EXHIBIT 10.12
FORM OF
SENIOR SUBORDINATED PROMISSORY NOTE
THE SUBORDINATED INDEBTEDNESS EVIDENCED BY THIS INSTRUMENT RANKS
PARI PASSU WITH CERTAIN OTHER SUBORDINATED INDEBTEDNESS OF THE MAKER
AND IS OTHERWISE SUBJECT TO CERTAIN OTHER RESTRICTIONS SET FORTH IN
THAT CERTAIN SUBORDINATED INDEBTEDNESS INTERCREDITOR AGREEMENT,
DATED AS OF SEPTEMBER 28, 2000, BY AND AMONG THE MAKER HEREOF, THE
PAYEE NAMED HEREIN, CERTAIN OTHER HOLDERS) OF INDEBTEDNESS OF THE
MAKER AND THE GUARANTORS OF SUCH INDEBTEDNESS, AS SUCH AGREEMENT MAY
BE AMENDED FROM TIME TO TIME.
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD,
TRANSFERRED, OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS
INTEGRATED DEFENSE TECHNOLOGIES, INC.
12% SENIOR SUBORDINATED PROMISSORY NOTE
DUE DECEMBER 31, 2007
$ ____________ New York, New York
September 28, 2000
FOR VALUE RECEIVED, the undersigned, Integrated Defense Technologies,
Inc., a Delaware corporation (the "BORROWER"), hereby promises to pay to the
order of [
], or its registered assigns (the "HOLDER"), the principal sum of
[________________________ ($___________) on December 31, 2007 (the "MATURITY
DATE"), with interest thereon from time to time as provided herein.
1. PURCHASE AGREEMENT. This Senior Subordinated Promissory Note (the
"NOTE") IS one of the notes issued by the Borrower, on the date hereof, pursuant
to the Securities Purchase Agreement (the "PURCHASE AGREEMENT"), dated as of the
date hereof, by and among the Borrower, X.X. Xxxxxxx Xxxxxxxxx Fund, L.P., X.X.
Xxxxxxx Market Value Fund, L.P., XxxxxXxxx Capital, L.P., First Union Investors,
Inc. and BNY Capital Partners, L.P., and is subject to the terms thereof. This
Note together with the other notes issued by the Borrower on the date hereof
pursuant to the Purchase Agreement and together with all promissory notes issued
pursuant to Section 12 hereof or thereof are hereinafter referred to as the
"NOTES." The Holder is entitled to the benefits of this Note and the Purchase
Agreement, as it relates to the Note, and may enforce the agreements of the
Borrower contained herein and therein and exercise the remedies provided for
hereby and thereby or otherwise available in respect hereto and thereto.
Capitalized terms used herein without definition are used herein with the
meanings ascribed to such terms in the Purchase Agreement.
2. INTEREST. The Borrower promises to pay interest ("INTEREST") on
the principal amount of this Note at the rate of 12% per annum (the "INTEREST
RATE"). Interest on this Note shall accrue from and including the date of
issuance through and until repayment of the principal amount of this Note and
payment of all Interest in full, and shall be computed on the basis of a 360-day
year of twelve 30-day months. Interest shall be paid quarterly on each March 31,
June 30, September 30 and December 31 of each year or, if any such date shall
not be a Business Day, on the next succeeding Business Day to occur after such
date (each date upon which interest shall be so payable, an "INTEREST PAYMENT
Date"), beginning on December 31, 2000, by wire transfer of immediately
available funds to an account at a bank designated by the Holder.
(a) DEFAULT RATE OF INTEREST. Notwithstanding the foregoing
provisions of this Section 2, but subject to applicable law, any overdue
principal of and overdue Interest on this Note shall bear interest, payable on
demand in immediately available funds, for each day from the date payment
thereof was due to the date of actual payment, at a rate equal to the sum of (i)
the Interest Rate and (ii) an additional 2% per annum, and, upon and during the
occurrence of an Event of Default (as hereinafter defined), this Note shall bear
interest, from the date of the occurrence of such Event of Default until such
Event of Default is cured or waived, payable on demand in immediately available
funds, at a rate equal to the sum of (i) the Interest Rate and (ii) an
additional 2% per annum. Subject to applicable law, any interest that shall
accrue on overdue interest on this Note as provided in the preceding sentence
and shall not have been paid in full on or before the next Interest Payment Date
to occur after the date on which the overdue interest became due and payable
shall itself be deemed to be overdue interest on this Note to which the
preceding sentence shall apply.
(b) In the event that any interest rate(s) provided for in
this Section 2, shall be determined to be unlawful, such interest rate(s) shall
be computed at the highest rate permitted by applicable law. Any payment by the
Borrower of any interest amount in excess of that permitted by law shall be
considered a mistake, with the excess being applied to the principal amount of
this Note without prepayment premium or penalty.
3. MANDATORY PREPAYMENT/REDEMPTION.
(a) INITIAL PUBLIC OFFERING. Subject to the subordination
provisions of Section 7 hereof, upon the consummation of an Initial Public
Offering (as hereinafter defined), the Borrower agrees to prepay the outstanding
principal amount of this Note in accordance with the redemption prices (the
"MANDATORY REDEMPTION PRICES") set forth below (expressed as a percentage of the
outstanding principal amount of this Note), together with Interest accrued
thereon through the date of such prepayment. If the consummation of an Initial
Public Offering shall occur during the consecutive 12-month period immediately
preceding August 1, of the calendar year set forth below, the Mandatory
Redemption Price shall be determined based upon the percentage of the
outstanding principal amount of this Note which corresponds to the period in
question; PROVIDED, HOWEVER, that in no event shall such percentage for any
twelve month period payable to the Holder of this Note exceed the maximum
permitted by any regulation applicable to such Holder, which limitation, if any,
shall not be applicable to any other Note or holder thereof.
