NOTE PURCHASE AGREEMENT
NOTE PURCHASE AGREEMENT ("Agreement") dated as of January 9, 1997, by
and between XXXXXXXXX INDUSTRIES, INC., a Delaware corporation, having its
executive office at 00000 X.X. 0xx Xxxxxx, Xxxxxxx, Xxxxxxx 00000 (the
"Company") and the purchasers named on Schedule I hereto (hereinafter referred
to individually as a "Purchaser" and collectively as the "Purchasers").
RECITALS
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WHEREAS, the Company desires to issue and sell to the Purchasers,
subject to the terms and conditions hereinafter provided, (i) an aggregate of
$6,000,000 principal amount of its 10% Senior Subordinated Notes (the "Notes"),
all as more fully set forth in this Agreement; (ii) warrants (the "Original
Warrants") to purchase 75,000 shares of the Company's common stock, par value
$.001 per share (the "Common Stock"); and (iii) if required under the terms of
the Notes, warrants (the "Additional Warrants") to purchase an aggregate of up
to 375,000 additional shares of Common Stock (collectively with the Original
Warrants, the "Bridge Financing Warrants").
WHEREAS, subject to the terms and conditions hereinafter set forth, the
Purchasers desire to purchase (i) the Notes in the aggregate principal amounts
set forth opposite their respective names on Schedule I hereto; (ii) the
Original Warrants for the number of shares set forth opposite their respective
names on Schedule I hereto; and (iii) if required under the terms of the Notes,
the Additional Warrants for the number of shares set forth opposite their
respective names on Schedule I hereto.
NOW, THEREFORE, the Company and each Purchaser agree as follows:
Section 1. Definitions.
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Section 1.1. Defined Terms. For the purposes of this Agreement, the
following terms shall have the following respective meanings:
"Accountants" has the meaning specified in Section 7.2.
"Additional Warrants" means warrants to purchase an aggregate of up to
375,000 shares of the Common Stock.
"Asset Purchase Agreement" means the Asset Purchase Agreement, dated
October 28, 1996, by and among the Company, IASI Inc., a Delaware corporation
and a wholly-owned subsidiary of the Company, International Aircraft Support
L.P. and Xxxxxxx Xxxx.
"Audited Financial Statements" has the meaning specified in Section 3.4.
"Bridge Financing Warrants" means the collective Original Warrants and
Additional Warrants.
"Business Day" means any day except a Saturday, a Sunday or a legal
holiday in the State of Florida.
"Capital Stock" means and includes any and all shares, interests,
participations or other equivalents of or interests in (however designated)
corporate stock, including, without limitation, shares of preferred or
preference stock.
"Common Stock" means the common stock, par value $.001 per share, of
the Company.
"Company" means Xxxxxxxxx Industries, Inc., a Delaware corporation, or
any of its successors or permitted assigns.
"Debt" with respect to any Person means, without duplication, (i) all
indebtedness of such Person for borrowed money, (ii) any obligation incurred for
all or any part of the purchase price of capital equipment or real property,
other than accounts payable and accrued expenses included in current liabilities
in accordance with GAAP, (iii) indebtedness or obligations evidenced by bonds,
notes or similar written instruments, (iv) all reimbursement obligations of such
Person (whether contingent or otherwise) in respect of letters of credit,
bankers' acceptances, surety or other bonds and similar instruments, (v) any
obligation (whether or not such Person has assumed or become liable for the
payment of such obligation) secured by a Lien on any Property of such Person,
(vi) capitalized lease obligations of such Person, and (vii) all Guarantees by
such Person of obligations of any other Person of the types referred to in the
foregoing clauses (i) through (vi), inclusive.
"Default" means any event or condition which, with due notice or lapse
of time or both, would become an Event of Default.
"Escrow Agent" means the party appointed as the escrow agent under the
Escrow Agreement.
"Escrow Agreement" means the Escrow Agreement dated the date hereof, by
and among the Company, the Purchasers and Fulbright & Xxxxxxxx L.L.P.
"Event of Default" has the meaning specified in Section 10.
"Exchange Act" means the U.S. Securities Exchange Act of 1934, as
amended, or any similar statute then in effect, and a reference to a particular
section thereof shall include a reference to the comparable section, if any, of
any such similar statute.
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"Filed Documents" has the meaning specified in Section 3.4.
"Financial Statements" has the meaning specified in Section 3.4.
"Funded Debt" of any Person shall mean all Debt of such Person payable
more than one year from the date such Debt is incurred, including the current
portion of such Debt, it being understood that any Debt of such Person which has
an initial term of more than one year shall be treated as Funded Debt throughout
the term of such Debt.
"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States of America applied on a consistent basis both
as to classification of items and amounts (except for changes in accounting
methods required by GAAP and concurred with by the Accountants).
"Governmental Body" means any federal, state, county, city, town,
village, municipal or other governmental department, commission, board, bureau,
agency, authority or instrumentality, domestic or foreign.
"Guarantee" means, with respect to any Person, any guarantee or other
contingent liability (other than any endorsement for collection or deposit in
the ordinary course of business and performance bonds, indemnities and similar
obligations not guaranteeing or otherwise insuring payment of any Debt or other
financial obligation), direct or indirect, of such Person with respect to any
Debt or other obligations of another Person (including, without limitation,
obligations under leases), through an agreement or otherwise, including, without
limitation, (a) any other endorsement or discount with recourse or undertaking
substantially equivalent to or having economic effect similar to a guarantee in
respect of any such Debt or other obligations and (b) any agreement (i) to
purchase, or to advance or supply funds for the payment or purchase of, any such
obligations, (ii) to purchase, sell or lease Property, products, materials or
supplies, or transportation or services, in respect of enabling such other
Person to pay any such obligation or to assure the owner thereof against loss
regardless of the delivery or nondelivery of the Property, products, materials
or supplies or transportation or services or (iii) to make any loan, advance or
capital contribution to or other investment in, or to otherwise provide funds to
or for, such other Person in respect of enabling such Person to satisfy any
obligation (including any liability for a dividend, stock liquidation payment or
expense) or to assure a minimum equity, working capital or other balance sheet
condition in respect of any such obligation.
