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Exhibit 10.15
ESOP LOAN AND PLEDGE AGREEMENT
by and between
XXXXX INSTRUMENTS CORP.
and the
XXXXX INSTRUMENTS CORP.
EMPLOYEE STOCK OWNERSHIP PLAN AND TRUST
Dated April 23, 1996
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TABLE OF CONTENTS
Page
ARTICLE 1......................................................... 3
The ESOP Loan..................................................... 3
1.1 Loan to ESOP........................................ 3
1.2 Use of Proceeds..................................... 3
1.3 Promissory Note..................................... 3
1.4 Interest............................................ 3
ARTICLE 2......................................................... 3
Loan Payments..................................................... 3
2.1 Payments of Principal and Interest.................. 3
2.2 Company Contributions............................... 4
2.3 Not Payable on Demand; Default...................... 4
2.4 Limitation on Payments.............................. 5
2.5 Due on Sale or Liquidation.......................... 6
ARTICLE 3......................................................... 6
Representations and Warranties of the ESOP........................ 6
3.1 Authorizations...................................... 6
3.2 Compliance with Obligations and Laws................ 7
ARTICLE 4......................................................... 7
Representations and Warranties of the Company..................... 7
4.1 Corporate Authority................................. 7
4.2 ESOP Adoption....................................... 8
4.3 Compliance with Laws and Obligations................ 8
4.4 Representations and Warranties under Fleet Loan
Agreement and Xxxxxxxxx Agreement................... 8
4.5 Governmental Consent................................ 9
ARTICLE 5......................................................... 9
Pledge of Shares.................................................. 9
5.1 Pledge.............................................. 9
5.2 Release of Shares from Pledge....................... 9
5.3 Default.............................................10
ARTICLE 6
Special Put Option Price..........................................11
6.1 Duration............................................11
6.2 Put Option Under The ESOP...........................11
ARTICLE 7.........................................................11
Miscellaneous.....................................................11
7.1 Amendments, Waivers and Modifications..............11
7.2 No Waiver..........................................12
7.3 Survival of Covenants, Etc.; Successors and
Assigns............................................12
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7.4 Communications.............................. 12
7.5 Capacity.................................... 13
7.6 Entire Agreement ........................... 13
7.7 Governing Law............................... 13
7.8 Compliance with Applicable Law.............. 13
7.9 Headings.................................... 14
7.10 Counterparts................................ 14
7.11 Severability................................ 15
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ESOP LOAN AND PLEDGE AGREEMENT
THIS AGREEMENT, effective as of April 23, 1996, by and between XXXXX
INSTRUMENTS CORP., a California corporation (the "Company"), and the XXXXX
INSTRUMENTS CORP. EMPLOYEE STOCK OWNERSHIP PLAN AND TRUST (the "ESOP").
W I T N E S S E T H:
WHEREAS, the Company has adopted the ESOP to provide stock ownership
interests in the Company to eligible employees, and the ESOP is designed to be
an employee stock ownership plan under Section 4975(e)(7) of the Internal
Revenue Code of 1986, as amended (the "Code"), and Section 407(d)(6) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA");
WHEREAS, the Xxxxxx Living Trust u/d/t dated January 12, 1995, the
Xxxxxxx 1986 Trust u/d/t dated October 23, 1986, Xxxxxx Ezra and Xxxxxx X.