Period Mandatory Redemption Price
------ --------------------------
2001 106%
2002 105%
2003 104%
2004 103%
2005 102%
2006 and thereafter 100%
The Borrower shall pay the Mandatory Redemption Price, together with Interest
accrued thereon, within 3 Business Days after receipt by the Borrower or any of
its Subsidiaries of the proceeds of such Initial Public Offering. For the
purposes hereof, "INITIAL PUBLIC OFFERING" means the sale by the Borrower or any
Subsidiary of the Borrower of capital stock to the public pursuant to a
registration statement on Form S- l or otherwise (other than a registration
statement on Form S-4 or S-8 or any similar or successor form filed) under the
Securities Act in which the issuer receives any Net Cash Proceeds. For the
purposes hereof, "NET CASH PROCEEDS" means (x) the cash proceeds in respect of
an Initial Public Offering MINUS (y) reasonable brokerage commissions or
underwriting fees and other reasonable fees and expenses (including, without
limitation, reasonable fees, charges and disbursements of counsel and reasonable
fees and expenses of investment bankers) relating to such Initial Public
Offering.
(b) CHANGE OF CONTROL. Subject to the subordination provisions
of Section 7 hereof, upon a Change of Control (as hereinafter defined), the
Borrower agrees to prepay the outstanding principal amount of this Note in
accordance with the Mandatory Redemption Prices set forth in Section 3(a) above,
together with Interest accrued thereon through the date of such prepayment, such
payment to be made upon the occurrence of such Change of Control. The Mandatory
Redemption Price with respect to a Change of Control shall be determined based
upon the percentage of outstanding principal amount of this Note which
corresponds to the period during which the Change of Control occurs. For the
purposes hereof, "CHANGE OF CONTROL" means (i) any transaction or series of
transactions in which The Veritas Capital Fund, L.P. and/or its Affiliates
("VERITAS") ceases to beneficially own at least 75% of the limited liability
company interests of IDT Holding L.L.C., a Delaware limited liability company
("IDT HOLDING"), or 1DT Holding ceases to own at least 100% of the outstanding
capital stock of the Borrower (other than capital stock of the Borrower owned by
the holders of the Warrants), (ii) the sale of all or substantially all of the
assets of the Borrower or any of its Subsidiaries, the operations of which in
the reasonable judgment of the Holder would constitute a material part of the
business or operations of the Borrower and its Subsidiaries, taken as a whole,
(iii) the liquidation of the Borrower or any of its Subsidiaries (other than the
Inactive Subsidiaries), the operations of which in the reasonable judgment of
the Holder would constitute a material part of the business or operations of the
Borrower and its Subsidiaries, taken as a whole, or (iv) the combination of the
Borrower or any of its Subsidiaries, the operations of which in the reasonable
judgment of the Holder would constitute a material part of the business or
operations of the Borrower and its Subsidiaries, taken as a whole, with another
entity, as a result of which (A) the shareholders of the Borrower directly or
indirectly, hold less than 50%> of the total of all voting shares outstanding or
(B) directors of the Borrower constitute less than a majority of the Board of
Directors of the combined entity; PROVIDED, HOWEVER, that any of the events
described above as applied to a Subsidiary of a the Borrower shall be deemed to
be a Change in Control only if such event is also an Event of Default; or (v) a
"Change of Control" as such term is defined in the Credit Agreement described in
the definition of Senior Indebtedness in Section 7(a) below.
(c) NOTICE. TO the extent possible, the Borrower shall give
written notice to the Holder of any mandatory prepayment pursuant to this
Section 3 at least fifteen (15) Business Days prior to the date of such
prepayment. Such notice shall be given in the manner specified in Section 11.2
of the Purchase Agreement.
(d) PARI PASSU PAYMENT. All payments made under this Section 3
shall be made pari passu with respect to all of the Notes.
4. OPTIONAL PREPAYMENT/REDEMPTION.
(a) Subject to the subordination provisions of Section 7
hereof, upon notice given to the Holder as provided in Section 4(b), the
Borrower, at its option, may prepay all or any portion of the principal amount
of this Note at any time, by paying to the Holder an amount equal to the
redemption prices (the "OPTIONAL REDEMPTION PRICES") set forth below
(expressed as a percentage of the outstanding principal amount being prepaid,
from time to time) together with Interest accrued and unpaid thereon to the date
fixed for such prepayment, and costs and expenses (including, without
limitation, reasonable fees, charges and disbursements of counsel), if any,
associated with such prepayment; PROVIDED, HOWEVER, each prepayment of less than
the full outstanding balance of the principal amount of this Note shall be in an
aggregate principal amount of this Note or $500,000 or a whole multiple thereof;
and PROVIDED, FURTHER, that unless this Note and all Notes shall be paid in
full, the aggregate principal balance of the Notes outstanding at any time shall
be at least $5,000,000. If such prepayment is to be made by the Borrower to the
Holder during the consecutive 12-month period immediately preceding August 1, of
the calendar year set forth below, the Optional Redemption Price shall be
determined based upon the percentage of the outstanding principal amount of this
Note and which corresponds to period in question; PROVIDED, HOWEVER, that in no
event shall such percentage for any twelve month period payable to the Holder of
this Note exceed the maximum permitted by any regulation applicable to such
Holder, which limitation, if any, shall not be applicable to any other Note or
holder thereof.