"Lien" means any security interest, mortgage, pledge, lien, claim,
charge, encumbrance, conditional sale or title retention agreement, lessor's
interest under a capitalized lease or analogous instrument, in, of or on any of
a Person's Property (whether held on the date hereof or hereafter acquired), or
any signed or filed financing statement which names such Person as the debtor,
or the execution of any security
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agreement or the like authorizing any other Person as the secured party
thereunder to file such a financing statement.
"Material Adverse Effect" means any change or changes or effect or
effects that individually or in the aggregate are or are likely to be materially
adverse to (i) the assets, business, operations, income, prospects or condition
(financial or otherwise) of the Company and its Subsidiaries taken as a whole,
(ii) the legality, validity or enforceability of this Agreement, the Escrow
Agreement, the Notes or the Bridge Financing Warrants, and (iii) the ability of
the Company to fulfill its obligations under this Agreement or the Notes or the
Bridge Financing Warrants without material delay or impairment.
"Maturity Date" means the 90th day following the Closing Date.
"Note" and "Notes" have the meanings specified in Section 2.1.
"Order" means any order, writ, injunction, decree, judgment, award,
determination or written direction or demand of any court, arbitrator or
Governmental Body.
"Original Warrants" means warrants to purchase an aggregate of 75,000
shares of the Common Stock.
"Person" means and includes an individual, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization and a government
or any department or agency thereof.
"Proceeding" means a bankruptcy, insolvency, reorganization,
receivership, composition, assignment for benefit of creditors or other similar
proceeding initiated by or against the Company or any dissolution or winding up
or total or partial liquidation or reorganization of the Company.
"Property" and "Properties" with respect to any Person, means any
interest in any kind of property or asset, whether real, personal or mixed,
tangible or intangible, of such Person.
"Purchaser" and "Purchasers" refer to the purchasers named on Schedule
I hereto.
"Revolving Loan Agreement" means the Revolving Loan Agreement by and
between the Company and Xxxxxxx Bank N.A., dated December 23, 1996.
"SEC" means the U.S. Securities and Exchange Commission and any
succeeding agency, authority, commission or Governmental Body.
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"Securities Act" means as of any date the U.S. Securities Act of 1933,
as amended, or any similar federal statute then in effect, and a reference to a
particular section thereof shall include a reference to the comparable section,
if any, of any such similar Federal statute.
"Securities Purchase Agreement" means the Securities Purchase Agreement
by and between the Company and The Equitable Life Assurance Society of the
United States to be executed at the closing of the transactions contemplated by
the Asset Purchase Agreement.
"Senior Indebtedness" has the meaning specified in Section 8.
"Shares" means the shares of the Common Stock.
"Subsidiary" shall mean, with respect to any Person, any corporation or
other entity of which at least a majority of the outstanding Voting Stock is at
the time directly or indirectly owned or controlled by such Person or by one or
more of any entities directly or indirectly owned or controlled by such Person.
"Unaudited Financial Statements" has the meaning specified in
Section 3.4.
"Voting Stock" with respect to any Person shall mean Capital Stock of
such Person of any class or classes, the holders of which are ordinarily, in the
absence of contingencies, entitled to vote for the election of members of the
Board of Directors (or Persons performing similar functions) of such Person.
Section 1.2. Accounting Terms. All accounting terms used in this
Agreement shall be applied on a consolidated basis for the Company and its
Subsidiaries, unless otherwise specifically indicated herein. Any accounting
terms not specifically defined herein shall have the meanings customarily given
them in accordance with GAAP.
Section 2. Sale and Purchase of the Notes.
Section 2.1. Authorization of the Notes. The Board of Directors of the
Company has duly authorized the issue, sale and delivery of (i) an aggregate of
$6,000,000 principal amount of its 10% Senior Subordinated Notes, to be dated
the date of issue thereof, to bear interest from such date on the unpaid
principal amount thereof and to mature on the Maturity Date, all in accordance
with the terms of the Notes which shall be in the form of Exhibit A hereto (the
Notes originally issued pursuant to this Agreement, or any Note delivered in
substitution or exchange therefor, being collectively called the "Notes" and
individually a "Note"); (ii) the Original Warrants; and (iii) the Additional
Warrants to the extent required under the terms of the Notes.
Section 2.2. Sale and Purchase of the Notes and Warrants. (a) Subject
to the applicable terms and conditions set forth in this Agreement, the Company
will issue and sell to the Purchasers, and the Purchasers will purchase from the
Company, on the
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Closing Date, (i) Notes with an aggregate principal amount of $6,000,000 to the
Purchasers in the aggregate principal amount set forth opposite each such
Purchaser's name on Schedule I hereto and (ii) the Original Warrants to purchase
the number of Shares set forth opposite their respective names on Schedule I
hereto.
(b) The purchase price to be paid by the Purchaser as consideration for
the issuance and sale of the Notes on the Closing Date shall be $6,000,000.
Section 2.3. Closing. Simultaneously with the execution of this
Agreement or at such later time as the Company and the Purchasers shall mutually
agree, but in no event later than 1:00 p.m. on January 10, 1997, (a) the Company
will deliver to the Escrow Agent (i) Notes, in the form of Exhibit A hereto, in
the aggregate principal amount of $6,000,000 payable to the Purchasers in the
amounts set forth opposite their respective names on Schedule I hereto and (ii)
the Original Warrants, in the form of Exhibit B hereto, for the purchase of the
number of shares set forth opposite their respective names on Schedule I hereto
and (b) the Purchasers shall deliver to the Escrow Agent immediately available
funds in an amount equal to $6,000,000, all of which deliveries to the Escrow
Agent shall be held in accordance with the Escrow Agreement.
Section 3. Representations and Warranties of the Company.
