E-4
Exhibit 10.10
SECURITIES PURCHASE AGREEMENT
THE X.X. XXX COMPANY
Xxx Xxxxxxxxxx Xxxx
Xxxxxxxxxx, Xxxxxxxxxxx 00000
As of December 29, 1997
BankBoston, N.A.
000 Xxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Ladies and Gentlemen:
The undersigned, The X.X. Xxx Company, a Delaware corporation (the
"Company"), hereby agrees with BankBoston as follows:
1. DEFINITIONS.
For all purposes of this Agreement the following terms shall have the
meanings set forth herein or elsewhere in the provisions hereof:
Affiliate. Affiliate shall mean any Person that would be considered to
be an affiliate of the Company or BankBoston under Rule 144(a) of the Rules and
Regulations of the Securities and Exchange Commission, as in effect on the date
hereof, if the Company or BankBoston were issuing securities; provided, however,
that BankBoston shall not be an Affiliate of the Company or any of its
Subsidiaries for the purposes of this Agreement.
Applicable Prepayment Charge. Applicable Prepayment Charge shall mean:
(a) with respect to a prepayment of the Note made concurrently with the
completion of an IPO, an amount equal to the difference obtained by: (x) the
product of (i) the principal amount of the Note so prepaid multiplied by (ii)
the percentage set forth in the table below opposite the period in which such
prepayment is made:
Period Percentage
From the Closing Date through December 28, 2001
6%
From December 29, 2001 through December 28,
2002 4%
From December 29, 2002 through December 28,
2003 2%
From and after December 29, 2003
0%
minus (y) the amount of net proceeds, if any, actually received by
BankBoston in connection with the repurchase or exercise of the Warrants.
(b) with respect to a prepayment of the Note other than concurrently
with the completion of an IPO, an amount equal to the product of (i) the
principal amount of the Note so prepaid multiplied by (ii) the percentage set
forth in the table below opposite the period in which such prepayment is made:
Period Percentage
From the Closing Date through December 28, 2001
3%
From December 29, 2001 through December 28,
2002 2%
From December 29, 2002 through December 28,
2003 1%
From and after December 29, 2003
0%
Balance Sheet Date. August 31, 1997.
Bank Affiliate. See Section 15.1.
BankBoston. BankBoston, N.A., a national banking association, and its
successors and assigns.
BankBoston Appraisal. See Section 11.4(b).
BankBoston Appraiser. See Section 11.4(b).
BankBoston's Special Counsel. Xxxxxxx Xxxx LLP.
Bank Holding Company Act. See Section 15.1.
Broker. A broker who trades for the Company's account in commodities
futures, forwards or other contracts or instruments related to commodities and
who is reasonably acceptable to the Senior Lenders.
Broker Accounts. The accounts maintained by the Company or any of the
Subsidiaries with any Broker for trading in commodities futures, forwards or
other contracts or instruments related to commodities.
Business Day. Any day on which banking institutions in Hartford,
Connecticut are open for the transaction of banking business.
Capital Assets. Fixed assets, both tangible (such as land, buildings,
fixtures, machinery and equipment) and intangible (such as patents, copyrights,
trademarks, franchises and good will).
Capital Expenditures. Amounts paid or indebtedness incurred by the
Company or any of its Subsidiaries in connection with the purchase or lease by
such Person of Capital Assets that would be required to be capitalized and shown
on the balance sheet of such Person in conformity with generally accepted
accounting principles.
Capital Lease. Leases under which the Company or any of its
Subsidiaries is the lessee or obligor, the discounted future rental payment
obligations under which are required to be capitalized on the balance sheet of
the lessee or obligor in conformity with generally accepted accounting
principles.
CERCLA. See definition of "Environmental Laws.".
Charter. Charter shall include the articles or certificate of
incorporation, statute, constitution, joint venture or partnership agreement or
articles or other organizational document of any Person other than an
individual, each as from time to time amended or modified.
Closing. See Section 2.3.
Closing Date. See Section 2.3.
Code. Code shall mean the Internal Revenue Code of 1986, any successor
statute of similar import, and the rules and regulations thereunder,
collectively and as from time to time amended and in effect.
Collateral. See Section 3.7.
Commission. Commission shall mean the Securities and Exchange Commission.
Common Shares. Common Shares shall mean (a) the Common Stock issued or
issuable to BankBoston upon exercise of the Warrant, (b) any capital stock or
other securities into which or for which such Common Stock shall have been
converted or exchanged pursuant to any recapitalization, reorganization or
merger of the Company and (c) any shares of capital stock issued with respect to
the foregoing pursuant to a stock split or stock dividend; provided that no
Common Shares which have been sold pursuant to a Public Sale shall be considered
to be outstanding Common Shares or Securities hereunder.
Common Stock. Common Stock shall mean the voting common stock of the
Company, $.01 par value per share, and in addition, any capital stock or other
securities into which or for which Common Stock shall have been converted or
exchanged pursuant to any recapitalization, reorganization or merger of the
Company.
Company. See preamble.
Company Appraisal. See Section 11.4(b).
Company Appraiser. See Section 11.4(b).
Company Security Agreement. The Security Agreement of even date herewith
between the Company and BankBoston.
Consolidated or consolidated. Consolidated or consolidated shall mean,
with reference to any term defined herein, that term as applied to the accounts
of the Company and all of its Subsidiaries, consolidated in accordance with
generally accepted accounting principles.
Consolidated Financial Obligations. With respect to any period, an
amount equal to the sum of all payments on Indebtedness that become due and
payable or that are to become due and payable during such period pursuant to any
agreement or instrument to which the Company or any of its Subsidiaries is a
party relating to the borrowing of money or the obtaining of credit or in
respect of Capital Leases (including, without limitation, Deferred Payment Sale
Interest, as such term is defined in the Credit Agreement); provided, that for
the purpose of calculating the Company's compliance with the terms of the
financial covenants set forth in ss.7.24 hereof, Consolidated Financial
Obligations shall not include interest accrued on the outstanding principal
amount of subordinated Permitted Indebtedness due and owing to Xxxxxxxx Group,
Inc. Demand obligations shall be deemed to be due and payable during any fiscal
year during which such obligations are outstanding.
Consolidated Net Income (or Net Loss). The consolidated net income (or
net loss) of the Company and its Subsidiaries, after deduction of all expenses,
taxes, and other proper charges, determined in conformity with generally
accepted accounting principles.
Consolidated Total Liabilities. All liabilities of the Company and its
Subsidiaries determined on a consolidated basis in conformity with generally
accepted accounting principles (including, without limitation, Deferred Payment
Sale Interest, as such term is defined in the Credit Agreement) and all
Indebtedness of the Company and its Subsidiaries, to the extent not so
classified.
Credit Agreement. Credit Agreement shall mean the Credit Agreement
dated as of October 8, 1996, among the Company and the Senior Lenders, as such
Credit Agreement may be amended, extended or renewed from time to time in
accordance with the provisions of Sections 6.11 and 7.29.
Default. Default shall mean an event or condition which with the passage of
time or giving of notice, or both, would become an Event of Default.
Disposal (or Disposed). Disposal (or Disposed) shall have the meaning
specified in RCRA and regulations promulgated thereunder; provided, that in the
event RCRA is amended so as to broaden the meaning of such term defined thereby,
such broader meaning shall apply as of the effective date of such amendment and
provided further, to the extent that the laws of a state wherein the Property
lies establishes a meaning for "Disposal" (or "Disposed") which is broader than
specified in RCRA, such broader meaning shall apply.
Distribution. Distribution shall mean (a) the declaration or payment of
any dividend on or in respect of any shares of any class of capital stock of the
Company or other specified Person; (b) the purchase, redemption or other
retirement of any shares of any class of capital stock of the Company or other
specified Person, directly or indirectly or otherwise; or (c) any other
distribution on or in respect of any shares of any class of capital stock of the
Company or other specified Person.
EBIT. The sum of (a) Consolidated Net Income (or Net Loss) for any
period, plus (b) any income taxes (as calculated in accordance with the Tax
Sharing Agreement) or interest expense of the Company and its Subsidiaries for
such period, all as determined in conformity with generally accepted accounting
principles.
EBITDA. The sum of (a) Consolidated Net Income (or Net Loss) for any
period, plus (b) any income taxes (as calculated in accordance with the Tax
Sharing Agreement) or interest expense of the Company and its Subsidiaries for
such period, plus (c) depreciation and amortization of the Company and its
Subsidiaries for such period, plus (d) to the extent deducted in determining
EBITDA, accrued and unpaid subordinated management fees payable for such period
by the Company to Xxxxxxxx Group, Inc. and permitted pursuant to Sections
7.14(l) and 7.27, all as determined in conformity with generally accepted
accounting principles.
Environmental Laws. Any judgment, decree, order, law, license, rule or
regulation pertaining to environmental matters, including without limitation,
those arising under the Resource Conservation and Recovery Act ("RCRA"), the
Comprehensive Environmental Response, Compensation and Liability Act of 1980 as
amended ("CERCLA"), the Superfund Amendments and Reauthorization Act of 1986
("XXXX"), the Federal Clean Water Act, the Federal Clean Air Act, the Toxic
Substances Control Act, or any state or local statute, regulation, ordinance,
order or decree relating to health, safety or the environment.
EPA. The United States Environmental Protection Agency.
Equity Securities. The Warrants and any Common Shares which have been
issued upon the exercise of the Warrants.
ERISA. ERISA shall mean the federal Employee Retirement Income Security
Act of 1974, any successor statute of similar import, and the rules and
regulations thereunder, collectively and as from time to time amended and in
effect.
ERISA Affiliate. Any Person which is treated as a single employer with
the Company under ss.414 of the Code.
ERISA Reportable Event. A reportable event with respect to a Guaranteed
Pension Plan within the meaning of ss.4043 of ERISA and the regulations
promulgated thereunder as to which the requirement of notice has not been
waived.
Events of Default. See Section 10.1.
Fair Market Value. See Section 11.4(b).
Financing Agreements. Financing Agreements shall include this
Agreement, the Securities, the Registration Rights Agreement, the Tax Sharing
Agreement, the Security Documents, the Subordination Agreement and any and every
other present or future instrument or agreement from time to time entered into
between the Company or any of its Subsidiaries and BankBoston or any other
holder of the Securities which relates to this Agreement or is stated to be a
Financing Agreement, as from time to time amended or modified, and all
certificates delivered by or on behalf of the Company to BankBoston or any other
holder of the Securities in connection herewith or therewith.
Fixed Rate. The fixed interest rate per annum equal to ten and twenty-six
-one-hundredths of one percent (10.26%).
Formula Value. See Section 11.4(c).
generally accepted accounting principles. Accounting principles which
are (a) consistent with the principles promulgated or adopted by the Financial
Accounting Standards Board and its predecessors and/or the American Institute of
Certified Public Accountants, as in effect from time to time, (b) applied on a
basis consistent with prior periods, and (c) such that a certified public
accountant would, insofar as the use of accounting principles is pertinent, be
in a position to deliver an unqualified opinion as to financial statements in
which such principles have been properly applied; provided, that for purposes of
compliance with Section 7.24 hereof, generally accepted accounting principles
shall mean such principles as in effect for the fiscal year of the Company ended
February 28, 1997. Notwithstanding anything to the contrary in the foregoing,
the Company shall base its accounting and financial calculations (including
without limitation those pursuant to ss.7.24) on the "first-in, first-out" or
"FIFO" method. Financial statements may be prepared using the "last-in,
first-out" or "LIFO" method, but shall for purposes of BankBoston be adjusted to
the "first-in, first-out" or "FIFO" method.
Guaranteed Pension Plan. Any employee pension benefit plan within the
meaning of ss.3(2) of ERISA maintained or contributed to by the Company or any
ERISA Affiliate the benefits of which are guaranteed on termination in full or
in part by the PBGC pursuant to Title IV of ERISA, other than a Multiemployer
Plan.
Hedging Policy. See Section 7.14.
Indebtedness. Indebtedness shall mean all obligations, contingent and
otherwise, that in conformity with generally accepted accounting principles
should be classified upon the obligor's balance sheet as liabilities, or to
which reference should be made by footnotes thereto, including in any event to
the extent not so classified: (a) all debt and similar monetary obligations,
whether direct or indirect; (b) all liabilities secured by any mortgage, pledge,
security interest, lien, charge or other encumbrance existing on property owned
or acquired subject thereto by the obligor, whether or not the liability secured
thereby shall have been assumed; (c) indebtedness arising under or in connection
with any judgment; and (d) all guarantees, endorsements and other contingent
obligations whether direct or indirect in respect of indebtedness of others,
including any obligation to supply funds to or in any manner to invest in,
directly or indirectly, the debtor, to purchase indebtedness, or to assure the
owner of indebtedness against loss, through an agreement to purchase goods,
supplies, or services for the purpose of enabling the debtor to make payment of
the indebtedness held by such owner or otherwise, and the obligations to
reimburse the issuer in respect of any letters of credit.
Investments. Investments shall mean all expenditures made and all
liabilities incurred (contingently or otherwise) for the acquisition of stock or
Indebtedness of, or for loans, advances, capital contributions or transfers of
property to, or in respect of any guaranties (or other commitments as described
under Indebtedness), or obligations of, any Person. In determining the aggregate
amount of Investments outstanding at any particular time: (a) the amount of any
Investment represented by a guaranty shall be taken at not less than the
principal amount of the obligations guaranteed and still outstanding; (b) there
shall be included as an Investment all interest accrued with respect to
Indebtedness constituting an Investment unless and until such interest is paid;
(c) there shall be deducted in respect of each such Investment any amount
received as a return of capital (but only by repurchase, redemption, retirement,
repayment, liquidating dividend or liquidating distribution); (d) there shall
not be deducted in respect of any Investment any amounts received as earnings on
such Investment, whether as dividends, interest or otherwise, except that
accrued interest included as provided in the foregoing clause (b) may be
deducted when paid; and (e) there shall not be deducted from the aggregate
amount of Investments any decrease in the value thereof.
IPO. IPO shall mean the initial public offering pursuant to an effective
registration statement under the Securities Act of shares of Common Stock.
Lien. Lien shall mean any encumbrance, mortgage, pledge, lien, charge
or other security interest of any kind upon any property or assets of any
character, or upon the income or profits therefrom.
Major Holder. Major Holder shall mean the holder or holders at the
relevant time (excluding the Company) of at least 10% of the total number of
then outstanding Common Shares (with each holder of then issued and outstanding
Warrants being treated for purposes of the determination of Major Holders as if
such holder was the holder of that number of Common Shares into which such
Warrants would be converted at the time of determination pursuant to the
Company's Charter and such Warrants).
