contract electronics manufacturing net sales for the three months ended September 28, 1997 increased $79,255 (127%) to $141,503 from $62,248 for the corresponding period in 1996. Contract electronics manufacturing net sales for the nine months ended September 28, 1997 increased $145,818 (72%) to $349,089 from $203,271 for the comparable period in 1996. These increases are primarily attributable to increased orders from existing customers and an expanding customer base, such as the high volume, multi-site production order for Hewlett-Packard, which began ramping earlier this year. Net sales for the Company's other products and services for the three months ended September 28, 1997 increased $25,408 (55%) to $71,361 from $45,953 for the comparable period in 1996. Net sales for the 11 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Dollars in thousands) B. RESULTS OF OPERATIONS, CONTINUED Company's other products and services for the nine months ended September 28, 1997 increased $51,982 (39%) to $184,952 from $132,970 for the comparable period in 1996. These increases are primarily attributable to (i) increased sales to existing customers, (ii) an expanding customer base from the continued industry-wide acceptance of its service offerings, and (iii) the 1997 acquisitions of DSI, PCT and the IBM Austin printed circuit board fabrication facility. Gross profit for the three months ended September 28, 1997 increased $12,854 to $33,302 from $20,448 for the comparable period in 1996. Gross profit for the nine-month period ending September 28, 1997 increased $27,024 to $92,161 from $65,137 for the comparable period in 1996. The gross margin decreased to 15.6% for the three months ended September 28, 1997 from 18.9% for the three months ended September 29, 1996. The gross margin decreased to 17.3% for the nine-month period ended September 28, 1997 from 19.4% for the nine-month period ended September 29, 1996. These decreases were the result of (i) the increase in the contract electronics manufacturing revenues which generate lower margins than the Company's other products and service offerings, (ii) pricing pressure as a result of a shift in Multek's product mix to higher-volume (lower margin) production from its quick-turn, low-volume (higher margin) production, (iii) Orbit's under-absorption of overhead associated with its transition into its new 6-inch, 0.6 micron wafer fabrication facility and (iv) Multek's under-absorbed overhead associated with the transition of its recently acquired printed circuit board fabrication facility in Austin, Texas to the merchant market. Selling, general and administrative (SG&A) expense increased $5,121 to $17,098 for the three months ended September 28, 1997 from $11,977 for the comparable period in 1996. The percentage of SG&A expense to net sales decreased to 8.0% for the three months ended September 28, 1997 from 11.1% for the three months ended September 29, 1996. The increase in absolute dollars was primarily attributable to (i) additional costs associated with the start-up of Orbit's newly acquired wafer fabrication facility while winding down its old wafer fabrication facility, (ii) the continued expansion of the Company's sales and marketing, finance, and other general and administrative infrastructure necessary to support the Company's sales growth, (iii) the start-up of Multek's recently acquired high volume printed circuit board fabrication facility in Austin, Texas, (iv) increased incentive-based stock compensation, the recognition of which is based upon expected achievement of certain earnings per share targets established by the Compensation Committee of the Board of Directors, and (v) increased SG&A expenses associated with the 97% increase in net sales in the three months ended September 29, 1997 versus the comparable period in 1996. The percentage of SG&A expense to net sales decreased during the three months ended September 28, 1997 versus September 29, 1996 due to the significant increase in revenues. SG&A expense increased $16,205 to $51,424 for the nine-month period ended September 28, 1997 from $35,219 for the comparable period in 1996. The percentage of SG&A expense to net sales decreased to 9.6% for the nine months ended September 28, 1997 from 10.5% for the nine months ended September 29, 1996. The increase in absolute dollars was primarily attributable to (i) additional costs associated with the start-up of Orbit's newly acquired wafer fabrication facility while winding down its old wafer fabrication facility, (ii) the continued expansion of the Company's sales and marketing, finance, and other general and administrative infrastructure necessary to support the Company's sales growth, (iii) increased incentive-based stock compensation, (iv) the start-up of Multek's recently acquired high volume printed circuit board fabrication facility in Austin, Texas, and (v) increased SG&A expenses associated with the 59% increase in net sales in the nine months ended September 28, 1997 versus the comparable period in 1996. The percentage of SG&A expense to net sales decreased during the nine months ended September 28, 1997 versus September 29, 1996 due to the significant increase in revenues. 12 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Dollars in thousands) B. RESULTS OF OPERATIONS, CONTINUED Interest income decreased $123 to $256 for the three months ended September 28, 1997 from $379 for the comparable period in 1996. Interest income decreased $708 to $654 for the nine months ended September 28, 1997 from $1,362 for the comparable period in 1996. These decreases are attributable to the earnings generated on the lower average balances of invested cash and cash equivalents. Interest expense increased $957 to $2,504 for the three months ended September 28, 1997 from $1,547 for the comparable period in 1996. Interest expense increased $1,305 to $5,924 for the nine months ended September 28, 1997 from $4,619 for the comparable period in 1996. These increases are primarily associated with increased line-of-credit advances, which included interim funding for the acquisition of the IBM Austin printed circuit board fabrication facility in August 1997, coupled with increased long-term financing obligations in connection with equipment additions related to Orbit's transition to its new 6-inch, 0.6 micron process facility. Additionally, the Company incurred approximately $455 of interest expense associated with its issuance of $150,000 of 8.50% senior subordinated notes in September 1997. The Company used part of the proceeds to repay the Company's outstanding advances against its line-of-credit. The line-of-credit advances were used for working capital purposes and to fund the Company's $46,064 acquisition of the IBM Austin printed circuit board fabrication facility in August 1997. Amortization of intangibles increased $201 to $1,033 for the three months ended September 28, 1997 from $832 for the comparable period in 1996. Amortization of intangibles increased $407 to $2,762 for the nine months ended September 28, 1997 from $2,355 for the comparable period in 1996. These increases are attributable to the amortization of goodwill associated with the Chemtech, DSI and PCT acquisitions. Other expenses (net) increased $710 for the three months ended September 28, 1997 from the comparable period of 1996, due primarily to increased provisions for doubtful accounts. Other expenses (net) increased $1,535 for the nine months ended September 28, 1997 from the corresponding period in 1996. This increase was due to increased provisions for doubtful accounts during the nine months ended September 28, 1997, partially offset by a $320 gain on the early extinguishment of long-term financing obligations during the nine months ended September 29, 1996. The Company's estimated effective income tax rate differs from the U.S. statutory rate due to domestic income tax credits and lower effective income tax rates on foreign earnings considered permanently invested abroad. The effective tax rate for a particular year will vary depending on the mix of foreign and domestic earnings, income tax credits and changes in previously established valuation allowances for deferred tax assets based upon management's current analysis of the realizability of these deferred tax assets. As foreign earnings considered permanently invested abroad increase as a percentage of consolidated earnings, the overall consolidated effective income tax rate will usually decrease because the foreign earnings are generally taxed at a lower rate than domestic earnings. The mix of foreign and domestic income from operations before income taxes, the recognition of income tax loss and tax credit carryforwards and management's current assessment of the required valuation allowance resulted in an estimated effective income tax rate of 29% for the nine months ended September 28, 1997. The Company's effective income tax rate was 35.1% for the nine months ended September 29, 1996. This resulted from the mix of foreign and domestic earnings, income tax credits, changes in previously established valuation allowances for deferred tax assets and certain Orbit merger costs not being deductible for income tax purposes. On July 29, 1997, the Company's Board of Directors declared a two-for-one stock split of the Company's common stock effected in the form of a stock dividend which was distributed to shareholders on September 2, 1997 to shareholders of record as of August 15, 1997. This increased the number of shares outstanding to approximately 25.2 million from 12.6 million. The Company transferred $126 from additional paid-in 13 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Dollars in thousands) B. RESULTS OF OPERATIONS, CONTINUED capital to the common stock par account to reflect the stock split. All share and per share data included in this report have been retroactively restated to reflect the split. C. ACQUISITIONS During the second quarter of 1997, the Company acquired DSI and PCT. DSI provides custom design and engineering services for printed circuit assemblies to original equipment manufacturers. PCT is a manufacturer of solutions to automate the transfer of bare printed circuit boards and assembled circuits through the entire manufacturing process including final box-build assembly. The cash purchase price, net of cash acquired, for these acquisitions was $7,939. The fair value of the assets acquired and liabilities assumed from these acquisitions were immaterial. The cost in excess of net assets acquired through these acquisitions amounted to $6,812. In April 1996, the Company acquired Chemtech, a quick-turn manufacturer of surface mount printed circuit board solder cream stencils located in the United Kingdom. The cash purchase price, net of cash acquired, was $2,056. The fair value of the assets acquired and liabilities assumed were immaterial. The cost in excess of net assets acquired amounted to $3,658. These acquisitions were accounted for as purchases with the results of operations from the acquired businesses included in the Company's results of operations from the acquisition dates forward. Pro forma results of operations would not be materially different from the historical results reported. The costs of these acquisitions have been allocated on the basis of the estimated fair value of the assets acquired and the liabilities assumed. D. LIQUIDITY, CAPITAL RESOURCES AND COMMITMENTS At September 28, 1997 the Company had working capital of $157,525 and a current ratio of 2.0x compared to working capital of $86,707 and a current ratio of 2.2x at December 29, 1996. Cash and cash equivalents at September 28, 1997 were $94,441, an increase of $69,431 from $25,010 at December 29, 1996. This increase resulted from cash provided by operating and financing activities of $41,660 and $139,331, respectively, offset by cash used by investing activities of $111,464. The Company's net cash flows used by investing activities amounted to $111,464 and $21,901 for the nine months ended September 28, 1997 and September 29, 1996, respectively. Capital expenditures amounted to $106,103 and $20,026 for the nine months ended September 28, 1997 and September 29, 1996, respectively. This increase is mainly attributable to the $46,064 acquisition of the IBM Austin printed circuit board fabrication facility combined with the Company's continued investment in state-of-the-art, high-technology equipment for its Multek and Dovatron operating companies which enables the Company to accept increasingly complex and higher-volume orders. In addition, this increase includes approximately $30,622 used in connection with additional capital equipment acquired for Orbit's 6-inch, 0.6 micron process facility. The Company sold $2,578 and $181 of equipment during the nine months ended September 28, 1997 and September 29, 1996, respectively, to allow for the potential replacement of older equipment with state-of-the-art, high-technology equipment. As described above in Section C, Acquisitions, the Company acquired DSI and PCT during the second quarter of 1997. The cash purchase price, net of cash acquired for these acquisitions, was $7,939. In April 1996, the Company acquired Chemtech for a cash purchase price, net of cash acquired, of $2,056. 14 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Dollars in thousands) D. LIQUIDITY, CAPITAL RESOURCES AND COMMITMENTS, CONTINUED The Company's net cash flows provided by financing activities amounted to $139,331 for the nine months ended September 28, 1997. The Company's net cash flows used by financing activities amounted to $17,545 for the nine months ended September 29, 1996. The Company repaid $10,973 and $4,039 in long-term financing obligations in the nine months ended September 28, 1997 and September 29, 1996, respectively. For the nine months ended September 28, 1997 and September 29, 1996, the Company repaid $826 and $16,836, respectively, of notes payable to sellers of various businesses acquired. The Company received $6,064 and $1,384 in proceeds from stock issued under its stock plans in the nine months ended September 28, 1997 and September 29, 1996, respectively. During September, the Company issued $150,000 of 8.50% senior subordinated notes. The proceeds from the issuance of the senior subordinated notes were used to repay the Company's outstanding advances against its line-of-credit. The line-of-credit advances were used for working capital purposes and to fund the Company's $46,064 acquisition of the IBM Austin printed circuit board fabrication facility in August 1997. Debt issue costs associated with the issuance of the senior subordinated notes and the Company's line-of-credit amounted to $4,934 and $314 for the nine-month periods ended September 28, 1997 and September 29, 1996, respectively. Management believes that cash generated from operations, existing cash reserves, leasing capabilities, and the line-of-credit availability will be adequate to fund the Company's current capital commitments. The Company's operations are subject to certain federal, state and local regulatory requirements relating to the use, storage, discharge and disposal of hazardous chemicals used during its manufacturing processes. The Company believes that it is currently operating in compliance with applicable regulations and does not believe that costs of compliance with these laws and regulations will have a material effect upon its capital expenditures, earnings or competitive position. The Company determines the amount of its accruals for environmental matters by analyzing and estimating the range of possible costs in light of information currently available. The imposition of more stringent standards or requirements under environmental laws or regulations, the results of future testing and analysis undertaken by the Company at its operating facilities, or a determination that the Company is potentially responsible for the release of hazardous substances at other sites, could result in expenditures in excess of amounts currently estimated to be required for such matters. No assurance can be given that actual costs will not exceed amounts accrued or that costs will not be incurred with respect to sites as to which no problem is currently known. Further, there can be no assurance that additional environmental matters will not arise in the future. See Note 6 to the condensed consolidated financial statements for a description of commitments, contingencies and environmental matters. E. NEW ACCOUNTING STANDARDS In February 1997, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS No. 128"). The current presentation of primary earnings per share and fully diluted earnings per share pursuant to Accounting Principles Board Opinion No. 15 is replaced with a presentation of basic earnings per share and diluted earnings per share pursuant to SFAS No. 128. Basic earnings per share excludes dilution and is computed by dividing earnings available to common shareholders by the weighted-average number of common shares outstanding for the period. DII's basic earnings per share is expected to be slightly higher than the currently presented 15 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Dollars in thousands) E. NEW ACCOUNTING STANDARDS, CONTINUED primary earnings per share as the effect of dilutive stock options will not be considered in computing basic earnings per share. Similar to fully diluted earnings per share, diluted earnings per share reflects the potential dilution of securities that could share in the earnings. DII's diluted earnings per share is expected to be comparable to the currently presented fully diluted earnings per share. The Company plans to adopt SFAS No. 128 in its fourth quarter ending December 28, 1997 and all historical earnings per share data presented will be restated to conform to the provisions of SFAS No. 128. In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income," which is effective for fiscal years beginning after December 15, 1997. This Statement requires that all items that are required to be recognized under accounting standards as components of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. This Statement further requires that an entity display an amount representing total comprehensive income for the period in that financial statement. This Statement also requires that an entity classify items of other comprehensive income by their nature in a financial statement. For example, other comprehensive income may include foreign currency items and unrealized gains and losses on certain investments in debt and equity securities. Reclassification of financial statements for earlier periods, provided for comparative purposes, is required. The Company will provide disclosures (including restated comparative information) of comprehensive income in its annual consolidated financial statements for its fiscal year ending December 27, 1998. In June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of an Enterprise and Related Information," which will be effective for fiscal years beginning after December 15, 1997. SFAS No. 131 redefines how operating segments are determined and requires disclosure of certain financial and descriptive information about a company's operating segments. This Statement establishes standards for reporting information about operating segments in annual financial statements and requires selected information about operating segments in interim financial reports issued to shareholders. It also establishes standards for related disclosures about products and services, geographic areas and major customers. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. This Statement requires reporting segment profit or loss, certain specific revenue and expense items and segment assets. It also requires reconciliations of total segment revenues, reported in consolidated financial statements. Restatement of comparative information for earlier periods presented is required in the initial year of application. Interim information is not required until the second year of application, at which time comparative information is required. The Company has not determined the impact that the adoption of this new accounting standard will have on its consolidated financial statement disclosures. The Company will provide disclosures (including restated comparative information) of certain financial and descriptive information about its operating segments in its annual consolidated financial statements for its fiscal year ending December 27, 1998. 16 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS In June 1997, a complaint was filed in the District Court of Boulder, Colorado against the Company and three of its officers and directors. An amended complaint was filed on September 5, 1997. The lawsuit purports to be brought on behalf of a class of persons who purchased the Company's common stock during the period from April 1, 1996 through September 8, 1996 and claims violations of Colorado law based on allegedly false and misleading statements made in connection with the offer, sale or purchase of the Company's common stock at allegedly artificially inflated prices, including statements made prior to the Company's acquisition of Orbit. The complaint seeks compensatory and other damages as well as equitable relief. On October 15, 1997, the Company filed a motion to dismiss the amended complaint. On September 8, 1997, a similar complaint, alleging violations of Federal securities laws based on the same allegedly false and misleading statements, purportedly on behalf of the same class of persons, was filed in the U.S. District Court for the District of Colorado against the Company and the same officers and directors. On November 10, 1997, the Company filed a motion to dismiss the Federal action. Both actions were brought by the same plaintiffs' law firm as the Orbit action discussed below. The Company believes that the claims asserted in both actions are without merit and intends to defend against such claims vigorously. There has been no discovery from the Company in either action and neither court has yet set a trial date. A class action complaint for violations of federal securities law was filed against Orbit and three of its officers in 1995, in the U.S. District Court for the Northern District of California. An amended complaint was filed on March 25, 1996. The amended complaint was dismissed on November 12, 1996, with leave to amend only as to certain specified claims relating to the statements made by securities analysts. On January 21, 1997, a second amended complaint was filed. The second amended complaint alleges that Orbit and three of its officers are responsible for actions of securities analysts that allegedly misled the market for Orbit's then existing public common stock. The second amended complaint seeks relief under Section 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder. The second amended complaint seeks compensatory and other damages as well as equitable relief. On September 2, 1997, Orbit filed its answer to the second amended complaint denying responsibility for the actions of securities analysts and further denying that it misled the securities market. The court has not yet set a trial date, but third party discovery is ongoing. In addition to the above matters, the Company is involved in certain other litigation arising in the ordinary course of business. Although management is of the opinion that none of these matters will have a material adverse effect on the consolidated financial position or results of operations of the Company, the ultimate outcome of these matters cannot, at this time, be predicted in light of the uncertainties inherent in litigation. See Note 10 of the 1996 Consolidated Financial Statements included in Part II, Item 8 of the Company's Form 10-K Annual Report for the fiscal year ended December 29, 1996 for contingencies and environmental matters. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None 17 ITEM 6(a). EXHIBITS
EXHIBIT NUMBER DESCRIPTION - ------- ----------- *2.1 Purchase Agreement, dated as of August 5, 1997, by and among International Business Machines Corporation, a New York corporation ("Seller"), Multilayer Tek, L.P., a Texas Limited partnership ("Buyer") and The DII Group, Inc., a Delaware corporation ("Guarantor") (incorporated by reference to Exhibit 2.1 of the Registrant's Report on Form 8-K dated August 29, 1997). 2.2 Exhibit A to Purchase Agreement - Assignment and Assumption Agreement (incorporated by reference to Exhibit 2.2 of the Registrant's Report on Form 8-K dated August 29, 1997). *2.3 Exhibit C to Purchase Agreement - Lease (incorporated by reference to Exhibit 2.3 of the Registrant's Report on Form 8-K dated August 29, 1997). *2.4 Exhibit E to Purchase Agreement - Project Operations Agreement (incorporated by reference to Exhibit 2.4 of the Registrant's Report on Form 8-K dated August 29, 1997). +2.5 Exhibit F to Purchase Agreement - Supply Agreement (incorporated by reference to Exhibit 2.5 of the Registrant's Report on Form 8-K dated August 29, 1997). 2.6 Exhibit G to Purchase Agreement - Bill of Sale (incorporated by reference to Exhibit 2.6 of the Registrant's Report on Form 8-K dated August 29, 1997). 2.7 Exhibit H to Purchase Agreement - Special Warranty Deed (incorporated by reference to Exhibit 2.7 of the Registrant's Report on Form 8-K dated August 29, 1997). 4.1 Indenture - 8.50% Senior Subordinated Notes Due 2007 dated September 19, 1997 between the Registrant and The Chase Trust Company of California, as trustee. 4.2 Purchase Agreement - 8.50% Senior Subordinated Notes Due 2007 dated September 16, 1997 between the Registrant and Salomon Brothers Inc, Donaldson, Lufkin & Jenrette Securities Corporation, and BT Alex. Brown Incorporated, as the initial purchasers. 4.3 Registration Agreement, dated September 16, 1997 between the Registrant and Salomon Brothers Inc, Donaldson, Lufkin & Jenrette Securities Corporation, and BT Alex. Brown Incorporated, as the initial purchasers. 10.1 Second Amendment to the $80,000,000 Revolving Line of Credit dated August 1, 1997 between The DII Group, Inc. and Norwest Bank Colorado, N.A., The Chase Manhattan Bank, N.A., Harris Trust and Savings Bank, and NBD Bank. 10.2 Third Amendment to the $80,000,000 Revolving Line of Credit dated September 15, 1997 between The DII Group, Inc. and Norwest Bank Colorado, N.A., The Chase Manhattan Bank, N.A., Harris Trust and Savings Bank, and NBD Bank. 10.3 First Amendment to Employment Agreement dated as of August 12, 1997 between The DII Group, Inc. and Ronald R. Budacz. 10.4 First Amendment to Employment Agreement dated as of August 12, 1997 between The DII Group, Inc. and Carl R. Vertuca, Jr.
18 ITEM 6(a). EXHIBITS, CONTINUED
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 10.5 First Amendment to Employment Agreement dated as of August 12, 1997 between The DII Group, Inc. and Ronald R. Snyder. 10.6 Employment Agreement dated as of January 1, 1997 between The DII Group, Inc. and Carl A. Plichta. 10.7 First Amendment to Employment Agreement dated as of August 12, 1997 between The DII Group, Inc. and Carl A. Plichta. 11.1 Statement regarding computation of per share earnings. 27 Financial Data Schedule.
- ---------------- * Schedules were not included but will be furnished supplementally to the Commission upon request. + Confidential treatment has been granted as to portions of this exhibit. ITEM 6(b). REPORTS ON FORM 8-K The Company filed three Current Reports on Form 8-K with the Securities and Exchange Commission during the quarter ended September 28, 1997. The following item was reported in the Form 8-K dated August 18, 1997: Item 2. Acquisition or Disposition of Assets - The Company completed its acquisition of IBM's high volume printed circuit board fabrication facility located in Austin, Texas pursuant to a Purchase Agreement dated as of August 5, 1997. No financial statements were filed as part of such report. The following item was reported in the Form 8-K dated September 4, 1997: Item 4. Changes in Registrant's Certifying Accountant - The Company terminated the appointment of KPMG Peat Marwick LLP as principal accountants for the Company and engaged Deloitte & Touche LLP as principal accountants. This decision to change accountants was approved by the Audit Committee of the Board of Directors. No financial statements were filed as part of such report. The following item was reported in the Form 8-K dated September 16, 1997: Item 5. Other Events - The Company completed a $150 million private placement of its 8.50% senior subordinated notes due 2007 to certain qualified investors and overseas persons, which notes are not registered or required to be registered under the Securities Act of 1993, as amended. No financial statements were filed as part of such report. 19 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 DII GROUP, INC. Date: November 10, 1997 By: /s/ Carl R. Vertuca, Jr. ------------------ -------------------------- Carl R. Vertuca, Jr. Executive Vice President - Finance, Administration and Corporate Development Date: November 10, 1997 By: /s/ Thomas J. Smach ------------------ -------------------------- Thomas J. Smach Chief Financial Officer 20 EXHIBIT INDEX
EXHIBIT LOCATION OF EXHIBIT IN NUMBER DESCRIPTION SEQUENTIAL NUMBERING SYSTEM - ------- ----------- --------------------------- *2.1 Purchase Agreement, dated as of August 5, 1997, by and among International Business Machines Corporation, a New York corporation ("Seller"), Multilayer Tek, L.P., a Texas Limited partnership ("Buyer") and The DII Group, Inc., a Delaware corporation ("Guarantor") (incorporated by reference to Exhibit 2.1 of the Registrant's Report on Form 8-K dated August 29, 1997). 2.2 Exhibit A to Purchase Agreement - Assignment and Assumption Agreement (incorporated by reference to Exhibit 2.2 of the Registrant's Report on Form 8-K dated August 29, 1997). *2.3 Exhibit C to Purchase Agreement - Lease (incorporated by reference to Exhibit 2.3 of the Registrant's Report on Form 8-K dated August 29, 1997). *2.4 Exhibit E to Purchase Agreement - Project Operations Agreement (incorporated by reference to Exhibit 2.4 of the Registrant's Report on Form 8-K dated August 29, 1997). +2.5 Exhibit F to Purchase Agreement - Supply Agreement (incorporated by reference to Exhibit 2.5 of the Registrant's Report on Form 8-K dated August 29, 1997). 2.6 Exhibit G to Purchase Agreement - Bill of Sale (incorporated by reference to Exhibit 2.6 of the Registrant's Report on Form 8-K dated August 29, 1997). 2.7 Exhibit H to Purchase Agreement - Special Warranty Deed (incorporated by reference to Exhibit 2.7 of the Registrant's Report on Form 8-K dated August 29, 1997). 4.1 Indenture - 8.50% Senior Subordinated Notes Due 2007 dated September 19, 1997 between the Registrant and The Chase Trust Company of California, as trustee. 4.2 Purchase Agreement - 8.50% Senior Subordinated Notes Due 2007 dated September 16, 1997 between the Registrant and Salomon Brothers Inc, Donaldson, Lufkin & Jenrette Securities Corporation, and BT Alex. Brown Incorporated, as the initial purchasers.
21 4.3 Registration Agreement, dated September 16, 1997 between the Registrant and Salomon Brothers Inc, Donaldson, Lufkin & Jenrette Securities Corporation, and BT Alex. Brown Incorporated, as the initial purchasers. 10.1 Second Amendment to the $80,000,000 Revolving Line of Credit dated August 1, 1997 between The DII Group, Inc. and Norwest Bank Colorado, N.A., The Chase Manhattan Bank, N.A., Harris Trust and Savings Bank, and NBD Bank. 10.2 Third Amendment to the $80,000,000 Revolving Line of Credit dated September 15, 1997 between The DII Group, Inc. and Norwest Bank Colorado, N.A., The Chase Manhattan Bank, N.A., Harris Trust and Savings Bank, and NBD Bank. 10.3 First Amendment to Employment Agreement dated as of August 12, 1997 between The DII Group, Inc. and Ronald R. Budacz. 10.4 First Amendment to Employment Agreement dated as of August 12, 1997 between The DII Group, Inc. and Carl R. Vertuca, Jr. 10.5 First Amendment to Employment Agreement dated as of August 12, 1997 between The DII Group, Inc. and Ronald R. Snyder. 10.6 Employment Agreement dated as of January 1, 1997 between The DII Group, Inc. and Carl A. Plichta. 10.7 First Amendment to Employment Agreement dated as of August 12, 1997 between The DII Group, Inc. and Carl A. Plichta. 11.1 Statement regarding computation of per share earnings. 27 Financial Data Schedule.
- ---------------- * Schedules were not included but will be furnished supplementally to the Commission upon request. + Confidential treatment has been granted as to portions of this exhibit. EX-4.1 2 INDENTURE DATED 9/19/97 1 EXHIBIT 4.1 ================================================================================ THE DII GROUP, INC. 8.50% Senior Subordinated Notes due 2007 __________________________________________ INDENTURE Dated as of September 19, 1997 __________________________________________ CHASE TRUST COMPANY OF CALIFORNIA Trustee ================================================================================ 2 TABLE OF CONTENTS
Page ---- ARTICLE I Definitions and Incorporation by Reference SECTION 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . 1 SECTION 1.02. Other Definitions . . . . . . . . . . . . . . . . . . . . . . 27 SECTION 1.03. Incorporation by Reference of Trust Indenture Act . . . . . . 28 SECTION 1.04. Rules of Construction . . . . . . . . . . . . . . . . . . . . 28 ARTICLE II The Securities SECTION 2.01. Amount of Securities; Issuable in Series . . . . . . . . . . 29 SECTION 2.02. Form and Dating . . . . . . . . . . . . . . . . . . . . . . . 31 SECTION 2.03. Execution and Authentication . . . . . . . . . . . . . . . . 31 SECTION 2.04. Registrar and Paying Agent . . . . . . . . . . . . . . . . . 32 SECTION 2.05. Paying Agent To Hold Money in Trust . . . . . . . . . . . . . 32 SECTION 2.06. Securityholder Lists . . . . . . . . . . . . . . . . . . . . 33 SECTION 2.07. Replacement Securities . . . . . . . . . . . . . . . . . . . 33 SECTION 2.08. Outstanding Securities . . . . . . . . . . . . . . . . . . . 33 SECTION 2.09. Temporary Securities . . . . . . . . . . . . . . . . . . . . 34 SECTION 2.10. Cancelation . . . . . . . . . . . . . . . . . . . . . . . . . 34 SECTION 2.11. Defaulted Interest . . . . . . . . . . . . . . . . . . . . . 34 SECTION 2.12. CUSIP Numbers . . . . . . . . . . . . . . . . . . . . . . . . 35 ARTICLE III Redemption SECTION 3.01. Notices to Trustee . . . . . . . . . . . . . . . . . . . . . 35
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Page ---- SECTION 3.02. Selection of Securities To Be Redeemed . . . . . . . . . . . 35 SECTION 3.03. Notice of Redemption . . . . . . . . . . . . . . . . . . . . 36 SECTION 3.04. Effect of Notice of Redemption . . . . . . . . . . . . . . . 36 SECTION 3.05. Deposit of Redemption Price . . . . . . . . . . . . . . . . 37 SECTION 3.06. Securities Redeemed in Part . . . . . . . . . . . . . . . . 37 ARTICLE IV Covenants SECTION 4.01. Payment of Securities . . . . . . . . . . . . . . . . . . . . 38 SECTION 4.02. SEC Reports . . . . . . . . . . . . . . . . . . . . . . . . . 38 SECTION 4.03. Limitation Debt . . . . . . . . . . . . . . . . . . . . . . . 39 SECTION 4.04. Limitation on Restricted Payments . . . . . . . . . . . . . . 39 SECTION 4.05. Limitation on Liens . . . . . . . . . . . . . . . . . . . . . 42 SECTION 4.06. Limitation on Issuance or Sale of Capital Stock of Restricted Subsidiaries . . . . . . . . . . . . . . . . . . . . . . 42 SECTION 4.07. Limitation on Asset Sales . . . . . . . . . . . . . . . . . . 42 SECTION 4.08. Limitation on Restrictions on Distributions from Restricted Subsidiaries . . . . . . . . . . . . . . . . . . . . . . 46 SECTION 4.09. Limitation on Transactions with Affiliates . . . . . . . . . 47 SECTION 4.10. Limitation on Layered Debt . . . . . . . . . . . . . . . . . 49 SECTION 4.11. Designation of Restricted and Unrestricted Subsidiaries . . . 49 SECTION 4.12. Change of Control . . . . . . . . . . . . . . . . . . . . . . 50 SECTION 4.13. Compliance Certificate . . . . . . . . . . . . . . . . . . . 51 SECTION 4.14. Further Instruments and Acts . . . . . . . . . . . . . . . . 52 ARTICLE V Successor Company . . . . . . . . . 52
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Page ---- ARTICLE VI Defaults and Remedies SECTION 6.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . 53 SECTION 6.02. Acceleration . . . . . . . . . . . . . . . . . . . . . . . . 55 SECTION 6.03. Other Remedies . . . . . . . . . . . . . . . . . . . . . . . 56 SECTION 6.04. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . 56 SECTION 6.05. Control by Majority . . . . . . . . . . . . . . . . . . . . . 56 SECTION 6.06. Limitation on Suits . . . . . . . . . . . . . . . . . . . . . 57 SECTION 6.07. Rights of Holders to Receive Payment . . . . . . . . . . . . 57 SECTION 6.08. Collection Suit by Trustee . . . . . . . . . . . . . . . . . 58 SECTION 6.09. Trustee May File Proofs of Claim . . . . . . . . . . . . . . 58 SECTION 6.10. Priorities . . . . . . . . . . . . . . . . . . . . . . . . . 58 SECTION 6.11. Undertaking for Costs . . . . . . . . . . . . . . . . . . . . 59 SECTION 6.12. Waiver of Stay or Extension Laws . . . . . . . . . . . . . . 59 ARTICLE VII Trustee SECTION 7.01. Duties of Trustee . . . . . . . . . . . . . . . . . . . . . . 59 SECTION 7.02. Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . 61 SECTION 7.03. Individual Rights of Trustee . . . . . . . . . . . . . . . . 62 SECTION 7.04. Trustee's Disclaimer . . . . . . . . . . . . . . . . . . . . 62 SECTION 7.05. Notice of Defaults . . . . . . . . . . . . . . . . . . . . . 62 SECTION 7.06. Reports by Trustee to Holders . . . . . . . . . . . . . . . . 62 SECTION 7.07. Compensation and Indemnity . . . . . . . . . . . . . . . . . 62 SECTION 7.08. Replacement of Trustee . . . . . . . . . . . . . . . . . . . 63 SECTION 7.09. Successor Trustee by Merger . . . . . . . . . . . . . . . . . 64 SECTION 7.10. Eligibility; Disqualification . . . . . . . . . . . . . . . . 65 SECTION 7.11. Preferential Collection of Claims Against Company . . . . . . 65 ARTICLE VIII Discharge of Indenture; Defeasance SECTION 8.01. Discharge of Liability on Securities; Defeasance . . . . . . 65
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Page ---- SECTION 8.02. Conditions to Defeasance . . . . . . . . . . . . . . . . . . 67 SECTION 8.03. Application to Trust Money . . . . . . . . . . . . . . . . . 68 SECTION 8.04. Repayment to Company . . . . . . . . . . . . . . . . . . . . 68 SECTION 8.05. Indemnity for Government Obligations . . . . . . . . . . . . 68 SECTION 8.06. Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . 69 ARTICLE IX Amendments SECTION 9.01. Without Consent of Holders . . . . . . . . . . . . . . . . . 69 SECTION 9.02. With Consent of Holders . . . . . . . . . . . . . . . . . . . 70 SECTION 9.03. Compliance with Trust Indenture Act . . . . . . . . . . . . . 71 SECTION 9.04. Revocation and Effect of Consents and Waivers . . . . . . . . 72 SECTION 9.05. Notation on or Exchange of Securities . . . . . . . . . . . . 72 SECTION 9.06. Trustee To Sign Amendments . . . . . . . . . . . . . . . . . 72 SECTION 9.07. Payment for Consent . . . . . . . . . . . . . . . . . . . . . 73 ARTICLE X Subordination SECTION 10.01. Agreement To Subordinate . . . . . . . . . . . . . . . . . . 73 SECTION 10.02. Liquidation, Dissolution, Bankruptcy . . . . . . . . . . . . 73 SECTION 10.03. Default on Senior Debt . . . . . . . . . . . . . . . . . . . 74 SECTION 10.04. Acceleration of Payment of Securities . . . . . . . . . . . . 75 SECTION 10.05. When Distribution Must Be Paid Over . . . . . . . . . . . . . 75 SECTION 10.06. Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . 75 SECTION 10.07. Relative Rights . . . . . . . . . . . . . . . . . . . . . . . 75 SECTION 10.08. Subordination May Not Be Impaired by Company . . . . . . . . 75 SECTION 10.09. Rights of Trustee and Paying Agent . . . . . . . . . . . . . 76 SECTION 10.10. Distribution or Notice to Representative . . . . . . . . . . 76
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Page ---- SECTION 10.11. Article X Not To Prevent Events of Default or Limit Right To 76 Accelerate . . . . . . . . . . . . . . . . . . . . . . . SECTION 10.12. Trust Moneys Not Subordinated . . . . . . . . . . . . . . . . 76 SECTION 10.13. Trustee Entitled To Rely . . . . . . . . . . . . . . . . . . 77 SECTION 10.14. Trustee To Effectuate Subordination . . . . . . . . . . . . . 77 SECTION 10.15. Trustee Not Fiduciary for Holders of Senior Debt . . . . . . 77 SECTION 10.16. Reliance by Holders of Senior Debt on Subordination Provisions 78 ARTICLE XI Miscellaneous SECTION 11.01. Trust Indenture Act Controls . . . . . . . . . . . . . . . . 78 SECTION 11.02. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 SECTION 11.03. Communication by Holders with Other Holders . . . . . . . . . 79 SECTION 11.04. Certificate and Opinion as to Conditions Precedent . . . . . 79 SECTION 11.05. Statements Required in Certificate or Opinion . . . . . . . . 79 SECTION 11.06. When Securities Disregarded . . . . . . . . . . . . . . . . . 80 SECTION 11.07. Rules by Trustee, Paying Agent and Registrar . . . . . . . . 80 SECTION 11.08. Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . 80 SECTION 11.09. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 80 SECTION 11.10. No Recourse Against Others . . . . . . . . . . . . . . . . . 81 SECTION 11.11. Successors . . . . . . . . . . . . . . . . . . . . . . . . . 81 SECTION 11.12. Multiple Originals . . . . . . . . . . . . . . . . . . . . . 81 SECTION 11.13. Table of Contents; Headings . . . . . . . . . . . . . . . . . 81 Appendix A Provisions Relating to Initial Securities and Exchange Securities Exhibit 1 to Appendix A Form of Initial Security Exhibit A Form of Exchange Security
7 CROSS-REFERENCE TABLE
TIA Indenture Section Section - ------- ------- 310(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10 (a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10 (a)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A. (a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A. (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.08; 7.10 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A. 311(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A. 312(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.06 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.03 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.03 313(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06 (b)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A. (b)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.02 (d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.06 314(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.02; 4.11; 11.02 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A. (c)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.04 (c)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.04 (c)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A. (d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A. (e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.05 (f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.11 315(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.01 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.05; 11.02 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.01 (d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.01 (e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.11 316(a) (last sentence) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.06 (a)(1)(A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.05 (a)(1)(B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.04 (a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A. (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.07 317(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.08
8 (a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.09 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.05 318(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.01
N.A. Means Not Applicable. Note: This Cross-Reference Table shall not, for any purposes, be deemed to be part of this Indenture. 9 INDENTURE dated as of September 19, 1997, between THE DII GROUP, INC., a Delaware corporation (the "Company"), and CHASE TRUST COMPANY OF CALIFORNIA, as Trustee (the "Trustee"). Each party agrees as follows for the benefit of the other party and for the equal and ratable benefit of the Holders of the Company's 8.50% Senior Subordinated Notes due 2007, to be issued, from time to time, in one or more series as in this Indenture provided (the "Initial Securities") and, if and when issued pursuant to a registered or private exchange for the Initial Securities, the Company's 8.50% Senior Subordinated Notes due 2007 (the "Exchange Securities" and, together with the Initial Securities, the "Securities"): ARTICLE I Definitions and Incorporation by Reference SECTION 1.01. Definitions. "Acquired Debt" means Debt of a Person existing at the time such Person became a Restricted Subsidiary or assumed in connection with the acquisition of Property and not incurred in connection with or in anticipation of the transaction or series of related transactions pursuant to which such Person became a Restricted Subsidiary or such Property was acquired. "Additional Assets" means (a) any Property (other than cash, cash equivalents and securities) to be owned by the Company or any Restricted Subsidiary and used in a Related Business; or (b) Capital Stock of a Person that becomes a Restricted Subsidiary as a result of the acquisition of such Capital Stock by the Company or another Restricted Subsidiary from any Person other than an Affiliate of the Company; provided, however, that, in the case of clause (b), such Restricted Subsidiary is primarily engaged in a Related Business. "Affiliate" of any specified Person means (a) any other Person, directly or indirectly, controlling or controlled by or under direct or indirect common control with such specified Person or (b) any other Person who is a 10 2 director or officer of (i) such specified Person, (ii) any Subsidiary of such specified Person or (iii) any Person described in clause (a) above. For the purposes of this definition, "control" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. For purposes of Sections 4.07 and 4.09 and the definition of the term "Additional Assets" only, "Affiliate" shall also mean any beneficial owner of shares representing 5% or more of the total voting power of the Voting Stock (on a fully diluted basis) of the Company or of rights or warrants to purchase such Voting Stock (whether or not currently exercisable) and any Person who would be an Affiliate of any such beneficial owner pursuant to the first sentence hereof. "Asset Sale" means any sale, lease, transfer, issuance or other disposition (or series of related sales, leases, transfers, issuances or dispositions) by the Company or any Restricted Subsidiary, including any disposition by means of a merger, consolidation or similar transaction (each referred to for the purposes of this definition as a "disposition"), of (a) any shares of Capital Stock of a Restricted Subsidiary (other than directors' qualifying shares or shares required by applicable law to be held by a Person other than the Company or any Restricted Subsidiary), (b) all or substantially all the assets of any division or line of business of the Company or any Restricted Subsidiary or (c) any other assets of the Company or any Restricted Subsidiary outside of the ordinary course of business of the Company or such Restricted Subsidiary (other than, in the case of (a), (b) and (c) above, (i) any disposition by a Restricted Subsidiary to the Company or by the Company or a Restricted Subsidiary to a Wholly Owned Subsidiary, (ii) for purposes of Section 4.07 only, any disposition that constitutes a Restricted Payment permitted by Section 4.07, (iii) any disposition effected in compliance with Section 5.01 and (iv) any disposition of Property having, together with other Property disposed of pursuant to the same transaction or any related transactions, an aggregate Fair Market Value of less than $5,000,000). "Attributable Debt" in respect of any Sale and Leaseback Transaction means, at any date of determination, (a) if such Sale and Leaseback Transaction is a Capital Lease Obligation, the amount of Debt represented thereby according to the definition of the term "Capital Lease 11 3 Obligation" and (b) in all other instances, the present value (discounted at the interest rate borne by the Securities, compounded annually) of the total obligations of the lessee for rental payments during the remaining term of the lease included in such Sale and Leaseback Transaction (including any period for which such lease has been extended). "Average Life" means, as of any date of determination, with respect to any Debt or Preferred Stock, the quotient obtained by dividing (a) the sum of the product of the numbers of years (rounded to the nearest one-twelfth of one year) from the date of determination to the dates of each successive scheduled principal payment of such Debt or redemption or similar payment with respect to such Preferred Stock multiplied by the amount of such payment by (b) the sum of all such payments. "Board of Directors" means the Board of Directors of the Company (or, in the case of Section 4.09(iii), the applicable Restricted Subsidiary) or any committee thereof duly authorized to act on behalf of such Board. "Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification. "Business Day" means each day which is not a Legal Holiday. "Capital Expenditure Debt" means Debt Incurred by any Person to finance a capital expenditure so long as (a) such capital expenditure is or should be included as an addition to "Property, plant and equipment" in accordance with GAAP and (b) such Debt is Incurred within 180 days of the date such capital expenditure is made. "Capital Lease Obligations" means any obligation under a lease that is required to be capitalized for financial reporting purposes in accordance with GAAP; and the amount of Debt represented by such obligation shall be the capitalized amount of such obligations determined in accordance with GAAP; and the Stated Maturity thereof shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be terminated by the lessee without payment of a penalty. For purposes of Section 4.05, a Capital Lease 12 4 Obligation shall be deemed secured by a Lien on the Property being leased. "Capital Stock" means, with respect to any Person, any and all shares or other equivalents (however designated) of corporate stock, partnership interests or any other participation, right, warrant, option or other interest in the nature of an equity interest in such Person, including Preferred Stock, but excluding any debt security convertible or exchangeable into such equity interest. "Capital Stock Sale Proceeds" means the aggregate Net Cash Proceeds received by the Company from the issue or sale (other than to a Subsidiary of the Company or an employee stock ownership plan or trust established by the Company or any of its Subsidiaries for the benefit of their employees) by the Company of any class of its Capital Stock (other than Disqualified Stock) after the Issue Date. "Change of Control" means the occurrence of any of the following events: (a) if any "Person" or "group" (as such terms are used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act or any successor provision to either of the foregoing) becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act, except that a Person will be deemed to have "beneficial ownership" of all shares that any such Person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of 35% or more of the total voting power of all classes of the Voting Stock of the Company; or (b) the sale, transfer, assignment, lease, conveyance or other disposition, directly or indirectly, of all or substantially all the assets of the Company and its Restricted Subsidiaries, considered as a whole (other than a disposition of such assets as an entirety or virtually as an entirety to a Wholly Owned Subsidiary) shall have occurred, or the Company merges, consolidates or amalgamates with or into any other Person or any other Person merges, consolidates or amalgamates with or into the Company, in any such event pursuant to a transaction in which the outstanding Voting Stock of the Company is reclassified into or exchanged for cash, securities or other Property, other than any such transaction where (i) the outstanding Voting Stock of the Company is reclassified into or 13 5 exchanged for Voting Stock of the surviving corporation and (ii) the holders of the Voting Stock of the Company immediately prior to such transaction