The Company represents and warrants to the Purchaser that:
Section 3.1. Corporate Existence and Power; Qualification. The Company
and each of its Subsidiaries is a company duly organized, validly existing and
in good standing under the laws of its jurisdiction of incorporation or
organization. The Company and each of its Subsidiaries has full power and
authority to conduct all the activities conducted by it, to own or lease all the
assets owned or leased by it and to conduct its business as described in the
Filed Documents. The Company and each of its Subsidiaries is duly qualified to
transact business as a foreign corporation in each jurisdiction in which the
nature of the business conducted by it or its ownership or leasing of property
make such qualification necessary, except where the failure to so qualify would
not have a Material Adverse Effect.
Section 3.2. Corporate Authority; Binding Effect. The Company has full
corporate power and authority to execute, deliver and perform this Agreement,
the Escrow Agreement, the Notes and the Bridge Financing Warrants. This
Agreement has been duly authorized, executed and delivered by the Company and,
assuming the due authorization, execution and delivery by the Purchaser, is the
legal, valid and binding agreement of the Company, enforceable against the
Company in accordance with its terms. The Notes to be issued and sold by the
Company to the Purchasers hereunder have been duly and validly authorized and,
when issued, executed and delivered against payment therefor as provided herein,
will constitute the legal, valid and binding agreement of the Company,
enforceable against the Company in accordance with their terms. The Original
Warrants and any Additional Warrants to be issued and sold by
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the Company to the Purchasers hereunder have been duly and validly authorized
and, when issued, executed and delivered against payment therefor as provided
herein, will constitute the legal, valid and binding agreement of the Company,
enforceable against the Company in accordance with their terms.
Section 3.3. Share Capital. The authorized share capital of the Company
consists of 20,000,000 Shares and 1,000,000 shares of Preferred Stock. As of
December 31, 1996 there were (i) 3,315,308 Shares issued and outstanding, (ii)
4,166,510 Shares reserved for issuance pursuant to issued and outstanding
warrants; (iii) 600,000 Shares reserved for issuance pursuant to issued and
outstanding unit purchase options, each such option entitling the holder to
purchase one unit consisting of one Share of Common Stock and two warrants; (iv)
500,000 Shares reserved for issuance pursuant to the Asset Purchase Agreement;
(v) 250,000 Shares reserved for issuance under the Company's 1995 Stock Option
Plan; (vi) 1,100,000 Shares reserved for issuance under the Company's 1996 Stock
Option Plan; (vii) 60,000 Shares reserved for issuance upon the exercise of
options granted to certain employees and prospective employees; (viii) 540,000
Shares which will be reserved for issuance in accordance with the Securities
Purchase Agreement; and (ix) 410,000 Shares reserved for issuance pursuant to
other warrants issued by the Company. The outstanding Shares have been duly
authorized, validly issued, fully paid and nonassessable and will not be subject
to any preemptive right, right of first refusal or similar right. Except as set
forth in this Section 3.3, the Company does not have outstanding any options to
purchase, or any rights or warrants to subscribe for, or any securities or
obligations convertible into, or exchangeable for, or any contracts or
commitments to issue or sell, any Capital Stock of the Company or any Subsidiary
or any such options, warrants, convertible or exchangeable securities or
obligations. There are no outstanding obligations, contingent or other of the
Company or any Subsidiary to purchase, redeem or otherwise acquire any Capital
Stock of the Company or any Subsidiary. To the best of the Company's knowledge,
except as contemplated hereunder or by the Stockholders' Agreement, dated August
24, 1995, by and among Xxxxx Xxxxxxxxx, Xxxx Xxxxx and Zivi Nedivi, there are no
voting trusts or other contracts, agreements, arrangements plans or
understandings restricting or otherwise relating to voting, dividend or other
rights with respect to the capital stock of the Company or any Subsidiary.
Section 3.4. Business Operations and Other Information; Financial
Condition. (a) The Company has made available to the Purchaser copies of the
Company's Annual Report on Form 10-KSB for the year ended December 31, 1995, the
Company's Quarterly Reports on Form 10-QSB for the quarters ended March 31,
1996, June 30, 1996 and September 30, 1996, the Company's Proxy Statement
distributed to its shareholders in connection with a special meeting of
shareholders held on June 22, 1995, and all other documents filed with the SEC
since January 1, 1996 (collectively, the "Filed Documents"). The Company has
filed all documents required to be filed by it under the Securities Act and the
Exchange Act, and the rules and regulations of the SEC thereunder. The Filed
Documents, as of their respective dates, do not contain any misstatement of a
material fact or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they were
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made, not misleading. The Filed Documents, as of their respective dates, contain
a true and correct description of the businesses, operations and principal
properties of the Company and its Subsidiaries. Set forth in the Filed Documents
are (i) the audited consolidated balance sheet of the Company and its
Subsidiaries as of December 31, 1995 and the related audited consolidated
statements of operations, shareholders' equity and cash flows for the fiscal
year then ended, together with the notes thereto and the reports thereon of KPMG
Peat Marwick (the "Audited Financial Statements") and (ii) the unaudited
consolidated balance sheet of the Company and its Subsidiaries as of September
30, 1996 and the related unaudited consolidated statements of operations,
shareholders' equity and cash flows for the nine months then ended and for the
comparable period in the prior fiscal year (the "Unaudited Financial
Statements"; the Audited Financial Statements and the Unaudited Financial
Statements are sometimes hereinafter collectively referred to as the "Financial
Statements"). The Financial Statements have been prepared in accordance with
GAAP consistently applied throughout the periods involved, and present fairly,
in all material respects, the consolidated financial position of the Company and
its Subsidiaries as of the dates of each of the balance sheets included in the
Financial Statements and the results of operations and cash flows of the Company
and its Subsidiaries for each of the periods then ended, subject to, in the case
of the Unaudited Financial Statements, normal year-end audit adjustments (which
adjustments will not have a Material Adverse Effect) and absence of the notes
required by GAAP.