Majority Holders. Majority Holders shall mean the holder or holders at
the relevant time (excluding the Company) of at least 51% of the total number of
then outstanding Common Shares (with each holder of then issued and outstanding
Warrants being treated for purposes of the determination of Majority Holders as
if such holder was the holder of that number of Common Shares into which such
Warrants would be converted at the time of determination pursuant to the
Company's Charter and such Warrants).
Management Agreement. That certain Financial, Investment Banking and
Professional Services Agreement dated as of December 1, 1997 between the
Company and Xxxxxxxx Group, Inc.
Maximum Rate. See Section 3.5(c).
Mortgage. The Mortgage Deed, Security Agreement and Fixture Filing of even
date herewith executed and delivered by the Company to BankBoston.
Multiemployer Plan. Any multiemployer plan within the meaning of ss.3(37)
of ERISA maintained or contributed to by the Company or any ERISA Affiliate.
Negotiation Period. See Section 11.4(b).
Note. Note shall mean the $7,500,000 Senior Subordinated Note of the
Company issued pursuant to Section 2.1 hereof and any other Note or Notes
transferred to any other holders pursuant to Section 16 hereof.
Obligations. All indebtedness, obligations and liabilities of every
kind and nature of the Company or any of its Subsidiaries to BankBoston,
existing on the date of this Agreement or arising thereafter, direct or
indirect, joint or several, absolute or contingent, matured or unmatured,
liquidated or unliquidated, secured or unsecured, arising by contract, operation
of law or otherwise, including, without limitation, those obligations arising or
incurred under this Agreement or any of the other Financing Documents and the
Company's obligations to pay the Repurchase Price as provided herein or other
instruments at any time evidencing any thereof, but excluding obligations and
liabilities related exclusively to the Equity Securities (other than obligations
to pay the Repurchase Price).
Patent Assignment. The Patent Collateral Assignment and Security Agreement
of even date herewith between the Company and BankBoston.
PBGC. PBGC shall mean the Pension Benefit Guaranty Corporation created by
ss.4002 of ERISA and any successor entity or entities having similar
responsibilities.
Permitted Indebtedness. Any Indebtedness that is permitted pursuant to
Section 7.14.
Permitted Liens. Any Liens that are permitted pursuant to Section 7.15.
Person. Person shall mean an individual, partnership, corporation,
association, trust, joint venture, unincorporated organization, and any
government, governmental department or agency or political subdivision thereof.
Precious Metals. Gold measured in xxxx ounces having a fineness of not
less than .995; silver measured in xxxx ounces having a fineness of not less
than .999; and platinum and palladium measured in xxxx ounces having a fineness
of not less than .9995, in each case without regard to whether such metal is in
bullion form or is contained in or processed into other materials which contain
elements other than such Precious Metal; provided that, for the purposes hereof,
the term "Precious Metals" refers only to the number of ounces of the applicable
metal, and not to any other contents of such materials.
Property. Property means the properties owned, leased or operated by the
Company and its Subsidiaries.
Public Sale. Public Sale shall mean any sale of Common Stock to the
public pursuant to a public offering registered under the Securities Act or to
the public through a broker pursuant to the provisions of Rule 144 (or any
successor rule) adopted under the Securities Act.
Purchase Price. See Section 2.2.
Purchased Securities. See Section 2.2.
Put Closing Date. See Section 11.2.
Put Date. The earliest to occur of the following events: (i) repayment
in full of the Note, (ii) the maturity of the Note (whether by stated maturity,
acceleration or otherwise), (iii) the fifth anniversary of the Closing Date,
(iv) any issuance by the Company of any capital stock (other than the Warrant
Shares and shares of Common Stock issued pursuant to the options and warrants
listed on Schedule 4.3(b)) for less than fair market value as determined by an
appraiser satisfactory to BankBoston, or (v) the consummation of an IPO by the
Company. For purposes of clause (iv) above, the "fair market value" of the
shares of Common Stock to be issued pursuant to options and warrants shall be
determined as of the date of grant of such option or warrant, and the
consideration paid for such shares shall equal the sum of (x) the cash price (if
any) paid by the grantee for such option or warrant, plus (y) the exercise price
specified in such option or warrant.
Put Notice. See Section 11.1.
RCRA. See definition of "Environmental Laws."
Real Estate. All real property at any time owned or leased (as lessee or
sublessee) by the Company or any of its Subsidiaries.
Registration Rights Agreement. Registration Rights Agreement shall mean
the Registration and Preemptive Rights Agreement, dated as of the date hereof
among the Company, BankBoston and Xxxxxxxx Group, Inc., in the form of Exhibit E
hereto.
Related Agreements. Related Agreements shall mean, collectively, the
Securities, the Registration Rights Agreement, the Charter of the Company, the
Credit Agreement, the Senior Loan Documents, the Security Documents and the
Subordination Agreement.
Release. Release shall have the meaning specified in CERCLA and
regulations promulgated thereunder; provided, that in the event CERCLA is
amended so as to broaden the meaning of such term defined thereby, such broader
meaning shall apply as of the effective date of such amendment and provided
further, to the extent that the laws of a state wherein the Property lies
establishes a meaning for "Release" which is broader than specified in CERCLA,
such broader meaning shall apply.
Repurchase Price. See Section 11.4(a).
Rescission Notice. See Section 11.3.
Securities. Securities shall mean the Note, the Warrants and the Common
Shares.
Securities Act. Securities Act shall mean the Securities Act of 1933,
as amended, or any successor federal statute, and the rules and regulations of
the Commission thereunder, all as the same shall be in effect at the time.
Security Documents. See Section 3.7.
Senior Indebtedness. Senior Indebtedness shall mean the Indebtedness of the
Company to the Senior Lenders arising under the Senior Loan Documents.
Senior Lenders. Senior Lenders shall mean BankBoston, N.A. and Rhode Island
Hospital Trust National Bank, as the lenders party to the Credit Agreement (and
shall not include any of their respective successors or assigns).
Senior Loan Documents. Senior Loan Documents shall mean the "Loan
Documents" as such term is defined in the Credit Agreement, as the same may be
amended, restated, modified or supplemented from time to time in accordance with
the provisions of Sections 6.11 and 7.29 hereof.
Subordinated Payments. See Section 7.27.
Subordination Agreement. See Section 7.27.
Subsidiary. Subsidiary shall mean any corporation, association, trust,
or other business entity of which the designated parent shall at any time own,
directly or indirectly through a Subsidiary or Subsidiaries, at least a majority
(by number of votes) of the outstanding Voting Stock or equity interests.
Tax Sharing Agreement. The Tax Sharing Agreement effective as of March 1,
1996 between Xxxxxxxx Group, Inc. and the Company.
Test Period. See Section 11.4(c).
Third Appraiser. See Section 11.4(b).
Transfer Notice. See Section 16.2.
Unfunded Accrued Benefits. With respect to any "employee pension
benefit plan" (as defined in Section 3(2) of ERISA) at any time, the amount (if
any) by which (a) the present value of all vested liabilities under such
employee pension benefit plan exceeds (b) the fair market value of plan assets,
all determined as of the most recent valuation date for such employee pension
benefit plan.
Unrepurchased Securities. See Section 11.3.
Warrants. Warrants shall mean the Warrants of the Company issued to
BankBoston pursuant to Section 2.1 hereof and any other Warrants transferred to
any other holders pursuant to Section 16 hereof; provided that no Warrants which
have been sold pursuant to a Public Sale shall be considered to be outstanding
Warrants or Securities hereunder.
Warrant Stock. Common Stock issued to BankBoston upon exercise of the
Warrant.
ss.1.1. Rules of Interpretation.
(a) A reference to any document or agreement shall include such document or
agreement as amended, modified or supplemented from time to time in accordance
with its terms and the terms of this Agreement.
(b) The singular includes the plural and the plural includes the singular.
(c) A reference to any law includes any amendment or modification to such
law.
(d) A reference to any Person includes its permitted successors and
permitted assigns.
(e) Accounting terms not otherwise defined herein have the meanings
assigned to them by generally accepted accounting principles applied on a
consistent basis by the accounting entity to which they refer.
(f) The words "include", "includes" and "including" are not limiting.
(g) All terms not specifically defined herein or by generally accepted
accounting principles, which terms are defined in the Uniform Commercial Code as
in effect in the State of Connecticut, have the meanings assigned to them
therein.
(h) Reference to a particular "ss." refers to that section of this
Agreement unless otherwise indicated.
(i) The words "herein", "hereof", "hereunder" and words of like import
shall refer to this Agreement as a whole and not to any particular section or
subdivision of this Agreement.
2. SALE AND PURCHASE OF PURCHASED SECURITIES.
2.1. Sale and Purchase of Purchased Securities. The Company
agrees to issue and sell to BankBoston and, subject to all of the terms and
conditions hereof and in reliance on the representations and warranties set
forth or referred to herein, BankBoston agrees to purchase (i) the Senior
Subordinated Note of the Company, in the principal amount of $7,500,000, in the
form of Exhibit A hereto; and (ii) Warrant Nos. W-1 and W-2 for the purchase of
up to an aggregate of 40,000 shares of Common Stock, each in the form of Exhibit
B hereto.
2.2. Purchase Price. The aggregate purchase price for the
Securities purchased pursuant to Section 2.1 (the "Purchased Securities") is
$7,500,000 (the "Purchase Price"). BankBoston and the Company agree that the
purchase price for the Note is $7,499,999 and the purchase price for the
Warrants is $1, and shall be treated as such for federal, state and local income
tax purposes.
2.3. Closing. The closing of the purchase and sale of the
Purchased Securities (the "Closing") will take place at the offices of Xxxxxxx
Xxxx LLP, 000 Xxxxx Xxxxxx, Xxxxxxxx, Xxxxxxxxxxx 00000, at 10:00 a.m. on
December 29, 1997, or at such other time, date and place as the parties hereto
may agree upon (the "Closing Date"). At the Closing, the Company will deliver to
BankBoston the Purchased Securities against payment by BankBoston of the
Purchase Price in immediately available funds. Each of the Purchased Securities
will be issued to BankBoston or any nominee specified by BankBoston on or before
the Closing Date and registered in BankBoston's name or the name of such
specified nominee in the records of the Company.
2.4. Use of Proceeds. The proceeds from the sale of the
Purchased Securities hereunder will be used solely for working capital and
general corporate purposes. Company further agrees that it will not use any part
of the proceeds from the sale of the Purchased Securities to purchase or carry
any "margin security" or "margin stock", as such terms are defined in any
regulation, rule or interpretation of the Board of Governors of the Federal
Reserve System.
3. PRINCIPAL AND INTEREST PAYMENTS ON NOTE; SUBORDINATION; SECURITY.
3.1. Mandatory Principal Repayments. The Company agrees to
repay the principal amount of the Note in one installment on the earliest to
occur of (i) December 29, 2004, or (ii) the date upon which the Senior
Indebtedness is fully and finally repaid and the commitments to lend under the
Senior Loan Documents are terminated, or (iii) the date upon which the Senior
Indebtedness is refinanced with loans made by any lenders other than the Senior
Lenders.
3.2. Prepayments. The Company, upon not less than 15 nor more
than 30 days' prior written notice to the holder of the Note of the date and
amount of optional prepayment, may prepay from time to time all or any portion
(in integral multiples of $500,000) of the principal amount of the Note;
provided that no prepayment of the Note may be made under this Agreement prior
to the sixth anniversary of the Closing Date except upon payment to the holder
thereof of the Applicable Prepayment Charge (including, without limitation, any
prepayment resulting from the acceleration of the Note under Section 10.2
hereof); and provided further that no optional prepayment of the Note may be
made under this Agreement prior to the third anniversary of the Closing Date
unless such prepayment is made concurrently with the completion of an IPO; and
provided further that any optional prepayments made concurrently with the
completion of an IPO shall be full (and not partial) prepayments of all amounts
due under the Note; and provided further that if (x) the Company prepays the
Note on or after December 29, 2002, (y) such prepayment is made solely as a
result of the unwillingness of the Senior Lenders to extend the maturity date of
the Senior Indebtedness beyond December 29, 2002, and (z) the unwillingness of
the Senior Lenders to extend the maturity of the Senior Indebtedness is not a
direct or indirect result of any defaults or threatened defaults by the Company
or its affiliates hereunder or under the Senior Loan Documents, then in such
case the Company shall not be required to pay the Applicable Prepayment Charge
in connection with such prepayment of the Note. The principal amount of any Note
designated for prepayment in any notice of optional prepayment permitted by this
Section 3.2 shall become due and payable on the date fixed for prepayment in
such notice, together with all accrued and unpaid interest thereon. No
prepayment of the Note will reduce the amount of the Warrants issued to
BankBoston.
3.3. Presentation or Surrender of Note. The Company may, as a
condition to making any prepayment of the Note, require the holder thereof to
present such Note at the place specified in the Note for payment of the
principal thereof, for notation thereon of the amount and date of such
prepayment, or, if the Note is prepaid in full, to surrender the same to the
Company.
3.4. No Reborrowing or Other Prepayments. Except as expressly
permitted by Section 3.2, the principal of the Note may not be prepaid. No
amount repaid or prepaid pursuant to Section 3.1 or 3.2 may be reborrowed under
the Note.
3.5. Interest Payments.
(a) Subject to Section 3.5(b) hereof, the unpaid principal
amount of the Note outstanding from time to time shall bear interest from the
Closing Date until the maturity of the Note at a rate equal to the Fixed Rate.
Interest on the Note shall be calculated on the basis of twelve 30-day months
and a 360 day year, and shall be payable quarterly in arrears on the first day
of each calendar quarter, commencing on the first such date to occur after the
Closing Date, and at the maturity of the Note.
(b) Overdue principal and (to the extent permitted by
applicable law) overdue interest on the Note shall bear interest at a rate equal
to 2% per annum in excess of the Fixed Rate, payable on demand and compounded
monthly, until such amount shall be paid in full.
(c) It is not intended by the holder of the Note, and nothing
contained in this Agreement or the Note shall be deemed, to establish or require
the payment of a rate of interest in excess of the maximum rate permitted by
applicable federal, state or other law (the "Maximum Rate") and, to prevent such
an occurrence, any agreement which may now or hereafter be in effect between the
Company and the holder of the Note regarding the payment of fees or interest to
such holder is hereby limited by the provisions of this Section 3.5(c). If, in
any month, the effective interest rate applicable to the principal outstanding
under the Note, absent the Maximum Rate limitation contained herein, would have
exceeded the Maximum Rate, then the effective interest rate applicable to the
Note for that month shall be the Maximum Rate, and, if in any subsequent month,
the effective interest rate would otherwise be less than the Maximum Rate, then
the effective interest rate applicable to the Note for such month shall be
increased to the Maximum Rate until such time as the amount of interest paid
hereunder equals the amount of interest which would have been paid in respect of
the Note if the same had not been limited by the Maximum Rate. In the event
that, upon payment in full of the principal outstanding under the Note, the
total amount of interest paid or accrued in respect of the Note under the terms
of this Agreement is less than the total amount of interest which would have
been paid or accrued in respect of the Note had the interest not been limited
hereby to the Maximum Rate, then the Company shall, to the extent permitted by
such applicable federal, state or other law, pay to the holder of the Note an
amount equal to the excess, if any, of (i) the lesser of (A) the amount of
interest which would have been charged in respect of the Note if the Maximum
Rate had, at all times, been in effect with respect to the Note and (B) the
amount of interest which would have accrued in respect of the Note had the
effective interest rate applicable with respect to the Note at all times not
been limited hereunder by the Maximum Rate over (ii) the amount of interest
actually paid or accrued in respect of the Note held by such holder under this
Agreement. In the event that the holder of the Note receives, collects or
applies as interest any sum in excess of the Maximum Rate, such excess amount
shall be applied to the reduction of principal outstanding under the Note and if
no such principal is then outstanding, such excess or part thereof remaining,
shall be paid to the Company.