Period Optional Redemption Price
------ -------------------------
2001 106%
2002 105%
2003 104%
2004 103
2005 102%
2006 and thereafter 100%
(b) The Borrower shall give written notice of prepayment of
this Note, or any portion thereof, pursuant to this Section 4 not less than 10
nor more than 60 days prior to the date fixed for such prepayment. Such notice
of prepayment pursuant to this Section 4 shall be given in the manner specified
in Section 11.2 of the Purchase Agreement. Upon notice of prepayment pursuant to
this Section 4 being given by the Borrower, the Borrower covenants and agrees
that it will prepay, on the date therein fixed for prepayment, this Note or the
portion hereof so called for prepayment, at the outstanding principal amount of
this Note thereof or the portion thereof so called for prepayment together with
Interest accrued and unpaid thereon to the date fixed for such prepayment,
together with the costs and expenses referred to in Section 4(a).
(c) All optional prepayments under this Section 4 shall
include payment of accrued Interest on the principal amount of this Note so
prepaid and shall be applied first to all costs, expenses and indemnities
payable under the Purchase Agreement, then to payment of default interest, if
any, then to payment of Interest, and thereafter to principal.
(d) PARI PASSU PAYMENT. All payments made under this Section 4
shall be made pari passu with respect to all of the Notes.
5. AMENDMENT. Amendments and modifications of this Note may be made
only in the manner provided in Section 11.4 of the Purchase Agreement.
6. DEFAULTS AND REMEDIES.
(a) EVENTS OF DEFAULt. An "EVENT OF DEFAULT" shall occur if:
(i) the Borrower shall default in the payment of the
principal of any of the Notes, when and as the same shall become due and
payable, whether at maturity or at a date fixed for prepayment or by
acceleration or otherwise; or
(ii) the Borrower shall default in the payment of any
installment of Interest on any of the Notes according to its terms, when and as
the same shall become due and payable and such default shall continue for a
period of 10 days; or
(iii) the Borrower or any of its Subsidiaries shall
default in the due observance or performance of any covenant to be observed or
performed pursuant to (x) Section 8.1 of the Purchase Agreement and such default
shall continue for a period of 10 days, or (y) Sections 8.2(a), 8.3, 8.8, 8.10,
8.11, 8,12 or Article 9 of the Purchase Agreement and provided, however, that a
default under Article 9 which does not or is not likely to have a material
adverse effect on the Borrower or any of its Subsidiaries taken as a whole shall
become an Event of Default only if such default shall continue for a period of
30 days; or
(iv) the Borrower or any of its Subsidiaries shall
default in the due observance or performance of any other covenant, condition or
agreement on the part of the Borrower or any Subsidiaries to be observed or
performed pursuant to the terms hereof or pursuant to the terms of the Purchase
Agreement or any of the Transaction Documents (other than those referred to in
clauses (i), (ii) or (iii) of this Section 6(a)), and such default shall
continue for 45 days after the earliest of (A) the date the Borrower is required
pursuant to the Transaction Documents or otherwise to give notice thereof to the
Holder (whether or not such notice is actually given) or (B) the date of written
notice thereof, specifying such default and, if such default is capable of being
remedied, requesting that the same be remedied, shall have been given to the
Borrower by the Holder; or
(v) any representation, warranty or certification made
by or on behalf of the Borrower or any of its Subsidiaries in the Purchase
Agreement, this Note, the Transaction Documents or in any certificate or other
document delivered pursuant hereto or thereto shall have been incorrect in any
material respect when made; or
(vi) any event or condition shall occur that results in
(A) the acceleration of the maturity of any Indebtedness of the Borrower or any
of its Subsidiaries (including the Senior Indebtedness), or (B) a default of any
Indebtedness of the Borrower or any of its Subsidiaries (other than Senior
Indebtedness), in either case in a principal amount aggregating $1,000,000 or
more; or
(vii) any uninsured damage to or loss, theft or
destruction of any assets of the Borrower or any of its Subsidiaries shall occur
that is in excess of $1,000,000; or
(viii) involuntary proceeding shall be commenced or an
involuntary petition shall be filed in a court of competent jurisdiction seeking
(a) relief in respect of the Borrower, or any Subsidiary of the Borrower, or of
a substantial part of their property or assets, under the United States Code, as
now constituted or hereafter amended, or any other Federal or state bankruptcy,
insolvency, receivership or similar law, (b) the appointment of a receiver,
trustee, custodian, sequestrator, conservator or similar official for the
Borrower, or any Subsidiary of the Borrower, or for a substantial part of their
property or assets, or (c) the winding up or liquidation of the Borrower, or any
Subsidiary of the Borrower; and such proceeding or petition shall continue
undismissed for 60 days, or an order or decree approving or ordering any of the
foregoing shall be entered; or
(ix) The Borrower or any Subsidiary of the Borrower
shall (a) voluntarily commence any proceeding or file any petition seeking
relief under the United States Code, as now constituted or hereafter amended, or
any other Federal or state bankruptcy, insolvency, receivership or similar law,
(b) consent to the institution of, or fail to contest in a timely and
appropriate manner, any proceeding or the filing of any petition described in
paragraph (viii) of this Section 6(a), (c) apply for or consent to the
appointment of a receiver, trustee, custodian, sequestrator, conservator or
similar official for such, or for a substantial part of its property or assets,
(d) file an answer admitting the material allegations of a petition filed
against it in any such proceeding, (e) make a general assignment for the benefit
of creditors, (f) become unable, admit in writing its inability or fail
generally to pay its debts as they become due or (g) take any action for the
purpose of effecting any of the foregoing; or
(x) one or more judgments for the payment of money in an
aggregate amount in excess of 5300,000 (to the extent not covered by insurance)
shall be rendered against the Borrower or any of its Subsidiaries and the same
shall remain undischarged for a period of 30 days during which execution shall
not be effectively stayed, or any action shall be legally taken by a judgment