(b) Since September 30, 1996, except for in connection
with the transactions contemplated by (i) the Asset Purchase Agreement, (ii) the
Revolving Loan Agreement; and (iii) the Securities Purchase Agreement and from
the date hereof until the Closing Date the Company shall have:
(i) (a) conducted its business in the manner in which such
business has heretofore been conducted in all material respects; (b) not
incurred any material liability or obligation whatsoever, secured or unsecured,
direct or indirect, other than current liabilities for accounts payable in the
ordinary course of its business, or as otherwise disclosed in this Agreement;
(c) not entered into any material contracts or agreements whatsoever, other than
in the ordinary course of its business; and (d) not amended nor terminated nor
suffered the amendment nor termination of, nor given nor received any notice of
any proposed amendment or termination of, any material contract or agreement;
(ii) without limiting the generality of subparagraph (i), not
sold, leased, mortgaged or otherwise encumbered or disposed of any of its
assets, except in the ordinary course of its business;
(iii)made no changes in its Certificate of Incorporation or
By-Laws;
(iv) without limiting the generality of subparagraph (i), not
canceled or released any material debts or claims except, in each case, in the
ordinary course of business;
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(v) not suffered any extraordinary loss or knowingly waived
any right, in either case which would have a Material Adverse Effect;
(vi) not suffered any damage, destruction or loss, whether or
not covered by insurance, which would have a Material Adverse Effect;
(vii) not suffered any Material Adverse Effect or any
occurrences or circumstances which might reasonably be expected to result in a
Material Adverse Effect;
(viii) not effected any material changes in the management or
operation of its business; and
(ix) not changed in any material respect any of its accounting
methods, principles, practices or policies.
Section 3.5. Litigation. (a) There are no actions, suits, arbitrations,
investigations or proceedings pending, or, to the knowledge of the Company,
threatened against or affecting the Company or any of its Subsidiaries or any of
their Properties or rights of any of them which, if adversely determined,
individually or in the aggregate have had or could reasonably be expected to
have a Material Adverse Effect. There is no judgment, decree, injunction, rule
or order of any Government Body or arbitrator outstanding against the Company or
any Subsidiary having or which, insofar as reasonably can be foreseen, in the
future would have a Material Adverse Effect.
(b) There are no actions, suits, investigations or proceedings pending,
or, to the knowledge of the Company, threatened against or affecting the Company
or any of its Subsidiaries which seek to enjoin, or otherwise prevent the
consummation of, the transactions contemplated herein or to recover any damages
or obtain any relief as a result of any of the transactions contemplated herein
in any court or before any arbitrator of any kind or before or by any
Governmental Body.
Section 3.6. No Conflicts with Agreements, Etc. (a) Neither the
execution and delivery by the Company of this Agreement, the Escrow Agreement,
the Notes or the Bridge Financing Warrants, nor the fulfillment of or compliance
with the terms and provisions hereof or thereof (including, without limitation,
the payment of principal and interest on the Notes), will conflict with, or
result in a breach or violation of the terms, conditions or provisions of, or
constitute a default under, or result in the creation of any Lien on any
Properties or assets of the Company or its Subsidiaries pursuant to, or result
in the acceleration of any obligation under, (i) the Certificate of
Incorporation or By-Laws of the Company or of the organizational documents of
any of its Subsidiaries, (ii) any contract, agreement, mortgage, indenture,
lease or instrument to which any of them is a party or by which any of them is
bound or to which any of them or any of their respective assets are subject, or
(iii) any Order, statute, law, rule or regulation to which any of them or any of
their respective assets are subject, or result
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in any suspension, revocation, impairment, forfeiture or non-renewal of any
material licenses.
(b) None of the Company or its Subsidiaries is now, or will be after or
as a result of giving effect to the transactions contemplated herein, in default
under or in violation of its respective Certificate of Incorporation or By-Laws,
other organizational documents, any contract, agreement, mortgage, indenture,
lease or instrument to which any of them is a party or by which any of them is
bound or to which any of them or any of their respective assets are subject, or
any order of any court, arbitrator or Governmental Body or of any federal,
state, local or foreign statute, ordinance or law or of any rule or regulation
of any Governmental Body, in each case which default or violation individually
or in the aggregate together with other such defaults and violations, has had or
could reasonably be expected to have a Material Adverse Effect.
Section 3.7. Consents, Etc.; Notice. Except for those which have been
obtained prior to the date hereof, no consent, approval, order or authorization
of or declaration, registration or filing with any Governmental Body or any
nongovernmental Person, including, without limitation, any creditor or
shareholder of the Company or any of its Subsidiaries or any party to a contract
to which the Company or any Subsidiary is a party or any of their respective
assets is subject, is required in connection with the execution or delivery by
the Company of this Agreement, the Escrow Agreement, the Notes or the Bridge
Financing Warrants, or the performance by the Company of its obligations
hereunder and thereunder, or as a condition to the legality, validity or
enforceability of this Agreement, the Escrow Agreement, the Notes or the Bridge
Financing Warrants.
Section 3.8. Compliance with Law. The operations of the Company and its
Subsidiaries have been conducted, and are now being conducted, in compliance in
all material respects with all applicable laws, rules, regulations and Orders
except in all cases in which the violation of said laws, rules, regulations and
Orders would not have a Material Adverse Effect.
Section 3.9. Contracts. Each material contract, agreement, mortgage,
indenture, lease or instrument to which the Company or any Subsidiary is bound
is a valid and binding obligation of the Company or its Subsidiary, as
applicable, and, to the best of the Company's knowledge, the other parties
thereto, enforceable in accordance with its terms (except as the enforceability
thereof may be limited by any applicable bankruptcy, insolvency or other laws
affecting creditors' rights generally or by general principles of equity,
regardless of whether such enforceability is considered in equity or at law),
and is in full force and effect (except for any contracts, agreements,
mortgages, indentures, leases or instruments which by their terms expire after
the date hereof or are terminated after the date hereof in accordance with the
terms thereof or which, if terminated, would not have a Material Adverse
Effect).
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Section 4. Representations and Warranties of the Purchasers.
Each Purchaser warrants to the Company that:
Section 4.1. Corporate Existence and Power. Such Purchaser is a
corporation, partnership or other legal entity, duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation or
organization. Such Purchaser has full power and authority to conduct all the
activities conducted by it, to own or lease all the assets owned or leased by it
and to conduct its business.