3.6. Subordination. NOTWITHSTANDING ANY OTHER PROVISION OF
THIS AGREEMENT, THE PAYMENT OF PRINCIPAL AND INTEREST ON THE NOTE AND OTHER
INDEBTEDNESS OF THE COMPANY HEREUNDER IS AND SHALL BE JUNIOR AND SUBORDINATED IN
RIGHT OF PAYMENT TO THE PRIOR PAYMENT OF ALL SENIOR INDEBTEDNESS IN ACCORDANCE
WITH THE TERMS HEREOF.
3.7. Security. The payment and performance of the Company's
obligations under this Agreement, the Note and any other Financing Agreements
shall at all times will be secured by the following (collectively, the
"Collateral"): second priority perfected liens on and security interests
(subject only to the first priority Liens in favor if the Senior Lenders
pursuant to the Senior Loan Documents) in (i) all property and assets of the
Company and its Subsidiaries, including, without limitation, all inventory
(including all Precious Metals), accounts, accounts receivable, chattel paper,
instruments, documents of the Company and its Subsidiaries, and all general
intangibles of the Company and books and records relating to the foregoing; (ii)
all other assets in which the Company at any time grants a security interest to
BankBoston for any other indebtedness (subject to any prior lien securing such
other indebtedness); and (iii) all proceeds and products of the foregoing. The
Company shall, and shall cause each of its Subsidiaries to, execute such
security agreements, assignments, and other documents (including, without
limitation, the Mortgage, the Patent Assignment, the Company Security Agreement
and any guaranties and security documents required pursuant to Section 7.28) as
may be requested from time to time by BankBoston in order to further evidence or
perfect the rights of BankBoston and obligations of the Company and its
Subsidiaries with respect to the Collateral (such security agreements,
assignments, and other documents being collectively referred to herein as the
"Security Documents"). Notwithstanding the foregoing, Ney Ultrasonics Inc. shall
be required to enter into Security Documents only as required under Section
7.28.
4. REPRESENTATIONS AND WARRANTIES.
In order to induce BankBoston to enter into this Agreement and to
purchase the Purchased Securities, the Company hereby represents and warrants
that, both immediately before and immediately after giving effect to the
Closing:
4.1. Corporate Authority.
(a) Incorporation; Good Standing. Each of the Company and its Subsidiaries
(i) is a corporation duly organized, validly existing and in good standing under
the laws of its state of incorporation, (ii) has all requisite corporate power
to own its property and conduct its business as now conducted and as presently
contemplated, and (iii) is in good standing as a foreign corporation and is duly
authorized to do business in each jurisdiction where such qualification is
necessary except where a failure to be so qualified would not have a material
adverse effect on the business, assets or financial condition of the Company or
such Subsidiary.
(b) Authorization. The execution, delivery and performance of this
Agreement and the other Financing Agreements to which the Company or any of its
Subsidiaries is or is to become a party and the transactions contemplated hereby
and thereby (i) are within the corporate authority of such Person, (ii) have
been duly authorized by all necessary corporate proceedings, (iii) do not
conflict with or result in any breach or contravention of any provision of law,
statute, rule or regulation to which the Company or any of its Subsidiaries is
subject or any judgment, order, writ, injunction, license or permit applicable
to the Company or any of its Subsidiaries and (iv) do not conflict with or
require approval under any provision of the corporate charter or bylaws of, or
any agreement or other instrument binding upon, the Company or any of its
Subsidiaries (other than those already obtained by the Company on or prior to
the date hereof).
(c) Enforceability. The execution and delivery of this Agreement and the
other Financing Agreements to which the Company or any of its Subsidiaries is or
is to become a party will result in valid and legally binding obligations of
such Person enforceable against it in accordance with the respective terms and
provisions hereof and thereof, except as enforceability is limited by
bankruptcy, insolvency, reorganization, moratorium or other laws relating to or
affecting generally the enforcement of creditors' rights and except to the
extent that availability of the remedy of specific performance or injunctive
relief or any other equitable remedy is subject to the discretion of the court
before which any proceeding therefor may be brought.
4.2. Governmental Approvals. The execution, delivery and
performance by the Company and any of its Subsidiaries of this Agreement and the
other Financing Agreements to which the Company or any of its Subsidiaries is or
is to become a party and the transactions contemplated hereby and thereby do not
require the approval or consent of, or filing with, any governmental agency or
authority other than those already obtained.
4.3. Capitalization.
(a) Capital Stock. At Closing, the authorized capital stock of
the Company consists solely of 1,100,000 shares of Common Stock. On the Closing
Date, after giving effect to the transactions contemplated hereby and by the
Related Agreements, the Company will have no outstanding capital stock other
than 850,000 shares of Common Stock, all of which will be owned as set forth in
Schedule 4.3(a) hereto and will be duly authorized, validly issued, fully paid
and non-assessable.
(b) Options, Etc. Except for the Warrants and other than as
disclosed on Schedule 4.3(b) hereto, the Company does not have any outstanding
rights (either pre-emptive or other) or options to subscribe for or purchase
from the Company and no warrants or other agreements providing for or requiring
the issuance by the Company of, any capital stock or any securities convertible
into or exchangeable for its capital stock.
(c) Reservation, Etc. Sufficient shares of authorized but
unissued shares of Common Stock have been reserved by appropriate corporate
action by the board of directors of the Company in connection with the
prospective exercise of the Warrants. The issuance of the Warrants (i) will not
require any further corporate action by the stockholders or directors of the
Company (other than, in the event the number of shares of Common Stock to be
purchased under the Warrants is adjusted as provided in the Warrants, the
reservation by the Company of additional shares of Common Stock for issuance
upon exercise of the adjusted Warrants), (ii) will not be subject to pre-emptive
rights in any present or future stockholders of the Company and (iii) will not
conflict with any provision of any agreement to which the Company is a party or
by which it is bound. All Common Stock, when issued upon exercise of the
Warrants in accordance with their terms, as provided in the Company's Charter,
will be duly authorized, validly issued, fully paid and non-assessable.
4.4. Subsidiaries. Except as otherwise set forth on Schedule
4.4 hereto, the Company does not have any Subsidiaries and does not own or hold
of record and/or beneficially any shares of any class of the capital stock of
any corporations. The Company does not own any legal and/or beneficial interests
in any partnerships, business trusts or joint ventures or in any other
unincorporated trade or business enterprises. Except as set forth on Schedule
4.4, all outstanding capital stock of each such Subsidiary is owned as set forth
on Schedule 4.4 hereto free and clear of any Lien other than Permitted Liens, is
validly issued and outstanding, fully paid and non-assessable, and there are no
commitments for the purchase or sale of, and no options, warrants or other
rights to subscribe for or purchase, any securities of any such Subsidiary.
4.5. Title to Properties; Leases. Except as indicated on
Schedule 4.5 hereto, the Company and its Subsidiaries own all of the assets
reflected in the consolidated balance sheet of the Company and its Subsidiaries
as at the Balance Sheet Date or acquired since that date (except property and
assets sold or otherwise disposed of in the ordinary course of business since
that date), subject to no rights of others, including any mortgages, leases,
conditional sales agreements, title retention agreements, liens or other
encumbrances except Permitted Liens.
4.6. Financial Statements. There has been furnished to
BankBoston consolidated and consolidating balance sheets and consolidated and
consolidating statements of income of Xxxxxxxx Group, Inc. and its Subsidiaries
(including the Company) for the fiscal year ended February 28, 1997, and as at
the end of each of the first two fiscal quarters of the fiscal year ending
February 28, 1998, and as at the Balance Sheet Date. Such balance sheets and
statements of income have been prepared in conformity with generally accepted
accounting principles and fairly present the financial condition of Xxxxxxxx
Group, Inc. and the Company as at the close of business on the dates thereof and
the results of operations for the periods reported therein. There are no
material contingent liabilities of the Company or any of its Subsidiaries as of
either of such dates which were not disclosed in such balance sheets and the
notes related thereto.
4.7. No Material Changes, Etc. Since the Balance Sheet Date
there has occurred no materially adverse change in the financial condition or
business of the Company and its Subsidiaries as shown on or reflected in the
consolidated balance sheet of the Company and its Subsidiaries as at the Balance
Sheet Date, or the consolidated statement of income for the six (6) fiscal month
period then ended, other than changes in the ordinary course of business that
have not had any materially adverse effect either individually or in the
aggregate on the business or financial condition of the Company or any of its
Subsidiaries.
4.8. Franchises, Patents, Copyrights, Etc. Each of the Company
and its Subsidiaries possesses all franchises, patents, copyrights, trademarks,
trade names, licenses and permits, and rights in respect of the foregoing,
adequate for the conduct of its business substantially as now conducted without
conflict with any rights of others.
4.9. Litigation. Except as set forth in Schedule 4.9 hereto,
there are no actions, suits, proceedings or investigations of any kind pending
or threatened against the Company or any of its Subsidiaries before any court,
tribunal or administrative agency or board that, if adversely determined, might,
either in any case or in the aggregate, materially adversely affect the
properties, assets, financial condition or business of the Company and its
Subsidiaries considered as a whole or materially impair the right of the Company
and its Subsidiaries, considered as a whole, to carry on business substantially
as now conducted by them, or result in any substantial liability not adequately
covered by insurance, or for which adequate reserves are not maintained on the
consolidated balance sheet of the Company and its Subsidiaries, or which
question the validity of this Agreement or any of the other Financing
Agreements, or any action taken or to be taken pursuant hereto or thereto.
4.10. No Materially Adverse Contracts, Etc. Neither the
Company nor any of its Subsidiaries is subject to any charter, corporate or
other legal restriction, or any judgment, decree, order, rule or regulation that
has or is expected in the future to have a materially adverse effect on the
business, assets or financial condition of the Company and its Subsidiaries
considered as a whole. Neither the Company nor any of its Subsidiaries is a
party to any contract or agreement that has or is expected to have any
materially adverse effect on the business of the Company and its Subsidiaries
considered as a whole.
4.11. Compliance with Other Instruments, Laws, Etc. Neither
the Company nor any of its Subsidiaries is in violation of any provision of its
Charter, bylaws, or any agreement or instrument to which it may be subject or by
which it or any of its properties may be bound or any decree, order, judgment,
statute, license, rule, regulation or law (including, without limitation,
Environmental Laws and ERISA), in any of the foregoing cases in a manner that
could result in the imposition of substantial penalties or materially and
adversely affect the financial condition, properties or business of the Company
and its Subsidiaries taken as a whole.
4.12. Tax Status. The Company and its Subsidiaries (a) have
made or filed all federal and state income and all other tax returns, reports
and declarations required by any jurisdiction to which any of them is subject,
(b) have paid all taxes and other governmental assessments and charges shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and by appropriate proceedings and (c) have set
aside on their books provisions reasonably adequate for the payment of all taxes
for periods subsequent to the periods to which such returns, reports or
declarations apply. There are no unpaid taxes in any material amount claimed to
be due by the taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim.
4.13. No Event of Default. No Default or Event of Default has
occurred and is continuing.
4.14. Holding Company and Investment Company Acts. Neither the
Company nor any of its Subsidiaries is (a) a "holding company", or a "subsidiary
company" of a "holding company", or an affiliate" of a "holding company", as
such terms are defined in the Public Utility Holding Company Act of 1935; (b) an
"investment company", or an "affiliated company" or a "principal underwriter" of
an "investment company", as such terms are defined in the Investment Company Act
of 1940; (c) a "commodity trading adviser," a "commodity pool operator" or a
"futures commission merchant" within the meaning of the Commodity Futures
Trading Commission Act of 1974, as amended.
4.15. Regulations U and X. The proceeds of the sale of the
Purchased Securities hereunder shall be used for working capital and general
corporate purposes of the Company. No portion of any such proceeds is to be used
for the purpose of purchasing or carrying any "margin security" or "margin
stock" as such terms are used in Regulations U and X of the Board of Governors
of the Federal Reserve System, 12 C.F.R. Parts 221 and 224.
4.16. Insurance. The Company and each of its Subsidiaries
maintain with financially sound and reputable insurers insurance with respect to
their properties and business against such casualties and contingencies as are
in accordance with the general practices of businesses engaged in similar
activities in similar geographic areas and in amounts, containing such terms, in
such forms and for such periods as are reasonable and prudent.
4.17. Broker Accounts. Attached hereto as Schedule 4.17 is a
true, correct and complete listing of all of the Broker Accounts of the Company.
4.18. Disclosure. The representations and warranties herein do
not contain any untrue statement of a material fact and do not omit any facts
necessary to make the statements contained in such representations and
warranties not misleading.
ss.4.19. Obligations as Senior Subordinated Debt. All
Indebtedness of the Company to BankBoston in respect of this Agreement
(including the principal of and interest due under the Note and all payments due
in connection with the Warrants) will constitute "Senior Subordinated Debt"
under the terms of the Subordination Agreement.
5. INVESTMENT REPRESENTATION.
BankBoston represents and warrants to the Company that BankBoston is
(i) an "accredited investor" as defined in Rule 501 promulgated under the
Securities Act, and (ii) acquiring the Purchased Securities for investment and
not with a view to selling or otherwise distributing the Purchased Securities;
provided, however, that the disposition of BankBoston's property shall at all
times be and remain in BankBoston's control, subject to the provisions of
Section 16 hereof.
6. CONDITIONS TO PURCHASE.
BankBoston's obligation to purchase the Purchased Securities pursuant
to this Agreement is subject to compliance by the Company with its agreements
herein contained, and to the satisfaction, on or prior to the Closing Date, of
the following conditions:
6.1. Financing Agreements. Each of the Financing Agreements
shall have been duly executed and delivered by the respective parties thereto,
shall be in full force and effect and shall be in form and substance
satisfactory to BankBoston. BankBoston shall have received a fully executed copy
of each such document.