Xxxxxx, Xx. (the "Sellers"), shareholders of the Company, have offered to sell
all of the 1,500,000 shares of Series B Common Stock of the Company (the
"Shares") to the ESOP for a total purchase price of $10,999,950;
WHEREAS, the Company is willing to make a loan to the ESOP in the
amount of $10,999,950 (the "Loan") in order to enable the ESOP to finance its
purchase of the Shares, subject to the condi-
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tion that the ESOP pledge the Shares to the Company as security for the Loan;
WHEREAS, the Company will obtain funds needed to make the Loan and for
other corporate purposes through the combination of a term loan ("Fleet Loan")
in the amount of $9,500,000 from Fleet Capital Corporation ("Fleet") pursuant to
the terms of the Loan and Security Agreement by and between Fleet and the
Company ("Fleet Loan Agreement") and the sale of $6 million of newly-issued
preferred stock to Xxxxxxxxx ESOP Capital Partners ("Xxxxxxxxx") pursuant to the
terms of the Securities Purchase Agreement by and between the Company and
Xxxxxxxxx ("Xxxxxxxxx Agreement");
WHEREAS, the ESOP desires to incur the Loan in order to finance its
purchase of the Shares; and
WHEREAS, Xxxxx Fargo Bank, N.A., as Trustee of the ESOP (the "Trustee")
has determined that the proposed purchase of the Shares and the borrowing of the
Loan are in the best interests of the ESOP and its participants and comply with
the applicable requirements of the Code and ERISA;
NOW, THEREFORE, the parties hereto agree as follows:
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ARTICLE 1
The ESOP Loan
1.1 Loan to ESOP. Subject to the terms and conditions herein
set forth, the Company agrees to lend $10,999,950 to the ESOP.
1.2 Use of Proceeds. The ESOP hereby agrees that it will use
the entire proceeds of the Loan to purchase the Shares and for no other purpose.
1.3 Promissory Note. The Loan is evidenced by a secured
promissory note in the original principal amount of $10,999,950 (the "Note") to
be delivered by the ESOP to the Company, in the form attached hereto.
1.4 Interest. Interest shall accrue on the unpaid principal
amount of the Note at the rate of 6% per annum.
ARTICLE 2
Loan Payments
2.1 Payments of Principal and Interest.
(a) Interest - The ESOP shall pay interest (including
interest on overdue payments) on the unpaid portion of the ESOP Loan
semi-annually on each August 31st and March 1st, commencing August 31, 1996, at
an annual rate equal to 6%.
(b) Principal - Principal on the Note shall be due
and payable in 20 consecutive semi-annual installments on each August 31st and
March 1st, beginning August 31, 1996, in the
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amount of $550,000.00. Any remaining principal balance (including the final
installment of $549,950) and accrued interest shall be due and payable on March
1, 2006.
(c) Optional Prepayment - The ESOP may prepay amounts
due hereunder in whole or in part at any time, and from time to time, without
premium or penalty. Any prepayment under this Section 2.1(c) shall be applied
first to accrued interest and then to payments of principal in the order of
maturity.
(d) Form of Payment - Payments of principal and/or
interest on the ESOP Loan may be made to the Company by the ESOP in cash or by
cancellation of indebtedness by the Company evidenced by written notice to the
ESOP.
2.2 Company Contributions. The Company hereby agrees to make
contributions to the ESOP in cash or by cancellation of indebtedness from time
to time in amounts sufficient to permit the ESOP to make timely payments of the
principal and interest due under Section 2.1(a) and (b), after taking into
account the amount of any cash dividends on the Shares received by the ESOP;
provided, however, that the Company shall not be required to make contributions
to the ESOP in amounts in excess of the limitations under Sections 404(a) and
415(c) of the Code. The ESOP agrees that so long as any interest or principal
amount remains payable on the Loan, the ESOP will use all cash contributions and
cash dividends on the Shares received by the ESOP to make payments on the Loan.
2.3 Not Payable on Demand; Default. Under no circumstances
will the outstanding balance of the Loan be payable on
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demand, except in the case of an Event of Default. For this purpose, the only
Event of Default hereunder shall be the ESOP's failure to make the payments
required under Section 2.1(a) and (b), but only if the ESOP has received
sufficient cash contributions and dividends from the Company to make such
payments.