Section 4.2. Corporate Authority; Binding Effect. Such Purchaser has
full corporate power and authority to execute, deliver and perform this
Agreement. This Agreement has been duly authorized, executed and delivered by
such Purchaser and, assuming the due authorization, execution and delivery by
the Company, is the legal, valid and binding agreement of such Purchaser,
enforceable against such Purchaser in accordance with its terms.
Section 4.3. Litigation. There are no actions, suits, investigations or
proceedings pending, or, to the knowledge of such Purchaser, threatened against
or affecting such Purchaser which seek to enjoin, or otherwise prevent the
consummation of, the transactions contemplated herein or to recover any damages
or obtain any relief as a result of any of the transactions contemplated herein
in any court or before any arbitrator of any kind or before or by any
Governmental Body.
Section 4.4. No Conflicts with Agreements, Etc. Neither the execution
and delivery by such Purchaser of this Agreement, nor the fulfillment of or
compliance with the terms and provisions hereof, will conflict with, or result
in a breach or violation of the terms, conditions or provisions of, or
constitute a default under, or result in the creation of any Lien on any
Properties or assets of such Purchaser or its Subsidiaries pursuant to, or
result in the acceleration of any obligation under, (i) the Certificate of
Incorporation or By-Laws or other organizational documents of the Purchaser or
of the organizational documents of any of its Subsidiaries, (ii) any contract,
agreement, mortgage, indenture, lease or instrument to which any of them is a
party or by which any of them is bound or to which any of them or any of their
respective assets are subject, or (iii) any Order, statute, law, rule or
regulation to which any of them or any of their respective assets are subject,
or result in any suspension, revocation, impairment, forfeiture or non-renewal
of any material licenses.
Section 4.5. Consents, Etc.; Notice. No consent, approval, order or
authorization of or declaration, registration or filing with any Governmental
Body or any nongovernmental Person, including, without limitation, any creditor
or shareholder of such Purchaser or any of its Subsidiaries or any party to a
contract to which such Purchaser or any Subsidiary is a party or any of their
respective assets is subject, is required in connection with the execution or
delivery by such Purchaser of this Agreement, or the performance by such
Purchaser of its obligations hereunder, or as a condition to the legality,
validity or enforceability of this Agreement.
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Section 4.6. Investment Intent. Such Purchaser represents that (i) it
is an "accredited investor" as such term in defined in Rule 501 (a) of
Regulation D promulgated under the Securities Act, (ii) it is purchasing the
Notes and the Bridge Financing Warrants for its own account for investment and
not with a view to a public distribution thereof (within the meaning of the
Securities Act and rules and regulations promulgated thereunder) and (iii) no
distribution of the Notes shall be made unless such distribution shall have been
duly registered under the Securities Act, or an exemption for such distribution
under the Securities Act is available. The Notes and the Bridge Financing
Warrants shall bear restrictive legends in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED UNLESS SO REGISTERED
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT, OR AN EXEMPTION FROM
REGISTRATION UNDER SAID ACT IS AVAILABLE.
Section 4.7 Investigations; Inquiries; Facilities. In making the
decision to purchase the Notes and the Bridge Financing Warrants hereunder, (a)
such Purchaser has relied, in addition to the representations and warranties of
the Company set forth in this Agreement, upon independent investigations made by
such Purchaser or its advisor(s), (b) the Purchaser and/or such Purchaser's
advisor(s) has/have had a reasonable opportunity to ask questions of and receive
answers from a person or persons acting on behalf of the Company concerning the
purchase and sale of the Notes and the Bridge Financing Warrants and all such
questions have been answered to the full satisfaction of the Purchaser and (c)
the Purchaser and/or the Purchaser's advisor(s) has/have had a reasonable
opportunity to visit and inspect the books and records of the Company and the
Company's facilities.
Section 5. Covenants.
The Company covenants and agrees that, so long as any principal or
interest under the Notes remains outstanding:
Section 5.1. Payment of Principal and Interest. The Company will duly
and punctually pay the principal of and interest on the Notes in accordance with
the terms of the Notes and this Agreement. The Company will comply with all of
the covenants, agreements and conditions contained in this Agreement, the Escrow
Agreement, the Notes and the Bridge Financing Warrants.
Section 5.2. Further Assurances. The Company will, and will cause its
Subsidiaries to, from time to time execute any and all further documents and
instruments, and take all further actions which may be required under applicable
law, or which the Purchasers may reasonably request, in order to effectuate the
transactions contemplated by this Agreement.
-12-
Section 5.3. SEC Filings. The Company shall timely file all reports
required to be filed by it with the SEC.
Section 5.4. Opinion of Counsel to the Company. Simultaneously with the
release of the Notes, the Original Warrants and the purchase price therefor from
escrow in accordance with the terms of the Escrow Agreement, the Company shall
cause to be delivered to Purchasers from counsel to the Company an opinion with
respect to the matters set forth in Section 3.1 with regard to the Company only
(other than the third sentence, regarding which no opinion shall be required),
Section 3.2, Section 3.6(a) (except that the matters set forth in clauses (ii)
and (iii) of such Section 3.6(a) shall be to the knowledge of such counsel), and
Section 3.7 (except that the matters set forth therein shall be to the knowledge
of such counsel).
Section 6. Transfer of the Notes and the Bridge Financing Warrants.
(a) The Purchaser acknowledges and agrees that the Notes may not be
transferred unless (i) an Event of Default shall have occurred and be continuing
thereunder as of the date of the proposed transfer, or (ii) the assignee shall
assume all the obligations of the Purchaser hereunder and under the Notes and
(iii) the transferring party shall receive the written consent of the Company,
which consent shall not be unreasonably withheld. If the Company shall consent
to a transfer of the Notes, any Note issued upon transfer thereof shall carry
the rights to unpaid interest and interest to accrue which were carried by the
Notes so transferred, and neither gain nor loss of interest shall result from
any such transfer. Any transfer tax or governmental charge relating to such
transaction shall be paid by the holder requesting the transfer.