6.2. Certified Copies of Charter Documents. BankBoston shall
have received from the Company a copy, certified by a duly authorized officer of
the Company to be true and complete on the Closing Date, of each of (a) its
Charter as in effect on such date of certification, and (b) its by-laws as in
effect on such date, and (c) a certificate, dated not more than ten (10) days
prior to the Closing Date, of the Secretary of State of each state in which the
Company is incorporated or qualified to do business as to the Company's
corporate good standing or qualification to do business in such state, as the
case may be.
6.3. Corporate Action. All corporate action necessary for the
valid execution, delivery and performance by the Company of this Agreement and
the other Financing Agreements to which it is or is to become a party shall have
been duly and effectively taken, and evidence thereof satisfactory to BankBoston
shall have been provided to BankBoston.
6.4. Incumbency Certificate. BankBoston shall have received
from the Company an incumbency certificate, dated as of the Closing Date, signed
by a duly authorized officer of the Company, and giving the name and bearing a
specimen signature of each individual who shall be authorized: (a) to sign, in
the name and on behalf of the Company, each of the Financing Agreements to which
the Company is or is to become a party; and (b) to give notices and to take
other action on its behalf under the Financing Agreements.
6.5. Financial Condition. BankBoston shall be satisfied that
the financial information previously delivered to it fairly presents the
business and financial condition of the Company and its Subsidiaries as at the
close of business on the Balance Sheet Date and the results of operations for
the periods covered by such information, and that there has been no material
adverse change in the business, assets, nature of assets, financial condition,
operations or prospects of the Company and/or its Subsidiaries since such date.
6.6. Opinion of Counsel. BankBoston shall have received a
favorable legal opinion addressed to BankBoston, dated as of the Closing Date,
in form and substance satisfactory to BankBoston, including opinions with
respect to the Company, the Financing Agreements, and the transactions
contemplated by this Agreement.
6.7. Security Documents. The Company and its Subsidiaries
shall have (a) executed and delivered to BankBoston the Security Documents and
(b) taken all steps reasonably required to effect and perfect BankBoston's
security interests in the Collateral.
6.8. Representations True; No Event of Default. Each of the
representations and warranties of any of the Company and its Subsidiaries
contained in this Agreement, the other Financing Agreements or in any document
or instrument delivered pursuant to or in connection with this Agreement shall
be true and no Default or Event of Default shall have occurred. BankBoston shall
have received a certificate of the Company signed by an authorized officer of
the Company to such effect.
6.9. Legality; Governmental Authorization. The purchase of the
Purchased Securities shall not be prohibited by any applicable law or
governmental order or regulation. All necessary consents, approvals, licenses,
permits, orders and authorizations of, or registrations, declarations and
filings with, any governmental or administrative agency or of or with any other
Person (including without limitation, any consents required under any material
contracts) required to be provided or obtained prior to the Closing Date and
with respect to any of the transactions contemplated by this Agreement or any of
the Related Agreements shall have been duly obtained or made and shall be in
full force and effect. BankBoston shall have received copies of all necessary
regulatory approvals and evidence of compliance with all state and federal laws,
including but not limited to Regulation U and state and federal securities laws,
applicable to any of the parties to the transactions.
6.10. [Intentionally Omitted]
6.11. Senior Debt Financing. The Senior Loan Documents shall
be in full force and effect, no default shall have occurred thereunder, and the
Credit Agreement shall have been amended pursuant to an amendment in form and
content satisfactory to BankBoston, to permit the transactions contemplated by
this Agreement.
6.12. No Material Change. There shall not have been, or
threatened to be, any material damage to or loss or destruction of any
properties owned or leased by the Company or any of its Subsidiaries (whether or
not covered by insurance) or any material adverse change in the business, assets
or financial condition of the Company and its Subsidiaries, taken as a whole, or
imposition of any applicable and enforceable laws, rules or regulations which
would have a material adverse effect on the business, assets or financial
condition of the Company or any of its Subsidiaries.
6.13. No Litigation. No restraining order or injunction shall
prevent the transactions contemplated by this Agreement and no action, suit or
proceeding shall be pending or threatened before any court or administrative
body in which it will be, or is, sought to restrain or prohibit or to obtain
damages or other relief in connection with this Agreement or the consummation of
the transactions contemplated hereby.
6.14. Proceedings and Documents. All proceedings in connection
with the transactions contemplated by this Agreement, the other Financing
Agreements and all other documents incident thereto shall be satisfactory in
substance and in form to BankBoston and BankBoston's Special Counsel, and
BankBoston and such counsel shall have received all information and such
counterpart originals or certified or other copies of such documents as
BankBoston may reasonably request.
7. COVENANTS APPLICABLE TO THE COMPANY WHILE NOTE IS OUTSTANDING.
The Company covenants that, until all of the Indebtedness of the
Company with respect to the Note has been paid in full, the Company will comply
and will cause each of its Subsidiaries to comply with the following provisions
unless otherwise consented to in writing by the holder of the Note.
7.1. Punctual Payment. The Company will duly and punctually
pay or cause to be paid the principal and interest on the Note and all other
amounts provided for in this Agreement and the other Financing Agreements to
which the Company or any of its Subsidiaries is a party, all in accordance with
the terms of this Agreement and such other Financing Agreements.
7.2. Maintenance of Office. The Company will maintain its
chief executive office in Bloomfield, Connecticut, or at such other place in the
United States of America as the Company shall designate upon written notice to
BankBoston, where notices, presentations and demands to or upon the Company in
respect of the Financing Agreements to which the Company is a party may be given
or made.
7.3. Records and Accounts. The Company will (a) keep, and
cause each of its Subsidiaries to keep, true and accurate records and books of
account in which full, true and correct entries will be made in conformity with
generally accepted accounting principles and (b) maintain adequate accounts and
reserves for all taxes (including income taxes), depreciation, depletion,
obsolescence and amortization of its properties and the properties of its
Subsidiaries, contingencies, and other reserves. The Company shall base its
accounting and financial calculations (including without limitation those
pursuant to ss.7.24) on the "first-in, first-out" or "FIFO" method.
7.4. Financial Statements, Certificates and Information. The Company will
deliver to BankBoston at the Company's expense:
(a) as soon as practicable, but in any event not later than
ninety (90) days after the end of each fiscal year of the Company, the
consolidated and reviewed consolidating balance sheets of Xxxxxxxx Group, Inc.
and its Subsidiaries (including, without limitation, the Company and its
Subsidiaries) as at the end of such year, and the related consolidated and
reviewed consolidating statements of income and consolidated statement of cash
flow for such year, each setting forth in comparative form the figures for the
previous fiscal year and all such consolidated statements to be in reasonable
detail, prepared in conformity with generally accepted accounting principles,
and accompanied by a review thereof (or, if requested at any time by BankBoston,
an unqualified (except for non-material qualifications acceptable to BankBoston)
audit thereof) by independent certified public accountants satisfactory to
BankBoston, which statements shall be accompanied by annual projections
submitted by the management of the Company in form and detail acceptable to
BankBoston;
(b) as soon as practicable, but in any event not later than
forty-five (45) days after the end of each calendar quarter, copies of the
unaudited consolidated and consolidating balance sheets of the Company and its
Subsidiaries as at the end of such quarter, and the related consolidated and
consolidating statements of income and consolidated statements of cash flow for
the portion of the Company's fiscal year then elapsed, and aging reports with
respect to accounts receivable and accounts payable, all in reasonable detail
and prepared in conformity with generally accepted accounting principles,
together with a certification by the principal financial or accounting officer
of the Company that the information contained in such financial statements
fairly presents the financial position of the Company and its Subsidiaries on
the date thereof (subject to customary year-end adjustments);
(c) simultaneously with the delivery of the financial
statements referred to in subsections (a) and (b) above, a statement certified
by the principal financial or accounting officer of the Company in form and
substance reasonably satisfactory to BankBoston and setting forth in reasonable
detail computations evidencing compliance with the covenants contained in
Section 7.24 and (if applicable) reconciliations to reflect changes in generally
accepted accounting principles since the Balance Sheet Date;
(d) prior to the effectiveness of an IPO, promptly upon the
mailing or filing thereof, copies of all financial statements, reports and proxy
statements mailed to the public shareholders of Xxxxxxxx Group, Inc. or any
controlling stockholder of the Company, and copies of all registration
statements and Forms 10-K, 10-Q and 8-K filed with the Securities and Exchange
Commission (or any successor thereto) or any national securities exchange by
Xxxxxxxx Group, Inc. or any controlling stockholder of Xxxxxxxx Group, Inc.;
(e) after the effectiveness of an IPO, promptly upon the
mailing or filing thereof, copies of all financial statements, reports and proxy
statements mailed to the public shareholders of the Company, and copies of all
registration statements and Forms 10-K, 10-Q and 8-K filed with the Securities
and Exchange Commission (or any successor thereto) or any national securities
exchange by the Company or any controlling stockholder of the Company;
(f) contemporaneously with the same being provided to the
Senior Lenders, such other financial data and other information as are provided
to the Senior Lenders; and
(g) from time to time such other financial data and
information (including accountants' management letters) as BankBoston may
reasonably request.
7.5. Notices.
(a)Defaults. The Company will promptly notify BankBoston in writing of the
occurrence of any Default or Event of Default. If any Person shall give any
notice or take any other action in respect of a claimed default (constituting an
Event of Default) under this Agreement or any other note, evidence of
indebtedness, indenture or other obligation to which or with respect to which
the Company or any of its Subsidiaries is a party or obligor (including the
Credit Agreement), whether as principal, guarantor, surety or otherwise, the
Company shall forthwith give written notice thereof to BankBoston, describing
the notice or action and the nature of the claimed default.
(b) Notice of Litigation and Judgments. The Company will, and will cause
each of its Subsidiaries to, give notice to BankBoston in writing within fifteen
(15) days of becoming aware of any litigation or proceedings threatened in
writing or any pending litigation and proceedings affecting the Company or any
of its Subsidiaries or to which the Company or any of its Subsidiaries is or
becomes a party involving an uninsured claim against the Company or any of its
Subsidiaries that could reasonably be expected to have a materially adverse
effect on the Company and its Subsidiaries considered as a whole and stating the
nature and status of such litigation or proceedings. The Company will, and will
cause each of its Subsidiaries to, give notice to BankBoston, in writing, in
form and detail satisfactory to BankBoston, within ten (10) days of any judgment
not fully covered by insurance, final or otherwise, against the Company or any
of its Subsidiaries in an amount in excess of $1,000,000.
7.6. Corporate Existence; Maintenance of Properties. The
Company will do or cause to be done all things necessary to preserve and keep in
full force and effect its corporate existence, rights and franchises and those
of its Subsidiaries. It (a) will cause all of its properties and those of its
Subsidiaries used or useful in the conduct of its business or the business of
its Subsidiaries to be maintained and kept in good condition, repair and working
order and supplied with all necessary equipment, (b) will cause to be made all
necessary repairs, renewals, replacements, betterments and improvements thereof,
all as in the judgment of the Company may be necessary so that the business
carried on in connection therewith may be properly and advantageously conducted
at all times, and (c) will, and will cause each of its Subsidiaries to, continue
to engage primarily in the businesses now conducted by them and in related
businesses; provided that nothing in this Section 7.6 shall prevent the Company
from discontinuing the operation and maintenance of any of its properties or any
of those of its Subsidiaries if such discontinuance is, in the judgment of the
Company, desirable in the conduct of its or their business and that do not in
the aggregate materially adversely affect the business of the Company and its
Subsidiaries on a consolidated basis.
7.7. Insurance. The Company will, and will cause each of its
Subsidiaries to, maintain with financially sound and reputable insurers
insurance with respect to its properties and business against such casualties
and contingencies as shall be in accordance with the general practices of
businesses engaged in similar activities in similar geographic areas and in
amounts, containing such terms, in such forms and for such periods as may be
reasonable and prudent.
7.8. Taxes. The Company will, and will cause each of its
Subsidiaries to, duly pay and discharge, or cause to be paid and discharged,
before the same shall become overdue, all taxes, assessments and other
governmental charges imposed upon it and its real properties, sales and
activities, or any part thereof, or upon the income or profits therefrom, as
well as all claims for labor, materials, or supplies that if unpaid might by law
become a lien or charge upon any of its property; provided that any such tax,
assessment, charge, levy or claim need not be paid if the validity or amount
thereof shall currently be contested in good faith by appropriate proceedings
and if the Company or such Subsidiary shall have set aside on its books adequate
reserves with respect thereto; and provided further that the Company and each
Subsidiary of the Company will pay all such taxes, assessments, charges, levies
or claims forthwith upon the commencement of proceedings to foreclose any lien
that may have attached as security therefor.
7.9. Inspection of Properties and Books, Etc. The Company
shall permit BankBoston and its representatives and consultants to (a) visit and
inspect any of the properties of the Company or any of its Subsidiaries, (b)
examine the books of account of the Company and its Subsidiaries (and to make
copies thereof and extracts therefrom), (c) conduct examinations and
verifications of the assets of the Company and all systems and procedures of the
Company, including those systems and procedures relating to tracking and
valuation of Precious Metals and to cash management, (d) if an Event of Default
shall have occurred and be continuing or if BankBoston shall have notice or
knowledge of any violation of Environmental Laws, to conduct environmental
inspections of the properties and assets of the Company and its Subsidiaries and
(e) discuss the affairs, finances and accounts of the Company and its
Subsidiaries with, and to be advised as to the same by, its and their officers,
all at such reasonable times and intervals as BankBoston may reasonably request.
7.10. Compliance with Laws, Contracts, Licenses, and Permits.
The Company will, and will cause each of its Subsidiaries to, comply in all
material respects with (a) the applicable laws and regulations wherever its
business is conducted, including all Environmental Laws, ERISA, and occupational
and safety laws; (b) the provisions of its Charter and by-laws, (c) all
agreements and instruments by which it or any of its properties may be bound and
(d) all applicable decrees, orders, and judgments. If any authorization,
consent, approval, permit or license from any officer, agency or instrumentality
of any government shall become necessary or required in order that the Company
or any of its Subsidiaries may fulfill any of its obligations hereunder or any
of the other Financing Agreements to which the Company or such Subsidiary is a
party, the Company will, or (as the case may be) will cause such Subsidiary to,
immediately take or cause to be taken all reasonable steps within the power of
the Company or such Subsidiary to obtain such authorization, consent, approval,
permit or license and furnish BankBoston with evidence thereof.
7.11. Use of Proceeds. The Company will use the proceeds from
the sale of the Purchased Securities hereunder solely for working capital and
general corporate purposes.
7.12. Margin Calls in Respect of Futures Contracts. The
Company shall, and shall cause each of the Subsidiaries to, meet all initial and
variation margin calls and make all other payments required in respect of
futures contracts acquired by the Company and the Subsidiaries, respectively, on
any commodities exchange as promptly as may be necessary in order that such
futures contracts shall remain in full force and effect. Furthermore, the
Company shall not, nor shall it permit or suffer any of the Subsidiaries to,
close out any of its futures contracts, except in the normal course of its
business operations.
7.13. Further Assurances. The Company will, and will cause
each of its Subsidiaries to, cooperate with BankBoston and execute such further
instruments and documents as BankBoston shall reasonably request to carry out to
their satisfaction the transactions contemplated by this Agreement and the other
Financing Agreements, including without limitation maintaining the second
priority security interest of BankBoston in the Collateral (subject only to the
first priority security interest in favor of the Senior Lenders pursuant to the
Senior Loan Documents).
7.14. Restrictions on Indebtedness. The Company will not, and
will not permit any of its Subsidiaries to, create, incur, assume, guarantee or
be or remain liable, contingently or otherwise, with respect to any Indebtedness
other than:
(a) Indebtedness to BankBoston and its Affiliates arising under any of the
Financing Agreements;
(b) the Senior Indebtedness;
(c) current liabilities incurred in the ordinary course of business not
incurred through (i) the borrowing of money, or (ii) the obtaining of credit
except for credit on an open account basis customarily extended and in fact
extended in connection with normal purchases of goods and services;
(d) Indebtedness in respect of taxes, assessments, governmental charges or
levies and claims for labor, materials and supplies to the extent that payment
therefor shall not at the time be required to be made in accordance with the
provisions of Section 7.8;
(e) Indebtedness in respect of judgments or awards that have been in force
for less than the applicable period for taking an appeal so long as execution is
not levied thereunder or in respect of which the Company or such Subsidiary
shall at the time in good faith be prosecuting an appeal or proceedings for
review and in respect of which a stay of execution shall have been obtained
pending such appeal or review;
(f) endorsements for collection, deposit or negotiation and warranties of
products or services, in each case incurred in the ordinary course of business;
(g) Indebtedness owed to the Company by a Subsidiary of the Company;
(h) Indebtedness under non-speculative hedge arrangements satisfactory
to BankBoston designed to hedge against fluctuations in the price of Precious
Metals, and interest rates covering the notional amount set forth in the trading
and hedging policies of the Company with respect to Precious Metals, financial
futures, foreign currencies, futures or options (the "Hedging Policy"), all of
which shall be reasonably satisfactory to BankBoston;
(i) Other Indebtedness to BankBoston and its Affiliates;
(j) Indebtedness owed by the Company to a Subsidiary of the Company;
(k) Indebtedness incurred in connection with Capital Leases
with third party financial institutions other than BankBoston; provided, that
the aggregate principal amount of all such Indebtedness shall not exceed the
amount permitted by the Senior Loan Documents;
(l) Subordinate Indebtedness to Xxxxxxxx Group, Inc. that satisfies each of
the following conditions: (a) the obligation to repay such Indebtedness is
evidenced by a written agreement between the Company (or its Subsidiary, as
applicable) and Xxxxxxxx Group, Inc., and (b) the Company (or its Subsidiary, as
applicable) and Xxxxxxxx Group, Inc. shall have entered into a Subordination
Agreement in form and substance satisfactory to BankBoston in respect of such
Indebtedness; and
(m) Any other Indebtedness that is permitted pursuant to Section 8.1 of the
Credit Agreement.
7.15. Restrictions on Liens. The Company will not, and will
not permit any of its Subsidiaries to, (a) create or incur or suffer to be
created or incurred or to exist any lien, encumbrance, mortgage, pledge, charge,
restriction or other security interest of any kind upon any of its property or
assets of any character whether now owned or hereafter acquired; (b) transfer
any of such property or assets or the income or profits therefrom for the
purpose of subjecting the same to the payment of Indebtedness or performance of
any other obligation in priority to payment of its general creditors; (c)
acquire, or agree or have an option to acquire, any property or assets upon
conditional sale or other title retention or purchase money security agreement,
device or arrangement; (d) suffer to exist for a period of more than thirty (30)
days after the same shall have been incurred any Indebtedness or claim or demand
against it that if unpaid might by law or upon bankruptcy or insolvency, or
otherwise, be given any priority whatsoever over its general creditors; (e)
sell, assign, pledge or otherwise transfer any accounts, contract rights,
general intangibles, chattel paper or instruments, with or without recourse; or
(f) enter into or permit to exist any arrangement or agreement which directly or
indirectly prohibits the Company or such Subsidiary from creating or incurring
any lien, encumbrance, mortgage, pledge, charge, restriction or other security
interest of any kind provided that the Company and any Subsidiary of the Company
may create or incur or suffer to be created or incurred or to exist:
(i) liens in favor of the Company on all or part of the assets of
Subsidiaries of the Company securing Indebtedness owing by Subsidiaries of the
Company to the Company;
(ii) liens to secure taxes, assessments and other government charges in
respect of obligations not overdue or liens on properties to secure claims for
labor, material or supplies in respect of obligations not overdue;
(iii) deposits or pledges made in connection with, or to secure payment of,
workmen's compensation, unemployment insurance, old age pensions or other social
security obligations;
(iv) liens on properties in respect of judgments or awards, the
Indebtedness with respect to which is permitted by Section 7.14(e);
(v) liens of carriers, warehousemen, mechanics and materialmen, and other
like liens on properties, in existence less than 60 days from the date of
creation thereof in respect of obligations not overdue;
(vi) encumbrances on Real Estate consisting of easements, rights of way,
zoning restrictions, restrictions on the use of real property and defects and
irregularities in the title thereto, landlord's or lessor's liens under leases
to which the Company or a Subsidiary of the Company is a party, and other minor
liens or encumbrances, none of which encumbrances, restrictions, defects,
irregularities and liens interferes materially with the use of the property
affected in the ordinary conduct of the business of the Company and its
Subsidiaries, and all of which do not individually or in the aggregate
materially affect the value or marketability of any Real Estate or have a
materially adverse effect on the business of the Company individually or of the
Company and its Subsidiaries on a consolidated basis;
(vii) liens in favor of BankBoston and its Affiliates securing the payment
of the Obligations and other Indebtedness due and owing to BankBoston and such
Affiliates;
(viii) liens in favor of the Senior Lenders pursuant to the Senior Loan
Documents;
(ix) security interests in personal property acquired by the Company or its
Subsidiaries after the date hereof to secure Capital Lease Indebtedness of the
type and amount permitted by Section 7.14(k) in connection with the acquisition
of such property, which security interests cover only the personal property so
acquired; and
(x) any other liens and security interests that are permitted pursuant to
Section 8.1 of the Credit Agreement.
7.16. Restrictions on Investments. The Company will not, and
will not permit any of its Subsidiaries to, make or permit to exist or to remain
outstanding any Investment, including without limitation any Investment in a
partnership or joint venture, except Investments in:
(a) marketable direct or guaranteed obligations of the United States of
America and its agencies that mature within five (5) years from the date of
purchase by the Company;
(b) demand deposits, certificates of deposit, bankers acceptances and time
deposits (x) of United States banks having total assets in excess of
$1,000,000,000 or (y) which deposits, certificates and acceptances are fully
insured by the Federal Deposit Insurance Corporation;
(c) securities commonly known as "commercial paper" issued by a corporation
organized and existing under the laws of the United States of America or any
state thereof that at the time of purchase have been rated and the ratings for
which are not less than "P 1" if rated by Xxxxx'x Investors Services, Inc., and
not less than "A 1" if rated by Standard and Poor's;
(d) Investments existing on September 30, 1997 and listed on Schedule 7.16
hereto;
(e) Investments by the Company in Subsidiaries existing on the date hereof;
(f) Investments consisting of loans and advances to employees for moving,
entertainment, travel and other similar expenses in the ordinary course of
business not to exceed $50,000 in the aggregate at any time outstanding;
(g) Investments permitted by Section 7.17; and
(h) Other Investments in an aggregate amount not in excess of $500,000 at
any time consisting of the issued and outstanding capital stock of savings and
loan associations having total assets of not less than $250,000,000.
7.17. Merger, Consolidation and Acquisition and Disposition of Assets.
(a) The Company will not, and will not permit any of its Subsidiaries to,
become a party to any merger or consolidation, or agree to or effect any asset
acquisition or stock acquisition other than (i) the sale of inventory and
leasing of equipment in the ordinary course of business; (ii) the merger or
consolidation of one or more of the Subsidiaries of the Company with and into
the Company, (iii) the merger or consolidation of two or more Subsidiaries of
the Company, provided, that, if a merger or consolidation occurs between a
Subsidiary that is partially owned by the Company and a Subsidiary that is
wholly owned by the Company, the wholly owned Subsidiary shall be the surviving
entity, and (iv) acquisitions permitted pursuant to Section 8.4(a) of the Credit
Agreement.
(b) The Company will not, and will not permit any of its Subsidiaries to,
become a party to or agree to or effect any disposition of assets, other than
the disposition of obsolete or worn-out assets in the ordinary course of
business, consistent with past practices. Notwithstanding the foregoing, and
subject to the following proviso, the Company may dividend and transfer to
Xxxxxxxx Group, Inc. (or, in the case of the assets described in the following
clause (y), transfer to Ney Ultrasonics Inc.) each of the following: (x) the
stock of Ney Ultrasonics Inc. and (y) after delivery to BankBoston of a pro
forma asset statement approved by BankBoston, the personal property used
primarily by Ney Ultrasonics Inc. in its Ultrasonics business with an aggregate
value not to exceed the value shown on such asset statement and approved by
BankBoston; provided, that (i) the aggregate unpaid principal and interest in
respect of all loans made by the Company to Ney Ultrasonics Inc. does not exceed
$750,000 as of the applicable date of such dividend, (ii) after giving effect to
such dividend, the Company shall retain all rights to repayment of such loans
theretofore made by the Company to Ney Ultrasonics Inc., and (iii) Xxxxxxxx
Group, Inc. shall agree in writing that the net proceeds of the sale of Ney
Ultrasonics Inc. shall be applied first to pay off such loans made by the
Company to Ney Ultrasonics Inc. prior to any other application of such net sale
proceeds.
7.18. Sale and Leaseback. The Company will not, and will not
permit any of its Subsidiaries to, enter into any arrangement, directly or
indirectly, whereby the Company or any Subsidiary of the Company shall sell or
transfer any property owned by it in order then or thereafter to lease such
property or lease other property that the Company or any Subsidiary of the
Company intends to use for substantially the same purpose as the property being
sold or transferred.
7.19. No Restrictions on Pledge or Upstreaming. The Company
will not, and will not permit any of its Subsidiaries to, agree with any third
party to limit, prohibit or restrict in any way (a) the ability or right of the
Company or any of its Subsidiaries to grant to BankBoston liens on or security
interests in any of their respective properties and assets, or (b) the ability
or right of any of the Subsidiaries of the Company to transfer money or other
assets to the Company at any time.
7.20. ERISA Compliance. Neither the Company nor any of its
subsidiaries will at any time permit any pension plan or other employee benefit
plan maintained by it that is subject to ERISA to:
(a) engage in any "prohibited transaction" as defined in the Code;
(b) incur any "accumulated funding deficiency" as defined in Section 302 of
ERISA; or
(c) terminate under circumstances which result in the imposition of a lien
on the property of the Company or any of its Subsidiaries.
7.21. Transactions with Affiliates. Neither the Company nor
any of its Subsidiaries will enter into any transaction, including without
limitation the purchase, sale or exchange of property or the rendering of any
service, with any Affiliate except in the ordinary course of business and
pursuant to the reasonable requirements of the Company's or such Subsidiary's
business and upon fair and reasonable terms no less favorable to the Company or
such Subsidiary than the Company or such Subsidiary would obtain in a comparable
arm's length transaction with a person or entity which is not an Affiliate,
provided that in no event shall any such transaction involve loans or extensions
of credit to or other investments in any such Affiliate except such Indebtedness
and other Investments that are expressly permitted by this Agreement.
Notwithstanding anything to the contrary in this Section 7.21, the Company may
(x) make payments to Xxxxxxxx Group, Inc. pursuant to the Tax Sharing Agreement,
as provided in Section 7.22 below, (y) enter into the Management Agreement with
Xxxxxxxx Group, Inc. as provided in Sections 7.14 and 7.27, and (z) issue a note
in an aggregate principal amount of up to $4,000,000 to Xxxxxxxx Group, Inc. as
provided in Sections 7.14 and 7.27, provided that the Company shall in no event
fail to comply with Sections 7.14, 7.22 and 7.27.
7.22. Dividends and Distributions. The Company shall not make
any dividend or distribution to or for the benefit of its shareholders;
provided, that as long as (a) no Default or Event of Default has occurred, and
(b) after giving effect to such dividend or distribution, the Company will be in
compliance with all of its covenants in Section 7.24 herein, the Company may
make payments to Xxxxxxxx Group, Inc., in any fiscal year of the Company ending
on or after February 28, 1997 in an aggregate amount equal to the amount of any
required payments under the Tax Sharing Agreement; and provided further that (i)
the Company may repurchase the Equity Securities in accordance with Sections
10.2 and 11 hereof, (ii) the Company may pay dividends to the holders of Common
Stock pro rata solely in shares of Common Stock, (iii) the Company may dividend
the stock and assets of Ney Ultrasonics Inc. to Xxxxxxxx Group, Inc. in
accordance with ss.7.17, (iv) the Company may, upon the termination of an
employee's employment with the Company, repurchase the Common Stock previously
purchased by such employee pursuant to employee stock option agreements and (v)
the Company may make dividends or distributions if permitted by ss.8.9 of the
Credit Agreement.
7.23. Tax Sharing Agreement. The Company will not amend,
modify or waive in any material respect any term or condition of the Tax Sharing
Agreement effective as of March 1, 1996 between Xxxxxxxx Group, Inc. and the
Company (the "Tax Sharing Agreement") without the prior written consent of
BankBoston.
7.24. Certain Financial Covenants. The Company and its
Subsidiaries will comply with each of the covenants set forth on Schedule 7.24
hereto.
7.25. Charter Amendments. The Charter of the Company and its
Subsidiaries shall not be amended or modified in any manner that might
materially and adversely affect BankBoston's rights in respect of the Equity
Securities. Provided that the parties (other than BankBoston) are in compliance
with the provisions of the Financing Agreements and the Related Agreements, and
that no default under the Financing Agreements or Related Agreements would be
caused thereby, amending the Charter of the Company to increase the authorized
number of shares of Common Stock shall not in and of itself be deemed to
materially and adversely affect BankBoston's rights in respect of the Equity
Securities.
7.26. Subsidiary Stock. The Company shall not (i) directly or
indirectly sell, assign, pledge or otherwise encumber or dispose of any shares
of capital stock or other equity securities of any of its Subsidiaries except to
qualify directors if required by applicable law and except in pledge to the
Senior Lender or BankBoston or (ii) permit any of its Subsidiaries directly or
indirectly to sell, assign, pledge or otherwise encumber or dispose of any
shares of capital stock or other equity securities of any of its Subsidiaries
(including such Subsidiary), except to the Company, another wholly-owned
Subsidiary of the Company or to qualify directors if required by applicable law.
The Company will not permit any of its Subsidiaries to issue any shares of
capital stock to any Person other than the Company or any of its other
wholly-owned Subsidiaries. Nothing in this Section 7.26 shall prohibit the
Company from dividending the stock of Ney Ultrasonics Inc. to Xxxxxxxx Group,
Inc. in accordance with this Agreement.
ss.7.27. Payments to Xxxxxxxx Group. The Company will not (and
will not permit any of its Subsidiaries to) repay any Indebtedness held by, pay
any management fees due to, or make any other payments (other than Distributions
permitted hereunder) (the "Subordinated Payments") to Xxxxxxxx Group, Inc.;
provided, that the Company may (and shall) make Subordinated Payments in respect
of such subordinated management fees and interest accrued on such subordinated
Indebtedness as earned or accrued quarterly in arrears so long as: (a) the
obligation to pay such Subordinated Payments shall be evidenced by a written
agreement between the Company (or such Subsidiary, as applicable) and Xxxxxxxx
Group, Inc., (b) the Company or such Subsidiary and Xxxxxxxx Group, Inc. shall
have entered into a Subordination Agreement in form and substance satisfactory
to BankBoston with respect to the payment of any Subordinated Payments (a
"Subordination Agreement"), (c) both before and after giving effect to such
payment, no Default or Event of Default shall have occurred and be continuing
under the Financing Documents, (d) both before and after giving effect to such
payment, the Company's Consolidated Net Income for the fiscal quarter ending
immediately preceding such date of payment is not less than $1.00 (as evidenced
by a certificate delivered by the Company to BankBoston prior to making such
payment), and (e) both before and after giving effect to such payment, the
difference between (x) the Company's Consolidated Net Income for the fiscal
quarter ending immediately preceding such date of payment minus (y) the amount
of such payment, is not less than $1.00 (as evidenced by a certificate delivered
by the Company to BankBoston prior to making such payment).
7.28. Disposition of Ney Ultrasonics Inc. If the Company shall
not have completed the distribution of the stock of Ney Ultrasonics Inc. to
Xxxxxxxx Group, Inc. in accordance with the last sentence of ss.7.17 on or prior
to April 1, 1998, then on April 1, 1998, the Company shall cause Ney Ultrasonics
Inc. to execute and deliver to BankBoston a guaranty, a security agreement, a
lessor's agreement, UCC financing statements and such other guaranty and
security documents as BankBoston shall reasonably require, each in form and
substance acceptable to BankBoston, and otherwise take all actions and file or
record all documents reasonably required by BankBoston in order to grant
BankBoston a second priority (subject only to the first priority liens pursuant
to the Senior Loan Documents), perfected lien on all of the assets and
properties of Ney Ultrasonics Inc. as security for the Company's obligations
under this Agreement, the Note and any other Financing Agreements.
7.29. Amendment of Senior Debt Documents, Etc. Neither the
Company nor any of its Subsidiaries shall agree to any material amendment or
modification of, or grant any waiver or fail to enforce any of its material
rights pursuant to the Credit Agreement or any of the Senior Loan Documents,
including without limitation, any terms of such documents relating to principal
amount, maturity, amortization, interest or fees, without in each case
BankBoston's prior written consent.
7.30. Intellectual Property Schedules. On or prior to January
22, 1998, the Company shall provide to BankBoston the following updated
schedules to the following Security Documents, each in form and substance
satisfactory to BankBoston: (i) Schedule 3 to that certain Security Agreement
dated as of December 29, 1997 between the Company and BankBoston, (ii) Schedule
A to that certain Trademark Collateral Security and Pledge Agreement dated as of
December 29, 1997 between the Company and BankBoston, and (iii) Schedule A to
that certain Patent Collateral Assignment and Security Agreement dated as of
December 29, 1997 between the Company and BankBoston.
8. COVENANTS APPLICABLE WHILE THE EQUITY SECURITIES ARE OUTSTANDING.
The Company covenants that, as long as at least 25% of the Equity
Securities initially issued or issuable hereunder remain outstanding, the
Company will comply with the following provisions:
8.1. General. The Company will comply with and will cause each
of its Subsidiaries to comply with the provisions of Sections 7.21 and 7.25
hereof.
8.2. Rights to Attend Meetings. The Company will call and hold
a meeting of its board of directors at least once each fiscal quarter. The
Company will give one representative designated by the Majority Holders of the
Equity Securities at least five days' prior written notice (or such shorter
notice as is given to the Company's outside directors) of any proposed meeting
(or action by written consent) of the board of directors of the Company (except
written consents executed solely in connection with the establishment of bank
accounts or other purely administrative matters), such notice in all cases to be
in the form and manner such notice is given to the Company's directors. Such
representative will be entitled to attend as an observer at any such meeting or,
if a meeting is held by telephone conference, to participate therein for the
purpose of listening thereto.
8.3. Other Information. From time to time upon the request of
any representative designated by the Majority Holders of Equity Securities, the
Company will furnish to such representative such information regarding the
business, affairs, prospects and financial condition of the Company and its
Subsidiaries as such representative may reasonably request. Such representative
shall have the right during normal business hours to examine the books and
records of the Company and its Subsidiaries to make copies, notes and abstracts
therefrom, and to make an independent examination of the books and records of
the Company and its Subsidiaries.
8.4. Confidentiality. BankBoston and each Major Holder will
hold in confidence, and will not use (except to evaluate its investment in the
Company), all confidential or proprietary information of the Company and its
Subsidiaries provided or made available to BankBoston and such Major Holder
pursuant to this Section 9 until such time as such information has become
publicly available other than as a consequence of any breach by BankBoston or a
Major Holder of its confidentiality obligations hereunder.
9. [INTENTIONALLY OMITTED]
10. DEFAULTS.
10.1. Events of Default. Holders of the Securities will be
entitled to exercise the remedies provided by Section 10.2 hereof in accordance
with the terms thereof if any one or more of the following events ("Events of
Default") shall occur:
(a) the Company shall fail to make any payment of interest
within five (5) days after the same shall become due, or the Company shall fail
to make any payment of principal on the Note as the same shall become due,
whether at maturity or by acceleration or otherwise; or
(b) The Company shall fail to pay the Repurchase Price for any
Equity Securities as and when required pursuant to Section 11 hereof (after
giving effect to the provisions of Section 11.3); or
(c) The Company or any of its Subsidiaries shall fail to
perform or observe any of the covenants applicable to it set forth in Sections
7.5(a) or (b), 7.14 through 7.29 or 8 hereof; or
(d) The Company or any of its Subsidiaries shall fail to
perform or observe any covenant, agreement or provision set forth in this
Agreement or any covenant, agreement, or provision to be performed or observed
by it under any Financing Agreements, other than those provisions set forth in
Sections 10.1(a), (b) and (c) above, and such failure shall not be rectified or
cured to BankBoston's satisfaction within thirty (30) days after written notice
from BankBoston; or
(e) any representation or warranty made by the Company or any
of its Subsidiaries to BankBoston in connection with this Agreement or any other
Financing Agreement or any amendment to this Agreement or any other Financing
Agreement shall prove to have been false in any material respect on the date as
of which it was made or deemed to have been made or repeated; or
(f) The Company or any of its Subsidiaries shall fail (i) to
pay when due, or within any applicable period of grace, any obligation for
borrowed money or credit received (including without limitation the Senior
Indebtedness) and/or in respect of any Capital Leases in an aggregate amount in
excess of $500,000 or fail to observe or perform any material term, covenant or
agreement contained in any agreement by which it is bound, evidencing or
securing borrowed money or credit received (including without limitation the
Senior Indebtedness) and/or in respect of any Capital Leases, in an aggregate
amount in excess of $500,000 for such period of time as would permit (assuming
the giving of appropriate notice if required) the holder or holders thereof or
of any obligations issued thereunder to accelerate the maturity thereof, or (ii)
to perform and observe any of the covenants or provisions required to be
performed or observed by it pursuant to the Credit Agreement or the Senior Loan
Documents, and in either case such failure results in the acceleration of the
maturity of the Company's obligations thereunder in an aggregate amount in
excess of $500,000; or
(g) the Company or any of its Subsidiaries shall make an
assignment for the benefit of creditors, or admit in writing its inability to
pay or generally fail to pay its debts as they mature or become due, or shall
petition or apply for the appointment of a trustee or other custodian,
liquidator or receiver of the Company or any of its Subsidiaries or of any
substantial part of the assets of the Company or any of its Subsidiaries or
shall commence any case or other proceeding relating to the Company or any of
its Subsidiaries under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation or similar law of any
jurisdiction, now or hereafter in effect, or shall take any action to authorize
or in furtherance of any of the foregoing, or if any such petition or
application shall be filed or any such case or other proceeding shall be
commenced against the Company or any of its Subsidiaries and the Company or any
of its Subsidiaries shall indicate its approval thereof, consent thereto or
acquiescence therein or such petition or application shall not be dismissed
within sixty (60) days of the filing thereof;
(h) a decree or order is entered appointing any such trustee,
custodian, liquidator or receiver or adjudicating the Company or any of its
Subsidiaries bankrupt or insolvent, or approving a petition in any such case or
other proceeding, or a decree or order for relief is entered in respect of the
Company or any Subsidiary of the Company in an involuntary case under federal
bankruptcy laws as now or hereafter constituted;
(i) there shall remain in force, undischarged, unsatisfied,
unstayed and unbonded (to the reasonable satisfaction of BankBoston), for more
than sixty (60) days, whether or not consecutive, any final judgment against the
Company and/or any of its Subsidiaries that, with other outstanding final
judgments, undischarged and unbonded (to the reasonable satisfaction of
BankBoston), against the Company or any of its Subsidiaries exceeds in the
aggregate $1,000,000;
(j) with respect to any pension plan, an ERISA Reportable
Event shall have occurred and BankBoston shall have determined in its reasonable
discretion that such event reasonably could be expected to result in liability
of the Company and/or any of its Subsidiaries to the PBGC or such pension plan
in an aggregate amount exceeding $1,000,000 and such event in the circumstances
occurring reasonably could constitute grounds for the termination of such
pension plan by the PBGC or for the appointment by the appropriate United States
District Court of a trustee to administer such pension plan; or a trustee shall
have been appointed by the United States District Court to administer such
pension plan; or the PBGC shall have instituted proceedings to terminate such
pension plan;
(k) if any of the Financing Agreements shall be canceled,
terminated, revoked or rescinded otherwise than in accordance with the terms
thereof or with the express prior written agreement, consent or approval of
BankBoston, or any action at law, suit in equity or other legal proceeding to
cancel, revoke or rescind any of the Financing Agreements shall be commenced by
or on behalf of the Company or any of its Subsidiaries party thereto or any of
their respective stockholders, or any court or any other governmental or
regulatory authority or agency of competent jurisdiction shall make a
determination that, or issue a judgment, order, decree or ruling to the effect
that, any one or more of the Financing Agreements is illegal, invalid or
unenforceable in accordance with the terms thereof;
(l) the Company or any of its Subsidiaries shall be enjoined,
restrained or in any way prevented by the order of any court or any
administrative or regulatory agency from conducting any material part of its
business and such order shall continue in effect for more than thirty (30) days;
(m) there shall occur for more than thirty (30) days the loss,
suspension or revocation of, or failure to renew, any license or permit now held
or hereafter acquired by the Company or any of its Subsidiaries if such loss,
suspension, revocation or failure to renew would have a material adverse effect
on the business or financial condition of the Company or such Subsidiary; or
(n) Xxxxxxxx Group, Inc., shall, at any time prior to the
effectiveness of an IPO of the Company, legally or beneficially own less than a
majority of the issued and outstanding voting stock of the Company (other than
pursuant to BankBoston's exercise of the Warrant).
10.2. Remedies.
(a) Subject to Section 3.6, upon the occurrence and
continuance of any of the Events of Default under Section 10.1 hereof, in each
and every such case, the holder of the Note may proceed to protect and enforce
its rights by suit in equity, action at law and/or other appropriate proceedings
either for specific performance of any covenant, provision or condition
contained or incorporated by reference in this Agreement or in the Note or any
of the Security Documents, including as permitted by applicable law the
obtaining of the ex parte appointment of a receiver, or in aid of the exercise
of any power granted in this Agreement or in the Note or any of the Security
Documents, and (unless there shall have occurred an Event of Default under
Section 10.1(h) hereof, in which case the unpaid balance of the Note shall
automatically become due and payable) may by notice to the Company, declare all
or any part of the unpaid principal amount of the Note then outstanding to be
forthwith due and payable, and thereupon such unpaid principal amount or part
thereof, together with interest accrued thereon and any Applicable Prepayment
Charge and all other sums, if any, payable under this Agreement or the Note or
the Security Documents shall become so due and payable without presentation,
presentment, protest or further demand or notice of any kind, all of which are
hereby expressly waived, and such holder may proceed to enforce payment of such
amount or part thereof or any other legal or equitable right in such manner as
it may elect. No remedy herein conferred herein is intended to be exclusive of
any other remedy and each and every 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 any other provision of law.
(b) Upon the occurrence and continuance of (A) any of the
Events of Default under Sections 10.1(c) (with respect to a breach of Sections
7.21 and/or 7.25, each as incorporated by reference into Section 8.1) or (B) any
failure of the Company to pay the Repurchase Price as and when required pursuant
to Section 11 (after giving effect to the provisions of Section 11.3) or (C) any
material breach by any party (other than BankBoston) of the Registration Rights
Agreement or the Warrant or any other Financing Agreement then in effect, in
each and every such case, (i) the Majority Holders of the Equity Securities may
proceed to protect and enforce its or their rights by suit in equity, action at
law and/or other appropriate proceeding for specific performance of any
covenant, provision or condition contained or incorporated by reference in this
Agreement or in any Related Agreement or (in the case of a breach under clause
(B) above, and to the extent not prohibited by applicable laws) in any Security
Document, or in aid of the exercise of any power granted in this Agreement or
any Related Agreement or (in the case of a breach under clause (B) above, and to
the extent not prohibited by applicable laws) in any Security Document, and (ii)
the Majority Holders of the Equity Securities may give a Put Notice to the
Company pursuant to Section 11 hereof and at any time after the giving of such
Put Notice, the theretofore unexercised "put" rights set forth in Section 11
hereof shall, to the extent not already exercisable, be deemed to have become
immediately exercisable and the Majority Holders of Equity Securities may in
such Put Notice to the Company declare all or part of such theretofore
unexercised "put" rights to be forthwith exercised and due and payable,
whereupon the Repurchase Price for the Equity Securities subject thereto shall
become so due and payable without presentation, presentment, protest or further
demand or notice of any kind, all of which are expressly waived, and any such
holder or holders may proceed to enforce payment of such amount or part thereof
in such manner as it or they may elect. No remedy herein conferred herein is
intended to be exclusive of any other remedy and each and every 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 any other provision
of law. Notwithstanding the foregoing, after (x) full and final repayment of all
amounts due in connection with the Notes (including all principal, interest, and
prepayment premiums, if any) and (y) (to the extent that BankBoston exercises
its rights to put the Equity Securities under Section 11.1 contemporaneously
with repayment of the Notes) satisfaction of any obligations to repay the
Repurchase Price, BankBoston shall release the Collateral from the lien of the
Security Documents, and thereupon the provisions of this Section 10.2(b) shall
no longer apply to any enforcement by BankBoston of the liens and security
interests created pursuant to the Security Documents.
10.3. Waivers. Each of the Company and its Subsidiaries hereby
waives, to the extent not prohibited by applicable law, (a) all presentments,
demands for performance and notices of nonperformance (except to the extent
specifically required by the provisions hereof), (b) any requirement of
diligence or promptness on the part of any holder of Securities in the
enforcement of its rights under the provisions of this Agreement, the Company's
Charter, or any Financing Agreement, and (c) any and all notices of every kind
and description which may be required to be given by any statute or rule of law.
10.4. Course of Dealing. No course of dealing between the
Company or any of its Subsidiaries on the one hand, and BankBoston or any holder
of Securities, on the other hand, shall operate as a waiver of any of
BankBoston's or its rights under this Agreement, the Company's Charter, or any
Financing Agreement. No delay or omission in exercising any right under this
Agreement, the Company's Charter, or any Financing Agreement shall operate as a
waiver of such right or any other right. A waiver on any one occasion shall not
be construed as a bar to or waiver of any right or remedy on any other occasion.
11. REPURCHASE OF EQUITY SECURITIES.
11.1. Right to Put Equity Securities. At any time, but only on
one occasion, on or after the Put Date, or on such earlier date as may be
determined under Section 10.2(b) hereof, BankBoston may, by notice to the
Company (a "Put Notice"), elect to sell to the Company (and the Company hereby
agrees to repurchase from BankBoston), at the Repurchase Price specified in
Section 11.4 hereof, such Equity Securities as are specified in the Put Notice.
For all purposes of this Section 11, each Warrant shall be treated as the number
of Common Shares for which it is then exercisable.
11.2. Put Closing. The put closing shall, subject to the terms
of ss.10.2(b) take place at the offices of the Company at 10:00 a.m. local time
on a date (a) not more than 120 days after the date a Put Notice is received by
the Company as the Company shall specify by notice to BankBoston, or at such
later time as Fair Market Value shall have been determined under Section 11.4(b)
hereof, or (b) at such other time and place as BankBoston and the Company may
agree upon (a "Put Closing Date"). At the put closing BankBoston will deliver to
the Company a certificate or certificates evidencing all of the Equity
Securities then to be purchased by the Company (properly endorsed or accompanied
by stock powers or, in the case of any Warrant, assignments, with signature(s)
guaranteed or similar appropriate documentation of authority to transfer)
against payment of the Repurchase Price to BankBoston in the manner specified in
Section 11.3 hereof. Except to the extent prohibited by applicable law, prior to
the Put Closing Date, the Company will provide BankBoston with all material
available information regarding the Company reasonably requested by BankBoston.
11.3. Payment. The Company shall pay the Repurchase Price at
any closing under Section 11.2 hereof out of funds legally available therefor in
cash or immediately available funds. If legally available funds are not
sufficient to pay the Repurchase Price in full at any closing, the failure to
pay the portion of the Repurchase Price for which legally available funds are
not available shall not constitute an Event of Default. In the event that any
portion of the Repurchase Price is not paid either in cash or immediately
available funds, BankBoston shall retain all BankBoston's rights hereunder and
with respect to the Equity Securities, as to that number of shares of Warrant
Stock or portion of the Warrants exercisable for that number of shares as such
unpaid portion represents (the "Unrepurchased Securities"), until such time as
the unpaid portion of the Repurchase Price and interest thereon, determined as
set forth below, shall be paid to BankBoston in full. If the Repurchase Price is
not paid on or prior to the Put Closing Date, BankBoston shall be entitled, by
notice to the Company (the "Rescission Notice"), to rescind BankBoston's put of
such Unrepurchased Securities pursuant to Section 11.1. Unless and until the
Company receives a Rescission Notice, the unpaid portion of the Repurchase Price
allocable to the Unrepurchased Securities shall remain an obligation of the
Company and shall become due and payable, in cash or immediately available
funds, as soon as there are funds legally available therefor. Interest shall
accrue from the date 120 days after the date on which the Company receives the
applicable Put Notice on any unpaid portion of the Repurchase Price at the per
annum rate that is 2% in excess of the Fixed Rate, compounded on a monthly basis
to the extent permitted by law and payable on demand.
11.4. Repurchase Price for Equity Securities.
(a) Repurchase Price. The repurchase price (the "Repurchase Price") shall
be an amount equal to:
(i) in the case of each Common Share, the quotient obtained by dividing (A)
the greater of the Formula Value of the Company's common stock equity (as
determined pursuant to Section 11.4(c) hereof) or the Fair Market Value of the
Company's common stock equity (as determined pursuant to Section 11.4(b)
hereof), calculated as of the date of the related Put Notice under Section 11.1
hereof, respectively, plus, the aggregate consideration to be paid to the
Company upon the exercise of all then exercisable outstanding warrants, options
or convertible securities pursuant to which the Company is then obligated to
issue Common Stock by (B) the sum of (1) the number of shares of Common Stock
then outstanding plus (2) the number of shares of Common Stock then issuable
upon exercise of then outstanding warrants, options or convertible securities,
in each case to the extent then exercisable; and
(ii) in the case of each Warrant, (A) the product of the Repurchase Price
per Common Share then purchasable thereunder as determined under this Section
11.4(a) multiplied by the number of such shares then purchasable thereunder,
minus (B) the aggregate exercise price for such shares.
(b) Fair Market Value. For a period of 20 days after the date of any Put
Notice (the "Negotiation Period"), each party hereto agrees to negotiate in good
faith to reach agreement upon the fair market value of the Company's common
stock equity (the "Fair Market Value"). In the event that the parties are unable
to agree upon the Fair Market Value by the end of the Negotiation Period, the
Fair Market Value of the Company's common stock equity shall be determined for
purposes of this Section 11.4(b) initially by an appraiser of nationally
recognized standing selected by the Company (the "Company Appraiser") and whose
appraisal (the "Company Appraisal") shall be furnished to BankBoston within 30
days after the end of the Negotiation Period. If BankBoston does not object to
such determination within 15 days after receipt of such notice, the fair market
value determined by the Company Appraiser shall be the Fair Market Value. If
BankBoston objects to the Fair Market Value determined by the Company Appraiser,
BankBoston may select an Appraiser of nationally recognized standing (the
"BankBoston Appraiser") who shall review the determination of the Company
Appraiser and issue a report thereon (the "BankBoston Appraisal"), within 30
days after delivery to BankBoston of the Company Appraisal. Within 10 days after
delivery to the Company of the BankBoston Appraisal, the Company Appraiser and
the BankBoston Appraiser shall meet in order to resolve any questions or
differences with respect to the Fair Market Value. If such Appraisers agree on a
Fair Market Value of the Company's common stock equity, such Fair Market Value
shall be the Fair Market Value. If no agreement is reached, such Appraisers
shall select an appraiser of nationally recognized standing (the "Third
Appraiser") within five days after such meeting. Fair Market Value shall then be
determined by the Third Appraiser within 30 days after delivery to the Company
of the BankBoston Appraisal, and the determination of the Third Appraiser shall
be conclusive and binding upon the Company and BankBoston. Fair Market Value
shall in all cases be calculated by determining the Fair Market Value of the
entire common stock equity interest of the Company taken as a whole, without
premium for control or discounts for minority interests or restrictions on
transfer. All expenses of the Company Appraiser shall be borne by the Company;
all expenses of the BankBoston Appraiser shall be borne by BankBoston; and all
expenses of the Third Appraiser shall be borne equally by the Company and
BankBoston.
(c) Formula Value. The Formula Value of the Company's common stock equity
at any particular date of determination shall be an amount calculated by adding
(1) the product obtained by (i) multiplying the number five (5) by (ii) the
difference obtained by (x) the Company's EBITDA for the twelve (12) full
calendar months immediately preceding such date (the "Test Period") minus (y)
the lesser of (A) the aggregate amount of non-discretionary, required
maintenance capital expenditures made by the Company during the Test Period and
(B) the aggregate amount of the Company's depreciation expense during the twelve
(12) calendar month period immediately preceding the Test Period, plus (2) the
sum of the Company's and its Subsidiaries' cash balances and cash equivalents on
hand as of such date, and minus (3) the aggregate amount of Indebtedness for
borrowed money outstanding as of such date and not prohibited by this Agreement.
12. SUBSEQUENT HOLDERS OF SECURITIES.
Whether or not any express assignment has been made in this Agreement,
the provisions of this Agreement and the Financing Agreements that are for
BankBoston's benefit as the holder of any Securities are also for the benefit
of, and enforceable by, all subsequent holders of Securities. If BankBoston
transfers any interest in the Common Shares to a transferee such that at any
time more than one Person shall hold the Common Shares, then any action or
decision provided herein to be taken or made by BankBoston during any such time
in respect of the Common Shares shall be taken or made by the holders of at
least 51% of the total number of then outstanding Common Shares. If BankBoston
transfers any interest in the Warrants to a transferee such that at any time
more than one Person shall hold the Warrants, then any action or decision
provided herein to be taken or made by BankBoston during any such time in
respect of the Warrants shall be taken or made by the holders of at least 51% of
the total number of then outstanding Common Shares issuable upon exercise of the
Warrants. If BankBoston transfers any interest in the Note to a transferee such
that at any time more than one Person shall hold the Note, then any action or
decision provided herein to be taken or made by BankBoston during any such time
in respect of the Note shall be taken or made by the holders of at least 51% of
the aggregate principal amount of the Note.
13. REGISTRATION RIGHTS.
BankBoston shall have certain registration rights with respect to the
Equity Securities as set forth in the Registration Rights Agreement.
14. REGISTRATION AND TRANSFER OF SECURITIES.
14.1. Registration, Transfer and Exchange of Note.
(a) The Company shall keep at its principal office a register
in which shall be entered the name and address of the registered holder of the
Note issued by it and particulars of the Note held by it and of all transfers of
such Note. References to the "holder" or "holder of record" of the Note shall
mean the payee thereof unless the payee shall have presented the Note to the
Company for transfer and the transferee shall have been entered in said register
as a subsequent holder, in which case the terms shall mean such subsequent
holder. The ownership of the Note shall be proven by such register and the
Company may conclusively rely upon such register.
(b) The holder of a Note may at any time and from time to time
prior to maturity or redemption thereof surrender the Note held by it for
exchange or (subject to compliance with the applicable provisions of Section 16
hereof) transfer at said office of the Company. Within a reasonable time
thereafter and without expense (other than transfer taxes, if any) to such
holder, the Company shall issue, at its expense, in exchange therefor another
Note or Notes, dated the date to which interest has been paid on the surrendered
Note, for the same aggregate principal amount as the unpaid principal amount of
the Note or Notes so surrendered (subject to the applicable holder's endorsement
or execution of any documents reasonably requested by the Company to evidence
the cancellation of any surrendered Note), having the same maturity and rate of
interest, containing the same provisions and subject to the same terms and
conditions as the Note or Notes so surrendered. Each such new Note shall be in
the denominations and registered in the name of such person or persons as the
holder of such surrendered Note or Notes may designate in writing, and such
exchange shall be made in a manner such that no additional or lesser amount of
principal or interest shall result. The Company will pay shipping and insurance
charges, from and to each holder's principal office, involved in the exchange or
transfer of any Note.
(c) Each Note issued hereunder, whether originally or in
substitution for, or upon transfer or exchange of, any Note shall be registered
on the date of execution thereof by the Company. The registered holder of record
shall be deemed to be the owner of the Note for all purposes of this Agreement.
All notices given hereunder to the holder of record shall be deemed validly
given if given in the manner specified in Section 18 hereof.
14.2. Registration, Transfer and Exchange of Warrants.
(a) The Company shall keep at its principal office a register
in which shall be entered the names and addresses of the holders of Warrants
issued by it and particulars of the respective Warrants held by them and of all
transfers of such Warrants. References to the "holder" or "holder of record" of
any Warrant shall mean the holder thereof unless the holder shall have presented
such Warrant to the Company for transfer and the transferee shall have been
entered in said register as a subsequent holder, in which case the terms shall
mean such subsequent holder. The ownership of any of the Warrants shall be
proven by such register and the Company may conclusively rely upon such
register.
(b) The holder of any of the Warrants may at any time and from
time to time prior to exercise, repurchase or redemption thereof surrender any
Warrant held by it for exchange or (subject to compliance with Section 16
hereof) transfer at said office of the Company. On surrender for exchange of the
Warrants, properly endorsed, to the Company, the Company at its expense will
issue and deliver to or on the order of the holder thereof a new warrant or
warrants of like tenor, in the name of such holder or, upon payment by such
holder of any applicable transfer taxes, as such holder may direct, calling in
the aggregate on the face or faces thereof for the number of Common Shares
called for on the face or faces of the Warrants so surrendered. The Company will
pay shipping and insurance charges, from and to each holder's principal office,
involved in the exchange or transfer of any Warrant.
(c) Each Warrant issued hereunder, whether originally or in
substitution for, or upon transfer or exchange of, any Warrant shall be
registered on the date of execution thereof by the Company. The registered
holder of record shall be deemed to be the owner of the Warrant for all purposes
of this Agreement. All notices given hereunder to the holder of record shall be
deemed validly given if given in the manner specified in Section 18 hereof.
14.3. Replacement of Securities. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of any Security and, in the case of any such loss, theft or
destruction, upon delivery of an indemnity bond in such reasonable amount as the
Company may determine (or, in the case of any Security held by BankBoston or
another institutional holder, an unsecured indemnity agreement from BankBoston
or such other holder reasonably satisfactory to the Company) or, in the case of
any such mutilation, upon the surrender of such Security for cancellation to the
Company at its principal office, the Company, at its own expense, will execute
and deliver, in lieu thereof, a new Security of like tenor, dated in the case of
a Note so that there will be no loss of interest. Any Security in lieu of which
any such new Security has been so executed and delivered by the Company shall
not be deemed to be outstanding for any purpose of this Agreement.
15. REGULATORY RESTRICTIONS.
15.1. Bank Holding Company Act. No Person which is a bank
holding company or a subsidiary of a bank holding company (a "Bank Affiliate")
as defined in the Bank Holding Company Act of 1956, as amended, or other
applicable banking laws of the United States of America and the rules and
regulations promulgated thereunder (the "Bank Holding Company Act") shall
exercise its rights to acquire Common Stock, if, after giving effect to such
acquisition, the Bank Affiliate, together with its Affiliates, would own more
than five percent (5%) of the outstanding voting securities the Company.
Notwithstanding the foregoing, to the extent not inconsistent with the Bank
Holding Company Act, such acquisition rights may be exercised or shares of
Common Stock may otherwise be acquired in the event that:
(a) The Company shall vote to merge or consolidate with or
into any other Person and after giving effect to such merger or consolidation
the Bank Affiliate would not own more than five percent (5%) of the outstanding
voting securities of the surviving corporation;
(b) said holder desires to sell shares of Common Stock to be
obtained by such acquisition in connection with any proposed purchase of Common
Stock by another Person (other than a Bank Affiliate); or
(c) said holder exercises its registration rights pursuant to
the Registration Rights Agreement and the registration statement resulting
therefrom is effective.
15.2. Statement of Compliance. For purposes of this Agreement,
a written statement of BankBoston or any of its Affiliates acquiring Common
Stock, delivered to the Company upon acquisition of any shares of Common Stock,
to the effect that BankBoston or its Affiliate, as the case may be, is legally
entitled to exercise its rights to purchase securities of the Company and that
such exercise will not violate or contravene any law or regulation or any
judgment, decree or order of any governmental authority then applicable to
BankBoston or such Affiliate, as the case may be, shall be conclusive and
binding upon the Company and shall absolutely obligate and bind the Company to
deliver, in accordance with the other terms and provisions hereof, certificates
or other appropriate instruments representing the securities so purchased.
16. RESTRICTIONS ON TRANSFER.
16.1. General Restriction. The Securities shall be
transferable to Permitted Transferees only upon the satisfaction of the
conditions set forth below in this Section 16. For purposes of this Section
16.1, a "Permitted Transferee" shall mean a Person (other than a natural person)
that constitutes an "accredited investor" as defined in Rule 501 promulgated
under the Securities Act.
16.2. Notice of Transfer. Prior to any transfer of any
Securities, the holder thereof shall be required to give written notice to the
Company describing in reasonable detail the manner and terms of the proposed
transfer and the identity of the proposed transferee (the "Transfer Notice"),
accompanied by (a) an opinion of BankBoston's Special Counsel addressed to the
Company or other counsel reasonably acceptable to the Company, that such
transfer may be effected without registration of such Securities under the
Securities Act and applicable state securities laws, and (b) the written
agreement of the proposed transferee to be bound by all of the provisions hereof
and of the Financing Agreements, applicable to holders of such Securities
hereunder or thereunder.
16.3. Restrictive Legends. Except as otherwise permitted by
this Section 16, each Security shall bear the legend specified for such Security
in Schedule 16.3 hereto and any other legend required by law or regulation.
16.4. Termination of Restrictions. The restrictions imposed by
this Section 16 upon the transferability of Securities shall terminate as to any
particular Securities when such Securities shall have been effectively
registered under the Securities Act or sold pursuant to a Public Sale. Whenever
any of such restrictions shall terminate as to any Securities, the holder
thereof shall be entitled to receive from the Company, at such Person's expense,
new Securities without such legends except that any legend required by law or
regulation will be removed only upon delivery to the Company of an opinion of
counsel of the type referred to in clause (a) of Section 16.2 hereof to the
effect that such legend may be removed.
17. EXPENSES; INDEMNITY.
(a) The Company hereby agrees to pay on demand all reasonable
out-of-pocket expenses incurred by BankBoston, in connection with the
transactions contemplated by this Agreement and the Related Agreements and in
connection with any amendments or waivers (whether or not the same become
effective) hereof or thereof and all reasonable out-of-pocket expenses incurred
by BankBoston or any holder of any Security issued hereunder in connection with
the enforcement of any rights hereunder, under any other Related Agreement or
with respect to any Security, including without limitation (i) the cost and
expenses of preparing and duplicating this Agreement, each other Financing
Agreement and Related Agreement and the Securities; (ii) the cost of delivering
to BankBoston's principal offices, insured to BankBoston's satisfaction, the
Securities sold to BankBoston hereunder and any Securities delivered to
BankBoston in exchange therefor or upon any exercise, conversion or substitution
thereof; (iii) the reasonable fees, expenses and disbursements of BankBoston's
Special Counsel in connection with the transactions contemplated by this
Agreement and the Related Agreements and any amendments, modifications,
approvals, consents or waivers hereunder or thereunder; (iv) the reasonable
fees, expenses and disbursements of BankBoston's accountants and other
consultants, in connection with BankBoston's due diligence investigation of the
Company prior to the execution of this Agreement or following the occurrence of
a default hereunder; (v) all documentary stamp and similar taxes at any time
payable in respect of this Agreement, any other Related Agreement or the
issuance of any of the Securities; and (vi) all reasonable out-of-pocket
expenses (including without limitation reasonable attorneys' fees and costs,
travel and lodging expenses related to board attendance, observation or
inspection, and reasonable consulting, accounting, appraisal, investment banking
and similar professional fees and charges) incurred by BankBoston in connection
with (A) the exercise, enforcement or preservation of rights under this
Agreement or any of the Related Agreements against the Company or any of its
Subsidiaries or the administration thereof whether before or after the
occurrence of a Default or Event of Default and (B) any litigation, proceeding
or dispute whether arising hereunder or otherwise, in any way related to
BankBoston's relationship with the Company or its Subsidiaries.
(b) The Company hereby further agrees to indemnify, exonerate
and hold BankBoston and BankBoston's stockholders, officers, directors,
employees and agents free and harmless from and against any and all actions,
causes of action, suits, losses, liabilities, damages and expenses (including,
without limitation, reasonable attorneys' fees and disbursements), incurred in
any capacity by any of the indemnitees as a result of or relating to (A) any
transaction financed or to be financed in whole or in part directly or
indirectly with proceeds from the sale of any of the Securities, or (B) the
execution, delivery, performance or enforcement of this Agreement (including,
without limitation, any failure by the Company to comply with any of its
covenants hereunder), the Related Agreements or any instrument contemplated
hereby or thereby, except, in each such case, for any such liabilities arising
from any indemnitee's breach of this Agreement, gross negligence or willful
misconduct.
(c) The Company hereby indemnifies BankBoston against and
agrees that it will hold BankBoston harmless from any claim, demand or liability
for any broker's, finder's or placement fees or lender's incentive fees alleged
to have been incurred in connection with the transactions contemplated by this
Agreement or the Related Agreements.
(d) The obligations of the Company under this Section 17 shall
survive payment or transfer of the Securities and the termination of this
Agreement.
18. NOTICES.
Any notice or other communication in connection with this Agreement,
any other Financing Agreement or the Securities shall be deemed to be delivered
if in writing (or in the form of a telex or telecopy) addressed as provided
below (a) when actually delivered, telexed or telecopied to said address or (b)
in the case of a letter, three business days shall have elapsed after the same
shall have been deposited in the United States mails, postage prepaid and
registered or certified:
if to the Company, at The X.X. Xxx Company, Ney Industrial Park,
Bloomfield, Connecticut 06002, Attention: Xxxxxx X. X'Xxxx, Chief Financial
Officer, or at such other address for notice as the Company shall last have
furnished in writing to the Person giving the notice;
if to BankBoston, at 000 Xxxxx Xxxxxx, Xxxxxxxx, Xxxxxxxxxxx 00000,
Attention: Xxxxx Xxxxxxxx, Senior Vice President, or such other address for
notice as BankBoston shall last have furnished in writing to the Person giving
the notice; and
If to any other holder of record of any Security, to it at its address set
forth in the applicable register referred to in Section 14 hereof.
19. SURVIVAL OF COVENANTS.
All covenants, agreements, representations and warranties made herein
or in any other document referred to herein or delivered to BankBoston pursuant
hereto shall be deemed to have been relied on by BankBoston, notwithstanding any
investigation made by BankBoston or on BankBoston's behalf, and shall survive
the execution and delivery to BankBoston hereof and of the Securities.
20. AMENDMENTS AND WAIVERS.
Any term of this Agreement may be amended and the observance of any
term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively) only with the written
consent of the Company and each holder of a Note and the Majority Holders of the
Equity Securities, respectively, with respect to any provision of this Agreement
which by its terms operates for the benefit of such respective holders. Any term
of the Note may be amended and the observance of any term of the Notes may be
waived (either generally or in a particular instance and either retroactively or
prospectively) only with the written consent of the Company and the holder of
such Note with respect to whom such amendment or waiver is made. Notwithstanding
the foregoing, (a) without the prior written consent of each holder of Equity
Securities with respect to whom such amendment or waiver is made, no such
amendment or waiver shall extend the scheduled date of any required repurchase
of such respective Securities held by such holder or reduce the repurchase price
payable thereon, (b) without the written consent of the aforesaid percentage of
Securities reduce the aforesaid percentage of Securities the holders of which
are required to consent to any such amendment or waiver, or (c) without the
written consent of the percentage of the holders of each Security required to
exercise the remedies provided in Section 10.2 hereof, increase such required
percentage. Any amendment or waiver effected in accordance with this Section 20
shall be binding upon each holder of any Security sold pursuant to this
Agreement and the Company.
21. CONSENT TO JURISDICTION.
THE COMPANY HEREBY AGREES TO SUBMIT TO THE NON-EXCLUSIVE JURISDICTION
OF THE COURTS IN AND OF THE STATE OF CONNECTICUT, AND CONSENTS THAT SERVICE OF
PROCESS WITH RESPECT TO ALL COURTS IN AND OF THE STATE OF CONNECTICUT MAY BE
MADE BY REGISTERED MAIL TO IT AT ITS ADDRESS SET FORTH ON PAGE 1 HEREOF.
22. RIGHT TO PUBLICIZE.
The Company hereby acknowledges that BankBoston will have the right to
publicize its investment in the Company as contemplated hereby by means of a
tombstone advertisement or other customary advertisement in newspapers and other
periodicals.
23. WAIVER OF JURY TRIAL.
THE COMPANY HEREBY EXPRESSLY WAIVES ANY RIGHT IT MAY HAVE TO A JURY
TRIAL IN ANY SUIT, ACTION OR PROCEEDING EXISTING UNDER OR RELATING TO THIS
AGREEMENT, THE SECURITIES OR ANY OF THE OTHER FINANCING AGREEMENTS.
24. GOVERNING LAW.
THIS AGREEMENT AND EACH OF THE OTHER FINANCING AGREEMENTS ARE CONTRACTS
UNDER THE LAWS OF THE STATE OF CONNECTICUT AND SHALL FOR ALL PURPOSES BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF SAID STATE (EXCLUDING
THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW). THE COMPANY AGREES THAT ANY
SUIT FOR THE ENFORCEMENT OF THIS AGREEMENT OR ANY OF THE OTHER FINANCING
AGREEMENTS MAY BE BROUGHT IN THE COURTS OF THE STATE OF CONNECTICUT OR ANY
FEDERAL COURT SITTING THEREIN AND CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF
SUCH COURT AND SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE UPON THE COMPANY
BY MAIL AT THE ADDRESS SPECIFIED IN ss.18. THE COMPANY HEREBY WAIVES ANY
OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY
SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT COURT.
25. COMMERCIAL TRANSACTION; PREJUDGMENT REMEDY WAIVER.
THE COMPANY REPRESENTS, WARRANTS AND ACKNOWLEDGES THAT THE TRANSACTION
OF WHICH THIS LOAN AGREEMENT AND THE OTHER FINANCING AGREEMENTS ARE A PART IS A
"COMMERCIAL TRANSACTION" WITHIN THE MEANING OF CHAPTER 903A OF CONNECTICUT
GENERAL STATUTES, AS AMENDED. THE COMPANY HEREBY WAIVES ITS RIGHT TO NOTICE AND
PRIOR COURT HEARING OR COURT ORDER UNDER CONNECTICUT GENERAL STATUTES SECTIONS
52-278a ET. SEQ. AS AMENDED OR UNDER ANY OTHER STATE OR FEDERAL LAW WITH RESPECT
TO ANY AND ALL PREJUDGMENT REMEDIES BANKBOSTON MAY EMPLOY TO ENFORCE THEIR
RIGHTS AND REMEDIES HEREUNDER AND UNDER THE OTHER FINANCING AGREEMENTS. MORE
SPECIFICALLY, COMPANY ACKNOWLEDGES THAT BANKBOSTON'S AND/OR ITS ATTORNEY MAY,
PURSUANT TO CONN. GEN. STAT. ss.52-278f, ISSUE A WRIT FOR A PREJUDGMENT REMEDY
WITHOUT SECURING A COURT ORDER. THE COMPANY ACKNOWLEDGES AND RESERVES ITS RIGHT
TO NOTICE AND A HEARING SUBSEQUENT TO THE ISSUANCE OF A WRIT FOR PREJUDGMENT
REMEDY AS AFORESAID AND BANKBOSTON ACKNOWLEDGES COMPANY'S RIGHT TO SAID HEARING
SUBSEQUENT TO THE ISSUANCE OF SAID WRIT.
26. MISCELLANEOUS.
This Agreement and the other Financing Agreements set forth the entire
understanding of the parties hereto with respect to the transactions
contemplated hereby and supersede any prior written or oral understandings with
respect thereto. The invalidity or unenforceability of any term or provision
hereof shall not affect the validity or enforceability of any other term or
provision hereof. The headings in this Agreement are for convenience of
reference only and shall not alter or otherwise affect the meaning hereof. THIS
AGREEMENT MAY BE EXECUTED IN ANY NUMBER OF COUNTERPARTS WHICH TOGETHER SHALL
CONSTITUTE ONE INSTRUMENT, AND SHALL BIND AND INURE TO THE BENEFIT OF THE
PARTIES HERETO AND THEIR RESPECTIVE SUCCESSORS AND ASSIGNS.
If the foregoing corresponds with BankBoston's understanding of our
agreement, kindly sign this letter and the accompanying copies thereof in the
appropriate space below and return one counterpart of the same to the Company,
at the address first listed above.
Very truly yours,
THE X.X. XXX COMPANY
By: /s/ Xxxxxx X. X'Xxxx
--------------------
Title: Chief Financial Officer
Accepted and agreed to:
BANKBOSTON, N.A.
By: /s/ Xxxxx Xxxxxxxx
------------------
Title: Senior Vice President