2.4 Limitation on Payments. Subject to the provisions of
Section 5.3, payments of principal and interest on the ESOP Loan shall not
exceed the sum of all Company contributions (excluding any contributions of
Company Stock) that are made to the ESOP by Company to enable the ESOP to meet
its obligations under this Agreement, any earnings on such Company contributions
and any cash dividends on the Shares (whether or not such Shares have been
released from pledge under Section 5.2 at the time the dividend is paid), less
payments made in prior years. The Company shall have no recourse against the
assets of the ESOP other than (a) cash contributions that are made to the ESOP
by the Company to enable the ESOP to meet its obligations hereunder, (b) any
earnings attributable to the investment of such cash contributions, (c) any cash
dividends on the Shares, and (d) the Shares remaining subject to pledge under
Article 5, but only to the extent permitted under Section 5.3. Notwithstanding
the foregoing provisions, the ESOP may elect to apply the proceeds from the sale
of any Shares remaining subject to pledge under Article 5 to pay principal and
accrued interest due on the ESOP Loan in the event of the sale of the Company
(including a transaction subject to Section 2.5) or the termination of the ESOP
or
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if the ESOP ceases to be an employee stock ownership plan under Section
4975(e)(7) of the Code.
2.5 Due on Sale or Liquidation.
(a) Due on Sale - In the event the ESOP agrees to
sell all of the Shares it owns in connection with the acquisition of the
Company, the ESOP shall apply the proceeds from the sale of any Shares then
remaining subject to pledge under Article 5 to the extent necessary to repay the
Loan. The mandatory repayment of the Loan provided for in this Section 2.5 shall
apply only if the sale of Shares by the ESOP has been approved by a fiduciary
who is "independent," within the meaning of Department of Labor Prop. Reg. Sec.
2510.3-18(b)(3)(ii)(B)(1).
(b) Due on Liquidation - In the event of a
liquidation, dissolution or winding up of the Company, either voluntary or
involuntary, the ESOP shall apply the proceeds attributable to any Shares then
remaining subject to pledge under Article 5 to the extent necessary to repay the
Loan.
ARTICLE 3
Representations and Warranties of the ESOP
The ESOP, as of the date hereof, represents and warrants as
follows:
3.1 Authorizations. This Agreement has been duly authorized by
all necessary action on the part of the ESOP. This Agreement has been duly
executed and delivered by the ESOP and
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constitutes a legal, valid and binding obligation of the ESOP, enforceable in
accordance with its terms, subject to bankruptcy, insolvency, reorganization and
other similar laws affecting creditors' rights generally and subject, as to
enforceability, to general equitable principles (regardless of whether
enforcement is sought in a proceeding in equity or at law).
3.2 Compliance with Obligations and Laws. Neither the
execution and delivery by the ESOP of this Agreement, nor the consummation of
the transactions contemplated hereby, nor compliance by the ESOP with its
obligations hereunder, will conflict with, or result in a breach or violation
of, or constitute a default under, any provision of the ESOP or any law, rule,
regulation, order, injunction or decree of any court, administrative authority
or arbitrator applicable to the ESOP.
ARTICLE 4
Representations and Warranties of the Company
The Company, as of the date hereof, hereby represents and
warrants as follows:
4.1 Corporate Authority. It has all requisite corporate power
and authority to execute, deliver and perform its obligations under this
Agreement. The Company has taken all corporate action to authorize the Loan and
the execution of this Agreement by the Company. This Agreement has been duly
executed and delivered by the Company.
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4.2 ESOP Adoption. The ESOP is an "employee stock ownership
plan" (as such term is defined in Section 4975(e)(7) of the Code) duly
established by the Company, and the Trustee has been duly appointed by the
Company and has all requisite power and authority to execute, deliver and
perform its obligations under this Agreement.
4.3 Compliance with Laws and Obligations. Neither the
execution of this Agreement by the Company nor the fulfillment of any of the
Company's obligations under this Agreement will, to the Company's knowledge,
conflict with, or result in a breach or violation of, or constitute a default
under any law, rule, regulation, order or injunction binding on the Company, or
any other obligation, loan, contract or agreement of the Company.
4.4 Representations and Warranties under Fleet Loan Agreement
and Xxxxxxxxx Agreement. Each of the representations and warranties in Section
7.1 of the Fleet Loan Agreement with respect to the Company, and each of the
representations and warranties in Section 4 of the Xxxxxxxxx Agreement with
respect to the Company, is hereby incorporated mutatis mutandis (without regard
to any waiver or amendment thereto from the form of the Fleet Loan Agreement and
the Xxxxxxxxx Agreement in the form existing on the date most recently delivered
to the ESOP (whether or not executed or delivered), other than those waivers and
amendments of which the ESOP has been advised a reasonable time prior to the
closing of the purchase of the Shares and that are subsequently confirmed to the
ESOP in writing).
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4.5 Governmental Consent. No approval, consent or withholding
of objection on the part of any regulatory body, state, Federal or local, is
necessary in connection with the execution and delivery by the Company of this
Agreement or the issuance, sale or delivery of the Shares or compliance by the
Company with any of the provisions of this Agreement.
ARTICLE 5
Pledge of Shares
5.1 Pledge. The Shares are hereby pledged by the ESOP to the
Company as collateral for the Loan, and the ESOP hereby grants to the Company a
security interest in the Shares, all free and clear of any other pledge,
security interest, lien or encumbrance. So long as there is no Event of Default,
the ESOP shall receive all dividends paid with respect to the Shares and
exercise all voting rights with respect to the Shares, subject to the applicable
provisions of the ESOP.
5.2 Release of Shares from Pledge. As of each date that a
payment of principal is made under the Loan, a number of the Shares shall be
released from pledge hereunder. The number of Shares to be so released shall be
calculated by multiplying the number of Shares held by the Company under the
pledge (immediately before the release) by a fraction. The numerator of the
fraction shall be the amount of the principal payment being made on that date.
The denominator of the fraction shall be the sum of the numerator plus the
remaining outstanding principal balance
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under the Loan. If at any time the ESOP fails to meet the requirements of
Treasury Regulation Section 54.4975-7(b)(8)(ii), thereafter, the number of
Shares released from pledge hereunder and delivered by the Company to the ESOP
shall be calculated in accordance with the Principal/Interest Method set forth
in Section 6(c)(1) of the ESOP.
5.3 Default. In the event of a failure of the ESOP to make any
payment of principal or interest due under the Loan after receipt by the ESOP
from the Company of cash contributions and cash dividends sufficient to make
such payment, the Company may notify the ESOP that an Event of Default has
occurred. If such an Event of Default shall occur and be continuing for a period
of thirty days following receipt of such notice, the Company shall then have the
right to transfer ownership of the Shares that remain subject to the pledge
under Section 5.1 out of the name of the ESOP and may apply the value thereof
toward the payment of the ESOP's obligations hereunder; provided, however, that
(a) the fair market value of the Shares to be so applied in satisfaction of the
Loan shall not exceed the amount (of principal and interest) then in default
(without acceleration), and (b) such Shares shall be so transferred only upon
and to the extent of the failure of the ESOP to make timely payments as required
under Article 2.
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ARTICLE 6
Special Put Option Price
6.1 Duration. If an ESOP participant or beneficiary is
entitled to receive a distribution from the ESOP prior to the date the Shares
convert into Series A Common Stock under the terms of the Amended and Restated
Articles of Incorporation of the Company (as in effect on the date of this
Agreement), such distribution must be made in the form of Shares (and not in
cash) if the then Fair Market Value (as defined in the ESOP) of the Shares is
less than the Liquidation Preference, as defined in Section 3.1(b) of the
Amended and Restated Articles of Incorporation of the Company (as in effect on
the date of this Agreement).
6.2 Put Option Under The ESOP. If an ESOP participant or
beneficiary exercises the put option granted to him under Section 14(b) of the
ESOP with respect to Shares distributed under the circumstances described in
Section 6.1, the Company will purchase such Shares at a per share price equal to
the Liquidation Preference.
ARTICLE 7
Miscellaneous
7.1 Amendments, Waivers and Modifications. No amendment,
waiver, or modification of any provision of this Agreement
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shall be effective unless set forth in an instrument in writing signed by both
parties to this Agreement.