(b) Subject to the provisions of Section 8(a), the Notes and Bridge
Financing Warrants may not be sold, transferred, assigned or hypothecated by any
holder thereof except in compliance with the provisions of the Securities Act or
any available exemption thereunder and any Notes or Bridge Financing Warrants
issued upon the transfer or assignment of a Note or Bridge Financing Warrant
will be dated the same date as such transferred or assigned Note or Bridge
Financing Warrant, and all rights of the holder thereof shall be identical to
those of the holder of such transferred or assigned Note or Bridge Financing
Warrant.
Section 7. Lost, Stolen, Damaged and Destroyed Notes or Bridge
Financing Warrants. At the request of the Purchasers, the Company will issue and
deliver at its expense, in replacement of any Notes lost, stolen, damaged or
destroyed, upon surrender thereof, if mutilated, new Notes for the same
aggregate unpaid principal amount and otherwise of the same tenor, or in
replacement of any Bridge Financing Warrants lost, stolen, damaged or destroyed,
upon surrender thereof, if mutilated, new Bridge Financing Warrants of the same
tenor as the Bridge Financing Warrants so lost, stolen, damaged or destroyed,
duly executed by the Company. The Company may condition the replacement of a
Note or Bridge Financing Warrant reported by the holder thereof as lost, stolen,
damaged or destroyed, upon the receipt from such holder
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of an indemnity or security reasonably satisfactory to the Company; provided
that if such holder be a Purchaser or a commercial or investment banking firm or
other institutional lender or institutional investor, or its nominee, such
Person's unsecured agreement of indemnity shall be sufficient for purposes of
this Section 9.
Section 8. Subordination.
(a) Subordination to Senior Indebtedness. The indebtedness evidenced by
the Notes, and the payment of the principal thereof, and any interest thereon,
is wholly subordinated, junior and subject in right of payment, to the extent
and in the manner hereinafter provided, to the prior payment of all Senior
Indebtedness of the Company now outstanding or hereinafter incurred. "Senior
Indebtedness" means the principal of, and premium, if any, and interest on (i)
all Funded Debt (excluding Guarantees made by the Company on behalf of
non-affiliated third parties), including deferrals, renewals, extensions and
refundings thereof; (ii) all debt incurred pursuant to the Revolving Loan
Agreement; (iii) the debt incurred by International Aircraft Support L.P.
pursuant to a credit agreement with Union Bank of California, N.A., dated April
29, 1996 and assumed by IASI, Inc. a Subsidiary of the Company; (iv) any other
Debt of the Company which the Company and the Purchaser may hereafter from time
to time expressly and specifically agree in writing shall constitute Senior
Indebtedness, provided that the debt incurred pursuant to the Securities
Purchase Agreement by and between the Company and The Equitable Life Assurance
Society of the United States and any other party, to be executed at the closing
of the transactions contemplated by the Asset Purchase Agreement, shall not
constitute Senior Indebtedness and, in turn, shall be subordinated, junior and
subject in right of payment to the prior payment of the Notes pursuant to this
Agreement in a manner comparable to the subordination provisions contained
herein.
(b) No Payment if Default in Senior Indebtedness. No payment on account
of principal of or interest on the Notes shall be made, and the Notes shall not
be redeemed or purchased directly or indirectly by the Company (or any of its
Subsidiaries), if at the time of such payment or purchase or immediately after
giving effect thereto, (i) there shall exist a default in any payment with
respect to any Senior Indebtedness or (ii) there shall have occurred an event of
default (other than a default in the payment of amounts due thereon) with
respect to any Senior Indebtedness, as defined in the instrument under which the
same is outstanding, permitting the holders thereof to accelerate the maturity
thereof, and such event of default shall not have been cured or waived or shall
not have ceased to exist; provided, however, that the payments and purchases
described above may resume in the case of an event of default described under
clause (ii) above upon the expiration of a period of 120 days after the
occurrence of the event of default if, at such time, the holders of the Senior
Indebtedness shall not have accelerated such Senior Indebtedness.
-14-
(c) Payment upon Dissolution, Etc.
------------------------------
(i) Upon payment or distribution to creditors in a Proceeding
of assets of the Company of any kind or character, whether in cash, property or
securities, all principal and interest due upon any Senior Indebtedness shall
first be paid in full, or payment thereof in full duly provided for, before any
holders of the Notes shall be entitled to receive or, if received, to retain any
payment or distribution on account of the Notes; and upon any such Proceeding,
any payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, to which any holders of the Notes would
be entitled except for the provisions of this Section 10 shall be paid by the
Company or by any receiver, trustee in bankruptcy, liquidating trustee, agent or
other person making such payment or distribution, or by any holders of the Notes
who shall have received such payment or distribution, directly to the holders of
the Senior Indebtedness (pro rata to each such holder on the basis of the
respective amounts of such Senior Indebtedness held by such holder) or their
representatives to the extent necessary to pay all such Senior Indebtedness in
full after giving effect to any concurrent payment or distribution to or for the
holder of such Senior Indebtedness, before any payment or distribution is made
to any holders of the Notes. In the event of any Proceeding, the holders of the
Notes shall be entitled to be paid one hundred percent (100%) of the principal
amount thereof and accrued interest thereon after payment of the Senior
Indebtedness, on a pari passu basis with the other creditors of the Company
before any distribution of assets shall be made among the holders of any class
of shares of the capital stock of the Company in their capacities as holders of
such shares or to any creditors of the Company subordinated to the holders of
the Notes.
(ii) For purposes of this Section 10(c), the words "assets"
and "cash, property or securities" shall not be deemed to include Shares of the
Company as reorganized or readjusted, or securities of the Company or any other
person provided for by a plan of reorganization or readjustment, the payment of
which is subordinated at least to the extent provided in this Section 10 with
respect to the Notes to the payment of all Senior Indebtedness which may at the
time be outstanding, if (x) the Senior Indebtedness is assumed by the new
person, if any, resulting from any such reorganization or readjustment, and (y)
the rights of the holders of Senior Indebtedness are not, without the consent of
such holders, altered by such reorganization or readjustment.