own, directly or indirectly, not less than a majority of the Voting Stock of the surviving corporation immediately after such transaction and in substantially the same proportion as before the transaction; or (c) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors (together with any new directors whose election or appointment by such Board or whose nomination for election by the stockholders of the Company was approved by a vote of 66-2/3% of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of such Board of Directors then in office; or (d) the stockholders of the Company shall have approved any plan of liquidation or dissolution of the Company. "Code" means the Internal Revenue Code of 1986, as amended. "Company" means the party named as such in this Indenture until a successor replaces it pursuant to the applicable provisions hereof and, thereafter, means the successor and, for purposes of any provision contained herein and required by the TIA, each other obligor on the indenture securities. "Consolidated Interest Coverage Ratio" means, as of any date of determination, the ratio of (a) the aggregate amount of EBITDA for the period of the most recent four consecutive fiscal quarters ending at least 30 days prior to such determination date to (b) Consolidated Interest Expense for such four fiscal quarters; provided, however, that (i) if the Company or any Restricted Subsidiary has Incurred any Debt since the beginning of such period that remains outstanding or if the transaction giving rise to the need to calculate the Consolidated Interest Coverage Ratio is an Incurrence of Debt, or both, Consolidated Interest Expense for such period shall be calculated after giving effect on a pro forma basis to such Debt as if such Debt had been Incurred on the first day of such period and the discharge 14 6 of any other Debt repaid, repurchased, legally defeased or otherwise discharged with the proceeds of such new Debt as if such discharge had occurred on the first day of such period, (ii) if since the beginning of such period the Company or any Restricted Subsidiary shall have repaid, repurchased, legally defeased or otherwise discharged any Debt with Capital Stock Sale Proceeds, Consolidated Interest Expense for such period shall be calculated after giving effect on a pro forma basis to such discharge as if such discharge had occurred on the first day of such period, (iii) if since the beginning of such period the Company or any Restricted Subsidiary shall have made any Asset Sale or if the transaction giving rise to the need to calculate the Consolidated Interest Coverage Ratio is an Asset Sale, or both, EBITDA for such period shall be reduced by an amount equal to the EBITDA (if positive) directly attributable to the Property which is the subject of such Asset Sale for such period, or increased by an amount equal to the EBITDA (if negative) directly attributable thereto for such period, in either case as if such Asset Sale had occurred on the first day of such period and Consolidated Interest Expense for such period shall be reduced by an amount equal to the Consolidated Interest Expense directly attributable to any Debt of the Company or any Restricted Subsidiary repaid, repurchased, legally defeased or otherwise discharged with respect to the Company and its continuing Restricted Subsidiaries in connection with such Asset Sale for such period, as if such Asset Sale had occurred on the first day of such period (or, if the Capital Stock of any Restricted Subsidiary is sold, by an amount equal to the Consolidated Interest Expense for such period directly attributable to the Debt of such Restricted Subsidiary to the extent the Company and its continuing Restricted Subsidiaries are no longer liable for such Debt after such sale), (iv) if since the beginning of such period the Company or any Restricted Subsidiary (by merger or otherwise) shall have made an Investment in any Restricted Subsidiary (or any Person which becomes a Restricted Subsidiary) or an acquisition of Property, including any acquisition of Property occurring in connection with a transaction causing a calculation to be made hereunder, which constitutes all or substantially all of an operating unit of a business, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto (including the Incurrence of any Debt) as if such Investment or acquisition occurred on the first day of such period and (v) if since the beginning of such period any Person (that subsequently became a Restricted Subsidiary or was merged with or into the Company or any Restricted Subsidiary since the beginning of such 15 7 period) shall have made any Asset Sale, Investment or acquisition of Property that would have required an adjustment pursuant to clause (iii) or (iv) above if made by the Company or a Restricted Subsidiary during such period, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto as if such Asset Sale, Investment or acquisition of Property occurred on the first day of such period. For purposes of this definition, whenever pro forma effect is to be given to an acquisition of Property, the amount of income or earnings relating thereto and the amount of Consolidated Interest Expense associated with any Debt incurred in connection therewith, the pro forma calculations shall be determined in good faith by a responsible financial or accounting Officer and as further contemplated by the definition of the term "pro forma". If any Debt bears a floating rate of interest and is being given pro forma effect, the interest expense on such Debt shall be calculated as if the rate in effect on the date of determination had been the applicable rate for the entire period (taking into account any Interest Rate Agreement applicable to such Debt if such Interest Rate Agreement has a remaining term in excess of 12 months). "Consolidated Interest Expense" means, for any period, the total interest expense of the Company and its consolidated Restricted Subsidiaries, plus, to the extent not included in such total interest expense, and to the extent Incurred by the Company or its Restricted Subsidiaries, (a) interest expense attributable to capital leases, (b) amortization of debt discount and debt issuance cost (other than debt issuance costs incurred in connection with the offering of the Original Securities, the Registered Exchange Offer for the Original Securities or the filing of the Shelf Registration Statement for the Original Securities), (c) capitalized interest, (d) noncash interest expenses, (e) commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing, (f) net costs associated with Hedging Obligations (including amortization of fees), (g) Redeemable Dividends, (h) Preferred Stock dividends in respect of all Preferred Stock of Restricted Subsidiaries held by Persons other than the Company or a Wholly Owned Subsidiary, (i) interest incurred in connection with Investments in discontinued operations, (j) interest actually paid on any Debt of any other Person that is Guaranteed by the Company or any Restricted Subsidiary and (k) the cash contributions to any employee stock ownership plan or similar trust to the extent such contributions are used by such plan or trust to 16 8 pay interest or fees to any Person (other than the Company) in connection with Debt Incurred by such plan or trust. "Consolidated Net Income" means, for any period, the net income (loss) of the Company and its consolidated Subsidiaries; provided, however, that there shall not be included in such Consolidated Net Income (a) any net income (loss) of any Person (other than the Company) if such Person is not a Restricted Subsidiary, except that (i) subject to the exclusion contained in clause (d) below, the Company's equity in the net income of any such Person for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash distributed by such Person during such period to the Company or a Restricted Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution to a Restricted Subsidiary, to the limitations contained in clause (c) below) and (ii) the Company's equity in a net loss of any such Person other than an Unrestricted Subsidiary for such period shall be included in determining such Consolidated Net Income, (b) for the purposes of Section 4.04 only, any net income (loss) of any Person acquired by the Company or any of its consolidated Subsidiaries in a pooling of interests transaction for any period prior to the date of such acquisition, (c) any net income (loss) of any Restricted Subsidiary if such Restricted Subsidiary is subject to restrictions, directly or indirectly, on the payment of dividends or the making of distributions, directly or indirectly, to the Company, except that (i) subject to the exclusion contained in clause (d) below, the Company's equity in the net income of any such Restricted Subsidiary for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash that could have been distributed by such Restricted Subsidiary consistent with such restriction during such period to the Company or another Restricted Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution to another Restricted Subsidiary, to the limitation contained in this clause) and (ii) the Company's equity in a net loss of any such Restricted Subsidiary for such period shall be included in determining such Consolidated Net Income, (d) any gain (or loss) realized upon the sale or other disposition of any Property of the Company or any of its consolidated Subsidiaries (including pursuant to any Sale and Leaseback Transaction) which is not sold or otherwise disposed of in the ordinary course of business and any gain (or loss) realized upon the sale or other disposition of any Capital Stock of any Person, 17 9 (e) any extraordinary gain or loss, (f) the cumulative effect of a change in accounting principles and (g) any noncash compensation expense realized for grants of performance shares, stock options or other stock awards to officers, directors and employees of the Company or any Restricted Subsidiary. Notwithstanding the foregoing, for the purposes of Section 4.04 only, there shall be excluded from Consolidated Net Income any dividends, repayments of loans or advances or other transfers of assets from Unrestricted Subsidiaries to the Company or a Restricted Subsidiary to the extent such dividends, repayments or transfers increase the amount of Restricted Payments permitted under Section 4.04 pursuant to clause (c)(iv) thereof. "Consolidated Net Worth" means the total of the amounts shown on the consolidated balance sheet of the Company and its Restricted Subsidiaries as of the end of the most recent fiscal quarter of the Company ending at least 30 days prior to the taking of any action for the purpose of which the determination is being made, as (a) the par or stated value of all outstanding Capital Stock of the Company plus (b) paid-in capital or capital surplus relating to such Capital Stock plus (c) any retained earnings or earned surplus less (i) any accumulated deficit and (ii) any amounts attributable to Disqualified Stock. "Convertible Subordinated Notes" means the Company's 6% Convertible Subordinated Notes due 2002, issued on October 11, 1995, in an aggregate principal amount of $86,250,000. "Credit Facility" means, with respect to the Company or any Restricted Subsidiary, one or more debt or commercial paper facilities with banks or other institutional lenders (including the Senior Credit Agreement) providing for revolving credit loans, terms loans, receivables or inventory financing (including through the sale of receivables or inventory to such lenders or to special purpose, bankruptcy remote entities formed to borrow from such lenders against such receivables or inventory) or trade letters of credit. "Currency Exchange Protection Agreement" means, in respect of a Person, any foreign exchange contract, currency swap agreement, currency option or other similar agreement or arrangement designed to protect such Person against fluctuations in currency exchange rates. 18 10 "Debt" means, with respect to any Person on any date of determination (without duplication), (a) the principal of and premium (if any) in respect of (i) debt of such Person for money borrowed and (ii) debt evidenced by notes, debentures, bonds or other similar instruments for the payment of which such Person is responsible or liable; (b) all Capital Lease Obligations of such Person and all Attributable Debt in respect of Sale and Leaseback Transactions entered into by such Person; (c) all obligations of such Person issued or assumed as the deferred purchase price of Property, all conditional sale obligations of such Person and all obligations of such Person under any title retention agreement (but excluding trade accounts payable arising in the ordinary course of business); (d) all obligations of such Person for the reimbursement of any obligor on any letter of credit, banker's acceptance or similar credit transaction (other than obligations with respect to letters of credit securing obligations (other than obligations described in (a) through (c) above) entered into in the ordinary course of business of such Person to the extent such letters of credit are not drawn upon or, if and to the extent drawn upon, such drawing is reimbursed no later than the third Business Day following receipt by such Person of a demand for reimbursement following payment on the letter of credit); (e) the amount of all obligations of such Person with respect to the redemption, repayment or other repurchase of any Disqualified Stock or, with respect to any Subsidiary of such Person, any Preferred Stock (but excluding, in each case, any accrued dividends); (f) all obligations of the type referred to in clauses (a) through (e) of other Persons and all dividends of other Persons for the payment of which, in either case, such Person is responsible or liable, directly or indirectly, as obligor, guarantor or otherwise, including by means of any Guarantee; (g) all obligations of the type referred to in clauses (a) through (f) of other Persons secured by any Lien on any Property of such Person (whether or not such obligation is assumed by such Person), the amount of such obligation being deemed to be the lesser of the value of such Property or the amount of the obligation so secured; and (h) to the extent not otherwise included in this definition, Hedging Obligations of such Person. The amount of Debt of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above and the maximum liability, upon the occurrence of the contingency giving rise to the obligation, of any contingent obligations at such date. 19 11 "Default" means any event which is, or after notice or passage of time or both would be, an Event of Default. "Designated Senior Debt" means any Senior Debt which has, at the time of determination, an aggregate principal amount outstanding of at least $25,000,000 (including the amount of all undrawn commitments and matured and contingent reimbursement obligations pursuant to letters of credit thereunder) that is specifically designated in the instrument evidencing such Senior Debt and is designated in a notice delivered by the Company to the holders or a Representative of the holders of such Senior Debt and in an Officers' Certificate delivered to the Trustee as "Designated Senior Debt" of the Company for purposes of this Indenture. "Disqualified Stock" means, with respect to any Person, Redeemable Stock of such Person as to which (i) the maturity, (ii) mandatory redemption or (iii) redemption, conversion or exchange at the option of the holder thereof, occurs, or may occur, on or prior to the first anniversary of the Stated Maturity of the Securities; provided, however, that Redeemable Stock in such Person that would not otherwise be characterized as Disqualified Stock under this definition shall not constitute Disqualified Stock if such Redeemable Stock is convertible or exchangeable into Debt solely at the option of the issuer thereof; provided further, however, that any Capital Stock that would not constitute Disqualified Stock but for the provisions thereof giving holders thereof the right to require such Person to repurchase or redeem such Capital Stock upon the occurrence of an Asset Sale or Change of Control occurring prior to the Stated Maturity of the Securities shall not constitute Disqualified Stock if the Asset Sale or Change of Control provisions applicable to such Capital Stock are no more favorable to the holders of such Capital Stock than pursuant to Sections 4.07 and 4.12 and such Capital Stock specifically provides that (a) such Person shall not repurchase or redeem any such Capital Stock pursuant to such provisions prior to such Person having repurchased all the Securities that are required to be repurchased pursuant to such Sections and (b) no default, event of default or similar occurrence under the terms of such Capital Stock shall result from such Person not so repurchasing or redeeming any such Capital Stock because of the prohibition described in the preceding clause (a). 20 12 "EBITDA" means, for any period, an amount equal to, for the Company and its consolidated Restricted Subsidiaries, (a) the sum of Consolidated Net Income for such period plus the following to the extent reducing Consolidated Net Income for such period: (i) the provision for taxes based on income or profits or utilized in computing net loss, (ii) Consolidated Interest Expense, (iii) depreciation expense, (iv) amortization of intangibles and (v) any other noncash items reducing Consolidated Net Income (other than items that will require cash payments and for which an accrual or reserve is, or is required by GAAP to be, made), minus (b) all noncash items increasing Consolidated Net Income for such period. Notwithstanding the foregoing, the provision for taxes based on the income or profits of, and the depreciation and amortization of, a Restricted Subsidiary shall be added to Consolidated Net Income to compute EBITDA only to the extent (and in the same proportion) that the net income of such Restricted Subsidiary was included in calculating Consolidated Net Income and only if a corresponding amount would be permitted at the date of determination to be dividended to the Company by such Restricted Subsidiary without prior approval (that has not been obtained), pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to such Restricted Subsidiary or its stockholders. "Exchange Act" means the Securities Exchange Act of 1934. "Fair Market Value" means, with respect to any Property, the price which could be negotiated in an arm's-length free market transaction, for cash, between a willing seller and a willing buyer, neither of whom is under undue pressure or compulsion to complete the transaction. "GAAP" means United States generally accepted accounting principles as in effect on the Issue Date, including those set forth (a) in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants, (b) in the statements and pronouncements of the Financial Accounting Standards Board, (c) in such other statements by such other entity as approved by a significant segment of the accounting profession and (d) the rules and regulations of the SEC governing the inclusion of financial statements (including pro forma financial statements) in periodic reports required to be filed pursuant to Section 13 of the 21 13 Exchange Act, including opinions and pronouncements in staff accounting bulletins and similar written statements from the accounting staff of the SEC. "Government Obligations" means direct obligations (or certificates representing an ownership interest in such obligations) of the United States of America or any state thereof (including any agency or instrumentality thereof) for the payment of which the full faith and credit of the United States of America or such state is pledged and which are not callable or redeemable at the issuer's option, provided that, in the case of any such state, (a) the long-term debt of such state is rated "A-3" or "A-" or higher according to Moody's or S&P (or such similar equivalent rating by at least one "nationally recognized statistical rating organization" (as defined in Rule 436 under the Securities Act)) and (b) such obligations mature within 365 days of the date of acquisition thereof. "Guarantee" means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Debt of any other Person and any obligation, direct or indirect, contingent or otherwise, of such Person (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt of such other Person (whether arising by virtue of partnership arrangements, or by agreements to keep-well, to purchase assets, goods, securities or services, to take-or-pay or to maintain financial statement conditions or otherwise) or (b) entered into for the purpose of assuring in any other manner the obligee against loss in respect thereof (in whole or in part); provided, however, that the term "Guarantee" shall not include (a) endorsements for collection or deposit in the ordinary course of business or (b) a contractual commitment by one Person to invest in another Person for so long as such Investment is reasonably expected to constitute a Permitted Investment under clause (b) of the definition of "Permitted Investments". The term "Guarantee" used as a verb has a corresponding meaning. "Hedging Obligation" of any Person means any obligation of such Person pursuant to any Interest Rate Agreement, Currency Exchange Protection Agreement or any other similar agreement or arrangement. "Holder" or "Securityholder" means the Person in whose name a Security is registered on the Security Register. 22 14 "Incur" means, with respect to any Debt or other obligation of any Person, to create, issue, incur (by merger, conversion, exchange or otherwise), extend, assume, Guarantee or become liable in respect of such Debt or other obligation or the recording, as required pursuant to GAAP or otherwise, of any such Debt or obligation on the balance sheet of such Person (and "Incurrence" and "Incurred" shall have meanings correlative to the foregoing); provided, however, that a change in GAAP that results in an obligation of such Person that exists at such time, and is not theretofore classified as Debt, becoming Debt shall not be deemed an Incurrence of such Debt; provided further, however, that solely for purposes of determining compliance with Section 4.03, amortization of debt discount shall not be deemed to be the Incurrence of Debt, provided that in the case of Debt sold at a discount, the amount of such Debt Incurred shall at all times be the aggregate principal amount at Stated Maturity. "Indenture" means this Indenture as amended or supplemented from time to time. "Independent Appraiser" means an investment banking firm of national standing or any third party appraiser of national standing, provided that such firm or appraiser is not an Affiliate of the Company. "Interest Rate Agreement" means, for any Person, any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement or other similar agreement designed to protect against fluctuations in interest rates. "Investment" by any Person means any direct or indirect loan (other than advances to customers in the ordinary course of business that are recorded as accounts receivable on the balance sheet of such Person), advance or other extension of credit or capital contribution (by means of transfers of cash or other Property (other than, for purposes of the definition of "Restricted Payment" only, Capital Stock of the Company which is not Disqualified Stock) to others or payments for Property or services for the account or use of others, or otherwise) to, or Incurrence of a Guarantee of any obligation of, or purchase or acquisition of Capital Stock, bonds, notes, debentures or other securities or evidence of Debt issued by, any other Person. For purposes of Section 4.11, the definition of "Restricted Payment" and Section 4.04, "Investment" shall include the portion of the Fair Market Value of the net 23 15 assets of any Subsidiary of the Company that is proportionate to the Company's equity interest in such Subsidiary at the time that such Subsidiary is designated an Unrestricted Subsidiary; provided, however, that upon a redesignation of such Subsidiary as a Restricted Subsidiary, the Company shall be deemed to continue to have a permanent "Investment" in an Unrestricted Subsidiary equal to an amount (if positive) equal to (a) the Company's "Investment" in such Subsidiary at the time of such redesignation less (b) the portion of the Fair Market Value of the net assets of such Subsidiary that is proportionate to the Company's equity interest in such Subsidiary at the time of such redesignation. In determining the amount of any Investment made by transfer of any Property other than cash, such Property shall be valued at its Fair Market Value at the time of such Investment. "Issue Date" means the date on which the Original Securities are initially issued. "Lien" means, with respect to any Property of any Person, any mortgage or deed of trust, pledge, hypothecation, assignment, deposit arrangement, security interest, lien, charge, easement (other than any easement not materially impairing usefulness or marketability), encumbrance, preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever on or with respect to such Property (including any Capital Lease Obligation, conditional sale or other title retention agreement having substantially the same economic effect as any of the foregoing or any Sale and Leaseback Transaction). "Moody's" means Moody's Investors Service, Inc. and the successor to the rating agency business thereof. "Net Available Cash" from any Asset Sale means cash payments received therefrom (including any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable or otherwise, but only as and when received, but excluding any other consideration received in the form of assumption by the acquiring Person of Debt or other obligations relating to such Properties or received in any other noncash form), in each case net of (a) all legal, title and recording tax expenses, commissions and other fees and expenses incurred, and all Federal, state, provincial, foreign and local taxes required to be accrued as a liability under GAAP, as a consequence of such Asset Sale, (b) all payments made on any Debt which is secured by any Property subject to such Asset 24 16 Sale, in accordance with the terms of any Lien upon or other security agreement of any kind with respect to such Property, or which must by its terms, or in order to obtain a necessary consent to such Asset Sale, or by applicable law, be repaid out of the proceeds from such Asset Sale, (c) all distributions and other payments required to be made to minority interest holders in Subsidiaries or joint ventures as a result of such Asset Sale and (d) the deduction of appropriate amounts provided by the seller as a reserve, in accordance with GAAP, against any liabilities associated with the Property disposed in such Asset Sale and retained by the Company or any Restricted Subsidiary after such Asset Sale. "Net Cash Proceeds" means, with respect to any issuance or sale of Capital Stock, the cash proceeds of such issuance or sale, net of attorneys' fees, accountants' fees, underwriters' or placement agents' fees, discounts or commissions and brokerage, consultant and other fees actually incurred in connection with such issuance or sale and net of taxes paid or payable as a result thereof. "Officer" means the Chief Executive Officer, the President, the Chief Financial Officer or any Vice President of the Company. "Officers' Certificate" means a certificate signed by two Officers of the Company, at least one of whom shall be the principal executive officer, principal financial officer or principal accounting officer of the Company, and delivered to the Trustee. "Opinion of Counsel" means a written opinion from legal counsel who is acceptable to the Trustee. The counsel may be an employee of or counsel to the Company or the Trustee. 25 17 "Permitted Debt" means: (a) Debt under the Credit Facility, provided that the aggregate principal amount of all such Debt under the Credit Facility, together with all Debt Incurred pursuant to clause (k) of this paragraph in respect of Debt previously Incurred pursuant to this clause (a), at any one time outstanding does not exceed the greater of (i) $80,000,000, which amount shall be permanently reduced by the amount of Net Available Cash used to repay Debt under the Credit Facility, and not subsequently reinvested in Additional Assets or used to purchase Securities, pursuant to Section 4.07, and (ii) the sum of (A) 75% of the book value of the inventory of the Company and its Restricted Subsidiaries and (B) 85% of the book value of the accounts receivable of the Company and its Restricted Subsidiaries, in each case as of the end of the most recent fiscal quarter (ending at least 30 days prior to the date of determination) for which financial statements of the Company have been provided to the holders of Securities pursuant to Section 4.02; (b) Capital Expenditure Debt, provided that (i) the aggregate principal amount of such Debt does not exceed the Fair Market Value (on the date of the Incurrence thereof) of the Property acquired, constructed or leased and (ii) after giving pro forma effect to the Incurrence of such Debt, the Company would have been able to Incur $1.00 of additional Debt pursuant to Section 4.03(a)(i); (c) Debt of the Company owing to and held by any Wholly Owned Subsidiary or Debt of any Restricted Subsidiary issued to and held by the Company or any Wholly Owned Subsidiary; provided, however, that any subsequent issue or transfer of Capital Stock or other event that results in any such Wholly Owned Subsidiary ceasing to be a Wholly Owned Subsidiary or any subsequent transfer of any such Debt (except to the Company or a Wholly Owned Subsidiary) shall be deemed, in each case, to constitute the Incurrence of such Debt by the issuer thereof; (d) Debt under Interest Rate Agreements entered into by the Company or any Restricted Subsidiary for the purpose of limiting interest rate risk in the ordinary course of the financial management of the Company or such Restricted Subsidiary and not for speculative purposes, provided that the obligations 26 18 under such agreements are directly related to payment obligations on Debt otherwise permitted by the terms of Section 4.03; (e) Debt under Currency Exchange Protection Agreements entered into by the Company or any Restricted Subsidiary for the purpose of limiting currency exchange rate risks directly related to transactions entered into by the Company or such Restricted Subsidiary in the ordinary course of business and not for speculative purposes; (f) Acquired Debt, provided that after giving pro forma effect to the Incurrence of such Debt, the Company would have been able to Incur $1.00 of additional Debt pursuant to Section 4.03(a)(i); (g) Debt in connection with one or more standby letters of credit or performance, surety or appeal bonds issued in the ordinary course of business or pursuant to self-insurance obligations and not in connection with the borrowing of money or the obtaining of advances or credit; (h) Debt outstanding on the Issue Date not otherwise described in clauses (a) through (g) above; (i) Debt in an aggregate principal amount, together with all other Permitted Debt of Restricted Subsidiaries (other than under clause (j) below), at any one time outstanding not to exceed the product of 2.0 times the aggregate amount of EBITDA for the period of the most recent four consecutive fiscal quarters ending at least 30 days prior to the date such Debt is Incurred, provided that, after giving pro forma effect to the Incurrence of such Debt, the Company would have been able to incur $1.00 of additional Debt pursuant to Section 4.03(a)(i); (j) Debt in an aggregate principal amount at any one time outstanding not to exceed $50,000,000; (k) Permitted Refinancing Debt Incurred in respect of Debt Incurred pursuant to Section 4.03(a)(i) or (ii) or clause (a), (b), (f) or (h) above, subject, in the case of clause (a) above, to the limitation set forth in the proviso thereto; and 27 19 (l) Debt consisting of obligations in respect of purchase price adjustments, indemnities or Guarantees of the same or similar matters in connection with the acquisition or disposition of Property. "Permitted Investment" means any Investment by the Company or a Restricted Subsidiary in (a) any Restricted Subsidiary or any Person that will, upon the making of such Investment, become a Restricted Subsidiary, provided that the primary business of such Restricted Subsidiary is a Related Business; (b) any Person if as a result of such Investment such Person is merged or consolidated with or into, or transfers or conveys all or substantially all its Property to, the Company or a Restricted Subsidiary, provided that such Person's primary business is a Related Business; (c) Temporary Cash Investments; (d) receivables owing to the Company or a Restricted Subsidiary, if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms; provided, however, that such trade terms may include such concessionary trade terms as the Company or such Restricted Subsidiary deems reasonable under the circumstances; (e) payroll, travel and similar advances to cover matters that are expected at the time of such advances ultimately to be treated as expenses for accounting purposes and that are made in the ordinary course of business; (f) loans and advances to employees made in the ordinary course of business consistent with past practices of the Company or such Restricted Subsidiary, as the case may be, provided that such loans and advances do not exceed $5,000,000 at any one time outstanding; (g) stock, obligations or other securities received in settlement of debts created in the ordinary course of business and owing to the Company or a Restricted Subsidiary or in satisfaction of judgments; (h) any Person to the extent such Investment represents the noncash portion of the consideration received in connection with an Asset Sale consummated in compliance with Section 4.07 and (i) other Investments made for Fair Market Value that do not exceed $10,000,000 outstanding at any one time in the aggregate. "Permitted Liens" means: (a) Liens securing Senior Debt; (b) Liens to secure Permitted Debt permitted to be Incurred under clause (a) of the definition thereof; 28 20 (c) Liens to secure Permitted Debt permitted to be Incurred under clause (b) of the definition thereof, provided that any such Lien may not extend to any Property of the Company or any Restricted Subsidiary, other than the Property acquired, constructed or leased with the proceeds of such Permitted Debt and any improvements or accessions to such Property; (d) Liens for taxes, assessments or governmental charges or levies on the Property of the Company or any Restricted Subsidiary if the same shall not at the time be delinquent or thereafter can be paid without penalty, or are being contested in good faith and by appropriate proceedings, provided that any reserve or other appropriate provision that shall be required in conformity with GAAP shall have been made therefor; (e) Liens imposed by law, such as carriers', warehousemen's and mechanics' Liens and other similar Liens on the Property of the Company or any Restricted Subsidiary arising in the ordinary course of business and securing payment of obligations which are not more than 60 days past due after notice thereof or are being contested in good faith and by appropriate proceedings; (f) Liens on the Property of the Company or any Restricted Subsidiary Incurred in the ordinary course of business to secure performance of obligations with respect to statutory or regulatory requirements, performance or return-of-money bonds, surety bonds or other obligations of a like nature and Incurred in a manner consistent with industry practice, in each case which are not Incurred in connection with the borrowing of money, the obtaining of advances or credit or the payment of the deferred purchase price of Property and which do not in the aggregate impair in any material respect the use of Property in the operation of the business of the Company and its Restricted Subsidiaries taken as a whole; (g) Liens securing Acquired Debt; provided, however, that any such Lien may not extend to any Property of the Company or any Restricted Subsidiary, other than the Property secured at the time such Acquired Debt was Incurred by the Company or a Restricted Subsidiary and other than Property of any Restricted Subsidiary which is a direct Subsidiary of the Restricted Subsidiary, if any, which Incurred such Acquired Debt; provided further, however, that any such Lien shall not have 29 21 been Incurred in anticipation of or in connection with the transaction or series of transactions pursuant to which such Acquired Debt was so Incurred; (h) pledges or deposits by the Company or any Restricted Subsidiary under workmen's compensation laws, unemployment insurance laws or similar legislation, or good faith deposits in connection with bids, tenders, contracts (other than for the payment of Debt) or leases to which the Company or any Restricted Subsidiary is party, or deposits to secure public or statutory obligations of the Company, or deposits for the payment of rent, in each case Incurred in the ordinary course of business; (i) easements, building restrictions and such other encumbrances or charges against real Property as are of a nature generally existing with respect to properties of a similar character; (j) Liens incurred to secure appeal bonds and judgment and attachment Liens, in each case in connection with litigation or legal proceedings that are being contested in good faith by appropriate proceedings so long as reserves have been established to the extent required by GAAP as in effect at such time and so long as such Liens do not encumber assets by an aggregate amount (together with the amount of any unstayed judgments against the Company or any Restricted Subsidiary) in excess of $10,000,000; (k) Liens existing on the Issue Date not otherwise described in clauses (a) through (j) above; (l) Liens not otherwise described in clauses (a) through (k) above on the Property of any Restricted Subsidiary to secure any Debt permitted to be Incurred by such Restricted Subsidiary pursuant to Section 4.03; and (m) Liens on the Property of the Company or any Restricted Subsidiary to secure any Refinancing, in whole or in part, of any Debt secured by Liens referred to in clause (a), (b), (c), (g), (k) or (l); provided, however, that any such Lien shall be limited to all or part of the same Property that secured the original Lien (together with improvements and accessions to such Property) and the aggregate principal amount of Debt that is secured by such Lien shall not be increased to 30 22 an amount greater than the sum of (i) the outstanding principal amount, or, if greater, the committed amount, of the Debt secured by Liens described under clause (a), (b), (c), (g), (k) or (l) at the time the original Lien became a Permitted Lien under this Indenture and (ii) an amount necessary to pay any premiums, fees and other expenses incurred by the Company or any Restricted Subsidiary in connection with such Refinancing. "Permitted Refinancing Debt" means any Debt that Refinances any other Debt, including any successive Refinancings, so long as (a) such Debt is in an aggregate principal amount (or if Incurred with original issue discount, an aggregate issue price) not in excess of the sum of (i) the aggregate principal amount (or if Incurred with original issue discount, the aggregate accreted value) then outstanding of the Debt being Refinanced and (ii) an amount necessary to pay any fees and expenses, including premiums and defeasance costs, related to such Refinancing, (b) the Average Life of such Debt is equal to or greater than the Average Life of the Debt being Refinanced, (c) the Stated Maturity of such Debt is no earlier than the Stated Maturity of the Debt being Refinanced and (d) such Debt is subordinated in right of payment to Senior Debt or the Securities to at least the same extent, if any, as the Debt being Refinanced; provided, however, that Permitted Refinancing Debt shall not include (A) Debt of a Subsidiary that Refinances Debt of the Company or (B) Debt of the Company or a Restricted Subsidiary that Refinances Debt of an Unrestricted Subsidiary. "Person" means any individual, corporation, company (including any limited liability company), partnership, joint venture, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity. "Preferred Stock" means any Capital Stock of a Person, however designated, which entitles the holder thereof to a preference with respect to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such Person, over shares of any other class of Capital Stock issued by such Person. "principal" of any Indebtedness (including the Securities) means the principal amount of such Indebtedness plus the premium, if any, on such Indebtedness. 31 23 "pro forma" means, with respect to any calculation made or required to be made pursuant to the terms hereof, a calculation performed in accordance with Article 11 of Regulation S-X promulgated under the Securities Act, as interpreted by the Company after consultation with the independent certified public accountants of the Company. "Property" means, with respect to any Person, any interest of such Person in any kind of property or asset, whether real, personal or mixed, or tangible or intangible, including Capital Stock in, and other securities of, any other Person. "Public Equity Offering" means an underwritten primary public offering of common stock of the Company pursuant to an effective registration statement under the Securities Act. "Redeemable Dividend" means, for any dividend in respect of Redeemable Stock, the quotient of such dividend divided by the difference between one and the maximum statutory Federal income tax rate (expressed as a decimal number between 1 and 0) then applicable to the issuer of such Redeemable Stock. "Redeemable Stock" means, with respect to any Person, any Capital Stock that by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable) or otherwise (a) matures or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise, (b) is or may become redeemable or repurchaseable at the option of the holder thereof, in whole or in part, or (c) is convertible or exchangeable for Debt or Disqualified Stock. "Refinance" means, in respect of any Debt, to refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue other Debt, in exchange or replacement for, such indebtedness. "Refinanced" and "Refinancing" shall have correlative meanings. "Related Business" means any business, related, ancillary or complementary to the businesses of the Company and the Restricted Subsidiaries on the Issue Date. "Representative" means the trustee, agent or representative expressly authorized to act in such capacity, if any, for an issue of Senior Debt. 32 24 "Restricted Payment" means (a) any dividend or distribution (whether made in cash, securities or other Property) declared or paid on or with respect to any shares of Capital Stock of the Company or any Restricted Subsidiary (including any payment in connection with any merger or consolidation with or into the Company or any Restricted Subsidiary), except for any dividend or distribution which is made solely to the Company or a Restricted Subsidiary (and, if such Restricted Subsidiary is not a Wholly Owned Subsidiary, to the other shareholders of such Restricted Subsidiary on a pro rata basis or on a basis that results in the receipt by the Company or a Restricted Subsidiary of dividends or distributions of greater value than it would receive on a pro rata basis) or any dividend or distribution payable solely in shares of Capital Stock (other than Redeemable Stock) of the Company; (b) the purchase, repurchase, redemption, acquisition or retirement for value of any Capital Stock of the Company or any Affiliate of the Company (other than a Restricted Subsidiary) or any securities exchangeable for or convertible into any such Capital Stock, including the exercise of any option to exchange any Capital Stock (other than for or into Capital Stock of the Company that is not Disqualified Stock); (c) the purchase, redemption, repurchase, defeasance, acquisition or retirement for value, prior to any scheduled maturity, scheduled sinking fund or mandatory redemption payment, of any Subordinated Obligation (other than the purchase, repurchase or other acquisition of any Subordinated Obligation purchased in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of acquisition); or (d) any Investment (other than Permitted Investments) in any Person. "Restricted Subsidiary" means (a) any Subsidiary of the Company in existence on or after the Issue Date unless such Subsidiary shall have been designated an Unrestricted Subsidiary as permitted or required pursuant Section 4.11 and (b) an Unrestricted Subsidiary which is redesignated as a Restricted Subsidiary as permitted pursuant to Section 4.11. "S&P" means Standard & Poor's Ratings Service or the successor to the rating agency business thereof. "Sale and Leaseback Transaction" means any arrangement relating to Property now owned or hereafter acquired whereby the Company or a Restricted Subsidiary 33 25 transfers such Property to another Person and the Company or a Restricted Subsidiary leases it from such Person. "SEC" means the Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933. "Senior Credit Agreement" means the loan agreement dated as of April 4, 1996, as amended through the Issue Date, among the Company, The Chase Manhattan Bank, Harris Trust and Savings Bank, NBD Bank and Norwest Bank of Colorado, National Association, as agent. "Senior Debt" means (a) all obligations consisting of the principal, premium, if any, and accrued and unpaid interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company to the extent postfiling interest is allowed in such proceeding) in respect of (i) Debt of the Company for borrowed money and (ii) Debt of the Company evidenced by notes, debentures, bonds or other similar instruments permitted under this Indenture for the payment of which the Company is responsible or liable; (b) all Capital Lease Obligations of the Company; (c) all obligations of the Company (i) for the reimbursement of any obligor on any letter of credit, bankers' acceptance or similar credit transaction, (ii) under Hedging Obligations or (iii) issued or assumed as the deferred purchase price of Property and all conditional sale obligations of the Company and all obligations under any title retention agreement permitted under this Indenture; and (d) all obligations of other Persons of the type referred to in clauses (a) and (b) for the payment of which the Company is responsible or liable as Guarantor; provided, however, that Senior Debt does not include (A) Debt of the Company that is by its terms subordinate or pari passu in right of payment to the Securities, including any Senior Subordinated Debt or any Subordinated Obligations; (B) any Debt Incurred in violation of the provisions of this Indenture; (C) accounts payable or any other obligations of the Company to trade creditors created or assumed by the Company in the ordinary course of business in connection with the obtaining of materials or services (including Guarantees thereof or instruments evidencing such liabilities); (D) any liability for Federal, state, local or other taxes owed or owing by the Company; (E) any obligation of the Company to any Subsidiary; or (F) any obligations with respect to any Capital Stock. 34 26 "Senior Subordinated Debt" means the Securities and any other subordinated Debt of the Company that specifically provides that such Debt is to rank pari passu with the Securities and is not subordinated by its terms to any other subordinated Debt or other obligation of the Company which is not Senior Debt. "Significant Subsidiary" means any Restricted Subsidiary that would be a "Significant Subsidiary" of the Company within the meaning of Rule 1-02 under Regulation S-X promulgated by the SEC, substituting 20% for 10% each place it appears therein. "Stated Maturity" means, with respect to any security, the date specified in such security as the fixed date on which the payment of principal of such security is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such security at the option of the holder thereof upon the happening of any contingency beyond the control of the issuer unless such contingency has occurred). "Subordinated Obligation" means any Debt of the Company (whether outstanding on the Issue Date or thereafter Incurred) which is subordinate or junior in right of payment to the Securities pursuant to a written agreement to that effect. "Subsidiary" of any specified Person means any corporation, partnership, joint venture, association or other business entity, whether now existing or hereafter organized or acquired, (a) in the case of a corporation, of which at least 50% of the total voting power of the Voting Stock is held by such first-named Person or any of its Subsidiaries and such first-named Person or any of its Subsidiaries has the power to direct the management, policies and affairs thereof; or (b) in the case of a partnership, joint venture, association, or other business entity, with respect to which such first-named Person or any of its Subsidiaries has the power to direct or cause the direction of the management and policies of such entity by contract or otherwise if in accordance with GAAP such entity is consolidated with the first-named Person for financial statement purposes. "Temporary Cash Investments" means any of the following: (a) Investments in Government Obligations, (b) Investments in time deposit accounts, certificates of 35 27 deposit and money market deposits maturing within 180 days of the date of acquisition thereof issued by a bank or trust company which is organized under the laws of the United States of America or any state thereof or any foreign country recognized by the United States of America, which bank or trust company has capital, surplus and undivided profits aggregating in excess of $500,000,000 or its foreign currency equivalent and a long-term debt rating "A-3" or "A-" or higher according to Moody's or S&P (or such similar equivalent rating by at least one "nationally recognized statistical rating organization" (as defined in Rule 436 under the Securities Act)), (c) repurchase obligations with a term of not more than 30 days for underlying securities of the types described in clause (a) entered into with a bank meeting the qualifications described in clause (b) above, (d) Investments in commercial paper, maturing not more than 90 days after the date of acquisition, issued by a corporation (other than an Affiliate of the Company) organized and in existence under the laws of the United States of America with a rating at the time as of which any Investment therein is made of "P-1" (or higher) according to Moody's or "A-1" (or higher) according to S&P (or such similar equivalent rating by at least one "nationally recognized statistical rating organization" (as defined in Rule 436 under the Securities Act)) and (e) Investments in money market funds all of whose assets are comprised of securities of the types described in clauses (a) through (d) above. "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb) as in effect on the date of this Indenture. "Trustee" means the party named as such in this Indenture until a successor replaces it and, thereafter, means the successor. "Trust Officer" means the President or any other officer or assistant officer of the Trustee assigned by the Trustee to administer the corporate trust matters hereunder. "Uniform Commercial Code" means the New York Uniform Commercial Code as in effect from time to time. "Unrestricted Subsidiary" means (a) any Subsidiary of the Company in existence on the Issue Date that is not a Restricted Subsidiary; (b) any Subsidiary of an Unrestricted Subsidiary; and (c) any Subsidiary of the Company that is designated after the Issue Date as an Unrestricted Subsidiary as permitted pursuant to Section 4.11 and not 36 28 thereafter redesignated as a Restricted Subsidiary as permitted pursuant thereto. "Voting Stock" of a corporation means all classes of Capital Stock of such corporation then outstanding and normally entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof. "Wholly Owned Subsidiary" means, at any time, a Restricted Subsidiary all the Voting Stock of which (except directors' qualifying shares) is at such time owned, directly or indirectly, by the Company and its other Wholly Owned Subsidiaries. SECTION 1.02. Other Definitions.