creditor to levy upon assets or properties of the Borrower, or any Subsidiary of
the Borrower to enforce any such judgment; or
(xi) (i) there shall be a default under any Government
Contract or other Significant Customer Contract; (ii) a notice of termination
shall have been issued under any Government Contract or other Significant
Customer Contract; or (iii) a cure notice issued under any Government Contract
or other Significant Customer Contract shall remain uncured beyond (x) the
expiration of the time period available to the Borrower or any Subsidiary of the
Borrower pursuant to such Government Contract or other Significant Customer
Contract and/or such cure notice (as the case may be), to cure the noticed
default, or (y) the date on which the other contracting party is entitled to
exercise its rights and remedies under the Government Contract or other
Significant Customer Contract as a consequence of such default; or
(xii) (i) the Borrower or any of its Subsidiaries is
debarred or suspended from contracting with Governmental Authority; (ii) a
notice of debarment or suspension shall have been issued to the Borrower or any
Subsidiary of the Borrower; or (iii) a notice OF termination for default or the
actual termination for default of any Government Contract or other Significant
Customer Contract shall have been issued to or received by the Borrower or any
Subsidiary of the Borrower; or (iv) an investigation or inquiry by any
Governmental Authority relating to the Borrower or any Subsidiary OF the
Borrower and involving fraud, deception or willful misconduct shall have been
commenced in connection with any Government Contract or other Significant
Customer Contract or the activities of the Borrower or any Subsidiary of the
Borrower.
(b) ACCELERATION. If an Event of Default occurs under Section
6(a)(viii) or (ix), then the outstanding principal of and all accrued Interest
on this Note shall automatically become immediately due and payable, without
presentment, demand, protest or notice of any kind, all of which are hereby
expressly waived. IF any other Event of Default occurs and is continuing the
Holder, by written notice to the Borrower, may declare the principal of and
accrued Interest on this Note to be immediately due and payable. Upon such
declaration, such principal and Interest shall become immediately due and
payable. The Holder may rescind an acceleration and its consequences 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,
and if the rescission would not conflict with any judgment or decree. Any notice
or rescission shall be given in the manner specified in Section 11.2 of the
Purchase Agreement.
7. SUBORDINATION. The Subordinated Indebtedness (as hereinafter
defined) shall at all times be wholly subordinate and junior in right and order
of payment to the payment in full of all Senior Indebtedness in cash to the
extent and in the manner provided in this Section 7. This Section 7 shall
constitute a continuing offer to all Persons who, in reliance upon such
provisions, become holders of the Senior Indebtedness, and such holders are made
obligees hereunder and any one or more of them may enforce such provisions.
(a) DEFINITIONS. As used in this Section 7, the following
terms shall have the following meanings:
"INDEBTEDNESS" SHALL have the meaning assigned to that term in the
Purchase Agreement.
"SENIOR COVENANT DEFAULT" shall mean any event of default as defined
under any agreement pertaining to Senior Indebtedness of the Borrower or
any Guarantor, other than a Senior Payment Default.
"SENIOR DEFAULT" SHALL mean a Senior Payment Default or a Senior
Covenant Default.
"SENIOR INDEBTEDNESS" MEANS all indebtedness, obligations
(including, without limitation, Hedging Agreements (as defined in the
Credit Agreement) in favor of the lenders thereunder) and liabilities of
the Borrower, including, without limitation, all principal, interest,
premiums, if any, costs, expenses, indemnitees and fees, currently
outstanding or incurred in the future pursuant to the Credit Agreement
(the "CREDIT AGREEMENT") dated as of September 28, 2000, among the
Borrower, IDT Holding, LLC, the subsidiaries of the Borrower as may from
time to time become parties thereto, the several banks and other financial
institutions as may from time to time become parties thereto (each a
"Lender") and First Union National Bank ("First Union"), as the
Administrative Agent, CIBC World Markets Corp. ("CIBC") as Syndication
Agent, Credit Lyonnais
New York Branch as Documentation Agent, and First
Union Securities, Inc. and CIBC, as co-lead arrangers and joint
bookrunners and any related documents, including without limitation, all
"Obligations" as defined therein, and all amendments, restatements,
renewals, extensions, increases, refinancings, modifications or refundings
thereof with the same or different lenders or agents from time to time;
together with all post-petition interest, if any, whether or not an
allowed claim, PROVIDED, HOWEVER, in no event shall the aggregate
principal amount of Senior Indebtedness exceed $190,000,000. To the extent
any payment of Senior Indebtedness (whether by or on behalf of the
Borrower or any Guarantor, as proceeds of security or enforcement of any
right of set-off or otherwise) is declared to be fraudulent or
preferential, set aside or required to be paid to a trustee, receiver or
similar party under any bankruptcy, insolvency, receivership, fraudulent
conveyance or similar law, then if such payment is recovered by or paid
over to, such trustee, receiver or other similar party, the Senior
Indebtedness or part thereof originally intended to be satisfied shall be
deemed to be reinstated and outstanding as if such payment had not
occurred, but only as to the applicability of the provisions of this
Section 7 with respect to any payment of principal and interest received
by the Holder (i) on or at any time subsequent to the date the Holder
receives written notice from the Administrative Agent of any recovery from
the Administrative Agent or any Lender, or (ii) following the commencement
of any bankruptcy or insolvency proceeding or the appointment of any
receiver, in each case with respect to the Borrower or any of its
Subsidiaries, or (iii) within 100 days following the payment of Senior
Indebtedness so declared to be fraudulent or preferential, set aside or
required to be paid to a trustee, receiver a similar party, or (iv) within
370 days following the closing date of the Original Credit Agreement; in
each case to the extent not otherwise declared to be fraudulent or
preferential, set aside or required to be paid to a trustee, receiver or
similar party under any bankruptcy, insolvency, receivership, fraudulent
conveyance or similar law.