(d) Subrogation. Subject to payment in full of all Senior Indebtedness,
the holder of the Notes shall be subrogated to the rights of the holders of
Senior Indebtedness to receive payments or distributions of the assets of the
Company made on such Senior Indebtedness until all principal and interest on the
Notes shall be paid in full; and for purposes of such subrogation, no payments
or distributions to the holders of Senior Indebtedness of any cash, property or
securities to which any holders of the Notes would be entitled except for the
subordination provisions of this Section 10 shall, as between the holders of the
Notes and the Company and/or its creditors
-15-
other than the holder of the Senior Indebtedness, be deemed to be a payment on
account of the Senior Indebtedness.
(e) Rights of Holder Unimpaired. The provisions of this Section 10 are
and are intended solely for the purposes of defining the relative rights of the
Company, on the one hand, and on the other hand, the holders of the Notes and
the holders of Senior Indebtedness and nothing in this Section 10 shall impair,
as between the Company and any holders of the Notes, the obligation of the
Company, which is unconditional and absolute, to pay to the holders of the Notes
the principal thereof and interest thereon, in accordance with the terms of the
Notes, nor shall anything herein prevent any holders of the Notes from
exercising all remedies otherwise permitted by applicable law or hereunder upon
default, subject to the rights set forth above of holders of Senior Indebtedness
to receive cash, property or securities otherwise payable or deliverable to the
holders of the Notes.
(f) Holders of Senior Indebtedness. These provisions regarding
subordination will constitute a continuing offer to all persons who, in reliance
upon such provisions, become holders of, or continue to hold, Senior
Indebtedness (including the purchasers under the Securities Purchase Agreement);
such provisions are made for the benefit of the holders of Senior Indebtedness,
and such holders are hereby made obligees under such provisions to the same
extent as if they were named therein, and they or any of them may proceed to
enforce such subordination. The holders of the Notes shall execute and deliver
to any holder of Senior Indebtedness (i) any such instrument as such holder of
Senior Indebtedness may request in order to confirm the subordination of the
Notes to such Senior Indebtedness upon the terms set forth in the Notes, and
(ii) any powers of attorney specifically confirming the rights of holders of
Senior Indebtedness to enforce such subordination and all such proofs of claim,
assignments of claim and other instruments as may be requested by the holders of
Senior Indebtedness or their representatives to enforce all claims upon or in
respect of the Notes.
(g) Notes as Payment for Warrants. Notwithstanding anything contained
in this Agreement to the contrary, the Purchasers shall be entitled to exercise
the Original Warrants and, if applicable, the Additional Warrants, in accordance
with Section 1, clause (ii) of such warrants.
Section 9. Termination. The Purchasers may terminate this Agreement if
the closing of the sale of the Notes and the Original Warrants does not take
place prior to January 31, 1997 as a result of the conditions set forth in
Section 5 hereof not having been fulfilled prior to such date. The Company may
terminate this Agreement if the closing of the sale of the Notes and the
Original Warrants does not take place prior to January 31, 1997 as a result of
the failure of the conditions set forth in Section 6 hereof not having been
fulfilled to such date.
-16-
Section 10. Events of Default.
-----------------
The entire unpaid principal of the Notes and the interest then accrued
on the Notes shall become and be immediately due and payable upon written demand
of the holder of the Notes, without any other notice or demand of any kind or
any presentment or protest, if any one of the following events (each an "Event
of Default") shall occur and be continuing at the time of such demand, whether
voluntarily or involuntarily, or, without limitation, occurring or brought about
by operation of law or pursuant to or in compliance with any judgment, decree or
order of any court or any order, rule or regulation of any Governmental Body:
(a) If any principal or interest payment under the Notes is
not made when due, and remains unpaid for seven (7) days (including if such
non-payment results from the provisions of Section 8 hereof);
(b) If the Company shall default in the performance or
observance of any material covenant, agreement or condition contained in this
Agreement, and such default shall remain unremedied for fifteen (15) days after
written notice of such default is given to the Company;
(c) If the Company (i) makes a composition or an assignment
for the benefit of creditors or trust mortgage, (ii) applies for, consents to,
acquiesces in, files a petition seeking or admits (by answer, default or
otherwise) the material allegations of a petition filed against it seeking the
appointment of a trustee, receiver or liquidator, in bankruptcy or otherwise, of
itself or of all or substantial portion of its assets, or a reorganization,
arrangement with creditors or other remedy, relief or adjudication available to
or against a bankrupt or insolvent debtor under any bankruptcy or insolvency law
or any law affecting the rights of creditors generally, or (iii) admits in
writing its inability to pay its debts generally as they become due; or
(d) If an order for relief shall have been entered by a
bankruptcy court or if a decree, order or judgment shall have been entered
adjudging the Company insolvent, or appointing a receiver, liquidator, custodian
or trustee, in bankruptcy or otherwise, for it or for all or a substantial
portion of its assets, or approving the winding-up or liquidation of its affairs
on the grounds of insolvency or nonpayment of debts, and such order for relief,
decree, order or judgment shall remain undischarged or unstayed for a period of
forty-five (45) days; or if any substantial part of the property of the Company
is sequestered or attached and shall not be returned to the possession of the
Company or such subsidiary or released from such attachment within forty-five
(45) days.
Notwithstanding anything in this Section 12 to the contrary,
in the case of any Event of Default other than an Event of Default specified in
(c) or (d) above, if there is any Senior Indebtedness outstanding at the time of
an acceleration under this Section 12, such acceleration (i) shall not become
effective until the first to occur of (A) an acceleration of any Senior
Indebtedness and (B) the 30th calendar day after notice
-17-
of acceleration of the Notes is received by the Company and (ii) shall (in the
absence of an acceleration under Senior Indebtedness) automatically be rescinded
if on or prior to such 30th calendar day the Company shall have (x) discharged
the indebtedness which triggered an Event of Default hereunder (if the Event of
Default was pursuant to clause (c) of this Section 12) or (y) otherwise cured
the Event of Default.
Section 11. Miscellaneous.