Defined in Term Section ---- ------- "Affiliate Transaction" . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.09 "Bankruptcy Law" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.01 "Change of Control Offer" . . . . . . . . . . . . . . . . . . . . . . . . . . 4.12 "Change of Control Payment Date" . . . . . . . . . . . . . . . . . . . . . . 4.12 "Change of Control Purchase Price" . . . . . . . . . . . . . . . . . . . . . 4.12 "covenant defeasance option" . . . . . . . . . . . . . . . . . . . . . . . . 8.01 "Custodian" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.01 "Event of Default" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.01 "Exchange Security" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Appendix A "Global Security" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Appendix A "legal defeasance option" . . . . . . . . . . . . . . . . . . . . . . . . . . 8.01 "Legal Holiday" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.08 "Offer Amount" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.07 "Offer Period" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.07 "OID" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.01 "Original Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.01 "pay the Securities" . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.03 "Paying Agent" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.04 "Payment Blockage Notice" . . . . . . . . . . . . . . . . . . . . . . . . . . 10.03 "Payment Blockage Period" . . . . . . . . . . . . . . . . . . . . . . . . . . 10.03 "Prepayment Offer" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.07
37 29 "Prepayment Offer Notice" . . . . . . . . . . . . . . . . . . . . . . . . . . 4.07 "Purchase Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.07 "Registered Exchange Offer . . . . . . . . . . . . . . . . . . . . . . . . . Appendix A "Shelf Registration statement . . . . . . . . . . . . . . . . . . . . . . . . Appendix A "Registrar" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.04 "Surviving Person" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.01
SECTION 1.03. Incorporation by Reference of Trust Indenture Act. This Indenture is subject to the mandatory provisions of the TIA which are incorporated by reference in and made a part of this Indenture. The following TIA terms have the following meanings: "Commission" means the SEC. "indenture securities" means the Securities. "indenture security holder" means a Securityholder. "indenture to be qualified" means this Indenture. "indenture trustee" or "institutional trustee" means the Trustee. "obligor" on the indenture securities means the Company and any other obligor on the indenture securities. All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule have the meanings assigned to them by such definitions. SECTION 1.04. Rules of Construction. Unless the context otherwise requires: (1) a term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (3) "or" is not exclusive; (4) "including" means including without limitation; 38 30 (5) words in the singular include the plural and words in the plural include the singular; (6) unsecured Debt shall not be deemed to be subordinate or junior to secured Debt merely by virtue of its nature as unsecured Debt; (7) the principal amount of any noninterest bearing or other discount security at any date shall be the principal amount thereof that would be shown on a balance sheet of the issuer dated such date prepared in accordance with GAAP; and (8) the principal amount of any Preferred Stock shall be the greater of (i) the maximum liquidation value of such Preferred Stock or (ii) the maximum mandatory redemption or mandatory repurchase price with respect to such Preferred Stock. ARTICLE II The Securities SECTION 2.01. Amount of Securities; Issuable in Series. The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture is $200,000,000. All Securities shall be identical in all respects other than issue prices and issuance dates. The Securities may be issued in one or more series; provided, however, that any Securities issued with original issue discount ("OID") for Federal income tax purposes shall not be issued as part of the same series as any Securities that are issued with a different amount of OID or are not issued with OID. All Securities of any one series shall be substantially identical except as to denomination. Subject to Section 2.03, the Trustee shall authenticate Securities for original issue on the Issue Date in the aggregate principal amount of $150,000,000 (the "Original Securities"). With respect to any Securities issued after the Issue Date (except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, Original Securities pursuant to Section 2.07, 2.08, 2.09 or 3.06 or Appendix A), there shall be established in or pursuant to a resolution of the Board of Directors, and subject to Section 2.03, set forth, or determined in the manner provided in an Officers' Certificate, or established in one or more indentures 39 31 supplemental hereto, prior to the issuance of such Securities: (1) whether such Securities shall be issued as part of a new or existing series of Securities and the title of such Securities (which shall distinguish the Securities of the series from Securities of any other series); (2) the aggregate principal amount of such Securities which may be authenticated and delivered under this Indenture, which shall be in aggregate principal amounts of not less than $10,000,000 per issuance and not to exceed $50,000,000 in the aggregate (except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities of the same series pursuant to Section 2.07, 2.08, 2.09 or 3.06 or Appendix A and except for Securities which, pursuant to Section 2.03, are deemed never to have been authenticated and delivered hereunder); (3) the issue price and issuance date of such Securities, including the date from which interest on such Securities shall accrue; (4) if applicable, that such Securities shall be issuable in whole or in part in the form of one or more Global Securities and, in such case, the respective depositories for such Global Securities, the form of any legend or legends which shall be borne by any such Global Security in addition to or in lieu of that set forth in Exhibit 1 to Appendix A and any circumstances in addition to or in lieu of those set forth in Section 2.3 of Appendix A in which any such Global Security may be exchanged in whole or in part for Securities registered, and any transfer of such Global Security in whole or in part may be registered, in the name or names of Persons other than the depository for such Global Security or a nominee thereof; and (5) if applicable, that such Securities shall not be issued in the form of Initial Securities subject to Appendix A, but shall be issued in the form of Exchange Securities as set forth in Exhibit A. If any of the terms of any series are established by action taken pursuant to a resolution of the Board of Directors, a copy of an appropriate record of such action 40 32 shall be certified by the Secretary or any Assistant Secretary of the Company and delivered to the Trustee at or prior to the delivery of the Officers' Certificate or the trust indenture supplementary thereto setting forth the terms of the series. SECTION 2.02. Form and Dating. Provisions relating to the Initial Securities of each series and the Exchange Securities are set forth in Appendix A, which is hereby incorporated in and expressly made part of this Indenture. The Initial Securities of each series and the Trustee's certificate of authentication shall be substantially in the form of Exhibit 1 to Appendix A which is hereby incorporated in and expressly made a part of this Indenture. The Exchange Securities and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A, which is hereby incorporated in and expressly made a part of this Indenture. The Securities of each series may have notations, legends or endorsements required by law, stock exchange rule, agreements to which the Company is subject, if any, or usage, provided that any such notation, legend or endorsement is in a form reasonably acceptable to the Company. Each Security shall be dated the date of its authentication. The terms of the Securities of each series set forth in Exhibit 1 to Appendix A and Exhibit A are part of the terms of this Indenture. SECTION 2.03. Execution and Authentication. Two Officers shall sign the Securities for the Company by manual or facsimile signature. The Company's seal shall be impressed, affixed, imprinted or reproduced on the Securities and may be in facsimile form. If an Officer whose signature is on a Security no longer holds that office at the time the Trustee authenticates the Security, the Security shall be valid nevertheless. At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Securities of any series executed by the Company to the Trustee for authentication, together with a written order of the Company in the form of an Officers' Certificate for the authentication and delivery of such Securities, and the Trustee in accordance with such written order of the Company shall authenticate and deliver such Securities. A Security shall not be valid until an authorized signatory of the Trustee manually signs the certificate of 41 33 authentication on the Security. The signature shall be conclusive evidence that the Security has been authenticated under this Indenture. The Trustee may appoint an authenticating agent reasonably acceptable to the Company to authenticate the Securities. Unless limited by the terms of such appointment, an authenticating agent may authenticate Securities whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as any Registrar, Paying Agent or agent for service of notices and demands. SECTION 2.04. Registrar and Paying Agent. The Company shall maintain an office or agency where Securities may be presented for registration of transfer or for exchange (the "Registrar") and an office or agency where Securities may be presented for payment (the "Paying Agent"). The Registrar shall keep a register of the Securities and of their transfer and exchange. The Company may have one or more co-registrars and one or more additional paying agents. The term "Paying Agent" includes any additional paying agent. The Company shall enter into an appropriate agency agreement with any Registrar, Paying Agent or co-registrar not a party to this Indenture, which shall incorporate the terms of the TIA. The agreement shall implement the provisions of this Indenture that relate to such agent. The Company shall notify the Trustee of the name and address of any such agent. If the Company fails to maintain a Registrar or Paying Agent, the Trustee shall act as such and shall be entitled to appropriate compensation therefor pursuant to Section 7.07. The Company or any of its domestically incorporated Wholly Owned Subsidiaries may act as Paying Agent, Registrar, co-registrar or transfer agent. The Company initially appoints the Trustee as Registrar and Paying Agent in connection with the Securities. SECTION 2.05. Paying Agent To Hold Money in Trust. Prior to each due date of the principal and interest on any Security, the Company shall deposit with the Paying Agent a sum sufficient to pay such principal and interest when so becoming due. The Company shall require each Paying Agent (other than the Trustee) to agree in writing that the Paying Agent shall hold in trust for the benefit of 42 34 Securityholders or the Trustee all money held by the Paying Agent for the payment of principal of or interest on the Securities and shall notify the Trustee of any default by the Company in making any such payment. If the Company or a Wholly Owned Subsidiary acts as Paying Agent, it shall segregate the money held by it as Paying Agent and hold it as a separate trust fund. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee and to account for any funds disbursed by the Paying Agent. Upon complying with this Section, the Paying Agent shall have no further liability for the money delivered to the Trustee. SECTION 2.06. Securityholder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Securityholders. If the Trustee is not the Registrar, the Company shall furnish to the Trustee, in writing at least five Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Securityholders. SECTION 2.07. Replacement Securities. If a mutilated Security is surrendered to the Registrar or if the Holder of a Security claims that such Security has been lost, destroyed or wrongfully taken, the Company shall issue and the Trustee shall authenticate a replacement Security if the requirements of Section 8-405 of the Uniform Commercial Code are met and the Holder satisfies any other reasonable requirements of the Trustee. If required by the Trustee or the Company, such Holder shall furnish an indemnity bond sufficient in the judgment of the Company and the Trustee to protect the Company, the Trustee, the Paying Agent, the Registrar and any co-registrar from any loss which any of them may suffer if a Security is replaced. The Company and the Trustee may charge the Holder for their expenses in replacing a Security. Every replacement Security is an additional obligation of the Company. SECTION 2.08. Outstanding Securities. Securities outstanding at any time are all Securities authenticated by the Trustee except for those canceled by it, those delivered to it for cancelation and those described in this Section as not outstanding. A Security does not cease to be outstanding 43 35 because the Company or an Affiliate of the Company holds the Security. If a Security is replaced pursuant to Section 2.07, it ceases to be outstanding unless the Trustee and the Company receive proof satisfactory to them that the replaced Security is held by a bona fide purchaser. If the Paying Agent segregates and holds in trust, in accordance with this Indenture, on a redemption date or maturity date money sufficient to pay all principal and interest payable on that date with respect to the Securities (or portions thereof) to be redeemed or maturing, as the case may be, and the Paying Agent is not prohibited from paying such money to the Securityholders on that date pursuant to the terms of this Indenture, then on and after that date such Securities (or portions thereof) cease to be outstanding and interest on them ceases to accrue. SECTION 2.09. Temporary Securities. Until definitive Securities are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Securities. Temporary Securities shall be substantially in the form of definitive Securities but may have variations that the Company considers appropriate for temporary Securities. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate definitive Securities and deliver them in exchange for temporary Securities. SECTION 2.10. Cancelation. The Company at any time may deliver Securities to the Trustee for cancelation. The Registrar and the Paying Agent shall forward to the Trustee any Securities surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel and destroy (subject to the record retention requirements of the Exchange Act) all Securities surrendered for registration of transfer, exchange, payment or cancelation and deliver a certificate of such destruction to the Company unless the Company directs the Trustee to deliver canceled Securities to the Company. The Company may not issue new Securities to replace Securities it has redeemed, paid or delivered to the Trustee for cancelation. SECTION 2.11. Defaulted Interest. If the Company defaults in a payment of interest on the Securities, the Company shall pay defaulted interest (plus interest on such defaulted interest to the extent lawful) in any lawful manner. The Company may pay the defaulted interest to the 44 36 persons who are Securityholders on a subsequent special record date. The Company shall fix or cause to be fixed any such special record date and payment date to the reasonable satisfaction of the Trustee and shall promptly mail to each Securityholder a notice that states the special record date, the payment date and the amount of defaulted interest to be paid. SECTION 2.12. CUSIP Numbers. The Company in issuing the Securities may use "CUSIP" numbers (if then generally in use) and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders; provided, however, that neither the Company nor the Trustee shall have any responsibility for any defect in the "CUSIP" number that appears on any Security, check, advice of payment or redemption notice, and any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. ARTICLE III Redemption SECTION 3.01. Notices to Trustee. If the Company elects to redeem Securities pursuant to paragraph 5 of the Securities, it shall notify the Trustee in writing of the redemption date, the principal amount of Securities to be redeemed and that such redemption is being made pursuant to paragraph 5 of the Securities. The Company shall give each notice to the Trustee provided for in this Section at least 45 days before the redemption date unless the Trustee consents to a shorter period. Such notice shall be accompanied by an Officers' Certificate and an Opinion of Counsel from the Company to the effect that such redemption will comply with the conditions herein. SECTION 3.02. Selection of Securities To Be Redeemed. If fewer than all the Securities are to be redeemed, the Trustee shall select the Securities to be redeemed pro rata or by lot or by a method that complies with applicable legal and securities exchange requirements, if any, and that the Trustee considers fair and appropriate 45 37 and in accordance with methods generally used at the time of selection by fiduciaries in similar circumstances. The Trustee shall make the selection from outstanding Securities not previously called for redemption. The Trustee may select for redemption portions of the principal of Securities that have denominations larger than $1,000. Securities and portions of them the Trustee selects shall be in amounts of $1,000 or a whole multiple of $1,000. Provisions of this Indenture that apply to Securities called for redemption also apply to portions of Securities called for redemption. The Trustee shall notify the Company promptly of the Securities or portions of Securities to be redeemed. SECTION 3.03. Notice of Redemption. At least 30 days but not more than 60 days before a date for redemption of Securities, the Company shall mail a notice of redemption by first-class mail to each Holder of Securities to be redeemed. The notice shall identify the Securities to be redeemed and shall state: (1) the redemption date; (2) the redemption price; (3) the name and address of the Paying Agent; (4) that Securities called for redemption must be surrendered to the Paying Agent to collect the redemption price; (5) if fewer than all the outstanding Securities are to be redeemed, the identification and principal amounts of the particular Securities to be redeemed; (6) that, unless the Company defaults in making such redemption payment or the Paying Agent is prohibited from making such payment pursuant to the terms of this Indenture, interest on Securities (or portion thereof) called for redemption ceases to accrue on and after the redemption date; and (7) that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Securities. At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at 46 38 the Company's expense. In such event, the Company shall provide the Trustee with the information required by this Section at least 45 days before the redemption date. SECTION 3.04. Effect of Notice of Redemption. Once notice of redemption is mailed, Securities called for redemption become due and payable on the redemption date and at the redemption price stated in the notice. Upon surrender to the Paying Agent, such Securities shall be paid at the redemption price stated in the notice, plus accrued interest to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the related interest payment date that is on or prior to the date of redemption). Failure to give notice or any defect in the notice to any Holder shall not affect the validity of the notice to any other Holder. SECTION 3.05. Deposit of Redemption Price. Prior to the redemption date, the Company shall deposit with the Paying Agent (or, if the Company or a Wholly Owned Subsidiary is the Paying Agent, shall segregate and hold in trust) money sufficient to pay the redemption price of and accrued interest (subject to the right of Holders of record on the relevant record date to receive interest due on the related interest payment date that is on or prior to the date of redemption) on all Securities to be redeemed on that date other than Securities or portions of Securities called for redemption which have been delivered by the Company to the Trustee for cancelation. SECTION 3.06. Securities Redeemed in Part. Upon surrender of a Security that is redeemed in part, the Company shall execute and the Trustee shall authenticate for the Holder (at the Company's expense) a new Security equal in principal amount to the unredeemed portion of the Security surrendered. 47 39 ARTICLE IV Covenants SECTION 4.01. Payment of Securities. The Company shall promptly pay the principal of and interest on the Securities on the dates and in the manner provided in the Securities and in this Indenture. Principal and interest shall be considered paid on the date due if on such date the Trustee or the Paying Agent holds in accordance with this Indenture money sufficient to pay all principal and interest then due and the Trustee or the Paying Agent, as the case may be, is not prohibited from paying such money to the Securityholders on that date pursuant to the terms of this Indenture. The Company shall pay interest on overdue principal at the rate specified therefor in the Securities, and it shall pay interest on overdue installments of interest at the same rate to the extent lawful. SECTION 4.02. SEC Reports. Notwithstanding that the Company may not be required to remain subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company shall file with the SEC and provide the Trustee and Securityholders with the annual reports and the information, documents and other reports which are specified in Sections 13 and 15(d) of the Exchange Act and applicable to a U.S. corporation subject to such Sections, such information, documents and reports to be so filed and provided at the times specified for the filing of such information, documents and reports under such Sections; provided, however, that the Company shall not be so obligated to file such information, documents and reports with the SEC if the SEC does not permit such filings. The Company also shall comply with the other provisions of TIA Section 314(a). SECTION 4.03. Limitation on Debt. (a) The Company shall not, and shall not permit any Restricted Subsidiary to, Incur, directly or indirectly, any Debt, unless after giving pro forma effect to the application of the proceeds thereof, no Default or Event of Default would occur as a consequence of such Incurrence or be continuing following such Incurrence and either such Debt is (i) Debt of the Company, provided that, after giving pro forma effect to the Incurrence of such Debt and the application of the proceeds thereof, the Consolidated Interest Coverage Ratio would be greater than 2.00 to 1.00, (ii) Debt of the Company 48 40 evidenced by the Original Securities or any Exchange Securities issued in respect thereof or (iii) Permitted Debt of the Company or any Restricted Subsidiary. (b) Notwithstanding the foregoing, (i) the Company shall not Incur any Permitted Debt if the proceeds thereof are used, directly or indirectly, to Refinance (A) any Subordinated Obligations unless such Permitted Debt shall be subordinated to the Securities to at least the same extent as such Subordinated Obligations or (B) any Senior Subordinated Debt unless such Permitted Debt shall be Senior Subordinated Debt or shall be subordinated to the Securities and (ii) the Company shall not permit any Restricted Subsidiary to Incur any Permitted Debt if the proceeds are used, directly or indirectly, to Refinance any Subordinated Obligations or any Senior Subordinated Debt. (c) For purposes of determining compliance with this Section 4.03, in the event that an item of Debt meets the criteria of more than one of the categories described in clauses (a) through (l) of the definition of "Permitted Debt" or is entitled to be Incurred pursuant to Section 4.03(a)(i) or (ii), the Company shall, in its sole discretion, classify such item of Debt in any manner that complies with this Section 4.03 and such item of Debt will be treated as having been Incurred pursuant to only one such clause or Section. SECTION 4.04. Limitation on Restricted Payments. The Company shall not make, and shall not permit any Restricted Subsidiary to make, directly or indirectly, any Restricted Payment if at the time of, and after giving pro forma effect to, such proposed Restricted Payment: (a) a Default or Event of Default shall have occurred and be continuing; (b) the Company could not Incur at least $1.00 of additional Debt pursuant to Section 4.03(a)(i); or 49 41 (c) the aggregate amount of such Restricted Payment and all other Restricted Payments declared or made since the Issue Date (the amount of any Restricted Payment, if made other than in cash, to be based upon Fair Market Value) would exceed an amount equal to the sum of: (i) 50% of the aggregate amount of Consolidated Net Income accrued during the period (treated as one accounting period) from and after the first day of the fiscal quarter following the end of the most recent fiscal quarter ended immediately prior to the Issue Date to the end of the most recent fiscal quarter ending at least 30 days prior to the date of such Restricted Payment (or if the aggregate amount of Consolidated Net Income for such period shall be a deficit, minus 100% of such deficit), (ii) Capital Stock Sale Proceeds, (iii) the amount by which Debt (including the Convertible Subordinated Notes but excluding all other Subordinated Obligations) of the Company or any Restricted Subsidiary is reduced on the Company's balance sheet upon the conversion or exchange (other than by a Subsidiary of the Company) subsequent to the Issue Date of any Debt of the Company or any Restricted Subsidiary convertible or exchangeable for Capital Stock (other than Disqualified Stock) of the Company (less the amount of any cash or other Property distributed by the Company or any Restricted Subsidiary upon such conversion or exchange), (iv) an amount equal to the sum of (i) the net reduction in Investments in any Person other than the Company or a Restricted Subsidiary resulting from dividends, repayments of loans or advances or other transfers of Property, in each case to the Company or any Restricted Subsidiary from such Person, and (ii) the portion (proportionate to the Company's equity interest in such Subsidiary) of the Fair Market Value of the net assets of an Unrestricted Subsidiary at the time such Unrestricted Subsidiary is designated a Restricted Subsidiary; provided, however, that the foregoing sum shall not exceed, in the case of any Person, the amount of Investments previously made 50 42 (and treated as a Restricted Payment) by the Company or any Restricted Subsidiary in such Person, and (v) $15,000,000. Notwithstanding the foregoing limitation, the Company may: (a) pay dividends on its Capital Stock within 60 days of the declaration thereof if, on said declaration date, such dividends could have been paid in compliance with this Indenture; provided, however, that at the time of such payment of such dividend, no other Default or Event of Default shall have occurred and be continuing (or result therefrom); provided further, however, that such dividend shall be included in the calculation of the amount of Restricted Payments; (b) purchase, repurchase, redeem, legally defease, acquire or retire for value Capital Stock of the Company or Subordinated Obligations in exchange for, or out of the proceeds of the substantially concurrent sale of, Capital Stock of the Company (other than Disqualified Stock and other than Capital Stock issued or sold to a Subsidiary of the Company or an employee stock ownership plan or trust established by the Company or any of its Subsidiaries for the benefit of their employees); provided, however, that (i) such purchase, repurchase, redemption, legal defeasance, acquisition or retirement shall be excluded in the calculation of the amount of Restricted Payments and (ii) the Net Cash Proceeds from such sale shall be excluded from the calculation of the amount of Capital Stock Sale Proceeds; and (c) purchase, repurchase, redeem, legally defease, acquire or retire for value any Subordinated Obligations in exchange for, or out of the proceeds of the substantially concurrent sale of, Permitted Refinancing Debt; provided, however, that such purchase, repurchase, redemption, legal defeasance, acquisition or retirement for value shall be excluded in the calculation of the amount of Restricted Payments; (d) repurchase shares of, or options to purchase shares of, common stock of the Company or any of its Subsidiaries from employees, former employees, 51 43 directors or former directors of the Company or any of its Subsidiaries (or permitted transferees of such employees, former employees, directors or former directors), pursuant to the terms of agreements (including employment agreements) or plans (or amendments thereto) approved by the Board of Directors under which such individuals purchase or sell or are granted the option to purchase or sell, shares of such common stock; provided, however, that (i) the aggregate amount of such repurchases shall not exceed $2,000,000 in any calendar year and (ii) at the time of such repurchase, no other Default or Event of Default shall have occurred and be continuing (or result therefrom); provided further, however, that such repurchases shall be included in the calculation of the amount of Restricted Payments; and (e) upon the occurrence of a Change of Control and within 60 days after the completion of the offer to purchase the Securities pursuant to Section 4.12 (including the purchase of all Securities tendered), any purchase or redemption of Subordinated Obligations required pursuant to the terms thereof as a result of such Change of Control; provided, however, that at the time of, and after giving pro forma effect to, such purchase or redemption, (i) no other Default or Event of Default shall have occurred and be continuing (or result therefrom) and (ii) the Company could Incur at least $1.00 of additional Debt pursuant to Section 4.03(a)(i); provided further, however, that such purchases or redemptions shall be included in the calculation of the amount of Restricted Payments. SECTION 4.05. Limitation on Liens. The Company shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, Incur or suffer to exist, any Lien (other than Permitted Liens) upon any of its Property (including Capital Stock of a Restricted Subsidiary), whether owned at the Issue Date or thereafter acquired, or any interest therein or any income or profits therefrom, unless (a) if such Lien secures Senior Subordinated Debt, the Securities are secured on an equal and ratable basis with such Debt or (b) if such Lien secures Subordinated Obligations, such Lien shall be subordinated to a Lien securing the Securities in the same Property as that securing such Lien to the same extent as such Subordinated Obligations are subordinated to the Securities. SECTION 4.06. Limitation on Issuance or Sale of Capital Stock of Restricted Subsidiaries. The Company shall 52 44 not (a) sell, pledge, hypothecate or otherwise dispose of any shares of Capital Stock of a Restricted Subsidiary or (b) permit any Restricted Subsidiary to, directly or indirectly, issue or sell or otherwise dispose of any shares of its Capital Stock other than (i) directors' qualifying shares, (ii) to the Company or a Wholly Owned Subsidiary, (iii) a disposition of shares of Capital Stock of a Restricted Subsidiary (which shares, in the case of a Significant Subsidiary, shall represent 100% of the outstanding shares of such Capital Stock) that complies with Section 4.07 or (iv) a pledge of shares of Capital Stock of a Restricted Subsidiary to the extent constituting a Permitted Lien and any subsequent disposition of such shares pursuant to the exercise of rights granted to the pledgee in connection with such pledge. SECTION 4.07. Limitation on Asset Sales. (a) The Company shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, consummate any Asset Sale unless (a) the Company or such Restricted Subsidiary, as the case may be, receives consideration at the time of such Asset Sale at least equal to the Fair Market Value of the Property subject to such Asset Sale; (b) at least 75% of the consideration paid to the Company or such Restricted Subsidiary in connection with such Asset Sale is in the form of cash or cash equivalents or the assumption by the purchaser of liabilities of the Company (other than liabilities of the Company that are by their terms subordinated to the Securities) or of any Restricted Subsidiary (including liabilities of a Restricted Subsidiary whose stock is acquired by such purchaser) as a result of which the Company and the Restricted Subsidiaries are no longer liable for such liabilities; and (c) the Company delivers an Officers' Certificate to the Trustee certifying that such Asset Sale complies with clauses (a) and (b). (b) The Net Available Cash (or any portion thereof) from Asset Sales may be applied by the Company or a Restricted Subsidiary, to the extent the Company or such Restricted Subsidiary elects (or is required by the terms of any Debt), (a) to prepay, repay, legally defease or purchase Senior Debt of the Company or Debt of any Restricted Subsidiary (excluding in each such case Debt owed to the Company or an Affiliate of the Company); or (b) to reinvest in Additional Assets (including by means of an Investment in Additional Assets by a Restricted Subsidiary with Net Available Cash received by the Company or another Restricted Subsidiary); provided, however, that in connection with any prepayment, repayment, legal defeasance or purchase of Debt 53 45 pursuant to clause (a) above, the Company or such Restricted Subsidiary shall retire such Debt and shall cause the related loan commitment (if any) to be permanently reduced by an amount equal to the principal amount so prepaid, repaid, legally defeased or purchased. (c) Any Net Available Cash from an Asset Sale not applied in accordance with the preceding paragraph within twelve months from the date of the receipt of such Net Available Cash shall constitute "Excess Proceeds". When the aggregate amount of Excess Proceeds exceeds $5,000,000 (taking into account income earned on such Excess Proceeds, if any), the Company will be required to make an offer to purchase (the "Prepayment Offer") the Securities which offer shall be in the amount of the Excess Proceeds, on a pro rata basis according to principal amount, at a purchase price equal to 100% of the principal amount thereof plus accrued and unpaid interest thereon, if any, to the Purchase Date, subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date, in accordance with the procedures (including prorating in the event of oversubscription) set forth herein. To the extent that any portion of the amount of Net Available Cash remains after compliance with the preceding sentence and provided that all holders of Securities have been given the opportunity to tender their Securities for purchase in accordance with Section 4.07(d), the Company or such Restricted Subsidiary may use such remaining amount for any purpose permitted by this Indenture and the amount of Excess Proceeds will be reset to zero. (d)(1) Within five Business Days after the Company is obligated to make a Prepayment Offer as described in Section 4.07(c), the Company shall send a written notice, by first class mail, to the Trustee and the holders of Securities (the "Prepayment Offer Notice"), accompanied by such information regarding the Company and its Subsidiaries as the Company in good faith believes will enable such holders to make an informed decision with respect to such Prepayment Offer (which at a minimum shall include (i) the most recently filed Annual Report on Form 10-K (including audited consolidated financial statements) of the Company, the most recent subsequently filed Quarterly Report on Form 10-Q of the Company and any Current Report on Form 8-K of the Company filed subsequent to such Quarterly Report, other than Current Reports describing Asset Sales otherwise described in the offering materials, or corresponding successor reports (or, during any time that the Company is not subject to the reporting requirements of Section 13 or 54 46 15(d) of the Exchange Act, corresponding reports prepared pursuant to Section 4.02), (ii) a description of material developments in the Company's business subsequent to the date of the latest of such reports and (iii) if material, appropriate pro forma financial information). The Prepayment Offer Notice shall state, among other things, (a) that a Prepayment Offer is being made pursuant to this Section 4.07 and that all Securities timely tendered will be accepted for payment (subject to proration), (b) that any Security (or any portion thereof) accepted for payment (and duly paid on the Purchase Date) pursuant to the Prepayment Offer shall cease to accrue interest after the Purchase Date, (c) the purchase price and purchase date, which shall be a Business Day no earlier than 30 days nor later than 60 days from the date the Prepayment Offer Notice is mailed (the "Purchase Date"), (d) the aggregate principal amount of Securities (or portions thereof) to be purchased, (e) that any Securities (or portions thereof) not tendered will continue to accrue interest and (f) the procedures that holders of Securities must follow in order to tender their Securities (or portions thereof) for payment and the procedures that holders of Securities must follow in order to withdraw an election to tender Securities (or portions thereof) for payment. (2) Not later than the date upon which written notice of a Prepayment Offer is delivered to the Trustee as provided above, the Company shall deliver to the Trustee an Officers' Certificate as to (i) the amount of the Prepayment Offer (the "Offer Amount"), (ii) the allocation of the Net Available Cash from the Asset Sales pursuant to which such Prepayment Offer is being made and (iii) the compliance of such allocation with the provisions of Section 4.07(b). On such date, the Company shall also irrevocably deposit with the Trustee or with the Paying Agent (or, if the Company or a Wholly Owned Subsidiary is the Paying Agent, shall segregate and hold in trust) in Temporary Cash Investments (other than in those enumerated in clause (b) of the definition of Temporary Cash Investments), maturing on the last day prior to the Purchase Date or on the Purchase Date if funds are immediately available by open of business, an amount equal to the Offer Amount to be held for payment in accordance with the provisions of this Section. Upon the expiration of the period for which the Prepayment Offer remains open (the "Offer Period"), the Company shall deliver to the Trustee for cancelation the Securities or portions thereof which have been properly tendered to and are to be accepted by the Company. The Trustee or the Paying Agent shall, on the Purchase Date, mail or deliver payment to each 55 47 tendering Holder in the amount of the purchase price. In the event that the aggregate purchase price of the Securities delivered by the Company to the Trustee is less than the Offer Amount, the Trustee or the Paying Agent shall deliver the excess to the Company immediately after the expiration of the Offer Period for application in accordance with this Section. (3) Holders electing to have a Security purchased shall be required to surrender the Security, with an appropriate form duly completed, to the Company or its agent at the address specified in the notice at least three Business Days prior to the Purchase Date. Holders shall be entitled to withdraw their election if the Trustee or the Company receives not later than one Business Day prior to the Purchase Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Security which was delivered for purchase by the Holder and a statement that such Holder is withdrawing his election to have such Security purchased. If at the expiration of the Offer Period the aggregate principal amount of Securities surrendered by Holders exceeds the Offer Amount, the Company shall select the Securities to be purchased on a pro rata basis (with such adjustments as may be deemed appropriate by the Company so that only Securities in denominations of $1,000, or integral multiples thereof, shall be purchased). Holders whose Securities are purchased only in part shall be issued new Securities equal in principal amount to the unpurchased portion of the Securities surrendered. (4) At the time the Company delivers Securities to the Trustee which are to be accepted for purchase, the Company shall also deliver an Officers' Certificate stating that such Securities are to be accepted by the Company pursuant to and in accordance with the terms of this Section. A Security shall be deemed to have been accepted for purchase at the time the Trustee or the Paying Agent mails or delivers payment therefor to the surrendering Holder. (e) The Company shall comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of Securities pursuant to this Section. To the extent that the provisions of any securities laws or regulations conflict with provisions of this Section, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to 56 48 have breached its obligations under this Section by virtue thereof. SECTION 4.08. Limitation on Restrictions on Distributions from Restricted Subsidiaries. The Company shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, create or otherwise cause or suffer to exist or become effective, or enter into any agreement with any Person that would cause to become effective, any consensual encumbrance or restriction on the ability of any Restricted Subsidiary to (a) pay dividends, in cash or otherwise, or make any other distributions on or in respect of its Capital Stock, or pay any Debt or other obligation owed, to the Company or any other Restricted Subsidiary, (b) make any loans or advances to the Company or any other Restricted Subsidiary or (c) transfer any of its Property to the Company or any other Restricted Subsidiary. The foregoing limitations will not apply (i) with respect to clauses (a), (b) and (c), to encumbrances and restrictions (A) in existence under or by reason of any agreements in effect on the Issue Date, (B) relating to Debt of a Restricted Subsidiary and existing at such Restricted Subsidiary at the time it became a Restricted Subsidiary if such encumbrance or restriction was not created in connection with or in anticipation of the transaction or series of related transactions pursuant to which such Restricted Subsidiary became a Restricted Subsidiary or was acquired by the Company, (C) relating to Debt of a Restricted Subsidiary so long as such encumbrance or restriction is no less favorable to the holders of the Securities than those under the Credit Facility as in effect on the Issue Date, (D) relating to Debt of a Restricted Subsidiary which has fully and unconditionally guaranteed, by supplemental indenture in form satisfactory to the Trustee, executed and delivered to the Trustee by such Restricted Subsidiary, the due and punctual performance and observance of all the obligations (financial or otherwise) of the Company under this Indenture and the Securities, provided that such guarantee may be subordinated to senior Debt of such Restricted Subsidiary to the same extent and on the same terms as the Securities are subordinated to Senior Debt of the Company and may provide for the release of such Guarantee upon the discharge of such Debt, (E) relating to borrowings under a foreign currency credit facility established for the benefit of a Restricted Subsidiary organized outside the laws of the United states of America or any State thereof or the District of Columbia, provided that such encumbrances and restrictions apply only with respect to such Restricted Subsidiary and only if an event 57 49 of default has occurred and is continuing under such credit facility and are otherwise customary for similar foreign currency credit facilities, (F) relating to any special purpose, bankruptcy remote Wholly Owned Subsidiary formed for the purpose of borrowing against receivables or inventory of the Company and its Subsidiaries pursuant to a Credit Facility or (G) which result from the Refinancing of Debt Incurred pursuant to an agreement referred to in the immediately preceding clauses (i)(A) and (B) above or in clauses (ii)(A) and (B) below, provided such encumbrance or restriction is no less favorable to the holders of Securities than those under the agreement evidencing the Debt so Refinanced, and (ii) with respect to clause (c) only, to encumbrances and restrictions (A) that limit the right of the debtor to transfer or dispose of the Property securing such Debt, provided that such Debt is permitted to be Incurred and secured pursuant to Sections 4.03 and 4.05, (B) in connection with an acquisition of Property, so long as such encumbrance or restriction relates solely to the Property so acquired and was not created in connection with or in anticipation of such acquisition, (C) resulting from customary provisions restricting subletting or assignment of leases or customary provisions in other agreements that restrict assignment of such agreements or rights thereunder or (D) customary restrictions contained in asset sale agreements limiting the transfer of such Property pending the closing of such sale. SECTION 4.09. Limitation on Transactions with Affiliates. The Company shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, conduct any business or enter into or suffer to exist any transaction or series of transactions (including the purchase, sale, transfer, assignment, lease, conveyance or exchange of any Property or the rendering of any service) with, or for the benefit of, any Affiliate of the Company (an "Affiliate Transaction"), unless (a) the terms of such Affiliate Transaction are no less favorable to the Company or such Restricted Subsidiary, as the case may be, than those that could be obtained in a comparable arm's-length transaction with a Person that is not an Affiliate of the Company or such Restricted Subsidiary, (b) with respect to an Affiliate Transaction involving aggregate payments or value in excess of $1,000,000, the terms of such Affiliate Transaction are set forth in writing, (c) with respect to an Affiliate Transaction involving aggregate payments or value in excess of $2,000,000, the Board of Directors (including a majority of the disinterested members of such Board of Directors) approves such Affiliate Transaction and, in its good faith 58 50 judgment, determines that such Affiliate Transaction complies with clauses (a) and (b) of this paragraph as evidenced by a Board Resolution promptly delivered to the Trustee and (d) with respect to an Affiliate Transaction involving aggregate payments or value in excess of $10,000,000, the Company obtains a written opinion from an Independent Appraiser to the effect that such Affiliate Transaction is fair, from a financial point of view, to the Company or such Restricted Subsidiary, as the case may be. Notwithstanding the foregoing limitation, Affiliate Transactions shall not include: (i) any transaction or series of transactions between the Company and one or more of its Restricted Subsidiaries or between two or more of its Restricted Subsidiaries, provided that no more than 5% of the total voting power of the Voting Stock (on a fully diluted basis) in any of such Restricted Subsidiaries is beneficially owned by an Affiliate of the