"SENIOR PAYMENT DEFAULT" shall mean any default in the payment of
any Senior Indebtedness.
"SUBORDINATED INDEBTEDNESS" shall mean (i) the principal of,
premium, if any and Interest on the Notes and any fees related thereto;
and (ii) any other obligations of the Borrower or any Guarantor arising
out of or in connection with the Purchase Agreement,
this Note or the other Transaction Documents, including, without
limitation, indemnification obligations and contribution obligations
pursuant to Section 7 of the Purchase Agreement.
(b) GENERAL. UPON the maturity of any Senior Indebtedness by
lapse of time, acceleration, required prepayment or otherwise, all Senior
Indebtedness shall first be paid in full in cash before any payment is made on
account of the Subordinated Indebtedness or by the Borrower or Affiliate of the
Borrower to acquire, redeem, retire or purchase this Note and any other
liabilities or obligations in connection herewith or arising hereunder. Prior to
such maturity (i) the Borrower may prepay this Note to the extent permitted
under the Credit Agreement in accordance with the provisions of Section 3 or
Section 4 only so long as no Senior Default has occurred and is continuing or
would occur as a result of any such prepayment and (ii) the Holder may receive
any distributions provided for in Section 7(e)(ii) hereof.
(c) LIMITATION ON PAYMENT.
(i) Upon receipt by the Borrower and the Holder of a
Blockage Notice (as defined below), then unless and until (1) all Senior
Defaults that gave rise to the Blockage Notice shall have been remedied or
waived in writing or shall have ceased to exist, or (2) the Senior Indebtedness
in respect of which such Senior Defaults shall have occurred shall have been
paid in full in cash, no direct or indirect payment (in cash, property,
securities or by set-off or otherwise) of or on account of the principal of,
premium, if any, or Interest on this Note or as a sinking fund for this Note or
in respect of any redemption, retirement, purchase or other acquisition of this
Note or any other payment on account of Subordinated Indebtedness shall be made
during any period prior to the expiration of the Blockage Period (as defined
below). Notwithstanding the foregoing, all interest paid with respect to this
Note prior to the giving of the Blockage Notice in question by the Holder hereof
may be kept by such Holder.
(ii) For purposes of this Section 7, a "BLOCKAGE NOTICE"
is a notice of a Senior Default that has occurred and is continuing, given to
the Borrower and the Holder by the Administrative Agent, on behalf of holders of
a majority in principal amount of the Senior Indebtedness then outstanding (or
their authorized agent); PROVIDED, HOWEVER, that not more than two (2) effective
Blockage Notices shall be given within any 365 day period and not more than four
(4) effective Blockage Notices shall be given pursuant to the provisions of this
Section 7; and PROVIDED, FURTHER, HOWEVER, that no Senior Default existing on
the date on which any Blockage Notice is given shall, unless the same shall have
ceased to exist for a period of at least 90 consecutive days, be used as a basis
for any subsequent Blockage Notice.
(iii) For purposes of this Section 7, a "BLOCKAGE
PERIOD" with respect to a Blockage Notice is the period commencing upon the date
of the Borrower's receipt of such Blockage Notice and having a duration as
follows:
(1) 360 days, if the Senior Default to which the
Blockage Notice refers is a Senior Payment Default; or
(2) 180 days if the Senior Default to which the Blockage
Notice refers is a Senior Covenant Default.