-------------
Section 11.1. Amendment and Waiver. No amendment or waiver of any
provision of this Agreement, the Escrow Agreement, the Notes or the Bridge
Financing Warrants, or any consent to any departure by the Company or any of its
Subsidiaries therefrom, shall in any event be effective as regards any holder of
Notes unless the same shall be in writing and signed by such holder. Any such
waiver or consent shall be effective only in the specific instance and for the
purpose for which given. Neither any failure nor any delay on the part of the
Purchasers in exercising any right, power or privilege hereunder, under the
Notes or under the Bridge Financing Warrants shall operate as a waiver thereof,
nor shall a single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. Except
as otherwise provided herein, in the Notes or in the Bridge Financing Warrants,
no notice to or demand on the Company or any of its Subsidiaries in any case
shall entitle the Company or such Subsidiary to any other or further notice or
demand in the same, similar or other circumstances.
Section 11.2. Expenses. Each of the parties hereto agrees to pay its
own costs and expenses in connection with the negotiation, execution and
delivery of this Agreement, the Escrow Agreement, the Notes and the Bridge
Financing Warrants and the consummation of the transactions contemplated hereby
and thereby, except that the Company agrees to pay the reasonable fees and
disbursements of legal counsel (not to exceed $5,000) for the Purchaser incurred
in connection with the negotiation, preparation and closing of the sale and
purchase of the Notes and the Original Warrants.
Section 11.3. Survival of Representations and Warranties. All
representations and warranties contained herein or made in writing by or on
behalf of any party to this Agreement or otherwise in connection herewith, shall
survive the execution and delivery of this Agreement and the delivery of the
Notes and the Bridge Financing Warrants to the Purchasers to the maximum extent
permitted by law notwithstanding any investigation made by, or constructive or
actual knowledge of, the Purchasers or the Company, as applicable, of any fact
which would constitute a breach of a representation or warranty.
Section 11.4. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the Company and the Purchasers and their
respective successors and assigns; provided, however, that any attempted
assignment or other attempted transfer of the Notes or Bridge Financing Warrants
shall be subject to the provisions of Section 8 hereof; provided further, that
the Company shall not have the
-18-
right to assign its rights hereunder or any interest herein or to delegate any
of its duties hereunder without the prior written consent of the Purchasers.
Section 11.5. Notices. All notices hereunder shall be in writing and
shall be conclusively deemed to have been received and shall be effective (a) on
the day on which delivered if delivered personally or transmitted by telex or
telegram or telecopier, or (b) one Business Day after the date on which the same
is delivered to a nationally recognized overnight courier service, and shall be
addressed:
(i) in the case of the Company, to:
XXXXXXXXX INDUSTRIES, INC.
00000 X.X. 0xx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Zivi X. Xxxxxx
Telecopier No.: (000) 000-0000
with a copy to:
FULBRIGHT & XXXXXXXX L.L.P.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Telecopier No.: (000) 000-0000
(ii) in the case of the Purchasers, to them at their
addresses set forth with their signatures hereto.
with a copy to:
XXXX XXXXXX & XXXXX
000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxxx
Telecopier No. (000) 000-0000
Section 11.6. Integration and Severability. This Agreement, the Escrow
Agreement, the Notes, the Escrow Agreement, and the Bridge Financing Warrants
embody the entire agreement and understanding between the Purchasers and the
Company, and supersede all prior agreements and understandings relating to the
subject matter hereof. In case any one or more of the provisions contained in
this Agreement or in any instrument contemplated hereby for such date, or any
application thereof, shall be invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions contained
herein and therein, and any other application thereof, shall not in any way be
affected or impaired thereby.
-19-
Section 11.7. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original but all of which
shall together constitute one and the same instrument.
SECTION 11.8. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK (WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW).
Section 11.9. Remedies Cumulative. No remedy herein conferred upon or
reserved to the Company, or upon or to the Purchasers, is intended to be
exclusive of any other remedy, but each and every such remedy shall be
cumulative and shall be in addition to every other remedy given hereunder or now
existing or hereafter to exist by law or by statute.
Section 11.10. Binding Agreement. This Agreement shall be binding upon
all Purchasers who execute this Agreement, and each such Purchaser shall be
obligated to purchase Notes and Original Warrants in the amounts set forth
opposite their respective names on Schedule I hereto, even in the event that
less than all the Purchasers named on Schedule I hereto execute this Agreement.
IN WITNESS WHEREOF, the Company and the Purchasers have executed this
Agreement by their duly authorized officers as of the date first written above.
XXXXXXXXX INDUSTRIES, INC.
By:
--------------------------------
Name: Xxxx X. Xxxxxxx
Title: Executive Vice President and CFO
NOTE PURCHASE AGREEMENT
-----------------------
PURCHASERS:
BEDFORD FALLS INVESTORS, L.P.
By: Metropolitan Capital Advisors, L.P.
General Partner
By: Metropolitan Capital Advisors, Inc.
General Partner
By:
-----------------------------
Xxxxxxx X. Xxxxxxx
Chief Executive Officer
000 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
METROPOLITAN CAPITAL ADVISORS, L.P.
By: Metropolitan Capital Advisors, Inc.
General Partner
By:
------------------------------
Xxxxxxx X. Xxxxxxx
Chief Executive Officer
000 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
METROPOLITAN CAPITAL ADVISORS
INTERNATIONAL LIMITED
By: Metropolitan Capital Partners III, L.P.
Investment Manager
By: Metropolitan Capital III, Inc.
General Partner
By:
------------------------------
Xxxxxxx X. Xxxxxxx
Chief Executive Officer
000 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
DIVERSIFIED STRATEGIES FUND, L.P.
By: Xxxxxx Financial, Inc.
General Partner
By:
---------------------------------
Xxxx X. Xxxxxx
President
000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
XXXXXXX CAPITAL MANAGEMENT, L.P.
By: S & E Partners, L.P.
General Partner
By: Xxxxxxx, Inc.
General Partner
By:
--------------------------------
Xxxxx Xxxxxx
President
000 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