Company (other than a Restricted Subsidiary); (ii) any Restricted Payment permitted to be made pursuant to Section 4.04; (iii) the payment of compensation (including amounts paid pursuant to employee benefit plans) for the personal services of executive officers and directors of the Company or any of the Restricted Subsidiaries, so long as the Board of Directors in good faith shall have approved the terms thereof and deemed the services theretofore or thereafter to be performed for such compensation to be fair consideration therefor (it being understood that such approval and determination shall not require a written opinion from an Independent Appraiser); and (iv) the payment of reasonable fees to directors of the Company or such Restricted Subsidiary who are not employees of the Company or any Restricted Subsidiary. SECTION 4.10. Limitation on Layered Debt. The Company shall not Incur, directly or indirectly, any Debt which is subordinate or junior in right of payment to any Senior Debt unless such Debt is Senior Subordinated Debt or is expressly subordinated in right of payment to Senior Subordinated Debt. 59 51 SECTION 4.11. Designation of Restricted and Unrestricted Subsidiaries. The Board of Directors may designate any Subsidiary of the Company or any Restricted Subsidiary to be an Unrestricted Subsidiary if (a) the Subsidiary to be so designated does not own any Capital Stock or Debt of, or own or hold any Lien on any Property of, the Company or any other Restricted Subsidiary, (b) the Subsidiary to be so designated is not obligated under any Debt, Lien or other obligation that, if in default, would result (with the passage of time or notice or otherwise) in a default on any Debt of the Company or of any Restricted Subsidiary and (c) either (i) the Subsidiary to be so designated has total assets of $1,000 or less or (ii) such designation is effective immediately upon such entity becoming a Subsidiary of the Company or any Restricted Subsidiary. Unless so designated as an Unrestricted Subsidiary, any Person that becomes a Subsidiary of the Company or of any Restricted Subsidiary will be classified as a Restricted Subsidiary; provided, however, that such Subsidiary shall not be designated a Restricted Subsidiary and shall be automatically classified as an Unrestricted Subsidiary if (A) such Subsidiary is a Subsidiary of a Restricted Subsidiary (other than a Wholly Owned Subsidiary) or (B) either of the requirements set forth in clauses (x) and (y) of the immediately following paragraph will not be satisfied after giving pro forma effect to such classification. Except as provided in the first sentence of this paragraph, no Restricted Subsidiary may be redesignated as an Unrestricted Subsidiary. The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary if, immediately after giving pro forma effect to such designation, (x) the Company could Incur at least $1.00 of additional Debt pursuant to Section 4.03(a)(i) and (y) no Default or Event of Default shall have occurred and be continuing or would result therefrom. Any such designation or redesignation by the Board of Directors will be evidenced to the Trustee by filing with the Trustee a Board Resolution giving effect to such designation or redesignation and an Officers' Certificate (a) certifying that such designation or redesignation complies with the foregoing provisions and (b) giving the effective date of such designation or redesignation, such filing with the Trustee to occur within 45 days after the end of the fiscal quarter of the Company in which such designation or redesignation is made (or, in the case of a designation or redesignation made during the last fiscal 60 52 quarter of the Company's fiscal year, within 90 days after the end of such fiscal year). SECTION 4.12. Change of Control. (a) Upon the occurrence of a Change of Control, each holder of Securities shall have the right to require the Company to repurchase all or any part of such holder's Securities pursuant to the offer described below (the "Change of Control Offer") at a purchase price (the "Change of Control Purchase Price") equal to 101% of the principal amount thereof, plus accrued and unpaid interest thereon, if any, to the purchase date (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date). (b) Within 30 days following any Change of Control, the Company shall (a) cause a notice of the Change of Control Offer to be sent at least once to the Dow Jones News Service or similar business news service in the United States and (b) send, by first-class mail, with a copy to the Trustee, to each holder of Securities, at such holder's address appearing in the Security Register, a notice stating: (i) that a Change of Control has occurred and a Change of Control Offer is being made pursuant to this Section 4.12 and that all Securities timely tendered will be accepted for payment; (ii) the Change of Control Purchase Price and the purchase date, which shall be, subject to any contrary requirements of applicable law, a Business Day no earlier than 30 days nor later than 60 days from the date such notice is mailed (the "Change of Control Payment Date"); (iii) that any Security (or portion thereof) accepted for payment (and duly paid on the Change of Control Payment Date) pursuant to the Change of Control Offer shall cease to accrue interest after the Change of Control Payment Date; (iv) that any Security (or portions thereof) not tendered will continue to accrue interest; (v) the circumstances and relevant facts regarding such Change of Control (including information with respect to pro forma historical income, cash flow and capitalization after giving effect to the Change of Control); and (vi) the procedures that Holders must follow in order to tender their Securities (or portions thereof) for payment and the procedures that Holders must follow in order to withdraw an election to tender Securities (or portions thereof) for payment. (c) Holders electing to have a Security purchased shall be required to surrender the Security, with an appropriate form duly completed, to the Company or its agent at the address specified in the notice at least three Business Days prior to the Change of Control Payment Date. Holders 61 53 shall be entitled to withdraw their election if the Trustee or the Company receives not later than one Business Day prior to the Change of Control Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Security which was delivered for purchase by the Holder and a statement that such Holder is withdrawing his election to have such Security purchased. (d) On or prior to the Change of Control Payment Date, the Company shall irrevocably deposit with the Trustee or with the Paying Agent (or, if the Company or any of its Wholly Owned Subsidiaries is acting as the Paying Agent, segregate and hold in trust) in cash an amount equal to the Change of Control Purchase Price payable to the Holders entitled thereto, to be held for payment in accordance wit the provisions of this Section. On the Change of Control Payment Date, the Company shall deliver to the Trustee the Securities or portions thereof which have been properly tendered to and are to be accepted by the Company for payment. The Trustee or the Paying Agent shall, on the Change of Control Payment Date, mail or deliver payment to each tendering Holder of the Change of Control Purchase Price. In the event that the aggregate Change of Control Purchase Price is less than the amount delivered by the Company to the Trustee or the Paying Agent, the Trustee or the Paying Agent, as the case may be, shall deliver the excess to the Company immediately after the Change of Control Payment Date. (e) The Company shall comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the purchase of Securities pursuant to this Section. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Section, the Company will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under this Section by virtue thereof. SECTION 4.13. Compliance Certificate. The Company shall deliver to the Trustee within 120 days after the end of each fiscal year of the Company an Officers' Certificate stating that in the course of the performance by the signers of their duties as Officers they would normally have knowledge of any Default and whether or not the signers know of any Default that occurred during such period. If they do, the certificate shall describe the Default, its 62 54 status and what action the Company is taking or proposes to take with respect thereto. The Company also shall comply with TIA Section 314(a)(4). SECTION 4.14. Further Instruments and Acts. Upon request of the Trustee, the Company will execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purpose of this Indenture. ARTICLE V Successor Company The Company shall not merge, consolidate or amalgamate with or into any other Person (other than a merger of a Wholly Owned Subsidiary into the Company) or sell, transfer, assign, lease, convey or otherwise dispose of all or substantially all its Property in any one transaction or series of transactions unless: (a) the Company shall be the surviving Person (the "Surviving Person") or the Surviving Person (if other than the Company) formed by such merger, consolidation or amalgamation or to which such sale, transfer, assignment, lease, conveyance or disposition is made shall be a corporation organized and existing under the laws of the United States of America, any State thereof or the District of Columbia; (b) the Surviving Person (if other than the Company) expressly assumes, by supplemental indenture in form satisfactory to the Trustee, executed and delivered to the Trustee by such Surviving Person, the due and punctual payment of the principal of and interest on all the Securities, according to their tenor, and the due and punctual performance and observance of all the covenants and conditions of this Indenture to be performed by the Company; (c) in the case of a sale, transfer, assignment, lease, conveyance or other disposition of all or substantially all the Company's Property, such Property shall have been transferred as an entirety or virtually as an entirety to one Person; (d) immediately before and after giving effect to such transaction or series of transactions on a pro forma basis (and treating, for purposes of this clause (d) and clauses (e) and (f) below, any Debt which becomes, or is anticipated to become, an obligation of the Surviving Person or any Restricted Subsidiary as a result of such transaction or series of transactions as having been Incurred by the Surviving Person or such Restricted Subsidiary at the time of such transaction or series of transactions), no Default or Event of Default shall have occurred and be continuing; 63 55 (e) immediately after giving effect to such transaction or series of transactions on a pro forma basis, the Company or the Surviving Person, as the case may be, would be able to Incur at least $1.00 of additional Debt under Section 4.03(a)(i); (f) immediately after giving effect to such transaction or series of transactions on a pro forma basis, the Surviving Person shall have a Consolidated Net Worth in an amount which is not less than the Consolidated Net Worth of the Company immediately prior to such transaction or series of transactions; and (g) the Company shall deliver, or cause to be delivered, to the Trustee, in form and substance reasonably satisfactory to the Trustee, an Officers' Certificate and an Opinion of Counsel, each stating that such transaction and the supplemental indenture, if any, in respect thereto comply with this Article V and that all conditions precedent herein provided for relating to such transaction have been satisfied. The Surviving Person shall succeed to, and be substituted for, and may exercise every right and power of the Company under this Indenture, and the predecessor Company in the case of a sale, transfer, assignment, lease, conveyance or other disposition shall not be released from the obligation to pay the principal of and interest on the Securities. ARTICLE VI Defaults and Remedies SECTION 6.01. Events of Default. The following events shall be "Events of Default": (1) the Company defaults in any payment of interest on any Security when the same becomes due and payable, whether or not such payment shall be prohibited by Article X, and such default continues for a period of 30 days; (2) the Company defaults in the payment of the principal of any Security when the same becomes due and payable at its Stated Maturity, upon acceleration, redemption, optional redemption, required repurchase or otherwise, whether or not such payment shall be prohibited by Article X; (3) the Company fails to comply with Article V; 64 56 (4) the Company fails to comply with any covenant or agreement in the Securities or in this Indenture (other than a failure which is the subject of the foregoing clause (1), (2) or (3)) and such failure continues for 30 days after notice is given to the Company as specified below; (5) a default by the Company or any Restricted Subsidiary under any Debt of the Company or any Restricted Subsidiary which results in acceleration of the maturity of such Debt, or the failure to pay any such Debt at maturity, in an aggregate amount in excess of $10,000,000 or its foreign currency equivalent at the time; (6) the Company or any Restricted Subsidiary pursuant to or within the meaning of any Bankruptcy Law: (A) commences a voluntary case; (B) consents to the entry of an order for relief against it in an involuntary case; (C) consents to the appointment of a Custodian of it or for any substantial part of its property; or (D) makes a general assignment for the benefit of its creditors; or takes any comparable action under any foreign laws relating to insolvency; (7) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (A) is for relief against the Company or any Restricted Subsidiary in an involuntary case; (B) appoints a Custodian of the Company or any Restricted Subsidiary or for any substantial part of its property; (C) orders the winding up or liquidation of the Company or any Restricted Subsidiary; or (D) grants any similar relief under any foreign laws; 65 57 and in each such case the order or decree remains unstayed and in effect for 30 days; or (8) any judgment or judgments for the payment of money in an unsecured aggregate amount in excess of $10,000,000 or its foreign currency equivalent at the time is entered against the Company or any Restricted Subsidiary and shall not be waived, satisfied or discharged for any of 30 consecutive days during which a stay of enforcement shall not be in effect. The foregoing will constitute Events of Default whatever the reason for any such Event of Default and whether it is voluntary or involuntary or is effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body. The term "Bankruptcy Law" means Title 11, United States Code, or any similar Federal or state law for the relief of debtors. The term "Custodian" means any receiver, trustee, assignee, liquidator, custodian or similar official under any Bankruptcy Law. A Default under clause (4) is not an Event of Default until the Trustee or the Holders of at least 25% in aggregate principal amount of the Securities notify the Company of the Default and the Company (and in the case of such notice by Holders, the Trustee) does not cure such Default within the time specified after receipt of such notice. Such notice must specify the Default, demand that it be remedied and state that such notice is a "Notice of Default". The Company shall deliver to the Trustee, within 30 days after the occurrence thereof, written notice in the form of an Officers' Certificate of any Event of Default and any event which with the giving of notice or the lapse of time would become an Event of Default, its status and what action the Company is taking or proposes to take with respect thereto. SECTION 6.02. Acceleration. If an Event of Default (other than an Event of Default specified in Section 6.01(6) or (7)) occurs and is continuing, the Trustee by notice to the Company, or the Holders of at least 25% in aggregate principal amount of the Securities by notice to the Company and the Trustee, may declare the 66 58 principal of and accrued and unpaid interest to the date of acceleration on all the Securities to be due and payable. Upon such a declaration, such principal and interest shall be due and payable immediately. If an Event of Default specified in Section 6.01(6) or (7) occurs, the principal of and accrued and unpaid interest to the date of acceleration on all the Securities shall, automatically and without any action by the Trustee or any Holder, become immediately due and payable. The Holders of a majority in aggregate principal amount of the outstanding Securities by notice to the Trustee and the Company may rescind any declaration of acceleration if the rescission would not conflict with any judgment or decree, and if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of the acceleration. No such rescission shall affect any subsequent Default or impair any right consequent thereto. SECTION 6.03. Other Remedies. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal of or interest on the Securities or to enforce the performance of any provision of the Securities or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Securities or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Securityholder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative. SECTION 6.04. Waiver of Past Defaults. The Holders of a majority in aggregate principal amount of the Securities by notice to the Trustee may waive an existing Default and its consequences except (i) a Default in the payment of the principal of or interest on a Security or (ii) a Default in respect of a provision that under Section 9.02 cannot be amended without the consent of each Securityholder affected. When a Default is waived, it is deemed cured, but no such waiver shall extend to any subsequent or other Default or impair any consequent right. SECTION 6.05. Control by Majority. The Holders of a majority in aggregate principal amount of the Securities may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the 67 59 Trustee with respect to the Securities. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture or, subject to Section 7.01, that the Trustee determines is unduly prejudicial to the rights of other Securityholders or would involve the Trustee in personal liability; provided, however, that the Trustee may take any other action deemed proper by the Trustee that is not inconsistent with such direction. Prior to taking any action hereunder, the Trustee shall be entitled to reasonable indemnification against all losses and expenses caused by taking or not taking such action. SECTION 6.06. Limitation on Suits. A Securityholder may not pursue any remedy with respect to this Indenture or the Securities unless: (1) such Holder shall have previously given to the Trustee written notice of a continuing Event of Default; (2) the Holders of at least 25% in aggregate principal amount of the Securities then outstanding shall have made a written request, and such Holder of or Holders shall have offered reasonable indemnity, to the Trustee to pursue such proceeding as trustee; and (3) the Trustee has failed to institute such proceeding and has not received from the Holders of at least a majority in aggregate principal amount of the Securities outstanding a direction inconsistent with such request, within 60 days after such notice, request and offer. The foregoing limitations on the pursuit of remedies by a Securityholder shall not apply to a suit instituted by a Holder of Securities for the enforcement of payment of the principal of or interest on such Security on or after the applicable due date specified in such Security. A Securityholder may not use this Indenture to prejudice the rights of another Securityholder or to obtain a preference or priority over another Securityholder. SECTION 6.07. Rights of Holders to Receive Payment. Notwithstanding any other provision of this Indenture, the right of any Holder to receive payment of principal of and interest on the Securities held by such Holder, on or after the respective due dates expressed in this Securities, or to bring suit for the enforcement of any such 68 60 payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. SECTION 6.08. Collection Suit by Trustee. If an Event of Default specified in Section 6.01(1) or (2) occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company for the whole amount then due and owing (together with interest on any unpaid interest to the extent lawful) and the amounts provided for in Section 7.07. SECTION 6.09. Trustee May File Proofs of Claim. The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee and the Securityholders allowed in any judicial proceedings relative to the Company, its creditors or its property and, unless prohibited by law or applicable regulations, may vote on behalf of the Holders in any election of a trustee in bankruptcy or other Person performing similar functions, and any Custodian in any such judicial proceeding is hereby authorized by each Holder to make payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and its counsel, and any other amounts due the Trustee under Section 7.07. SECTION 6.10. Priorities. If the Trustee collects any money or property pursuant to this Article VI, it shall pay out the money or property in the following order: FIRST: to the Trustee for amounts due under Section 7.07; SECOND: to holders of Senior Debt to the extent required by Article X; THIRD: to Securityholders for amounts due and unpaid on the Securities for principal and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Securities for principal and interest, respectively; and FOURTH: to the Company. The Trustee may fix a record date and payment date for any payment to Securityholders pursuant to this Section. 69 61 At least 15 days before such record date, the Company shall mail to each Securityholder and the Trustee a notice that states the record date, the payment date and amount to be paid. SECTION 6.11. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07 or a suit by Holders of more than 10% in aggregate principal amount of the Securities. SECTION 6.12. Waiver of Stay or Extension Laws. The Company (to the extent it may lawfully do so) shall not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and shall not hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law had been enacted. ARTICLE VII Trustee SECTION 7.01. Duties of Trustee. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent Person would exercise or use under the circumstances in the conduct of such Person's own affairs. 70 62 (b) Except during the continuance of an Event of Default: (1) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. (c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act or its own wilful misconduct, except that: (1) this paragraph does not limit the effect of paragraph (b) of this Section; (2) the Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (3) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05. (d) Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b) and (c) of this Section. (e) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. (f) Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. (g) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise 71 63 incur financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers. (h) Every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section and to the provisions of the TIA and the provisions of this Article VII shall apply to the Trustee in its role as Registrar, Paying Agent and Security Custodian. (i) The Trustee shall not be deemed to have notice of a Default or an Event of Default unless (a) the Trustee has received written notice thereof from the Company or any Holder or (b) a Trust Officer shall have actual knowledge thereof. SECTION 7.02. Rights of Trustee. (a) The Trustee may rely on any document believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document. The Trustee may, however, in its discretion make such further inquiry or investigation into such facts or matters as it may see fit and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on the Officers' Certificate or Opinion of Counsel. (c) The Trustee may act through agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers; provided, however, that the Trustee's conduct does not constitute wilful misconduct or negligence. (e) The Trustee may consult with counsel, and the advice or opinion of counsel with respect to legal matters relating to this Indenture and the Securities shall be full and complete authorization and protection from liability in 72 64 respect to any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel. (f) The permissive rights of the Trustee to do things enumerated in this Indenture shall not be construed as a duty unless so specified herein. SECTION 7.03. Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. Any Paying Agent, Registrar or co-registrar may do the same with like rights. However, the Trustee must comply with Sections 7.10 and 7.11. SECTION 7.04. Trustee's Disclaimer. The Trustee shall not be responsible for and makes no representation as to the validity, priority or adequacy of this Indenture or the Securities, it shall not be accountable for the Company's use of the proceeds from the Securities, and it shall not be responsible for any statement of the Company in this Indenture or in any document issued in connection with the sale of the Securities or in the Securities other than the Trustee's certificate of authentication. SECTION 7.05. Notice of Defaults. If a Default or Event of Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to each Securityholder notice of the Default or Event of Default within 90 days after it is known to a Trust Officer or written notice of it is received by the Trustee. Except in the case of a Default or Event of Default in payment of principal of or interest on any Security, the Trustee may withhold the notice if and so long as a committee of its Trust Officers in good faith determines that withholding the notice is in the interests of Securityholders. SECTION 7.06. Reports by Trustee to Holders. As promptly as practicable after each May 15 beginning with May 15, 1998, and in any event prior to July 15 in each year, the Trustee shall mail to each Securityholder a brief report dated as of May 15 each year as and if required by TIA Section 313(a) if and to the extent required by such subsection. The Trustee also shall comply with TIA Section 313(b). A copy of each report at the time of its mailing to Securityholders shall be filed with the SEC and each 73 65 stock exchange (if any) on which the Securities are listed. The Company agrees to notify promptly the Trustee whenever the Securities become listed on any stock exchange and of any delisting thereof. SECTION 7.07. Compensation and Indemnity. The Company shall pay to the Trustee from time to time reasonable compensation for its services. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee upon request for all reasonable out-of-pocket expenses incurred or made by it, including costs of collection, in addition to the compensation for its services. Such expenses shall include the reasonable compensation and expenses, disbursements and advances of the Trustee's agents, counsel, accountants and experts. The Company shall indemnify the Trustee against any and all loss, liability or expense (including attorneys' fees) incurred by it in connection with the acceptance and administration of this trust and the performance of its duties hereunder. The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company shall not relieve the Company of its obligations hereunder. The Company shall defend the claim and the Trustee may have separate counsel and the Company shall pay the fees and expenses of such counsel. The Company need not reimburse any expense or indemnify against any loss, liability or expense incurred by the Trustee through the Trustee's own wilful misconduct, negligence or bad faith. The Company need not pay for any settlement made by the Trustee without the Company's consent, such consent not to be unreasonably withheld. All indemnifications and releases from liability granted hereunder to the Trustee shall extend to its officers, directors, employees, agents, successors and assigns. To secure the Company's payment obligations in this Section, the Trustee shall have a lien prior to the Securities on all money or property held or collected by the Trustee other than money or property held in trust to pay principal of and interest on particular Securities. The Company's payment obligations pursuant to this Section shall survive the discharge of this Indenture. When the Trustee incurs expenses after the occurrence of a Default specified in Section 6.01(6) or (7) with respect to the Company, the expenses are intended to constitute expenses of administration under the Bankruptcy Law. 74 66 SECTION 7.08. Replacement of Trustee. The Trustee may resign at any time by so notifying the Company. The Holders of a majority in aggregate principal amount of the Securities may remove the Trustee by so notifying the Trustee and may appoint a successor Trustee. The Company shall remove the Trustee if: (1) the Trustee fails to comply with Section 7.10; (2) the Trustee is adjudged bankrupt or insolvent; (3) a receiver or other public officer takes charge of the Trustee or its property; or (4) the Trustee otherwise becomes incapable of acting. If the Trustee resigns, is removed by the Company or by the Holders of a majority in aggregate principal amount of the Securities and such Holders do not reasonably promptly appoint a successor Trustee, or if a vacancy exists in the office of Trustee for any reason (the Trustee in such event being referred to herein as the retiring Trustee), the Company shall promptly appoint a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Securityholders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, subject to the lien provided for in Section 7.07. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee or the Holders of 10% in aggregate principal amount of the Securities may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee fails to comply with Section 7.10, any Securityholder who has been a bona fide Holder of a Security for at least six months may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. 75 67 Notwithstanding the replacement of the Trustee pursuant to this Section, the Company's obligations under Section 7.07 shall continue for the benefit of the retiring Trustee. SECTION 7.09. Successor Trustee by Merger. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all its corporate trust business or assets to, another corporation or banking association, the resulting, surviving or transferee corporation or banking association without any further act shall be the successor Trustee. In case at the time such successor or successors by merger, conversion or consolidation to the Trustee shall succeed to the trusts created by this Indenture any of the Securities shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor trustee, and deliver such Securities so authenticated; and in case at that time any of the Securities shall not have been authenticated, any such successor to the Trustee may authenticate such Securities either in the name of any predecessor hereunder or in the name of the successor to the Trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Securities or in this Indenture provided that the certificate of the Trustee shall have. SECTION 7.10. Eligibility; Disqualification. The Trustee shall at all times satisfy the requirements of TIA Section 310(a). The Trustee shall have (or, in the case of a corporation included in a bank holding company system, the related bank holding company shall have) a combined capital and surplus of at least $50,000,000 as set forth in its (or its related bank holding company's) most recent published annual report of condition. The Trustee shall comply with TIA Section 310(b), subject to the penultimate paragraph thereof; provided, however, that there shall be excluded from the operation of TIA Section 310(b)(1) any indenture or indentures under which other securities or certificates of interest or participation in other securities of the Company are outstanding if the requirements for such exclusion set forth in TIA Section 310(b)(1) are met. SECTION 7.11. Preferential Collection of Claims Against Company. The Trustee shall comply with TIA Section 311(a), excluding any creditor relationship listed in TIA 76 68 Section 311(b). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated. ARTICLE VIII Discharge of Indenture; Defeasance SECTION 8.01. Discharge of Liability on Securities; Defeasance. (a) When (i) the Company delivers to the Trustee all outstanding Securities (other than Securities replaced pursuant to Section 2.07) for cancelation or (ii) all outstanding Securities have become due and payable, whether at maturity or as a result of the mailing of a notice of redemption pursuant to Article III and the Company irrevocably deposits with the Trustee funds sufficient to pay at maturity or upon redemption all outstanding Securities, including interest thereon to maturity or such redemption date (other than Securities replaced pursuant to Section 2.07), and if in either case the Company pays all other sums payable hereunder by the Company, then this Indenture shall, subject to Section 8.01(c), cease to be of further effect. The Trustee shall acknowledge satisfaction and discharge of this Indenture on demand of the Company accompanied by an Officers' Certificate and an Opinion of Counsel and at the cost and expense of the Company. (b) Subject to Sections 8.01(c) and 8.02, the Company at any time may terminate (i) all its obligations under the Securities and this Indenture ("legal defeasance option") or (ii) its obligations under Sections 4.02, 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.09, 4.10, 4.11 and 4.12, the operation of Sections 6.01(5), 6.01(6), 6.01(7) and 6.01(8) (but, in the case of Sections 6.01(6) and (7), with respect only to Restricted Subsidiaries) and the limitations contained in clauses (e) and (f) of Article V ("covenant defeasance option"). The Company may exercise its legal defeasance option notwithstanding its prior exercise of its covenant defeasance option. If the Company exercises its legal defeasance option, payment of the Securities may not be accelerated because of an Event of Default. If the Company exercises its covenant defeasance option, payment of the Securities may not be accelerated because of an Event of Default specified in Sections 6.01(4) (with respect to the covenants of Article IV identified in the immediately preceding paragraph), 6.01(5), 6.01(6), 6.01(7) and 6.01(8) (with respect only to Restricted Subsidiaries in the case of 77 69 Sections 6.01(6) and 6.01(7)) or because of the failure of the Company to comply with the limitations contained in clauses (e) and (f) of Article V. Upon satisfaction of the conditions set forth herein and upon request of the Company, the Trustee shall acknowledge in writing the discharge of those obligations that the Company terminates. (c) Notwithstanding clauses (a) and (b) above, the Company's obligations in Sections 2.04, 2.05, 2.06, 2.07, 7.07, 7.08, 8.05 and 8.06 shall survive until the Securities have been paid in full. Thereafter, the Company's obligations in Sections 7.07 and 8.05 shall survive. SECTION 8.02. Conditions to Defeasance. The Company may exercise its legal defeasance option or its covenant defeasance option only if: (1) the Company irrevocably deposits in trust with the Trustee money or U.S. Government Obligations for the payment of principal of and interest on the Securities to maturity or redemption, as the case may be; (2) the Company delivers to the Trustee a certificate from a nationally recognized firm of independent accountants expressing their opinion that the payments of principal and interest when due and without reinvestment on the deposited U.S. Government Obligations plus any deposited money without investment will provide cash at such times and in such amounts as will be sufficient to pay principal and interest when due on all the Securities to maturity or redemption, as the case may be; (3) 123 days pass after the deposit is made and during the 123-day period no Default specified in Section 6.01(6) or (7) with respect to the Company occurs which is continuing at the end of the period; (4) the deposit does not constitute a default under any other agreement binding on the Company and is not prohibited by Article X; (5) the Company delivers to the Trustee an Opinion of Counsel to the effect that the trust resulting from the deposit does not constitute, or is qualified as, a 78 70 regulated investment company under the Investment Company Act of 1940; (6) in the case of the legal defeasance option, the Company shall have delivered to the Trustee an Opinion of Counsel stating that (i) the Company has received from, or there has been published by, the Internal Revenue Service a ruling, or (ii) since the date of this Indenture there has been a change in the applicable Federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Securityholders will not recognize income, gain or loss for Federal income tax purposes as a result of such defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance had not occurred; (7) in the case of the covenant defeasance option, the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that the Securityholders will not recognize income, gain or loss for Federal income tax purposes as a result of such covenant defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such covenant defeasance had not occurred; and (8) the Company delivers to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent to the defeasance and discharge of the Securities as contemplated by this Article VIII have been complied with. Before or after a deposit, the Company may make arrangements satisfactory to the Trustee for the redemption of Securities at a future date in accordance with Article III. SECTION 8.03. Application of Trust Money. The Trustee shall hold in trust money or U.S. Government Obligations deposited with it pursuant to this Article VIII. It shall apply the deposited money and the money from U.S. Government Obligations through the Paying Agent and in accordance with this Indenture to the payment of principal of and interest on the Securities. Money and securities so held in trust are not subject to Article X. 79 71 SECTION 8.04. Repayment to Company. The Trustee and the Paying Agent shall promptly turn over to the Company upon request any excess money or securities held by them at any time. Subject to any applicable abandoned property law, the Trustee and the Paying Agent shall pay to the Company upon request any money held by them for the payment of principal or interest that remains unclaimed for two years, and, thereafter, Securityholders entitled to the money must look to the Company for payment as general creditors. SECTION 8.05. Indemnity for Government Obligations. The Company shall pay and shall indemnify the Trustee against any tax, fee or other charge imposed on or assessed against deposited U.S. Government Obligations or the principal and interest received on such U.S. Government Obligations. SECTION 8.06. Reinstatement. If the Trustee or Paying Agent is unable to apply any money or U.S. Government Obligations in accordance with this Article VIII by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's obligations under this Indenture and the Securities shall be revived and reinstated as though no deposit had occurred pursuant to this Article VIII until such time as the Trustee or Paying Agent is permitted to apply all such money or U.S. Government Obligations in accordance with this Article VIII; provided, however, that, if the Company has made any payment of interest on or principal of any Securities because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money or U.S. Government Obligations held by the Trustee or Paying Agent. 80 72 ARTICLE IX Amendments SECTION 9.01. Without Consent of Holders. The Company and the Trustee may amend this Indenture or the Securities without notice to or consent of any Securityholder: (1) to cure any ambiguity, omission, defect or inconsistency; (2) to comply with Article V; (3) to provide for uncertificated Securities in addition to or in place of certificated Securities; provided, however, that the uncertificated Securities are issued in registered form for purposes of Section 163(f) of the Code or in a manner such that the uncertificated Securities are described in Section 163(f)(2)(B) of the Code; (4) to make any change in Article X that would limit or terminate the benefits available to any holder of Senior Debt (or Representatives therefor) under Article X or to comply with any requirement of the SEC in connection with the qualification of this Indenture under the TIA; (5) to add Guarantees with respect to the Securities or to secure the Securities; (6) to add to the covenants of the Company for the benefit of the Holders or to surrender any right or power herein conferred upon the Company; (7) to comply with any requirements of the SEC in connection with qualifying, or maintaining the qualification of, this Indenture under the TIA; or (8) to make any change that does not adversely affect the rights of any Securityholder. Notwithstanding the foregoing, no amendment may be made to Article X that adversely affects the rights of any holder of Senior Debt then outstanding unless the holders of such Senior Debt (or their Representative) consent to such change. 81 73 After an amendment under this Section becomes effective, the Company shall mail to Securityholders a notice briefly describing such amendment. The failure to give such notice to all Securityholders, or any defect therein, shall not impair or affect the validity of an amendment under this Section. SECTION 9.02. With Consent of Holders. The Company and the Trustee may amend this Indenture or the Securities without notice to any Securityholder but with the written consent of the Holders of at least a majority in aggregate principal amount of the Securities outstanding (including consents obtained in connection with a tender offer or exchange offer for the Securities). However, without the consent of each Securityholder affected thereby, an amendment may not: (1) reduce the amount of Securities whose Holders must consent to an amendment; (2) reduce the rate of or extend the time for payment of interest on any Security; (3) reduce the principal of or extend the Stated Maturity of any Security; (4) impair the right of any Holder to receive payment of principal of and interest on such Holder's Securities on or after the due dates therefor or to institute suit for the enforcement of any payment on or with respect to such Holder's Securities; (5) reduce the amount payable upon the redemption or repurchase of any Security under Article III or Section 4.07 or 4.12, change the time at which any Security may be redeemed in accordance with Article III, or, at any time after a Change in Control or Asset Sale has occurred, change the time at which any Change of Control Offer or Prepayment Offer must be made or at which the Securities must be repurchased pursuant to such Change of Control Offer or Prepayment Offer; (6) make any Security payable in money other than that stated in the Security; (7) make any change in Article X that would adversely affect the Securityholders; 82 74 (8) release any security interest that may have been granted in favor of the Holders; or (9) make any change in Section 6.04 or 6.07 or the second sentence of this Section. Notwithstanding the foregoing, no amendment may be made to Article X that adversely affects the rights of any holder of Senior Debt then outstanding unless the holders of such Senior Debt (or their Representative) consent to such change. It shall not be necessary for the consent of the Holders under this Section to approve the particular form of any proposed amendment, but it shall be sufficient if such consent approves the substance thereof. After an amendment under this Section becomes effective, the Company shall mail to Securityholders a notice briefly describing such amendment. The failure to give such notice to all Securityholders, or any defect therein, shall not impair or affect the validity of an amendment under this Section. SECTION 9.03. Compliance with Trust Indenture Act. Every amendment to this Indenture or the Securities shall comply with the TIA as then in effect. SECTION 9.04. Revocation and Effect of Consents and Waivers. A consent to an amendment or a waiver by a Holder of a Security shall bind the Holder and every subsequent Holder of that Security or portion of the Security that evidences the same debt as the consenting Holder's Security, even if notation of the consent or waiver is not made on the Security. However, any such Holder or subsequent Holder may revoke the consent or waiver as to such Holder's Security or portion of the Security if the Trustee receives the notice of revocation before the date the amendment or waiver becomes effective. After an amendment or waiver becomes effective, it shall bind every Securityholder. An amendment or waiver becomes effective upon the execution of such amendment or waiver by the Trustee. The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Securityholders entitled to give their consent or take any other action described above or required or permitted to be taken pursuant to this Indenture. If a record date is fixed, then notwithstanding the immediately preceding 83 75 paragraph, those Persons who were Securityholders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to give such consent or to revoke any consent previously given or to take any such action, whether or not such Persons continue to be Holders after such record date. No such consent shall be valid or effective for more than 120 days after such record date. SECTION 9.05. Notation on or Exchange of Securities. If an amendment changes the terms of a Security, the Trustee may require the Holder of the Security to deliver it to the Trustee. The Trustee may place an appropriate notation on the Security regarding the changed terms and return it to the Holder. Alternatively, if the Company or the Trustee so determines, the Company in exchange for the Security shall issue and the Trustee shall authenticate a new Security that reflects the changed terms. Failure to make the appropriate notation or to issue a new Security shall not affect the validity of such amendment. SECTION 9.06. Trustee To Sign Amendments. The Trustee shall sign any amendment authorized pursuant to this Article IX if the amendment does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may but need not sign it. In signing such amendment the Trustee shall be entitled to receive indemnity reasonably satisfactory to it and to receive, and (subject to Section 7.01) shall be fully protected in relying upon, an Officers' Certificate and an Opinion of Counsel stating that such amendment is authorized or permitted by this Indenture. SECTION 9.07. Payment for Consent. Neither the Company nor any Affiliate of the Company shall, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any Holder for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture or the Securities unless such consideration is offered to be paid to all Holders that so consent, waive or agree to amend in the time frame set forth in solicitation documents relating to such consent, waiver or agreement. 84 76 ARTICLE X Subordination SECTION 10.01. Agreement To Subordinate. The Company agrees, and each Securityholder by accepting a Security agrees, that the Debt evidenced by the Securities is subordinated in right of payment, to the extent and in the manner provided in this Article X, to the payment when due of all Senior Debt and that the subordination is for the benefit of and enforceable by the holders of Senior Debt. The Securities shall in all respects rank pari passu with any future Senior Subordinated Debt and senior to all existing and future junior subordinated Debt of the Company, and only Senior Debt shall rank senior to the Securities in accordance with the provisions set forth herein. All provisions of this Article X shall be subject to Section 10.12. SECTION 10.02. Liquidation, Dissolution, Bankruptcy. Upon any payment or distribution of the assets of the Company to creditors upon a total or partial liquidation or a total or partial dissolution of the Company or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property: (1) holders of Senior Debt shall be entitled to receive payment in full before Securityholders shall be entitled to receive any payment of principal of or interest on the Securities; and (2) until the Senior Debt is paid in full, any distribution made by or on behalf of the Company to which Securityholders would be entitled but for this Article X shall be made to holders of the Senior Debt as their interests may appear, except that all Securityholders may receive and retain shares of stock and any debt securities that are subordinated to Senior Debt to at least the same extent as the Securities. SECTION 10.03. Default on Senior Debt. The Company may not pay the principal of or interest on the Securities or make any deposit pursuant to Section 8.01 and may not repurchase, redeem or otherwise retire any Securities (collectively, "pay the Securities") if (i) any principal, interest or other amounts due in respect of any Senior Debt is not paid within any applicable grace period (including at maturity) or (ii) any other default on Senior Debt occurs and the maturity of such Senior Debt is 85 77 accelerated in accordance with its terms unless, in either case, (x) the default has been cured or waived and any such acceleration has been rescinded or (y) such Senior Debt has been paid in full; provided, however, that the Company may pay the Securities without regard to the foregoing if the Company and the Trustee receive written notice approving such payment from the Representative of such Senior Debt. During the continuance of any default (other than a default described in clause (i) or (ii) of the preceding sentence) with respect to any Designated Senior Debt pursuant to which the maturity thereof may be accelerated immediately without further notice (except such notice as may be required to effect such acceleration), or after the expiration of any applicable grace periods, the Company may not pay the Securities for a period (a "Payment Blockage Period") commencing upon the receipt by the Company and the Trustee of written notice of such default from the Representative of the holders of any Designated Senior Debt specifying an election to effect a Payment Blockage Period (a "Payment Blockage Notice") and ending 179 days after receipt of such notice by the Company and the Trustee unless earlier terminated (i) by written notice to the Trustee and the Company from the Representative who gave such Payment Blockage Notice, (ii) because such Designated Senior Debt has been repaid in full or (iii) because the default giving rise to such Payment Blockage Notice is no longer continuing. Notwithstanding the provisions described in the immediately preceding sentence, unless the holders of such Designated Senior Debt or the Representative of such holders shall have accelerated the maturity of such Designated Senior Debt and not rescinded such acceleration, the Company may (unless otherwise prohibited as described in the first sentence of this paragraph) resume payments on the Securities after such Payment Blockage Period. Not more than one Payment Blockage Notice with respect to all issues of Designated Senior Debt may be given in any consecutive 360-day period regardless of the number of defaults with respect to one or more issues of Designated Senior Debt during such Period. SECTION 10.04. Acceleration of Payment of Securities. If payment of the Securities is accelerated because of an Event of Default, the Company or the Trustee shall promptly notify the holders of the Designated Senior Debt (or their Representatives) of the acceleration. SECTION 10.05. When Distribution Must Be Paid Over. If a distribution is made to Securityholders that because of this Article X should not have been made to them, 86 78 the Securityholders who receive the distribution shall hold it in trust for holders of Senior Debt and pay it over to them as their interests may appear. SECTION 10.06. Subrogation. After all Senior Debt is paid in full and until the Securities are paid in full, Securityholders shall be subrogated to the rights of holders of Senior Debt to receive distributions applicable to Senior Debt. A distribution made under this Article X to holders of Senior Debt which otherwise would have been made to Securityholders is not, as between the Company and Securityholders, a payment by the Company on such Senior Debt. SECTION 10.07. Relative Rights. This Article X defines the relative rights of Securityholders and holders of Senior Debt. Nothing in this Indenture shall: (1) impair, as between the Company and Securityholders, the obligation of the Company, which is absolute and unconditional, to pay principal of and interest on the Securities in accordance with their terms; or (2) prevent the Trustee or any Securityholder from exercising its available remedies upon a Default or an Event of Default, subject to the rights of holders of Senior Debt to receive distributions otherwise payable to Securityholders. SECTION 10.08. Subordination May Not Be Impaired by Company. No right of any holder of Senior Debt of the Company to enforce the subordination of the Debt evidenced by the Securities shall be impaired by any act or failure to act by the Company or by its failure to comply with this Indenture. SECTION 10.09. Rights of Trustee and Paying Agent. Notwithstanding Section 10.03, the Trustee or Paying Agent may continue to make payments on the Securities and shall not be charged with knowledge of the existence of facts that would prohibit the making of any such payments unless, not less than two Business Days prior to the date of such payment, a Trust Officer receives notice satisfactory to it that payments may not be made under this Article X. The Company, the Registrar or co-registrar, the Paying Agent, a Representative or a holder of Senior Debt may give the notice; provided, however, that, if an issue of Senior 87 79 Debt has a Representative, only the Representative may give the notice. The Trustee in its individual or any other capacity may hold Senior Debt with the same rights it would have if it were not Trustee. The Registrar and co-registrar and the Paying Agent may do the same with like rights. The Trustee shall be entitled to all the rights set forth in this Article X with respect to any Senior Debt which may at any time be held by it, to the same extent as any other holder of such Senior Debt; and nothing in Article VII shall deprive the Trustee of any of its rights as such holder. Nothing in this Article X shall apply to claims of, or payments to, the Trustee under or pursuant to Section 7.07. SECTION 10.10. Distribution or Notice to Representative. Whenever a distribution is to be made or a notice given to holders of Senior Debt, the distribution may be made and the notice given to their Representative (if any). SECTION 10.11. Article X Not To Prevent Events of Default or Limit Right To Accelerate. The failure to make a payment pursuant to the Securities by reason of any provision in this Article X shall not be construed as preventing the occurrence of a Default. Nothing in this Article X shall have any effect on the right of the Securityholders or the Trustee to accelerate the maturity of the Securities. SECTION 10.12. Trust Moneys Not Subordinated. Notwithstanding anything contained herein to the contrary, payments from money or the proceeds of U.S. Government Obligations held in trust under Article VIII by the Trustee for the payment of principal of and interest on the Securities shall not be subordinated to the prior payment of any Senior Debt or subject to the restrictions set forth in this Article X, and none of the Securityholders shall be obligated to pay over any such amount to the Company or any holder of Senior Debt or any other creditor of the Company. SECTION 10.13. Trustee Entitled To Rely. Upon any payment or distribution pursuant to this Article X, the Trustee and the Securityholders shall be entitled to rely (i) upon any order or decree of a court of competent jurisdiction in which any proceedings of the nature referred to in Section 10.02 are pending, (ii) upon a certificate of the liquidating trustee or agent or other Person making such payment or distribution to the Trustee or to the Securityholders 88 80 or (iii) upon the Representatives for the holders of Senior Debt for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of Senior Debt and other Debt of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article X. In the event that the Trustee determines, in good faith, that evidence is required with respect to the right of any Person as a holder of Senior Debt to participate in any payment or distribution pursuant to this Article X, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of such Senior Debt held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and other facts pertinent to the rights of such Person under this Article X, and, if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. The provisions of Sections 7.01 and 7.02 shall be applicable to all actions or omissions of actions by the Trustee pursuant to this Article X. SECTION 10.14. Trustee To Effectuate Subordination. Each Securityholder by accepting a Security authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination between the Securityholders and the holders of Senior Debt as provided in this Article X and appoints the Trustee as attorney-in-fact for any and all such purposes. SECTION 10.15. Trustee Not Fiduciary for Holders of Senior Debt. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Debt and shall not be liable to any such holders if it shall mistakenly pay over or distribute to Securityholders or the Company or any other Person, money or assets to which any holders of Senior Debt shall be entitled by virtue of this Article X or otherwise. SECTION 10.16. Reliance by Holders of Senior Debt on Subordination Provisions. Each Securityholder by accepting a Security acknowledges and agrees that the foregoing subordination provisions are, and are intended to be, an inducement and a consideration to each holder of any Senior Debt, whether such Senior Debt was created or acquired before or after the issuance of the Securities, to acquire and continue to hold, or to continue to hold, such Senior 89 81 Debt and such holder of such Senior Debt shall be deemed conclusively to have relied on such subordination provisions in acquiring and continuing to hold, or in continuing to hold, such Senior Debt. ARTICLE XI Miscellaneous SECTION 11.01. Trust Indenture Act Controls. If any provision of this Indenture limits, qualifies or conflicts with another provision which is required to be included in this Indenture by the TIA, the required provision shall control. SECTION 11.02. Notices. Any notice or communication shall be in writing and delivered in person or mailed by first class mail or sent by facsimile (with a hard copy delivered in person or by mail promptly thereafter) and addressed as follows: if to the Company: The DII Group, Inc. 6273 Monarch Park Place, Suite 200 Niwot, CO 80503 Facsimile: 303-652-0416 Attention: Chief Financial Officer if to the Trustee: Chase Trust Company of California 101 California Street, Suite 2725 San Francisco, CA 94111 Facsimile: 415-693-8850 Attention: Corporate Trust Department The Company or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications. Any notice or communication mailed to a Securityholder shall be mailed to the Securityholder at the Securityholder's address as it appears on the registration books of the Registrar and shall be sufficiently given if so mailed within the time prescribed. 90 82 Failure to mail a notice or communication to a Securityholder or any defect in it shall not affect its sufficiency with respect to other Securityholders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it. SECTION 11.03. Communication by Holders with Other Holders. Securityholders may communicate pursuant to TIA Section 312(b) with other Securityholders with respect to their rights under this Indenture or the Securities. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA Section 312(c). SECTION 11.04. Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Company to the Trustee to take or refrain from taking any action under this Indenture, the Company shall furnish to the Trustee: (1) an Officers' Certificate in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and (2) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of such counsel, all such conditions precedent have been complied with. SECTION 11.05. Statements Required in Certificate or Opinion. Each certificate or opinion with respect to compliance with a covenant or condition provided for in this Indenture shall include: (1) a statement that the individual making such certificate or opinion has read such covenant or condition; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of such individual, he has made such examination or investigation as is necessary to enable him to express 91 83 an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether or not, in the opinion of such individual, such covenant or condition has been complied with. SECTION 11.06. When Securities Disregarded. In determining whether the Holders of the required principal amount of Securities have concurred in any direction, waiver or consent, Securities owned by the Company or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company shall be disregarded and deemed not to be outstanding, except that, for the purpose of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Securities which the Trustee knows are so owned shall be so disregarded. Also, subject to the foregoing, only Securities outstanding at the time shall be considered in any such determination. SECTION 11.07. Rules by Trustee, Paying Agent and Registrar. The Trustee may make reasonable rules for action by or a meeting of Securityholders. The Registrar and the Paying Agent or co-registrar may make reasonable rules for their functions. SECTION 11.08. Legal Holidays. A "Legal Holiday" is a Saturday, a Sunday or a day on which banking institutions are not required to be open in the State of New York or in San Francisco, California. If a payment date is a Legal Holiday, payment shall be made on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. If a regular record date is a Legal Holiday, the record date shall not be affected. SECTION 11.09. Governing Law. THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. SECTION 11.10. No Recourse Against Others. A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Securities or this Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Securityholder shall waive and release all such liability. 92 84 The waiver and release shall be part of the consideration for the issue of the Securities. SECTION 11.11. Successors. All agreements of the Company in this Indenture and the Securities shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successors. SECTION 11.12. Multiple Originals. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. One signed copy is enough to prove this Indenture. SECTION 11.13. Table of Contents; Headings. The table of contents, cross-reference sheet and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not intended to be considered a part hereof and shall not modify or restrict any of the terms or provisions hereof. 93 85 IN WITNESS WHEREOF, the parties have caused this Indenture to be duly executed as of the date first written above. THE DII GROUP, INC., by ----------------------------------------- Name: Title: CHASE TRUST COMPANY OF CALIFORNIA, as Trustee, by ----------------------------------------- Name: Title: EX-4.2 3 PURCHASE AGREEMENT DATED 9/16/97 1 EXHIBIT 4.2 THE DII GROUP, INC. $150,000,000 8.50% Senior Subordinated Notes Due 2007 PURCHASE AGREEMENT New York, New York September 16, 1997 To: SALOMON BROTHERS INC DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION BT ALEX. BROWN INCORPORATED In care of: Salomon Brothers Inc Seven World Trade Center New York, New York 10048 Dear Ladies and Gentlemen: The DII Group, Inc., a Delaware corporation (the "Company"), proposes to issue and sell to you (the "Purchasers") $150,000,000 principal amount of its 8.50% Senior Subordinated Notes due 2007 (the "Securities"), to be issued under an indenture (the "Indenture") to be dated as of September 19, 1997, between the Company and Chase Trust Company of California, as trustee (the "Trustee"). The sale of the Securities to you will be made without registration of the Securities under the Securities Act of 1933, as amended (the "Act"), in reliance upon the exemption from the registration requirements of the Act provided by Section 4(2) thereof. You have advised the Company that you will make an offering of the Securities purchased by you hereunder in accordance with Section 4 hereof on the terms set forth in the Final Memorandum (as defined below), as soon as you deem advisable after this Agreement has been executed and delivered. 2 2 In connection with the sale of the Securities, the Company has prepared a preliminary offering memorandum, dated September 3, 1997 (the "Preliminary Memorandum"), and a final offering memorandum, dated September 16, 1997 (the "Final Memorandum"). Each of the Preliminary Memorandum and the Final Memorandum sets forth certain information concerning the Company and the Securities. The Company hereby confirms that it has authorized the use of the Preliminary Memorandum and the Final Memorandum in connection with the offering and resale by the Purchasers of the Securities. Any references herein to the Preliminary Memorandum or the Final Memorandum, and any amendment or supplement thereto, shall be deemed to include all exhibits thereto and all documents incorporated by reference therein that were filed under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), on or before the date and time that this Agreement is executed and delivered by the parties hereto (the "Execution Time"); and any reference herein to the terms "amend", "amendment" or "supplement" with respect to the Final Memorandum shall be deemed to refer to and include the filing of any document under the Exchange Act after the Execution Time that is incorporated by reference therein. The holders of the Securities will be entitled to the benefits of the Registration Rights Agreement dated September 16, 1997, between the Company and the Purchasers (the "Registration Agreement"). 1. Representations and Warranties. The Company represents and warrants to, and agrees with, the Purchasers as set forth below in this Section 1. (a) Each of the Preliminary Memorandum and the Final Memorandum as of its respective date did not, and the Final Memorandum (as the same may have been amended or supplemented) as of the Closing Date will not, contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that the Company makes no representations or warranties as to the information contained in or omitted from the Preliminary Memorandum or the Final Memorandum in reliance upon and in conformity with information furnished in writing to the Company by or 3 3 on behalf of the Purchasers specifically for inclusion in the Preliminary Memorandum or the Final Memorandum (or any amendment or supplement thereof or thereto). All documents incorporated by reference in the Preliminary Memorandum or the Final Memorandum that were filed under the Exchange Act on or before the Execution Time complied, and all such documents that are filed under the Exchange Act after the Execution Time and on or before the Closing Date will comply, in all material respects with the applicable requirements of the Exchange Act and the rules thereunder. (b) The Company has not taken and will not take, directly or indirectly, any action prohibited by Regulation M under the Exchange Act in connection with the offering of the Securities. (c) Neither the Company nor any affiliate (as defined in Rule 501(b) of Regulation D under the Act ("Regulation D")) of the Company has directly, or through any agent, (i) sold, offered for sale, solicited offers to buy or otherwise negotiated in respect of, any security (as defined in the Act) the offer or sale of which is currently or will be considered integrated with the sale of the Securities in a manner that would require the registration of the Securities under the Act or (ii) engaged in any form of general solicitation or general advertising (within the meaning of Regulation D) in connection with the offering of the Securities. (d) It is not necessary in connection with the offer, sale and delivery of the Securities in the manner contemplated by this Agreement and the Final Memorandum to register the Securities under the Act or to qualify the Indenture under the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). (e) None of the Company, its affiliates or any person acting on its or their behalf has engaged in any directed selling efforts (as that term is defined in Regulation S under the Act ("Regulation S")) with 4 4 respect to the Securities, and the Company and its affiliates and any person acting on its or their behalf have complied with the offering restrictions requirement of Regulation S. Terms used in this paragraph have the meanings given to them by Regulation S. (f) The Company is subject to the reporting requirements of Section 13 or Section 15(d) of the Exchange Act. (g) The Securities satisfy the eligibility requirements set forth in Rule 144A(d)(3) under the Act. (h) The Company has agreed to permit the Securities to be designated PORTAL eligible securities, will pay the requisite fees related thereto and has provided all necessary information to the National Association of Securities Dealers, Inc., in order to ensure that the Securities are designated PORTAL eligible securities. (i) The Company is not required to register as an "investment company" under the Investment Company Act of 1940, as amended (the "Investment Company Act"), without taking account of any exemption arising out of the number of holders of the Company's securities. (j) The Company has not paid or agreed to pay to any person any compensation for soliciting another to purchase any Securities of the Company (except as contemplated by this Agreement). (k) The information provided by the Company pursuant to Section 5(h) hereof will not, at the date thereof, contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. 5 5 2. Purchase and Sale. (a) Subject to the terms and conditions and in reliance upon the representations and warranties herein set forth, the Company agrees to sell to the Purchasers, and the Purchasers agree to purchase from the Company, severally and not jointly, at a purchase price of 97.267% of the principal amount thereof, plus accrued interest, if any, from September 19, 1997, to the Closing Date, the principal amount of the Securities set forth opposite each Purchaser's name in Schedule I hereto. (b) The Purchasers shall notify the Company of the completion of the sale of the Securities by the Purchasers. 3. Delivery and Payment. Delivery of and payment for the Securities shall be made at 10:00 AM, New York City time, on September 19, 1997, or such later date as the Purchasers and the Company shall agree (such date and time of delivery and payment for the Securities being herein called the "Closing Date"). Delivery of the Securities shall be made to the Purchasers against payment by the Purchasers of the purchase price thereof to or upon the order of the Company by wire transfer in Federal (same day) funds to an account previously designated by the Company and agreed to by the Purchasers not less than two business days prior to the Closing Date. Delivery of the Securities shall be made at the office of Cravath, Swaine & Moore, Worldwide Plaza, 825 Eighth Avenue, New York, New York. Certificates for the Securities shall be registered in such names and in such denominations as the Purchasers may request not less than two full business days in advance of the Closing Date. The Company agrees to have the Securities available for inspection, checking and packaging by the Purchasers in New York, New York, not later than 1:00 PM on the business day prior to the Closing Date. 4. Offering of Securities. Each Purchaser (i) acknowledges that the Securities have not been registered under the Act and may not be offered or sold except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Act or 6 6 pursuant to an effective registration statement under the Act and (ii) represents and warrants to and agrees with the Company that: (a) It has not offered or sold, and will not offer or sell, any Securities except (i) to those it reasonably believes to be qualified institutional buyers (as defined in Rule 144A under the Securities Act) and that, in connection with each such sale, it has taken or will take reasonable steps to ensure that the purchaser of such Securities is aware that such sale is being made in reliance on Rule 144A or (ii) in accordance with the restrictions set forth in Exhibit A hereto. (b) Neither it nor any person acting on its behalf has made or will make offers or sales of the Securities in the United States by means of any form of general solicitation or general advertising (within the meaning of Regulation D) in the United States, except pursuant to a registered public offering, whether an exchange offer or shelf registration, as provided in the Registration Agreement. (c) (i) It has not offered or sold, and will not offer or sell, any Securities to persons in the United Kingdom, except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or as agent) for the purposes of their businesses or otherwise in circumstances which have not resulted and will not result in an offer to the public in the United Kingdom, within the meaning of the Public Offers of Securities Regulations 1995 (the "Regulations"), (ii) it has complied and will comply with all applicable provisions of the Financial Services Act 1986 and the Regulations with respect to anything done by it in relation to the Securities in, from or otherwise involving the United Kingdom, and (iii) it has only issued or passed on and will only issue or pass on to any person in the United Kingdom any document received by it in connection with the issue of the Securities if that person is of a kind 7 7 described in Article 11(3) of the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1995 or is a person to whom such document may otherwise lawfully be issued or passed on. 5. Agreements. The Company agrees with the Purchasers that: (a) The Company will furnish to the Purchasers, without charge, during the period mentioned in paragraph (c) below, as many copies of the Final Memorandum and any supplements and amendments thereof or thereto as the Purchasers may reasonably request. The Company will pay the expenses of printing or other production of all documents relating to the offering. (b) The Company will not amend or supplement the Final Memorandum, other than by filing documents under the Exchange Act that are incorporated by reference therein, without prior consent (which shall not be unreasonably withheld) of the Purchasers. Prior to the completion of the sale of the Securities by the Purchasers, the Company will not file any document under the Exchange Act that is incorporated by reference in the Final Memorandum unless the Company has furnished you a copy for your review prior to filing and will not file any such document to which you reasonably and timely object. (c) The Company will promptly advise the Purchasers when, prior to the completion of the sale of the Securities by the Purchasers, any document filed under the Exchange Act which is incorporated by reference in the Final Memorandum shall have been filed with the Securities and Exchange Commission (the "Commission"). (d) If at any time prior to the completion of the sale of the Securities by the Purchasers, any event occurs as a result of which it is necessary to amend or supplement the Final Memorandum in order to make the statements therein in the light of the circumstances 8 8 under which they were made not misleading, or if it shall be necessary to amend or supplement the Final Memorandum (including any document incorporated by reference therein which was filed under the Exchange Act) to comply with the Exchange Act or the rules thereunder or other applicable law, the Company promptly will notify the Purchasers of the same and, subject to paragraph (b) of this Section 5, will prepare and provide to the Purchasers pursuant to paragraph (a) of this Section 5 an amendment or supplement which will correct such statement or omission or effect such compliance and, in the case of such an amendment or supplement which is to be filed under the Exchange Act and which is incorporated by reference in the Final Memorandum, will file such amendment or supplement with the Commission. (e) The Company will cooperate with you and your counsel in endeavoring to obtain for the qualification of the Securities for sale under the laws of such jurisdictions as the Purchasers may reasonably designate and will maintain such qualifications in effect so long as reasonably required for the sale of the Securities; provided, however, that the Company shall not be required to file any general consent to service of process or to qualify as a foreign corporation or as a dealer in securities in any jurisdiction in which it is not so qualified or to subject itself to taxation in respect of doing business in any jurisdiction in which it is not otherwise so subject. The Company will promptly advise the Purchasers of the receipt by the Company of any notification with respect to (i) the suspension of the qualification of the Securities for sale in any jurisdiction or (ii) the initiation or threatening of any proceeding for such purpose. (f) None of the Company, affiliates or any person acting on its or their behalf will solicit any offer to buy or offer or sell the Securities by means of any form of general solicitation or general advertising (within the meaning of Regulation D) in connection with 9 9 any offer or sale of the Securities in the United States, except pursuant to a registered public offering, whether an exchange offer or shelf registration, as provided in the Registration Agreement. (g) None of the Company, its affiliates or any person acting on its or their behalf will engage in any directed selling efforts with respect to the Securities within the meaning of Regulation S, except pursuant to a registered public offering as provided in the Registration Agreement, and the Company, its affiliates and each such person acting on its or their behalf will comply with the offering restrictions requirement of Regulation S. Terms used in this paragraph have the meanings given to them by Regulation S. (h) The Company shall, during any period in the two years after the Closing Date in which the Company is not subject to Section 13 or 15(d) of the Exchange Act, make available, upon request, to any holder of the Securities in connection with any sale thereof and any prospective purchaser of Securities from such holder the information specified in Rule 144A(d)(4) under the Act. This covenant is intended to be for the benefit of the holders, and the prospective purchasers designated by such holders from time to time of the Securities. (i) The Company will not, and will not permit any of its affiliates to, resell any Securities which constitute "restricted securities" under Rule 144 that have been reacquired by any of them. (j) Neither the Company nor any affiliate will sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in the Act) the offering of which security will be considered integrated with the sale of the Securities in a manner that would require the registration of the Securities under the Act. 10 10 (k) The Company shall use its best efforts in cooperation with the Purchasers to permit the Securities to be eligible for clearance and settlement through The Depository Trust Company. (l) The Company will not, for a period of 180 days following the Execution Time without the prior written consent of Salomon Brothers Inc (which consent shall not be unreasonably withheld), offer, sell or contract to sell, grant any other option to purchase or otherwise dispose of, directly or indirectly, or announce the offering of, or file a registration statement for, any debt securities issued or guaranteed by the Company, or enter into an agreement to do any of the foregoing (other than the Offering or pursuant to the Registration Agreement). The Company will not at any time offer, sell, contract to sell or otherwise dispose of, directly or indirectly, any securities under circumstances where such offer, sale, contract or disposition would cause the exemption afforded by Section 4(2) of the Securities Act or the safe harbor of Regulation S thereunder to cease to be applicable to the offer and sale of the Securities as contemplated by this Agreement and the Final Memorandum. (m) The Company will apply the net proceeds from the sale of the Securities in the manner set forth in the Final Memorandum under the caption "Use of Proceeds". 6. Conditions to the Obligations of the Purchasers. The obligations of the Purchasers to purchase the Securities shall be subject to the accuracy of the representations and warranties on the part of the Company contained herein as of the Execution Time and the Closing Date, to the accuracy of the statements of the Company made in any certificates pursuant to the provisions hereof, to the performance by the Company of its obligations hereunder and to the following additional conditions: (a) The Company shall have furnished to the 11 11 Purchasers the opinion of Curtis, Mallet-Prevost, Colt & Mosle, special counsel for the Company, dated the Closing Date, to the effect that: (i) the Company and each of its Significant Subsidiaries (as defined in the Indenture) organized under the laws of the United States of America or any State thereof or the District of Columbia (individually a "U.S. Significant Subsidiary" and collectively the "U.S. Significant Subsidiaries") has been duly incorporated and is validly existing as a corporation in good standing under the laws of the jurisdiction in which it is chartered or organized, with full corporate power and authority to own its properties and conduct its business as described in the Final Memorandum, and is duly qualified to do business as a foreign corporation and is in good standing under the laws of each jurisdiction which requires such qualification wherein it owns or leases material properties or conducts material business, except where failure to be so qualified or to be in good standing would not have a material adverse effect on the Company and its subsidiaries taken as a whole; (ii) all the outstanding shares of capital stock of each U.S. Significant Subsidiary have been duly and validly authorized and issued and are fully paid and nonassessable, and, except as otherwise set forth in the Final Memorandum, all outstanding shares of capital stock of the U.S. Significant Subsidiaries are owned of record by the Company either directly or through wholly owned subsidiaries free and clear of any perfected security interest other than pursuant to those certain pledge agreements dated as of April 4, 1996, as amended, from the Company to and for the benefit of Norwest Bank Colorado, National Association ("Norwest"), acting as agent for itself and the other Secured Parties named therein, entered into in connection with the loan 12 12 agreement dated as of April 4, 1996, between the Company, Norwest, The Chase Manhattan Bank, Harris Trust and Savings Bank and NBD Bank (as amended, the "Loan Agreement"), and, to the knowledge of such counsel, based solely upon a certificate of a responsible officer of the Company, any other security interests, claims, liens or encumbrances; (iii) the Securities conform as to legal matters in all material respects to the descriptions thereof contained in the Final Memorandum; (iv) the Indenture has been duly authorized, executed and delivered by the Company, and, assuming due authorization, execution and delivery by the Trustee, constitutes a legal, valid and binding instrument enforceable against the Company in accordance with its terms (subject, as to enforcement of remedies, to applicable bankruptcy, reorganization, insolvency, moratorium or other laws affecting creditors' rights generally from time to time in effect and general principles of equity, whether enforcement is considered in a proceeding in equity or at law and the discretion of the court before which any proceeding therefor may be brought); and the Securities have been duly authorized by the Company and, when executed and authenticated in accordance with the provisions of the Indenture and delivered to and paid for by the Purchasers pursuant to this Agreement, will constitute legal, valid and binding obligations of the Company entitled to the benefits of the Indenture (subject, as to enforcement of remedies, to applicable bankruptcy, reorganization, insolvency, moratorium or other laws affecting creditors' rights generally from time to time in effect and general principles of equity, whether enforcement is considered in a proceeding in equity or at law and the discretion of the court before which any proceeding therefor may be brought); 13 13 (v) this Agreement and the Registration Agreement have been duly authorized, executed and delivered by the Company; (vi) to such counsel's knowledge, no consent, approval, authorization or order of any court or governmental agency or body is required for the performance by the Company of its obligations hereunder or under the Indenture, the Registration Agreement or the Securities, except such as may be required under the blue sky laws of any jurisdiction in connection with the purchase and distribution of the Securities by the Purchasers (as to which such counsel need express no opinion) and such other approvals (specified in such opinion) as have been obtained and except such as may be required under the Securities Act with respect to the registration of the New Securities (or Registrable Securities in the case of a Shelf Registration Statement, each as defined in the Registration Agreement) pursuant to the Registration Agreement and the transactions contemplated by the Registration Agreement and except as may be required by the securities or blue sky laws of the various states in connection with the offer and sale of the New Securities (or the Registrable Securities in the case of a Shelf Registration Statement), and except for the qualification of the Indenture relating to the New Securities (or Registrable Securities in the case of a Shelf Registration) pursuant to the Trust Indenture Act; (vii) neither the issue and sale of the Securities, the execution, delivery and performance by the Company of this Agreement, the Indenture, the Registration Agreement or the Securities, nor the fulfillment of the terms hereof or thereof will conflict with, result in a breach or violation of, or constitute a default under any law or the charter or by-laws of the 14 14 Company or the terms of any indenture or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which it is bound which is listed as an exhibit to the Company's most recent Form 10-K (except that such counsel need not express an opinion as to any covenant, restriction or provision of any such agreement with respect to financial covenants, ratios or tests relating to the financial condition or results of operations of the Company or any of its subsidiaries) or any judgment, order or decree known to such counsel to be applicable to the Company or any of its subsidiaries of any court, regulatory body, administrative agency, governmental body or arbitrator having jurisdiction over the Company or any of its subsidiaries; (viii) based on the representations, warranties and agreements of the Company in Sections 1 and 5 of this Agreement, and the Purchasers in Section 4 of this Agreement, it is not necessary in connection with the offer, sale and delivery of the Securities in the manner contemplated by this Agreement to register the Securities under the Act, it being understood that no opinion is expressed as to any subsequent reoffer or resale of any Security; and (ix) the Indenture conforms as to form in all material respects with the requirements of the Trust Indenture Act, and the rules and regulations of the Commission applicable to an indenture which is qualified thereunder. Such counsel shall also state that, in the course of preparation by the Company of the Final Memorandum, such counsel has participated in conferences with officers and other representatives of the Company, representatives of the independent public accountants for the Company, representatives of the Purchasers and representatives of counsel for the Purchasers, at which 15 15 conferences such counsel made inquiries of such officers, representatives and accountants and discussed the contents of the Final Memorandum and related matters and, although such counsel has not independently verified and is not passing upon and does not assume any responsibility for the accuracy, completeness or fairness of the statements contained in the Final Memorandum (other than the statements set forth under "Description of Notes"), and noting that they have relied as to materiality to a large extent upon statements of directors, officers and other representatives of the Company, no facts have come to the attention of such counsel which would lead such counsel to believe that the Final Memorandum (other than the financial or statistical information contained therein or omitted therefrom as to which such counsel need not express any statement), as of its date or on the Closing Date, contained or contains an untrue statement of a material fact or omitted or omits to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. In rendering such opinion, such counsel may, without independent investigation, rely (A) as to matters involving the application of laws of any jurisdiction other than the State of New York, in the State of Delaware or the United States, to the extent they deem proper and specified in such opinion, upon the opinion of other counsel of good standing whom they believe to be reliable and who are satisfactory to counsel for the Purchasers and (B) as to matters of fact, to the extent they deem proper, on certificates of responsible officers of the Company and public officials, in each case subject to the assumptions, qualifications, or limitations therein. References to the Final Memorandum in this paragraph (a) include any amendments or supplements thereof or thereto at the Closing Date. Such counsel need express no opinion as to the enforcement of any provision of the Registration 16 16 Agreement or the Purchase Agreement providing for indemnification by one party of any other party thereto. For purposes of such opinion, such counsel may state that the phrase "to our knowledge" means the actual conscious awareness of information about either fact or law (depending on the context). (b) The Purchasers shall have received from Cravath, Swaine & Moore, counsel for the Purchasers, such opinion or opinions, dated the Closing Date, with respect to the issuance and sale of the Securities, the Indenture, the Final Memorandum (together with any amendment or supplement thereof or thereto) and other related matters as the Purchasers may reasonably require, and the Company shall have furnished to such counsel such documents as they request for the purpose of enabling them to pass upon such matters. (c) The Company shall have furnished to the Purchasers a certificate of the Company, signed by the Chairman of the Board and the Chief Executive Officer and the Executive Vice President-Finance, dated the Closing Date, to the effect that the signers of such certificate have carefully examined the Final Memorandum, any amendment or supplement to the Final Memorandum and this Agreement and that: (i) the representations and warranties of the Company in this Agreement are true and correct in all material respects on and as of the Closing Date with the same effect as if made on the Closing Date and the Company has complied in all material respects with all the agreements and satisfied all the conditions on its part to be performed or satisfied pursuant to this Agreement at or prior to the Closing Date; and (ii) since the date of the most recent financial statements included or incorporated by 17 17 reference in the Final Memorandum (exclusive of any amendment or supplement thereof or thereto), there has been no material adverse change in the condition (financial or other), earnings, business or properties of the Company and its subsidiaries taken as a whole, whether or not arising from transactions in the ordinary course of business, except as set forth in or contemplated in the Final Memorandum (exclusive of any amendment or supplement thereof or thereto). (d) At the Execution Time and at the Closing Date, KPMG Peat Marwick LLP shall have furnished to the Purchasers a letter or letters, dated respectively as of the Execution Time and as of the Closing Date, in form and substance satisfactory to the Purchasers, confirming that they are independent accountants within the meaning of the Securities Act and the Exchange Act and the applicable rules and regulations thereunder and Rule 101 of the Code of Professional Conduct of the American Institute of Certified Public Accountants (the "AICPA") and stating in effect that: (i) in their opinion the audited financial statements and financial statement schedules included or incorporated by reference in the Final Memorandum and reported on by them comply in form in all material respects with the applicable accounting requirements of the Exchange Act and the related published rules and regulations that would apply to the Final Memorandum if the Final Memorandum were a prospectus included in a registration statement on Form S-1 under the Securities Act; 18 18 (ii) based upon the procedures detailed in such letter with respect to the period subsequent to the date of the latest audited financial statements included in the Final Memorandum, including the reading of the minutes and inquiries of certain officials of the Company who have responsibility for the financial and accounting matters and certain other limited procedures requested by the Purchasers and described in detail in such letter, nothing has come to their attention that causes them to believe that: (A) any unaudited financial statements of the Company included or incorporated by reference in the Final Memorandum do not comply in form in all material respects with applicable accounting requirements of the Securities Act that would apply to the Final Memorandum if the Final Memorandum were a prospectus included in a registration statement on Form S-1 under the Securities Act and with the published rules and regulations of the Commission with respect to financial statements included or incorporated in quarterly reports on Form 10-Q under the Exchange Act; or that such unaudited financial statements are not, in all material respects, in conformity with generally accepted accounting principles applied on a basis substantially consistent with that of the audited financial statements of the Company included or incorporated by reference in the Final Memorandum; or (B) with respect to the period subsequent to June 29, 1997, there were any increases, at a specified date not more than five business days prior to the date of the letter, in the total debt or other non-current liabilities of the Company and its subsidiaries or decreases in the stockholders' equity of the Company or 19 19 decreases in working capital of the Company and its subsidiaries, as compared with the amounts shown on the June 29, 1997 consolidated balance sheet included in the Final Memorandum, or for the period from June 30, 1997, to such specified date there were any decreases, as compared with the corresponding period in the immediately preceding fiscal quarter in net sales, gross profit-income before income taxes and extraordinary items, net income or EBITDA, as defined in the Indenture, except in all instances for changes or decreases set forth in such letter, in which case the letter shall be accompanied by an explanation by the Company as to the significance thereof unless said explanation is not deemed necessary by the Purchasers; or (C) the information included under the headings "Selected Consolidated Financial Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" is not in conformity with the disclosure requirements of Regulation S-K that would apply to the Final Memorandum if the Final Memorandum were a prospectus included in a registration statement on Form S-1 under the Securities; and (iii) they have performed certain other specified procedures, at the request of the Purchasers, as a result of which they determined that certain information of an accounting, financial or statistical nature (which is limited to accounting, financial or statistical information derived from the general accounting records of the Company and its subsidiaries) set forth or incorporated by reference in the Final Memorandum agrees with the accounting records of the Company and its subsidiaries, excluding any questions of legal interpretation. 20 20 All references in this Section 6(d) to the Final Memorandum shall be deemed to include any amendment or supplement thereto at the date of the letter. (e) The Company shall have furnished to the Purchasers the opinion of Leoff Claeys Verbeke, special Netherlands counsel to the Company, dated the Closing Date, to the effect that: (i) DOVatron Ireland B.V. ("DOVatron Ireland") is a company duly incorporated for an unlimited time and is validly existing as a legal entity in the form of a private company with limited liability and has the corporate power to conduct its business within the limits of the objects clause in its Articles of Association; and (ii) all the issued shares of DOVatron Ireland have been duly and validly authorized and issued and are fully paid, and, except as otherwise set forth in the Final Memorandum, all issued shares of DOVatron Ireland are registered in the name of NortaVOD Corporation (except for one ordinary share, which is held in trust for NortaVOD Corporation) free and clear of any perfected security interest and, to the knowledge of such counsel, based solely on officer's certificates and searches attached to the opinion, any other security interests, claims, liens or encumbrances. (f) The Company shall have furnished to the Purchasers the opinion of Curtis, Mallet-Prevost, Colt & Mosle, S.C., special Mexican counsel for the Company, dated the Closing Date, to the effect that: (i) DOVatron de Mexico, S.A. de C.V. has been duly incorporated and is validly existing as a corporation under the laws of Mexico, with full corporate power and authority to own its properties and conduct its business as described 21 21 in the Final Memorandum, and is duly qualified to do business as a foreign corporation and is in good standing under the laws of each jurisdiction which requires such qualification wherein it owns or leases material properties or conducts material business, except where failure to be so qualified or to be in good standing would not have a material adverse effect on the Company and its subsidiaries taken as a whole; and (ii) all the outstanding shares of capital stock of DOVatron de Mexico, S.A. de C.V. have been duly and validly authorized and issued and are fully paid and nonassessable, and, except as otherwise set forth in the Final Memorandum, all outstanding shares of capital stock of DOVatron de Mexico, S.A. de C.V. are owned of record by the Company either directly or through wholly owned subsidiaries free and clear of any perfected security interest, other than pursuant to those certain pledge agreements, dated as of April 4, 1996, as amended, from The DII Group, Inc. to and for the benefit of Norwest Bank Colorado, National Association ("Norwest"), acting as agent for itself and the other Secured Parties named therein, entered into in connection with the loan agreement dated as of April 4, 1996, as amended, between the Company, Norwest, The Chase Manhattan Bank, Harris Trust and Savings Bank and NBD Bank, and, to the knowledge of such counsel, based solely upon a certificate of a responsible officer of DOVatron de Mexico, S.A. de C.V., any other security interests, claims, liens or encumbrances. (g) Subsequent to the Execution Time or, if earlier, the dates as of which information is given in the Final Memorandum (exclusive of any amendment or supplement thereof or thereto), there shall not have been (i) any change or decrease specified in the letter or letters referred to in paragraph (d) of this Section 6 or (ii) any change, or any development 22 22 involving a prospective change, in or affecting the business or properties of the Company and its subsidiaries the effect of which, in any case referred to in clause (i) or (ii) above, is, in the reasonable judgment of the Purchasers, so material and adverse as to make it impractical or inadvisable to market the Securities as contemplated by the Final Memorandum (exclusive of any amendment or supplement thereof or thereto). (h) Subsequent to the Execution Time, there shall not have been any decrease in the rating of any of the Company's debt securities by any "nationally recognized statistical rating organization" (as defined for purposes of Rule 436(g) under the Securities Act) or any notice given of any intended or potential decrease in any such rating or of a possible change in any such rating that does not indicate the direction of the possible change. (i) Prior to the Closing Date, the Company shall have furnished to the Purchasers such further information, certificates and documents as the Purchasers may reasonably request. (j) At the Closing Date, the Company will have obtained all waivers, amendments or consents in connection with the Loan Agreement that are necessary for the Company to consummate the Offering. If any of the conditions specified in this Section 6 shall not have been fulfilled in all material respects when and as provided in this Agreement, or if any of the opinions and certificates mentioned above or elsewhere in this Agreement shall not be in all material respects reasonably satisfactory in form and substance to the Purchasers and counsel for the Purchasers, this Agreement and all obligations of the Purchasers hereunder may be canceled at, or at any time prior to, the Closing Date by the Purchasers. Notice of such cancelation shall be given to the Company in writing or by telephone or telefax confirmed in writing. 23 23 The documents required to be delivered by this Section 6 shall be delivered at the office of Cravath, Swaine & Moore, counsel for the Purchasers, at Worldwide Plaza, 825 Eighth Avenue, New York, New York, on the Closing Date. 7. Reimbursement of Purchasers' Expenses. If the sale of the Securities provided for herein is not consummated because any condition to the obligations of the Purchasers set forth in Section 6 hereof is not satisfied, because of any termination pursuant to Section 10 hereof or because of any refusal, inability or failure on the part of the Company to perform any agreement herein or comply with any provision hereof other than by reason of a default by the Purchasers, the Company will reimburse the Purchasers upon demand for all reasonable and duly documented out-of-pocket expenses (including reasonable fees and disbursements of counsel) that shall have been incurred by them in connection with the proposed purchase and sale of the Securities. 8. Indemnification and Contribution. (a) The Company agrees to indemnify and hold harmless each Purchaser, the directors, officers, employees and agents of each Purchaser and each person who controls any Purchaser within the meaning of either the Act or the Exchange Act against any and all losses, claims, damages or liabilities, joint or several, to which they or any of them may become subject under the Act, the Exchange Act or other Federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Preliminary Memorandum, the Final Memorandum or any information provided by the Company to any holder or prospective purchaser of Securities pursuant to Section 5(h), or in any amendment thereof or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and agrees to 24 24 reimburse each such indemnified party, as incurred, for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Company will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made in the Preliminary Memorandum or the Final Memorandum, or in any amendment thereof or supplement thereto, in reliance upon and in conformity with written information furnished to the Company by or on behalf of the Purchasers specifically for inclusion therein. This indemnity agreement will be in addition to any liability which the Company may otherwise have. (b) Each Purchaser severally and not jointly agrees to indemnify and hold harmless the Company, its directors, officers, employees and agents and each person who controls the Company within the meaning of either the Act or the Exchange Act, to the same extent as the foregoing indemnity from the Company to the Purchasers, but only with reference to written information furnished to the Company by or on behalf of each Purchaser specifically for inclusion in the Preliminary Memorandum or the Final Memorandum, or in any amendment thereof or supplement thereto. This indemnity agreement will be in addition to any liability which any Purchaser may otherwise have. The Company acknowledges that the statements set forth in the last paragraph of the cover page and under the heading "Plan of Distribution" in the Preliminary Memorandum and the Final Memorandum (or any amendment or supplement thereto) constitute the only information furnished in writing by or on behalf of the several Purchasers for inclusion in the Preliminary Memorandum or the Final Memorandum (or any amendment or supplement thereto). (c) Promptly after receipt by an indemnified party under this Section 8 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 8, notify the indemnifying party in 25 25 writing of the commencement thereof; but the failure so to notify the indemnifying party (i) will not relieve it from liability under paragraph (a) or (b) above unless and to the extent it did not otherwise learn of such action and such failure results in the forfeiture by the indemnifying party of substantial rights and defenses and (ii) will not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligation provided in paragraph (a) or (b) above. The indemnifying party shall be entitled to appoint counsel of the indemnifying party's choice at the indemnifying party's expense to represent the indemnified party in any action for which indemnification is sought (in which case the indemnifying party shall not thereafter be responsible for the fees and expenses of any separate counsel retained by the indemnified party or parties except as set forth below); provided, however, that such counsel shall be reasonably satisfactory to the indemnified party. Notwithstanding the indemnifying party's election to appoint counsel to represent the indemnified party in an action, the indemnified party shall have the right to employ separate counsel (including local counsel), and the indemnifying party shall bear the reasonable fees, costs and expenses of such separate counsel, if (i) the use of counsel chosen by the indemnifying party to represent the indemnified party would present such counsel with a conflict of interest, (ii) the actual or potential defendants in, or targets of, any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party, (iii) the indemnifying party shall not have employed counsel reasonably satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of the institution of such action or (iv) the indemnifying party shall authorize the indemnified party to employ separate counsel at the expense of the indemnifying party. It is understood that the indemnifying party shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for (i) the fees and expenses of more than one 26 26 separate firm (in addition to any local counsel) for the Purchasers, their directors, officers, employees and agents, and all persons, if any, who control the Purchasers within the meaning of the Act or the Exchange Act, and (ii) the fees and expenses of more than one separate firm (in addition to any local counsel) for the Company, its directors, officers, employees and agents and each person, if any, who controls the Company within the meaning of the Act or the Exchange Act. An indemnifying party will not, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified parties are actual or potential parties to such claim or action) unless such settlement, compromise or consent includes an unconditional release of each indemnified party from all liability arising out of such claim, action, suit or proceeding. (d) In the event that the indemnity provided in paragraph (a) or (b) of this Section 8 is unavailable to or insufficient to hold harmless an indemnified party for any reason, the Company and the Purchasers agree to contribute to the aggregate losses, claims, damages and liabilities (including legal or other expenses reasonably incurred in connection with investigating or defending same) (collectively "Losses") to which the Company and the Purchasers may be subject in such proportion as is appropriate to reflect the relative benefits received by the Company and by the Purchasers from the offering of the Securities; provided, however, that in no case shall the Purchasers be responsible for any amount in excess of the purchase discount or commission applicable to the Securities purchased by the Purchasers hereunder. If the allocation provided by the immediately preceding sentence is unavailable for any reason, the Company and the Purchasers shall contribute in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Company and of the Purchasers in connection with the statements or omissions that resulted in such Losses as well as any other relevant equitable 27 27 considerations. Benefits received by the Company shall be deemed to be equal to the total net proceeds from the offering of the Securities (before deducting expenses), and benefits received by the Purchasers shall be deemed to be equal to the total purchase discounts and commissions, in each case as set forth on the cover page of the Final Memorandum. Relative fault shall be determined by reference to whether any alleged untrue statement or omission relates to information provided by the Company or the Purchasers. The Company and the Purchasers agree that it would not be just and equitable if contribution were determined by pro rata allocation or any other method of allocation that does not take account of the equitable considerations referred to above. Notwithstanding the provisions of this paragraph (d), no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 8, each person who controls a Purchaser within the meaning of either the Act or the Exchange Act and each director, officer, employee and agent of a Purchaser shall have the same rights to contribution as such Purchaser, and each person who controls the Company within the meaning of either the Act or the Exchange Act and each officer and director of the Company shall have the same rights to contribution as the Company, subject in each case to the applicable terms and conditions of this paragraph (d). 9. Default by a Purchaser. If any one or more Purchasers shall fail to purchase and pay for any of the Securities agreed to be purchased by such Purchaser hereunder and such failure to purchase shall constitute a default in the performance of its or their obligations under this Agreement, the remaining Purchasers shall be obligated severally to take up and pay for (in the respective proportions which the principal amount of Securities set forth opposite their names in Schedule I hereto bears to the aggregate principal amount of Securities set forth opposite the names of all the remaining Purchaser(s)) the Securities that the defaulting Purchaser or Purchasers agreed but failed to purchase; provided, however, that in the event 28 28 that the aggregate principal amount of Securities that the defaulting Purchaser or Purchasers agreed but failed to purchase shall exceed 10% of the aggregate principal amount of Securities set forth in Schedule I hereto, the remaining Purchasers shall have the right to purchase all, but shall not be under any obligation to purchase any, of the Securities, and if such non-defaulting Purchasers do not purchase all the Securities, this Agreement will terminate without liability to any non-defaulting Purchaser or the Company. In the event of a default by any Purchaser as set forth in this Section 9, the Closing Date shall be postponed for such period, not exceeding seven days, as the Purchasers shall determine in order that the required changes in the Final Memorandum or in any other documents or arrangements may be effected. Nothing contained in this Agreement shall relieve any defaulting Purchaser of its liability, if any, to the Company or any non-defaulting Purchaser for damages occasioned by its default hereunder. 10. Termination. This Agreement shall be subject to termination in the absolute discretion of the Purchasers, by notice given to the Company prior to delivery of and payment for the Securities, if prior to such time (i) trading in the Company's Common Stock shall have been suspended by the Commission or the National Association of Securities Dealers Automated Quotation National Market System, (ii) trading in securities generally on the New York Stock Exchange or the National Association of Securities Dealers Automated Quotation National Market System shall have been suspended or limited or minimum prices shall have been established on either of such Exchange or Market System, (iii) a banking moratorium shall have been declared either by Federal or New York State authorities or (iv) there shall have occurred any outbreak or escalation of hostilities, declaration by the United States of a national emergency or war or other calamity or crisis the effect of which on financial markets is such as to make it, in the reasonable judgment of the Purchasers, impracticable or inadvisable to proceed with the offering or delivery of the Securities as contemplated by the Final Memorandum (exclusive of any amendment or supplement thereof or thereto). 29 29 11. Representations and Indemnities to Survive. The respective agreements, representations, warranties, indemnities and other statements of the Company or its officers and of the Purchasers set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation made by or on behalf of the Purchasers or the Company or any of the officers, directors or controlling persons referred to in Section 8 hereof, and will survive delivery of and payment for the Securities. The provisions of Sections 7 and 8 hereof shall survive the termination or cancelation of this Agreement. 12. Notices. All communications hereunder will be in writing and effective only on receipt, and, if sent to the Purchasers, will be mailed, delivered or telecopied and confirmed to them in writing, care of Salomon Brothers Inc, at Seven World Trade Center, New York, New York, 10048, telecopier no.: (212) 783-2274, attention of Legal Department; or, if sent to the Company, will be mailed, delivered or telecopied and confirmed to it in writing at 6273 Monarch Park Place, Suite 200, Niwot, Colorado, 80503, telecopier no.: (303) 652-0416, attention of Mr. Ronald R. Budacz, with a copy to Curtis, Mallet-Prevost, Colt & Mosle, 101 Park Avenue, New York, NY, 10178, telecopier no. (212) 697-1559, attention of Jeffrey N. Ostrager, Esq. 13. Successors. This Agreement will inure to the benefit of and be binding upon the parties hereto and their respective successors and the officers and directors and controlling persons referred to in Section 8 hereof, and, except as expressly set forth in Section 5(h) hereof, no other person will have any right or obligation hereunder. 14. Applicable Law. This Agreement will be governed by and construed in accordance with the laws of the State of New York without reference to principles of conflict of law. 15. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall constitute 30 30 an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. 31 31 If the foregoing is in accordance with your understanding of our agreement, please sign and return to us the enclosed duplicate hereof, whereupon this letter and your acceptance shall represent a binding agreement between the Company and the several Purchasers. Very truly yours, THE DII GROUP, INC. By -------------------------------------- Name: Title: The foregoing Agreement is hereby confirmed and accepted as of the date first above written. SALOMON BROTHERS INC DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION BT ALEX.BROWN INCORPORATED By SALOMON BROTHERS INC By --------------------------------- Name: Title: For themselves and the other Purchasers named in Schedule I to the foregoing Agreement. 32 SCHEDULE I
Principal Amount of Securities Purchasers to be Purchased ---------- --------------- Salomon Brothers Inc . . . . . . . . . . . . . . . . . . . $ 96,000,000 Donaldson, Lufkin & Jenrette Securities Corporation . . . . . . . . . . . . . . . . . 36,000,000 BT Alex. Brown Incorporated . . . . . . . . . . . . . . . . 18,000,000 ------------- Total . . . . . . . . . . . . . . . . . . . . . . . . $ 150,000,000
33 EXHIBIT A Selling Restrictions for Offers and Sales outside the United States (a) The Securities have not been and will not be registered under the Securities Act and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except in accordance with Regulation S or pursuant to an exemption from the registration requirements of the Securities Act. Each Purchaser represents and agrees that, except as otherwise permitted by Section 4(a)(i) of the Agreement to which this is an exhibit, it has offered and sold the Securities, and will offer and sell the Securities, (i) as part of their distribution at any time and (ii) otherwise until 40 days after the later of the commencement of the offering and the Closing Date, only in accordance with Rule 903 of Regulation S under the Securities Act. Accordingly, each Purchaser represents and agrees that neither it, nor any of its affiliates nor any person acting on its or their behalf has engaged or will engage in any directed selling efforts with respect to the Securities, and that it and they have complied and will comply with the offering restrictions requirement of Regulation S. Each Purchaser agrees that, at or prior to the confirmation of sale of Securities (other than a sale of Securities pursuant to Section 4(a)(i) of the Agreement to which this is an exhibit), it shall have sent to each distributor, dealer or person receiving a selling concession, fee or other remuneration that purchases Securities from it during the restricted period a confirmation or notice to substantially the following effect: "The Securities covered hereby have not been registered under the U.S. Securities Act of 1933 (the "Securities Act") and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons (i) as part of their distribution at any time or (ii) otherwise until 40 days after the later of the commencement of the offering and September 19, 1997, 34 except in either case in accordance with Regulation S, Rule 144A or other available exemption from registration under the Securities Act. Terms used above have the meanings given to them by Regulation S." (b) Each Purchaser also represents and agrees that it has not entered and will not enter into any contractual arrangement with any distributor with respect to the distribution of the Securities, except with its affiliates or with the prior written consent of the Company. (c) Terms used in this Exhibit have the meanings given to them by Regulation S. EX-4.3 4 REGISTRATION AGREEMENT DATED 9/16/97 1 EXHIBIT 4.3 THE DII GROUP, INC. $150,000,000 8.50% Senior Subordinated Notes Due 2007 REGISTRATION RIGHTS AGREEMENT New York, New York September 16, 1997 To: SALOMON BROTHERS INC DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION BT ALEX. BROWN INCORPORATED In care of: Salomon Brothers Inc Seven World Trade Center New York, New York 10048 Ladies and Gentlemen: The DII Group, Inc., a Delaware corporation (the "Company"), proposes to issue and sell to you (the "Purchasers"), upon the terms set forth in a purchase agreement dated the date hereof (the "Purchase Agreement"), $150,000,000 aggregate principal amount of its 8.50% Senior Subordinated Notes due 2007 (the "Securities") (the "Initial Placement"). As an inducement to the Purchasers to enter into the Purchase Agreement and in satisfaction of a condition to your obligations thereunder, the Company agrees with you, (i) for your benefit and the benefit of the other Purchasers and (ii) for the benefit of the holders of the Securities (including you and the other Purchasers) from time to time (each of the foregoing a "Holder" and together 2 2 the "Holders"), as follows: 1. Definitions. Capitalized terms used herein without definition shall have their respective meanings set forth in the Purchase Agreement. As used in this Agreement, the following capitalized defined terms shall have the following meanings: "Act" means the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder. "Affiliate" of any specified person means any other person that, directly or indirectly, is in control of, is controlled by, or is under common control with, such specified person. For purposes of this definition, control of a person means the power, direct or indirect, to direct or cause the direction of the management and policies of such person whether by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Closing Date" has the meaning set forth in the Purchase Agreement. "Commission" means the Securities and Exchange Commission. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder. "Exchange Offer Registration Period" means the period beginning when the New Securities are first issued in the Registered Exchange Offer, and ending 180 days after the consummation of the Registered Exchange Offer, or such shorter period if all New Securities received by an Exchanging Dealer have been disposed of by such Exchanging Dealer, in any case exclusive of any period during which any stop order shall be in effect suspending the effectiveness of the Exchange Offer Registration Statement or of any period pursuant to Section 2(g). 3 3 "Exchange Offer Registration Statement" means a registration statement of the Company on an appropriate form under the Act with respect to the Registered Exchange Offer, all amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "Exchanging Dealer" means any Holder (which may include the Purchasers) which is a broker-dealer, electing to exchange Securities acquired for its own account as a result of market-making activities or other trading activities, for New Securities. "Holder" has the meaning set forth in the preamble hereto. "Indenture" means the Indenture relating to the Securities and the New Securities, to be entered into by the Company and Chase Trust Company of California, as trustee, as the same may be amended from time to time in accordance with the terms thereof. "Initial Placement" has the meaning set forth in the preamble hereto. "Majority Holders" means the Holders of a majority of the aggregate principal amount of securities registered under a Registration Statement. "Managing Underwriters" means the investment banker or investment bankers and manager or managers that shall administer an underwritten offering. "New Securities" means debt securities of the Company identical in all material respects to the Securities (except that the cash interest and interest rate step-up provisions and the transfer restrictions will be modified or eliminated, as appropriate), to be issued under the Indenture. 4 4 "Prospectus" means the prospectus included in any Registration Statement (including a prospectus that discloses information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A under the Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Securities or the New Securities covered by such Registration Statement, and all amendments and supplements to the Prospectus, including post-effective amendments. "Registered Exchange Offer" means the proposed offer to the Holders to issue and deliver to such Holders, in exchange for the Securities, a like principal amount of the New Securities. "Registrable Securities" has the meaning set forth in Section 3(a). "Registration Statement" means any Exchange Offer Registration Statement or Shelf Registration Statement that covers any of the Securities or the New Securities pursuant to the provisions of this Agreement, all amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "Securities" has the meaning set forth in the preamble hereto. "Shelf Registration" means a registration effected pursuant to Section 3 hereof. "Shelf Registration Period" has the meaning set forth in Section 3(b) hereof. "Shelf Registration Statement" means a "shelf" registration statement of the Company pursuant to the provisions of Section 3 hereof which covers some or all of the Securities and the New Securities, as applicable, on an 5 5 appropriate form under Rule 415 under the Act, or any similar rule that may be adopted by the Commission, and all amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "Trustee" means the trustee with respect to the Securities and the New Securities under the Indenture. "underwriter" means any underwriter of securities in connection with an offering thereof under a Shelf Registration Statement. 2. Registered Exchange Offer; Resales of New Securities by Exchanging Dealers; Private Exchange. (a) The Company shall prepare and, not later than 60 days after the date of the original issuance of the Securities, shall file with the Commission the Exchange Offer Registration Statement with respect to the Registered Exchange Offer. The Company shall use its reasonable best efforts to cause the Exchange Offer Registration Statement to become effective under the Act within 120 days after the date of the original issuance of the Securities. (b) Upon the effectiveness of the Exchange Offer Registration Statement, the Company shall promptly commence the Registered Exchange Offer, it being the objective of such Registered Exchange Offer to enable each Holder electing to exchange Securities for New Securities (assuming that such Holder is not an affiliate of the Company within the meaning of the Act, acquires the New Securities in the ordinary course of such Holder's business and has no arrangements with any person to participate in the distribution of the New Securities) to trade such New Securities from and after their receipt without any limitations or restrictions under the Act and without material restrictions under the securities laws of a substantial proportion of the several states of the United States. 6 6 (c) In connection with the Registered Exchange Offer, the Company shall: (i) mail to each Holder a copy of the Prospectus forming part of the Exchange Offer Registration Statement, together with an appropriate letter of transmittal and related documents, stating, in addition to such other disclosures as are required by applicable law, that Holders electing to have Securities exchanged in the Registered Exchange Offer shall be required to represent that any New Securities to be received by them will be acquired in the ordinary course of their business and that at the time of the commencement of the Registered Exchange Offer they have no arrangement or understanding with any person to participate in the distribution (within the meaning of the Act) of the New Securities and that they are not "affiliates" of the Company as defined in Rule 405 of the Act and that they will comply with the registration and prospectus delivery requirements of the Act to the extent applicable; (ii) keep the Registered Exchange Offer open for not less than 30 days after the date notice thereof is mailed to the Holders (or longer if required by applicable law); (iii) utilize the services of a depositary as an exchange agent for the Registered Exchange Offer with an address in the Borough of Manhattan, the City of New York; and (iv) comply in all material respects with all applicable laws. (d) As soon as practicable after the close of the Registered Exchange Offer, the Company shall: (i) accept for exchange all Securities tendered and not validly withdrawn pursuant to the Registered 7 7 Exchange Offer; (ii) deliver, or cause to be delivered, to the Trustee for cancellation all Securities so accepted for exchange; and (iii) cause the Trustee promptly to authenticate and deliver to each Holder of Securities New Securities equal in principal amount to the Securities of such Holder so accepted for exchange. (e) The Purchasers and the Company acknowledge that, pursuant to current interpretations by the Commission's staff of Section 5 of the Act, and in the absence of an applicable exemption therefrom, each Exchanging Dealer is required to deliver a Prospectus in connection with a sale of any New Securities received by such Exchanging Dealer pursuant to the Registered Exchange Offer in exchange for Securities acquired for its own account as a result of market-making activities or other trading activities. Accordingly, the Company shall: (i) include the information set forth in Annex A hereto on the cover of the Exchange Offer Registration Statement, in Annex B hereto in the forepart of the Exchange Offer Registration Statement in a section setting forth details of the Exchange Offer, in Annex C hereto in the underwriting or plan of distribution section of the Prospectus forming a part of the Exchange Offer Registration Statement, and in Annex D hereto in the Letter of Transmittal delivered pursuant to the Registered Exchange Offer; and (ii) use its reasonable best efforts to keep the Exchange Offer Registration Statement continuously effective under the Act during the Exchange Offer Registration Period for delivery by Exchanging Dealers in connection with sales of New Securities received pursuant to the Registered Exchange Offer, as contemplated by Section 4(h) below. 8 8 (f) In the event that any Purchaser determines that it is not eligible to participate in the Registered Exchange Offer with respect to the exchange of Securities constituting any portion of an unsold allotment, at the request of such Purchaser, the Company shall issue and deliver to such Purchaser or the party purchasing New Securities registered under a Shelf Registration Statement as contemplated by Section 3(iii) hereof from such Purchaser, in exchange for such Securities, a like principal amount of New Securities. The Company shall seek to cause the CUSIP service bureau to issue the same CUSIP number for such New Securities as for New Securities issued pursuant to the Registered Exchange Offer. (g) The Company may suspend the availability and use of the Exchange Offer Registration Statement for one period not to exceed 30 days following the consummation of the Registered Exchange Offer for valid business reasons (not including avoidance of the Company's obligations hereunder) including the acquisition or divestiture of assets, public filings with the Commission, pending corporate developments and similar events. 9 9 3. Shelf Registration. If, (i) because of any change in law or applicable interpretations thereof by the Commission's staff, the Company determines upon advice of its outside counsel that it is not permitted to effect the Registered Exchange Offer as contemplated by Section 2 hereof, or (ii) for any other reason the Exchange Offer Registration Statement is not declared effective within 120 days after the Closing Date or the Registered Exchange Offer is not consummated within 150 days after the Closing Date, or (iii) any Purchaser so requests with respect to Securities (or any New Securities received pursuant to Section 2(f)) not eligible to be exchanged for New Securities in a Registered Exchange Offer or, in the case of any Purchaser that participates in any Registered Exchange Offer, such Purchaser does not receive freely tradable New Securities, or (iv) any Holder (other than a Purchaser) is not eligible to participate in the Registered Exchange Offer or (v) in the case of any such Holder that participates in the Registered Exchange Offer, such Holder does not receive freely tradable New Securities in exchange for tendered securities, other than by reason of such Holder being an affiliate of the Company within the meaning of the Act (it being understood that, for purposes of this Section 3, (x) the requirement that a Purchaser deliver a Prospectus containing the information required by Items 507 and/or 508 of Regulation S-K under the Act in connection with sales of New Securities acquired in exchange for such Securities shall result in such New Securities being not "freely tradeable" but (y) the requirement that an Exchanging Dealer deliver a Prospectus in connection with sales of New Securities acquired in the Registered Exchange Offer in exchange for Securities acquired as a result of market-making activities or other trading activities shall not result in such New Securities being not "freely tradeable"), the following provisions shall apply: (a) The Company shall as promptly as practicable after so required or requested pursuant to this Section 3 file with the Commission and thereafter shall use its reasonable best efforts to cause to be declared effective under the Act a Shelf Registration Statement relating to the 10 10 offer and sale of the Securities or the New Securities, as applicable, by the Holders from time to time in accordance with the methods of distribution elected by such Holders (subject to the provisions of Section 4(q)) and set forth in such Shelf Registration Statement (such Securities or New Securities, as applicable, to be sold by Holders under such Shelf Registration Statement being referred to herein as "Registrable Securities"); provided, however, that, with respect to New Securities received by a Purchaser in exchange for Securities constituting any portion of an unsold allotment, the Company may, if permitted by then-current interpretations by the Commission's staff, file a post- effective amendment to the Exchange Offer Registration Statement containing the information required by Regulation S-K Items 507 and/or 508, as applicable, in satisfaction of its obligations under this paragraph (a) with respect thereto, and any such Exchange Offer Registration Statement, as so amended, shall be referred to herein as, and governed by the provisions herein applicable to, a Shelf Registration Statement. (b) The Company shall use its reasonable best efforts to keep the Shelf Registration Statement continuously effective in order to permit the Prospectus forming part thereof to be usable by Holders for a period of two years from the date the Shelf Registration Statement is declared effective by the Commission (or until one year after such effective date if such Shelf Registration Statement is filed at the request of a Purchaser) or such shorter period that will terminate when all the Securities or New Securities, as applicable, covered by the Shelf Registration Statement have been sold pursuant to the Shelf Registration Statement (in any such case, such period being called the "Shelf Registration Period"). The Company shall be deemed not to have used its reasonable best efforts to keep the Shelf Registration Statement effective during the requisite period if it voluntarily takes any action that results or will result in Holders of securities covered thereby not being able to offer and sell such securities during that period, unless such action is (i) required by applicable law or (ii) pursuant to Section 2(c), 2(g) or 11 11 3(c) hereof, and, in either case, so long as the Company promptly thereafter complies with the requirements of Section 4(k) hereof, if applicable. (c) The Company may suspend the use of the prospectus for a period not to exceed 30 days in any three month period or two periods not to exceed an aggregate of 60 days in any 12-month period for valid business reasons (not including avoidance of the Company's obligations hereunder), including the acquisition or divestiture of assets, public filings with the Commission, pending corporate developments and similar events. Notwithstanding anything to the contrary in this Section 3, it is understood that Holders who (i) are eligible to participate in the Registered Exchange Offer and fail to duly tender their Securities for exchange pursuant to the Registered Exchange Offer (other than Purchasers in connection with Securities held by them constituting any portion of any unsold allotment), or otherwise fail to comply with the requirements of the Registered Exchange Offer, or voluntarily take any action which results in their not receiving "freely tradeable" New Securities in the Registered Exchange Offer or (ii) fail to furnish to the Company such information as the Company may request in accordance with Section 4(o) in connection with a Shelf Registration Statement, shall not retain any rights under this Section 3, including any right to have Securities owned by them included in any Shelf Registration Statement. 4. Registration Procedures. In connection with any Shelf Registration Statement, and, to the extent applicable, any Exchange Offer Registration Statement, the following provisions shall apply: (a) The Company shall furnish to you, prior to the filing thereof with the Commission, a copy of any Shelf Registration Statement and any Exchange Offer Registration Statement, and each amendment thereof and each amendment or supplement, if any, to the Prospectus included therein and shall use its reasonable best 12 12 efforts to reflect in each such document, when so filed with the Commission, such comments as you reasonably may propose. (b) The Company shall cause (i) any Registration Statement and any amendment thereto and any Prospectus forming part thereof and any amendment or supplement thereto to comply in all material respects with the Act and the rules and regulations thereunder, (ii) any Registration Statement and any amendment thereto not to, when it becomes effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (iii) any Prospectus forming part of any Registration Statement, and any amendment or supplement to such Prospectus, not to include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (c) (1) The Company shall advise you and, in the case of a Shelf Registration Statement, the Holders of securities covered thereby and, if requested by you or any such Holder, confirm such advice in writing: (i) when a Registration Statement and any amendment thereto has been filed with the Commission and when the Registration Statement or any post-effective amendment thereto has become effective; and (ii) of any request by the Commission for amendments or supplements to the Registration Statement or the Prospectus included therein or for additional information. (2) The Company shall advise you and, in the case of a Shelf Registration Statement, the Holders of securities covered thereby, and, in the case of an 13 13 Exchange Offer Registration Statement, any Exchanging Dealer which has provided in writing to the Company a telephone or facsimile number and address for notices, and, if requested by you or any such Holder or Exchanging Dealer, confirm such advice in writing: (i) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose; (ii) of the receipt by the Company of any notification with respect to the suspension of the qualification of the securities included in any Registration Statement for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and (iii) of the happening of any event that requires the making of any changes in the Registration Statement or the Prospectus so that, as of such date, the statements therein are not misleading and do not omit to state a material fact required to be stated therein or necessary to make the statements therein (in the case of the Prospectus, in light of the circumstances under which they were made) not misleading (which advice shall be accompanied by an instruction to suspend the use of the Prospectus until the requisite changes have been made), provided that such notice shall not be required to specify the nature of the event giving rise to the notice requirement hereunder. (d) The Company shall use its reasonable best efforts to obtain the withdrawal of any order suspending the effectiveness of any Registration Statement at the earliest possible time. (e) The Company shall furnish to each Holder of securities included within the coverage of any Shelf 14 14 Registration Statement, without charge, at least one copy of such Shelf Registration Statement and any post- effective amendment thereto, including financial statements and schedules, and, if the Holder so requests in writing, any documents incorporated by reference therein and all exhibits thereto (including those incorporated by reference therein). (f) The Company shall, during the Shelf Registration Period, deliver to each Holder of securities included within the coverage of any Shelf Registration Statement, without charge, as many copies of the Prospectus (including each preliminary Prospectus) included in such Shelf Registration Statement and any amendment or supplement thereto as such Holder may reasonably request; and the Company consents to the use of the Prospectus or any amendment or supplement thereto by each of the selling Holders of securities in connection with the offering and sale of the securities covered by the Prospectus or any amendment or supplement thereto. (g) The Company shall furnish to each Exchanging Dealer which so requests, without charge, at least one copy of the Exchange Offer Registration Statement and any post-effective amendment thereto, including financial statements and schedules, and, if the Exchanging Dealer so requests in writing, any documents incorporated by reference therein and all exhibits thereto (including those incorporated by reference therein). (h) The Company shall, during the Exchange Offer Registration Period, promptly deliver to each Exchanging Dealer, without charge, as many copies of the Prospectus included in such Exchange Offer Registration Statement and any amendment or supplement thereto as such Exchanging Dealer may reasonably request for delivery by such Exchanging Dealer in connection with a sale of New Securities received by it pursuant to the Registered Exchange Offer; and the 15 15 Company consents to the use of the Prospectus or any amendment or supplement thereto by any such Exchanging Dealer, as aforesaid. (i) Prior to the Registered Exchange Offer or any other offering of securities pursuant to any Registration Statement, the Company shall register or qualify or cooperate with the Holders of securities included therein and their respective counsel in connection with the registration or qualification of such securities for offer and sale under the securities or blue sky laws of such jurisdictions as any such Holder reasonably requests in writing and do any and all other acts or things reasonably necessary or advisable to enable the offer and sale in such jurisdictions of the securities covered by such Registration Statement; provided, however, that the Company will not be required to qualify generally to do business in any jurisdiction where it is not then so qualified or to take any action which would subject it to general service of process or to taxation in any such jurisdiction where it is not then so subject. (j) The Company shall cooperate with the Holders of Securities to facilitate the timely preparation and delivery of certificates representing Securities to be sold pursuant to any Registration Statement free of any restrictive legends and in such denominations and registered in such names as Holders may request prior to sales of securities pursuant to such Registration Statement. (k) Upon the occurrence of any event contemplated by paragraph (c)(2)(iii) above, the Company shall, if required pursuant to the Act or paragraph (c)(2)(iii) above, promptly prepare a post-effective amendment to any Registration Statement or an amendment or supplement to the related Prospectus or file any other required document so that, as thereafter delivered to purchasers of the securities included therein, the Prospectus will not include an untrue statement of a 16 16 material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (l) Not later than the effective date of any Registration Statement hereunder, the Company shall provide a CUSIP number for the Securities or New Securities, as the case may be, registered under such Registration Statement, and provide the Trustee with printed certificates for such Securities or New Securities, in a form, if requested by the applicable Holder, eligible for deposit with The Depository Trust Company. (m) The Company shall use its reasonable best efforts to comply with all applicable rules and regulations of the Commission to the extent and so long as they are applicable to the Registered Exchange Offer or the Shelf Registration and shall make generally available to its security holders as soon as practicable after the effective date of the applicable Registration Statement an earnings statement satisfying the provisions of Section 11(a) of the Act. (n) The Company shall cause the Indenture to be qualified under the Trust Indenture Act of 1939, as amended, in a timely manner. (o) The Company may require each Holder of Securities to be sold pursuant to any Shelf Registration Statement to furnish to the Company such information regarding the Holder and the distribution of such securities as the Company may from time to time reasonably require for inclusion in such Registration Statement. Any Holder who fails to provide such information promptly after receipt of a request therefor shall not be entitled to use the Prospectus and may not require any additional interest (as specified in Section 1(b) of the Securities) to be paid until such time as the information is provided. 17 17 (p) The Company shall, if requested, promptly incorporate in a Prospectus supplement or post-effective amendment to a Shelf Registration Statement, such information as the Managing Underwriters and Majority Holders reasonably agree should be included therein and shall make all required filings of such Prospectus supplement or post-effective amendment as soon as notified of the matters to be incorporated in such Prospectus supplement or post-effective amendment. (q) In the case of any Shelf Registration Statement, the Company shall enter into such customary agreements (including an underwriting agreement) and take all other appropriate actions in order to expedite or facilitate the registration or the disposition of the Securities, including not more than one underwritten offering, and in connection therewith, if an underwriting agreement is entered into, cause the same to contain indemnification provisions and procedures no less favorable than those set forth in Section 6 (or such other provisions and procedures acceptable to the Majority Holders and the Managing Underwriters, if any), with respect to all parties to be indemnified pursuant to Section 6 from Holders of Securities to the Company. (r) In the case of any Shelf Registration Statement, subject to Section 4(q), the Company shall (i) make reasonably available for inspection by the Holders of securities to be registered thereunder, any underwriter participating in any disposition pursuant to such Registration Statement, and any attorney, accountant or other agent retained by the Holders or any such underwriter all relevant financial and other records, pertinent corporate documents and properties of the Company and its subsidiaries as is customary for similar due diligence examinations; (ii) cause the Company's officers, directors and employees to supply all relevant information reasonably requested by the Holders or any such underwriter, attorney, accountant 18 18 or agent in connection with such Registration Statement as is customary for similar due diligence examinations; provided, however, that any information that is designated in writing by the Company, in good faith, as confidential at the time of delivery of such information shall be kept confidential by the Holders or any such underwriter, attorney, accountant or agent, unless disclosure thereof is made in connection with a court proceeding or required by law, or such information has become available (not in violation of this agreement) to the public generally or through a third party without an accompanying obligation of confidentiality; (iii) if requested, make such representations and warranties to the Holders of securities registered thereunder and the underwriters, if any, in form, substance and scope as are customarily made by issuers to underwriters in primary underwritten offerings and covering matters including, but not limited to, those set forth in the Purchase Agreement; (iv) if requested, obtain opinions of counsel to the Company and updates thereof (which counsel and opinions (in form, scope and substance) shall be reasonably satisfactory to the Managing Underwriters, if any) addressed to each selling Holder and the underwriters, if any, covering such matters as are customarily covered in opinions requested in underwritten offerings and such other matters as may be reasonably requested by such Holders and underwriters; (v) if requested, obtain "cold comfort" letters and updates thereof from the independent certified public accountants of the Company (and, if necessary, any other independent certified public accountants of any subsidiary of the Company or of any business acquired by the Company for which financial statements and financial data are, or are required to be, included in the Registration Statement), addressed to each selling Holder of securities registered thereunder and the underwriters, if any, in customary form and covering matters of the type customarily covered in "cold comfort" letters in connection with primary underwritten offerings; and (vi) if requested, deliver such documents and 19 19 certificates as may be reasonably requested by the Majority Holders and the Managing Underwriters, if any, including those to evidence compliance with Section 4(k) and with any customary conditions contained in the underwriting agreement or other agreement entered into by the Company. The foregoing actions set forth in clauses (iii), (iv), (v) and (vi) of this Section 4(r) shall be performed at (A) the effectiveness of such Registration Statement and each post-effective amendment thereto and (B) each closing under any underwriting or similar agreement as and to the extent required thereunder. 5. Registration Expenses. The Company shall bear all expenses incurred in connection with the performance of its obligations under Sections 2, 3 and 4 hereof and, in the event of any Shelf Registration Statement, shall reimburse the Holders for the reasonable and duly documented fees and disbursements of one firm or counsel designated by the Majority Holders to act as counsel for the Holders in connection therewith and in the case of any Exchange Offer Registration Statement, shall reimburse the Purchasers for the reasonable fees and disbursements of one firm or counsel designated by the Majority Holders to act as counsel for the Holders in connection therewith. 6. Indemnification and Contribution. (a) In connection with any Registration Statement, the Company agrees to indemnify and hold harmless each Holder of securities covered thereby (including each Purchaser and, with respect to any Prospectus delivery contemplated in Section 4(h) hereof, each Exchanging Dealer), the directors, officers, employees and agents of each such Holder and each person who controls any such Holder within the meaning of either the Act or the Exchange Act against any and all losses, claims, damages or liabilities, joint or several, to which they or any of them may become subject under the Act, the Exchange Act or other Federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions in 20 20 respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement as originally filed or in any amendment thereof, or in any preliminary Prospectus or Prospectus, or in any amendment thereof or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and agrees to reimburse each such indemnified party, as incurred, for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that (i) the Company will not be liable in any case to the extent that any such loss, claim, damage or liability arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information furnished to the Company by or on behalf of any such Holder or underwriter or Managing Underwriter specifically for inclusion therein, (ii) the Company shall not be liable to any indemnified party under this indemnity agreement with respect to any Registration Statement or Prospectus to the extent that any such loss, claim, damage or liability of such indemnified party results solely from an untrue statement of a material fact contained in, or the omission of a material fact from, the Registration Statement or Prospectus which untrue statement or omission was corrected in an amended or supplemented Registration Statement or Prospectus, if the person alleging such loss, claim, damage or liability was not sent or given, at or prior to the written confirmation of such sale, a copy of the amended or supplemented Registration Statement or Prospectus if the Company had previously furnished copies thereof to such indemnified party and if such delivery of a prospectus is finally judicially determined to be required by the Act and was not so made and (iii) the Company will not be liable to any indemnified party under this indemnity agreement with respect to any Registration Statement or Prospectus to the extent that any such loss, claim, damage or liability of such indemnified party results (a) from the use of a 21 21 Registration Statement during a period when a stop order has been issued in respect thereof or any proceedings for that purpose have been initiated or (b) from the use of the Prospectus during a period when the use of the Prospectus has been suspended in accordance with Section 2(g), 3(c) or 4(c) hereof, provided that Holders received prior notice of such stop order or initiation of proceedings or suspension. This indemnity agreement will be in addition to any liability which the Company may otherwise have. The Company also agrees to indemnify or contribute to Losses, as provided in Section 6(d), of any underwriters of Securities registered under a Shelf Registration Statement, their officers and directors and each person who controls such underwriters on substantially the same basis as that of the indemnification of the Purchasers and the selling Holders provided in this Section 6(a) and shall, if requested by any Holder, enter into an underwriting agreement reflecting such agreement, as provided in Section 4(q) hereof. (b) Each Holder of securities covered by a Registration Statement (including each Purchaser and, with respect to any Prospectus delivery as contemplated in Section 4(h) hereof, each Exchanging Dealer) severally and not jointly agrees to indemnify and hold harmless the Company, each of its directors, officers, employees, agents and each person who controls the Company within the meaning of either the Act or the Exchange Act to the same extent as the foregoing indemnity from the Company to each such Holder, but only with reference to written information relating to such Holder furnished to the Company by or on behalf of such Holder specifically for inclusion in the documents referred to in the foregoing indemnity. This indemnity agreement will be in addition to any liability which any such Holder may otherwise have. (c) Promptly after receipt by an indemnified party under this Section 6 of notice of the commencement of any action, such indemnified party will, if a claim in 22 22 respect thereof is to be made against the indemnifying party under this Section 6, notify the indemnifying party in writing of the commencement thereof; but the failure so to notify the indemnifying party (i) will not relieve it from liability under paragraph (a) or (b) above unless and to the extent it did not otherwise learn of such action and such failure results in the forfeiture by the indemnifying party of substantial rights and defenses and (ii) will not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligation provided in paragraph (a) or (b) above. The indemnifying party shall be entitled to appoint counsel of the indemnifying party's choice at the indemnifying party's expense to represent the indemnified party in any action for which indemnification is sought (in which case the indemnifying party shall not thereafter be responsible for the fees and expenses of any separate counsel retained by the indemnified party or parties except as set forth below); provided, however, that such counsel shall be reasonably satisfactory to the indemnified party. Notwithstanding the indemnifying party's election to appoint counsel to represent the indemnified party in an action, the indemnified party shall have the right to employ separate counsel (including local counsel), but the indemnified party shall bear the reasonable fees, costs and expenses of such separate counsel (and local counsel) unless (i) the use of counsel chosen by the indemnifying party to represent the indemnified party would present such counsel with a conflict of interest, (ii) the actual or potential defendants in, or targets of, any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party, (iii) the indemnifying party shall not have employed counsel reasonably satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of the institution of such action or (iv) the indemnifying party shall authorize the indemnified party to employ separate counsel at the expense of the indemnifying party. It is understood that the 23 23 indemnifying party shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for (i) the fees and expenses of more than one separate firm (in addition to any local counsel) for the Purchasers, their directors, officers, employees and agents, and all persons, if any, who control the Purchasers within the meaning of the Act or the Exchange Act, (ii) the fees and expenses of more than one separate firm (in addition to any local counsel) for the Company, its directors, officers, employees and agents and each person, if any, who controls the Company within the meaning of the Act or the Exchange Act and (iii) the fees and expenses of more than one separate firm (in addition to any local counsel) for all Holders, their directors, officers, employees and agents and all persons, if any, who control any Holders within the meaning of the Act or the Exchange Act, and that all such fees and expenses shall be reimbursed as they are incurred. An indemnifying party will not, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified parties are actual or potential parties to such claim or action) unless such settlement, compromise or consent includes an unconditional release of each indemnified party from all liability arising out of such claim, action, suit or proceeding. (d) In the event that the indemnity provided in paragraph (a) or (b) of this Section 6 is unavailable to or insufficient to hold harmless an indemnified party for any reason, then each applicable indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the aggregate losses, claims, damages and liabilities (including legal or other expenses reasonably incurred in connection with investigating or defending same) (collectively "Losses") to which such indemnified party may be subject in such proportion as is appropriate to reflect the relative benefits received by such indemnifying party, on the one hand, and such indemnified party, on the other hand, from 24 24 the Initial Placement and the Registration Statement which resulted in such Losses; provided, however, that in no case shall any Purchaser or any subsequent Holder of any Security or New Security be responsible, in the aggregate, for any amount in excess of the purchase discount or commission applicable to such Security, or in the case of a New Security, applicable to the Security which was exchangeable into such New Security as set forth on the cover page of the Final Memorandum, nor shall any underwriter be responsible for any amount in excess of the underwriting discount or commission applicable to the securities purchased by such underwriter under the Registration Statement which resulted in such Losses. If the allocation provided by the immediately preceding sentence is unavailable for any reason, the indemnifying party and the indemnified party shall contribute in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of such indemnifying party, on the one hand, and such indemnified party, on the other hand, in connection with the statements or omissions which resulted in such Losses as well as any other relevant equitable considerations. Benefits received by the Company shall be deemed to be equal to the sum of (x) the total net proceeds from the Initial Placement (before deducting expenses) as set forth on the cover page of the Final Memorandum and (y) the total amount of additional interest which the Company was not required to pay as a result of registering the securities covered by the Registration Statement which resulted in such Losses. Benefits received by the Purchasers shall be deemed to be equal to the total purchase discounts and commissions as set forth on the cover page of the Final Memorandum, and benefits received by any other Holders shall be deemed to be equal to the value of receiving Securities or New Securities, as applicable, registered under the Act. Benefits received by any underwriter shall be deemed to be equal to the total underwriting discounts and commissions, as set forth on the cover page of the Prospectus forming a part of the Registration Statement which resulted in such Losses. Relative fault shall be determined by reference to whether any alleged untrue statement or omission relates to 25 25 information provided by the indemnifying party, on the one hand, or by the indemnified party, on the other hand. The parties agree that it would not be just and equitable if contribution were determined by pro rata allocation or any other method of allocation which does not take account of the equitable considerations referred to above. Notwithstanding the provisions of this paragraph (d), no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 6, each person who controls a Holder within the meaning of either the Act or the Exchange Act and each director, officer, employee and agent of such Holder shall have the same rights to contribution as such Holder, and each person who controls the Company within the meaning of either the Act or the Exchange Act, and each director, officer, employee and agent of the Company shall have the same rights to contribution as the Company, subject in each case to the applicable terms and conditions of this paragraph (d). (e) The provisions of this Section 6 will remain in full force and effect, regardless of any investigation made by or on behalf of any Holder or the Company or any of the officers, directors or controlling persons referred to in Section 6 hereof, and will survive the sale by a Holder of securities covered by a Registration Statement. 7. Miscellaneous. (a) No Inconsistent Agreements. The Company has not, as of the date hereof, entered into, nor shall it, on or after the date hereof, enter into, any agreement with respect to its securities that is inconsistent with the rights granted to the Holders herein or otherwise conflicts with the provisions hereof. 26 26 (b) Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, qualified, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the Company has obtained the written consent of the Holders of at least a majority of the then outstanding aggregate principal amount of Securities (or, after the consummation of any Exchange Offer in accordance with Section 2 hereof, of New Securities); provided that, with respect to any matter that directly or indirectly affects the rights of any Purchaser hereunder, the Company shall obtain the written consent of each such Purchaser against which such amendment, qualification, supplement, waiver or consent is to be effective. Notwithstanding the foregoing (except the foregoing proviso), a waiver or consent to departure from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders whose securities are being sold pursuant to a Registration Statement and that does not directly or indirectly affect the rights of other Holders may be given by the Majority Holders, determined on the basis of securities being sold rather than registered under such Registration Statement. (c) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, first-class mail, telex, telecopier, or air courier guaranteeing overnight delivery: (1) if to a Holder, at the most current address given by such Holder to the Company in accordance with the provisions of this Section 7(c), which address initially is, with respect to each Holder, the address of such Holder maintained by the registrar under the Indenture, with a copy in like manner to Salomon Brothers Inc by fax (212-783-2823) and confirmed by mail to it at Seven World Trade Center, New York, New York, 10048; (2) if to you, initially at the address set forth in the Purchase Agreement; and 27 27 (3) if to the Company, initially at its address set forth in the Purchase Agreement. All such notices and communications shall be deemed to have been duly given when received. Any Purchaser or the Company by notice to the others may designate additional or different addresses for subsequent notices or communications. (d) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, including, without the need for an express assignment or any consent by the Company thereto, subsequent Holders of Securities and/or New Securities. The Company hereby agrees to extend the benefits of this Agreement to any Holder of Securities and/or New Securities and any such Holder may specifically enforce the provisions of this Agreement as if an original party hereto. (e) Counterparts. This agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (f) Headings. The headings in this agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (g) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO THE CONFLICT OF LAW PROVISIONS THEREOF). (h) Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the validity, 28 28 legality and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired or affected thereby, it being intended that all of the rights and privileges of the parties shall be enforceable to the fullest extent permitted by law. (i) Securities Held by the Company, etc. Whenever the consent or approval of Holders of a specified percentage of principal amount of Securities or New Securities is required hereunder, Securities or New Securities, as applicable, held by the Company or its Affiliates (other than subsequent Holders of Securities or New Securities if such subsequent Holders are deemed to be Affiliates solely by reason of their holdings of such Securities or New Securities) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage. 29 29 Please confirm that the foregoing correctly sets forth the agreement between the Company and you. Very truly yours, THE DII GROUP, INC. by -------------------------------------- Name: Title: The foregoing Agreement is hereby confirmed and accepted as of the date first above written. SALOMON BROTHERS INC DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION BT ALEX. BROWN INCORPORATED by SALOMON BROTHERS INC by ------------------------------------ Name: Title: For themselves and the other Purchasers named in Schedule I to the Purchase Agreement. 30 ANNEX A Each broker-dealer that receives New Securities for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such New Securities. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of New Securities received in exchange for Securities where such New Securities were acquired by such broker-dealer as a result of market-making activities or other trading activities. The Company has agreed that, starting on the date hereof (the "Expiration Date") and ending on the close of business on the 180th day after the Expiration Date, it will make this Prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution." 31 ANNEX B Each broker-dealer that receives New Securities for its own account in exchange for Securities, where such Securities were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such New Securities. See "Plan of Distribution." 32 ANNEX C PLAN OF DISTRIBUTION Each broker-dealer that receives New Securities for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such New Securities. The Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of New Securities received in exchange for Securities where such Securities were acquired as a result of market-making activities or other trading activities. The Company has agreed that, starting on the Expiration Date and ending on the close of business on the 180th day after the Expiration Date, it will make this Prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. In addition, until , 199 , all dealers effecting transactions in the Exchange Securities may be required to deliver a prospectus.(*) The Company will not receive any proceeds from any sale of New Securities by broker-dealers. New Securities received by broker-dealers for their own account pursuant to the Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the New Securities or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may __________________________________ (*) In addition, the legend required by Item 502(e) of Regulation S-K will appear on the back cover page of the Exchange Offer prospectus. 33 2 receive compensation in the form of commissions or concessions from any such broker-dealer and/or the purchasers of any such New Securities. Any broker-dealer that resells New Securities that were received by it for its own account pursuant to the Exchange Offer and any broker or dealer that participates in a distribution of such New Securities may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit of any such resale of New Securities and any commissions or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. For a period of one year after the Expiration Date, the Company will promptly send additional copies of this Prospectus and any amendment or supplement to this Prospectus to any broker-dealer that requests such documents in the Letter of Transmittal. The Company has agreed to pay all expenses incident to the Exchange Offer other than commissions or concessions of any brokers or dealers and will indemnify the holders of the Securities (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act. [If applicable, add information required by Regulation S-K Items 507 and/or 508.] 34 ANNEX D Rider A CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. Name: ----------------------------------------------- Address: -------------------------------------------- -------------------------------------------- Rider B If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of New Securities. If the undersigned is a broker-dealer that will receive New Securities for its own account in exchange for Securities that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus in connection with any resale of such New Securities; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. EX-10.1 5 AMENDED LINE OF CREDIT DATED 8/1/97 1 EXHIBIT 10.1 SECOND AMENDMENT TO LOAN AGREEMENT THIS SECOND AMENDMENT TO LOAN AGREEMENT (this "Amendment") dated as of August 1, 1997, is among THE DII GROUP, INC., a Delaware corporation, formerly known as DOVatron International, Inc. ("DII"), DOVATRON INTERNATIONAL, INC., a Delaware corporation, formerly known as DOVatron, Inc., CENCORP INC., a Delaware corporation, MULTILAYER TECHNOLOGY, INC., a California corporation ("MTI"), and TTI TESTRON, INC., a Delaware corporation, formerly known as TTI Merger Corporation, as successor to TTI Testron, Inc., a Rhode Island corporation, by virtue of its merger with TTI Merger Corporation (collectively, the "Original Borrowers"), Orbit Semiconductor, Inc., a Delaware corporation (collectively with the Original Borrowers, the "Existing Borrowers"), and MULTILAYER TEK, L.P., a Texas limited partnership ("MTLP") (MTLP collectively with the Existing Borrowers, the "Borrowers") and NORWEST BANK COLORADO, NATIONAL ASSOCIATION, a national banking association ("Norwest"), THE CHASE MANHATTAN BANK, a New York state bank, as successor to The Chase Manhattan Bank, N.A., a national banking association, HARRIS TRUST AND SAVINGS BANK, an Illinois state bank, and NBD BANK, a Michigan banking corporation (together with their respective successors and permitted assigns, if any, from time to time, individually, a "Lender" and collectively, the "Lenders"), and Norwest, as agent for the Lenders (in such capacity, the "Agent"). RECITALS A. Original Borrowers, the Lenders and the Agent are parties to the Loan Agreement, dated as of April 4, 1996, as amended by a First Amendment to Loan Agreement executed December 20, 1996 by and among the Existing Borrowers, the Lenders and the Agent (as further amended, and as it may hereafter be amended, restated or supplemented from time to time, the "Loan Agreement"), providing for a Loan from the Lenders to Existing Borrowers. Capitalized terms that are used but not defined herein have the meanings set forth in the Loan Agreement. B. The parties desire to enter into this Amendment in order to (i) increase the Maximum Loan Amount from $60,000,000 to $80,000,000, (ii) revise certain financial covenants contained in the Loan Agreement as described herein, (iii) extend the Maturity Date, (iv) provide for a pledge of the assets, including real estate, acquired in connection with the Multilayer Tek Asset Acquisition (as defined below), and (v) add MTLP as a co-Borrower under the Loan Documents. AGREEMENT IN CONSIDERATION of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Borrowers, the Lenders and the Agent agree as follows: 1. Capitalized Terms. Capitalized terms that are used but not defined in this Amendment have the meanings given to them in the Loan Agreement. 2. Definitions. The following definitions in Section 1.1 of the Loan Agreement are hereby amended and restated in their entirety to read as follows: 2 a. "Fixed Charges" means income taxes and interest expense for Borrowers and their Subsidiaries, calculated on a Consolidated basis in accordance with GAAP; plus the sum of regularly scheduled payments of principal under any promissory notes delivered in consideration for acquisition of Multilayer Technology, Inc. and TTI TesTron (meaning notes payable to the sellers of such companies in consideration of the purchase), respectively; plus long-term debt principal payments and redemption payments (except as set forth below); plus all other payments of principal, interest and other amounts if the failure to pay such amounts would have a material adverse impact on any Borrower or its operations, calculated in each case on the basis of the four Quarters immediately preceding the date of calculation. Fixed Charges excludes earn-out payments which the Borrowers are obligated to make arising out of any acquisitions. b. "Maturity Date" means the earlier of (i) acceleration, or (ii) June 30, 2002. c. "Maximum Loan Amount" means $80,000,000, subject to reductions in such amount pursuant to Section 2.1(j) below, minus the Letter of Credit Liability (taking into account the face amount of any requested Letter of Credit). d. "Notes" means the promissory notes made by Borrowers and evidencing the Loan, as they may be amended, restated, extended or supplemented from time to time and all notes given in substitution therefor, including without limitation: (a) the Promissory Note, as amended by Amendment to Promissory Note executed December 20, 1996, as further amended by Second Amendment to Promissory Note dated as of even date herewith, in the amended principal amount of $20,000,000 from Borrowers payable to Norwest evidencing Norwest's Percentage Interest of the Loan, (b) the Promissory Note, as amended by Amendment to Promissory Note executed December 20, 1996, as further amended by Second Amendment to Promissory Note dated as of even date herewith, in the amended principal amount of $20,000,000 from Borrowers payable to Chase evidencing Chase's Percentage Interest in the Loan, (c) the Promissory Note, as amended by Amendment to Promissory Note executed December 20, 1996, as further amended by Second Amendment to Promissory Note dated as of even date herewith, in the amended principal amount of $20,000,000 from Borrowers payable to Harris evidencing Harris's Percentage Interest in the Loan, and (d) the Promissory Note, as amended by Amendment to Promissory Note executed December 20, 1996, as further amended by Second Amendment to Promissory Note dated as of even date herewith, in the amended principal amount of $20,000,000 from Borrowers payable to NBD evidencing NBD's Percentage Interest in the Loan, together with any and all renewals, extensions, amendments and changes of, or substitutions for such notes. 3. Request for Advance under the Loan. Section 2.1(g)(i) of the Loan Agreement is amended and restated in its entirety to read as follows: (i) Each request for an Advance under the Loan must be substantially in the form of the Request for Advance (subject to modifications approved by 2 3 Agent) and submitted to the Agent on or before noon Denver, Colorado time on (A) the Business Day such Advance is requested to be made if such Advance is a Base Rate Advance, or (B) three Business Days preceding the date such Advance is requested to be made if such Advance is a LIBOR Rate Advance. Upon receipt of a Request for Advance, the Agent shall promptly provide a copy thereof to each Lender. If all conditions precedent to each Advance have been met by noon Denver time on the Business Day such Advance is requested to be made, each Lender shall make available to the Agent, by 3:00 p.m. Denver, Colorado time on such Business Day, in immediately available funds the amount of such Lender's Percentage Interest of the amount specified in the Request for Advance; provided, however, that the Lenders shall not be obligated to make any Advance to Borrowers that would result in the aggregate unpaid principal balance outstanding under the Loan exceeding the Maximum Loan Amount (other than Advances to the Agent to fund draws under a Letter of Credit). 4. Funded Debt to EBITDA. Section 7.11(a) of the Loan Agreement is amended and restated in its entirety to read as follows: (a) Funded Debt to EBITDA. (i) For the four-Quarter period ending September 30, 1997 (based on the Quarter ending such date and the preceding three Quarters) and for the four-Quarter period ending December 31, 1997 (based on the Quarter ending such date and the preceding three Quarters), Borrowers shall maintain a ratio of Funded Debt (as of the last day of such Quarter) to EBITDA (excluding from EBITDA an amount equal to four Quarters of interest due and payable on the Convertible Subordinated Debt) of less than or equal to 2.0 to 1.0. For each four-Quarter period (based on the Quarter in which the determination is being made and the preceding three Quarters) after January 1, 1998, Borrowers shall maintain a ratio of Funded Debt (as of the last day of such Quarter) to EBITDA (excluding from EBITDA an amount equal to four Quarters of interest due and payable on the Convertible Subordinated Debt) of less than or equal to 1.75 to 1.0. 5. Fixed Charge Coverage Ratio. Section 7.11(b) of the Loan Agreement is hereby deleted; however, the LIBOR Rate shall continue to be determined based on the ratio of EBITDA to Fixed Charges. 6. Interest Coverage Ratio. a. The Loan Agreement is amended by adding a new Section 7.11(f) of the Loan Agreement as follows: (f) For each four-Quarter period (based on the Quarter in which the determination is being made and the preceding 3 4 three Quarters), the Borrowers shall maintain an Interest Coverage Ratio of at least 2.0 to 1.0. b. The following definitions are added to Section 1.1 of the Loan Agreement: i. "Interest Coverage Ratio" means for the applicable period the ratio of (a) EBITDA for such period to (b) Interest Expense for such period. ii. "Interest Expense" means all interest expense of the Borrowers and their Subsidiaries, including without limitation interest expense attributable to capital leases and operating leases, amortization of debt discount and debt issuance costs, capitalized interest, interest actually paid by the Borrowers on the debt of any other person or entity which is guaranteed by the Borrowers or their Subsidiaries and any and all other interest expense regardless of form or amount; but excluding interest on the Convertible Subordinated Debt. 7. Current Ratio. Section 7.11(c) of the Loan Agreement is amended and restated in its entirety to read as follows: (c) Current Ratio. [INTENTIONALLY DELETED] 8. Minimum Tangible Net Worth. Section 7.11(e) of the Loan Agreement is amended and restated in its entirety to read as follows: (e) Minimum Tangible Net Worth. [INTENTIONALLY DELETED] 9. Capital Expenditures. a. Section 8.4 of the Loan Agreement is amended and restated in its entirety to read as follows: 8.4 Capital Expenditures. [INTENTIONALLY DELETED] 10. Investments in New Business. a. Section 8.5(a) of the Loan Agreement is amended and restated in its entirety to read as follows: "(a) Make any acquisitions of or capital contributions to or other investments in any Person, except that acquisitions are permitted within the Industry; provided that acquisitions within the Industry shall only be permitted to the extent that the Consolidated Net 4 5 Worth of DII after the acquisition is not less than the Consolidated Net Worth of DII immediately prior to such acquisition; all acquisitions of or capital contributions to or other investments in any Person outside of the Industry and all other investments require the prior written consent of the Lenders," b. Section 8.5(b) remains unchanged. c. The following definitions are added to Section 1.1 of the Loan Agreement: i. "Industry" means the same business engaged in by the Borrowers, as determined by Agent in its reasonable discretion, which industries include but are not limited to printed circuit board contract manufacturing, electronic interconnect technologies, electronics process technologies and semi-conductor manufacturing. ii. "Consolidated Net Worth" means the consolidated net worth of Borrowers and their Subsidiaries as determined in accordance with GAAP. 11. Indebtedness. Section 8.1(e) of the Loan Agreement is amended and restated in its entirety to read as follows: (e) Indebtedness (which may include Accommodation Obligations for the benefit of Affiliates and related parties but no other Accommodation Obligations) in the aggregate outstanding at any one time (including (c) above, but excluding (a) and (b) above) not exceeding $40,000,000. 12. Addition of MTLP as Co-Borrower. a. MTLP is hereafter a co-borrower with respect to the Loan, jointly and severally liable with the Existing Borrowers pursuant to the terms of the Loan Agreement, as amended by this Amendment, the Note (as made by MTLP and amended concurrent herewith) and the other Loan Documents (as amended concurrent herewith). Accordingly, all references in this Amendment and the Loan Agreement to the term "Borrower" hereafter mean and refer to MTLP as well as to each of the Existing Borrowers, and to the term "Borrowers" hereafter mean and refer to MTLP and the Existing Borrowers, collectively. b. MTLP hereby represents that there is nothing preventing MTLP from entering into this Amendment or assuming all obligations of co-Borrower under the Loan Documents and co-Maker of the Notes. MTLP further represents and warrants that all representations and warranties of "Borrowers" set forth in the Loan Documents are true and correct with 5 6 respect to MTLP as of the date hereof as if such representations and warranties were being made by MTLP. 13. Conditions Precedent. All of Lenders' agreements and obligations under this Amendment are conditioned upon and subject to satisfaction of all the following conditions in a manner acceptable to Agent in its sole discretion on or before August 8, 1997 (except as set forth below): a. Borrowers shall have paid each of the Lenders a facility fee in the amount of $15,000.00. b. Borrowers shall have paid Agent such additional fee as has been mutually agreed upon by Borrowers and Agent. c. No Event of Default or Unmatured Event of Default shall have occurred as of the date hereof. d. Borrowers shall have executed and delivered the documents described on Schedule I attached hereto. 14. Failure of Conditions Precedent. In the event that any of the conditions set forth above are not satisfied as of the date hereof, all of Lenders' obligations hereunder shall be, at the option of the Agent, null and void and of no further force and effect whatsoever. 15. Multilayer Tek Asset Acquisition. a. DII through MTLP, or another entity owned or controlled by DII, intends to acquire certain circuit board manufacturing assets (the "Multilayer Tek Asset Acquisition") from International Business Machines, Inc. ("IBM") in connection with IBM's existing operation in Austin, Texas. b. On or before 30 days after the closing of the Multilayer Tek Asset Acquisition, Borrowers shall have pledged or caused to be pledged to Agent, as agent for Lenders, as additional security for the Loan, all assets (including, without limitation, all inventory, accounts receivable, equipment, general intangibles, notes receivable and real estate) acquired in the Multilayer Tek Asset Acquisition (the "Collateral"), subject to only those liens and encumbrances approved in writing by Agent. c. On or before 30 days after the closing of the Multilayer Tek Asset Acquisition, Borrowers shall deliver such opinions of counsel and shall execute all such documents and take all such actions or cause any other party to execute all such documents and take all such actions as Agent may reasonably require in connection with the provisions of this Section 15 or the Multilayer Tek Asset Acquisition. 6 7 d. On or before 30 days after the closing of the Multilayer Tek Asset Acquisition, Borrower shall obtain a landlord waiver, in form and substance satisfactory to Agent, from the lessor of any facilities at which any Collateral is located. e. In the event that MTLP or any other subsidiary of DII acquires any real estate in connection with the Multilayer Tek Asset Acquisition at any time after the closing of such acquisition, immediately upon acquiring such real estate, MTLP shall grant to the Agent or DII shall cause such other subsidiary to grant to the Agent, as agent for the Lenders, a valid perfected first priority lien on such real estate subject only to exceptions approved by Agent in its sole discretion and execute all documents required in connection therewith, including, without limitation, Environmental Indemnity Agreement. 16. Fees and Expenses. Borrowers shall pay all costs and expenses incurred by Agent in connection with this Amendment and the amendments to the other Loan Documents within 15 days after request by Agent. At the option of the Agent, failure to pay such costs and expenses shall constitute an Event of Default under the Loan Agreement. 17. Further Assurances. Borrowers shall execute all documents and instruments and take all actions, and shall use its best efforts to cause any other party, to execute all documents and instruments and take all actions as the Agent may reasonably require to effect the transactions contemplated by this Amendment. 18. Representations and Warranties. Borrowers hereby certify to the Lenders that as of the date of this Amendment (taking into consideration the transactions contemplated by this Amendment), all of Borrowers' representations and warranties contained in the Loan Documents are true, accurate and complete in all material respects, and no Event of Default or Unmatured Event of Default has occurred under any Loan Document (as amended concurrent herewith). Without limiting the generality of the foregoing, Borrowers represent and warrant to the Lenders that the execution and delivery of this Amendment has been authorized by all necessary action on the part of Borrowers, that each person executing this Amendment on behalf of Borrowers is duly authorized to do so, and that this Amendment constitutes the legal, valid, binding and enforceable obligation of Borrowers. 19. Loan Documents. a. The Lenders, the Agent, and Borrowers agree that all of the Loan Documents shall be amended to reflect the amendments set forth herein. 7 8 b. All references in any document to the Loan Agreement hereafter refer to the Loan Agreement as amended pursuant to this Amendment. c. All references in the Loan Agreement to the Loan Documents, or any particular Loan Document, hereby refer to such Loan Documents as amended pursuant to the amendments executed concurrent herewith. 20. Continuation of the Loan Agreement Except as specified in this Amendment, the provisions of the Loan Agreement remain in full force and effect, and if there is a conflict between the terms of this Amendment and those of the Loan Agreement, the terms of this Amendment control. 21. Miscellaneous. a. This Amendment shall be governed by and construed under the laws of the State of Colorado and shall be binding upon and inure to the benefit of the parties hereto and their successors and permissible assigns. b. This Amendment may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument. c. This Amendment and all documents to be executed and delivered hereunder may be delivered in the form of a facsimile copy, subsequently confirmed by delivery of the originally executed document. d. Time is of the essence hereof with respect to the dates, terms and conditions of this Amendment and the documents to be delivered pursuant hereto. e. This Amendment constitutes the entire agreement between Borrowers, the Agent, and the Lenders concerning the subject matter of this Amendment. This Amendment may not be amended or modified orally, but only by a written agreement executed by Borrowers, the Agent and the Lenders and designated as an amendment or modification of the Loan Agreement. f. If any provision of this Amendment is held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions of this Amendment shall not be impaired thereby. g. The section headings herein are for convenience only and shall not affect the construction hereof. 8 9 EXECUTED as of the date first set forth above. LENDERS: NORWEST BANK COLORADO, NATIONAL ASSOCIATION By: --------------------------------------- Karen I. Hardy Vice President THE CHASE MANHATTAN BANK, a New York state bank, as successor to The Chase Manhattan Bank, N.A., a national banking association By: --------------------------------------- Michael Brunner Vice President HARRIS TRUST AND SAVINGS BANK, an Illinois state bank By: --------------------------------------- James H. Colley Vice President NBD BANK, a Michigan banking corporation By: --------------------------------------- Marguerite C. Mullins Vice President 9 10 AGENT: NORWEST BANK COLORADO, NATIONAL ASSOCIATION, a national banking association By: --------------------------------------- Karen I. Hardy Vice President BORROWERS: THE DII GROUP, INC. (formerly known as DOVatron International, Inc.), a Delaware corporation By: --------------------------------------- Carl R. Vertuca Jr. Senior Vice President and Chief Financial Officer DOVATRON INTERNATIONAL, INC., (formerly known as DOVatron, Inc.), a Delaware corporation By: --------------------------------------- Carl R. Vertuca Jr. Senior Vice President and Chief Financial Officer CENCORP INC., a Delaware corporation By: --------------------------------------- Carl R. Vertuca Jr. Senior Vice President and Chief Financial Officer 10 11 MULTILAYER TECHNOLOGY, INC., a California corporation By: --------------------------------------- Carl R. Vertuca Jr. Senior Vice President and Chief Financial Officer TTI TESTRON, INC., (formerly known as TTI Merger Corporation), a Delaware corporation, as successor to TTI TesTron, Inc., a Rhode Island corporation By: --------------------------------------- Carl R. Vertuca Jr. Senior Vice President and Chief Financial Officer ORBIT SEMICONDUCTOR, INC., a Delaware corporation (formerly known as DII Merger, Inc. By: --------------------------------------- Carl R. Vertuca Jr. Senior Vice President and Chief Financial Officer MULTILAYER TEK, LP, a Texas limited partnership By: --------------------------------------- Name: ---------------------------------- Title: --------------------------------- 11 12 SCHEDULE I Attached to and forming a part of the Second Amendment to Loan Agreement, dated August __, 1997, among The DII Group, Inc.; DOVatron International, Inc.; CENCORP Inc.; Multilayer Technology, Inc.; TTI TesTron, Inc.; Orbit Semiconductor, Inc.; Multilayer Technology, LP; Norwest Bank Colorado, National Association; The Chase Manhattan Bank; Harris Trust and Savings Bank; and NBD Bank (See Attached) 12 EX-10.2 6 AMENDED LINE OF CREDIT DATED 9/15/97 1 EXHIBIT 10.2 THIRD AMENDMENT TO LOAN AGREEMENT THIS THIRD AMENDMENT TO LOAN AGREEMENT (this "Amendment") dated as of September 15, 1997, is among THE DII GROUP, INC., a Delaware corporation, formerly known as DOVatron International, Inc. ("DII"), DOVATRON INTERNATIONAL, INC., a Delaware corporation, formerly known as DOVatron, Inc., CENCORP INC., a Delaware corporation, MULTILAYER TECHNOLOGY, INC., a California corporation ("MTI"), and TTI TESTRON, INC., a Delaware corporation, formerly known as TTI Merger Corporation, as successor to TTI Testron, Inc., a Rhode Island corporation, by virtue of its merger with TTI Merger Corporation (collectively, the "Original Borrowers"), Orbit Semiconductor, Inc., a Delaware corporation ("Orbit"), and MULTILAYER TEK, L.P., a Texas limited partnership ("MTLP") (Orbit and MTLP collectively with the Original Borrowers, the "Borrowers") and NORWEST BANK COLORADO, NATIONAL ASSOCIATION, a national banking association ("Norwest"), THE CHASE MANHATTAN BANK, a New York state bank, as successor to The Chase Manhattan Bank, N.A., a national banking association, HARRIS TRUST AND SAVINGS BANK, an Illinois state bank, and NBD BANK, a Michigan banking corporation (together with their respective successors and permitted assigns, if any, from time to time, individually, a "Lender" and collectively, the "Lenders"), and Norwest, as agent for the Lenders (in such capacity, the "Agent"). RECITALS A. Original Borrowers, the Lenders and the Agent are parties to the Loan Agreement, dated as of April 4, 1996, as amended by a First Amendment to Loan Agreement executed December 20, 1996 by and among the Original Borrowers, Orbit, the Lenders and the Agent, as amended by Second Amendment to Loan Agreement dated as of August 1, 1997, by and among the Borrowers, Lenders and Agent (as further amended, and as it may hereafter be amended, restated or supplemented from time to time, the "Loan Agreement"), providing for a Loan from the Lenders to Borrowers. Capitalized terms that are used but not defined herein have the meanings set forth in the Loan Agreement. B. The Borrowers have requested that the Lenders consent to an additional subordinate debt offering (the "Additional Subordinate Debt Offering") by DII in the amount up to $150,000,000 in accordance with the terms and conditions contemplated in the Preliminary Offering Memorandum, dated September 15, 1997 (the "Offering Memorandum"), and the Indenture, to be dated on or about September 19, 1997 between the Company and Chase Trust Company of California (the "Indenture"). AGREEMENT IN CONSIDERATION of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Borrowers, the Lenders and the Agent agree as follows: 2 1. Capitalized Terms. Capitalized terms that are used but not defined in this Amendment have the meanings given to them in the Loan Agreement. 2. Consent to Additional Subordinate Debt Offering. Each of the Lenders hereby agrees as follows: a. The Additional Subordinate Debt Offering does not constitute a violation of and shall be Indebtedness permitted pursuant to Section 8.1 of the Loan Agreement; provided that any increase in the amount of the Additional Subordinated Debt Offering above $150 million shall require the consent of the Required Lenders, which shall be in the Required Lenders sole and absolute discretion. b. The Additional Subordinated Debt Offering does not constitute a burdensome undertaking pursuant to Section 8.9 of the Loan Agreement. 3. Consent to Certain Other Transactions. Each of the Lenders hereby agrees as follows: a. The Lenders consent to and waive any default under Section 8.3 of the Loan Agreement arising out of the loans to certain executives of Borrower, which loans are described on Exhibit A attached hereto; on the condition that the consent and waiver of Lenders set forth herein is limited to the loan amounts and loan terms described on Exhibit A attached hereto and not to any changes or modifications thereto. b. The Lenders consent to and waive any default under Section 8.12 of the Loan Agreement arising out of the Lease Agreement, dated August 12, 1997 between Ronald R. Budacz and Carl R. Vertuca and DII; on the condition that the consent and waiver of Lenders set forth herein is limited to the terms and conditions of the Lease Agreement and not to any amendments or modificiations to the monetary or economic terms thereof. 4. Amendment to Loan Agreement Article IX of the Loan Agreement regarding Event of Default is hereby amended to add the following Events of Default: 9.14 Default Under Subordinate Debt. A default or event of default under the Indenture or the Securities (as defined in the Indenture) whether or not such default or event of default is declared, waived or otherwise forgiven, shall, at the option of Agent, constitute an Event of Default hereunder. 5. Agreement Not to Amend. The Borrowers hereby agree not to (a) amend or modify the subordination provisions of any of the Securities, the Indenture or any other document executed in connection with the Additional Subordinate Debt 2 3 Offering if such amendment would adversely effect the rights of the Lenders, or (b) amend or modify the Securities, the Indenture or any other document to increase the amount of the Additional Subordinated Debt Offering to in excess of $150,000,000, in either case without the prior written consent of the Lenders. 6. Fees and Expenses. Borrowers shall pay all costs and expenses incurred by Agent in connection with this Amendment and any amendments to the other Loan Documents within 15 days after request by Agent. At the option of the Agent, failure to pay such costs and expenses shall constitute an Event of Default under the Loan Agreement. 7. Further Assurances. Borrowers shall execute all documents and instruments and take all actions, and shall use its best efforts to cause any other party, to execute all documents and instruments and take all actions as the Agent may reasonably require to effect the transactions contemplated by this Amendment. 8. Representations and Warranties. Borrowers hereby certify to the Lenders that as of the date of this Amendment (taking into consideration the transactions contemplated by this Amendment), all of Borrowers' representations and warranties contained in the Loan Documents are true, accurate and complete in all material respects, and no Event of Default or Unmatured Event of Default has occurred under any Loan Document (as amended concurrent herewith). Without limiting the generality of the foregoing, Borrowers represent and warrant to the Lenders that the execution and delivery of this Amendment has been authorized by all necessary action on the part of Borrowers, that each person executing this Amendment on behalf of Borrowers is duly authorized to do so, and that this Amendment constitutes the legal, valid, binding and enforceable obligation of Borrowers. 9. Loan Documents. a. The Lenders, the Agent, and Borrowers agree that all of the Loan Documents shall be amended to reflect the amendments set forth herein. b. All references in any document to the Loan Agreement hereafter refer to the Loan Agreement as amended pursuant to this Amendment. c. All references in the Loan Agreement to the Loan Documents, or any particular Loan Document, hereby refer to such Loan Documents as amended pursuant to the amendments executed concurrent herewith. 10. Continuation of the Loan Agreement Except as specified in this Amendment, the provisions of the Loan Agreement remain in full force and effect, and if there is a conflict between the terms of this Amendment and those of the Loan Agreement, the terms of this Amendment control. 3 4 11. Miscellaneous. a. This Amendment shall be governed by and construed under the laws of the State of Colorado and shall be binding upon and inure to the benefit of the parties hereto and their successors and permissible assigns. b. This Amendment may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument. c. This Amendment and all documents to be executed and delivered hereunder may be delivered in the form of a facsimile copy, subsequently confirmed by delivery of the originally executed document. d. Time is of the essence hereof with respect to the dates, terms and conditions of this Amendment and the documents to be delivered pursuant hereto. e. This Amendment constitutes the entire agreement between Borrowers, the Agent, and the Lenders concerning the subject matter of this Amendment. This Amendment may not be amended or modified orally, but only by a written agreement executed by Borrowers, the Agent and the Lenders and designated as an amendment or modification of the Loan Agreement. f. If any provision of this Amendment is held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions of this Amendment shall not be impaired thereby. g. The section headings herein are for convenience only and shall not affect the construction hereof. [THE REMAINDER OF THIS PAGE WAS INTENTIONALLY LEFT BLANK] 4 5 EXECUTED as of the date first set forth above. LENDERS: NORWEST BANK COLORADO, NATIONAL ASSOCIATION By: --------------------------------------- Karen I. Hardy Vice President THE CHASE MANHATTAN BANK, a New York state bank, as successor to The Chase Manhattan Bank, N.A., a national banking association By: --------------------------------------- Michael Brunner Vice President HARRIS TRUST AND SAVINGS BANK, an Illinois state bank By: --------------------------------------- James H. Colley Vice President NBD BANK, a Michigan banking corporation By: --------------------------------------- Marguerite C. Gordy Vice President 5 6 AGENT: NORWEST BANK COLORADO, NATIONAL ASSOCIATION, a national banking association By: --------------------------------------- Karen I. Hardy Vice President BORROWERS: THE DII GROUP, INC. (formerly known as DOVatron International, Inc.), a Delaware corporation By: --------------------------------------- Name: ---------------------------------- Title: --------------------------------- DOVATRON INTERNATIONAL, INC., (formerly known as DOVatron, Inc.), a Delaware corporation By: --------------------------------------- Name: ---------------------------------- Title: --------------------------------- CENCORP INC., a Delaware corporation By: --------------------------------------- Name: ---------------------------------- Title: --------------------------------- 6 7 MULTILAYER TECHNOLOGY, INC., a California corporation By: --------------------------------------- Name: ---------------------------------- Title: --------------------------------- TTI TESTRON, INC., (formerly known as TTI Merger Corporation), a Delaware corporation, as successor to TTI TesTron, Inc., a Rhode Island corporation By: --------------------------------------- Name: ---------------------------------- Title: --------------------------------- ORBIT SEMICONDUCTOR, INC., a Delaware corporation (formerly known as DII Merger, Inc. By: --------------------------------------- Name: ---------------------------------- Title: --------------------------------- MULTILAYER TEK, LP, a Texas limited partnership By: --------------------------------------- Name: ---------------------------------- Title: --------------------------------- 7 8 EXHIBIT A DII made loans to certain of its executives in order to enable the executives to satisfy their tax obligations in connection with the vesting of the performance shares in 1996 and 1997. The loans were advanced in January 1996 and April 1997. Interest on the loans accrues at a rate of 5.7% per annum and 6.5% per annum, respectively. As of June 29, 1997, the aggregate amount of principal and interest outstanding with respect to the executive was as follows: Ronald R. Budacz, $0.6 million; Carl R. Vertuca, Jr., $0.4 million; Ronald R. Snyder, $0.2 million; Carl A. Plichta, $0.3 million; Thomas J. Smach, $0.2 million; Steven C. Schlepp, $0.2 million; and Mark D. Herbst, $0.1 million. The loans will be forgiven ratably over four-years from the date of each advance. A-1 EX-10.3 7 AMENDED EMPLOYMENT AGREEMENT DATED 8/12/97 1 EXHIBIT 10.3 FIRST AMENDMENT TO EMPLOYMENT AGREEMENT Agreement, made as of the 12th day of August 1997, by and between The DII Group, Inc., a Delaware corporation (the "Company"), and Ronald R. Budacz (the "Executive"). RECITALS A. The Company and the Executive are parties to an Employment Agreement, dated as of January 1, 1997 (the "Employment Agreement); and B. The Company desires to continue to employ the Executive pursuant to the Employment Agreement and the Executive is willing to accept such employment on the terms and conditions set forth in the Employment Agreement, in each case as amended hereby. THE PARTIES AGREE as follows: 1. The Employment Agreement is hereby amended by inserting the following Section 3.2.1.: "3.2.1. Forgiveness of Additional Indebtedness. The Company agrees to forgive the outstanding indebtedness of Executive to the Company in the principal amount of $255,707, evidenced by a Promissory Note dated April 16, 1997, together with interest accrued and accruing thereon (collectively, the "Aggregate Additional Indebtedness"), subject to the following terms. On the first anniversary of the date of the Employment Agreement, 25% of the Aggregate Additional Indebtedness then outstanding shall be forgiven; on the second anniversary of the date of the Employment Agreement, 33-1/3% of the Aggregate Additional Indebtedness then outstanding shall be forgiven; on the third anniversary of the date of the Employment Agreement, 50% of the Aggregate Additional Indebtedness then outstanding shall be forgiven; 2 and any remaining Aggregate Additional Indebtedness shall be forgiven on the fourth anniversary of the date of the Employment Agreement. All other terms and conditions set forth in Section 3.2. with respect to the forgiveness of the Aggregate Indebtedness shall also apply to the forgiveness of the Additional Aggregate Indebtedness provided for in this Section 3.2.1, including without limitation, additional payments on an After-Tax Basis and forgiveness in the event of termination of employment or a Change in Control." 2. Except as amended hereby, the Employment Agreement shall continue in full force and effect in accordance with its terms. 3. This First Amendment may be executed in one or more separate counterparts, all of which taken together shall constitute one and the same First Amendment Agreement. IN WITNESS WHEREOF, the parties have executed this First Amendment as of the day and year first above written. THE DII GROUP, INC. By: ------------------------------------ Title: --------------------------------- --------------------------------------- Ronald R. Budacz -2- EX-10.4 8 AMENDED EMPLOYMENT AGREEMENT DATED 8/12/97 1 EXHIBIT 10.4 FIRST AMENDMENT TO EMPLOYMENT AGREEMENT Agreement, made as of the 12th day of August 1997, by and between The DII Group, Inc., a Delaware corporation (the "Company"), and Carl R. Vertuca, Jr. (the "Executive"). RECITALS A. The Company and the Executive are parties to an Employment Agreement, dated as of January 1, 1997 (the "Employment Agreement); and B. The Company desires to continue to employ the Executive pursuant to the Employment Agreement and the Executive is willing to accept such employment on the terms and conditions set forth in the Employment Agreement, in each case as amended hereby. THE PARTIES AGREE as follows: 1. The Employment Agreement is hereby amended by inserting the following Section 3.2.1.: "3.2.1. Forgiveness of Additional Indebtedness. The Company agrees to forgive the outstanding indebtedness of Executive to the Company in the principal amount of $172,167, evidenced by a Promissory Note dated April 16, 1997, together with interest accrued and accruing thereon (collectively, the "Aggregate Additional Indebtedness"), subject to the following terms. On the first anniversary of the date of the Employment Agreement, 25% of the Aggregate Additional Indebtedness then outstanding shall be forgiven; on the second anniversary of the date of the Employment Agreement, 33-1/3% of the Aggregate Additional Indebtedness then outstanding shall be forgiven; on the third anniversary of the date of the Employment Agreement, 50% of the Aggregate Additional Indebtedness then outstanding shall be forgiven; 2 and any remaining Aggregate Additional Indebtedness shall be forgiven on the fourth anniversary of the date of the Employment Agreement. All other terms and conditions set forth in Section 3.2. with respect to the forgiveness of the Aggregate Indebtedness shall also apply to the forgiveness of the Additional Aggregate Indebtedness provided for in this Section 3.2.1, including without limitation, additional payments on an After-Tax Basis and forgiveness in the event of termination of employment or a Change in Control." 2. Except as amended hereby, the Employment Agreement shall continue in full force and effect in accordance with its terms. 3. This First Amendment may be executed in one or more separate counterparts, all of which taken together shall constitute one and the same First Amendment Agreement. IN WITNESS WHEREOF, the parties have executed this First Amendment as of the day and year first above written. THE DII GROUP, INC. By: ------------------------------------- Title: ---------------------------------- ---------------------------------------- Carl R. Vertuca, Jr. -2- EX-10.5 9 AMENDED EMPLOYMENT AGREEMENT DATED 8/12/97 1 EXHIBIT 10.5 FIRST AMENDMENT TO EMPLOYMENT AGREEMENT Agreement, made as of the 12th day of August 1997, by and between The DII Group, Inc., a Delaware corporation (the "Company"), and Ronald R. Snyder (the "Executive"). RECITALS A. The Company and the Executive are parties to an Employment Agreement, dated as of January 1, 1997 (the "Employment Agreement); and B. The Company desires to continue to employ the Executive pursuant to the Employment Agreement and the Executive is willing to accept such employment on the terms and conditions set forth in the Employment Agreement, in each case as amended hereby. THE PARTIES AGREE as follows: 1. The Employment Agreement is hereby amended by inserting the following Section 3.2.1.: "3.2.1. Forgiveness of Additional Indebtedness. The Company agrees to forgive the outstanding indebtedness of Executive to the Company in the principal amount of $93,161, evidenced by a Promissory Note dated April 16, 1997, together with interest accrued and accruing thereon (collectively, the "Aggregate Additional Indebtedness"), subject to the following terms. On the first anniversary of the date of the Employment Agreement, 25% of the Aggregate Additional Indebtedness then outstanding shall be forgiven; on the second anniversary of the date of the Employment Agreement, 33-1/3% of the Aggregate Additional Indebtedness then outstanding shall be forgiven; on the third anniversary of the date of the Employment Agreement, 50% of the Aggregate Additional Indebtedness then outstanding shall be forgiven; 2 and any remaining Aggregate Additional Indebtedness shall be forgiven on the fourth anniversary of the date of the Employment Agreement. All other terms and conditions set forth in Section 3.2. with respect to the forgiveness of the Aggregate Indebtedness shall also apply to the forgiveness of the Additional Aggregate Indebtedness provided for in this Section 3.2.1, including without limitation, additional payments on an After-Tax Basis and forgiveness in the event of termination of employment or a Change in Control." 2. Except as amended hereby, the Employment Agreement shall continue in full force and effect in accordance with its terms. 3. This First Amendment may be executed in one or more separate counterparts, all of which taken together shall constitute one and the same First Amendment Agreement. IN WITNESS WHEREOF, the parties have executed this First Amendment as of the day and year first above written. THE DII GROUP, INC. By: ------------------------------------- Title: ---------------------------------- ---------------------------------------- Ronald R. Snyder -2- EX-10.6 10 EMPLOYMENT AGREEMENT DATED 1/1/97 1 EXHIBIT 10.6 EMPLOYMENT AGREEMENT Agreement, made as of the 1st day of January 1997, by and between The DII Group, Inc., a Delaware corporation (the "Company"), and Carl A. Plichta (the "Executive"). RECITALS A. The Company desires to continue to employ Executive as Senior Vice President and Senior Vice President of Materials and Information Systems, DOVatron International, Inc.; and B. Executive is willing to accept such employment on the terms and conditions set forth in this Agreement. THE PARTIES AGREE as follows: 1. Position and Term of Employment. Executive's employment hereunder shall commence as of January 1, 1997 and shall end December 31, 2000, unless terminated sooner pursuant to Section 7 of this Agreement or extended by the mutual agreement of the parties. During the term hereof, Executive shall be employed as Senior Vice President (and Senior Vice President of Materials and Information Systems, DOVatron International, Inc.) of the Company and shall devote his full business time, skill, attention and best efforts in carrying out his duties and promoting the best interests of the Company. Executive shall also serve as a director and/or officer of one or more of the Company's subsidiaries as may be requested from time to time by the Board of Directors. Subject always to the instructions and control of the Board of Directors of the Company, Executive shall report to the Chief Executive Officer of the 2 Company and shall be responsible for the duties of Senior Vice President and Senior Vice President of Materials and Information Systems, DOVatron International, Inc. Executive shall not at any time while employed by the Company or any of its affiliates or for a period of one (1) year following the later of (i) termination of employment for any reason or (ii) the date on which the last payment is required to be made under Section 2.1(a)(ii) hereof, without the prior consent of the Board of Directors, knowingly acquire any financial interests, directly or indirectly, in or perform any services for or on behalf of any business, person or enterprise which undertakes any business in competition with the business of the Company and its affiliates or sells to or buys from or otherwise transacts business with the Company and its affiliates; provided that Executive may acquire and own not more than five percent (5%) of the outstanding capital stock of any public corporation or mutual fund. Executive shall not at any time while employed by the Company or any of its affiliates or for a period of two (2) years following termination of employment for any reason, directly or indirectly, solicit for employment, employ or enter into any business or contractual relationship with any employee of the Company or any of its affiliates. 2.1 Base Salary. (a) (i) Executive shall be paid an initial salary at the monthly rate of Thirteen Thousand Five Hundred Eighty-Four Dollars ($13,584), which shall be paid in accordance with the Company's normal payroll practice with respect to salaried employees, subject to applicable payroll taxes and deductions (the "Base Salary"). Executive's Base Salary shall be subject to review and possible change in accordance with the usual practices and policies of the Company. However, Executive's base annual salary shall not be reduced unless such reduction is part of a Company-wide reduction in pay scale and such reduction is proportionate to reductions imposed on the Company's and its subsidiaries' -2- 3 employees; however, in no event may Executive's then current Base Salary be reduced by more than 10%. (ii) If for any reason other than Executive's voluntary resignation or termination pursuant to Sections 7(a), (b) or (c) hereof, Executive does not continue to be employed by the Company, Executive shall continue to receive an amount equal to his then current Base Salary plus an annual performance bonus equal to the highest annual bonus payment Executive has received in the previous three years for the then remaining balance of the term of this Agreement. In no event shall such payment be less than one year's base salary plus such highest annual bonus. The foregoing amounts shall be paid to Executive over the remaining term of this Agreement or one year (whichever is applicable) in accordance with the Company's payroll and bonus payment policies. Notwithstanding the foregoing, no payments under this subparagraph (ii) shall be made if the Company makes all payments to Executive required to be made under the Executive's Senior Executive Severance Agreement (the "Severance Agreement") in the event of a Change in Control. For purposes of this Agreement, a Change in Control shall be deemed to have taken place upon the occurrence of any of the following events: (A) any corporation, person, other entity or group (other than the trustee of any qualified retirement plan maintained by the Company) becomes the "beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act of 1934), directly or indirectly, of securities representing twenty percent (20%) or more of the combined voting power of the Company's then outstanding securities; or (B) during any period of twenty-four consecutive months, individuals who at the beginning of such consecutive twenty-four month period constitute the Board of -3- 4 Directors cease for any reason (other than retirement upon reaching normal retirement age, disability or death) to constitute at least a majority thereof, unless the election or the nomination for election by the Company's stockholders of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such twenty-four month period; or (C) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 80% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all the Company's assets; or (D) there shall occur a transaction or series of transactions which the Board of Directors shall determine to have the effect of a Change in Control. (b) If Executive resigns voluntarily or ceases to be employed by the Company (or any affiliate) for any reason described in Section 7(a) or (c) of this Agreement, all benefits described in Sections 2 and 4 hereof shall terminate (except to the extent previously earned or vested). (c) If Executive's employment shall have been terminated pursuant to Section 7(b), the Company shall pay in equal monthly installments for the then remaining balance of the -4- 5 term of this Agreement to Executive (or his beneficiaries or personal representatives, as the case may be) disability benefits at a rate per annum equal to one hundred percent (100%) of his then current Base Salary, plus amounts equal to the highest annual bonus as provided in clause (ii) of Section 2.1(a), less payments and benefits, if any, received under any disability plan or insurance provided by the Company and less any "sick leave" payments received from the Company for the applicable period. 2.2 Bonuses. Executive shall be eligible for an annual performance bonus for calendar years beginning after December 31, 1996, in accordance with the Company's Senior Executive Performance Bonus Plan. The Company shall administer such bonus plan on a basis consistent with the past. 2.3 Expenses. During the term hereof, the Company shall pay or reimburse Executive in accordance with the Company's normal practices any travel, hotel and other expenses or disbursements reasonably incurred or paid by Executive in connection with the services performed by Executive hereunder, in each case upon presentation by Executive of itemized accounts of such expenditures or such other supporting information as the Company may require. 3.1 Stock Options; Performance Shares. Executive shall be eligible for grants of stock options and performance share awards under the Company's 1994 Stock Incentive Plan (the "Plan"), as may hereafter be determined by the Compensation Committee of the Board of Directors of the Company under the Plan. 3.2 Forgiveness of Indebtedness. The Company agrees to forgive the outstanding indebtedness of Executive to the Company in the principal amount of $139,392, together with interest accrued and accruing thereon (collectively, the "Aggregate Indebtedness"), -5- 6 subject to the following terms. On the first anniversary of the date hereof, 25% of the Aggregate Indebtedness then outstanding shall be forgiven; on the second anniversary of the date hereof, 33-1/3% of the Aggregate Indebtedness then outstanding shall be forgiven; on the third anniversary of the date hereof, 50% of the Aggregate Indebtedness then outstanding shall be forgiven; and any remaining Aggregate Indebtedness shall be forgiven on the fourth anniversary of the date hereof. In addition, the Company shall make certain payments on an After-Tax Basis to Executive on each of the first, second, third and fourth anniversary dates equal to Executive's actual federal, state and local tax liability resulting from the forgiveness of the Aggregate Indebtedness on any such date. Further, in the event that Executive's employment is terminated as a result of death, disability, or for any reason other than Executive's voluntary resignation or termination pursuant to Section 7(c), the amount of the Aggregate Indebtedness then outstanding shall be forgiven in full and the Company shall make additional payments on an After-Tax Basis to Executive equal to Executive's actual federal, state and local tax liability resulting from the forgiveness of the Aggregate Indebtedness. Further, if at any time during the term of employment there is a Change in Control, the amount of the Aggregate Indebtedness then outstanding shall be forgiven in full effective immediately upon the Change in Control and the Company shall immediately make additional payments on an After-Tax Basis to Executive equal to Executive's actual federal, state and local tax liability resulting from the forgiveness of the Aggregate Indebtedness. For purposes of this Section 3.2, After-Tax Basis shall mean with respect to any payment to be received or deemed to be received by Executive, the amount of such payment (the "Base Payment") supplemented by a further payment (the "Additional Payment") to Executive so that the sum of the Base Payment plus the Additional Payment shall, after deducting all taxes imposed on such Executive as a result of the receipt or accrual of the Base -6- 7 Payment and such Additional Payment, be equal to the Base Payment. If at any time during the term of employment, Executive voluntarily resigns or is terminated pursuant to Section 7(c), Executive shall forfeit any benefits not yet then realized under this Section 3.2. For example, if Executive voluntarily resigns in December 1998, Executive shall not realize any of the forgiveness which would have occurred on January 1, 1999. 3.3 Effect of Termination of Employment; Change in Control. (a) Notwithstanding the provisions of Executive's options, if Executive shall resign voluntarily or cease to be employed by the Company (or an affiliate) other than as a result of death or disability, Executive shall be entitled to exercise such options to the extent such options could otherwise have been exercised immediately prior to the time of termination at any time up to and including 90 days after the date of termination, but not beyond the expiration date of an option. This provision is not intended to limit any other rights that Executive may have with respect to the vesting or exercise of options. (b) If Executive shall die or become disabled, all options and performance shares which have not vested will accelerate and vest immediately, and, in the event of Executive's death, all option rights will transfer to Executive's representative. All then unexercised options will be cancelled one year after Executive dies or becomes disabled. (c) If there is a Change in Control, all options and performance shares which have not vested will accelerate and vest immediately. 4. Other Benefits. Executive shall be entitled to (i) participate in medical, dental, hospitalization, disability and life insurance benefit plans made available by the Company to its senior executives and shall also be eligible to participate in existing retirement or pension plans offered by the Company to its senior executives, subject in each case to the terms and -7- 8 requirements of each such plan or program, (ii) reimbursement for country club dues at one country club, (iii) reimbursement for automobile lease payments up to $700 per month and non-routine maintenance costs, and (iv) an annual financial and tax-planning allowance up to 1% of base salary. 5. Confidential Information. Except as specifically permitted by this Section 5, and except as required in the course of his employment with the Company, while in the employ of the Company or thereafter, Executive will not communicate or divulge to or use for the benefit of himself or any other person, firm, association, or corporation without the prior written consent of the Company, any Confidential Information (as defined herein) owned, or used by the Company or any of its affiliates that may be communicated to, acquired by or learned of by Executive in the course of, or as a result of, Executive's employment with the Company or any of its affiliates. All Confidential Information relating to the business of the Company or any of its affiliates which Executive shall use or prepare or come into contact with shall become and remain the sole property of the Company or its affiliates. "Confidential Information" means information not generally known about the Company and its affiliates, services and products, whether written or not, including information relating to research, development, purchasing, marketing plans, computer software or programs, any copyrightable material, trade secrets and proprietary information, including, but not limited to, customer lists. Executive may disclose Confidential Information to the extent it (i) becomes part of the public domain otherwise than as a result of Executive's breach hereof or (ii) is required to be disclosed by law. If Executive is required by applicable law or regulation or by legal process -8- 9 to disclose any Confidential Information, Executive will provide the Company with prompt notice thereof so as to enable the Company to seek an appropriate protective order. Upon request by the Company, Executive agrees to deliver to the Company at the termination of Executive's employment, or at such other times as the Company may request, all memoranda, notes, plans, records, reports and other documents (and all copies thereof) containing Confidential Information that Executive may then possess or have under his control. 6. Assignment of Patents and Copyrights. Executive shall assign to the Company all inventions and improvements within the existing or contemplated scope of the Company's business made by Executive while in the Company's employ, together with any such patents or copyrights as may be obtained thereon, both domestic and foreign. Upon request by the Company and at the Company's expense, Executive will at any time during his employment with the Company and after termination regardless of the reason therefor, execute all proper papers for use in applying for, obtaining and maintaining such domestic and foreign patents and/or copyrights as the Company may desire, and will execute and deliver all proper assignments therefor. 7. Termination. (a) This Agreement shall terminate upon Executive's death. (b) The Company may terminate Executive's employment hereunder upon fifteen (15) days' written notice if in the opinion of the Board of Directors, Executive's physical or mental disability has continued or is expected to continue for one hundred and eighty (180) consecutive days and as a result thereof, Executive will be unable to continue the proper performance of his duties hereunder. For the purpose of determining disability, Executive agrees to submit to such reasonable physical and mental examinations, if any, as the Board of Directors -9- 10 may request and hereby authorizes the examining person to disclose his findings to the Board of Directors of the Company. (c) The Company may terminate Executive's employment hereunder "for cause" (as hereinafter defined). If Executive's employment is terminated for cause, Executive's salary and all other rights not then vested under this Agreement shall terminate upon written notice of termination being given to Executive. As used herein, the term "for cause" means the occurrence of any of the following: (i) Executive having willfully and continually failed to perform substantially his duties with the Company (other than such failure resulting from incapacity due to physical or mental illness, death or disability) after a written demand for substantial performance has been delivered to the Executive by the Board or the President of the Company which specifically identifies the manner in which the Executive is not substantially performing his duties; or (ii) Executive having willfully engaged in conduct which is materially demonstrably injurious to the Company. For purposes of this section, no act, or failure to act, on the part of the Executive shall be considered "willful" unless done, or omitted to be done, by the Executive in bad faith and without reasonable belief that such action or omission was in, or not opposed to, the best interests of the Company. Any act or failure to act based upon authority given pursuant to a resolution duly adopted by the Board or based upon the advice of counsel to the Company shall be conclusively presumed to be done or omitted to be done by the Executive in good faith and in the best interests of the Company. Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated for cause unless and until there shall have been delivered to the Executive a copy of a written resolution duly adopted by the affirmative vote of not less than three-quarters (3/4) of the entire membership of the Board at a meeting called and held for that purpose after reasonable notice to and opportunity for the Executive and the executive's counsel to be heard by the Board, finding that in the good faith opinion of the Board the Executive was guilty of the conduct set forth above in (i) or (ii) and specifying the particulars thereof in detail. 8. Additional Remedies. Executive recognizes that irreparable injury will result to the Company and to its business and properties in the event of any breach by Executive of the non-compete or non-solicitation provisions of Section 1, the confidentiality provisions of -10- 11 Section 5 or the assignment provisions of Section 6 and that Executive's continued employment is predicated on the covenants made by him pursuant to such Sections. In the event of any breach by Executive of his obligations under said provisions, the Company shall be entitled, in addition to any other remedies and damages available, to injunctive relief to restrain any such breach by Executive or by any person or persons acting for or with Executive in any capacity whatsoever and other equitable relief. 9. Successors and Assigns. This Agreement is intended to bind and inure to the benefit of and be enforceable by Executive and the Company and their respective legal representatives, successors and assigns. Neither this Agreement nor any of the duties or obligations hereunder shall be assignable by Executive. 10. Governing Law; Jurisdiction. This Agreement shall be interpreted and construed in accordance with the laws of the State of Colorado. Each of the Company and Executive consents to the jurisdiction of any state or federal court sitting in Colorado, in any action or proceeding arising out of or relating to this Agreement. 11. Headings. The paragraph headings used in this Agreement are for convenience of reference only and shall not constitute a part of this Agreement for any purpose or in any way affect the interpretation of this Agreement. 12. Severability. If any provision, paragraph or subparagraph of this Agreement is adjudged by any court to be void or unenforceable in whole or in part, this adjudication shall not affect the validity of the remainder of this Agreement. In addition, to the extent possible, a like valid term which meets the objective of the void or unenforceable term shall be substituted for any such void or unenforceable term. -11- 12 13. Complete Agreement. This document embodies the complete agreement and understanding among the parties, written or oral, which may have related to the subject matter hereof in any way and shall not be amended orally, but only by the mutual agreement of the parties hereto in writing, specifically referencing this Agreement. 14. Counterparts. This Agreement may be executed in one or more separate counterparts, all of which taken together shall constitute one and the same Agreement. IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. THE DII GROUP, INC. By: ------------------------------------ Title: --------------------------------- ------------------------------------ CARL A. PLICHTA -12- EX-10.7 11 AMENDED EMPLOYMENT AGREEMENT DATED 8/12/97 1 EXHIBIT 10.7 FIRST AMENDMENT TO EMPLOYMENT AGREEMENT Agreement, made as of the 12th day of August 1997, by and between The DII Group, Inc., a Delaware corporation (the "Company"), and Carl A. Plichta (the "Executive"). RECITALS A. The Company and the Executive are parties to an Employment Agreement, dated as of January 1, 1997 (the "Employment Agreement); and B. The Company desires to continue to employ the Executive pursuant to the Employment Agreement and the Executive is willing to accept such employment on the terms and conditions set forth in the Employment Agreement, in each case as amended hereby. THE PARTIES AGREE as follows: 1. The Employment Agreement is hereby amended by inserting the following Section 3.2.1.: "3.2.1. Forgiveness of Additional Indebtedness. The Company agrees to forgive the outstanding indebtedness of Executive to the Company in the principal amount of $130,142, evidenced by a Promissory Note dated April 16, 1997, together with interest accrued and accruing thereon (collectively, the "Aggregate Additional Indebtedness"), subject to the following terms. On the first anniversary of the date of the Employment Agreement, 25% of the Aggregate Additional Indebtedness then outstanding shall be forgiven; on the second anniversary of the date of the Employment Agreement, 33-1/3% of the Aggregate Additional Indebtedness then outstanding shall be forgiven; on the third anniversary of the date of the Employment Agreement, 50% of the Aggregate Additional Indebtedness then outstanding shall be forgiven; 2 and any remaining Aggregate Additional Indebtedness shall be forgiven on the fourth anniversary of the date of the Employment Agreement. All other terms and conditions set forth in Section 3.2. with respect to the forgiveness of the Aggregate Indebtedness shall also apply to the forgiveness of the Additional Aggregate Indebtedness provided for in this Section 3.2.1, including without limitation, additional payments on an After-Tax Basis and forgiveness in the event of termination of employment or a Change in Control." 2. Except as amended hereby, the Employment Agreement shall continue in full force and effect in accordance with its terms. 3. This First Amendment may be executed in one or more separate counterparts, all of which taken together shall constitute one and the same First Amendment Agreement. IN WITNESS WHEREOF, the parties have executed this First Amendment as of the day and year first above written. THE DII GROUP, INC. By: --------------------------------------- Title: ------------------------------------ --------------------------------------- Carl A. Plichta -2- EX-11.1 12 COMPUTATION OF EARNINGS PER SHARE 1 EXHIBIT 11.1 THE DII GROUP, INC. AND SUBSIDIARIES STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS (IN THOUSANDS, EXCEPT PER SHARE DATA)
FOR THE THREE MONTHS FOR THE NINE MONTHS ENDED ENDED --------------------- ------------------------ SEPT. 28, SEPT. 29, SEPT. 28, SEPT. 29, 1997 1996 1997 1996 --------- --------- --------- --------- PRIMARY EARNINGS PER SHARE: Earnings Available for Primary Earnings Per Share: Net income $ 9,955 1,491 22,572 13,163 ======= ======= ======= ======= Shares Used in Computation: Weighted average common shares outstanding 25,058 23,738 24,533 23,612 Common share equivalents outstanding: Stock options 1,234 1,142 1,250 1,358 Deferred stock compensation 240 112 216 112 ------- ------- ------- ------- 26,532 24,992 25,999 25,082 ======= ======= ======= ======= Primary Earnings Per Share $ 0.38 0.06 0.87 0.52 ======= ======= ======= ======= FULLY DILUTED EARNINGS PER SHARE: Earnings Available for Fully Diluted Earnings Per Share: Net income $ 9,955 1,491 22,572 13,163 Interest expense (net of tax) on 6% convertible subordinated notes 776 -- (1) 2,328 -- (1) Amortization (net of tax) of debt issuance cost on convertible subordinated notes 65 -- (1) 195 -- (1) ------- ------- ------- ------- Earnings available for fully diluted earnings per share $10,796 1,491 25,095 13,163 ======= ======= ======= ======= Shares Used in Computation: Weighted average common shares outstanding 25,058 23,738 24,533 23,612 Additional potentially dilutive securities (equivalent in common stock): Stock options 1,299 1,142 1,635 1,358 Deferred stock compensation 246 112 246 112 Convertible subordinated notes 4,600 -- (1) 4,600 -- (1) ------- ------- ------- ------- 31,203 24,992 31,014 25,082 ======= ======= ======= ======= Fully Diluted Earnings Per Share $ 0.35 0.06 0.81 0.52 ======= ======= ======= =======
(1) The 6% convertible subordinated notes were antidilutive for the three and nine months ended September 29, 1996, and therefore not assumed to be converted for fully diluted earnings per share computations. EX-27 13 FINANCIAL DATA SCHEDULE
5 1,000 9-MOS DEC-28-1997 DEC-30-1996 SEP-28-1997 94,441 0 128,785 2,983 78,399 307,689 255,935 57,917 589,268 150,164 0 0 0 252 190,704 589,268 534,041 534,041 441,880 441,880 53,203 1,248 5,924 31,786 9,214 22,572 0 0 0 22,572 0.87 0.81
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