(d) LIMITATION ON REMEDIES. As long as any Senior Indebtedness
remains outstanding, upon the occurrence of an Event of Default under this Note,
the Holder shall not, unless the holders of any Senior Indebtedness shall have
caused such Senior Indebtedness to become due prior to its stated maturity or
any Event of Default pursuant to Section 6(a)(viii) or (ix) of this Note shall
have commenced with respect to the Borrower, declare or join in any declaration
of this Note to be due and payable by reason of such Event of Default or
otherwise take any action against either the Borrower (including, without
limitation, commencing any legal action against the Borrower or filing or
joining in the filing of any insolvency petition against the Borrower) during
the period (a "REMEDY STANDSTILL PERIOD") beginning upon the date of written
notice (a "REMEDY NOTICE") of occurrence of an Event of Default from the Holder
to the Borrower and the Administrative Agent on behalf of the holders of the
Senior Indebtedness and ending on the earlier to occur of: (i) the acceleration
of the Senior Indebtedness which such Blockage Notice relates, (ii) 90 days
after the receipt by the Administrative Agent of the Remedy Notice or (iii) such
time as the holders of Senior Indebtedness (or any requisite percentage thereof)
consent in writing to the termination of the Remedy Standstill Period. During
the Remedy Standstill Period, the Holders shall be prohibited from accelerating
the Notes and shall be prohibited from enforcing any of their default remedies
with respect thereto (including any right to sue the Borrower or to file or
participate in the filing of any involuntary bankruptcy petition against the
Borrower) until the Remedy Standstill Period shall cease to be in effect;
provided that any Blockage Period (if not also terminated) shall continue for
the full period notwithstanding the termination or expiration of the Remedy
Standstill Period.
Notwithstanding the foregoing, the Remedy Standstill Period shall be
inapplicable or cease to be effective if an Event of Default pursuant to Section
6(a)(viii) or (ix) shall have occurred with respect to the Borrower or its
Subsidiaries. In addition, any Remedy Standstill Period shall cease to be
effective if at any time during such period: (i) substantial assets of the
Borrower or its Subsidiaries are offered for sale, sold or otherwise disposed of
outside of the ordinary course of business for less than fair value or (ii)
payment or any distribution of any character, whether in cash, securities or
other property of the Borrower or its Subsidiaries shall be made to or received
outside of the ordinary course of business by any creditor on any Indebtedness
which is on the same level of priority with or junior and subordinate in right
of payment to this Note.
Upon the expiration or termination of any Blockage Remedy Standstill
Period, the Holder shall be entitled to exercise any of its rights with respect
to this Note other than any right to accelerate the maturity date of this Note
based upon the occurrence of any Event of Default in respect thereto which has
been cured or otherwise remedied during the Blockage Period.
(e) SUBORDINATION UPON CERTAIN EVENTS. Upon the occurrence of
any Event of Default with respect to the Borrower or its Subsidiaries under
Sections 6(a)(viii) or (ix) of this Note:
(i) Upon any payment or distribution of any and all
assets of the Borrower or its Subsidiaries of any kind or character to creditors
thereof, holders of Senior Indebtedness shall be entitled to receive
indefeasible payment in full in cash of all obligations with respect to the
Senior Indebtedness before the Holder shall be entitled to receive any payment
in respect of the Subordinated Indebtedness.
(ii) Until all Senior Indebtedness is paid in full in
cash, any distribution to which the Holder would be entitled but for this
Section 7 shall be made to the holders of Senior Indebtedness, as their
interests may appear, except that the Holder may, pursuant to a plan of
reorganization under Chapter 11 of the Bankruptcy Code of 1978, as amended, or
any similar provision of any successor legislation thereto, receive securities
that are subordinate to the Senior Indebtedness to at least the same extent as
this Note if pursuant to such plan the distributions to the holders of the
Senior Indebtedness in the form of cash, securities or other property, by
set-off or otherwise, provide for payment of the full amount of the allowed
claim of the holders of the Senior Indebtedness.
(iii) For purposes of this Section 7, a distribution may
consist of cash, securities or other property, by set-off or otherwise.
(f) PAYMENTS AND DISTRIBUTIONS RECEIVED. If the Holder shall
have received any payment from or distribution of assets of the Borrower or any
of its Subsidiaries in respect of the Subordinated Indebtedness in contravention
of the terms of this Section 7 before all Senior Indebtedness is paid in full in
cash, then and in such event such payment or distribution shall be received and
held in trust for and shall be promptly paid over or delivered to the holders of
Senior Indebtedness to the extent necessary to pay all such Senior Indebtedness
in full in cash.
(g) PROOFS OF CLAIM. If, while any Senior Indebtedness is
outstanding, any Event of Default under Section 6(a)(viii) or (ix) of this Note
occurs with respect to the Borrower or its Subsidiaries, the Holder shall duly
and promptly take such action as any holder of Senior Indebtedness may
reasonably request to collect any payment with respect to this Note for the
account of the holders of the Senior Indebtedness and to file appropriate claims
or proofs of claim in respect of this Note. Upon the failure of the Holder to
take any such action, each holder of Senior Indebtedness is hereby irrevocably
authorized and empowered (in its own name or otherwise), but shall have no
obligation, to demand, sue for, collect and receive every payment or
distribution referred to in respect of this Note and to file claims and proofs
of claim and take such other action as it may deem necessary or advisable for
the exercise or enforcement of any of the rights or interests of the holder with
respect to this Note.
(h) SUBROGATION. After all amounts payable under or in respect
of Senior Indebtedness are paid in full in cash and the commitments under the
Credit Agreement shall have been terminated, the Holder shall be subrogated to
the rights of holders of Senior Indebtedness to receive payments or
distributions applicable to Senior Indebtedness to the extent that distributions
otherwise payable to the Holder have been applied to the payment of Senior
Indebtedness. A distribution made under this Section 7 to a holder of Senior
Indebtedness which otherwise would have been made to the Holder is not, as
between the Borrower and the Holder, a payment by the Borrower on Senior
Indebtedness.