7.2 No Waiver. No delay or failure of the Company or the ESOP
in exercising any right, power or privilege hereunder shall affect such right,
power or privilege; nor shall any single or partial exercise thereof nor any
abandonment or discontinuance of steps to enforce such a right, power or
privilege preclude any further exercise thereof or any other right, power or
privilege of the Company or the ESOP. The rights and remedies of the Company and
the ESOP hereunder are cumulative and not exclusive. Any waiver, permit, consent
or approval of any kind by the Company or the ESOP of any breach or default
hereunder, or any such waiver of any provisions or conditions hereof, must be in
writing and shall be effective only to the extent set forth in such writing.
7.3 Survival of Covenants, Etc.; Successors and Assigns. So
long as any amount shall be outstanding under the Loan, all covenants,
agreements, representations and warranties made by the Company and the ESOP in
this Agreement and in any certificate or other document delivered pursuant
hereto shall inure to the benefit of the Company or the ESOP, as the case may
be, and shall be binding upon any successors and assigns of the Company or the
ESOP, as the case may be.
7.4 Communications. All notices and other communications
which are required or may be given hereunder shall be in writing, shall be
effective upon receipt and shall be deemed to have been duly given if delivered
personally or sent by cable,
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telegram, telex or facsimile or by registered or certified mail, postage
prepaid, sent to the following addresses:
If to the Company: Xxxxx Instruments Corp.
00000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxx 00000
Attn: Chief Financial Officer
If to the ESOP: Xxxxx Fargo Bank, N.A.,
As Trustee of the
Xxxxx Instruments Corp. Employee
Stock Ownership Plan and Trust
000 Xxxxxxxx Xxxxxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xx. Xxxxx Xxxxx
Vice President and Manager
with a copy to: Administrative Committee of the
Xxxxx Instruments Corp.
Employee Stock Ownership Plan
00000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxx 00000
Attn: Committee Chairman
Such addresses may be changed from time to time by notice to the ESOP, in the
case of the Company, and by notice to the Company, in the case of the ESOP.
7.5 Capacity. The Trustee is executing this Agreement solely
in its capacity as trustee of the ESOP, and not in either its corporate or
individual capacity.
7.6 Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto with respect to the
Loan.
7.7 Governing Law. This Agreement shall be governed by, and
interpreted in accordance with, the substantive laws of the State of California,
except as preempted by ERISA.
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7.8 Compliance with Applicable Law. It is intended that the
loan and the pledge of the Shares contemplated hereunder, including all terms
and provisions of this Agreement and the Secured Promissory Note, shall qualify
for exemption under Section 4975(d)(3) of the Code from being a prohibited
transaction under Section 4975(c) of the Code, and shall qualify for exemption
under Section 408(b)(3) of ERISA from being a prohibited transaction under
Section 406 of ERISA. Notwithstanding anything herein or in any of the
aforementioned documents to the contrary, (i) neither the Company nor the ESOP
shall take any action or fail to take any action the result of which would cause
any portion or all of the transaction contemplated hereby to be a prohibited
transaction under Section 4975(c) of the Code or Section 406 of ERISA, (ii) any
action in contravention of this provision shall be null and void and
unenforceable, and (iii) in the event that any portion of the transaction
contemplated hereby is determined to be or it appears reasonably certain to be
such a prohibited transaction, the parties shall take such action as shall be
reasonably necessary and appropriate to correct any such prohibited transaction.
7.9 Headings. The Table of Contents and headings of the
Articles and Sections of this Agreement are inserted for convenience only and
shall not be deemed to constitute a part hereof.
7.10 Counterparts. This Agreement may be executed in one or
more counterparts each of which shall be deemed to constitute an original and
shall become effective when one or more
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counterparts have been signed by each party hereto and delivered to the other
party.
7.11 Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision hereunder.
IN WITNESS WHEREOF, the Company and the ESOP have executed this ESOP
Loan and Pledge Agreement as of this 23rd day of April, 1996.
XXXXX INSTRUMENTS CORP.
By /s/ XXXXXX XXXXXXX
-------------------------------------
President
XXXXX INSTRUMENTS CORP. EMPLOYEE
STOCK OWNERSHIP PLAN AND TRUST
By: Xxxxx Fargo Bank,
N.A., not in an individual
or corporate capacity, but
solely in its capacity
as Trustee
By /s/ XXXXX XXXXX
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