(i) RELATIVE RIGHTS. This Section defines the relative rights
of the Holder and the holders of Senior Indebtedness. Nothing in this Section
shall: (1) impair, as between the Borrower and the Holder, the obligation of the
Borrower, which is absolute and unconditional, to pay principal of and interest
(including default interest) on this Note in accordance with its terms; (2)
affect the relative rights of the Holder and creditors of the Borrower or any of
its Subsidiaries other than holders of Senior Indebtedness or (3) prevent the
Holder from exercising its available remedies upon a default or Event of
Default, subject to the rights, if any, under this Section 7 of holders of
Senior Indebtedness.
(j) SUBORDINATION MAY NOT BE IMPAIRED BY THE BORROWER. No
right of any holder of any Senior Indebtedness to enforce the subordination of
the. Indebtedness evidenced by this Note shall be impaired by any failure to act
by the Borrower or such holder of Senior Indebtedness or by the failure of the
Borrower or such holder to comply with this Note. The provisions of this Section
7 shall continue to be effective or be reinstated, as the case may be, if at any
time any payment of any of the Senior Indebtedness is rescinded or must
otherwise be returned by any holder of Senior Indebtedness as a result of the
insolvency, bankruptcy or reorganization of the Borrower or any of its
Subsidiaries or otherwise, all as though such payment had not been made.
(k) PAYMENTS. A payment with respect to principal of or
interest on the Subordinated Indebtedness shall include, without limitation,
payment of principal of, and Interest on this Note, any depositing of funds for
the defeasance of the Subordinated Indebtedness, any sinking fund and any
payment on account of mandatory prepayment or optional prepayment provisions.
(l) SECTION NOT TO PREVENT EVENTS OF DEFAULT. The failure to
make a payment on account of principal of or interest on or other amounts
constituting Subordinated Indebtedness by reason of any provision of this
Section 7 shall not be construed as preventing the occurrence of an Event of
Default under Section 6.
(m) SUBORDINATION NOT IMPAIRED; BENEFIT OF SUBORDINATION. The
Holder agrees and consents that without notice to or assent by such Holder, and
without affecting the liabilities and obligations of the Borrower and the rights
and benefits of the holders of the Senior Indebtedness set forth in this Section
7:
(i) The obligations and liabilities of the Borrower and
its Subsidiaries and any other party or parties for or upon the Senior
Indebtedness may, from time to time, be increased, renewed, refinanced,
extended, modified, amended, restated, compromised, supplemented, terminated,
waived or released, PROVIDED in all cases, the maximum outstanding principal
amount of Senior Indebtedness shall not exceed $190,000,000;
(ii) The holders of Senior Indebtedness, and any
representative or representatives acting on behalf thereof, may exercise or
refrain from exercising any right, remedy or power granted by or in connection
with any agreements relating to the Senior Indebtedness; and
(iii) Any balance or balances of funds with any holder
of Senior Indebtedness at any time outstanding to the credit of the Borrower and
any collateral in which a security interest has been granted to any holder of
Senior Indebtedness may, from time to time, in whole or in part, be surrendered
or released;
all as the holders of the Senior Indebtedness, and any representative or
representatives acting on behalf thereof, may deem advisable, and all without
impairing, abridging, diminishing, releasing or affecting the subordination of
the Subordinated Indebtedness to the Senior Indebtedness provided for herein.
(n) MODIFICATION OF SECTION 7. The provisions of this Section
7 and all definitions referred to or pertaining to defined terms used in this
Section 7 whether or not such definitions are set forth in this Note, are for
the benefit of the holders from time to time of Senior Indebtedness and, so long
as any Senior Indebtedness remains unpaid, may not be modified, rescinded or
canceled in whole or in part without the prior written consent thereto of all
holders of Senior Indebtedness. No modification of this Section 7 in this Note
shall be valid unless a similar modification has been agreed to and made in the
other Notes.
(o) COVENANTS OF HOLDER. Until all of the Senior Indebtedness
has been fully paid in cash:
(i) Upon the occurrence and during the continuance of a
Senior Default, the Holder shall not release, exchange, extend the time of
payment of; compromise, set off or otherwise discharge any part of this Note or
modify or amend this Note; PROVIDED, however, that at such time or times as the
actions referred to in this Section 7(o)(i) may be taken by the Holder, such
Holder shall give the holders of Senior Indebtedness five Business Days prior
written notice before taking any of such actions.
(ii) The Holder hereby undertakes and agrees for the
benefit of the holders of Senior Indebtedness that, upon the occurrence and
during the continuance of a Senior Default, it shall take any actions reasonably
requested by any holder of Senior Indebtedness to effectuate the full benefit of
the subordination contained herein.
(iii) Until the Senior Indebtedness is paid in full in
cash and notwithstanding anything contained in the Transaction Documents, or the
Senior Loan Agreements to the contrary, the Holder shall not, without the prior
written consent of Administrative Agent, agree to any amendment, modification or
supplement to the Notes which (w) increases the maximum principal amount of the
Notes or rate of interest on any of the Notes (it being understood that the
imposition of a default rate of interest contained in the Notes as in effect on
the date hereof shall not be restricted by this clause (w)), (x) accelerates the
dates (including maturity dates) upon which payments of principal or interest on
the Notes are due, (y) makes more restrictive or adds any event of default or
any covenant with respect to the Notes or (z) changes the redemption or
prepayment provisions of the Notes.
(p) NO CONTEST OF SENIOR INDEBTEDNESS; NO SECURITY FOR
SUBORDINATED INDEBTEDNESS. The Holder agrees that it will not, and will not
encourage any other Person (as defined in the Credit Agreement) to, at any time,
contest the validity, perfection, priority or enforceability of the Senior
Indebtedness or Liens (as defined in the Credit Agreement) in the Collateral
granted to Administrative Agent pursuant to the Credit Agreement, or the other
Credit Documents or accept or take any collateral security for the Subordinated
Indebtedness.
(q) MISCELLANEOUS.
(i) To the extent permitted by applicable law, the
Holder and the Borrower hereby waive (1) notice of acceptance hereof by the
holders of the Senior Indebtedness, and (2) all diligence in the collection or
protection of or realization upon the Senior Indebtedness.
(ii) the Borrower and the Holder hereby expressly agree
that the holders of Senior Indebtedness may enforce any and all rights derived
herein by suit, either in equity or law, for specific performance of any
agreement contained in this Section 7 or for judgment at law and any other
relief whatsoever appropriate to such action or procedure.
(iii) The Holder acknowledges and agrees that the
foregoing subordination provisions are, and are intended to be, an inducement
and a consideration to each holder of Senior Indebtedness, whether such Senior
Indebtedness was created or acquired before or after the issuance of this Note,
and each holder of Senior Indebtedness shall be deemed conclusively to have
relied upon such subordination provisions in acquiring and continuing to hold
such Senior Indebtedness.
8. USE OF PROCEEDS. The Borrower shall use the principal amount
of this Note in accordance with the permitted uses described in Section 8.10 of
the Purchase Agreement.
9. SUITS. OR ENFORCEMENT.
(a) Subject to Section 7 and Sections 3(d) and 4(d), upon the
occurrence of any one or more Events of Default, the Holder of this Note may
proceed to protect
and enforce its rights hereunder by suit in equity, action at law or by other
appropriate proceeding, whether for the specific performance of any covenant or
agreement contained in the Purchase Agreement or this Note or in aid of the
exercise of any power granted in the Purchase Agreement or this Note, or may
proceed to enforce the payment of this Note, or to enforce any other legal or
equitable right of the Holders of this Note.
(b) In case of any default under this Note, the Borrower will
pay to the Holder such amounts as shall be sufficient to cover the costs and
expenses of such Holder due to such default, as provided in Article 7 of the
Purchase Agreement.
10. REMEDIES CUMULATIVE. No remedy herein conferred upon the
Holder is intended to be exclusive of any other remedy and each and every such
remedy shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or
otherwise.
11. REMEDIES NOT WAIVED. No course of dealing between the Borrower
and the Holder or any delay on the part of the Holder in exercising any rights
hereunder shall operate as a waiver of any right.
12. TRANSFER.
(a) The term "HOLDER" as used herein shall also include any
transferee of this Note whose name has been recorded by the Borrower in the Note
Register. Each transferee of this Note acknowledges that this Note has not been
registered under the Securities Act, and may be transferred only pursuant to an
effective registration under the Securities Act or pursuant to an applicable
exemption from the registration requirements of the Securities Act and subject
to the pledge by the Holder of this Note pursuant to the terms of the
partnership agreement or other agreement of the Holder pursuant to which the
Holder issued any indebtedness.
(b) The Borrower shall maintain a register (the "NOTE
REGISTER") in its principal offices for the purpose of registering the Notes and
any transfer thereof, which register shall reflect and identify, at all times,
the ownership of any interest in the Note. Upon the issuance of this Note, the
Borrower shall record the name of the initial purchaser of this Note in the Note
Register as the first Holder. Upon surrender for registration of transfer or
exchange of this Note at the principal offices of the Borrower, the Borrower
shall, at its expense, execute and deliver one or more new Notes of like tenor
and of denominations of at least $500,000 (except as may be necessary to reflect
any principal amount of this Note not evenly divisible by $500,000) of alike
aggregate principal amount of this Note, registered in the name of the Holder or
a transferee or transferees. Every Note surrendered for registration of transfer
or exchange shall be duly endorsed, or be accompanied by written instrument of
transfer duly executed by the Holder of such Note or such holder's attorney duly
authorized in writing.
(c) This Note may be transferred or assigned, in whole or in
part, by the Holder at any time.
13. REPLACEMENT OF NOTE. On receipt by the Borrower of an
affidavit of an authorized representative of the Holder stating the
circumstances of the loss, theft, destruction or mutilation of this Note (and in
the case of any such mutilation, on surrender and cancellation of such Note),
the Borrower, at its expense, will promptly execute and deliver, in lieu
thereof, a new Note of like tenor. If required by the Borrower, such Holder must
provide an indemnity bond or other indemnity sufficient in the judgment of the
Borrower to protect the Borrower from any loss which it may suffer if a lost,
stolen or destroyed Note is replaced.
14. COVENANTS BIND SUCCESSORS AND ASSIGNS. All the covenants,
stipulations, promises and agreements in this Note contained by or on behalf of
the Borrower shall bind its successors and assigns, whether so expressed or not.
15. GOVERNING LAW. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICTS OF LAW OF SUCH STATE.
16. SEVERABILITY. IF any one or more OF the provisions contained
herein, or the application thereof in any circumstance, is held invalid, illegal
or unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions hereof shall not be in any way impaired, unless the provisions held
invalid, illegal or unenforceable shall substantially impair the benefits of the
remaining provisions hereof.
17. HEADINGS. The headings in this Note are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
INTEGRATED DEFENSE TECHNOLOGIES, INC.
By: _______________________________________
Name:
Title:
