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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 19, 1997
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------------
HIGH VOLTAGE ENGINEERING CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
MASSACHUSETTS 3625 04-2035796
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
401 EDGEWATER PLACE, SUITE 680
WAKEFIELD, MA 01880
(617) 224-1001
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
---------------------------
JOSEPH W. MCHUGH, JR.,
VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
HIGH VOLTAGE ENGINEERING CORP.
401 EDGEWATER PLACE
WAKEFIELD, MA 01880
(617) 224-1001
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------------------
WITH A COPY TO:
MICHAEL P. O'BRIEN, ESQ.
BINGHAM, DANA & GOULD LLP
150 FEDERAL STREET
BOSTON, MA 02110
(617) 951-8302
FACSIMILE NO. (617) 951-8736
- --------------------------------------------------------------------------------
Approximate date of commencement of proposed sale to the public: As
soon as practicable after the effective date of this Registration Statement.
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If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
============================ ============ ============== ============ ============
PROPOSED
PROPOSED MAXIMUM
AMOUNT MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER NOTE(1) PRICE(2) FEE
- ---------------------------- ------------ -------------- ------------ ------------
<S> <C> <C> <C> <C>
10-1/2% Senior Notes due 2004 $135,000,000 100% $135,000,000 $40,909.09
============================ ============ ============== ============ ============
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457 of Regulation C under the Securities Act of 1933,
as amended.
(2) Reflects proceeds received upon issuance of 10-1/2% Senior Notes dues 2004,
before deduction of discounts, fees and expenses.
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED AUGUST 19, 1997
PROSPECTUS
OFFER TO EXCHANGE 10-1/2% SENIOR NOTES DUE 2004 WHICH HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
FOR ANY AND ALL OF ITS OUTSTANDING 10-1/2% SENIOR NOTES DUE 2004
[LOGO] HIGH VOLTAGE ENGINEERING CORPORATION
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON _______________, 1997, UNLESS EXTENDED
_______________
High Voltage Engineering Corporation ("HVE" or, together with its subsidiaries,
the "Company") hereby offers, upon the terms and subject to the conditions set
forth in this Prospectus and the accompanying letter of transmittal (the "Letter
of Transmittal," and together with this Prospectus, the "Exchange Offer"), to
exchange up to an aggregate amount of $135,000,000 of its 10-1/2% Senior Notes
Dues 2004 (the "New Notes"), which have been registered under the Securities Act
of 1933, as amended (the "Securities Act"), pursuant to a Registration Statement
of which this Prospectus is a part, for a like principal amount of its
outstanding 10-1/2% Senior Notes due 2004 (the "Existing Notes"), of which
$135,000,000 in aggregate principal amount is outstanding as of the date hereof.
The terms of the New Notes are identical in all material respects to the terms
of the Existing Notes, except for certain transfer restrictions and registration
rights relating to the Existing Notes. The New Notes will be issued pursuant to,
and entitled to the benefits of, the Indenture, dated as of August 8, 1997,
between the Company and State Street Bank and Trust Company, as trustee,
governing the Existing Notes. The New Notes and the Existing Notes are
hereinafter sometimes collectively referred to as the "Notes."
The Company will accept for exchange any and all Existing Notes that
are validly tendered on or prior to 5:00 p.m., New York City time, on the date
the Exchange Offer expires, which will be ___________, 1997, unless the Exchange
Offer is extended (the "Expiration Date"). Tenders of Existing Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the business
day prior to the Expiration Date. The Exchange Offer is not conditioned upon any
minimum principal amount of Existing Notes being tendered for exchange. However,
the Exchange Offer is subject to certain conditions which may be waived by the
Company and to the terms and provisions of the Notes Registration Rights
Agreement (as defined herein). See "Exchange Offer." The Company has agreed to
pay the expenses of the Exchange Offer.
Holders of Existing Notes whose notes are not tendered and accepted in
the Exchange Offer will continue to hold such Existing Notes. Following
consummation of the Exchange Offer, the holders of Existing Notes will continue
to be subject to the existing restrictions upon transfer thereof and, except as
provided herein, the Company will have no further obligation to such holders to
provide for the registration under the Securities Act of the Existing Notes held
by them.
SEE "RISK FACTORS" BEGINNING ON PAGE 17 FOR A DISCUSSION OF CERTAIN RISKS
THAT SHOULD BE CONSIDERED BY HOLDERS OF EXISTING NOTES AND PROSPECTIVE
PURCHASERS OF NEW NOTES.
_______________
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THE COMPANY WILL NOT RECEIVE ANY PROCEEDS FROM THIS EXCHANGE OFFER AND
NO UNDERWRITER IS BEING UTILIZED IN CONNECTION WITH THE EXCHANGE OFFER.
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE
_______________
The date of this Prospectus is _________ ___, 1997.
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<PAGE> 5
$135,000,000 aggregate principal amount of the Existing Notes were
issued and sold on August 8, 1997 in a transaction not registered under the
Securities Act, in reliance upon the exemption provided in Section 4(2) of the
Securities Act. Accordingly, the Existing Notes may not be offered, resold or
otherwise pledged, hypothecated or transferred in the United States unless so
registered or unless an applicable exemption from the registration requirements
of the Securities Act is available. The New Notes are being offered hereby in
order to satisfy the obligations of the Company under the Notes Registration
Rights Agreement. See "Exchange Offer -- Purpose of the Exchange Offer." Based
on no-action letters issued by the staff of the Securities and Exchange
Commission (the "Commission") to third parties, the Company believes New Notes
to be issued pursuant to the Exchange Offer may be offered for sale, resold and
otherwise transferred by holders thereof (other than (i) a broker-dealer who
purchases New Notes directly from the Company to resell pursuant to Rule 144A or
any other available exemption under the Securities Act or (ii) a person that is
an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act), without compliance with the registration and prospectus
delivery provisions of the Securities Act provided that such New Notes are
acquired in the ordinary course of such holders' business and such holders have
no arrangements with any person to participate in the distribution of such New
Notes. Eligible holders wishing to accept the Exchange Offer must represent to
the Company that such conditions have been met. Each broker-dealer that receives
New Notes for its own account pursuant to the Exchange Offer must acknowledge
that it will deliver a prospectus in connection with any resale of such New
Notes. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of shares of New Notes received in
exchange for Existing Notes where such Existing Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities. For a period of 90 days following the consummation of the Exchange
Offer, the Company has agreed to use its best efforts to make this Prospectus
available to broker-dealers who have identified themselves as such for use in
connection with resales by such broker-dealers of New Notes received in exchange
for Existing Notes acquired by such broker-dealers for their own accounts as a
result of market-making or other trading activities. See "Plan of Distribution."
Interest on the Notes will be payable in cash semiannually on each
August 15 and February 15, commencing February 15, 1998. The Notes will be
redeemable at the option of the Company, in whole or in part, at any time on or
after August 15, 2001, at the redemption prices set forth herein, plus accrued
and unpaid interest to the redemption date. In addition, the Company, at its
option, may redeem in the aggregate up to 35% of the original principal amount
of the Notes at any time prior to August 15, 2000, at a redemption price equal
to 110.500% of the aggregate principal amount thereof, plus accrued and unpaid
interest to the redemption date, with the Net Proceeds (as defined herein) of
one or more Qualified Equity Offerings (as defined herein) of HVE, or Letitia
Corporation (HVE's parent) to the extent such proceeds were contributed to HVE
as common equity; provided that at least $87.8 million of the principal amount
of the Notes originally issued remain outstanding after giving effect to any
such redemption and that any such redemption occurs within 60 days following the
closing of any such Qualified Equity Offering. In addition, the Company will
allow each Restricted Subsidiary that is an obligor under an Intercompany Note
to effect a Qualified Subsidiary IPO; provided, among other things, that any
Restricted Subsidiary effecting a Qualified Subsidiary IPO will be obligated to
repay in full its Intercompany Note with the Net Proceeds of such Qualified
Subsidiary IPO; that the Company will be obligated to make an offer to purchase
Notes from the holders thereof equal in aggregate principal amount to the
Intercompany Note being repaid by such Restricted Subsidiary at a purchase price
equal to 101% of the principal amount thereof, plus accrued and unpaid interest
to the purchase date and that any such purchase of Notes occurs within 90 days
following the closing of any such Qualified Subsidiary IPO; that immediately
after giving pro forma effect to such Qualified Subsidiary IPO, the Company
(excluding the EBITDA and the Consolidated Fixed Charges (as defined herein) of
the Restricted Subsidiary effecting the Qualified Subsidiary IPO) could incur
$1.00 of additional Indebtedness (as defined herein) under the covenant set
forth under "Description of the Notes -- Certain Covenants -- Limitation on
Additional Indebtedness," assuming for this purpose only, that the
aforementioned offer to repurchase has been subscribed in full; and that all
remaining Net Proceeds of such Qualified Subsidiary IPO received by HVE will be
deemed an Asset Sale (as defined herein). A Restricted Subsidiary will become an
Unrestricted Subsidiary (as defined herein) upon completion of a Qualified
Subsidiary IPO and the repayment of its Intercompany Note. See "Description of
the Notes -- Offer to Repurchase upon a Qualified Subsidiary IPO."
The Notes will be senior unsecured obligations of the Company ranking
pari passu in right of payment with all existing and future senior indebtedness
of the Company and senior in right of payment to any subordinated indebtedness
of the Company. The Notes will be effectively subordinated to all existing and
future secured indebtedness of the Company,
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<PAGE> 6
including indebtedness under the New Revolving Credit Facility. Despite the
pledge of the Intercompany Notes (as defined herein) to secure the repayment of
the Notes, a bankruptcy court could subordinate such repayments to all existing
and future indebtedness and other liabilities and commitments of any of HVE's
subsidiaries. As of April 26, 1997, pro forma for the Transactions (as defined
herein), HVE would have had $159.9 million of senior indebtedness outstanding
(including the Notes), of which $20.7 million would have been secured
indebtedness, and the subsidiaries of HVE would have had $49.1 million of
indebtedness and other liabilities and commitments outstanding (excluding the
Intercompany Notes).
Upon the occurrence of a Change of Control (as defined herein), each
holder of the Notes will be entitled to require the Company to purchase such
holder's Notes at a purchase price equal to 101% of the principal amount
thereof, plus accrued and unpaid interest to the purchase date. See "Description
of the Notes -- Change of Control Offer." In addition, the Company will be
obligated in certain instances to make an offer to purchase the Notes at a
purchase price in cash equal to 100% of the principal amount thereof, plus
accrued and unpaid interest to the purchase date, with the Available Asset Sale
Proceeds (as defined herein) of certain asset sales. See "Description of the
Notes -- Certain Covenants -- Limitation on Certain Asset Sales."
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF EXISTING NOTES IN ANY JURISDICTION IN
WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE
WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
There can be no assurance that an active public or private market for
the New Notes will develop. Whether or not a market for the New Notes should
develop, the New Notes could trade at a discount from their aggregate
liquidation preference. The Company does not intend to list the New Notes on a
national securities exchange or to apply for quotation of the New Notes through
the National Association of Securities Dealers Automated Quotation System. To
the extent Existing Notes are tendered and accepted in the Exchange Offer, the
trading market for untendered and tendered but unaccepted shares of Existing
Notes could be adversely affected.
The Company has been advised by CIBC Wood Gundy Securities Corp. (the
"Initial Purchaser") that it intends to make a market in the New Notes; however,
it is under no obligation to do so and any market making activities with respect
to the New Notes may be discontinued at any time.
Market data used throughout this Prospectus was obtained through
Company research, surveys or studies conducted by third parties, or industry or
general publications. The Company has not independently verified market data
provided by third parties or industry or general publications. Similarly,
internal Company research, while believed by the Company to be reliable, has not
been verified by any independent sources.
Anderson Power Products(R), AST(TM), Datcon(R), Illuma Deluxe(TM),
IllumaSeal(TM), Intellisensor(TM), Perfect Harmony(TM), PHI(R), Powerpole(R),
Quantum 2000 Scanning ESCA Microprobe(TM), SB(R), Smart Instrument(TM),
SMART-200(TM) and TRIFT II(TM) are trademarks, registered trademarks or brands
that are owned by, or licensed to, the Company. All other trademarks or service
marks referred to in this Prospectus are the property of their respective
owners.
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to, and
should be read in conjunction with, the more detailed information and the
consolidated financial statements and the notes thereto appearing elsewhere in
this Prospectus. As used in this Prospectus, unless the context otherwise
indicates, the term "HVE" refers to High Voltage Engineering Corporation and the
term the "Company" refers to HVE and its wholly-owned subsidiaries, including
PHI. As used in this Prospectus, the terms "Fiscal 1993," "Fiscal 1994," "Fiscal
1995," "Fiscal 1996" and "Fiscal 1997" refer to HVE's fiscal years ended May 1,
1993, April 30, 1994, April 29, 1995, April 27, 1996 and April 26, 1997,
respectively.
THE COMPANY
The Company owns and operates a diversified group of seven middle
market industrial manufacturing businesses. These businesses focus on designing
and manufacturing high quality, applications-engineered products which are
designed to address specific customer needs. The Company's products are sold to
a broad range of domestic and foreign original equipment manufacturers ("OEMs")
and end-users in a variety of industries including process automation,
freshwater and wastewater treatment, petrochemicals, semiconductor fabrication,
chemicals, construction, agriculture, materials handling, computers,
telecommunications, medical equipment and climate control and for scientific and
educational research. The diversified nature of the products sold and
end-markets served by the Company's businesses limits the effect on the Company
of operating performance fluctuations in any single operating unit and cyclical
downturns within individual industries and end-markets, while the Company
believes that its focus on middle market manufacturing enhances its growth
prospects. The Company believes that these factors have contributed to steady
growth in consolidated net sales and EBITDA (as defined herein). Between Fiscal
1993 and Fiscal 1997, the Company's historical net sales increased at a 14.3%
compound annual growth rate ("CAGR"), from $101.3 million to $173.1 million, and
its EBITDA increased at a 15.7% CAGR from $9.1 million to $16.3 million. Pro
forma for the Merger, the Company had net sales and EBITDA of $237.9 million and
$26.4 million, respectively, in Fiscal 1997.
The Company manufactures and markets its products through the following
seven operating units:
ROBICON CORPORATION ("ROBICON"). Robicon is a leading designer and
manufacturer of high power conversion products, which are used to regulate
electric power, reduce energy costs and improve process control in a wide
variety of industrial applications. Products include variable frequency drives
("VFDs") for large electric motors and power control systems for other
applications. These products are used in process automation, freshwater and
wastewater treatment, oil and gas extraction and transmission, petrochemical
processing, silicon processing, glass manufacturing, cement production and other
general industrial applications. For Fiscal 1997, Robicon had net sales of $83.1
million.
PHYSICAL ELECTRONICS, INC. ("PHI"). On August 8, 1997, HVE acquired PHI
for an aggregate consideration of $55.5 million in cash, subject to certain
adjustments. PHI is the world's leading designer and manufacturer of advanced
surface analysis instruments and components used to determine the elemental
and/or chemical composition of materials found on or near the surface of a
sample. Advanced surface analysis instruments are used in commercial
applications in central support laboratories and at or near the production line
in the semiconductor fabrication, computer peripherals, chemicals, aerospace,
metals, polymers, automotive and biomaterials industries, among others, for
product and process development, process control, defect review and failure
analysis. Advanced surface analysis instruments are also used for materials
science research by universities and government institutions. For the latest
twelve month ("LTM") period ended March 28, 1997, PHI had net sales of $64.8
million.
DATCON INSTRUMENT COMPANY ("DATCON"). Datcon together with its
wholly-owned subsidiary, Industrias Jorda, S.L. ("Jorda"), designs and
manufactures customized monitoring instrumentation for heavy duty and
off-highway vehicles. Datcon's products include instrument clusters,
speedometers, tachometers and fuel, temperature and pressure gauges which are
used in construction equipment, agricultural machinery, materials handling
equipment and generator and compressor engines. For Fiscal 1997, Datcon had net
sales of $32.5 million.
ANDERSON POWER PRODUCTS ("ANDERSON"). Anderson is a leading designer
and manufacturer of high efficiency, pluggable power connectors for use in high
current, quick disconnect applications including materials handling equipment
and other
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electric-powered vehicles, uninterruptible power supply products,
telecommunications and networking equipment and office furniture panel
electrification. For Fiscal 1997, Anderson had net sales of $21.6 million.
NATVAR COMPANY ("NATVAR"). Natvar is a manufacturer of disposable
specialty bulk medical grade plastic tubing used primarily in medical devices
and for less-invasive surgical procedures. Natvar also produces electrical
sleeving and tubing used to protect multiple insulated wires. For Fiscal 1997,
Natvar had net sales of $15.2 million.
GENERAL EASTERN INSTRUMENTS ("GENERAL EASTERN"). General Eastern is a
leading designer and manufacturer of relative humidity measurement instruments
and humidity calibration instruments. General Eastern's products are used in a
wide range of applications including energy management and climate control,
calibration and standards laboratories, thermal processing, environmental
monitoring and process control. For Fiscal 1997, General Eastern had net sales
of $12.2 million.
HIGH VOLTAGE ENGINEERING EUROPA B.V. ("HVE EUROPA"). HVE Europa is the
world's leading designer and manufacturer of particle accelerator systems used
in scientific and educational research. HVE Europa's products include ion
particle accelerator systems, research ion implanters, accelerator mass
spectrometer systems and component parts. For Fiscal 1997, HVE Europa had net
sales of $8.5 million.
COMPETITIVE STRENGTHS
Management has focused its efforts on acquiring and developing a group
of middle market manufacturing businesses that generally share the following
competitive strengths:
- Leading Market Positions. Several of the Company's products
hold leading market share positions in their respective niche
markets, including the Company's medium voltage VFDs
(Robicon), advanced surface analysis instruments (PHI), high
current, quick disconnect power connectors (Anderson),
humidity calibration instruments (General Eastern) and
particle accelerator systems (HVE Europa). The Company
believes that applications-engineering expertise, proprietary
technology and customer relationships act as significant
barriers to entry in several of the Company's markets.
- Reputation for Innovative Product Development. The Company
believes that its operating units have reputations for the
development of innovative products designed to address
specific customer needs. For example, in November 1994,
Robicon introduced its Perfect Harmony(TM) series of medium
voltage VFDs which represented a significant technological
breakthrough relative to competitors' product offerings by
increasing power factor and reducing harmonic distortion
typically resulting from the use of VFDs with large electric
motors. In addition, PHI has recently introduced several new
surface analysis instruments, including the SMART-200(TM),
TRIFT II(TM) and 6800 Dynamic SIMS, which each have the
ability to analyze every point on an 8-inch semiconductor
wafer.
- Long-Term Relationships with Market-Leading Customers. The
Company's operating units serve some of the largest companies
in their respective industries, including: Advanced Micro
Devices, Advanced Silicon Materials, American Power
Conversion, Amoco, Caterpillar, Cummins Engine, E-Z-GO
(Textron), Harley-Davidson, Hewlett-Packard, Hitachi, IBM,
Lucent Technologies, Massey Ferguson, 3M Healthcare and
Yaskawa Electric. With the exception of one customer which
accounted for 6.6% of the Company's consolidated net sales for
Fiscal 1997, pro forma for the Merger, no customer of any of
its operating units accounted for more than 2.7% of such
sales. The Company's operating units have long-term
relationships with many of their customers; in many cases
these relationships have existed in excess of 10 years.
- Experienced and Incentivized Senior Management Team. The
Company and each of its operating units are run by senior
managers who have an average of over 20 years of relevant
operating experience. The Company's senior management team has
financial incentives tied to long-term improvements in the
Company's financial performance.
BUSINESS STRATEGY
The Company's business strategy is to increase the sales and
profitability of its existing businesses and to build upon their inherent
competitive strengths. The Company applies a consistent operating strategy to
its individual operating units, key elements of which include:
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- Focus on Applications-Engineered Products. The Company's
products are typically engineered based upon specific customer
applications. The Company seeks to involve its customers at an
early stage of the product development process in order to
jointly design new products and to improve existing ones. In
certain instances, this process has resulted in the Company
becoming a sole source supplier. The Company believes that
this strategy has led to incremental long-term business with
key customers and the addition of new customers.
- Integrated Product Development. The Company seeks to develop
new products and find new applications for existing products
through an integrated product development process that
involves cross-functional teams including engineering,
manufacturing and marketing personnel. As a result, the
Company believes that it is able to design and manufacture
products that address specific customer needs and can be
manufactured efficiently, cost-effectively and on a timely
basis.
- Focus on Core Competencies. The Company believes that its core
competencies are the design, engineering and assembly of
applications-engineered products. As part of its focus on
these core competencies, the Company has eliminated certain
ancillary functions performed by certain of its operating
units over the last several years including printed circuit
board assembly, machining and metal stamping and plating.
- Commitment to Process Re-engineering and Total Quality. The
Company maintains process re-engineering and Total Quality
programs at each of its operating units, which it began
implementing in 1993. These programs have enabled the Company
to improve product quality, increase manufacturing efficiency
and productivity, reduce product lead and cycle times and
reduce the relative amount of working capital invested in its
businesses.
- Decentralized Management of Operating Units. The Company's
operating units are managed on a decentralized basis by senior
managers who apply a consistent operating strategy, while a
small corporate staff provides strategic direction and
support. As a result of the discrete nature of the Company's
operating units, the Company has been able to sell businesses
or product lines on an opportunistic basis. For example, since
1988, the Company has divested 12 businesses that generally
lacked some or all of the competitive strengths common to its
current operating units.
Acquisitions are also an important part of the Company's growth
strategy. The Company seeks to supplement its internal growth with selected
add-on acquisitions of businesses that are complementary to its existing
operating units. In recent years, both Robicon and Datcon have successfully
completed and integrated such add-on acquisitions. In addition, the Company
seeks to acquire middle market manufacturing businesses to operate on a
stand-alone basis, such as PHI, that possess competitive strengths similar to
those of its existing businesses.
THE TRANSACTIONS
On May 7, 1997, HVE entered into an Agreement and Plan of Merger (the
"Merger Agreement") with PHI Acquisition Holdings, Inc. ("PHI Holdings") and
Chase Venture Capital Associates, L.P. ("CVCA"), the principal stockholder of
PHI Holdings, to acquire PHI for an aggregate consideration of $55.5 million in
cash, subject to certain adjustments (the "Merger Consideration"). This
acquisition was effected on August 8, 1997 through the merger (the "Merger") of
Lauren Corporation, a wholly-owned subsidiary of HVE, with and into PHI
Holdings. Immediately thereafter, PHI Holdings was merged with and into Physical
Electronics, Inc., its wholly-owned subsidiary, and Physical Electronics, Inc.
became a direct, wholly-owned subsidiary of HVE. After the repayment of certain
obligations of PHI, including all of PHI's outstanding indebtedness, the
remainder of the Merger Consideration was distributed to the holders of the
capital stock of PHI Holdings (including holders of options to purchase capital
stock).
In addition to the Merger, on August 8, 1997, the Company completed the
following transactions (collectively with the Merger, the "Transactions"): (i)
the issuance of $135,000,000 in aggregate principal amount of Existing Notes,
and $35,200,000 representing units (the "Units") consisting of an aggregate of
33,000 shares of 12-1/2% Series A Preferred Stock (together with 12-1/2% Series
A Exchange Preferred Stock, the "Preferred Stock", 82.7429 shares of HVE Common
Stock ("Common Shares") and Warrants to purchase 82.7429 shares of HVE Common
Stock ("Warrants"), (collectively, the "Offerings"), (ii) a refinancing (the
"Refinancing") comprised of the repayment by the Company of certain of its
outstanding indebtedness, the redemption of the Company's outstanding redeemable
preferred stock, the extinguishment by the Company
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<PAGE> 10
of certain CIP Agreements (as defined herein), the repurchase by the Company of
certain existing warrants, the payment by the Company of certain distributions
and the Company's entrance into a new revolving credit facility (the "New
Revolving Credit Facility") and (iii) the issuance to HVE by each of its direct
Restricted Subsidiaries (as defined herein) of intercompany notes (the
"Intercompany Notes") to be pledged by HVE as security for payment of principal
and interest on the Notes.
THE EXCHANGE OFFER
Securities Offered.......... Up to $135,000 aggregate principal amount of
10-1/2% Senior Notes due 2004 (the "New
Notes"). The terms of the New Notes and
those of the Existing Notes are identical in
all material respects, except for certain
transfer restrictions relating to the
Existing Notes. See "Description of the
Notes."
The Exchange Offer.......... The New Notes are being offered in exchange
for a like principal amount of Existing
Notes. Existing Notes may be exchanged only
in existing multiples of $1,000. The
issuance of the New Notes is intended to
satisfy obligations of the Company under the
Notes Registration Rights Agreement. For a
description of the procedures for tendering,
see "Exchange Offer -- Procedures for
Tendering Existing Notes."
Expiration Date; Withdrawal. The Exchange Offer will expire at 5:00 p.m.,
New York City time, on ____________, 1997,
or such later date and time to which it may
be extended in the sole discretion of the
Company (the "Expiration Date"). The tender
of Existing Notes pursuant to the Exchange
Offer may be withdrawn at any time prior to
any time prior to 5:00 p.m., New York City
time, on the business day prior to the
Expiration Date. Any Existing Notes not
accepted for exchange for any reason will be
returned without expense to the tendering
holders thereof as promptly as practicable
after the expiration or termination of the
Exchange Offer. See "Exchange Offer --
Expiration Date; Extensions; Termination;
Amendments; and Withdrawal Rights."
Conditions to Exchange Offer The Exchange Offer is subject to certain
conditions. See "Exchange Offer -- Certain
Conditions to the Exchange Offer."
8
<PAGE> 11
Procedures for Tendering
Existing Notes.............. Each holder of Existing Notes wishing to
accept the Exchange Offer must complete,
sign and date a Letter of Transmittal, or a
facsimile thereof, in accordance with the
instructions contained herein and therein,
and mail or otherwise deliver such Letter of
Transmittal, or such facsimile, together
with such Existing Notes and any other
required documents, to the Exchange Agent
(as defined) at the address set forth
herein. See "Exchange Offer -- Procedures
for Tendering Existing Notes."
Use of Proceeds............. There will be no proceeds to the Company
from the exchange of Notes pursuant to the
Exchange Offer.
Certain Federal Income Tax
Consideration............... The exchange pursuant to the Exchange Offer
should not be a taxable event to the holder
for federal income tax purposes, and the
holder should not recognize any taxable gain
or loss as a result of such exchange. See
"Certain Federal Income Tax Considerations."
Untendered Existing Notes... Upon consummation of the Exchange Offer, the
holders of Existing Notes, if any, will have
no further rights under the Notes
Registration Rights Agreement, except as
provided herein. Holders of Existing Notes
who do not tender their Existing Notes in
the Exchange Offer or whose Existing Notes
are not accepted for exchange will continue
to hold such Existing Notes by their terms,
terminate or cease to and will be entitled
to all the rights and preferences thereof
and will be subject to all the limitations
applicable thereto, except for any such
rights or limitations which, be effective as
a result of this Exchange Offer. All
untendered and tendered but unaccepted
Existing Notes will continue to be subject
to the restrictions on transfer provided
therein. To the extent that Existing Notes
are tendered and accepted in the Exchange
Offer, the trading market for untendered and
tendered but unaccepted Existing Notes could
be adversely affected.
Exchange Agent.............. State Street Bank and Trust Company is
serving as the Exchange Agent in connection
with the Exchange Offer.
9
<PAGE> 12
TERMS OF THE NOTES
Except as otherwise indicated, the following description relates both to the
Existing Notes issued pursuant to the Offering and to the New Notes to be issued
in exchange for Existing Notes in connection with the Exchange Offer. The New
Notes will be obligations of the Company evidencing the same indebtedness as the
Existing Notes, and will be entitled to the benefits of the same Indenture. The
form and terms of the New Notes are the same as the form and terms of the
Existing Notes, except that the New Notes have been registered under the
Securities Act and therefore will not bear legends restricting the transfer
thereof. For a more complete description of the Notes see "Description of
Notes." Throughout this Prospectus, references to the "Notes" refer to the New
Notes and the Existing Notes collectively.
Issuer...................... High Voltage Engineering Corporation.
Notes Offered............... $135,000,000 principal amount of 10-1/2%
Senior Notes due 2004.
Maturity Date............... August 15, 2004.
Interest Payment Dates...... Interest will accrue on the Notes from the
date of issuance of the Notes (the "Issue
Date") and will be payable in cash
semiannually on each August 15 and February
15, commencing February 15, 1998.
Optional Redemption......... The Notes will be redeemable, at the option
of the Company, in whole or in part, at any
time on or after, August 15, 2001, at the
redemption prices set forth herein, plus
accrued and unpaid interest to the
redemption date. In addition, the Company,
at its option, may redeem in the aggregate
up to 35% of the original principal amount
of the Notes at any time and from time to
time prior to August 15, 2000, at a
redemption price equal to 110.500% of the
aggregate principal amount thereof, plus
accrued and unpaid interest to the
redemption date, with the Net Proceeds of
one or more Qualified Equity Offerings of
HVE, or Letitia Corporation (HVE's parent)
to the extent such proceeds are contributed
to HVE as common equity; provided that at
least $87.8 million of the principal amount
of the Notes originally issued remains
outstanding after giving effect to any such
redemption and that any such redemption
occurs within 60 days following the closing
of any such Qualified Equity Offering. See
"Description of the Notes -- Optional
Redemption."
10
<PAGE> 13
Intercompany Notes.......... At the closing of the Offerings, the
principal amount of the Existing Notes was
allocated among HVE and each of its direct
Restricted Subsidiaries in consideration for
the release of certain obligations of such
Restricted Subsidiaries relating to the
indebtedness being repaid in connection with
the Refinancing. Amounts allocated to such
Restricted Subsidiaries were evidenced by
Intercompany Notes. The Intercompany Notes
are senior obligations of each Restricted
Subsidiary, have terms substantially similar
to the terms of the Notes and have been
pledged by HVE as security for payment of
principal and interest on the Notes. The
Intercompany Notes may not be forgiven by
the Company as long as the Notes remain
outstanding; provided, however, that the
Intercompany Note of a particular Restricted
Subsidiary must be repaid with the Net
Proceeds of a Qualified Subsidiary IPO of
such Restricted Subsidiary.
Offer to Repurchase upon a
Qualified Subsidiary IPO.. The Indenture allows each Restricted
Subsidiary that is an obligor under an
Intercompany Note to effect a Qualified
Subsidiary IPO; provided, among other
things, that: (i) any Restricted Subsidiary
effecting a Qualified Subsidiary IPO will be
obligated to repay in full its Intercompany
Note with the Net Proceeds of such Qualified
Subsidiary IPO; (ii) the Company will be
obligated to make an offer to purchase Notes
from the holders thereof equal in aggregate
principal amount to the Intercompany Note
being repaid by such Restricted Subsidiary
at a purchase price equal to 101% of the
principal amount thereof, plus accrued and
unpaid interest to the purchase date and
that any such purchase of Notes occurs
within 90 days following the closing of any
such Qualified Subsidiary IPO; (iii)
immediately after giving pro forma effect to
such Qualified Subsidiary IPO, the Company
(excluding the EBITDA and the Consolidated
Fixed Charges of the Restricted Subsidiary
effecting the Qualified Subsidiary IPO)
could incur $1.00 of additional Indebtedness
(other than Permitted Indebtedness) under
the covenant set forth under "Description of
the Notes - Certain Covenants -- Limitation
on Additional Indebtedness," and assuming
for purposes of this calculation only, that
the aforementioned offer to repurchase has
been subscribed in full, and (iv) all
remaining Net Proceeds of such Qualified
Subsidiary IPO received by HVE will be
deemed an Unrestricted Subsidiary upon
completion of a Qualified Subsidiary IPO.
See "Description of the Notes - Offer to
Repurchase upon a Qualified Subsidiary IPO."
11
<PAGE> 14
Ranking..................... The Notes are senior unsecured obligations
of the Company ranking pari passu in right
of payment with all existing and future
senior indebtedness of the Company and
senior in right of payment to any
subordinated indebtedness of the Company.
The Notes will be effectively subordinated
to all existing and future secured
indebtedness of the Company, including
indebtedness under the New Revolving Credit
Facility. Despite the pledge of the
Intercompany Notes to secure the repayment
of the Notes, a bankruptcy court could
subordinate such repayments to all existing
and future indebtedness and other
liabilities and commitments of any of HVE's
subsidiaries. As of April 26, 1997, pro
forma for the Transactions, HVE would have
had $159.9 million of senior indebtedness
outstanding (including the Notes), of which
$20.7 million would have been secured
indebtedness, and the subsidiaries of HVE
would have had $49.1 million of indebtedness
and other liabilities and commitments
outstanding (excluding the Intercompany
Notes).
Change of Control........... Upon the occurrence of a Change of Control,
each holder of the Notes will be entitled to
require the Company to purchase such
holder's Notes at a purchase price equal to
101% of the principal amount thereof, plus
accrued and unpaid interest to the purchase
date. There can be no assurance that the e
Company will have sufficient funds or will
be contractually permitted by the New
Revolving Credit Facility to pay the
required purchase price for all Notes
tendered by holders thereof upon the
occurrence of a Change of Control. See
"Description of the Notes -- Change of
Control Offer."
Asset Sale Proceeds......... The Company will be obligated in certain
instances to make an offer to purchase the
Notes at a purchase price in cash equal to
100% of the principal amount thereof, plus
accrued and unpaid interest to the purchase
date, with the Available Asset Sale Proceeds
of certain asset sales. See "Description of
the Notes -- Certain Covenants -- Limitation
on Certain Asset Sales."
12
<PAGE> 15
Certain Covenants........... The Indenture pursuant to which the Notes
have been and will be issued (the
"Indenture") contains covenants for the
benefit of the holders of the Notes that,
among other things, restrict the ability of
HVE and its Restricted Subsidiaries to: (i)
incur additional Indebtedness; (ii) pay
dividends or make certain other restricted
payments; (iii) issue capital stock or
preferred stock of Restricted Subsidiaries;
(iv) make certain investments; (v) create
liens; (vi) enter into transactions with
affiliates; (vii) transfer or repay the
Intercompany Notes; (viii) enter into sale
and lease-back transactions; (ix) merge or
consolidate HVE or any Restricted
Subsidiaries; (x) transfer or sell assets;
(xi) create dividend or other payment
restrictions affecting Restricted
Subsidiaries; and (xii) guarantee certain
indebtedness. These covenants are subject to
a number of important exceptions. See
"Description of the Notes -- Certain
Covenants."
COMPARISON OF NEW NOTES WITH EXISTING NOTES
Freely Transferable......... Generally, the New Notes will be freely
transferable under the Securities Act by
holders thereof other than any holder that
is either an affiliate of the Company or a
broker-dealer that purchased the Notes from
the Company to resell pursuant to Rule 144A
or any other available exemption. The New
Notes otherwise will be substantially
identical in all material respects
(including interest rate and maturity) to
the Existing Notes. See "Exchange Offer."
Registration Rights......... The holders of Existing Notes currently are
entitled to certain registration rights
pursuant to the Notes Registration Rights
Agreement (the "Notes Registration Rights
Agreement"), dated as of August 8, 1997,
between the Company and the Initial
Purchasers. However, upon consummation of
the Exchange Offer, subject to certain
exceptions, holders of Existing Notes who do
not exchange their Existing Notes for New
Notes in the Exchange Offer will no longer
be entitled to registration rights and will
not be able to offer or sell their Existing
Notes, unless such Existing Notes are
subsequently registered under the Securities
Act (which, subject to certain limited
exceptions, the Company will have no
obligation to do), except pursuant to an
exemption from, or in a transaction not
subject to, the Securities Act and
applicable state securities laws. See "Risk
Factors -- Adverse Consequences of Failure
to Adhere to Exchange Offer Procedures."
13
<PAGE> 16
Absence of a Public Market for
the New Notes............... The New Notes are new securities and there
is currently no established market for the
New Notes. Accordingly, there can be no
assurance as to the development or liquidity
of any market for the New Notes. The Company
does not intend to apply for listing on a
securities exchange of the New Notes.
For more complete information regarding the Existing Notes and the New
Notes, including the definitions of certain capitalized terms used above, see
"Description of the Notes."
RISK FACTORS
Holders of Existing Notes and prospective purchasers of New Notes
should consider carefully the information set forth under the caption "Risk
Factors," and all other information set forth in this Prospectus, in connection
with the Exchange Offer.
14
<PAGE> 17
SUMMARY UNAUDITED PRO FORMA CONDENSED FINANCIAL DATA
(DOLLARS IN THOUSANDS)
The following table sets forth Summary Unaudited Pro Forma Condensed
Financial Data derived from the Unaudited Pro Forma Condensed Consolidated
Financial Data contained elsewhere herein. The statement of operations data for
the Company's fiscal year ended April 26, 1997 include the results of operations
of PHI Acquisition Holdings, Inc. and subsidiaries for the LTM period ended
March 28, 1997 and give effect to the Transactions as if they had occurred on
April 28, 1996. The balance sheet data set forth below present the financial
condition of the Company as if the Transactions had occurred on April 26, 1997.
The Summary Unaudited Pro Forma Condensed Financial Data do not purport
to be indicative of the actual financial position or results of operations of
the Company that would have actually been attained had the Transactions in fact
occurred on the date specified, nor are they necessarily indicative of the
results of operations that may be achieved in the future. Furthermore, the
Summary Unaudited Pro Forma Condensed Financial Data set forth below do not
consider any future events which may occur after the Transactions have been
consummated. The Summary Unaudited Pro Forma Condensed Financial Data are based
on certain assumptions described in the Notes to Unaudited Pro Forma Condensed
Consolidated Financial Data and should be read in conjunction therewith. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements of High Voltage
Engineering Corporation and subsidiaries and the notes thereto and the
consolidated financial statements of PHI Acquisition Holdings, Inc. and
subsidiaries and the notes thereto, included elsewhere herein.
<TABLE>
<CAPTION>
PRO FORMA
FISCAL YEAR ENDED
APRIL 26, 1997
-----------------
<S> <C>
STATEMENT OF OPERATIONS DATA:
Net sales ............................................... $ 237,855
Gross profit ............................................ 82,999
Income from operations .................................. 15,174
Interest expense ........................................ 17,137
Interest income ......................................... 418
Income taxes ............................................ 2,104
Loss from continuing operations before extraordinary
item.......................................................... (3,649)
Preferred dividends ..................................... 4,242
Accretion of redeemable put warrants .................... 2,587
Loss available to common stockholders before
extraordinary item ........................................... (10,478)
OTHER DATA:
EBITDA(a) ............................................... $ 26,407
Depreciation and amortization ........................... 8,295
Capital expenditures .................................... 8,233
Cash interest expense(b) ................................ 16,408
Ratio of EBITDA to cash interest expense(b) ............. 1.6x
Ratio of net debt to EBITDA(c) .......................... 5.6x
Ratio of net debt and redeemable preferred stock to
EBITDA(c)..................................................... 6.7x
BALANCE SHEET DATA (AT PERIOD END):
Working capital(d) ...................................... $ 47,908
Total assets ............................................ 197,273
Total debt (including redeemable put warrants)(e) ....... 159,897
Redeemable preferred stock .............................. 29,291
Stockholder's deficiency ................................ (56,423)
</TABLE>
(see footnotes on following page)
15
<PAGE> 18
NOTES TO SUMMARY UNAUDITED PRO FORMA CONDENSED FINANCIAL DATA
(DOLLARS IN THOUSANDS)
(a) EBITDA is defined as earnings from continuing operations before
interest, income taxes, depreciation, amortization and non-recurring
items. Non-recurring items are comprised of: (i) reimbursed
environmental and litigation costs -- net and other and (ii) $210 of
severance payments to a former officer of PHI and $60 of relocation
expenses in connection with the replacement of such officer of PHI in
Fiscal 1997. See Notes F, K and N to "Notes to Consolidated Financial
Statements" of High Voltage Engineering Corporation and subsidiaries.
EBITDA is not a measure of performance under generally accepted
accounting principles ("GAAP"). While EBITDA should not be considered
as a substitute for net income, cash flows from operating activities
and other income or cash flow statement data prepared in accordance
with GAAP, or as a measure of profitability or liquidity, management
understands that EBITDA is customarily used as a measurement in
evaluating companies. Moreover, substantially all of the Company's
financing agreements contain covenants in which EBITDA, as defined
therein, is used as a measure of financial performance. See
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" for discussion of other measures of performance
determined in accordance with GAAP.
(b) For the purpose of computing the ratio of EBITDA to cash interest
expense, cash interest expense excludes $0.7 million of non-cash
interest expense comprised of amortization of deferred financing costs.
See "Unaudited Pro Forma Condensed Consolidated Financial Data" and
"Description of Other Indebtedness."
(c) Net debt represents total debt (including redeemable put warrants) less
unrestricted cash and cash equivalents.
(d) Working capital is defined as total current assets less total current
liabilities.
(e) Total debt includes an amount of $2.5 million related to the estimated
value of certain redeemable put warrants issued in connection with the
Subordinated Notes (as defined herein).
16
<PAGE> 19
RISK FACTORS
Holders of Existing Notes and prospective purchasers of New Notes
should consider carefully the following risk factors in addition to the other
information set forth in this Prospectus. Certain of the statements in this
Prospectus are forward-looking in nature and, accordingly, are subject to many
risks and uncertainties. The actual results that the Company achieves may differ
materially from any forward-looking statements in this Prospectus. Factors that
could cause or contribute to such differences include, but are not limited to,
those discussed below and those contained in "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business," as
well as those discussed elsewhere in this Prospectus.
HIGH LEVEL OF INDEBTEDNESS; ABILITY TO SERVICE INDEBTEDNESS
The Company is, and will continue to be, highly leveraged. At April 26,
1997, on a pro forma basis after giving effect to the Transactions, the Company
would have had $159.9 million of total indebtedness, mandatorily redeemable
preferred stock with an aggregate liquidation preference of $33.0 million, and a
stockholder's deficit of $56.4 million. See "Capitalization." On a pro forma
basis for Fiscal 1997, the Company's earnings would have been insufficient to
cover fixed charges (including preferred dividends requirements and accretion of
redeemable put warrants) by approximately $8.4 million. Furthermore, subject to
certain restrictions in the Indenture, the Company may incur additional
indebtedness from time to time to finance acquisitions, provide for working
capital or capital expenditures or for other purposes.
The level of the Company's indebtedness could have important
consequences to holders of the Notes, including, but not limited to, the
following: (i) a substantial portion of the Company's cash flow from operations
must be dedicated to debt service and will not be available for other purposes;
(ii) the Company's ability to obtain additional financing in the future, as
needed, may be limited; (iii) the Company's leveraged position and covenants
contained in the Indenture and other indebtedness of the Company may limit its
ability to grow and make capital improvements and acquisitions; (iv) the
Company's level of indebtedness may make it more vulnerable to economic
downturns; and (v) the Company may be at a competitive disadvantage because some
of the Company's competitors are less leveraged, resulting in greater
operational and financial flexibility for such competitors.
The Company currently anticipates that its operating cash flow,
together with available borrowings, will be sufficient to meet its operating
expenses and to service its debt requirements as they become due. However, the
ability of the Company to pay cash dividends on, and to satisfy the redemption
obligations in respect of, the Preferred Stock and to satisfy its debt
obligations, including the Notes, will be primarily dependent upon the future
financial and operating performance of the Company's operating units. Such
performance is dependent upon financial, business and other general economic
factors, many of which are beyond the control of the Company and its operating
units. If the Company is unable to generate sufficient cash flow to meet its
debt service obligations or provide adequate long-term liquidity, it will have
to pursue one or more alternatives, such as reducing or delaying capital
expenditures, refinancing debt, selling assets or raising equity capital. There
can be no assurance that such alternatives could be accomplished on satisfactory
terms, if at all, or in a timely manner. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
EFFECTIVE SUBORDINATION OF THE NOTES
The Notes are senior unsecured obligations of the Company ranking pari
passu in right of payment with all existing and future senior indebtedness of
the Company and senior in right of payment to any subordinated indebtedness of
the Company. The Notes will be effectively subordinated in right of payment to
all existing and future secured indebtedness of the Company, including
indebtedness under the New Revolving Credit Facility. Despite the pledge of the
Intercompany Notes to secure the repayment of the Notes, a bankruptcy court
could subordinate such repayments to all existing and future indebtedness and
other liabilities and commitments of any of HVE's subsidiaries. As of April 26,
1997, pro forma for the Transactions, HVE would have had $146.0 million of
senior indebtedness outstanding (including the Notes), of which $24.3 million
would have been secured indebtedness, and the subsidiaries of HVE would have had
$49.1 million of indebtedness and other liabilities and commitments outstanding
(excluding the Intercompany Notes). The Indenture will limit, but not prohibit,
the incurrence of additional indebtedness by the Company. See "Description of
Other Indebtedness"
17
<PAGE> 20
SUBSIDIARY OPERATIONS; RELIANCE ON SUBSIDIARIES
The Company conducts a substantial portion of its business through
HVE's direct or indirect subsidiaries. HVE's subsidiaries are separate and
distinct legal entities and have no obligations, contingent or otherwise, to pay
any amounts due under the Notes, to meet HVE's obligations to other creditors or
to make funds available therefor. Because the Notes are direct obligations of
HVE, it must rely on (i) the ability of those of HVE's subsidiaries which have
issued Intercompany Notes to HVE to pay principal and interest thereon and (ii)
the ability of HVE's subsidiaries to pay dividends and make other advances and
transfers of funds to generate the funds necessary to meet the Company's
obligations, including payment of amounts due under the Notes. There can be no
assurance that such payments and distributions will be adequate to fund payments
due under the Notes. The ability of HVE's subsidiaries to make such payments,
advances and transfers will be subject to applicable state law regulating the
payment of dividends and the terms of the New Revolving Credit Facility and the
Indenture. In addition, none of HVE's subsidiaries or Letitia Corporation (HVE's
parent) will be a guarantor under the Notes, and the Indenture expressly
provides that by accepting the Notes, each holder of the Notes waives and
releases the liability of any person or entity other than HVE relating to the
Notes, which waiver and release are part of the consideration for the Notes. See
"Description of Other Indebtedness" and "Description of the Notes -- Certain
Covenants -- Limitation on Additional Indebtedness."
The Intercompany Notes will be unsecured obligations of HVE's
subsidiaries. The principal amount of the Notes has been allocated among HVE and
each of its direct Restricted Subsidiaries, evidenced by the Intercompany Notes,
in consideration for the release of certain obligations of such Restricted
Subsidiaries relating to the indebtedness being repaid in connection with the
Refinancing. Persons seeking to enforce payments under any Intercompany Note
will only have the rights of a general unsecured creditor of the issuer of such
Intercompany Note with respect thereto and, as a result, the benefits which
might be realized in connection with the enforcement of such obligations may be
limited.
POSSIBLE EFFECTS OF FRAUDULENT CONVEYANCE LAWS
Management of the Company believes that the indebtedness of the Company
represented by the Notes is being incurred for proper purposes and in good
faith, and that, based on present forecasts, asset valuations and other
financial information, the Company, after giving effect to the consummation of
the Transactions, is solvent, has sufficient capital for carrying on its
business and will be able to pay its debts as they mature. Notwithstanding
management's belief, if a court of competent jurisdiction in a suit by an unpaid
creditor or a representative of creditors (such as a trustee in bankruptcy or a
debtor-in-possession) were to find that, at the time the Company consummated the
Transactions, including the Merger, the Company (i) intended to hinder, delay or
defraud any existing or future creditor or contemplated insolvency with a design
to prefer one or more creditors to the exclusion in whole or in part of others
or (ii) did not receive fair consideration or reasonably equivalent value for
issuing the Notes, and the Company (a) was insolvent; (b) was rendered insolvent
by reason of the Merger; (c) was engaged or about to engage in a business or
transaction for which its remaining assets constituted unreasonably small
capital to carry on its business; or (d) intended to incur, or believed that it
would incur, debts beyond its ability to pay such debts as they matured, such
court could avoid such indebtedness. A possible consequence of such avoidance
would be the subordination of the indebtedness represented by the Notes to
existing and future indebtedness of the Company. Similarly, despite the pledge
of Intercompany Notes to secure the repayment of the Notes, a bankruptcy court
could subordinate the repayment of the Intercompany Notes to all existing and
future indebtedness and other liabilities and commitments of any of HVE's
subsidiaries.
The measure of insolvency for purposes of the foregoing will vary
depending upon the law of the relevant jurisdiction. Generally, however, a
company would be considered insolvent for purposes of the foregoing if the
present fair salable value of the company's assets is less than the amount that
will be required to pay its probable liability on existing debts as they become
absolute and mature. In rendering its opinion on the validity of the Existing
Notes in connection with the Offering, counsel for each of the Company and the
Initial Purchasers expressed no opinion as to federal or state laws relating to
fraudulent transfers.
18
<PAGE> 21
ACQUISITION OF PHI
The acquisition of PHI is the largest acquisition completed by the
Company to date. Acquisitions of this magnitude are inherently subject to
significant risk. Although the Company intends to operate PHI as a stand-alone
subsidiary, the acquisition will require some integration of PHI's management,
control and administrative systems with those of the Company. The Merger will
require substantial attention from, and place substantial demands upon, the
senior management of the Company, which may divert attention from and adversely
impact their ability to manage the Company's existing businesses.
The representations and warranties made by PHI and its principal
stockholder in the Merger Agreement relating to PHI and the indemnities made
with respect to such representations and warranties expired upon the closing of
the Merger. As a result, the Company has little or no recourse to PHI and its
principal stockholder after the Merger. In addition, unanticipated events or
liabilities related to PHI's business could materially and adversely affect the
Company and the success of the Merger.
EFFECT OF POSSIBLE QUALIFIED SUBSIDIARY IPO
Robicon, PHI, Datcon, Anderson and HVE Europa are direct or indirect
subsidiaries of HVE. The Indenture allows each Restricted Subsidiary that is an
obligor under an Intercompany Note to effect a Qualified Subsidiary IPO;
provided, among other things, that: (i) any Restricted Subsidiary effecting a
Qualified Subsidiary IPO will be obligated to repay in full its Intercompany
Note with the net proceeds of such Qualified Subsidiary IPO; (ii) that the
Company make a pro rata offer to purchase Notes from the holders thereof equal
in aggregate principal amount to the Intercompany Note being repaid by such
Restricted Subsidiary at a purchase price equal to 101% of the principal amount
thereof, plus accrued and unpaid interest to the purchase date; and (iii) that
immediately after giving effect to such Qualified Subsidiary IPO, and assuming
that the offer to repurchase is fully-subscribed, the Company (excluding the
EBITDA and the Consolidated Fixed Charges of the Restricted Subsidiary effecting
the Qualified Subsidiary IPO) could incur $1.00 of additional Indebtedness
(other than Permitted Indebtedness) under a covenant set forth in the Indenture.
Upon the occurrence of a Qualified Subsidiary IPO, holders of Warrants will have
a one-time right (with respect to each Qualified Subsidiary IPO) to require the
Company, subject to certain restrictions, to exchange their Warrants for
Subsidiary Warrants to purchase common stock of the Restricted Subsidiary
effecting such Qualified Subsidiary IPO. In addition, upon the occurrence of a
Qualified Subsidiary IPO, holders of Common Shares will have a one-time right
(with respect to each Qualified Subsidiary IPO) to require the Company, subject
to certain restrictions, to exchange their Common Shares for Subsidiary Shares
of the Restricted Subsidiary effecting such Qualified Subsidiary IPO. The
exchange of Warrants for Subsidiary Warrants and Common Shares for Subsidiary
Shares will constitute permitted Restricted Payments under the Indenture. Upon
completion of a Qualified Subsidiary IPO, a Restricted Subsidiary will become an
Unrestricted Subsidiary and the cash flow of such Unrestricted Subsidiary will
no longer be available (i) to service debt obligations of HVE or its remaining
Restricted Subsidiaries or (ii) for purposes of determining whether HVE or its
remaining Restricted Subsidiaries will be able to incur additional indebtedness,
either of which could affect the ability of the Company to meet the requirements
of certain financial covenants in the New Revolving Credit Facility and certain
of its other indebtedness. There can be no assurance that such events will not
have an adverse effect on the price at which the Notes may be traded.
UNCERTAINTIES REGARDING PATENTS AND PROTECTION OF PROPRIETARY TECHNOLOGY
The Company currently relies on a combination of patents, trade
secrets, technical expertise and continuing technological research and
development to establish and protect proprietary rights in its products. There
can be no assurance that the Company's patents will not be successfully
challenged, that any patents that have been applied for will issue, or that
competitors will not find ways to design around such patents to provide similar
or functionally equivalent products, processes or technologies. In addition, the
Company recognizes that the exclusive rights to make, use and sell a technology
are granted for only a finite time and that new technologies must be developed
on an ongoing basis to replace those under expired patents or which have become
obsolete. The Company attempts to ensure that its products and processes do not
infringe patents and other proprietary rights of third parties, but there can be
no assurance that such an infringement may not be alleged by third parties in
the future. If infringement is alleged, there can be no assurance that the
Company would prevail in any such challenge, or that if the Company did not
prevail, that the necessary licenses would be available on acceptable terms, if
at all. In addition, patent and proprietary rights litigation can be extremely
protracted and expensive. See "Business -- Patents and Trademarks."
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<PAGE> 22
VARIABILITY OF CUSTOMER REQUIREMENTS; FLUCTUATIONS IN OPERATING RESULTS
The timing of orders placed by the customers of the Company's operating units
varies with, among other factors, the introduction of new products, product life
cycles, customer attempts to manage inventory levels, competitive conditions,
general economic conditions and the funding of scientific and educational
research. Historically, the industries served by the Company have been cyclical,
affected by both general economic conditions and industry-specific cycles.
Depressed general economic conditions and cyclical downturns in these industries
have had adverse effects on the Company's customers, contributing to
fluctuations in the Company's operating results. The variability of the level
and timing of orders from, and shipments to, customers may result in significant
periodic and quarterly fluctuations in the Company's results of operations. In
addition, the Company's operating units rely upon supplies or subcontractors for
custom components in their respective manufacturing processes, the loss of which
could adversely affect an operating unit's business until alternate suppliers
could be found.
Because the Company's operating expenses are based on anticipated
revenue levels and a high percentage of the Company's operating expenses is
relatively fixed, any unanticipated shortfall in revenue in a quarter may have
an adverse impact on the Company's results of operations for that quarter, which
could impact the Company's ability to pay amounts due under the Notes. In
addition to the factors affecting customer requirements noted above, the
Company's operating results may also fluctuate due to factors such as changes in
the product mix of sales; changes in manufacturing, raw material and other costs
or expenses; competitive pricing pressures; the gain or loss of significant
customers and increased research and development expenses. The Company believes
that quarter-to-quarter comparisons of results of operations are not necessarily
meaningful or indicative of future performance. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
DEPENDENCE ON KEY PERSONNEL
The success of the Company depends upon the efforts, abilities and
expertise of its executive officers and other key employees, including its
Chairman of the Board and Chief Executive Officer, President, and Chief
Operating Officer and the president or managing director of each of the
Company's operating units. The loss of the services of such individuals and/or
other key individuals could have a material adverse effect on the Company's
operations. Generally, the Company does not offer employment agreements to its
executive officers or key employees, nor does the Company maintain key man life
insurance on such individuals. See "Management."
TECHNOLOGICAL CHANGE; MANUFACTURING PROCESS DEVELOPMENTS
The markets for the Company's products may be affected by technological
change, continuing process development and new product introductions. The
Company's success will depend, in part, upon its continued ability to
manufacture products that meet changing customer needs, successfully anticipate
or respond to technological changes in manufacturing processes on a
cost-effective and timely basis and enhance and expand its existing product
offerings. Current competitors or new market entrants may develop new products
with features that could adversely affect the competitive position of the
Company's products. The Company has invested and continues to invest substantial
resources in research and development for new products and improved
manufacturing processes; however, there can be no assurance that the Company's
new product or process development efforts will be successful or that the
emergence of new technologies, industry standards or customer requirements will
not render the Company's technology, equipment or processes obsolete or
uncompetitive. Any failure or delay in accomplishing these goals could have a
material adverse effect on the Company's business, results of operations and
financial condition. In addition, to the extent that the Company determines that
new manufacturing equipment or processes are required to remain competitive, the
acquisition and implementation of the technologies, equipment and processes
required are likely to require significant capital investment by the Company.
FOREIGN OPERATIONS
The Company has manufacturing operations in three foreign countries and
sells its products in a significant number of foreign countries. Pro forma for
the Merger, approximately $81.0 million, or 34%, of the Company's Fiscal 1997
net sales were from products sold overseas. Risks inherent in foreign operations
include fluctuations in foreign currency exchange rates and changes in social,
political and economic conditions. Changes in currency exchange rates may affect
the relative prices at
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<PAGE> 23
which the Company and foreign competitors purchase component materials and sell
their finished products in the same market. Except with respect to certain of
its European operations, the Company generally does not hedge its exposure to
foreign currency exchange rate changes. The Company is also exposed to risks
associated with changes in the laws and policies that govern foreign investments
in countries where it has operations as well as, to a lesser extent, changes in
United States laws and regulations relating to foreign trade and investment.
While such changes in laws, regulations and conditions to date have not had a
material adverse effect on the Company's business or financial condition, there
can be no assurance as to the future effect of any such changes.
COMPETITION
The markets for the Company's products are highly competitive. Many of
the Company's competitors are large companies, or divisions or parts of large
companies, that have greater financial resources than the Company. The Company
believes that the principal points of competition in its market niches are
product quality, design and engineering capabilities, product development,
conformity to customer specifications, quality of post-sale support, timeliness
of delivery and price. The rapidly evolving nature of the markets in which the
Company competes may attract new entrants as they perceive opportunities, and
the Company's competitors may foresee the course of market development more
accurately than the Company. In addition, the Company's competitors may develop
products that are superior to the Company's products or may adapt more quickly
than the Company to new technologies or evolving customer requirements. The
Company expects competitive pressures in these markets to remain strong. These
pressures arise from existing competitors, other companies that may enter the
Company's existing or future markets and, in certain cases, the Company's
customers, which may decide to move production in-house of certain items sold by
the Company. There can be no assurance that the Company will be able to compete
successfully with its existing competitors or with new competitors. Failure to
compete successfully could adversely affect the Company's business, results of
operations and financial condition. See "Business -- The Operating Units."
RESTRICTIVE DEBT COVENANTS
Certain loan agreements relating to the financing of Robicon's facility
in New Kensington, Pennsylvania, as well as the New Revolving Credit Facility
(and any other indebtedness incurred to provide for working capital or other
cash needs), contain a number of covenants that, among other things, limit the
ability of the Company to incur additional indebtedness, pay certain dividends,
prepay indebtedness, dispose of certain assets, create liens, make capital
expenditures and make certain investments or acquisitions and otherwise restrict
corporate activities. The New Revolving Credit Facility also contains (and any
indebtedness incurred to provide for working capital or other needs likely will
contain) provisions relating to a change of control of the Company. The New
Revolving Credit Facility also requires the Company to comply with certain
financial ratios and tests, under which the Company will be required to achieve
certain financial and operating results. The ability of the Company to comply
with such provisions may be affected by events beyond its control, including
changes in prevailing economic conditions and in the Company's competitive
environment, which could impair the Company's operating performance. A breach of
any of these covenants would result in a default under the New Revolving Credit
Facility, in which event the lenders under the New Revolving Credit Facility
could elect to declare all outstanding amounts borrowed thereunder, together
with accrued and unpaid interest thereon, to be due and payable. Such
acceleration may also constitute an event of default under the Indenture. As a
result of the security interest expected to be afforded to the lender under the
New Revolving Credit Facility, there can be no assurance that the Company would
have sufficient funds to pay amounts due under the New Revolving Credit
Facility, the Notes and the Preferred Stock, in the event of such acceleration.
Acceleration of such indebtedness would have a material adverse effect on the
Company. See "Description of Other Indebtedness."
In addition, the Indenture contains covenants that, among other things,
limit the ability of the Company to incur additional indebtedness, incur liens,
pay dividends and make certain other restricted payments, make certain
investments, consummate certain assets sales, enter into certain transactions
with affiliates, issue subsidiary stock, consolidate or merge with any other
person or transfer all or substantially all of the assets of the Company. See
"Description of Other Indebtedness."
ENVIRONMENTAL COMPLIANCE
The Company is subject to a variety of environmental laws and
regulations that regulate the use, handling, treatment, storage, discharge and
disposal of solid and hazardous substances and hazardous wastes used or
generated during the Company's manufacturing processes. A failure by the Company
to comply with present and future environmental laws and
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<PAGE> 24
regulations could subject it to future liabilities or the suspension of
production. Such environmental laws and regulations could also restrict the
Company's ability to expand its facilities or could require the Company to
acquire costly equipment or to incur other significant expenses in connection
with its manufacturing processes. Although the Company believes it has made
sufficient capital expenditures to maintain compliance with existing laws and
regulations, future expenditures may be necessary as compliance standards and
technology change. See "Business -- Environmental and Insurance Matters."
PRODUCT LIABILITY
The Company's businesses expose it to potential product liability risks
that are inherent in the design, manufacture and sale of its products. While the
Company currently maintains what it believes to be suitable product liability
insurance, there can be no assurance that it will be able to maintain such
insurance on acceptable terms or that any such insurance will provide adequate
protection against potential liabilities. In the event of a claim against the
Company, a lack of sufficient insurance coverage could have a material adverse
effect on the Company. Moreover, even if the Company maintains adequate
insurance, any successful claim could materially and adversely affect the
reputation and prospects of the Company. See "Business -- Legal Proceedings."
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, the Company will, subject
to certain conditions, be required to offer to purchase all of the Notes then
outstanding at a purchase price equal to 101% of the principal amount thereof,
plus accrued and unpaid interest to the purchase date and all of the shares of
the Exchange Preferred Stock then outstanding at a purchase price equal to 101%
of the liquidation preference thereof, plus, without duplication, accumulated
and unpaid dividends to the purchase date. If a Change of Control were to occur,
there can be no assurance that the Company would have sufficient funds to pay
the purchase price for all of the Notes and all of the shares of the Exchange
Preferred Stock that the Company might be required to purchase. The exercise by
the respective holders of the Notes and the Exchange Preferred Stock of their
right to require the Company to repurchase the Notes and the Exchange Preferred
Stock upon the occurrence of a Change of Control could also cause a default
under other indebtedness of the Company, even if the Change of Control itself
does not, because of the financial effect of such repurchase on the Company. The
Company's ability to pay cash to holders of the Notes and the Exchange Preferred
Stock upon a repurchase may be limited by the Company's then existing financial
resources. There can be no assurance that, in the event of a Change of Control,
the Company will have, or will have access to, sufficient funds or will be
contractually permitted under the terms of other outstanding indebtedness and
obligations, including the New Revolving Credit Facility, to pay the required
purchase price for all of the Notes tendered by holders thereof upon the
occurrence of a Change of Control. In addition, the Indenture will restrict the
Company's ability to repurchase the shares of the Exchange Preferred Stock,
including pursuant to a Change of Control. See "Description of Other
Indebtedness", "Description of the Notes -- Change of Control Offer" and
"Description of Outstanding Capital Stock -- Preferred Stock."
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<PAGE> 25
CONTROL BY PRINCIPAL STOCKHOLDERS
Letitia Corporation beneficially owns 90% of the outstanding HVE Common
Stock. Messrs. Laurence S. Levy and Clifford Press, the Chairman of the Board
and Chief Executive Officer, and President and a Director, respectively, of the
Company, are the sole directors of Letitia Corporation and, together with
certain of their affiliates and family members, beneficially own 90% of the
outstanding common stock of Letitia Corporation, before giving effect to any
repurchase of Letitia Common Stock from the High Voltage Engineering Corporation
Retirement Plan. As a result, Messrs. Levy and Press, and such affiliates and
family members, through their control of Letitia Corporation, are currently able
to elect all of the directors of HVE, retain the voting power to approve all
matters requiring stockholder approval and will continue to control HVE. See
"Principal Stockholders."
ADVERSE CONSEQUENCES OF FAILURE TO ADHERE TO EXCHANGE OFFER PROCEDURES
Issuance of the New Notes in exchange for the Existing Notes pursuant
to the Exchange Offer will be made only after a timely receipt by the Company of
such Existing Notes, a properly completed and duly executed Letter of
Transmittal and all other required documents. All questions as to the validity,
form, eligibility (including time of receipt) and acceptance of the Existing
Notes tendered for exchange will be determined by the Company in its sole
discretion, which determination will be final and binding on all parties.
Holders of the Existing Notes desiring to tender such the Existing Notes in
exchange for New Notes should allow sufficient time to ensure timely delivery.
The Company is under no duty to give notification of defects or irregularities
with respect to the tenders of the Existing Notes for exchange. Existing Notes
that are not tendered or are tendered but not accepted will, following the
consummation of the Exchange Offer, continue to be subject to the existing
restrictions upon transfer thereof and, except as provided herein, the Company
will have no further obligations to provide for the registration under the
Securities Act of such Existing Notes. To the extent that Existing Notes are
tendered and accepted in the Exchange Offer, the trading market for untendered
and tendered but unaccepted Existing Notes could be adversely affected. See
"Exchange Offer."
LACK OF PUBLIC MARKET FOR THE SECURITIES; RESTRICTIONS ON RESALE
There is no existing trading market for the Notes. There can be no
assurance regarding the future development of a market for the Notes, or the
ability of holders of any of the Notes to sell their Notes, or the price at
which such holders may be able to sell such Notes. If such a market were to
develop, the Notes could trade at prices that may be lower than the initial
offering price for the Notes depending on many factors, including prevailing
interest rates, the Company's operating results and the market for similar
securities. The Initial Purchaser has advised the Company that it currently
intends to make a market in the Notes. The Initial Purchaser is not obligated to
do so, however, and any market-making with respect to the Notes may be
discontinued at any time without notice. Therefore, there can be no assurance as
to the liquidity of any trading market for the Notes, or that an active public
market for the New Notes will develop. In addition, such market-making activity
will be subject to the limitations imposed by the Securities Act and the
Exchange Act and may be limited during the Exchange Offer. The Company does not
intend to apply for listing or quotation of the New Notes on any securities
exchange or stock market. See "Plan of Distribution."
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<PAGE> 26
THE COMPANY
The Company owns and operates a diversified group of seven middle
market industrial manufacturing businesses. HVE was incorporated in
Massachusetts in 1946 by Robert J. van de Graaff, a Massachusetts Institute of
Technology professor of nuclear physics. In the 1970s, HVE began acquiring a
diversified group of industrial manufacturing businesses. In 1988, the Company
was acquired by Letitia Corporation, which is beneficially owned primarily by
Laurence S. Levy, Chairman of the Board and Chief Executive Officer of the
Company, Clifford Press, President and a Director of the Company, and certain of
their affiliates and family members. Since the Company's acquisition by Letitia
Corporation, the Company has disposed of 12 non-core businesses and has made
four acquisitions, including PHI.
The Company operates Robicon, PHI, Datcon, Anderson and HVE Europa as
direct or indirect wholly-owned subsidiaries. Natvar and General Eastern are
operated as divisions of the Company.
The Company's executive offices are located at 401 Edgewater Place,
Suite 680, Wakefield, Massachusetts 01880 and its telephone number is (617)
224-1001.
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<PAGE> 27
THE TRANSACTIONS
THE OFFERINGS
On August 8, 1997, the Company issued $135,000,000 in aggregate
principal amount of Existing Notes and $35,200,000 representing 33,000 Units
consisting in the aggregate of 33,000 shares of Series A Preferred Stock,
82.7429 shares of HVE Common Stock and Warrants to purchase 82.7429 shares of
HVE Common Stock. The gross proceeds to the Company from the Offerings of $170.2
million were or will be used to consummate the Refinancing on August 8, 1997, to
finance the Merger, for general corporate purposes and to pay related fees and
expenses.
THE REFINANCING
Of such proceeds, the Company used or will use (i) $80.5 million to
repay certain of its outstanding indebtedness, including accrued and unpaid
interest thereon and prepayment penalties associated therewith, estimated as of
the closing of the Transactions; (ii) $11.6 million to redeem all of the
Company's outstanding redeemable preferred stock, including accumulated and
unpaid dividends thereon, estimated as of the closing of the Transactions; and
(iii) $6.8 million to extinguish the right of BancBoston Capital, Inc.
("BancBoston") pursuant to two agreements (the "CIP Agreements") to require the
Company to make "contingent interest payments" to BancBoston under certain
circumstances; (iv) $2.5 million to repurchase certain warrants issued in
connection with certain subordinated notes included in the repaid indebtedness
(the "Subordinated Notes Warrants"); and (v) up to $2.4 million for
distributions comprised of $2.25 million which may be used for the repurchase of
Letitia Common Stock from the High Voltage Engineering Corporation Retirement
Plan representing up to 10% of the outstanding Letitia Common Stock, and
$150,000 for a proportional accrual relating to the Subordinated Notes Warrants.
As a condition to the completion of the Offerings, the Company entered
into the New Revolving Credit Facility with a maximum committed amount of $25.0
million. The term of the New Revolving Credit Facility is five years.
Obligations under the New Revolving Credit Facility are guaranteed by HVE and
all of its domestic subsidiaries and are secured by the inventories and accounts
receivable of HVE and its domestic subsidiaries. See "Description of Other
Indebtedness -- New Revolving Credit Facility."
THE MERGER
On May 7, 1997, HVE entered into the Merger Agreement with PHI Holdings
and CVCA, the principal stockholder of PHI Holdings, to acquire PHI. The
acquisition was effected on August 8, 1997 through the merger of Lauren
Corporation, a wholly-owned subsidiary of HVE, with and into PHI Holdings.
Immediately thereafter, PHI Holdings was merged with and into Physical
Electronics, Inc., its wholly-owned subsidiary, and Physical Electronics, Inc.
became a direct, wholly-owned subsidiary of HVE. The aggregate Merger
Consideration paid, after adjustment, was approximately $54.6 million in cash
and included the payment of the following: (i) approximately $31.6 million in
cash consideration to the current holders of the capital stock of PHI (including
holders of options to purchase capital stock); (ii) approximately $9.8 million
to The Perkin-Elmer Corporation in repayment of a convertible subordinated
promissory note of PHI (the "Perkin-Elmer Note"); (iii) approximately $7.6
million in the aggregate to First Bank National Association to repay a term
promissory note of PHI; (iv) approximately $1.3 million to CVCA as an advance
against expenses incurred or to be incurred by CVCA in its capacity as
representative of the holders of the capital stock of PHI as determined
immediately prior to the consummation of the Merger; and (v) an aggregate of
approximately $4.3 million to the former and current Chief Executive Officers of
PHI in payment of certain existing obligations of PHI to such officers.
Approximately $12.9 million of the $31.6 million in cash consideration paid to
the holders of the capital stock of PHI in the Merger was received by 93
officers, directors and employees of, and consultants to, PHI in exchange for
their capital stock and options to purchase capital stock of PHI. See "Certain
Relationships and Related Transactions." In addition, pre-Merger holders of the
capital stock of PHI (including holders of options to purchase capital stock)
are entitled to receive an amount in cash equal to the amount of any refunds the
Company receives after the closing of the Merger of taxes paid by PHI for
periods prior to the closing of the Merger and an amount in cash equal to the
amount, if any, by which the cash and cash equivalents of PHI on the closing
date exceed the cash and cash equivalents of PHI on July 31, 1997.
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<PAGE> 28
INTERCOMPANY NOTES
At the closing of the Offerings, the principal amount of the Existing
Notes was allocated among HVE and each of its direct Restricted Subsidiaries in
consideration for the release of certain obligations of such Restricted
Subsidiaries relating to the indebtedness repaid in connection with the
Refinancing. Amounts allocated to such Restricted Subsidiaries are evidenced by
Intercompany Notes in the following principal amounts: (i) Robicon: $39.5
million; (ii) PHI: $39.5 million; (iii) Datcon: $19.0 million; (iv) Anderson:
$19.0 million; and (v) HIVEC Holdings: $3.5 million. The Intercompany Notes: (i)
are senior obligations of each Restricted Subsidiary; (ii) have terms
substantially similar to the terms of the Notes; and (iii) may not be forgiven
by the Company as long as the Notes remain outstanding; provided, however, that
the Intercompany Note of a particular Restricted Subsidiary must be repaid with
the Net Proceeds of a Qualified Subsidiary IPO of such Restricted Subsidiary.
See "Description of Other Indebtedness."
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<PAGE> 29
USE OF PROCEEDS
No proceeds will be received by the Company from the Exchange Offer.
The gross proceeds to the Company from the Offerings of $170.2 million were or
will be used to consummate the Refinancing, to finance the Merger, for general
corporate purposes and to pay related fees and expenses. See "The Transactions."
The following table sets forth the sources and uses of funds as of the closing
date of the Transactions (dollars in thousands):
<TABLE>
<S> <C>
SOURCES OF FUNDS:
Notes sold in Offering .................................. $135,000
Units sold in Offering .................................. 35,200
--------
Total sources of funds ............................. $170,200
========
USES OF FUNDS:
Repayment of Revolving Credit Facility due
2001(a) ................................................ $ 14,426
Repayment of Senior Term Loan due 2003(b) ............... 8,231
Repayment of Senior Secured Notes due 2003(c) ........... 23,551
Repayment of Senior Unsecured Notes due 2003(d) ......... 7,723
Repayment of Subordinated Notes due 2004(e) ............. 26,544
Redemption of Series C Preferred Stock(f) ............... 6,871
Redemption of Series B Preferred Stock(g) ............... 4,750
Extinguishment of BancBoston CIP Agreements (h) ......... 6,750
Repurchase of certain Subordinated Notes
Warrants (i) ........................................ 2,500
Cash purchase price of PHI(j) ........................... 54,536
Distributions to fund Letitia Common
Stock repurchase (k) ................................ 2,400
General corporate purposes ............................. 4,935
Estimated fees and expenses ............................. 6,983
--------
Total uses of funds ................................ $170,200
========
</TABLE>
- ----------
(a) The Company's former senior revolving credit facility (the "Former
Revolving Credit Facility") bore interest, at the Company's option, at
(i) LIBOR plus 2.75% or (ii) the Base Rate (as defined therein)
currently 8.50%, and matured on April 30, 2001. Repayment included
$400,000 in prepayment penalties and $26,000 of accrued and unpaid
interest.
(b) The Company's senior term loan (the "Senior Term Loan") bore interest
at the Company's option at (i) LIBOR plus 3.25% or (ii) the Base Rate
plus .75% (as defined therein), currently 9.25% and matured on April
30, 2003. Repayment included $17,000 of accrued and unpaid interest.
(c) The Company's senior secured notes (the "Senior Secured Notes") bore
interest at 10.84% and matured on May 1, 2003. Repayment included a
make whole premium of $3.0 million and $0.6 million of accrued and
unpaid interest.
(d) The Company's senior unsecured notes (the "Senior Unsecured Notes")
bore interest at 12.09% and matured on May 1, 2003. Repayment included
$493,000 in prepayment penalties and $230,000 of accrued and unpaid
interest.
(e) The Company's senior subordinated notes (the "Subordinated Notes") paid
cash interest that, together with accrued non-cash interest, provided
an annual yield to maturity of 14%. The Subordinated Notes matured on
May 1, 2004. Repayment included $6.2 million in prepayment penalties
and $0.5 million of accrued and unpaid interest.
(f) The Series C Preferred Stock had an aggregate liquidation preference of
$6.9 million (as of the closing date of the Transactions) and was
mandatorily redeemable on June 1, 2000. All of the outstanding Series C
Preferred Stock was owned by Letitia Corporation, which had issued to
Quest Equities Corp. ("Quest") a class of its own capital stock (the
"Letitia Quest Preferred Stock") having identical rights and
preferences to the Series C Preferred Stock. Letitia Corporation caused
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<PAGE> 30
the redemption of all of the outstanding Letitia Quest Preferred Stock,
simultaneously with the closing of the Transactions, with the proceeds
of the redemption of the Series C Preferred Stock. In connection with
the redemption of the Letitia Quest Preferred Stock, certain rights of
Quest under agreements substantially similar to the CIP Agreements,
pursuant to which, under certain circumstances, Quest was entitled to
demand "contingent interest payments" equal to a minimum of 3.1% of
HVE's common stock equity value at the time payment was demanded, were
extinguished.
(g) The Series B Preferred Stock had an aggregate liquidation preference of
$4.8 million, and was mandatorily redeemable by the Company on March
17, 2008. All of the outstanding 25,705 shares of Series B Preferred
Stock were held by Letitia Corporation. Messrs. Laurence S. Levy and
Clifford Press, the Chairman of the Board and Chief Executive Officer,
and President and a Director, respectively, of the Company and certain
of their affiliates and family members beneficially own 90% of the
outstanding Letitia Common Stock, before giving effect to any
repurchase of Letitia Common Stock from the High Voltage Engineering
Corporation Retirement Plan..
(h) Under the terms of the CIP Agreements, BancBoston had the right to
demand cash payments equal to a minimum of approximately 12.4% of the
Company's common stock equity value determined as the greater of the
fair market value or the Formula Value of the Company's common stock
equity at the time the demand is made. The Formula Value was an amount
calculated as of a certain date by (a) multiplying the Company's
Consolidated EBITA (as defined therein) during the preceding 12 full
calendar months by 6.5, (b) subtracting the total amount of the
Company's consolidated indebtedness for borrowed money outstanding on
such date and (c) adding to this amount the Company's cash and cash
equivalents on such date (adjusted to include the amount of certain
distributions). The Company and BancBoston extinguished these CIP
Agreements, simultaneously with the closing of the Transactions, along
with other accommodations, in return for payment to BancBoston of $6.75
million from a portion of the net proceeds of the Offerings.
(i) Represents the repurchase of warrants that entitled the holders thereof
to purchase 71.43 shares of HVE Common Stock, or 6.25% of HVE's Common
Stock on a fully diluted basis. In connection with the issuance of the
Subordinated Notes in May 1996, the Company issued to the holders
thereof warrants (the "Subordinated Notes Warrants") to purchase 142.86
shares of HVE Common Stock, representing 12.5% of the fully-diluted HVE
Common Stock.
(j) The Merger Consideration paid at the closing date of the Transactions,
after adjustment, of approximately $54.6 million was distributed as
follows: (i) approximately $31.6 million in cash consideration to the
holders of the capital stock of PHI (including holders of options to
purchase capital stock); (ii) approximately $9.8 million to repay the
Perkin-Elmer Note, which bore interest at a rate of 10.0% and had a
scheduled final maturity of May 20, 2001; (iii) approximately $7.6
million in the aggregate to First Bank National Association to repay a
term promissory note of PHI, which had a scheduled maturity of June 30,
2000 and formerly bore interest at a rate of 8.75%; (iv) approximately
$1.3 million to CVCA as an advance against expenses incurred or to be
incurred by CVCA in its capacity as representative of the holders of
the capital stock of PHI as determined immediately prior to the
consummation of the Merger; and (v) an aggregate of approximately $4.3
million to the former and current Chief Executive Officers of PHI in
payment of certain obligations of PHI to such officers. Approximately
$12.9 million of the $31.6 million in cash consideration paid to the
holders of the capital stock of PHI in the Merger was received by 93
current officers, directors and employees of, and consultants to, PHI
in exchange for their capital stock and options to purchase capital
stock of PHI. These estimated payments do not include post-closing
adjustments which may be required. See "The Transactions -- The Merger"
and "Certain Relationships and Related Transactions."
(k) Represents a distribution to Letitia Corporation of up to $2.25 million
to fund the intended purchase of Letitia Common Stock held by the High
Voltage Engineering Corporation Retirement Plan representing up to 10%
of the outstanding Letitia Common Stock, and a $150,000 proportional
accrual relating to the Subordinated Notes Warrants not repurchased
with a portion of the net proceeds of the Offerings.
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<PAGE> 31
CAPITALIZATION
(DOLLARS IN THOUSANDS)
The following table sets forth the consolidated capitalization of High
Voltage Engineering Corporation and subsidiaries as of April 26, 1997, PHI
Acquisition Holdings, Inc. and subsidiaries as of March 28, 1997, and the
Company pro forma as of April 26, 1997, as adjusted to reflect the Transactions.
This table should be read in conjunction with "Use of Proceeds," "Unaudited Pro
Forma Condensed Consolidated Financial Data," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the consolidated
financial statements and the notes thereto included elsewhere herein.
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
-------------------------- -----------------------------
HVE(a) PHI(b) ADJUSTMENTS COMBINED
--------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
New Revolving Credit Facility(c) ........... $ -- $ -- $ -- $ --
Existing senior secured debt(d) ............ 36,630 8,395 (45,025) --
Notes sold in the Offering ................. -- -- 135,000 135,000
Senior Unsecured Notes ..................... 7,000 -- (7,000) --
Other debt(e) .............................. 22,397 9,456 (9,456) 22,397
Subordinated Notes(f) ...................... 19,374 -- (19,374) --
Total debt ....................... 85,401 17,851 54,145 157,397
--------- --------- --------- ---------
Series A Redeemable Preferred Stock ........ -- -- 33,000 29,291
(2,200)
(1,509)
Series B Redeemable Preferred Stock ........ 4,750 -- (4,750) --
Series C Redeemable Preferred Stock ........ 6,724 -- (6,724) --
Redeemable put warrants(g) ................. 2,800 (2,500) 2,500
2,200
Stockholder's Deficiency
Common stock .......................... 1 17 (17) 1
Paid-in capital ....................... 17,326 7,520 2,200 19,425
(7,520)
(101)
Retained earnings (accumulated
deficit) ............................ (54,104) 6,432 (21,786)(h) (75,890)
(6,432)
(2,200)
2,200
Cumulative foreign currency translation
adjustment .......................... 41 (472) 472 41
--------- --------- --------- ---------
Total stockholder's equity
(deficiency) ................... (36,736) 13,497 (33,184) (56,423)
--------- --------- --------- ---------
Total capitalization ............. $ 62,939 $ 31,348 $ 38,478 $ 132,765
========= ========= ========= =========
</TABLE>
- ----------
(a) For purposes of this table, the term "HVE" refers to High Voltage
Engineering Corporation and subsidiaries.
(b) For purposes of this table, the term "PHI" refers to PHI Acquisition
Holdings, Inc. and subsidiaries.
(c) The New Revolving Credit Facility will be a $25.0 million senior
secured revolving credit facility and will bear interest at (i) the
Lender's Base Rate plus 0.25% or (ii) LIBOR plus 1.50%.
(d) Comprised of the Existing Revolving Credit Facility, the Senior Term
Loan, the Senior Secured Notes and PHI's term promissory note.
29
<PAGE> 32
(e) Other debt is comprised of capital leases, industrial revenue bonds
("IRBs"), mortgage notes, notes payable, the foreign credit line and
the Perkin-Elmer Note.
(f) The Subordinated Notes were issued at a price of 82.086% of the
principal amount thereof. The initial carrying value also reflected an
additional discount related to the value allocated to redeemable put
warrants (the "Subordinated Notes Warrants") issued in connection
therewith.
(g) In connection with the issuance of the Subordinated Notes in 1996, the
Company issued the Subordinated Notes Warrants. As of April 26, 1997,
the value allocated to such warrants was $2.8 million. In connection
with the Offerings, the Company repurchased Subordinated Notes Warrants
entitling the holders thereof to purchase 71.43 shares of HVE Common
Stock, or 6.25% of HVE Common Stock on a fully diluted basis, for $2.5
million. As a result, the carrying value of the remaining Subordinated
Notes Warrants will be increased from $1.4 million to $2.5 million.
(h) Reflects the payment of prepayment penalties, the write-off of
purchased in-process research development, the write-off of deferred
financing costs, a charge related to the extinguishment of the
BancBoston CIP Agreements, distributions to fund the Letitia Common
Stock repurchase and a payment to fund a proportional accrual relating
to the Subordinated Notes Warrants.
30
<PAGE> 33
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
The following Unaudited Pro Forma Condensed Consolidated Balance Sheet
presents the pro forma financial position of the Company as if the Transactions
had occurred on April 26, 1997. The following Unaudited Pro Forma Condensed
Consolidated Statement of Operations for Fiscal 1997 presents the results of
operations of the Company as if the Transactions had occurred at the beginning
of the period presented. The Unaudited Pro Forma Condensed Consolidated
Financial Data for Fiscal 1997 have been prepared by the Company's management
and are not necessarily indicative of the Company's financial position and
results of operations had the Transactions actually occurred on the assumed
dates, nor are they necessarily indicative of the Company's financial position
and results of operations for any future period. In the opinion of management,
all necessary adjustments have been made to fairly present this pro forma
information. The Unaudited Pro Forma Condensed Consolidated Financial Data are
based on the historical financial statements of High Voltage Engineering
Corporation and subsidiaries and PHI Acquisition Holdings, Inc. and
subsidiaries, and give effect to the assumptions and adjustments set forth in
the accompanying notes. References in this Prospectus to the Company's pro forma
fiscal year ended April 26, 1997, combine, on a pro forma basis, the results of
High Voltage Engineering Corporation and subsidiaries for Fiscal 1997 and PHI
Acquisition Holdings, Inc. and subsidiaries for the LTM period ended March 28,
1997. The fiscal year end of PHI Acquisition Holdings, Inc. and subsidiaries is
on the Friday closest to June 30.
The allocation of the aggregate purchase price for the Merger, together
with the liabilities assumed pursuant thereto, to the net assets acquired has
been based on management's preliminary estimate of the fair value of such assets
and liabilities. Adjustments to asset values, including inventories, and
liabilities in the final allocation may differ from these estimates, which could
significantly impact future earnings.
The Unaudited Pro Forma Condensed Consolidated Financial Data should be
read in conjunction with the "Selected Historical Consolidated Financial Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "The Transactions," the audited consolidated financial statements
of High Voltage Engineering Corporation and subsidiaries and the notes thereto,
and the audited and unaudited financial statements of PHI Acquisition Holdings,
Inc. and subsidiaries and the notes thereto, included elsewhere in this
Prospectus.
31
<PAGE> 34
` HIGH VOLTAGE ENGINEERING CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF APRIL 26, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
-------------------------- -----------------------------
HVE(a) PHI(b) ADJUSTMENTS COMBINED
--------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents ...................... $ 1,542 $ 2,647 $ 9,041 (c) $ 13,230
Restricted cash ................................ 2,210 -- 2,210
Accounts receivable -- net ..................... 33,333 13,337 46,670
Inventories .................................... 22,334 15,901 38,235
Prepaid expenses and other current assets ...... 1,164 336 1,500
Deferred income taxes .......................... -- 288 288
--------- --------- --------- ---------
Total current assets .................... 60,583 32,509 9,041 102,133
PROPERTY, PLANT AND EQUIPMENT -- Net ............. 30,966 9,850 $ 14,561 (e) 55,377
INVESTMENT IN JOINT VENTURE ...................... -- 1,896 1,896
ASSETS HELD FOR SALE ............................. 5,248 -- 5,248
OTHER ASSETS -- Net .............................. 16,790 575 5,023 (c) 26,520
(5,800)(d)
(2,668)(d)
12,600 (e)
COST IN EXCESS OF NET ASSETS ACQUIRED ............ -- -- 6,099 (e) 6,099
--------- --------- --------- ---------
$ 113,587 $ 44,830 $ 38,856 $ 197,273
========= ========= ========= =========
LIABILITIES AND STOCKHOLDER'S (DEFICIENCY) EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt obligations $ 2,609 $ 2,250 $ (1,429)(c) $ 1,180
(2,250)(c)
Foreign credit line ............................ 2,284 -- 2,284
Accounts payable ............................... 17,199 3,208 20,407
Accrued interest ............................... 8,394 130 951 (d) 144
(2,581)(c)
(6,750)(c)
Accrued liabilities ............................ 12,000 7,439 (9,967)(c) 19,439
9,967 (d)
Advance payments by customers .................. 5,294 800 6,094
Federal, foreign and state income taxes payable 1,261 1,245 2,506
Deferred income taxes .......................... 2,171 -- 2,171
--------- --------- --------- ---------
Total current liabilities ............... 51,212 15,072 (12,059) 54,225
LONG-TERM OBLIGATIONS, LESS CURRENT MATURITIES ... 80,508 15,601 135,000 (c) 153,933
(61,575)(c)
(15,601)(c)
DEFERRED INCOME TAXES ............................ 1,834 -- 8,758 (e) 10,592
OTHER LIABILITIES ................................ 2,495 660 3,155
COMMITMENTS AND CONTINGENCIES
REDEEMABLE PREFERRED STOCK ....................... 11,474 -- 33,000 (c) 29,291
(2,200)(c)
(11,474)(c)
(1,509)(c)
REDEEMABLE PUT WARRANTS .......................... 2,800 -- (2,500)(c) 2,500
2,200 (f)
STOCKHOLDER'S (DEFICIENCY) EQUITY ................ (36,736) 13,497 2,200 (c) (56,423)
(101)(c)
2,200 (c)
(21,786)(d)
(13,497)(e)
(2,200)(f)
---------
$ 113,587 $ 44,830 $ 38,856 $ 197,273
========= ========= ========= =========
</TABLE>
See accompanying Notes to Unaudited Pro Forma
Condensed Consolidated Balance Sheet.
32
<PAGE> 35
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF APRIL 26, 1997
(DOLLARS IN THOUSANDS)
(a) For purposes of the Unaudited Pro Forma Condensed Consolidated Balance
Sheet, the term "HVE" refers to High Voltage Engineering Corporation
and subsidiaries.
(b) For purposes of the Unaudited Pro Forma Condensed Consolidated Balance
Sheet, the term "PHI" refers to PHI Acquisition Holdings, Inc. and
subsidiaries. The financial position of PHI is as of March 28, 1997,
the end of PHI's third fiscal quarter.
(c) Reflects the estimated sources and uses of funds for the Transactions,
assuming they had occurred as of April 26, 1997:
<TABLE>
<S> <C> <C>
SOURCES OF FUNDS:
Notes sold in Offering ................................................................. $135,000
Units sold in Offering(i) .............................................................. 35,200
--------
Total sources of funds ......................................................... $170,200
========
USES OF FUNDS:
Merger:
Cash consideration paid to holders of PHI capital stock and
holders of options to purchase capital stock(ii) .................................. $ 33,400
Payments to current and former officers of PHI ...................................... 4,249
Repayment of existing PHI indebtedness:
Term promissory note -- current maturities ........................................ 2,250
Term promissory note -- long-term obligations ..................................... 6,145
Perkin-Elmer Note -- long-term obligations ........................................ 9,456 $ 55,500
--------
Estimated Merger expenses ........................................................... 350
Repayment of HVE's indebtedness:
Senior Term Loan -- current maturities .............................................. 1,429
Existing Revolving Credit Facility .................................................. 7,702
Senior Term Loan .................................................................... 7,499
Senior Secured Notes ................................................................ 20,000
Senior Unsecured Notes .............................................................. 7,000
Subordinated Notes(iii) ............................................................. 19,374 61,575
--------
Accrued interest .................................................................... 2,581
Prepayment penalties and make whole premiums:
Prepayment penalty -- Existing Revolving Credit
Facility ...................................................................... 400
Make whole premium -- Senior Secured Notes ..................................... 2,448
Prepayment penalty -- Senior Unsecured Notes ................................... 493
Prepayment penalty -- Subordinated Notes(iii) .................................. 6,626 9,967
--------
Redemption of HVE's redeemable preferred stock(iv) ..................................... 11,474
Extinguishment of BancBoston CIP Agreements (v) ........................................ 6,750
Repurchase of certain Subordinated Notes Warrants (vi) ................................. 2,500
Distributions to fund Letitia Common Stock repurchase (vii) ............................ 2,400
General corporate purposes ............................................................. 9,041
Estimated fees and expenses associated with the Notes Offering ......................... 4,823
Estimated fees and expenses associated with the New Revolving Credit Facility .......... 200
Estimated fees and expenses associated with Series A Preferred Stock and Warrants (viii) 1,509
Estimated fees and expenses associated with the Common
Shares .......................................................................... 101
--------
Total uses of funds ............................................................ $170,200
========
</TABLE>
- ----------
33
<PAGE> 36
(i) The proceeds from the Units sold in the Offering, excluding the $2.2
million of proceeds from the Common Shares, which have been allocated
by the Company between the Series A Preferred Stock ($30,800) and the
Warrants ($2,200) based on the initial estimated value of such Warrants
at the Issue Date. The initial estimated value of such Common Shares,
Series A Preferred Stock and Warrants are based on preliminary
evaluations by the Company and are subject to change.
(ii) Cash consideration paid to the holders of PHI capital stock and holders
of options to purchase capital stock includes transaction fees and
expenses of approximately $1.2 million. In addition, the Company may be
required to pay to the former shareholders of PHI contingent
consideration in an amount equal to (1) income tax refunds, if any,
that the Company receives after closing of the Merger for taxes paid by
PHI for periods prior to the closing of the Merger and (2) an amount in
cash equal to the amount, if any, by which the cash and cash
equivalents of PHI on the closing date exceed its cash and cash
equivalents on July 31, 1997.
(iii) HVE's Subordinated Notes were issued at a price of 82.086% of the
principal amount thereof, resulting in gross proceeds to HVE of $20.5
million. The carrying value of the Subordinated Notes at April 26, 1997
reflects an additional discount of $2.4 million related to the value
allocated to the redeemable put warrants issued in connection
therewith. The Subordinated Notes were redeemed at a redemption price
of $26.0 million, 104% of the principal amount thereof, plus accrued
and unpaid interest thereon.
(iv) In connection with the Refinancing, the Company redeemed the issued and
issuable shares of all of the Company's redeemable preferred stock
comprised of the Series B Preferred Stock and the Series C Preferred
Stock at their carrying value. See "Use of Proceeds."
(v) Under the terms of the CIP Agreements, BancBoston had the right to
demand cash payments equal to a minimum of approximately 12.4% of the
Company's common stock equity value determined as the greater of the
fair market value or the Formula Value of the Company's common stock
equity at the time the demand is made. The Formula Value was an amount
calculated as of a certain date by (a) multiplying the Company's
consolidated EBITA (as defined therein) during the preceding 12 full
calendar month by 6.5, (b) subtracting the total amount of the
Company's consolidated indebtedness for borrowed money outstanding on
such date and (c) adding to this amount the Company's cash and cash
equivalents on such date (adjusted to include the amount of certain
distributions). The Company and BancBoston extinguished these CIP
Agreements, simultaneously with the closing of the Transactions, along
with other accommodations, in return of payment to BancBoston of $6.75
million from a portion of the net proceeds of the Offerings.
(vi) Represents the repurchase of warrants entitling the holders thereof to
purchase 71.43 shares of HVE's Common Stock, or 6.25% of HVE's Common
stock on a fully diluted basis. In connection with the issuance of the
Subordinated Notes in May 1996, the Company issued to the holders
thereof warrants to purchase 142.86 shares of HVE Common Stock,
representing 12.5% of the fully-diluted HVE Common Stock.
(vii) Represents a $2.25 million distribution to Letitia Corporation to fund
the intended purchase of Letitia Common Stock held by the High Voltage
Engineering Corporation Retirement Plan representing up to 10% of the
outstanding Letitia Common Stock, and a $150,000 proportional accrual
relating to the Subordinated Notes Warrants.
(viii) On a historical basis, costs associated with the issuance of the Series
A Preferred Stock and Warrants will be charged to paid-in-capital.
(d) Reflects the following adjustments to Stockholder's equity (deficiency):
34
<PAGE> 37
<TABLE>
<S> <C> <C>
Charges to historical earnings:
Make whole premiums and prepayment penalties on HVE indebtedness . $ 9,967
Write-off of purchased in-process research and development ....... 5,800
Write-off of deferred financing costs ............................ 2,668
Extinguishment of BancBoston CIP Agreements ...................... 951
-------
Subtotal ................................................... $19,386
Distributions to fund Letitia Common Stock repurchase ............ 2,400
-------
Total ....................................................... $21,786
=======
</TABLE>
(e) Reflects the purchase price allocation to cost in excess of net assets
acquired using the purchase method of accounting. The preliminary
allocation of the purchase price and related transaction costs is as
follows:
<TABLE>
<S> <C> <C>
Cash consideration paid to holders of PHI capital stock and
holders of options to purchase capital stock ............. $ 33,400
Payments to current and former officers of PHI ............ 4,249 $ 37,649
--------
Estimated Merger expenses ................................. 350
Less: Merger adjustments to PHI's historical financial
statements(i):
Elimination of PHI's stockholders' equity ............ 13,497
Increase in intangibles(ii)(iii) ..................... 12,600
Write-up of PHI fixed assets(iii) .................... 14,561
Deferred tax liability arising from the Merger ....... (8,758) 31,900
-------- --------
Cost in excess of net assets acquired ........... $ 6,099
========
</TABLE>
- ----------
(i) The purchase price allocation is subject to final
determination upon the closing of the Merger. Contingent
consideration relating to income tax refunds and excess cash
may be required. See "The Transactions." The fair value of net
assets acquired has been based on management's preliminary
estimate of the fair value of such assets and liabilities.
Adjustments to asset values, including inventories and
liabilities in the final allocation may differ from these
estimates, which could significantly impact future earnings.
(ii) Consists of the following (with the amortization period noted
parenthetically):
<TABLE>
<S> <C>
Patents/patent applications (11 years) ........................ $ 6,800
In-process research and development -- (see note (d) above) ... 5,800
-------
Total ........................................................... $12,600
=======
</TABLE>
(iii) Based on a preliminary appraisal by a nationally recognized
independent appraiser of property and companies, with a
valuation date of May 23, 1997, and current fixed asset
additions after such date.
(f) In connection with the Offerings, the Company repurchased from CIBC
Wood Gundy Subordinated Notes Warrants entitling the holders thereof to
purchase 71.43 shares of HVE's Common Stock, or 6.25% of HVE's Common
Stock on a fully diluted basis, for $2.5 million. As a result, the
carrying value of the Subordinated Notes Warrants will be increased
form $2.8 million to $5.0 million.
35
<PAGE> 38
HIGH VOLTAGE ENGINEERING CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED APRIL 26, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
-------------------------- -----------------------------
HVE(a) PHI(b) ADJUSTMENTS COMBINED
--------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net sales ................................... $ 173,103 $ 64,752 $ 237,855
Cost of sales ............................... 114,848 39,641 $ 209(c) 154,856
158(f)
--------- --------- --------- ---------
Gross profit ........................... 58,255 25,111 (367) 82,999
Administrative and selling expenses ......... 36,967 10,251 116(c) 48,434
305(d)
618(e)
177(f)
Research and development expenses ........... 9,361 7,286 76(c) 16,723
Reimbursed environmental and litigation
costs-net ................................. 26 -- 26
Other ....................................... 2,234 408 2,642
--------- --------- --------- ---------
Income from operations ................. 9,667 7,166 (1,659) 15,174
Interest expense ............................ 11,602 1,821 3,714(g) 17,137
Interest income ............................. (351) (67) (418)
--------- --------- --------- ---------
Income (loss) from continuing operations
before income taxes and extraordinary
item ................................. (1,584) 5,412 (5,373) (1,545)
Income taxes ................................ 526 1,578 -- (h) 2,104
--------- --------- --------- ---------
Income (loss) from continuing operations
before extraordinary item ............ (2,110) 3,834 (5,373) (3,649)
Preferred dividend requirement ......... (479) -- (3,763)(i) (4,242)
Accretion of redeemable put warrants ... (387) -- (2,200)(j) (2,587)
--------- --------- --------- ---------
Income (loss) available to common
stockholders before extraordinary item .... $ (2,976) $ 3,834 $ (11,336) $ (10,478)
========= ========= ========= =========
Ratio of earnings to fixed charges(k) ....... -- --
EBITDA data(i):
Income from operations .................... $ 9,667 $ 7,166 $ (1,659) $ 15,174
Reimbursed environmental and litigation
costs-net .............................. 26 -- 26
Other ..................................... 2,234 408 2,642
Depreciation and amortization ............. 4,376 2,595 1,324 8,295
PHI severance and relocation expenses ..... -- 270 270
--------- --------- --------- ---------
EBITDA ................................. $ 16,303 $ 10,439 $ (335) $ 26,407
========= ========= ========= =========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed
Consolidated Statement of Operations.
36
<PAGE> 39
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED APRIL 26, 1997
(DOLLARS IN THOUSANDS)
(a) For purposes of the Unaudited Pro Forma Condensed Consolidated
Statement of Operations, the term "HVE" refers to High Voltage
Engineering Corporation and subsidiaries.
(b) For purposes of the Unaudited Pro Forma Condensed Consolidated
Statement of Operations, the term "PHI" refers to PHI Acquisition
Holdings, Inc. and subsidiaries. The results of operations of PHI are
for the LTM period ended March 28, 1997.
(c) Reflects an increase in depreciation expense resulting from an
appraisal of both the estimated fair value of fixed assets and their
estimated remaining service lives as of March 28, 1997 and current
fixed asset additions after such date. Such assets will be depreciated
over their estimated remaining service lives which range from 3 to 30
years. See note (e) to "Notes to Unaudited Pro Forma Condensed
Consolidated Balance Sheet." The increase in depreciation expense is
allocated $209 to cost of sales, $116 to administrative and selling
expenses and $76 to research and development expenses, based upon the
allocation of historical depreciation expense in the results of
operations of PHI for the LTM period ended March 28, 1997.
(d) Reflects $305 of estimated amortization of cost in excess of net assets
acquired, totaling $6.1 million, over 20 years resulting from the
Merger. See note (e) to "Notes to Unaudited Pro Forma Condensed
Consolidated Balance Sheet."
(e) Reflects $618 of amortization of intangible assets, totaling $6.8
million, resulting from the Merger. See note (e) (ii) to "Notes to
Unaudited Pro Forma Condensed Consolidated Balance Sheet."
(f) Reflects an adjustment to remove the reversal of incentive compensation
accruals recorded by PHI in the fourth quarter of its fiscal year ended
June 28, 1996. The amounts recorded were $158 to cost of sales and $177
to administrative and selling expenses, respectively.
(g) Reflects the effect on interest expense resulting from the
Transactions:
<TABLE>
<CAPTION>
INTEREST
INTEREST RATE AMOUNT EXPENSE
------------- ------ -------
PRO FORMA INTEREST EXPENSE
<S> <C> <C> <C>
Calculation:
New Revolving Credit Facility(i) . 7.22% $ -- $ --
Notes offered hereby ............. 10.5% 135,000 14,175
Mortgage notes, capital leases,
foreign credit line and notes
payable ....................... 2.0% -- 16.4% 22,397 2,108
Unused credit facility fee ....... 125
--------
Pro forma cash interest
expense ..................... 16,408
Amortization of deferred financing
costs ......................... 729
--------
Total pro forma interest
expense ..................... 17,137
Less:
Historical HVE interest expense .. 11,602
Historical PHI interest expense .. 1,821
--------
Total historical interest expense .. 13,423
--------
Total pro forma interest expense
adjustment........................ $ 3,714
========
</TABLE>
- ----------
37
<PAGE> 40
(i) The New Revolving Credit Facility will bear interest at LIBOR plus
1.50% or the Lender's Base Rate plus .25%. For the purpose of this
computation LIBOR is assumed to be 5.72% which is the average of the
one, three and six month LIBOR rates.
(h) An income tax benefit has not been recognized for the tax effect of pro
forma adjustments due to the non-deductibility of costs in excess of
net assets acquired and a valuation allowance which was established
against the recoverability of the future income tax benefits due to
uncertainties as to their utilization in future periods.
(i) Represents dividends in the amount of $4,242 on the Series A Preferred
Stock at 12.50% per annum, payable semiannually in cash or additional
shares of Series A Preferred Stock, at the option of the Company, and
the elimination of dividends on the Series C Preferred Stock of $479.
(j) In connection with the Offerings, the Company repurchased Subordinated
Notes Warrants entitling the holders thereof to purchase 71.43 shares
of HVE's Common Stock, or 6.25% of HVE's Common Stock on a fully
diluted basis, for $2.5 million. As a result, the carrying value of the
Subordinated Notes Warrants will be increased from $2.8 million to $5.0
million.
(k) For the purpose of this computation, earnings are defined as income or
loss from continuing operations before income taxes, extraordinary
items and fixed charges. Fixed charges are the sum of: (i) interest
cost; (ii) amortization of deferred financing costs; (iii) the portion
of operating lease rental expense that is representative of the
interest factor (deemed to be one-third); (iv) dividends on preferred
stock; and (v) accretion of redeemable put warrants issued in
connection with the Subordinated Notes. On a pro forma basis and HVE
historical basis, earnings were inadequate to cover fixed charges by
$8.4 million and $2.5 million, respectively, in Fiscal 1997.
(l) EBITDA is defined as earnings from continuing operations before
interest, income taxes, depreciation, amortization and non-recurring
items. Non-recurring items are comprised of: (i) reimbursed
environmental and litigation costs -- net and other and (ii) $210 of
severance payments to a former officer of PHI and $60 of relocation
expenses included in administrative and selling expenses in connection
with the replacement of such officer of PHI in Fiscal 1997. See notes
F, K and N to "Notes to Consolidated Financial Statements" of High
Voltage Engineering Corporation and subsidiaries. EBITDA is not a
measure of performance under GAAP. While EBITDA should not be
considered as a substitute for net income, cash flows from operating
activities and other income or cash flow statement data prepared in
accordance with GAAP, or as a measure of profitability or liquidity,
management understands that EBITDA is customarily used as a measurement
in evaluating companies. Moreover, substantially all of the Company's
financing agreements contain covenants in which EBITDA, as defined
therein, is used as a measure of financial performance. See
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" for discussion of other measures of performance
determined in accordance with GAAP.
38
<PAGE> 41
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS)
HIGH VOLTAGE ENGINEERING CORPORATION AND SUBSIDIARIES
The Selected Historical Consolidated Financial Data presented below
under the captions "Statement of Operations Data" and "Balance Sheet Data" as of
and for each of the fiscal years in the five-year period ended April 26, 1997
are derived from the consolidated financial statements of High Voltage
Engineering Corporation and its subsidiaries, as restated.
The Selected Historical Consolidated Financial Data of High Voltage
Engineering Corporation and its subsidiaries should be read in conjunction with
the historical consolidated financial statements of High Voltage Engineering
Corporation and subsidiaries for the fiscal years in the three-year period ended
April 26, 1997 and the notes thereto included elsewhere herein. For additional
information, see "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-------------------------------------------------------------
1993 1994 1995 1996 1997
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales ..................................................... $ 101,282 $ 102,098 $ 116,551 $ 149,100 $ 173,103
Cost of sales ................................................. 65,109 63,951 73,424 97,386 114,848
--------- --------- --------- --------- ---------
Gross profit ................................................ 36,173 38,147 43,127 51,714 58,255
Administrative and selling expenses(a) ........................ 24,323 24,902 26,113 34,915 36,967
Research and development expenses ............................. 6,732 6,940 8,094 8,071 9,361
Restructuring charge(b) ....................................... -- -- 1,294 150 --
Reimbursed environmental and litigation costs-net(c) .......... (2,467) (6,725) (2,130) (450) 26
Other(d) ...................................................... (408) 703 892 1,163 2,234
--------- --------- --------- --------- ---------
Income from operations ...................................... 7,993 12,327 8,864 7,865 9,667
Interest expense .............................................. (8,753) (7,870) (8,573) (11,225) (11,602)
Interest income ............................................... 628 99 74 278 351
Income (loss) from continuing operations before income taxes,
discontinued operations and extraordinary item ............ (132) 4,556 365 (3,082) (1,584)
Income taxes (credit) ......................................... 1,677 4,209 196 (2,619) 526
--------- --------- --------- --------- ---------
Income (loss) from continuing operations before discontinued
operations and extraordinary item ........................... (1,809) 347 169 (463) (2,110)
Discontinued operations:
Income (loss) from discontinued operations, net of income
taxes ..................................................... (392) 106 607 (135) --
Gain (loss) on disposal of discontinued operations, net of
income taxes .............................................. -- -- (331) 1,633 --
--------- --------- --------- --------- ---------
Extraordinary gain (loss), net of income taxes ................ 356 -- -- (422) (259)
--------- --------- --------- --------- ---------
Net income (loss) ............................................. $ (1,845) $ 453 $ 445 $ 613 $ (2,369)
========= ========= ========= ========= =========
OTHER DATA:
EBITDA(e) ..................................................... $ 9,120 $ 9,593 $ 12,246 $ 12,768 $ 16,303
Depreciation and amortization(f) .............................. 4,002 3,288 3,080 3,584 4,376
Capital expenditures(g) ....................................... 1,406 3,175 9,135 5,959 5,010
Backlog ....................................................... 23,993 27,883 42,707 62,990 69,632
Ratio of earnings to fixed charges(h) ......................... -- 1.5x -- -- --
BALANCE SHEET DATA (AT PERIOD END):
Working capital ............................................... $ 11,730 $ 19,157 $ 10,685 $ 11,894 $ 9,371
Total assets .................................................. 89,517 92,664 105,974 113,718 113,587
Total debt (including redeemable put warrants) ................ 80,023 78,190 82,232 84,671 88,201
Redeemable preferred stock .................................... 9,750 10,134 10,549 10,995 11,474
Stockholder's deficiency ...................................... (34,426) (34,728) (33,897) (33,482) (36,736)
OPERATING UNIT DATA:
Net sales:
Robicon(i) .................................................. $ 34,099 $ 34,738 $ 40,061 $ 56,145 $ 83,096
Datcon ...................................................... 15,170 16,875 21,514 32,514 32,482
Anderson(i) ................................................. 15,017 15,471 18,136 21,509 21,554
Natvar ...................................................... 13,979 13,948 16,828 17,101 15,227
General Eastern ............................................. 9,837 9,969 10,176 12,093 12,256
HVE Europa .................................................. 7,929 6,008 8,048 9,738 8,488
--------- --------- --------- --------- ---------
Subtotal ................................................ 96,031 97,009 114,763 149,100 173,103
Divested product lines(i) ................................... 5,251 5,089 1,788 -- --
--------- --------- --------- --------- ---------
Total net sales ......................................... $ 101,282 $ 102,098 $ 116,551 $ 149,100 $ 173,103
========= ========= ========= ========= =========
EBITDA:(j)
Robicon ..................................................... $ 2,337 $ 3,057 $ 2,212 $ 1,425 $ 6,330
Datcon ...................................................... 2,005 2,233 3,444 4,230 4,338
Anderson .................................................... 2,632 3,271 3,922 5,240 4,885
Natvar ...................................................... 2,268 2,357 2,881 1,784 1,328
General Eastern ............................................. 1,154 1,173 1,318 1,681 1,916
HVE Europa .................................................. 445 155 463 1,146 673
--------- --------- --------- --------- ---------
Total operating unit EBITDA ............................. 10,841 12,246 14,240 15,506 19,470
Corporate overhead .......................................... (1,721) (2,653) (1,994) (2,738) (3,167)
--------- --------- --------- --------- ---------
Total EBITDA ............................................ $ 9,120 $ 9,593 $ 12,246 $ 12,768 $ 16,303
========= ========= ========= ========= =========
</TABLE>
See accompanying Notes to Selected Historical Consolidated Financial Data.
39
<PAGE> 42
NOTES TO SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS)
(a) EBITDA excludes severance expenses of $246 and $456 included in
administrative and selling expenses in Fiscal 1995 and Fiscal 1996,
respectively. See note (e) below.
(b) In Fiscal 1995, HVE incurred a total restructuring charge of $1,294
comprised primarily of $548 due to the closure of a duplicate
manufacturing facility, and costs related to the consolidation of the
operations of this manufacturing facility into another existing
facility and $746 in connection with the write-off of the cumulative
foreign currency translation adjustment resulting from the liquidation
of a subsidiary of HVE Europa.
(c) Represents insurance recoveries related to environmental litigation,
remediation and consequential damages, net of actual legal costs,
estimated settlement costs and changes in cost remediation estimates in
connection with two properties formerly owned by HVE in Burlington,
Massachusetts and Woodbridge Township, New Jersey. See "Business --
Environmental and Insurance Matters."
(d) Other is comprised of the following:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------------------------------------------
1993 1994 1995 1996 1997
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Writedown of assets held for sale ...... $ -- $ -- $ 815 $ 1,200 $ --
Net gain on disposition of miscellaneous
assets ............................... (408) -- (47) (83) (230)
Division relocation and moving costs ... -- 488 124 103 --
Facilities (income) expense, net ....... -- -- -- (57) 319
Aborted acquisition and offering costs . -- -- -- -- 2,145
Acquisition costs and loss on
write-off of purchased assets .......... -- 215 -- -- --
------- ------- ------- ------- -------
Total ............................. $ (408) $ 703 $ 892 $ 1,163 $ 2,234
======= ======= ======= ======= =======
</TABLE>
(e) EBITDA is defined as earnings from continuing operations before
interest, income taxes, depreciation, amortization and non-recurring
items. Non-recurring items are comprised of: (i) restructuring charge,
reimbursed environmental and litigation costs - net, and other, and
(ii) non-recurring severance payments of $246 and $456 to certain
former senior executives included in administrative and selling
expenses of HVE in Fiscal 1995 and Fiscal 1996, respectively. See notes
(a) through (d) above and notes F, K and N to "Notes to Consolidated
Financial Statements" of High Voltage Engineering Corporation and
subsidiaries. EBITDA is not a measure of performance under GAAP. While
EBITDA should not be considered as a substitute for net income, cash
flows from operating activities and other income or cash flow statement
data prepared in accordance with GAAP, or as a measure of profitability
or liquidity, management understands that EBITDA is customarily used as
a measurement in evaluating companies. Moreover, substantially all of
the Company's financing agreements contain covenants in which EBITDA,
as defined therein, is used as a measure of financial performance. See
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" for a discussion of other measures of
performance determined in accordance with GAAP.
(f) Depreciation and amortization excludes $1.1 million and $0.6 million
attributable to discontinued operations in Fiscal 1995 and Fiscal 1996,
respectively.
(g) Capital expenditures include assets acquired under capital leases and
exclude capital expenditures from discontinued operations in the
amounts of $0.8 million and $4 in Fiscal 1995 and Fiscal 1996,
respectively.
(h) For purposes of this computation, earnings are defined as income or
loss from continuing operations before income taxes, discontinued
operations and extraordinary item and fixed charges. Fixed charges are
the sum of: (i) interest cost; (ii) amortization of deferred financing
costs; (iii) the portion of operating lease rental expense that is
representative of the interest factor (deemed to be one third); (iv)
dividends on preferred stock; and (v) accretion of redeemable put
warrants.
40
<PAGE> 43
Earnings were inadequate to cover fixed charges by $496, $0.6 million,
$3.5 million and $2.5 million in Fiscal 1993, Fiscal 1995, Fiscal 1996
and Fiscal 1997.
(i) Anderson's net sales exclude net sales of $4.5 million, $4.1 million
and $1.4 million from divested product lines for Fiscal 1993, Fiscal
1994 and Fiscal 1995, respectively. Robicon's net sales exclude net
sales of $0.7 million, $1.0 million and $345 from divested product
lines for Fiscal 1993, Fiscal 1994 and Fiscal 1995, respectively.
(j) EBITDA has not been adjusted to exclude divested product lines.
41
<PAGE> 44
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS)
PHI ACQUISITION HOLDINGS, INC. AND SUBSIDIARIES
The following Selected Historical Consolidated Financial Data of PHI
Acquisition Holdings, Inc. and subsidiaries for its fiscal years ended June 30,
1995 and June 28, 1996 have been derived from the audited consolidated financial
statements of PHI Acquisition Holdings, Inc. and its subsidiaries (referred to
herein collectively as "PHI"). The Selected Historical Consolidated Financial
Data of PHI for the nine months ended March 30, 1996 and March 28, 1997 and the
12 months ended March 28, 1997 are derived from the unaudited financial
statements of PHI. Such unaudited consolidated financial statements have been
prepared on a basis consistent with the audited consolidated financial
statements of PHI and, in the opinion of management, include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the financial position and results of operations of PHI for the
periods covered thereby. The results of any interim periods are not necessarily
indicative of results of operations for a full year. The information presented
below should be read in conjunction with PHI's consolidated financial statements
and the notes thereto included elsewhere herein.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED 12 MONTHS
---------------------- ---------------------- ENDED
JUNE 30, JUNE 28, MARCH 30, MARCH 28, MARCH 28,
1995 1996 1996 1997 1997
-------- -------- -------- -------- --------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales ................................................ $ 54,764 $ 58,074 $ 38,446 $ 45,124 $ 64,752
Cost of sales ............................................ 34,244 35,740 24,047 27,948 39,641
-------- -------- -------- -------- --------
Gross profit ........................................... 20,520 22,334 14,399 17,176 25,111
Administrative and selling expenses(a) ................... 9,374 10,046 7,468 7,673 10,251
Research and development expenses ........................ 6,197 6,333 4,884 5,837 7,286
Equity in earnings of joint venture(b) ................... (337) (206) (738) (124) 408
-------- -------- -------- -------- --------
Operating income ....................................... 5,286 6,161 2,785 3,790 7,166
Interest expense ......................................... (1,855) (1,827) (1,316) (1,310) (1,821)
Interest income .......................................... 89 137 89 19 67
-------- -------- -------- -------- --------
Income before income taxes ............................. 3,520 4,471 1,558 2,499 5,412
Income tax expense ....................................... 812 1,496 623 705 1,578
-------- -------- -------- -------- --------
Net income ............................................... $ 2,708 $ 2,975 $ 935 $ 1,794 $ 3,834
======== ======== ======== ======== ========
OTHER DATA:
EBITDA(c) ................................................ $ 7,064 $ 8,180 $ 3,793 $ 6,052 $ 10,439
Depreciation, amortization and other non-cash transactions 2,115 2,225 1,746 2,116 2,595
Capital expenditures ..................................... 2,596 2,814 1,715 2,124 3,223
Backlog .................................................. 13,345 17,797 22,306 21,681 21,681
BALANCE SHEET DATA (AT PERIOD END):
Working capital .......................................... $ 14,123 $ 16,037 $ 13,815 $ 17,437 $ 17,437
Total assets ............................................. 39,252 41,772 42,996 44,830 44,830
Total debt ............................................... 19,668 18,315 19,596 17,851 17,851
Stockholders' equity ..................................... 8,836 11,412 9,266 13,497 13,497
</TABLE>
- ----------
(a) Includes $210 of severance payments to a former officer of PHI and $60
in relocation expenses incurred in connection with the replacement of
such officer of PHI in 1997.
42
<PAGE> 45
(b) PHI owns a 50% interest in a joint venture (ULVAC-PHI) which operates
in Japan. The joint venture is responsible for sales and service of
PHI's products in Japan.
(c) EBITDA is defined as earnings before interest, income taxes,
depreciation, amortization, other non-cash transactions, equity in
earnings of joint venture and non-recurring items. See notes (a) and
(b) above. Non-recurring items are comprised of severance payments of
$210 to a former officer of PHI and relocation expenses of $60 in
connection with the replacement of such officer of PHI in 1997 and are
included in administrative and selling expenses. EBITDA is not a
measure of performance under GAAP. While EBITDA should not be
considered as a substitute for net income, cash flows from operating
activities and other income or cash flow statement data prepared in
accordance with GAAP, or as a measure of profitability or liquidity,
management understands that EBITDA is customarily used as a measurement
in evaluating companies.
43
<PAGE> 46
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Except as otherwise indicated, the following discussion relates to the
Company on a historical basis without giving effect to the acquisition of PHI.
Certain of the statements in this section are forward-looking in nature and,
accordingly, are subject to many risks and uncertainties. The actual results
that the Company achieves may differ materially from any forward-looking
statements herein. Factors that could cause or contribute to such differences
include, but are not limited to, those discussed below and those contained in
"Risk Factors" and "Business," as well as those discussed elsewhere in this
Prospectus. The following discussion should be read in conjunction with the
Selected Historical Consolidated Financial Data and Unaudited Pro Forma
Condensed Consolidated Financial Data and the consolidated financial statements
and notes thereto, and the other financial and operating data included elsewhere
in this Prospectus.
The consolidated financial statements of the Company include the
accounts of High Voltage Engineering Corporation and its subsidiaries after
elimination of material intercompany transactions and balances. The audited
historical financial information of the Company's continuing operations is not
directly comparable on a year to year basis due to (i) the acquisition of Jorda
on March 15, 1995 and (ii) the divestiture by the Company's Robicon and Anderson
operating units of certain non-strategic product lines. Anderson divested five
non-strategic product lines in a series of transactions from Fiscal 1993 to
Fiscal 1995 in accordance with its strategy of focusing on its core power
connector business. These divested product lines accounted for net sales of
approximately $1.4 million in Fiscal 1995. In addition, Robicon divested four
non-strategic product lines which accounted for net sales of approximately
$400,000 in Fiscal 1995. Net sales generated by such divested product lines are
presented elsewhere in this Prospectus under the caption "Divested product
lines" in the Selected Historical Consolidated Financial Data of High Voltage
Engineering Corporation and subsidiaries.
As a result of the sale by the Company of: (i) the assets of the
Company's Shore Instruments operating unit on January 5, 1995; (ii)
substantially all of the assets of the Company's Berger operating unit on
January 27, 1995; and (iii) substantially all of the assets of the Company's
Specialty Connector operating unit on November 9, 1995, the Company's
consolidated results have been restated to reclassify the results of such
operations as discontinued operations.
OVERVIEW
The Company owns and operates a diversified group of seven middle
market industrial manufacturing businesses including PHI. These businesses focus
on designing and manufacturing high quality, applications-engineered products
which are designed to address specific customer needs. The Company's products
are sold to a broad range of domestic and foreign OEMs and end-users in a
variety of industries including process automation, freshwater and wastewater
treatment, petrochemicals, semiconductor fabrication, chemicals, construction,
agriculture, materials handling, computers, telecommunications, medical
equipment and climate control and for scientific and educational research. The
diversified nature of the products sold and end-markets served by the Company's
businesses limits the effect on the Company of operating performance
fluctuations in any single operating unit and cyclical downturns within
individual industries and end-markets, while the Company believes that its focus
on middle market manufacturing enhances its growth prospects. Since Fiscal 1993,
the Company has taken several initiatives that have contributed to growth in net
sales and EBITDA, margin improvement and gains in market share, including: (i)
implementing Total Quality and process re-engineering programs; (ii) introducing
new products, certain of which utilize proprietary technology or are
applications-engineered to address specific customer requirements; (iii)
increasing research and development and capital expenditures; and (iv) hiring
new senior management at each operating unit. Between Fiscal 1993 and Fiscal
1997, the Company's historical net sales increased at a 14.3% CAGR, from $101.3
million to $173.1 million, and its EBITDA increased at a 15.7% CAGR from $9.1
million to $16.3 million. On August 8, 1997, the Company purchased PHI. Pro
forma for the Merger, the Company had net sales and EBITDA of $237.9 million and
$26.4 million, respectively, in Fiscal 1997. See " -- The PHI Acquisition."
The Company maintains Total Quality and process re-engineering programs
at each of its operating units, which it began implementing in 1993. These
programs have enabled the Company to improve product quality, increase
manufacturing efficiencies and productivity, reduce product lead times and
reduce the relative amount of working capital invested in its businesses. The
Company uses a variety of analytical tests to assess the effectiveness of these
programs. The Company
44
<PAGE> 47
believes that the most important of these tests is the calculation of cycle
time, which is the time necessary to complete certain strategic business
processes. The Company specifically measures the cycle time for obtaining new
customers, order fulfillment and new product development and views the
compression of cycle time as a point of market differentiation.
Between Fiscal 1995 and Fiscal 1997, the Company's operating units have
invested $25.5 million in research and development and $20.1 million in capital
expenditures primarily to facilitate growth. Such research and development
expenditures have resulted in innovative new products such as Robicon's Perfect
Harmony series of medium voltage VFDs, Datcon's Intellisensor(TM) fuel
measurement systems, Natvar's bonded tri-layer 151 tubing and numerous
applications-engineered products for Anderson's customers. As a result of the
capital expenditures incurred since the beginning of Fiscal 1995, the majority
of which funded the construction of new manufacturing facilities and the upgrade
of existing facilities, management currently believes that the Company's capital
expenditures in the fiscal year ending April 1998 will primarily fund planned
maintenance, including information technology investments, although the Company
may invest in information technology and additional manufacturing capacity if
necessitated by sales volume increases.
Since January 1992, the Company has replaced the senior management at
all of its operating units, in addition to hiring a new Chief Operating Officer;
Chief Financial Officer; Vice President, Financial Operations; and Vice
President, Human Relations.
SEASONALITY; VARIABILITY OF OPERATING RESULTS
The majority of the Company's operating units have historically
recorded the strongest operating results in the fourth quarter of the fiscal
year due in part to seasonal considerations and other factors, although in
recent years, seasonal fluctuations have been partially mitigated by overall
business growth.
The timing of orders placed by the Company's customers has varied with,
among other factors, the introduction of new products, product life cycles,
customer attempts to manage inventory levels, competitive conditions, general
economic conditions and the funding of scientific and educational research. The
variability of the level and timing of orders has, from time to time, resulted
in significant periodic and quarterly fluctuations in the operations of the
Company's operating units. Such variability is particularly evident at HVE
Europa, which ships on average four particle accelerator systems per year. These
systems are typically sold for between $1.0 million and $2.0 million each and
have long lead times. As a result, the timing of HVE Europa's shipments within
any fiscal year can have a material impact on an individual quarter's results.
RESTRUCTURING CHARGES
Restructuring costs declined from $1.3 million in Fiscal 1995 to
$150,000 in Fiscal 1996. The Fiscal 1995 provision included costs related to the
closing of an excess manufacturing facility, costs related to the consolidation
of the operations of this manufacturing facility into another existing facility,
and the write-off of the cumulative foreign currency translation adjustment
resulting from the liquidation of a subsidiary of HVE Europa. The Fiscal 1996
provision reflected the closure of a sales office in Europe.
REIMBURSED ENVIRONMENTAL AND LITIGATION COSTS - NET
The Company has, from time to time, received cash settlements and
insurance recoveries relating to environmental litigation, remediation and
consequential damages incurred in connection with properties formerly owned or
leased by the Company. The Company recorded net gains of $2.1 million, $450,000
and $351,000 for Fiscal 1995, Fiscal 1996 and Fiscal 1997, respectively, net of
actual legal costs, estimated settlement costs and changes in cost remediation
estimates, on cash recoveries of $2.3 million, $1.5 million and $1.1 million,
respectively, for such years. These cash recoveries have generally been received
from insurance companies in reimbursement of costs previously incurred, or
scheduled to be incurred, by the Company in remediation efforts or the payment
of damages to third parties, from other responsible or potentially responsible
parties in settlement of potential claims relating to remediation
responsibilities, and from the recovery of expenses incurred both in the
recovery of such amounts and the remediation of affected properties. See
"Business -- Environmental and Insurance Matters."
45
<PAGE> 48
OTHER
Other expenses in Fiscal 1995 were primarily related to a $0.8 million
provision to write down certain assets held for sale to estimated net realizable
value and costs incurred by Anderson to move into another existing facility.
Other expenses in Fiscal 1996 included a $1.2 million provision to write down
certain assets held for sale to estimated net realizable value and costs
incurred by Robicon to move to a newly constructed facility, which were
partially offset by a net gain on the sale of vacant land and income from
certain excess facilities. In Fiscal 1997, HVE recorded a $2.1 million provision
to write-off the costs associated with an aborted acquisition and related
offering costs, and $319,000 in net expenses incurred in connection with for
assets held for sale, offset by a $230,000 gain on the sale of a small product
line at Robicon. See note K to the consolidated financial statements of High
Voltage Engineering Corporation and subsidiaries.
THE PHI ACQUISITION
On May 7, 1997, HVE entered into the Merger Agreement with PHI Holdings
and CVCA, the principal stockholder of PHI Holdings, to acquire PHI for an
aggregate Merger Consideration of $55.5 million in cash, subject to certain
adjustments. The acquisition was consummated on August 8, 1997 through the
merger of Lauren Corporation, a wholly-owned subsidiary of HVE, with and into
PHI Holdings. Immediately thereafter, PHI Holdings was merged with and into
Physical Electronics, Inc., its wholly-owned subsidiary, and Physical
Electronics, Inc. became a direct, wholly-owned subsidiary of HVE.
PHI was founded in 1969 as a manufacturer of surface analysis
components for use by industrial customers primarily for metallurgy and thin
film applications. During the early 1970's, PHI introduced its first Auger
surface analysis instruments and its second line of surface analysis instruments
when it entered the ESCA market. PHI was subsequently acquired in 1977 by The
Perkin-Elmer Corporation ("Perkin-Elmer"), a diversified manufacturing company.
In 1982, PHI formed a 50%/50% joint venture ("ULVAC-PHI") with ULVAC, a Japanese
manufacturing company, which resells and services PHI's instruments in the
Japanese market. This joint venture has enabled PHI to successfully sell
products in Japan, currently the largest market for advanced surface analysis
instruments. PHI introduced its first Dynamic SIMS instruments in 1985 to
complement Auger in serving the semiconductor fabrication market. In 1988, PHI
introduced a TOF-SIMS instrument primarily for use in applications in the
chemicals industry and subsequently the semiconductor industry. The assets of
PHI were acquired from Perkin-Elmer on May 20, 1994 in a leveraged acquisition
sponsored by PHI's former senior management and CVCA. In August 1994, PHI
acquired the instrument division of Charles Evans & Associates ("CEA") which was
designing and manufacturing market-leading surface analysis instruments using
state-of-the-art TOF-SIMS and Dynamic SIMS surface analysis techniques primarily
for use in semiconductor applications. As a result of this acquisition, PHI
added a facility in Redwood City, California, the manufacturing activities of
which were recently consolidated into PHI's main facility in Eden Prairie,
Minnesota. For a more detailed description of PHI's products, see "Business --
The Operating Units -- PHI."
With the exception of Dr. David Chalmers, Chief Executive Officer, and
Mr. Paul Brown, Chief Financial Officer, PHI's senior management team has been
with PHI for an average of 14 years. Dr. Chalmers replaced Paul Palmberg, Former
Chief Executive Officer, in February 1997 and Mr. Brown joined PHI in 1994. The
management team has worked to increase PHI's net sales and cash flow by
implementing an operating strategy based upon: (i) the development of new
applications for existing products; (ii) increased penetration of international
markets; (iii) the development of new hardware configurations for its
instruments; and (iv) improvements in the ease of use of its instruments through
increased automation and enhanced technological capability.
CERTAIN BENEFITS OF THE PHI ACQUISITION
Management believes that PHI possesses many of the competitive
strengths common to its other operating units, including but not limited to:
leading market position, reputation for innovative product development,
long-term relationships with market-leading customers and an experienced senior
management team. PHI is the world's leading designer and manufacturer of
advanced surface analysis instruments and components. The Company believes that
PHI's patented and proprietary technology, expertise in the manufacture of
instruments incorporating ultrahigh vacuum technology, superior customer
service, support and training and reputation for product quality and reliability
will continue to differentiate PHI from its competitors and result in strong
operating performance. In addition, PHI has recently introduced several new
surface analysis instruments, including the SMART-200, TRIFT II and 6800 Dynamic
SIMS, which each have the ability to analyze every point on an 8-inch
semiconductor wafer and can be used for process development and failure analysis
in semiconductor fabrication.
46
<PAGE> 49
PHI serves some of the largest companies in their respective industries,
including Advanced Micro Devices, Alcoa, DuPont, Hewlett-Packard, IBM,
Matsushita, Motorola, Nippon Steel, Samsung, Seagate, Siemens, Texas Instruments
and Toshiba.
CERTAIN EFFECTS OF THE PHI ACQUISITION
In recent years, PHI has achieved consistent growth in consolidated net
sales and EBITDA. PHI increased net sales and EBITDA from $54.8 million and $7.1
million, respectively, for the fiscal year ended June 30, 1995 to $64.8 million
and $10.4 million, respectively, for the LTM period ended March 28, 1997. PHI's
EBITDA margin also increased from 12.9% for the fiscal year ended June 30, 1995
to 16.1% for the LTM period ended March 28, 1997.
The Company does not believe that there will be significant cost
savings or integration costs as a result of the Merger, as PHI will be operated
as a stand-alone operating unit.
The Company believes that PHI has the leading market share in Auger,
ESCA and TOF-SIMS and the second largest market share in Dynamic SIMS. The
capital outlay required to purchase advanced surface analysis instruments
(ranging from approximately $250,000 to $1.5 million) leads to careful
consideration by potential purchasers not only of product reliability and
performance, but also availability and quality of technical support and
training, factors which the Company believes favor PHI and enable it to realize
a pricing premium over competitors' comparable products. For the LTM period
ended March 28, 1997, PHI had a gross margin of 38.8% and an EBITDA margin of
16.1%. Pro forma for the Merger, the Company's gross margin and EBITDA margin
for Fiscal 1997 would have been 34.9% and 11.1%, respectively, as compared to
33.7% and 9.4% on a historical basis.
In recent years, PHI's shipments have increased to approximately 70
systems per year plus ongoing services and complementary components and hardware
options. Due to the relatively large capital outlay required to purchase PHI's
surface analysis instruments, the limited quantity sold every year and the
timing of shipments, the acquisition of PHI may increase the variability of the
Company's quarterly operating results. PHI incurs significant research and
development expenses due to the high technology content of PHI's surface
analysis instruments and PHI's growth strategy of increasing sales through
identification of new applications for its existing products, enhancements in
the technological capability of its instruments, development of
application-specific hardware configurations for its instruments and continued
improvement in operating ease and efficiency of its instruments through
increased automation and software development. In recent years, such initiatives
have resulted in the development of innovative products especially suitable for
applications in high growth end markets such as the semiconductor fabrication
industry. PHI's research and development expenses represented 11.3% of net sales
for the LTM period ended March 28, 1997 as compared to 5.4% of net sales for the
Company in Fiscal 1997.
RESULTS OF OPERATIONS
Fiscal 1997 Compared to Fiscal 1996
Net sales increased $24.0 million, or 16.1%, from $149.1 million in
Fiscal 1996 to $173.1 million in Fiscal 1997. This increase was primarily
attributable to a $27.0 million, or 48.0%, increase at Robicon due to the
continued growth in sales of medium voltage VFDs. Robicon's net sales increase
was slightly offset by a $1.9 million, or 11.0% decline in Natvar's net sales,
due to weakness in medical markets and related market price reductions, as well
as a decrease of $1.3 million, or 12.8%, at HVE Europa which was primarily
attributable to weaker foreign currencies. Net sales at General Eastern
increased slightly despite flatness in the market for humidity measurement
instruments. Net sales at Datcon remained flat as a sales increase in domestic
markets was offset by weakness in agricultural equipment markets in Europe. Net
sales at Anderson remained flat as higher domestic shipments of connectors for
new applications and new customers were offset by weaker markets in traction
batteries for materials handling equipment.
Gross profit increased $6.5 million, or 12.6%, from $51.7 million
during Fiscal 1996 to $58.3 million in Fiscal 1997. The increase was primarily
attributable to the growth in shipments at Robicon, but was somewhat offset by
lower sales at Natvar and HVE Europa. Gross margin declined from 34.7% to 33.7%
primarily due to the shipment by Robicon of certain higher cost prototype units
for new applications, the investment in a leased facility (a technical center
for new applications) at Anderson and the inclusion of the first full year of
costs of Natvar's Colorado facility.
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Administrative and selling expenses increased $2.1 million, or 5.9%,
primarily due to a $1.6 million increase at Robicon due to increased commissions
and other selling and administrative costs attributable to higher sales levels.
Administrative and selling expenses declined as a percentage of net sales from
23.4% to 21.4% during the periods compared, including a decline from 21.9% to
16.7% at Robicon.
Research and development expenses increased $1.3 million, or 16.0% from
$8.1 million to $9.4 million, which was primarily attributable to new product
investments at Robicon, as well as volume related applications engineering to
support the aforementioned sales increase at Robicon. Such expenses remained
unchanged as a percentage of net sales at 5.4%.
Depreciation and amortization from continuing operations increased from
$3.6 million to $4.4 million as a result of continued capital investment in
automation at Anderson and Datcon as well as a full year of depreciation in
connection with a new facility at Natvar.
As a result of the factors discussed above, EBITDA as defined in note
(e) to "Notes to Selected Historical Consolidated Financial Data," increased
$3.5 million, or 27.7%, from $12.8 million in Fiscal 1996 to $16.3 million in
Fiscal 1997.
The net total of restructuring charges, net reimbursed environmental
and litigation costs and other increased from a charge of $0.9 million in Fiscal
1996 to a charge of $2.3 million in Fiscal 1997. In Fiscal 1996, a restructuring
charge of $150,000 was recorded in connection with the closure of a sales office
in Europe. In Fiscal 1996, the Company recorded a gain of $450,000 resulting
from reimbursement from an insurance company of environmental and litigation
expenses. Other expenses in Fiscal 1996 included a $1.2 million provision to
write down certain assets held for sale to estimated net realizable value and
costs incurred by Robicon to move to a newly constructed facility, which were
partially offset by a net gain on the sale of vacant land and income from
certain excess facilities. In Fiscal 1997, other expenses reflected a $2.1
million provision to write-off costs associated with an aborted acquisition and
related offering costs, and $319,000 in net expenses incurred for assets held
for sale. In addition, Robicon recorded a gain on the sale of a small product
line of $230,000 in Fiscal 1997.
As a result of the factors described above, income from operations
increased $1.8 million, or 22.9%, from $7.9 million in Fiscal 1996 to $9.7
million in Fiscal 1997.
Interest expense increased $377,000 from $11.2 million in Fiscal 1996
to $11.6 million in Fiscal 1997 due to higher average interest rates in Fiscal
1997 which were partially offset by a reduction in CIP expense.
As a result of the above items, the Company recorded a loss from
continuing operations before income taxes, discontinued operations and
extraordinary item of $3.1 million in Fiscal 1996, as compared to a loss of $1.6
million in Fiscal 1997.
The Company recorded an income tax credit of $2.6 million in Fiscal
1996 compared to income taxes of $0.5 million in Fiscal 1997. The change in tax
provision was largely attributable to a Fiscal 1996 reversal of a tax reserve
previously accrued in connection with a federal tax audit of prior years.
Income from continuing operations before extraordinary items decreased
$1.6 million to a loss of $2.1 million in Fiscal 1997. Income from discontinued
operations totaling $1.5 million was recorded in Fiscal 1996 primarily relating
to the sale of the Specialty Connector operating unit. The Company recorded an
extraordinary loss related to debt extinguishment, net of income taxes, of
$422,000 in Fiscal 1996 and $259,000 in Fiscal 1997.
The foregoing factors contributed to net income of $0.6 million in
Fiscal 1996 compared to a net loss of $2.4 million in Fiscal 1997.
Fiscal 1996 Compared to Fiscal 1995
Net sales increased $32.5 million, or 27.9%, from $116.6 million in Fiscal
1995 to $149.1 million in Fiscal 1996. This increase included a $16.1 million,
or 40.1%, increase at Robicon, excluding sales from divested product lines of
$345,000, due to increased sales of medium voltage VFDs, as well as an increase
of $11.0 million at Datcon attributable to the inclusion of sales generated by
Jorda for an entire fiscal year. Excluding sales from divested product lines
totaling $1.4 million in Fiscal 1995, net sales increased at Anderson by $3.4
million, or 18.6%, primarily as a result of increased power connector sales for
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new applications, market growth (particularly in Europe), new market penetration
and price increases. General Eastern's net sales increased $1.9 million, or
18.8%, primarily due to higher calibration and service revenues. HVE Europa's
net sales increased $1.7 million, or 21.0%, in Fiscal 1996 as compared to Fiscal
1995, primarily due to higher average selling prices, as well as increased sales
of component parts. Fiscal 1996 net sales at Natvar were generally flat compared
to the prior year.
Gross profit increased $8.6 million, or 19.9%, from $43.1 million
during Fiscal 1995, to $51.7 million in Fiscal 1996. This increase was primarily
attributable to the higher sales volumes discussed above. Gross margin decreased
from 37.0% to 34.7%, primarily as a result of: (i) a reduction in gross margin
at Natvar from 30.9% to 23.4% in Fiscal 1996 resulting from pricing pressures
and new plant start-up costs; (ii) a reduction in gross margin at Datcon from
36.3% to 28.9% in Fiscal 1996 resulting from plant reconfiguration and new
product introduction costs, as well as the impact of a full year of Jorda's
lower gross margin; and (iii) a reduction in gross margin at Robicon from 36.6%
to 33.0% in Fiscal 1996 resulting from inefficiencies relating to Robicon's move
to a new facility, its outsourcing of production of its printed circuit boards
and an upgrade of its MIS software system. These gross margin reductions were
partially offset by: (i) an increase in gross margin at Anderson from 41.1% to
47.0% in Fiscal 1996 resulting from increased automation, a more profitable mix
of products resulting from the divestiture of three lower margin product lines
in Fiscal 1995, and cost savings resulting from the consolidation of Anderson's
manufacturing operations into a single facility in Fiscal 1996; (ii) an increase
in gross margin at HVE Europa from 29.1% to 36.8% in Fiscal 1996 resulting from
improved pricing and certain product cost reductions; and (iii) an increase in
gross margin at General Eastern from 48.8% to 50.8% in Fiscal 1996 resulting
primarily from the growth of its calibration and service businesses.
Administrative and selling expenses increased $8.8 million, or 33.7%,
including $1.1 million due to the incremental costs associated with the
inclusion of the operations of Jorda for a full year and increased commissions
and other selling and administrative costs at Robicon, Anderson, General Eastern
and HVE Europa attributable to higher sales levels. In addition, the Company
incurred severance costs of $246,000 during Fiscal 1995, as compared to $456,000
in Fiscal 1996, in connection with the replacement of operating unit presidents
as part of the Company's overall program to improve operating unit management.
Such costs have been excluded from EBITDA. Administrative and selling expenses
as a percentage of net sales increased from 22.4% to 23.4%, primarily as a
result of the increase at Robicon from 19.3% to 21.9% in Fiscal 1996 due to
higher sales levels.
Research and development expenses were $8.1 million in both Fiscal 1995
and Fiscal 1996. As a percentage of net sales, such expenses declined from 6.9%
in Fiscal 1995 to 5.4% in Fiscal 1996.
Depreciation and amortization from continuing operations increased
$500,000, from $3.1 million to $3.6 million, primarily as a result of the Jorda
acquisition.
As a result of the factors discussed above, EBITDA as defined in note
(e) to "Notes to Selected Historical Consolidated Financial Data," increased
$0.5 million, or 4.3%, from $12.2 million in Fiscal 1995 to $12.8 million in
Fiscal 1996.
The net total of restructuring charges, net reimbursed environmental
and litigation costs and other increased from a charge of $56,000 in Fiscal 1995
to a charge of $0.9 million in Fiscal 1996. Restructuring costs declined from
$1.3 million in Fiscal 1995 to $150,000 in Fiscal 1996. The Fiscal 1995
provision included costs related to the closure of a duplicate manufacturing
facility, costs related to the consolidation of the operations of this
manufacturing facility into another existing facility, and the write-off of the
cumulative foreign currency translation adjustment resulting from the
liquidation of a subsidiary of HVE Europa. The Fiscal 1996 provision reflected
the closure of a sales office in Europe. The favorable impact of net reimbursed
environmental and litigation costs declined approximately $1.7 million from $2.1
million in Fiscal 1995 to $450,000 in Fiscal 1996. See "Business --
Environmental and Insurance Matters." Other expenses increased from $0.9 million
in Fiscal 1995 to $1.2 million in Fiscal 1996. Other expenses in Fiscal 1995
were primarily related to a $0.8 million provision to write down certain assets
held for sale to estimated net realizable value and costs incurred by Anderson
to move into another existing facility. Other expenses in Fiscal 1996 included a
$1.2 million provision to write down certain assets held for sale to estimated
net realizable value and costs incurred by Robicon to move to a newly
constructed facility, which were partially offset by a net gain on the sale of
vacant land and income from certain excess facilities.
As a result of the factors described above, income from operations
decreased $1.0 million, from $8.9 million in Fiscal 1995 to $7.9 million in
Fiscal 1996.
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Interest expense increased $2.7 million from $8.6 million in Fiscal
1995 to $11.2 million in Fiscal 1996 due to an increase in CIP expense, the full
year impact of indebtedness incurred in connection with the Jorda acquisition
and the construction of a new manufacturing facility for Robicon, as well as
slightly higher interest rates.
As a result of the above items, the Company recorded income from
continuing operations before income taxes, discontinued operations and
extraordinary item of $365,000 in Fiscal 1995, as compared to a loss of $3.1
million in Fiscal 1996.
In Fiscal 1995, the Company had income tax expense of $196,000 compared
to an income tax credit of $2.6 million in Fiscal 1996, which was largely
attributable to a Fiscal 1996 reversal of a tax reserve previously accrued in
connection with a federal tax audit of prior years.
The Company recorded income from discontinued operations net of income
taxes of $276,000 in Fiscal 1995 including the net loss on disposal of the
Berger and Shore operating units as compared to income of $1.5 million in Fiscal
1996, net of income taxes, including a gain on disposal of the Specialty
Connector operating unit.
In Fiscal 1996, the Company recorded an extraordinary loss of $422,000
on debt extinguishment, net of income taxes.
The foregoing factors contributed to an increase in net income from
$445,000 in Fiscal 1995 to $0.6 million in Fiscal 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity needs are primarily for working capital and
capital expenditures. The Company's primary sources of liquidity have been funds
provided by operations, proceeds from the sale of discontinued operations and
asset sales and proceeds from financing activities. On August 8, 1997, the
Company entered into a $25.0 million New Revolving Credit Facility which is
being used primarily to fund the Company's working capital requirements and has
a $5.0 million sublimit for the issuance of standby letters of credit. The New
Revolving Credit Facility has a term of five years and replaces the $20.0
million Existing Revolving Credit Facility. Borrowings outstanding under the New
Revolving Credit Facility as of August 8, 1997 were $8.5 million. The New
Revolving Credit Facility contains covenants restricting the ability of the
Company's operating units to, among other things, pay dividends or make other
restricted payments to the Company. See "Description of Other Indebtedness and
Obligations -New Revolving Credit Facility."
On August 8, 1997, the Company completed a private placement of
$135,000,000 in Existing Notes and $35,200,000 in Units consisting of Series A
Preferred Stock, Common Stock and Warrants to purchase Common Stock
(collectively, the "Offerings"). A portion of the net proceeds of the Offerings
was used to repay existing indebtedness described below, including accrued and
unpaid interest thereon and associated prepayment penalties. In connection with
the issuance of the Series A Preferred Stock, the Company issued to the holders
thereof warrants representing 6.6% of the fully-diluted HVE Common Stock.
On May 9, 1996, the Company entered into the Existing Revolving Credit
Facility and the $10.0 million Senior Term Loan and completed a private
placement of $20.0 million of Senior Secured Notes, $7.0 million of Senior
Unsecured Notes and $25.0 million principal amount of Subordinated Notes (issued
at 82.086% of the principal amount thereof), the net proceeds of which were used
to refinance existing indebtedness. In connection with the issuance of the
Subordinated Notes, the Company issued to the holders thereof warrants (the
"Subordinated Notes Warrants") representing 12.5% of the fully-diluted HVE
Common Stock. The holders of such warrants have the right, after May 1, 2000, to
require the Company to purchase all or any portion of such warrants or any
shares of HVE Common Stock issued upon exercise of such warrants at the greater
of (i) a valuation prepared by an independent financial advisor or (ii) a
formula value calculated as 8.0x the Company's EBITDA (as defined therein) less
preferred stock and debt outstanding plus excess cash. The Company used $2.5
million of the net proceeds of the Offerings to repurchase Subordinated Notes
Warrants representing 6.25% of the fully-diluted HVE Common Stock.
For the third and fourth quarters of Fiscal 1997, the Company was not
in compliance with certain of its financial covenants contained in the Existing
Revolving Credit Facility, Senior Term Loan, Senior Secured Notes, Senior
Unsecured Notes and
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Subordinated Notes due primarily to costs incurred in connection with an aborted
acquisition and related offering costs. These technical covenant breaches did
not create an event of default whereby the lenders could declare all outstanding
balances due and payable, terminate all available commitments or enforce their
rights under all security arrangements. The Company has received waivers with
respect to such covenant defaults and all such indebtedness was repaid in full,
together with accrued and unpaid interest and prepayment penalties, with the net
proceeds of the Offerings.
During the same time period, the Company was also not in compliance
with certain of the financial covenants contained in the PEDFA IRB (as defined
herein) as a result of the factors described above; however the Company has
received a waiver with respect to such defaults. Additionally, if the waivers
discussed above had not been obtained one of the Company's lessors could have
declared a default under leases of certain of its properties in Lancaster,
Pennsylvania and Sterling, Massachusetts.
Pro forma for the consummation of the Transactions, as of April 26,
1997, the Company would have had total indebtedness (including redeemable put
warrants) of $159.9 million and mandatorily redeemable preferred stock with an
aggregate liquidation preference of $33.0 million.
The Company does not anticipate any significant principal payment
obligations under any of its outstanding indebtedness prior to maturity of the
Notes except with respect to the New Revolving Credit Facility which has a term
of five years. The ability of the Company to satisfy its obligations under
existing indebtedness and preferred stock will be primarily dependent upon the
future financial and operating performance of its operating units and upon the
Company's ability to renew or refinance borrowings or to raise additional equity
capital as necessary.
The Company's working capital was $10.7 million, $11.9 million and $9.4
million at April 29, 1995, April 27, 1996 and April 26, 1997, respectively. The
$1.2 million increase in working capital from April 29, 1995 to April 27, 1996
resulted in part from increases in accounts receivable, inventories and
restricted cash and a decrease in federal, foreign and state income taxes
payable which were partially offset by an increase in accounts payable, accrued
interest and accrued liabilities, advance payments by customers and deferred
income taxes. The increases in accounts receivable and inventories were related
to growth of Robicon's medium voltage VFD sales, the inclusion of sales
generated by Jorda for the entire fiscal year and growth in the sales of
Anderson's power connectors, partially offset by the sale of the Specialty
Connector operating unit. The increase in working capital was funded primarily
by proceeds from the divestiture of discontinued operations and the net proceeds
from the issuance of long-term obligations and a cash overdraft. The $2.5
million decrease in working capital from April 27, 1996 to April 26, 1997
resulted from a decrease in restricted cash and an increase in accrued interest
and accrued liabilities, despite increases in inventories and decreases in
deferred income taxes and advance payments by customers. The decrease in
restricted cash was due to the shipment of certain systems by HVE Europa and the
increase in inventories was related to higher sales levels. After giving effect
to the Merger, the Company's pro forma working capital at April 26, 1997 would
have increased by $38.5 million. Cash and cash equivalents of $1.5 million on
the Company's balance sheet as of April 26, 1997, unadjusted for the
Transactions, excludes $2.2 million of restricted cash in uninsured foreign bank
accounts which was used as collateral for a bank guarantee facility for customer
advances.
Net cash provided by operating activities in Fiscal 1995 was $10.1
million, compared to net cash used in operating activities of $6.4 million in
Fiscal 1996. The increase in net cash used in operating activities reflected
significant increases in accounts receivable and inventories related to higher
sales volumes in Fiscal 1996 and a decrease in federal, foreign and state income
taxes payable. Net cash used in operating activities in Fiscal 1996 was $6.4
million as compared to $0.6 million of net cash provided by operating activities
in Fiscal 1997. The net cash provided by operating activities in Fiscal 1997
resulted primarily from a decrease in working capital employed in the Company's
businesses, despite increased sales levels.
As of April 29, 1995, April 27, 1996 and April 26, 1997, the Company
had assets held for sale, consisting of several former manufacturing facilities,
of $6.4 million, $6.2 million and $5.2 million, respectively. These properties
are recorded at the carrying amount or fair value less selling costs. The
Company believes it is possible that the proceeds from the sale of these
properties will differ significantly from the carrying amount and additional
losses may then be recorded. During Fiscal 1995 and Fiscal 1996, the Company
recorded provisions of $0.8 million and $1.2 million, respectively, to write
down the value of certain former manufacturing facilities. During Fiscal 1996,
the Company reclassified to assets held for sale a former manufacturing facility
valued at $1.2 million, which was retained in the sale of the Specialty
Connector operating unit.
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Net cash used in investing activities in Fiscal 1995 was $12.3 million
due primarily to the $10.0 million of capital expenditures (including $0.8
million related to discontinued operations and leased asset additions) and the
$5.9 million investment to acquire Jorda in Fiscal 1995. In Fiscal 1996, net
cash provided by investing activities was $5.7 million, due primarily to
approximately $11.0 million of proceeds from the sale of the Specialty Connector
operating unit partially offset by $6.0 million in capital expenditures
(including leased asset additions) in Fiscal 1996. The Company incurred capital
expenditures of $10.0 million (including $0.8 million related to discontinued
operations and leased asset additions) in Fiscal 1995, including $6.6 million
for a new manufacturing facility for Robicon compared to $6.0 million of capital
expenditures (including leased asset additions) in Fiscal 1996. Net cash
provided by investing activities in Fiscal 1996 was $5.7 million, as compared to
$3.1 million used in investing activities in Fiscal 1997. Cash provided by
investing activities in Fiscal 1996 was due primarily to the sale of Specialty
Connector partially offset by additions to property, plant and equipment. Net
cash used in investing activities increased in Fiscal 1997 despite a decrease in
capital expenditures (including leased asset additions) from $6.0 million in
Fiscal 1996 to $5.0 million in Fiscal 1997. Capital expenditures in Fiscal 1996
included a $1.9 million expenditure for an additional facility for Natvar.
Although the Company believes that a significant portion of future capital
expenditures will be used to fund planned maintenance of facilities and
equipment, the Company may require additional capital expenditures to support
growth at certain of its operating units. The Company expects to make capital
expenditures (including leased asset additions) of $7.5 million in its fiscal
year ending April 1998.
Net cash provided by financing activities increased from $1.2 million
in Fiscal 1995 to $1.9 million in Fiscal 1996, primarily due to the issuance of
long-term obligations and the cash overdraft which was partially offset by
payments on certain long-term obligations and decreases in restricted cash. Net
cash provided by financing activities was $1.9 million for Fiscal 1996 and
Fiscal 1997, which included a refinancing of a majority of the Company's
long-term obligations in Fiscal 1997.
The Indenture will allow each Restricted Subsidiary that is an obligor
under an Intercompany Note to effect a Qualified Subsidiary IPO. Upon completion
of a Qualified Subsidiary IPO, such Restricted Subsidiary will become an
Unrestricted Subsidiary and the cash flow of such Unrestricted Subsidiary will
no longer be available (i) to service debt obligations of the Company or its
remaining Restricted Subsidiaries or (ii) for purposes of determining whether
the Company or its remaining Restricted Subsidiaries will be able to incur
additional indebtedness, either of which could affect the liquidity of the
Company.
While the Company believes that internally generated funds and amounts
available under the New Revolving Credit Facility will be sufficient to satisfy
its operating cash requirements and make required interest and principal
payments under the New Revolving Credit Facility, the Notes and existing capital
leases, IRBs, mortgage notes, notes payable and the foreign credit line and
payments with respect to the contingent interest payments and the redeemable put
warrants, there can be no assurance that such sources will be adequate and that
the Company will not require additional capital from borrowings or securities
offerings to satisfy such requirements. In addition, the Company may require
additional capital to fund future acquisitions. There can be no assurance that
such capital will be available.
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BUSINESS
COMPANY OVERVIEW
The Company owns and operates a diversified group of seven middle
market industrial manufacturing businesses. These businesses focus on designing
and manufacturing high quality, applications-engineered products which are
designed to address specific customer needs. The Company's products are sold to
a broad range of domestic and foreign OEMs and end-users in a variety of
industries including process automation, freshwater and wastewater treatment,
petrochemicals, semiconductor fabrication, chemicals, construction, agriculture,
materials handling, computers, telecommunications, medical equipment and climate
control and for scientific and educational research. The diversified nature of
the products sold and end-markets served by the Company's businesses limits the
effect on the Company of operating performance fluctuations in any single
operating unit and cyclical downturns within individual industries and
end-markets, while the Company believes that its focus on middle market
manufacturing enhances its growth prospects. The Company believes that these
factors have contributed to steady growth in consolidated net sales and EBITDA.
Between Fiscal 1993 and Fiscal 1997, the Company's historical net sales
increased at a 14.3% CAGR, from $101.3 million to $173.1 million, and its EBITDA
increased at a 15.7% CAGR from $9.1 million to $16.3 million. Pro forma for the
Merger, the Company had net sales and EBITDA of $237.9 million and $26.4
million, respectively, in Fiscal 1997.
COMPETITIVE STRENGTHS
Management has focused its efforts on acquiring and developing a group
of middle market manufacturing businesses that generally share the following
competitive strengths:
- Leading Market Positions. Several of the Company's products
hold leading market share positions in their respective niche
markets, including the Company's medium voltage VFDs
(Robicon), advanced surface analysis instruments (PHI), high
current, quick disconnect power connectors (Anderson),
humidity calibration instruments (General Eastern) and
particle accelerator systems (HVE Europa). The Company
believes that applications-engineering expertise, proprietary
technology and customer relationships act as significant
barriers to entry in several of the Company's markets.
- Reputation for Innovative Product Development. The Company
believes that its operating units have reputations for the
development of innovative products designed to address
specific customer needs. For example, in November 1994,
Robicon introduced its Perfect Harmony series of medium
voltage VFDs which represented a significant technological
breakthrough relative to competitors' product offerings by
increasing power factor and reducing harmonic distortion
typically resulting from the use of VFDs with large electric
motors. In addition, PHI has recently introduced several new
surface analysis instruments, including the SMART-200, TRIFT
II and 6800 Dynamic SIMS, which each have the ability to
analyze every point on an 8-inch semiconductor wafer.
- Long-Term Relationships with Market-Leading Customers. The
Company's operating units serve some of the largest companies
in their respective industries, including: Advanced Micro
Devices, Advanced Silicon Materials, American Power
Conversion, Amoco, Caterpillar, Cummins Engine, E-Z-GO
(Textron), Harley-Davidson, Hewlett-Packard, Hitachi, IBM,
Lucent Technologies, Massey Ferguson, 3M Healthcare and
Yaskawa Electric. With the exception of one customer which
accounted for 6.6% of the Company's consolidated net sales for
Fiscal 1997, pro forma for the Merger, no customer of any of
its operating units accounted for more than 2.7% of such
sales. The Company's operating units have long-term
relationships with many of their customers; in many cases
these relationships have existed in excess of 10 years.
- Experienced and Incentivized Senior Management Team. The
Company and each of its operating units are run by senior
managers who have an average of over 20 years of relevant
operating experience. The Company's senior management team has
financial incentives tied to long-term improvements in the
Company's financial performance.
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BUSINESS STRATEGY
The Company's business strategy is to increase the sales and
profitability of its existing businesses and to build upon their inherent
competitive strengths. The Company applies a consistent operating strategy to
its individual operating units, key elements of which include:
- Focus on Applications-Engineered Products. The Company's
products are typically engineered based upon specific customer
applications. The Company seeks to involve its customers at an
early stage of the product development process in order to
jointly design new products and to improve existing ones. In
certain instances, this process has resulted in the Company
becoming a sole source supplier. The Company believes that
this strategy has led to incremental long-term business with
key customers and the addition of new customers.
- Integrated Product Development. The Company seeks to develop
new products and find new applications for existing products
through an integrated product development process that
involves cross-functional teams including engineering,
manufacturing and marketing personnel. As a result, the
Company believes that it is able to design and manufacture
products that address specific customer needs and can be
manufactured efficiently, cost-effectively and on a timely
basis.
- Focus on Core Competencies. The Company believes that its core
competencies are the design, engineering and assembly of
applications-engineered products. As part of its focus on
these core competencies, the Company has eliminated certain
ancillary functions performed by certain of its operating
units over the last several years including printed circuit
board assembly, machining and metal stamping and plating.
- Commitment to Process Re-engineering and Total Quality. The
Company maintains process re-engineering and Total Quality
programs at each of its operating units, which it began
implementing in 1993. These programs have enabled the Company
to improve product quality, increase manufacturing efficiency
and productivity, reduce product lead and cycle times and
reduce the relative amount of working capital invested in its
businesses.
- Decentralized Management of Operating Units. The Company's
operating units are managed on a decentralized basis by senior
managers who apply a consistent operating strategy, while a
small corporate staff provides strategic direction and
support. As a result of the discrete nature of the Company's
operating units, the Company has been able to sell businesses
or product lines on an opportunistic basis. For example, since
1988, the Company has divested 12 businesses that generally
lacked some or all of the competitive strengths common to its
current operating units.
Acquisitions are also an important part of the Company's growth
strategy. The Company seeks to supplement its internal growth with selected
add-on acquisitions of businesses that are complementary to its existing
operating units. In recent years, both Robicon and Datcon have successfully
completed and integrated such add-on acquisitions. In addition, the Company
seeks to acquire middle market manufacturing businesses to operate on a
stand-alone basis, such as PHI, that possess competitive strengths similar to
those of its existing businesses.
THE OPERATING UNITS
The Company conducts its business through seven independent operating
units, Robicon, PHI, Datcon, Anderson, Natvar, General Eastern and HVE Europa,
each of which has its own management team and manufacturing facilities and
maintains its own independent market identity. A discussion of the businesses
conducted by each of the operating units follows.
ROBICON
Robicon is a leading designer and manufacturer of high power conversion
products, which are used to regulate electric power, reduce energy costs and
improve process control in a wide variety of industrial applications. Products
include variable frequency drives ("VFDs") for large electric motors and power
control systems for other applications. These products are used in process
automation, freshwater and wastewater treatment, oil and gas extraction and
transmission, petrochemical processing, silicon processing, glass manufacturing,
cement production and other general industrial applications. In general,
Robicon's products are designed to provide highly engineered solutions to
specific customer requirements by utilizing a combination of standard product
platforms and options, with customized features. Robicon's growth strategy is to
increase sales of existing product lines through entrance into new end markets
and international expansion, and to add products and
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services complementary to its existing product lines. The Company believes that
Robicon is able to differentiate itself from its competitors through the use of
proprietary technology, innovative product development, superior customer
service, and the ability to offer applications-engineered solutions based on
standard products. Robicon's headquarters are located in New Kensington,
Pennsylvania, a facility opened in Fiscal 1996. For Fiscal 1997, Robicon had net
sales of $83.1 million, which represented 34.9% of the Company's consolidated
net sales for such period, pro forma for the Merger.
Products
Industry sources estimate that motors consume 65% to 70% of all
electricity used for industrial applications, or more than half of the electric
power generated in the United States, at an annual cost of over $90 billion. In
a single year, a typical large industrial motor typically consumes electricity
that costs 10 to 20 times its total capital cost. Many machines driven by
electric motors, particularly pumps and fans, need to vary their speed in
response to changing process needs. Particularly in large motor applications,
this is often done by operating the pump or fan at full power while "throttling"
its output with a partly closed valve or damper, which is comparable to driving
a car with the accelerator completely depressed and using the brake pedal to
vary the car's speed. Operating the pump or fan at full power wastes tremendous
amounts of electricity at significant cost and results in poor process control.
A VFD is analogous to an electric dimmer switch which regulates the brightness
of light in a lamp. VFDs regulate the amount of electricity supplied to electric
motors as an alternative means of varying output. For example, when only half
the flow from a pump is needed, the VFD supplies a reduced amount of electricity
to the electric motor driving the pump. As a result, according to industry
sources, electricity savings on motors using VFDs can range from 10% to 40%. Of
particular importance to Robicon, which participates in the VFD market for large
motors, is the estimate by industry sources that the largest 10% of the domestic
motor population accounts for at least 80% of all motor energy consumption. Use
of VFDs has been growing steadily, driven by the desire to achieve energy cost
savings, the need to control large industrial processes more accurately and
technological advances that have improved the cost and practicality of using
VFDs in large motor applications.
Historically, Robicon primarily manufactured low voltage (480 volts)
VFDs for small electric motors (20 to 1,500 horsepower) for use in industrial
applications such as commercial building climate control, incinerators and
freshwater and wastewater treatment plants, and in other general industrial
uses. Recently, the Company introduced the Perfect Harmony series of medium
voltage (2,300 to 7,200 volts) VFDs for large electric motors (400 to 7,000
horsepower). Heavy industrial processes such as freshwater and wastewater
treatment, oil and gas extraction and transmission, petrochemical processing,
and cement production, utilize large electric motors that require high levels of
power to drive pumps and fans. An undesirable byproduct of using medium voltage
VFDs on a large electric motor is the creation of harmonic distortion which
causes stress and fatigue to the electric motor and shortens its useful life, as
well as current and voltage fluctuations which may result in damage to other
equipment on the power grid. Most VFDs also place greater demands on a power
grid than the actual power consumed by the motor, an occurrence referred to as
reduced power factor, which can result in assessments of penalty charges against
the user by the local utility. Perfect Harmony, Robicon's patented technology
for medium voltage VFDs, virtually eliminates harmonic distortion and poor power
factor in large electric motors and as a result has significantly expanded the
market for medium voltage VFDs. The Company believes that Perfect Harmony is the
leading technology for reducing harmonic distortion and improving power factor
in medium voltage VFD applications and that this technology complements
Robicon's applications expertise and long-term customer relationships. Perfect
Harmony drives can be installed on virtually any large electric motor without
costly modifications and can be customized using a standard set of options.
Robicon has recently expanded its Perfect Harmony series to include synchronous
transfer, a feature that allows a single VFD to regulate multiple motors
sequentially. These VFDs are currently targeted at new end users in the oil and
gas pipeline markets. Introduced in November 1994, Perfect Harmony medium
voltage VFDs accounted for approximately $27 million of Robicon's net sales for
Fiscal 1997, or approximately 33% of Robicon's total net sales for such period.
While VFDs regulate electricity for motors, power control systems
regulate electric power for other applications. Typical applications for
Robicon's power control systems include: (i) power supplies for high-power
melting applications, such as glass and fiberglass furnaces and plasma arc
torches used in steel mills and smelters; (ii) power supplies for polysilicon
extraction and silicon crystal growing for use in the semiconductor industry;
and (iii) power supplies for plasma generators used in sputtering equipment for
coating the surface of glass or plastics. Power control systems are critical to
process control and reducing overall energy costs in these applications.
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Markets and Customers
Robicon markets and sells VFDs primarily in North America and Asia with
an expanding presence in Europe, Australia and South America. The market for
VFDs is comprised primarily of two customer segments: industrial and municipal.
The industrial market for VFDs is comprised of large power users such as metals
smelting plants, cement plants, pulp and paper mills, chemical processing plants
and power generation facilities. Robicon's industrial customers include Amoco,
Chevron, Interprovincial Pipeline, Lafarge, Mead Paper, Medusa Cement,
Westinghouse Electric and Yaskawa Electric. The municipal market for VFDs is
comprised primarily of municipalities which operate freshwater and wastewater
treatment facilities.
Customers for Robicon's power control systems include OEMs such as
British Oxygen (Airco), Kayex and Wheelabrator and end-users such as Advanced
Silicon Materials, Geneva Steel and Owens-Corning. Demand for power control
systems is driven by the construction of new, or the upgrading of existing,
steel mills or smelting facilities, semiconductor fabrication facilities, glass
and fiberglass furnaces and other large electrical process manufacturing
facilities. Because of the long lead time required to design, permit and build
such facilities, demand for power systems does not necessarily correlate to
general economic cycles.
Sales and Marketing
Robicon's VFDs are sold through Robicon's direct sales force and by
independent manufacturers' representatives. Bids for large municipal VFD
contracts are typically conducted through a "request for proposal" process and
handled by Robicon's independent manufacturers' representatives. Robicon's power
control systems are sold by its direct sales force.
Competition
Robicon's principal competitor in the VFD market is Rockwell Automation
(Allen-Bradley/Reliance). Other competitors include divisions of multinational
corporations such as Ansaldo Ross-Hill, Asea Brown Boveri ("ABB"), Cegelec,
Eaton (Cutler Hammer), Emerson Electric and Siemens. Robicon's major competitors
in the power control systems market include multinational corporations such as
ABB and Westinghouse Electric, and several niche engineering firms such as
InverPower, Rapid Technology and Spang & Company. As with VFDs, power systems
are often produced by divisions of large multinational corporations that may
offer a broader product range than that of Robicon.
PHI
PHI is the world's leading designer and manufacturer of advanced
surface analysis instruments and components used to determine the elemental
and/or chemical composition of materials found on or near the surface of a
sample. Advanced surface analysis instruments are used in commercial
applications in central support laboratories and at or near the production line
in the semiconductor fabrication, computer peripherals, chemicals, aerospace,
metals, polymer, automotive and biomaterials industries, among others, for
product and process development, process control, defect review and failure
analysis. Advanced surface analysis instruments are also used for materials
science research by universities and government institutions. PHI is also a
leading supplier of ultrahigh vacuum ion pumps and controls required for highly
accurate surface analysis and for other applications. PHI's headquarters are
located in Eden Prairie, Minnesota. For the LTM period ended March 28, 1997, PHI
had net sales of $64.8 million, which represented 27.2% of the Company's
consolidated net sales for Fiscal 1997, pro forma for the Merger.
PHI's growth strategy is to increase sales of its products through
identification of new applications for its existing products, increased
penetration of international markets, enhancements in the technological
capability of its instruments, development of application-specific hardware
configurations for its instruments and the continued improvement in the
operating ease and efficiency of its instruments through increased automation
and software development. The Company believes that PHI differentiates itself
from its competitors through its patented and proprietary technology, expertise
in the manufacture of instruments incorporating ultrahigh vacuum technology,
superior customer service, support and training and a reputation for product
quality, ease of operation and reliability.
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Products
PHI's products include Auger Electron Spectroscopy ("Auger"), Electron
Spectroscopy for Chemical Analysis ("ESCA"), Time-of-Flight Secondary Ion Mass
Spectrometry ("TOF-SIMS") and Dynamic Secondary Ion Mass Spectrometry ("Dynamic
SIMS") instruments. Under ultrahigh vacuum conditions, PHI's surface analysis
instruments direct a particle beam at the surface of a solid under
investigation, causing the emission of particles from the specimen that may be
analyzed to determine the elemental and/or chemical composition of the sample
surface. Highly sophisticated software, customized for each of PHI's surface
analysis instruments, interprets data received from the instrument's analyzer
and creates images that show the distribution of elements or molecules on a
surface. Graphical and numerical data may also be obtained. In addition, by
removing and analyzing successive layers of material each surface analysis
instrument is capable of generating a depth profile, which indicates how
elemental and/or chemical composition varies throughout the thickness of a
sample.
PHI's Auger surface analysis instruments direct a highly focused
continuous electron beam onto a sample, which causes high energy "Auger
electrons" to be emitted from the sample surface. Because the energy level of
such Auger electrons is unique to the element from which they were emitted, it
may be measured to identify the elements present on the surface. Auger offers
the highest spatial resolution of all of PHI's surface analysis instruments,
providing high definition images of the distribution of elements on a
microscopic region of a surface. In general, Auger may be used to examine
inorganic samples that are electrically conductive, such as semiconductors and
metals. While PHI's Auger instruments are well-suited to a variety of
applications, they are primarily used in the semiconductor industry for process
development, process control, defect review and failure analysis. For example,
PHI's Auger instruments are used to create high resolution images showing the
location of elements on a selected region of a semiconductor wafer. The Company
believes that, because of its high resolution capabilities, Auger will be of
increasing significance in semiconductor fabrication as the dimensions of
semiconductor devices are reduced. Auger also offers high elemental sensitivity,
enabling the identification of impurities in or on semiconductor devices which
may affect production yields in semiconductor fabrication. PHI's 680 Auger
instrument is primarily used in central support laboratories to analyze
materials in a variety of industries, including the semiconductor, aerospace,
computer peripherals, metals and automotive industries. PHI's introduction in
1994 of the SMART-200, a new Auger surface analysis instrument which has the
ability to analyze every point on an 8-inch semiconductor wafer, enabled PHI to
expand the market for its Auger instruments within the semiconductor industry.
Another typical application of PHI's Auger instruments is the analysis of
corrosion of the read/write heads of computer hard drives.
PHI's ESCA surface analysis instruments direct a continuous x-ray beam
onto a sample, which causes "photoelectrons" to be emitted from the sample
surface. Because the energy level of such photoelectrons is unique to the
element or arrangement of atoms from which they were emitted, it may be measured
to identify the elements or determine the chemical composition of molecules on
the surface. ESCA may be used to analyze a wide variety of materials, including
both conductive and non-conductive solids, and provides both elemental and
chemical data, although with lower spatial resolution than Auger. While PHI's
ESCA instruments are well-suited to a variety of applications, they are
primarily used by PHI's customers for the analysis of polymers, semiconductors,
chemicals, computer peripherals, biomaterials and automotive components-.
Typical applications include the development and optimization of chemical
processing for etching semiconductor wafers, the application of thin polymer
films on bulk materials, such as polymer coatings on aluminum cans,
anti-corrosion coatings on metal surfaces and non-stick coatings for kitchen
utensils, as well as the analysis of multi-layered paint. PHI's ESCA product
line currently includes the 5800 as its standard model and the Quantum 2000
Scanning ESCA Microprobe(TM), which offers enhanced resolution and operation on
a fully-automated "turn-key" basis.
PHI's TOF-SIMS surface analysis instruments direct short, intermittent
bursts of charged atoms or molecules called "ions" onto a sample, which causes
other ions to be emitted from the sample surface. These emitted ions traverse a
long flight path, with the time required for an ion to reach the analyzer (the
"time of flight") being directly related to its mass. Because the mass of such
ions is unique to the material from which they were emitted, it may be measured
to identify the elements or molecules present. The "time of flight" method of
determining the mass of the emitted ions is highly precise and can be used to
accurately identify both the elemental and chemical composition of a surface. In
addition, TOF-SIMS is the best-suited of PHI's instruments to the detection of
very large molecules, such as those found in plastics and biomaterials, and
PHI's TOF-SIMS instruments can detect trace impurities in a sample at levels of
one part per million. PHI's TOF-SIMS products are used in a variety of
applications including the semiconductor industry for quality control and
process development, primarily in central support laboratories. For example,
PHI's TOF-SIMS instruments are capable of detecting contamination on
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semiconductor devices, including photoresist used in semiconductor device
manufacturing, which may affect production yields. PHI's TOF-SIMS products are
also sold for use in a variety other industries, including polymers, computer
peripherals and biomaterials. Applications include the process development of
the application of thin films on printer paper and lubricants on computer hard
disks. In 1994, PHI introduced the TRIFT II, a new TOF-SIMS instrument which may
be configured to analyze every point on an 8-inch semiconductor wafer.
PHI's Dynamic SIMS surface analysis instruments direct a highly focused
continuous beam of ions onto a sample, which causes other ions to be emitted
from the sample surface. Because the mass of such ions is unique to the material
from which they were emitted, it may be measured to identify the elements
present. In general, Dynamic SIMS is used to examine inorganic samples. PHI's
Dynamic SIMS instruments are capable of detecting trace impurities with a
sensitivity of greater than one part per billion, although without the chemical
sensitivity of PHI's TOF-SIMS instruments. While PHI's Dynamic SIMS instruments
are well-suited to a variety of applications, they are predominantly used in
central support laboratories in the semiconductor industry for process control
to monitor the precise elemental composition of semiconductor devices and in
quality control to identify contaminants that may affect yields in semiconductor
fabrication. Because the ion beam in PHI's Dynamic SIMS instruments removes the
surface layer of a material under investigation, depth profiles are generated as
a result of the operation of the instrument. This is in contrast to PHI's other
surface analysis instruments in which an additional ion beam is required to
remove successive layers of material. The 6650 Dynamic SIMS is PHI's standard
model. In 1997, PHI intends to introduce the 6800 Dynamic SIMS instrument, which
has the ability to analyze every point on an 8-inch semiconductor wafer. All of
PHI's Dynamic SIMS surface analysis instruments are designed for ease of use and
rapid sample change for efficiency of sample analysis in industrial
applications.
Markets and Customers
PHI markets and sells its surface analysis instruments worldwide, with
Japan representing its largest market and North America its second largest
market. The Company believes that demand for advanced surface analysis
instruments will increase most rapidly in Asia and the Pacific Rim region over
the next several years due primarily to an increased level of semiconductor
fabrication facility construction in those regions.
Historically, customers have operated PHI's surface analysis
instruments primarily in industrial central support laboratories for research
and development, pre-production testing of pilot processes, materials
characterization and process control and verification, typically where
understanding the elemental and/or chemical composition of a material's surface
is critical to product or process development. In addition, the Company believes
that production support applications, such as failure analysis, defect review
and quality control, represent an important growth area, particularly in
semiconductor fabrication. PHI's surface analysis instruments are also used by
universities and government institutions for materials science research.
Due to the diversity of applications for PHI's surface analysis
instruments, PHI is not dependent on sales to customers in any single industry.
PHI's products are suitable for a wide variety of applications without the need
for customization or modification. This versatility of function permits PHI to
respond quickly to changes in the marketplace that favor new technologies or
demonstrate new applications. In addition, PHI has the ability to tailor each
surface analysis instrument to specific applications through changes in hardware
configuration, software customization and varying degrees of automation of
operation in response to industry-specific demands or customer requirements.
PHI's customer base is principally comprised of industrial
laboratories, OEMs and research facilities, including those associated with
universities and government institutions. Demand for PHI's products is driven by
the need for precise chemical and/or elemental analysis of materials. Some of
PHI's customers include Advanced Micro Devices, Alcoa, DuPont, Hewlett-Packard,
IBM, Matsushita, Motorola, Nippon Steel, Samsung, Seagate, Siemens, Texas
Instruments, Toshiba and numerous universities and government institutions
worldwide. PHI seeks to cultivate long-term relationships with its various
customers through the continuous provision of post-sale technical support and
on-site training of new users of PHI's installed base of surface analysis
instruments.
Sales and Marketing
PHI markets its products domestically and internationally on the basis
of product performance and quality, availability and quality of after-sales
support, and industry reputation in the manufacture of advanced surface analysis
instruments. The
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significant cost of surface analysis instruments (ranging from approximately
$250,000 to $1.5 million) leads to careful consideration among potential
purchasers not only of product reliability and performance, but also
availability and quality of technical support and training, factors which the
Company believes favor PHI and enable it to realize a pricing premium over
competitors' comparable products.
PHI's experienced and technically-oriented sales force is organized
geographically and consists of teams responsible for North America, Japan, the
Pacific Rim region and Europe. Technical service personnel (most of whom are
scientists and engineers) are decentralized within each region and strategically
situated in close proximity to major customers. PHI presently has a 50% interest
in a joint venture with ULVAC, a Japanese company, which resells and services
PHI's surface analysis instruments in the Japanese market. This joint venture
(ULVAC-PHI) has enabled PHI to successfully sell products into Japan, currently
the largest market for advanced surface analysis instruments. In addition, PHI
provides surface analysis services on a contract basis in its analytical
laboratories located in the United States, Germany and Japan. Such services
often serve as an effective means of demonstrating the capabilities of PHI's
surface analysis instruments to customers who may then consider purchasing an
instrument.
Competition
Competition in the surface analysis market is highly concentrated. The
only broad line competitors in the markets served by PHI's products are Cameca
and VG Scientific (Thermo Electron). The Company believes that PHI has leading
market shares in the Auger, ESCA and TOF-SIMS and that PHI has the second
largest market share in Dynamic SIMS. In Auger, PHI's primary competitors are VG
Scientific and JEOL (Nihon Densi). In ESCA, PHI's primary competitors are Kratos
Analytical (Shimadzu) and VG Scientific. In TOF-SIMS, PHI's primary competitor
is ION-TOF, which is partially-owned by and markets its products through Cameca.
In Dynamic SIMS, PHI's primary competitor is Cameca. The Company believes that
the technical expertise required for the design, production and support of
instruments incorporating ultrahigh vacuum technology is a significant barrier
to entry to potential competitors.
DATCON
Datcon together with its wholly-owned subsidiary, Jorda, designs and
manufactures customized monitoring instrumentation for heavy duty and
off-highway vehicles. Datcon's products include instrument clusters,
speedometers, tachometers and fuel, temperature and pressure gauges which are
used in construction equipment, agricultural machinery, materials handling
equipment and generator and compressor engines. Jorda, based in Barcelona,
Spain, was acquired by the Company in March 1995, and is a leading manufacturer
of instrument clusters for farm tractors in Europe. Datcon's headquarters are
located in Lancaster, Pennsylvania. For Fiscal 1997, Datcon had net sales of
$32.5 million, which represented 13.7% of the Company's consolidated net sales
for such period, pro forma for the Merger.
A principal element of Datcon's strategy is to provide its customers a
broad line of "mass customized" products in the niche market for monitoring
instrumentation for heavy duty and off-highway vehicles. Mass customization
involves several steps, from manufacturing instrumentation to a customer's
specific tolerances to incorporating the customer's logo and design profile in
the product. In order to mass customize products profitably, a manufacturer must
be able to meet short lead times and operate short production runs, both areas
in which Datcon has significant expertise. Datcon seeks to increase its market
share by introducing complementary new products that leverage its applications
expertise. Datcon has designed many innovative products capable of performing
accurately under the harsh conditions that are endemic to the construction,
agriculture and mining industries, including high vibration, extreme
temperature, exposure to ultra-violet light and humidity, which can cause
fogging.
Products
The Company believes that Datcon has one of the broadest lines of mass
customized monitoring instrumentation for heavy duty and off-highway vehicles.
Datcon's line of gauges and meters includes electrical instruments such as
speedometers, tachometers, fuel, temperature and pressure gauges and hour meters
in a variety of styles. Datcon offers its customers integrated monitoring
instrumentation packages comprised of gauges and/or senders or sensors. Sensors
and senders are devices that collect information at its source and relay it to
gauges and meters. Sensors are generally more technologically sophisticated than
senders and are used where the provision of precise measurement is
cost-justified. Datcon also
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manufactures and sells instrument clusters, which are distinct from stand-alone
vehicle monitoring instrumentation as they combine multiple instruments in a
single package with one set of electronics. Datcon believes that its ability to
offer its customers instrument clusters, through the acquisition of Jorda, has
enhanced its market position. In furtherance of its strategy to increase market
share through the introduction of innovative products, Datcon has introduced
several products including: (i) the IllumaSeal(TM) line of heavy duty
instruments that deliver no-fog, waterproof performance and high levels of night
visibility; (ii) the Smart Instrument(TM) line of instruments that provide
visual indication of operational problems and can offer such feature
enhancements on a simple plug-in replacement basis to existing vehicle designs;
(iii) the Illuma Deluxe(TM) line of field-programmable speedometers and
tachometers which enable customers to custom-calibrate these new microprocessor
controlled instruments to match individual vehicle specifications; and (iv) the
Intellisensor series of fuel measurement systems which allow for electronic
measurement of fluid levels through the use of solid state technology, thereby
eliminating moving parts and increasing accuracy and durability.
Markets and Customers
Datcon sells its products in 40 countries worldwide. Approximately 75%
of Datcon's product sales are to OEM markets (including OEM after market sales)
to a diverse group of customers. Datcon has multi-year relationships with some
of the largest OEMs in its markets including Caterpillar, Cummins Engine,
Harley-Davidson, Case, Landini, Massey Ferguson, SAME and Toro. The remaining
25% of Datcon's products are sold through third-party distributors under the
Datcon(R) and AST(TM) brand names to other OEM customers and to the after
market. Datcon believes that it has developed significant customer loyalty by
consistently providing high quality products and exceptional service. The
acquisition of Jorda has provided Datcon with direct access to additional
European customers and an immediate presence in the European instrument cluster
market.
Sales and Marketing
Datcon's products are sold through direct sales representatives in the
United States and Europe, as well as by manufacturers' sales agents in regions
where sales volume does not necessitate the assignment of a direct
representative. In addition, Datcon is represented by a worldwide network of
authorized distributors who carry Datcon products in inventory.
Competition
The market for monitoring instrumentation for heavy duty and
off-highway vehicles is highly fragmented. The U.S. Gauge/Dixson division of
AMETEK, a diversified manufacturer, is the largest competitor in the industry.
Other competitors are Beede, Frank W. Murphy Manufacturing, Hobbs, Joseph
Pollack (Stoneridge), Kysor/Medallion (Kuhlman) and Teleflex. The Company
believes that Datcon's largest competitor in Europe is VDO, a subsidiary of
Mannesman.
ANDERSON
Anderson is a leading designer and manufacturer of high efficiency,
pluggable power connectors for use in high current, quick disconnect
applications including materials handling equipment and other electric-powered
vehicles, uninterruptible power supply products, telecommunications and
networking equipment and office furniture panel electrification. Anderson
specializes in high efficiency, pluggable connectors that are designed to
provide applications-specific solutions to power distribution and power
management challenges for end users. In addition to introducing new
applications-specific products, Anderson seeks to increase sales through finding
new applications for its standard power connectors. Anderson's headquarters are
located in Sterling, Massachusetts. For Fiscal 1997, Anderson had net sales of
$21.6 million, which represented 9.1% of the Company's consolidated net sales
for such period, pro forma for the Merger.
Products
Power connectors allow for the transmission of electric current to
provide distributed power within a device or system. Anderson focuses on the
niche market for wire-to-wire and wire-to-board, high current, quick disconnect
electric power connectors. Quick disconnect power connectors, in contrast to
permanent connectors, allow for easy and repeated disconnection and reconnection
to the power source. Anderson manufactures a broad range of both
applications-specific and standard power connectors. Anderson connectors utilize
a flat interlock contact design. These contacts are supplied in a variety
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of housings and manufactured in a range of sizes in two product families. The
SB(R) series consists of two contacts, spring-mounted in a genderless plastic
housing design for easy connection and disconnection. The Powerpole(R) series
consists of a single contact, mounted in a modular, genderless housing which can
be assembled with other connectors in any configuration or quantity, offering
customers wide flexibility in customized connector solutions at reasonable cost
for low and high volume applications.
Anderson differentiates its power connectors from those of its competitors by
focusing on specialized applications that require unique power connectors to be
customized for specific applications on a rapid-turnaround basis. For example,
Anderson designed a special power connector for electric golf carts made by
E-Z-GO (Textron). Anderson designed and supplies a unique "smart" connector that
disables the electric drive control while the cart is being recharged, thereby
eliminating the possibility of inadvertent drive-aways while the cart remains
connected to the charging stand. Anderson also specializes in uncovering new
applications for its standard power connectors. For example, Anderson
successfully applied its existing power connector technology to the rapidly
growing market for uninterruptible power supply products.
Markets and Customers
Anderson's connectors are primarily used in OEM applications that
typically require high current capacity, high reliability and ease of
installation, as well as blind-mate, hot pluggable and quick disconnect
capabilities. Typical applications include: (i) materials handling equipment and
other electric-powered vehicles, including forklifts, golf carts, wheelchairs
and other vehicles; (ii) uninterruptible power supply (UPS) products and other
peripherals; (iii) telecommunications and networking equipment; and (iv) office
furniture panel electrification. Anderson's products are purchased both directly
by OEMs and indirectly through distributors.
A majority of Anderson's sales are derived from products which are
incorporated into the design of an OEM's product. Therefore, Anderson focuses
its sales and marketing efforts on OEMs and Anderson's engineers work directly
with an OEM's in-house product development team during the design phase of the
OEM's product life cycle to facilitate the engineering of effective power
interconnect solutions. Frequently, this collaborative effort results in a
design for which Anderson is designated by the OEM as a sole source supplier
through the life of the product program. Anderson believes that OEMs choose
Anderson's power connector products in large part due to its reputation for
innovative and customized solutions, its ability to quickly design products and
create prototypes and its long-term customer relationships. Anderson's product
design and prototyping capabilities were recently enhanced by the addition in
Fiscal 1997 of a technical center located in Leominster, Massachusetts which was
established specifically for such purposes.
Anderson's connectors are designed into products by OEMs including
E-Z-GO (Textron), Hyster-Yale and Yuasa-Exide in the materials handling
equipment and electric-powered vehicle industries, American Power Conversion and
Yuasa-Exide in UPS applications and Ericsson and Lucent Technologies in the
telecommunications and networking equipment industry.
Sales and Marketing
Anderson markets and sells the majority of its products under the
Anderson Power Products(R) name primarily in North America, Europe, Japan and
the Pacific Rim region both through an in-house direct sales force and through a
global third-party network of manufacturers' representatives, stocking agents
and authorized distributors. Anderson's products are generally purchased
directly by OEMs and by distributors for resale to OEMs and the after market.
Competition
The connector market served by Anderson is highly fragmented, although
the Company believes that the segment in which Anderson participates is less
fragmented than the overall connector market. Anderson's principal competitors
include Hypertronics, Multi-Contact, ODU and Positronics Industries. In
addition, certain large manufacturers of connectors, such as AMP, also produce
power connectors for certain applications which compete directly with Anderson
products.
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NATVAR
Natvar is a manufacturer of disposable specialty bulk medical grade
plastic tubing used primarily in medical devices and for less-invasive surgical
procedures. Specialty bulk medical grade tubing is made from standard PVC,
polyethylene, polyurethane and radio page resin compounds extruded in conformity
with customer requirements and tolerances. The Company believes that Natvar
differentiates itself from other specialty bulk medical grade plastic tubing
manufacturers by selling products customized on a highly accurate basis to
medical device manufacturers' exacting standards. Natvar does not compete in the
non-specialty bulk medical tubing market, which is a commodity-type product used
in applications such as intravenous infusion therapy. Natvar also produces
electrical sleeving and tubing used to protect multiple insulated wires.
Natvar's headquarters are located in Clayton, North Carolina. For Fiscal 1997,
Natvar had net sales of $15.2 million, which represented 6.4% of the Company's
consolidated net sales for such period, pro forma for the Merger.
Products
Natvar manufactures a variety of disposable specialty bulk medical
grade tubing products. These products are primarily incorporated in single use,
disposable products used in medical devices and for less-invasive surgical
procedures as opposed to products used in administering long-term patient care.
Specialty bulk medical grade tubing products include: (i) co-extruded
combinations of PVC and polyethylene used for administering unstable solutions
such as nitroglycerine, insulin and chemotherapy drugs; (ii) profile extrusion
tubing used as connectors to medical devices; (iii) transition tubing with
specially designed bubble spaces that reduce platelet damage during blood
hemolysis; (iv) heat exchanger coils used during cardioplegia procedures when
warming or cooling of blood is required; and (v) anesthesia monitoring lines.
Specialty bulk medical grade tubing can also be solvent bonded into paratubing
which allows for multiple fluids to be infused or removed without the need for
separate lines. Natvar has developed proprietary products such as Natvar 151
tubing, a bonded tri-layer tubing which does not react with drugs being
administered, and thereby combines the low cost of PVC with the inert properties
of more expensive materials such as silicone. Natvar also manufactures precision
medical and surgical tubing, which is designed for less-invasive surgical
procedures involving the use of products such as catheters, dilators and
arthroscopic applicators.
Natvar manufactures electrical sleeving and tubing for the secondary
electrical insulation market for use in a variety of applications, including low
voltage electric motors, instrument wiring, electric heater elements, wire
harnesses and cable assemblies. Electrical sleeving and tubing differs from
standard primary wire insulation in that it provides a secondary layer of
protection for an insulated wire. Electrical sleeving is made from fiberglass,
nylon and other fibers.
Markets and Customers
Substantially all of Natvar's customers for specialty bulk medical
grade tubing are medical equipment OEMs. Typically, manufacturing specifications
for such tubing are established by the customer in advance of placing the order.
Although many medical device companies utilize Natvar's products, each requires
slight variances in hardness, tint level, plasticity and thickness. All of these
customer specifications must be approved by the Food and Drug Administration
(the "FDA") prior to sale. OEMs closely monitor their suppliers to ensure that
tubing is being produced within FDA-approved specifications, and have lengthy
qualification procedures for new products to assure compliance. As a consequence
of this level of oversight, medical equipment manufacturers tend to maintain
only a limited number of specialty bulk medical grade tubing suppliers. Natvar's
major customers include COBE Laboratories, Haemonetics, Medtronics and 3M
Healthcare.
Unlike specialty bulk medical grade tubing, the majority of electrical
sleeving and tubing sales are made through distributors, while the balance is
made to OEMs. Products are sold primarily on the basis of price and performance
considerations. Electrical sleeving is sold for use in motors and appliances as
well as applications in the automotive and aerospace industries.
Sales and Marketing
All of Natvar's products are sold primarily by a direct sales force to
customers located primarily in the United States. Natvar maintains a performance
guarantee and marketing campaign for its specialty bulk medical grade tubing
products that guarantees that its products will be shipped on the date quoted to
the customer or the product and shipping is provided free to
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the customer. Since the introduction of this policy, known as "On Time or On
Us," Natvar has consistently met this performance guarantee.
Competition
Competitors in the specialty bulk medical grade tubing market are
typically small, private companies, such as Kelcourt, Pexco and Sunlite, and
divisions of larger companies, including Norton and Plastron. Major competitors
in the electrical sleeving and tubing market include Bentley-Harris
Manufacturing and Varflex.
GENERAL EASTERN
General Eastern is a leading designer and manufacturer of relative
humidity measurement instruments and humidity calibration instruments. General
Eastern's products are used in a wide range of applications including energy
management and climate control, calibration and standards laboratories, thermal
processing, environmental monitoring and process control. General Eastern also
provides long-term support and calibration services for all of its products.
Humidity measurement instruments are used to save energy, manufacture products
with greater quality and consistency, and allow people to live and work in more
comfortable surroundings. General Eastern's headquarters are located in Woburn,
Massachusetts. For Fiscal 1997, General Eastern had net sales of $12.2 million,
which represented 5.1% of the Company's consolidated net sales for such period,
pro forma for the Merger.
Products
General Eastern designs and manufactures a broad line of relative
humidity measurement instruments which are used to measure moisture levels in
ambient environments (those not subject to extreme conditions) for the purpose
of monitoring the temperature and humidity of such environments. General Eastern
also manufactures chilled mirror hygrometers, which are humidity measurement and
calibration instruments used primarily to confirm the accuracy of other humidity
measurement instruments. Chilled mirror hygrometers are highly accurate and are
therefore used as a reference standard for faster but less accurate humidity
measurement devices.
Markets and Customers
General Eastern's products are used in a wide range of application
markets including energy management and control, calibration and standards
laboratories, thermal processing, environmental monitoring, process control and
gas systems. Relative humidity measurement instruments are used in a wide
variety of manufacturing processes including pulp and paper drying,
pharmaceuticals production and other processes that require the monitoring of
humidity to ensure product quality. Humidity monitoring applications include
semiconductor fabrication, pharmaceutical production, museums and warehouses.
General Eastern's customers include OEMs such as Cray Computer, Johnson
Controls, Landis & Staefa and Siebe (Barber-Colman), and end users such as
Eastman Kodak and Intel. Customers for General Eastern's calibration services
include the Department of the Navy and the U.S. Geological Survey.
Sales and Marketing
General Eastern's products are sold in North America through a direct
sales force and independent manufacturers' representatives and overseas by a
network of distributors. General Eastern markets its products through direct
mail advertisement, advertisement in trade journals, participation in trade
shows, attendance at industry-related seminars, publication of scientific papers
and an internet website.
Competition
General Eastern's primary competitors are Edgetech, HyCal (Honeywell),
MBW, Panametrics, Protimeter and Vaisala. Companies compete in the humidity
measurement instrumentation industry primarily on the basis of price and the
quality and accuracy of their products.
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HVE EUROPA
HVE Europa is the world's leading designer and manufacturer of particle
accelerator systems used in scientific and educational research. HVE Europa's
products are used primarily for applications including "carbon dating" and
materials science and semiconductor research. HVE Europa's headquarters are
located in Amersfoort, The Netherlands. For Fiscal 1997, HVE Europa had net
sales of $8.5 million, which represented 3.6% of the Company's consolidated net
sales for such period, pro forma for the Merger.
In addition to focusing on its core research markets, HVE Europa has
begun to pursue a strategy of identifying new markets for its existing products.
In furtherance of this strategy, HVE Europa has developed and begun to sell a
new ion particle accelerator subsystem to a launch customer in the industrial
ion implantation market who supplies complete systems to semiconductor
manufacturers. In addition, HVE Europa is currently assessing the feasibility of
adapting certain of its systems for biomedical and biochemical applications.
Products
HVE Europa's products include ion particle accelerator systems,
research ion implanters, accelerator mass spectrometer systems and component
parts such as accelerator tubes. In a particle accelerator, ions are accelerated
to a high velocity under the influence of a strong electrical field and then
fired into the material under investigation. Instrumentation then measures the
impact of the ion beams on the target material. Accelerator mass spectrometer
systems are specialized ion particle accelerator systems used for carbon dating
materials.
Markets and Customers
Historically, demand for HVE Europa's products was driven by nuclear
physics research. However, since the end of the Cold War, HVE Europa's products
have been sold for applications including carbon dating and materials science
and semiconductor research. Other applications include ratio spectrometry in
archaeology, oceanography, geosciences, materials science and biochemistry.
Accelerator mass spectrometer systems are used by universities and research
institutes for carbon dating in the fields of archaeology, oceanography and
geosciences. The demand for particle accelerator systems has historically been
tied to the construction of new or expanded research facilities, which for
educational institutions is mainly dependent upon grants and fund raising.
Sales and Marketing
HVE Europa's products are sold worldwide by its direct sales force. Due
to the complex, custom-built nature of HVE Europa's particle accelerators,
frequent and extensive interaction is required between HVE Europa and the
customer. HVE Europa presents technical papers at, and participates in,
scientific conferences, advertises in scientific periodicals and distributes
product literature and information on new developments to its existing
customers.
Competition
Competition in HVE Europa's market is highly concentrated. HVE Europa's
sales in the particle accelerator market are often bid competitively against the
National Electrostatics Corporation, a privately-held U.S. manufacturer. HVE
Europa's primary competitor in Japan is Nissin High Voltage.
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BACKLOG
The Company's backlog (prior to giving effect to the Merger) was as
follows as of the dates indicated (dollars in thousands):
<TABLE>
<CAPTION>
APRIL 29, 1995 APRIL 27, 1996 APRIL 26, 1997
------------------- ------------------- -------------------
PERCENTAGE PERCENTAGE PERCENTAGE
AMOUNT OF TOTAL AMOUNT OF TOTAL AMOUNT OF TOTAL
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Robicon ....... $20,887 48.9% $38,158 60.6% $41,661 59.8%
Datcon ........ 4,787 11.2 6,773 10.7 7,655 11.0
Anderson ...... 3,758 8.8 2,584 4.1 3,425 4.9
Natvar ........ 3,432 8.0 3,579 5.7 3,239 4.7
General Eastern 1,735 4.1 1,430 2.3 1,804 2.6
HVE Europa .... 8,108 19.0 10,466 16.6 11,848 17.0
------- ------- ------- ------- ------- -------
Total .... $42,707 100.0% $62,990 100.0% $69,632 100.0%
======= ======= ======= ======= ======= =======
</TABLE>
The backlog of PHI as of March 28, 1997 was $21.7 million.
The Company believes that the Company's backlog as of any particular
date may not be indicative of sales for any future period. The Company expects
that approximately 25% of the Company's backlog (excluding PHI) as of April 26,
1997 will not be shipped before the end of the Company's 1998 fiscal year.
RESEARCH AND DEVELOPMENT
Research and development activities are conducted separately by each
operating unit. The Company's operating units focus on developing
applications-engineered products designed to meet their customers' needs. Teams
representing different functional areas within an operating unit work closely
with customers early in the product design process to ensure that the product
meets the customer's specifications and is designed for ease of manufacturing.
As a general matter, with the exception of Robicon and PHI, the Company's
operating units have not required substantial research and development
expenditures. Research and development expenditures that the Company has made
have resulted in innovative new products such as Robicon's Perfect Harmony
series of medium voltage VFDs, Datcon's Intellisensor fuel measurement systems,
Natvar's bonded tri-layer 151 tubing and numerous applications-engineered
products for Anderson's customers. PHI incurs significant research and
development expenses due to the high technology content of PHI's surface
analysis instruments and PHI's growth strategy of increasing sales through the
identification of new applications for its existing products, enhancements in
the technological capability of its instruments, the development of
application-specific hardware configurations for its instruments and the
continued improvement in the operating ease and efficiency of its instruments
through increased automation and software development. Pro forma for the Merger,
the Company incurred research and development expenses of $16.7 million for
Fiscal 1997 (representing 7.0% of the consolidated net sales of the Company for
such period), the majority of which was incurred at Robicon and PHI.
PATENTS AND TRADEMARKS
The Company holds domestic and foreign patents covering certain
products and processes in all of its operating units, as well as trademarks
covering certain of its products. While these patents and trademarks are
considered important to the ability of the various operating units to compete,
the Company believes that these patents and trademarks are less important than
the quality and applications-engineered nature of its products and its
unpatented manufacturing expertise. Certain patents relating to Robicon's
Perfect Harmony series of medium voltage VFDs are of particular significance;
these patents issued in April and June of 1997. In addition, PHI holds key
patents relating to its Auger, ESCA and TOF-SIMS surface analysis instruments
that issued between 1991 and 1995, and filed a provisional patent application in
December 1996 relating to its ESCA surface analysis instruments. The Company
also holds patents on certain products which, although valuable to the Company,
are not
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critical to its operations. Management does not believe that the future
profitability of the Company's operating units is dependent upon any one patent
or group of related patents.
EMPLOYEES
At April 26, 1997, pro forma for the Merger, the Company had a total of
1,616 employees, of whom 1,600 were employed by the Company's operating units.
The Company's domestic employees are not covered by collective bargaining
agreements, however, substantially all of the personnel employed by its foreign
subsidiaries belong to national Workers' Councils. The Company considers it
relations with its employees to be good. The following table provides
information relating to the employees of the Company's operating units as of
April 26, 1997, pro forma for the Merger:
<TABLE>
<CAPTION>
TOTAL
OPERATING UNIT EMPLOYEES
- -------------- ----------
<S> <C>
Robicon ....................................................... 446
PHI ........................................................... 386
Datcon ........................................................ 333
Anderson ...................................................... 126
Natvar ........................................................ 168
General Eastern ............................................... 66
HVE Europa .................................................... 75
-----
Total Operating Unit Employees ...................... 1,600
=====
</TABLE>
PROPERTIES
The following are the principal operating facilities of the Company,
listed by operating unit, each of which also has limited general office and
administrative space:
<TABLE>
<CAPTION>
USABLE SPACE
OPERATING UNIT FUNCTION (SQUARE FEET) OWNED/LEASED
-------------- -------- ------------- ------------
<S> <C> <C> <C>
ROBICON:
New Kensington,
Pennsylvania Design and assembly 124,800 Leased(a)
Pittsburgh, Pennsylvania Assembly 79,000 Owned(b)
PHI:
Eden Prairie, Minnesota Design and assembly 207,000 Owned(c)
Redwood City, California Design 11,800 Leased
DATCON:
Lancaster, Pennsylvania Design and assembly 70,700 Leased(a)
Barcelona, Spain Design and assembly 35,500 Leased(a)
ANDERSON:
Sterling, Massachusetts Plastic injection molding and 42,400 Leased(a)
assembly
Sterling, Massachusetts Plastic injection molding and 31,000 Leased(a)
assembly
Leominster, Massachusetts Technical center (design and 10,000 Leased(a)
tooling)
Fermoy, Ireland Plastic injection molding and 8,500 Leased
assembly
NATVAR:
Clayton, North Carolina Plastic extrusion 75,000 Owned
Lakewood, Colorado Plastic extrusion 17,300 Leased
GENERAL EASTERN:
Woburn, Massachusetts Design and assembly 21,400 Leased
HVE EUROPA:
Amersfoort, The Netherlands Design and assembly 60,000 Owned
</TABLE>
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- ----------
(a) The Company holds a purchase option on these facilities.
(b) Approximately 21,800 square feet of space at the Robicon facility in
Pittsburgh, Pennsylvania is currently leased by Robicon to a third
party.
(c) Approximately 14,000 square feet of space at the PHI facility in Eden
Prairie, Minnesota is currently leased by PHI to a third party.
In addition to the facilities described above, the Company leases
various warehouses and sales and administrative facilities. The Company believes
that its manufacturing facilities are properly maintained and that production
capacity is adequate to meet the requirements of its operating units.
ENVIRONMENTAL AND INSURANCE MATTERS
The Company's operations are subject to extensive and changing federal,
state, local and foreign environmental laws and regulations, including those
relating to the use, handling, storage, discharge and disposal of hazardous
substances and, as a result, the Company is from time to time involved in
administrative and judicial proceedings and inquiries relating to environmental
matters. Following is a description of the Company's significant pending
environmental matters.
Burlington, Massachusetts Cleanup. In June 1989, the Company entered
into a Consent Order with the predecessor to the Massachusetts Department of
Environmental Protection (the "DEP") with respect to the remediation of alleged
contamination at property formerly leased by the Company in Burlington,
Massachusetts (the "Burlington Site"). Pursuant to the Consent Order and a
remediation plan approved by the DEP, the Company has posted financial
assurances currently consisting of a $100,000 letter of credit and a $1.3
million lien on a site owned by the Company in Dorchester, Massachusetts and is
proceeding with certain remediation measures at the Burlington Site. The owners
of several parcels of land adjoining or near the Burlington Site have also
asserted claims or sought damages from the Company claiming damages from waste
allegedly originating from activities on the Burlington Site. The Company has
allowed $200,000 with respect to one adjoining property, and has agreed to pay
the first $500,000 of future costs incurred plus two-thirds of any additional
costs with respect to the cleanup of another. As of April 26, 1997, the
Company's estimate of the costs that will be necessary to complete these
cleanups is $1.5 million. Expenditures for cleanup will be incurred by the
Company over a number of years.
Woodbridge Township, New Jersey Cleanup. The Company is conducting an
environmental investigation and remediation of a former manufacturing site
located in Woodbridge Township, New Jersey (the "New Jersey Site") under New
Jersey law. The investigation and remediation are being undertaken in accordance
with an August 1989 agreement (the "Settlement Agreement") among the Company,
the current owner of the site and the former owner of the site who had purchased
the site from the Company which settled litigation brought against the Company
by the current owner of the New Jersey Site to recover damages allegedly caused
by environmental contamination of the site. As part of the Settlement Agreement,
the Company has agreed to assume full responsibility for the cleanup, and has
been conducting an investigation and remediation of the New Jersey Site in
accordance with the terms of the Settlement Agreement and New Jersey law. As of
April 26, 1997, the Company's estimate of the costs that will be necessary to
complete the cleanup is $2.1 million. Expenditures for cleanup will be incurred
by the Company over a number of years. In accordance with the terms of the
Settlement Agreement, the Company has posted financial assurances currently
consisting of a $2.2 million letter of credit. The Company is also involved in
litigation with the current owner of the New Jersey Site in which the Company is
seeking limited monetary damages in recovery of legal and consulting fees as
well as other relief.
The Company has, from time to time, received cash settlements and
insurance recoveries relating to environmental litigation, remediation and
consequential damages incurred in connection with properties formerly owned or
leased by the Company. The Company recorded net gains of $2.1 million, $450,000
and $351,000 for Fiscal 1995, Fiscal 1996 and Fiscal 1997, respectively, net of
actual legal costs, estimated settlement costs and changes in cost remediation
estimates, on cash recoveries of $2.3 million, $1.5 million and $1.1 million,
respectively, for such fiscal years. These cash recoveries have generally been
received from insurance companies in reimbursement of costs previously incurred
by the Company in
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remediation efforts or the payment of damages to third parties, from other
responsible or potentially responsible parties in settlement of potential claims
relating to remediation responsibilities, and from the recovery of expenses
incurred both in the recovery of such amounts and the remediation of affected
properties. Most of the amounts recovered by the Company in Fiscal 1995, Fiscal
1996 and Fiscal 1997 were recovered in connection with the litigation and
arbitration relating to the Burlington Site and the New Jersey Site. The Company
is not currently a party to any actions in which it has made a claim seeking
recovery for remediation and consequential damages incurred in connection with
environmental matters at properties formerly owned or leased by the Company.
Although the Company has realized significant recoveries on a historical basis,
the Company does not expect to receive any material recoveries relating to
environmental matters in any future periods.
In addition, although the Company believes it has made sufficient
capital expenditures to maintain compliance with existing laws and regulations,
future expenditures may be necessary as compliance standards and technology
change. The Company has expended, and may be required to expend in the future,
significant amounts for investigation of environmental conditions, remediation
of environmental conditions and other similar matters. See "Risk Factors --
Environmental Compliance."
LEGAL PROCEEDINGS
The nature of the Company's business is such that it is regularly
involved in legal proceedings incidental to its business. Although the Company
believes that none of these proceedings is material, the Company, along with six
others, is a defendant in an action commenced in November 1996 by
Chicago-Dubuque Foundry Corporation ("Chicago-Dubuque") and its property
insurer, Employers Mutual Casualty Co. in Iowa state court. The suit concerns a
May 1, 1996 fire that destroyed a Chicago-Dubuque facility located in East
Dubuque, Illinois. According to the complaint, defective products sold by one or
more of the defendants (including, it is alleged, the Company's Anderson
division) to Chicago-Dubuque, or incorporated in products sold by others to
Chicago-Dubuque, caused or contributed to the casualty. Chicago-Dubuque has not
yet quantified the amount of damages sought, but its property insurer has stated
that damages for property damage will be in excess of $11 million. No estimate
of economic losses caused by business interruption has been made by any
plaintiff. At the present time, the Company is not aware of any personal
injuries or deaths caused by the fire and the Company has been informed that the
State Fire Marshall who investigated the fire has, to date, not been able to
render an opinion as to the cause of the fire. The Company has placed its
insurers on notice of the claim and at least one insurer has retained legal
counsel to defend the Company. In light of the preliminary stage of the
proceedings, the Company is unable to assess the likelihood of liability in this
action, the amount of any damages that may be assessed against the Company, and
the extent to which any assessed liability will be covered by the Company's
insurance, as of the date of this Prospectus.
Natvar received a sixty (60) day notice of intent to sue on December
11, 1996 from a California citizens group regarding alleged violations of notice
and labeling requirements under California Proposition 65, a "right to know"
provision intended to give consumers clear and reasonable warnings of the
presence of certain potentially hazardous substances in products. Natvar and the
citizens group have signed an agreement delaying the deadline for filing any
lawsuit. The relevant regulations provide that violations of Proposition 65 are
subject to civil penalties of up to $2,500 per day retroactive to the beginning
of an alleged violation of Proposition 65. The substance contained in Natvar's
products and implicated in the notice of intent to sue has been listed under
Proposition 65 since 1988, and Natvar has sold products containing this
substance in California since that time. The Company is currently conducting
fact-finding to determine whether it believes a violation of Proposition 65 has
occurred. If a lawsuit is filed, the Company intends to defend it vigorously;
however, the Company believes, based on results in similar cases and a
preliminary review of the relevant facts, that any such suit could be settled
for substantially less than the maximum penalty available under the statute. The
Company does not believe that it is likely that it will incur material liability
as a result of any lawsuit arising in connection with this matter.
During Fiscal 1996, the Company reached a proposed settlement with the
IRS and various state taxation authorities with respect to issues arising out of
an audit of the 1986 through 1991 tax years of the Company and Letitia
Corporation which was approved, in January 1997, by the Joint Committee on
Taxation. The Company agreed to pay an aggregate amount of $1.2 million in
income tax assessments in settlement of such issues. The assessments that were
the subject of the audit related primarily to foreign tax credits claimed and
disallowances of deductions for certain costs incurred in connection with the
acquisition of HVE in the 1988 tax year of Letitia Corporation.
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In February 1997, the Company commenced litigation in Massachusetts
federal court against TVM Group, Inc., ("TVM") of Fremont, California, and TVM's
principal stockholder, Mr. T. Lyn Morris, seeking damages on account of breach
by TVM and Mr. Morris of a December 1996 agreement pursuant to which a
subsidiary of the Company was to acquire TVM. In April 1997, TVM and Mr. Morris
filed a counterclaim alleging breaches by the Company and its subsidiary of that
agreement and seeking damages. In light of the preliminary stage of the
proceedings, the Company is unable to assess the likelihood of liability in this
action, the amount of any damages that may be assessed against the Company, and
the extent to which any assessed liability will be covered by the Company's
insurance; however, the Company believes the counterclaim to be without merit.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers, directors and key employees of the Company are
as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Laurence S. Levy ................... 41 Chairman of the Board and Chief Executive
Officer
Clifford Press ..................... 43 President and Director
Paul H. Snyder ..................... 59 Chief Operating Officer and Director
Joseph W. McHugh, Jr ............... 42 Vice President and Chief Financial Officer
Michael Brosnan .................... 42 Vice President, Financial Operations
Arthur J. Burdett .................. 53 Vice President, Human Relations
Jody E. Kurtzhalts ................. 50 President of Robicon
David J. Chalmers .................. 57 President of PHI
Oddie V. Leopando .................. 51 President of Datcon
Ronald G. Robinson ................. 63 President of Anderson
Scott M. Kelley .................... 43 President of Natvar
James H. Schleckser ................ 34 President of General Eastern
Renee Koudijs ...................... 51 Managing Director of HVE Europa
Edward Levy ........................ 33 Director
H. Cabot Lodge III ................. 41 Director
</TABLE>
Laurence S. Levy is the Chairman of the Board and Chief Executive
Officer of the Company. Mr. Levy joined the Company in 1988 in connection with
its acquisition and reorganization and has been a member of the Board of
Directors since that time. Since 1988, he has served as Chairman and since 1991
he has been the Company's Chief Executive Officer. From 1983 to 1986, Mr. Levy
was a consultant with Bain & Co., a leading strategic management company. Mr.
Levy is a graduate of the University of Witwatersrand in South Africa and the
Harvard Business School. Mr. Levy is also a director of Safety 1st, Inc.
Clifford Press is the President and a Director of the Company. Mr.
Press joined the Company in 1988 in connection with its acquisition and
reorganization and has been a member of the Board of Directors since that time.
Since 1991, he has served as President. From 1983 to 1986, Mr. Press was
employed by Morgan Stanley & Co., Incorporated in its Mergers and Acquisitions
Department. Mr. Press is a graduate of Oxford University and the Harvard
Business School. Mr. Press is also a director of Buck Hill Falls Company.
Paul H. Snyder is the Chief Operating Officer of the Company and became
a Director of the Company effective upon consummation of the Transactions. Mr.
Snyder joined the Company in February 1993 and has over 37 years of management
experience. Since joining the Company, Mr. Snyder has implemented Total Quality
programs and process re-engineering at each of the Company's operating units.
From 1989 to 1993, Mr. Snyder was President of the Bendix Electric Power
Division of AlliedSignal Inc. From 1976 to 1989, Mr. Snyder served as Vice
President/General Manager and in other senior management positions in various
divisions of TRW, Inc., including the Computer Services, Electronic Assemblies
and Electronic Connector Divisions. From 1959 to 1976, Mr. Snyder held various
financial management positions at Bose Corporation, Polaroid Corporation,
Corning Glass and Bell Telephone. Mr. Snyder is a graduate of Penn State
University.
Joseph W. McHugh, Jr. is a Vice President and the Chief Financial
Officer of the Company. Mr. McHugh joined the Company in January 1992. From 1983
to 1992, Mr. McHugh worked at GCA Corporation as a Division Controller and later
as Controller. In the former capacity, he participated in the workout and
recapitalization of GCA before its purchase in 1988 by General Signal. From 1977
to 1983, Mr. McHugh served in various financial management positions at
Honeywell Information Systems. Mr. McHugh is a Certified Management Accountant
and received both a Bachelor of Science degree in accounting and a Masters
degree in Business Administration from Bentley College.
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Michael Brosnan is Vice President, Financial Operations of the Company.
Prior to joining the Company in March 1997, Mr. Brosnan worked at Polaroid
Corporation as Senior Controller - Electronic Imaging Systems Group from 1994
through 1996, and Senior Controller - Commercial Imaging Group thereafter. Mr.
Brosnan was employed by KPMG Peat Marwick LLP from 1978 to 1994, most recently
as an Audit Partner. Mr. Brosnan is a Certified Public Accountant and received
his Bachelor of Science degree in Business Administration from Northeastern
University.
Arthur J. Burdett is Vice President, Human Relations of the Company.
Mr. Burdett joined the Company in 1993. From 1982 to 1993, Mr. Burdett held
various human resources and management positions at Hewlett-Packard Company
culminating in the position of Education Manager for the Medical Products Group.
From 1966 to 1982, Mr. Burdett held various teaching and program director
positions in the Philadelphia School System and was one of the founders and
eventually the Director of the Bartram School for Human Services. Mr. Burdett is
a graduate of Temple University.
Jody E. Kurtzhalts has served as President of Robicon since April 1995.
Prior to joining the Company, Mr. Kurtzhalts was employed by Giddings & Lewis
Corp., from November 1992 to March 1995 as the Vice President/General Manager of
its Automation Control Division. Prior to November 1992, Mr. Kurtzhalts was the
Vice President, Electronics and Software Engineering of Giddings & Lewis. Mr.
Kurtzhalts has a Bachelor of Science in Electrical Engineering from Marquette
University.
David J. Chalmers has served as President and Chief Executive Officer
of PHI since February 1997. Following the Merger, Dr. Chalmers will continue to
serve in such capacities. Prior to February 1997, Dr. Chalmers was the President
and Chief Executive Officer of TA Instruments Inc., which was formed through a
leveraged buyout of the Thermal Analysis Division of E.I DuPont de Nemours in
1990. From 1967 to 1990, Dr. Chalmers held several technical, marketing and
product management positions at E.I DuPont de Nemours, most recently serving as
General Manager of the Thermal Analysis Division. Dr. Chalmers received a
Bachelor of Science in Chemistry from the University of Aberdeen and a Ph.D. in
Chemistry from Oxford University.
Oddie V. Leopando has served as President of Datcon since November
1995. Prior to joining the Company, Mr. Leopando was employed by MascoTech, Inc.
as President of the MascoTech Body Systems & Assembly Division from 1994 to
1995. From 1991 to 1994, Mr. Leopando was the Senior Vice President/General
Manager of MascoTech Manufacturing & Assembly Division. Prior to 1991, Mr.
Leopando acted in managerial roles in several other companies, including Massey
Ferguson, Inc. and the Chrysler Corporation. Mr. Leopando earned a Masters of
Business Administration in Finance and Operations from the University of Detroit
and a Bachelor of Science in Mechanical Engineering from the Mapua Institute of
Technology in Manila, Philippines. Mr. Leopando is a licensed professional
engineer.
Ronald G. Robinson has served as President of Anderson since 1992.
Prior to joining the Company in 1985, Mr. Robinson was employed by the Selectro
Corporation, where he was Senior Vice President, Operations. Mr. Robinson is a
former Director of the American Production and Inventory Control Society. Mr.
Robinson is a graduate of the University of Hartford.
Scott M. Kelley, who has been employed by the Company since 1993, has
served as President of Natvar since January 1996. Prior to being appointed as
President of Natvar, Mr. Kelley was the President of the Company's General
Eastern division, from August 1994 to January 1996, and the Acting President of
the Company's Specialty Connector division from December 1993 to August 1994.
Prior to joining the Company, Mr. Kelley was the Vice President of Operations at
Data Translation Inc. from 1990 to 1993. Mr. Kelley also served as a management
consultant at Ernst & Young LLP and Coopers & Lybrand L.L.P. Mr. Kelley is a
graduate of Eastern Connecticut State University.
James H. Schleckser has served as President of General Eastern since
January 1996. Prior to being appointed President, Mr. Schleckser was the Vice
President, Sales and Marketing at General Eastern from August 1995 to January
1996. Prior to joining the Company in 1995, Mr. Schleckser was employed from
1988 to 1995 by J.M. Ney Company, most recently serving as the Director, Sales
and Marketing of Ney Ultrasonics Inc. Mr. Schleckser received his Master of
Business Administration from the University of Connecticut and his Bachelor of
Chemical Engineering from the University of Delaware.
Renee Koudijs has served as Managing Director of HVE Europa since May
1993, and served as Engineering and Research and Development Manager at HVE
Europa from 1978 to 1993. From 1976 to 1978, Mr. Koudijs served as Engineering
Manager at Unicorp. Prior to that, Mr. Koudijs founded the Netherlands division
of Sola Basic Industries. Mr. Koudijs
71
<PAGE> 74
graduated from the Industrial and Commercial Mechanical and Electrical College
in The Netherlands and has a License for Business Operation in The Netherlands
through the General Commercial School.
Edward Levy became a Director of the Company effective upon
consummation of the Transactions. Mr. Levy has been a Managing Director of CIBC
Wood Gundy Securities Corp. since August 1995. Between 1991 and 1995, Mr. Levy
held various positions at The Argosy Group L.P. culminating in the position of
Managing Director. Mr. Levy has also held positions in the Mergers and
Acquisitions Group of Drexel Burnham Lambert Incorporated and the Corporate
Finance Department of Kidder, Peabody & Co. Incorporated. Mr. Levy is a graduate
of Connecticut College. Mr. Levy is also a director of Heating Oil Partners,
L.P., Norcross Safety Products L.L.C. and DSMax International Inc.
H. Cabot Lodge III became a Director of the Company effective upon
consummation of the Transactions. Mr. Lodge is the Chairman, Chief Executive
Officer and President of Superconducting Core Technologies, Inc., a wireless
telephone equipment manufacturer that he founded in 1987. Mr. Lodge also served
as Executive Vice President, Managing Director and in other senior management
positions at W.P. Carey & Co., an investment banking firm, from 1983 to 1995.
Mr. Lodge is a graduate of Harvard University and the Harvard Business School.
Mr. Lodge is also a director of American General Hospitality Corp. and
TelAmerica Media, Inc.
ELECTION; TERM OF OFFICE
All officers are elected at the annual meeting of the Board of Directors and
hold office until the next annual meeting of the Board of Directors or until
their respective successors are chosen and qualified. Directors are elected at
the annual meeting of the stockholders and hold office until the next annual
meeting of the stockholders or until their successors are elected. According to
the Company's By-Laws, the President of the Company must be a member of the
Board of Directors. In addition, holders of the Exchange Preferred Stock (acting
as a single class together with holders of any Series A Preferred Stock) will
have the right to elect that number of directors constituting at least 25% of
the Board of Directors if cash dividends are in arrears and unpaid for two
semiannual periods after August 15, 2002.
BOARD COMMITTEES
The Bylaws of the Company provide for the election of an executive
committee of the Board of Directors which may exercise any powers delegated to
it by the full Board of Directors which the law permits a corporation's board to
delegate to a committee. There is no executive committee in existence at this
time and the Board of Directors has no plans to establish such a committee. By
November 5, 1997, the Company expects to appoint both an audit committee and a
compensation committee of the Board of Directors, both committees to be
delegated the customary functions of such committees, with the compensation
committee being specifically empowered to set the compensation of each of the
Company's executive officers, including the Company's Chairman of the Board and
Chief Executive Officer and President.
COMPENSATION OF DIRECTORS
Prior to the Offerings, directors of the Company were not compensated
for their service as such. After the Offerings, non-employee directors of the
Company will be paid an annual retainer of $10,000 plus expenses incurred by the
directors in such capacity.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company does not currently have a compensation committee. During
Fiscal 1997, Fiscal 1996 and Fiscal 1995, Laurence S. Levy and Clifford Press,
the Company's Chairman of the Board and Chief Executive Officer, and President
and a Director, respectively (who together comprised the Board of Directors
during such period) established the compensation of the Company's executive
officers, including their own compensation. The Company expects to appoint a
compensation committee by November 5, 1997.
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<PAGE> 75
EXECUTIVE COMPENSATION
The following table sets forth the aggregate compensation paid by the
Company for services rendered during Fiscal 1997, Fiscal 1996 and Fiscal 1995 to
the Company's Chairman of the Board and Chief Executive Officer, President and
four other most highly-compensated executive officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
--------------------------------------------------------
NAME AND PRINCIPAL POSITION FISCAL OTHER ANNUAL ALL OTHER
PERIOD SALARY BONUS COMPENSATION(6) COMPENSATION(1)
- -------------------------------- ------ ------------ ------------ --------------- ----------------
<S> <C> <C> <C> <C> <C>
Laurence S. Levy .......... 1997 $100,000(2) $ -- $ 3,300
Chairman of the Board and 1996 100,000(2) 250,000(3) 4,000
Chief Executive Officer 1995 184,050(2) -- 8,311
Clifford Press ............ 1997 $100,000(2) $ -- $ 3,300
President and Director 1996 100,000(2) 250,000(3) 4,000
1995 184,050(2) -- 8,536
Paul H. Snyder ............ 1997 $210,000 $ 50,000 $ 4,950
Chief Operating Officer 1996 203,850 45,600 6,260
1995 189,050 65,000 4,936
Oddie V. Leopando ......... 1997 $181,750 $ 74,000 $ 6,805
President of Datcon 1996(4) 87,500 35,000 --
Renee Koudijs ............. 1997 $162,614 $ 53,164 $ --
Managing Director of HVE 1996 141,327 125,597 --
Europa 1995 116,003 41,039 --
Jody E. Kurtzhalts ........ 1997 $168,750 $ 40,000 $ 51,480
President of Robicon 1996 165,000 18,250 $ 31,492 4,713
1995(5) 13,750 -- --
</TABLE>
- ----------
(1) Represents matching employer contributions under the Company's Section
401(k) savings plan. See "Retirement Plans" below.
(2) Amounts shown as salary do not include management and transaction fees
paid to Hyde Park Holdings, Inc. ("Hyde Park"), and certain of its
affiliates at the request of the named executive officers, aggregating
$780,901, $758,424 and $552,226 in Fiscal 1997, Fiscal 1996 and Fiscal
1995, respectively. See "Certain Relationships and Related
Transactions."
(3) Represents amounts paid to affiliates of Hyde Park at the request of
the named executive officers.
(4) Mr. Leopando became an employee of the Company in November 1995.
(5) Mr. Kurtzhalts became an employee of the Company in April 1995.
(6) Represents relocation expenses.
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<PAGE> 76
VALUE CREATION PLAN AND RELATED PLAN
The Company's Value Creation Plan (the "VCP") is a long-term cash
incentive compensation plan for certain key officers and employees of the
Company which is intended to provide participants in the VCP with an opportunity
to share in an increase in the value of the operating unit or units with which
the participating employee is associated. The VCP is designed to provide
incentives for employees in the Company's various operating units by tracking
increases in the economic value of an operating unit based upon a multiple of
EBITDA, as defined in the VCP, and allocating to the VCP an aggregate amount
equal to up to 5% of the incremental increases in value achieved in the unit. In
the event that the value of any of the operating units increases over time, the
interests of its participating employees in the VCP will increase
proportionally.
Interests are granted in the VCP to certain key employees of a
particular operating unit as they are hired or promoted and vest over five
years. The value of an employee's interest is based on increases in the value of
the employee's operating unit (based on a multiple of EBITDA of the operating
unit) from the date of grant to the end of the year prior to the determination
date. Subject to the Company's discretion to defer cash payments, an employee
may cash out up to 50% of his vested interests at any one time and may cash out
all of his vested interests if he leaves the Company or retires, if his
operating unit is sold or if he is transferred to another division; provided
that if he is dismissed for cause, his interests (vested and unvested) are
forfeited. The VCP is a non-qualified and non-funded plan. While Messrs.
Leopando, Kurtzhalts and Koudijs have each received interests in the VCP, none
of Messrs. Laurence S. Levy, Press or Snyder participates in the VCP. As of
April 26, 1997, the Company had an accrued liability of $1.3 million under the
VCP.
Paul H. Snyder, who is the Chief Operating Officer of the Company and
who became a Director of the Company effective upon the consummation of the
Transactions, is the beneficiary of an incentive compensation plan of the
Company pursuant to which Mr. Snyder shall be entitled to receive, upon
termination of employment with the Company or his death, a special bonus equal
to the amount that the market value of 2% of the outstanding common equity of
Letitia Corporation exceeds $300,000. Mr. Snyder's right to receive this bonus
vests in equal installments on May 1 of each year beginning in 1994 and ending
in 1998; provided that Mr. Snyder is employed by the Company on such vesting
date. In the event that a majority interest in HVE is sold to an unrelated third
party, or in the event of Mr. Snyder's death, any unvested rights to this bonus
shall immediately vest. Any bonus payment which becomes due shall be paid over
two years, but only to the extent permitted by applicable covenants and
restrictions, including those under the Indenture, and shall bear interest until
paid.
RETIREMENT PLANS
The Company maintains the High Voltage Engineering Corporation 401(k)
Retirement Plan, a Section 401(k) savings plan for qualified domestic employees,
pursuant to which the Company matches discretionary employee contributions up to
$1,800, and also contributes an annual profit-sharing amount equal to 2.5% of
the employee's annual salary and bonus. While each of Messrs. Laurence S. Levy,
Press, Snyder, Leopando and Kurtzhalts participates in this plan, Mr. Koudijs
does not participate in this plan.
The Company also maintains the High Voltage Engineering Corporation
Retirement Plan (the "Retirement Plan"), a defined benefit plan, which provides
for the accrual of annual pension benefits, payable on retirement, based on the
participating employee's salary during the time of accrual. Participation in the
Retirement Plan, and the accrual of additional benefits thereunder, was frozen
by the Company in 1992. Messrs. Laurence S. Levy and Press will receive monthly
benefits under the Retirement Plan of $191.05 and $148.35, respectively,
beginning upon their retirement. Messrs. Snyder, Leopando, Koudijs and
Kurtzhalts do not participate in the Retirement Plan.
BONUS PLAN
The Company has in effect various plans pursuant to which the Company's
executive officers and certain other employees may receive incentive cash
bonuses based upon the achievement of certain earnings goals in the preceding
fiscal year by an operating unit or by the Company as a whole, and upon
individual performance. The amounts of incentive and discretionary awards, and
the performance criteria for such awards, are currently fixed by the Board of
Directors. Such amounts, and the related performance criteria, will be set by
the compensation committee of the Board of Directors to be appointed within 90
days after consummation of the Offerings.
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<PAGE> 77
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Laurence S. Levy and Clifford Press, officers and directors of the
Company, are directors of Letitia Corporation, which owns all of the Company's
outstanding common and preferred stock. Hyde Park Holdings, Inc. ("Hyde Park"),
a corporation wholly-owned by Laurence S. Levy and Clifford Press, is a minority
stockholder of Letitia Corporation. See "Principal Stockholders" and "Management
- -- Executive Compensation."
Historically, the Company has paid to Hyde Park and its affiliates: (i)
an annual fee for services performed in managing the Company; (ii) an
acquisition fee payable upon the closing of acquisitions by the Company of
additional businesses; and (iii) a disposition fee payable upon the closing of
the disposition of certain divisions or subsidiaries (or significant groups of
assets) of the Company.
The management fees paid to Hyde Park and its affiliates were $780,901,
$648,424 and $450,376 for Fiscal 1997, Fiscal 1996 and Fiscal 1995,
respectively. Under the terms of the Indenture, while there are any of the Notes
outstanding, management fees to Hyde Park in excess of $750,000 for any fiscal
year of the Company will be limited by the Indenture's Restricted Payments
provision. Acquisition and disposition fees have been calculated as an amount
equal to 1% of the sum of the total price paid or received for shares of stock
(or in the case of an asset acquisition or disposition, the total price paid for
such assets) in such acquisition or divestiture. In Fiscal 1996, the Company
paid a fee of $110,000 in connection with the disposition of the Company's
Specialty Connector division. In Fiscal 1995, the Company paid fees aggregating
$101,850 in connection with the sale of the Company's Shore Instruments and
Berger divisions, and the acquisition of Jorda. No acquisition or divestiture
fees were paid in Fiscal 1997, and the Company did not pay an acquisition fee in
connection with the Merger.
In connection with the consummation of the Refinancing, the Company
redeemed all of the outstanding Series B Preferred Stock for an aggregate
redemption price of $4.8 million. All of the outstanding 25,705 shares of Series
B Preferred Stock were held by Letitia Corporation. Messrs. Laurence S. Levy
and Clifford Press, the Company's Chairman of the Board and Chief Executive
Officer, and President and a Director, respectively, and certain of their
affiliates and family members beneficially own 90% of the outstanding common
stock of Letitia Corporation before giving effect to any repurchase of Letitia
Common Stock from the High Voltage Engineering Corporation Retirement Plan and,
accordingly, were the primary beneficiaries of such redemption and could
through dividends or other distributions receive a majority of the proceeds of
such redemption.
Mr. Press and Mr. Levy, as well as certain other executives named above
in "Management -- Executive Compensation", also hold interests in the High
Voltage Engineering Corporation Retirement Plan, which holds shares of Letitia
Common Stock intended to be repurchased with a portion of the net proceeds from
the Offerings.
In connection with the consummation of the Refinancing, the Company
also redeemed all of the issued and issuable 6,871 shares of Series C Preferred
Stock for an aggregate liquidation preference of $6.9 million. All of these
shares were held by Letitia Corporation, which redeemed 6,871 issued and
issuable shares of the Letitia Quest Preferred Stock having identical rights and
preferences to the Series C Preferred Stock, simultaneously with the closing of
the Transactions, with the proceeds of the redemption of the Series C Preferred
Stock.
Upon the consummation of the Merger, CIBC Wood Gundy Securities Corp.
("CIBC Wood Gundy") received a transaction fee of $500,000 (comprising a portion
of the Merger Consideration) for advisory services provided to the Company in
connection with the Merger. A predecessor of CIBC Wood Gundy also provided
investment banking services in connection with the May 1996 refinancing of
certain of the Company's indebtedness, for which it received customary
compensation. On July 24, 1997, CIBC Wood Gundy purchased existing Subordinated
Notes Warrants to purchase 71.43 shares of HVE Common Stock, representing 6.25%
of the HVE Common Stock on a fully diluted basis, for an aggregate purchase
price of $2.5 million. Such Subordinated Notes Warrants were repurchased from
CIBC Wood Gundy for the same purchase price by the Company from the proceeds of
the Offering. Mr. Edward Levy, who became a director of the Company effective
upon the consummation of the Transactions, is a managing director of CIBC Wood
Gundy.
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<PAGE> 78
David J. Chalmers, the President of PHI, is party to an employment
agreement, dated as of February 14, 1997, with Physical Electronics, Inc.
pursuant to which, among other things, PHI established an Executive Equity
Compensation Plan (the "Equity Plan") for Dr. Chalmers' benefit. The Equity Plan
is intended to provide Dr. Chalmers with stock appreciation rights payable in
shares of PHI common stock or cash, at the discretion of PHI, in the event of
certain transactions constituting the sale of PHI to a third party. Under the
terms of the Equity Plan, Dr. Chalmers was entitled to receive a benefit
calculated as 20% of the remainder of the aggregate cash proceeds received by
the common equity stockholders in a sale of PHI minus an accreting base value
equal to $10.0 million plus $40,000 for each complete month after December 31,
1996 to the relevant determination date. The Company believes that the Merger
constituted a sale of PHI for purposes of the Equity Plan and the aggregate
benefit paid to Dr. Chalmers under the Equity Plan (comprising a portion of the
Merger Consideration) was approximately $3.8 million.
In addition to the payment to Dr. Chalmers, 93 officers, directors and
employees of, and consultants to, PHI received an aggregate of approximately
$12.9 million in cash (comprising a portion of the Merger Consideration) in the
Merger in exchange for their capital stock and options to purchase capital stock
of PHI. See "The Transactions."
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<PAGE> 79
PRINCIPAL STOCKHOLDERS
The following table sets forth information concerning the beneficial
ownership of the HVE Common Stock, as of the date of this Prospectus by: (i)
each person known to the Company to own beneficially more than 5% of the
outstanding shares of HVE Common Stock; (ii) each director and each executive
officer named in the "Summary Compensation Table;" and (iii) all directors and
executive officers of the Company as a group. All shares are owned by such
person with sole voting and investment power. See "Description of Outstanding
Capital Stock."
<TABLE>
<CAPTION>
HVE COMMON STOCK
---------------------------
NAME OF STOCKHOLDERS, DIRECTORS NUMBER OF PERCENT OF
AND EXECUTIVE OFFICERS SHARES COMMON SHARES
- ---------------------------------------------------------- --------- ---------------
<S> <C> <C>
Letitia Corporation(1) ................................... 1,000 92.4%
Laurence S. Levy(1)(2) ................................... 1,000 92.4%
Clifford Press(1)(3) ..................................... 1,000 92.4%
Jody E. Kurtzhalts ....................................... -- --
Oddie V. Leopando ........................................ -- --
Paul H. Snyder ........................................... -- --
Edward Levy .............................................. -- --
H. Cabot Lodge III ....................................... -- --
CIBC Woody Gund Securities Corp. (4) ..................... 6.3%
Directors and executive officers as a group .............. 1,000 92.4%
</TABLE>
- ----------
(1) The address of each of these persons or organizations is c/o Hyde Park
Holdings, Inc., 595 Madison Avenue, 35th Floor, New York, New York
10022.
(2) All of such shares of HVE Common Stock (92.4% of the outstanding HVE
Common Stock) are held by Letitia Corporation. Mr. Laurence S. Levy is
the Chairman of the Board, Treasurer and Secretary of Letitia
Corporation. Mr. Levy is also a 50% stockholder of Hyde Park, which
owns 15 shares (representing 2.5% of the total outstanding) of Letitia
Common Stock. Mr. Levy also personally owns 25 shares (4.3%) of Letitia
Corporation common stock and has an option to purchase an additional
38.9015 shares (6.6%) of such stock from Clifford Press for a nominal
sum. Mr. Levy also holds a minor interest in the High Voltage
Engineering Corporation Retirement Plan, which owns 10% of the
outstanding Letitia Common Stock. Mr. Laurence S. Levy disclaims
beneficial ownership of any shares of HVE Common Stock.
(3) All of such shares of HVE Common Stock (92.4% of the outstanding HVE
Common Stock) are held by Letitia Corporation. Mr. Press is a Director
and President of Letitia Corporation. Mr. Press is also a 50%
stockholder of Hyde Park, which owns 15 shares (representing 2.5% of
the total outstanding) of Letitia Common Stock. In addition, Mr. Press
personally owns 103 shares (17.4%) of Letitia Common Stock and has
granted an option to purchase 38.9015 shares (6.6%) of such stock to
Mr. Laurence S. Levy for a nominal sum. Certain family members of Mr.
Press own, in the aggregate, 389 shares (65.8%) of Letitia Common
Stock, with respect to which Mr. Press does not have any voting or
investment power. Mr. Press also holds a minor interest in the High
Voltage Engineering Corporation Retirement Plan, which owns 10% of the
outstanding Letitia Common Stock. Mr. Press disclaims beneficial
ownership of any shares of HVE Common Stock.
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<PAGE> 80
EXCHANGE OFFER
GENERAL
The Company hereby offers, upon the terms and subject to the conditions
set forth in this Prospectus and in the accompanying Letter of Transmittal
(which together constitute the Exchange Offer), to exchange up to $135.0 million
aggregate principal amount of New Notes for a like aggregate principal amount of
Existing Notes properly tendered on or prior to the Expiration Date and not
withdrawn as permitted pursuant to the procedures described below. The Exchange
Offer is being made with respect to all of the Existing Notes; the total
aggregate principal amount of Existing Notes and New Notes will in no event
exceed $135.0 million.
PURPOSE OF THE EXCHANGE OFFER
Pursuant to the Offering, which closed on August 8, 1997, the Company
issued $135.0 million aggregate principal amount of Existing Notes. The issuance
of the Existing Notes was not registered under the Securities Act in reliance
upon the exemption provided in Section 4(2) of the Securities Act.
In connection with the issuance and sale of the Existing Notes, the
Company entered into the Notes Registration Rights Agreement, which requires it,
at its cost, (i) within 45 days after the date of original issue of the Existing
Notes, to file a registration statement (the "Notes Exchange Offer Registration
Statement") with the Commission with respect to a registered offer to exchange
the Existing Notes for the New Notes, which will have terms substantially
identical in all material respects to the Existing Notes (except that the
Existing Notes will not contain terms with respect to transfer restrictions),
and (ii) within 135 days after the Issue Date, use its best efforts to cause the
Notes Exchange Offer Registration Statement to be declared effective under the
Securities Act. Upon the Notes Exchange Offer Registration Statement being
declared effective, the Company will offer the New Notes in exchange for
surrender of the Existing Notes. The Company will keep the Exchange Offer open
for not less than 30 days (or longer if required by applicable law) after the
date notice of the Exchange Offer is mailed to the holders of the Existing
Notes. For each $1,000 principal amount of outstanding Existing Notes
surrendered to the Company pursuant to the Exchange Offer, the holder who
surrendered such Existing Notes will receive $1,000 principal amount of New
Notes. Under existing Commission interpretations, the New Notes will in general
be freely transferable after the Exchange Offer without further registration
under the Securities Act; provided that in the case of broker-dealers, a
prospectus meeting the requirements of the Act be delivered as required. The
Company has agreed for a period of 180 days after consummation of the Exchange
Offer to make available a prospectus meeting the requirements of the Securities
Act to any broker-dealer for use in connection with any resale of any such New
Notes acquired as described below. A broker-dealer which delivers such a
prospectus to purchasers in connection with such resales will be subject to
certain of the civil liability provisions under the Act, and will be bound by
the provisions of the Notes Registration Rights Agreement (including certain
indemnification rights and obligations). See "Plan of Distribution."
In the event that applicable interpretations of the staff of the
Commission do not permit the Company to effect such an Exchange Offer, or if for
any other reason the Notes Exchange Offer is not consummated within 180 days of
the date of the Notes Registration Rights Agreement, the Company will, at its
own expense, (a) as promptly as practicable, file a Shelf Registration Statement
covering resales of the Existing Notes (the "Notes Shelf Registration
Statement"), (b) use its best efforts to cause the Notes Shelf Registration
Statement to be declared effective under the Act and (c) use its best efforts to
keep effective the Notes Shelf Registration Statement until two years after its
effective date. The Company will, in the event of the Notes Shelf Registration
Statement, provide to each holder of the Existing Notes copies of the prospectus
which is a part of the Notes Shelf Registration Statement, notify each such
holder when the Notes Shelf Registration Statement for the Existing Notes has
become effective and take certain other actions as are required to permit
unrestricted resales of the Existing Notes. A holder of the Existing Notes that
sells such Notes pursuant to the Notes Shelf Registration Statement generally
would be required to be named as a selling securityholder in the related
prospectus and to deliver a prospectus to purchasers, will be subject to certain
of the civil liability provisions under the Securities Act in connection with
such sales and will be bound by the provisions of the Notes Registration Rights
Agreement which are applicable to such a holder (including certain
indemnification rights and obligations).
If the Company fails to comply with the above provisions or if such
registration statement fails to become effective, then, as liquidated damages,
additional interest shall become payable in respect of the Existing Notes as
follows:
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<PAGE> 81
If (i) the Exchange Offer Registration Statement or Shelf
Registration Statement is not filed within 45 days of the Issue Date,
or, if required to be filed on behalf of the holders, the Notes Shelf
Registration Statement is not filed within 30 days following delivery
of notice of a Notes Shelf Registration Statement;
(ii) the Exchange Offer Registration Statement or Shelf
Registration Statement is not declared effective within 135 days after
the Issue Date; and
(iii) either (A) the Company has not exchanged the New Notes
for all Existing Notes validly tendered in accordance with the terms of
the Exchange Offer on or prior to 60 days after the date on which the
Exchange Offer Registration Statement was declared effective or (B) the
Exchange Offer Registration Statement ceases to be effective at any
time prior to the time that the Exchange Offer is consummated or (C) if
applicable, the Shelf Registration Statement has been declared
effective and such Shelf Registration Statement ceases to be effective
at any time prior to the second anniversary of its effective date;
(each of such events referred to in clauses (i) through (iii) above is a
"Registration Default"), the sole remedy available to holders of the Existing
Notes will be the immediate assessment of additional interest ("Additional
Interest") as follows: the per annum interest rate on the Existing Notes will
increase by 50 basis points; and the per annum interest rate will increase by an
additional 25 basis points for each subsequent 90-day period during which the
Registration Default remains uncured, up to a maximum additional interest rate
of 200 basis points per annum in excess of the interest rate on the cover of
this Prospectus. All Additional Interest will be payable to holders of the
Existing Notes in cash on each August 15 and February 15, commencing with the
first such date occurring after any such Additional Interest commences to
accrue, until such Registration Default is cured. After the date on which such
Registration Default is cured, the interest rate on the Existing Notes will
revert to the interest rate originally borne by the Existing Notes (as shown on
the cover of this Prospectus).
The Exchange Offer is being made by the Company to satisfy its
obligations under the Notes Registration Rights Agreement.
The summary herein of certain provisions of the Notes Registration
Rights Agreement does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, all the provisions of the Notes
Registration Rights Agreement, a copy of which will be available upon request to
the Company.
EXPIRATION DATE; EXTENSIONS; TERMINATION; AMENDMENTS
The Exchange Offer will expire at 5:00 P.M., New York City time,
on , 1997, unless the Company, in its sole discretion, has extended
the period of time (as described below) for which the Exchange Offer is open
(such date, as it may be extended, is referred to herein as the "Expiration
Date"). The Expiration Date will be at least 30 days after the commencement of
the Exchange Offer (or longer if required by applicable law. The Company
expressly reserves the right, at any time or from time to time, to extend the
period of time during which the Exchange Offer is open, and thereby delay
acceptance for exchange of any Existing Notes by giving oral notice
(confirmed in writing) or written notice to the Exchange Agent (as defined
herein) and by giving written notice of such extension to the holders thereof
or by timely public announcement communicated, unless otherwise required by
applicable law or regulation, by making a release through the Dow Jones News
Service, in each case, no later than 9:00 A.M. New York City time, on the next
business day after the previously scheduled Expiration Date. Such announcement
may state that the Company is extending the Exchange Offer for a specified
period of time. During any such extension, all Existing Notes previously
tendered will remain subject to the Exchange Offer.
In addition, the Company expressly reserves the right to terminate or
amend the Exchange Offer and not to accept for exchange any Existing Notes not
theretofore accepted for exchange upon the occurrence of any of the events
specified below under "--Certain Conditions to the Exchange Offer." If any such
termination or amendment occurs, the Company will notify the Exchange Agent and
will either issue a press release or give oral or written notice to the holders
of the Existing Notes as promptly as practicable.
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PROCEDURES FOR TENDERING EXISTING NOTES
The tender to the Company of Existing Notes by a holder thereof as set
forth below and the acceptance thereof by the Company will constitute a binding
agreement between the tendering holder and the Company upon the terms and
subject to the conditions set forth in this Prospectus and in the accompanying
Letter of Transmittal.
A holder of Existing Notes may tender the same by (i) properly
completing and signing the Letter of Transmittal or a facsimile thereof (all
references in this Prospectus to the Letter of Transmittal shall be deemed to
include a facsimile thereof) and delivering the same, together with the
certificate or certificates representing the Existing Notes being tendered and
any required signature guarantees, to the Exchange Agent at its address set
forth below on or prior to 5:00 p.m., New York City time, on the Expiration Date
(or complying with the procedure for book-entry transfer described below) or
(ii) complying with the guaranteed delivery procedures described below.
THE METHOD OF DELIVERY OF EXISTING NOTES, LETTERS OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS. IF SUCH
DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL PROPERLY INSURED,
WITH RETURN RECEIPT REQUESTED, OR AN OVERNIGHT OR HAND DELIVERY SERVICE, BE
USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO INSURE TIMELY DELIVERY.
NO EXISTING NOTES OR LETTERS OF TRANSMITTAL SHOULD BE SENT TO THE COMPANY.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the Existing Notes surrendered for
exchange pursuant thereto are tendered (i) by a registered holder of the
Existing Notes who has not completed the box entitled "Special Issuance
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal or
(ii) for the account of an Eligible Institution (as defined herein). In the
event that signatures on a Letter of Transmittal or a notice of withdrawal, as
the case may be, are required to be guaranteed, such guarantee must be by a firm
which is a member of a registered national securities exchange or a member of
the National Association of Securities Dealers, Inc. or by a commercial bank or
trust company having an office or correspondent in the United States (each an
"Eligible Institution"). If Existing Notes are registered in the name of a
person other than a signer of the Letter of Transmittal, the Existing Notes
surrendered for exchange must be endorsed by, or be accompanied by a written
instrument or instruments of transfer or exchange, in satisfactory form as
determined by the Company in its sole discretion, duly executed by the
registered holder with the signature thereon guaranteed by an Eligible
Institution.
The Exchange Agent will make a request promptly after the date of this
Prospectus to establish accounts with respect to the Existing Notes at the
book-entry transfer facility, The Depository Trust Company, for the purpose of
facilitating the Exchange Offer, and subject to the establishment thereof, any
financial institution that is a participant in the book-entry transfer
facility's system may make book-entry delivery of Existing Notes by causing such
book-entry transfer facility to transfer such Existing Notes into the Exchange
Agent's account with respect to the Existing Notes in accordance with the
book-entry transfer facility's procedures for such transfer. Although delivery
of Existing Notes may be effected through book-entry transfer in the Exchange
Agent's account at the book-entry transfer facility, an appropriate Letter of
Transmittal with any required signature guarantee and other required documents
must in each case be transmitted to and received or confirmed by the Exchange
Agent at its address set forth below on or prior to the Expiration Date, or, if
the guaranteed delivery procedures described below are complied with, within the
time period provided under such procedures.
If a holder desires to accept the Exchange Offer and time will not
permit a Letter of Transmittal or Existing Notes to reach the Exchange Agent
before the Expiration Date or the procedure for book-entry transfer cannot be
completed on a timely basis, a tender may be effected if the Exchange Agent has
received at its address or facsimile number set forth below on or prior to the
Expiration Date a letter, telegram or facsimile from an Eligible Institution
setting forth the name and address of the tendering holder, the name in which
the Existing Notes are registered and, if possible the certificate number or
numbers of the Certificate or certificates representing the Existing Notes to be
tendered, and stating that the tender is being made thereby and guaranteeing
that within three business days after the Expiration Date the Existing Notes in
proper form for transfer (or a confirmation of book-entry transfer of such
Existing Notes into the Exchange Agent's account at the book-entry transfer
facility), will be delivered by such Eligible Institution together with a
properly completed and duly executed Letter of Transmittal (and any other
required documents). Unless Existing Notes being tendered by the above-described
method are deposited with the Exchange Agent within the time period set forth
above (accompanied or preceded by a properly completed Letter of Transmittal and
any other required documents), the Company may, at its option, reject the
tender. Copies of a Notice
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of Guaranteed Delivery which may be used by an Eligible Institution for the
purposes described in this paragraph are available from the Exchange Agent.
A tender will be deemed to have been received as of the date when (i)
the tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Existing Notes (or a confirmation of book-entry transfer of
such Existing Notes into the Exchange Agent's account at the book-entry transfer
facility) is received by the Exchange Agent, or (ii) a Notice of Guaranteed
Delivery or letter, telegram or facsimile to similar effect (as provided above)
from an Eligible Institution is received by the Exchange Agent. Issuances of New
Notes in exchange for Existing Notes tendered pursuant to a Notice of Guaranteed
Delivery or letter, telegram or facsimile to similar effect (as provided above)
by an Eligible Institution will be made only against deposit of the Letter of
Transmittal (and any other required documents) and the tendered Existing Notes.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Existing Notes tendered for exchange will be
determined by the Company in its sole discretion, which determination will be
final and binding on all parties. The Company reserves the right to reject any
and all tenders of any particular Existing Notes not properly tendered or reject
any particular shares of Existing Notes the acceptance of which might, in the
judgment of the Company or its counsel, be unlawful. The Company also reserves
the absolute right to waive any defects or irregularities or condition of the
Exchange Offer as to any particular Existing Notes either before or after the
Expiration Date (including the right to waive the ineligibility of any holder
who seeks to tender Existing Notes in the Exchange Offer). The interpretation of
the terms and conditions of the Exchange Offer (including the Letter of
Transmittal and the instructions thereto) by the Company shall be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Existing Notes for exchange must be cured within such
time as the Company shall determine. Neither the Company nor any other person
shall be under any duty to give notification of defects or irregularities with
respect to tenders of Existing Notes for exchange, nor shall any of them incur
any liability for failure to give such notification.
If the Letter of Transmittal or any Existing Notes or powers of
attorney are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing, and
unless waived by the Company, proper evidence satisfactory to the Company of
their authority to so act must be submitted.
By tendering, each holder that is not a broker-dealer or is a
broker-dealer but is not receiving New Notes for its own account will represent
to the Company that, among other things, the New Notes acquired pursuant to the
Exchange Offer are being obtained in the ordinary course of such holder's
business, that such holder has no arrangement or understanding with any person
to participate in the distribution of such New Notes and that such holder is not
an "affiliate" of the Company as defined in Rule 405 under the Securities Act
or, if it is an affiliate, such holder will comply with the registration and
prospectus delivery requirements of the Securities Act, to the extent
applicable. Each broker-dealer that is receiving New Notes for its own account
in exchange for Existing Notes that were acquired as a result of market-making
or other trading activities will represent to the Company that it will deliver a
prospectus in connection with any resale of such Existing Notes.
In addition, the Company reserves the right in its sole discretion to
(a) purchase or make offers for any Existing Notes that remain outstanding
subsequent to the Expiration Date, or, as set forth under "-- Certain Conditions
to the Exchange Offer," to terminate the Exchange Offer and (b) to the extent
permitted by applicable law, purchase Existing Notes in the open market, in
privately negotiated transactions or otherwise. The terms of any such purchases
or offers may differ from the terms of the Exchange Offer.
WITHDRAWAL RIGHTS
Tenders of Existing Notes may be withdrawn at any time prior to at any
time prior to 5:00 p.m., New York City time, on the business day prior to the
Expiration Date. For a withdrawal to be effective, a written notice of
withdrawal sent by letter, telegram or facsimile must be received by the
Exchange Agent at any time prior to 5:00 p.m., New York City time, on the
business day prior to the Expiration Date at its address or facsimile number set
forth below. Any such notice of withdrawal must (i) specify the name of the
person having tendered the Existing Notes to be withdrawn (the "Depositor"),
(ii) identify the Existing Notes to be withdrawn (including the certificate
number of numbers of the certificate or certificates representing such Existing
Notes and the aggregate principal amount of such Existing Notes), (iii) be
signed by the holder in the same manner as the original signature on the Letter
of Transmittal by which such Existing Notes were tendered (including any
required
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signature guarantees) or be accompanied by documents of transfer sufficient to
permit the Transfer Agent with respect to the Existing Notes to register the
transfer of such Existing Notes into the name of the person withdrawing the
tender and (iv) specify the name in which any such Existing Notes are to be
registered, if different from that of the Depositor. All questions as to the
validity, form and eligibility (including time of receipt) of such withdrawal
notices will be determined by the Company in its sole discretion, which
determination will be final and binding on all parties. Any Existing Notes so
withdrawn will be deemed not to have been validly tendered for purposes of the
Exchange Offer and no New Notes will be issued with respect thereto unless the
Existing Notes so withdrawn are validly retendered. Any Existing Notes which
have been tendered but which are withdrawn will be returned to the holder
thereof without cost to such holder as soon as practicable after such
withdrawal. Properly withdrawn Existing Notes may be retendered by following one
of the procedures described above under "-- Procedures for Tendering Existing
Notes" at any time prior to the Expiration Date.
ACCEPTANCE OF EXISTING NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange
Offer, the Company will accept, promptly after the Expiration Date, all Existing
Notes properly tendered and will issue the New Notes promptly after acceptance
of the Exchange Offer. See "-- Certain Conditions to the Exchange Offer" below.
For purposes of the Exchange Offer, the Company will be deemed to have accepted
properly tendered Existing Notes for exchange when the Company has given oral or
written notice thereof to the Exchange Agent.
In all cases, issuance of the New Notes in exchange for Existing Notes
pursuant to the Exchange Offer will be made only after timely receipt by the
Company of such Existing Notes, a properly completed and duly executed Letter of
Transmittal and all other required documents. If any tendered Existing Notes are
not accepted for exchange for any reason set forth in the terms and conditions
of the Exchange Offer, such unaccepted Existing Notes will be returned without
expense to the tendering holder thereof as promptly as practicable after the
rejection of such tender or the expiration or termination of the Exchange Offer.
UNTENDERED EXISTING NOTES
Holders of Existing Notes whose Existing Notes are not tendered or are
tendered but not accepted in the Exchange Offer will continue to hold such
Existing Notes and will be entitled to all the rights and preferences and
subject to the limitations applicable thereto. Following consummation of the
Exchange Offer, the holders of Existing Notes will continue to be subject to the
existing restrictions upon transfer thereof and, except as provided herein, the
Company will have no further obligation to such holders to provide for the
registration under the Securities Act of the Existing Notes held by them. To the
extent that Existing Notes are tendered and accepted in the Exchange Offer, the
trading market for untendered and tendered but unaccepted Existing Notes could
be adversely affected.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other term of the Exchange Offer, the Company will
not be required to accept for exchange, or issue New Notes in exchange for, any
Existing Notes, and may terminate or amend the Exchange Offer, if at any time
before the acceptance of such Existing Notes for exchange, any of the following
events shall occur:
(A) an injunction, order or decree shall have been issued by
any court or governmental agency that would prohibit, prevent or
otherwise materially impair the ability of the Company to proceed with
the Exchange Offer; or
(B) there shall occur a change in the current interpretation
of the staff of the Commission which current interpretation permits the
New Notes issued pursuant to the Exchange Offer in exchange for the
Existing Notes to be offered for resale, resold and otherwise
transferred by holders thereof (other than (i) a broker-dealer who
purchases such New Notes directly from the Company to resell pursuant
to Rule 144A or any other available exemption under the Securities Act
or (ii) a person that is an affiliate of the Company within the meaning
of Rule 405 under the Securities Act), without compliance with the
registration and prospectus delivery provisions of the Securities Act
provided that such New Notes are acquired in the ordinary course of
such holders' business and such holders have no arrangement with any
person to participate in the distribution of New Notes.
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The foregoing conditions are for the sole benefit of the Company and
may be asserted by the Company regardless of the circumstances giving rise to
any such condition or may be waived by the Company in whole or in part at any
time and from time to time in its sole discretion. The failure by the Company at
any time to exercise any of the foregoing rights shall not be deemed a waiver of
any such right and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time.
If the Company determines that it may terminate the Exchange Offer, as
set forth above, the Company may (i) refuse to accept any Existing Notes and
return any Existing Notes that have been tendered to the holders thereof, (ii)
extend the Exchange Offer and retain all Existing Notes tendered prior to the
Expiration Date, subject to the rights of such holders of tendered shares of
Existing Notes to withdraw their tendered Existing Notes, or (iii) waive such
termination event with respect to the Exchange Offer and accept all properly
tendered Existing Notes that have not been withdrawn. If such waiver constitutes
a material change in the Exchange Offer, the Company will disclose such change
by means of a supplement to this Prospectus that will be distributed to each
registered holder of Existing Notes, and the Company will extend the Exchange
Offer for a period of five to ten business days, depending upon the significance
of the waiver and the manner of disclosure to the registered holders of the
Existing Notes, if the Exchange Offer would otherwise expire during such period.
In addition, the Company will not accept for exchange any Existing
Notes tendered, and no New Notes will be issued in exchange for any such
Existing Notes, if at any time any stop order shall be threatened by the
Commission or in effect with respect to the Registration Statement.
The Exchange Offer is not conditioned on any minimum principal amount
of Existing Notes being tendered for exchange.
EXCHANGE AGENT
State Street Bank and Trust Company has been appointed as Exchange
Agent for the Exchange Offer. Questions regarding Exchange Offer procedures and
requests for additional copies of this Prospectus or the Letter of Transmittal
should be directed to the Exchange Agent addressed as follows:
By Mail: By Hand or Overnight Delivery:
------------------------------- -----------------------------------
------------------------------- -----------------------------------
By Facsimile:
-----------------------------------
Confirm by Telephone:
-----------------------------------
State Street Bank and Trust Company is also the Transfer Agent for the
Existing Notes and New Notes.
SOLICITATION OF TENDERS; FEES AND EXPENSES
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or other
persons soliciting acceptance of the Exchange Offer. The Company, however, will
pay the Exchange Agent reasonable and customary fees for its services and will
reimburse the Exchange Agent for its reasonable out-of-pocket expenses in
connection therewith. The cash expenses to be incurred by the Company in
connection with the Exchange Offer will be paid by the Company.
No person has been authorized to give any information or to make any
representation in connection with the Exchange Offer other than those contained
in this Prospectus. If given or made, such information or representations should
not be relied upon as having been authorized by the Company. Neither the
delivery of this Prospectus nor any exchange made hereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of the Company since the respective dates as of which information is
given herein. The Exchange Offer is not being made to (nor will tenders be
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accepted from or on behalf of) holders of Existing Notes in any jurisdiction in
which the making of the Exchange Offer or the acceptance thereof would not be in
compliance with the laws of such jurisdiction.
TRANSFER TAXES
The Company will pay all transfer taxes, if any, applicable to the
exchange of Existing Notes pursuant to the Exchange Offer. If, however,
certificates representing New Notes or Existing Notes not tendered or accepted
for exchange are to be delivered to, or are to be registered or issued in the
name of, any person other than the registered holder of the Existing Notes
tendered, or if tendered Existing Notes are registered in the name of any person
other than the person signing the Letter of Transmittal, or if a transfer tax is
imposed for any reason other than the exchange of New Notes pursuant to the
Exchange Offer, then the amount of any such transfer taxes (whether imposed on
the registered holder or any other persons) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exemption therefrom
is not submitted with the Letter of Transmittal, the amount of such transfer
taxes will be billed directly to such tendering holders.
ACCOUNTING TREATMENT
No gain or loss for accounting purposes will be recognized by the
Company upon the consummation of the Exchange Offer. Expenses incurred in
connection with the issuance of the New Notes will be amortized by the Company
over the term of the New Notes under generally accepted accounting principles.
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PLAN OF DISTRIBUTION
Based on no action letters issued by the staff of the Commission to
third parties, the Company believes that the New Notes issued pursuant to the
Exchange Offer in exchange for Existing Notes may be offered for resale, resold
and otherwise transferred by holders thereof (other than (i) a broker-dealer who
purchases such New Notes directly from the Company to resell pursuant to Rule
144A or any other available exemption under the Securities Act or (ii) a person
that is an affiliate of the Company within the meaning of Rule 405 under the
Securities Act), without compliance with the registration and prospectus
delivery requirements of the Securities Act provided that New Notes are acquired
in the ordinary course of such holders' business and such holders have no
arrangement with any person to participate in the distribution of such New
Notes. Any holder of Existing Notes who tenders in the Exchange Offer for the
purpose of participating in a distribution of the New Notes could not rely on
such interpretation by the staff of the Commission and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. Thus, any New Notes acquired by such
holders will not be freely transferable except in compliance with the Securities
Act.
Each broker-dealer that receives New Notes for its own account in
exchange for Existing Notes acquired as a result of market-making or other
trading activities must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. For a period of 90 days after the
Expiration Date, this Prospectus, as it may be amended or supplemented from time
to time, may be used by a broker-dealer in connection with resales of such New
Notes. During such 90-day period, the Company will use its best efforts to make
this Prospectus available to any broker-dealer for use in connection with such
resale, provided that such broker-dealer indicates in the Letter of Transmittal
that it is a broker-dealer.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through broker-dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such New Notes. Any broker-dealer
that resells New Notes that were received by it for its own account pursuant to
the Exchange Offer and any person that participates in the distribution of such
New Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any such resale of New Notes and any
commissions or concessions received by any such broker-dealers may be deemed to
be underwriting compensation under the Securities Act. The Letter of Transmittal
states that a broker-dealer, by acknowledging that it will deliver and by
delivering a prospectus, will not be deemed to admit that it is an "underwriter"
within the meaning of the Securities Act.
The Company will indemnify the holders of the New Notes (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
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DESCRIPTION OF THE NOTES
Except as otherwise indicated, the following description relates both
to the Existing Notes issued in the Offering and the New Notes to be issued in
exchange for the Existing Notes in the Exchange Offer. The form and terms of the
New Notes are the same as the form and terms of the Existing Notes, except that
the New Notes have been registered under the Securities Act and therefore will
not bear legends restricting the transfer thereof. The New Notes will be
obligations of the Company evidencing the same indebtedness as the Existing
Notes and will be entitled to the benefits of the Indenture, dated as of August
8, 1997 (the "Indenture") by and between the Company and State Street Bank and
Trust Company, as trustee (the "Trustee"). The terms of the Notes include those
stated in the Indenture and those made part of the Indenture by reference to the
Trust Indenture Act of 1939, as amended (the "Trust Indenture Act") as in effect
on the date of the Indenture. The Notes are subject to all such terms, and
holders of the Notes are referred to the Indenture and the Trust Indenture Act
for a statement of them. The following is a summary of the material terms and
provisions of the Notes. This summary does not purport to be a complete
description of the Notes and is subject to the detailed provisions of, and
qualified in its entirety by reference to, the Notes and the Indenture
(including the definitions contained therein). A copy of the form of Indenture
may be obtained from the Company by any holder or prospective investor upon
request. In addition, the Company has filed the Indenture with the Commission as
an exhibit to the Registration Statement of which this Prospectus is a part.
Definitions relating to certain capitalized terms are set forth under " --
Certain Definitions" and throughout this description. Capitalized terms that are
used but not otherwise defined herein have the meanings assigned to them in the
Indenture and such definitions are incorporated herein by reference. As used in
this description, the "Company" means HVE only.
GENERAL
The Notes are limited in aggregate principal amount to $135,000,000.
The Notes are general unsecured obligations of the Company ranking pari passu in
right of payment to all existing and future senior indebtedness of the Company
and senior in right of payment to any current or future subordinated
indebtedness of the Company.
The Indenture, the Notes, the Intercompany Notes and the agreement
governing the pledge of the Intercompany Notes to the Trustee, as collateral
agent, are governed by the laws of the Commonwealth of Massachusetts.
MATURITY, INTEREST AND PRINCIPAL
The Notes will mature on August 15, 2004. The Notes will bear interest
at a rate of 10-1/2% per annum from the date of original issuance until
maturity. Interest is payable semiannually in arrears on August 15 and February
15, commencing February 15, 1998, to holders of record of the Notes at the close
of business on the immediately preceding August 1, and February 1, respectively.
OPTIONAL REDEMPTION
The Notes will be redeemable at the option of the Company, in whole or
in part, at any time on or after August 15, 2001 at the following redemption
prices (expressed as a percentage of principal amount), together, in each case,
with accrued and unpaid interest to the redemption date, if redeemed during the
twelve-month period beginning on August 15, of each year listed below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- -----------
<S> <C>
2001......................... 105.250%
2002......................... 102.625%
2003 and thereafter.......... 100.000%
</TABLE>
Notwithstanding the foregoing, the Company may redeem in the aggregate
up to 35% of the original principal amount of Notes at any time and from time to
time prior to August 15, 2000, at a redemption price equal to 110.500% of the
aggregate principal amount so redeemed, plus accrued and unpaid interest to the
redemption date with the Net Proceeds of one or more Qualified Equity Offerings
of the Company, or Parent to the extent such proceeds were contributed to the
Company as common equity; provided that at least $87.8 million of the principal
amount of Notes originally issued remains outstanding
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<PAGE> 89
immediately after the occurrence of any such redemption and that any such
redemption occurs within 60 days following the closing of any such Qualified
Equity Offering.
In the event of redemption of fewer than all of the Notes, the Trustee
shall select by lot or in such other manner as it shall deem fair and equitable
the Notes to be redeemed. The Notes will be redeemable in whole or in part upon
not less than 30 nor more than 60 days' prior written notice, mailed by first
class mail to a holder's last address as it shall appear on the register
maintained by the Registrar of the Notes. On and after any redemption date,
interest will cease to accrue on the Notes or portions thereof called for
redemption unless the Company shall fail to redeem any such Note.
INTERCOMPANY NOTES
At the closing of the Offerings, the principal amount of the Notes
Offering was allocated among the Company and each of its direct Restricted
Subsidiaries in consideration for the release of certain obligations of such
Restricted Subsidiaries relating to the indebtedness being repaid in connection
with the Refinancing. Amounts allocated to individual Restricted Subsidiaries
were evidenced by the Intercompany Notes. The Intercompany Notes: (i) are senior
obligations of each Restricted Subsidiary; (ii) bear interest at least at the
rate borne by the Notes; (iii) mature on the maturity date of the Notes or such
earlier time when no Notes remain outstanding; (iv) not be subject to
redemption, repayment or repurchase prior to the stated maturity thereof except
as set forth under " -- Offer to Repurchase Upon a Qualified Subsidiary IPO" and
" -- Limitation on Transfer of Intercompany Notes; Repayment of Intercompany
Notes;" and (v) are pledged by the Company as collateral on the Notes. See "The
Transactions -- Intercompany Notes."
OFFER TO REPURCHASE UPON A QUALIFIED SUBSIDIARY IPO
The Indenture allows each Restricted Subsidiary that is an obligor
under an Intercompany Note to effect a Qualified Subsidiary IPO; provided that
(i) the Restricted Subsidiary consummating such Qualified Subsidiary IPO will
have repaid in full its applicable Intercompany Note, together with all accrued
and unpaid interest, if any, thereon, (ii) immediately after giving pro forma
effect to such Qualified Subsidiary IPO, the Company (excluding the EBITDA and
Consolidated Fixed Charges of the Restricted Subsidiary effecting the Qualified
Subsidiary IPO) could incur $1.00 of additional Indebtedness (other than
Permitted Indebtedness) under the covenant set forth under " -- Limitation on
Additional Indebtedness," assuming for the purposes of this calculation only,
that the offer to repurchase referred to in the following paragraph has been
subscribed in full, and (iii) no Default or Event of Default shall have occurred
and be continuing. Upon completion of a Qualified Subsidiary IPO and the
repayment of its Intercompany Note, such Restricted Subsidiary will become an
Unrestricted Subsidiary.
Within 30 days of the consummation of a Qualified Subsidiary IPO, the
Company shall mail a notice to each holder of Notes stating, among other things:
(1) that the holders of the Notes have the right to require the Company to apply
the Net Proceeds received from the repayment of the applicable Intercompany Note
to repurchase Notes from the holders thereof at a purchase price in cash equal
to 101% of the aggregate principal amount thereof (plus accrued and unpaid
interest to the purchase date) in the principal amount of the Intercompany Note
being repaid by such Restricted Subsidiary; (2) the purchase date, which shall
be no earlier than 30 days and not later than 60 days from the date such notice
is mailed; (3) the instructions, determined by the Company, that each holder
must follow in order to have such Notes repurchased; and (4) if the aggregate
principal amount of Notes surrendered by Holders exceeds the principal amount of
such Intercompany Note, the Company shall select the Notes to be purchased on a
pro rata basis.
Following the consummation of any such offer to holders of the Notes
following a Qualified Subsidiary IPO, the remaining Net Proceeds from the
payment of the Intercompany Note repurchased by the Company in connection
therewith shall be proceeds of an Asset Sale and shall be applied in accordance
with the " -- Limitation on Certain Asset Sales" covenant.
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CERTAIN COVENANTS
The Indenture contains, among others, the following covenants. Except
as otherwise specified, all of the covenants described below appear in the
Indenture.
Limitation on Additional Indebtedness
The Company will not, and will not permit any Restricted Subsidiary of
the Company to, directly or indirectly, incur (as defined) any Indebtedness
(including Acquired Indebtedness); provided that the Company may incur
Indebtedness if (i) after giving effect to the incurrence of such Indebtedness
and the receipt and application of the proceeds thereof, the Company's
consolidated Fixed Charge Coverage Ratio (determined on a pro forma basis for
the last four fiscal quarters of the Company for which financial statements are
available at the date of determination) is at least 2.00 to 1, and (ii) no
Default or Event of Default shall have occurred and be continuing at the time or
as a consequence of the incurrence of such Indebtedness; and, provided, further,
that any Restricted Subsidiary may incur Indebtedness if (i) after giving effect
to the incurrence of such Indebtedness and the receipt and application of the
proceeds thereof, such Restricted Subsidiary's Fixed Charge Coverage Ratio
(determined on a pro forma basis for the last four fiscal quarters of such
Restricted Subsidiary for which financial statements are available at the date
of determination) is at least 2.50 to 1, and (ii) no Default or Event of Default
shall have occurred and be continuing at the time or as a consequence of the
incurrence of such Indebtedness. For purposes of computing the Fixed Charge
Coverage Ratio, (A) if the Indebtedness which is the subject of a determination
under this provision is Acquired Indebtedness, or Indebtedness incurred in
connection with the simultaneous acquisition (by way of merger, consolidation or
otherwise) of any Person, business, property or assets (an "Acquisition"), then
such ratio shall be determined by giving effect (on a pro forma basis, as if the
transaction had occurred at the beginning of the four-quarter period) to both
the incurrence or assumption of such Acquired Indebtedness or such other
Indebtedness by the Company and the inclusion in the Company's or such
Restricted Subsidiary's EBITDA of the EBITDA of the acquired Person, business,
property or assets, (B) if any Indebtedness to be incurred (x) bears a floating
rate of interest, the interest expense on such Indebtedness shall be calculated
as if the rate in effect on the date of determination had been the applicable
rate for the entire period (taking into account on a pro forma basis any
Interest Rate Agreement applicable to such Indebtedness if such Interest Rate
Agreement has a remaining term as at the date of determination in excess of 12
months), (y) bears, at the option of the Company or a Subsidiary, a fixed or
floating rate of interest, the interest expense on such Indebtedness shall be
computed by applying, at the option of the Company or such Subsidiary, either a
fixed or floating rate and (z) was incurred under a revolving credit facility,
the interest expense on such Indebtedness shall be computed based upon the
average daily balance of such Indebtedness during the applicable period, (C) for
any quarter prior to the date hereof included in the calculation of such ratio,
such calculation shall be made on a pro forma basis, giving effect to the PHI
Acquisition, the issuance of the Notes and the use of the net proceeds therefrom
as if the same had occurred at the beginning of the four-quarter period used to
make such calculation and (D) for any quarter included in the calculation of
such ratio prior to the date that any Asset Sale was consummated, or that any
Indebtedness was incurred, or that any Acquisition was effected, by the Company
or any of its Restricted Subsidiaries, such calculation shall be made on a pro
forma basis, giving effect to each Asset Sale, incurrence of Indebtedness or
Acquisition, as the case may be, and the use of any proceeds therefrom, as if
the same had occurred at the beginning of the four-quarter period used to make
such calculation.
Notwithstanding the foregoing, the Company and its Restricted
Subsidiaries may incur Permitted Indebtedness.
The Company will not, directly or indirectly, in any event incur any
Indebtedness which by its terms (or by the terms of any agreement governing such
Indebtedness) is subordinated to any other Indebtedness of the Company unless
such Indebtedness is also by its terms (or by the terms of any agreement
governing such Indebtedness) made expressly subordinate to the Notes to the same
extent and in the same manner as such Indebtedness is subordinated pursuant to
subordination provisions that are most favorable to the holders of any other
Indebtedness of the Company.
Limitation on Restricted Payments
The Company will not make, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, make, any Restricted Payment, unless:
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(a) no Default or Event of Default shall have occurred and be
continuing at the time of or immediately after giving effect to such
Restricted Payment;
(b) immediately after giving pro forma effect to such
Restricted Payment, the Company could incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) under the covenant set
forth under " -- Limitation on Additional Indebtedness"; and
(c) immediately after giving effect to such Restricted
Payment, the aggregate of all Restricted Payments declared or made
after the Issue Date does not exceed the sum of (1) 50% of the
Company's cumulative Consolidated Net Income after the Issue Date (or
minus 100% of any cumulative deficit in Consolidated Net Income during
such period), (2) 100% of the aggregate Net Proceeds and the fair
market value of securities or other property received by the Company as
a capital contribution to the common equity of the Company after the
Issue Date and from the issue or sale, after the Issue Date, of Capital
Stock (other than Disqualified Capital Stock or Capital Stock of the
Company issued to any Subsidiary of the Company) of the Company or any
Indebtedness or other securities of the Company convertible into or
exercisable or exchangeable for Capital Stock (other than Disqualified
Capital Stock) of the Company which has been so converted or exercised
or exchanged, as the case may be and (3) $2,500,000. For purposes of
determining under this clause (c) the amount expended for Restricted
Payments, cash distributed shall be valued at the face amount thereof
and property other than cash shall be valued at its fair market value.
The provisions of this covenant shall not prohibit (i) the payment of
any distribution within 60 days after the date of declaration thereof, if at
such date of declaration such payment would comply with the provisions of the
Indenture, (ii) the retirement of any shares of Capital Stock of the Company or
subordinated Indebtedness by conversion into, or by or in exchange for, shares
of Capital Stock (other than Disqualified Capital Stock), or out of, the Net
Proceeds of the substantially concurrent sale (other than to a Subsidiary of the
Company) of other shares of Capital Stock of the Company (other than
Disqualified Capital Stock), (iii) the redemption or retirement of Indebtedness
of the Company subordinated to the Notes in exchange for, by conversion into, or
out of the Net Proceeds of, a substantially concurrent sale or incurrence of
Indebtedness (other than any Indebtedness owed to a Subsidiary) of the Company
that is contractually subordinated in right of payment to the Notes to at least
the same extent as the Subordinated Indebtedness being redeemed or retired, (iv)
the retirement of any shares of Disqualified Capital Stock by conversion into,
or by exchange for, shares of Disqualified Capital Stock, or out of the Net
Proceeds of the substantially concurrent sale (other than to a Subsidiary of the
Company) of other shares of Disqualified Capital Stock, (v) so long as no
Default or Event of Default shall have occurred and be continuing, the payment
of cash dividends on the Series A Preferred Stock when such dividends are
required to be paid in cash in accordance with the Restated Articles, (vi)
payment from the net proceeds of the Offerings, of up to $2.25 million to
Letitia Corporation to be used to repurchase from the High Voltage Engineering
Corporation Retirement Plan shares of Letitia Common Stock within 60 days of the
Issue Date for not more than $2.25 million, and fund a proportional accrual
relating to the Subordinated Notes Warrants of up to $150,000, (vii) so long as
no Default or Event of Default shall have occurred and be continuing, the
exchange of Warrants for Subsidiary Warrants or Common Shares of Subsidiary
Shares in the event of a Qualified Subsidiary IPO, (viii) payments required to
effect the reclassification of an Unrestricted Subsidiary as a Restricted
Subsidiary in compliance with " -- Offer to Repurchase upon a Qualified
Subsidiary IPO," and (ix) the payment of management fees for services provided
by Parent or its employees in an aggregate annual amount not to exceed $750,000;
provided, however, that any amounts paid by the Company pursuant to clauses (i),
(v) and (vii) shall reduce amounts otherwise available for Restricted Payments.
Not later than the date of making any Restricted Payment, the Company
shall deliver to the Trustee an Officers' Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by the covenant " -- Limitation on Restricted Payments"
were computed, which calculations may be based upon the Company's latest
available financial statements, and that no Default or Event of Default exists
and is continuing and no Default or Event of Default will occur immediately
after giving effect to any Restricted Payments.
Limitations on Investments
The Company will not, and will not permit any of its Restricted
Subsidiaries to, make any Investment other than (i) a Permitted Investment or
(ii) an Investment that is made as a Restricted Payment in compliance with the "
- -- Limitation on Restricted Payments" covenant, after the Issue Date.
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Limitations on Liens
The Company will not, and will not permit any of its Restricted
Subsidiaries to, create, incur or otherwise cause or suffer to exist or become
effective any Liens of any kind (other than Permitted Liens and other than a
pledge of the Intercompany Notes to the Trustee as security for the Notes) upon
any property or asset of the Company or any Restricted Subsidiary or any shares
of stock or debt of any Restricted Subsidiary which owns property or assets, now
owned or hereafter acquired, unless (i) if such Lien secures Indebtedness which
is pari passu with the Notes, then the Notes are secured on an equal and ratable
basis with the obligations so secured until such time as such obligation is no
longer secured by a Lien or (ii) if such Lien secures Indebtedness which is
subordinated to the Notes, any such Lien shall be subordinated to a Lien on such
property or asset or shares of stock or debt granted to the Holders of the Notes
to the same extent as such subordinated Indebtedness is subordinated to the
Notes; provided, however, that in no event will the Company create, incur or
otherwise cause or suffer to exist or become effective any Liens of any kind on
any of the Intercompany Notes other than a pledge of the Intercompany Notes to
the Trustee as security for the Notes.
Limitation on Transactions with Affiliates
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, enter into or suffer to exist any
transaction or series of related transactions (including, without limitation,
the sale, purchase, exchange or lease of assets, property or services) with any
Affiliate (including entities in which the Company or any of its Restricted
Subsidiaries owns a minority interest) or holder of 10% or more of the Company's
Common Stock (an "Affiliate Transaction") or extend, renew, waive or otherwise
modify the terms of any Affiliate Transaction entered into prior to the Issue
Date unless (i) such Affiliate Transaction is between or among the Company and
its Wholly-Owned Subsidiaries; or (ii) the terms of such Affiliate Transaction
are fair and reasonable to the Company or such Restricted Subsidiary, as the
case may be, and the terms of such Affiliate Transaction are at least as
favorable as the terms which could be obtained by the Company or such Restricted
Subsidiary, as the case may be, in a comparable transaction made on an arm's-
length basis between unaffiliated parties. In any Affiliate Transaction
involving an amount or having a value in excess of $1.0 million which is not
permitted under clause (i) above, the Company must obtain a resolution of the
Board of Directors certifying that such Affiliate Transaction complies with
clause (ii) above. In transactions with a value in excess of $3.0 million which
are not permitted under clause (i) above, the Company must obtain a written
opinion as to the fairness of such a transaction from an independent investment
banking firm selected by the Company.
The foregoing provisions will not apply to (i) any Restricted Payment
that is not prohibited by the provisions described under " -- Limitation on
Restricted Payments" contained herein or (ii) any transaction, approved by the
Board of Directors of the Company, with an officer or director of the Company or
of any Subsidiary in his or her capacity as officer or director entered into in
the ordinary course of business, including compensation and employee benefit
arrangements with any officer or director of the Company or of any Subsidiary
that are customary for public companies in the manufacturing industry.
Limitation on Certain Asset Sales
The Company will not, and will not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless (i) the Company or its
Restricted Subsidiaries, as the case may be, receives consideration at the time
of such sale or other disposition at least equal to the fair market value
thereof (as determined in good faith by the Company's Board of Directors, and
evidenced by a board resolution); (ii) not less than 85% of the consideration
received by the Company or its Subsidiaries, as the case may be, is in the form
of cash or cash equivalents (those equivalents allowed under "Temporary Cash
Investments"); and (iii) subject to the Company's obligations with respect to
the Intercompany Notes in the event of a Qualified Subsidiary IPO, the Asset
Sale Proceeds received by the Company or such Restricted Subsidiary are applied
(a) first, to the extent the Company elects, or is required, to prepay, repay or
purchase debt under any then existing Indebtedness of the Company or any
Restricted Subsidiary ranking pari passu to the Notes within 180 days following
the receipt of the Asset Sale Proceeds from any Asset Sale, provided that any
such repayment shall result in a permanent reduction of the commitments
thereunder in an amount equal to the principal amount so repaid; (b) second, to
the extent of the balance of Asset Sale Proceeds after application as described
above, to the extent the Company elects, to an investment in assets (including
Capital Stock or other securities purchased in connection with the acquisition
of Capital Stock or property of another person) used or useful in businesses
similar or ancillary to the business of the Company or any Restricted Subsidiary
as conducted at the time of such Asset Sale, provided that such investment
occurs or the Company or a Restricted Subsidiary enters into contractual
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commitments to make such investment, subject only to customary conditions (other
than the obtaining of financing), on or prior to the 181st day following receipt
of such Asset Sale Proceeds and Asset Sale Proceeds contractually committed are
so applied within 360 days following the receipt of such Asset Sale Proceeds
(the "Reinvestment Date"); and (c) third, if on the Reinvestment Date with
respect to any Asset Sale, the Available Asset Sale Proceeds exceed $10 million,
the Company shall apply an amount equal to Available Asset Sale Proceeds to an
offer to repurchase the Notes, at a purchase price in cash equal to 100% of the
principal amount thereof plus accrued and unpaid interest, if any, to the date
of repurchase (an "Excess Proceeds Offer"). If an Excess Proceeds Offer is not
fully subscribed, the Company may retain the portion of the Available Asset Sale
Proceeds not required to repurchase Notes and the Available Asset Sale Proceeds
shall be reset to zero.
If the Company is required to make an Excess Proceeds Offer, the
Company shall mail, within 30 days following the Reinvestment Date, a notice to
the Holders stating, among other things: (1) that such Holders have the right to
require the Company to apply the Available Asset Sale Proceeds to repurchase
such Notes at a purchase price in cash equal to 100% of the principal amount
thereof plus accrued and unpaid interest, if any, to the date of purchase; (2)
the purchase date, which shall be no earlier than 30 days and not later than 60
days from the date such notice is mailed; (3) the instructions, determined by
the Company, that each Holder must follow in order to have such Notes
repurchased; and (4) the calculations used in determining the amount of
Available Asset Sale Proceeds to be applied to the repurchase of such Notes.
Limitation on Disposition of Assets
The Company will not, and will not permit any Restricted Subsidiary of
the Company to, sell, convey, lease, transfer or otherwise contribute or dispose
of any of its assets or property or the proceeds from the sale or other
disposition of any such assets or property (including any shares of Capital
Stock of any Restricted Subsidiary of the Company) existing on the Issue Date
(each referred to for the purpose of this covenant as a "disposition") to any
other Subsidiary of the Company, other than (a) de minimis dispositions made in
the ordinary course of business, (b) intercompany loans and cash equity
contributions (other than the Intercompany Notes), including, without
limitation, any such loans or contributions for the purpose of effecting the
payment of any tax owed by any such Subsidiary to any governmental entity), (c)
dispositions of trade or other receivables and assets relating to trade and (d)
dispositions permitted by the covenant " -- Limitation on Restricted Payments."
Limitation on Preferred Stock of Restricted Subsidiaries
The Company will not permit any Restricted Subsidiary to issue any
Preferred Stock (except Preferred Stock issued to the Company or a Restricted
Subsidiary) or permit any Person (other than the Company or a Restricted
Subsidiary) to hold any such Preferred Stock unless the Company or such
Restricted Subsidiary would be entitled to incur or assume Indebtedness under
the covenant described under " -- Limitation on Additional Indebtedness" in the
aggregate principal amount equal to the aggregate liquidation value of the
Preferred Stock to be issued.
Limitation on Capital Stock of Restricted Subsidiaries
The Company will not (i) sell, pledge, hypothecate or otherwise convey
or dispose of any Capital Stock of a Restricted Subsidiary or (ii) permit any of
its Restricted Subsidiaries to issue any Capital Stock, other than to the
Company or a Wholly-Owned Subsidiary of the Company. The foregoing restrictions
shall not apply to the issuance and sale of Capital Stock of a Restricted
Subsidiary that is an obligor under an Intercompany Note in compliance with
"Offer to Repurchase upon a Qualified Subsidiary IPO," an Asset Sale made in
compliance with " -- Limitation on Certain Asset Sales" or the issuance of
Preferred Stock in compliance with the covenant described under " -- Limitation
on Preferred Stock of Restricted Subsidiaries."
Limitation on Transfer of Intercompany Notes; Repayment of Intercompany Notes
With the exception of the pledge of the Intercompany Notes to the
Trustee as security for the Notes, the Company will not sell, pledge,
hypothecate or otherwise convey or dispose of any Intercompany Note except in
accordance with " -- Offer to Repurchase upon a Qualified Subsidiary IPO." The
Company shall agree not to reduce the principal amount of any Intercompany Note
or otherwise amend or modify the terms of any Intercompany Note as in effect on
the Issue Date.
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Limitation on Business of HIVEC Holdings; Capital Stock of Foreign Subsidiaries
HIVEC Holdings shall not engage in any trade or business, incur any
Indebtedness other than Permitted Indebtedness, incur any liabilities other than
nominal expenses necessary to maintain its corporate existence, hold any assets
other than the capital stock of HIVEC, B.V., or sell, pledge, encumber or
transfer or cause or permit the sale, pledge, encumbrance or transfer of Capital
Stock of any of its direct or indirect Subsidiaries. Datcon shall not sell,
pledge, encumber or transfer the Capital Stock of any of its direct or indirect
foreign subsidiaries. Notwithstanding the foregoing, by May 31, 1998, the
Company shall cause HIVEC Holdings and HIVEC, B.V. to: (i) transfer (directly or
indirectly) to Datcon all of the capital stock of Industrias Jorda that is not
held by Datcon (or a direct or indirect subsidiary of Datcon); and (ii) transfer
(directly or indirectly) all of the asset of Anderson Ireland (as defined
herein) to Anderson (or a direct or indirect subsidiary of Anderson) ((i) and
(ii) together, the "Foreign Realignment").
Limitation on Sale and Lease-Back Transactions
The Company will not, and will not permit any Restricted Subsidiary to,
enter into any Sale and Lease-Back Transaction unless (i) the consideration
received in such Sale and Lease-Back Transaction is at least equal to the fair
market value of the property sold, as determined by a board resolution of the
Company and (ii) the Company could incur the Attributable Indebtedness in
respect of such Sale and Lease-Back Transaction in compliance with the covenant
described under " -- Limitation on Additional Indebtedness."
Limitation on Dividend and Other Payment Restrictions Affecting Subsidiaries
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to meet its principal and interest obligations on the
Notes (a)(i) through the payment of dividends or make any other distributions to
the Company or any of its Restricted Subsidiaries (A) on its Capital Stock or
(B) with respect to any other interest or participation in, or measured by, its
profits, or (ii) through the payment of any Indebtedness owed to the Company or
any of its Restricted Subsidiaries, (b) through the making of loans or advances
or capital contributions to the Company or any of its Restricted Subsidiaries or
(c) through the transfer of any of its properties or assets to the Company or
any of its Restricted Subsidiaries, except for such encumbrances or restrictions
existing under or by reason of (i) encumbrances or restrictions existing on the
Issue Date, (ii) the Indenture and the Notes, (iii) applicable law, (iv) any
instrument governing Indebtedness or Capital Stock of a Person acquired by the
Company or any of its Restricted Subsidiaries or of any Person that becomes a
Restricted Subsidiary as in effect at the time of such acquisition or such
Person becoming a Restricted Subsidiary (except to the extent such Indebtedness
was incurred in connection with or in contemplation of such acquisition of such
Person becoming a Restricted Subsidiary), which encumbrance or restriction is
not applicable to any Person, or the properties or assets of any Person, other
than the Person, or the property of assets of the Person (including any
Subsidiary of the Person), so acquired, (v) customary non-assignment provisions
in leases or other agreements entered into in the ordinary course of business
and consistent with past practices, (vi) Refinancing Indebtedness; provided that
such restrictions are in the aggregate no more restrictive than those contained
in the agreements governing the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded or (vii) customary restrictions in
security agreements or mortgages securing Indebtedness of the Company or a
Restricted Subsidiary to the extent such restrictions restrict the transfer or
encumbrance of the property subject to such security agreements and mortgages.
Guarantees of Certain Indebtedness
The Company will not permit any of its Restricted Subsidiaries,
directly or indirectly, to Guarantee any Indebtedness of the Company or a
Guarantor (except as permitted under clause (i) of the definition of "Permitted
Indebtedness" below) unless, in the case of a domestic Restricted Subsidiary,
such Restricted Subsidiary simultaneously executes and delivers to the Trustee a
supplemental indenture, in form reasonably satisfactory to the Trustee,
providing for the Guarantee by such Restricted Subsidiary of the payment of the
obligations of the Company under the Notes in the manner set forth under " --
Guarantees." Neither the Company nor any such Guarantor shall be required to
make a notation on the Notes to reflect any such Guarantee. Nothing in this
covenant shall be construed to permit any Restricted Subsidiary of the Company
to incur Indebtedness otherwise prohibited by the " -- Limitation on Additional
Indebtedness" covenant.
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Payments for Consent
Neither the Company nor any of its Subsidiaries shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any holder of any Notes for or as an inducement
to any consent, waiver or amendment of any of the terms or provisions of the
Indenture or the Notes unless such consideration is offered to be paid or agreed
to be paid to all holders of the Notes which so consent, waive or agree to amend
in the time frame set forth in solicitation documents relating to such consent,
waiver or agreement.
CHANGE OF CONTROL OFFER
Within 20 days of the occurrence of a Change of Control, the Company
shall notify the Trustee in writing of such occurrence and shall make an offer
to purchase (the "Change of Control Offer") the outstanding Notes at a purchase
price equal to 101% of the principal amount thereof plus any accrued and unpaid
interest thereon to the Change of Control Payment Date (as hereinafter defined)
(such applicable purchase price being hereinafter referred to as the "Change of
Control Purchase Price") in accordance with the procedures set forth in this
covenant.
Within 20 days of the occurrence of a Change of Control, the Company
also shall (i) cause a notice of the Change of Control Offer to be sent at least
once to the Dow Jones News Service or similar business news service in the
United States and (ii) send by first-class mail, postage prepaid, to the Trustee
and to each Holder of the Notes, at the address appearing in the register
maintained by the Registrar of the Notes, a notice stating:
(1) that the Change of Control Offer is being made pursuant to
this covenant and that all Notes tendered will be accepted for payment,
and otherwise subject to the terms and conditions set forth herein;
(2) the Change of Control Purchase Price and the purchase date
(which shall be a Business Day no earlier than 20 business days nor
more than 60 days from the date such notice is mailed (the "Change of
Control Payment Date"));
(3) that any Note not tendered will continue to accrue
interest;
(4) that, unless the Company defaults in the payment of the
Change of Control Purchase Price, any Notes accepted for payment
pursuant to the Change of Control Offer shall cease to accrue interest
after the Change of Control Payment Date;
(5) that Holders accepting the offer to have their Notes
purchased pursuant to a Change of Control Offer will be required to
surrender the Notes to the Paying Agent at the address specified in the
notice prior to the close of business on the second Business Day
preceding the Change of Control Payment Date;
(6) that Holders will be entitled to withdraw their acceptance
if the Paying Agent receives, not later than the close of business on
the third Business Day preceding the Change of Control Payment Date, a
telegram, telex, facsimile transmission or letter setting forth the
name of the Holder, the principal amount of the Notes delivered for
purchase, and a statement that such Holder is withdrawing his election
to have such Notes purchased;
(7) that Holders whose Notes are being purchased only in part
will be issued new Notes equal in principal amount to the unpurchased
portion of the Notes surrendered, provided that each Note purchased and
each such new Note issued shall be in an original principal amount in
denominations of $1,000 and integral multiples thereof;
(8) any other procedures that a Holder must follow to accept a
Change of Control Offer or effect withdrawal of such acceptance; and
(9) the name and address of the Paying Agent.
On the Change of Control Payment Date, the Company shall, to the extent
lawful, (i) accept for payment Notes or portions thereof tendered pursuant to
the Change of Control Offer, (ii) deposit with the Paying Agent money sufficient
to pay the purchase price of all Notes or portions thereof so tendered, and
(iii) deliver or cause to be delivered to the Trustee Notes so accepted together
with an Officers' Certificate stating the Notes or portions thereof tendered to
the Company. The Paying Agent shall promptly mail to each Holder of Notes so
accepted payment in an amount equal to the purchase price for such
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Notes, and the Company shall execute and issue, and the Trustee shall promptly
authenticate and mail to such Holder, a new Note equal in principal amount to
any unpurchased portion of the Notes surrendered; provided that each such new
Note shall be issued in an original principal amount in denominations of $1,000
and integral multiples thereof.
The Indenture will provide that, (A) if the Company or any Subsidiary
thereof has issued any outstanding (i) Indebtedness that is subordinated in
right of payment to the Notes or (ii) Preferred Stock, and the Company or such
Subsidiary is required to make a Change of Control Offer or to make a
distribution with respect to such subordinated Indebtedness or Preferred Stock
in the event of a Change of Control, the Company shall not consummate any such
offer or distribution with respect to such subordinated Indebtedness or
Preferred Stock until such time as the Company shall have paid the Change of
Control Purchase Price in full to the holders of Notes that have accepted the
Company's Change of Control Offer and shall otherwise have consummated the
Change of Control Offer made to holders of the Notes and (B) the Company will
not issue Indebtedness that is subordinated in right of payment to the Notes or
Preferred Stock with change of control provisions requiring the payment of such
Indebtedness or Preferred Stock prior to the payment of the Notes in the event
of a Change in Control under the Indenture.
In the event that a Change of Control occurs and the holders of Notes
exercise their right to require the Company to purchase Notes, if such purchase
constitutes a "tender offer" for purposes of Rule 14e-1 under the Exchange Act
at that time, the Company will comply with the requirements of Rule 14e-1 as
then in effect with respect to such repurchase.
MERGER, CONSOLIDATION OR SALE OF ASSETS
The Company will not and will not permit any Restricted Subsidiary to
consolidate with, merge with or into, or transfer all or substantially all of
its assets (as an entirety or substantially as an entirety in one transaction or
a series of related transactions), to any Person unless: (i) the Company or the
Restricted Subsidiary, as the case may be, shall be the continuing Person, or
the Person (if other than the Company or the Restricted Subsidiary) formed by
such consolidation or into which the Company or the Restricted Subsidiary, as
the case may be, is merged or to which the properties and assets of the Company
or the Restricted Subsidiary, as the case may be, are transferred shall be a
corporation organized and existing under the laws of the United States or any
state thereof or the District of Columbia and shall expressly assume, by a
supplemental indenture, executed and delivered to the Trustee, in form
satisfactory to the Trustee, all of the obligations of the Company or the
Restricted Subsidiary, as the case may be, under the Notes and the Indenture,
and the obligations under the Indenture shall remain in full force and effect;
(ii) immediately before and immediately after giving effect to such transaction,
no Default or Event of Default shall have occurred and be continuing; and (iii)
immediately after giving effect to such transaction on a pro forma basis the
Company or such Person could incur at least $1.00 of additional Indebtedness
(other than Permitted Indebtedness) under the covenant set forth under " --
Limitation on Additional Indebtedness;" provided that a Person that is a
Restricted Subsidiary may merge into the Company or another Person that is a
Restricted Subsidiary without complying with this clause (iii).
In connection with any consolidation, merger or transfer of assets
contemplated by this provision, the Company shall deliver, or cause to be
delivered, to the Trustee, in form and substance reasonably satisfactory to the
Trustee, an Officers' Certificate and an opinion of counsel, each stating that
such consolidation, merger or transfer and the supplemental indenture in respect
thereto comply with this provision and that all conditions precedent herein
provided for relating to such transaction or transactions have been complied
with.
GUARANTEES
Under the circumstances described above in "Guarantees of Certain
Indebtedness", the Company's payment obligations under the Notes may in the
future be jointly and severally guaranteed (a "Guarantee") on a senior unsecured
basis by existing or future domestic Restricted Subsidiaries of the Company as
guarantors (each, a "Guarantor"). It is not expected that any Restricted
Subsidiary of the Company will initially execute and deliver the Indenture as a
Guarantor. Each Guarantor will guarantee to each holder of the Notes and the
Trustee, the full and prompt performance of the obligations of the Company under
the Notes, including the payment of principal of premium, if any, on and
interest on the Notes pursuant to its Guarantee. Any of the Company's Restricted
Subsidiaries which become Unrestricted Subsidiaries pursuant to the terms and
provisions of the Indenture shall be released from their obligations under the
Guarantees.
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The obligations of each Guarantor will be limited to the maximum amount
as will, after giving effect to all other contingent and fixed liabilities of
such Guarantor (including, without limitation, any guarantees of other
Indebtedness) and after giving effect to any collections from or payments made
by or on behalf of any other Guarantor in respect of the obligations of such
other Guarantor under its Guarantee or pursuant to its contribution obligations
under the Indenture, result in the obligations of such Guarantor under the
Guarantee not constituting a fraudulent conveyance or fraudulent transfer under
federal or state law. Each Guarantor that makes a payment or distribution under
a Guarantee shall be entitled to a contribution from each other Guarantor in a
pro rata amount based on the Adjusted Net Assets of each Guarantor.
A Guarantor shall be released from all of its obligations under its
Guarantee if all or substantially all of its assets are sold or all of its
Capital Stock is sold, in each case in a transaction in compliance with the
covenant described under " -- Limitation on Certain Asset Sales," the Guarantor
merges with or into or consolidates with, or transfers all or substantially all
of its assets to, the Company or another Guarantor in a transaction in
compliance with " -- Merger, Consolidation or Sale of Assets," or, in the case
of a Restricted Subsidiary that is an obligor under an Intercompany Note, upon
the consummation of a Qualified Subsidiary IPO, complying with "Offer to
Repurchase upon a Qualified Subsidiary IPO" and, in each case, such Guarantor
has delivered to the Trustee an Officers' Certificate and an opinion of counsel,
each stating that all conditions precedent herein provided for relating to such
transaction have been complied with.
EVENTS OF DEFAULT
The following events are defined in the Indenture as "Events of
Default":
(i) default in payment of any principal of, or premium, if
any, on the Notes;
(ii) default for 30 days in payment of any interest on the
Notes;
(iii) default by the Company or any Guarantor in the
observance or performance of any other covenant in the Notes or the
Indenture for 60 days after written notice from the Trustee or the
holders of not less than 25% in aggregate principal amount of the Notes
then outstanding;
(iv) failure to pay when due principal, interest or premium in
an aggregate amount of $3,000,000 or more with respect to any
Indebtedness of the Company or any Restricted Subsidiary thereof, or
the acceleration of any such Indebtedness aggregating $3,000,000 or
more which default shall not be cured, waived or postponed pursuant to
an agreement with the holders of such Indebtedness within 60 days after
written notice as provided in the Indenture, or such acceleration shall
not be rescinded or annulled within 20 days after written notice as
provided in the Indenture;
(v) any final judgment or judgments which can no longer be
appealed for the payment of money in excess of $3,000,000 shall be
rendered against the Company or any Restricted Subsidiary thereof, and
shall not be discharged for any period of 60 consecutive days during
which a stay of enforcement shall not be in effect;
(vi) certain events involving bankruptcy, insolvency or
reorganization of the Company or any Restricted Subsidiary thereof;
(vii) the failure of the Company to cause up to $2.25 million
of the proceeds of the Offerings to be applied, as completely as
possible, to the repurchase of Letitia Common Stock held by the High
Voltage Engineering Corporation Retirement Plan within 60 days of the
Issue Date; or
(viii) the failure of the Company to cause the Foreign
Realignment to occur.
The Indenture provides that the Trustee may withhold notice to the
Holders of the Notes of any default (except in payment of principal or premium,
if any, or interest on the Notes) if the Trustee considers it to be in the best
interest of the Holders of the Notes to do so.
The Indenture provides that if an Event of Default (other than an Event
of Default resulting from certain events of bankruptcy, insolvency or
reorganization) shall have occurred and be continuing, then the Trustee or the
holders of not less
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than 25% in aggregate principal amount of the Notes then outstanding may declare
to be immediately due and payable the entire principal amount of all the Notes
then outstanding plus accrued interest to the date of acceleration; provided,
however, that after such acceleration but before a judgment or decree based on
acceleration is obtained by the Trustee, the holders of a majority in aggregate
principal amount of outstanding Notes may, under certain circumstances, rescind
and annul such acceleration if all Events of Default, other than nonpayment of
accelerated principal, premium or interest, have been cured or waived as
provided in the Indenture. In case an Event of Default resulting from certain
events of bankruptcy, insolvency or reorganization shall occur, the principal,
premium and interest amount with respect to all of the Notes shall be due and
payable immediately without any declaration or other act on the part of the
Trustee or the Holders of the Notes.
The holders of a majority in principal amount of the Notes then
outstanding shall have the right to waive any existing default or compliance
with any provision of the Indenture or the Notes and to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee,
subject to certain limitations specified in the Indenture.
No Holders of any Note will have any right to institute any proceeding
with respect to the Indenture or for any remedy thereunder, unless such Holders
shall have previously given to the Trustee written notice of a continuing Event
of Default and unless also the holders of at least 25% in aggregate principal
amount of the outstanding Notes shall have made written request and offered
reasonable indemnity to the Trustee to institute such proceeding as a trustee,
and unless the Trustee shall not have received from the holders of a majority in
aggregate principal amount of the outstanding Notes a direction inconsistent
with such request and shall have failed to institute such proceeding within 60
days. However, such limitations do not apply to a suit instituted on such Note
on or after the respective due dates expressed in such Note.
DEFEASANCE AND COVENANT DEFEASANCE
The Indenture provides the Company may elect either (a) to defease and
be discharged from any and all obligations with respect to the Notes (except for
the obligations to register the transfer or exchange of such Notes, to replace
temporary or mutilated, destroyed, lost or stolen Notes, to maintain an office
or agency in respect of the Notes and to hold monies for payment in trust)
("defeasance") or (b) to be released from its obligations with respect to the
Notes under certain covenants contained in the Indenture and described above
under " -- Certain Covenants" ("covenant defeasance"), upon the deposit with the
Trustee (or other qualifying trustee), in trust for such purpose, of money
and/or U.S. Government Obligations which through the payment of principal and
interest in accordance with their terms will provide money, in an amount
sufficient to pay the principal of, premium, if any, and interest on the Notes,
on the scheduled due dates therefor or on a selected date of redemption in
accordance with the terms of the Indenture. Such a trust may only be established
if, among other things, the Company has delivered to the Trustee an opinion of
counsel (as specified in the Indenture) (i) to the effect that neither the trust
nor the Trustee will be required to register as an investment company under the
Investment Company Act of 1940, as amended, and (ii) describing either a private
ruling concerning the Notes or a published ruling of the Internal Revenue
Service, to the effect that holders of the Notes or persons in their positions
will not recognize income, gain or loss for federal income tax purposes as a
result of such deposit, defeasance and discharge and will be subject to federal
income tax on the same amount and in the same manner and at the same times, as
would have been the case if such deposit, defeasance and discharge had not
occurred.
MODIFICATION OF INDENTURE
From time to time, the Company and the Trustee may, without the consent
of holders of the Notes, amend the Indenture or the Notes or supplement the
Indenture for certain specified purposes, including providing for uncertificated
Notes in addition to certificated Notes, and curing any ambiguity, defect or
inconsistency, or making any other change that does not materially and adversely
affect the rights of any holder. The Indenture contains provisions permitting
the Company and the Trustee, with the consent of holders of at least a majority
in principal amount of the outstanding Notes, to modify or supplement the
Indenture or the Notes, except that no such modification shall, without the
consent of each holder affected thereby, (i) reduce the amount of Notes whose
holders must consent to an amendment, supplement, or waiver to the Indenture or
the Notes, (ii) reduce the rate of or change the time for payment of interest on
any Note, (iii) reduce the principal of or premium on or change the stated
maturity of any Note, (iv) make any Note payable in money other than that stated
in the Note or change the place of payment from New York, New York, (v) change
the amount or time of any payment required by the Notes or reduce the premium
payable upon any redemption of Notes, or change the time before which no such
redemption may be made, (vi)
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waive a default on the payment of the principal of, interest on, or redemption
payment with respect to any Note, or (vii) take any other action otherwise
prohibited by the Indenture to be taken without the consent of each holder
affected thereby.
REPORTS TO HOLDERS
So long as the Company is subject to the periodic reporting
requirements of the Exchange Act, it will continue to furnish the information
required thereby to the Commission and to the holders of the Notes, the
Indenture provides that even if the Company is not subject to the reporting
requirements of Section 13 or Section 15(d) of the Exchange Act, the Company
will be obligated to provide to the holders of Notes all annual and quarterly
reports and other documents which the Company would have been required to file
with the Commission pursuant to such Sections 13 and 15(d) had it been so
subject and provide to all holders of Notes, without costs to such holders,
copies of such reports and documents.
COMPLIANCE CERTIFICATE
The Company will deliver to the Trustee on or before 100 days after the
end of the Company's fiscal year and on or before 50 days after the end of each
of the first, second and third fiscal quarters in each year an Officers'
Certificate stating whether or not the signers know of any Default or Event of
Default that has occurred. If they do, the certificate will describe the Default
or Event of Default and its status.
THE TRUSTEE
The Trustee under the Indenture will be the Registrar and Paying Agent
with regard to the Notes. The Indenture provides that, except during the
continuance of an Event of Default, the Trustee will perform only such duties as
are specifically set forth in the Indenture. During the existence of an Event of
Default, the Trustee will exercise such rights and powers vested in it under the
Indenture and use the same degree of care and skill in its exercise as a prudent
person would exercise under the circumstances in the conduct of such person's
own affairs.
TRANSFER AND EXCHANGE
Holders of the Notes may transfer or exchange Notes in accordance with
the Indenture. The Registrar under such Indenture may require a Holder, among
other things, to furnish appropriate endorsements and transfer documents, and to
pay any taxes and fees required by law or permitted by the Indenture. The
Registrar is not required to transfer or exchange any Note selected for
redemption. Also, the Registrar is not required to transfer or exchange any Note
for a period of 15 days before selection of the Notes to be redeemed.
The registered Holder of a Note may be treated as the owner of it for
all purposes.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in
the covenants contained in the Indenture. Reference is made to the Indenture for
the full definition of all such terms as well as any other capitalized terms
used herein for which no definition is provided.
"Acquired Indebtedness" means Indebtedness of a Person (including an
Unrestricted Subsidiary) existing at the time such Person becomes a Restricted
Subsidiary or assumed in connection with the acquisition of assets from such
Person.
"Adjusted Net Assets" of a Guarantor at any date shall mean the lesser
of (x) the amount by which the fair value of the property of such Guarantor
exceeds the total amount of liabilities, including, without limitation,
contingent liabilities (after giving effect to all other fixed and contingent
liabilities), but excluding liabilities under the Guarantee, of such Guarantor
at such date and (y) the amount by which the present fair salable value of the
assets of such Guarantor at such date exceeds the amount that will be required
to pay the probable liability of such Guarantor on its debts (after giving
effect to all other fixed and contingent liabilities and after giving effect to
any collection from any subsidiary of such Guarantor in respect of the
obligations of such Subsidiary under the Guarantee), excluding Indebtedness in
respect of the Guarantee, as they become absolute and matured.
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"Affiliate" of any specified Person means any other Person which
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person. For the
purposes of this definition, "control" (including, with correlative meanings,
the terms "controlling," "controlled by," and "under common control with"), as
used with respect to any Person, means the possession, directly or indirectly,
of the power to direct or cause the direction of the management or policies of
such Person, whether through the ownership of voting securities, by agreement or
otherwise.
"Asset Sale" means the sale, transfer, repayment or other disposition
(other than to the Company or any of its Restricted Subsidiaries) in any single
transaction or series of related transactions with a fair market value in excess
of $1.0 million of (a) any Capital Stock of or other equity interest in any
Restricted Subsidiary of the Company, (b) all or substantially all of the assets
of the Company or of any Restricted Subsidiary thereof, (c) real property, (d)
all or substantially all of the assets of any business owned by the Company or
any Restricted Subsidiary thereof, or a division, line of business or comparable
business segment of the Company or any Restricted Subsidiary thereof; or (e) any
of the Intercompany Notes; provided that Asset Sales shall not include sales,
leases, conveyances, transfers or other dispositions to the Company or to a
Restricted Subsidiary or to any other Person if after giving effect to such
sale, lease, conveyance, transfer or other disposition such other Person becomes
a Restricted Subsidiary; and provided, further that any sale of capital stock of
any Restricted Subsidiary pursuant to a Qualified Subsidiary IPO shall be an
Asset Sale only to the extent provided under " -- Offer to Repurchase upon a
Qualified Subsidiary IPO."
"Asset Sale Proceeds" means, with respect to any Asset Sale, (i) cash
received by the Company or any Restricted Subsidiary from such Asset Sale
(including cash received as consideration for the assumption of liabilities
incurred in connection with or in anticipation of such Asset Sale), after (a)
provision for all income or other taxes measured by or resulting from such Asset
Sale, (b) payment of all brokerage commissions, underwriting and other fees and
expenses related to such Asset Sale, (c) provision for minority interest holders
in any Restricted Subsidiary as a result of such Asset Sale and (d) deduction of
appropriate amounts to be provided by the Company or a Restricted Subsidiary as
a reserve, in accordance with GAAP, against any liabilities associated with the
assets sold or disposed of in such Asset Sale and retained by the Company or a
Restricted Subsidiary after such Asset Sale, including, without limitation,
pension and other post employment benefit liabilities and liabilities related to
environmental matters or against any indemnification obligations associated with
the assets sold or disposed of in such Asset Sale, and (ii) promissory notes and
other noncash consideration received by the Company or any Restricted Subsidiary
from such Asset Sale or other disposition, but only upon the liquidation or
conversion of such notes or noncash consideration into cash.
"Attributable Indebtedness" under the Indenture in respect of a Sale
and Lease-Back Transaction means, as at the time of determination, the greater
of (i) the fair value of the property subject to such arrangement (as determined
by the Board of Directors) and (ii) the present value of the obligation
(discounted at a rate of 10%, compounded annually) of the lessee for rental
payments during the remaining term of the lease included in such Sale and
Lease-Back Transaction (including any period for which such lease has been
extended).
"Available Asset Sale Proceeds" means, with respect to any Asset Sale,
the aggregate Asset Sale Proceeds from such Asset Sales that have not been
applied in accordance with clauses (iii)(a) or (iii)(b), and which has not yet
been the basis for an Excess Proceeds Offer in accordance with clause (iii)(c)
of the first paragraph of " -- Limitation on Certain Asset Sales."
"Capital Stock" means, with respect to any Person, any and all shares
or other equivalents (however designated) of capital stock, partnership
interests or any other participation, right or other interest in the nature of
an equity interest in such Person or any option, warrant or other security
convertible into any of the foregoing.
"Capitalized Lease Obligations" means Indebtedness represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP, and the amount of such Indebtedness
shall be the capitalized amount of such obligations determined in accordance
with GAAP.
A "Change of Control" of the Company will be deemed to have occurred at
such time as (i) any Person (including a Person's Affiliates and associates),
other than a Permitted Holder, becomes the beneficial owner (as defined under
Rule 13d-3 or any successor rule or regulation promulgated under the Exchange
Act) of 50% or more of the total voting or economic power of the Company's or
Parent's Common Stock, as the case may be, (ii) any Person (including a Person's
Affiliates and
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associates), other than a Permitted Holder, becomes the beneficial owner of more
than 33 1/3% of the total voting power of the Common Stock, and the Permitted
Holders beneficially own, in the aggregate, a lesser percentage of the total
voting power of the Company or Parent, as the case may be, than such other
Person and do not have the right or ability by voting power, contract or
otherwise to elect or designate for election a majority of the Board of
Directors of the Company or Parent, as the case may be, (iii) there shall be
consummated any consolidation or merger of the Company or Parent in which the
Company or Parent, as the case may be, is not the continuing or surviving
corporation or pursuant to which the Common Stock of the Company or Parent, as
the case may be, would be converted into cash, securities or other property,
other than a merger or consolidation of the Company or Parent, as the case may
be, in which the holders of the Common Stock of the Company or Parent, as the
case may be, outstanding immediately prior to the consolidation or merger hold,
directly or indirectly, at least a majority of the Common Stock of the surviving
corporation immediately after such consolidation or merger, or (iv) during any
period of two consecutive years, individuals who at the beginning of such period
constituted the Board of Directors of the Company (together with any new
directors whose election by such Board of Directors or whose nomination for
election by the shareholders of the Company or Parent, as the case may be, has
been approved by 66 2/3% of the directors then still in office who either were
directors at the beginning of such period or whose election or recommendation
for election was previously so approved) cease to constitute a majority of the
Board of Directors of the Company or Parent, as the case may be.
"Common Stock" of any Person means all Capital Stock of such Person
that is generally entitled to (i) vote in the election of directors of such
Person or (ii) if such Person is not a corporation, vote or otherwise
participate in the selection of the governing body, partners, managers or others
that will control the management and policies of such Person.
"Consolidated Fixed Charges" means, with respect to any Person and with
respect to any determination date, the sum of a Person's (i) Consolidated
Interest Expense, plus (ii) the product of (x) the aggregate amount of all
dividends paid on Disqualified Capital Stock of the Company or on each series of
preferred stock of each Subsidiary of such Person (other than dividends paid or
payable in additional shares of preferred stock or to the Company or any of its
Wholly-Owned Subsidiaries) times (y) a fraction, the numerator of which is one
and the denominator of which is one minus the then current effective combined
federal, state and local tax rate of such Person (expressed as a decimal), in
each case, for the prior four full fiscal quarter period for which financial
results are available.
"Consolidated Interest Expense" means, with respect to any Person, for
any period, the aggregate amount of interest which, in conformity with GAAP,
would be set forth opposite the caption "interest expense" or any like caption
on an income statement for such Person and its Restricted Subsidiaries on a
consolidated basis (including, but not limited to, Redeemable Dividends, whether
paid or accrued, on Subsidiary Preferred Stock (as defined below in these
"Certain Definitions"), imputed interest included in Capitalized Lease
Obligations, all commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers' acceptance financing, the net costs
associated with hedging obligations, amortization of other financing fees and
expenses, the interest portion of any deferred payment obligation, amortization
of discount or premium, if any, and all other non-cash interest expense) plus,
without duplication, all net capitalized interest for such period and all
interest paid under any guarantee of Indebtedness (including a guarantee of
principal, interest or any combination thereof) of any Person, plus, without
duplication, the amount of all dividends or distributions paid on Disqualified
Capital Stock (other than dividends paid or payable in shares of Capital Stock
of the Company) and, minus: (i) amortization of deferred financing costs and
expenses; (ii) prepayment penalties on outstanding indebtedness of the Company
retired on the Issue Date; (iii) accrual, redemption or payment of Contingent
Interest Payments, and (iv) any accretions with respect to any of the Warrants.
"Consolidated Net Income" means, with respect to any Person, for any
period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided, however, that (a) the Net Income of any Person, including
any Unrestricted Subsidiary of the Company or a Restricted Subsidiary (the
"other Person") in which the Person in question or any of its Restricted
Subsidiaries has less than a 100% interest (which interest does not cause the
net income of such other Person to be consolidated into the net income of the
Person in question in accordance with GAAP) shall be included only to the extent
of the amount of dividends or distributions actually paid to the Person in
question or the Restricted Subsidiary, (b) the Net Income of any Restricted
Subsidiary of the Person in question that is subject to any restriction or
limitation on the payment of dividends or the making of other distributions to
the Company (other than pursuant to the Notes or the Indenture) shall be
excluded to the extent of such restriction or limitation, (c)(i) the Net Income
of any Person acquired in a pooling of interests transaction for any period
prior to the date of such acquisition and (ii) any net gain (but not loss)
resulting from an Asset Sale by the Person in question or any of its Restricted
Subsidiaries other than in the ordinary course of business shall be excluded,
(d) extraordinary, unusual and
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non-recurring gains and losses shall be excluded and (e) without duplication,
the tax effected non-cash accrual or accretion of, and payment of, Contingent
Interest Payments or Warrants during such period shall be excluded.
"Contingent Interest Payments" means the contingent interest payments
payable by the Company to BancBoston Capital, Inc. pursuant to the Contingent
Interest Payment Agreement, dated as of April 27, 1991, between the Company,
Robicon and Datcon and BancBoston Capital, Inc. ("BancBoston"), as amended, and
that Agreement for Additional Contingent Interest Payments (Quest), dated as of
June 29, 1995, between the Company, Robicon and Datcon and BancBoston.
"Disqualified Capital Stock" means any Capital Stock of the Company or
a Restricted Subsidiary thereof which, by its terms (or by the terms of any
security into which it is convertible or for which it is exchangeable at the
option of the holder), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the option of the holder thereof, in whole or in part, on or
prior to the maturity date of the Notes, for cash or securities constituting
Indebtedness. Without limitation of the foregoing, Disqualified Capital Stock
shall be deemed to include (i) any Preferred Stock of a Restricted Subsidiary of
the Company and (ii) any Preferred Stock of the Company, with respect to either
of which, under the terms of such Preferred Stock, by agreement or otherwise,
such Restricted Subsidiary or the Company is obligated to pay current dividends
or distributions in cash during the period prior to the maturity date of the
Notes; provided, however, that Preferred Stock of the Company or any Restricted
Subsidiary thereof that is issued with the benefit of provisions requiring a
change of control offer to be made for such Preferred Stock in the event of a
change of control of the Company or Restricted Subsidiary, which provisions have
substantially the same effect as the provisions of the Indenture described under
"Change of Control," shall not be deemed to be Disqualified Capital Stock solely
by virtue of such provisions; and, provided, further, that the Series A
Preferred Stock shall be deemed not to be Disqualified Capital Stock.
"EBITDA" means, for any Person, for any period, an amount equal to (a)
the sum of (i) Consolidated Net Income for such period, plus (ii) the provision
for taxes for such period based on income or profits to the extent such income
or profits were included in computing Consolidated Net Income and any provision
for taxes utilized in computing net loss under clause (i) hereof, plus (iii)
Consolidated Interest Expense for such period (but only including Redeemable
Dividends in the calculation of such Consolidated Interest Expense to the extent
that such Redeemable Dividends have been included in the calculation of
Consolidated Net Income), plus (iv) depreciation for such period on a
consolidated basis, plus (v) amortization of intangibles for such period on a
consolidated basis, plus (vi) any other non-cash items reducing Consolidated Net
Income for such period, minus (b) all non-cash items increasing Consolidated Net
Income for such period, all for such Person and its Subsidiaries determined in
accordance with GAAP, except that with respect to the Company each of the
foregoing items shall be determined on a consolidated basis with respect to the
Company and its Restricted Subsidiaries only; and provided, however, that, for
purposes of calculating EBITDA during any fiscal quarter, cash income from a
particular Investment of such Person shall be included only (x) if cash income
has actually been received by such Person with respect to such Investment, or
(y) if the cash income derived from such Investment is attributable to Temporary
Cash Investments.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fixed Charge Coverage Ratio" of any Person means, with respect to any
determination date, the ratio of (i) EBITDA for such Person's prior four
full-fiscal quarters for which financial results have been reported prior to the
determination date to (ii) Consolidated Fixed Charges of such Person for such
period.
"GAAP" means generally accepted accounting principles consistently
applied as in effect in the United States from time to time.
"incur" means, with respect to any Indebtedness or other obligation of
any Person, to create, issue, incur (by conversion, exchange or otherwise),
assume, guarantee or otherwise become liable in respect of such Indebtedness or
other obligation or the recording, as required pursuant to GAAP or otherwise, of
any such Indebtedness or other obligation on the balance sheet of such person
(and "incurrence," "incurred," "incurable," and "incurring" shall have meanings
correlative to the foregoing); provided that a change in GAAP that results in an
obligation of such Person that exists at such time becoming Indebtedness shall
not be deemed an incurrence of such Indebtedness.
"Indebtedness" means (without duplication), with respect to any Person,
any indebtedness at any time outstanding, secured or unsecured, contingent or
otherwise, which is for borrowed money (whether or not the recourse of the
lender is to the whole
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of the assets of such Person or only to a portion thereof), or evidenced by
bonds, notes, debentures or similar instruments or representing the balance
deferred and unpaid of the purchase price of any property (excluding, without
limitation, any balances that constitute accounts payable or trade payables, and
other accrued liabilities arising in the ordinary course of business) if and to
the extent any of the foregoing indebtedness would appear as a liability upon a
balance sheet of such Person prepared in accordance with GAAP, and shall also
include, to the extent not otherwise included (i) any Capitalized Lease
Obligations, (ii) obligations secured by a lien to which the property or assets
owned or held by such Person is subject, whether or not the obligation or
obligations secured thereby shall have been assumed, (iii) guarantees of items
of other Persons which would be included within this definition for such other
Persons (whether or not such items would appear upon the balance sheet of the
guarantor), (iv) all obligations for the reimbursement of any obligor on any
letter of credit, banker's acceptance or similar credit transaction, (v) in the
case of the Company, Disqualified Capital Stock of the Company or any Restricted
Subsidiary thereof, and (vi) obligations of any such Person under any Interest
Rate Agreement applicable to any of the foregoing (if and to the extent such
Interest Rate Agreement obligations would appear as a liability upon a balance
sheet of such Person prepared in accordance with GAAP). The amount of
Indebtedness of any Person at any date shall be the outstanding balance at such
date of all unconditional obligations as described above and, with respect to
contingent obligations, the maximum liability upon the occurrence of the
contingency giving rise to the obligation; provided (i) that the amount
outstanding at any time of any Indebtedness issued with original issue discount,
including the Notes, is the principal amount of such Indebtedness less the
remaining unamortized portion of the original issue discount of such
Indebtedness at such time as determined in conformity with GAAP and (ii) that
Indebtedness shall not include any liability for federal, state, local or other
taxes. Notwithstanding any other provision of the foregoing definition, any
trade payable arising from the purchase of goods or materials or for services
obtained in the ordinary course of business shall not be deemed to be
"Indebtedness" of the Company or any Restricted Subsidiaries for purposes of
this definition. Furthermore, guarantees of (or obligations with respect to
letters of credit supporting) Indebtedness otherwise included in the
determination of such amount shall not also be included.
"Interest Rate Agreement" means, for any Person, any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement or other
similar agreement designed to protect the party indicated therein against
fluctuations in interest rates.
"Investments" means, directly or indirectly, any advance (other than
advances to employees and directors of the Company and its Restricted
Subsidiaries in the ordinary course of business of the Company and its
Restricted Subsidiaries), account receivable (other than an account receivable
arising in the ordinary course of business), loan or capital contribution to (by
means of transfers of property to others, payments for property or services for
the account or use of others or otherwise), the purchase of any stock, bonds,
notes, debentures, partnership or joint venture interests or other securities
of, the acquisition, by purchase or otherwise, of all or substantially all of
the business or assets or stock or other evidence of beneficial ownership of,
any Person or the making of any investment in any Person. Investments shall
exclude extensions of trade credit on commercially reasonable terms in
accordance with normal trade practices.
"Issue Date" means the date the Notes are first issued by the Company
and authenticated by the Trustee under the Indenture.
"Lien" means with respect to any property or assets of any Person, any
mortgage or deed of trust, pledge, hypothecation, assignment, deposit
arrangement, security interest, lien, charge, easement, encumbrance, preference,
priority, or other security agreement or preferential arrangement of any kind or
nature whatsoever on or with respect to such property or assets (including
without limitation, any Capitalized Lease Obligation, conditional sales, or
other title retention agreement having substantially the same economic effect as
any of the foregoing).
"Net Income" means, with respect to any Person for any period, the net
income (loss) of such Person determined in accordance with GAAP.
"Net Investment" means the excess of (i) the aggregate amount of all
Investments in Unrestricted Subsidiaries made by the Company on or after the
Issue Date (in the case of an Investment made other than in cash, the amount
shall be the fair market value of such Investment as determined in good faith by
the board of directors of the Company) over (ii) the sum of (A) the aggregate
amount returned in cash on such Investments whether through interest payments,
principal payments, dividends or other distributions and (B) the net cash
proceeds received by the Company from the disposition of all or any portion of
such
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Investments (other than to a Subsidiary of the Company); provided, however, that
with respect to all Investments made in an Unrestricted Subsidiary the sum of
clauses (A) and (B) above with respect to such Investments shall not exceed the
aggregate amount of all such Investments made in such Unrestricted Subsidiary.
"Net Proceeds" means (a) in the case of any sale of Capital Stock by
any Person, the aggregate net proceeds received by such Person, after payment of
expenses, commissions and the like incurred in connection therewith, whether
such proceeds are in cash or in property (valued at the fair market value
thereof, as determined in good faith by the board of directors, at the time of
receipt), (b) in the case of any exchange, exercise, conversion or surrender of
outstanding securities of any kind for or into shares of Capital Stock of the
Company which is not Disqualified Capital Stock, the net book value of such
outstanding securities on the date of such exchange, exercise, conversion or
surrender (plus any additional amount required to be paid by the holder to the
Company upon such exchange, exercise, conversion or surrender, less any and all
payments made to the holders, e.g., on account of fractional shares and less all
expenses incurred by the Company in connection therewith) and (c) in the case of
any issuance of any Indebtedness by the Company or any Restricted Subsidiary,
the aggregate net cash proceeds received by such Person after the payment of
expenses, commissions, underwriting discounts and the like incurred in
connection therewith.
"New Revolving Credit Facility" means the credit agreement or credit
agreements to be entered into by and among the Company, the Restricted
Subsidiaries and any one or more lenders from time to time parties thereto, as
the same may be amended, extended, increased, renewed, restated, supplemented or
otherwise modified (in whole or in part, and without limitation as to amount,
terms, conditions, covenants and other provisions) from time to time and any
agreement or agreements governing Indebtedness incurred to refinance, replace,
restructure or refund in whole or in part the borrowings and then maximum
commitments under the New Revolving Credit Facility or such agreement (whether
with the original administrative agent and lenders or other lenders or other
agents and lenders or otherwise and whether provided under the original credit
facility or other credit agreements or otherwise). The Company shall promptly
notify the Trustee of any such refunding, replacement, restructuring or
refinancing of the New Revolving Credit Facility.
"Officers' Certificate" means, with respect to any Person, a
certificate signed by the Chairman of the Board, the Chief Executive Officer,
the Deputy Chairman of the Board, the President, the Chief Operating Officer or
any Vice President and the Chief Financial Officer or any Treasurer of such
Person that shall comply with applicable provisions of the Indenture.
"Parent" means Letitia Corporation, a Delaware corporation and the
Company's sole stockholder.
"Permitted Holders" means (a) Parent, (b) Laurence S. Levy, (c)
Clifford Press and (d) any spouse and any trust, holding company, or similar
entity established by and or controlled by either or both of Laurence S. Levy
and Clifford Press for the principal benefit of any of them or their spouses,
lineal descendants or other family members.
"Permitted Indebtedness" means:
(i) Indebtedness of the Company or any Restricted Subsidiary
arising under or in connection with the New Revolving Credit Facility
in an amount not to exceed $25,000,000 less any mandatory prepayments
actually made thereunder (to the extent, in the case of payments of
revolving credit indebtedness, that the corresponding commitments have
been permanently reduced);
(ii) Indebtedness under the Notes and the Guarantees, if
applicable;
(iii) (A) Indebtedness of foreign Restricted Subsidiaries
outstanding under one or more working capital facilities not to exceed
the aggregate of 85% of eligible accounts receivable and 60% of
eligible inventory of each such Restricted Subsidiary and (B)
additional Indebtedness of such Restricted Subsidiaries not to exceed
$2,000,000 in aggregate principal amount outstanding at any one time;
(iv) Indebtedness not covered by any other clause of this
definition which is outstanding on the date of the Indenture;
(v) Indebtedness of the Company to any Restricted Subsidiary
and Indebtedness of any Restricted Subsidiary to the Company or another
Restricted Subsidiary;
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(vi) Purchase Money Indebtedness and Capitalized Lease
Obligations incurred to acquire property in the ordinary course of
business which Indebtedness and Capitalized Lease Obligations do not in
the aggregate exceed $5,000,000;
(vii) Interest Rate Agreements;
(viii) additional Indebtedness of the Company not to exceed
$2,000,000 in principal amount outstanding at any time; and
(ix) Refinancing Indebtedness.
"Permitted Investments" means, for any Person, Investments made on or
after the date of the Indenture consisting of:
(i) Investments by the Company, or by a Restricted Subsidiary
thereof, in the Company or a Restricted Subsidiary, provided that any
such Investment is permitted under clauses (a), (b) or (c) of the " --
Limitation on Disposition of Assets" covenant;
(ii) Temporary Cash Investments;
(iii) Investments by the Company, or by a Restricted
Subsidiary thereof, in a Person, if as a result of such Investment (a)
such Person becomes a Restricted Subsidiary of the Company or (b) such
Person is merged, consolidated or amalgamated with or into, or
transfers or conveys substantially all of its assets to, or is
liquidated into, the Company or a Restricted Subsidiary thereof;
(iv) Existing Investments in a Restricted Subsidiary which
becomes an Unrestricted Subsidiary after a Qualified Subsidiary IPO;
provided, however, that investments by the Company in a Restricted
Subsidiary in anticipation of a Qualified Subsidiary IPO shall not be
considered Permitted Investments;
(v) reasonable and customary loans made to employees in
connection with their relocation not to exceed $1,000,000 in the
aggregate at any one time outstanding;
(vi) an Investment that is made by the Company or a Restricted
Subsidiary thereof in the form of any stock, bonds, notes, debentures,
partnership or joint venture interests or other securities that are
issued by a third party to the Company or Restricted Subsidiary solely
as partial consideration for the consummation of an Asset Sale that is
otherwise permitted under the covenant described under " -- Limitation
on Certain Asset Sales"; and
(vii) other Investments that do not exceed $1,000,000 at any
time outstanding plus, the aggregate amount returned in cash on or with
respect to Investments made pursuant to this clause (vii) not to exceed
the aggregate amount invested by the Company therein.
"Permitted Liens" means (i) Liens on property or assets of, or any
shares of stock of or secured debt of, any corporation existing at the time such
corporation becomes a Restricted Subsidiary of the Company or at the time such
corporation is merged into the Company or any of its Restricted Subsidiaries;
provided that such Liens are not incurred in connection with, or in
contemplation of, such corporation becoming a Restricted Subsidiary of the
Company or merging into the Company or any of its Restricted Subsidiaries, (ii)
Liens securing Refinancing Indebtedness; provided that any such Lien does not
extend to or cover any Property, shares or debt other than the Property, shares
or debt securing the Indebtedness so refunded, refinanced or extended, (iii)
Liens in favor of the Company or any of its Restricted Subsidiaries, (iv) Liens
securing industrial revenue bonds, (v) Liens to secure Purchase Money
Indebtedness that is otherwise permitted under the Indenture; provided that (a)
any such Lien is created solely for the purpose of securing Indebtedness
representing, or incurred to finance, refinance or refund, the cost (including
sales and excise taxes, installation and delivery charges and other direct costs
of, and other direct expenses paid or charged in connection with, such purchase
or construction) of such Property, (b) the principal amount of the Indebtedness
secured by such Lien does not exceed 100% of such costs, and (c) such Lien does
not extend to or cover any Property other than such item of Property and any
improvements on such item, (vi) statutory liens or landlords', carriers',
warehouseman's, mechanics', suppliers', materialmen's, repairmen's or other like
Liens arising in the ordinary course of
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business which do not secure any Indebtedness and with respect to amounts not
yet delinquent or being contested in good faith by appropriate proceedings, if a
reserve or other appropriate provision, if any, as shall be required in
conformity with GAAP shall have been made therefor, (vii) other Liens securing
obligations incurred in the ordinary course of business which obligations do not
exceed $1,000,000 in the aggregate at any one time outstanding, (viii) any
extensions, substitutions, replacements or renewals of the foregoing, (ix) Liens
for taxes, assessments or governmental charges that are being contested in good
faith by appropriate proceedings, (x) Liens securing Capitalized Lease
Obligations permitted to be incurred under clause (vi) of the definition of
"Permitted Indebtedness"; provided that such Lien does not extend to any
property other than that subject to the underlying lease; (xi) Liens to secure
Indebtedness consisting of Interest Rate Agreements; and (xii) Liens securing
the New Revolving Credit Facility.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government (including any agency or political subdivision thereof).
"PHI Acquisition" means the acquisition of PHI Acquisition Holdings,
Inc. by the Company and Lauren Corporation pursuant to an Agreement and Plan of
Merger dated as of May 7, 1997.
"Preferred Stock" means any Capital Stock of a Person, however
designated, which entitles the holder thereof to a preference with respect to
dividends, distributions or liquidation proceeds of such Person over the holders
of other Capital Stock issued by such Person.
"Property" of any Person means all types of real, personal, tangible,
intangible or mixed property owned by such Person whether or not included in the
most recent consolidated balance sheet of such Person and its Subsidiaries under
GAAP.
"Purchase Money Indebtedness" means any Indebtedness incurred in the
ordinary course of business by a Person to finance the cost (including the cost
of construction) of an item of property, the principal amount of which
Indebtedness does not exceed the sum of (i) 100% of such cost and (ii)
reasonable fees and expenses of such Person incurred in connection therewith.
"Qualified Equity Offering" means a public offering by the Company or
Parent of shares of its common stock (however designated and whether voting or
non-voting) and any and all rights, warrants or options to acquire such common
stock.
"Qualified Subsidiary IPO" means a public offering by a Restricted
Subsidiary that is an obligor under an Intercompany Note of shares of its
Capital Stock (however designated and whether voting or non-voting) and any and
all rights, warrants or options to acquire such Capital Stock.
"Redeemable Dividend" means, for any dividend or distribution with
regard to Disqualified Capital Stock, the quotient of the dividend or
distribution divided by the difference between one and the maximum statutory
federal income tax rate (expressed as a decimal number between 1 and 0) then
applicable to the issuer of such Disqualified Capital Stock.
"Refinancing Indebtedness" means Indebtedness that refunds, refinances
or extends any Indebtedness of the Company or any Restricted Subsidiary
outstanding on the Issue Date or other Indebtedness permitted to be incurred by
the Company or its Restricted Subsidiaries pursuant to the terms of the
Indenture, but only to the extent that (i) the Refinancing Indebtedness is
subordinated to the Notes to at least the same extent as the Indebtedness being
refunded, refinanced or extended, if at all, (ii) the Refinancing Indebtedness
is scheduled to mature either (a) no earlier than the Indebtedness being
refunded, refinanced or extended, or (b) after the maturity date of the Notes,
(iii) the portion, if any, of the Refinancing Indebtedness that is scheduled to
mature on or prior to the maturity date of the Notes has a weighted average life
to maturity at the time such Refinancing Indebtedness is incurred that is equal
to or greater than the weighted average life to maturity of the portion of the
Indebtedness being refunded, refinanced or extended that is scheduled to mature
on or prior to the maturity date of the Notes, (iv) such Refinancing
Indebtedness is in an aggregate principal amount that is equal to or less than
the sum of (a) the aggregate principal amount then outstanding under the
Indebtedness being refunded, refinanced or extended, (b) the amount of accrued
and unpaid interest, if any, and premiums owed, if any, not in excess of
preexisting prepayment provisions on such Indebtedness being refunded,
refinanced or extended and (c) the amount of customary fees, expenses and costs
related to the incurrence of such Refinancing Indebtedness, and (v) such
Refinancing Indebtedness is incurred by the same Person that initially incurred
the Indebtedness being refunded, refinanced or extended, except that the Company
may incur Refinancing Indebtedness to refund, refinance or extend Indebtedness
of any Wholly-Owned Subsidiary of the Company and any Wholly-
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Owned Subsidiary of the Company which becomes a Guarantor may incur Refinancing
Indebtedness to refund, refinance or extend Indebtedness of the Company.
"Restricted Payment" means any of the following: (i) the declaration or
payment of any dividend or any other distribution or payment on Capital Stock of
the Company or any Restricted Subsidiary of the Company or any payment made to
the direct or indirect holders (in their capacities as such) of Capital Stock of
the Company or any Restricted Subsidiary of the Company (other than (x)
dividends or distributions payable solely in Capital Stock (other than
Disqualified Capital Stock) or in options, warrants or other rights to purchase
Capital Stock (other than Disqualified Capital Stock), and (y) in the case of
Subsidiaries of the Company, dividends or distributions payable to the Company
or to a Wholly-Owned Subsidiary of the Company), (ii) the purchase, redemption
or other acquisition or retirement for value of any Capital Stock of the Company
or any of its Restricted Subsidiaries (other than Capital Stock owned by the
Company or a Wholly-Owned Subsidiary of the Company, excluding Disqualified
Capital Stock), (iii) the making of any principal payment on, or the purchase,
defeasance, repurchase, redemption or other acquisition or retirement for value,
prior to any scheduled maturity, scheduled repayment or scheduled sinking fund
payment, of any Indebtedness which is subordinated in right of payment to the
Notes (other than subordinated Indebtedness acquired in anticipation of
satisfying a scheduled sinking fund obligation, principal installment or final
maturity, in each case due within one year of the date of acquisition), (iv) the
making of any Investment or guarantee of any Investment in any Person other than
a Permitted Investment, (v) any designation of a Restricted Subsidiary as an
Unrestricted Subsidiary on the basis of the amount of the Net Investment by the
Company therein (other than in connection with a Qualified Subsidiary IPO), (vi)
the redemption of or the making of any Contingent Interest Payments, (vii)
forgiveness of any Indebtedness of an Affiliate of the Company to the Company or
a Restricted Subsidiary and (viii) the exchange of Warrants for Subsidiary
Warrants or Common Shares for Subsidiary Shares. For purposes of determining the
amount expended for Restricted Payments, cash distributed or invested shall be
valued at the face amount thereof and property other than cash shall be valued
at its fair market value.
"Restricted Subsidiary" means a Subsidiary of the Company other than an
Unrestricted Subsidiary and includes all of the direct or indirect Subsidiaries
of the Company existing as of the Issue Date. The Board of Directors of the
Company may designate any Unrestricted Subsidiary or any Person to be acquired
that is to become a Subsidiary as a Restricted Subsidiary if immediately after
giving effect to such action (and treating any Acquired Indebtedness as having
been incurred at the time of such action), the Company could have incurred at
least $1.00 of additional Indebtedness (other than Permitted Indebtedness)
pursuant to the " -- Limitation on Additional Indebtedness" covenant, provided,
however, that the foregoing Indebtedness incurrence condition shall not apply to
the designation as a Restricted Subsidiary of the Subsidiary ("Anderson
Ireland") to which is to be transferred the assets and liabilities of the
Fermoy, Ireland division of HIVEC, B.V. that is associated with the business of
Anderson.
"Sale and Lease-Back Transaction" means any arrangement with any Person
providing for the leasing by the Company or any Restricted Subsidiary of the
Company of any real or tangible personal property, which property has been or is
to be sold or transferred by the Company or such Restricted Subsidiary to such
Person in contemplation of such leasing.
"Series A Preferred Stock" means the 12-1/2% Senior Redeemable
Preferred Stock of the Company.
"Subsidiary" of any specified Person means any corporation,
partnership, joint venture, association or other business entity, whether now
existing or hereafter organized or acquired, (i) in the case of a corporation,
of which more than 50% of the total voting power of the Capital Stock entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors, officers or trustees thereof is held by such first named Person or
any of its Subsidiaries; or (ii) in the case of a partnership, joint venture,
association or other business entity, with respect to which such first-named
Person or any of its Subsidiaries has the power to direct or cause the direction
of the management and policies of such entity by contract or otherwise or if in
accordance with generally accepted accounting principles such entity is
consolidated with the first named Person for financial statement purposes.
"Subsidiary Warrants" means warrants of a Subsidiary that may be issued
in exchange for the Warrants in connection with a Qualified Subsidiary IPO.
"Temporary Cash Investments" means (i) Investments in marketable,
direct obligations issued or guaranteed by the United States of America, or of
any governmental agency or political subdivision thereof, maturing within 365
days of the date of
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purchase; (ii) Investments in certificates of deposit issued by a bank organized
under the laws of the United States of America or any state thereof or the
District of Columbia, in each case having capital, surplus and undivided profits
totaling more than $500,000,000 and rated at least A by Standard & Poor's
Corporation and A-2 by Moody's Investors Service, Inc., maturing within 365 days
of purchase; or (iii) Investments not exceeding 365 days in duration in money
market funds that invest substantially all of such funds' assets in the
Investments described in the preceding clauses (i) and (ii).
"Unrestricted Subsidiary" means (a) any Subsidiary of an Unrestricted
Subsidiary and (b) any Subsidiary of the Company which is classified after the
Issue Date as an Unrestricted Subsidiary by a resolution adopted by the Board of
Directors of the Company; provided that, other than a Restricted Subsidiary
which may be classified as an Unrestricted Subsidiary upon consummation of a
Qualified Subsidiary IPO in compliance with " -- Offer to Repurchase upon a
Qualified Subsidiary IPO," a Subsidiary may be so classified as an Unrestricted
Subsidiary only if (x) the Restricted Subsidiary to be so designated has total
assets of $1,000 or less or (y) immediately after giving effect to such
designation, the Company could incur at least $1.00 of additional Indebtedness
pursuant to the first paragraph under " -- Limitation on Additional
Indebtedness"; and provided, further, that the Company could make a Restricted
Payment in an amount equal to the greater of the fair market value (as
determined by the Board of Directors in good faith) and book value of such
Restricted Subsidiary pursuant to the " -- Limitation on Restricted Payments"
covenant and such amount is thereafter treated as a Restricted Payment for the
purpose of calculating the aggregate amount available for Restricted Payments
thereunder. The Trustee shall be given prompt notice by the Company of each
resolution adopted by the Board of Directors of the Company under this
provision, together with a copy of each such resolution adopted.
"Warrants" means the warrants issued in connection with the Series A
Preferred Stock.
"Wholly-Owned Subsidiary" means any Restricted Subsidiary, all of the
outstanding voting securities (other than directors' qualifying shares) of which
are owned, directly or indirectly, by the Company.
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DESCRIPTION OF OTHER INDEBTEDNESS
The Company has certain other outstanding indebtedness and other
payment obligations (including guarantees of a subsidiary's indebtedness) which
contain a number of covenants that, among other things, restrict the ability of
the Company and its subsidiaries to incur additional indebtedness, pay certain
dividends, prepay indebtedness, dispose of certain assets, create liens, make
capital expenditures, make certain investments or acquisitions and otherwise
restrict corporate activities. Certain of these agreements also contain
provisions relating to a change of control of the Company, requirements that the
Company comply with certain financial ratios and tests and, in some cases, that
the Company make payments relating to the value of the Company's equity.
Following is a description of such other indebtedness and other obligations. The
following summary does not purport to be complete and is qualified in its
entirety by reference to the provisions of these agreements, copies certain of
which have been filed as exhibits to the Registration Statement of which this
Prospectus is a part.
NEW REVOLVING CREDIT FACILITY
Concurrently with the closing of the Offerings, the Company entered
into a new $25.0 million senior secured revolving credit facility, including a
$5.0 million sublimit for the issuance of standby letters of credit (the "New
Revolving Credit Facility"), with Fleet National Bank (the "Lender").
Interest Rate and Security. Availability under the New Revolving Credit
Facility is limited to the sum of 85% of eligible accounts receivable and 60% of
eligible inventory. The term of the New Revolving Credit Facility is five years.
Amounts borrowed under the New Revolving Credit Facility will bear interest, at
the option of the Company, at either (i) the Lender's Base Rate plus 0.25% or
(ii) LIBOR plus 1.50%. Obligations under the New Revolving Credit Facility are
guaranteed by the Company and all of its domestic subsidiaries and secured by
accounts receivable and inventories of HVE and its domestic subsidiaries.
Certain Covenants. The New Revolving Credit Facility contains a number
of covenants that restrict the operation of the Company, including restrictions
on, among other things: (i) certain mergers, acquisitions or sales of the
Company's assets or stock (other than the stock of HVE); (ii) cash dividends and
other distributions to equity holders; (iii) payments in respect of subordinated
debt; (iv) transactions resulting in a change of control of HVE; (v)
transactions with affiliates; and (vi) indebtedness and liens. The New Revolving
Credit Facility will also include certain financial covenants, including without
limitation, a maximum total leverage ratio and a minimum fixed charge coverage
ratio. The New Revolving Credit Facility also contains customary
representations, warranties, affirmative and negative covenants and events of
default for a facility of this type.
GUARANTEES OF ROBICON INDUSTRIAL REVENUE BONDS
Pennsylvania Economic Development Financing Authority. HVE is the
guarantor of Robicon's obligations to the Pennsylvania Economic Development
Financing Authority ("PEDFA") under a certain loan agreement among Robicon,
PEDFA and Dollar Bank, Federal Savings Bank ("Dollar Bank"), pursuant to which
Robicon borrowed $4.2 million from PEDFA to finance the construction of
Robicon's manufacturing facility in New Kensington, Pennsylvania. In connection
with the loan, PEDFA issued a Pennsylvania Economic Development Revenue Bond
(1995 Series C) (the "PEDFA IRB") to Dollar Bank for $4.2 million. PEDFA
simultaneously assigned most of its rights to reimbursement under the loan
agreement to Dollar Bank pursuant to an indenture between PEDFA and Dollar Bank.
The PEDFA IRB is a special limited obligation of PEDFA, payable solely from
funds received from Robicon and under the guarantee (the "PEDFA Guarantee") from
HVE and an Open-End Mortgage and Security Agreement granting a first priority
security interest in the land and improvements at the New Kensington facility.
The PEDFA IRB bears interest at a rate of 8.29% and matures on April
21, 2011. Robicon is permitted to prepay the PEDFA IRB at any time before
maturity, subject to prepayment premiums ranging from 101% to 105% of the
principal amount thereof.
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The PEDFA Guarantee imposes certain financial and non-financial
covenants upon the Company which, once modified, are expected to correspond to
covenants contained in the New Revolving Credit Facility. The PEDFA Guarantee
provides a cure period of 30 days with respect to certain non-financial
covenants contained therein and, in most cases, an additional notice period of
five days following the acceleration of the PEDFA IRB before payment must be
made by the Company under the PEDFA Guarantee. The outstanding principal balance
under the PEDFA IRB as of April 26, 1997 was $3.9 million.
In the third and fourth quarters of Fiscal 1997, HVE was in technical
default of certain covenants under the PEDFA Guarantee, which defaults were
waived by the lender. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources."
Pennsylvania Industrial Development Authority. HVE has also guaranteed
Robicon's obligations to the Pennsylvania Industrial Development Authority
("PIDA") under a Consent, Subordination and Assumption Agreement (the
"Assumption Agreement") between Robicon and the Monroeville Area Industrial
Development Corporation ("MAID"), pursuant to which MAID assigned to Robicon all
of MAID's obligations to PIDA under a Loan Agreement between PIDA and MAID (the
"PIDA Loan Agreement"). Under the PIDA Loan Agreement, MAID borrowed $2.0
million from PIDA to defray the costs of Robicon's construction of its New
Kensington facility. Simultaneously with the execution of the Assumption
Agreement, Robicon entered into an installment sale agreement (the "Installment
Sale Agreement") with MAID pursuant to which Robicon agreed to purchase the New
Kensington property from MAID. The PIDA Loan Agreement is secured by the
guaranty from HVE and a mortgage granting a security interest in the land and
improvements at the New Kensington facility. The security interest represented
by this mortgage has been subordinated to the lien of Dollar Bank under the
PEDFA IRB pursuant to a subordination agreement between PIDA and Dollar Bank.
The balance outstanding under the PIDA Loan Agreement as of April 26, 1997 was
approximately $1.7 million.
The PIDA loan is evidenced by a note which bears interest at a rate of
2% per annum of the outstanding principal balance of the note, unless the loan
is in default, in which case the note shall bear interest at a rate of the
greater of 12.5% or the Prime Interest Rate (as defined therein) plus 2% per
annum, applied from the date of such event of default (or if the event of
default relates to violation of a certain covenant relating to employment,
applied retroactively to the date of disbursement of the funds under the note)
prospectively until the note is paid in full. Robicon's obligations under the
Installment Sale Agreement also include payment of a fee to MAID of
seven-eighths of 1% charged on the outstanding principal balance of the note for
each year that the Installment Sale Agreement remains unsatisfied together with
any and all charges assessed annually or otherwise by PIDA relative to the note.
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DESCRIPTION OF OUTSTANDING CAPITAL STOCK
Under HVE's Restated Articles of Organization (the "Restated
Articles"), HVE is authorized to issue up to 4,000 shares of HVE Common Stock,
and 400,000 shares of preferred stock, par value $1.00 per share ("Preferred
Stock").
HVE COMMON STOCK
At August 15, 1997, there were 1,084.7429 shares of HVE Common Stock
outstanding and held of record by two stockholders HVE has reserved up to
154.1729 shares of HVE Common Stock for issuance upon exercise of certain
warrants described below.
Holders of HVE Common Stock are entitled to one vote for each share
held on all matters submitted to a vote of stockholders and do not have
cumulative voting rights. Accordingly, holders of a majority of the shares of
HVE Common Stock entitled to vote in any election of directors may elect a
majority of the directors standing for election. Holders of HVE Common Stock are
entitled to receive ratably such dividends, if any, as may be declared by the
Board of Directors out of funds legally available therefor, subject to any
preferential dividend rights of outstanding Preferred Stock. Upon the
liquidation, dissolution or winding-up of HVE, the holders of HVE Common Stock
are entitled to receive ratably the net assets of HVE available after the
payment of all debts and other liabilities, subject to the prior rights of any
outstanding Preferred Stock. Holders of HVE Common Stock have no preemptive,
subscription, redemption or conversion rights. The outstanding shares of HVE
Common Stock are fully paid and nonassessable. The rights, preferences and
privileges of holders of HVE Common Stock are subject to, and may be adversely
affected by, the rights of the holders of shares of any additional series of
Preferred Stock that the Company may designate and issue in the future.
Holders of the Common Shares included in the Units sold in the
Offerings will have the right, immediately prior to the occurrence of a
Qualified Subsidiary IPO and at certain times thereafter, to require the Company
to exchange a portion of their Common Shares into shares of common stock of the
Restricted Subsidiary effecting such Qualified Subsidiary IPO ("Subsidiary
Shares"). In addition, holders of the Common Shares have certain registration
rights and take-along rights. Moreover, additional Common Shares may be issuable
to the holders of the Common Shares in the future, under certain circumstances.
COMMON STOCK WARRANTS
In connection with the sale of HVE's Subordinated Notes, HVE issued to
such noteholders warrants (the "Subordinated Notes Warrants") to purchase an
aggregate of 142.86 shares of HVE Common Stock (the "Subordinated Notes Warrant
Shares"), representing 12.5% of the fully-diluted HVE Common Stock, at an
exercise price of $.01 per share. The exercise price and number of Subordinated
Notes Warrant Shares issuable upon exercise of the Subordinated Notes Warrants
are subject to adjustment to prevent dilution in the event of issuance of shares
of HVE Common Stock below the then-current market value or payments made by the
Company under the CIP Agreements. The Subordinated Notes Warrant holders will
have the right to require the Company to purchase the Subordinated Notes
Warrants or Subordinated Notes Warrant Shares at a price calculated as the
proportionate percentage of the value of the Company's capital stock (determined
by an appraiser or pursuant to a formula of a multiple of eight times the
Company's EBITDA (as defined therein) less outstanding preferred stock and debt
plus cash), if the Company does not consummate an initial public offering of its
capital stock before May 1, 2000. Any repurchase of Subordinated Notes Warrants
by the Company would constitute a Restricted Payment under the Indenture. The
Subordinated Notes Warrants expire on May 9, 2004. On July 24, 1997, CIBC Wood
Gundy purchased Subordinated Notes Warrants to purchase 71.43 shares of HVE
Common Stock, representing 6.25% of the then outstanding HVE Common Stock on a
fully-diluted basis, for an aggregate purchase price of $2.5 million. Such
Subordinated Notes Warrants were repurchased by the Company with a portion of
the net proceeds of the Offering at the same purchase price. See "Use of
Proceeds."
In the Offerings, HVE issued, as part of 33,000 Units also comprising
in the aggregate 33,000 shares of Series A Preferred stock and 82.7429 Common
Shares, Warrants to purchase an aggregate of 82.7429 shares of HVE Common Stock.
109
<PAGE> 112
Each Warrant, when exercised, will entitle the holder thereof to
purchase .00250736 shares of HVE Common Stock (each such share a "Warrant
Share") at an exercise price equal to $0.01 per .00250736 shares (the "Exercise
Price"). The number of Warrant Shares may be adjusted from time to time upon the
occurrence of certain events as provided in the Warrant Agreement. The Warrants
are presently exercisable and, unless exercised, will automatically expire on
August 15, 2005 (the "Expiration Date"). The Warrants will entitle the holders
thereof to purchase in the aggregate approximately 6.6% of the outstanding HVE
Common Stock on a fully diluted basis as of the date of issuance of the
Warrants.
The Warrants are detachable from the Series A Preferred Stock and the
Common Shares and separately transferable, subject to compliance with applicable
federal and state securities laws. The Warrants and the Warrant Shares have not
been registered under the Securities Act and are subject to certain transfer
restrictions further described in the Warrant Agreement.
Immediately prior to the occurrence of a Qualified Subsidiary IPO and
at certain times thereafter, Warrant holders will have a right to require the
Company to exchange a portion of their Warrants into new warrants to purchase
Subsidiary Shares. In addition, holders of the Warrants have certain
registration rights and take-along rights. Moreover, additional Warrants may be
issuable to the holders of the Warrants in the future, under certain
circumstances.
PREFERRED STOCK
The Board of Directors is authorized, subject to certain limitations
prescribed by law and the terms of the Indenture and the Restated Articles,
without further stockholder approval, from time to time to issue up to an
aggregate of 400,000 shares of Preferred Stock in one or more series and to fix
or alter the designations, preferences and rights, and any qualifications,
limitations or restrictions thereof, of the shares of each such series,
including the number of shares constituting any such series and the dividend
rights, dividend rates, conversion rights, voting rights, terms of redemption
(including sinking fund provisions), redemption price or prices and liquidation
preferences thereof. 110,000 of these shares of Preferred Stock have been
designated as Series A Preferred Stock and an additional 110,000 of these shares
have been designated as Exchange Preferred Stock. The creation and issuance of
any additional series of Preferred Stock may have the effect of delaying,
deferring or preventing a change of control of the Company.
The Company issued an aggregate of 33,000 shares of Series A Preferred
Stock with a liquidation preference of $1,000 per share on August 8, 1997 in the
Offerings. Pursuant to a registration statement filed by the Company, the
Company is offering to exchange the outstanding shares of Series A Preferred
Stock for shares of Exchange Preferred Stock pursuant to an exchange offer (the
"Preferred Stock Exchange Offer"). The terms of the Series A Preferred Stock are
substantially identical to the terms of the Exchange Preferred Stock, except
that the shares of Series A Preferred Stock have not been registered under the
Securities Act and contain terms restricting the transfer of such shares.
The Exchange Preferred Stock when issued in exchange for the Series A
Preferred Stock in accordance with the terms of the Preferred Stock Exchange
Offer will be fully paid and nonassessable.
The Series A Preferred Stock and Exchange Preferred Stock will, with
respect to dividend distributions and distributions upon the liquidation,
dissolution or winding-up of the Company, rank senior to all classes of common
stock of the Company and to each other class of capital stock or series of
preferred stock established after the date of this Prospectus (collectively,
"Junior Securities"). The Company may not issue any class or series of capital
stock ranking senior to or on a parity with the Series A Preferred Stock and
Exchange Preferred Stock (or amend the provisions of any existing class of
capital stock or series of preferred stock to make such class or series rank
senior to or on a parity with the Series A Preferred Stock and Exchange
Preferred Stock) with respect to dividend distributions or distributions upon
liquidation, dissolution or winding-up of the Company without the approval of
the holders of at least a majority of the shares of Series A Preferred Stock and
Exchange Preferred Stock then outstanding, voting or consenting, as the case may
be, together as one class; provided, however, that the Company can issue, from
time to time, (i) additional shares of Series A Preferred Stock and Exchange
Preferred Stock to satisfy dividend payments on outstanding shares of Series A
Preferred Stock and Exchange Preferred Stock, and (ii) up to 5,000 shares of
Exchange Preferred Stock, or Series A Preferred Stock, along with sufficient
additional shares of Exchange Preferred Stock and Series A Preferred Stock to
satisfy the payment of dividends thereon. The Exchange Preferred Stock will rank
pari passu with the Series A Preferred Stock.
110
<PAGE> 113
Holders of Series A Preferred Stock and Exchange Preferred Stock will
be entitled to receive, when, as and if declared by the Board of Directors of
the Company, out of funds legally available therefor, dividends on the Series A
Preferred Stock and Series A Preferred Stock and Exchange Preferred Stock at a
rate per annum equal to 12-1/2% of the liquidation preference per share of
Series A Preferred Stock and Exchange Preferred Stock, payable semiannually. All
dividends will be cumulative whether or not earned or declared on a daily basis
from the Issue Date and will be payable semiannually in arrears on August 15 and
February 15 of each year, commencing on February 15, 1998, to holders of record
on the August 1 and February 1 immediately preceding the relevant dividend
payment date. Dividends may be paid, at the Company's option, on any dividend
payment date occurring on or prior to August 15, 2002 either in cash or by the
issuance of additional shares of Series A Preferred Stock or Exchange Preferred
Stock (including fractional shares) having an aggregate liquidation preference
equal to the amount of such dividends. In the event that on or prior to August
15, 2002 dividends are declared and paid through the issuance of additional
shares of Series A Preferred Stock or Exchange Preferred Stock, as provided in
the previous sentence, such dividends shall be deemed paid in full and will not
accumulate. If any dividend payable on any dividend payment date subsequent to
August 15, 2000 is not paid in full in cash, the per annum dividend rate will be
increased by 0.50% from such dividend payment date, and following two such
non-cash payments, the per annum dividend rate will be increased by 1.00% for
each additional semiannual period in which such non-cash payment occurs, up to a
maximum rate of 200 basis points in excess of the dividend rate originally borne
by the Series A Preferred Stock and Exchange Preferred Stock. After the date on
which such dividend default is cured, the dividend rate on the Series A
Preferred Stock and Exchange Preferred Stock will revert to the dividend rate
originally borne by the Series A Preferred Stock and Exchange Preferred Stock.
After August 15, 2002, dividends must be paid in cash.
The Series A Preferred Stock and Exchange Preferred Stock may be
redeemed (subject to contractual and other restrictions with respect thereto and
to the legal availability of funds therefor) at any time on or after August 15,
2002, in whole or in part, at the option of the Company, at the redemption
prices (expressed in percentages of the then effective liquidation preference
thereof) set forth below, plus, without duplication, an amount in cash equal to
all accumulated and unpaid dividends (including an amount in cash equal to a
prorated dividend for the period from the dividend payment date immediately
prior to the redemption date to the redemption date), if redeemed during the
12-month period beginning August 15 of each of the years set forth below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- -----------
<S> <C>
2002.............. 106.250%
2003.............. 103.125%
2004.............. 101.563%
2005 and thereafter 100.000%
</TABLE>
The Series A Preferred Stock and Exchange Preferred Stock will also be
subject to mandatory redemption (subject to contractual and other restrictions
with respect thereto and to the legal availability of funds therefor) in whole
on August 15, 2005 at a price equal to 100% of the liquidation preference
thereof, payable in cash, plus, without duplication, all accumulated and unpaid
dividends, which will also be paid in cash (whether or not otherwise payable in
cash) to the date of redemption.
Upon any voluntary or involuntary liquidation, dissolution or
winding-up of the Company, holders of the Series A Preferred Stock and Exchange
Preferred Stock will initially be entitled to be paid, out of the assets of the
Company available for distribution, $1,000 per share, plus an amount in cash
equal to accumulated and unpaid dividends thereon to the date fixed for
liquidation, dissolution or winding-up (including an amount equal to a prorated
dividend for the period from the immediately preceding dividend payment date to
the date fixed for liquidation, dissolution or winding-up), before any
distribution is made on any Junior Securities. If upon any voluntary or
involuntary liquidation, dissolution or winding-up of the Company, the amounts
payable with respect to the Series A Preferred Stock and Exchange Preferred
Stock are not paid in full, the holders of the Series A Preferred Stock and
Exchange Preferred Stock will share equally and ratably in any distribution of
assets of the Company first in proportion to the full liquidation preference to
which each is entitled until such preferences are paid in full, and then in
proportion to their respective amounts of accumulated but unpaid dividends.
Holders of the Series A Preferred Stock and Exchange Preferred Stock
will have no voting rights with respect to general corporate matters except as
provided by law or upon the occurrence of certain events as set forth in the
Restated Articles.
111
<PAGE> 114
Within 20 days of the occurrence of a Change of Control, the Company
shall make an offer to purchase (the "Change of Control Offer") the outstanding
Exchange Preferred Stock at a purchase price equal to 101% of the liquidation
preference thereof plus, without duplication, an amount in cash equal to all
accumulated and unpaid dividends thereon (including an amount in cash equal to a
prorated dividend for the period from the immediately preceding dividend payment
date to the Change of Control Payment Date (such applicable purchase price being
hereinafter referred to as the "Change of Control Purchase Price")) in
accordance with the procedures set forth in this covenant.
The Restated Articles impose certain restrictions on the ability of
Company to declare or pay dividends or make distributions with respect to, or
purchase, or redeem or exchange, any capital stock of the Company other than the
Series A Preferred Stock and the Exchange Preferred Stock.
LIMITATION OF LIABILITY AND INDEMNIFICATION
The Restated Articles contain certain provisions permitted under
Massachusetts law relating to the liability of directors. These provisions
eliminate a director's personal liability for monetary damages resulting from a
breach of fiduciary duty, except in certain circumstances involving certain
wrongful acts, such as the breach of a director's duty of loyalty or acts or
omissions that involve intentional misconduct or a knowing violation of law.
These provisions do not limit or eliminate the rights of the Company or any
stockholder to seek non-monetary relief, such as an injunction or rescission, in
the event of a breach of a director's fiduciary duty. These provisions will not
alter a director's liability under federal securities laws. The Company's
Restated Articles and By-laws also contain provisions indemnifying the directors
and officers of the Company to the fullest extent permitted by Massachusetts
law. The Company believes that these provisions will assist the Company in
attracting and retaining qualified individuals to serve as directors.
112
<PAGE> 115
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion of certain of the anticipated federal income
tax consequences of an exchange of the Existing Notes for New Notes and of the
purchase, ownership, and disposition of the New Notes is based upon the
provisions of the Internal Revenue Code of 1986, as amended (the "Code"), the
final, temporary, and proposed regulations promulgated thereunder, and
administrative rulings and judicial decisions now in effect, all of which are
subject to change (possibly with retroactive effect) or different
interpretations. This summary does not purport to deal with all aspects of
federal income taxation that may be relevant to a particular investor, nor any
tax consequences arising under the laws of any state, locality, or foreign
jurisdiction, and it is not intended to be applicable to all categories of
investors, some of which, such as dealers in securities, banks, insurance
companies, tax-exempt organizations, foreign persons, persons that hold New
Notes as part of a straddle or conversion transactions or holders subject to the
alternative minimum tax, may be subject to special rules. In addition, the
summary is limited to persons that will hold the New Notes as "capital assets"
(generally, property held for investment) within the meaning of Section 1221 of
the Code. ALL INVESTORS ARE ADVISED TO CONSULT THEIR OWN TAX ADVISERS REGARDING
THE FEDERAL, STATE, LOCAL, AND FOREIGN TAX CONSEQUENCES OF THE EXCHANGE AND THE
OWNERSHIP AND DISPOSITION OF NEW NOTES.
TAXATION OF HOLDERS ON EXCHANGE
Although the matter is not free from doubt, an exchange of Existing
Notes for New Notes should not be a taxable event to holders of Existing Notes,
and holders should not recognize any taxable gain or loss as a result of such an
exchange. Accordingly, a holder would have the same adjusted basis and holding
period in the New Notes as it had in the Existing Notes immediately before the
exchange. Further, the tax consequences of ownership and disposition of any New
Notes should be the same as the tax consequences of ownership and disposition of
Existing Notes.
MARKET DISCOUNT
If a holder purchases a Note for an amount that is less than its
principal amount, the amount of the difference will be treated as "market
discount" for federal income tax purposes, unless such difference is less than a
specified de minimis amount. Under the market discount rules, a holder will be
required to treat any principal payment on, or any gain on the sale, exchange,
retirement or other disposition of, a Note as ordinary income to the exchange of
the market discount which has not previously been included in income and is
treated as having accrued on such a Note at the time of such payment or
disposition. In addition, the holder may be required to defer, until the
maturity of the Note or its earlier disposition in a taxable transaction, the
deduction of all or a portion of the interest expense on any indebtedness
incurred or continued to purchase or carry such Note.
Any market discount will be considered to accrue ratably during the
period from the date of acquisition to the maturity date of the Note, unless the
holder elects to accrue on a constant interest method. A holder of a Note may
elect to include market discount in income currently as it accrues (on either a
ratable or constant interest method), in which case the rule described above
regarding deferral of interest deductions will not apply. This election to
include market discount in income currently, once made, applies to all market
discount obligations acquired on or after the first taxable year to which the
election applies and may not be revoked without the consent of the Internal
Revenue Service (the "IRS").
AMORTIZABLE BOND PREMIUM
A holder that purchases a Note for an amount in excess of the sum of
its principal amount will be considered to have purchased the Note at a
"premium." A holder generally may elect to amortize the premium over the
remaining term of the Note on a constant yield method. The amount amortized in
any year will be treated as a reduction of the holder's interest income from the
Note. Bond premium on a Note held by a holder that does not make such an
election will decrease the gain or increase the loss otherwise recognized on
disposition of the Note. The election to amortize premium on a constant yield
method once made applies to all debt obligations held or subsequently acquired
by the electing holder on or after the first day of the first taxable year to
which the election applies and may not be revoked without the consent of the
IRS.
113
<PAGE> 116
SALE, EXCHANGE AND RETIREMENT OF NOTES
A holder's tax basis in a Note will, in general, be the holder's cost
therefor, increased by market discount previously included in income by the
holder and reduced by any amortized premium. Upon the sale, exchange or
retirement of a Note, a holder will recognize gain or loss equal to the
difference between the amount realized upon the sale, exchange or retirement
(less any accrued interest, which will be taxable as such) and the adjusted tax
basis of the Note. Except as described above with respect to market discount,
such gain or loss will be capital gain or loss and will, as a general rule, be
long-term capital gain or loss if at the time of sale, exchange or retirement
the Note has been held for more than eighteen months. Under current law,
long-term capital gains of individuals are, under certain circumstances, taxed
at lower rates than items of ordinary income. The deductibility of capital
losses is subject to limitations.
BACKUP WITHHOLDING
In general, information reporting requirements will apply to certain
payments of principal, interest and premium paid on Notes and to the proceeds of
sale of a Note made to holders other than certain exempt recipients (such as
corporations). A 31% backup withholding tax will apply to such payments if the
holder fails to provide a taxpayer identification number or certification of
foreign or other exempt status or fails to report in full dividend and interest
income.
Any amounts withheld under the backup withholding rules will be allowed
as a refund or a credit against such holder's U.S. federal income tax liability
provided the required information is furnished to the IRS.
THE UNITED STATES FEDERAL TAX DISCUSSION SET FORTH ABOVE IS INCLUDED
FOR GENERAL INFORMATION ONLY AND MAY OR MAY NOT BE APPLICABLE DEPENDING UPON A
HOLDER'S PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISERS WITH
RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE EXCHANGE OF EXISTING NOTES FOR
NEW NOTES AND OF THE OWNERSHIP AND DISPOSITION OF THE NEW NOTES, INCLUDING THE
TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE
EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAWS.
EXPERTS
The consolidated historical financial statements of High Voltage
Engineering Corporation and Subsidiaries as of April 27, 1996 and April 26,
1997, and for each of the fiscal years in the three-year period ended April 26,
1997, included in this Prospectus and elsewhere in this Registration Statement
have been audited by Grant Thornton LLP, independent public accountants, as
indicated in their report with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in auditing and accounting.
The consolidated historical financial statements of PHI Acquisition
Holdings, Inc. and Subsidiaries as of June 30, 1995 and June 28, 1996, and for
each of the years in the two-year period ended June 28, 1996, included in this
Prospectus and elsewhere in this Registration Statement have been audited by
KPMG Peat Marwick LLP, independent auditors, as indicated in their report with
respect thereto, and are included herein in reliance upon the authority of said
firm as experts in auditing and accounting.
LEGAL MATTERS
Certain legal matters in connection with the Exchange Offer will be
passed upon for the Company by Bingham, Dana & Gould LLP, Boston, Massachusetts.
114
<PAGE> 117
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Exchange Act and in accordance therewith will be required to file reports and
other information with the Commission. The Registration Statements filed by the
Company with the Commission with respect to the New Notes and Exchange Preferred
Stock and the exhibits thereto, as well as such reports and other information to
be filed by the Company with the Commission, may be inspected, without charge,
at the public reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549, as well as the regional offices
of the Commission at the Northwest Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661 and 7 World Trade Center, 13th Floor, New York,
New York 10048. Copies of such documents can be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, at prescribed rates. In addition, the Company is
required to file electronic versions of these documents with the Commission
through the Commission's Electronic Data Gathering, Analysis, and Retrieval
(EDGAR) system. The Commission maintains a World Wide Web site, located at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus contains certain statements that may be considered
"forward-looking." Those forward-looking statements include, among other things,
discussions of the Company's business strategy and expectations concerning the
Company's position in the various industries in which it participates, future
operations, growth, product development and marketing efforts, the issuance of
patents, margins, profitability, liquidity and capital resources, as well as
statements concerning certain products under development, and the acquisition of
PHI and PHI's contribution to the realization of the Company's overall
strategies. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause the actual results, performance
or achievements of the Company to be materially different from any future
results, performance or achievements of the Company expressed or implied by such
forward-looking statements. Prospective investors in the New Notes offered
hereby are cautioned that although the Company believes that the assumptions on
which the forward-looking statements contained herein are based are reasonable,
any of those assumptions could prove to be inaccurate and, as a result, the
forward-looking statements based on those assumptions also could be materially
incorrect. The uncertainties in this regard include, but are not limited to,
those identified in the section of this Prospectus entitled "Risk Factors." In
light of these and other uncertainties, the inclusion of a forward-looking
statement herein should not be regarded as a representation by the Company that
the Company's plans and objectives will be achieved and prospective investors in
the New Notes should not place undue reliance on such forward-looking
statements. The Company disclaims any obligation to publicly announce the result
of any revisions to any of the forward-looking statements contained herein to
reflect future events or developments.
115
<PAGE> 118
INDEX TO FINANCIAL STATEMENTS
PAGE
HIGH VOLTAGE ENGINEERING CORPORATION AND SUBSIDIARIES
Consolidated Financial Statements -- April 29, 1995, April 27, 1996
and April 26, 1997
Report of Grant Thornton LLP, Independent Certified Public Accountants F-2
Consolidated Balance Sheets............................................... F-3
Consolidated Statements of Operations..................................... F-4
Consolidated Statements of Stockholder's Deficiency....................... F-5
Consolidated Statements of Cash Flows..................................... F-6
Notes to Consolidated Financial Statements................................ F-7
PHI ACQUISITION HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Financial Statements -- June 30, 1995, June 28, 1996 and
March 28, 1997 (unaudited)
Report of KPMG Peat Marwick LLP, Independent Auditors..................... F-28
Consolidated Balance Sheets............................................... F-29
Consolidated Statements of Operations..................................... F-30
Statement of Stockholders' Equity......................................... F-31
Consolidated Statements of Cash Flows..................................... F-32
Notes to Consolidated Financial Statements................................ F-33
F-1
<PAGE> 119
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholder
High Voltage Engineering Corporation
We have audited the accompanying consolidated balance sheets of High
Voltage Engineering Corporation and Subsidiaries (the Company) as of April 27,
1996 and April 26, 1997 and the related consolidated statements of operations,
stockholder's deficiency, and cash flows for each of the three years in the
period ended April 26, 1997. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of the
Company as of April 27, 1996 and April 26, 1997 and the consolidated results of
their operations and their consolidated cash flows for each of the three years
in the period ended April 26, 1997, in conformity with generally accepted
accounting principles.
Boston, Massachusetts GRANT THORNTON LLP
June 18, 1997 (except for notes N and P
as to which the dates are July 29, 1997 and
July 26, 1997, respectively)
F-2
<PAGE> 120
HIGH VOLTAGE ENGINEERING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
APRIL 27, APRIL 26,
1996 1997
--------- ---------
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents ........................................ $ 2,107 $ 1,542
Restricted cash .................................................. 4,595 2,210
Accounts receivable -- net of allowance for doubtful accounts .... 33,340 33,333
Inventories ...................................................... 20,972 22,334
Prepaid expenses and other current assets ........................ 1,971 1,164
--------- ---------
Total current assets ....................................... 62,985 60,583
PROPERTY, PLANT AND EQUIPMENT -- Net .................................. 29,222 30,966
ASSETS HELD FOR SALE .................................................. 6,173 5,248
OTHER ASSETS -- Net ................................................... 15,338 16,790
--------- ---------
$ 113,718 $ 113,587
========= =========
LIABILITIES AND STOCKHOLDER'S DEFICIENCY
CURRENT LIABILITIES
Current maturities of long-term debt obligations ................. $ 1,909 $ 2,609
Foreign credit line .............................................. 2,753 2,284
Accounts payable ................................................. 18,119 17,199
Accrued interest ................................................. 6,211 8,394
Accrued liabilities .............................................. 11,530 12,000
Advance payments by customers .................................... 6,324 5,294
Federal, foreign and state income taxes payable .................. 997 1,261
Deferred income taxes ............................................ 3,248 2,171
--------- ---------
Total current liabilities ............................... 51,091 51,212
LONG-TERM OBLIGATIONS, LESS CURRENT MATURITIES ........................ 80,009 80,508
DEFERRED INCOME TAXES ................................................. 1,900 1,834
OTHER LIABILITIES ..................................................... 3,205 2,495
COMMITMENTS AND CONTINGENCIES
REDEEMABLE PREFERRED STOCK ............................................ 10,995 11,474
REDEEMABLE PUT WARRANTS ............................................... -- 2,800
STOCKHOLDER'S DEFICIENCY
Common stock ..................................................... 1 1
Paid-in-capital .................................................. 17,326 17,326
Accumulated deficit .............................................. (50,869) (54,104)
Cumulative foreign currency translation adjustment ............... 60 41
--------- ---------
Total stockholder's deficiency .......................... (33,482) (36,736)
--------- ---------
$ 113,718 $ 113,587
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE> 121
HIGH VOLTAGE ENGINEERING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED
-------------------------------------
APRIL 29, APRIL 27, APRIL 26,
1995 1996 1997
------ ------ ------
<S> <C> <C> <C>
Net sales .................................................. $ 116,551 $ 149,100 $ 173,103
Cost of sales .............................................. 73,424 97,386 114,848
--------- --------- ---------
Gross profit ............................................ 43,127 51,714 58,255
Administrative and selling expenses ........................ 26,113 34,915 36,967
Research and development expenses .......................... 8,094 8,071 9,361
Restructuring charge ....................................... 1,294 150 --
Reimbursed environmental and litigation costs-net .......... (2,130) (450) 26
Other ...................................................... 892 1,163 2,234
--------- --------- ---------
Income from operations .................................. 8,864 7,865 9,667
Interest expense ........................................... 8,573 11,225 11,602
Interest income ............................................ (74) (278) (351)
--------- --------- ---------
Income (loss) from continuing operations before income
taxes, discontinued operations and extraordinary item . 365 (3,082) (1,584)
Income taxes (credit) ...................................... 196 (2,619) 526
--------- --------- ---------
Income (loss) from continuing operations before
discontinued operations and extraordinary item ........ 169 (463) (2,110)
Discontinued operations:
Income (loss) from discontinued operations, net of income
taxes ................................................. 607 (135) --
Gain (loss) on disposal of discontinued operations, net
of income taxes ....................................... (331) 1,633 --
--------- --------- ---------
276 1,498 --
Extraordinary loss, net of income taxes .................... -- (422) (259)
--------- --------- ---------
NET INCOME (LOSS) .......................................... 445 613 (2,369)
Preferred dividends ........................................ (415) (446) (479)
Accretion of redeemable put warrants ....................... -- -- (387)
--------- --------- ---------
Net income (loss) available to common stockholders ......... $ 30 $ 167 $ (3,235)
========= ========= =========
Net income (loss) per common share:
Continuing operations ................................... $ (246.00) $ (909.00) $(2,603.67)
Discontinued operations ................................. 276.00 1,498.00 --
Extraordinary item ...................................... -- (422.00) (226.60)
--------- --------- ---------
Net income (loss) ....................................... $ 30.00 $ 167.00 $(2,830.27)
========= ========= =========
Weighted average common stock and dilutive
equivalents outstanding ............................... 1,000 1,000 1,143
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE> 122
HIGH VOLTAGE ENGINEERING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S DEFICIENCY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
CUMULATIVE
FOREIGN
CURRENCY PENSION
COMMON PAID-IN- ACCUMULATED TRANSLATION LIABILITY
STOCK CAPITAL DEFICIT ADJUSTMENT ADJUSTMENT TOTAL
----- -------- ----------- --------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance, April 30, 1994 as restated
(note A) .......................... 1 $ 17,326 $(51,066) $ (915) $ (74) $(34,728)
Net income, as restated ........... 445 445
Preferred stock dividends ......... (415) (415)
Change in foreign currency
translation ..................... 201 201
Liquidation of foreign subsidiary . 526 526
Pension liability adjustment ...... 74 74
-- -------- -------- -------- -------- --------
Balance, April 29, 1995 ........... 1 17,326 (51,036) (188) -- (33,897)
Net income, as restated ........... 613 613
Preferred stock dividends ......... (446) (446)
Change in foreign currency
translation ..................... 248 248
-- -------- -------- -------- -------- --------
Balance April 27, 1996 ............ 1 17,326 (50,869) 60 -- (33,482)
Net loss .......................... (2,369) (2,369)
Preferred stock dividends ......... (479) (479)
Change in fair value of redeemable
put warrants .................... (387) (387)
Change in foreign currency
translation ..................... (19) (19)
-- -------- -------- -------- -------- --------
Balance, April 26, 1997 ........... $1 $ 17,326 $(54,104) $ 41 $ -- $(36,736)
== ======== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE> 123
HIGH VOLTAGE ENGINEERING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED
----------------------------------
APRIL 29, APRIL 27, APRIL 26,
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Increase (Decrease) in Cash and Cash Equivalents
Cash flows from operating activities:
Net income (loss) ......................................................... $ 445 $ 613 $ (2,369)
Adjustments to reconcile net income to net cash provided
by operating activities:
Extraordinary item, net of income taxes ................................. -- 422 --
Depreciation and amortization ........................................... 4,234 4,134 4,376
Write-off of other assets ............................................... 650 1,200 --
Non-cash interest ....................................................... 2,104 2,533 2,510
Deferred income taxes ................................................... (410) (2,714) (1,143)
Undistributed earnings of affiliate ..................................... (250) (88) (201)
(Gain) loss on sale of discontinued operations .......................... 331 (1,633) --
Other ................................................................... 456 (37) (186)
Change in assets and liabilities, net of effects of business acquisitions
and divestitures:
Accounts receivable ................................................... (1,137) (7,547) 257
Refundable income taxes ............................................... (997) 997 --
Inventories ........................................................... 644 (5,754) (1,482)
Prepaid expenses and other current assets ............................. 147 67 857
Other assets .......................................................... (304) (576) (3,094)
Accounts payable, accrued interest and accrued liabilities ............ 1,670 893 1,868
Advance payments by customers ......................................... 1,965 2,511 (1,030)
Federal, foreign and state income taxes payable ....................... 579 (1,381) 264
-------- -------- --------
Net cash provided by (used in) operating activities ................... 10,127 (6,360) 627
-------- -------- --------
Cash flows from investing activities:
Additions to property, plant and equipment ................................ (9,873) (5,791) (3,516)
Proceeds from sales of discontinued operation ............................. 2,194 11,000 --
Proceeds from sales of assets net of expenses ............................. 950 402 260
Acquisition of Industrias Jorda S.L ....................................... (5,946) -- --
Other ..................................................................... 397 118 190
-------- -------- --------
Net cash provided by (used in) investing activities ................... (12,278) 5,729 (3,066)
-------- -------- --------
Cash flows from financing activities:
Cash overdraft ............................................................ $ 797 $ 2,416 $ (1,306)
Proceeds from the issuance of long-term obligations ....................... 3,628 4,813 66,267
Net proceeds from the issuance of redeemable warrants ..................... -- -- 2,413
Net proceeds/(payments) from foreign credit line .......................... 2,090 663 (469)
Net (increase) decrease in restricted cash ................................ (2,123) (1,696) 2,385
Net payments under senior credit agreement ................................ (2,300) (515) (2,957)
Principal payments on long-term obligations ............................... (871) (3,828) (64,440)
-------- -------- --------
Net cash provided by financing activities ............................... 1,221 1,853 1,893
-------- -------- --------
Effect of foreign exchange rate changes on cash .............................. 391 380 (19)
-------- -------- --------
Net (decrease) increase in cash and cash equivalents .................... (539) 1,602 (565)
Cash and cash equivalents, beginning of year ................................. 1,044 505 2,107
-------- -------- --------
Cash and cash equivalents, end of year ....................................... $ 505 $ 2,107 $ 1,542
======== ======== ========
Supplemental Disclosure of Cash Flow Information:
Cash paid for:
Interest .................................................................. $ 6,542 $ 8,272 $ 7,568
Income taxes .............................................................. 905 408 1,246
Supplemental Schedule of Non-cash Investing and Financing
Activities:
Preferred stock dividends-in-kind and issuable preferred stock
dividends-in-kind ....................................................... $ 415 $ 446 $ 479
Leased asset additions .................................................... 96 172 1,494
Transfer from property, plant and equipment to assets held for sale,
net ..................................................................... 6,195 1,178 (1,378)
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE> 124
HIGH VOLTAGE ENGINEERING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 29, 1995, APRIL 27, 1996 AND APRIL 26, 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of significant accounting policies consistently applied in the
preparation of the accompanying financial statements follows:
Financial Statement Presentation
High Voltage Engineering Corporation (the "Company") is a wholly-owned
subsidiary of Letitia Corporation ("Letitia"). The Company's wholly-owned
subsidiaries include Datcon Instrument Company, HIVEC B.V., and Halmar Robicon
Group, Inc.
The consolidated financial statements include the accounts of the Company
and its domestic and foreign subsidiaries after elimination of material
intercompany transactions and balances.
The Company owns 49% of an affiliated company which is accounted for using
the equity method. Separate disclosure is not presented as the amounts are not
significant.
The accompanying consolidated financial statements for fiscal years 1995
and 1996 have been restated to correct the method of valuing contingent interest
payments (see note E). The effect of the restatement was to decrease net income
for 1995 by $604 ($604.00 per share), decrease net income for fiscal year 1996
by $1,582 ($1,582.00 per share) and also to increase the accumulated deficit at
the beginning of fiscal year 1995 by $2,763.
Nature of Operations
The Company operates a diversified portfolio of specialty industrial
manufacturing businesses with multiple product lines that serve a broad spectrum
of original equipment manufacturers and end-users. Business and customer
concentration is minimal due to the diversified nature of its portfolio of
businesses, with respect to products sold and end-markets served on a world-wide
basis. Examples of end-markets served include process automation, wastewater
treatment, petrochemicals, construction, agriculture, materials handling,
computers, telecommunications, medical equipment, climate control and
scientific, and educational research.
Accounting Period
The Company operates on a 52 or 53 week fiscal period. Each of the fiscal
periods presented are 52 week periods.
Revenue Recognition
Revenue is recognized when goods are shipped and the risk of loss passes to
the customer or in the case of significant long-term contracts on the
percentage-of-completion method. Provisions for estimated losses on long-term
contracts are charged to operations when identified.
When customers, under the terms of specific orders, request that the
Company manufacture, invoice and ship goods on a bill and hold basis, the
Company recognizes revenue based on the completion date required in the order
and actual completion of the manufacturing process. At the time such goods are
ready for delivery, title and risk of ownership pass to the customer.
Accounts receivable include retainages of approximately $504 and $1,279 as
of April 27, 1996 and April 26, 1997, respectively. Bill and hold receivables
were not significant as of April 27, 1996 and April 26, 1997.
F-7
<PAGE> 125
HIGH VOLTAGE ENGINEERING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Allowance for Doubtful Accounts
A summary of activity in the allowance for doubtful accounts is as follows:
<TABLE>
<CAPTION>
YEARS ENDED
---------------------------------------
APRIL 29, APRIL 27, APRIL 26,
1995 1996 1997
---------- ---------- ---------
<S> <C> <C> <C>
Balance at beginning of year ......... $ 906 $ 973 $ 1,973
Provision ............................ 166 1,412 813
Charge-offs, net of recoveries ....... (99) (412) (929)
------- ------- -------
Balance at end of year ............... $ 973 $ 1,973 $ 1,857
======= ======= =======
</TABLE>
Cash Equivalents
For purposes of the statements of cash flows, all highly liquid debt
instruments purchased with a maturity of three months or less are considered to
be cash equivalents.
Cash overdrafts included in trade accounts payable were $3,587 and $2,281
at April 27, 1996 and April 26, 1997, respectively.
At April 27, 1996 and April 26, 1997, cash in the amounts of $6,191 and $
2,712, respectively, was in uninsured foreign bank accounts, including $4,595
and $2,210, respectively which was used for collateral for a bank guarantee
facility for customer advances.
Inventories
Inventories are stated at the lower of cost (first-in, first-out or average
cost method) or market.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost. Depreciation and
amortization are provided for in amounts sufficient to relate the cost of
depreciable assets to operations over their estimated service lives. Leasehold
improvements are amortized over the lives of the respective leases or the
service lives of the improvements, whichever is shorter. Leased property under
capital leases is amortized over the lives of the respective leases or over the
service lives of the assets for those leases which substantially transfer
ownership. The straight-line method of depreciation is followed for
substantially all assets for financial reporting purposes, while accelerated
methods are used for tax purposes. Future income taxes resulting from
depreciation temporary differences have been provided for as deferred income
taxes.
Depreciation is based upon the following estimated useful lives:
Building and building improvements................. 30 to 40 years
Leasehold improvements............................. 5 to 20 years
Machinery and equipment............................ 2 to 10 years
Cost in Excess of Net Assets Acquired
The cost in excess of net assets acquired (goodwill) is amortized on a
straight-line basis over the expected period of benefit of forty years. The
Company continually evaluates the carrying value of goodwill. Any impairments
would be recognized when the expected undiscounted future operating cash flows
derived from such goodwill is less than the carrying value.
F-8
<PAGE> 126
HIGH VOLTAGE ENGINEERING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Intangible Assets
Costs incurred to obtain debt financing are amortized over the expected
term of the related debt. Amortization of deferred financing costs is recorded
as interest expense. The costs associated with non-compete and consulting
agreements are amortized over the period to which the agreements relate.
Long-Term Compensation Plan
Costs associated with a Valuation Creation Plan (VCP) which provides
long-term compensation for key individuals are recorded, on a quarterly basis,
based on the formula as defined in the VCP (see note I).
Foreign Currency Activities
Foreign subsidiaries use the local currency as their functional currency.
Assets and liabilities of these entities are translated into U.S. dollars at
rates of exchange in effect at the balance sheet date. The resulting translation
adjustments are accumulated in a separate component of stockholder's deficiency
and are included in operations only upon the sale or liquidation of the
underlying foreign investment. Revenue and expense transactions are translated
at the weighted average exchange rates for the fiscal month in which the
transaction occurred.
The Company may enter into foreign currency forward exchange and option
contracts to manage exposure related to certain foreign currency commitments,
certain foreign currency denominated balance sheet positions and anticipated
foreign currency denominated expenditures. Gains and losses on contracts to
hedge identifiable foreign currency commitments are deferred and accounted for
as part of the related foreign currency transaction. Gains and losses on all
other forward exchange and option contracts are included in income currently.
Transaction gains and losses have not been material.
At April 26, 1997, the Company had forward currency exchange contracts of
$200 maturing May, 1997, $200 maturing June, 1997 and $872 maturing in April,
1998 to sell U.S. dollars for Netherland guilders.
Environmental Expenditures
Costs associated with remediation activities are expensed. Liabilities
relating to probable remedial activities are recorded when the cost of such
activities can be reasonably estimated. The liability is discounted when the
amount and timing of the cash payments for that remediation site are fixed or
reliably determinable. The liabilities are adjusted as further information
develops or circumstances change.
Certain Risks and Concentration
The Company operates in highly competitive and rapidly changing markets and
some competitors have substantially greater sales and financial resources. Entry
into the market by new competition or the development of new technologies could
adversely affect operating results. Significant concentration of credit risk is
with trade receivables, which is somewhat mitigated due to the Company's
diversity of regions and customers.
The Company has manufacturing operations in three foreign countries (Spain,
Ireland and the Netherlands). Risks inherent in foreign operations include
changes in social, political and economic conditions, changes in currency
exchange rates, changes in the laws and policies that govern foreign investments
in countries and to a lesser extent, changes in United States laws and
regulations relating to foreign trade and investment.
F-9
<PAGE> 127
HIGH VOLTAGE ENGINEERING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Income Taxes
Deferred tax assets and liabilities are determined based on the differences
between the financial statement and tax basis of assets and liabilities as
measured by the enacted tax rates which will be in effect when these differences
reverse, subject to a valuation allowance.
Deferred income taxes result from changes in deferred tax assets, deferred
tax liabilities and changes in the valuation allowance. Income tax expense
consists of the taxes payable for the year and deferred income taxes as
discussed above (see note J).
Net Income (Loss) Per Common Share
Net income (loss) per common share has been computed using the weighted
average number of common and dilutive equivalent shares outstanding during each
period presented.
Liquidity
The Company believes that its current financing together with internally
generated funds will be sufficient to fund its operations over the next twelve
months.
Use of Estimates
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
Advertising
Advertising costs are expensed as incurred. Advertising expense was $1,458,
$1,429 and $1,754 for the fiscal years 1995, 1996 and 1997, respectively.
Research and Development
Research and development costs are charged to operations as incurred.
Fair Value of Financial Instruments
The carrying amount of cash and cash equivalents approximates its fair
value. The fair value of notes receivable is estimated by discounting the
expected future cash flows at interest rates commensurate with the
creditworthiness of the parties to the notes receivable, which approximates its
carrying values.
The carrying amounts of borrowings under short-term revolving credit
agreements, and variable rate long-term debt instruments approximate their fair
value as the floating rates applicable to the financial instruments reflect
changes in overall market interest rates. The fair value of other long-term debt
is estimated using discounted cash flow analysis, based on the Company's current
incremental borrowing rates for similar types of borrowing arrangements. The
fair value of long-term debt refinanced, as discussed in note E, was estimated
at its carrying value. At April 27, 1996, the carrying amount and estimated fair
value of long-term debt was $81,918 and $81,001, respectively. At April 26,
1997, the carrying amount and estimated fair value of long-term debt was $83,117
and $82,196, respectively.
The carrying value of the redeemable warrants is equal to the estimated
fair value.
F-10
<PAGE> 128
HIGH VOLTAGE ENGINEERING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The estimate fair value of forward currency exchange contracts is
calculated using the exchange rate at the Company's year end as quoted by the
respective brokers and at April 26, 1997 was approximately $1,162.
Fair value estimates are subjective in nature and involve uncertainties and
matters of significant judgement and therefore cannot be determined with
precision. Changes in assumptions could significantly affect these estimates.
The Company believes that it is not practical to estimate a fair value
different from these securities' carrying value of its redeemable preferred
stock as these securities are issued to Letitia, a related party, and have
numerous unique features (see note G).
Reclassifications
Certain reclassifications have been made to the fiscal year 1995 and 1996
consolidated financial statements in order to conform with the current year's
presentation.
NOTE B -- INVENTORIES
Inventories consisted of the following as of:
<TABLE>
<CAPTION>
APRIL 27, APRIL 26,
1996 1997
-------- --------
<S> <C> <C>
Raw materials ............................ $13,461 $14,912
Work in process .......................... 4,462 3,977
Finished goods ........................... 3,049 3,445
------- -------
Total .................................... $20,972 $22,334
======= =======
</TABLE>
NOTE C -- PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following as of:
<TABLE>
<CAPTION>
APRIL 27, APRIL 26,
1996 1997
---------- --------
<S> <C> <C>
Land and land improvements ......................... $ 3,763 $ 5,788
Buildings and building improvements ................ 15,722 16,494
Machinery and equipment ............................ 29,713 30,681
Construction in progress ........................... 789 644
-------- --------
Total ......................................... 49,987 53,607
Less accumulated depreciation and amortization ... (20,765) (22,641)
-------- --------
Total ......................................... $ 29,222 $ 30,966
======== ========
</TABLE>
Property under capital leases is included in these amounts (see note M)
NOTE D -- ASSETS HELD FOR SALE AND OTHER ASSETS
At April 27, 1996 and April 26, 1997, assets held for sale of $6,173 and
$5,248 consisted of several former manufacturing facilities. These properties
are recorded at the lower of the carrying amount or fair value less costs to
sell. It is reasonably possible that the proceeds from the sales of these
properties will differ significantly from the carrying amount and additional
losses may be recorded.
F-11
<PAGE> 129
HIGH VOLTAGE ENGINEERING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Two of the properties are leased to third parties, one lease is for a term
of five years which commenced in March, 1997 with annual payments of $336 in
year one $360 in year two $468 in year three $528 in year four and $567 in year
five. This lease contains a buyout provision. The other lease is also a five
year term which commenced in November, 1995 with annual payments of $120.
During fiscal year 1997, a facility was transferred to fixed assets at its
carrying value of $1,378. The transfer was made because the facility is now
being utilized in the Company's operations.
Other assets consisted of the following as of:
<TABLE>
<CAPTION>
APRIL 27, APRIL 26,
1996 1997
------- -------------------------------
NET NET
CARRYING GROSS ACCUMULATED CARRYING
AMOUNT AMOUNT AMORTIZATION AMOUNT
------- ------- ------------ --------
<S> <C> <C> <C> <C>
Cost in excess of net assets acquired $ 9,711 $11,842 $(2,484) $ 9,358
Deferred financing costs (note E) ... 1,100 4,771 (1,183) 3,588
Covenant not-to-compete (note O) .... 853 1,280 (854) 426
Prepaid consulting agreement (note O) 533 800 (533) 267
Prepaid pension cost (note I) ....... 2,018 2,119 -- 2,119
Notes receivable .................... 947 696 -- 696
Other ............................... 176 699 (363) 336
------- ------- ------- -------
Total .......................... $15,338 $22,207 $(5,417) $16,790
======= ======= ======= =======
</TABLE>
The fiscal year 1996 net carrying amount is net of accumulated amortization
of $3,753. Amortization expense was $931, $1,729 and $1,664 for fiscal years
1995, 1996 and 1997, respectively.
NOTE E -- LONG-TERM OBLIGATIONS AND FOREIGN CREDIT LINE
Long-term obligations consisted of the following as of:
<TABLE>
<CAPTION>
APRIL 27, APRIL 26,
1996 1997
-------- --------
<S> <C> <C>
1996 Senior Credit Agreement ......................... $ -- $ 16,630
1996 Senior Secured Notes ............................ 20,000
1996 Senior Unsecured Notes .......................... -- 7,000
1996 Senior Subordinated Notes (face value $25,000) .. -- 19,374
1995 Senior Credit Agreement ......................... 30,485 --
1995 Senior Subordinated Note ........................ 13,808 --
1995 Junior Subordinated Note ........................ 18,230 --
Capital lease obligations (note M) ................... 9,143 10,382
Mortgage notes payable ............................... 8,271 8,035
Notes payable ........................................ 1,981 1,696
-------- --------
Total (see note P) .............................. 81,918 83,117
Less current maturities ......................... (1,909) (2,609)
-------- --------
Long-term obligations, net of current maturities $ 80,009 $ 80,508
======== ========
</TABLE>
On May 9, 1996, the Company entered into new revolving and long-term credit
agreements. The 1996 Agreements refinanced the 1995 Senior Credit Agreement, the
1995 Senior Subordinated Note, and the 1995 Junior Subordinated Note. In
connection with this refinancing the Company incurred financing costs of
approximately $3,192 (see note D).
F-12
<PAGE> 130
HIGH VOLTAGE ENGINEERING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company also recorded an extraordinary loss on this refinancing of $422
and $259, net of income taxes in fiscal years 1996 and 1997, respectively.
1996 Senior Credit Agreement
The 1996 Senior Credit Agreement provides a $20,000 revolving credit
facility ($7,702 outstanding as of April 26, 1997) with principal due at
maturity on April 30, 2001, as well as a $10,000 term loan ($8,928 outstanding
as of April 26, 1997) with principal due in twenty seven (27) equal installments
due quarterly, with the balance due on April 30, 2003. Interest under the
revolving credit facility is computed at the Prime Rate of the bank (8.5% as of
April 26, 1997) which is payable monthly. The interest rate of the term loans
was computed at the Prime Rate of the bank plus 0.75% (9.25% as of April 26,
1997) and is payable quarterly. As of April 26, 1997, letters of credit
outstanding were $2,932.
1996 Senior Secured Notes
The 1996 Senior Secured Notes provides $20,000 in notes with repayments on
May 1, 2001, and 2002 of the lesser of $6,667 or the outstanding balance, and
the remaining amounts due on May 1, 2003. Interest expense is payable
semi-annually at a rate of 10.84% per annum.
1996 Senior Unsecured Notes
The 1996 Senior Unsecured Notes provides $7,000 in notes with repayments in
equal installments of $2,333 on May 1, 2001, 2002, and 2003. Interest expense is
payable semi-annually at a rate of 12.09% per annum.
1996 Senior Subordinated Notes
The 1996 Senior Subordinated Notes ($25,000) provided net proceeds of
$20,520 with repayment of $25,000 (principal including "payment-in-kind"
interest) due at maturity on May 1, 2004. The Senior Subordinated Notes include
warrants to purchase 142.86 shares at $.01 per share of the Company's Common
Stock subject to a dilution adjustment, as defined, which represents 12.5% of
the Company's fully diluted common stock. The warrants expire on May 9, 2004
(see note P). For financial reporting purposes, the Company assigned an initial
estimated fair value of these warrants at $2,413 of the net proceeds. In the
event the Company does not consummate an initial public offering of its common
stock prior to May 1, 2000, the holders of the warrants may "put" the warrants
to the Company at amounts which are the greater of the then appraised value or
by formula as defined in the agreement. Changes in the value of the warrants are
classified as an equity adjustment. It is reasonably possible that the value of
the warrants will differ significantly from the carrying amount and additional
adjustments may be recorded. The effective interest rate of the debt after
giving effect to the discount and warrant valuation is approximately 17.1%.
Interest payments are made quarterly at a rate of 8% of the face value of the
note ($25,000) per annum until May 1, 2000, and at a rate of 14% thereafter.
Collateral and Contingent Interest
Obligations were collateralized under an Intercreditor Agreement which
provided for liens on substantially all of the Company's assets. Under certain
circumstances, the Company may be required to make contingent interest payments
("CIP") to the former 1995 Senior and Junior Subordinated Noteholders based upon
the greater of the fair value of the Company, or formula, both as defined. The
Company has accrued its estimate of amounts due based on an independent
appraisal. It is reasonably possible that the settlement of CIP will differ from
the amounts accrued (see note P).
F-13
<PAGE> 131
HIGH VOLTAGE ENGINEERING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Mortgage Notes Payable
The mortgage notes generally are due June 2004, November 2009, April 2011
and January 2016, and bear interest between 2% and 9.75% (weighted average
interest rate of 6.4% at April 26, 1997). The notes are collateralized by land
and buildings with a net book value of approximately $10,438 as of April 26,
1997. Certain of these mortgages were issued through the Pennsylvania Economic
Development Financing Authority and the Pennsylvania Industrial Development
Authority in conjunction with the construction of a new facility for a
subsidiary of the Company. The subsidiary may prepay the mortgage before
maturity, subject to a prepayment premium ranging from 101% to 105% of the
principal amount thereof.
Foreign Credit Line
At April 26, 1997, the foreign credit line outstanding balance is $2,284.
The borrowing bears interest at 10% per annum, and matures at the earlier of the
collection of the receivables securing the credit line or 120 days.
Restrictive Covenants
The 1996 Credit Agreements, subordinated notes and mortgage notes payable
contain restrictive provisions relating to the maintenance of certain financial
ratios, as defined in the respective agreements, restrictions on the payment of
common stock dividends, leases, capital expenditures, borrowings, the
acquisition or disposition of material subsidiaries and other matters. The
borrowings under certain capital leases contain cross default provisions. The
Company was in violation of certain covenants, which were waived by the
respective lenders.
Aggregate maturities of long-term obligations including discount are as
follows:
<TABLE>
<CAPTION>
FISCAL
<S> <C>
1998.......................................... $ 2,609
1999.......................................... 2,688
2000.......................................... 4,324
2001.......................................... 12,502
2002.......................................... 4,753
Thereafter.................................... 61,867
------
$88,743
=======
</TABLE>
NOTE F -- OTHER LIABILITIES
Other liabilities consisted of the following:
<TABLE>
<CAPTION>
APRIL 27, APRIL 26,
1996 1997
-------- --------
<S> <C> <C>
Environmental cleanup and related litigation costs (note N).. $ 4,472 $ 3,267
Other ....................................................... 876 1,739
------- -------
Total .................................................. 5,348 5,006
Less current portion included in accrued liabilities ... (2,143) (2,511)
------- -------
$ 3,205 $ 2,495
======= =======
</TABLE>
F-14
<PAGE> 132
HIGH VOLTAGE ENGINEERING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE G -- REDEEMABLE PREFERRED STOCK
Redeemable preferred stock was issued to Letitia. The Series B and Series C
Preferred Stock is indirectly owned by a former Junior Subordinated noteholder
(see note P).
Redeemable Preferred Stock consisted of the following:
<TABLE>
<CAPTION>
SHARES ISSUED
AND
ISSUABLE
--------------------
PAR SHARES APRIL 27, APRIL 26,
VALUE AUTHORIZED 1996 1997
----- ---------- --------- ---------
<S> <C> <C> <C> <C>
Series A..................... $1 25,000 -- --
Series B..................... $1 30,000 5,705 25,705
Series C..................... $1 10,000 6,245 6,724
</TABLE>
Changes in Redeemable Preferred Stock (issued and issuable) were as
follows:
<TABLE>
<CAPTION>
SERIES B SERIES C TOTAL
<S> <C> <C> <C>
Balance at April 29, 1995................... $4,750 $5,799 $10,549
Dividends declared.......................... -- 446 446
------ ------ -------
Balance at April 27, 1996................... 4,750 6,245 10,995
Dividends declared.......................... -- 479 479
------ ------ -------
Balance at April 26, 1997................... $4,750 $6,724 $11,474
====== ====== =======
</TABLE>
Dividends and Redemptions
Series A Preferred Stock is authorized but no shares are issued or
outstanding.
Dividends on Series B Preferred Stock are noncumulative and payable when
and as declared by the Board of Directors out of funds legally available for
such purpose. The rate at which dividends may be declared and paid shall not
exceed 17-1/2% per annum of the Liquidation Value (defined below). Dividends of
1,745 shares and 1,903 shares of Series B Preferred Stock were declared during
the fiscal years 1995 and 1996, respectively. This dividend has no effect on the
Liquidation Value of the Series B Preferred Stock and the Company has ceased
declaring dividends in fiscal year 1997.
Dividends on Series C Preferred Stock are cumulative and accrue at a rate
of 7.6% per annum. Dividends through June 1, 2000, are payable in the form of
additional shares of Series C Preferred Stock, and, thereafter, dividends are
payable annually in cash, except to the extent restricted by other agreements of
the Company. Holders of Series C Preferred Stock have preference as to payments
of dividends over holders of Series A and Series B Preferred Stock and Common
Stock.
Redemption Provisions
The Series B Preferred Stock has a mandatory redemption date of March 17,
2008, except to the extent restricted by other agreements, at a redemption price
equal to the Liquidation Value (discussed below) together with all declared, but
unpaid dividends thereon.
The Series C Preferred Stock has a mandatory redemption date of June 2000,
except to the extent restricted by other agreements, at a redemption price of
one thousand dollars per share together with accrued dividends thereon. The
Company may, at its sole option, redeem shares of Series C Preferred Stock using
the same terms as noted on the mandatory redemption date except to the extent
restricted by other agreements.
Voting Rights
Holders of Series B and Series C Preferred Stock have no voting rights
except, as to holders of Series C, if the Company is in arrears in the payment
of dividends in an amount equal to or exceeding two quarterly
F-15
<PAGE> 133
HIGH VOLTAGE ENGINEERING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
dividend payments and until all such arrearages are repaid in full, the holders
of the Series C, voting as a class, are entitled to elect one director to the
Board of Directors of the Company.
The consent of the holders of a majority of shares of any outstanding
Series B and Series C Preferred Stock is necessary for effecting certain
significant transactions.
Restrictive Covenants
As long as any shares of Series B or Series C Preferred Stock are
outstanding, no common stock dividend may be paid or declared, nor may any
distribution be made on any other class of preferred or common stock.
Additionally, no shares of any other class of preferred or common stock may be
purchased, redeemed or otherwise acquired unless (a) all dividends on the Series
B and Series C Preferred Stock for all past dividend periods, and for the then
current period, have been paid, or, if declared and unpaid, a sum sufficient for
the payment thereof set apart and all mandatory redemption payments then due
with respect to Series B and Series C Preferred Stock have been made or funds
therefore set apart for payment or (b) the holders of a majority of the shares
of Series B and Series C Preferred Stock, each voting as a class, approve such
dividend, distribution, purchase, redemption or acquisition.
Liquidation Value
The holder of shares of Series B Preferred Stock shall be entitled to
receive the lesser of (a) one thousand dollars per share or (b) $4,750
representing the fair value, as determined by the Board of Directors. The fair
value was determined based on the proceeds received by the Company as a result
of the liquidation of a 1988 investment made with the proceeds of the issuance
of the Series B Preferred Stock, net of all liabilities and expenses, including
taxes, divided by the number of shares of Series B Preferred Stock outstanding,
plus all dividends declared and unpaid. Holders of Series B Preferred Stock have
preferences as to liquidation over holders of Series C Preferred Stock.
In the event of a voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the Company, the holders of Series C Preferred
Stock are entitled to receive all dividends accrued and unpaid to the date of
payment and a liquidation value per share of one thousand dollars prior to any
payment to holders of any junior stock.
NOTE H -- COMMON STOCK
At April 27, 1996 and April 26, 1997, the Company had two thousand shares
of common stock authorized, and one thousand issued and outstanding. Such common
stock has a par value of $.01 per share. The declaration or payment of dividends
is restricted as discussed in notes E and G.
NOTE I -- BENEFIT PLANS
Defined Benefit Plan
The Company and its subsidiaries have a frozen pension plan. The benefit
accruals for certain remaining former employees became frozen in February 1995.
Pension costs are determined in accordance with Statement of Financial
Accounting Standards (SFAS) No. 87, "Employers' Accounting for Pensions."
Service cost is determined using the projected unit credit actuarial cost
method. In fiscal year 1995, a curtailment of the plan occurred and the
remaining prior service costs of $419 was written off. It is the Company's
policy to make annual contributions to the plan in amounts at least equal to the
amounts required by law.
F-16
<PAGE> 134
HIGH VOLTAGE ENGINEERING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Domestic net pension costs are summarized as follows:
<TABLE>
<CAPTION>
YEARS ENDED
------------------------------------
APRIL 29, APRIL 27, APRIL 26,
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
Service cost ........................... $ 50 $ -- $ --
Interest cost .......................... 1,227 1,227 1,351
Curtailment loss ....................... 419 -- --
-------- -------- --------
1,696 1,227 1,351
======== ======== ========
Return on plan assets:
Actual .............................. $ (685) $ (3,834) $ (2,215)
Deferred ............................ (484) 2,592 763
Unrecognized loss ................... 9 -- --
-------- -------- --------
Net recognized ...................... (1,160) (1,242) (1,452)
-------- -------- --------
Total pension expense (income) .... $ 536 $ (15) $ (101)
======== ======== ========
</TABLE>
The funded status and prepaid net pension cost are as follows:
<TABLE>
<CAPTION>
APRIL 27, APRIL 26,
1996 1997
-------- --------
<S> <C> <C>
Vested and accumulated benefit obligation ............... $ 14,805 $ 16,378
======== ========
Fair value of plan assets ............................... $ 17,179 $ 17,505
Projected benefit obligation ............................ 14,805 16,378
-------- --------
Excess of plan assets over projected benefit obligation . 2,374 1,127
Unrecognized net (gain) loss ............................ (356) 992
-------- --------
Prepaid pension cost -- (note D) ........................ $ 2,018 $ 2,119
======== ========
Assumed discount rate ................................... 8.5% 8.5%
Expected rate of return on plan assets .................. 9.0% 9.0%
</TABLE>
No compensation increases have been assumed due to the plan being frozen.
The plan assets as of April 27, 1996 and April 26, 1997 consisted primarily
of equity securities, pooled real estate funds, guaranteed interest contracts,
fixed income securities and cash equivalents. The plan holds stock in Letitia
who is the sole shareholder of the Company. The plan has valued this stock at
$1,300 (unaudited) as of April 27, 1996 and $2,088 (unaudited) as of April 26,
1997, respectively (see note P).
The Company elected to adopt a revised mortality rate in the current year
to more accurately reflect employees life expectancies.
Multi-Employer Plan
Foreign employees generally participate in a multiemployer pension plan.
Foreign pension expense totaled $138, $163 and $199 in fiscal years 1995, 1996
and 1997, respectively.
Defined Contribution Plans
The Company has a 401(k) savings plan (the "Plan") covering substantially
all U.S. employees. The Plan provides for a Company matching contribution of up
to one thousand eight hundred dollars per year based on
F-17
<PAGE> 135
HIGH VOLTAGE ENGINEERING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the amount of elective deferral selected by the employee, plus a profit sharing
contribution, equal to two percent (2%) of the employees annual salary and
bonus, when applicable.
Contributions to the Plan were $1,449, $1,289 and $1,581 in fiscal years
1995, 1996 and 1997, respectively. The Company provides certain other retirement
benefits, which are not material, to some former officers and former key
management employees which have been provided for in the consolidated financial
statements.
Long-Term Compensation Plan
The Company maintains a Valuation Creation Plan (VCP) which provides
long-term compensation for key individuals. Upon joining the VCP, benefits vest
at twenty percent a year and participants can "cash out", as defined, up to
fifty percent of their vested value anytime with the remainder paid at
retirement or termination. All payments under the VCP are subject to the
availability of general funds of the Company. The VCP is a nonqualified and
non-funded plan. The Company has accrued $720 and $1,266 as of fiscal years 1996
and 1997, respectively and administrative and selling expenses includes $149,
$436 and $698 for fiscal years 1995, 1996 and 1997, respectively related to VCP.
In the event of the sale or certain other changes in ownership of a
subsidiary or division, impacted key individuals would become 100% vested.
Benefits, if any, would be calculated up to that date based upon fair values as
established by the transaction. Such benefits would be charged to operations
immediately and may be greater than that which would have been calculated under
the original terms of the VCP.
An officer of the Company is the beneficiary of an incentive compensation
plan pursuant to which such officer shall be entitled to receive upon
termination of employment or his death certain payments in accordance with a
formula, as defined. The vesting is in equal installments from May 1, 1994
through May 1, 1998. The Company has accrued the estimated vested balance.
NOTE J -- INCOME TAXES
The foreign and domestic components of income (loss) from continuing
operations before income taxes and extraordinary item were as follows:
<TABLE>
<CAPTION>
APRIL 29, APRIL 27, APRIL 26,
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Domestic .................... $ 1,171 $(6,795) $(4,020)
Foreign ..................... (806) 3,713 2,436
------- ------- -------
Total .............. $ 365 $(3,082) $(1,584)
======= ======= =======
</TABLE>
F-18
<PAGE> 136
HIGH VOLTAGE ENGINEERING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The components of income taxes expense (credit) are:
<TABLE>
<CAPTION>
YEARS ENDED
---------------------------------
APRIL 29, APRIL 27, APRIL 26,
1995 1996 1997
-------- --------- ---------
<S> <C> <C> <C>
Continuing operations:
Current:
Federal .......................................... $ (28) $ (742) $ --
State ............................................ 288 120 400
Foreign .......................................... 346 717 1,269
------- ------- -------
606 95 1,669
------- ------- -------
Deferred (net of impact of valuation allowance):
Federal .......................................... (560) (3,228) (592)
Foreign .......................................... 150 514 (551)
------- ------- -------
(410) (2,714) (1,143)
------- ------- -------
Total continuing operations .................. $ 196 $(2,619) $ 526
------- ------- -------
Discontinued operations and extraordinary item:
Current:
Federal .......................................... 140 531 (159)
State ............................................ 65 95 --
------- ------- -------
Total discontinued operations and extraordinary item 205 626 (159)
------- ------- -------
Net income taxes (benefit) ............................ $ 401 $(1,993) $ 367
======= ======= =======
</TABLE>
Total income taxes (benefit) from continuing operations differed from
"expected" income tax expense, computed by applying the U.S. Federal statutory
tax rate of 35 percent to income before income tax, as follows:
<TABLE>
<CAPTION>
APRIL 29, APRIL 27, APRIL 26,
1995 1996 1997
---------- ---------- --------
<S> <C> <C> <C>
Federal statutory rate applied to income before income taxes,
discontinued operations and extraordinary item.................. $ 127 $(1,078) $ (554)
State and local taxes, net of Federal tax benefit................. 199 80 264
Effect of foreign operations...................................... 770 (66) (1,684)
Costs in excess of net assets acquired............................ 423 246 234
Change in valuation reserve....................................... (1,459) 1,669 2,958
Provision (benefit) for Internal Revenue Service ("IRS")
examination..................................................... -- (3,429) (696)
Other items....................................................... 136 (41) 4
------- ------- -------
Income tax expense (benefit) -- continuing operations........ $ 196 $(2,619) $ 526
======= ======= =======
</TABLE>
F-19
<PAGE> 137
HIGH VOLTAGE ENGINEERING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A deferred income tax (expense) benefit results from temporary differences
in the recognition of income and expense for income tax and financial reporting
purposes. The temporary differences which gave rise to the following deferred
income tax assets and liabilities are:
<TABLE>
<CAPTION>
APRIL 27, APRIL 26,
1996 1997
--------- ---------
<S> <C> <C>
Deferred income tax assets:
Accounts receivable ................................ $ 720 $ 1,027
Inventory .......................................... 883 915
Accrued liabilities ................................ 2,518 2,858
Net operating losses ............................... 2,386 2,542
Tax credits ........................................ 193 2,873
Assets held for sale ............................... 580 580
Accrued interest ................................... 815 1,074
Other .............................................. 186 94
-------- --------
Total gross deferred income tax assets ..... 8,281 11,963
Valuation allowance ................................ (6,493) (9,451)
-------- --------
Total net deferred income tax assets ....... 1,788 2,512
Deferred income tax liabilities:
Depreciation ....................................... $ (1,700) $ (2,291)
Reserve for IRS examination ........................ (3,078) (2,382)
Foreign items ...................................... (1,641) (1,090)
Other .............................................. (517) (754)
-------- --------
Total gross deferred income tax liabilities (6,936) (6,517)
-------- --------
Net deferred income tax liability .......... $ (5,148) $ (4,005)
======== ========
</TABLE>
These deferred income tax assets and liabilities are presented as follows
in the consolidated balance sheets:
<TABLE>
<CAPTION>
APRIL 27, APRIL 26,
1996 1997
--------- ---------
<S> <C> <C>
Current deferred tax liability....................... $ 3,248 $ 2,171
Noncurrent deferred tax liability.................... 1,900 1,834
------- -------
$ 5,148 $ 4,005
======= =======
</TABLE>
A valuation allowance against the recoverability of deferred tax assets has
been established because more likely than not the Company will not be able to
utilize certain credits and net operating loss carryforwards in future years.
The Company has offset certain deferred tax liabilities, with deferred tax
assets which are expected to generate offsetting deductions within the same
periods.
A summary of the activity in the allowance for deferred tax assets is as
follows:
<TABLE>
<CAPTION>
YEARS ENDED
-------------------------------------
APRIL 29, APRIL 27, APRIL 26,
1995 1996 1997
--------- ---------- --------
<S> <C> <C> <C>
Balance at beginning of period......... $ 6,283 $4,824 $6,493
Net change............................. (1,459) 1,669 2,958
-------- ------ ------
Balance at end of period............... $ 4,824 $6,493 $9,451
======== ====== ======
</TABLE>
F-20
<PAGE> 138
HIGH VOLTAGE ENGINEERING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
During fiscal 1995, the IRS completed an examination of the Company's
income tax returns for the years ended December 1986 through April 1991. During
fiscal year 1996, the Company and the IRS reached a proposed settlement of this
liability which was subsequently approved by the Joint Committee on Taxation.
Subsequent to April 26, 1997, the Company and the IRS settled on the interest to
be paid related to the assessment. The amount of the settlement including
interest, as well as the state taxes which are expected to be levied due to this
settlement have been accrued.
At April 26, 1997, the Company has available net operating loss
carryforwards of approximately $6,355 which generally expire in the fiscal year
ending in 2006. Such carryforwards are substantially limited upon an "ownership
change" as defined in the Internal Revenue Code. No such ownership change is
currently anticipated. The Company also has foreign tax credits of $2,584 the
majority of which expire in the fiscal year 2002.
NOTE K -- OTHER STATEMENT OF OPERATIONS ITEMS
Restructuring Charge
For the fiscal years 1995 and 1996, restructuring charges in the amount of
$1,294 and $150, respectively, which have been paid, represents a restructuring
program designed to reduce cost and improve operating processes. The program
included relocation to a new facility in Massachusetts by one of the Company's
operating divisions, (including a facility write-down and related severance
costs of the respective terminated employees), the write-off of the cumulative
foreign currency translation adjustment resulting from the liquidation of a
foreign subsidiary and the closure of a European office.
Other Expense -- Net
Other expense -- net includes the following:
<TABLE>
<CAPTION>
YEARS ENDED
---------------------------------
APRIL 29, APRIL 27, APRIL 26,
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Writedown of assets held for sale (note D) .... $ 815 $ 1,200 $ --
Net gain on disposition of miscellaneous assets (47) (83) (230)
Division relocation and moving costs .......... 124 103 --
Facilities (income) expense (note D) .......... -- (57) 319
Aborted acquisition and offering costs ........ -- -- 2,145
------- ------- -------
Total ............................... $ 892 $ 1,163 $ 2,234
======= ======= =======
</TABLE>
NOTE L -- RELATED-PARTY TRANSACTIONS
Management Fees
Management fees were incurred with respect to services rendered in
connection with financing, merger and acquisitions and various operational and
strategic matters. Management fees were $450, $648 and $781 for fiscal years
1995, 1996 and 1997, respectively.
Transaction Fees
The Company has agreed to pay a related party a transaction fee of 1% of
the gross proceeds of all asset acquisitions and divestitures. Transaction fees
of $102 and $110 (reflected in gain/(loss) on disposal of discontinued
operations) were paid in fiscal years 1995 and 1996. There were no transaction
fees for fiscal year 1997.
F-21
<PAGE> 139
HIGH VOLTAGE ENGINEERING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE M -- LEASES
Capital and Operating Leases
The Company conducts a portion of its operations in facilities under
capital and operating leases and also has capital and operating leases covering
certain machinery and equipment. Certain of the leases contain renewal and
purchase options. Rental expense charged to operations in fiscal years 1995,
1996 and 1997, was approximately $1,256, $1,079, and $1,626, respectively.
Property under capital leases consisted of the following:
<TABLE>
<CAPTION>
APRIL 27, APRIL 26,
1996 1997
--------- ---------
<S> <C> <C>
Land, buildings and improvements............. $ 9,650 $ 9,650
Machinery and equipment...................... 563 2,160
Less accumulated amortization........... (2,288) (2,647)
------- -------
Total.............................. $ 7,925 $ 9,163
======= =======
</TABLE>
At April 26, 1997, the minimum rental commitments for noncancelable leases
that have initial or remaining terms of more than one year are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
<S> <C> <C>
1998.................................................. $ 1,757 $1,581
1999.................................................. 1,777 1,306
2000.................................................. 1,665 837
2001.................................................. 1,451 269
2002.................................................. 1,357 62
Thereafter through 2014............................... 13,805 --
--------- ------
Minimum commitments................................... 21,812 $4,055
======
Less amount representing interest..................... (11,430)
---------
Capital lease obligations (included in long-
term obligations)(note E)............................. $ 10,382
=========
</TABLE>
NOTE N -- LITIGATION, CLAIMS AND ENVIRONMENTAL MATTERS
The Company is obligated to clean-up three sites relating to former
manufacturing facilities and has accrued the estimated costs of remediation (see
note F). Estimated costs are determined by external and internal environmental
remediation experts. The estimated costs of remediation of one site is based on
its estimated present value. The discount rate used was 6%. The gross
undiscounted amount differs from the estimated present value by approximately
$667 as of April 26, 1997. There are no assurances that additional costs will
not be incurred or that significant changes in estimates or changes in
environmental laws will not require additional amounts to be accrued. The
Company believes that it can continue to meet these environmental standards
without material adverse effect on its financial condition. The completion of
the clean-up relating to these sites is estimated at 10 years. The expected
future payments for the environmental liabilities is $985 in fiscal year 1997,
$303 in fiscal year 1998, $259 in fiscal year 1999 through fiscal year 2001 and
$1,469 thereafter.
During fiscal years 1995, 1996 and 1997, the Company recorded operating
cash proceeds of $2,280, $1,500 and $1,100, respectively, from insurance
recoveries related to environmental litigation, remediation and consequential
damages. Such amounts were recorded as Reimbursed Environmental and Litigation
Costs, net
F-22
<PAGE> 140
HIGH VOLTAGE ENGINEERING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
of actual legal costs, estimated settlement costs, and changes in cost
remediation estimates. These settlements relate to recoveries of environmental
and legal costs incurred primarily in fiscal years 1995 and prior.
During fiscal year 1996, the Company reached an agreement with the owners
of two separate properties adjacent to the remediation sites on the principal
terms of a settlement and are currently preparing the documentation of such
settlements. The settlement terms principally include a mutual release of claims
for past costs and an undertaking by the Company to perform certain future
remediation work on the site, for which the Company will pay up to the first
$500 in costs and two thirds of any cost over this threshold for the first
property and $200 for the second property. At April 26, 1997, the Company has
accrued the estimated remediation cost with respect to this matter (see note F).
There are no assurances that additional costs will not be incurred or that
significant changes in estimates or changes in environmental laws will not
require additional amounts to be accrued.
In connection with matters referred to above, the Company has posted
financial assurances that the remediation will be completed in the form of
$2,250 letters of credit and a lien of $1,250 on certain real property held for
sale.
In February 1997, the Company commenced litigation seeking damages for
breaches in connection with a aborted acquisition. The other party has filed
counterclaims. The Company believes the case has merit and there are substantial
defenses to these counterclaims. In light of the preliminary stage of the
proceedings, the Company is unable to assess the likelihood of liability arising
from this action, if any, the amount of any damages that may be assessed against
the Company, and the extent to which any assessed liability will be covered by
the Company's insurance; however, the Company believes the counterclaims to be
without merit.
The Company, along with six others, is a defendant in an action commenced
in November 1996 by Chicago-Dubuque Foundry Corporation and its property
insurer, Employers Mutual Casualty Co. in Iowa state court. The suit concerns a
May 1, 1996 fire that destroyed a Chicago-Dubuque facility located in East
Dubuque, Illinois. According to the complaint, defective products sold by one or
more of the defendants (including, it is alleged, the Company's Anderson
division) to Chicago-Dubuque, or incorporated in products sold by others to
Chicago-Dubuque, caused or contributed to the casualty. The plaintiff has not
yet quantified the amount of damages sought, but its property insurer has stated
that damages for property damage will be in excess of $11 million. No estimate
of economic losses caused by business interruption has been made by any
plaintiff. The Company has placed its insurers on notice of the claim and at
least one insurer has retained legal counsel to defend the Company. In light of
the preliminary stage of the proceedings, the Company is unable to assess the
likelihood of liability in this action, the amount of any damages that may be
assessed against the Company, and the extent to which any assessed liability
will be covered by the Company's insurance.
The Company received a sixty (60) day notice of intent to sue on December
11, 1996 from a California citizens group regarding alleged violations of notice
and labeling requirements under California Proposition 65, a "right to know"
provision intended to give consumers clear and reasonable warnings of the
presence of certain potentially hazardous substances in products. The Company
and the citizens group have signed an agreement tolling the deadline for filing
any lawsuit. The relevant regulations provide that violations of Proposition 65
are subject to civil penalties of up to $2,500 per day retroactive to the
beginning of an alleged violation of Proposition 65. The substance contained in
the Company's products and implicated in the notice of intent to sue has been
listed under Proposition 65 since 1988, and the Company has sold products
containing this substance in California since that time. The Company is
currently conducting fact-finding to determine whether it believes a violation
of Proposition 65 has occurred. If a lawsuit is filed, the Company intends to
defend it vigorously; however, the Company believes, based on results in similar
cases and a preliminary review of the relevant facts, that any such suit could
be settled for substantially less than the maximum penalty available under the
statute. The Company does not believe that it is likely that it will incur
material liability as a result of any lawsuit arising in connection with this
matter.
F-23
<PAGE> 141
HIGH VOLTAGE ENGINEERING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Certain other claims, suits and complaints have been filed or are pending
against the Company. In the opinion of the Company, all matters are adequately
covered by insurance or, if not covered, are without merit or are of such kind,
or involve such amounts, as would not have a material effect on the consolidated
financial position of the Company if disposed of unfavorably. If estimates
change, there is no assurances these items will not require additional accruals
by the Company.
NOTE O -- ACQUISITIONS AND DIVESTITURES
Acquisition - Industrias Jorda, S.L. ("Jorda")
During fiscal year 1995, the Company acquired all the outstanding stock of
Jorda, a Spanish corporation, for approximately $1,843 in cash and $2,023 in
seller notes which bear interest at 7.50% and mature in March 2000.
Jorda primarily manufactures and markets electrical and mechanical gauges
and integrated instrument clusters which are sold throughout Europe. The
acquisition has been accounted for under the purchase method of accounting. The
impact on fiscal year 1995 earnings was not significant.
In connection with the acquisition, the Company entered into a non-compete
and consulting agreements in the amount of approximately $1,280 and $800
respectively (see note D). The acquisition of Jorda was financed in part through
the financing of specific accounts receivables of Jorda amounting to
approximately $2,100 at the acquisition date.
Divestitures of Berger Instruments Division and The Shore Instruments & Mfg.
Co., Inc. Subsidiary
During fiscal year 1995, the Company sold the assets of The Shore
Instruments & Mfg. Co., Inc. subsidiary in exchange for cash proceeds totaling
$2,460. The Company recorded a gain on disposal of $572, net of taxes, including
the write-off of $772 in goodwill.
During fiscal year 1995, the Company sold substantially all of the assets
of the Berger Instruments division in exchange for total consideration of
$1,046, consisting of $125 in cash, an interest bearing promissory note for
$846, and a non-interest bearing promissory note for $75. The Company recorded a
loss on disposal of $903, net of taxes. At April 26, 1997, the outstanding
balance of the promissory note, included in other assets, is $532.
Divestiture of Specialty Connector Company Division
During fiscal year 1996, the Company sold substantially all of the assets
of the Specialty Connector Company division in exchange for cash proceeds
totaling $11,000. The Company recorded a gain on disposal of $1,633, net of
taxes.
Revenues applicable to discontinued operations were approximately $18,791
and $6,900 for the years ended April 29, 1995 and April 27, 1996, respectively.
NOTE P -- SUBSEQUENT EVENTS
Proposed Acquisition
On May 7, 1997, the Company signed an Agreement and Plan of Merger
("Agreement") among the Company, PHI Acquisition Holdings, Inc. ("PHI") and
Chase Venture Capital Associates, L.P., the principal shareholder of PHI
Acquisition Holdings, Inc., that provided subject to financing, the Company will
acquire PHI through a merger of a wholly-owned subsidiary of the Company with
and into PHI Acquisition Holdings, Inc. Under the Agreement, the current
shareholders of PHI will receive in exchange for their stock an aggregate of
$55.5 million in cash plus an amount of income tax refunds, if any, the Company
receives after the closing of the Merger of taxes paid by PHI for periods prior
to the closing of the Merger. In addition, in
F-24
<PAGE> 142
HIGH VOLTAGE ENGINEERING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the event that the closing of the Agreement occurs on or after August 1, 1997,
the former shareholders of PHI shall be entitled to receive an amount in cash
equal to the amount, if any, by which the cash and cash equivalents on the
closing date exceed the cash and cash equivalents of PHI on July 31, 1997.
The $55.5 million paid to the shareholders of PHI will be reduced by the
payment of PHI's debt, certain transaction costs, and contractual payments to
the current and former Chief Executive Officers of PHI.
Proposed Financing
In connection with the proposed acquisition described above, the Company
plans a Rule 144A offering in the amount of $170.2 million consisting of $135.0
million of Senior Notes, due in 2004 and $35.2 million representing 33,000 units
consisting of 33,000 shares of Series A Senior Redeemable Preferred Stock,
warrants to purchase 82.7429 shares of common stock of the Company and 82.7429
shares of common stock of the Company. The Company will also enter into a $25
million revolving credit facility. Both of these proposed financings will close
simultaneously with the proposed acquisition and will be needed to finance the
acquisition, repay certain indebtedness and all existing redeemable Preferred
Stock, repurchase certain existing put warrants, make distributions to Letitia,
extinguish BBC CIP Agreement, pay fees and for general corporate purposes. Upon
consummation of the Rule 144A offering, the Company will charge historical
earnings for premiums, penalties and deferred financing costs related to the
retired indebtedness and purchased research and development acquired in the
acquisition of PHI.
Under the terms of the CIP Agreements, the consent of the CIP holder is
required for consummation of certain transactions, and the Company has sought
such consent. By agreement, dated July 26, 1997, the Company, Letitia and
BancBoston Capital, Inc. ("BBC"), a CIP holder, agreed to the termination of CIP
obligations and other rights in return, effective on the closing of the Rule
144A offering, for a cash payment of $6,750. As a result of the Agreement, the
Company will record a charge of approximately $951 during the three months ended
July 26, 1997.
NOTE Q -- FOREIGN SALES
International sales represented 20%, 26% and 27% of the Company's net sales
in fiscal years 1995, 1996 and 1997, respectively. These sales represented the
combined total of export sales made by United States operations and all sales
made by foreign operations.
Export sales made by United States operations were less than 10% of the
Company's net sales for fiscal years 1995 and 1996, and 13% for fiscal year
1997.
F-25
<PAGE> 143
HIGH VOLTAGE ENGINEERING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes the Company's sales and selected operating
data in different geographic areas:
<TABLE>
<CAPTION>
ADJUSTMENTS
UNITED AND
STATES EUROPE ELIMINATIONS CONSOLIDATED
<S> <C> <C> <C> <C>
FISCAL 1995
Sales to unaffiliated customers.................. $ 104,397 $ 12,154 $116,551
Transfers between geographic locations........... 1,547 84 $ (1,631) --
--------- -------- -------- -------
Net sales........................................ 105,944 12,238 (1,631) 116,551
Income from operations........................... 9,598 (734) 8,864
Identifiable assets.............................. 88,295 17,679 105,974
FISCAL 1996
Sales to unaffiliated customers.................. $ 122,952 $ 26,148 $149,100
Transfers between geographic locations........... 1,939 103 $ (2,042) --
--------- -------- -------- -------
Net sales........................................ 124,891 26,251 (2,042) 149,100
Income from operations........................... 4,362 3,503 7,865
Identifiable assets.............................. 90,771 22,947 113,718
FISCAL 1997
Sales to unaffiliated customers.................. $ 149,065 $ 24,038 $173,103
Transfers between geographic locations........... 1,660 76 $ (1,736) --
--------- -------- -------- -------
Net sales........................................ 150,725 24,114 (1,736) 173,103
Income from operations........................... 7,999 1,668 9,667
Identifiable assets.............................. 94,293 19,294 113,587
</TABLE>
Identifiable assets by geographic area are those assets used in the
Company's operations in each area.
Net assets for European operations amounted to approximately $15,874 as of
April 26, 1997. Included in net assets of European operations were intercompany
payables to affiliated companies amounting to approximately $9,721 as of April
26, 1997.
Insofar as can be reasonably determined, there are no foreign-exchange
restrictions that materially affect the financial position or the operating
results of the Company and its subsidiaries.
F-26
<PAGE> 144
HIGH VOLTAGE ENGINEERING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE R -- SEGMENT DATA
The Company operates in six industry segments. Information concerning
operations in these businesses is as follows (all amounts are from continuing
operations only):
<TABLE>
<CAPTION>
DEPRECIATION
OPERATING IDENTIFIABLE AND CAPITAL
NET SALES INCOME (LOSS) ASSETS AMORTIZATION EXPENDITURES
--------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
YEAR END APRIL 29, 1995
High power electric conversion
products ................... $ 40,406 $ 1,060 $ 30,132 $ 588 6,978
Electrical power connectors .. 19,579 2,041 13,679 891 496
Engine monitoring
instruments ................ 21,514 2,839 21,295 605 492
Disposable medical and
surgical tubing ............ 16,828 2,512 7,657 369 906
Humidity measurement
instruments ................ 10,176 965 4,360 221 195
Corporate and other .......... 8,048 (553) 28,851 406 68
-------- -------- -------- -------- --------
Consolidated ............ $116,551 $ 8,864 $105,974 $ 3,080 9,135
======== ======== ======== ======== ========
YEAR END APRIL 27, 1996
High power electric conversion
products ................... $ 56,145 $ (265) $ 40,580 $ 569 $ 1,142
Electrical power connectors .. 21,509 4,628 13,659 612 1,090
Engine monitoring
instruments ................ 32,514 2,378 21,338 1,474 492
Disposable medical and
surgical tubing ............ 17,101 1,024 9,885 532 2,666
Humidity measurement
instruments ................ 12,093 1,456 5,133 225 379
Corporate and other .......... 9,738 (1,356) 23,123 172 190
-------- -------- -------- -------- --------
Consolidated ............ $149,100 $ 7,865 $113,718 $ 3,584 $ 5,959
======== ======== ======== ======== ========
YEAR END APRIL 26, 1997
High power electric conversion
products ................... $ 83,096 $ 5,592 $ 41,849 $ 591 $ --
Electrical power connectors .. 21,554 1,907 15,049 833 1,794
Engine monitoring
instruments ................ 32,482 2,676 20,457 1,662 1,261
Disposable medical and
surgical tubing ............ 15,227 531 8,938 797 360
Humidity measurement
instruments ................ 12,256 1,662 4,827 254 287
Corporate and other .......... 8,488 (2,701) 22,467 239 1,308
-------- -------- -------- -------- --------
Consolidated ............ $173,103 $ 9,667 $113,587 $ 4,376 $ 5,010
======== ======== ======== ======== ========
</TABLE>
F-27
<PAGE> 145
INDEPENDENT AUDITORS' REPORT
The Board of Directors
PHI Acquisition Holdings, Inc.:
We have audited the accompanying consolidated balance sheets of PHI
Acquisition Holdings, Inc. and subsidiaries as of June 28, 1996 and June 30,
1995, and the related consolidated statements of operations, stockholders'
equity, and cash flows for the years then ended. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of PHI
Acquisition Holdings, Inc. and subsidiaries as of June 28, 1996 and June 30,
1995, and the results of their operations and their cash flows for the years
then ended, in conformity with generally accepted accounting principles.
Minneapolis, Minnesota KPMG Peat Marwick LLP
August 9, 1996
F-28
<PAGE> 146
PHI ACQUISITION HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1995, JUNE 28, 1996, AND MARCH 28, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
(UNAUDITED)
1995 1996 1997
------------ ------------ ------------
ASSETS
<S> <C> <C> <C>
Current assets:
Cash ............................................... $ 4,469,000 $ 437,900 $ 2,647,000
Trade accounts receivable, net of allowance for
doubtful accounts of $275,000 in 1995, $246,800 in
1996, and $176,000 in 1997 ....................... 8,237,000 14,663,000 13,337,000
Inventories, net (note 2) .......................... 11,745,000 13,539,500 15,901,000
Other receivable ................................... 188,000 -- --
Prepaid expenses and other current assets .......... 1,132,400 714,300 336,000
Deferred income tax asset .......................... -- 54,500 288,000
------------ ------------ ------------
Total current assets ........................ 25,771,400 29,409,200 32,509,000
------------ ------------ ------------
Property, plant, and equipment, net (note 3) ......... 10,994,000 9,753,000 9,850,000
Investment in joint venture .......................... 2,463,000 2,044,000 1,896,000
Other non-current assets ............................. 24,000 566,000 531,000
Deferred income tax asset ............................ -- -- 44,000
------------ ------------ ------------
Total assets ................................ $ 39,252,400 $ 41,772,200 $ 44,830,000
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt (note 8) .... $ 1,417,000 $ 2,250,000 $ 2,250,000
Accounts payable ................................... 1,876,500 2,390,900 3,208,390
Income tax payable ................................. -- 770,200 1,245,000
Accrued expenses (note 4) .......................... 1,474,000 1,531,800 1,509,000
Accrued wages and benefits ......................... 3,257,000 2,606,000 2,879,000
Warranty accrual ................................... 1,363,000 1,128,000 954,000
Installation reserve ............................... 29,000 297,000 304,000
Deferred revenues (note 5) ......................... 1,909,000 2,298,000 2,623,000
Other current liabilities .......................... -- 100,000 100,000
Deferred income tax liability ...................... 323,000 -- --
------------ ------------ ------------
Total current liabilities ................... 11,648,500 13,371,900 15,072,390
Pension liability .................................... 457,000 705,000 660,000
Long-term debt, less current installments (note 8) ... 10,250,000 7,269,000 6,145,000
Note payable to seller (note 9) ...................... 8,001,000 8,796,000 9,456,000
Other long-term liabilities .......................... -- 101,000 --
Deferred income tax liability ........................ 59,700 117,000 --
------------ ------------ ------------
Total liabilities ........................... 30,416,200 30,359,900 31,333,390
------------ ------------ ------------
Stockholders' equity:
Capital stock (note 11) ............................ 16,526 16,504 16,504
Additional paid-in capital (note 11) ............... 7,033,474 7,096,906 7,519,906
Retained earnings .................................. 1,663,200 4,638,500 6,432,200
Foreign currency translation adjustment ............ 123,000 (339,610) (472,000)
------------ ------------ ------------
Total stockholders' equity .................. 8,836,200 11,412,300 13,496,610
Commitments and contingencies
(notes 6, 7, 8, 9, 12, and 13)...................... ------------ ------------ ------------
Total liabilities and stockholders' equity .. $ 39,252,400 $ 41,772,200 $ 44,830,000
============ ============ ============
</TABLE>
See accompanying notes to the consolidated financial statements.
F-29
<PAGE> 147
PHI ACQUISITION HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THE YEARS ENDED JUNE 30, 1995, JUNE 28, 1996,
AND THE NINE-MONTH PERIOD ENDED MARCH 28, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
NINE
MONTHS
ENDED
MARCH 28,
FISCAL FISCAL 1997
1995 1996 (UNAUDITED)
------------ ------------ ------------
<S> <C> <C> <C>
Net sales .................................... $ 54,764,000 $ 58,074,000 $ 45,124,000
Cost of sales ................................ 34,244,000 35,740,500 27,948,000
------------ ------------ ------------
Gross profit ....................... 20,520,000 22,333,500 17,176,000
------------ ------------ ------------
Selling, general, and administrative expenses:
Selling and marketing ...................... 7,071,000 7,349,500 5,588,000
General and administrative ................. 2,303,000 2,696,400 2,085,000
Research and development ................... 6,197,000 6,332,600 5,837,000
------------ ------------ ------------
Total operating expenses ........... 15,571,000 16,378,500 13,510,000
------------ ------------ ------------
Equity in earnings of joint venture .......... 337,000 206,000 124,000
------------ ------------ ------------
Operating income ................... 5,286,000 6,161,000 3,790,000
------------ ------------ ------------
Interest expense ........................... (1,855,000) (1,827,000) (1,310,000)
Interest income ............................ 89,000 137,000 19,000
------------ ------------ ------------
Income before income taxes ......... 3,520,000 4,471,000 2,499,000
Income tax expense (note 6) .................. 812,300 1,495,700 705,300
------------ ------------ ------------
Net income ......................... $ 2,707,700 $ 2,975,300 $ 1,793,700
------------ ------------ ------------
Net income per share ............... $ 2.14 $ 2.22 $ 1.34
------------ ------------ ------------
Weighted average shares outstanding .......... 1,266,965 1,337,511 1,337,394
============ ============ ============
</TABLE>
See accompanying notes to the consolidated financial statements.
F-30
<PAGE> 148
PHI ACQUISITION HOLDINGS, INC. AND SUBSIDIARIES
STATEMENT OF STOCKHOLDERS' EQUITY
THE YEARS ENDED JUNE 28, 1996, JUNE 30, 1995, AND
THE NINE-MONTH PERIOD ENDED MARCH 28, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C PREFERRED STOCK
------------------ ----------------- ----------------- ------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------- ------- ------- ------ ------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, July 1, 1994........... 398,070 $ 3,981 398,070 $3,981 203,860 $2,038 600,000 $6,000
Net income for the fiscal year
ended June 30, 1995.........
Gain (loss) on currency
translation.................
Sales of common and preferred 206,410 2,064
stock.......................
Repurchase of common and
preferred stock............. (206,410) (2,064)
Shares issued upon conversion
of convertible note......... 52,632 526
------- ------- ------- ------ ------- ------ ------- ------
Balance June 30, 1995......... 191,660 1,917 398,070 3,981 462,902 4,628 600,000 6,000
Net income for the fiscal year
ended June 28, 1996.........
Gain (loss) on currency
translation.................
Repurchase of common and
preferred stock............. (1,430) (13) (857) (9)
Compensation expense
associated with granting of
options.....................
------- ------- ------- ------ ------- ------ ------- ------
Balance, June 28, 1996.......... 191,660 1,917 398,070 3,981 461,472 4,615 599,143 5,991
Net income for the nine
months ended March 28,
1997 (unaudited)............
Gain (loss) on currency
translation (unaudited)
Compensation expense
associated with granting of
options (unaudited)........
------- ------- ------- ------ ------- ------ ------- ------
Balance, March 28, 1997
(Unaudited)................... 191,660 $ 1,917 398,070 $3,981 461,472 $4,615 599,143 $5,991
======= ======= ======= ====== ======= ====== ======= ======
</TABLE>
<TABLE>
<CAPTION>
ADDITIONAL ADDITIONAL RETAINED FOREIGN
PAID-IN PAID-IN EARNINGS CURRENCY TOTAL
CAPITAL CAPITAL (ACCUMULATED TRANSLATION STOCKHOLDERS'
COMMON PREFERRED DEFICIT) ADJUSTMENT EQUITY
---------- ---------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Balance, July 1, 1994........... $ 990,000 $5,994,000 $(1,044,500) $ 62,000 $ 6,017,500
Net income for the fiscal year
ended June 30, 1995......... 2,707,700 2,707,700
---------- ---------- ----------- ---------- ------------
Gain (loss) on currency
translation................. 61,000 61,000
Sales of common and preferred
stock....................... 2,064
---------- ---------- ----------- ---------- ------------
Repurchase of common and
preferred stock............. (2,064)
Shares issued upon conversion
of convertible note......... 49,474 50,000
---------- ---------- ----------- ---------- ------------
Balance June 30, 1995......... 1,039,474 5,994,000 1,663,200 123,000 8,836,200
Net income for the fiscal year
ended June 28, 1996......... 2,975,300 2,975,300
---------- ---------- ----------- ---------- ------------
Gain (loss) on currency
translation................. (462,610) (462,610)
Repurchase of common and
preferred stock............. (6,953) (9,615) (16,590)
Compensation expense
associated with granting of
options..................... 80,000 80,000
---------- ---------- ----------- ---------- ------------
Balance, June 28, 1996.......... 1,112,521 5,984,385 4,638,500 (339,610) 11,412,300
Net income for the nine
months ended March 28,
1997 (unaudited)............ 1,793,700 1,793,700
Gain (loss) on currency
translation (unaudited)..... (132,390) (132,390)
Compensation expense
associated with granting of
options (unaudited)......... 423,000 423,000
---------- ---------- ----------- ---------- ------------
Balance, March 28, 1997
(Unaudited)................... $1,535,521 $5,984,385 $ 6,432,200 $ (472,000) $ 13,496,610
========== ========== =========== ========== ============
</TABLE>
See accompanying notes to the consolidated financial statements.
F-31
<PAGE> 149
PHI ACQUISITION HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THE YEARS ENDED JUNE 30, 1995, JUNE 28, 1996 AND
THE NINE-MONTH PERIOD ENDED MARCH 29, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
(UNAUDITED)
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Cash provided by operating activities:
Net income ...................................... $ 2,707,700 $ 2,975,300 $ 1,793,700
Adjustments to reconcile net income to net cash
(used) provided by operating activities:
Depreciation, amortization, and other noncash
transactions ............................... 2,115,000 2,225,000 2,116,000
Net (gain) or loss on disposal of fixed assets (238,000) (1,167,000) (706,000)
Cumulative translation adjustment ............ 61,000 (463,000) (132,390)
Deferred income taxes ........................ 603,200 (320,200) (340,500)
Changes in operating assets and liabilities:
Trade accounts receivable .................. (1,294,000) (6,426,000) 1,326,000
Inventories ................................ (1,100,000) (1,794,500) (2,361,500)
Other receivable ........................... (21,000) 188,000 0
Prepaid expenses and other current assets .. (694,400) 217,100 324,300
Other noncurrent assets .................... 0 (341,000) 35,000
Accounts payable ........................... 46,500 514,400 817,490
Income tax payable ......................... (5,000) 770,200 474,800
Accrued expenses ........................... (218,000) 57,800 (22,800)
Accrued wages and benefits ................. 1,105,000 (651,000) 273,000
Warranty reserve ........................... 322,000 (235,000) (174,000)
Installation reserve ....................... 2,000 268,000 7,000
Deferred revenues .......................... (30,000) 389,000 325,000
Other current liabilities .................. 0 100,000 0
Other long-term liabilities ................ 0 101,000 (101,000)
Pension liability .......................... 260,000 248,000 (45,000)
----------- ----------- -----------
Net cash (used) provided by operating
activities ............................ 3,622,000 (3,343,900) 3,609,100
----------- ----------- -----------
Cash used in investing activities:
Proceeds from sale of land ...................... -- 1,440,000 --
Net proceeds from sale of Demo Systems .......... 366,000 1,637,000 1,040,000
Purchase of property, plant, and equipment ...... (2,596,000) (2,813,600) (2,124,000)
Investment in joint venture ..................... (614,000) 419,000 148,000
----------- ----------- -----------
Net cash (used) provided by investing
activities ................................. (2,844,000) 682,400 (936,000)
----------- ----------- -----------
Cash used in financing activities:
Purchase of common and preferred stock .......... -- (16,600) --
Proceeds from issuance of note payable .......... 50,000 0 --
Increase in note payable to seller (note 9) ..... 732,000 795,000 660,000
Repayments of note payable ...................... (333,000) (2,148,000) (1,124,000)
----------- ----------- -----------
Net cash (used) provided in financing
activities ................................. 449,000 (1,369,600) (464,000)
----------- ----------- -----------
Net (decrease) increase in cash and cash
equivalents ..................................... 1,227,000 (4,031,100) 2,209,100
Cash and cash equivalents at beginning of period .. 3,242,000 4,469,000 437,900
----------- ----------- -----------
Cash and cash equivalents at end of period ........ $ 4,469,000 $ 437,900 $ 2,647,000
=========== =========== ===========
Supplemental disclosure of cash information:
Cash paid during the period for interest ........ $ 1,043,000 $ 809,000 $ 661,000
Cash paid during the period for income taxes .... 922,000 375,000 625,000
Supplemental schedule of noncash investing and
financing activities:
Conversion of note payable to Class C common
stock ........................................ 52,632 -- --
</TABLE>
See accompanying notes to the consolidated financial statements.
F-32
<PAGE> 150
PHI ACQUISITION HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 28, 1996, AND JUNE 30, 1995
AND MARCH 28, 1997 (UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
PHI Acquisition Holdings, Inc. (PHI or the Company) was formed on March 10,
1994 to acquire certain assets and assume certain liabilities of the Physical
Electronics Division of the Perkin Elmer Corporation (Perkin Elmer). Physical
Electronics, Inc. (Physical Electronics), a wholly owned subsidiary of PHI, was
also formed on March 10, 1994 to serve as the operating company under PHI.
Physical Electronics designs, manufactures, installs, and services surface
analysis instrument systems and ultrahigh vacuum equipment in North America,
Japan, and Europe.
The consolidated financial statements include the accounts of PHI, Physical
Electronics, and Physical Electronics' wholly owned subsidiaries, Physical
Electronics GmbH, Physical Electronics S.A.R.L., and Physical Electronics FSC,
Inc. All significant intercompany accounts have been eliminated in
consolidation.
UNAUDITED INTERIM INFORMATION
The financial statements and related footnote information as of March 28,
1997 and for the nine-month period ended March 28, 1997 are unaudited. In the
opinion of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation of such unaudited periods have been
included herein.
INVESTMENT IN JOINT VENTURE
The Company owns a 50% interest in a joint venture which operates in Japan.
The joint venture is responsible for sales and service of the Company's products
in Japan.
FISCAL YEAR END
The Company's fiscal year end is the Friday closest to June 30. The period
end for the nine months of fiscal 1997 was March 28, the year end for fiscal
1996 was June 28, and for 1995 was June 30.
INVENTORIES
As of March 28, 1997, June 28, 1996, and June 30, 1995, inventory is stated
at lower of cost (first in, first out method) or market.
CREDIT CONCENTRATIONS
The Company extends unsecured credit to customers in North America, Europe,
and to its joint venture in Japan. Other international customers normally
provide irrevocable letters of credit.
PROPERTY AND EQUIPMENT
Property and equipment are stated at fair market value at the date of
acquisition. Depreciation and amortization is computed on a straight-line basis
over the estimated useful lives of the assets. Maintenance, repairs, and minor
renewals are expensed as incurred.
The Company maintains a laboratory used primarily for demonstrations of the
Company's products to potential customers. Investment in the Company's products
used in this laboratory is capitalized and depreciated over its useful life. In
the normal course of business, the Company replaces older technology as new
technology is introduced at which time product is sold and revenue and cost of
sales are recognized.
F-33
<PAGE> 151
PHI ACQUISITION HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Depreciation and amortization is computed using the following estimated
useful lives:
<TABLE>
<CAPTION>
USEFUL LIVES
------------
<S> <C>
Buildings and leasehold improvements..................... 5-40 years
Machinery and equipment.................................. 3-15 years
</TABLE>
INCOME TAXES
The Company accounts for income taxes under provisions of Financial Account
Standard No. 109, Accounting for Income Taxes (Statement No. 109). Under
Statement No. 109, deferred income taxes are recognized for the temporary
differences between the financial statement carrying amounts and the tax basis
of existing assets and liabilities. Deferred taxes are measured using enacted
tax rates expected to be in effect when those temporary differences are expected
to be included in future taxable income.
REVENUE RECOGNITION
Revenue is recognized upon shipment or upon delivery, depending upon
negotiated terms of sale.
Revenue from service contracts and customer training is recognized over the
terms of the contracts and as the training services are performed.
RESEARCH AND DEVELOPMENT
Research and development costs are expensed as incurred.
FOREIGN CURRENCY TRANSLATION
Exchange adjustments resulting from foreign currency transactions are
generally recognized in net earnings, whereas adjustments resulting from the
translation of financial statements, if material, are reflected as a separate
component of stockholders' equity. Net foreign currency transaction gains or
losses are not significant.
STATEMENTS OF CASH FLOWS
For purposes of the statements of cash flows, the Company considers all
highly liquid debt instruments purchased with an original maturity of three
months or less to be cash equivalents.
ACCOUNTING ESTIMATES
The presentation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments are recorded on its consolidated
balance sheet. The carrying amount for cash, accounts receivable, accounts
payable, and accrued expenses approximates fair value due to the immediate or
short-term maturity of these financial instruments. The fair value of notes
receivable and notes payable approximate their carrying value.
F-34
<PAGE> 152
PHI ACQUISITION HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
STOCK-BASED EMPLOYEE COMPENSATION
The Company follows the provisions of APB Opinion No. 25, Accounting for
Stock Issued to Employees, in accounting for all of its stock-based employee
compensation arrangements. Under the guidelines of Opinion 25, compensation cost
for stock-based employee compensation plans is recognized based on the
difference, if any, between the quoted or estimated market price of the stock on
the date of grant and the amount an employee must pay to acquire the stock. The
Company plans to implement the disclosure requirements of Statement of Financial
Accounting Standards No. 123, Accounting for Stock-Based Compensation, in fiscal
year 1997 and to retain its current accounting method for stock-based employee
compensation.
NET INCOME PER SHARE
Net income per share has been calculated using the weighted average of
common stock outstanding and dilutive common stock equivalents determined by the
treasury stock method.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to the 1997
presentation. Such reclassifications had no impact on net earnings and
stockholders' equity.
(2) INVENTORIES
Inventories are summarized as follows:
<TABLE>
<CAPTION>
(UNAUDITED)
JUNE 30, JUNE 28, MARCH 28,
1995 1996 1997
------------ ------------ ------------
<S> <C> <C> <C>
Raw materials and subassemblies..... $ 7,451,000 $ 9,806,500 $ 9,789,000
Work-in-process..................... 3,533,000 3,733,000 6,112,000
Finished goods...................... 761,000 -- --
------------ ------------ ------------
$ 11,745,000 $ 13,539,500 $ 15,901,000
============ ============ ============
</TABLE>
(3) PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment is summarized as follows:
<TABLE>
<CAPTION>
(UNAUDITED)
JUNE 30, JUNE 28, MARCH 28,
1995 1996 1997
------------ ----------- ------------
<S> <C> <C> <C>
Land................................... $ 1,913,000 $ 556,000 $ 556,000
Buildings and leasehold improvements... 4,002,000 4,012,000 4,025,000
Machinery and equipment................ 7,232,000 9,095,000 10,370,000
Less accumulated depreciation.......... (2,153,000) (3,910,000) (5,101,000)
------------ ----------- ------------
$ 10,994,000 $ 9,753,000 $ 9,850,000
============ =========== ============
</TABLE>
F-35
<PAGE> 153
PHI ACQUISITION HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(4) ACCRUED EXPENSES
Accrued expenses are summarized as follows:
<TABLE>
<CAPTION>
(UNAUDITED)
JUNE 30, JUNE 28, MARCH 28,
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Commissions ....................... $ 65,000 $ 233,000 $ 52,000
Audit and tax fees ................ 117,000 126,000 104,000
Interest payable .................. -- 148,000 130,000
Sales and real estate taxes ....... 141,000 252,000 122,000
Customer deposits ................. 430,000 342,000 800,000
Acquisition costs ................. 221,000 -- --
Other ............................. 500,000 430,800 301,000
---------- ---------- ----------
$1,474,000 $1,531,800 $1,509,000
========== ========== ==========
</TABLE>
(5) DEFERRED REVENUES
<TABLE>
<CAPTION>
(UNAUDITED)
JUNE 30, JUNE 28, MARCH 28,
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Service contracts ................. $1,455,000 $1,862,000 $2,259,000
Customer training ................. 454,000 436,000 364,000
---------- ---------- ----------
Total deferred revenue ...... $1,909,000 $2,298,000 $2,623,000
========== ========== ==========
</TABLE>
(6) INCOME TAXES
Income tax expense for the periods ended June 28, 1996, and June 30, 1995
and the nine months ended March 28, 1997 consists of the following:
<TABLE>
<CAPTION>
FEDERAL STATE TOTAL
----------- ----------- -----------
<S> <C> <C> <C>
1997 (unaudited):
Current ............... $ 983,900 $ 115,700 $ 1,099,600
Deferred .............. (335,200) (59,100) (394,300)
----------- ----------- -----------
$ 648,700 56,600 705,300
----------- ----------- -----------
1996:
Current ............... 1,625,000 191,200 1,816,200
Deferred .............. (272,400) (48,100) (320,500)
----------- ----------- -----------
$ 1,352,600 143,100 1,495,700
----------- ----------- -----------
1995:
Current ............... 807,000 142,400 949,400
Deferred .............. (116,500) (20,600) (137,100)
----------- ----------- -----------
$ 690,500 $ 121,800 $ 812,300
=========== =========== ===========
</TABLE>
The provision for income taxes differs from the amount computed by applying
the statutory U.S. federal income tax rate to the income or loss before income
taxes due to the impact of state income taxes, the change in the valuation
reserve, and the impact of the purchase price allocation which occurred on May
20, 1994.
F-36
<PAGE> 154
PHI ACQUISITION HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A reconciliation of the expected federal income taxes at the statutory rate
of 34% with the provision of income taxes is as follows:
<TABLE>
<CAPTION>
(UNAUDITED)
NINE
MONTHS
TWELVE MONTHS ENDED ENDED
------------------------------- ---------
1995 1996 1997
----------- ----------- ---------
<S> <C> <C> <C>
Expected federal tax expense .............. $ 1,196,800 $ 1,518,400 $ 849,700
State income tax expense, net of federal
effect .................................. 140,800 171,400 84,700
Permanent differences ..................... (314,682) (64,600) (145,900)
Differences due to general business credits -- (131,900) (100,000)
Purchase accounting adjustment ............ (281,000) -- --
Other ..................................... 70,382 2,400 16,800
----------- ----------- ---------
$ 812,300 $ 1,495,700 $ 705,300
=========== =========== =========
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets (liabilities) are as follows:
<TABLE>
<CAPTION>
(UNAUDITED)
JUNE 30, JUNE 28, MARCH 28,
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Current deferred asset (liability):
Inventories ............................. $ 42,000 $ 150,100 $ 258,800
Warranty accrual ........................ 387,300 325,500 232,800
Accrued expenses ........................ (147,000) 272,000 364,200
Deferred revenue ........................ (605,300) (977,700) (902,200)
Net operating loss carryforward ......... 41,700 -- --
Other assets ............................ -- 408,100 486,400
Other liabilities ....................... -- (123,500) (152,000)
--------- --------- ---------
Total current gross deferred tax asset
(liabilities) ...................... (281,300) (54,500) 288,000
Less valuation allowance .................. (41,700) -- --
--------- --------- ---------
Net current deferred tax asset
(liability) ........................ $(323,000) $ (54,500) $ 288,000
========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
(UNAUDITED)
JUNE 30, JUNE 28, MARCH 28,
1995 1996 1997
-------- --------- ---------
<S> <C> <C> <C>
Noncurrent deferred tax asset (liability):
Differences in tax and adjusted book basis in
plant and equipment ...................... $(59,700) $(116,700) $(116,700)
Employee stock options ...................... -- -- 160,700
-------- --------- ---------
Net noncurrent deferred tax asset
(liability) ............................ $(59,700) $(116,700) $ 44,000
======== ========= =========
</TABLE>
Certain of the temporary differences noted above arose due to differences in
the tax and book purchase price allocation which occurred on May 20, 1994.
The activity related to the valuation allowance is as follows:
<TABLE>
<S> <C>
Valuation allowance at June 30, 1995 .................... $ 41,700
Decrease in valuation allowance ......................... (41,700)
--------
Valuation allowance at June 30, 1996 .................... $ --
========
</TABLE>
F-37
<PAGE> 155
PHI ACQUISITION HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company has a net operating loss carryover for tax purposes of
approximately $0 and $104,000, at June 28, 1996 and June 30, 1995, respectively.
A valuation allowance for the tax asset related to any benefit for the
carryforward was established at July 1, 1994.
(7) CREDIT AGREEMENT
The Company has a $17,000,000 credit agreement with First Bank National
Association with a $12,000,000 note payable and a $5,000,000 line of credit. The
line of credit and the note payable to bank (note 8) are secured by
substantially all of the Company's assets and have the same restrictive
covenants and termination date. Such covenants restrict debt and lease
financing, annual capital expenditures, dividends, management's compensation,
and the sale of assets, and requires the Company to meet certain financial
results and financial ratios as defined in the agreement. Borrowings under the
line of credit are subject to borrowing base restrictions and bear interest,
payable monthly, at either 2.0% over the bank's reference rate or 3.0% over
LIBOR. The Company has the potential to have decreases in the interest rate
based on future operations. On March 28, 1997, June 28, 1996, and June 30, 1995,
the effective rate was 8.59%, 7.98%, and 9.05%, respectively. At March 28, 1997,
June 28, 1996, and June 30, 1995, the balance outstanding on the line of credit
was $0, $261,000, and $61,650, respectively.
(8) LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
(UNAUDITED)
JUNE 28, JUNE 30, MARCH 28,
1995 1996 1997
------------ ----------- -----------
<S> <C> <C> <C>
Note payable to bank with interest payable monthly .
Principal due in three installments during fiscal
1995 and in quarterly installments thereafter
through June 30, 2000. The installments range from
approximately $333,000 to $875,000. The agreement
has the same interest rate and covenants as the
line of credit (note 7) .......................... $ 11,667,000 $ 9,519,000 $ 8,395,000
Less current installments .......................... (1,417,000) (2,250,000) (2,250,000)
------------ ----------- -----------
Long-term debt, less current installments ........ $ 10,250,000 $ 7,269,000 $ 6,145,000
============ =========== ===========
</TABLE>
The minimum annual maturities of long-term debt as of July 1, 1996 are as
follows:
<TABLE>
<S> <C>
1997 ................................................... $2,250,000
1998 ................................................... 2,500,000
1999 ................................................... 3,125,000
2000 ................................................... 1,644,000
----------
$9,519,000
==========
</TABLE>
(9) NOTE PAYABLE TO SELLER
In connection with the business acquisition described in note 1, the Company
entered into a convertible subordinated promissory note with Perkin Elmer. The
outstanding balance of $9,456,000 is due on May 20, 2001. The accrued interest
compounds annually at a rate of 10%. Interest payments begin 100 days following
the end of the fiscal year ending June 30, 1998, and are made annually
thereafter. The note is convertible into 253,843 shares of Class B common stock
of the Company upon consummation of a sale of the business or after May 21,
1997.
F-38
<PAGE> 156
PHI ACQUISITION HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(10) LEASES
As of June 30, 1996, minimum annual lease payments, under noncancelable
operating leases with initial and remaining lease payments in excess of one year
are as follows:
1997 ............................................. $ 588,000
1998 ............................................. 351,000
1999 ............................................. 257,000
----------
Total minimum lease payments ........... $1,196,000
==========
Rental expense for all operating leases for the nine-month period ended
March 28, 1997, the years ended June 28, 1996, and June 30, 1995 were $801,000,
$829,000, and $583,000, respectively.
(11) CAPITAL STOCK AND ADDITIONAL PAID-IN CAPITAL
Capital stock consists of the following:
<TABLE>
<CAPTION>
JUNE 28, JUNE 30,
1995 1996
---------- ----------
<S> <C> <C>
Class A common stock; $.01 par value. Authorized 1,000,000 shares; $ 1,917 $ 1,917
issued and outstanding 191,660 shares in 1997, 191,660 shares in
1996, 191,660 shares in 1995, and 398,070 shares in 1994 ........
---------- ----------
Class B common stock; $.01 par value. Authorized 1,000,000 shares; $ 3,981 $ 3,981
issued and outstanding 398,070 shares ...........................
---------- ----------
Class C common stock; $.01 par value. Authorized 1,000,000 shares; $ 4,628 $ 4,615
issued and outstanding 461,472 shares in 1997, 461,472 shares in
1996, 462,902 shares in 1995, and 203,860 in 1994 ...............
---------- ----------
Additional paid-in capital on common stock ........................ $1,039,474 $1,112,521
========== ==========
Series A 10% redeemable cumulative preferred stock; $.01 par value. $ 6,000 $ 5,991
Authorized 700,000 shares; issued and outstanding 599,143 shares
in 1997, 599,143 shares in 1996, 600,000 shares in 1995, and
600,000 shares in 1994 ..........................................
---------- ----------
Additional paid-in capital on preferred stock ..................... $5,994,000 $5,984,385
========== ==========
</TABLE>
The Class A, B, and C common stock have the same powers, preferences, and
rights except for the following: Voting, Class A and B common stock each have
one vote per share. Class C common stock has no voting rights. As to the board
of directors, Class A common stockholders have the right to elect 3 directors
and Class B common stockholders have the right to elect 4 directors. Class C
common stockholders do not have the right to participate in any director
elections. The designations, voting powers, and preferences of the preferred
stock shall be established by resolution of the board of directors.
(12) EMPLOYEE BENEFITS
Prior to May 20, 1994, employees participated in the Perkin Elmer pension
plan. Active participation in this plan ended on May 20, 1994 with the
participants' accrued benefits remaining in the Perkin Elmer plan. On July 1,
1994 PHI implemented a 401(k) plan. In lieu of a pension plan, the Company
contributes an amount equal to 2% of the employee's compensation to their
respective 401(k) account. In addition, employees can contribute up to 15% of
their eligible compensation to the plan. The Company will match 100% of each
employee's contribution up to 3% of the employee's eligible compensation. Total
expense under this plan was $642,000 in 1997.
F-39
<PAGE> 157
PHI ACQUISITION HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(13) PENSION PLAN
The Company's wholly-owned subsidiary, Physical Electronics, GmbH, has a
defined benefit pension plan which is covered by a group insurance policy. The
plan covers 18 employees. The benefits are based upon the number of years
service and the employee's past compensation.
The following table sets forth the plan's funded status as of June 28, 1996,
and the net periodic pension expense for the year then ended. The Company
adopted FASB #87 treatment in the year ended June 28, 1996.
<TABLE>
<S> <C>
Actuarial present value of benefit obligations:
Vested ............................................. $399,371
Nonvested .......................................... 109,997
--------
Accumulated benefit obligation .................. 509,368
Effect of projected future salary increases .......... 196,198
--------
Projected benefit obligation .................... 705,566
Plan assets at market value .......................... --
--------
Unfunded status ................................. 705,566
Unamortized transition amount ........................ 213,509
Unrecognized net gain ................................ --
Unrecognized prior service cost ...................... --
--------
Pension liability ............................... $492,057
========
Asset value of group insurance policy ................ $103,822
========
</TABLE>
Net pension expense includes the following components:
<TABLE>
<CAPTION>
YEAR-ENDED
JUNE 28,
1996
----------
<S> <C>
Service cost -- benefits earned during the period ..... $ 79,449
Interest cost on projected benefit obligation ......... 51,832
Actual gain of plan assets ............................ --
Amortization of transition amount ..................... 12,448
Amortization of unrecognized service cost ............. --
Amortization of unrecognized net gain ................. --
--------
Net pension expense ................................. $143,729
========
</TABLE>
Measurement of the 1996 projected benefit obligation was based on a 7.0%
discount rate and a 4% long-term rate of compensation increase.
(14) EMPLOYEE STOCK PURCHASE AND STOCK OPTION PLAN
On May 16, 1994, the Company established an Employee Stock Purchase and
Stock Option Plan. The plan gives key employees rights to acquire specific
numbers of Class C common stock at $1 per share and Series A preferred stock at
$10 per share. The plan also includes a feature to provide employees with
options to purchase additional Class C common stock. The Plan was modified on
October 28, 1994 to increase the number of shares.
F-40
<PAGE> 158
PHI ACQUISITION HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The rights to acquire Class C common stock and Series A preferred stock
exist for the various participants in two distinct offering periods. The first
offering period began May 16, 1994 and ended on November 15, 1994. The second
offering period began on June 2, 1995 and ended June 16, 1995. The two tables
below summarize the activity related to the rights to acquire stock.
To fund this plan, the Company acquired Class A common shares from its
majority shareholder, retired those shares, and issued Class C common shares to
plan participants.
Class C common stock activity under this plan is summarized as follows:
<TABLE>
<CAPTION>
SHARES
AVAILABLE FOR
PURCHASE
-------------
<S> <C>
Establishment of plan ................................................ 271,429
Shares purchased ..................................................... (129,570)
--------
Shares available for purchase on May 20, 1994 .............. 141,859
Shares purchased ..................................................... --
--------
Shares available for purchase on July 1, 1994 .............. 141,859
Increase in number of shares available as a result of October 28, 1994
amendment .......................................................... 100,571
Shares purchased ..................................................... (242,130)
--------
Shares not purchased at expiration of plan ........................... 300
--------
Shares available for purchase on June 30, 1995 ............. --
========
</TABLE>
Series A preferred stock activity under this plan is summarized as follows:
<TABLE>
<CAPTION>
SHARES
AVAILABLE FOR
PURCHASE
-------------
<S> <C>
Establishment of plan ................................................ 162,857
Shares purchased ..................................................... (77,743)
--------
Shares available for purchase on May 20, 1994 .............. 85,114
Shares purchased ..................................................... --
--------
Shares available for purchase on July 1, 1994 .............. 85,114
Increase in number of shares available as a result of October 28, 1994
amendment .......................................................... 60,463
Shares purchased ..................................................... (145,274)
--------
Shares not purchased at expiration of plan ........................... 303
--------
Shares available for purchase on June 30, 1995 ............. --
========
</TABLE>
All preferred shares purchased under this plan were acquired by the Company
from its majority shareholder.
The stock options awarded under this plan will be based upon the operating
results for each of the five fiscal years 1995 through 1999. During the year
ended June 28, 1996, the Company granted 22,223 options and recognized $80,000
compensation expense which represents the difference between fair market value
and exercise prices at the date of grant.
F-41
<PAGE> 159
PHI ACQUISITION HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Class C common stock option activity under this plan is summarized as
follows:
<TABLE>
<CAPTION>
OPTION PRICE AVAILABLE
PER SHARE OUTSTANDING FOR GRANT
------------ ----------- ---------
<S> <C> <C> <C>
Establishment of plan ...................... $1.00 -- 111,115
Options granted ............................ -- -- --
----- ------ -------
Options available for grant at July 1, 1994 1.00 -- 111,115
Options granted ............................ -- -- --
----- ------ -------
Options available for grant at June 30, 1995 1.00 -- 111,115
Options granted ............................ 1.00 22,223 88,892
----- ------ -------
Options available for grant at June 28, 1996 $1.00 -- 88,892
===== ====== =======
</TABLE>
In connection with the Charles Evans & Associates acquisition, a stock
option plan was established which gives certain key employees the right to
purchase up to 58,480 shares of Class C common stock at $1 per share. 11,696
options were granted during the year ended June 28, 1996 and the Company
recognized $28,000 compensation expense.
(15) FOREIGN SALES
International sales represented 52%, 54%, and 48% of the Company's net sales
for the nine-month period ended March 28, 1997, and the years ended June 28,
1996 and June 30, 1995, respectively. These sales represented the combined total
of export sales made by United States operations and all sales made by foreign
operations.
Export sales made by United States operations were 43%, 43%, and 37% of the
Company's net sales for the nine-month period ended March 28, 1997, and the
years ended June 28, 1996 and June 30, 1995, respectively.
F-42
<PAGE> 160
PHI ACQUISITION HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes the Company's sales and selected operating
data in different geographic areas (amounts in thousands):
<TABLE>
<CAPTION>
EUROPE,
UNITED AFRICA,
STATES INDIA ELIMINATIONS CONSOLIDATED
------ ------- ------------ ------------
<S> <C> <C> <C> <C>
Fiscal 1995:
Sales to unaffiliated customers ........... $46,472 8,292 -- 54,764
Transfers between geographic locations .... 2,283 -- (2,283) --
Net sales ................................. 48,755 8,292 (2,283) 54,764
Income from operations .................... 4,751 535 -- 5,286
Identifiable assets ....................... 38,699 2,788 (2,235) 39,252
Fiscal 1996:
Sales to unaffiliated customers ........... 46,381 11,693 -- 58,074
Transfers between geographic locations .... 5,348 -- (5,348) --
Net sales ................................. 51,729 11,693 (5,348) 58,074
Income (loss) from operations ............. 6,265 (104) -- 6,161
Identifiable assets ....................... 40,054 4,643 (2,925) 41,772
Nine months ended March 28, 1997 (unaudited):
Sales to unaffiliated customers ........... 36,270 8,854 -- 45,124
Transfers between geographic locations .... 4,804 -- (4,804) --
Net sales ................................. 41,074 8,854 (4,804) 45,124
Income (loss) from operations ............. 3,890 (52) -- 3,838
Identifiable assets ....................... 43,003 4,507 (2,632) 44,878
</TABLE>
(16) EVENTS (UNAUDITED) SUBSEQUENT TO THE DATE OF THE INDEPENDENT AUDITORS'
REPORT
During the nine months ended March 28, 1997, the Company granted 22,623 and
11,696 options under Option Plan A and Option Plan B, respectively and
recognized aggregate compensation expense of $423,000.
On April 17, 1997, the Company reacquired 50,000 shares of Class C common
stock at $11.47 per share and 30,000 shares of preferred stock at $13.01 per
share from a former executive of the Company.
On May 7, 1997, the Company signed a purchase agreement with High Voltage
Engineering Corporation (HVE) for the sale of all shares of common and preferred
stock of the Company to HVE.
F-43
<PAGE> 161
================================================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFERS
CONTAINED HEREIN OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE INITIAL PURCHASERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY TO ANY PERSON
IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN
WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR
TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
---------------
TABLE OF CONTENTS
PAGE
Prospectus Summary...................................................... 5
Risk Factors............................................................ 17
The Company............................................................. 24
The Transactions........................................................ 25
Use of Proceeds......................................................... 27
Capitalization.......................................................... 29
Unaudited Pro Forma Condensed Consolidated
Financial Data.......................................................... 31
Selected Historical Consolidated Financial Data......................... 39
Management's Discussion and Analysis of Financial
Condition and Results of Operations..................................... 44
Business................................................................ 53
Management.............................................................. 70
Certain Relationships and Related Transactions.......................... 75
Principal Stockholders.................................................. 77
Exchange Offer.......................................................... 78
Plan of Distribution.................................................... 85
Description of the Notes................................................ 86
Description of Other Indebtedness....................................... 107
Description of Outstanding Capital Stock................................ 109
Certain Federal Income Tax Considerations............................... 113
Experts................................................................. 114
Legal Matters........................................................... 114
Available Information................................................... 115
Special Note Regarding Forward-Looking Statements....................... 115
Index to Financial Statements........................................... F-1
================================================================================
================================================================================
[LOGO]
HIGH VOLTAGE
ENGINEERING
CORPORATION
OFFER TO EXCHANGE 10-1/2% SENIOR NOTES DUE 2004
WHICH HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED,
FOR ANY AND ALL OF ITS OUTSTANDING
10-1/2% SENIOR NOTES DUE 2004, OF WHICH
$135,000,000 IN PRINCIPAL AMOUNT IS OUTSTANDING
ON THE DATE HEREOF.
----------------
PROSPECTUS
----------------
, 1997
================================================================================
<PAGE> 162
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 67 of the Massachusetts Business Corporation Law (the "MBCL")
grants a Massachusetts corporation the power to indemnify any director, officer,
employee or other agent to the extent specified in or authorized by (i) the
articles of organization, (ii) a by-law adopted by the stockholders or (iii) a
vote adopted by the holders of a majority of the shares of stock entitled to
vote at an election of directors. No indemnification may be provided, however,
for any person with respect to any matter as to which he shall have been
adjudicated in any proceeding not to have acted in good faith in the reasonable
belief that his action was in the best interest of the corporation.
The Restated Articles of Organization of the Company and the Amended
and Restated By-laws of the Company, copies of which are filed as Exhibits 3.1
and 3.2, provide for indemnification of officers and directors of the Company
and certain other persons against liabilities and expenses incurred by any of
them in certain stated proceedings and under certain stated conditions.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following is a list of exhibits filed as a part of this
registration statement:
EXHIBIT
- -------
2.1 Agreement and Plan of Merger, dated as of May 7, 1997, by and
between PHI Acquisition Holdings, Inc. and Chase Venture
Capital Associates, L.P.
3.1 Restated Articles of Organization of the Registrant.
3.2 Amended and Restated By-laws of the Registrant.
4.1 Indenture, dated as of August 8, 1997, by and between Registrant
and State Street Bank and Trust Company.
4.2 Form of Exchange Note.*
4.3 Notes Registration Rights Agreement, by and between Registrant
and CIBC Wood Gundy Securities Corp. and Painewebber
Incorporated.
5.1 Opinion of Bingham, Dana & Gould LLP, as to legality of
securities being registered.*
10.1 Senior Secured Revolving Credit Agreement, dated as of August
8, 1997, by and between the Registrant and Fleet National Bank.
<PAGE> 163
-2-
10.2 Lease Agreement, dated as of November 10, 1988, by and
between Corporate Property Associates 8, L.P. and Datcon
Instrument Company (Lancaster, PA).
10.3 Lease Agreement, dated as of November 10, 1988, by and
between Corporate Property Associates 8, L.P. and the Registrant
(Sterling, MA).
10.4 Installment Sale Agreement, dated as of September 23, 1994, by
and between Monroeville Area Industrial Development
Corporation and Halimar Robicon Group, Inc. (New Kensington,
PA).
10.5 Lease with Option to Purchase, dated as of July 15, 1996, by and
between Raija Olkkola & Joseph Grammel, Co-Trustees of THO
Trust and Registrant (Sterling, MA).
10.6 Amendment to Lease Agreement, dated as of May 8, 1996, by
and between Corporate Property Associates 8, L.P. and the
Registrant (Sterling, MA).
10.7 Value Creation Plan of the Registrant.*
10.8 Employment Agreement, dated December 1, 1992, by and
between Registrant and Paul Snyder.
21.1 List of Subsidiaries.*
23.1 Consent of Bingham, Dana & Gould LLP, counsel to Registrant
(included in Exhibit 5.1).*
23.2 Consent of Grant Thornton LLP.
23.3 Consent of KPMG Peat Marwick LLP.
24.1 Power of Attorney (included in signature page to Registration
Statement).
25 Statement of Eligibility of Trustee.
27 Financial Data Schedule.*
99.1 Form of Letter of Transmittal.*
99.2 Form of Notice of Guaranteed Delivery.*
99.3 Form of exchange agency agreement between the Exchange
Agent and the Registrant.*
- ---------------------
* To be filed by amendment
(b) All schedules have been omitted because either they are not required,
are not applicable, or the information is otherwise set forth in the
Consolidated Financial Statements and notes thereto.
<PAGE> 164
-3-
ITEM 22. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in the volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) (Section
2304.424(b) of this chapter) if, in the aggregate, the changes in
volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the
<PAGE> 165
-4-
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus pursuant
to Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
The undersigned Registrant hereby undertakes:
(1) That for purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Registrant pursuant to Rule
424(b)(1) or (4), or 497(h) under the Securities Act shall be deemed to be part
of this registration statement as of the time it was declared effective.
(2) That for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
[The undersigned registrant hereby undertakes to file an application
for the purpose of determining the eligibility of the trustee to act under
subsection (a) of Section 310 of the Trust Indenture Act ("Act") in accordance
with the rules and regulations prescribed by the Commission under section
305(b)(2) of the Act.]
<PAGE> 166
-5-
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has
duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Boston, Commonwealth of
Massachusetts, on this 19th day of August, 1997.
HIGH VOLTAGE ENGINEERING CORPORATION
By: /s/ Joseph W. McHugh, Jr.
---------------------------------
Joseph W. McHugh, Jr.,
Vice President and Chief
Financial Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby appoints Clifford
Press, Laurence S. Levy, Joseph W. McHugh, Jr. and Ronald R. Fortier, and each
of them severally, acting alone and without the other, his true and lawful
attorney-in-fact with the authority to execute in the name of each such person,
and to file with the Securities and Exchange Commission, together with any
exhibits thereto and other documents therewith, any and all amendments
(including without limitation post-effective amendments) to this Registration
Statement necessary or advisable to enable the Registrant to comply with the
Securities Act of 1933, as amended, and any rules, regulations and requirements
of the Securities and Exchange Commission in respect thereof, which amendments
may make such other changes in the Registration Statement as the aforesaid
attorney-in-fact executing the same deems appropriate.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Laurence S. Levy Chief Executive Officer and Director August 19, 1997
- -------------------------------
Laurence S. Levy
/s/ Clifford Press President and Director August 19, 1997
- -------------------------------
Clifford Press
</TABLE>
<PAGE> 167
-6-
<TABLE>
<S> <C> <C>
/s/ Paul H. Snyder Director August 19, 1997
- -------------------------------
Paul H. Snyder
/s/ Edward Levy Director August 19, 1997
- -------------------------------
Edward Levy
Director August 19, 1997
/s/ H. Cabot Lodge III
- -------------------------------
H. Cabot Lodge III
/s/ Joseph W. McHugh, Jr. Vice President and Chief August 19, 1997
- ------------------------------- Financial Officer
Joseph W. McHugh, Jr. (principal financial and
accounting officer)
</TABLE>
<PAGE> 168
Exhibit Index
<TABLE>
<CAPTION>
Exhibit
- -------
Number Description Page
- -------------------------------------------------------------------------------
<S> <C> <C>
2.1 Agreement and Plan of Merger, dated as of May 7, 1997, by
and between PHI Acquisition Holdings, Inc. and Chase Venture
Capital Associates, L.P.
3.1 Restated Articles of Organization of the Registrant.
3.2 Amended and Restated By-laws of the Registrant.
4.1 Indenture, dated as of August 8, 1997, by and between Registrant
and State Street Bank and Trust Company.
4.2 Form of Exchange Note.*
4.3 Notes Registration Rights Agreement, by and between Registrant and
CIBC Wood Gundy Securities Corp. and PaineWebber Incorporated.
5.1 Opinion of Bingham, Dana & Gould LLP, as to legality of
securities being registered.*
10.1 Senior Secured Revolving Credit Agreement, dated as of August 8,
1997, by and between the Registrant and Fleet National Bank.
10.2 Lease Agreement, dated as of November 10, 1988, by and between
Corporate Property Associates 8, L.P. and Datcon Instrument
Company (Lancaster, PA).
10.3 Lease Agreement, dated as of November 10, 1988, by and between
Corporate Property Associates 8, L.P. and the Registrant
(Sterling, MA).
10.4 Installment Sale Agreement, dated as of September 23, 1994, by
and between Monroeville Area Industrial Development Corporation
and Halimar Robicon Group, Inc.(New Kensington, PA).
10.5 Lease with Option to Purchase, dated as of July 15, 1996, by
and between Raija Olkkola & Joseph Grammel, Co-Trustees of THO
Trust and Registrant. (Sterling, MA).
10.6 Amendment to Lease Agreement, dated as of May 8, 1996, by and
between Corporate Property Associates 8, L.P. and the Registrant
(Sterling, MA).
10.7 Value Creation Plan of the Registrant.*
10.8 Employment Agreement, dated December 1, 1992, by and between
Registrant and Paul Snyder.
21.1 List of Subsidiaries.*
23.1 Consent of Bingham, Dana & Gould LLP, counsel to Registrant
(included in Exhibit 5.1).*
23.2 Consent of Grant Thornton LLP.
23.3 Consent of KPMG Peat Marwick LLP.
</TABLE>
<PAGE> 169
-2-
<TABLE>
<CAPTION>
Exhibit
- -------
Number Description Page
- --------------------------------------------------------------------------------
<S> <C> <C>
24.1 Power of Attorney (included in signature page to Registration
Statement).
25 Statement of Eligibility of Trustee.
27 Financial Data Schedule.
99.1 Form of Letter of Transmittal.*
99.2 Form of Notice of Guaranteed Delivery.*
99.3 Form of exchange agency agreement between the Exchange Agent
and the Registrant.*
</TABLE>
* To be filed by amendment.
<PAGE> 1
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
dated as of
May 7, 1997
by and among
HIGH VOLTAGE ENGINEERING CORPORATION
LAUREN CORPORATION
and
PHI ACQUISITION HOLDINGS, INC.
and
CHASE VENTURE CAPITAL ASSOCIATES, L.P.
(as to certain specified provisions only)
<PAGE> 2
TABLE OF CONTENTS
Page
----
ARTICLE I THE MERGER......................................................
Section 1.1 The Merger..................................................
Section 1.2 Conversion of Shares and Options............................
Section 1.3 Certain Payments............................................
Section 1.4 Exchange of Certificates....................................
Section 1.5 Approval of Merger..........................................
Section 1.6 Tax Refunds.................................................
Section 1.7 Holder Allocable Expenses...................................
Section 1.8 Dissenting Shares...........................................
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY..................
Section 2.1 Corporate Organization......................................
Section 2.2 Subsidiaries................................................
Section 2.3 Capitalization of the Company...............................
Section 2.4 Due Authorization...........................................
Section 2.5 No Conflict.................................................
Section 2.6 Financial Statements........................................
Section 2.7 Absence of Certain Changes or Events........................
Section 2.8 Contracts; No Defaults......................................
Section 2.9 Machinery, Equipment and Other Tangible Property............
Section 2.10 Owned Real Property; Facilities.............................
Section 2.11 Intellectual Property.......................................
Section 2.12 Litigation and Proceedings..................................
Section 2.14 Labor Matters...............................................
Section 2.15 Legal Compliance............................................
Section 2.16 Environmental Matters.......................................
Section 2.17 Taxes.......................................................
Section 2.18 Governmental Authorities: Consents.........................
Section 2.19 Licenses, Permits and Authorizations........................
Section 2.20 Brokers' Fees...............................................
Section 2.21 Bank Accounts, Etc..........................................
Section 2.22 Accounts Receivable.........................................
Section 2.23 Substantial Customers.......................................
Section 2.24 Directors and Officers......................................
Section 2.25 Minute Books; Stock Records.................................
Section 2.26 Inventory...................................................
ARTICLE III REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND
MERGER SUB..................................................
Section 3.1 Corporate Organization......................................
Section 3.2 Due Authorization...........................................
i
<PAGE> 3
Page
----
Section 3.3 No Conflict.................................................
Section 3.4 Litigation and Proceedings..................................
Section 3.5 Governmental Authorities: Consents.........................
Section 3.6 Brokers' Fees...............................................
ARTICLE IV COVENANTS OF THE COMPANY.......................................
Section 4.1 Conduct of Business.........................................
Section 4.2 Inspection..................................................
Section 4.3 HSR Act.....................................................
Section 4.4 No Solicitations............................................
ARTICLE V COVENANTS OF ACQUIROR..........................................
Section 5.1 HSR Act.....................................................
Section 5.2 Indemnification and Insurance...............................
ARTICLE VI CONFIDENTIALITY; SUPPORT OF TRANSACTION........................
Section 6.1 Confidentiality.............................................
Section 6.2 Support of Transaction......................................
Section 6.3 Chalmers Payment............................................
ARTICLE VII CLOSING........................................................
Section 7.1 Filing......................................................
Section 7.2 Closing.....................................................
ARTICLE VIII CONDITIONS TO OBLIGATIONS.....................................
Section 8.1 Conditions to Obligations of Acquiror,
Merger Sub and the Company ..............................
Section 8.2 Conditions to Obligations of Acquiror and Merger Sub........
Section 8.3 Conditions to the Obligations of the Company................
ARTICLE IX TERMINATION/EFFECTIVENESS......................................
Section 9.1 Termination.................................................
Section 9.2 Effect of Termination.......................................
ARTICLE X CERTAIN DEFINITIONS............................................
ARTICLE XI HOLDER REPRESENTATIVE..........................................
Section 11.1 Designation and Replacement of Holder Representative........
Section 11.2 Authority and Rights of Holder Representative;
Limitations on Liability ................................
ii
<PAGE> 4
Page
----
ARTICLE XII MISCELLANEOUS..................................................
Section 12.1 Nonsurvival of Representations and Warranties...............
Section 12.2 Waiver......................................................
Section 12.3 Notices.....................................................
Section 12.4 Assignment..................................................
Section 12.5 Rights of Third Parties.....................................
Section 12.6 Expenses....................................................
Section 12.7 Construction................................................
Section 12.8 Captions; Counterparts......................................
Section 12.9 Entire Agreement............................................
Section 12.10 Amendments.................................................
Section 12.11 Publicity..................................................
iii
<PAGE> 5
Schedules
Schedule 2.1 - Foreign Jurisdictions
Schedule 2.2 - Subsidiaries of the Company
Schedule 2.3 - Capitalization of the Company
Schedule 2.5 - Exceptions to No Conflict Representation
Schedule 2.7 - Certain Changes or Events
Schedule 2.8 - Contracts
Schedule 2.9 - Exceptions to Title to Machinery, Equipment and Other Tangible
Property
Schedule 2.10 - Facilities
Schedule 2.11 - Intellectual Property
Schedule 2.12 - Litigation and Proceedings
Schedule 2.13 - Employee Benefits
Schedule 2.14 - Labor Relations
Schedule 2.15 - Legal Compliance
Schedule 2.16 - Environmental Matters
Schedule 2.17 - Tax Matters
Schedule 2.18 - Governmental Authorities; Consents
Schedule 2.19 - Licenses, Permits and Authorizations
Schedule 2.20 - Brokers' Fees
Schedule 2.21 - Bank Accounts
Schedule 2.22 - Accounts Receivable
Schedule 2.23 - Substantial Customers
Schedule 2.24 - Directors and Officers
Schedule 2.26 - Inventory
Schedule 3.3 - Conflicts
Schedule 3.5 - Governmental Authorities; Consents (Acquiror)
Schedule 3.6 - Brokers' Fees (Acquiror)
Annexes
Annex A - Certificate of Merger
Annex B - Illustrative Determination and Allocation of the
Merger Consideration
Annex C - Form of Opinion of Counsel to the Company
Annex D - Form of Opinion of Counsel to Acquiror
Annex E - Employees; Terms of Employment
Annex F - Certificate of Incorporation of Surviving Corporation
Exhibit
Exhibit 1 - Anticipated Refunds
iv
<PAGE> 6
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger, dated as May 7, 1997 (this
"Agreement"), is entered into by and among HIGH VOLTAGE ENGINEERING CORPORATION,
a Massachusetts corporation ("Acquiror"), LAUREN CORPORATION, a Delaware
corporation and a wholly-owned subsidiary of Acquiror ("Merger Sub") and PHI
ACQUISITION HOLDINGS, INC, a Delaware corporation (the "Company") and, as to
certain specified provisions only, Chase Venture Capital Associates, L.P.
("CVCA").
WITNESSETH
WHEREAS, Acquiror, Merger Sub and the Company (Merger Sub and the Company
sometimes being referred to as the "Constituent Corporations") are hereby
adopting a plan of merger, providing for the merger (the "Merger") of Merger Sub
with and into the Company, with the Company being the surviving corporation; the
Merger will be consummated in accordance with this Agreement, such Merger to be
consummated as of the Effective Time of the Merger (as defined below);
WHEREAS, the respective Boards of Directors of Acquiror, Merger Sub and
the Company have adopted resolutions approving this Agreement; and
WHEREAS, certain defined terms used herein have the meanings assigned to
them in Article X hereof.
<PAGE> 7
AGREEMENT
In order to consummate the Merger, and in consideration of the mutual
agreements hereinafter contained, Acquiror, Merger Sub and the Company agree as
follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. At the Effective Time of the Merger, Merger Sub
will merge with and into the Company, the separate corporate existence of Merger
Sub shall cease and the Company, as the surviving corporation in the Merger
(hereinafter sometimes referred to for the periods on and after the Effective
Time of the Merger as the "Surviving Corporation"), shall continue its corporate
existence under the DGCL as a wholly-owned Subsidiary of Acquiror. The Merger
will have the effects specified under the DGCL.
Section 1.2 Conversion of Shares and Options.
(a) At the Effective Time of the Merger, by virtue of the Merger and
without any action on the part of the holder thereof:
(i) Each share of Preferred Stock (other than shares, if any,
held in treasury of the Company, which treasury shares shall be cancelled as
part of the Merger, and other than shares held by Dissenting Stockholders) that
is then issued and outstanding shall thereupon be converted into the right to
receive a portion of the Merger Consideration (defined below) equal to the
Liquidation Value thereof;
(ii) Each share of Common Stock that is then issued and
outstanding (other than shares, if any, held in the treasury of the Company,
which treasury shares shall be canceled as part of the Merger, and other than
shares held by Dissenting Stockholders) and each
2
<PAGE> 8
unexercised Option that is then outstanding shall thereupon terminate and be
converted into and become solely the right to receive the applicable portion of
the Common Equity Merger Consideration (defined below), as determined pursuant
to Section 1.2(c); and
(iii) Each share of the common stock, par value $ .01 per
share, of Merger Sub outstanding immediately prior to the Effective Time of the
Merger shall be converted into one fully-paid and non-assessable share of common
stock, par value $ .01 per share, of the Surviving Corporation.
(b) Subject to the adjustments set forth in Section 1.6, the "Merger
Consideration" shall consist of (i) Fifty Five Million Five Hundred Thousand
Dollars ($55,500,000) in cash, less (ii) the principal amount and accrued but
unpaid interest and outstanding on the Closing Date under the terms of the
Perkin-Elmer Note (after any conversion thereof pursuant to the terms of the
Perkin-Elmer Note but prior to repayment thereof as set forth in Section 1.3)
and any prepayment penalties payable by the Company thereunder, less (iii) the
principal amount and accrued but unpaid interest outstanding on the Closing Date
under the First Bank Loans and any prepayment penalties payable by the Company
thereunder, less (iv) the amount of Holder Allocable Expenses paid by Acquiror
to the Holder Representative at Closing in accordance with Section 1.7, plus (v)
(if Closing shall occur on or after August 1, 1997) the positive amount, if any,
equal to the amount by which all cash and cash equivalents of the Company and
its consolidated Subsidiaries on the Closing Date exceed the amount of all cash
and cash equivalents of the Company and its consolidated Subsidiaries on July
31, 1997, less (vi) any sums payable by the Company to David L. Chalmers (the
"Chalmers Payment") pursuant to the executive equity compensation plan set forth
in Exhibit B to his employment agreement
3
<PAGE> 9
with the Physical Electronics, Inc. dated as of February 14, 1997, a copy of
which has been delivered to Acquiror, less (vii) sums payable upon Closing to
Paul W. Palmberg pursuant to a letter from the Company to him dated April 29,
1997, a copy of which has been delivered to Acquiror (the "Palmberg Payment")
and less (viii) an amount equal to the aggregate amount paid to former employees
of the Company or any of its Subsidiaries upon the repurchase of any shares of
Common Stock or Preferred Stock held by them after April 1, 1997 and prior to
the Closing Date. Subject to the adjustments set forth in Section 1.6, the
"Common Equity Merger Consideration" shall consist of (i) the Merger
Consideration, less (ii) the portion of the Merger Consideration into which all
shares of Preferred Stock (other than such shares, if any, held in the treasury
of the Company) are converted (or would have been converted, but for being held
by Dissenting Stockholders) by virtue of the Merger pursuant to Section
1.2(a)(i) above.
(c) The Common Equity Merger Consideration shall be allocated among
the holders of the Common Stock (other than Dissenting Stockholders and other
than shares, if any, held in the treasury of the Company) and the Options as set
forth below in this subsection 1.2(c). Each holder of Common Stock (other than
Dissenting Stockholders and other than shares, if any, held in the treasury of
the Company) shall be entitled to receive a portion of the Common Equity Merger
Consideration equal to (i) the Cash Per Fully-Diluted Common Share (as defined
below), multiplied by (ii) the number of shares of Common Stock held by such
holder immediately prior to the Effective Time of the Merger (but not including
any Common Stock issuable upon the exercise of any unexercised Options held by
such holder at the Effective Time of the Merger). Each holder of Options shall
be entitled to receive, subject to Section 1.4, a portion of the Common Equity
Merger Consideration equal to (i) the Cash Per Fully-Diluted Common Share,
4
<PAGE> 10
multiplied by the aggregate number of shares of Common Stock issuable upon
exercise in full of all Options held by such holder as of the Effective Time of
the Merger, minus (ii) the aggregate cash exercise price payable upon exercise
of all Options held by such holder. For purposes of the foregoing, "Cash Per
Fully-Diluted Common Share" shall mean (i) the sum of (A) the Common Equity
Merger Consideration, plus (B) the Aggregate Option Exercise Price (defined
below), divided by (ii) the Aggregate Fully-Diluted Common Shares. The
"Aggregate Fully-Diluted Common Shares" shall be the (i) aggregate number of
shares of Common Stock held by all holders immediately prior to the Effective
Time of the Merger (other than shares, if any, held in the treasury of the
Company), plus (ii) the aggregate number of shares of Common Stock issuable upon
the exercise in full of all Options (whether or not exercisable by their terms)
held by all holders immediately prior to the Effective Time of the Merger; and
the "Aggregate Option Exercise Price" shall mean the sum of the cash exercise
prices paid or payable upon exercise in full of all Options held by all holders
immediately prior to the Effective Time of the Merger.
(d) Annex B sets forth an illustrative determination and allocation
of the Merger Consideration, based on the assumptions set forth therein.
Section 1.3 Certain Payments. Immediately prior to, or concurrently with,
the Effective Time of the Merger, Acquiror will provide to the Company funds in
an amount equal to the amount required to repay the First Bank Loans and
Perkin-Elmer Note and make the Chalmers Payment and the Palmberg Payment, in
each case immediately prior to, or concurrently with, the Effective Time of the
Merger. The Company shall apply such amount to repay in full all indebtedness
outstanding under the First Bank Loans and the Perkin-Elmer Note and shall make
the Chalmers Payment immediately prior to, or concurrently with, the Effective
Time of
5
<PAGE> 11
the Merger.
6
<PAGE> 12
Section 1.4 Exchange of Certificates. After the Effective Time of the
Merger, each holder (other than Dissenting Stockholders) of an outstanding stock
certificate or certificates evidencing Preferred Stock or Common Stock or
certificates or agreements evidencing Options (collectively, the "Certificates")
shall surrender the same to the Acquiror at Closing or, if later, to such bank
or trust company selected by Acquiror and reasonably satisfactory to the Holder
Representative to act as the exchange agent (the "Exchange Agent") on Acquiror's
behalf. Upon surrender by a holder of such a Certificate at Closing to the
Acquiror plus such other documentation as may be reasonably be required by
Acquiror, the Acquiror shall pay such holder in cash such percentage (the
"Applicable Percentage") of the Merger Consideration into which such holder's
shares and/or Options evidenced by such Certificate shall have been converted as
a result of the Merger. Any Merger Consideration not disbursed at Closing
(except that portion attributable to shares held by Dissenting Stockholders) by
the Acquiror shall be paid to the Exchange Agent (the "Exchange Fund"). Upon
surrender by such a holder of his Certificates (other than Certificates held by
Dissenting Stockholders) following Closing to the Exchange Agent, plus such
other documentation as may be reasonably be required by Acquiror, the Acquiror
shall cause the Exchange Agent to pay such holder in cash the Applicable
Percentage of the Merger Consideration into which such a holder's shares and/or
Options shall have been converted as a result of the Merger as specified above,
without interest. Pending such surrender and exchange, such a holder's
Certificate or Certificates (other than Certificates held by Dissenting
Stockholders) shall be deemed for all purposes (other than the exchange
contemplated by this Section 1.4) to evidence such holder's Applicable
Percentage of the Merger Consideration into which such shares and/or Options
shall have been converted by the Merger; provided that
7
<PAGE> 13
any payment with respect to Options held by employees of the Company or
otherwise shall be reduced by any taxes required to be withheld under applicable
law with respect to such payments and amounts so withheld shall be paid to the
applicable taxing authority. Any interest, dividend or other income earned by
the Exchange Fund shall be for the sole account of the Acquiror. Any amounts in
the Exchange Fund which remain undistributed to Certificate holders for 60 days
after the Closing shall be delivered to the Acquiror upon demand by the
Acquiror, and any holders of Certificates who have not theretofore complied with
the foregoing provisions shall thereafter look only to the Acquiror for the
Merger Consideration to which they are entitled pursuant to this Agreement. None
of the Acquiror, Merger Sub or the Company shall be liable to any Certificate
holder for any amounts from the Exchange Fund or otherwise delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
Section 1.5 Approval of Merger; Effective Time of Merger.
(a) As soon as practicable following the satisfaction (or, to the
extent permitted, the waiver) of all conditions to the Merger set forth in this
Agreement, and provided that this Agreement has not been terminated pursuant to
the provisions hereof, Merger Sub and the Company shall cause a Certificate of
Merger in substantially the form of Annex A hereto (the "Certificate of Merger")
to be executed and filed with the Secretary of State of Delaware as provided in
Section 251 of the DGCL.
(b) At the Effective Time of the Merger, the Certificate of
Incorporation and Bylaws of the Company shall be amended in their entirety to
read as set forth in Annex F and, as so amended, shall be the Certificate of
Incorporation and Bylaws of the Company and the directors and officers of the
Surviving Corporation shall be the directors and officers of Merger
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Sub immediately prior to the Effective Time of the Merger.
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(c) Following execution of this Agreement, Merger Sub and the
Company shall convene meetings of, or seek the requisite written consents of
their respective stockholders to, the Merger in accordance with the DGCL and
their respective Certificates of Incorporation and Bylaws.
Section 1.6 Tax Refunds.
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(a) Promptly after the Closing Date, Acquiror shall, and shall cause each
Subsidiary and the Surviving Corporation to, use commercially reasonable efforts
to obtain a refund of any amounts paid by the Company for taxable periods (or a
portion thereof) ending on or prior to the Closing Date in respect of federal
and state corporate income tax for the Company's fiscal years ended June 30,
1995, June 28, 1996 and June 27, 1997 and any payments of estimated federal or
state corporate tax for the Surviving Corporation's fiscal year ending June 27,
1997 (each, as estimated on Exhibit 1) or made during and attributable to the
portion of such fiscal year ending on the Closing Date, that Acquiror, such
Subsidiary or the Surviving Corporation shall be entitled to claim as a result
of (i) the conversion of the Options (whether by exercise or cancellation, at
the option of the holder thereof) into the right to receive a portion of Merger
Consideration pursuant to the Merger Agreement, (ii) the payment of the Chalmers
Payment, or (iii) any combination of the foregoing (a "Refund"); provided,
however, that the Holder Representative will waive the requirement that
Acquiror, any Subsidiary of Acquiror, or the Surviving Corporation apply for a
Refund of amounts paid for state corporate income tax from a relevant taxing
authority where the Holder Representative, after consulting with Acquiror,
determines there is no reasonable likelihood of recovering a Refund of at least
$10,000 from such taxing authority, taking into account reasonable costs of
pursuing such recovery (other than costs related to the escrow arrangement
described in this Section 1.6). Exhibit 1 sets forth the Refunds that the
Company presently anticipates receiving. Acquiror and each Subsidiary of
Acquiror shall make available, or shall cause the Surviving Corporation to make
available, to the Holder Representative, promptly upon request therefor, copies
of Tax Returns (including any return, statements or reports, any schedule or
attachment thereto and any amendment thereof) prepared
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by or for the Company, the Surviving Corporation or any Subsidiary of Acquiror
in connection with a Refund prior to the filing of such Tax Returns for its
review and, in respect of Tax Returns for the Company's fiscal years ended June
30, 1995 and June 28, 1996 and the Company's or the Surviving Corporation's
fiscal year ending June 27, 1997 or any period between June 27, 1997 and the
Closing Date or any amended Tax Return for prior fiscal years, its consent, such
consent not to be unreasonably withheld. If at any time and from time to time
after the Closing Date, Acquiror, any Subsidiary of Acquiror or the Surviving
Corporation shall receive any Refund, an amount equal to (i) the amount of such
Refund minus (ii) reasonable, out-of-pocket or additional expenses (or a portion
thereof) actually incurred by the party filing the Tax Return to which such
Refund relates but only to the extent such expenses are attributable to
obtaining such Refund shall be payable upon receipt or realization to holders of
Common Stock and Options entitled to receive Common Equity Merger Consolidation
pro rata in accordance with their Applicable Percentage (the "Net Refund") which
shall be paid as follows: Acquiror shall pay fifty percent (50%) of each Net
Refund to the Holder Representative for distribution to the holders of the
Common Stock and Options entitled to receive the Common Equity Merger
Consideration pro rata in accordance with their Applicable Percentages, and
shall pay the remaining fifty percent (50%) of each Net Refund to an independent
third party bank selected by Acquiror and reasonably acceptable to the Holder
Representative (the "Escrow Agent") for deposit into an interest-bearing escrow
account selected by Acquiror (the "Escrow Account"). Fees of the Escrow Agent
shall be paid by the Acquiror and the Holder Representative in equal amounts,
and shall not be taken into account by Acquiror in computing the amount of a Net
Refund. Interest on any amounts deposited in the Escrow Account shall be paid
not less than annually to the
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Holder Representative for distribution to the holders of Common Stock and
Options entitled to receive Common Equity Merger Consideration, in accordance
with their Applicable Percentages.
(b) If a Tax Return to which a Refund relates is audited by the relevant
taxing authority at any time the Escrow Agent is holding a percentage of such
Refund, Acquiror shall notify the Holder Representative and the Escrow Agent in
writing. If an adjustment is proposed that would reduce the amount of such
Refund, Acquiror shall within 15 business days notify the Escrow Agent and the
Holder Representative in writing of such proposed adjustment. The Holder
Representative, on behalf of the holders of Common Stock and Options entitled to
receive Common Equity Merger Consideration, shall have the right to direct in a
commercially reasonable manner the conduct of the defense (including appeals, if
any) with respect to any such adjustment insofar as such adjustment would reduce
the amount of the Refund; provided that such right shall not include the power
to compel Acquiror to engage any particular firm of accountant or expert; and,
provided further, that Acquiror and its representatives shall not be required to
sign any filing or take any action which they reasonably consider to be in
violation of any applicable law. Upon final settlement or determination of the
proposed adjustment, the Holder Representative and Acquiror shall notify the
Escrow Agent. Within five (5) business days of the Escrow Agent's receipt of
such notice signed by Acquiror and Holder Representative, the Escrow Agent shall
release to the Acquiror the lesser of (i) the amount by which the Refund was
reduced plus the associated reasonable out-of-pocket costs (not including any
costs of the escrow management), or (ii) the amount on deposit in the Escrow
Account relating to such Refund (not including amounts attributable to interest
earned thereon).
(c) With respect to each Refund, the amount of such Refund as was
initially received
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by the Escrow Agent (together with any accrued interest thereon that has not
been paid to the Holder Representative as described above), as properly adjusted
to take into account the final settlement or determination of any proposed
adjustment regarding the Refund shall be released by the Escrow Agent to the
Holder Representative (x) on the date falling three years after the date the Tax
Return to which the Refund relates was filed, or (y) if such Tax Return is then
under audit by the relevant taxing authority, on the earliest of the date (i) it
becomes apparent (based on written communications from the relevant taxing
authority) that no adjustment (or no further adjustment) will be made that could
result in a reduction or loss of the Refund, or (ii) on which the audit is
completed, or (iii) such earlier date as the Acquiror and Holder Representative
shall agree in writing.
(d) If any Net Refund is not paid when due to the Holder Representative or
the Escrow Agent in accordance Section 1.6(a) additional interest shall accrue
on the amount payable, from the date falling five (5) business days after
payment of such amount is due to the date of payment, at a rate of sixteen
percent (16%) per annum. Any Refund amount payable pursuant to this Section 1.6
with respect to Options held by employees of the Company shall be paid net of
any withholding on account of taxes as may be required under applicable law with
respect to such payment.
(e) Notwithstanding anything to the contrary in this Agreement, in no
event shall Acquiror, any Subsidiary of Acquiror, or the Surviving Corporation
be required to pay any amounts in respect of Refunds to the extent that such
amounts were received by the Company on or prior to the Closing Date and Merger
Consideration was increased to reflect the Company's receipt of such amount
pursuant to Section 1.2(b)(v).
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(f) The Acquiror shall have no further recourse against the Escrow
Account, the Escrow Agent, the Holder Representative or any holders of Common
Stock or Options in respect of any Refund once the Acquiror has received a
payment in respect thereof from the Escrow Account to the full extent of its
entitlement under Section 1.6(b) or payment has been made to the Holder
Representative under Section 1.6(a) or (c).
(g) The Acquiror shall (i) for the period starting on the day following
the Closing Date, include the Surviving Corporation in the consolidated return
filed by the affiliated group that includes the Acquiror, and (ii) not make an
election to waive carryback of net operating losses with respect to the
Surviving Corporation.
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Section 1.7 Holder Allocable Expenses. Not less than two (2) Business Days
prior to the Closing Date, the Holder Representative will provide to Acquiror an
estimate (which estimate shall include such reserves as the Holder
Representative in good faith determines in its discretion to be appropriate for
any Holder Allocable Expenses that are not then known or determinable) of the
following fees and expenses that may be incurred by the Holder Representative on
behalf of the Company and the holders of Common Stock and Options in connection
with the preparation, negotiation and execution of this Agreement and the
consummation of the transactions contemplated hereby: (i) the fees and
disbursements of outside counsel to the Company incurred in connection with the
transactions contemplated hereby, (ii) the fees and expenses of any other
agents, consultants and experts specially employed by the Company and/or the
Holder Representative in connection with the Merger, including the fees of the
Escrow Agent, the fees payable to any Person listed on Schedule 2.20 hereof
(which fees, if any, shall be paid by the Holder Representative and not the
Company) and the fees and expenses of CIBC Wood Gundy Securities, Corp. pursuant
to the letter agreement from it described on Schedule 3.6 hereof up to $500,000
(which fees shall be paid by the Holder Representative and not Acquiror) and
(iii) the reasonable third party expenses of the Holder Representative incurred
in such capacity (collectively, the "Holder Allocable Expenses"). On the Closing
Date, Acquiror shall pay to the Holder Representative cash in the amount of such
estimated Holder Allocable Expenses and the Holder Representative shall use such
cash to pay the Holder Allocable Expenses and any other amounts to which the
Holder Representative is entitled to reimbursement under Section 11.2 hereof.
From time to time (and no less frequently than quarterly commencing three months
following the Closing Date), the Holder Representative shall distribute to the
holders of
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Common Stock and Options (pro rata, in accordance with their respective
Applicable Percentages, as additional Common Equity Merger Consideration) any
portion of such cash (and any interest earned thereon) which has not been so
expended and which the Holder Representative has determined in its discretion is
in excess of the actual amounts required to pay (or to be held in reserve to
pay) such Holder Allocable Expenses and reimbursements, provided that any such
payment to holders of Options shall be paid net of any withholding on account of
taxes as may be required by applicable law. In no event will the Holder
Representative or Acquiror or the Company be responsible for payment of Holder
Allocable Expenses in excess of the cash amounts paid to the Holder
Representative by Acquiror pursuant to this Section 1.7. Such Holder Allocable
Expenses shall be reimbursed by Holders of Common Stock and Options, pro rata,
in accordance with their respective Applicable Percentages as further described
in Section 11.2.
Section 1.8 Dissenting Shares.
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(a) Notwithstanding any other provision of this Agreement to the
contrary, shares of capital stock of any class of the Company that are
outstanding immediately prior to the Effective Time of the Merger and which are
held by Dissenting Stockholders (collectively, the "Dissenting Shares") shall
not be converted into or represent the right to receive any portion of the
Merger Consideration. Such stockholders shall be entitled to receive payment of
the appraised value of such shares held by them in accordance with the
provisions of the DGCL, except that all Dissenting Shares held by such
stockholders who shall have failed to perfect or who effectively shall have
withdrawn, forfeited or lost their rights to appraisal of such shares under the
DGCL shall thereupon have been converted into, as of the Effective Time of the
Merger, the right to receive, without any interest thereon, that portion of the
Merger Consideration to which they would have been entitled in accordance with
Section 1.2 if they had not been Dissenting Stockholders, upon surrender, in the
manner provided in Section 1.4, of the Certificate or Certificates that formerly
evidenced such shares.
(b) The Company shall give the Acquiror and Merger Sub prompt notice
of any demands for appraisal received by it, withdrawals of such demands, and
any other instruments served pursuant to the DGCL and received by the Company
and relating thereto.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Acquiror and Merger Sub as of the
date of this Agreement that:
Section 2.1 Corporate Organization. The Company has been duly incorporated
and is validly existing as a corporation in good standing under the laws of the
State of Delaware.
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The Company is duly licensed or qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where the character of
its properties owned or leased or the nature of its activities make such
licensing or qualification necessary, except where the failure to be so licensed
or qualified or in good standing would not have a material adverse effect on the
business, operations, or financial condition of the Company and its
Subsidiaries, taken as a whole. Copies of the Certificate of Incorporation and
Bylaws of the Company, and all amendments thereto, heretofore delivered to
Acquiror are accurate and complete as of the date hereof. Schedule 2.1 contains
a true, correct and complete list of all jurisdictions in which the Company is
qualified to do business as a foreign corporation.
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Section 2.2 Subsidiaries. Schedule 2.2 sets forth a complete list of the
Subsidiaries of the Company, and the Company does not own any capital stock or
equity or proprietary interest in any other entity or enterprise other than
ULVAC-PHI, Inc., however organized and however such interest may be denominated
or evidenced, except as set forth in Schedule 2.2. Each of the Subsidiaries
listed on Schedule 2.2 is a duly incorporated, validly existing and in good
standing or appropriately recognized as legally in existence and active under
the laws of its jurisdiction) under the laws of the jurisdiction identified on
Schedule 2.2. The shares of ULVAC-PHI, Inc. owned by the Company constitute 50%
of the outstanding shares of capital stock of ULVAC-PHI, Inc., and, except as
set forth in the Basic Agreement dated as of September 1, 1982 (a copy of which
has been delivered to Acquiror) by and between Seller and ULVAC Corporation, a
Japanese corporation, there are no outstanding warrants, options, conversions
privileges, preemptive rights or other rights or agreements to purchase or
otherwise acquire any equity or other securities of any Subsidiary or ULVAC-PHI,
Inc. No corporate or partnership proceedings on the part of any Subsidiary are
necessary to authorize this Agreement and the transactions contemplated hereby.
Section 2.3 Capitalization of the Company.
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(a) The authorized capital stock of the Company consists solely of
(i) 1,000,000 shares of Class A Common Stock, of which 191,660 shares are issued
and outstanding, (ii) 1,000,000 shares of Class B Common Stock, of which 398,070
shares are issued and outstanding and of which 253,843 shares are reserved for
issuance pursuant to the Perkin-Elmer Note, (iii) 1,000,000 shares of Class C
Common Stock, of which 411,472 shares are issued and outstanding and of which
169,595 are reserved for issuance upon exercise of outstanding Options, (iv)
700,000 shares of Preferred Stock, par value $0.01 per share, of which 600,000
shares have been designated as Series A Cumulative Redeemable Preferred Stock,
of which 569,143 shares are issued and outstanding.
(b) Except as set forth on Schedule 2.3, the Company has not granted
any outstanding options, warrants, rights or other securities convertible into
or exchangeable or exercisable for shares of the capital stock of the Company,
any other commitments or agreements providing for the issuance of additional
shares, the sale of treasury shares, or for the repurchase or redemption of
shares of the Company's capital stock, and there are no agreements of any kind
which may obligate the Company to issue, purchase, redeem or otherwise acquire
any of its capital stock.
Section 2.4 Due Authorization. The Company has all requisite corporate
power and authority, and has taken all corporate action necessary, to own, lease
and operate its assets, to conduct its business as it is presently being
conducted and as it is proposed to be conducted between the date of this
Agreement and the Closing Date and, subject to the approval by the requisite
holders of the Common Stock, to execute and deliver this Agreement, consummate
the transactions contemplated hereby and perform its obligations hereunder. The
execution and
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delivery of this Agreement by the Company and the consummation by the Company of
the transactions contemplated hereby have been duly approved by the board of
directors. Other than receipt of approval of holders of a majority of the Class
A Common Stock and Class B Common Stock, voting as a single class, no other
corporate proceedings on the part of the Company are necessary to authorize this
Agreement. This Agreement has been duly executed and delivered by the Company
and, upon approval by the requisite holders of the Common Stock, will be a
legal, valid and binding obligation of the Company enforceable against it in
accordance with its terms, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws affecting
creditors' rights generally and subject, to general principles of equity.
Section 2.5 No Conflict. Except as set forth in Schedule 2.5, the
execution and delivery of this Agreement by the Company and the consummation of
the transactions contemplated hereby does not and will not violate any provision
of, or result in the breach of, any applicable law, rule or regulation of any
governmental body, the Certificate of Incorporation, Bylaws or other
organizational documents of the Company or any of its Subsidiaries, or any
agreement, indenture or other instrument to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries may
be bound, or of any order, judgment or decree applicable to any of them, or
terminate or result in the termination of any such agreement, indenture or
instrument, or result in the creation of any Lien, charge or encumbrance upon
any of the properties or assets of the Company or its Subsidiaries, or
constitute an event which, after notice or lapse of time or both, would result
in any such violation, breach, acceleration, termination or creation of a Lien
or result in a violation or revocation of any required license, permit or
approval from any government or other third party,
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except to the extent that the occurrence of any of the foregoing would not have
a material adverse effect on (i) the ability of the Company to enter into and
perform fully its obligations under this Agreement or (ii) the business,
operations or financial condition of the Company and its Subsidiaries, taken as
a whole.
Section 2.6 Financial Statements. The Company has previously delivered to
Acquiror the following financial statements, all of which have been prepared in
accordance with GAAP applied on a consistent basis (except as otherwise stated
in the footnotes or the audit opinion related thereto) throughout the periods
covered thereby (subject, in the case of the financial statements referenced in
paragraph (b) below, to the absence of footnotes, normal year-end adjustments,
adjustments relating to the stock option plans, adjustments relating to the
termination of Mr. Palmberg's employment in the Company and adjustments relating
to Mr. Chalmer's appointment as Chief Executive Officer substantially as set
forth on Schedule 2.6) and, as applicable, present fairly in all material
respects the consolidated financial position of the Company and its consolidated
Subsidiaries at the dates stated in such financial statements and the results of
their operations for the periods stated therein:
(a) the audited consolidated Balance Sheets of the Company and its
consolidated Subsidiaries as of June 28, 1996 and June 30, 1995, and the audited
consolidated Statements of Operations and Cash Flows of the Company and its
consolidated Subsidiaries for the years ended June 28, 1996 and June 30, 1995,
together with the auditors' report thereon; and
(b) the unaudited consolidated Balance Sheet of the Company and its
consolidated Subsidiaries (the "Interim Balance Sheet") as of March 28, 1997
(the "Interim Balance Sheet Date") and the unaudited consolidated Statement of
Operations of the Company
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and its consolidated Subsidiaries for the nine-month period ended March 28,
1997.
(c) As of the Interim Balance Sheet Date, neither the Company nor
any Subsidiary has any material liabilities (or liabilities which, when
aggregated with all other such liabilities, are material), present or deferred,
accrued or unaccrued, fixed, absolute or contingent except as disclosed in the
Interim Balance Sheet or arising under any Contracts, permits, licenses or other
commitments or liabilities disclosed or referred to on the Schedules (and under
those Contracts which are not required to be disclosed on the Schedules).
Section 2.7 Absence of Certain Changes or Events. Except as set forth on
Schedule 2.7 or otherwise disclosed in writing to Acquiror pursuant to this
Agreement, since the Interim Balance Sheet Date, there has not been any:
(a) actual or threatened material adverse change in the condition
(financial or otherwise), business or operations of the Company and its
Subsidiaries, taken as a whole;
(b) material increase of more than ten percent in the rate of
compensation payable or to become payable to any employee of the Company or its
Subsidiaries or any consultant, representative or agent of the Company or its
Subsidiaries, including the making of any loan to, or the payment, grant or
accrual of any bonus, incentive compensation, service award or other similar
benefit to, any such person, or the addition to, modification of, or
contribution to any Benefit Plan, arrangement, or practice described on Schedule
2.7 other than (i) contributions made for 1996 in accordance with the normal
practices of the Company or its Subsidiaries or (ii) the extension of coverage
to others who become eligible after the Interim Balance Sheet Date or (iii) such
increases, payments, grants or accruals as occur in the ordinary course of
business of the Company or its Subsidiaries;
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(c) mortgage, pledge or other encumbrance of, individually or in the
aggregate, material assets, except purchase money mortgages arising in the
ordinary course of business of the Company and its Subsidiaries;
(d) sale, assignment or transfer of, individually or in the
aggregate, material assets, other than in the ordinary course of business of the
Company and its Subsidiaries;
(e) incurrence of material indebtedness by the Company or its
Subsidiaries for borrowed money or any material commitment to borrow money
entered into by the Company or its Subsidiaries, or any material loans made or
agreed to be made by the Company or its Subsidiaries, or any material
indebtedness guaranteed by the Company or its Subsidiaries;
(f) to the Company's knowledge, incurrence by the Company or its
Subsidiaries of material liabilities (or liabilities which, when aggregated with
all other such liabilities, are material), absolute or contingent, except
liabilities incurred in the ordinary course of business of the Company and its
Subsidiaries and consistent with past practice, or increase or change in any
assumptions underlying or methods of calculating any doubtful account
contingency or other reserves of the Company or its Subsidiaries;
(g) payment, discharge or satisfaction of any material liabilities
of the Company or its Subsidiaries other than the payment, discharge or
satisfaction of material liabilities in the ordinary course of the business of
the Company and its Subsidiaries consistent with the past practice of the
Company and its Subsidiaries and, in the case of indebtedness for borrowed
money, limited to scheduled repayments disclosed in the Interim Balance Sheet or
on Schedule 4.1(i);
(h) capital expenditure in excess of $100,000 in any instance (or in
the
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aggregate with respect to any one project) by the Company or its Subsidiaries or
the incurring of any obligation by the Company or its Subsidiaries to make any
capital expenditure in excess of $100,000 in any instance (or in the aggregate
with respect to any one project) or execute any material lease, other than in
each case any capital expenditure or execution of a material lease which occurs
(i) in the ordinary course of business, or (ii) in connection the ERP project
being undertaken by the Company and its subsidiaries, or (iii) in connection
with the renewal of the lease of the Facility at Redwood City, CA with the
superior Landlord of such Facility;
(i) failure to pay or satisfy when due any obligation of Seller in
connection with the business or operations of the Company or its Subsidiaries,
except where the failure would not have a material adverse effect on the
business, operations or financial condition of the Company and its Subsidiaries,
taken as a whole;
(j) disposition or lapsing of any material Intellectual Property
rights;
(k) repurchase or redemption of any shares of the Company's capital
stock other than stock purchased from former employees of the Company or any of
its Subsidiaries and the amounts paid therefor are taken into account in the
determination of the Merger Consideration; or
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(l) agreement by the Company or any of its Subsidiaries to the
Company's knowledge to do any of the things described in the preceding clauses
(a) through (k) other than as provided for herein.
Section 2.8 Contracts; No Defaults.
(a) Schedule 2.8 (i) through (x) contains a listing of all Contracts
described in clauses (i) through (x) below to which the Company or any of its
Subsidiaries is a party or by which they or any of their properties are bound.
True, correct and complete copies of contracts referred to in clauses (i)-(x)
below have been delivered to or made available to Acquiror or its agents or
representatives.
(i) Each Contract not made in the ordinary course of business
involving expenditures or receipts by the Company or its Subsidiaries in
excess of $100,000;
(ii) Each material distribution, franchise, sales, third-party
commission, consulting, agency or advertising contract or similar
agreement to which Company or any of its Subsidiaries is a party or which
is not cancelable without penalty on thirty (30) calendar days notice;
(iii) Each Contract which involves performance of services or
delivery of goods and/or materials by or to the Company or any of its
Subsidiaries of an amount or value in excess of $100,000 and not
cancelable without penalty upon thirty (30) calendar days notice;
(iv) Each material contract or commitment relating to
commission arrangements with persons other than employees of the Company
or its Subsidiaries.
(v) Each Promissory note, loan, agreement, indenture, evidence of
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indebtedness, letter of credit, guarantee, or other instrument relating
to an obligation to pay money in excess of $100,000, whether the Company
or any of its Subsidiaries shall be the borrower, lender or guarantor
thereunder or whereby any material assets of the Company or any of its
Subsidiaries are pledged (excluding credit provided by the Company or any
of its Subsidiaries in the ordinary course of business of the Company or
its Subsidiaries to employees or purchasers of their products and any such
instruments representing accounts payable or receivable generated in the
ordinary course of business);
(vi) Each lease of real property;
(vii) Each lease of personal property involving expenditures
or liabilities in excess of $25,000 in any one year or $100,000 in the
aggregate over the term of the lease and not cancelable without penalty
upon thirty (30) calendar days notice;
(viii) Each material licensing agreement or other material
written Contract with respect to any Intellectual Property (as hereinafter
defined), including forms of Intellectual Property licenses and
sublicenses and agreements with current or former employees, consultants,
or contractors regarding the ownership, appropriation or the nondisclosure
of Intellectual Property;
(ix) Each agreement or commitment that the Company currently
anticipates will account for more than 5% of the aggregate purchases or
sales projected to be made by the Company and its Subsidiaries during the
current fiscal year; and
(x) Each agreement imposing material non-competition or
material exclusive dealing obligations on the Company or any of its
Subsidiaries.
(b) Except as set forth on Schedule 2.8, all of the Contracts listed
pursuant to
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paragraph (a) hereof are valid and in full force and effect
and the Company, or Subsidiary party thereto, has duly performed its
obligations under the Contracts listed or required to be set forth on
Schedule 2.8 or as indicated on Schedule 2.5 in all material respects to
the extent those obligations to perform have accrued. Except as set forth
on Schedule 2.8 to the best knowledge of the Company, no material
violation of, or default or breach under, any such Contracts by any party
thereto has occurred, except where violation, default or breach would not
have a material adverse effect on the business, operations or financial
condition of the Company and its Subsidiaries, taken as a whole.
Section 2.9 Machinery, Equipment and Other Tangible Property. Excluding
the Owned Real Property and except as set forth on Schedule 2.9, the Company or
one of its Subsidiaries owns and has good title to all machinery, equipment and
other tangible property reflected on the books of the Company and its
Subsidiaries as owned by the Company or its Subsidiaries and which is material
to the business and operations of the Company and its Subsidiaries taken as a
whole ("Material Equipment"), free and clear of all Liens other than Permitted
Liens. Except as set forth on Schedule 2.9, all the Material Equipment is in a
state of good repair and maintenance and is in good operating condition,
reasonable wear and tear excepted.
Section 2.10 Owned Real Property; Facilities.
(a) Owned Real Property. The Company has good and marketable fee
simple title to the Owned Real Property and all buildings and other improvements
located thereon, subject only to: (i) the Permitted Liens; and (ii) such
easements, licenses, restrictions, reservations, leases and other rights to
possession or use of the Owned Real Property, or any
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portion thereof, which do not materially interfere with the use of the Owned
Real Property as a manufacturing facility as currently used or any other use to
which the Owned Real Property may lawfully be put.
(b) Actions. There are no pending or, to the Company's knowledge,
threatened condemnation proceedings with respect to any Facility.
(c) Certificate of Occupancy and other Compliances. All Facilities
have received all material required approvals of governmental authorities
(including, without limitation, a certificate of occupancy or other similar
certificate permitting lawful occupancy of the Facilities) required in
connection with the operation thereof and have been operated and maintained in
all material respects in accordance with applicable laws, rules and regulations.
(d) Schedule 2.10 lists the Facilities of the Company and its
Subsidiaries since the Interim Balance Sheet Date. Except for the Facilities,
since May 20, 1994 the Company has not operated any manufacturing facilities.
Section 2.11 Intellectual Property. Schedule 2.11 lists each patent,
trademark, service mark or trade name, registered copyright or mask work which,
in each case, is material to the business and operations of the Company and its
Subsidiaries (taken as a whole) as presently conducted, and applications for any
of the foregoing (collectively, "Intellectual Property") held by the Company or
any of its Subsidiaries. The Contracts listed on Schedule 2.8 include all
material license or sublicense agreements with respect to any Intellectual
Property to which the Company or any of its Subsidiaries is a party. Except as
set forth on Schedule 2.11, (i) the Company or one or more of its Subsidiaries
has good title to each item of Intellectual Property owned by it, free and clear
of any Lien other than Permitted Liens and (ii) the Company and its
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Subsidiaries own or have the right to use pursuant to license, sublicense,
agreement or permission all items of Intellectual Property used in the operation
of the business of the Company and its Subsidiaries, as presently conducted,
except where the failure to have such rights would not have a material adverse
effect on the business, operations or financial condition of the Company and its
Subsidiaries, taken as a whole. The consummation of the transactions
contemplated hereby will not alter or impair any such right and no actions are
pending or, to the knowledge of the Company, threatened against the Company or
its Subsidiaries which would result in revocation or termination of any such
right, except to the extent that such revocation or termination would not have a
material adverse effect on the business, operations or financial condition of
the Company and its Subsidiaries taken as a whole. To the best of the Company's
knowledge, the conduct of the business of the Company and its Subsidiaries, as
currently conducted, does not, in any material respect, conflict with, or
infringe upon, the material Intellectual Property rights of any third party.
Section 2.12 Litigation and Proceedings. Except as set forth on Schedule
2.12, as at the date of this Agreement there are no lawsuits, actions, suits or
other proceedings at law or in equity, or to the knowledge of the Company,
investigations, before or by any court or other Governmental Authority or before
any arbitrator pending or, to the knowledge of the Company, threatened, against
the Company or any of its Subsidiaries, or, to the Company's knowledge, any
other person in respect of which the Company or any Subsidiary has
indemnification obligations and, as at the Closing there shall be no such
lawsuit, action, suit or proceeding in which the relief sought includes damages
in excess of $100,000 in any individual case or $1,000,000 in the aggregate.
Except as set forth on Schedule 2.12, there is no unsatisfied judgment, order or
decree
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requiring payment in excess of $100,000 or any open injunction binding upon the
Company or any of its Subsidiaries.
Section 2.13 Employee Benefit Plans. The Schedule 2.13 lists each (i)
pension, retirement, profit-sharing, employee stock ownership, deferred
compensation, stock bonus or other similar plan or arrangement, (ii) each
medical, vision, dental or other health plan or arrangement, (iii) each life
insurance plan or arrangement, (iv) each vacation, severance or other similar
plan or arrangement, (v) each stock option, stock appreciation or other similar
plan or arrangement and (vi) each other employee benefit plan, including,
without limitation, any "employee benefit plan" as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), to
which the Company or any entity which is (or at a relevant time was) a member of
a "controlled group of corporations" with or under "common control" with the
Company as defined in Section 414(b) or (c) of the Code and (an "ERISA
Affiliate") is required to contribute or which the Company or any ERISA
Affiliate sponsors, in each case, for the benefit of any of the Company's
domestic employees or former employees (the "Benefit Plans").
Section 2.14 Labor Matters.
(a) Except as set forth in Schedule 2.14, neither the Company nor
any of its Subsidiaries is a party to any labor agreement with respect to their
employees with any labor organization, union, group or association and there are
no employee unions (nor any other similar labor or employee organizations) under
local statutes, custom or practice. Neither the Company nor any Subsidiary is
now, or since May 20, 1994 has been, subject to or involved in, or threatened
with any union elections, petitions therefor or other organizational activities
and, to
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the knowledge of the Company, none of the employees of the Company or any
Subsidiary are now, or since May 20, 1994 have been, represented by any labor
union or other employee collective bargaining organization and there are no
pending grievances, disputes or controversies with any union or other employee
collective bargaining organization of such employees or threats of strikes, work
stoppages or slowdowns or pending demands for collective bargaining by any union
or other such organization, and the Company is not, nor is any Subsidiary nor,
to the knowledge of the Company, is any employee of the Company or any
Subsidiary, now subject to or involved in or threatened with any union
elections, petitions therefor or other organizational or recruiting activities,
except as disclosed in Schedule 2.14. The Company and each Subsidiary is in
compliance in all material respects with all applicable laws respecting
employment practices, employee documentation, terms and conditions of employment
and wages and hours and is not and has not engaged in any unfair labor practice.
There is no unfair labor practice charge or complaint against the Company and
any of its Subsidiaries pending before the National Labor Relations Board and
there are no facts or information to the knowledge of the Company which would
give rise thereto. Schedule 2.14 also sets forth a list of all employment
agreements with employees who earn over $75,000 per year.
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(b) Except for (i) those matters set forth on Schedule 2.14, (ii)
the Chalmers Payment, (iii) the Palmberg Payment and (iv) under the Employee
Stock Option Plans, no employee shall accrue or receive additional benefits,
service or accelerated rights to payments of benefits under any employment plan,
agreement or arrangement, including the right to receive any parachute payment,
as defined in Section 280G of the Code, or become entitled to severance,
termination allowance or similar payments as a result of the transactions
contemplated by this Agreement. Since May 20, 1994 neither the Company nor any
Subsidiary has experienced a material work slowdown or stoppage due to labor
problems.
Section 2.15 Legal Compliance. Except with respect to (a) matters set
forth on Schedule 2.15, and (b) matters addressed in Sections 2.13, 2.16 and
2.17 (as to which certain representations and warranties are made pursuant to
such Sections), the Company and its Subsidiaries are in substantial compliance
and at all times have been in substantial compliance with all laws (including
rules and regulations thereunder) of federal, state, local and foreign
governments (and all agencies thereof) applicable thereto, except where such
instances of noncompliance would not have a material adverse effect on the
business, operations or financial condition of the Company and its Subsidiaries,
taken as a whole.
Section 2.16 Environmental Matters.
(a) The following terms, when used in this Section 2.16, shall have
the following meanings. Any of these terms may, unless the context otherwise
requires, used in the singular or the plural depending on the reference.
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"Release" shall mean and include any material spilling,
leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, dumping or disposing into the environment of any Hazardous Substance.
"Hazardous Substance" shall mean any "hazardous waste,"
"hazardous material," "hazardous substance," "industrial waste," "subject
waste," "pollutant," "contaminant," "toxic waste" or "toxic substance" (as
defined in or for purposes of any Environmental Law), whether solid, liquid or
gas, including but not limited to asbestos, radioactive materials, PCB's,
pesticides, and petroleum or petroleum products.
(b) Since May 20, 1994 (or, if later, the date the Company first
occupied the relevant Facility) the Facilities have been maintained and operated
in material compliance with all Environmental Laws. Prior to May 20, 1994 (or,
if later, the date the Company first occupied the relevant Facility), to the
Company's knowledge, the Facilities were maintained and operated in material
compliance with all Environmental Laws.
(c) Except as disclosed on Schedule 2.16(c), neither the Company,
nor any of the Subsidiaries, has received any written notice since May 20, 1994,
nor, to the Company's knowledge, prior thereto, alleging that it is or was
claimed to be in violation of or in material non-compliance with the conditions
of any permit required under any Environmental Law or the provisions of any
Environmental Law, which violation has not been remedied to the satisfaction of
the person issuing the notice;
(d) There is not now pending or, to the Company's knowledge,
threatened any Action against the Company or any of the Subsidiaries under any
Environmental Law with respect to any alleged Release, handling or mishandling
of any Hazardous Substance;
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(e) Hazardous Substances. The Company has not used, generated,
treated, stored, transported or disposed of any Hazardous Substance except in
material compliance with applicable Environmental Laws;
(f) Environmental Conditions. Except as disclosed on Schedule 2.16,
or as would not have a material adverse effect on the business, operations or
financial condition of the Company and the Subsidiaries taken as a whole, no
Hazardous Substances are present or have been located on, under or about, or
have migrated or been Released on, under, about or from, the Facilities which
could form the basis of any demand, cause of action, claim or Action of any
person against the Company or the Subsidiaries or give rise to liability under
any applicable Environmental Law;
(g) CERCLA or RCRA. No current or, to the Company's knowledge, past
use, generation, treatment, transportation, storage, disposal or handling
practice of the Company with respect to any Hazardous Substance has resulted or
could reasonably be expected to result in any material liability under CERCLA or
RCRA or any Environmental Laws of similar effect;
(h) Storage Tank or Pipeline. Neither the Company nor any of its
Subsidiaries operates any underground storage tank (as defined by any
Environmental Law). There is not now and to the Company's knowledge has not been
at any time any underground or above-ground storage tank or pipeline at the
Owned Real Property where the installation, use, maintenance, repair, testing,
closure or removal of such tank or pipeline was not in material compliance with
all Environmental Laws, and there has been no material Release from or rupture
of any such tank or pipeline, including without limitation any material Release
from or in connection with the filling or emptying of such tank or pipeline;
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(i) Releases or Indemnification Agreements. Neither the Company nor
any of its Subsidiaries has released any person from or agreed to indemnify any
person against any claim any of them may have (i) under any Environmental Law,
or (ii) otherwise regarding any use, generation, treatment, storage,
transportation, disposal, migration or Release of any Hazardous Substances.
(j) Site Assessments, etc. No site assessment, audit or other
investigation has been conducted by or on behalf of the Company or any
Subsidiary as to environmental matters at any of the Facilities since May 20,
1994, except as set forth on Schedule 2.16(j).
Section 2.17 Taxes. Except as otherwise disclosed in Schedule 2.17:
(a) All material federal, state, local, and foreign tax returns of
the Company and its Subsidiaries ("Tax Returns"), including those Tax Returns
relating to income, employment, franchise, property, sales and use, and excise
taxes, and any other taxes due from and/or withheld by or required to be
withheld by the Company and its Subsidiaries (collectively, "Taxes") have been
prepared in all material respects accordance with all applicable laws and have
been duly and timely filed, except for those returns for which the time for
filing thereof has been validly extended, and the information shown on such
returns (complete copies of which have been furnished to the Acquiror by the
Company), fairly and accurately reflects the information purported to be shown
in all material respects. The Company has made available to Acquiror copies of
its federal income Tax Returns for 1994, 1995 and 1996.
(b) All Taxes or estimates thereof that are shown as due on the Tax
Returns filed have been timely and appropriately paid (or an adequate reserve
has been established therefor), except for amounts being contested in good faith
by appropriate proceedings.
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(c) To the knowledge of the Company, all Taxes that the Company and
each Subsidiary are required by law to withhold and collect to date have been
duly and timely withheld and collected, and, except for amounts being contested
in good faith in appropriate proceedings, have been paid over in to the proper
authorities to the extent due and payable.
(d) The Company is not aware of any transactions or matters or any
basis which might or could result in material additional Taxes for the Company
or any Subsidiary with respect to prior taxable periods for which an adequate
reserve has not been provided.
(e) None of the Tax Returns is being audited by any taxing
authority.
(f) No assessment, audit or other proceeding by any taxing
authority, court, or other governmental or regulatory authority is proposed or
pending with respect to the Taxes or Tax Returns.
(g) There are no outstanding agreements, waivers, or arrangements
extending the statutory period of limitations applicable to any claim for or the
period for the collection or assessment of Taxes due for any taxable period.
(h) No consent to the application of Section 341(f)(2) of the Code
(or any predecessor thereof) has been made or filed by or with respect to any of
the Company or its Subsidiaries or any of their assets and properties.
(i) None of the assets and properties of the Company or its
Subsidiaries is an asset or property that Acquiror or any of its Affiliates is
or will be required to treat as being (i) owned by any other Person pursuant to
the provisions of Section 168(f)(8) of the Internal Revenue Code of 1954 as
amended, and in effect immediately before the enactment of the Tax Reform Act of
1986, or (ii) tax-exempt use property within the meaning of Section 168(h)(1) of
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the Code.
Section 2.18 Governmental Authorities: Consents. Assuming the truth and
completeness of the representations and warranties of Acquiror contained in this
Agreement, no consent, approval or authorization of, or designation, declaration
or filing with, any Governmental Authority or other third party is required on
the part of the Company with respect to the Company's execution or delivery of
this Agreement or the consummation of the transactions contemplated hereby,
except for (i) applicable requirements of the HSR Act, (ii) any novations or
consents required in connection with Government Contracts or subcontracts
thereunder, (iii) any filings required under any United States export control
laws, (iv) any consents under Contracts which are not material to the business,
operations or financial condition of the Company and its Subsidiaries, taken as
a whole, (v) the filing of the Certificate of Merger with the Secretary of State
of the State of Delaware and (vi) as otherwise disclosed in Schedule 2.18.
Section 2.19 Licenses, Permits and Authorizations. Schedule 2.19 contains
a list of all material licenses, franchises and other permits of or with any
Governmental Authority which are held by the Company or any of its Subsidiaries.
All such licenses, franchises and other permits are in full force and effect and
there are no proceedings pending or, to the best knowledge of the Company,
threatened that seek the revocation, cancellation, suspension or adverse
modification thereof. Such licenses, franchises and permits constitute all of
the material licenses, franchises and permits necessary to permit the Company
and its Subsidiaries to own, operate, use and maintain their assets in the
manner in which they are now operated and maintained and to conduct the business
of the Company and its Subsidiaries as currently conducted.
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Section 2.20 Brokers' Fees. Except as set forth on Schedule 2.20, no
broker, finder, investment banker or other Person is entitled to any brokerage
fee, finders' fee or other commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by the Company or
any of its Subsidiaries or Affiliates or by CVCA.
Section 2.21 Bank Accounts, Etc. Schedule 2.21 contains a true and correct
and complete list as of the date hereof of all banks, trust companies, savings
and loan associations and brokerage firms which the Company or any Subsidiary
has an account or a safe deposit box and the names of all Persons authorized to
draw thereon, to have access thereto, or to authorize transactions therein, the
names of all Persons, if any, holding powers of attorney from the Company or any
Subsidiary and a summary statement as to the terms thereof.
Section 2.22 Accounts Receivable. Except as set forth in Schedule 2.22 all
accounts and notes receivable reflected on the Interim Balance Sheet, and all
accounts and notes receivable arising subsequent to the date of the Interim
Balance Sheet, represent bona fide claims of the Company and the Subsidiaries
and, subject only to consistently recorded reserves for bad debts, have been
collected or are collectible in the aggregate recorded amounts thereof.
Section 2.23 Substantial Customers.
(a) Schedule 2.23 lists the five customers of the Company and its
Subsidiaries with the highest volume of purchases from the Company and its
Subsidiaries during the 12-month period ended the Interim Balance Sheet Date,
and the amount for which each such customer was invoiced during such period.
(b) No customer listed on Schedule 2.23 has (i) ceased, or indicated
to the Company or any Subsidiary an intention to cease, dealing with or through
the Company or any Subsidiary, (ii) reduced, or indicated an intention to
reduce, substantially its dealings with or through the Company or any
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Subsidiary, or (iii) changed, or indicated an intention to change, substantially
the terms on which it is prepared to deal with or through the Company or any
Subsidiary. Neither the Company nor any Subsidiary has any knowledge that any of
the customers listed in Schedule 2.23 will not continue to be customers of the
Company and the Subsidiaries after the closing.
Section 2.24 Directors and Officers. Schedule 2.24 sets forth the name and
current annual salary and other compensation payable by the Company or any
Subsidiary to each director and officer of the Company or any Subsidiary.
Section 2.25 Minute Books; Stock Records. The minute books of the Company
and each Subsidiary made available to the Acquiror for inspection accurately
record therein all actions taken by the Board of Directors and shareholders of
the Company or the applicable Subsidiary. The stock records of the Company and
each of the Subsidiaries made available to the Acquiror for inspection
accurately record all issuances and transfers of any capital stock of the
Company or the applicable Subsidiary.
Section 2.26 Inventory. As of the Interim Balance Sheet Date, except as
set forth in Schedule 2.26 or as reserved against by the Company on the Interim
Balance Sheet, the Company and its Subsidiaries represent that their inventory
of goods to be sold ("Inventory") is in good and merchantable condition, and is
in such condition that it can be sold in the ordinary course of business. The
values at which all Inventory is carried on the Interim Balance Sheet reflect
the historical inventory valuation policy of the Company for overhead
capitalization and of stating inventory at the lower of cost or market value.
The Company and its Subsidiaries have
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good and marketable title to the Inventory free and clear of all Liens other
than Permitted Liens. The Company and its Subsidiaries are not under any
obligation or liability with respect to accepting returns of items of Inventory
in possession of customers except in the ordinary course of business or as set
forth in Schedule 2.26 of the Disclosure Schedule.
ARTICLE IIA
REPRESENTATIONS, WARRANTIES AND OTHER UNDERTAKINGS OF CVCA
Section 2A.1 Representations. CVCA hereby represents and warrants to
Acquiror and Merger Sub as of the date of this Agreement that:
(a) CVCA has all requisite partnership power and authority and has
taken all partnership action necessary to execute and deliver this Agreement and
to perform its obligations hereunder. The execution and delivery of this
Agreement by CVCA and the consummation of the transactions contemplated hereby
have been duly and validly authorized and approved by or on behalf of CVCA and
no other proceeding on the part of CVCA is necessary to authorize this
Agreement. This Agreement has been duly and validly executed by or on behalf of
CVCA and constitutes a valid and binding obligation of CVCA, enforceable in
accordance with its terms, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws affecting
creditors rights generally and subject, as to enforceability, to general
principles of equity.
(b) No Conflict. The execution and delivery of this Agreement by
CVCA does not and will not violate any provision of, or result in the breach of,
any applicable law, rule or regulations of any governmental body, the Agreement
of Limited Partnership of CVCA or any agreement, indenture or other instrument
to which CVCA is a party or by which CVCA may be
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bound, or of any order, judgment or decree applicable to CVCA, or constitute an
event which, after notice or lapse of time or both, would result in any such
violation or breach, except to the extent that the occurrence of any of the
foregoing would not have a material adverse effect on the ability of CVCA enter
into and perform fully its obligations under this Agreement.
Section 2A.2 Written Consent. Prior to Closing, CVCA shall deliver to the
Company its written consent to the Merger in accordance with Section 228 of the
DGCL in respect of the voting securities of the Company owned of record by it
and shall not, in any event, assert dissenters' rights in respect of any shares
of capital stock of the Company beneficially owned by it.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND MERGER SUB
Acquiror and Merger Sub represent and warrant to the Company as of the
date of this Agreement that:
Section 3.1 Corporate Organization. Acquiror has been duly incorporated
and is validly existing as a corporation in good standing under the laws of the
Commonwealth of Massachusetts. Merger Sub has been duly incorporated and is
validly existing as a corporation in good standing under the laws of the State
of Delaware. Each of Acquiror and Merger Sub is duly licensed or qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
where the character of its properties owned or leased or the nature of its
activities make such licensing or qualification necessary, except where failure
to be so licensed or qualified would not have a material adverse effect on the
ability of Acquiror or Merger Sub to enter into this Agreement or consummate the
transactions contemplated hereby. The copies of the Restated
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Articles of Organization or Certificate of Incorporation of each of Acquiror and
Merger Sub previously delivered by Acquiror to the Company are true, correct and
complete.
Section 3.2 Due Authorization. Each of Acquiror and Merger Sub has all
requisite corporate power and authority and has taken all corporate action
necessary, to own, lease and operate its assets, to conduct its businesses as it
is presently conducted, and subject to the approval by the requisite holders of
stock of Merger Sub, to execute and deliver this Agreement, to consummate the
transactions contemplated hereby and to perform its obligations hereunder. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby by each of Acquiror and Merger Sub have been
duly and validly authorized and approved by the respective Boards of Directors
of Acquiror and Merger Sub, and (subject to the approval of the holder of stock
of Merger Sub, which approval shall be given by Acquiror prior to Closing) no
other corporate proceeding on the part of Acquiror or Merger Sub is necessary to
authorize this Agreement. This Agreement has been duly and validly executed and
delivered by each of Acquiror and Merger Sub and is a valid and binding
obligation of Acquiror and Merger Sub, enforceable against Acquiror and Merger
Sub in accordance with its terms, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws affecting
creditors' rights generally and subject, as to enforceability, to general
principles of equity.
Section 3.3 No Conflict. Except as set forth in Schedule 3.3, the
execution and delivery of this Agreement by Acquiror and Merger Sub and the
consummation of the transactions contemplated hereby does not and will not
violate any provision of, or result in the breach of any applicable law, rule or
regulation of any governmental body, the charter, bylaws,
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as amended, or other organizational documents of Acquiror and Merger Sub, or any
agreement, indenture or other instrument to which Acquiror or any of its
Subsidiaries, including Merger Sub, is a party or by which Acquiror or any of
its Subsidiaries, including Merger Sub, may be bound, or of any order, judgment
or decree applicable to Acquiror or any of its Subsidiaries, including Merger
Sub, or terminate or result in the termination of any such agreement, indenture
or instrument, or result in the creation of any Lien, charge or encumbrance upon
any of the properties or assets of Acquiror or any of its Subsidiaries,
including Merger Sub, or constitute an event which, after notice or lapse of
time or both, would result in any such violation, breach, acceleration,
termination or creation of a Lien, except to the extent that the occurrence of
the foregoing would not have a material adverse effect on the ability of
Acquiror and Merger Sub to enter into and perform fully their respective
obligations under this Agreement.
Section 3.4 Litigation and Proceedings. There are no lawsuits, actions,
suits or other proceedings at law or in equity, or, to the knowledge of
Acquiror, investigations, before or by any court or other Governmental Authority
or before any arbitrator pending or, to the knowledge of Acquiror, threatened,
against Acquiror or any of its Subsidiaries, including Merger Sub, which, if
determined adversely, could reasonably be expected to have a material adverse
effect on the ability of Acquiror Merger Sub to enter into and perform fully
their respective obligations under this Agreement. There is no unsatisfied
judgment or any open injunction binding upon Acquiror or any of its
Subsidiaries, including Merger Sub, which could reasonably be expected to have a
material adverse effect on the ability of Acquiror or Merger Sub to enter into
and perform fully their respective obligations under this Agreement.
Section 3.5 Governmental Authorities: Consents. Assuming the truth and
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completeness of the representations and warranties of the Company contained in
this Agreement, no consent, approval or authorization of, or designation,
declaration or filing with, any Governmental Authority or other third party is
required on the part of Acquiror or any of its Subsidiaries, including Merger
Sub, with respect to Acquiror or Merger Sub's execution or delivery of this
Agreement or the consummation of the transactions contemplated hereby, except
for (i) applicable requirements of the HSR Act, (ii) any novations or consents
required in connection with Government Contracts or subcontracts thereunder,
(iii) any filings required under any United States export control laws, (iv) the
filing of the Certificate of Merger with the Secretary of State of the State of
Delaware and (v) as otherwise disclosed in Schedule 3.5.
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Section 3.6 Brokers' Fees. Except as set forth on Schedule 3.6, no broker,
finder, investment banker or other Person is entitled to any brokerage fee,
finders' fee or other commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by Acquiror or any
of its Affiliates. All such arrangements are the sole obligation of Acquiror.
ARTICLE IV
COVENANTS OF THE COMPANY
Section 4.1 Conduct of Business. From the date hereof through the Closing,
the Company and each of its Subsidiaries shall, except as contemplated by this
Agreement, or as consented to by Acquiror in writing (which consent will not be
unreasonably withheld), operate its business in the ordinary course and
substantially in accordance with past practice and will use all commercially
reasonable efforts not to take any action inconsistent with this Agreement.
Without limiting the generality of the foregoing, unless consented to by
Acquiror in writing (which consent shall not be unreasonably withheld), the
Company shall not, and the Company shall cause each of its Subsidiaries not to,
except as contemplated by this Agreement:
(a) alter or amend the Certificate of Incorporation or Bylaws of the
Company or any of its Subsidiaries, except as otherwise required by law;
(b) enter into, extend, materially modify, terminate or renew any
Contract of a type required to be listed on Schedule 2.8, except (i) in the
ordinary course of business consistent with past practices or (ii) in connection
with the ERP project being undertaken by the Company, or (iii) in connection
with the anticipated renewal of the lease of the Facility at Redwood City, CA;
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(c) sell, assign, transfer, convey, lease or otherwise dispose of
any material assets or properties except in the ordinary course of business
consistent with past practices;
(d) (i) except as otherwise required by law make any change in the
key management structure of the Company or any of its Subsidiaries, including,
without limitation, the hiring of additional executive officers or the
terminations of existing executive officers, other than in the ordinary course
of business; or (ii) adopt, enter into or materially amend any Benefit Plan;
(e) acquire by merger or consolidation with, or merge or consolidate
with, or purchase substantially all of the assets of, or otherwise acquire any
material assets or business of, any corporation, partnership, association or
other business organization or division thereof;
(f) make any material loans or advances to any partnership, firm or
corporation, or, except for expenses incurred in the ordinary course of
business, any individual;
(g) pay any dividend or make any other distribution to holders of
Shares of Common Stock;
(h) purchase or redeem any shares of Common Stock or Preferred Stock
from the holders thereof; provided, that the Company may purchase shares of
Common Stock or Preferred Stock held by any former employee of the Company;
(i) repay any of the principal amount owed under the term loan
included in the First Bank Loans, or pay any other obligation or liability
(absolute or contingent) other than current liabilities or obligations under
Contracts and other than interest payments and regularly scheduled amortizations
with respect to obligations for borrowed money, as set forth in Schedule 4.1(i);
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(j) enter any transaction or series of transactions which,
individually or in the aggregate, is material to the Company and its
Subsidiaries taken as a whole, except in the ordinary course of business;
(k) fail to pay any material current liability or obligation (other
than when there is a bona fide dispute as to whether such liability or
obligation is due); or
(l) enter into any agreement, or otherwise become obligated, to do
any action prohibited hereunder.
Section 4.2 Inspection. Subject to (i) confidentiality obligations and
similar restrictions that may be applicable to information furnished to the
Company by third parties that may be in the Company's possession from time to
time and (ii) the terms of the Confidentiality Agreement and the provisions of
Section 6.1 hereof, the Company shall, and shall cause its Subsidiaries to,
afford to Acquiror and its accountants, counsel and other representatives
reasonable access, during normal business hours, to all of their respective
properties, books, contracts, commitments, tax returns, records and appropriate
officers and employees of the Company and its Subsidiaries, and shall furnish
such representatives with all financial and operating data and other information
concerning the affairs of the Company and its Subsidiaries as they may
reasonably request.
Section 4.3 HSR Act. (a) In connection with the transactions contemplated
by this Agreement, the Company shall (and, to the extent required, shall cause
each of its Affiliates to) comply promptly (and in any event by June 15, 1997)
with the notification and reporting requirements of the HSR Act and use all
commercially reasonable efforts to obtain early termination of the waiting
period under the HSR Act. The Company shall (and, to the extent
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required, shall cause its Affiliates to) substantially comply with any
additional requests for information, including requests for production of
documents and production of witnesses for interviews or depositions, by any
Antitrust Authority.
(b) The Company shall exercise all commercially reasonable efforts,
and the Acquiror shall cooperate fully with Company, to prevent the entry in any
Action of a Governmental Order which would prohibit, make unlawful or delay the
consummation of the transactions contemplated by this Agreement.
Section 4.4 No Solicitations. From the date hereof through the Closing or
the earlier termination of this Agreement in accordance with its terms, neither
CVCA, nor the Company nor any of its Subsidiaries shall, and neither CVCA nor
the Company shall knowingly permit their Affiliates, officers, directors,
employees, representatives and agents to, directly or indirectly, encourage,
solicit, participate in or initiate discussions or negotiations with, or provide
any information to, any Person or group of Persons (other than Acquiror, Merger
Sub or any of their respective Affiliates) concerning any merger, sale of
assets, exclusive license of a material proportion of the Intellectual Property,
sale of shares of capital stock or similar transactions involving the Company or
any Subsidiary or division of the Company, and will promptly report to Acquiror
any proposal or inquiry from any Person or group as to such a transaction.
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Section 4.5 Perkin-Elmer Note. The Company shall give all requisite
notices to the holder(s) of, and comply with the terms of, the Perkin-Elmer Note
in connection with the transactions contemplated by this Agreement.
ARTICLE V
COVENANTS OF ACQUIROR
Section 5.1 HSR Act.
(a) In connection with the transactions contemplated by this
Agreement, Acquiror shall (and, to the extent required, shall cause each of its
Affiliates to) comply promptly (and, in any event, by June 15, 1997) with the
notification and reporting requirements of the HSR Act and use all commercially
reasonable efforts to obtain early termination of the waiting period under the
HSR Act. Acquiror shall (and, to the extent required, shall cause its Affiliates
to) substantially comply with any additional requests for information, including
requests for production of documents and production of witnesses for interviews
or depositions, by any Antitrust Authority.
(b) Acquiror shall exercise all commercially reasonable efforts, and
the Company shall cooperate fully with Acquiror, to prevent the entry in any
Action of a Governmental Order which would prohibit, make unlawful or delay the
consummation of the transactions contemplated by this Agreement.
Section 5.2 Indemnification and Insurance. From and after the Effective
Time of the Merger, Acquiror agrees that it will cause the Surviving Corporation
to continue to indemnify and hold harmless each present and former director and
officer of the Company or any of its Subsidiaries against any costs or expenses
(including reasonable attorneys' fees), judgments,
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fines, losses, claims, damages or liabilities incurred in connection with any
claim, action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of or pertaining to matters
existing or occurring at or prior to the Effective Time of the Merger, whether
asserted or claimed prior to, at or after the Effective Time of the Merger, to
the fullest extent that the Company or its Subsidiaries, as the case may be,
would have been permitted under its charter or bylaws in effect on the date
hereof to indemnify such person (including the advancing of expenses as incurred
to the fullest extent permitted under applicable law); provided that the person
to whom such expenses are advanced provides an undertaking to the Surviving
Corporation to repay such advances if it is ultimately determined that such
person is not entitled to indemnification; provided, further, that any
determination required to be made with respect to whether an officer's or
director's conduct complies with the standards set forth under Delaware law and
the charter and bylaws of the Company or its applicable Subsidiary shall be made
by independent counsel selected by the Surviving Corporation.
Section 5.3 Financing. Acquiror shall use commercially reasonable efforts
to ensure that the offering described in Section 8.2(g) hereof is consummated as
soon as practicable following the date hereof.
Section 5.4 Perkin-Elmer Note. Acquiror shall give the Company sufficient
notice of the anticipated Closing Date to enable it to comply with Section 4.5
of this Agreement.
ARTICLE VI
CONFIDENTIALITY; SUPPORT OF TRANSACTION
Section 6.1 Confidentiality.
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(a) Each of the Company, CVCA and Acquiror hereby covenants that
except (i) for any governmental filings required in order to complete the
transactions contemplated herein, and (ii) as Acquiror and the Company may agree
or consent in writing, all information received by the Company, CVCA and
Acquiror and their respective representatives in contemplation, or pursuant to
the terms, of this Agreement shall be kept in confidence by the receiving party
and its representatives; provided, however, that any party hereto may disclose
such information to its legal and financial advisors, lenders, financing sources
and their respective legal advisors and representatives so long as such Persons
agree to maintain the confidentiality of such information in accordance with
this Section 6.1. If the transactions contemplated hereby shall fail to be
consummated, all copies of documents or extracts thereof containing information
and data as to one of the other parties, including all information prepared by
the receiving party or such receiving party's representatives, shall be turned
over to the party furnishing same, except that such information prepared by the
receiving party or such receiving party's representatives may be destroyed at
the option of the receiving party, with notice of such destruction (or return)
to be confirmed in writing to the disclosing party. Any information not so
destroyed (or returned) will remain subject to these confidentiality provisions
(notwithstanding any termination of this Agreement).
(b) The foregoing confidentiality provisions shall not apply to such
portions of the information received which (i) are or become generally available
to the public through no action by the receiving party or by such party's
representatives or (ii) are or become available to the receiving party on a
nonconfidential basis from a source, other than the disclosing party or its
representatives, which the receiving party believes, after reasonable inquiry,
is not prohibited
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from disclosing such portions to it by a contractual, legal or fiduciary
obligation, and shall not apply to any disclosure by Acquiror after the Closing
of any information disclosed by the Company or CVCA.
Section 6.2 Support of Transaction. Without limiting any provision hereof,
Acquiror, the Company, and their respective Subsidiaries shall each (i) use all
commercially reasonable efforts to assemble, prepare and file any information
(and, as needed, to supplement such information) as may be reasonably necessary
to obtain as promptly as practicable all governmental and regulatory consents
required to be obtained in connection with the transactions contemplated hereby,
including (at the cost and expense of the Acquiror) the financing referred to in
Section 8.2(g), (ii) use all commercially reasonable efforts to obtain all
material consents and approvals of third parties that any of Acquiror, the
Company, or their respective Subsidiaries are required to obtain in order to
consummate the Merger, (iii) take such other action as may reasonably be
necessary or as another party may reasonably request to satisfy the conditions
set forth in Article VIII or otherwise to comply with this Agreement, and (iv)
provide the other parties, and such other party's employees, officers,
accountants, lawyers, financial advisors and other representatives with access
to its personnel, properties, business and records under all reasonable
circumstances.
Section 6.3 Chalmers Payment. Between the date of this Agreement and
Closing, Acquiror and the Company agree to cooperate to ensure the deductibility
of the Chalmers Payment for Tax purposes. Following Closing, Acquiror shall (and
shall cause its Subsidiaries to) take all reasonable steps to ensure the
deductibility of the Chalmers Payment for Tax purposes and shall not take any
action which is likely to jeopardize the deductibility of the
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Chalmers Payment.
ARTICLE VII
CLOSING
Section 7.1 Filing. As soon as all of the conditions set forth in Article
VIII of this Agreement have either been fulfilled or waived, and if this
Agreement has not heretofore been terminated pursuant to its terms, the Boards
of Directors of Acquiror, Merger Sub and the Company shall direct their officers
forthwith to file and record all relevant documents with the appropriate
government officials to effectuate the Merger.
Section 7.2 Closing. The Closing shall take place at a location and time
mutually agreed upon by Acquiror and the Company at the earliest practicable
date after the conditions set forth in Section 8.1 have been satisfied, and such
date, time and location shall be confirmed in writing by such parties not less
than 5 days prior to the scheduled date of the Closing. The term "Closing," when
used in this Agreement, means the Effective Time of the Merger.
ARTICLE VIII
CONDITIONS TO OBLIGATIONS
Section 8.1 Conditions to Obligations of Acquiror, Merger Sub and the
Company. The obligations of Acquiror, Merger Sub and the Company to consummate,
or cause to be consummated, the Merger are subject to the satisfaction of the
following conditions:
(a) All waiting periods under the HSR Act applicable to the Merger
shall have expired or been terminated.
(b) All necessary permits, approvals, clearances, filings and
consents of Governmental Authorities required to be procured by Acquiror, Merger
Sub and the Company in
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connection with the Merger and the transactions contemplated by this Agreement
shall have been procured, it being understood, however, that (i) any novations
or consents required in connection with any Government Contracts or subcontracts
thereunder and (ii) any other consents, authorizations, or approvals, the
absence of which would not have a material adverse effect on the business,
operations or financial condition of Acquiror or the Company, need not be
obtained prior to Closing.
(c) There shall not be in force any order or decree, statute, rule
or regulation enjoining or prohibiting the consummation of the Merger.
Section 8.2 Conditions to Obligations of Acquiror and Merger Sub. The
obligations of Acquiror and Merger Sub to consummate, or cause to be
consummated, the transactions contemplated by this Agreement are subject to the
satisfaction of the following additional conditions, any one or more of which
may be waived in writing by Acquiror and Merger Sub:
(a) Each of the representations and warranties of the Company
contained in this Agreement shall be true and correct in all material respects
both on the date hereof and as of the Closing, as if made anew at and as of that
time, and each of the covenants and agreements of the Company to be performed as
of or prior to the Closing shall have been duly performed, except in each case
for changes after the date hereof which are contemplated or permitted by this
Agreement.
(b) The Company shall have delivered to Acquiror a certificate
signed, on behalf of the Company, by an officer of the Company, dated the
Closing, certifying that, to the best of the knowledge and belief of such
officer, the conditions specified in Section 8.1, as they relate to the Company,
and subsection 8.2(a) have been fulfilled.
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(c) Any consent required for the consummation of the Merger under
any agreement, contract or license described in an annex or schedule hereto or
for the continued enjoyment by the Company and its Subsidiaries of the benefits
of any agreement, contract or license described in an annex or schedule hereto
after the Merger shall have been obtained, except where the failure to obtain
such consent would not have a material adverse effect on the business,
operations or financial condition of the Company and its Subsidiaries taken as a
whole, it being understood that any novations or consents required in connection
with the Government Contracts or subcontracts thereunder need not be obtained
prior to Closing.
(d) At the Effective Time of the Merger, (i) the aggregate number of
shares of Common Stock held by Dissenting Stockholders, if any, shall not exceed
five percent of the total number of shares of Common Stock then outstanding and
(ii) the aggregate number of shares of Preferred Stock held by Dissenting
Stockholders, if any, shall not exceed five percent of the total number of
shares of Preferred Stock then outstanding.
(e) Acquiror shall have received an opinion, dated as of the Closing
Date, from Latham & Watkins substantially in the form of Annex C.
(f) The form and substance of all actions, proceedings, instruments
and documents required to consummate the transactions contemplated by this
Agreement shall be satisfactory in all reasonable respects to Acquiror and its
counsel.
(g) Acquiror shall have received not less than $125,000,000 gross
proceeds from an offering of senior unsecured notes, or other similar
instrument.
(h) Other than the exercise by Dissenting Stockholders of their
appraisal rights under the DGCL, no legal action or other claim shall be pending
or threatened before or by
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any Governmental Authority or by any other Person seeking to restrain or
prohibit, or damages or other relief in connection with, the execution and
delivery of this Agreement or the consummation of the Merger and the
transactions contemplated thereby which might in the reasonable judgment of the
Acquiror have a material adverse effect on the Company and its Subsidiaries
taken as a whole or, assuming consummation of the Merger, the Acquiror and its
Subsidiaries taken as a whole.
(i) The Company shall have used reasonable efforts to cause the
persons listed on Annex E to enter into employment agreements with the Company
or one of its Subsidiaries, including substantially the terms set forth on Annex
E with effect from the Closing.
(j) The Holder Representative shall have delivered to Acquiror a
certificate setting forth the portion of the Merger Consideration to be paid to
each holder of Preferred Stock, Common Stock and Options upon the Closing Date
(upon compliance by such holders with Section 1.4 hereof).
(k) Between the date hereof and the Closing Date, there shall not
have occurred and be continuing any act, condition, event, omission or
development materially adversely affecting the Company and its Subsidiaries
taken as a whole from the condition thereof (financial and other) reflected in
the financial statements of the Company described in Section 2.6.
Section 8.3 Conditions to the Obligations of the Company. The obligation
of the Company to consummate the transactions contemplated by this Agreement is
subject to the satisfaction of the following additional conditions, any one or
more of which may be waived in writing by the Company:
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(a) Each of the representations and warranties of Acquiror contained
in this Agreement shall be true and correct in all material respects both on the
date hereof and as of the Closing, as if made anew at and as of that time, and
each of the covenants and agreements of Acquiror to be performed as of or prior
to the Closing shall have been duly performed, except in each case for changes
after the date hereof which are contemplated or permitted by this Agreement.
(b) Acquiror shall have delivered to the Company a certificate
signed, on behalf of Acquiror, by an officer of Acquiror, dated the Closing,
certifying that, to the best of the knowledge and belief of such officer, the
conditions specified in Section 8.1, as they relate to Acquiror and Merger Sub,
and subsection 8.3(a) have been fulfilled.
(c) The Company shall have received an opinion, dated as of the
Closing Date, from Bingham, Dana & Gould LLP, counsel to Acquiror substantially
in the form of Annex D.
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(d) The form and substance of all actions, proceedings, instruments
and documents required to consummate the transactions contemplated by this
Agreement shall be satisfactory in all reasonable respects to the Company and
its counsel.
(e) Other than the exercise by Dissenting Stockholders of their
appraisal rights under the DGCL, no legal action or other claim shall be pending
or threatened before or by any Governmental Authority or by any other Person
seeking to restrain or prohibit, or damages or other relief in connection with,
the execution and delivery of this Agreement or the consummation of the Merger
and the transactions contemplated thereby which might in the reasonable judgment
of the Company, have a material adverse effect on the Company and its
Subsidiaries taken as a whole.
ARTICLE IX
TERMINATION/EFFECTIVENESS
Section 9.1 Termination. This Agreement may be terminated and the
transactions contemplated hereby abandoned:
(a) By mutual written consent of Acquiror and the Company authorized
by their respective Boards of Directors, at any time prior to the Closing.
(b) Prior to the Closing, by written notice to the Company from
Acquiror, authorized by the Board of Directors of Acquiror, if (i) prior to May
31, 1997, in the course of its investigation of the business, properties,
assets, financial and legal condition, balance sheets, statements of operations
and earnings, books, contracts, agreements, leases, commitments, financial and
operating data, records, documents and files of the Company as are made
available to the Acquiror, the Acquiror becomes aware of any materially adverse
fact, matter or
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circumstance (or any combination of such facts, matters or circumstances which,
when combined, are materially adverse) of which it was not aware as of the date
of this Agreement, (ii) there is any material breach (or any combination of such
breaches which, when combined, are material) of any representation, warranty,
covenant or agreement on the part of the Company set forth in this Agreement, or
if a representation or warranty of the Company shall be untrue in any material
respect, in either case, such that the condition specified in Section 8.2(a)
hereof would not be satisfied at the Closing (a "Terminating Company Breach"),
except that, if such Terminating Company Breach is curable by the Company
through the exercise of its reasonable best efforts, then, for a period of up to
30 days from the date that written notice of the Terminating Company Breach is
given to the Company by Acquiror (the "Company Cure Period"), but only as long
as the Company continues to use its reasonable best efforts to cure such
Terminating Company Breach, such termination shall not be effective, and such
termination shall become effective only if the Terminating Company Breach is not
cured within the Company Cure Period, (iii) the conditions set forth in Sections
8.1 and 8.2 of this Agreement have not been satisfied on or before July 31,
1997, or (iv) the Closing has not occurred on or before August 31, 1997.
(c) Prior to the Closing, by written notice to Acquiror from the
Company, authorized by its Board of Directors, if (i) there is any material
breach (or any combination of such breaches which, when combined, are materially
adverse) of any representation, warranty, covenant or agreement on the part of
Acquiror set forth in this Agreement, or if a representation or warranty of
Acquiror shall be untrue in any material respect, in either case, such that the
condition specified in Section 8.3(a) hereof would not be satisfied at the
Closing (a "Terminating
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Acquiror Breach"), except that, if such Terminating Acquiror Breach is curable
by Acquiror through the exercise of its reasonable best efforts, then, for a
period of up to 30 days from the date that written notice of the Terminating
Acquiror Breach is given to the Acquiror by the Company (the "Acquiror Cure
Period"), but only as long as Acquiror continues to exercise such reasonable
best efforts to cure such Terminating Acquiror Breach, such termination shall
not be effective, and such termination shall become effective only if such
Terminating Acquiror Breach is not cured within the Acquiror Cure Period, (ii)
the conditions set forth in Sections 8.1 and 8.3 of this Agreement shall have
not been satisfied on or before July 31, 1997, or (iii) the Closing has not
occurred on or before August 31, 1997.
Section 9.2 Effect of Termination. In the event of termination and
abandonment of this Agreement pursuant to Section 9.1, this Agreement shall
forthwith become void and have no effect, without any liability on the part of
any party hereto or its respective Affiliates, officers, directors or
stockholders. The provisions of Sections 6.1, 9.3 and 12.6 hereof shall survive
any termination of this Agreement.
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Section 9.3 Sole Remedy. Acquiror and Merger Sub hereby acknowledge and
agree that their sole and exclusive remedy for (i) any breach of any
representation or warranty of the Company or CVCA contained herein or made
pursuant hereto or in any certificate delivered pursuant hereto by the Company
or CVCA or any officer, director or representative thereof; or (ii) any breach
by the Company or CVCA, of any covenant or agreement contained herein or made
pursuant hereto other than any intentional breach of the covenants and
agreements set forth in Sections 1.1 through 1.7, 1.8(b) or Section 4.1 (but
only insofar as such breach results in an increase, pursuant to Section
1.2(b)(v), in the Merger Consideration which is payable) or Sections 4.2, 4.3,
4.4, 6.1, 6.2, 7.1 or 12.6 hereof shall be to terminate this Agreement in
accordance with Section 9.1. Under no circumstance, other than an intentional
breach described in (ii) above, shall Acquiror, Merger Sub or any Affiliate,
representative or Person acting for, on behalf of or through any of the
foregoing have any claim for indemnification, damages or otherwise as a result
of, arising out of or based upon any breach of any such representation,
warranty, covenant or agreement.
ARTICLE X
CERTAIN DEFINITIONS
As used herein, the following terms shall have the following meanings:
"Acquiror" has the meaning specified in the Preamble hereto.
"Acquiror Cure Period" has the meaning specified in Section 9.1.
"Action" means any claim, action, suit, audit, assessment, arbitration or
inquiry, or any proceeding or investigation, by or before any Governmental
Authority.
"Affiliate" means, with respect to any specified Person, any Person that,
directly or
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indirectly, controls, is controlled by, or is under common control with, such
specified Person, through one or more intermediaries or otherwise.
"Aggregate Fully-Diluted Common Shares" has the meaning specified in
Section 1.2.
"Aggregate Option Exercise Price" has the meaning specified in Section
1.2.
"Agreement" has the meaning specified in the Preamble hereto.
"Antitrust Authorities" means the Antitrust Division of the United Stated
Department of Justice, the United States Federal Trade Commission or the
antitrust or competition law authorities of any other jurisdiction (whether
United States, foreign or multinational).
"Applicable Percentage" has the meaning specified in Section 1.4
"Benefit Plan" has the meaning specified in Section 2.12.
"Cash Per Fully-Diluted Common Share" has the meaning specified in Section
1.2.
"Certificate of Merger" has the meaning specified in Section 1.5.
"Certificates" has the meaning specified in Section 1.4.
"Chalmers Payment" has the meaning specified in Section 1.2.
"Class A Common Stock" means the Class A Common Stock, par value $ .01 per
share, of the Company.
"Class B Common Stock" means the Class B Common Stock, par value $ .01 per
share, of the Company.
"Class C Common Stock" means the Class C Common Stock, par value $ .01 per
share, of the Company.
"Closing" has the meaning specified in Section 7.2.
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"Closing Date" means the date on which the Effective Time of the Merger
occurs.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Equity Merger Consideration" has the meaning specified in Section
1.2.
"Common Stock" means (i) the Class A Common Stock, (ii) the Class B Common
Stock and (iii) the Class C Common Stock.
"Company" has the meaning specified in the Preamble hereto.
"Company Cure Period" has the meaning specified in Section 9.1.
"Confidentiality Agreement" means that certain letter agreement dated
February 16, 1996 between Hyde Park Holdings and CS First Boston Corporation.
"Constituent Corporations" has the meaning specified in the recitals
hereto.
"Contracts" means any agreements, contracts, subcontracts, leases or other
legally binding contractual commitments.
"CVCA" has the meaning specified in the Preamble hereto.
"DGCL" means the Delaware General Corporations Law.
"Dissenting Stockholders" means holders of shares of the capital stock of
the Company who are entitled to appraisal of their shares pursuant to the DGCL
and who comply with the provisions of the DGCL concerning the rights of such
holders to require appraisal of such shares.
"Effective Time of the Merger" means the time at which the Certificate of
Merger has been duly filed in the Office of the Secretary of State of Delaware
and becomes effective in accordance with the DGCL.
"Employee Stock Option Plans" means the Amended and Restated Employee
Stock
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Option Plans of the Company dated as of May 16, 1994 and August 17, 1994 each as
amended to date.
"Environmental Laws" means, collectively, all applicable foreign, U.S.
federal, state or local laws, statutes, ordinances, rules, regulations or codes
relating to protection of the environment, as in effect as of the date hereof
(including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act, as amended ("CERCLA"), the Resource Conservation
and Recovery Act, as amended ("RCRA"), the Clean Air Act, as amended, and the
California Hazardous Waste Control Act, as amended).
"ERISA" has the meaning specified in Section 2.12.
"ERISA Affiliate" has the meaning specified in Section 2.12.
"Escrow Account" has the meaning specified in Section 1.6.
"Escrow Agent" has the meaning specified in Section 1.6.
"Exchange Agent" has the meaning specified in Section 1.4.
"Exchange Fund" has the meaning specified in Section 1.4.
"Facilities" means the Owned Real Property and the leased facilities at
Redwood City, CA, Munich, Germany, Geneva, Switzerland and Paris, France.
"First Bank Loans" means the loans made to Physical Electronics, Inc, a
Subsidiary of the Company, under that certain credit agreement dated as of May
20, 1994 between Physical Electronics, Inc and First Bank National Association.
"GAAP" means United States generally accepted accounting principles, as in
effect on the date hereof.
"Government Contracts" means any Contract between the Company or any of
its
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Subsidiaries and the United States Government or a department or agency thereof.
"Governmental Authority" means any Federal, state, municipal or local
government, governmental authority, regulatory or administrative agency,
governmental commission, department, board, bureau, agency or instrumentality,
court, tribunal, arbitrator or arbitral body.
"Government Order" means any order, writ, rule, judgment, injunction,
decree, stipulation, determination or award entered by or with any Governmental
Authority.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and the rules and regulations promulgated thereunder.
"Holder Allocable Expenses" has the meaning specified in Section 1.7.
"Holder Representative" has the meaning specified in Section 11.1.
"Intellectual Property" has the meaning specified in Section 2.11.
"Interim Balance Sheet" has the meaning specified in Section 2.6.
"Interim Balance Sheet Date" has the meaning specified in Section 2.6.
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
encumbrance, security interest or other lien of any kind.
"Liquidation Value" of each share of Preferred Stock means (x) Ten Dollars
($10) plus (y) all accrued and unpaid dividends thereon to the date of payment
including all compounding thereon in accordance with Section 2(b) of the
Certificate of Designation of the Preferred Stock filed with the Secretary of
State of the State of Delaware.
"Material Equipment" has the meaning specified in Section 2.9.
"Majority Holders" has the meaning specified in Section 11.1.
"Merger" has the meaning specified in the recitals hereto.
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"Merger Consideration" has the meaning specified in Section 1.2.
"Merger Sub" has the meaning specified in the Preamble hereto.
"Net Refund" has the meaning specified in Section 1.6.
"Options" means all options to purchase shares of Common Stock from the
Company (whether or not vested) issued pursuant to the Employee Stock Option
Plans.
"Owned Real Property" means the facility at 6509 Flying Cloud Drive, Eden
Prairie, Minnesota 55344.
"Palmberg Payment" has the meaning specified in Section 1.2.
"Perkin-Elmer Note" means that certain convertible subordinated promissory
note of the Company dated as of May 20, 1994 in the principal amount of
$7,191,000, a copy of which has been delivered to Acquiror.
"Permitted Liens" means (i) mechanics, materialmen's and similar Liens
with respect to any amounts not yet due and payable or which are being contested
in good faith through appropriate proceedings, (ii) Liens for Taxes not yet due
and payable or which are being contested in good faith through appropriate
proceedings, (iii) Liens securing the obligations of the Company under the First
Bank Loans, (iv) Liens on goods in transit incurred pursuant to documentary
letters of credit, (v) Liens securing rental payments under capital lease
agreements, (vi) Liens arising in favor of the United States Government as a
result of progress payment clauses contained in any Contract, (vii) encumbrances
and restrictions on real property that do not materially interfere with the
present uses of such real property and (viii) other Liens arising in the
ordinary course of business and not incurred in connection with the borrowing of
money and which do not materially interfere with the operation of the business
of the Company and its
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Subsidiaries as currently conducted.
"Person" means any individual, firm, corporation, partnership, limited
liability company, incorporated or unincorporated association, joint venture,
joint stock company, governmental agency or instrumentality or other entity of
any kind.
"Preferred Stock" means the Series A 10% Senior Cumulative Redeemable
Preferred Stock, par value $1.00 per share, of the Company.
"Refund" has the meaning specified in Section 1.6.
"Subsidiary" means, with respect to any Person, a corporation or other
entity of which 50% or more of the voting power of the equity securities or
equity interests is owned, directly or indirectly, by such Person, provided,
that ULVAC-PHI Inc. shall not be considered a "Subsidiary" of the Company for
the purposes of this Agreement.
"Surviving Corporation" shall have the meaning specified in Section 1.1.
"Taxes" has the meaning specified in Section 2.17.
"Tax Returns" has the meaning specified in Section 2.17.
"Terminating Acquiror Breach" has the meaning specified in Section 9.1.
"Terminating Company Breach" has the meaning specified in Section 9.1.
69
<PAGE> 75
ARTICLE XI
HOLDER REPRESENTATIVE
Section 11.1 Designation and Replacement of Holder Representative. The
parties have agreed that it is desirable to designate a representative to act on
behalf of holders of the shares of Common Stock and Options for certain limited
purposes, as specified herein (the "Holder Representative"). The parties have
designated CVCA as the initial Holder Representative, and approval of this
Agreement by the holders of the shares of Common Stock (other than Dissenting
Shareholders) shall constitute ratification and approval of such designation. On
or prior to Closing the holders of the Common Stock and Options shall enter into
an agreement in a form approved by the Company approving the initial Holder
Representative. The Holder Representative may resign at any time, and the Holder
Representative may be removed by the vote of Persons which collectively owned
more than 50% of the Aggregate Fully-Diluted Common Shares at the Effective Time
of the Merger ("Majority Holders"). In the event that a Holder Representative
has resigned or been removed, a new Holder Representative shall be appointed by
a vote of Majority Holders, such appointment to become effective upon the
written acceptance thereof by the new Holder Representative.
70
<PAGE> 76
Section 11.2 Authority and Rights of Holder Representative; Limitations on
Liability. The Holder Representative shall have such powers and authority as are
necessary to carry out the functions assigned to it under this Agreement;
provided, however, that the Holder Representative will have no obligation to act
on behalf of the holders of the shares of Common Stock and Options, except as
expressly provided herein. Without limiting the generality of the foregoing, the
Holder Representative shall have full power, authority and discretion to
estimate and determine the amounts of Holder Allocable Expenses and to pay such
Holder Allocable Expenses in accordance with Section 1.7 hereof. The Holder
Representative will have no liability to Acquiror, the Company or the holders of
any equity securities or Options of the Company with respect to actions taken or
omitted to be taken in its capacity as Holder Representative, except with
respect to any liability resulting primarily from the Holder Representative's
gross negligence or willful misconduct. The Holder Representative will at all
times be entitled to rely on any directions received from the Majority Holders;
provided, however, that the Holder Representative shall not be required to
follow any such direction, and shall be under no obligation to take any action
in its capacity as Holder Representative, unless the Holder Representative is
holding funds delivered to it under Section 1.7 of this Agreement and/or has
been provided with other funds, security or indemnities which, in the sole
determination of the Holder Representative, are sufficient to protect the Holder
Representative against the costs, expenses and liabilities which may be incurred
by the Holder Representative in responding to such direction or taking such
action. The Holder Representative shall be entitled to engage such counsel,
experts and other agents and consultants as it shall deem necessary in
connection with exercising its powers and performing its function hereunder and
(in the absence
71
<PAGE> 77
of bad faith on the part of the Holder Representative) shall be entitled to
conclusively rely on the opinions and advice of such Persons. The Holder
Representative shall be entitled to reimbursement, but solely from funds paid to
it under Section 1.7 of this Agreement and/or otherwise received by it in its
capacity as Holder Representative pursuant to or in connection with this
Agreement, for all reasonable expenses, disbursements and advances (including
fees and disbursements of its counsel, experts and other agents and consultants)
incurred by the Holder Representative in such capacity, and for indemnification,
but solely from the same funds, against any loss, liability or expenses arising
out of actions taken or omitted to be taken in its capacity as Holder
Representative (except for those arising out of the Holder Representative's
gross negligence or willful misconduct), including the costs and expenses of
investigation and defense of claims. Any liability or obligation of CVCA
hereunder shall be enforced only against CVCA and shall be non-recourse to any
general or limited partner of CVCA.
ARTICLE XII
MISCELLANEOUS
Section 12.1 Nonsurvival of Representations and Warranties. The
representations and warranties contained in this Agreement and in any
certificate delivered pursuant hereto shall not survive beyond the Effective
Time of the Merger or termination of this Agreement and, from and after the
Closing, none of Acquiror, Merger Sub or any Affiliate, representative or Person
acting for, on behalf of or through any of the foregoing have any claim for
indemnification, damages or otherwise as a result of, arising out of or based
upon any breach of any such representation, warranty, covenant or agreement.
Section 12.2 Waiver. Subject to the provisions of applicable law, any
party to this
72
<PAGE> 78
Agreement may, at any time prior to the Closing, by action taken by its Board of
Directors, or officers thereunto duly authorized, waive any of the terms or
conditions of this Agreement or agree to an amendment or modification to this
Agreement by an agreement in writing executed in the same manner (but not
necessarily by the same Persons) as this Agreement.
Section 12.3 Notices. All notices and other communications among the
parties shall be in writing and shall be deemed to have been duly given when (i)
delivered in person or by private courier, or (ii) actually delivered by
registered or certified mail return receipt requested, or (iii) delivered by
telecopy (provided that it is telephonically or electronically confirmed)
addressed as follows:
(a) If to Acquiror or Merger Sub, to:
High Voltage Engineering Corporation
401 Edgewater Place, Suite 680
Wakefield, MA 01880
Attention: Joseph W. McHugh, Jr.
Chief Financial Officer
Telecopy: (617) 224-1011
with a copy to:
Bingham, Dana & Gould LLP
150 Federal Street
Boston, MA 02110
Attention: Michael P. O'Brien
Telecopy: (617) 951-8736
(b) If to the Company, to:
PHI Acquisition Holdings, Inc.
6509 Flying Cloud Drive
Eden Prairie, Minnesota 55344
Attention: David L. Chalmers
Telecopy: (612) 828-6109
73
<PAGE> 79
with copies to:
Chase Venture Capital Associates, L.P.
380 Madison Avenue
12th Floor
New York, New York 10017
Attention: Brian J. Richmand
Telecopy No.: (212) 622-3101
and
Latham & Watkins
885 Third Avenue
New York, N.Y. 10022
Attention: Samuel A. Fishman, Esq.
Telecopy No.: (212) 751-4864
(c) If to the Holder Representative, to:
with copies to:
Chase Venture Capital Associates, L.P.
380 Madison Avenue
12th Floor
New York, New York 10017
Attention: Brian J. Richmand
Telecopy No.: (212) 622-3101
Latham & Watkins
885 Third Avenue
New York, N.Y. 10022
Attention: Samuel A. Fishman, Esq.
Telecopy No.: (212) 751-4864
or to such other address or addresses as the parties may from time to time
designate in writing.
Section 12.4 Assignment. No party hereto shall assign this Agreement or
any part hereof without the prior written consent of the other parties. Except
as otherwise provided herein, this Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective permitted successors and
assigns.
74
<PAGE> 80
Section 12.5 Rights of Third Parties. Nothing expressed or implied in this
Agreement is intended or shall be construed to confer upon or give any Person,
other than the parties hereto, any right or remedies under or by reason of this
Agreement.
Section 12.6 Expenses. Except for the Holder Allocable Expenses, which
shall be paid as set forth in Section 1.7, each party hereto, other than the
Holder Representative (whose expenses shall be paid out of funds paid to the
Holder Representative under Section 1.7 in the event the transactions
contemplated hereby are consummated), shall bear its own expenses incurred in
connection with this Agreement and the transactions herein contemplated whether
or not such transactions shall be consummated, including, without limitation,
all fees of its legal counsel, financial advisers and accountants; provided
that, in the event that the transactions contemplated hereby are not
consummated, the Company shall reimburse the Holder Representative for all costs
and expenses incurred by the Holder Representative in connection with the
transactions contemplated hereby and provided, further, that whether or not the
transactions contemplated hereby are consummated the Acquiror shall reimburse
the Company for any fees and expenses incurred by the Company in connection with
the financing described in Section 8.2(g). Notwithstanding anything to the
contrary, transfer taxes, sales taxes and other similar taxes imposed on the
transaction contemplated by this Agreement shall be paid by Acquiror.
75
<PAGE> 81
Section 12.7 Construction. This Agreement shall be construed and enforced
in accordance with the laws of the State of New York, except as to any matters
relating to the corporate governance or the capital stock of the Company, which
shall be governed by the laws of the State of Delaware. Unless otherwise stated,
references to Sections, Articles or Annexes refer to the Sections, Articles and
Annexes to this Agreement. As used herein, the phrase "to the knowledge" of any
Person shall mean the actual knowledge of such Person's executive officers. The
parties to this Agreement participated jointly in the negotiation and drafting
of this Agreement. If an ambiguity or question of intent or interpretation
arises, then this Agreement will be construed as if drafted jointly by the
parties to this Agreement, and no presumption or burden of proof will arise
favoring or disfavoring any party to this Agreement by virtue of the authorship
of any of the provisions of this Agreement.
Section 12.8 Captions; Counterparts. The captions in this Agreement are
for convenience only and shall not be considered a part of or affect the
construction or interpretation of any provision of this Agreement. This
Agreement may be executed in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
76
<PAGE> 82
Section 12.9 Entire Agreement. This Agreement (together with the
Schedules, Exhibits and Annexes to this Agreement) constitutes the entire
agreement among the parties and supersedes any other agreements, whether written
or oral, that may have been made or entered into by or among any of the parties
hereto or any of their respective Subsidiaries relating to the transactions
contemplated hereby. No representations, warranties, covenants, understandings,
agreements, oral or otherwise, relating to the transactions contemplated by this
Agreement exist between the parties except as expressly set forth in this
Agreement.
Section 12.10 Amendments. This Agreement may be amended or modified in
whole or in part, only by a duly authorized agreement in writing executed in the
same manner as this Agreement and which makes reference to this Agreement.
Section 12.11 Publicity. All press releases or other public communications
of any nature whatsoever relating to the transactions contemplated by this
Agreement, and the method of the release for publication thereof, shall be
subject to the prior mutual approval of Acquiror and the Company which approval
shall not be unreasonably withheld by any party; provided, however, that,
nothing herein shall prevent any party from publishing such press releases or
other public communications as such party may consider necessary in order to
satisfy such party's legal or contractual obligations after such consultation
with the other parties hereto as is reasonable under the circumstances.
* * * * *
77
<PAGE> 83
IN WITNESS WHEREOF the parties have hereunto caused this Agreement to be
duly executed as of the date first above written.
HIGH VOLTAGE ENGINEERING
CORPORATION
By: /s/ Clifford Press
----------------------------------
Name: Clifford Press
Title: President
LAUREN CORPORATION
By: /s/ Clifford Press
----------------------------------
Name: Clifford Press
Title: President
PHI ACQUISITION HOLDINGS, INC.
By: /s/ David J. Chalmers
----------------------------------
Name: David J. Chalmers
Title: Chief Executive Officer
CHASE VENTURE CAPITAL ASSOCIATES,
LP (as to certain specified provisions only)
By: CHASE CAPITAL PARTNERS, its General
Partner
By: /s/ Brian J. Richmand
----------------------------------
Name: Brian J. Richmand
Title: General Partner
78
<PAGE> 1
EXHIBIT 3.1
FEDERAL IDENTIFICATION
NO. 04-2035796
----------
THE COMMONWEALTH OF MASSACHUSETTS
WILLIAM FRANCIS GALVIN
Secretary of the Commonwealth
One Ashburton Place, Boston, Massachusetts 02108-1512
RESTATED ARTICLES OF ORGANIZATION
(GENERAL LAWS, CHAPTER 156B, SECTION 74)
We, Joseph W. McHugh, Jr. , Vice President,
-----------------------------------------------------------
and Ronald R. Fortier , /* Assistant Clerk,
-------------------------------------------------------
of High Voltage Engineering Corporation ,
----------------------------------------------------------------------------
(Exact name of corporation)
located at 401 Edgewater Place, Suite, 680, Wakefield, MA 01880 ,
--------------------------------------------------------------------
do hereby certify that the following Restatement of the Articles of Organization
was duly adopted by unanimous written consent dated August 5, 1997 of the
directors and unanimous written consent dated August 5, 1997 of holders of
1,000 shares of Common Stock of 1,000 shares outstanding,**
- ----------- ------------------ -----------
(type, class & series, if any)
shares of of shares outstanding, and
- ----------- ------------------ -----------
(type, class & series, if any)
shares of of shares outstanding,
- ----------- ------------------ -----------
(type, class & series, if any)
**being at least two-thirds of each type, class or series outstanding and
entitled to vote thereon and of each type, class or series of stock whose rights
are adversely affected thereby:
ARTICLE I
The name of the corporation is:
High Voltage Engineering Corporation
ARTICLE II
The purpose of the Corporation is to engage in the following business
activities:
To design, manufacture and sell tubing used primarily in medical
devices and for surgical procedures, electrical sleeving and tubing used to
protect insulated wires, humidity measurement and calibration instruments and
any other goods or products, to provide any related to other services and in
general to carry on any and all lawful activities permitted to businesses under
Chapter 156B of the Massachusetts General Laws.
*Delete the inapplicable words. **Delete the inapplicable clause.
NOTE: IF THE SPACE PROVIDED UNDER ANY ARTICLE OR ITEM ON THIS FORM IS
INSUFFICIENT, ADDITIONS SHALL BE SET FORTH ON SEPARATE 8 1/2 X 11 SHEETS OF
PAPER WITH A LEFT MARGIN OF AT LEAST 1 INCH. ADDITIONS TO MORE THAN ONE ARTICLE
MAY BE MADE ON A SINGLE SHEET SO LONG AS EACH ARTICLE REQUIRING EACH ADDITION IS
CLEARLY INDICATED.
<PAGE> 2
ARTICLE III
State the total number of shares and par value, if any, of each class of stock
which the corporation is authorized to issue:
<TABLE>
- --------------------------------------------------------------------------------
<CAPTION>
WITHOUT PAR VALUE WITH PAR VALUE
- --------------------------------------------------------------------------------
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Common: Common: 4,000 $ .01 per share
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Preferred: Preferred: 400,000 $1.00 per share
- --------------------------------------------------------------------------------
(110,000 Series A)
- --------------------------------------------------------------------------------
(110,000 Series A Exchange)
</TABLE>
ARTICLE IV
If more than one class of stock is authorized, state a distinguishing
designation for each class. Prior to the issuance of any shares of a class, if
shares of another class are outstanding, the corporation must provide a
description of the preferences, voting powers, qualifications, and special or
relative rights or privileges of that class and of each other class of which
shares are outstanding and of each series then established within any class.
See continuation pages 4.1-4.44 for the text of Article IV of the Restated
Articles of Organization of High Voltage Engineering Corporation.
ARTICLE V
The restrictions, if any, imposed by the Articles of Organization upon the
transfer of shares of stock of any class are:
Not Applicable
ARTICLE VI
**Other lawful provisions, if any, for the conduct and regulation of the
business and affairs of the corporation, for its voluntary dissolution, or for
limiting, defining, or regulating the powers of the corporations, or of its
directors or stockholders, or of any class of stockholders:
See continuation page 6.1 for the text of Article VI of the Restated Articles of
Organization of High Voltage Engineering Corporation.
**IF THERE ARE NO PROVISIONS STATE "NONE".
NOTE: THE PRECEDING SIX (6) ARTICLES ARE CONSIDERED TO BE PERMANENT AND MAY ONLY
BE CHANGED BY FILING APPROPRIATE ARTICLES OF AMENDMENT
<PAGE> 3
ARTICLE IV
The total number of shares of all classes of stock which High Voltage
Engineering Corporation (the "COMPANY") shall have authority to issue shall be
404,000 shares, consisting of (i) 4,000 shares of the Corporation's Common
Stock, $0.01 value per share ("COMMON STOCK"), and (ii) 400,000 shares of the
Corporation's preferred stock, par value $1.00 per share (the "PREFERRED
STOCK"), of which 110,000 shares have been designated Series A Senior Redeemable
Preferred Stock, and 110,000 shares of which have been designated Series A
Exchange Senior Redeemable Preferred Stock.
The following is a statement of the designations, preferences and
relative, participating, optional and other special rights, and the
qualifications, limitations and restrictions thereof in respect of each such
class of stock of the Company:
A. COMMON STOCK
Except as otherwise required by law, each holder of shares of Common
Stock, shall be entitled to one vote for all purposes for each share of Common
Stock held.
Except for and subject to those rights expressly granted to the holders
of any series of Preferred Stock, and except to the extent otherwise provided in
the Company's Restated Articles of Organization, or Bylaws, as each may be
amended from time to time, or by applicable law, the holders of Common Stock
shall have exclusively all rights of stockholders of the Company under the
Massachusetts Business Corporation Law.
B. PREFERRED STOCK
The Board of Directors of the Company (or a duly authorized committee
thereof) is authorized to establish one or more series of Preferred Stock and,
to the extent now or hereafter permitted by the laws of the Commonwealth of
Massachusetts, to fix and determine the preferences, voting powers,
qualifications and special or relative rights or privileges of the Preferred
Stock including, but not limited to:
(a) the number of shares to constitute such series and the
distinguishing designation thereof;
(b) the dividend rate (cumulative or noncumulative) on the shares of
such series and the preferences, if any, and the special and relative rights of
such shares of such series as to dividends;
(c) whether or not the shares of such series shall be redeemable, and,
if redeemable, the price, terms and manner of redemption;
(d) the preferences, if any, and the special and relative rights of the
shares of such series upon liquidation of the Company;
(e) whether or not the shares of such series shall be subject to the
operation of a sinking or purchase fund and, if so, the terms and provisions of
such fund;
(f) whether or not the shares of such series shall be convertible into
shares of any other class or any other series of the same or any other class of
stock of the Company and, if so, the conversion price or ratio and other
conversion rights;
(g) the conditions under which the shares of such series shall have
separate voting rights or no voting rights; and
(h) such other designations, preferences and relative, participating,
optional or other special rights and qualifications, limitations or restrictions
of such series to the full extent now or hereafter permitted by the laws of the
Commonwealth of Massachusetts.
The Preferred Stock may consist of one or more series. 110,000 shares
of the Preferred Stock have been designated as Series A Senior Redeemable
Preferred Stock, and 110,000 shares of the Preferred Stock have been designated
as Series A Exchange Senior Redeemable Preferred Stock. In the event that at any
time the Board of Directors of the Company (or a duly authorized committee
thereof) shall have established and designated one or more series of Preferred
Stock consisting in the aggregate of a number of shares less than all of the
authorized number of shares of Preferred Stock, the remaining authorized
CONTINUATION PAGE 4.1
<PAGE> 4
shares of Preferred Stock shall be deemed to be shares of an undesignated series
of Preferred Stock until designated by the Board of Directors of the Company (or
a duly authorized committee thereof) as being a part of a series previously
established or a new series then being established by the Board of Directors.
Notwithstanding the fixing of the number of shares constituting a particular
series, the Board of Directors of the Company (or a duly authorized committee
thereof) may at any time authorize the issuance of additional shares of the same
series. The preferences, voting powers, qualifications and special or relative
rights or privileges of each series of Preferred Stock may be made dependent on
facts ascertainable outside of the Company's Restated Articles of Organization,
as amended from time to time, or outside the vote or votes providing for the
issuance of such Preferred Stock, provided that such vote or votes shall
expressly set forth the manner in which any such facts shall operate upon the
preferences, voting powers, qualifications and special or relative rights or
privileges of such Preferred Stock.
B1. SERIES A SENIOR REDEEMABLE PREFERRED STOCK
1. CERTAIN DEFINITIONS. As used in this description of the
preferences, voting powers, qualifications and rights of the Series A Senior
Redeemable Preferred Stock (the "SERIES A DESCRIPTION"), the following terms
shall have the following meanings (with terms defined in the singular having
comparable meanings when used in the plural and vice versa), unless the context
otherwise requires:
"ADDITIONAL DIVIDENDS" shall have the meaning set forth under Section 3
of this Series A Description.
"AFFILIATE" of any specified Person means any other Person which
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person. For the
purposes of this definition, "control" (including, with correlative meanings,
the terms "controlling," "controlled by," and "under common control with"), as
used with respect to any Person, means the possession, directly or indirectly,
of the power to direct or cause the direction of the management or policies of
such Person, whether through the ownership of voting securities, by agreement or
otherwise.
"AGENT MEMBER" has the meaning specified in Section 16 of this Series A
Description.
"ASSET SALE" means the sale, transfer, repayment or other disposition
(other than to the Company or any of its Restricted Subsidiaries) in any single
transaction or series of related transactions with a fair market value in excess
of $1.0 million of (a) any Capital Stock of or other equity interest in any
Restricted Subsidiary of the Company, (b) all or substantially all of the assets
of the Company or of any Restricted Subsidiary thereof, (c) real property, (d)
all or substantially all of the assets of any business owned by the Company or
any Restricted Subsidiary thereof, or a division, line of business or comparable
business segment of the Company or any Restricted Subsidiary thereof; provided
that Asset Sales shall not include sales, leases, conveyances, transfers or
other dispositions to the Company or to a Restricted Subsidiary or to any other
Person if after giving effect to such sale, lease, conveyance, transfer or other
disposition such other Person becomes a Restricted Subsidiary.
"BOARD OF DIRECTORS" means the board of directors of the Company or any
committee authorized to act therefor.
"BOARD VOTE" means a copy of a vote certified pursuant to an officers'
certificate to have been duly adopted by the Board of Directors of the Company
or a Subsidiary, as applicable, and to be in full force and effect.
"BUSINESS DAY" means a day that is not a Saturday, a Sunday or a day on
which banking institutions in the Commonwealth of Massachusetts are not required
to be open.
"CAPITALIZED LEASE OBLIGATIONS" means Indebtedness represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP, and the amount of such Indebtedness
shall be the capitalized amount of such obligations determined in accordance
with GAAP.
"CAPITAL STOCK" means, with respect to any Person, any and all shares
or other equivalents (however designated) of capital stock, partnership
interests or any other participation, right or other interest in the nature of
an equity interest in such Person or any option, warrant or other security
convertible into any of the foregoing.
CONTINUATION PAGE 4.2
<PAGE> 5
"CHANGE OF CONTROL" of the Company will be deemed to have occurred
at such time as (i) any Person (including a Person's Affiliates and associates),
other than a Permitted Holder, becomes the beneficial owner (as defined under
Rule 13d-3 or any successor rule or regulation promulgated under the Exchange
Act) of 50% or more of the total voting or economic power of the Company's or
Parent's Common Stock, as the case may be, (ii) any Person (including a Person's
Affiliates and associates), other than a Permitted Holder, becomes the
beneficial owner of more than 33 1/3% of the total voting power of the Common
Stock of the Company or Parent, as the case may be, and the Permitted Holders
beneficially own, in the aggregate, a lesser percentage of the total voting
power of the Common Stock of the Company or Parent, as the case may be, than
such other Person and do not have the right or ability by voting power, contract
or otherwise to elect or designate for election a majority of the Board of
Directors of the Company or Parent, as the case may be, (iii) there shall be
consummated any consolidation or merger of the Company or Parent in which the
Company or Parent, as the case may be, is not the continuing or surviving
corporation or pursuant to which the Common Stock of the Company or Parent, as
the case may be, would be converted into cash, securities or other property,
other than a merger or consolidation of the Company or Parent, as the case may
be, in which the holders of the Common Stock of the Company or Parent, as the
case may be, outstanding immediately prior to the consolidation or merger hold,
directly or indirectly, at least a majority of the Common Stock of the surviving
corporation immediately after such consolidation or merger, or (iv) during any
period of two consecutive years, individuals who at the beginning of such period
constituted the Board of Directors of the Company or Parent, as the case may be,
(together with any new directors whose election by such Board of Directors or
whose nomination for election by the shareholders of the Company or Parent, as
the case may be, has been approved by 66 2/3% of the directors then still in
office who either were directors at the beginning of such period or whose
election or recommendation for election was previously so approved) cease to
constitute a majority of the Board of Directors of the Company or Parent, as the
case may be.
"CHANGE OF CONTROL OFFER" has the meaning specified in Section 7(C)
of this Series A Description.
"CHANGE OF CONTROL PAYMENT DATE" has the meaning specified in
Section 7(C) of this Series A Description.
"CHANGE OF CONTROL PURCHASE PRICE" has the meaning specified in
Section 7(C) of this Series A Description.
"CHAPTER 156B" has the meaning specified in Section 5 of this Series
A Description.
"COMMON SHARES" means the shares of Company Common Stock sold in the
Units Offering.
"COMMON STOCK" of any Person means all Capital Stock of such Person
that is generally entitled to (i) vote in the election of directors of such
Person or (ii) if such Person is not a corporation, vote or otherwise
participate in the selection of the governing body, partners, managers or others
that will control the management and policies of such Person.
"COMPANY" means High Voltage Engineering Corporation, a
Massachusetts corporation.
"COMPANY COMMON STOCK" means the Common Stock, par value $.01 per
share, of the Company.
"COMPANY PREFERRED STOCK" means the Preferred Stock, $1.00 par value
per share, of the Company.
"CONSOLIDATED NET INCOME" means, with respect to any Person, for any
period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided, however, that (a) the Net Income of any Person, including
any Unrestricted Subsidiary of the Company or a Restricted Subsidiary (the
"OTHER PERSON") in which the Person in question or any of its Restricted
Subsidiaries has less than a 100% interest (which interest does not cause the
net income of such other Person to be consolidated into the net income of the
Person in question in accordance with GAAP) shall be included only to the extent
of the amount of dividends or distributions actually paid to the Person in
question or the Restricted Subsidiary, (b) the Net Income of any Restricted
Subsidiary of the Person in question that is subject to any restriction or
limitation on the payment of dividends or the making of other distributions to
the Company (other than pursuant to the Notes or the Indenture) shall be
excluded to the extent of such restriction or limitation, (c)(i) the Net Income
of any Person acquired in a pooling of interests transaction for any period
prior to the date of such acquisition and (ii) any net gain (but not loss)
resulting from an Asset Sale by the Person in question or any of its Restricted
Subsidiaries other than in the ordinary course of business shall be excluded,
(d) extraordinary, unusual and non-recurring gains and losses shall be excluded,
and (e) without duplication, the tax effected non-cash accrual or accretion of,
and payment of, Contingent Interest Payments or Warrants during such period
shall be excluded.
"CONTINGENT INTEREST PAYMENTS" means the contingent interest
payments payable by the Company to BancBoston Capital, Inc. pursuant to the
Contingent Interest Payment Agreement, dated as of April 27, 1991, between the
Company,
CONTINUATION PAGE 4.3
<PAGE> 6
Halmar Robicon Group, Inc. and Datcon Instrument Company and BancBoston Capital
Inc. ("BANCBOSTON"), as amended, and that Agreement for Additional Contingent
Interest Payment (Quest), dated as of June 29, 1995, between the Company, Halmar
Robicon Group, Inc. and Datcon Instrument Company and BancBoston.
"DEPOSITARY" has the meaning specified in Section 16 of this Series
A Description.
"DISQUALIFIED CAPITAL STOCK" means any Capital Stock of the Company
or a Restricted Subsidiary, other than the Series A Preferred Stock and any
Exchange Preferred Stock, which, by its terms (or by the terms of any equity
security into which it is convertible or for which it is exchangeable at the
option of the holder), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the option of the holder thereof, in whole or in part, on or
prior to the date set for mandatory redemption of the Series A Preferred Stock,
for cash or securities constituting Indebtedness; provided, however, that
Preferred Stock of the Company or a Restricted Subsidiary that is issued with
the benefit of provisions requiring a change of control offer to be made for
such Preferred Stock in the event of a Change of Control of the Company or
Subsidiary, which provisions have substantially the same effect as the
provisions described in Section 7(C) below shall not be deemed to be
Disqualified Capital Stock solely by virtue of any such provisions.
"DIVIDEND PAYMENT DATE" means February 15 and August 15, commencing
February, 1998, unless such day is not a Business Day, in which case the
Dividend Payment Date shall be the immediately succeeding Business Day.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"EXCHANGE PREFERRED STOCK" means those shares of Company Preferred
Stock to be issued in exchange for Series A Preferred Stock pursuant to the
terms of the Preferred Stock Registration Rights Agreement.
"GAAP" means generally accepted accounting principles consistently
applied as in effect in the United States from time to time.
"GLOBAL SERIES A PREFERRED STOCK" has the meaning specified in
Section 16 hereof.
"HOLDER" means a registered holder of shares of Series A Preferred
Stock.
"INCUR" means, with respect to any Indebtedness or other obligation
of any Person, to create, issue, incur (by conversion, exchange or otherwise),
assume, guarantee or otherwise become liable in respect of such Indebtedness or
other obligation or the recording, as required pursuant to GAAP or otherwise, of
any such Indebtedness or other obligation on the balance sheet of such person
(and "incurrence," "incurred," "incurrable," and "incurring" shall have meanings
correlative to the foregoing); provided that a change in GAAP that results in an
obligation of such Person that exists at such time becoming Indebtedness shall
not be deemed an incurrence of such Indebtedness.
"INDEBTEDNESS" means (without duplication), with respect to any
Person, any indebtedness at any time outstanding, secured or unsecured,
contingent or otherwise, which is for borrowed money (whether or not the
recourse of the lender is to the whole of the assets of such Person or only to a
portion thereof), or evidenced by bonds, notes, debentures or similar
instruments or representing the balance deferred and unpaid of the purchase
price of any property (excluding, without limitation, any balances that
constitute accounts payable or trade payables, and other accrued liabilities
arising in the ordinary course of business) if and to the extent any of the
foregoing indebtedness would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP, and shall also include, to the extent
not otherwise included (i) any Capitalized Lease Obligations, (ii) obligations
secured by a lien to which the property or assets owned or held by such Person
is subject, whether or not the obligation or obligations secured thereby shall
have been assumed, (iii) guarantees of items of other Persons which would be
included within this definition for such other Persons (whether or not such
items would appear upon the balance sheet of the guarantor), (iv) all
obligations for the reimbursement of any obligor on any letter of credit,
banker's acceptance or similar credit transaction, (v) in the case of the
Company, Disqualified Capital Stock of the Company or any Restricted Subsidiary
thereof, and (vi) obligations of any such Person under any Interest Rate
Agreement applicable to any of the foregoing (if and to the extent such Interest
Rate Agreement obligations would appear as a liability upon a balance sheet of
such Person prepared in accordance with GAAP). The amount of Indebtedness of any
Person at any date shall be the outstanding balance at such date of all
unconditional obligations as described above and, with respect to contingent
obligations, the maximum liability upon the occurrence of the contingency giving
rise to the obligation; provided (i) that the amount outstanding at any time of
any Indebtedness issued with original issue discount, is the principal amount of
such Indebtedness less the remaining unamortized portion of the original issue
discount of such Indebtedness at such time as
CONTINUATION PAGE 4.4
<PAGE> 7
determined in conformity with GAAP and (ii) that Indebtedness shall not include
any liability for federal, state, local or other taxes. Notwithstanding any
other provision of the foregoing definition, any trade payable arising from the
purchase of goods or materials or for services obtained in the ordinary course
of business shall not be deemed to be "Indebtedness" of the Company or any
Restricted Subsidiaries for purposes of this definition. Furthermore, guarantees
of (or obligations with respect to letters of credit supporting) Indebtedness
otherwise included in the determination of such amount shall not also be
included.
"INDENTURE" means the Indenture, dated August 8, 1997, by and
between the Company and State Street Bank & Trust Company as Trustee, pursuant
to which the Notes are being issued, as amended or supplemented from time to
time in accordance with the terms thereof.
"INTERCOMPANY NOTES" means the Intercompany Notes issued by the
direct Subsidiaries of the Company in the following principal amounts: (i)
Halmar Robicon Group, Inc.: $35.0 million; (ii) Physical Electronics, Inc.:
$35.0 million; (iii) Datcon Instrument Company: $17.0 million; (iv) Anderson
Interconnect, Inc.: $17.00 million; and (v) HIVEC Holdings, Inc.: $3.0 million.
"INTEREST RATE AGREEMENT" means, for any Person, any interest rate
swap agreement, interest rate cap agreement, interest rate collar agreement or
other similar agreement designed to protect the party indicated therein against
fluctuations in interest rates.
"ISSUE DATE" means the date shares of Series A Preferred Stock are
first issued by the Company.
"LIQUIDATION PREFERENCE" means $1,000 per share of Series A
Preferred Stock plus, for purposes of Section 8 of this Series A Description,
whether such share is issued or accrued, in each case, accrued and unpaid
dividends, whether or not declared, if any, thereon through the date such
Liquidation Preference is paid.
"NET INCOME" means, with respect to any Person for any period, the
net income (loss) of such Person determined in accordance with GAAP.
"NET PROCEEDS" means (a) in the case of any sale of Capital Stock by
any Person, the aggregate net proceeds received by such Person, after payment of
expenses, commissions and the like incurred in connection therewith, whether
such proceeds are in cash or in property (valued at the fair market value
thereof, as determined in good faith by the Board of Directors of the Company,
at the time of receipt), (b) in the case of any exchange, exercise, conversion
or surrender of outstanding securities of any kind for or into shares of Capital
Stock of the Company which is not Disqualified Capital Stock, the net book value
of such outstanding securities on the date of such exchange, exercise,
conversion or surrender (plus any additional amount required to be paid by the
holder to the Company upon such exchange, exercise, conversion or surrender,
less any and all payments made to the holders, e.g., on account of fractional
shares and less all expenses incurred by the Company in connection therewith)
and (c) in the case of any issuance of any Indebtedness by the Company or any
Restricted Subsidiary, the aggregate net cash proceeds received by such Person
after the payment of expenses, commissions, underwriting discounts and the like
incurred in connection therewith.
"NEW REVOLVING CREDIT FACILITY" means the credit agreement or credit
agreements to be entered into by and among the Company, the Restricted
Subsidiaries and any one or more lenders from time to time parties thereto, as
the same may be amended, extended, increased, renewed, restated, supplemented or
otherwise modified (in whole or in part, and without limitation as to amount,
terms, conditions, covenants and other provisions) from time to time and any
agreement or agreements governing Indebtedness incurred to refinance, replace,
restructure or refund in whole or in part the borrowings and then maximum
commitments under the New Revolving Credit Facility or such agreement (whether
with the original administrative agent and lenders or other lenders or other
agents and lenders or otherwise and whether provided under the original credit
facility or other credit agreements or otherwise).
"NOTES" means the 10 1/2% Senior Notes due 2004 of the Company,
including those issued in the Notes Offering and those issued subsequently in
exchange therefor, collectively.
"NOTES OFFERING" means the offering by the Company of $135,000,000
in aggregate principal amount of the Company's 10 1/2% Senior Notes due 2004
pursuant to an Offering Memorandum dated as of August 5, 1997.
"PARENT" means Letitia Corporation, a Delaware corporation.
CONTINUATION PAGE 4.5
<PAGE> 8
"PERMITTED HOLDERS" means (a) Parent, (b) Laurence S. Levy, (c)
Clifford Press and (d) any spouse and any trust, holding company, or similar
entity established by and or controlled by either or both of Laurence S. Levy
and Clifford Press for the principal benefit of them and any of their spouses,
lineal descendants or other family members.
"PERSON" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government (including any agency or political subdivision thereof).
"PHYSICAL SERIES A PREFERRED STOCK" has the meaning specified in
Section 16 hereof.
"PREFERRED STOCK" means any Capital Stock of a Person, however
designated, which entitles the holder thereof to a preference with respect to
dividends, distributions or liquidation proceeds of such Person over the holders
of other Capital Stock issued by such Person.
"PREFERRED STOCK REGISTRATION RIGHTS AGREEMENT" means the
registration rights agreement by and between the Company and the Initial
Purchasers relating to the registration of a series of Preferred Stock to be
offered by the Company to the holders of Series A Preferred Stock for exchange.
"QUALIFIED SUBSIDIARY IPO" means a public offering by a Restricted
Subsidiary that is an obligor under an Intercompany Note of shares of its
Capital Stock (however designated and whether voting or non-voting) and any and
all rights, warrants or options to acquire such Capital Stock.
"REDEMPTION DATE" when used with respect to any shares of Series A
Preferred Stock means the date fixed for such redemption of such shares of
Series A Preferred Stock pursuant to Section 6 of this Series A Description.
"REDEMPTION NOTICE" has the meaning specified in Section 6(C) of
this Series A Description.
"REQUIRED FILING DATE" has the meaning specified in Section 7(A) of
this Series A Description.
"RESTRICTED PAYMENT" means any of the following:
(i) the declaration or payment of any dividend or any other
distribution or payment on Capital Stock of the Company (other than Series A
Preferred Stock or Exchange Preferred Stock) or any Restricted Subsidiary or any
payment made to the direct or indirect holders (in their capacities as such) of
Capital Stock of the Company or any Restricted Subsidiary (other than dividends
or distributions payable solely in Capital Stock (other than Disqualified
Capital Stock) or in options, warrants or other rights to purchase Capital Stock
(other than Disqualified Capital Stock) or, in the case of Restricted
Subsidiaries, dividends or distributions payable to the Company or to a
Wholly-Owned Subsidiary of the Company) or
(ii) the purchase, redemption or other acquisition or retirement
for value of any Capital Stock of the Company or any Restricted Subsidiaries
(other than Series A Preferred Stock or Exchange Preferred Stock or Capital
Stock owned by the Company or a Wholly-Owned Subsidiary of the Company,
excluding Disqualified Capital Stock).
"RESTRICTED SUBSIDIARY" means a Subsidiary of the Company other than
an Unrestricted Subsidiary and includes all of the Subsidiaries of the Company
existing as of the Issue Date.
"REQUIRED FILING DATE" has the meaning specified in Section 7(A) of
this Series A Description.
"SEC" means the United States Securities and Exchange Commission as
constituted from time to time or any successor performing substantially the same
functions.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SERIES A PREFERRED STOCK" means the Series A Senior Redeemable
Preferred Stock of the Company.
"SUBSIDIARY" of any specified Person means any corporation,
partnership, joint venture, association or other business entity, whether now
existing or hereafter organized or acquired, (i) in the case of a corporation,
of which more than 50% of the total voting power of the Capital Stock entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors, officers or trustees thereof is held by such first-named Person or
any of its Subsidiaries; or (ii) in the
CONTINUATION PAGE 4.6
<PAGE> 9
case of a partnership, joint venture, association or other business entity, with
respect to which such first-named Person or any of its Subsidiaries has the
power to direct or cause the direction of the management and policies of such
entity, by contract or otherwise or if in accordance with generally accepted
accounting principles such entity is consolidated with the first-named Person
for financial statement purposes.
"SUBSIDIARY SHARES" means shares of Capital Stock of a Subsidiary
that may be issued in exchange for the Common Shares in connection with a
Qualified Subsidiary IPO.
"SUBSIDIARY WARRANTS" means warrants of a Subsidiary that may be
issued in exchange for the Warrants in connection with a Qualified Subsidiary
IPO.
"UNITS OFFERING" means the offering by the Company of Units pursuant
to the Offering Memorandum dated August 5, 1997, each Unit consisting of one
share of Series A Preferred Stock, one warrant to purchase .0025 shares of
Company Common Stock and .0025 shares of Company Common Stock.
"UNRESTRICTED SUBSIDIARY" means (a) any Subsidiary of an
Unrestricted Subsidiary, (b) any Subsidiary of the Company which is classified
after the Issue Date as an Unrestricted Subsidiary by a vote adopted by the
Board of Directors of the Company and (c) any Restricted Subsidiary that may be
classified as an Unrestricted Subsidiary pursuant to the Indenture.
"WARRANTS" means the warrants issued in connection with the Series A
Preferred Stock and Company Common Stock as part of the Units Offering.
"WHOLLY-OWNED SUBSIDIARY" means any Restricted Subsidiary, all of
the outstanding voting securities (other than directors' qualifying shares) of
which are owned, directly or indirectly, by the Company.
2. DESIGNATION. The series of preferred stock established hereby
shall be designated the "Series A Senior Redeemable Preferred Stock" (and shall
be referred to herein as the "SERIES A PREFERRED STOCK"). The total authorized
number of shares of Series A Preferred Stock shall be 110,000 shares, of which
38,000 shares may be used for original issuance (consisting of 33,000 shares
issued pursuant to the Units Offering and 5,000 additional shares issuable from
time to time at the option of the Board of Directors of the Company). The
remaining 72,000 shares are reserved and issuable only to pay dividends on the
Series A Preferred Stock if the Company elects to pay dividends in additional
shares of Series A Preferred Stock.
3. DIVIDENDS. Holders of the Series A Preferred Stock will be
entitled to receive, when, as and if declared by the board of directors of the
Company, out of funds legally available therefor, dividends on the Series A
Preferred Stock at a rate per annum equal to 12 1/2% of the liquidation
preference per share of Series A Preferred Stock, payable semiannually. All
dividends will be cumulative whether or not earned or declared on a daily basis
from the Issue Date and will be payable semiannually in arrears on February 15
and August 15 of each year, commencing on February 15, 1998, to holders of
record on the February 1 and August 1 and immediately preceding the relevant
Dividend Payment Date. Dividends may be paid, at the Company's option, on any
Dividend Payment Date occurring on or prior to August 15, 2002, either in cash
or by the issuance of additional shares of Series A Preferred Stock (including
fractional shares) having an aggregate liquidation preference equal to the
amount of such dividends. In the event that on or prior to August 15, 2002
dividends are declared and paid through the issuance of additional shares of
Series A Preferred Stock, as provided in the previous sentence, such dividends
shall be deemed paid in full and will not accumulate. If any dividend payable on
any Dividend Payment Date subsequent to August 15, 2000 is not paid in full in
cash, the per annum dividend rate will be increased by 0.50% from such Dividend
Payment Date, and following two such non-cash payments, the per annum dividend
rate will be increased by 1.00% for each additional semiannual period in which
such non-cash payment occurs, up to a maximum rate of 2.00% in excess of the
dividend rate originally borne by the Series A Preferred Stock. After the date
on which such dividend default is cured, the dividend rate on the Series A
Preferred Stock will revert to 12 1/2%. After August 15, 2002, dividends must be
paid in cash.
Unpaid dividends accumulating after August 15, 2002 on the Series A
Preferred Stock for any past dividend period and dividends in connection with
any optional redemption may be declared and paid at any time, without reference
to any regular Dividend Payment Date, to holders of record on such date, not
more than forty-five days prior to the payment thereof, as may be fixed by the
Board of Directors of the Company.
The dividend rate on the Series A Preferred Stock is subject to
increase, and additional dividends ("ADDITIONAL DIVIDENDS") will be payable on
the Dividend Payment Dates set forth above if a Preferred Stock Registration
Default (as
CONTINUATION PAGE 4.7
<PAGE> 10
defined in the Preferred Stock Registration Rights Agreement) occurs. If such a
Preferred Stock Registration Default occurs, the sole remedy available to
holders of the Series A Preferred Stock will be the immediate assessment of
Additional Dividends as follows: the per annum dividend rate on the Series A
Preferred Stock will increase by 0.50% per annum; and the per annum dividend
rate will increase by an additional 0.25% per annum for each subsequent 90-day
period during which the Preferred Stock Registration Default remains uncured, up
to a maximum additional dividend rate of 2.00% per annum in excess of the
dividend rate originally borne by the Series A Preferred Stock. All Additional
Dividends will be payable to holders of the Preferred Stock in cash on each
February 15 and August 15, commencing with the first such date occurring after
any such Additional Dividend commences to accrue, until such Preferred Stock
Registration Default is cured. After the date on which such Preferred Stock
Registration Default is cured, the dividend rate on the Series A Preferred Stock
will revert to 12 1/2%.
Notwithstanding anything contained herein to the contrary, the
provisions for the payment of additional dividends contained in the first and
third paragraphs of this Section 3 shall be mutually exclusive, and provided,
further, that in no event shall the maximum dividend rate (including any
Additional Dividends) exceed 14 1/2%.
4. RANKING. The Series A Preferred Stock will, with respect to
dividend distributions and distributions upon the liquidation, dissolution or
winding-up of the Company, rank senior to all classes of common stock of the
Company and to each other class of capital stock or series of preferred stock
established after the Issue Date, and on a parity with any Exchange Preferred
Stock. The Company may not issue any other class or series of capital stock,
other than the Exchange Preferred Stock, ranking senior to or on a parity with
the Series A Preferred Stock (or amend the provisions of any existing class of
capital stock or series of preferred stock to make such class or series rank
senior to or on a parity with the Series A Preferred Stock) with respect to
dividend distributions or distributions upon liquidation, dissolution or
winding-up of the Company without the approval of the holders of at least a
majority of the shares of Series A Preferred Stock then outstanding, voting or
consenting, as the case may be, together as one class; provided, however, that
the Company can issue, from time to time, (i) additional shares of Series A
Preferred Stock to satisfy dividend payments on outstanding shares of Series A
Preferred Stock, (ii) any Exchange Preferred Stock and (iii) 5,000 shares of
Series A Preferred Stock (in addition to the 33,000 shares issued pursuant to
the Units Offering), or corresponding Exchange Preferred Stock, along with
sufficient additional shares of Series A Preferred Stock and Exchange Preferred
Stock to satisfy the payment of dividends thereon.
5. VOTING RIGHTS. Except as required by Massachusetts General Laws,
Chapter 156B ("CHAPTER 156B") and as provided in Section 4 hereof and this
Section 5, the Holders shall not be entitled to vote on any matter submitted to
a vote of stockholders of the Company.
If (i) after August 15, 2002, cash dividends on the Series A
Preferred Stock are in arrears and unpaid for two consecutive semiannual
periods; (ii) the Company fails to redeem the Series A Preferred Stock on or
before August 15, 2005 or fails to discharge any redemption obligation with
respect to the Series A Preferred Stock; (iii) the Company fails to make a
Change of Control Offer in the event of a Change of Control or fails to purchase
shares of the Series A Preferred Stock from holders who elect to have such
shares purchased pursuant to the Change of Control Offer; (iv) a breach or
violation of any of the provisions described under Section 7 occurs and the
breach or violation continues for a period of 30 days or more after the Company
receives notice thereof specifying the default from the holders of at least 25%
of the shares of the Series A Preferred Stock then outstanding; or (v) the
failure to pay at the final stated maturity (giving effect to any extensions
thereof and applicable grace periods) the principal amount of any Indebtedness
of the Company or any Subsidiary of the Company, or the acceleration of the
final stated maturity of any such Indebtedness, if the aggregate principal
amount of such Indebtedness, together with the aggregate principal amount of any
other such Indebtedness in default for failure to pay principal at the final
stated maturity (giving effect to any extensions thereof and applicable grace
periods) or which has been accelerated, aggregates $3.0 million or more at any
time, in each case, after a 10-day period during which any one or more of the
above defaults shall not have been cured or such acceleration rescinded, then
the number of directors constituting the Board of Directors of the Company will
be adjusted to permit the holders of the majority of the then outstanding Series
A Preferred Stock, acting together with the Exchange Preferred Stock, as a
single class and series, to elect that number of directors constituting at least
25% of the Board of Directors of the Company. Such voting rights will continue
until such time as, in the case of a dividend default, all accumulated and
unpaid dividends on the Series A Preferred Stock are paid in full in cash and,
in all other cases, any failure, breach or default giving rise to such voting
right is remedied, at which time the term of any directors elected pursuant to
the provisions of this paragraph shall immediately terminate.
The Company shall not authorize any additional shares of Series A
Preferred Stock or any class or series of capital stock ranking prior to or on a
parity with the Series A Preferred Stock (other than the Exchange Preferred
Stock) with respect to dividend distributions or distributions upon liquidation,
dissolution or winding-up without the affirmative vote or consent of holders of
at least a majority of the shares of Series A Preferred Stock of the Company
then outstanding which are entitled
CONTINUATION PAGE 4.8
<PAGE> 11
to vote thereon, voting or consenting, as the case may be, as one class. In
addition, the Company may not amend its Articles of Organization so as to affect
adversely the specified rights, preferences, privileges or voting rights of the
holders of shares of Series A Preferred Stock, without the affirmative vote or
consent of the holders of at least a majority of the then outstanding shares of
Series A Preferred Stock which are entitled to vote thereon, voting or
consenting, as the case may be, as one class.
6. REDEMPTION.
(A) OPTIONAL REDEMPTION. The Series A Preferred Stock may be
redeemed (subject to contractual and other restrictions with respect thereto and
the legal availability of funds therefor) at the option of the Company in whole
or, from time to time, in part, in the manner provided in Section 6(C) of this
Series A Description at any time on or after August 15, 2002 at the redemption
prices set forth below (expressed as percentages of aggregate Liquidation
Preference) plus accrued and unpaid dividends (whether or not declared) to the
Redemption Date if redeemed during the 12-month period beginning on August 15 of
the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2002 106.250%
2003 103.125%
2004 101.563%
</TABLE>
and on and after August 15, 2005 at 100.000% of the aggregate Liquidation
Preference of the Series A Preferred Stock so redeemed, payable in cash to the
Redemption Date.
(B) MANDATORY REDEMPTION. The Company shall redeem the Series A
Preferred Stock (subject to contractual and other restrictions with respect
thereto and to the legal availability of funds therefor) in whole on August 15,
2005 at a price equal to 100% of the liquidation preference thereof, payable in
cash, plus, without duplication, all accumulated and unpaid dividends, which
will also be paid in cash (whether or not otherwise payable in cash) to the date
of redemption.
(C) PROCEDURE FOR REDEMPTION.
(i) In the event of a redemption of less than all of the
outstanding Series A Preferred Stock, the shares so redeemed will be determined
by the Company pro rata according to the number of shares held by each Holder,
or by lot, as determined by the Company except that the Company may redeem such
shares of Series A Preferred Stock held by any holder of fewer than 100 shares
of either series (or shares held by any Holder who would hold less than 100
shares as a result of such redemption) as may be determined by the Company.
(ii) The Company shall send a written notice of redemption (the
"REDEMPTION NOTICE") by first-class mail, postage prepaid, not fewer than thirty
(30) days (except with respect to any redemptions under Section 6(B) of this
Series A Description) nor more than sixty (60) days prior to the applicable
Redemption Date to each Holder as of the record date fixed for such redemption
of Series A Preferred Stock at such Holder's address as the same appears on the
stock books of the Company; provided, however, that no failure to give such
notice to any Holder or Holders nor any deficiency therein shall affect the
validity of the procedure for the redemption of any shares of Series A Preferred
Stock to be redeemed except as to the Holder or Holders to whom the Company has
failed to give said notice or except as to the Holder or Holders whose notice
was defective. The Redemption Notice shall state:
(a) whether all or less than all of the outstanding shares of
Series A Preferred Stock are to be redeemed and the total number of shares of
Series A Preferred Stock being redeemed;
(b) the number of shares of Series A Preferred Stock held of
record by that specific Holder that the Company intends to redeem;
(c) the applicable Redemption Date;
(d) the manner and place or places at which payment for the
shares called for redemption will, upon presentation and surrender to the
Company of the Series A Preferred Stock Certificates evidencing the shares being
redeemed, be made;
CONTINUATION PAGE 4.9
<PAGE> 12
(e) whether such redemption is conditioned upon the
consummation of a simultaneous financing or any other condition; and
(f) that dividends on the shares of Series A Preferred Stock
being redeemed shall cease to accrue on the applicable Redemption Date.
(iii) On the applicable Redemption Date, the full applicable
redemption price shall become payable for the shares of Series A Preferred Stock
being redeemed on the applicable Redemption Date, subject to the consummation of
a simultaneous financing or satisfaction of any other condition, if applicable.
As a condition of payment of the applicable redemption price, each Holder of
Series A Preferred Stock must surrender a Series A Preferred Stock Certificate
or Certificates representing the shares of Series A Preferred Stock being
redeemed by the Company in the manner and at the place designated in the
applicable Redemption Notice. The full applicable redemption price for such
shares properly tendered for payment shall be paid to the person whose name
appears on such certificate or certificates as the owner thereof, on and after
the applicable Redemption Date when and as certificates for the shares being
redeemed are properly tendered for payment. Each surrendered Series A Preferred
Stock Certificate shall be canceled and retired. In the event that less than all
of the shares represented by any such certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares.
(iv) On the applicable Redemption Date, unless the Company defaults
in the payment of the applicable redemption price, dividends will cease to
accrue with respect to the shares of Series A Preferred Stock called for
redemption. All rights of Holders of such redeemed shares will terminate except
for the right to receive the applicable redemption price.
7. COVENANTS.
(A) SEC REPORTS.
So long as any of the Series A Preferred Stock remains outstanding,
whether or not the Company is subject to Section 13(a) or 15(d) of the Exchange
Act, the Company shall provide to the holders of the Series A Preferred Stock
the annual reports, quarterly reports and other documents which the Company
would have been required to file with the SEC pursuant to such Sections 13(a)
and 15(d) if the Company were so subject, such documents to be provided on or
prior to the respective dates (the "REQUIRED FILING DATES") by which the Company
would have been required so to file such documents if the Company were so
subject. The Company shall also in any event within 15 days of each Required
Filing Date transmit by mail to all Holders, as their names and addresses appear
on the stock books of the Company, without cost to such Holders, copies of the
annual reports, quarterly reports and other documents which the Company would
have been required to file with the SEC pursuant to Sections 13(a) and 15(d) of
the Exchange Act if the Company were subject to such Sections.
(B) LIMITATION ON RESTRICTED PAYMENTS.
The Company will not make, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, make, any Restricted Payment unless:
(A) dividends on the Series A Preferred Stock have been paid in cash for the
most recent semiannual period and (B) the payments made on Capital Stock shall
not exceed the sum of (1) 50% of the Company's cumulative Consolidated Net
Income after the Issue Date (or minus 100% of any cumulative deficit in
Consolidated Net Income during such period), (2) 100% of the aggregate Net
Proceeds and the fair market value of securities or other property received by
the Company as a capital contribution to the common equity of the Company after
the Issue Date and from the issue or sale, after the Issue Date, of Capital
Stock (other than Disqualified Capital Stock or Capital Stock of the Company
issued to any Subsidiary of the Company) of the Company or any Indebtedness or
other securities of the Company convertible into or exercisable or exchangeable
for Capital Stock (other than Disqualified Capital Stock) of the Company which
has been so converted or exercised or exchanged, as the case may be, and (3)
$2,500,000.
The provisions of this Section 7(B) shall not prohibit (i) the
retirement of any shares of Capital Stock of the Company or by conversion into,
or by or in exchange for, shares of Capital Stock (other than Disqualified
Capital Stock), or out of, the Net Proceeds of the substantially concurrent sale
(other than to a Subsidiary of the Company) of other shares of Capital Stock of
the Company (other than Disqualified Capital Stock); (ii) the retirement of any
shares of Disqualified Capital Stock by conversion into, or by exchange for,
shares of Disqualified Capital Stock, or out of the Net Proceeds of the
substantially concurrent sale (other than to a Subsidiary of the Company) of
other shares of Disqualified Capital Stock; (iii) payment, from the proceeds of
the Note Offering and the Units Offering, of up to $2,250,000 to Parent to be
used to repurchase from the High Voltage Engineering Corporation Retirement Plan
shares of Common Stock of Parent within 60 days of the Issue Date for not more
than $2,250,000 and payment of $150,000 to fund a pro rata accrual relating to
certain
CONTINUATION PAGE 4.10
<PAGE> 13
warrants to purchase Company Common Stock issued in connection with the
issuance of the Company's Senior Subordinated Notes due 2004, of up to $150,000,
(iv) the exchange of Warrants for Subsidiary Warrants or Common Shares for
shares of Capital Stock of one or more of the Company's Subsidiaries in the
event of a Qualified Subsidiary IPO; or (v) the payment of management fees for
services provided by Parent or its employees in an aggregate annual amount not
to exceed $750,000; PROVIDED, however that any amounts paid by the Company with
respect to clause (iv) shall reduce amounts available for other payments on
Capital Stock as described in clause (B) of the immediately preceding paragraph.
(C) CHANGE OF CONTROL.
Within 20 days of the occurrence of a Change of Control, the Company
shall make an offer to purchase (the "CHANGE OF CONTROL OFFER") the outstanding
Series A Preferred Stock at a purchase price equal to 101% of the liquidation
preference thereof plus, without duplication, an amount in cash equal to all
accumulated and unpaid dividends thereon (including an amount in cash equal to a
prorated dividend for the period from the immediately preceding Dividend Payment
Date to the Change of Control Payment Date (such applicable purchase price being
hereinafter referred to as the "CHANGE OF CONTROL PURCHASE PRICE")) in
accordance with the procedures set forth in this Section 7(C).
Within 20 days of the occurrence of a Change of Control, the Company
also shall (i) cause a notice of the Change of Control to be sent at least once
to the Dow Jones News Service or similar business news service in the United
States and (ii) send by first-class mail, postage prepaid, to each holder of
Series A Preferred Stock, at the address appearing in the register maintained by
the Transfer Agent, a notice stating:
(i) that the Change of Control Offer is being made pursuant to
this Section 7(C) and that all Series A Preferred Stock tendered will be
accepted for payment, and otherwise subject to the terms and conditions set
forth herein;
(ii) the Change of Control Purchase Price and the purchase date
(which shall be a Business Day no earlier than 20 Business Days from the date
such notice is mailed (the "CHANGE OF CONTROL PAYMENT DATE"));
(iii) that any Series A Preferred Stock not tendered will continue
to accumulate dividends;
(iv) that, unless the Company defaults in the payment of the
Change of Control Purchase Price, any Series A Preferred Stock accepted for
payment pursuant to the Change of Control Offer shall cease to accumulate
dividends after the Change of Control Payment Date;
(v) that holders accepting the offer to have their Series A
Preferred Stock purchased pursuant to a Change of Control Offer will be required
to surrender their certificates representing Series A Preferred Stock to the
Company at the address specified in the notice prior to the close of business on
the Business Day preceding the Change of Control Payment Date;
(vi) that holders will be entitled to withdraw their acceptance
if the Company receives, not later than the close of business on the third
Business Day preceding the Change of Control Payment Date, a telegram, telex,
facsimile transmission or letter setting forth the name of the holder, the
number of shares of Series A Preferred Stock delivered for purchase, and a
statement that such holder is withdrawing his election to have such Series A
Preferred Stock purchased;
(vii) that holders whose Series A Preferred Stock is being
purchased only in part will be issued new certificates representing the number
of shares of Series A Preferred Stock equal to the unpurchased portion of the
certificates surrendered; and
(viii) any other procedures that a holder must follow to accept a
Change of Control Offer or effect withdrawal of such acceptance.
On the Change of Control Payment Date, the Company shall accept for
payment the Series A Preferred Stock tendered pursuant to the Change of Control
Offer and promptly mail to each holder of Series A Preferred Stock so accepted
payment in an amount equal to the purchase price for such Series A Preferred
Stock, and the Company shall execute and issue a new Series A Preferred Stock
certificate equal to any unpurchased shares represented by a certificate
surrendered.
In the event that a Change of Control occurs and the holders of
Series A Preferred Stock exercise their right to require the Company to purchase
Series A Preferred Stock, if such purchase constitutes a "tender offer" for
purposes of Rule
CONTINUATION PAGE 4.11
<PAGE> 14
14e-1 under the Exchange Act at that time, the Company will comply with the
requirements of Rule 14e-1 as then in effect with respect to such repurchase.
Prior to the mailing of the notice referred to above, but in any
event within 20 days following the date on which a Change of Control occurs, the
Company covenants that, if the purchase of the Series A Preferred Stock would
violate or constitute a default or be prohibited under the Indenture, the New
Revolving Credit Facility or any other instrument governing Indebtedness
outstanding at the time, then the Company will, to the extent needed to permit
such purchase of Series A Preferred Stock, either (i) repay in full all
Indebtedness under the Indenture, the New Revolving Credit Facility or any such
other instrument, as the case may be, or (ii) obtain the requisite consents
under the Indenture, the New Revolving Credit Facility or any such other
instrument, as the case may be, to permit the redemption of the Series A
Preferred Stock as provided above. The Company will first comply with the
covenant in the preceding sentence before it will be required to redeem Series A
Preferred Stock pursuant to the provisions described above.
8. PAYMENT ON LIQUIDATION.
(A) Upon any voluntary or involuntary liquidation, dissolution
or winding-up of the Company, holders of the Series A Preferred Stock will
initially be entitled to be paid, out of the assets of the Company available for
distribution, $1,000 per share, plus an amount in cash equal to accumulated and
unpaid dividends thereon to the date fixed for liquidation, dissolution or
winding-up (including an amount equal to a prorated dividend for the period from
the immediately preceding Dividend Payment Date to the date fixed for
liquidation, dissolution or winding-up), before any distribution is made on any
Common Stock or other Preferred Stock (other than any Series A Preferred Stock
or Exchange Preferred Stock) of the Company. If upon any voluntary or
involuntary liquidation, dissolution or winding-up of the Company, the amounts
payable with respect to the Series A Preferred Stock are not paid in full, the
holders of the Series A Preferred Stock will share equally and ratably in any
distribution of assets of the Company first in proportion to the full
liquidation preference to which each is entitled until such preferences are paid
in full, and then in proportion to their respective amounts of accumulated but
unpaid dividends. After payment of the full amount of the liquidation preference
and accumulated and unpaid dividends to which they are entitled, the holders of
shares of Series A Preferred Stock will not be entitled to any further
participation in any distribution of assets of the Company.
(B) For the purposes of this Section 8, neither the sale,
conveyance, exchange or transfer (for cash, shares of stock, securities or other
consideration) of all or substantially all of the property or assets of the
Company nor the consolidation or merger of the Company with one or more
corporations shall be deemed to be a liquidation, dissolution or winding-up of
the Company, unless such sale, conveyance, exchange or transfer is in connection
with a dissolution or winding-up of the business of the Company.
9. EXCLUSION OF OTHER RIGHTS. Except as may otherwise be
required by the laws of the Commonwealth of Massachusetts, shares of the Series
A Preferred Stock shall not have any preferences or relative, participating,
optional or other special rights, other than those specifically set forth in the
Articles of Organization of the Company, as amended from time to time. No shares
of Series A Preferred Stock shall have any preemptive or subscription rights
whatsoever as to any securities of the Company.
10. REISSUANCE OF PREFERRED STOCK. Shares of Series A Preferred
Stock that have been issued and reacquired by the Company in any manner,
including shares purchased or redeemed, shall (upon compliance with any
applicable provisions of Chapter 156B) have the status of authorized and
unissued shares of preferred stock undesignated as to series and may be
redesignated and reissued as part of any series of preferred stock, except that
any issuance or reissuance of shares of Series A Preferred Stock must be in
compliance with the Articles of Organization of the Company, as amended from
time to time.
11. BUSINESS DAY. If any payment or redemption shall be required
by the terms hereof to be made on a day that is not a Business Day, such
payment, redemption or exchange shall be made on the immediately succeeding
Business Day.
12. HEADINGS OF SUBDIVISIONS. The headings of the various
subdivisions hereof are for convenience of reference only and shall not affect
the interpretation of any of the provisions hereof.
13. SEVERABILITY OF PROVISIONS. If any right, preference or
limitation of the Series A Preferred Stock set forth in the Articles of
Organization of the Company, as amended from time to time, is invalid, unlawful
or incapable of being enforced by reason of any rule or law or public policy,
all other rights, preferences and limitations with respect to the Series A
Preferred Stock set forth in the Articles of Organization of the Company, as so
amended, which can be given effect without the invalid, unlawful or
unenforceable right, preference or limitation shall, nevertheless, remain in
full force and effect, and
CONTINUATION PAGE 4.12
<PAGE> 15
no right, preference or limitation therein set forth shall be deemed dependent
upon any other such right, preference or limitation unless so expressed herein.
14. NOTICE. All notices and other communications provided for or
permitted to be given to the Company hereunder shall be made by hand delivery,
next day air courier or certified first-class mail to the Company at its
principal executive offices (currently located at 401 Edgewater Place, Suite
680, Wakefield, Massachusetts 01880).
15. AMENDMENTS. This Series A Description may be amended without
notice to or the consent of any Holder to cure any ambiguity, defect or
inconsistency provided that such amendment does not adversely affect the rights
of any Holder.
16. BOOK-ENTRY PROVISIONS.
(a) Series A Preferred Stock registered in global form ("GLOBAL
SERIES A PREFERRED STOCK") will (i) be registered in the name of The Depository
Trust Company (the "DEPOSITARY") or the nominee of such Depositary, (ii) be
delivered to the Transfer Agent as custodian for such Depositary and (iii) bear
customary legends as required by the Depositary.
Members of, or participants in, the Depositary ("AGENT MEMBERS")
shall have no rights hereunder with respect to any Global Series A Preferred
Stock held on their behalf by the Depositary or its custodian, or under the
Global Series A Preferred Stock, and the Depositary may be treated by the
Company and any agent of the Company as the absolute owner of the Global Series
A Preferred Stock for all purposes whatsoever. Notwithstanding the foregoing,
nothing herein shall prevent the Company or any agent of the Company from giving
effect to any written certification, proxy or other authorization furnished by
the Depositary or impair, as between the Depositary and its Agent Members, the
operation of customary practices governing the exercise of the rights of a
holder of any Series A Preferred Stock.
(b) Transfers of Global Series A Preferred Stock shall be
limited to transfer in whole, but not in part, to the Depositary, its successors
or their respective nominees. Interests of beneficial owners in the Global
Series A Preferred Stock may be transferred or exchanged for physical Series A
Preferred Stock (the "PHYSICAL SERIES A PREFERRED STOCK") in accordance with the
rules and procedures of the Depositary. In addition, Physical Series A Preferred
Stock shall be transferred to all beneficial owners in exchange for their
beneficial interests in Global Series A Preferred Stock if the Depositary
notifies the Company that it is unwilling or unable to continue as Depositary
for any Global Series A Preferred Stock and a successor depositary is not
appointed by the Company within 90 days of such notice.
(c) In connection with any transfer or exchange of a portion of
the beneficial interest in any Global Series A Preferred Stock to beneficial
owners pursuant to paragraph (b), the Company shall (if one or more Physical
Series A Preferred Stock Certificates are to be issued) reflect on its books and
records the date and a decrease in the amount of shares of the Global Series A
Preferred Stock in an amount equal to the amount of shares of the beneficial
interest in the Global Series A Preferred Stock to be transferred, and the
Company shall execute one or more Physical Series A Preferred Stock Certificates
of like tenor and amount.
(d) In connection with the transfer of Global Series A Preferred
Stock as an entirety to beneficial owners pursuant to paragraph (b), the Global
Series A Preferred Stock shall be deemed to be surrendered to the Company for
cancellation, and the Company shall execute and deliver to each beneficial owner
identified by the Depositary in writing in exchange for its beneficial interest
in the Global Series A Preferred Stock an equal aggregate amount of shares of
Physical Series A Preferred Stock of authorized denominations.
(e) Any Physical Series A Preferred Stock delivered in exchange
for an interest in Global Series A Preferred Stock pursuant to paragraph (b),
(c) or (d) shall, except as otherwise provided herein, bear an appropriate
legend, if required.
(f) The Holder of any Global Series A Preferred Stock may grant
proxies and otherwise authorize any person, including Agent Members and persons
that may hold interests through Agent Members, to take any action which a Holder
is entitled to take hereunder.
(g) Notwithstanding anything to the contrary herein, all
transfers of interests in Global Series A Preferred Stock must be made to a
"qualified institutional buyer" as such term is defined in Rule 144A promulgated
under the Securities Act.
The Company will, so long as any shares of Series A Preferred Stock
are outstanding, maintain an office or agency where such shares may be presented
for registration or transfer and where such shares may be presented for
conversion and redemption.
CONTINUATION PAGE 4.13
<PAGE> 16
B2. SERIES A EXCHANGE SENIOR REDEEMABLE PREFERRED
1. CERTAIN DEFINITIONS. As used in this description of the
preferences, voting powers, qualifications and rights of the Series A Exchange
Senior Redeemable Preferred Stock (the "EXCHANGE DESCRIPTION"), the following
terms shall have the following meanings (with terms defined in the singular
having comparable meanings when used in the plural and vice versa), unless the
context otherwise requires:
"AFFILIATE" of any specified Person means any other Person which
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person. For the
purposes of this definition, "control" (including, with correlative meanings,
the terms "controlling," "controlled by," and "under common control with"), as
used with respect to any Person, means the possession, directly or indirectly,
of the power to direct or cause the direction of the management or policies of
such Person, whether through the ownership of voting securities, by agreement or
otherwise.
"AGENT MEMBER" has the meaning specified in Section 16 of this
Exchange Description.
"ASSET SALE" means the sale, transfer, repayment or other
disposition (other than to the Company or any of its Restricted Subsidiaries) in
any single transaction or series of related transactions with a fair market
value in excess of $1.0 million of (a) any Capital Stock of or other equity
interest in any Restricted Subsidiary of the Company, (b) all or substantially
all of the assets of the Company or of any Restricted Subsidiary thereof, (c)
real property, (d) all or substantially all of the assets of any business owned
by the Company or any Restricted Subsidiary thereof, or a division, line of
business or comparable business segment of the Company or any Restricted
Subsidiary thereof; provided that Asset Sales shall not include sales, leases,
conveyances, transfers or other dispositions to the Company or to a Restricted
Subsidiary or to any other Person if after giving effect to such sale, lease,
conveyance, transfer or other disposition such other Person becomes a Restricted
Subsidiary.
"BOARD OF DIRECTORS" means the board of directors of the Company or
any committee authorized to act therefor.
"BOARD VOTE" means a copy of a vote certified pursuant to an
officers' certificate to have been duly adopted by the Board of Directors of the
Company or a Subsidiary, as applicable, and to be in full force and effect.
"BUSINESS DAY" means a day that is not a Saturday, a Sunday or a day
on which banking institutions in the Commonwealth of Massachusetts are not
required to be open.
"CAPITALIZED LEASE OBLIGATIONS" means Indebtedness represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP, and the amount of such Indebtedness
shall be the capitalized amount of such obligations determined in accordance
with GAAP.
"CAPITAL STOCK" means, with respect to any Person, any and all
shares or other equivalents (however designated) of capital stock, partnership
interests or any other participation, right or other interest in the nature of
an equity interest in such Person or any option, warrant or other security
convertible into any of the foregoing.
"CHANGE OF CONTROL" of the Company will be deemed to have occurred
at such time as (i) any Person (including a Person's Affiliates and associates),
other than a Permitted Holder, becomes the beneficial owner (as defined under
Rule 13d-3 or any successor rule or regulation promulgated under the Exchange
Act) of 50% or more of the total voting or economic power of the Company's or
Parent's Common Stock, as the case may be, (ii) any Person (including a Person's
Affiliates and associates), other than a Permitted Holder, becomes the
beneficial owner of more than 33 1/3% of the total voting power of the Common
Stock of the Company or Parent, as the case may be, and the Permitted Holders
beneficially own, in the aggregate, a lesser percentage of the total voting
power of the Common Stock of the Company or Parent, as the case may be, than
such other Person and do not have the right or ability by voting power, contract
or otherwise to elect or designate for election a majority of the Board of
Directors of the Company or Parent, as the case may be, (iii) there shall be
consummated any consolidation or merger of the Company or Parent in which the
Company or Parent, as the case may be, is not the continuing or surviving
corporation or pursuant to which the Common Stock of the Company or Parent, as
the case may be, would be converted into cash, securities or other property,
other than a merger or consolidation of the Company or Parent, as the case may
be, in which the holders of the Common Stock of the Company or Parent, as the
case may be, outstanding immediately prior to the consolidation or merger hold,
directly or indirectly, at least a majority of the Common Stock of the
CONTINUATION PAGE 4.14
<PAGE> 17
surviving corporation immediately after such consolidation or merger, or (iv)
during any period of two consecutive years, individuals who at the beginning of
such period constituted the Board of Directors of the Company or Parent, as the
case may be, (together with any new directors whose election by such Board of
Directors or whose nomination for election by the shareholders of the Company or
Parent, as the case may be, has been approved by 66 2/3% of the directors then
still in office who either were directors at the beginning of such period or
whose election or recommendation for election was previously so approved) cease
to constitute a majority of the Board of Directors of the Company or Parent, as
the case may be.
"CHANGE OF CONTROL OFFER" has the meaning specified in Section 7(C)
of this Exchange Description.
"CHANGE OF CONTROL PAYMENT DATE" has the meaning specified in
Section 7(C) of this Exchange Description.
"CHANGE OF CONTROL PURCHASE PRICE" has the meaning specified in
Section 7(C) of this Exchange Description.
"CHAPTER 156B" has the meaning specified in Section 5 of this
Exchange Description.
"COMMON STOCK" of any Person means all Capital Stock of such Person
that is generally entitled to (i) vote in the election of directors of such
Person or (ii) if such Person is not a corporation, vote or otherwise
participate in the selection of the governing body, partners, managers or others
that will control the management and policies of such Person.
"COMMON SHARES" means the shares of Company Common Stock sold in the
Units Offering.
"COMPANY" means High Voltage Engineering Corporation, a
Massachusetts corporation.
"COMPANY COMMON STOCK" means the Common Stock, par value $.01 per
share, of the Company.
"COMPANY PREFERRED STOCK" means the Preferred Stock, $1.00 par value
per share, of the Company.
"CONSOLIDATED NET INCOME" means, with respect to any Person, for any
period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided, however, that (a) the Net Income of any Person, including
any Unrestricted Subsidiary of the Company or a Restricted Subsidiary (the
"OTHER PERSON") in which the Person in question or any of its Restricted
Subsidiaries has less than a 100% interest (which interest does not cause the
net income of such other Person to be consolidated into the net income of the
Person in question in accordance with GAAP) shall be included only to the extent
of the amount of dividends or distributions actually paid to the Person in
question or the Restricted Subsidiary, (b) the Net Income of any Restricted
Subsidiary of the Person in question that is subject to any restriction or
limitation on the payment of dividends or the making of other distributions to
the Company (other than pursuant to the Notes or the Indenture) shall be
excluded to the extent of such restriction or limitation, (c)(i) the Net Income
of any Person acquired in a pooling of interests transaction for any period
prior to the date of such acquisition and (ii) any net gain (but not loss)
resulting from an Asset Sale by the Person in question or any of its Restricted
Subsidiaries other than in the ordinary course of business shall be excluded,
(d) extraordinary, unusual and non-recurring gains and losses shall be excluded,
and (e) without duplication, the tax effected non-cash accrual or accretion of,
and payment of, Contingent Interest Payments or Warrants during such period
shall be excluded.
"CONTINGENT INTEREST PAYMENTS" means the contingent interest
payments payable by the Company to BancBoston Capital, Inc. pursuant to the
Contingent Interest Payment Agreement, dated as of April 27, 1991, between the
Company, Halmar Robicon Group, Inc. and Datcon Instrument Company and BancBoston
Capital Inc. ("BANCBOSTON"), as amended, and that Agreement for Additional
Contingent Interest Payment (Quest), dated as of June 29, 1995, between the
Company, Halmar Robicon Group, Inc. and Datcon Instrument Company and
BancBoston.
"DEPOSITARY" has the meaning specified in Section 16 of this
Exchange Description.
"DISQUALIFIED CAPITAL STOCK" means any Capital Stock of the Company
or a Restricted Subsidiary, other than the Original Series A Preferred Stock and
the Series A Exchange Preferred Stock, which, by its terms (or by the terms of
any equity security into which it is convertible or for which it is exchangeable
at the option of the holder), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the option of the holder thereof, in whole or in part, on or
prior to the date set for mandatory redemption of the Series A Exchange
Preferred Stock, for cash or securities constituting Indebtedness; provided,
however, that Preferred Stock of the Company or a Restricted Subsidiary that is
issued with the benefit of provisions requiring a change of control offer to be
made for such Preferred Stock in the event of a Change of Control of the Company
or Subsidiary, which provisions have
CONTINUATION PAGE 4.15
<PAGE> 18
substantially the same effect as the provisions described in Section 7(C) below
shall not be deemed to be Disqualified Capital Stock solely by virtue of any
such provisions.
"DIVIDEND PAYMENT DATE" means February 15 and August 15, commencing
February, 1998, unless such day is not a Business Day, in which case the
Dividend Payment Date shall be the immediately succeeding Business Day.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"GAAP" means generally accepted accounting principles consistently
applied as in effect in the United States from time to time.
"GLOBAL SERIES A EXCHANGE PREFERRED STOCK" has the meaning specified
in Section 16 hereof.
"HOLDER" means a registered holder of shares of Series A Exchange
Preferred Stock.
"INCUR" means, with respect to any Indebtedness or other obligation
of any Person, to create, issue, incur (by conversion, exchange or otherwise),
assume, guarantee or otherwise become liable in respect of such Indebtedness or
other obligation or the recording, as required pursuant to GAAP or otherwise, of
any such Indebtedness or other obligation on the balance sheet of such person
(and "incurrence," "incurred," "incurrable," and "incurring" shall have meanings
correlative to the foregoing); provided that a change in GAAP that results in an
obligation of such Person that exists at such time becoming Indebtedness shall
not be deemed an incurrence of such Indebtedness.
"INDEBTEDNESS" means (without duplication), with respect to any
Person, any indebtedness at any time outstanding, secured or unsecured,
contingent or otherwise, which is for borrowed money (whether or not the
recourse of the lender is to the whole of the assets of such Person or only to a
portion thereof), or evidenced by bonds, notes, debentures or similar
instruments or representing the balance deferred and unpaid of the purchase
price of any property (excluding, without limitation, any balances that
constitute accounts payable or trade payables, and other accrued liabilities
arising in the ordinary course of business) if and to the extent any of the
foregoing indebtedness would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP, and shall also include, to the extent
not otherwise included (i) any Capitalized Lease Obligations, (ii) obligations
secured by a lien to which the property or assets owned or held by such Person
is subject, whether or not the obligation or obligations secured thereby shall
have been assumed, (iii) guarantees of items of other Persons which would be
included within this definition for such other Persons (whether or not such
items would appear upon the balance sheet of the guarantor), (iv) all
obligations for the reimbursement of any obligor on any letter of credit,
banker's acceptance or similar credit transaction, (v) in the case of the
Company, Disqualified Capital Stock of the Company or any Restricted Subsidiary
thereof, and (vi) obligations of any such Person under any Interest Rate
Agreement applicable to any of the foregoing (if and to the extent such Interest
Rate Agreement obligations would appear as a liability upon a balance sheet of
such Person prepared in accordance with GAAP). The amount of Indebtedness of any
Person at any date shall be the outstanding balance at such date of all
unconditional obligations as described above and, with respect to contingent
obligations, the maximum liability upon the occurrence of the contingency giving
rise to the obligation; provided (i) that the amount outstanding at any time of
any Indebtedness issued with original issue discount, is the principal amount of
such Indebtedness less the remaining unamortized portion of the original issue
discount of such Indebtedness at such time as determined in conformity with GAAP
and (ii) that Indebtedness shall not include any liability for federal, state,
local or other taxes. Notwithstanding any other provision of the foregoing
definition, any trade payable arising from the purchase of goods or materials or
for services obtained in the ordinary course of business shall not be deemed to
be "Indebtedness" of the Company or any Restricted Subsidiaries for purposes of
this definition. Furthermore, guarantees of (or obligations with respect to
letters of credit supporting) Indebtedness otherwise included in the
determination of such amount shall not also be included.
"INDENTURE" means the Indenture, dated August 8, 1997, by and
between the Company and State Street Bank & Trust Company as Trustee, pursuant
to which the Notes are being issued, as amended or supplemented from time to
time in accordance with the terms thereof.
"INTERCOMPANY NOTES" means the Intercompany Notes issued by the
direct Subsidiaries of the Company in the following principal amounts: (i)
Halmar Robicon Group, Inc.: $35.0 million; (ii) Physical Electronics, Inc.:
$35.0 million; (iii) Datcon Instrument Company: $17.0 million; (iv) Anderson
Interconnect, Inc.: $17.00 million; and (v) HIVEC Holdings, Inc.: $3.0 million.
CONTINUATION PAGE 4.16
<PAGE> 19
"INTEREST RATE AGREEMENT" means, for any Person, any interest rate
swap agreement, interest rate cap agreement, interest rate collar agreement or
other similar agreement designed to protect the party indicated therein against
fluctuations in interest rates.
"ISSUE DATE" means, with respect to a share of Series A Exchange
Preferred Stock, the date such share of Series A Exchange Preferred Stock is
first issued by the Company.
"LIQUIDATION PREFERENCE" means $1,000 per share of Series A Exchange
Preferred Stock plus, for purposes of Section 8 of this Exchange Description,
whether such share is issued or accrued, in each case, accrued and unpaid
dividends, whether or not declared, if any, thereon through the date such
Liquidation Preference is paid.
"NET INCOME" means, with respect to any Person for any period, the
net income (loss) of such Person determined in accordance with GAAP.
"NET PROCEEDS" means (a) in the case of any sale of Capital Stock by
any Person, the aggregate net proceeds received by such Person, after payment of
expenses, commissions and the like incurred in connection therewith, whether
such proceeds are in cash or in property (valued at the fair market value
thereof, as determined in good faith by the Board of Directors of the Company,
at the time of receipt), (b) in the case of any exchange, exercise, conversion
or surrender of outstanding securities of any kind for or into shares of Capital
Stock of the Company which is not Disqualified Capital Stock, the net book value
of such outstanding securities on the date of such exchange, exercise,
conversion or surrender (plus any additional amount required to be paid by the
holder to the Company upon such exchange, exercise, conversion or surrender,
less any and all payments made to the holders, e.g., on account of fractional
shares and less all expenses incurred by the Company in connection therewith)
and (c) in the case of any issuance of any Indebtedness by the Company or any
Restricted Subsidiary, the aggregate net cash proceeds received by such Person
after the payment of expenses, commissions, underwriting discounts and the like
incurred in connection therewith.
"NEW REVOLVING CREDIT FACILITY" means the credit agreement or credit
agreements to be entered into by and among the Company, the Restricted
Subsidiaries and any one or more lenders from time to time parties thereto, as
the same may be amended, extended, increased, renewed, restated, supplemented or
otherwise modified (in whole or in part, and without limitation as to amount,
terms, conditions, covenants and other provisions) from time to time and any
agreement or agreements governing Indebtedness incurred to refinance, replace,
restructure or refund in whole or in part the borrowings and then maximum
commitments under the New Revolving Credit Facility or such agreement (whether
with the original administrative agent and lenders or other lenders or other
agents and lenders or otherwise and whether provided under the original credit
facility or other credit agreements or otherwise).
"NOTES" means the 10 1/2% Senior Notes due 2004 of the Company,
including those issued in the Notes Offering and those issued subsequently in
exchange therefor, collectively.
"NOTES OFFERING" means the offering by the Company of $135,000,000
in aggregate principal amount of the Company's 10 1/2% Senior Notes due 2004
pursuant to an Offering Memorandum dated as of August 5, 1997.
"ORIGINAL SERIES A PREFERRED STOCK" means up to 115,000 shares of
Company Preferred Stock designated as Series A Senior Redeemable Preferred
Stock.
"PARENT" means Letitia Corporation, a Delaware corporation.
"PERMITTED HOLDERS" means (a) Parent, (b) Laurence S. Levy, (c)
Clifford Press and (d) any spouse and any trust, holding company, or similar
entity established by and or controlled by either or both of Laurence S. Levy
and Clifford Press for the principal benefit of them and any of their spouses,
lineal descendants or other family members.
"PERSON" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government (including any agency or political subdivision thereof).
"PHYSICAL SERIES A EXCHANGE PREFERRED STOCK" has the meaning
specified in Section 16 hereof.
"PREFERRED STOCK" means any Capital Stock of a Person, however
designated, which entitles the holder thereof to a preference with respect to
dividends, distributions or liquidation proceeds of such Person over the holders
of other Capital Stock issued by such Person.
CONTINUATION PAGE 4.17
<PAGE> 20
"QUALIFIED SUBSIDIARY IPO" means a public offering by a Restricted
Subsidiary that is an obligor under an Intercompany Note of shares of its
Capital Stock (however designated and whether voting or non-voting) and any and
all rights, warrants or options to acquire such Capital Stock.
"REDEMPTION DATE" when used with respect to any shares of Series A
Exchange Preferred Stock means the date fixed for such redemption of such shares
of Series A Exchange Preferred Stock pursuant to Section 6 of this Exchange
Description.
"REDEMPTION NOTICE" has the meaning specified in Section 6(C) of
this Exchange Description.
"REQUIRED FILING DATE" has the meaning specified in Section 7(A)
hereof.
"RESTRICTED PAYMENT" means any of the following:
(i) the declaration or payment of any dividend or any other
distribution or payment on Capital Stock of the Company (other than Original
Series A Preferred Stock or Series A Exchange Preferred Stock) or any Restricted
Subsidiary or any payment made to the direct or indirect holders (in their
capacities as such) of Capital Stock of the Company or any Restricted Subsidiary
(other than dividends or distributions payable solely in Capital Stock (other
than Disqualified Capital Stock) or in options, warrants or other rights to
purchase Capital Stock (other than Disqualified Capital Stock) or, in the case
of Restricted Subsidiaries, dividends or distributions payable to the Company or
to a Wholly-Owned Subsidiary of the Company) or
(ii) the purchase, redemption or other acquisition or retirement
for value of any Capital Stock of the Company or any Restricted Subsidiaries
(other than Original Series A Preferred Stock, Series A Exchange Preferred Stock
or Capital Stock owned by the Company or a Wholly-Owned Subsidiary of the
Company, excluding Disqualified Capital Stock).
"RESTRICTED SUBSIDIARY" means a Subsidiary of the Company other than
an Unrestricted Subsidiary and includes all of the Subsidiaries of the Company
existing as of the Issue Date.
"REQUIRED FILING DATE" has the meaning specified in Section 7(A) of
this Exchange Description.
"SEC" means the United States Securities and Exchange Commission as
constituted from time to time or any successor performing substantially the same
functions.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SERIES A EXCHANGE PREFERRED STOCK" means the Series A Exchange
Senior Redeemable Preferred Stock of the Company.
"SUBSIDIARY" of any specified Person means any corporation,
partnership, joint venture, association or other business entity, whether now
existing or hereafter organized or acquired, (i) in the case of a corporation,
of which more than 50% of the total voting power of the Capital Stock entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors, officers or trustees thereof is held by such first-named Person or
any of its Subsidiaries; or (ii) in the case of a partnership, joint venture,
association or other business entity, with respect to which such first-named
Person or any of its Subsidiaries has the power to direct or cause the direction
of the management and policies of such entity, by contract or otherwise or if in
accordance with generally accepted accounting principles such entity is
consolidated with the first-named Person for financial statement purposes.
"SUBSIDIARY SHARES" means shares of Capital Stock of a Subsidiary
that may be issued in exchange for the Common Shares in connection with a
Qualified Subsidiary IPO.
"SUBSIDIARY WARRANTS" means warrants of a Subsidiary that may be
issued in exchange for the Warrants in connection with a Qualified Subsidiary
IPO.
"UNITS OFFERING" means the offering by the Company of Units pursuant
to the Offering Memorandum dated August 5, 1997, each Unit consisting of one
share of Original Series A Preferred Stock, one warrant to purchase .0025 shares
of Company Common Stock and .0025 shares of Company Common Stock.
CONTINUATION PAGE 4.18
<PAGE> 21
"UNRESTRICTED SUBSIDIARY" means (a) any Subsidiary of an
Unrestricted Subsidiary, (b) any Subsidiary of the Company which is classified
after the Issue Date as an Unrestricted Subsidiary by a vote adopted by the
Board of Directors of the Company and (c) any Restricted Subsidiary that may be
classified as an Unrestricted Subsidiary pursuant to the Indenture.
"WARRANTS" means the warrants issued in connection with the Original
Series A Preferred Stock and Company Common Stock as part of the Units Offering.
"WHOLLY-OWNED SUBSIDIARY" means any Restricted Subsidiary, all of
the outstanding voting securities (other than directors' qualifying shares) of
which are owned, directly or indirectly, by the Company.
2. DESIGNATION. The series of preferred stock established hereby
shall be designated the "Series A Exchange Senior Redeemable Preferred Stock"
(and shall be referred to herein as the "SERIES A EXCHANGE PREFERRED STOCK").
The total authorized number of shares of Series A Exchange Preferred Stock shall
be 110,000 shares, all of which may be issued either in exchange for shares of
Original Series A Preferred Stock or in the payment of dividends on the Series A
Exchange Preferred Stock if the Company elects to pay dividends in additional
shares of the Series A Exchange Preferred Stock.
3. DIVIDENDS. Holders of the Series A Exchange Preferred Stock will
be entitled to receive, when, as and if declared by the board of directors of
the Company, out of funds legally available therefor, dividends on the Series A
Exchange Preferred Stock at a rate per annum equal to 12 1/2% of the liquidation
preference per share of Series A Exchange Preferred Stock, payable semiannually.
All dividends will be cumulative whether or not earned or declared on a daily
basis from the respective Issue Dates of the Series A Exchange Preferred Stock
and will be payable semiannually in arrears on February 15 and August 15 of each
year, commencing after the applicable Issue Date, to the holder of record on the
February 1 and August 1 and immediately preceding the relevant Dividend Payment
Date. Dividends may be paid, at the Company's option, on any Dividend Payment
Date occurring on or prior to August 15, 2002, either in cash or by the issuance
of additional shares of Series A Exchange Preferred Stock (including fractional
shares) having an aggregate liquidation preference equal to the amount of such
dividends. In the event that on or prior to August 15, 2002 dividends are
declared and paid through the issuance of additional shares of Series A Exchange
Preferred Stock, as provided in the previous sentence, such dividends shall be
deemed paid in full and will not accumulate. If any dividend payable on any
Dividend Payment Date subsequent to August 15, 2000 is not paid in full in cash,
the per annum dividend rate will be increased by 0.50% from such Dividend
Payment Date, and following two such non-cash payments, the per annum dividend
rate will be increased by 1.00% for each additional semiannual period in which
such non-cash payment occurs, up to a maximum rate of 2.00% in excess of the
dividend rate originally borne by the Series A Exchange Preferred Stock. After
the date on which such dividend default is cured, the dividend rate on the
Series A Exchange Preferred Stock will revert to 12 1/2%. After August 15, 2002,
dividends must be paid in cash.
Unpaid dividends accumulating after August 15, 2002 on the Series A
Exchange Preferred Stock for any past dividend period and dividends in
connection with any optional redemption may be declared and paid at any time,
without reference to any regular Dividend Payment Date, to holders of record on
such date, not more than forty-five days prior to the payment thereof, as may be
fixed by the Board of Directors of the Company.
4. RANKING. The Series A Exchange Preferred Stock will, with respect
to dividend distributions and distributions upon the liquidation, dissolution or
winding-up of the Company, rank senior to all classes of common stock of the
Company and to each other class of capital stock or series of preferred stock
established after the Issue Date, and on a parity with any Original Series A
Preferred Stock. The Company may not issue any other class or series of capital
stock, other than the Original Series A Preferred Stock, ranking senior to or on
a parity with the Series A Exchange Preferred Stock (or amend the provisions of
any existing class of capital stock or series of preferred stock to make such
class or series rank senior to or on a parity with the Series A Exchange
Preferred Stock) with respect to dividend distributions or distributions upon
liquidation, dissolution or winding-up of the Company without the approval of
the holders of at least a majority of the shares of Series A Exchange Preferred
Stock then outstanding, voting or consenting, as the case may be, together as
one class; provided, however, that the Company can issue, from time to time, (i)
additional shares of Original Series A Preferred Stock and Series A Exchange
Preferred Stock to satisfy dividend payments on outstanding shares of such
Preferred Stock and (ii) 5,000 shares of Original Series A Preferred Stock (in
addition to the 33,000 shares issued pursuant to the Units Offering), or
corresponding Series A Exchange Preferred Stock, along with sufficient
additional shares of Original Series A Preferred Stock and Series A Exchange
Preferred Stock to satisfy the payment of dividends thereon.
5. VOTING RIGHTS. Except as required by Massachusetts General Laws,
Chapter 156B ("CHAPTER 156B") and as provided in Section 4 hereof and this
Section 5, the Holders shall not be entitled to vote on any matter submitted to
a vote of stockholders of the Company.
CONTINUATION PAGE 4.19
<PAGE> 22
If (i) after August 15, 2002, cash dividends on the Series A
Exchange Preferred Stock are in arrears and unpaid for two consecutive
semiannual periods; (ii) the Company fails to redeem the Series A Exchange
Preferred Stock on or before August 15, 2007 or fails to discharge any
redemption obligation with respect to the Series A Exchange Preferred Stock;
(iii) the Company fails to make a Change of Control Offer in the event of a
Change of Control or fails to purchase shares of the Series A Exchange Preferred
Stock from holders who elect to have such shares purchased pursuant to the
Change of Control Offer; (iv) a breach or violation of any of the provisions
described under Section 7 occurs and the breach or violation continues for a
period of 30 days or more after the Company receives notice thereof specifying
the default from the holders of at least 25% of the shares of the Series A
Exchange Preferred Stock then outstanding; or (v) the failure to pay at the
final stated maturity (giving effect to any extensions thereof and applicable
grace periods) the principal amount of any Indebtedness of the Company or any
Subsidiary of the Company, or the acceleration of the final stated maturity of
any such Indebtedness, if the aggregate principal amount of such Indebtedness,
together with the aggregate principal amount of any other such Indebtedness in
default for failure to pay principal at the final stated maturity (giving effect
to any extensions thereof and applicable grace periods) or which has been
accelerated, aggregates $3.0 million or more at any time, in each case, after a
10-day period during which any one or more of the above defaults shall not have
been cured or such acceleration rescinded, then the number of directors
constituting the Board of Directors of the Company will be adjusted to permit
the holders of the majority of the then outstanding Series A Exchange Preferred
Stock, acting together with the Original Series A Preferred Stock, as a single
class and series, to elect that number of directors constituting at least 25% of
the Board of Directors of the Company. Such voting rights will continue until
such time as, in the case of a dividend default, all accumulated and unpaid
dividends on the Series A Exchange Preferred Stock are paid in full in cash and,
in all other cases, any failure, breach or default giving rise to such voting
right is remedied, at which time the term of any directors elected pursuant to
the provisions of this paragraph shall immediately terminate.
The Company shall not authorize any additional shares of Series A
Exchange Preferred Stock or any class or series of capital stock ranking prior
to or on a parity with the Series A Exchange Preferred Stock (other than the
Original Series A Preferred Stock) with respect to dividend distributions or
distributions upon liquidation, dissolution or winding-up without the
affirmative vote or consent of holders of at least a majority of the shares of
Series A Exchange Preferred Stock of the Company then outstanding which are
entitled to vote thereon, voting or consenting, as the case may be, as one
class. In addition, the Company may not amend its Articles of Organization so as
to affect adversely the specified rights, preferences, privileges or voting
rights of the holders of shares of Series A Exchange Preferred Stock, without
the affirmative vote or consent of the holders of at least a majority of the
then outstanding shares of Series A Exchange Preferred Stock which are entitled
to vote thereon, voting or consenting, as the case may be, as one class.
6. REDEMPTION.
(A) OPTIONAL REDEMPTION. The Series A Exchange Preferred Stock
may be redeemed (subject to contractual and other restrictions with respect
thereto and the legal availability of funds therefor) at the option of the
Company in whole or, from time to time, in part, in the manner provided in
Section 6(C) of this Exchange Description at any time on or after August 15,
2002 at the redemption prices set forth below (expressed as percentages of
aggregate Liquidation Preference) plus accrued and unpaid dividends (whether or
not declared) to the Redemption Date if redeemed during the 12-month period
beginning on August 15 of the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2002 106.250%
2003 103.125%
2004 101.563%
</TABLE>
and on and after August 15, 2005 at 100.000% of the aggregate Liquidation
Preference of the Series A Exchange Preferred Stock so redeemed, payable in cash
to the Redemption Date.
(B) MANDATORY REDEMPTION. The Company shall redeem the Series A
Exchange Preferred Stock (subject to contractual and other restrictions with
respect thereto and to the legal availability of funds therefor) in whole on
August 15, 2005 at a price equal to 100% of the liquidation preference thereof,
payable in cash, plus, without duplication, all accumulated and unpaid
dividends, which will also be paid in cash (whether or not otherwise payable in
cash) to the date of redemption.
(C) PROCEDURE FOR REDEMPTION.
CONTINUATION PAGE 4.20
<PAGE> 23
(i) In the event of a redemption of less than all of the
outstanding Series A Exchange Preferred Stock, the shares so redeemed will be
determined by the Company pro rata according to the number of shares held by
each Holder, or by lot, as determined by the Company except that the Company may
redeem such shares of Series A Exchange Preferred Stock held by any holder of
fewer than 100 shares of either series (or shares held by any Holder who would
hold less than 100 shares as a result of such redemption) as may be determined
by the Company.
(ii) The Company shall send a written notice of redemption (the
"REDEMPTION NOTICE") by first-class mail, postage prepaid, not fewer than thirty
(30) days (except with respect to any redemptions under Section 6(B) of this
Exchange Description) nor more than sixty (60) days prior to the applicable
Redemption Date to each Holder as of the record date fixed for such redemption
of Series A Exchange Preferred Stock at such Holder's address as the same
appears on the stock books of the Company; provided, however, that no failure to
give such notice to any Holder or Holders nor any deficiency therein shall
affect the validity of the procedure for the redemption of any shares of Series
A Exchange Preferred Stock to be redeemed except as to the Holder or Holders to
whom the Company has failed to give said notice or except as to the Holder or
Holders whose notice was defective. The Redemption Notice shall state:
(a) whether all or less than all of the outstanding shares
of Series A Exchange Preferred Stock are to be redeemed and the total number of
shares of Series A Exchange Preferred Stock being redeemed;
(b) the number of shares of Series A Exchange Preferred
Stock held of record by that specific Holder that the Company intends to redeem;
(c) the applicable Redemption Date;
(d) the manner and place or places at which payment for the
shares called for redemption will, upon presentation and surrender to the
Company of the Series A Exchange Preferred Stock Certificates evidencing the
shares being redeemed, be made;
(e) whether such redemption is conditioned upon the
consummation of a simultaneous financing or any other condition; and
(f) that dividends on the shares of Series A Exchange
Preferred Stock being redeemed shall cease to accrue on the applicable
Redemption Date.
(iii) On the applicable Redemption Date, the full applicable
redemption price shall become payable for the shares of Series A Exchange
Preferred Stock being redeemed on the applicable Redemption Date, subject to the
consummation of a simultaneous financing or satisfaction of any other condition,
if applicable. As a condition of payment of the applicable redemption price,
each Holder of Series A Exchange Preferred Stock must surrender a Series A
Exchange Preferred Stock Certificate or Certificates representing the shares of
Series A Exchange Preferred Stock being redeemed by the Company in the manner
and at the place designated in the applicable Redemption Notice. The full
applicable redemption price for such shares properly tendered for payment shall
be paid to the person whose name appears on such certificate or certificates as
the owner thereof, on and after the applicable Redemption Date when and as
certificates for the shares being redeemed are properly tendered for payment.
Each surrendered Series A Exchange Preferred Stock Certificate shall be canceled
and retired. In the event that less than all of the shares represented by any
such certificate are redeemed, a new certificate shall be issued representing
the unredeemed shares.
(iv) On the applicable Redemption Date, unless the Company defaults
in the payment of the applicable redemption price, dividends will cease to
accrue with respect to the shares of Series A Exchange Preferred Stock called
for redemption. All rights of Holders of such redeemed shares will terminate
except for the right to receive the applicable redemption price.
7. COVENANTS.
(A) SEC REPORTS.
So long as any of the Series A Exchange Preferred Stock remains
outstanding, whether or not the Company is subject to Section 13(a) or 15(d) of
the Exchange Act, the Company shall provide to the holders of the Series A
Exchange Preferred Stock the annual reports, quarterly reports and other
documents which the Company would have been required to file with
CONTINUATION PAGE 4.21
<PAGE> 24
the SEC pursuant to such Sections 13(a) and 15(d) if the Company were so
subject, such documents to be provided on or prior to the respective dates (the
"REQUIRED FILING DATES") by which the Company would have been required so to
file such documents if the Company were so subject. The Company shall also in
any event within 15 days of each Required Filing Date transmit by mail to all
Holders, as their names and addresses appear on the stock books of the Company,
without cost to such Holders, copies of the annual reports, quarterly reports
and other documents which the Company would have been required to file with the
SEC pursuant to Sections 13(a) and 15(d) of the Exchange Act if the Company were
subject to such Sections.
(B) LIMITATION ON RESTRICTED PAYMENTS.
The Company will not make, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, make, any Restricted Payment unless:
(A) dividends on the Series A Exchange Preferred Stock have been paid in cash
for the most recent semiannual period and (B) the payments made on Capital Stock
shall not exceed the sum of (1) 50% of the Company's cumulative Consolidated Net
Income after the date on which the Original Series A Preferred Stock is first
issued (or minus 100% of any cumulative deficit in Consolidated Net Income
during such period), (2) 100% of the aggregate Net Proceeds and the fair market
value of securities or other property received by the Company as a capital
contribution to the common equity of the Company after the date on which the
Original Series A Preferred Stock is first issued and from the issue or sale,
after such date, of Capital Stock (other than Disqualified Capital Stock or
Capital Stock of the Company issued to any Subsidiary of the Company) of the
Company or any Indebtedness or other securities of the Company convertible into
or exercisable or exchangeable for Capital Stock (other than Disqualified
Capital Stock) of the Company which has been so converted or exercised or
exchanged, as the case may be, and (3) $2,500,000.
The provisions of this Section 7(B) shall not prohibit (i) the
retirement of any shares of Capital Stock of the Company or by conversion into,
or by or in exchange for, shares of Capital Stock (other than Disqualified
Capital Stock), or out of, the Net Proceeds of the substantially concurrent sale
(other than to a Subsidiary of the Company) of other shares of Capital Stock of
the Company (other than Disqualified Capital Stock); (ii) the retirement of any
shares of Disqualified Capital Stock by conversion into, or by exchange for,
shares of Disqualified Capital Stock, or out of the Net Proceeds of the
substantially concurrent sale (other than to a Subsidiary of the Company) of
other shares of Disqualified Capital Stock; (iii) payment, from the proceeds of
the Note Offering and the Units Offering, of up to $2,250,000 to Parent to be
used to repurchase from the High Voltage Engineering Corporation Retirement Plan
shares of Common Stock of Parent within 60 days of the Issue Date for not more
than $2,250,000 and payment of $150,000 to fund a pro rata accrual relating to
certain warrants to purchase Company Common Stock issued in connection with the
issuance of the Company's Senior Subordinated Notes due 2004, of up to $150,000,
(iv) the exchange of Warrants for Subsidiary Warrants or Common Shares for
shares of Capital Stock of one or more of the Company's Subsidiaries in the
event of a Qualified Subsidiary IPO; or (v) the payment of management fees for
services provided by Parent or its employees in an aggregate annual amount not
to exceed $750,000; PROVIDED, however that any amounts paid by the Company with
respect to clause (iv) shall reduce amounts available for other payments on
Capital Stock as described in clause (B) of the immediately preceding paragraph.
(C) CHANGE OF CONTROL.
Within 20 days of the occurrence of a Change of Control, the Company
shall make an offer to purchase (the "CHANGE OF CONTROL OFFER") the outstanding
Series A Exchange Preferred Stock at a purchase price equal to 101% of the
liquidation preference thereof plus, without duplication, an amount in cash
equal to all accumulated and unpaid dividends thereon (including an amount in
cash equal to a prorated dividend for the period from the immediately preceding
Dividend Payment Date to the Change of Control Payment Date (such applicable
purchase price being hereinafter referred to as the "CHANGE OF CONTROL PURCHASE
PRICE")) in accordance with the procedures set forth in this Section 7(C).
Within 20 days of the occurrence of a Change of Control, the Company
also shall (i) cause a notice of the Change of Control to be sent at least once
to the Dow Jones News Service or similar business news service in the United
States and (ii) send by first-class mail, postage prepaid, to each holder of
Series A Exchange Preferred Stock, at the address appearing in the register
maintained by the Transfer Agent, a notice stating:
(i) that the Change of Control Offer is being made pursuant to
this Section 7(C) and that all Series A Exchange Preferred Stock tendered will
be accepted for payment, and otherwise subject to the terms and conditions set
forth herein;
(ii) the Change of Control Purchase Price and the purchase date
(which shall be a Business Day no earlier than 20 Business Days from the date
such notice is mailed (the "CHANGE OF CONTROL PAYMENT DATE"));
CONTINUATION PAGE 4.22
<PAGE> 25
(iii) that any Series A Exchange Preferred Stock not tendered will
continue to accumulate dividends;
(iv) that, unless the Company defaults in the payment of the
Change of Control Purchase Price, any Series A Exchange Preferred Stock accepted
for payment pursuant to the Change of Control Offer shall cease to accumulate
dividends after the Change of Control Payment Date;
(v) that holders accepting the offer to have their Series A
Exchange Preferred Stock purchased pursuant to a Change of Control Offer will be
required to surrender their certificates representing Series A Exchange
Preferred Stock to the Company at the address specified in the notice prior to
the close of business on the Business Day preceding the Change of Control
Payment Date;
(vi) that holders will be entitled to withdraw their acceptance
if the Company receives, not later than the close of business on the third
Business Day preceding the Change of Control Payment Date, a telegram, telex,
facsimile transmission or letter setting forth the name of the holder, the
number of shares of Series A Exchange Preferred Stock delivered for purchase,
and a statement that such holder is withdrawing his election to have such Series
A Exchange Preferred Stock purchased;
(vii) that holders whose Series A Exchange Preferred Stock is
being purchased only in part will be issued new certificates representing the
number of shares of Series A Exchange Preferred Stock equal to the unpurchased
portion of the certificates surrendered; and
(viii) any other procedures that a holder must follow to accept a
Change of Control Offer or effect withdrawal of such acceptance.
On the Change of Control Payment Date, the Company shall accept for
payment the Series A Exchange Preferred Stock tendered pursuant to the Change of
Control Offer and promptly mail to each holder of Series A Exchange Preferred
Stock so accepted payment in an amount equal to the purchase price for such
Series A Exchange Preferred Stock, and the Company shall execute and issue a new
Series A Exchange Preferred Stock certificate equal to any unpurchased shares
represented by a certificate surrendered.
In the event that a Change of Control occurs and the holders of
Series A Exchange Preferred Stock exercise their right to require the Company to
purchase Series A Exchange Preferred Stock, if such purchase constitutes a
"tender offer" for purposes of Rule 14e-1 under the Exchange Act at that time,
the Company will comply with the requirements of Rule 14e-1 as then in effect
with respect to such repurchase.
Prior to the mailing of the notice referred to above, but in any
event within 20 days following the date on which a Change of Control occurs, the
Company covenants that, if the purchase of the Series A Exchange Preferred Stock
would violate or constitute a default or be prohibited under the Indenture, the
New Revolving Credit Facility or any other instrument governing Indebtedness
outstanding at the time, then the Company will, to the extent needed to permit
such purchase of Series A Exchange Preferred Stock, either (i) repay in full all
Indebtedness under the Indenture, the New Revolving Credit Facility or any such
other instrument, as the case may be, or (ii) obtain the requisite consents
under the Indenture, the New Revolving Credit Facility or any such other
instrument, as the case may be, to permit the redemption of the Series A
Exchange Preferred Stock as provided above. The Company will first comply with
the covenant in the preceding sentence before it will be required to redeem
Series A Exchange Preferred Stock pursuant to the provisions described above.
8. PAYMENT ON LIQUIDATION.
(A) Upon any voluntary or involuntary liquidation, dissolution
or winding-up of the Company, holders of the Series A Exchange Preferred Stock
will initially be entitled to be paid, out of the assets of the Company
available for distribution, $1,000 per share, plus an amount in cash equal to
accumulated and unpaid dividends thereon to the date fixed for liquidation,
dissolution or winding-up (including an amount equal to a prorated dividend for
the period from the immediately preceding Dividend Payment Date to the date
fixed for liquidation, dissolution or winding-up), before any distribution is
made on any Common Stock or other Preferred Stock (other than any Series A
Exchange Preferred Stock or Original Series A Preferred Stock) of the Company.
If upon any voluntary or involuntary liquidation, dissolution or winding-up of
the Company, the amounts payable with respect to the Series A Exchange Preferred
Stock are not paid in full, the holders of the Series A Exchange Preferred Stock
will share equally and ratably in any distribution of assets of the Company
first in proportion to the full liquidation preference to which each is entitled
until such preferences are paid in full, and then in proportion to their
respective amounts of accumulated but unpaid dividends. After payment of the
full amount of the
CONTINUATION PAGE 4.23
<PAGE> 26
liquidation preference and accumulated and unpaid dividends to which they are
entitled, the holders of shares of Series A Exchange Preferred Stock will not be
entitled to any further participation in any distribution of assets of the
Company.
(B) For the purposes of this Section 8, neither the sale,
conveyance, exchange or transfer (for cash, shares of stock, securities or other
consideration) of all or substantially all of the property or assets of the
Company nor the consolidation or merger of the Company with one or more
corporations shall be deemed to be a liquidation, dissolution or winding-up of
the Company, unless such sale, conveyance, exchange or transfer is in connection
with a dissolution or winding-up of the business of the Company.
9. EXCLUSION OF OTHER RIGHTS. Except as may otherwise be
required by the laws of the Commonwealth of Massachusetts, shares of the Series
A Exchange Preferred Stock shall not have any preferences or relative,
participating, optional or other special rights, other than those specifically
set forth in the Articles of Organization of the Company, as amended from time
to time. No shares of Series A Exchange Preferred Stock shall have any
preemptive or subscription rights whatsoever as to any securities of the
Company.
10. REISSUANCE OF PREFERRED STOCK. Shares of Series A Exchange
Preferred Stock that have been issued and reacquired by the Company in any
manner, including shares purchased or redeemed, shall (upon compliance with any
applicable provisions of Chapter 156B) have the status of authorized and
unissued shares of preferred stock undesignated as to series and may be
redesignated and reissued as part of any series of preferred stock, except that
any issuance or reissuance of shares of Series A Exchange Preferred Stock must
be in compliance with the Articles of Organization of the Company, as amended
from time to time.
11. BUSINESS DAY. If any payment or redemption shall be required
by the terms hereof to be made on a day that is not a Business Day, such
payment, redemption or exchange shall be made on the immediately succeeding
Business Day.
12. HEADINGS OF SUBDIVISIONS. The headings of the various
subdivisions hereof are for convenience of reference only and shall not affect
the interpretation of any of the provisions hereof.
13. SEVERABILITY OF PROVISIONS. If any right, preference or
limitation of the Series A Exchange Preferred Stock set forth in the Articles of
Organization of the Company, as amended from time to time, is invalid, unlawful
or incapable of being enforced by reason of any rule or law or public policy,
all other rights, preferences and limitations with respect to the Series A
Exchange Preferred Stock set forth in the Articles of Organization of the
Company, as so amended, which can be given effect without the invalid, unlawful
or unenforceable right, preference or limitation shall, nevertheless, remain in
full force and effect, and no right, preference or limitation therein set forth
shall be deemed dependent upon any other such right, preference or limitation
unless so expressed herein.
14. NOTICE. All notices and other communications provided for or
permitted to be given to the Company hereunder shall be made by hand delivery,
next day air courier or certified first-class mail to the Company at its
principal executive offices (currently located at 401 Edgewater Place, Suite
680, Wakefield, Massachusetts 01880).
15. AMENDMENTS. This Exchange Description may be amended without
notice to or the consent of any Holder to cure any ambiguity, defect or
inconsistency provided that such amendment does not adversely affect the rights
of any Holder.
16. BOOK-ENTRY PROVISIONS.
(a) Series A Exchange Preferred Stock registered in global form
("GLOBAL SERIES A EXCHANGE PREFERRED STOCK") will (i) be registered in the name
of The Depository Trust Company (the "DEPOSITARY") or the nominee of such
Depositary, (ii) be delivered to the Transfer Agent as custodian for such
Depositary and (iii) bear customary legends as required by the Depositary.
Members of, or participants in, the Depositary ("AGENT MEMBERS")
shall have no rights hereunder with respect to any Global Series A Exchange
Preferred Stock held on their behalf by the Depositary or its custodian, or
under the Global Series A Exchange Preferred Stock, and the Depositary may be
treated by the Company and any agent of the Company as the absolute owner of the
Global Series A Exchange Preferred Stock for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Company or any
agent of the Company from giving effect to any written certification, proxy or
other authorization furnished by the Depositary or impair, as between the
Depositary and its Agent Members, the operation of customary practices governing
the exercise of the rights of a holder of any Series A Exchange Preferred Stock.
CONTINUATION PAGE 4.24
<PAGE> 27
(b) Transfers of Global Series A Exchange Preferred Stock shall be
limited to transfer in whole, but not in part, to the Depositary, its successors
or their respective nominees. Interests of beneficial owners in the Global
Series A Exchange Preferred Stock may be transferred or exchanged for physical
Series A Exchange Preferred Stock (the "PHYSICAL SERIES A EXCHANGE PREFERRED
STOCK") in accordance with the rules and procedures of the Depositary. In
addition, Physical Series A Exchange Preferred Stock shall be transferred to all
beneficial owners in exchange for their beneficial interests in Global Series A
Exchange Preferred Stock if the Depositary notifies the Company that it is
unwilling or unable to continue as Depositary for any Global Series A Exchange
Preferred Stock and a successor depositary is not appointed by the Company
within 90 days of such notice.
(c) In connection with any transfer or exchange of a portion of the
beneficial interest in any Global Series A Exchange Preferred Stock to
beneficial owners pursuant to paragraph (b), the Company shall (if one or more
Physical Series A Exchange Preferred Stock Certificates are to be issued)
reflect on its books and records the date and a decrease in the amount of shares
of the Global Series A Exchange Preferred Stock in an amount equal to the amount
of shares of the beneficial interest in the Global Series A Exchange Preferred
Stock to be transferred, and the Company shall execute one or more Physical
Series A Exchange Preferred Stock Certificates of like tenor and amount.
(d) In connection with the transfer of Global Series A Exchange
Preferred Stock as an entirety to beneficial owners pursuant to paragraph (b),
the Global Series A Exchange Preferred Stock shall be deemed to be surrendered
to the Company for cancellation, and the Company shall execute and deliver to
each beneficial owner identified by the Depositary in writing in exchange for
its beneficial interest in the Global Series A Exchange Preferred Stock an equal
aggregate amount of shares of Physical Series A Exchange Preferred Stock of
authorized denominations.
(e) Any Physical Series A Exchange Preferred Stock delivered in
exchange for an interest in Global Series A Exchange Preferred Stock pursuant to
paragraph (b), (c) or (d) shall, except as otherwise provided herein, bear an
appropriate legend, if required.
(f) The Holder of any Global Series A Exchange Preferred Stock may
grant proxies and otherwise authorize any person, including Agent Members and
persons that may hold interests through Agent Members, to take any action which
a Holder is entitled to take hereunder.
The Company will, so long as any shares of Series A Exchange
Preferred Stock are outstanding, maintain an office or agency where such shares
may be presented for registration or transfer and where such shares may be
presented for conversion and redemption.
CONTINUATION PAGE 4.25
<PAGE> 28
Article VI A: No director shall be personally liable to the corporation or
to any of its stockholders for monetary damages for any breach of fiduciary duty
by such director as a director notwithstanding any provision of law imposing
such liability; provided, however, that, to the extent required from time to
time by applicable law, this provision shall not eliminate the liability of a
director, to the extent such liability is provided by applicable law, (i) for
any breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith which involve
intentional misconduct or a knowing violation of law, (iii) under Section 61 or
Section 62 of the Business Corporation Law of the Commonwealth of Massachusetts,
or (iv) for any transaction from which the director derived an improper personal
benefit. No amendment to or repeal of this Article VI-A shall apply to or have
any effect on the liability or alleged liability of any director for or with
respect to any acts or omissions of such director occurring prior to the
effective date of such amendment or repeal.
Article VI B: Meetings of the stockholders of the corporation may be held
anywhere in the United States.
Article VI C: The directors may make, amend, or repeal the By-Laws in whole
or in part except with respect to any provision thereof which by law or the
By-Laws requires action by the stockholders.
Article VI D: The Corporation may be a partner in any business enterprise
which the Corporation would have power to conduct by itself.
Continuation Page 6.1
<PAGE> 29
ARTICLE VII
The effective date of the restated Articles of Organization of the corporation
shall be the date approved and filed by the Secretary of the Commonwealth. If a
later effective date is desired, specify such date which shall not be more than
thirty days after the date of filing.
ARTICLE VIII
THE INFORMATION CONTAINED IN ARTICLE VIII IS NOT A PERMANENT PART OF THE
ARTICLES OF ORGANIZATION.
a. The street address (post office boxes are not acceptable) of the principal
office of the corporation in Massachusetts is:
401 Edgewater Place, Suite 680, Wakefield, MA 01880
b. The name, residential address and post office address of each director and
officer of the corporation is as follows:
<TABLE>
<CAPTION>
NAME RESIDENTIAL ADDRESS POST OFFICE ADDRESS
<S> <C> <C> <C>
PRESIDENT: Clifford Press 1120 5th Ave., New York, NY 10128 SAME
TREASURER: Ronald R. Fortier 43 South Hampton Rd., SAME
Amesbury, MA 01913
CLERK: Joseph W. McHugh, Jr. 5 Minuteman Drive SAME
Chelmsford, MA 01824
DIRECTORS: Clifford Press 1120 5th Ave., SAME
New York, NY 10128
Laurence S. Levy 40 Olmstead Road SAME
Scarsdale, NY 10583
Paul H. Snyder 125 Townsend Farm Road SAME
Boxford, MA 01921
Edward Levy 35 East 84th St., #313 SAME
New York, NY 10028
H. Cabot Lodge III 800 3rd Avenue, 40th Fl. SAME
New York, NY 10022
</TABLE>
c. The fiscal year (i.e., tax year) of the corporation shall end on the last
__________________ : Saturday in April.
d. The name and business address of the resident agent, if any, of the
corporation is:
**We further certify that the foregoing Restated Articles of Organization affect
no amendments to the Articles of Organization of the corporation as heretofore
amended, except amendments to the following articles. Briefly describe
amendments below:
The Restated Articles of Organization amend Article II and Article VI to read in
their entirety as set forth herein. These Restated Articles of Organization also
amend Article IV to reflect the retirement and cancellation of all shares of
series of Preferred Stock other than those described in Article IV of these
Restated Articles, including without limitation the terminated prior series
designated Series B Redeemable Preferred Stock and Series C Redeemable Preferred
Stock, respectively.
SIGNED UNDER THE PENALTIES OF PERJURY, this eleventh day of August, 1997.
/s/ Joseph W. McHugh, Jr. , /*Vice President,
- -------------------------------------------------------------
/s/ Ronald R. Fortier , *Assistant Clerk
- -------------------------------------------------------------
*Delete the inapplicable words. **If there are no amendments state 'None'.
<PAGE> 30
THE COMMONWEALTH OF MASSACHUSETTS
RESTATED ARTICLES OF ORGANIZATION
(GENERAL LAWS, CHAPTER 156B, SECTION 74)
=================================================
I hereby approve the within Restated Articles of
Organization and, the filing fee in the amount of
$600.00 having been paid, said articles are
deemed to have been filed with me this 14th day
of August, 1997.
Effective Date: August 14, 1997
----------------------------------
WILLIAM FRANCIS GALVIN
Secretary of the Commonwealth
TO BE FILED IN BY CORPORATION
PHOTOCOPY OF DOCUMENT TO BE SENT TO:
Robert Porcelli
--------------------------------------------
Bingham, Dana & Gould LLP
150 Federal Street, 22nd Fl.
--------------------------------------------
Boston, MA 02110
--------------------------------------------
Telephone: 617-951-8512
----------------------------------
<PAGE> 1
EXHIBIT 3.2
HIGH VOLTAGE ENGINEERING CORPORATION
AMENDED AND RESTATED BY-LAWS
Adopted August 5, 1997
Article I. - General.
1.1. Offices. The principal office of the corporation shall be in
Wakefield, Massachusetts. The corporation may also have offices at such other
place or places within or without Massachusetts as the Board of Directors may
from time to time determine or the business of the corporation may require.
1.2. Seal. The seal of the corporation shall be in the form of a circle
inscribed with the name of the corporation, the year of its incorporation and
the word "Massachusetts". When authorized by the Board of Directors and to the
extent not prohibited by law, a facsimile of the corporate seal may be affixed
or reproduced.
1.3. Fiscal Year. The fiscal year of the corporation shall be the
twelve months ending the last Saturday in April of each year.
Article II. - Stockholders.
2.1. Place of Meeting. Meetings of stockholders shall be held at the
principal office of the corporation or, to the extent permitted by the Articles
of Organization, at such other place within the United States as the Board of
Directors may from time to time designate.
2.2. Annual Meetings. The annual meeting of stockholders shall be held
within six months after the end of the fiscal year of the corporation, on such
date and at such time as the Board of Directors may determine, for the purpose
of electing a Board of Directors and transacting such other business as may
properly be brought before such meeting. At the annual meeting any business may
be transacted whether or not the notice of such meeting shall have contained a
reference thereto, except where such a reference is required by law, the
Articles of Organization or these By-laws. If the annual meeting is not held on
the date determined in accordance with this Section, a special meeting in lieu
of the annual meeting may be held with all the force and effect of an annual
meeting.
2.3. Special Meetings. Special meetings of stockholders may be called
by the President or by the Board of Directors, and shall be called by the Clerk
or, in case of death, absence, incapacity or refusal of the Clerk, by any other
officer, upon written application of one or more stockholders who hold at least
one-tenth part in interest of the capital stock entitled to
<PAGE> 2
-2-
vote at the meeting. At any special meeting only business to which a reference
shall have been contained in the notice of such meeting may be transacted.
2.4. Notice of Meetings. Written or printed notice of each meeting of
stockholders, stating the place, date and hour and the purposes of the meeting
shall be given by the Clerk or other officer calling the meeting at least seven
days, but not more than sixty days, before the meeting to each stockholder
entitled to vote at the meeting or entitled to such notice by leaving such
notice with him at his residence or usual place of business or by mailing it,
postage prepaid, and addressed to the stockholder at his address as it appears
in the records of the corporation. No notice need be given to any stockholder if
he, or his authorized attorney, waives such notice by a writing executed before
or after the meeting and filed with the records of the meeting or by his
presence, in person or by proxy, at the meeting. Any person authorized to give
notice of any such meeting may make affidavit of such notice, which, as to the
facts therein stated, shall be conclusive. It shall be the duty of every
stockholder to furnish to the Clerk of the corporation or to the transfer agent,
if any, of the class of stock owned by him, his current post office address.
2.5. Quorum. At all meetings of stockholders the holders of a majority
in interest of all capital stock entitled to vote at such meeting or, if two or
more classes of stock are issued, outstanding and entitled to vote as separate
classes, a majority in interest of each class, present in person or represented
by proxy, shall constitute a quorum. The announcement of a quorum by the officer
presiding at the meeting shall constitute a conclusive determination that a
quorum is present. The absence of such an announcement shall have no
significance. Shares of its own stock held by the corporation or held for its
use and benefit shall not be counted in determining the total number of shares
outstanding at any particular time. If a quorum is not present or represented,
the stockholders present or represented and entitled to vote at such meeting, by
a majority vote, may adjourn the meeting from time to time, without notice other
than announcement at the meeting until a quorum is present or represented. At
any adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted if the meeting had
been held as originally called. The stockholders present at a duly organized
meeting may continue to transact business until adjournment notwithstanding the
withdrawal of one or more stockholders so as to leave less than a quorum.
<PAGE> 3
-3-
2.6. Voting. Except as otherwise provided by law or the Articles of
Organization, at all meetings of stockholders each stockholder shall have one
vote for each share of stock entitled to vote and registered in his name and a
proportionate vote for a fractional share. Any stockholder may vote in person or
by proxy dated not more than six months prior to the meeting and filed with the
Clerk of the meeting. Every proxy shall be in writing, subscribed by a
stockholder or his authorized attorney-in-fact, and dated. A proxy with respect
to stock held in the name of two or more persons shall be valid if executed by
any one of them unless at or prior to exercise of the proxy the corporation
receives a specific written notice to the contrary from any one of them. No
proxy shall be valid after the final adjournment of the meeting. Voting on all
matters, including the election of directors, shall be by voice vote unless
voting by ballot is requested by any stockholder. At all meetings of
stockholders, any matter put to a vote of stockholders shall be determined by a
vote of a majority of the shares voting on such matter, or, if two or more
classes of stock are entitled to vote as separate classes on such matter, a vote
of a majority of the shares voting of each class, present in person or
represented by proxy, except (i) where a larger vote is required by law, the
Articles of Organization or these By-Laws, or (ii) in the case of elections of
directors by stockholders, which shall be decided by a vote of a plurality of
shares so voting. The corporation shall not, directly or indirectly, vote shares
of its own stock.
2.7. Inspectors of Election. One or more inspectors may be appointed by
the Board of Directors before or at each meeting of stockholders, or, if no such
appointment shall have been made, the presiding officer may make such
appointment at the meeting. At the meeting for which they are appointed, such
inspectors shall open and close the polls, receive and take charge of the
proxies and ballots, and decide all questions touching on the qualifications of
voters, the validity of proxies and the acceptance and rejection of votes. If
any inspector previously appointed shall fail to attend or refuse or be unable
to serve, the presiding officer shall appoint an inspector in his place.
2.8. Action Without Meeting. Any action which may be taken by
stockholders may be taken without a meeting if all stockholders entitled to vote
on the matter consent to the action in writing and the written consents are
filed with the records of the meetings of stockholders. Such consents shall be
treated for all purposes as a vote at a meeting.
Article III. - Directors.
3.1. Powers. Except as otherwise provided by law, the Articles of
Organization or these By-laws, the business of the corporation shall be
<PAGE> 4
-4-
managed by a Board of Directors who may exercise all the powers of the
corporation.
3.2. Number, Election and Term of Office. The Board of Directors shall
consist of not less than one nor more than twenty directors. Within the limits
specified, the number of directors shall be determined (i) by a vote of the
stockholders at the annual meeting, or (ii) by a vote of the stockholders at a
special meeting called for the purpose by the Board of Directors, or (iii) by
vote of the Board of Directors. Except for the initial directors and except as
provided in ss.3.14, the directors shall be elected at the annual meeting of the
stockholders or at a special meeting. All directors shall hold office until the
following annual meeting or special meeting in lieu of the annual meeting and
until their successors are chosen and qualified.
3.3. Place of Meetings. Meetings of the Board of Directors may be held
at any place within or without the Commonwealth of Massachusetts.
3.4. Annual Meetings. A meeting of the Board of Directors for the
election of officers and the transaction of general business shall be held each
year at the place of and immediately after the final adjournment of the annual
meeting of stockholders or the special meeting in lieu of the annual meeting. No
notice of such annual meeting need be given.
3.5. Regular Meetings. Regular meetings of the Board of Directors may
be held, without notice, at such time and place as the Board of Directors may
determine. Any director not present at the time of the determination shall be
advised, in writing, of any such determination.
3.6. Special Meetings. Special meetings of the Board of Directors,
including meetings in lieu of the annual or regular meetings, may be held upon
notice at any time upon the call of the President and shall be called by the
President or the Clerk or, in case of the death, absence, incapacity or refusal
of the Clerk, by any other officer, upon written application, signed by any two
directors, stating the purpose of the meeting.
3.7. Notice of Meetings. Wherever notice of any meetings of the Board
of Directors is required by these By-laws or by vote of the Board of Directors,
such notice shall state the place, date and hour of the meeting and shall be
given to each director by the President, Clerk or other officer calling the
meeting at least two days prior to such meeting if given in person by telephone
or by telecopier or at least four days prior to such meeting if given by mail.
Notice shall be deemed to have been duly given,
<PAGE> 5
-5-
if by mail, by depositing the notice in the post office as a first class letter,
postage prepaid, or, if by telecopier, by completing the telecopier transmission
and receiving an answer-back, the letter or telecopy being addressed to the
director at his last known mailing address or telecopy number as it appears on
the books of the corporation. No notice need be given to any director who waives
such notice by a writing executed before or after the meeting and filed with the
records of the meeting or by his attendance at the meeting without protesting at
or before the commencement of the meeting the lack of notice to him. No notice
of adjourned meetings of the Board of Directors need be given.
3.8. Quorum. At all meetings of the Board of Directors, a majority of
the directors then in office shall constitute a quorum. If a quorum is not
present, those present may adjourn the meeting from time to time until a quorum
is obtained. At any adjourned meeting at which a quorum shall be present, any
business may be transacted which might have been transacted if the meeting had
been held as originally called.
3.9. Voting. At any meeting of the Board of Directors, the vote of a
majority of those present shall decide any matter except as otherwise provided
by law, the Articles of Organization or these By-laws.
3.10. Action Without Meeting. Any action which may be taken at any
meeting of the Board of Directors may be taken without a meeting if all the
directors consent to the action in writing and the written consents are filed
with the records of the meetings of the Board of Directors. Such consents shall
be treated for all purposes as a vote at a meeting.
3.11. Meetings by Telephone Conference Calls. Directors or members of
any committee designated by the Board of Directors may participate in a meeting
of the Board of Directors or such committee by means of a conference telephone
or similar communications equipment by means of which all persons participating
in the meeting can hear each other at the same time and participation by such
means shall constitute presence in person at a meeting.
3.12. Resignations. Any director may resign by giving written notice to
the President or Clerk. Such resignation shall take effect at the time or upon
the event specified therein, or, if none is specified, upon receipt. Unless
otherwise specified in the resignation, its acceptance shall not be necessary to
make it effective.
3.13. Removal. A director may be removed from office with or without
cause by vote of the holders of a majority in interest of the stock
<PAGE> 6
-6-
entitled to vote in the election of such director and may be removed from office
with cause by vote of a majority of the directors then in office. A director may
be removed for cause only after reasonable notice and opportunity to be heard
before the body proposing to remove him.
3.14. Vacancies. In the event of a vacancy in the Board of Directors,
by reason of an enlargement of the Board of Directors or otherwise, the
remaining directors, by majority vote, may elect a director to fill such vacancy
and may exercise the powers of the full Board of Directors until the vacancy is
filled.
3.15. Compensation of Directors. Directors may be paid such
compensation for their services and such reimbursement for expenses of
attendance at meetings as the Board of Directors may from time to time
determine. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor.
3.16. Committees. The Board of Directors may, by vote of a majority of
the directors then in office, appoint from their number one or more committees
and delegate to such committees some or all of their powers to the extent
permitted by law, the Articles of Organization or these By-laws. Except as the
Board of Directors may otherwise determine, any such committee shall be governed
in the conduct of its business by the rules governing the conduct of the
business of the Board of Directors contained in these By-laws and may, by
majority vote of the entire committee, make other rules for the conduct of its
business. The Board of Directors shall have power at any time to fill vacancies
in any such committees, to change its membership or to discharge the committee.
3.17. Issuance of Stock. The Board of Directors shall have power to
issue and sell or otherwise dispose of such shares of the corporation's
authorized but unissued capital stock to such persons and at such times and for
such lawful consideration, including cash, property, services, a debt, note or
expenses (except that, in the case of such stock having a par value, lawful
consideration other than a debt or note of the purchaser must be received to the
extent of such par value), and upon such terms as it shall determine from time
to time.
Article IV. - Officers.
4.1. Officers. The officers of the corporation shall consist of a
President, a Treasurer, a Clerk, and such other officers with such other titles
as the Board of Directors may determine, including but not limited to a Chairman
of the Board of Directors, a Secretary, one or more Vice Presidents, Assistant
Treasurers and Assistant Clerks, and Assistant
<PAGE> 7
-7-
Secretaries. Any officer may be required to give a bond for the faithful
performance of his duties in such form and with such sureties as the Board of
Directors may determine. Any number of offices may be held by the same person.
4.2. Election and Term of Office. Except for the initial officers and
except as provided in ss.4.10, the President, Treasurer and Clerk shall be
elected by the Board of Directors at its annual meeting or at the special
meeting held in lieu of the annual meeting and shall hold office until the
following annual meeting of the Board of Directors or the special meeting in
lieu of said annual meeting and until their successors are chosen and qualified.
Other officers may be chosen by the Board of Directors at the annual meeting or
any other meeting and shall hold office for such period as the Board of
Directors may prescribe.
4.3. President. Unless the Board of Directors otherwise determines, the
President shall be the chief executive officer of the corporation. He shall have
the general control and management of the corporation's business and affairs. He
need not be a director. Unless there is a Chairman of the Board, the President
shall preside at all meetings of the Board of Directors and of the stockholders.
4.4. Vice Presidents. The Vice President, or if there be more than one,
the Vice Presidents, shall perform such of the duties of the President on behalf
of the corporation as may be respectively assigned to him or them from time to
time by the Board of Directors or the President. The Board of Directors may
designate a Vice President as the Executive Vice President, and in the absence
or inability of the President to act, such Executive Vice President shall have
and possess all of the powers and discharge all of the duties of the President,
subject to the control of the Board of Directors.
4.5. Treasurer and Assistant Treasurer. The Treasurer shall be the
principal financial officer of the corporation. He shall have custody and
control over all funds and securities of the corporation, maintain full and
adequate accounts of all moneys received and paid by him on account of the
corporation and, subject to the control of the Board of Directors, discharge all
duties incident to the office of Treasurer. Any Assistant Treasurer shall
perform such of the duties of the Treasurer and such other duties as the Board
of Directors, the President or the Treasurer may designate. The Treasurer shall
have authority, in connection with the normal business of the corporation, to
sign contracts, bids, bonds, powers of attorney and other documents when
required.
<PAGE> 8
-8-
4.6. Clerk and Assistant Clerk. The Clerk shall be the principal
recording officer of the corporation. He shall record all proceedings of the
stockholders and discharge all duties incident to the office of Clerk. Unless a
Secretary is appointed by the Board of Directors to perform such duties, the
Clerk shall record all proceedings of the Board of Directors and of any
committees appointed by the Board of Directors. Any Assistant Clerk shall
perform such of the duties of the Clerk and such other duties as the Board of
Directors, the President or the Clerk may designate. In the absence of the Clerk
or any Assistant Clerk from any meeting of stockholders, the Board of Directors
or any committee appointed by the Board of Directors, a Temporary Clerk
designated by the person presiding at the meeting shall perform the duties of
the Clerk. The Clerk shall be a resident of the Commonwealth of Massachusetts
unless a resident agent has been appointed by the corporation pursuant to law to
accept service of process.
4.7. Secretary and Assistant Secretary. If appointed by the Board of
Directors, the Secretary shall record all proceedings of the Board of Directors
and discharge all duties incident to the office of Secretary. Any Assistant
Secretary shall perform such of the duties of the Secretary and such other
duties as the Board of Directors, President or Secretary may designate. The
Board of Directors and any committee appointed by the Board of Directors may
appoint a Secretary and one or more Assistant Secretaries to perform the
functions of the Secretary and Assistant Secretary for such committee.
4.8. Resignation. Any officer may resign by giving written notice to
the President or Clerk. Such resignation shall take effect at the time or upon
the event specified therein, or, if none is specified, upon receipt. Unless
otherwise specified in the resignation, its acceptance shall not be necessary to
make it effective.
4.9. Removal. An officer may be removed from office with cause, after
reasonable notice and opportunity to be heard, or without cause, in either case,
by vote of a majority of the directors then in office.
4.10. Vacancies. The Board of Directors may fill any vacancy occurring
in any office for any reason and may, in its discretion, leave unfilled for such
period as it may determine any offices other than those of President, Treasurer
and Clerk.
4.11. Subordinate Officers. The Board of Directors may, from time to
time, authorize any officer to appoint and remove subordinate officers and to
prescribe their powers and duties. The term "subordinate officers" shall in no
event include the President, Treasurer and Clerk.
<PAGE> 9
-9-
4.12. Compensation. The Board of Directors may fix the compensation of
all officers of the corporation and may authorize any officer upon whom the
power of appointing subordinate officers may have been conferred to fix the
compensation of such subordinate officers.
Article V. - Stock.
5.1. Stock Certificates. Each stockholder shall be entitled to a
certificate or certificates of stock of the corporation in such form as the
Board of Directors may from time to time prescribe. Each certificate shall be
duly numbered and entered in the books of the corporation as it is issued, shall
state the holder's name and the number and the class and the designation of the
series, if any, of his shares, shall be signed by the President or a Vice
President and by the Treasurer or an Assistant Treasurer and may, but need not,
be sealed with the seal of the corporation. If any stock certificate is signed
by a transfer agent, or by a registrar, other than a director, officer or
employee of the corporation, the signatures thereon of the officers may be
facsimiles. In case any officer who has signed or whose facsimile signature has
been placed on any certificate shall have ceased to be such officer before such
certificate is issued, it may nevertheless be issued by the corporation and
delivered with the same effect as if he were such officer at the time of its
issue. Every certificate of stock which is subject to any restriction on
transfer pursuant to the Articles of Organization, the By-laws or any agreement
to which the corporation is a party, shall have the restrictions noted
conspicuously on the certificate and shall also set forth on the face or back of
the certificate either (i) the full text of the restriction, or (ii) a statement
of the existence of such restriction and a statement that the corporation will
furnish a copy thereof to the holder of such certificate upon written request
and without charge. Every certificate issued at a time when the corporation is
authorized to issue more than one class or series of stock shall set forth upon
the face or back of the certificate either (i) the full text of the preferences,
voting powers, qualifications and special and relative rights of the shares of
each class and series, if any, authorized to be issued, as set forth in the
Articles of Organization or (ii) a statement of the existence of such
preferences, powers, qualifications and rights, and a statement that the
corporation will furnish a copy thereof to the holder of such certificate upon
written request and without charge.
5.2. Transfer of Stock. Subject to any transfer restrictions then in
force, the shares of stock of the corporation shall be transferable only upon
its books by the holders thereof in person or by their duly authorized attorneys
or legal representatives. Such transfer shall be effected by
<PAGE> 10
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delivery of the old certificate, together with a duly executed assignment and
power to transfer endorsed thereon or attached thereto and with such proof of
the authenticity of the signature and such proof of authority to make the
transfer as the corporation or its agents may reasonably require, to the person
in charge of the stock and transfer books and ledgers or to such other person as
the Board of Directors may designate, who shall thereupon cancel the old
certificate and issue a new certificate. The corporation may treat the holder of
record of any share or shares of stock as the owner of such stock, and shall not
be bound to recognize any equitable or other claim to or interest in such share
on the part of any other person, whether or not it shall have notice thereof,
express or otherwise.
5.3. Fixing Date for Determination of Stockholders' Rights. The Board
of Directors may fix in advance a time, not exceeding sixty days preceding the
date of any meeting of stockholders, or the date for the payment of any dividend
or the making of any distribution to stockholders, or the date for the allotment
of rights, or the date when any change or conversion or exchange of capital
stock shall go into effect, or the last date on which the consent or dissent of
stockholders may be effectively expressed for any purpose, as the record date
for determining the stockholders entitled to notice of, and to vote at, such
meeting and any adjournment thereof, to receive such dividend or distribution,
to receive such allotment of rights, or to exercise the rights in respect of any
such change, conversion or exchange of capital stock, or to express such consent
or dissent. In such case only stockholders of record on the date so fixed shall
have such right, notwithstanding any transfer of stock on the books of the
corporation after the record date. In lieu of fixing such record date, the Board
of Directors may close the stock transfer books for all or any part of such
period. In any case in which the Board of Directors does not fix a record date
or provide for the closing of the transfer books, the record date shall be the
thirtieth day next preceding the date of such meeting, the dividend payment or
distribution date, the date for allotment of rights, the date for exercising of
rights in respect of any such change, conversion or exchange of capital stock,
or the date for expressing such consent or dissent, as the case may be.
5.4. Lost, Mutilated or Destroyed Certificates. No certificates for
shares of stock of the corporation shall be issued in place of any certificate
alleged to have been lost, mutilated or destroyed, except upon production of
such evidence of the loss, mutilation or destruction and upon indemnification of
the corporation and its agents to such extent and in such manner as the Board of
Directors may prescribe and as required by law.
<PAGE> 11
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Article VI. - Miscellaneous Management Provisions.
6.1. Execution of Instruments. Except as otherwise provided in these
By-laws or as the Board of Directors may generally or in particular cases
authorize the execution thereof in some other manner, all instruments,
documents, deeds, leases, transfers, contracts, bonds, notes, checks, drafts and
other obligations made, accepted or endorsed by the corporation shall be signed
by the President or a Vice President, or by the Treasurer or an Assistant
Treasurer, or by the Clerk. Facsimile signatures may be used in the manner and
to the extent authorized generally or in particular cases by the Board of
Directors.
6.2. Corporate Records. The original, or attested copies, of the
Articles of Organization, By-laws, and records of all meetings of incorporators
and stockholders, and the stock and transfer records, which shall contain the
names of all stockholders and the record address and the amount of stock held by
each, shall be kept in the Commonwealth of Massachusetts at the principal office
of the corporation, or at an office of its Clerk, its resident agent or its
transfer agent. The copies and records need not all be kept in the same office.
They shall be available at all reasonable times for inspection by any
stockholder for any proper purpose. They shall not be available for inspection
to secure a list of stockholders or other information for the purpose of selling
such list or information or copies thereof or of using the same for a purpose
other than in the interest of the applicant, as a stockholder, relative to the
affairs of the corporation.
6.3. Voting of Securities owned by this Corporation. Subject always to
the specific directions of the Board of Directors, (i) any shares or other
securities issued by any other corporation and owned or controlled by this
corporation may be voted in person at any meeting of security holders of such
other corporation by the President of this corporation if he is present at such
meeting, or in his absence by the Treasurer of this corporation if he is present
at such meeting, and (ii) whenever, in the judgment of the President, it is
desirable for this corporation to execute a proxy or written consent in respect
to any shares or other securities issued by any other corporation and owned by
this corporation, such proxy or consent shall be executed in the name of this
corporation by the President, without the necessity of any authorization by the
Board of Directors, affixation of corporate seal or countersignature or
attestation by another officer, provided that if the President is unable to
execute such proxy or consent by reason of sickness, absence from the United
States or other similar cause, the Treasurer may execute such proxy or consent.
Any person or persons designated in the manner above stated as the proxy or
proxies of this corporation shall have full right, power and authority to
<PAGE> 12
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vote the shares or other securities issued by such other corporation and owned
by this corporation the same as such shares or other securities might be voted
by this corporation.
6.4. Interested Transactions. No contract or other transaction of this
corporation with any other person, corporation, association, or partnership
shall be affected or invalidated by the fact that (i) this corporation is a
stockholder or partner in such other corporation, association, or partnership,
or (ii) any one or more of the officers or directors of this corporation is an
officer, director or partner of such other corporation, association or
partnership, or (iii) any officer or director of this corporation, individually
or jointly with others, is a party to or is interested in such contract or
transaction. Any director of this corporation may be counted in determining the
existence of a quorum at any meeting of the board of directors for the purpose
of authorizing or ratifying any such contract or transaction, and may vote
thereon, with like force and effect as if he or she were not so interested or
were not an officer, director, or partner of such other corporation,
association, or partnership.
Article VII. - Indemnification.
7.1. Right to Indemnification. The corporation shall indemnify and hold
harmless each person who was or is a party or is threatened to be made a party
to or is otherwise involved in any threatened, pending or completed action,
suit, proceeding or investigation, whether civil, criminal or administrative (a
"Proceeding"), by reason of being, having been or having agreed to become, a
director or officer of the corporation, or serving, having served or having
agreed to serve, at the request of the corporation, as a director or officer of,
or in a similar capacity with, another organization or in any capacity with
respect to any employee benefit plan (any such person being referred to
hereafter as an "Indemnitee"), or by reason of any action alleged to have been
taken or omitted in such capacity, against all expense, liability and loss
(including without limitation reasonable attorneys' fees, judgments, fines,
"ERISA" excise taxes or penalties) incurred or suffered by the Indemnitee or on
behalf of the Indemnitee in connection with such Proceeding and any appeal
therefrom, unless the Indemnitee shall have been adjudicated in such Proceeding
not to have acted in good faith in the reasonable belief that his or her action
was in the best interest of the corporation or, to the extent such matter
relates to service with respect to an employee benefit plan, in the best
interests of the participants or beneficiaries of such employee benefit plan.
Notwithstanding anything to the contrary in this Article, except as set forth in
ss.7.6 below, the corporation shall not indemnify or advance expenses to an
Indemnitee seeking indemnification
<PAGE> 13
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in connection with a Proceeding (or part thereof) initiated by the Indemnitee,
unless the initiation thereof was approved by the Board of Directors of the
corporation.
7.2. Settlements. Subject to compliance by the Indemnitee with the
applicable provisions of ss.7.5 below, the right to indemnification conferred in
this Article shall include the right to be paid by the corporation for amounts
paid in settlement of any such Proceeding and any appeal therefrom, and all
expenses (including attorneys' fees) incurred in connection with such
settlement, pursuant to a consent decree or otherwise, unless it is held or
determined pursuant to ss.7.5 below that the Indemnitee did not act in good
faith in the reasonable belief that his or her action was in the best interest
of the corporation or, to the extent such matter relates to service with respect
to an employee benefit plan, in the best interests of the participants or
beneficiaries of such employee benefit plan.
7.3. Notification and Defense of Proceedings. The Indemnitee shall
notify the corporation in writing as soon as reasonably practicable of any
Proceeding involving the Indemnitee for which indemnity or advancement of
expenses is intended to be sought. Any omission so to notify the corporation
shall not relieve it from any liability that it may have to the Indemnitee under
this Article unless, and only to the extent that, such omission results in the
forfeiture of substantive rights or defenses by the corporation. With respect to
any Proceeding of which the corporation is so notified, the corporation shall be
entitled, but not obligated, to participate therein at its own expense and/or to
assume the defense thereof at its own expense, with legal counsel reasonably
acceptable to the Indemnitee, except as provided in the last sentence of this
ss.7.3. After notice from the corporation to the Indemnitee of its election so
to assume such defense (subject to the limitations in the last sentence of this
ss.7.3), the corporation shall not be liable to the Indemnitee for any fees and
expenses of counsel subsequently incurred by the Indemnitee in connection with
such Proceeding, other than as provided below in this ss.7.3. The Indemnitee
shall have the right to employ his or her own counsel in connection with such
Proceeding, but the fees and expenses of such counsel incurred after notice from
the corporation of its assumption of the defense thereof at its expense with
counsel reasonably acceptable to Indemnitee shall be at the expense of the
Indemnitee unless (i) the employment of counsel by the Indemnitee at the
corporation's expense has been authorized by the corporation, (ii) counsel to
the Indemnitee shall have reasonably concluded that there may be a conflict of
interest or position on any significant issue between the corporation and the
Indemnitee in the conduct of the defense of such action or (iii) the
<PAGE> 14
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corporation shall not in fact have employed counsel reasonably acceptable to the
Indemnitee to assume the defense of such Proceeding within a reasonable time
after receiving notice thereof, in each of which cases the fees and expenses of
counsel for the Indemnitee shall be at the expense of the corporation, except as
otherwise expressly provided by this Article. The corporation shall not be
entitled, without the consent of the Indemnitee, to assume the defense of any
Proceeding brought by or in the right of the corporation or as to which counsel
for the Indemnitee shall have reasonably made the conclusion provided for in
clause (ii) above.
7.4. Advancement of Expenses. Except as provided in ss.7.3 of this
Article, as part of the right to indemnification granted by this Article, any
expenses (including attorneys' fees) incurred by an Indemnitee in defending any
Proceeding within the scope of ss.7.1 of this Article or any appeal therefrom
shall be paid by the corporation in advance of the final disposition of such
matter, provided, however, that the payment of such expenses incurred by an
Indemnitee in advance of the final disposition of such matter shall be made only
upon receipt of a written undertaking by or on behalf of the Indemnitee to repay
all amounts so advanced in the event that it shall ultimately be determined that
the Indemnitee is not entitled to be indemnified by the corporation as
authorized by ss.7.1 or 7.2 of this Article. Such undertaking need not be
secured and shall be accepted without reference to the financial ability of the
Indemnitee to make such repayment. Such advancement of expenses shall be made by
the corporation promptly following its receipt of written requests therefor by
the Indemnitee, accompanied by reasonably detailed documentation, and of the
foregoing undertaking.
7.5. Certain Presumptions and Determinations. If, in a Proceeding
brought by or in the right of the corporation, a director or officer of the
corporation is held not liable for monetary damages, whether because that
director or officer is relieved of personal liability under the provisions of
Article 6A of the Articles of Organization of the corporation or otherwise, that
director or officer shall be deemed to have met the standard of conduct set
forth in ss.7.1 and thus to be entitled to be indemnified by the corporation
thereunder. In any adjudicated Proceeding against an Indemnitee brought by
reason of the Indemnitee's serving, having served or agreed to serve, at the
request of the corporation, an organization other than the corporation in one or
more of the capacities indicated in ss.7.1, if the Indemnitee shall not have
been adjudicated not to have acted in good faith in the reasonable belief that
the Indemnitee's action was in the best interest of such other organization, the
Indemnitee shall be deemed to have met the standard of conduct set forth in
ss.7.1 and thus be entitled to be indemnified
<PAGE> 15
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thereunder. An adjudication in such a Proceeding that the Indemnitee did not act
in good faith in the reasonable belief that the Indemnitee's action was in the
best interest of such other organization shall not create a presumption that the
Indemnitee has not met the standard of conduct set forth in ss.7.1. In order to
obtain indemnification of amounts paid in settlement pursuant to ss.7.2 of this
Article, the Indemnitee shall submit to the corporation a written request,
including in such request such documentation and information as is reasonably
available to the Indemnitee and is reasonably necessary to determine whether and
to what extent the Indemnitee is entitled to such indemnification. Any such
indemnification under ss.7.2 shall be made promptly, and in any event within 60
days after receipt by the corporation of the written request of the Indemnitee,
unless a court of competent jurisdiction holds within such 60-day period that
the Indemnitee did not meet the standard of conduct set forth in ss.7.2 or the
corporation determines, by clear and convincing evidence, within such 60-day
period that the Indemnitee did not meet such standard. Such determination shall
be made by the Board of Directors of the corporation, based on advice of
independent legal counsel (who may, with the consent of the Indemnitee, be
regular legal counsel to the corporation). The corporation and the directors
shall be under no obligation to undertake any such determination or to seek any
ruling from any court.
7.6. Remedies. The right to indemnification or advances as granted by
this Article shall be enforceable by the Indemnitee in any court of competent
jurisdiction if the corporation denies such a request, in whole or in part, or,
with respect to indemnification pursuant to ss.7.2, if no disposition thereof is
made within the 60-day period referred to above in ss.7.5. Unless otherwise
provided by law, the burden of proving that the Indemnitee is not entitled to
indemnification or advancement of expenses under this Article shall be on the
corporation. Neither absence of any determination prior to the commencement of
such action that indemnification is proper in the circumstances because the
Indemnitee has met any applicable standard of conduct, nor an actual
determination by the corporation pursuant to ss.7.5 that the Indemnitee has not
met such applicable standard of conduct, shall be a defense to the action or
create a presumption that the Indemnitee has not met the applicable standard of
conduct. The Indemnitee's expenses (including reasonable attorneys' fees)
incurred in connection with successfully establishing his or her right to
indemnification, in whole or in part, in any such Proceeding shall also be paid
by the corporation.
7.7. Contract Right; Subsequent Amendment. The right to indemnification
and advancement of expenses conferred in this Article
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shall be a contract right. No amendment, termination or repeal of this Article
or of the relevant provisions of Chapter 156B of the Massachusetts General Laws
or any other applicable laws shall affect or diminish in any way the rights of
any Indemnitee to indemnification or advancement of expenses under the
provisions hereof with respect to any Proceeding arising out of or relating to
any action, omission, transaction or facts occurring prior to the final adoption
of such amendment, termination or repeal, except with the consent of the
Indemnitee.
7.8. Other Rights. The indemnification and advancement of expenses
provided by this Article shall not be deemed exclusive of any other rights to
which an Indemnitee seeking indemnification or advancement of expenses may be
entitled under any law (common or statutory), agreement or vote of stockholders
or directors or otherwise, both as to action in his or her official capacity and
as to action in any other capacity while holding office for the corporation, and
shall continue as to an Indemnitee who has ceased to be a director or officer,
and shall inure to the benefit of the estate, heirs, executors and
administrators of the Indemnitee. Nothing contained in this Article shall be
deemed to prohibit, and the corporation is specifically authorized to enter
into, agreements with any Indemnitee providing indemnification rights and
procedures different from those set forth in the Article.
7.9. Partial Indemnification. If an Indemnitee is entitled under any
provision of this Article to indemnification by the corporation for some or a
portion of the expenses (including attorneys' fees), judgments, fines or amounts
paid in settlement actually and reasonably incurred by the Indemnitee or on his
or her behalf in connection with any Proceeding and any appeal therefrom but
not, however, for the total amount thereof, the corporation shall nevertheless
indemnify the Indemnitee for the portion of such expenses (including attorneys'
fees), judgments, fines or amounts paid in settlement to which the Indemnitee is
entitled.
7.10. Insurance. The corporation may purchase and maintain insurance,
at its expense, to protect itself and any director, officer, employee or agent
of the corporation or another organization or employee benefit plan against any
expense, liability or loss incurred by such person in any such capacity, or
arising out of such person's status as such, whether or not the corporation
would have the power to indemnify such person against such expense, liability or
loss under Chapter 156B of the Massachusetts General Laws.
7.11. Merger or Consolidation. If the corporation is merged into or
consolidated with another corporation and the corporation is not the
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surviving corporation, the surviving corporation shall assume the obligations of
the corporation under this Article with respect to any Proceeding arising out of
or relating to any action, omission, transaction or facts occurring on or prior
to the date of such merger or consolidation.
7.12. Savings Clause. If this Article or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify and advance expenses to each Indemnitee
as to any expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement in connection with any Proceeding, including an action by or
in the right of the corporation, to the fullest extent permitted by any
applicable portion of this Article that shall not have been invalidated and to
the fullest extent permitted by applicable law.
7.13. Subsequent Legislation. If the Massachusetts General Laws are
amended after adoption of this Article to expand further the indemnification
permitted to Indemnitees, then the corporation shall indemnify such persons to
the fullest extent permitted by the Massachusetts General Laws as so amended.
7.14. Indemnification of Others. The corporation may, to the extent
authorized from time to time by its Board of Directors, grant indemnification
rights to employees or agents of the corporation or other persons serving the
corporation who are not Indemnitees, and such rights may be equivalent to, or
greater or less than, those set forth in this Article.
Article VIII. - Amendments.
8.1. General. These By-laws may be amended, added to or repealed, in
whole or in part, (i) by vote of the stockholders at a meeting, where the
substance of the proposed amendment is stated in the notice of the meeting, or
(ii) by vote of a majority of the directors then in office, except that no
amendment may be made by the Board of Directors on matters reserved to the
stockholders by law or the Articles of Organization or which changes the
provisions of these By-laws relating to the removal of directors or to the
requirements for amendment of these By-laws. Notice of any amendment, addition
or repeal of any By-law by the Board of Directors stating the substance of such
action shall be given to all stockholders not later than the time when notice is
given of the meeting of stockholders next following such action by the Board of
Directors. Any By-law adopted by the Board of Directors may be amended or
repealed by the stockholders.
<PAGE> 1
EXHIBIT 4.1
================================================================================
HIGH VOLTAGE ENGINEERING CORPORATION, as Issuer
and
STATE STREET BANK AND TRUST COMPANY, as Trustee
INDENTURE
Dated as of August 8, 1997
$135,000,000
10 1/2% Senior Notes due 2004
================================================================================
<PAGE> 2
CROSS-REFERENCE TABLE
TIA Indenture
Section Section
- ------- ---------
310(a)(1) .............................................. 7.10
(a)(2) .............................................. 7.10
(a)(3) .............................................. N.A.
(a)(4) .............................................. N.A.
(b) .............................................. 7.08; 7.10
.............................................. 12.02
(b)(1) .............................................. 7.10
(b)(9) .............................................. 7.10
(c) .............................................. N.A.
311(a) .............................................. 7.11
(b) .............................................. 7.11
(c) .............................................. N.A.
312(a) .............................................. 2.05
(b) .............................................. 12.03
(c) .............................................. 12.03
313(a) .............................................. 7.06
(b)(1) .............................................. N.A.
(b)(2) .............................................. 7.06
(c) .............................................. 12.02
(d) .............................................. 7.06
314(a) .............................................. 4.02; 4.04
.............................................. 12.02
(b) .............................................. 11.02;11.04
(c)(1) .............................................. 11.04; 12.04; 12.05
(c)(2) .............................................. 11.04; 12.04; 12.05
(c)(3) .............................................. N.A.
(d) .............................................. 11.04
(e) .............................................. 12.05
(f) .............................................. N.A.
315(a) .............................................. 7.01; 7.02
(b) .............................................. 7.05; 12.02
(c) .............................................. 7.01
(d) .............................................. 6.05; 7.01;
.............................................. 7.02
(e) .............................................. 6.12
316(a)(last sentence)................................... 6.05
(a)(1)(A) ........................................... 6.05
(a)(1)(B) ........................................... 6.04
(a)(2) ........................................... 8.02
<PAGE> 3
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(b) ........................................... 6.08
(c) ........................................... 8.04
317(a)(1) ........................................... 6.09
(a)(2) ........................................... 6.10
(b) ........................................... 7.12
318(a) ........................................... 12.01
- ------------------
N.A. means Not Applicable
Note: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of the Indenture
<PAGE> 4
TABLE OF CONTENTS
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
Page
----
Section 1.01. Definitions................................................
Section 1.02. Other Definitions..........................................
Section 1.03. Incorporation by Reference of Trust Indenture Act..........
Section 1.04. Rules of Construction......................................
ARTICLE 2
THE NOTES
Section 2.01. Form and Dating............................................
Section 2.02. Execution and Authentication...............................
Section 2.03. Registrar and Paying Agent.................................
Section 2.04. Paying Agent To Hold Money in Trust........................
Section 2.05. Noteholder Lists...........................................
Section 2.06. Transfer and Exchange......................................
Section 2.07. Replacement Notes..........................................
Section 2.08. Outstanding Notes..........................................
Section 2.09. Treasury Notes.............................................
Section 2.10. Temporary Notes............................................
Section 2.11. Cancellation...............................................
Section 2.12. Defaulted Interest.........................................
Section 2.13. CUSIP Number...............................................
Section 2.14. Deposit of Moneys..........................................
Section 2.15. Book-Entry Provisions for Global Notes.....................
Section 2.16. Special Transfer Provisions................................
Section 2.17. Computation of Interest....................................
ARTICLE 3
REDEMPTION
Section 3.01. Election to Redeem; Notices to Trustee.....................
Section 3.02. Selection by Trustee of Notes To Be Redeemed...............
Section 3.03. Notice of Redemption.......................................
Section 3.04. Effect of Notice of Redemption.............................
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Section 3.05. Deposit of Redemption Price................................
Section 3.06. Notes Redeemed in Part.....................................
ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes...........................................
Section 4.02. SEC Reports................................................
Section 4.03. Waiver of Stay, Extension or Usury Laws....................
Section 4.04. Compliance Certificate.....................................
Section 4.05. Taxes......................................................
Section 4.06. Limitation on Additional Indebtedness......................
Section 4.07. Limitation on Preferred Stock of Restricted
Subsidiaries.............................................
Section 4.08. Limitation on Capital Stock of Restricted
Subsidiaries.............................................
Section 4.09. Limitation on Restricted Payments..........................
Section 4.10. Limitation on Certain Asset Sales..........................
Section 4.11. Limitation on Transactions with Affiliates.................
Section 4.12. Limitations on Liens.......................................
Section 4.13. Limitations on Investments.................................
Section 4.14. Limitation on Disposition of Assets........................
Section 4.15. Limitation on Sale and Lease-Back
Transactions.............................................
Section 4.16. Limitation on Dividend and other Payment
Restrictions Affecting Subsidiaries......................
Section 4.17. Payments for Consent.......................................
Section 4.18. Legal Existence............................................
Section 4.19. Change of Control..........................................
Section 4.20. Maintenance of Properties; Insurance; Books
and Records; Compliance with Law.........................
Section 4.21. Further Assurance to the Trustee...........................
Section 4.22. Qualified Subsidiary IPO...................................
Section 4.23. Limitation on Transfer of Intercompany Notes;
Repayment of Intercompany Notes..........................
Section 4.24. Guarantees of Certain Indebtedness.........................
Section 4.25. Limitation on Business of HIVEC Holdings;
Capital Stock of Foreign Subsidiaries....................
ARTICLE 5
SUCCESSOR CORPORATION
Section 5.01. Limitation on Consolidation, Merger
and Sale of Assets.......................................
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Section 5.02. Successor Person Substituted...............................
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default..........................................
Section 6.02. Acceleration...............................................
Section 6.03. Other Remedies.............................................
Section 6.04. Waiver of Past Defaults and Events of Default..............
Section 6.05. Control by Majority........................................
Section 6.06. Limitation on Suits........................................
Section 6.07. No Personal Liability of Directors, Officers,
Employees and Stockholders ..............................
Section 6.08. Rights of Holders To Receive Payment.......................
Section 6.09. Collection Suit by Trustee.................................
Section 6.10. Trustee May File Proofs of Claim...........................
Section 6.11. Priorities.................................................
Section 6.12. Undertaking for Costs......................................
Section 6.13. Restoration of Rights and Remedies.........................
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee..........................................
Section 7.02. Rights of Trustee..........................................
Section 7.03. Individual Rights of Trustee...............................
Section 7.04. Trustee's Disclaimer.......................................
Section 7.05. Notice of Defaults.........................................
Section 7.06. Reports by Trustee to Holders..............................
Section 7.07. Compensation and Indemnity.................................
Section 7.08. Replacement of Trustee.....................................
Section 7.09. Successor Trustee by Consolidation, Merger, etc............
Section 7.10. Eligibility; Disqualification..............................
Section 7.11. Preferential Collection of Claims Against Company..........
Section 7.12. Paying Agents..............................................
ARTICLE 8
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 8.01. Without Consent of Holders.................................
Section 8.02. With Consent of Holders....................................
Section 8.03. Compliance with Trust Indenture Act........................
Section 8.04. Revocation and Effect of Consents..........................
Section 8.05. Notation on or Exchange of Notes...........................
<PAGE> 7
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Section 8.06. Trustee To Sign Amendments, etc............................
ARTICLE 9
DISCHARGE OF INDENTURE; DEFEASANCE
Section 9.01. Discharge of Indenture.....................................
Section 9.02. Legal Defeasance...........................................
Section 9.03. Covenant Defeasance........................................
Section 9.04. Conditions to Legal Defeasance or
Covenant Defeasance......................................
Section 9.05. Deposited Money and U.S. Government........................
Obligations To Be Held in Trust; Other
Miscellaneous Provisions.................................
Section 9.06. Reinstatement..............................................
Section 9.07. Moneys Held by Paying Agent................................
Section 9.08. Moneys Held by Trustee.....................................
ARTICLE 10
GUARANTEE OF NOTES
Section 10.01. Guarantee..................................................
Section 10.02. Execution and Delivery of Guarantees.......................
Section 10.03. Limitation of Guarantee....................................
Section 10.04. Additional Guarantors......................................
Section 10.05. Release of Guarantor.......................................
ARTICLE 11
COLLATERAL AND SECURITY
Section 11.01. Pledge Agreement...........................................
Section 11.02. Recording and Opinions.....................................
Section 11.03. Release of Collateral......................................
Section 11.04. Certificates of the Company................................
Section 11.05. Authorization Of Trustee Actions
Under Pledge Agreement...................................
Section 11.06. Authorization of Receipt of Funds
By Trustee Under Pledge Agreement........................
Section 11.07. Termination Of Security Interest...........................
ARTICLE 12
MISCELLANEOUS
Section 12.01. Trust Indenture Act Controls...............................
Section 12.02. Notices....................................................
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Section 12.03. Communications by Holders with Other Holders...............
Section 12.04. Certificate and Opinion as to
Conditions Precedent ....................................
Section 12.05. Statements Required in Certificate
and opinion..............................................
Section 12.06. Rules by Trustee and Agents................................
Section 12.07. Business Days; Legal Holidays..............................
Section 12.08. Governing Law..............................................
Section 12.09. No Adverse Interpretation of Other
Agreements...............................................
Section 12.10. No Recourse Against Others.................................
Section 12.11. Successors.................................................
Section 12.12. Multiple Counterparts......................................
Section 12.13. Table of Contents, Headings, etc...........................
Section 12.14. Separability...............................................
SIGNATURES
EXHIBITS
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Exhibit A. Form of Note..................................................
Exhibit B. Form of Legend and Assignment for 144A Note...................
Exhibit C. Form of Legend and Assignment for
Regulation S Note...........................................
Exhibit D. Form of Legend for Global Note................................
Exhibit E. Form of Certificate to Be Delivered
in Connection with Transfers to
Non-QIB Accredited Investors................................
Exhibit F. Form of Certificate to Be Delivered
in Connection with Transfers
Pursuant to Regulation S......................................
Exhibit G. Form of Guarantee.............................................
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INDENTURE, dated as of August 8, 1997, by and between HIGH VOLTAGE
ENGINEERING CORPORATION, a Massachusetts corporation (the "COMPANY"), and STATE
STREET BANK AND TRUST COMPANY (the "TRUSTEE") .
Each party agrees as follows for the benefit of the other parties
and for the equal and ratable benefit of the Holders of the Notes:
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01. DEFINITIONS.
"ACQUIRED INDEBTEDNESS" means Indebtedness of a Person (including an
Unrestricted Subsidiary) existing at the time such Person becomes a Restricted
Subsidiary or assumed in connection with the acquisition of assets from such
Person.
"ADDITIONAL INTEREST" means additional interest on the Notes which
the Company agrees to pay to the Holders pursuant to Section 4 of the
Registration Rights Agreement.
"ADJUSTED NET ASSETS" of a Guarantor at any date shall mean the
lesser of (x) the amount by which the fair value of the property of such
Guarantor exceeds the total amount of liabilities, including, without
limitation, contingent liabilities (after giving effect to all other fixed and
contingent liabilities), but excluding liabilities under the Guarantee, of such
Guarantor at such date and (y) the amount by which the present fair salable
value of the assets of such Guarantor at such date exceeds the amount that will
be required to pay the probable liability of such Guarantor on its debts (after
giving effect to all other fixed and contingent liabilities and after giving
effect to any collection from any Subsidiary of such Guarantor in respect of the
obligations of such Subsidiary under the Guarantee), excluding Indebtedness in
respect of the Guarantee, as they become absolute and matured.
"AFFILIATE" of any specified Person means any other Person which
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person. For the
purposes of this definition, "control" (including, with correlative meanings,
the terms "controlling," "controlled by," and "under common control with"), as
used with respect to any Person, means the possession, directly or indirectly,
of the power to direct or cause the direction of the
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management or policies of such Person, whether through the ownership of voting
securities, by agreement or otherwise.
"AGENT" means any Registrar, Paying Agent, or agent for service of
notices and demands.
"ANDERSON" means Anderson Interconnect, Inc., a Massachusetts
corporation.
"ANDERSON IRELAND" shall have the meaning set forth in the
definition of "RESTRICTED PAYMENT."
"ASSET SALE" means the sale, transfer, repayment or other
disposition (other than to the Company or any of its Restricted Subsidiaries) in
any single transaction or series of related transactions with a fair market
value in excess of $1.0 million of (a) any Capital Stock of or other equity
interest in any Restricted Subsidiary of the Company, (b) all or substantially
all of the assets of the Company or of any Restricted Subsidiary thereof, (c)
real property, (d) all or substantially all of the assets of any business owned
by the Company or any Restricted Subsidiary thereof, or a division, line of
business or comparable business segment of the Company or any Restricted
Subsidiary thereof, or (e) any of the Intercompany Notes; PROVIDED that Asset
Sales shall not include sales, leases, conveyances, transfers or other
dispositions to the Company or to a Restricted Subsidiary or to any other Person
if after giving effect to such sale, lease, conveyance, transfer or other
disposition such other Person becomes a Restricted Subsidiary; and provided,
further, that any sale of capital stock of any Restricted Subsidiary pursuant to
a Qualified Subsidiary IPO shall be an Asset Sale only to the extent provided in
Section 4.22.
"ASSET SALE PROCEEDS" means, with respect to any Asset Sale, (i)
cash received by the Company or any Restricted Subsidiary from such Asset Sale
(including cash received as consideration for the assumption of liabilities
incurred in connection with or in anticipation of such Asset Sale), after (a)
provision for all income or other taxes measured by or resulting from such Asset
Sale, (b) payment of all brokerage commissions, underwriting and other fees and
expenses related to such Asset Sale, (c) provision for minority interest holders
in any Restricted Subsidiary as a result of such Asset Sale and (d) deduction of
appropriate amounts to be provided by the Company or a Restricted Subsidiary as
a reserve, in accordance with GAAP, against any liabilities associated with the
assets sold or disposed of in such Asset Sale and retained by the Company or a
Restricted Subsidiary after such Asset Sale, including, without limitation,
pension and other post-employment benefit liabilities and liabilities
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related to environmental matters or against any indemnification obligations
associated with the assets sold or disposed of in such Asset Sale, and (ii)
promissory notes and other non-cash consideration received by the Company or any
Restricted Subsidiary from such Asset Sale or other disposition, but only upon
the liquidation or conversion of such notes or non-cash consideration into cash.
"ATTRIBUTABLE INDEBTEDNESS" under this Indenture in respect of a
Sale and Lease-Back Transaction means, as at the time of determination, the
greater of (i) the fair value of the property subject to such arrangement (as
determined by the Board of Directors) and (ii) the present value of the
obligation (discounted at a rate of 10%, compounded annually) of the lessee for
rental payments during the remaining term of the lease included in such Sale and
Lease-Back Transaction (including any period for which such lease has been
extended).
"AVAILABLE ASSET SALE PROCEEDS" means, with respect to any Asset
Sale, the aggregate Asset Sale Proceeds from such Asset Sale that have not been
applied in accordance with clauses (iii)(a) or (iii)(b), and that have not yet
been the basis for an Excess Proceeds Offer in accordance with clause (iii)(c),
of the first paragraph of Section 4.10.
"BOARD OF DIRECTORS" with respect to any Person means the board of
directors of such Person or any committee authorized to act therefor.
"BOARD RESOLUTION" means a copy of a resolution certified pursuant
to an Officers' Certificate to have been duly adopted by the Board of Directors
of the Company and to be in full force and effect, and delivered to the Trustee.
"CAPITAL STOCK" means, with respect to any Person, any and all
shares or other equivalents (however designated) of capital stock, partnership
interests or any other participation, right or other interest in the nature of
an equity interest in such Person or any option, warrant or other security
convertible into any of the foregoing.
"CAPITALIZED LEASE OBLIGATIONS" means Indebtedness represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP, and the amount of such Indebtedness
shall be the capitalized amount of such obligations determined in accordance
with GAAP.
"CASH EQUIVALENTS" means (i) direct obligations of the United States
of America or any agency thereof, or obligations guaranteed or insured by the
United States of America, PROVIDED that in each case such obligations
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mature within one year from the date of acquisition thereof, (ii) certificates
of deposit maturing within one year from the date of creation thereof issued by
any U.S. national or state banking institution having capital, surplus and
undivided profits aggregating at least $250,000,000 and at the time of
investment rated at least A-1 by S&P and P-1 by Moody's, (iii) commercial paper
with a maturity of 180 days or less issued by a corporation (except an Affiliate
of the Company) organized under the laws of any state of the United States or
the District of Columbia and at the time of investment rated at least A-1 by S&P
or at least P-1 by Moody's and (iv) repurchase agreements and reverse repurchase
agreements relating to marketable direct obligations issued or unconditionally
guaranteed by the United States of America or issued by an agency thereof and
backed by the full faith and credit of the United States of America, in each
case maturing within one year from the date of acquisition; PROVIDED that the
terms of such agreements comply with the guidelines set forth in the Federal
Financial Agreements of Depository Institutions with Securities Dealers and
Others, as adopted by the Comptroller of the Currency and (v) tax-exempt auction
rate securities and municipal preferred stock, in each case, subject to reset no
more than 35 days after the date of acquisition and having a rating of at least
AA by S&P or AA by Moody's at the time of investment.
A "CHANGE OF CONTROL" of the Company will be deemed to have occurred
at such time as (i) any Person (including a Person's Affiliates and associates),
other than a Permitted Holder, becomes the beneficial owner (as defined under
Rule 13d-3 or any successor rule or regulation promulgated under the Exchange
Act) of 50% or more of the total voting or economic power of the Company's or
Parent's Common Stock, as the case may be, (ii) any Person (including a Person's
Affiliates and associates), other than a Permitted Holder, becomes the
beneficial owner of more than 33 1/3% of the total voting power of the Common
Stock, and the Permitted Holders beneficially own, in the aggregate, a lesser
percentage of the total voting power of the Company or Parent, as the case may
be, than such other Person and do not have the right or ability by voting power,
contract or otherwise to elect or designate for election a majority of the Board
of Directors of the Company or Parent, as the case may be, (iii) there shall be
consummated any consolidation or merger of the Company or Parent in which the
Company or Parent, as the case may be, is not the continuing or surviving
corporation or pursuant to which the Common Stock of the Company or Parent, as
the case may be, would be converted into cash, securities or other property,
other than a merger or consolidation of the Company or Parent, as the case may
be, in which the holders of the Common Stock of the Company or Parent, as the
case may be, outstanding immediately prior to the consolidation or merger hold,
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directly or indirectly, at least a majority of the Common Stock of the surviving
corporation immediately after such consolidation or merger, or (iv) during any
period of two consecutive years, individuals who at the beginning of such period
constituted the Board of Directors of the Company (together with any new
directors whose election by such Board of Directors or whose nomination for
election by the shareholders of the Company or Parent, as the case may be, has
been approved by 66 2/3% of the directors then still in office who either were
directors at the beginning of such period or whose election or recommendation
for election was previously so approved) cease to constitute a majority of the
Board of Directors of the Company or Parent, as the case may be.
"COLLATERAL" means the Intercompany Notes in the possession of the
Trustee pursuant to the Pledge Agreement.
"COMMON STOCK" of any Person means all Capital Stock of such Person
that is generally entitled to (i) vote in the election of directors of such
Person or (ii) if such Person is not a corporation, vote or otherwise
participate in the selection of the governing body, partners, managers or others
that will control the management and policies of such Person.
"COMPANY" means the party named as such in the first paragraph of
this Indenture until a successor replaces such party pursuant to this Indenture
and thereafter means the successor.
"COMPANY REQUEST" means any written request signed in the name of
the Company by the Chairman of the Board of Directors, the Chief Executive
Officer, the President, Chief Operating Officer, any Vice President, the Chief
Financial Officer or the Treasurer of the Company and attested to by the
Secretary or any Assistant Secretary of the Company.
"CONSOLIDATED FIXED CHARGES" means, with respect to any Person and
with respect to any determination date, the sum of a Person's (i) Consolidated
Interest Expense, plus (ii) the product of (x) the aggregate amount of all
dividends paid on Disqualified Capital Stock of the Company or on each series of
preferred stock of each Subsidiary of such Person (other than dividends paid or
payable in additional shares of preferred stock or to the Company or any of its
Wholly-Owned Subsidiaries) times (y) a fraction, the numerator of which is one
and the denominator of which is one minus the then current effective combined
federal, state and local tax rate of such Person (expressed as a decimal), in
each case, for the prior four full fiscal quarter period for which financial
results are available.
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"CONSOLIDATED INTEREST EXPENSE" means, with respect to any Person,
for any period, the aggregate amount of interest which, in conformity with GAAP,
would he set forth opposite the caption "interest expense" or any like caption
on an income statement for such Person and its Restricted Subsidiaries on a
consolidated basis (including, but not limited to, Redeemable Dividends, whether
paid or accrued, on Subsidiary Preferred Stock, imputed interest included in
Capitalized Lease obligations, all commissions, discounts and other fees and
charges owed with respect to letters of credit and bankers, acceptance
financing, the net costs associated with hedging obligations, amortization of
other financing fees and expenses, the interest portion of any deferred payment
obligation, amortization of discount or premium, if any, and all other non-cash
interest expense) plus, without duplication, all net capitalized interest for
such period and all interest paid under any guarantee of Indebtedness (including
a guarantee of principal, interest or any combination thereof) of any Person,
plus, without duplication, the amount of all dividends or distributions paid on
Disqualified Capital Stock (other than dividends paid or payable in shares of
Capital Stock of the Company) and, minus: W amortization of deferred financing
costs and expenses; (ii) prepayment penalties on outstanding indebtedness of the
Company retired on the Issue Date; (iii) accrual, redemption or payment of
Contingent Interest Payments; and (iv) any accretions with respect to any of the
Warrants.
"CONSOLIDATED NET INCOME" means, with respect to any Person, for any
period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; PROVIDED, HOWEVER, that (a) the Net Income of any Person, including
any Unrestricted Subsidiary of the Company or a Restricted Subsidiary (the
"other Person") in which the Person in question or any of its Restricted
Subsidiaries has less than a 100% interest (which interest does not cause the
net income of such other Person to be consolidated into the net income of the
Person in question in accordance with GAAP) shall be included only to the extent
of the amount of dividends or distributions actually paid to the Person in
question or the Restricted Subsidiary, (b) the Net Income of any Restricted
Subsidiary of the Person in question that is subject to any restriction or
limitation on the payment of dividends or the making of other distributions to
the Company (other than pursuant to the Notes or this Indenture) shall be
excluded to the extent of such restriction or limitation, (c) (i) the Net Income
of any Person acquired in a pooling of interests transaction for any period
prior to the date of such acquisition and (ii) any net gain (but not loss)
resulting from an Asset Sale by the Person in question or any of its Restricted
Subsidiaries other than in the ordinary course of business shall be excluded,
(d) extraordinary, unusual and non-recurring gains and
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losses shall be excluded and (e) without duplication, the tax effected non-cash
accrual or accretion of, and payment of, Contingent Interest Payments or
Warrants during such period shall be excluded.
"CONTINGENT INTEREST PAYMENTS" means the contingent interest
payments payable by the Company to BancBoston Capital, Inc. pursuant to the
Contingent Interest Payment Agreement, dated as of April 27, 1991, between the
Company, Robicon and Datcon and BancBoston Capital, Inc. ("BancBoston"), as
amended, and that Agreement for Additional Contingent Interest Payments (Quest),
dated as of June 29, 1995, as amended, between the Company, Robicon and Datcon
and BancBoston.
"CORPORATE TRUST OFFICE" means the office of the Trustee at which at
any particular time its corporate trust business shall be principally
administered, which office at the date of execution of this Indenture is located
at 2 International Place, Boston, Massachusetts 02110-2804.
"DATCON" means Datcon Instrument Company, Inc., a Pennsylvania
corporation.
"DEFAULT" means any event that is, or with the passing of time or
giving of notice or both would be, an Event of Default.
"DEPOSITORY" means, with respect to the Notes issued in the form of
one or more Global Notes, The Depository Trust Company or another Person
designated as Depository by the Company, which Person must be a clearing agency
registered under the Exchange Act.
"DISQUALIFIED CAPITAL STOCK" means any Capital Stock of the Company
or a Restricted Subsidiary thereof which, by its terms (or by the terms of any
security into which it is convertible or for which it is exchangeable at the
option of the holder), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the option of the holder thereof, in whole or in part, on or
prior to the maturity date of the Notes, for cash or securities constituting
Indebtedness. Without limitation of the foregoing, Disqualified Capital Stock
shall be deemed to include (i) any Preferred Stock of a Restricted Subsidiary of
the Company and (ii) any Preferred Stock of the Company, with respect to either
of which, under the terms of such Preferred Stock, by agreement or otherwise,
such Restricted Subsidiary or the Company is obligated to pay current dividends
or distributions in cash during the period prior to the maturity date of the
Notes; -PROVIDED, however, that Preferred Stock of the Company or any Restricted
Subsidiary thereof that is issued with the
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benefit of provisions requiring a change of control offer to be made for such
Preferred Stock in the event of a change of control of the Company or such
Restricted Subsidiary, which provisions have substantially the same effect as
the provisions of this Indenture described under Section 4.19, shall not he
deemed to be Disqualified Capital Stock solely by virtue of such provisions; and
PROVIDED, FURTHER, that the Series A Preferred Stock shall be deemed not to be
Disqualified Capital Stock.
"EBITDA" means, for any Person, for any period, an amount equal to
(a) the sum of (i) Consolidated Net Income for such period, plus (ii) the
provision for taxes for such period based on income or profits to the extent
such income or profits were included in computing Consolidated Net Income and
any provision for taxes utilized in computing net loss under clause (i) hereof,
plus (iii) Consolidated Interest Expense for such period (but only including
Redeemable Dividends in the calculation of such Consolidated Interest Expense to
the extent that such Redeemable Dividends have been included in the calculation
of Consolidated Net Income), plus (iv) depreciation for such period on a
consolidated basis, plus (v) amortization of intangibles for such period on a
consolidated basis, plus (vi) any other non-cash items reducing Consolidated Net
Income for such period, minus (b) all non-cash items increasing Consolidated Net
Income for such period, all for such Person and its Subsidiaries determined in
accordance with GAAP, except that with respect to the Company each of the
foregoing items shall be determined on a consolidated basis with respect to the
Company and its Restricted Subsidiaries only; and PROVIDED, however, that, for
purposes of calculating EBITDA during any fiscal quarter, cash income from a
particular Investment of such Person shall be included only (x) if cash income
has actually been received by such Person with respect to such Investment, or
(y) if the cash income derived from such Investment is attributable to Temporary
Cash Investments.
"EQUITY INTERESTS" means, with respect to any Person, any and all
shares or other equivalents (however designated) of capital stock, partnership
interests or any other participation, right or other interest in the nature of
an equity interest in such Person or any option, warrant or other security
convertible or exchangeable for any of the foregoing.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"EXCHANGE NOTES" has the meaning provided in the Registration Rights
Agreement.
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"FIXED CHARGE COVERAGE RATIO" of any Person means, with respect to
any determination date, the ratio of (i) EBITDA for such Person's prior four
full fiscal quarters for which financial results have been reported prior to the
determination date to (ii) Consolidated Fixed Charges of such Person for such
period.
"GAAP" means generally accepted accounting principles consistently
applied as in effect in the United States from time to time.
"GUARANTEE" means, as the context may require, individually, a
guarantee, or collectively, any and all guarantees, of the Obligations of the
Company with respect to the Notes by each Guarantor, if any, pursuant to the
terms of Article 10 hereof, substantially in the form set forth in Exhibit G.
"GUARANTOR" means each Person that hereafter becomes a Guarantor
pursuant to Sections 10.02 and 10.04, and "Guarantors" means such entities,
collectively.
"HIVEC HOLDINGS" means HIVEC Holding, Inc., a Delaware corporation.
"HOLDER" or "NOTEHOLDER" means the Person in whose name a Note is
registered on the Registrar's books.
"INCUR" means, with respect to any Indebtedness or other obligation
of any Person, to create, issue, incur (by conversion, exchange or otherwise),
assume, guarantee or otherwise become liable in respect of such Indebtedness or
other obligation or the recording, as required pursuant to GAAP or otherwise, of
any such Indebtedness or other obligation on the balance sheet of such Person
(and "incurrence," "incurred," "incurrable," and "incurring" shall have meanings
correlative to the foregoing); provided that a change in GAAP that results in an
obligation of such Person that exists at such time becoming Indebtedness shall
not be deemed an incurrence of such Indebtedness.
"INDEBTEDNESS" means (without duplication), with respect to any
Person, any indebtedness at any time outstanding, secured or unsecured,
contingent or otherwise, which is for borrowed money (whether or not the
recourse of the lender is to the whole of the assets of such Person or only to a
portion thereof), or evidenced by bonds, notes, debentures or similar
instruments or representing the balance deferred and unpaid of the purchase
price of any property (excluding, without limitation, any balances that
constitute accounts payable or trade payables, and other accrued liabilities
arising in the ordinary course of business) if and to the
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extent any of the foregoing indebtedness would appear as a liability upon a
balance sheet of such Person prepared in accordance with GAAP, and shall also
include, to the extent not otherwise included, (i) any Capitalized Lease
Obligations, (ii) obligations secured by a lien to which the property or assets
owned or held by such Person are subject, whether or not the obligation or
obligations secured thereby shall have been assumed, (iii) guarantees of items
of other Persons which would be included within this definition for such other
Persons (whether or not such items would appear upon the balance sheet of the
guarantor), (iv) all obligations for the reimbursement of any obligor on any
letter of credit, banker's acceptance or similar credit transaction, (v) in the
case of the Company, Disqualified Capital Stock of the Company or any Restricted
Subsidiary thereof, and (vi) obligations of any such Person under any Interest
Rate Agreement applicable to any of the foregoing (if and to the extent such
Interest Rate Agreement obligations would appear as a liability upon a balance
sheet of such Person prepared in accordance with GAAP). The amount of
Indebtedness of any Person at any date shall be the outstanding balance at such
date of all unconditional obligations as described above and, with respect to
contingent obligations, the maximum liability upon the occurrence of the
contingency giving rise to the obligation; PROVIDED (i) that the amount
outstanding at any time of any Indebtedness issued with original issue discount,
including the Notes, is the principal amount of such Indebtedness less the
remaining unamortized portion of the original issue discount of such
Indebtedness at such time as determined in conformity with GAAP and (ii) that
Indebtedness shall not include any liability for federal, state, local or other
taxes. Notwithstanding any other provision of the foregoing definition, any
trade payable arising from the purchase of goods or materials or for services
obtained in the ordinary course of business shall not be deemed to be
Indebtedness of the Company or any Restricted Subsidiaries for purposes of this
definition. Furthermore, guarantees of (or obligations with respect to letters
of credit supporting) Indebtedness otherwise included in the determination of
such amount shall not also be included.
"INDENTURE" means this Indenture as amended, restated or
supplemented from time to time.
"INDUSTRIAS JORDA" shall mean that indirect foreign Subsidiary of
the Company, Industrias Jorda. S.L.
"INTERCOMPANY NOTES" means the Intercompany Notes issued by the
direct Subsidiaries of the Company in the following principal amounts: (i)
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Robicon: $39.5 million; (ii) PHI: $39.5 million; (iii) Datcon: $19.0 million;
(iv) Anderson: $19.0 million; and (v) HIVEC Holdings: $3.5 million.
"INITIAL PURCHASERS" means CIBC Wood Gundy Securities Corp. and
PaineWebber Incorporated.
"INSTITUTIONAL ACCREDITED INVESTOR" means an institution that is an
"accredited investor" as that term is defined in Rule 501 (a)(1), (2), (3) or
(7) promulgated under the Securities Act.
"INTEREST PAYMENT DATE" means the stated maturity of an installment
of interest on the Notes.
"INTEREST RATE AGREEMENT" means, for any Person, any interest rate
swap agreement, interest rate cap agreement, interest rate collar agreement or
other similar agreement designed to protect the party indicated therein against
fluctuations in interest rates.
"INVESTMENTS" means, directly or indirectly, any advance (other than
advances to employees and directors of the Company and its Restricted
Subsidiaries in the ordinary course of business of the Company and its
Restricted Subsidiaries), account receivable (other than an account receivable
arising in the ordinary course of business), loan or capital contribution to (by
means of transfers of property to others, payments for property or services for
the account or use of others or otherwise), the purchase of any stock, bonds,
notes, debentures, partnership or joint venture interests or other securities
of, or the acquisition, by purchase or otherwise, of all or substantially all of
the business or assets or stock or other evidence of beneficial ownership of,
any Person or the making of any investment in any Person. Investments shall
exclude extensions of trade credit on commercially reasonable terms in
accordance with normal trade practices.
"ISSUE DATE" means the date the Notes are first issued by the
Company and authenticated by the Trustee under this Indenture.
"ISSUE DATE OFFERINGS" shall have the meaning given to the
collective term "Offerings" in the Purchase Agreement.
"LAUREN" means Lauren Corporation, a Delaware corporation and
wholly-owned subsidiary of the Company.
"LIEN" means with respect to any property or assets of any Person,
any mortgage or deed of trust, pledge, hypothecation, assignment, deposit
arrangement, security interest, lien, charge, easement, encumbrance,
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preference, priority, or other security agreement or preferential arrangement of
any kind or nature whatsoever on or with respect to such property or assets
(including without limitation, any Capitalized Lease obligation, conditional
sales, or other title retention agreement having substantially the same economic
effect as any of the foregoing).
"MATURITY DATE" means August 15, 2004.
"MERGER" means the merger of Lauren into PHI.
"MERGER AGREEMENT" means the Agreement and Plan of Merger dated as
of May 7, 1997 by and among the Company, PHI and Lauren, as amended.
"MOODY'S" means Moody's Investors Service, Inc. and its successors.
"NET INCOME" means, with respect to any Person for any period, the
net income (loss) of such Person determined in accordance with GAAP.
"NET INVESTMENT" means the excess of W the aggregate amount of all
Investments in Unrestricted Subsidiaries made by the Company on or after the
Issue Date (in the case of an Investment made other than in cash, the amount
shall be the fair market value of such Investment as determined in good faith by
the board of directors of the Company) over (ii) the sum of (A) the aggregate
amount returned in cash on such Investments whether through interest payments,
principal payments, dividends or other distributions and (B) the net cash
proceeds received by the Company from the disposition of all or any portion of
such Investments (other than to a Subsidiary of the Company); PROVIDED, however,
that with respect to all Investments made in an Unrestricted Subsidiary the sum
of clauses (A) and (B) above with respect to such Investments shall not exceed
the aggregate amount of all such Investments made in such Unrestricted
Subsidiary.
"NET PROCEEDS" means (a) in the case of any sale of Capital Stock by
any Person, the aggregate net proceeds received by such Person, after payment of
expenses, commissions and the like incurred in connection therewith, whether
such proceeds are in cash or in property (valued at the fair market value
thereof, as determined in good faith by the board of directors, at the time of
receipt), (b) in the case of any exchange, exercise, conversion or surrender of
outstanding securities of any kind for or into shares of Capital Stock of the
Company which is not Disqualified Capital Stock, the net book value of such
outstanding securities on the date of such exchange, exercise, conversion or
surrender (plus any additional amount required to be paid by the holder to the
Company upon such
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exchange, exercise, conversion or surrender, less any and all payments made to
the holder, e.g., on account of fractional shares and less all expenses incurred
by the Company in connection therewith) and (c) in the case of any issuance of
any Indebtedness by the Company or any Restricted Subsidiary, the aggregate net
cash proceeds received by such Person after the payment of expenses,
commissions, underwriting discounts and the like incurred in connection
therewith.
"NEW REVOLVING CREDIT FACILITY" means the credit agreement or credit
agreements to be entered into by and among the Company, the Restricted
Subsidiaries and any one or more lenders from time to time parties thereto, as
the same may be amended, extended, increased, renewed, restated, supplemented or
otherwise modified (in whole or in part, and without limitation as to amount,
terms, conditions, covenants and other provisions) from time to time and any
agreement or agreements governing Indebtedness incurred to refinance, replace,
restructure or refund in whole or in part the borrowings and then maximum
commitments under the New Revolving Credit Facility or such agreement (whether
with the original administrative agent and lenders or other lenders or other
agents and lenders or otherwise and whether provided under the original credit
facility or other credit agreements or otherwise). The Company shall promptly
notify the Trustee of any such refunding, replacement, restructuring or
refinancing of the New Revolving Credit Facility.
"NON-U.S. PERSON" means a Person who is not a U.S. person, as
defined in Regulation S.
"NOTES" means the securities issued by the Company, including,
without limitation, the Private Exchange Notes, if any, and the Exchange Notes,
treated as a single class of securities, as amended or supplemented from time to
time in accordance with the terms hereof, that are issued pursuant to this
Indenture.
"OBLIGATIONS" means, with respect to any Indebtedness, any
principal, premium, interest, penalties, fees, indemnifications, reimbursements,
damages and other expenses payable under the documentation governing such
Indebtedness.
"OFFERING" means the offering of the Notes as described in the
offering Memorandum.
"OFFERING MEMORANDUM" means the Offering Memorandum dated August 5,
1997 pursuant to which the Notes issued on the Issue Date were offered.
<PAGE> 22
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"OFFICER", with respect to any Person (other than the Trustee),
means the Chairman of the Board of Directors, Chief Executive Officer, Chief
Operating Officer, the President, any Vice President and the Chief Financial
officer, the Treasurer or the Secretary of such Person, or any other officer of
such Person designated by the Board of Directors of such Person and set forth in
an Officers' Certificate delivered to the Trustee.
"OFFICERS' CERTIFICATE" means, with respect to any Person, a
certificate signed by the Chairman of the Board, the Chief Executive Officer,
the Deputy Chairman of the Board, the President, the Chief Operating Officer or
any Vice President and the Chief Financial Officer or any Treasurer of such
Person that shall comply with applicable provisions of this Indenture.
"OPINION OF COUNSEL" means a written opinion reasonably satisfactory
in form and substance to the Trustee from legal counsel which counsel is
reasonably acceptable to the Trustee, stating the matters required by Section
12.05 and delivered to the Trustee.
"PARENT" means Letitia Corporation, a Delaware corporation and the
Company's sole stockholder.
"PERMITTED HOLDERS" means (a) Parent, (b) Laurence S. Levy, (c)
Clifford Press and (d) any spouse and any trust, holding company, or similar
entity established by and or controlled by either or both of Laurence S. Levy
and Clifford Press for the principal benefit of any of them or their spouses,
lineal descendants or other family members.
"PERMITTED INDEBTEDNESS" means:
(i) Indebtedness of the Company or any
Restricted Subsidiary arising under or in connection
with the New Revolving Credit Facility in an amount not
to exceed $25,000,000 less any mandatory prepayments
actually made thereunder (to the extent, in the case of
payments of revolving credit indebtedness, that the
corresponding commitments have been permanently
reduced);
(ii) Indebtedness under the Notes and
the Guarantees, if applicable;
(iii) (A) Indebtedness of foreign Restricted
Subsidiaries outstanding under one or more working
capital facilities not to exceed the aggregate of 85% of
eligible accounts receivable and 60% of eligible
inventory of each such
<PAGE> 23
-15-
Restricted Subsidiary and (B) additional Indebtedness of
such Restricted Subsidiaries not to exceed $2,000,000 in
aggregate principal amount outstanding at any one time;
(iv) Indebtedness not covered by any
other clause of this definition which is outstanding on
the date of this Indenture;
(v) Indebtedness of the Company to any
Restricted Subsidiary and Indebtedness of any Restricted
Subsidiary to the Company or another Restricted
Subsidiary;
(vi) Purchase money Indebtedness and
Capitalized Lease Obligations incurred to acquire
property in the ordinary course of business which
Indebtedness and Capitalized Lease Obligations do not in
the aggregate exceed $5,000,000;
(vii) Interest Rate Agreements;
(viii) additional Indebtedness of the
Company not to exceed $2,000,000 in principal amount
outstanding at any time; and
(ix) Refinancing Indebtedness.
"PERMITTED INVESTMENTS" means, for any Person, Investments made on
or after the date of this Indenture consisting of:
(i) Investments by the Company, or by a
Restricted Subsidiary thereof, in the Company or a
Restricted Subsidiary, PROVIDED that any such Investment
is permitted under clauses (a), (b) or (c) of Section
4.14;
(ii) Temporary Cash Investments;
(iii) Investments by the Company, or by a
Restricted Subsidiary thereof, in a Person, if as a
result of such Investment (a) such Person becomes a
Restricted Subsidiary of the Company or (b) such Person
is merged, consolidated or amalgamated with or into, or
transfers or conveys substantially all of its assets to,
or is liquidated into, the Company or a Restricted
Subsidiary thereof;
(iv) Existing Investments in a
Restricted Subsidiary which becomes an Unrestricted
Subsidiary after a Qualified
<PAGE> 24
-15-
Subsidiary IPO; PROVIDED, HOWEVER, that investments by
the Company in a Restricted Subsidiary in anticipation
of a Qualified Subsidiary IPO shall not be considered
Permitted Investments;
(v) reasonable and customary loans made
to employees in connection with their relocation not to
exceed $1,000,000 in the aggregate at any one time
outstanding;
(vi) an Investment that is made by the
Company or a Restricted Subsidiary thereof in the form
of any stock, bonds, notes, debentures, partnership or
joint venture interests or other securities that are
issued by a third party to the Company or Restricted
Subsidiary solely as partial consideration for the
consummation of an Asset Sale that is otherwise
permitted under Section 4.10; and
(vii) other Investments that do not
exceed $1,000,000 at any time outstanding plus, the
aggregate amount returned in cash on or with respect to
Investments made pursuant to this clause (vii) not to
exceed the aggregate amount invested by the Company
therein.
"PERMITTED LIENS" means (i) Liens on property or assets of, or any
shares of stock of or secured debt of, any corporation existing at the time such
corporation becomes a Restricted Subsidiary of the Company or at the time such
corporation is merged into the Company or any of its Restricted Subsidiaries;
PROVIDED that such Liens are not incurred in connection with, or in
contemplation of, such corporation becoming a Restricted Subsidiary of the
Company or merging into the Company or any of its Restricted Subsidiaries, (ii)
Liens securing Refinancing Indebtedness; PROVIDED that any such Lien does not
extend to or cover any Property, shares or debt other than the Property, shares
or debt securing the Indebtedness so refunded, refinanced or extended, (iii)
Liens in favor of the Company or any of its Restricted Subsidiaries, (iv) Liens
securing industrial revenue bonds, (v) Liens to secure Purchase Money
Indebtedness that are otherwise permitted under this Indenture; PROVIDED that
(a) any such Lien is created solely for the purpose of securing Indebtedness
representing, or incurred to finance, refinance or refund, the cost (including
sales and excise taxes, installation and delivery charges and other direct costs
of, and other direct expenses paid or charged in connection with, such purchase
or construction) of such Property, (b) the principal amount of the Indebtedness
secured by such Lien does not exceed 100% of such costs, and (c) such Lien does
not extend to or cover
<PAGE> 25
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any Property other than such item of Property and any improvements on such item,
(vi) statutory liens or landlords', carriers', warehouseman's, mechanics',
suppliers', materialmen's, repairmen's or other like Liens arising in the
ordinary course of business which do not secure any Indebtedness and with
respect to amounts not yet delinquent or being contested in good faith by
appropriate proceedings, if a reserve or other appropriate provision, if any, as
shall be required in conformity with GAAP shall have been made therefor, (vii)
other Liens securing obligations incurred in the ordinary course of business
which obligations do not exceed $1,000,000 in the aggregate at any one time
outstanding, (viii) any extensions, substitutions, replacements or renewals of
the foregoing, (ix) Liens for taxes, assessments or governmental charges that
are being contested in good faith by appropriate proceedings, (x) Liens securing
Capitalized Lease Obligations permitted to be incurred under clause (v) of the
definition of "Permitted Indebtedness"; PROVIDED that such Lien does not extend
to any property other than that subject to the underlying lease; (xi) Liens to
secure Indebtedness consisting of Interest Rate Agreements; and (xii) Liens
securing the New Revolving Credit Facility.
"PERSON" means any individual, corporation, limited liability
company, partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government (including any agency or political
subdivision thereof).
"PHI" means PHI Acquisition Holdings, Inc.
"PHI ACQUISITION" means the acquisition of PHI by the Company and
Lauren Corporation pursuant to the Merger Agreement.
"PHYSICAL NOTES" means certificated Notes in registered form in
substantially the form set forth in EXHIBIT A.
"PLEDGE AGREEMENT" means the pledge agreement between the Company
and the Trustee dated August 8, 1997, relating to the pledge of the Intercompany
Notes by the Company to secure its Obligations hereunder.
"PREFERRED STOCK" means any Capital Stock of a Person, however
designated, which entitles the holder thereof to a preference with respect to
dividends, distributions or liquidation proceeds of such Person over the holders
of other Capital Stock issued by such Person.
"PRIVATE EXCHANGE" has the meaning set forth in the Registration
Rights Agreement.
<PAGE> 26
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"PRIVATE EXCHANGE NOTES" has the meaning set forth in the
Registration Rights Agreement.
"PRIVATE PLACEMENT LEGEND" means the legend initially set forth on
the Rule 144A Notes in the form set forth in EXHIBIT B.
"PROPERTY" of any Person means all types of real, personal,
tangible, intangible or mixed property owned by such Person whether or not
included in the most recent consolidated balance sheet of such Person and its
Subsidiaries under GAAP.
"PURCHASE AGREEMENT" means the Securities Purchase Agreement dated
as of August 5, 1997 by and among the Company and the Initial Purchaser.
"PURCHASE MONEY INDEBTEDNESS" means any Indebtedness incurred in the
ordinary course of business by a Person to finance the cost (including the cost
of construction) of an item of Property, the principal amount of which
Indebtedness does not exceed the sum of (i) 100% of such cost and (ii)
reasonable fees and expenses of such Person incurred in connection therewith.
"QUALIFIED EQUITY OFFERING" means a public offering by the Company
or Parent of shares of its common stock (however designated and whether voting
or non-voting) and any and all rights, warrants or options to acquire such
common stock.
"QUALIFIED INSTITUTIONAL BUYER" or "QIB", shall have the meaning
specified in Rule 144A promulgated under the Securities Act.
"QUALIFIED SUBSIDIARY IPO" means a public offering by a Restricted
Subsidiary that is an obligor under an intercompany Note of shares of its
Capital Stock (however designated and whether voting or non-voting) and any and
all rights, warrants or options to acquire such Capital Stock.
"REDEEMABLE DIVIDEND" means, for any dividend or distribution with
regard to Disqualified Capital Stock, the quotient of the dividend or
distribution divided by the difference between one and the maximum statutory
federal income tax rate (expressed as a decimal number between 1 and 0) then
applicable to the issuer of such Disqualified Capital Stock.
"REDEMPTION DATE" when used with respect to any Note to be redeemed
means the date fixed for such redemption pursuant to the terms of the Notes.
<PAGE> 27
-19-
"REFINANCING INDEBTEDNESS" means Indebtedness that refunds,
refinances or extends any Indebtedness of the Company or any Restricted
Subsidiary outstanding on the Issue Date or other Indebtedness permitted to be
incurred by the Company or its Restricted Subsidiaries pursuant to the terms of
this Indenture, but only to the extent that (i) the Refinancing Indebtedness is
subordinated to the Notes to at least the same extent as the Indebtedness being
refunded, refinanced or extended, if at all, (ii) the Refinancing Indebtedness
is scheduled to mature either (a) no earlier than the Indebtedness being
refunded, refinanced or extended, or (b) after the maturity date of the Notes,
(iii) the portion, if any, of the Refinancing Indebtedness that is scheduled to
mature on or prior to the maturity date of the Notes has a weighted average life
to maturity at the time such Refinancing Indebtedness is incurred that is equal
to or greater than the weighted average life to maturity of the portion of the
Indebtedness being refunded, refinanced or extended that is scheduled to mature
on or prior to the maturity date of the Notes, (iv) such Refinancing
Indebtedness is in an aggregate principal amount that is equal to or less than
the sum of (a) the aggregate principal amount then outstanding under the
Indebtedness being refunded, refinanced or extended, (b) the amount of accrued
and unpaid interest, if any, and premiums owed, if any, not in excess of
preexisting prepayment provisions on such Indebtedness being refunded,
refinanced or extended and (c) the amount of customary fees, expenses and costs
related to the incurrence of such Refinancing Indebtedness, and (v) such
Refinancing Indebtedness is incurred by the same Person that initially incurred
the Indebtedness being refunded, refinanced or extended, except that the Company
may incur Refinancing Indebtedness to refund, refinance or extend Indebtedness
of any Wholly-Owned Subsidiary of the Company and any Wholly-Owned Subsidiary of
the Company which becomes a Guarantor may incur Refinancing Indebtedness to
refund, refinance or extend Indebtedness of the Company.
"REGISTRATION RIGHTS AGREEMENT" means the Notes Registration Rights
Agreement dated as of the Issue Date by and between the Company and the Initial
Purchasers, as amended from time to time.
"REGULATION S" means Regulation S promulgated under the Securities
Act.
"RESPONSIBLE OFFICER" when used with respect to the Trustee, means
an officer or assistant officer assigned to the corporate trust department of
the Trustee (or any successor group of the Trustee) with direct responsibility
for the administration of this Indenture and also means, with respect to a
particular corporate trust matter, any other officer to
<PAGE> 28
-20-
whom such matter is referred because of his knowledge of and familiarity with
the particular subject.
"RESTATED ARTICLES" means the Restated Articles of Organization of
the Company filed with the Secretary of the Commonwealth of Massachusetts, as
may be amended from time to time.
"RESTRICTED NOTE" has the same meaning as "Restricted Security" set
forth in Rule 144(a)(3) promulgated under the Securities Act; PROVIDED, that the
Trustee shall be entitled to request and conclusively rely upon an Opinion of
Counsel with respect to whether any Note is a Restricted Note.
"RESTRICTED PAYMENT" means any of the following: (i) the declaration
or payment of any dividend or any other distribution or payment on Capital Stock
of the Company or any Restricted Subsidiary of the Company or any payment made
to the direct or indirect holders (in their capacities as such) of Capital Stock
of the Company or any Restricted Subsidiary of the Company (other than (x)
dividends or distributions payable solely in Capital Stock (other than
Disqualified Capital Stock) or in options, warrants or other rights to purchase
Capital Stock (other than Disqualified Capital Stock), and (y) in the case of
Subsidiaries of the Company, dividends or distributions payable to the Company
or to a Wholly-Owned Subsidiary of the Company), (ii) the purchase, redemption
or other acquisition or retirement for value of any Capital Stock of the Company
or any of its Restricted Subsidiaries (other than Capital Stock owned by the
Company or a Wholly-Owned Subsidiary of the Company, excluding Disqualified
Capital Stock), (iii) the making of any principal payment on, or the purchase,
defeasance, repurchase, redemption or other acquisition or retirement for value,
prior to any scheduled maturity, scheduled repayment or scheduled sinking fund
payment, of any Indebtedness which is subordinated in right of payment to the
Notes (other than subordinated Indebtedness acquired in anticipation of
satisfying a scheduled sinking fund obligation, principal installment or final
maturity, in each case due within one year of the date of acquisition), (iv) the
making of any Investment or guarantee of any Investment in any Person other than
a Permitted Investment, (v) any designation of a Restricted Subsidiary as an
Unrestricted Subsidiary on the basis of the amount of the Net Investment by the
Company therein (other than in connection with a Qualified Subsidiary IPO), (vi)
the redemption of or the making of any Contingent Interest Payments, (vii)
forgiveness of any Indebtedness of an Affiliate of the Company to the Company or
a Restricted Subsidiary and (viii) the exchange of Warrants for Subsidiary
Warrants in connection with a Qualified Subsidiary IPO. For purposes of
determining the amount expended for Restricted
<PAGE> 29
-21-
Payments, cash distributed or invested shall be valued at the face amount
thereof and property other than cash shall be valued at its fair market value.
"RESTRICTED SUBSIDIARY" means a Subsidiary of the Company other than
an Unrestricted Subsidiary and includes all of the direct and indirect
Subsidiaries of the Company existing as of the Issue Date. The Board of
Directors of the Company may designate any Unrestricted Subsidiary or any Person
to be acquired that is to become a Subsidiary as a Restricted Subsidiary if
immediately after giving effect to such action (and treating any Acquired
Indebtedness as having been incurred at the time of such action), the Company
could have incurred at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) pursuant to Section 4.06 of this Indenture, PROVIDED,
HOWEVER that the foregoing Indebtedness incurrence condition shall not apply to
the designation as a Restricted Subsidiary of the Subsidiary ("Anderson
Ireland") to which is to be transferred the assets and liabilities of the
Fermoy, Ireland division of HIVEC, B.V. that is associated with the business of
Anderson.
"ROBICON" means Halmar Robicon Group, Inc., a Pennsylvania
corporation.
"RULE 144" means Rule 144 promulgated under the Securities Act.
"RULE 144A" means Rule 144A promulgated under the Securities Act.
"SALE AND LEASE-BACK TRANSACTION" means any arrangement with any
Person providing for the leasing by the Company or any Restricted Subsidiary of
the Company of any real or tangible personal Property, which Property has been
or is to he sold or transferred by the Company or such Restricted Subsidiary to
such Person in contemplation of such leasing.
"S&P" means Standard & Poor's Ratings Services and its successors.
"SEC" means the United States Securities and Exchange Commission as
constituted from time to time or any successor performing substantially the same
functions.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SERIES A PREFERRED STOCK" means the 12 1/2% Senior Redeemable
Preferred Stock of the Company, whether designated as "Series A Senior
<PAGE> 30
-22-
RedeemabLE Preferred Stock" or "Series A Exchange Senior Redeemable Preferred
Stock" in the Restated Articles.
"SIGNIFICANT RESTRICTED SUBSIDIARY" means any Restricted Subsidiary
of the Company that satisfies the criteria for a "significant subsidiary" set
forth in Rule 1.02(v) of Regulation S-X under the Securities Act.
"SUBORDINATED INDEBTEDNESS" means any Indebtedness of the Company
which is expressly subordinated in right of payment to the Notes.
"SUBSIDIARY" of any specified Person means any corporation,
partnership, joint venture, association or other business entity, whether now
existing or hereafter organized or acquired, (i) in the case of a corporation,
of which more than 50% of the total voting power of the Capital Stock entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors, officers or trustees thereof is held by such first named Person or
any of its Subsidiaries; or (ii) in the case of a partnership, joint venture,
association or other business entity, with respect to which such first named
Person or any of its Subsidiaries has the power to direct or cause the direction
of the management and policies of such entity by contract or otherwise or if in
accordance with generally accepted accounting principles such entity is
consolidated with the first named Person for financial statement purposes.
"SUBSIDIARY WARRANTS" means warrants of a Subsidiary that may be
issued in exchange for the Warrants in connection with a Qualified Subsidiary
IPO.
"TEMPORARY CASH INVESTMENTS" means (i) Investments in marketable,
direct obligations issued or guaranteed by the United States of America, or of
any governmental agency or political subdivision thereof, maturing within 365
days of the date of purchase; (ii) Investments in certificates of deposit issued
by a bank organized under the laws of the United States of America or any state
thereof or the District of Columbia, in each case having capital, surplus and
undivided profits totaling more than $500,000,000 and rated at least A by
Standard & Poor's Corporation and A-2 by Moody's Investors Service, Inc.,
maturing within 365 days of purchase; or (iii) Investments not exceeding 365
days in duration in money market funds that invest substantially all of such
funds' assets in the Investments described in the preceding clauses (i) and
(ii).
<PAGE> 31
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"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code secs.
77aaa-77bbbb) as in effect on the date of this Indenture (except as provided in
Section 8.03 hereof).
"TRUSTEE" means the party named as such in this Indenture until a
successor replaces it pursuant to this Indenture and thereafter means the
successor.
"UNRESTRICTED SUBSIDIARY" means (a) any Subsidiary of an
Unrestricted Subsidiary and (b) any Subsidiary of the Company which is
classified after the Issue Date as an Unrestricted Subsidiary by a vote adopted
by the Board of Directors of the Company; PROVIDED that, other than a Restricted
Subsidiary which may be classified as an Unrestricted Subsidiary upon
consummation of a Qualified Subsidiary IPO in compliance with Section 4.22, a
Subsidiary may be so classified as an Unrestricted Subsidiary only if (x) the
Restricted Subsidiary to be so designated has total assets of $1,000 or less or
(y) immediately after giving effect to such designation, the Company could incur
at least $1.00 of additional Indebtedness pursuant to the first paragraph of
Section 4.06; and PROVIDED, FURTHER, that the Company could make a Restricted
Payment in an amount equal to the greater of the fair market value (as
determined by the Board of Directors in good faith) and book value of such
Restricted Subsidiary pursuant to Section 4.09 and such amount is thereafter
treated as a Restricted Payment for the purpose of calculating the aggregate
amount available for Restricted Payments thereunder. The Trustee shall be given
prompt notice by the Company of each resolution adopted by the Board of
Directors of the Company under this provision, together with a copy of each such
resolution adopted.
"U.S. GOVERNMENT OBLIGATIONS" means (a) securities that are direct
obligations of the United States of America for the payment of which its full
faith and credit are pledged or (b) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America, the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case, are
not callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank (as defined in Section 3(a)(2) of
the Securities Act) as custodian with respect to any such U.S. Government
Obligation or a specific payment of principal of or interest on any such U.S.
Government Obligation held by such custodian for the account of the holder of
such depository receipt; PROVIDED that (except as required by law) such
custodian is not authorized to make any deduction from the amount payable to the
holder of such depository receipt from any amount received by the custodian in
respect of the U.S.
<PAGE> 32
-24-
Government Obligation or a specific payment of principal or interest on any such
U.S. Government obligation held by such custodian for the account of the holder
of such depository receipt.
"WARRANTS" means the warrants issued in connection with the Series A
Preferred Stock.
"WHOLLY-OWNED RESTRICTED SUBSIDIARY" means any Restricted
Subsidiary, all of the outstanding voting securities (other than directors,
qualifying shares) of which are owned, directly or indirectly, by the Company.
Section 1.02. OTHER DEFINITIONS.
The definitions of the following terms may be found in the sections
indicated as follows:
Term Defined in Section
- ---- ------------------
"Affiliate Transaction".................................... 4.11
"Agent Members"............................................ 2.15(a)
"Bankruptcy Law"........................................... 6.01
"Business Day"............................................. 12.07
"CEDEL".................................................... 2.15(a)
"Change of Control Offer".................................. 4.19
"Change of Control Payment Date"........................... 4.19
"Change of Control Purchase Price"......................... 4.19
"Covenant Defeasance"...................................... 9.03
"Custodian"................................................ 6.01
"Euroclear"................................................ 2.15(a)
"Event of Default"......................................... 6.01
"Excess Proceeds Offer".................................... 4.10
"Global Notes"............................................. 2.15
<PAGE> 33
-25-
"Legal Defeasance"......................................... 9.02
"Legal Holiday"............................................ 12.07
"Offer Period"............................................. 4.10
"Other Notes".............................................. 2.01
"Paying Agent"............................................. 2.03
"Purchase Date"............................................ 4.10
"Registrar"................................................ 2.03
"Regulation S Global Notes"................................ 2.15(a)
"Regulation S Notes"....................................... 2.01
"Reinvestment Date"........................................ 4.10
"Restricted Global Note"................................... 2.15(a)
"Restricted Period"........................................ 2.15(1)
"Rule 144A Notes".......................................... 2.01
Section 1.03. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the
portion of such provision required to be incorporated herein in order for this
Indenture to he qualified under the TIA is incorporated by reference in and made
a part of this Indenture. The following TIA terms used in this Indenture have
the following meanings:
"COMMISSION" means the SEC.
"INDENTURE SECURITIES" means the Notes.
"INDENTURE SECURITYHOLDER" means a Holder or Noteholder.
"INDENTURE TO BE QUALIFIED" means this Indenture.
"INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means the Trustee.
<PAGE> 34
-26-
"OBLIGOR ON THE INDENTURE SECURITIES" means the Company, the
Guarantors or any other obligor on the Notes.
All other terms used in this Indenture that are defined by the TIA,
defined in the TIA by reference to another statute or defined by SEC rule have
the meanings therein assigned to them.
Section 1.04. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it herein,
whether defined expressly or by reference;
(2) an accounting term not otherwise defined has the
meaning assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the
plural include the singular;
(5) words used herein implying any gender shall apply to
both genders; and
(6) whenever in this Indenture there is mentioned, in
any context, principal, interest or any other amount payable under
or with respect to any Note, such mention shall be deemed to include
mention of the payment of Additional Interest to the extent that, in
such context, Additional Interest is, was or would be payable in
respect thereof.
ARTICLE 2
THE NOTES
Section 2.01. FORM AND DATING.
The Notes and the Trustee's certificate of authentication with
respect thereto shall be substantially in the form set forth in EXHIBIT A, which
is incorporated in and forms a part of this Indenture. The Notes may have
notations, legends or endorsements required by law, rule or usage to which the
Company is subject. Without limiting the generality of the foregoing, Notes
offered and sold to Qualified Institutional Buyers in
<PAGE> 35
-27-
reliance on Rule 144A ("RULE 144A NOTES") shall bear the legend and include the
form of assignment set forth in EXHIBIT B, Notes offered and sold in offshore
transactions in reliance on Regulation S ("REGULATION S NOTES") shall bear the
legend and include the form of assignment set forth in EXHIBIT C, and Notes
offered and sold to Institutional Accredited Investors in transactions exempt
from registration under the Securities Act ("OTHER NOTES") shall be represented
by a Physical Note hearing the Private Placement Legend. Each Note shall be
dated the date of its authentication and show the date of its authentication.
The terms and provisions contained in the Notes and set forth on
EXHIBIT A shall constitute, and are expressly made, a part of this Indenture
and, to the extent applicable, the Company and the Trustee, by their execution
and delivery of this Indenture, expressly agree to such terms and provisions and
agree to be bound thereby.
The Notes may be presented for registration of transfer and exchange
at the offices of the Registrar.
Section 2.02. EXECUTION AND AUTHENTICATION.
Two Officers shall sign, or one Officer shall sign and one Officer
(each of whom shall, in each case, have been duly authorized by all requisite
corporate actions) shall attest to, the Notes for the Company by manual or
facsimile signature.
If an Officer whose signature is on a Note was an Officer at the
time of such execution but no longer holds that office at the time the Trustee
authenticates the Note, the Note shall be valid nevertheless.
No Note shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose unless there appears on such Note a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any Note
shall be conclusive evidence, and the only evidence, that such Note has been
duly authenticated and delivered hereunder. Notwithstanding the foregoing, if
any Note shall have been authenticated and delivered hereunder but never issued
and sold by the Company, and the Company shall deliver such Note to the Trustee
for cancellation as provided in Section 2.11, for all purposes of this Indenture
such Note shall be deemed never to have been authenticated and delivered
hereunder and shall never be entitled to the benefits of this Indenture.
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The Trustee or an authenticating agent shall authenticate Notes for
original issue in the aggregate principal amount of up to $135,000,000 upon a
Company Request. The aggregate principal amount of Notes outstanding at any time
may not exceed such amount except as provided in Section 2.07 hereof. Upon
receipt of the Company Request and an Officers' Certificate certifying that the
registration statement relating to the exchange offer specified in the
Registration Rights Agreement is effective and that the conditions precedent to
a Private Exchange thereunder have been met, the Trustee shall authenticate an
additional series of Notes in an aggregate principal amount not to exceed
$135,000,000 for issuance in exchange for all Notes previously issued pursuant
to an exchange offer registered under the Securities Act or pursuant to a
Private Exchange. Exchange Notes or Private Exchange Notes may have such
distinctive series designations and such changes in the form thereof as are
specified in the Company Request referred to in the preceding sentence. The
Exchange Notes and Private Exchange Notes shall be issuable only in registered
form without coupons and only in denominations of $1,000 and integral multiples
thereof.
The Trustee may appoint an authenticating agent reasonably
acceptable to the Company to authenticate the Notes. Unless otherwise provided
in the appointment, an authenticating agent may authenticate the Notes whenever
the Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with the Company and Affiliates of the Company.
Each Paying Agent is designated as an authenticating agent for purposes of this
Indenture.
The Notes shall be issuable only in registered form without coupons
in denominations of $1,000 and any integral multiple thereof.
Section 2.03. REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency (which shall be
located in the Borough of Manhattan in The City of New York, State of New York)
where Notes may be presented for registration of transfer or for exchange (the
"REGISTRAR"), and an office or agency where Notes may be presented for payment
(the "PAYING AGENT") and an office or agency where notices and demands to or
upon the Company, if any, in respect of the Notes and this Indenture may be
served. The Registrar shall keep a register of the Notes and of their transfer
and exchange. The Company may have one or more additional Paying Agents. The
term "Paying
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Agent" includes any additional Paying Agent. Neither the Company nor any
Affiliate thereof may act as Paying Agent.
The Company shall enter into an appropriate agency agreement with
any Agent not a party to this Indenture, which shall incorporate the provisions
of the TIA. The agreement shall implement the provisions of this Indenture that
relate to such Agent. The Company shall notify the Trustee of the name and
address of any such Agent. If the Company fails to maintain a Registrar or
Paying Agent, or fails to give the foregoing notice, the Trustee shall act as
such and shall be entitled to appropriate compensation in accordance with
Section 7.07.
The Company initially appoints the Trustee as Registrar, Paying
Agent and agent for service of notices and demands in connection with the Notes
and this Indenture.
Section 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.
Each Paying Agent shall hold in trust for the benefit of the
Noteholders or the Trustee all money held by the Paying Agent for the payment of
principal of or premium or interest on the Notes (whether such money has been
paid to it by the Company or any other obligor on the Notes), and the Company
and the Paying Agent shall notify the Trustee of any default by the Company (or
any other obligor on the Notes) in making any such payment. Money held in trust
by the Paying Agent need not be segregated except as required by law and in no
event shall the Paying Agent be liable for any interest on any money received by
it hereunder. The Company at any time may require the Paying Agent to pay all
money held by it to the Trustee and account for any funds disbursed and the
Trustee may at any time during the continuance of any Event of Default specified
in Section 6.01 (1) or (2), upon written request to the Paying Agent, require
such Paying Agent to pay forthwith all money so held by it to the Trustee and to
account for any funds disbursed. Upon making such payment, the Paying Agent
shall have no further liability for the money delivered to the Trustee.
Any money deposited with any Paying Agent, or then held by the
Company or a Subsidiary in trust for the payment of principal or interest on any
Note and remaining unclaimed for two years after such principal and interest has
become due and payable shall be paid to the Company at its request, or, if then
held by the Company or a Subsidiary, shall be discharged from such trust; and
the Noteholders shall thereafter, as unsecured general creditors, look only to
the Company for payment thereof, and all liability of the Paying Agent with
respect to such money,
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and all liability of the Company or such Subsidiary as trustee thereof, shall
thereupon cease.
Section 2.05. NOTEHOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
the Noteholders. If the Trustee is not the Registrar, the Company shall furnish
to the Trustee at least five Business Days before each Interest Payment Date,
and at such other times as the Trustee may request in writing, a list in such
form and as of such date as the Trustee may reasonably require of the names and
addresses of the Noteholders.
Section 2.06. TRANSFER AND EXCHANGE.
Subject to Sections 2.15 and 2.16, when Notes are presented to the
Registrar with a request from the Holder of such Notes to register a transfer or
to exchange them for an equal principal amount of Notes of other authorized
denominations, the Registrar shall register the transfer as requested. Every
Note presented or surrendered for registration of transfer or exchange shall be
duly endorsed or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Registrar, duly executed by the Holder
thereof or his attorneys duly authorized in writing. To permit registrations of
transfers and exchanges, the Company shall issue and execute and the Trustee
shall authenticate new Notes (and the Guarantors shall execute the guarantee
thereon) evidencing such transfer or exchange at the Registrar's request. No
service charge shall be made to the Noteholder for any registration of transfer
or exchange. The Company may require from the Noteholder payment of a sum
sufficient to cover any transfer taxes or other governmental charge that may be
imposed in relation to a transfer or exchange, but this provision shall not
apply to any exchange pursuant to Section 2.02, 2.10, 3.06, 4.10, 4.19 or 8.05
(in which events the Company shall be responsible for the payment of such
taxes). The Registrar shall not be required to exchange or register a transfer
of any Note for a period of 15 days immediately preceding the mailing of notice
of redemption of Notes to be redeemed or of any Note selected, called or being
called for redemption except the unredeemed portion of any Note being redeemed
in part.
Any Holder of the Global Note shall, by acceptance of such Global
Note, agree that transfers of the beneficial interests in such Global Note may
be effected only through a book entry system maintained by the Holder of such
Global Note (or its agent), and that ownership of a
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beneficial interest in the Global Note shall be required to be reflected in a
book entry.
Each Holder of a Note agrees to indemnify the Company and the
Trustee against any liability that may result from the transfer, exchange or
assignment of such Holder's Note in violation of any provision of this Indenture
and/or applicable U.S. Federal or state securities law.
Except as expressly provided herein, neither the Trustee nor the
Registrar shall have any duty to monitor the Company's compliance with or have
any responsibility with respect to the Company's compliance with any Federal or
state securities laws.
Section 2.07. REPLACEMENT NOTES.
If a mutilated Note is surrendered to the Registrar or the Trustee,
or if the Holder of a Note claims that the Note has been lost, destroyed or
wrongfully taken, the Company shall issue and the Trustee shall authenticate a
replacement Note (and the Guarantors shall execute the guarantee thereon) if the
Holder of such Note furnishes to the Company and the Trustee evidence reasonably
acceptable to them of the ownership and the destruction, loss or theft of such
Note. If required by the Trustee or the Company, an indemnity bond shall be
posted, sufficient in the judgment of both to protect the Company, the Trustee
or any Paying Agent from any loss that any of them may suffer if such Note is
replaced. The Company may charge such Holder for the Company's reasonable
out-of-pocket expenses in replacing such Note and the Trustee may charge the
Company for the Trustee's expenses (including, without limitation, attorneys,
fees and disbursements) in replacing such Note. Every replacement Note shall
constitute a contractual obligation of the Company. In the event any such
mutilated, lost, destroyed or wrongfully taken Note has become due and payable,
the Company in its discretion may pay such Note instead of issuing a new Note in
replacement thereof.
Section 2.08. OUTSTANDING NOTES.
The Notes outstanding at any time are all Notes that have been
authenticated by the Trustee except for (a) those canceled by it, (b) those
delivered to it for cancellation, (c) to the extent set forth in Sections 9.01
and 9.02, on or after the date on which the conditions set forth in Section 9.01
or 9.02 have been satisfied, those Notes theretofore authenticated and delivered
by the Trustee hereunder and (d) those described in this Section 2.08 as not
outstanding. Subject to Section 2.09, a Note does not
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cease to be outstanding because the Company or one of its Affiliates holds the
Note.
If a Note is replaced pursuant to Section 2.07 (other than a
mutilated Note surrendered for replacement), it ceases to be outstanding unless
the Trustee receives proof satisfactory to it that the replaced Note is held by
a bona fide purchaser in whose hands such Note is a legal, valid and binding
obligation of the Company. A mutilated Note ceases to be outstanding upon
surrender of such Note and replacement thereof pursuant to Section 2.07.
If the Paying Agent holds, in its capacity as such, on any Maturity
Date or on any optional redemption date, money sufficient to pay all accrued
interest and principal with respect to the Notes payable on that date and is not
prohibited from paying such money to the Holders thereof pursuant to the terms
of this Indenture, then on and after that date such Notes cease to be
outstanding and interest on them ceases to accrue.
Section 2.09. TREASURY NOTES.
In determining whether the Holders of the required principal amount
of Notes have concurred in any declaration of acceleration or notice of default
or direction, waiver or consent or any amendment, modification or other change
to this Indenture, Notes owned by the Company or any other Affiliate of the
Company shall be disregarded as though they were not outstanding, except that
for the purposes of determining whether the Trustee shall be protected in
relying on any such direction, waiver or consent or any amendment, modification
or other change to this Indenture, only Notes as to which a Responsible officer
of the Trustee has received an Officers' Certificate stating that such Notes are
so owned shall be so disregarded. Notes so owned which have been pledged in good
faith shall not be disregarded if the pledgee established to the satisfaction of
the Trustee the pledgee's right so to act with respect to the Notes and that the
pledgee is not the Company, a Guarantor, any other obligor on the Notes or any
of their respective Affiliates.
Section 2.10. TEMPORARY NOTES.
Until definitive Notes are prepared and ready for delivery, the
Company may prepare and the Trustee shall authenticate temporary Notes.
Temporary Notes shall be substantially in the form of definitive Notes but may
have variations that the Company considers appropriate for temporary Notes.
Without unreasonable delay, the Company shall prepare and the Trustee shall
authenticate definitive Notes in exchange
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for temporary Notes. Until such exchange, temporary Notes shall be entitled to
the same rights, benefits and privileges as definitive Notes.
Section 2.11. CANCELLATION.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Notes surrendered to them for registration of transfer, exchange or payment.
The Trustee shall cancel all Notes surrendered for registration of transfer,
exchange, payment, replacement or cancellation and shall (subject to the
record-retention requirements of the Exchange Act) destroy canceled Notes and
deliver a certificate of destruction thereof to the Company. The Company may not
reissue or resell, or issue new Notes to replace, Notes that the Company has
redeemed or paid, or that have been delivered to the Trustee for cancellation.
Section 2.12. DEFAULTED INTEREST.
If the Company defaults on a payment of interest on the Notes, it
shall pay the defaulted interest, plus (to the extent permitted by law) any
interest payable on the defaulted interest, in accordance with the terms hereof,
to the Persons who are Noteholders on a subsequent special record date, which
date shall be at least five Business Days prior to the payment date. The Company
shall fix such special record date and payment date in a manner satisfactory to
the Trustee. At least 15 days before such special record date, the Company shall
mail to each Noteholder a notice that states the special record date, the
payment date and the amount of defaulted interest, and interest payable on
defaulted interest, if any, to be paid. The Company may make payment of any
defaulted interest in any other lawful manner not inconsistent with the
requirements (if applicable) of any securities exchange on which the Notes may
be listed and, upon such notice as may be required by such exchange, if, after
written notice given by the Company to the Trustee of the proposed payment
pursuant to this sentence, such manner of payment shall be deemed practicable by
the Trustee.
Section 2.13. CUSIP NUMBER.
The Company in issuing the Notes may use a "CUSIP" number, and if
so, such CUSIP number shall be included in notices of redemption or exchange as
a convenience to Holders; PROVIDED, that any such notice may state that no
representation is made as to the correctness or accuracy of the CUSIP number
printed in the notice or on the Notes, and that reliance may be placed only on
the other identification numbers printed on the
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Notes. The Company shall promptly notify the Trustee of any such CUSIP number
used by the Company in connection with the issuance of the Notes and of any
change in the CUSIP number.
Section 2.14. DEPOSIT OF MONEYS.
Prior to 10:00 a.m., New York City time, on each Interest Payment
Date and Maturity Date, the Company shall have deposited with the Paying Agent
in immediately available funds money sufficient to make cash payments, if any,
due on such Interest Payment Date or Maturity Date, as the case may be, in a
timely manner which permits the Trustee to remit payment to the Holders on such
Interest Payment Date or Maturity Date, as the case may be. The principal and
interest on Global Notes shall be payable to the Depository or its nominee, as
the case may be, as the sole registered owner and the sole holder of the Global
Notes represented thereby. The principal and interest on Physical Notes shall be
payable at the office of the Paying Agent.
Section 2.15. BOOK-ENTRY PROVISIONS FOR GLOBAL NOTES.
(a) Rule 144A Notes initially shall be represented by one or more
notes in registered, global form without interest coupons (collectively, the
"RESTRICTED GLOBAL NOTE"). Regulation S Notes initially shall be represented by
one or more notes in registered, global form without interest coupons
(collectively, the "REGULATION S GLOBAL NOTE," and, together with the Restricted
Global Note and any other global notes representing Notes, the "GLOBAL NOTES").
The Global Notes initially shall (i) be registered in the name of the Depository
or the nominee of such Depository, in each case for credit to an account of an
Agent Member (or, in the case of the Regulation S Global Notes, of Euroclear
System ("EUROCLEAR") and Cedel Bank, S.A. ("CEDEL")), (ii) be delivered to the
Trustee as custodian for such Depository and (iii) bear legends as set forth in
EXHIBIT D.
Members of, or direct or indirect participants in, the Depository
("AGENT MEMBERS") shall have no rights under this Indenture with respect to any
Global Note held on their behalf by the Depository, or the Trustee as its
custodian, or under the Global Notes, and the Depository may be treated by the
Company, the Trustee and any agent of the Company or the Trustee as the absolute
owner of the Global Note for all purposes whatsoever. Notwithstanding the
foregoing, nothing herein shall prevent the Company, the Trustee or any agent of
the Company or the Trustee from giving effect to any written certification,
proxy or other authorization furnished by the Depository or impair, as between
the
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Depository and its Agent Members, the operation of customary practices governing
the exercise of the rights of a Holder of any Note.
((b) Transfers of Global Notes shall be limited to transfer in
whole, but not in part, to the Depository, its successors or their respective
nominees. Interests of beneficial owners in the Global Notes may be transferred
or exchanged for Physical Notes in accordance with the rules and procedures of
the Depository and the provisions of Section 2.16. In addition, a Global Note
shall be exchangeable for Physical Notes if (i) the Depository (x) notifies the
Company that it is unwilling or unable to continue as depository for such Global
Note and the Company thereupon fails to appoint a successor depository or (y)
has ceased to be a clearing agency registered under the Exchange Act, (ii) the
Company, at its option, notifies the Trustee in writing that it elects to cause
the issuance of such Physical Notes or (iii) there shall have occurred and be
continuing an Event of Default with respect to the Notes. In all cases, Physical
Notes delivered in exchange for any Global Note or beneficial interests therein
shall be registered in the names, and issued in any approved denominations,
requested by or on behalf of the Depository (in accordance with its customary
procedures).
(c) In connection with any transfer or exchange of a portion of the
beneficial interest in any Global Note to beneficial owners pursuant to
paragraph (b), the Registrar shall (if one or more Physical Notes are to be
issued) reflect on its books and records the date and a decrease in the
principal amount of the Global Note in an amount equal to the principal amount
of the beneficial interest in the Global Note to be transferred, and the Company
shall execute, and the Trustee shall upon receipt of a written order from the
Company authenticate and make available for delivery, one or more Physical Notes
of like tenor and amount.
(d) In connection with the transfer of Global Notes as an entirety
to beneficial owners pursuant to paragraph (b), the Global Notes shall be deemed
to be surrendered to the Trustee for cancellation, and the Company shall be
deemed to execute, and the Trustee shall be deemed to authenticate and deliver,
to each beneficial owner identified by the Depository in writing in exchange for
its beneficial interest in the Global Notes, an equal aggregate principal amount
of Physical Notes of authorized denominations.
(e) Any Physical Note constituting a Restricted Note delivered in
exchange for an interest in a Global Note pursuant to paragraph (b), (c) or (d)
shall, except as otherwise provided by paragraphs (a)(i)(x) and (c) of Section
2.16, bear the Private Placement Legend or, in the case of the
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Regulation S Global Note, the legend set forth in EXHIBIT Q, in each case,
unless the Company determines otherwise in compliance with applicable law.
(f) on or prior to the 40th day after the later of the commencement
of the offering of the Notes represented by the Regulation S Global Note and the
issue date of such Notes (such period through and including such 40th day, the
"RESTRICTED PERIOD"), a beneficial interest in a Regulation S Global Note may be
transferred to a Person who takes delivery in the form of an interest in the
corresponding Restricted Global Note only upon receipt by the Trustee of a
written certification from the transferor to the effect that such transfer is
being made (i)(a) to a Person whom the transferor reasonably believes is a
Qualified Institutional Buyer in a transaction meeting the requirements of Rule
144A or (b) pursuant to another exemption from the registration requirements
under the Securities Act which is accompanied by an opinion of counsel
reasonably satisfactory to the Trustee regarding the availability of such
exemption and (ii) in accordance with all applicable securities laws of any
state of the United States or any other jurisdiction.
(g) Beneficial interests in the Restricted Global Note may be
transferred to a Person who takes delivery in the form of an interest in the
Regulation S Global Note, whether before or after the expiration of the
Restricted Period, only if the transferor first delivers to the Trustee a
written certificate substantially in the form of EXHIBIT F hereto, to the effect
that such transfer is being made in accordance with Rule 903 or 904 of
Regulation S or Rule 144 (if available) and that, if such transfer occurs prior
to the expiration of the Restricted Period, the interest transferred will be
held immediately thereafter through Euroclear or CEDEL.
(h) Any beneficial interest in one of the Global Notes that is
transferred to a Person who takes delivery in the form of an interest in another
Global Note shall, upon transfer, cease to be an interest in such Global Note
and become an interest in such other Global Note and, accordingly, shall
thereafter be subject to all transfer restrictions and other procedures
applicable to beneficial interests in such other Global Note for as long as it
remains such an interest.
(i) The Holder of any Global Note may grant proxies and otherwise
authorize any Person, including Agent Members and Persons that may hold
interests through Agent Members, to take any action which a Holder is entitled
to take under this Indenture or the Notes.
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Section 2.16. SPECIAL TRANSFER PROVISIONS.
(a) TRANSFERS TO NON-QIB INSTITUTIONAL ACCREDITED INVESTORS
AND NON-U.S. PERSONS. The following provisions shall apply with respect to the
registration of any proposed transfer of a Note constituting a Restricted Note
to any Institutional Accredited Investor which is not a QIB or to any Non-U.S.
Person:
(i) the Registrar shall register the transfer of any
Note constituting a Restricted Note, whether or not such Note bears
the Private Placement Legend, if (x) the requested transfer is after
July 2, 1999 or such other date as such Note shall be freely
transferable under Rule 144 as certified in an Officers' Certificate
or (y) (1) in the case of a transfer to an Institutional Accredited
Investor which is not a QIB (excluding Non-U.S. Persons), the
proposed transferee has delivered to the Registrar a certificate
substantially in the form of EXHIBIT E hereto or (2) in the case of
a transfer to a Non-U.S. Person (including a QIB), the proposed
transferor has delivered to the Registrar a certificate
substantially in the form of EXHIBIT F hereto; PROVIDED that in the
case of a transfer of a Note bearing the Private Placement Legend
for a Note not bearing the Private Placement Legend, the Registrar
has received an Officers' Certificate authorizing such transfer; and
(ii) if the proposed transferor is an Agent Member
holding a beneficial interest in a Global Note, upon receipt by the
Registrar of (x) the certificate, if any, required by paragraph (i)
above and (y) instructions given in accordance with the Depository's
and the Registrar's procedures,
whereupon (a) the Registrar shall reflect on its books and records the date and
(if the transfer does not involve a transfer of outstanding Physical Notes) a
decrease in the principal amount of a Global Note in an amount equal to the
principal amount of the beneficial interest in a Global Note to be transferred,
and (b) the Company shall execute and the Trustee shall authenticate and make
available for delivery one or more Physical Notes of like tenor and amount.
(b) TRANSFERS TO QIBS. The following provisions shall apply
with respect to the registration of any proposed registration of transfer of a
Note constituting a Restricted Note to a QIB (excluding transfers to Non-U.S.
Persons):
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(i) the Registrar shall register the transfer if such
transfer is being made by a proposed transferor who has checked the
box provided for on such Holder's Note stating, or has otherwise
advised the Company and the Registrar in writing (substantially as
set forth in EXHIBIT B hereto), that the sale has been made in
compliance with the provisions of Rule 144A to a transferee who has
signed the certification provided for on such Holder's Note stating,
or has otherwise advised the Company and the Registrar in writing,
that it is purchasing the Note for its own account or an account
with respect to which it exercises sole investment discretion and
that it and any such account is a QIB within the meaning of Rule
144A, and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information
regarding the Company as it has requested pursuant to Rule 144A or
has determined not to request such information and that it is aware
that the transferor is relying upon its foregoing representations in
order to claim the exemption from registration provided by Rule
144A; and
(ii) if the proposed transferee is an Agent Member, and
the Notes to be transferred consist of Physical Notes which after
transfer are to be evidenced by an interest in the Global Note, upon
receipt by the Registrar of instructions given in accordance with
the Depository's and the Registrar's procedures, the Registrar shall
reflect on its books and records the date and an increase in the
principal amount of the Global Note in an amount equal to the
principal amount of the Physical Notes to be transferred, and the
Trustee shall cancel the Physical Notes so transferred.
(c) PRIVATE PLACEMENT LEGEND. Upon the registration of
transfer, exchange or replacement of Notes not bearing the Private Placement
Legend, the Registrar shall deliver Notes that do not bear the Private Placement
Legend. Upon the registration of transfer, exchange or replacement of Notes
bearing the Private Placement Legend, the Registrar shall deliver only Notes
that bear the Private Placement Legend unless (i) it has received the Officers'
Certificate required by paragraph (a)(i)(y) of this Section 2.16, (ii) there is
delivered to the Registrar an Opinion of Counsel reasonably satisfactory to the
Company and the Trustee to the effect that neither such legend nor the related
restrictions on transfer are required in order to maintain compliance with the
provisions of the Securities Act or (iii) such Note has been sold pursuant to an
effective registration statement under the Securities Act and the Registrar has
received an Officers, Certificate from the Company to such effect.
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(d) GENERAL. By its acceptance of any Note bearing the Private
Placement Legend, each Holder of such Note acknowledges the restrictions on
transfer of such Note set forth in this Indenture and in the Private Placement
Legend and agrees that it will transfer such Note only as provided in this
Indenture.
The Registrar shall retain for a period of two years copies of all
letters, notices and other written communications received pursuant to Section
2.15 or this Section 2.16. The Company shall have the right to inspect and make
copies of all such letters, notices or other written communications at any
reasonable time upon the giving of reasonable notice to the Registrar.
Section 2.17. COMPUTATION OF INTEREST.
Interest on the Notes shall he computed on the basis of a 360-day
year of twelve 30-day months.
ARTICLE 3
REDEMPTION
Section 3.01. ELECTION TO REDEEM; NOTICES TO TRUSTEE.
If the Company elects to redeem Notes pursuant to paragraph 5 of the
Notes, at least 45 days prior to the Redemption Date (unless a shorter notice
shall be agreed to in writing by the Trustee) but not more than 65 days before
the Redemption Date, the Company shall notify the Trustee in writing of the
Redemption Date, the principal amount of Notes to be redeemed and the redemption
price, and deliver to the Trustee an Officers' Certificate and an Opinion of
Counsel stating that such redemption will comply with the conditions contained
in paragraph 5 of the Notes.
If fewer than all the Notes are to be redeemed, the record date
relating to such redemption shall be selected by the Company and given to the
Trustee, which record date shall be not less than 15 days after the date of
notice to the Trustee (unless a shorter period shall be acceptable to the
Trustee). Any such notice may be canceled by notice in writing to the Trustee at
any time prior to notice of such redemption being mailed to any Holder and shall
thereby be void and of no effect.
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Section 3.02. SELECTION BY TRUSTEE OF NOTES TO BE REDEEMED.
In the event that fewer than all of the Notes are to be redeemed,
the Trustee shall select the Notes to be redeemed, if the Notes are listed on a
national securities exchange, in accordance with the rules of such exchange or,
if the Notes are not so listed, either on a pro rata basis or by lot, or such
other method as it shall deem fair and equitable; PROVIDED, HOWEVER, that if a
partial redemption is made with the proceeds of a public equity offering,
selection of the Notes or portion thereof for redemption shall be made by the
Trustee on a PRO RATA basis to the extent practical, unless such a method is
prohibited. The Trustee shall promptly notify the Company of the Notes selected
for redemption and, in the case of any Notes selected for partial redemption,
the principal amount thereof to be redeemed. The Trustee may select for
redemption portions of the principal of the Notes that have denominations larger
than $1,000. Notes and portions thereof the Trustee selects shall be redeemed in
amounts of $1,000 or whole multiples of $1,000. For all purposes of this
Indenture unless the context otherwise requires, provisions of this Indenture
that apply to Notes called for redemption also apply to portions of Notes called
for redemption.
Section 3.03. NOTICE OF REDEMPTION.
At least 30 days, and no more than 60 days, before a Redemption
Date, the Company shall mail, or cause to be mailed, a notice of redemption by
first-class mail to each Holder of Notes to be redeemed at his or her last
address as the same appears on the registry books maintained by the Registrar
pursuant to Section 2.03 hereof.
The notice shall identify the Notes to be redeemed (including the
CUSIP numbers thereof, if any) and shall state:
(1) the Redemption Date;
(2) the redemption price and the amount of
premium and accrued interest, if any, to be paid;
(3) if any Note is being redeemed in part, the
portion of the principal amount of such Note to be redeemed and
that, after the Redemption Date and upon surrender of such Note, a
new Note or Notes in principal amount equal to the unredeemed
portion will be issued;
(4) the name and address of the Paying Agent;
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(5) that Notes called for redemption must be
surrendered to the Paying Agent to collect the redemption price;
(6) that unless the Company defaults in
making the redemption payment, interest on Notes called for
redemption ceases to accrue on and after the Redemption Date;
(7) the provision of paragraph 5 of the Notes
pursuant to which the Notes called for redemption are being
redeemed;
(8) that no representation is made as to the
correctness or accuracy of the CUSIP number, if any, listed in such
notice or printed on the Notes; and
(9) the aggregate principal amount of Notes that
are being redeemed.
At the Company's written request made at least fifteen Business Days
prior to the date on which notice is to be given, the Trustee shall give the
notice of redemption in the Company's name and at the Company's sole expense. In
such event, the Company shall provide the Trustee with the information required
by this Section.
Section 3.04. EFFECT OF NOTICE OF REDEMPTION.
Once the notice of redemption described in Section 3.03 is mailed,
Notes called for redemption become due and payable on the Redemption Date and at
the redemption price, including premium, if any, and interest, if any, accrued
to the Redemption Date. Upon surrender to the Paying Agent, such Notes shall be
paid at the redemption price, including premium and interest, if any, accrued to
the Redemption Date, PROVIDED that if the Redemption Date is after a regular
record date and on or prior to the Interest Payment Date, the accrued interest
shall be payable to the Holder of the redeemed Notes registered on the relevant
record date, and PROVIDED, FURTHER, that if a Redemption Date is a Legal
Holiday, payment shall be made on the next succeeding Business Day and no
interest shall accrue for the period from such Redemption Date to such
succeeding Business Day.
Section 3.05. DEPOSIT OF REDEMPTION PRICE.
On or prior to 10:00 A.M., New York City time, on each Redemption
Date, the Company shall deposit with the Paying Agent in immediately
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available funds money sufficient to pay the redemption price of, including
premium and accrued interest, if any, on all Notes to be redeemed on that date
other than Notes or portions thereof called for redemption on that date which
have been delivered by the Company to the Trustee for cancellation.
On and after any Redemption Date, if money sufficient to pay the
redemption price of, including premium and accrued interest, if any, on, Notes
called for redemption shall have been made available in accordance with the
preceding paragraph, the Notes called for redemption will cease to accrue
interest and the only right of the Holders of such Notes will be to receive
payment of the redemption price of and, subject to the first proviso in Section
3.04, accrued and unpaid interest on such Notes to the Redemption Date. If any
Note surrendered for redemption shall not be so paid, interest will be paid,
from the Redemption Date until such redemption payment is made, on the unpaid
principal of the Note and any interest not paid on such unpaid principal, in
each case, at the rate and in the manner provided in the Notes.
Section 3.06. NOTES REDEEMED IN PART.
Upon surrender of a Note that is redeemed in part, the Trustee shall
authenticate for the Holder thereof a new Note equal in principal amount to the
unredeemed portion of the Note surrendered.
ARTICLE 4
COVENANTS
Section 4.01. PAYMENT OF NOTES.
The Company shall pay the principal of, premium (if any) and
interest (including all Additional Interest as provided in the Registration
Rights Agreement or, in the case of Notes issued subsequent to the Issue Date, a
registration rights agreement substantially identical to the Registration Rights
Agreement which shall be deemed to be included in the term "interest" for
purposes of this Indenture and the Notes) on the Notes on the dates and in the
manner provided in the Notes and this Indenture. An installment of principal or
interest shall be considered paid on the date it is due if the Trustee or Paying
Agent holds on that date money designated for and sufficient to pay such
installment. The Trustee shall have no obligation to determine whether any such
Additional Interest is due and payable or to determine the allocation of such
Additional Interest among the Holders. To the extent the Trustee is
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required to make distributions of such Additional Interest, the Company shall
provide the Trustee with written instructions as to the amount of the
distribution to be paid to each holder.
The Company shall pay interest on overdue principal (including
post-petition interest in a proceeding under any Bankruptcy Law), and overdue
interest, to the extent lawful, at the rate specified in the Notes.
Section 4.02. SEC REPORTS.
(a) The Company shall mail to each Holder of the Notes, and shall
file with the Trustee within 15 days after it is required to file the same with
the SEC, copies of the annual reports and quarterly reports or any amendments to
such reports and of the information, documents and other reports which it may be
required to file with the SEC pursuant to Section 13(a), 13(c) or 15(d) of the
Securities Exchange Act. The Company shall also comply with the other provisions
of TIA sec. 314(a).
(b) Whether or not the Company is required to file with the SEC such
reports and other information referred to in Section 4.2(a), the Company shall
furnish without cost to each Holder of the Notes and file with the SEC and the
Trustee (i) within 120 days after the end of each fiscal year of the Company,
(x) audited year-end consolidated financial statements (including a balance
sheet, income statement and statement of changes of cash flow) prepared in
accordance with GAAP and substantially in the form required under Regulation S-X
under the Securities Act and (y) the information described in Item 303 of
Regulation S-K under the Securities Act with respect to such period and (ii)
within 50 days after the end of each of the first three fiscal quarters of each
fiscal year of the Company, (x) unaudited quarterly consolidated financial
statements (including a balance sheet, income statement and statement of changes
of cash flows) prepared in accordance with GAAP and substantially in the form
required by Regulation S-X under the Securities Act and (y) the information
described in Item 303 of Regulation S-K under the Securities Act with respect to
such period.
Section 4.03. WAIVER OF STAY, EXTENSION OR USURY LAWS.
The Company covenants (to the extent that it may lawfully do so)
that it shall not at any time insist upon, or plead (as a defense or otherwise)
or in any manner whatsoever claim or take the benefit or advantage of, any stay
or extension law or any usury law or other law which would prohibit or forgive
the Company from paying all or any portion of the principal of, premium, if any,
and/or interest on the Notes
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as contemplated herein, wherever enacted, now or at any time hereafter in force,
or which may affect the covenants or the performance of this Indenture; and (to
the extent that it may lawfully do so) the Company hereby expressly waives all
benefit or advantage of any such law, and covenants that it will not hinder,
delay or impede the execution of any power herein granted to the Trustee, but
will suffer and permit the execution of every such power as though no such law
had been enacted.
Section 4.04. COMPLIANCE CERTIFICATE.
(a) The Company shall deliver to the Trustee, within 120 days after
the end of each fiscal year and on or before 50 days after the end of the first,
second and third quarters of each fiscal year, an Officers, Certificate (one of
the signers of which shall be the principal executive officer, principal
financial officer or principal accounting officer of the Company) stating that a
reasonable review of the activities of the Company and its Subsidiaries during
such fiscal year or fiscal quarter, as the case may be, has been made under the
supervision of the signing Officers with a view to determining whether the
Company has kept, observed, performed and fulfilled its obligations under this
Indenture, and further stating, as to each such Officer signing such
certificate, that to the best of his or her knowledge, the Company has kept,
observed, performed and fulfilled in all material respects each and every
covenant contained in this Indenture and are not in default in the performance
or observance of any of the terms, provisions and conditions hereof (or, if a
Default or Event of Default shall have occurred, describing all such Defaults or
Events of Default of which he or she may have knowledge and what action they are
taking or propose to take with respect thereto) and that to the best of his or
her knowledge no event has occurred and remains in existence by reason of which
payments on account of the principal of or interest, if any, on the Notes is
prohibited or if such event has occurred, a description of the event and what
action the Company is taking or proposes to take with respect thereto.
(b) So long as (and to the extent) not contrary to the then current
recommendations of the American Institute of Certified Public Accountants, the
year-end financial statements delivered pursuant to Section 4.02 above shall be
accompanied by a written statement of the Company's independent public
accountants (who shall be a firm of established national reputation) that in
making the examination necessary for certification of such financial statements
nothing has come to their attention which would lead them to believe that the
Company or any Guarantor has violated any provisions of this Article 4 or
Article 5 of this Indenture or, if any such violation has occurred, specifying
the nature
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and period of existence thereof, it being understood that such accountants shall
not be liable directly or indirectly for any failure to obtain knowledge of any
such violation.
(c) The Company shall, so long as any of the Notes are outstanding,
deliver to the Trustee, forthwith upon any officer becoming aware of any Default
or Event of Default, an Officers, Certificate specifying such Default or Event
of Default and what action the Company is taking or proposes to take with
respect thereto.
Section 4.05. TAXES.
The Company and the Guarantors, if any, shall, and shall cause each
of their Subsidiaries to, pay prior to delinquency all material taxes,
assessments, and governmental levies except as contested in good faith and by
appropriate proceedings.
Section 4.06. LIMITATION ON ADDITIONAL INDEBTEDNESS.
The Company shall not, and shall not permit any Restricted
Subsidiary of the Company to, directly or indirectly, incur (as defined) any
Indebtedness (including Acquired Indebtedness); PROVIDED that the Company may
incur Indebtedness if (i) after giving effect to the incurrence of such
Indebtedness and the receipt and application of the proceeds thereof, the
Company's consolidated Fixed Charge Coverage Ratio (determined on a PRO FORMA
basis for the last four fiscal quarters of the Company for which financial
statements are available at the date of determination) is at least 2.00 to 1,
and (ii) no Default or Event of Default shall have occurred and be continuing at
the time or as a consequence of the incurrence of such Indebtedness; and,
PROVIDED, FURTHER, that any Restricted Subsidiary may incur Indebtedness if (i)
after giving effect to the incurrence of such Indebtedness and the receipt and
application of the proceeds thereof, such Restricted Subsidiary's Fixed Charge
Coverage Ratio (determined on a PRO FORMA basis for the last four fiscal
quarters of such Restricted Subsidiary for which financial statements are
available at the date of determination) is at least 2.50 to 1, and (ii) no
Default or Event of Default shall have occurred and be continuing at the time or
as a consequence of the incurrence of such Indebtedness. For purposes of
computing the Fixed Charge Coverage Ratio, (A) if the Indebtedness which is the
subject of a determination under this provision is Acquired Indebtedness, or
Indebtedness incurred in connection with the simultaneous acquisition (by way of
merger, consolidation or otherwise) of any Person, business, property or assets
(an "ACQUISITION"), then such ratio shall be determined by giving effect (on a
PRO FORMA basis, as if the
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transaction had occurred at the beginning of the four-quarter period) to both
the incurrence or assumption of such Acquired Indebtedness or such other
Indebtedness by the Company and the inclusion in the Company's or such
Restricted Subsidiary's EBITDA of the EBITDA of the acquired Person, business,
property or assets, (B) if any Indebtedness to be incurred (x) bears a floating
rate of interest, the interest expense on such Indebtedness shall be calculated
as if the rate in effect on the date of determination had been the applicable
rate for the entire period (taking into account on a PRO FORMA basis any
Interest Rate Agreement applicable to such Indebtedness if such Interest Rate
Agreement has a remaining term as at the date of determination in excess of 12
months), (y) bears, at the option of the Company or a Subsidiary, a fixed or
floating rate of interest, the interest expense on such Indebtedness shall be
computed by applying, at the option of the Company or such Subsidiary, either a
fixed or floating rate and (z) was incurred under a revolving credit facility,
the interest expense on such Indebtedness shall be computed based upon the
average daily balance of such Indebtedness during the applicable period, (C) for
any quarter prior to the date hereof included in the calculation of such ratio,
such calculation shall be made on a PRO FORMA basis, giving effect to the PHI
Acquisition, the issuance of the Notes and the use of the net proceeds therefrom
as if the same had occurred at the beginning of the four-quarter period used to
make such calculation and (D) for any quarter included in the calculation of
such ratio prior to the date that any Asset Sale was consummated, or that any
Indebtedness was incurred, or that any Acquisition was effected, by the Company
or any of its Restricted Subsidiaries, such calculation shall he made on a PRO
FORMA basis, giving effect to each Asset Sale, incurrence of Indebtedness or
Acquisition, as the case may be, and the use of any proceeds therefrom, as if
the same had occurred at the beginning of the four-quarter period used to make
such calculation.
Notwithstanding the foregoing, the Company and its Restricted
Subsidiaries may incur Permitted Indebtedness.
The Company shall not, directly or indirectly, in any event incur
any Indebtedness which by its terms (or by the terms of any agreement governing
such Indebtedness) is subordinated to any other Indebtedness of the Company
unless such Indebtedness is also by its terms (or by the terms of any agreement
governing such Indebtedness) made expressly subordinate to the Notes to the same
extent and in the same manner as such Indebtedness is subordinated pursuant to
subordination provisions that are most favorable to the holders of any other
Indebtedness of the Company.
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Section 4.07. LIMITATION ON PREFERRED STOCK OF RESTRICTED SUBSIDIARIES.
The Company shall not permit any Restricted Subsidiary to issue any
Preferred Stock (except Preferred Stock issued to the Company or a Restricted
Subsidiary) or permit any Person (other than the Company or a Restricted
Subsidiary) to hold any such Preferred Stock unless the Company or such
Restricted Subsidiary would be entitled to incur or assume Indebtedness under
Section 4.06 in the aggregate principal amount equal to the aggregate
liquidation value of the Preferred Stock to be issued.
Section 4.08. LIMITATION ON CAPITAL STOCK OF RESTRICTED SUBSIDIARIES.
The Company shall not (i) sell, pledge, hypothecate or otherwise
convey or dispose of any Capital Stock of a Restricted Subsidiary or (ii) permit
any of its Restricted Subsidiaries to issue any Capital Stock, other than to the
Company or a Wholly-Owned Subsidiary of the Company. The foregoing restrictions
shall not apply to the issuance and sale of Capital Stock of a Restricted
Subsidiary that is an obligor under an Intercompany Note in compliance with
Section 4.22, an Asset Sale made in compliance with Section 4.10 or the issuance
of Preferred Stock in compliance with Section 4.07.
Section 4.09. LIMITATION ON RESTRICTED PAYMENTS.
The Company shall not make, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, make, any Restricted
Payment, unless:
(a) no Default or Event of Default shall have occurred
and be continuing at the time of or immediately after giving effect
to such Restricted Payment;
(b) immediately after giving pro forma effect to such
Restricted Payment, the Company could incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) under Section 4.06;
and
(c) immediately after giving effect to such Restricted
Payment, the aggregate of all Restricted Payments declared or made
after the Issue Date does not exceed the sum of (1) 50% of the
Company's cumulative Consolidated Net Income after the Issue Date
(or minus 100% of any cumulative deficit in Consolidated Net Income
during such period), (2) 100% of the aggregate Net Proceeds
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and the fair market value of securities or other property received
by the Company as a capital contribution to the common equity of the
Company after the Issue Date and from the issue or sale, after the
Issue Date, of Capital Stock (other than Disqualified Capital Stock
or Capital Stock of the Company issued to any Subsidiary of the
Company) of the Company or any Indebtedness or other securities of
the Company convertible into or exercisable or exchangeable for
Capital Stock (other than Disqualified Capital Stock) of the Company
which has been so converted or exercised or exchanged, as the case
may be and (3) $2,500,000. For purposes of determining under this
clause (c) the amount expended for Restricted Payments, cash
distributed shall be valued at the face amount thereof and property
other than cash shall be valued at its fair market value.
The provisions of this covenant shall not prohibit (i) the payment
of any distribution within 60 days after the date of declaration thereof, if at
such date of declaration such payment would comply with the provisions of this
Indenture, (ii) the retirement of any shares of Capital Stock of the Company or
subordinated Indebtedness by conversion into, or by or in exchange for, shares
of Capital Stock (other than Disqualified Capital Stock), or out of, the Net
Proceeds of the substantially concurrent sale (other than to a Subsidiary of the
Company) of other shares of Capital Stock of the Company (other than
Disqualified Capital Stock), (iii) the redemption or retirement of Indebtedness
of the Company subordinated to the Notes in exchange for, by conversion into, or
out of the Net Proceeds of, a substantially concurrent sale or incurrence of
Indebtedness (other than any Indebtedness owed to a Subsidiary) of the Company
that is contractually subordinated in right of payment to the Notes to at least
the same extent as the Subordinated Indebtedness being redeemed or retired, (iv)
the retirement of any shares of Disqualified Capital Stock by conversion into,
or by exchange for, shares of Disqualified Capital Stock, or out of the Net
Proceeds of the substantially concurrent sale (other than to a Subsidiary of the
Company) of other shares of Disqualified Capital Stock, (v) so long as no
Default or Event of Default shall have occurred and be continuing, the payment
of cash dividends on the Series A Preferred Stock when such dividends are
required to be paid in cash in accordance with the Restated Articles, (vi)
payment, from the net proceeds of the Offerings, of up to $2,250,000 to Parent
to be used to repurchase from the High Voltage Engineering Corporation
Retirement Plan shares of the common stock of Parent within 60 days of the Issue
Date for not more than $2,250,000, and fund a proportional accrual relating to
the Subordinated Notes Warrants of up to $150,000, (vii) so long as no Default
or Event of Default shall have occurred and be continuing, the exchange of
Warrants for Subsidiary Warrants or Common Shares for
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Subsidiary Shares in the event of a Qualified Subsidiary IPO, (viii) payments
required to effect the reclassification of an Unrestricted Subsidiary as a
Restricted Subsidiary in compliance Section 4.22 and (ix) the payment of
management fees for services provided by Parent or its employees in an aggregate
annual amount not to exceed $750,000; PROVIDED, HOWEVER, that any amounts paid
by the Company pursuant to clauses (i), (v) and (vii) shall reduce amounts
otherwise available for Restricted Payments.
Not later than the date of making any Restricted Payment, the
Company shall deliver to the Trustee an Officers' Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by this Section 4.09 were computed, which calculations may
be based upon the Company's latest available financial statements, and that no
Default or Event of Default exists and is continuing and no Default or Event of
Default will occur immediately after giving effect to any Restricted Payments.
Section 4.10. LIMITATION ON CERTAIN ASSET SALES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless (i) the Company or its
Restricted Subsidiaries, as the case may be, receives consideration at the time
of such sale or other disposition at least equal to the fair market value
thereof (as determined in good faith by the Company's Board of Directors, and
evidenced by a board resolution); (ii) not less than 85% of the consideration
received by the Company or its Subsidiaries, as the case may be, is in the form
of cash or cash equivalents (those equivalents included in the definition of
"Temporary Cash Investments" in Section 1.01); and (iii) subject to the
Company's obligations with respect to the Intercompany Notes in the event of a
Qualified Subsidiary IPO, the Asset Sale Proceeds received by the Company or
such Restricted Subsidiary are applied (a) first, to the extent the Company
elects, or is required, to prepay, repay or purchase debt under any then
existing Indebtedness of the Company or any Restricted Subsidiary ranking PARI
PASSU to the Notes within 180 days following the receipt of the Asset Sale
Proceeds from any Asset Sale, provided that any such repayment shall result in a
permanent reduction of the commitments thereunder in an amount equal to the
principal amount so repaid; (b) second, to the extent of the balance of Asset
Sale Proceeds after application as described above, to the extent the Company
elects, to an investment in assets (including Capital Stock or other securities
purchased in connection with the acquisition of Capital Stock or property of
another person) used or useful in businesses similar or ancillary to the
business of the Company or any Restricted Subsidiary
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as conducted at the time of such Asset Sale, provided that such investment
occurs or the Company or a Restricted Subsidiary enters into contractual
commitments to make such investment, subject only to customary conditions (other
than the obtaining of financing), on or prior to the 181st day following receipt
of such Asset Sale Proceeds and Asset Sale Proceeds contractually committed are
so applied within 360 days following the receipt of such Asset Sale Proceeds
(the "REINVESTMENT DATE") and (c) third, if on the Reinvestment Date with
respect to any Asset Sale, the Available Asset Sale Proceeds exceed $10 million,
the Company shall apply an amount equal to Available Asset Sale Proceeds to an
offer to repurchase the Notes, at a purchase price in cash equal to 100% of the
principal amount thereof plus accrued and unpaid interest, if any, to the date
of repurchase (an "EXCESS PROCEEDS OFFER"). If an Excess Proceeds Offer is not
fully subscribed, the Company may retain the portion of the Available Asset Sale
Proceeds not required to repurchase Notes and the Available Asset Sale Proceeds
shall be reset to zero.
If the Company is required to make an Excess Proceeds Offer, the
Company shall mail, within 30 days following the Reinvestment Date, a notice to
the Holders stating, among other things: (1) that such Holders have the right to
require the Company to apply the Available Asset Sale Proceeds to repurchase
such Notes at a purchase price in cash equal to 100% of the principal amount
thereof plus accrued and unpaid interest, if any, to the date of purchase; (2)
the purchase date (the "PURCHASE DATE"), which shall be no earlier than 30 days
and not later than 60 days from the date such notice is mailed; (3) the
instructions, determined by the Company, that each Holder must follow in order
to have such Notes repurchased; and (4) the calculations used in determining the
amount of Available Asset Sale Proceeds to be applied to the repurchase of such
Notes. The Excess Proceeds Offer shall remain open for a period of 20 Business
Days following its commencement (the "OFFER PERIOD"). The notice, which shall
govern the terms of the Excess Proceeds Offer, shall state:
(1) that the Excess Proceeds Offer is being made
pursuant to this Section 4.10 and the length of time the Excess
Proceeds Offer will remain open;
(2) the purchase price and the Purchase Date;
(3) that any Note not tendered or accepted for payment
will continue to accrue interest;
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(4) that any Note accepted for payment pursuant to the
Excess Proceeds Offer shall cease to accrue interest on and after
the Purchase Date and the deposit of the purchase price with the
Trustee;
(5) that Holders electing to have a Note purchased
pursuant to any Excess Proceeds offer will be required to surrender
the Note, with the form entitled "Option of Holder to Elect
Purchase" on the reverse of the Note completed, to the Company, a
depositary, if appointed by the Company, or a Paying Agent at the
address specified in the notice prior to the close of business on
the second Business Day preceding the Purchase Date;
(6) that Holders will be entitled to withdraw their
election if the Company, depositary or Paying Agent, as the case may
be, receives, not later than the expiration of the Offer Period, a
facsimile transmission or letter setting forth the name of the
Holder, the principal amount of the Note the Holder delivered for
purchase and a statement that such Holder is withdrawing his
election to have the Note purchased;
(7) that, if the aggregate principal amount of Notes
surrendered by Holders exceeds the Available Asset Sale Proceeds,
the Company shall select the Notes to be purchased on a pro rata
basis (with such adjustments as may be deemed appropriate by the
Company so that only Notes in denominations of $1,000, or integral
multiples thereof, shall be purchased); and
(8) that Holders whose Notes were purchased only in part
will be issued new Notes equal in principal amount to the
unpurchased portion of the Notes surrendered.
On or before the Purchase Date, the Company shall, to the extent
lawful, accept for payment, on a pro rata basis to the extent necessary, Notes
or portions thereof tendered pursuant to the Excess Proceeds Offer, deposit with
the Paying Agent U.S. legal tender sufficient to pay the purchase price plus
accrued interest, if any, on the Notes to be purchased and deliver to the
Trustee an Officers, Certificate stating that such Notes or portions thereof
were accepted for payment by the Company in accordance with the terms of this
Section 4.10. The Paying Agent shall promptly (but in any case not later than 5
days after the Purchase Date) mail or deliver to each tendering Holder an amount
equal to the purchase price of the Note tendered by such Holder and accepted by
the Company for purchase, and the Company shall promptly issue a new Note, any
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Guarantor shall endorse the guarantee thereon and the Trustee shall authenticate
and mail or make available for delivery such new Note to such Holder equal in
principal amount to any unpurchased portion of the Note surrendered. Any Note
not so accepted shall be promptly mailed or delivered by the Company to the
Holder thereof. The Company will publicly announce the results of the Excess
Proceeds Offer on the Purchase Date by sending a press release to the Dow Jones
News Service or similar business news service in the United States. If an Excess
Proceeds offer is not fully subscribed, the Company may retain that portion of
the Available Asset Sale Proceeds not required to repurchase Notes.
Section 4.11. LIMITATION ON TRANSACTIONS WITH AFFILIATES.
(a) The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, enter into or suffer to
exist any transaction or series of related transactions (including, without
limitation, the sale, purchase, exchange or lease of assets, property or
services) with any Affiliate (including entities in which the Company or any of
its Restricted Subsidiaries owns a minority interest) or holder of 10% or more
of the Company's Common Stock (an "AFFILIATE TRANSACTION") or extend, renew,
waive or otherwise modify the terms of any Affiliate Transaction entered into
prior to the Issue Date unless (i) such Affiliate Transaction is between or
among the Company and its Wholly-Owned Subsidiaries; or (ii) the terms of such
Affiliate Transaction are fair and reasonable to the Company or such Restricted
Subsidiary, as the case may be, and the terms of such Affiliate Transaction are
at least as favorable as the terms which could be obtained by the Company or
such Restricted Subsidiary, as the case may be, in a comparable transaction made
on an arm's-length basis between unaffiliated parties. In any Affiliate
Transaction involving an amount or having a value in excess of $1.0 million
which is not permitted under clause (i) above, the Company must obtain a
resolution of the Board of Directors certifying that such Affiliate Transaction
complies with clause (ii) above. In transactions with a value in excess of $3.0
million which are not permitted under clause (i) above, the Company must obtain
a written opinion as to the fairness of such a transaction from an independent
investment banking firm selected by the Company.
(b) The foregoing provisions will not apply to (i) any Restricted
Payment that is not prohibited by the provisions of Section 4.09 or (ii) any
transaction, approved by the Board of Directors of the Company, with an officer
or director of the Company or of any Subsidiary in his or her capacity as
officer or director entered into in the ordinary course of
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business, including compensation and employee benefit arrangements with any
officer or director of the Company or of any Subsidiary that are customary for
public companies in the manufacturing industry.
Section 4.12. LIMITATIONS ON LIENS.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, create, incur or otherwise cause or suffer to exist or become
effective any Liens of any kind (other than Permitted Liens and other than a
pledge of the Intercompany Notes to the Trustee as security for the Notes) upon
any property or asset of the Company or any Restricted Subsidiary or any shares
of stock or debt of any Restricted Subsidiary which owns property or assets, now
owned or hereafter acquired, unless (i) if such Lien secures Indebtedness which
is PARI PASSU with the Notes, then the Notes are secured on an equal and ratable
basis with the obligations so secured until such time as such obligation is no
longer secured by a Lien or (ii) if such Lien secures Indebtedness which is
subordinated to the Notes, any such Lien shall be subordinated to a Lien on such
property or asset or shares of stock or debt granted to the Holders of the Notes
to the same extent as such subordinated Indebtedness is subordinated to the
Notes; PROVIDED, HOWEVER, that in no event will the Company create, incur or
otherwise cause or suffer to exist or become effective any Liens of any kind on
any of the Intercompany Notes other than a pledge of the Intercompany Notes to
the Trustee as security for the Notes.
Section 4.13. LIMITATIONS ON INVESTMENTS.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, make any Investment other than (i) a Permitted Investment or
(ii) an Investment that is made as a Restricted Payment in compliance with
Section 4.09, after the Issue Date.
Section 4.14. LIMITATION ON DISPOSITION OF ASSETS
The Company shall not, and shall not permit any Restricted
Subsidiary of the Company to, sell, convey, lease, transfer or otherwise
contribute or dispose of any of its assets or property or the proceeds from the
sale or other disposition of any such assets or property (including any shares
of Capital Stock of any Restricted Subsidiary of the Company) existing on the
Issue Date (each referred to for the purpose of this covenant as a
"disposition") to any other Subsidiary of the Company, other than (a) DE MINIMIS
dispositions made in the ordinary course of business, (b) intercompany loans and
cash equity contributions (other than the
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Intercompany Notes), including, without limitation, any such loans or
contributions for the purpose of effecting the payment of any tax owed by any
such Subsidiary to any governmental entity), (c) dispositions of trade or other
receivables and assets relating to trade and (d) dispositions permitted by
Section 4.09.
Section 4.15. LIMITATION ON SALE AND LEASE-BACK TRANSACTIONS.
The Company shall not, and shall not permit any Restricted
Subsidiary to, enter into any Sale and Lease-Back Transaction unless (i) the
consideration received in such Sale and Lease-Back Transaction is at least equal
to the fair market value of the property sold, as determined by a board
resolution of the Company and (ii) the Company could incur the Attributable
Indebtedness in respect of such Sale and Lease-Back Transaction in compliance
with Section 4.06.
Section 4.16. LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING
SUBSIDIARIES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to meet its principal and interest obligations on the
Notes (a)(i) through the payment of dividends or make any other distributions to
the Company or any of its Restricted Subsidiaries (A) on its Capital Stock or
(B) with respect to any other interest or participation in, or measured by, its
profits, or (ii) through the payment of any Indebtedness owed to the Company or
any of its Restricted Subsidiaries, (b) through the making of loans or advances
or capital contributions to the Company or any of its Restricted Subsidiaries or
(c) through the transfer of any of its properties or assets to the Company or
any of its Restricted Subsidiaries, except for such encumbrances or restrictions
existing under or by reason of (i) encumbrances or restrictions existing on the
Issue Date, (ii) this Indenture and the Notes, (iii) applicable law, (iv) any
instrument governing Indebtedness or Capital Stock of a Person acquired by the
Company or any of its Restricted Subsidiaries or of any Person that becomes a
Restricted Subsidiary as in effect at the time of such acquisition or such
Person becoming a Restricted Subsidiary (except to the extent such Indebtedness
was incurred in connection with or in contemplation of such acquisition of such
Person becoming a Restricted Subsidiary), which encumbrance or restriction is
not applicable to any Person, or the properties or assets of any Person, other
than the Person, or the property of assets of the Person (including any
Subsidiary of the Person), so acquired, (v) customary non-assignment provisions
in leases or
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other agreements entered into in the ordinary course of business and consistent
with past practices, (vi) Refinancing Indebtedness; PROVIDED that such
restrictions are in the aggregate no more restrictive than those contained in
the agreements governing the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded or (vii) customary restrictions in security
agreements or mortgages securing Indebtedness of the Company or a Restricted
Subsidiary to the extent such restrictions restrict the transfer or encumbrance
of the property subject to such security agreements and mortgages.
Section 4.17. PAYMENTS FOR CONSENT.
Neither the Company nor any of its Subsidiaries shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any holder of any Notes for or as an inducement
to any consent, waiver or amendment of any of the terms or provisions of this
Indenture or the Notes unless such consideration is offered to be paid or agreed
to be paid to all holders of the Notes which so consent, waive or agree to amend
in the time frame set forth in solicitation documents relating to such consent,
waiver or agreement.
Section 4.18. LEGAL EXISTENCE.
Subject to Article 5 hereof, the Company shall do or cause to be
done all things necessary to preserve and keep in full force and effect (i) its
legal existence, and the corporate, partnership or other existence of each
Restricted Subsidiary, in accordance with the respective organizational
documents (as the same may be amended from time to time) of each Restricted
Subsidiary and the rights (charter and statutory), licenses and franchises of
the Company and its Restricted Subsidiaries; PROVIDED, HOWEVER, that the Company
shall not be required to preserve any such right, license or franchise, or the
corporate, partnership or other existence of any of its Restricted Subsidiaries
if the Board of Directors of the Company shall determine that the preservation
thereof is no longer desirable in the conduct of the business of the Company and
its Restricted Subsidiaries, taken as a whole, and that the loss thereof is not
adverse in any material respect to the Holders.
Section 4.19. CHANGE OF CONTROL.
(a) within 20 days of the occurrence of a Change of Control, the
Company shall notify the Trustee in writing of such occurrence and shall make an
offer to purchase (the "CHANGE OF CONTROL OFFER") the outstanding Notes at a
purchase price equal to 101% of the principal amount thereof
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plus any accrued and unpaid interest thereon to the Change of Control Payment
Date (as hereinafter defined) (such applicable purchase price being hereinafter
referred to as the "CHANGE OF CONTROL PURCHASE PRICE") in accordance with the
procedures set forth below.
If the New Revolving Credit Facility is in effect, or any amounts
are owing thereunder, at the time of the occurrence of a Change of Control,
prior to the mailing of the notice to Holders described in paragraph (b) below,
but in any event within 30 days following any Change of Control, the Company
covenants to (i) repay in full all obligations under the New Revolving Credit
Facility or offer to repay in full all obligations under or in respect of the
New Revolving Credit Facility and repay the obligations under or in respect of
the New Revolving Credit Facility of each lender who has accepted such offer or
(ii) obtain the requisite consent under the Revolving Credit Facility to permit
the repurchase of the Notes pursuant to this Section 4.19. The Company must
first comply with the covenant described in the preceding sentence before it may
commence a Change of Control Offer in the event of a Change of Control; PROVIDED
that the Company's failure to comply with the covenant described in the
preceding sentence constitutes an Event of Default described in clause (3) under
Section 6.01 hereof if not cured within 30 days after the notice required by
such clause.
(b) Within 30 days of the occurrence of a Change of Control, the
Company also shall (i) cause a notice of the Change of Control Offer to be sent
at least once to the Dow Jones News Service or similar business news service in
the United States and (ii) send by first-class mail, postage prepaid, to the
Trustee and to each Holder of the Notes, at the address appearing in the
register maintained by the Registrar of the Notes, a notice stating:
(1) that the Change of Control Offer is being made
pursuant to this Section 4.19 and that all Notes tendered will be
accepted for payment, and otherwise subject to the terms and
conditions set forth herein;
(2) the Change of Control Purchase Price and the
purchase date (which shall be a Business Day no earlier than 30
Business Days from the date such notice is mailed (the "CHANGE OF
CONTROL PAYMENT DATE"));
(3) that any Note not tendered will continue to accrue
interest;
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(4) that, unless the Company defaults in the payment of
the Change of Control Purchase Price, any Notes accepted for payment
pursuant to the Change of Control Offer shall cease to accrue
interest after the Change of Control Payment Date;
(5) that Holders accepting the offer to have their Notes
purchased pursuant to a Change of Control Offer will he required to
surrender the Notes, with the form entitled "Option of Holder to
Elect Purchase" on the reverse of the Note completed, to a
depository, if appointed, or the Paying Agent at the address
specified in the notice prior to the close of business on the
Business Day preceding the Change of Control Payment Date;
(6) that Holders will be entitled to withdraw their
acceptance if the depository or Paying Agent receives, not later
than the close of business on the third Business Day preceding the
Change of Control Payment Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the
principal amount of the Notes delivered for purchase, and a
statement that such Holder is withdrawing his election to have such
Notes purchased;
(7) that Holders whose Notes are being purchased only in
part will be issued new Notes equal in principal amount to the
unpurchased portion of the Notes surrendered, PROVIDED that each
Note purchased and each such new Note issued shall be in an original
principal amount in denominations of $1,000 and integral multiples
thereof;
(8) any other procedures that a Holder must follow to
accept a Change of Control Offer or effect withdrawal of such
acceptance; and
(9) the name and address of the depository or Paying
Agent.
On the Change of Control Payment Date, the Company shall, to the
extent lawful, (i) accept for payment Notes or portions thereof tendered
pursuant to the Change of Control Offer, (ii) deposit with the depository or
Paying Agent money sufficient to pay the purchase price of all Notes or portions
thereof so tendered and (iii) deliver or cause to be delivered to the Trustee
Notes so accepted together with an Officers, Certificate stating the Notes or
portions thereof tendered to the Company. The Paying Agent shall promptly mail
to each Holder of Notes so accepted
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payment in an amount equal to the purchase price for such Notes, and the Company
shall execute and issue, and the Trustee shall promptly authenticate and mail to
such Holder, a new Note equal in principal amount to any unpurchased portion of
the Notes surrendered; PROVIDED that each such new Note shall be issued in an
original principal amount in denominations of $1,000 and integral multiples
thereof.
(c) (A) If either Company or any Subsidiary thereof has issued any
outstanding (i) Indebtedness that is subordinated in right of payment to the
Notes or (ii) Preferred Stock, and the Company or such Subsidiary is required to
make a Change of Control offer or to make a distribution with respect to such
subordinated Indebtedness or Preferred Stock in the event of a Change of
Control, the Company shall not consummate any such offer or distribution with
respect to such subordinated Indebtedness or Preferred Stock until such time as
the Company shall have paid the Change of Control Purchase Price in full to the
Holders of Notes that have accepted the Company's Change of Control Offer and
shall otherwise have consummated the Change of Control Offer made to Holders of
the Notes and (B) the Company will not issue Indebtedness that is subordinated
in right of payment to the Notes or Preferred Stock with change of control
provisions requiring the payment of such Indebtedness or Preferred Stock prior
to the payment of the Notes in the event of a Change in Control under this
Indenture.
In the event that a Change of Control occurs and the Holders of
Notes exercise their right to require the Company to purchase Notes, if such
purchase constitutes a "tender offer" for purposes of Rule 14e-1 under the
Exchange Act at that time, the Company will comply with the requirements of Rule
14e-1 as then in effect with respect to such repurchase.
Section 4.20. MAINTENANCE OF PROPERTIES; INSURANCE; BOOKS AND RECORDS;
COMPLIANCE WITH LAW.
The Company shall, and shall cause each of its Restricted
Subsidiaries to, at all times cause all properties used or useful in the conduct
of their business to be maintained and kept in good condition, repair and
working order (reasonable wear and tear excepted) and supplied with all
necessary equipment, and shall cause to he made all repairs, renewals,
replacements and betterments thereto except where any failure to so do will not
have a material adverse effect on the business, earnings, properties, assets or
financial condition of the Company and its Subsidiaries, taken as a whole.
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The Company shall, and shall cause each of its Restricted
Subsidiaries to, maintain insurance in such amounts and covering such risks as
are usually and customarily carried with respect to similar facilities according
to their respective locations.
The Company shall, and shall cause each of its Subsidiaries to, keep
proper books of record and account, in which full and correct entries shall be
made of all financial transactions and the assets and business of the Company
and each Subsidiary of the Company, in accordance with GAAP consistently applied
to the Company and its Subsidiaries taken as a whole.
The Company shall, and shall cause each of its Subsidiaries to,
comply with all statutes, laws, ordinances or government rules and regulations
to which they are subject, non-compliance with which would materially adversely
affect the business, earnings, properties, assets or financial condition of the
Company and its Subsidiaries taken as a whole.
Section 4.21. FURTHER ASSURANCE TO THE TRUSTEE.
The Company shall, upon the reasonable request of the Trustee,
execute and deliver such further instruments and do such further acts as may be
reasonably necessary or proper to carry out more effectively the provisions of
this Indenture.
Section 4.22. QUALIFIED SUBSIDIARY IPO.
Each Restricted Subsidiary that is an obligor under an Intercompany
Note may effect a Qualified Subsidiary IPO; PROVIDED that: (i) the Restricted
Subsidiary consummating such Qualified Subsidiary IPO will have repaid in full
its applicable Intercompany Note, together with all accrued and unpaid interest,
if any, thereon, (ii) immediately after giving PRO FORMA effect to such
Qualified Subsidiary IPO, the Company (excluding the EBITDA and Consolidated
Fixed Charges of the Restricted Subsidiary subject to the Qualified Subsidiary
IPO) could incur $1.00 of additional Indebtedness (other than Permitted
Indebtedness) under Section 4.06, assuming for the purposes of this calculation
only, that the offer to repurchase referred to in the following paragraph has
been subscribed in full, and (iii) no Default or Event of Default shall have
occurred and be continuing. Upon completion of a Qualified Subsidiary IPO and
the repayment of its Intercompany Note, such Restricted Subsidiary will become
an Unrestricted Subsidiary.
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Within 30 days of the consummation of a Qualified Subsidiary IPO,
the Company shall mail a notice to each holder of Notes stating, among other
things: (1) that the holders of the Notes have the right to require the Company
to apply the Net Proceeds received from the repayment of the applicable
Intercompany Note to repurchase Notes from the holders thereof at a purchase
price in cash equal to 101% of the aggregate principal amount thereof (plus
accrued and unpaid interest, if any, to the purchase date) in the principal
amount of the Intercompany Note being repaid by such Restricted Subsidiary; (2)
the purchase date of such Notes (the "PURCHASE DATE"), which shall be no earlier
than 30 days and not later than 60 days from the date such notice is mailed; and
(3) the instructions, determined by the Company, that each holder must follow in
order to have such Notes repurchased. An offer pursuant to this Section 4.22
shall remain open for a period of 20 Business Days following its commencement
(the "OFFER PERIOD"). The notice, which shall govern the terms of such offer,
shall state:
(1) that the offer is being made pursuant to this
Section 4.22 and the length of time such offer will remain open;
(2) the purchase price and the Purchase Date;
(3) that any Note not tendered or accepted for payment
will continue to accrue interest;
(4) that any Note accepted for payment pursuant to such
offer shall cease to accrue interest on and after the Purchase Date
and the deposit of the purchase price with the Trustee;
(5) that Holders electing to have a Note purchased
pursuant to such offer will be required to surrender the Note, with
the form entitled "Option of Holder to Elect Purchase" on the
reverse of the Note completed, to the Company, a depositary, if
appointed by the Company, or a Paying Agent at the address specified
in the notice prior to the close of business on the Business Day
preceding the Purchase Date;
(6) that Holders will be entitled to withdraw their
election if the Company, depositary or Paying Agent, as the case may
be, receives, not later than the close of business on the third
business day prior to the expiration of the Offer Period, a
facsimile transmission or letter setting forth the name of the
Holder, the principal amount of the Note the Holder delivered for
purchase and
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a statement that such Holder is withdrawing his election to have the
Note purchased;
(7) that, if the aggregate principal amount of Notes
surrendered by Holders exceeds the principal amount of the redeemed
Intercompany Note, the Company shall select the Notes to be
purchased on a pro rata basis (with such adjustments as may be
deemed appropriate by the Company so that only Notes in
denominations of $1,000, or integral multiples thereof, shall be
purchased); and
(8) that Holders whose Notes were purchased only in part
will be issued new Notes equal in principal amount to the
unpurchased portion of the Notes surrendered.
On or before the Purchase Date, the Company shall, to the extent
lawful, accept for payment, on a pro rata basis to the extent necessary, Notes
or portions thereof tendered pursuant to such offer, deposit with the Paying
Agent U.S. legal tender sufficient to pay the purchase price plus accrued
interest, if any, on the Notes to be purchased and deliver to the Trustee an
Officers' Certificate stating that such Notes or portions thereof were accepted
for payment by the Company in accordance with the terms of this Section 4.22.
The Paying Agent shall promptly (but in any case not later than 5 days after the
Purchase Date) mail or deliver to each tendering Holder an amount equal to the
purchase price of the Note tendered by such Holder and accepted by the Company
for purchase, and the Company shall promptly issue a new Note, any Guarantor
shall endorse the guarantee thereon and the Trustee shall authenticate and mail
or make available for delivery such new Note to such Holder equal in principal
amount to any unpurchased portion of the Note surrendered. Any Note not so
accepted shall be promptly mailed or delivered by the Company to the Holder
thereof. The Company will publicly announce the results of such offer on the
Purchase Date by sending a press release to the Dow Jones News Service or
similar business news service in the United States.
Following the consummation of any such offer to holders of the Notes
following a Qualified Subsidiary IPO, the remaining Net Proceeds from the
payment of the Intercompany Note repurchased by the Company in connection
therewith shall be proceeds of an Asset Sale and shall be applied in accordance
with Section 4.10.
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Section 4.23. LIMITATION ON TRANSFER OF INTERCOMPANY NOTES; REPAYMENT OF
INTERCOMPANY NOTES.
With the exception of the pledge of the Intercompany Notes to the
Trustee as security for the Notes, the Company shall not sell, pledge,
hypothecate or otherwise convey or dispose of any Intercompany Note except in
accordance with Section 4.22. The Company shall agree not to reduce the
principal amount of any Intercompany Note or otherwise amend or modify the terms
of any Intercompany Note as in effect on the Issue Date.
Section 4.24. GUARANTEES OF CERTAIN INDEBTEDNESS.
The Company shall not permit any of its Restricted Subsidiaries,
directly or indirectly, to Guarantee any Indebtedness of the Company or a
Guarantor (except as permitted under clause (i) of the definition of "Permitted
Indebtedness" in Section 1.01) unless, in the case of a domestic Restricted
Subsidiary, such Restricted Subsidiary simultaneously executes and delivers to
the Trustee a supplemental indenture, in form reasonably satisfactory to the
Trustee, providing for the Guarantee, in the form attached hereto as EXHIBIT G
by such Restricted Subsidiary of the payment of the obligations of the Company
under the Notes in the manner set forth under Article 10 hereof. Neither the
Company nor any such Guarantor shall be required to make a notation on the Notes
to reflect any such Guarantee. Nothing in this covenant shall be construed to
permit any Restricted Subsidiary of the Company to incur Indebtedness otherwise
prohibited by Section 4.06.
Section 4.25. LIMITATION ON BUSINESS OF HIVEC HOLDINGS; CAPITAL STOCK OF FOREIGN
SUBSIDIARIES.
HIVEC Holdings shall not engage in any trade or business, incur any
Indebtedness other than Permitted Indebtedness, incur any liabilities other than
nominal expenses necessary to maintain its corporate existence, hold any assets
other than the capital stock of HIVEC, B.V., or sell, pledge, encumber or
transfer or cause or permit the sale, pledge, encumbrance or transfer of Capital
Stock of any of its direct or indirect Subsidiaries. Datcon shall not sell,
pledge, encumber or transfer the Capital Stock of any of its direct or indirect
foreign subsidiaries. Notwithstanding the foregoing, by May 31, 1998, the
Company shall cause HIVEC Holdings and HIVEC, B.V. to: (i) transfer (directly or
indirectly) to Datcon all of the capital stock of Industrias Jorda that is not
held by Datcon (or a direct or indirect subsidiary of Datcon); and (ii) transfer
(directly or indirectly) all of the assets of Anderson Ireland to Anderson
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(or a direct or indirect subsidiary of Anderson) ((i) and (ii) together, the
"Foreign Realignment").
ARTICLE 5
SUCCESSOR CORPORATION
Section 5.01. LIMITATION ON CONSOLIDATION, MERGER AND SALE OF ASSETS.
(a) The Company shall not and shall not permit any Restricted
Subsidiary to consolidate with, merge with or into, or transfer all or
substantially all of its assets (as an entirety or substantially as an entirety
in one transaction or a series of related transactions), to any Person unless:
(i) the Company or the Restricted Subsidiary, as the case may be, shall be the
continuing Person, or the Person (if other than the Company or the Restricted
Subsidiary) formed by such consolidation or into which the Company or the
Restricted Subsidiary, as the case may be, is merged or to which the properties
and assets of the Company or the Restricted Subsidiary, as the case may be, are
transferred shall be a corporation organized and existing under the laws of the
United States or any state thereof or the District of Columbia and shall
expressly assume, by a supplemental indenture, executed and delivered to the
Trustee, in form satisfactory to the Trustee, all of the obligations of the
Company or the Restricted Subsidiary, as the case may be, under the Notes and
this Indenture, and the obligations under this Indenture shall remain in full
force and effect; (ii) immediately before and immediately after giving effect to
such transaction, no Default or Event of Default shall have occurred and be
continuing; and (iii) immediately after giving effect to such transaction on a
PRO FORMA basis the Company or such Person could incur at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) under Section 4.06;
PROVIDED that a Person that is a Restricted Subsidiary may merge into the
Company or another Person that is a Restricted Subsidiary without complying with
this clause (iii).
(b) In connection with any consolidation, merger or transfer of
assets contemplated by this provision, the Company shall deliver, or cause to be
delivered, to the Trustee, in form and substance reasonably satisfactory to the
Trustee, an Officers' Certificate and an opinion of counsel, each stating that
such consolidation, merger or transfer and the supplemental indenture in respect
thereto comply with this provision and that all conditions precedent herein
provided for relating to such transaction or transactions have been complied
with.
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Section 5.02. SUCCESSOR PERSON SUBSTITUTED. Upon any consolidation or merger, or
any transfer of all or substantially all of the assets of the Company or any
Guarantor, if applicable, in accordance with Section 5.01 above, the successor
corporation formed by such consolidation or into which the Company or such
Guarantor is merged or to which such transfer is made shall succeed to, and be
substituted for, and may exercise every right and power of, the Company or such
Guarantor under this Indenture with the same effect as if such successor
corporation had been named as the Company or such Guarantor herein, and
thereafter the predecessor corporation shall be relieved of all obligations and
covenants under this Indenture and the Notes.
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. EVENTS OF DEFAULT.
An "Event of Default" occurs if
(1) there is a default in payment of any principal of,
or premium, if any, on the Notes when the same becomes due and
payable at maturity, upon acceleration or otherwise;
(2) there is a default in the payment of any interest on
any Note when the same becomes due and payable and the Default
continues for a period of 30 days;
(3) there is a default by the Company or any Guarantor
in the observance or performance of any other covenant in the Notes
or this Indenture for 60 days after written notice from the Trustee
or the holders of not less than 25% in aggregate principal amount of
the Notes then outstanding;
(4) there is a default in the payment when due of
principal, interest or premium in an aggregate amount of $3,000,000
or more with respect to any Indebtedness of the Company or any
Restricted Subsidiary thereof, or the acceleration of any such
Indebtedness aggregating $3,000,000 or more which default shall not
be cured, waived or postponed pursuant to an agreement with the
holders of such Indebtedness within 60 days after written notice of
such Default to the Company by the Trustee or to the Company and the
Trustee by any Holder, or such acceleration shall not be rescinded
or annulled within 20 days after
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written notice of such Default to the Company by the Trustee or to
the Company and the Trustee by any Holder;
(5) the entry of a final judgment or judgments which can
no longer be appealed for the payment of money in excess of
$3,000,000 shall be rendered against the Company or any Restricted
Subsidiary thereof, and shall not be discharged for any period of 60
consecutive days during which a stay of enforcement shall not be in
effect;
(6) the Company or any Significant Restricted Subsidiary
pursuant to or within the meaning of any Bankruptcy Law:
(A) commences a voluntary case,
(B) consents to the entry of an order for relief
against it in an involuntary case,
(C) consents to the appointment of a Custodian of it
or for all or substantially all of its property,
(D) makes a general assignment for the benefit of
its creditors, or
(E) generally is not paying its debts as they become
due;
(7) a court of competent jurisdiction enters an order
or decree under any Bankruptcy Law that:
(A) is for relief against either of the Company or
any Restricted Subsidiary in an involuntary case,
(B) appoints a Custodian of either of the Company or
any Restricted Subsidiary or for all or substantially
all of the property of either of the Company or any
Restricted Subsidiary, or
(C) orders the liquidation of either of the Company
or any Restricted Subsidiary, and the order or decree
remains unstayed and in effect for 60 days;
(8) the Company fails to cause up to $2,250,000 of the
proceeds from the Issue Date Offerings to be applied, as completely
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as possible, to the repurchase of the common stock of Parent held by
the High Voltage Engineering Corporation Retirement Plan within 60
days of the Issue Date; or
(9) the Company fails to cause the Foreign Realignment
to occur on or before May 31, 1998.
The term "BANKRUPTCY LAW" means Title 11, U.S. Code or any similar
Federal or state law for the relief of debtors. The term "Custodian" means any
receiver, trustee, assignee, liquidator or similar official under any Bankruptcy
Law.
Subject to Sections 7.01 and 7.02, the Trustee shall not be charged
with knowledge of any Default, Event of Default, Change of Control or Asset Sale
or the requirement for payment of Additional Interest unless written notice
thereof shall have been given to a Responsible Officer at the Corporate Trust
Office of the Trustee by the Company or any other Person.
Section 6.02. ACCELERATION.
If an Event of Default (other than an Event of Default arising under
Section 6.01(6) or (7) with respect to the Company) occurs and is continuing,
the Trustee by notice to the Company, or the Holders of not less than 25% in
aggregate principal amount of the Notes then outstanding by written notice to
the Company and the Trustee, may declare to be immediately due and payable the
entire principal amount of all the Notes then outstanding plus accrued but
unpaid interest, if any, to the date of acceleration; PROVIDED, HOWEVER, that
after such acceleration but before a judgment or decree based on such
acceleration is obtained by the Trustee, the Holders of a majority in aggregate
principal amount of the outstanding Notes may rescind and annul such
acceleration and its consequences if all existing Events of Default, other than
the nonpayment of accelerated principal, premium, if any, or interest that has
become due solely because of the acceleration, have been cured or waived and if
the rescission would not conflict with any judgment or decree. No such
rescission shall affect any subsequent Default or impair any right consequent
thereto. In case an Event of Default specified in Section 6.01(6) or (7) with
respect to the Company occurs, such principal, premium, if any, and interest
amount with respect to all of the Notes shall he due and p able immediately
without any declaration or other act on t part of the Trustee or the Holders of
the Notes.
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Section 6.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, Trustee may pursue
any available remedy by proceeding at law or in equity to collect the payment of
principal of, or premium if any, and interest on the Notes or to enforce the
perform of any provision of the Notes or this Indenture and may take any
necessary action requested of it as Trustee to settle, promise, adjust or
otherwise conclude any proceedings to which it is a party.
The Trustee may maintain a proceeding even if it does not possess
any of the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Noteholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
Section 6.04. WAIVER OF PAST DEFAULTS AND EVENTS OF DEFAULT.
Subject to Sections 6.02, 6.08 and 8.02 hereof, the Holders of a
majority in principal amount of the Notes then outstanding have the right to
waive any existing Default or Event of Default or compliance with any provision
of this Indenture or the Notes. Upon any such waiver, such Default shall cease
to exist, and any Event of Default arising therefrom shall be deemed to have
been cured for every purpose of this Indenture; but no such waiver shall extend
to any subsequent other Default or Event of Default or impair any right
consequent thereto.
Section 6.05. CONTROL BY MAJORITY.
The Holders of a majority in principal amount of the Notes then
outstanding may direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee or exercising any trust or power
conferred on the Trust by this Indenture. The Trustee, however, may refuse to
follow any direction that conflicts with law or this Indenture or that the
Trustee determines may be unduly prejudicial to the rights of another Noteholder
not taking part in such direction, and the Trustee shall have the right to
decline to follow any such direction if the Trustee, being advised by counsel,
determines that the action so directed may not lawfully be taken or if the
Trustee in good faith shall, by a Responsible Officer, determine that the
proceedings so directed may involve it in personal liability; PROVIDED that the
Trustee may take any
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other action deemed proper by the Trustee which is not inconsistent with such
direction.
Section 6.06. LIMITATION ON SUITS.
Subject to Section 6.08 below, a Noteholder may not institute any
proceeding or pursue any remedy with respect to this Indenture or the Notes
unless:
(1) the Holder gives to the Trustee written notice of a
continuing Event of Default;
(2) the Holders of at least 25% in aggregate principal
amount of the Notes then outstanding make a written request to the
Trustee to pursue the remedy;
(3) such Holder or Holders offer and if requested
provide to the Trustee indemnity reasonably satisfactory to the
Trustee against any loss, liability or expense;
(4) the Trustee does not comply with the request within
60 days after receipt of the request and the offer, and, if
requested, provision of, indemnity; and
(5) no direction inconsistent with such written request
has been given to the Trustee during such 60 day period by the
Holders of a majority in aggregate principal amount of the Notes
then outstanding.
A Noteholder may not use this Indenture to prejudice the rights of
another Noteholder or to obtain a preference or priority over another
Noteholder.
Section 6.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND
STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the
Company or any Guarantor shall have any liability for any obligations of the
Company or the Guarantors under the Notes, the Guarantees, if any, or this
Indenture or for a claim based on, in respect of, or by reason of such
obligations or their creation. Each Holder of the Notes by accepting a Note
waives and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes.
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Section 6.08. RIGHTS OF HOLDERS TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of
any Holder of a Note to receive payment of principal of, or premium, if any, and
interest of the Note (including Additional Interest) on or after the respective
due dates expressed in the Note, or to bring suit for the enforcement of any
such payment on or after such respective dates, is absolute and unconditional
and shall not be impaired or affected without the consent of the Holder.
Section 6.09. COLLECTION SUIT BY TRUSTEE.
If an Event of Default in payment of principal, premium or interest
specified in Section 6.01(1) or (2) hereof occurs and is continuing, the Trustee
may recover judgment in its own name and as trustee of an express trust against
the Company or the Guarantors (or any other obligor on the Notes) for the whole
amount of unpaid principal and accrued interest, if any, remaining unpaid,
together with interest on overdue principal and, to the extent that payment of
such interest is lawful, interest on overdue installments of interest, in each
case at the rate set forth in the Notes, and such further amounts as shall be
sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
Section 6.10. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 7.07 hereof) and the Noteholders allowed
in any judicial proceedings relative to the Company or the Guarantors (or any
other obligor upon the Notes), its creditors or its property and shall be
entitled and empowered to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute the same after
deduction of its charges and expenses to the extent that any such charges and
expenses are not paid out of the estate in any such proceedings and any
custodian in any such judicial proceeding is hereby authorized by each
Noteholder to make such payments to the Trustee, and in the event that the
Trustee shall consent to the making of such payments directly to the
Noteholders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses,
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disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 7.07 hereof.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Noteholder any plan
or reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder thereof, or to authorize the Trustee to vote in respect
of the claim of any Noteholder in any such proceedings.
Section 6.11. PRIORITIES.
If the Trustee collects any money pursuant to this Article 6, it
shall pay out the money in the following order:
FIRST: to the Trustee for amounts due under
Section 7.07 hereof;
SECOND: to Noteholders for amounts due and unpaid on the
Notes for principal, premium, if any, and interest (including
Additional Interest, if any) as to each, ratably, without preference
or priority of any kind, according to the amounts due and payable on
the Notes; and
THIRD: to the Company or, to the extent the Trustee
collects any amount from any Guarantor, to such Guarantor.
The Trustee may fix a record date and payment date for any payment
to Noteholders pursuant to this Section 6.11.
Section 6.12. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys, fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 6.12 does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 6.08 hereof or a suit by Holders of more than 10% in
principal amount of the Notes then outstanding.
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Section 6.13. RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee or any Holder has instituted any proceeding to
enforce any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
ARTICLE 7
TRUSTEE
Section 7.01. DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing,
the Trustee shall exercise such of the rights and powers vested in it by this
Indenture and use the same degree of care and skill in their exercise as a
prudent man would exercise or use under the same circumstances in the conduct of
his own affairs.
(b) Except during the continuance of an Event of Default:
(1) The Trustee need perform only those duties that are
specifically set forth in this Indenture and no others.
(2) In the absence of bad faith on its part, the Trustee
may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming on their face to
the requirements of this Indenture but, in the case of any such
certificates or opinions which by any provision hereof are
specifically required to be furnished to the Trustee, the Trustee
shall be under a duty to examine the same to determine whether or
not they conform to the requirements of this Indenture (but need not
confirm or investigate the accuracy of mathematical calculations or
other facts stated therein).
(c) The Trustee may not be relieved from liability for its
own negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
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(1) This paragraph does not limit the effect of
paragraph (b) of this Section 7.01.
(2) The Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer, unless it is
proved that the Trustee was negligent in ascertaining the pertinent
facts.
(3) The Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Sections 6.02 or 6.05 hereof.
(4) No provision of this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur any
financial liability in the performance of any of its rights, powers
or duties if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity satisfactory to it
against such risk or liability is not reasonably assured to it.
(d) Whether or not therein expressly so provided,
paragraphs (a), (b), (c), (e) and (f) of this Section 7.01 shall
govern every provision of this Indenture that in any way relates to
the Trustee.
(e) The Trustee may refuse to perform any duty or
exercise any right or power unless it receives indemnity
satisfactory to it in its sole discretion against any loss,
liability, expense or fee.
(f) The Trustee shall not be liable for interest on any
money received by it except as the Trustee may agree in writing with
the Company or any Guarantor. Money held in trust by the Trustee
need not be segregated from other funds except to the extent
required by the law.
Section 7.02. RIGHTS OF TRUSTEE.
Subject to Section 7.01 hereof:
The Trustee may rely on any document, certificate, resolution,
opinion, statement, consent, order or other writing reasonably believed by it to
be genuine and to have been signed or presented by the proper person. The
Trustee need not investigate any fact or matter stated in the document.
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Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel, or both, which shall conform to
the provisions of Section 12.05 hereof. The Trustee shall be protected and shall
not be liable for any action it takes or omits to take in good faith in reliance
on such certificate or opinion.
The Trustee may act through its attorneys and agents and shall not
be responsible for the misconduct or negligence of any agent appointed by it
with due care.
The Trustee shall not be liable for any action it takes or omits to
take in good faith which it reasonably believes to be authorized or within its
rights or powers; PROVIDED that the Trustee's conduct does not constitute
negligence or bad faith.
The Trustee may consult with counsel of its selection, and the
advice or opinion of such counsel as to matters of law shall be full and
complete authorization and protection from liability in respect of any action
taken, omitted or suffered by it hereunder in good faith and in accordance with
the advice or opinion of such counsel.
The Trustee shall be under no obligation to exercise any of the
rights or powers created in it by this Indenture at the request or direction of
any of the Holders pursuant to this Indenture, unless such Holders shall have
offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which might be incurred by it in compliance with such
request or direction.
The Trustee shall not be deemed to have notice or knowledge of any
Default, Event of Default, or other fact, event, or circumstances the occurrence
or existence of which may impose duties upon the Trustee hereunder unless a
Responsible Officer of the Trustee has actual knowledge thereof. The Trustee
shall not be bound to make any investigation into the facts or matters stated in
any document, but the Trustee, in its discretion, may make such further inquiry
or investigation into such facts or matters as it may see fit.
Section 7.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may make loans to, accept deposits from, perform
services for or otherwise deal with the either of the Company or any Guarantor,
or any Affiliates thereof, with the same rights it would
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have if it were not Trustee. Any Agent may do the same with like rights. The
Trustee, however, shall he subject to Sections 7.10 and 7.11 hereof.
Section 7.04. TRUSTEE'S DISCLAIMER.
The Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for the Company's use of the proceeds from the sale of Notes or any
money paid to the Company pursuant to the terms of this Indenture and it shall
not be responsible for any statement in the Notes or this Indenture other than
its certificate of authentication.
Section 7.05. NOTICE OF DEFAULTS.
If a Default occurs and is continuing and if it is known to a
Responsible Officer of the Trustee, the Trustee shall mail to each Noteholder
notice of the Default within 90 days after it occurs. Except in the case of a
Default in payment of the principal of, or premium, if any, or interest on any
Note, the Trustee may withhold the notice if and so long as a committee of its
Responsible Officers in good faith determine(s) that withholding the notice is
in the interests of the Noteholders.
Section 7.06. REPORTS BY TRUSTEE TO HOLDERS.
If required by TIA sec. 313(a), within 60 days after May 15 of any
year, commencing May 15, 1998, the Trustee shall mail to each Noteholder A brief
report dated as of such May 15 that complies with TIA sec. 313(a). The Trustee
also shall comply with TIA sec. 313(b)(2). The Trustee shall also transMIT by
mail all reports as required by TIA sec. 313(c) and TIA sec. 313(d).
A copy of each report at the time of its mailing to Noteholders
shall be filed with the SEC and each stock exchange, if any, on which the Notes
are listed. The Company shall promptly notify the Trustee when the Notes are
listed on any stock exchange.
Section 7.07. COMPENSATION AND INDEMNITY.
The Company and the Guarantors shall pay to the Trustee and Agents
from time to time such compensation as shall be agreed in writing between the
Company and the Trustee for its services hereunder (which compensation shall not
be limited by any provision of law in regard to the compensation of a trustee of
an express trust). The Company and the Guarantors shall reimburse the Trustee
and Agents promptly upon
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request for all reasonable disbursements, expenses and advances incurred or made
by it, including costs of collection, in connection with its duties under this
Indenture, including the reasonable compensation, disbursements and expenses of
the Trustee's agents, accountants and counsel.
The Company and the Guarantors shall indemnify each of the Trustee
and any predecessor Trustee for, and hold each of them harmless against, any and
all loss, damage, claim, liability or expense, including without limitation
taxes (other than taxes based on the income of the Trustee or such Agent) and
reasonable attorneys' fees and expenses incurred by each of them in connection
with the acceptance or performance of its duties under this Indenture and the
enforcement of this Indenture (including this Section 7.07) against the Company
and any Guarantor, including the reasonable costs and expenses of defending
itself against any claim or liability in connection with the exercise or
performance of any of its powers or duties hereunder (including, without
limitation, settlement costs). The Trustee or Agent shall notify the Company and
the Guarantors in writing promptly of any claim asserted against the Trustee or
Agent for which it may seek indemnity. However, the failure by the Trustee or
Agent to so notify the Company and the Guarantors shall not relieve the Company
and Guarantors of their obligations hereunder.
Notwithstanding the foregoing, the Company and the Guarantors need
not reimburse the Trustee for any expense or indemnify it against any loss or
liability incurred by the Trustee through its negligence or bad faith. To secure
the payment obligations of the Company and the Guarantors in this Section 7.07,
the Trustee shall have a lien prior to the Notes on all money or property held
or collected by the Trustee except such money or property held in trust to pay
principal of and interest on particular Notes. The Trustee's right to receive
payment of any amounts under this Section 7.07 shall not be subordinate to any
other liability or indebtedness of the Company or the Guarantors. The
obligations of the Company and the Guarantors under this Section 7.07 to
compensate and indemnify the Trustee, Agents and each predecessor Trustee and to
pay or reimburse the Trustee, Agents and each predecessor Trustee for expenses,
disbursements and advances shall be joint and several liabilities of the Company
and each of the Guarantors and shall survive the satisfaction and discharge of
this Indenture, including any termination or resection hereof under any
Bankruptcy Law.
When the Trustee incurs expenses or renders services after an Event
of Default specified in Section 6.01(6) or (7) hereof occurs, the
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expenses and the compensation for the services (including the fees and expenses
of its agents and counsel) are intended to constitute expenses of administration
under any Bankruptcy Law, and the Trustee shall have a lien upon any securities,
money, property or other consideration to which the Holders may become entitled
pursuant to any plan of reorganization or readjustment of obligations in any
proceedings under Bankruptcy Law. The Trustee is hereby irrevocably appointed
attorney-in-fact for the Holders to collect and receive in their name, place and
stead, such distributions, dividends or other disbursements, to deduct therefrom
the amounts due the Trustee for such expenses and compensation for services, and
to pay and distribute the balance, pro-rata, to the Holders.
For purposes of this Section 7.07, the term "Trustee" shall include
any trustee appointed pursuant to Article 9.
Section 7.08. REPLACEMENT OF TRUSTEE.
The Trustee may resign by so notifying the Company and the
Guarantors in writing. The Holders of a majority in principal amount of the
outstanding Notes may remove the Trustee by notifying the Company and the
removed Trustee in writing and may appoint a successor Trustee with the
Company's written consent, which consent shall not be unreasonably withheld. The
Company may remove the Trustee at its election if:
(1) the Trustee fails to comply with Section 7.10
hereof;
(2) the Trustee is adjudged a bankrupt or an insolvent;
(3) a receiver or other public officer takes charge of
the Trustee or its property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of a majority in principal amount of the outstanding Notes may petition
any court of competent jurisdiction for the appointment of a successor Trustee.
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If the Trustee fails to comply with Section 7.10 hereof, any
Noteholder may petition any court of competent jurisdiction for the removal of
the Trustee and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately following
such delivery, the retiring Trustee shall, subject to its rights under Section
7.07 hereof, transfer all property held by it as Trustee to the successor
Trustee (provided that the amounts owing to the Trustee hereunder have been paid
in full), the resignation or removal of the retiring Trustee shall become
effective, and the successor Trustee shall have all the rights, powers and
duties of the Trustee under this Indenture. A successor Trustee shall mail
notice of its succession to each Noteholder. Notwithstanding replacement of the
Trustee pursuant to this Section 7.08, the Company obligations under Section
7.07 hereof shall continue for the benefit of the retiring Trustee.
Section 7.09. SUCCESSOR TRUSTEE BY CONSOLIDATION, MERGER, ETC.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust assets to, another
corporation, subject to Section 7.10 hereof, the successor corporation without
any further act shall be the successor Trustee.
Section 7.10. ELIGIBILITY; DISQUALIFICATION.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA sec. 310(a)(1) and (2) in every respect. The Trustee shall
havE a combined capital and surplus of at least $100,000,000 as set forth in its
most recent published annual report of condition. The Trustee shall comply with
TIA sec. 310(b), including the provision in sec. 310(b)(1); PROVIDED that there
shall he excluded from the operation of TIA sec. 310(b)(1) any indenture OR
indentures under which other securities, or conflicts of interest or
participation in other securities, of the Company or the Guarantors are
outstanding if the requirements for exclusion set forth in TIA sec. 310(b)(1)
are met.
Section 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee shall comply with TIA sec. 311(a), excluding any
creditor relationship listed in TIA sec. 311(b). A Trustee who has resigned or
been removed shall be subject to TIA sec. 311(a) to the extent indicated
therein.
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Section 7.12. PAYING AGENTS.
The Company shall cause each Paying Agent other than the Trustee to
execute and deliver to it and the Trustee an instrument in which such agent
shall agree with the Trustee, subject to the provisions of this Section 7.12:
(A) that it will hold all sums held by it as agent for
the payment of principal of, or premium, if any, or interest on, the
Notes (whether such sums have been paid to it by the Company or by
any obligor on the Notes) in trust for the benefit of Holders of the
Notes or the Trustee;
(B) that it will at any time during the continuance of
any Event of Default, upon written request from the Trustee, deliver
to the Trustee all sums so held in trust by it together with a full
accounting thereof; and
(C) that it will give the Trustee written notice within
three (3) Business Days of any failure of the Company (or by any
obligor on the Notes) in the payment of any installment of the
principal of, premium, if any, or interest on, the Notes when the
same shall be due and payable.
ARTICLE 8
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 8.01. WITHOUT CONSENT OF HOLDERS.
The Company and the Guarantors, if any, when authorized by a Board
Resolution of each of them, and the Trustee may amend, waive or supplement this
Indenture, the Notes or the Pledge Agreement without notice to or consent of any
Noteholder:
(1) to comply with Section 5.01 hereof;
(2) to provide for uncertificated Notes in addition to
or in place of certificated Notes;
(3) to comply with any requirements of the SEC under the
TIA;
(4) to cure any ambiguity, defect or inconsistency;
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(5) to make any other change that does not adversely
affect the rights of any Noteholders hereunder;
(6) to add or release a Guarantor; or
(7) to provide for the issuance of the Exchange Notes
and the Private Exchange Notes in accordance with Section 2.02 in a
manner that does not adversely affect the rights of any Noteholder.
The Trustee is hereby authorized to join with the Company and the
Guarantors, if any, in the execution of any supplemental indenture authorized or
permitted by the terms of this Indenture and to make any further appropriate
agreements and stipulations which may be therein contained, but the Trustee
shall not he obligated to enter into any such supplemental indenture which
adversely affects its own rights, duties or immunities under this Indenture.
Section 8.02. WITH CONSENT OF HOLDERS.
The Company, the Guarantors, if any, and the Trustee may modify,
amend, waive or supplement this Indenture or the Notes with the written consent
of the Holders of not less than a majority in aggregate principal amount of the
outstanding Notes. The Holders of not less than a majority in aggregate
principal amount of the outstanding Notes may waive compliance in a particular
instance by the Company or any Guarantor with any provision of this Indenture or
the Notes. Subject to Section 8.04, without the consent of each Noteholder
affected, however, an amendment, supplement or waiver, including a waiver
pursuant to Section 6.04, may not:
(1) reduce the principal amount of outstanding Notes
whose Holders must consent to an amendment, supplement or waiver to
this Indenture or the Notes;
(2) reduce the rate of or change the time for payment of
interest on any Note;
(3) reduce the principal of or premium on or change the
stated maturity of any Note;
(4) make any Note payable in money other than that
stated in the Note or change the place of presentment from New York,
New York;
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(5) change the amount or time of any payment required by
the Notes or reduce the premium payable upon any redemption of the
Notes in accordance with Section 3.01 hereof, or change the time
before which no such redemption may be made;
(6) waive a default in the payment of the principal of,
or interest on, or redemption payment with respect to, any Note
(including any obligation to make a Change of Control Offer or,
after the Company's obligation to purchase Notes arises thereunder,
an Excess Proceeds Offer or modify any of the provisions or
definitions with respect to such offers);
(7) make any changes in Sections 6.04 or 6.08 hereof or
this sentence of Section 8.02; or
(8) affect the ranking of the Notes or any Guarantee in
a manner adverse to the Holders.
After a modification, amendment, supplement or waiver under this
Section 8.02 becomes effective, the Company shall mail to the Holders a notice
briefly describing the modification, amendment, supplement or waiver. Any
failure of the Company to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such modification,
amendment, supplement or waiver.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, supplement or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
Section 8.03. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment or supplement to this Indenture or the Notes shall
comply with the TIA as then in effect.
Section 8.04. REVOCATION AND EFFECT OF CONSENTS.
Until a modification, amendment, supplement, waiver or other action
becomes effective, a consent to it by a Holder of a Note is a continuing consent
conclusive and binding upon such Holder and every subsequent Holder of the same
Note or portion thereof, and of any Note issued upon the transfer thereof or in
exchange therefor or in place thereof, even if notation of the consent is not
made on any such Note. Any
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such Holder or subsequent Holder, however, may revoke the consent as to his Note
or portion of a Note, if the Trustee receives the written notice of revocation
before the date the modification, amendment, supplement, waiver or other action
becomes effective.
The Company may, but shall not he obligated to, fix a record date
for the purpose of determining the Holders entitled to consent to any
modification, amendment, supplement, or waiver. If a record date is fixed, then,
notwithstanding the preceding paragraph, those Persons who were Holders at such
record date (or their duly designated proxies), and only such Persons, shall be
entitled to consent to such modification, amendment, supplement, or waiver or to
revoke any consent previously given, whether or not such Persons continue to be
Holders after such record date. No such consent shall be valid or effective for
more than 90 days after such record date unless the consent of the requisite
number of Holders has been obtained.
After a modification, amendment, supplement, waiver or other action
becomes effective, it shall bind every Noteholder, unless it makes a change
described in any of clauses (1) through (8) of Section 8.02 hereof. In that case
the modification, amendment, supplement, waiver or other action shall bind each
Holder of a Note who has consented to it and every subsequent Holder of a Note
or portion of a Note that evidences the same debt as the consenting Holder's
Note.
Section 8.05. NOTATION ON OR EXCHANGE OF NOTES.
If a modification, amendment, supplement or waiver changes the terms
of a Note, the Trustee may request the Holder of the Note deliver it to the
Trustee. In such case, the Trustee shall place an appropriate notation on the
Note about the changed terms and return it to the Holder. Alternatively, if the
Company or the Trustee so determines, the Company in exchange for the Note shall
issue, the Guarantors shall endorse, and the Trustee shall authenticate a new
Note that reflects the changed terms. Failure to make the appropriate notation
or issue a new Note shall not affect the validity and effect of such amendment,
supplement or waiver.
Section 8.06. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any modification, amendment, supplement or
waiver authorized pursuant to this Article 8 if the modification, amendment,
supplement or waiver does not adversely affect the rights, duties, liabilities
or immunities of the Trustee. If it does, the Trustee
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may, but need not, sign it. In signing or refusing to sign such modification,
amendment, supplement or waiver the Trustee shall be entitled to receive and,
subject to Section 7.01 hereof, shall be fully protected in relying upon an
Officers, Certificate and an Opinion of Counsel stating that such modification,
amendment, supplement or waiver is authorized or permitted by this Indenture and
is a legal, valid and binding obligation of the Company and the Guarantors, if
any, enforceable against each of them in accordance with its terms (subject to
customary exceptions). The Company or any Guarantor may not sign a modification,
amendment or supplement until the Board of Directors of the Company or such
Guarantor, as appropriate, approves it.
ARTICLE 9
DISCHARGE OF INDENTURE; DEFEASANCE
Section 9.01. DISCHARGE OF INDENTURE.
The Company and the Guarantors, if any, may terminate their
obligations under the Notes, the Guarantees, if any, and this Indenture, except
the obligations referred to in the last paragraph of this Section 9.01, if there
shall have been canceled by the Trustee or delivered to the Trustee for
cancellation all Notes theretofore authenticated and delivered (other than any
Notes that are asserted to have been destroyed, lost or stolen and that shall
have been replaced as provided in Section 2.07 hereof) and the Company has paid
all sums payable by them hereunder or deposited all required sums with the
Trustee.
After such delivery, the Trustee upon Company Request shall
acknowledge in writing the discharge of the Company's and the Guarantors'
obligations under the Notes, the Guarantees and this Indenture except for those
surviving obligations specified below.
Notwithstanding the satisfaction and discharge of this Indenture,
the obligations of the Company in Sections 7.07, 9.05, 9.06 and 9.08 hereof
shall survive.
Section 9.02. LEGAL DEFEASANCE.
The Company may at its option, by Board Resolution of the Board of
Directors of the Company, be discharged from its obligations with respect to the
Notes and the Guarantors, if any, discharged from their obligations under the
Guarantees, if any, on the date the conditions set forth in Section 9.04 below
are satisfied (hereinafter, "LEGAL DEFEASANCE"). For
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this purpose, such Legal Defeasance means that the Company shall be deemed to
have paid and discharged the entire indebtedness represented by the Notes and to
have satisfied all its other obligations under such Notes and this Indenture
insofar as such Notes are concerned (and the Trustee, at the expense of the
Company, shall, subject to Section 9.06 hereof, execute instruments in form and
substance reasonably satisfactory to the Trustee and Company acknowledging the
same), except for the following which shall survive until otherwise terminated
or discharged hereunder: (A) the rights of Holders of outstanding Notes to
receive solely from the trust funds described in Section 9.04 hereof and as more
fully set forth in such Section, payments in respect of the principal of,
premium, if any, and interest on such Notes when such payments are due, (B) the
Company's obligations with respect to such Notes under Sections 2.03, 2.04,
2.05, 2.06, 2.07, 2.08, 2.09 and 4.20 hereof, (C) the rights, powers, trusts,
duties, and immunities of the Trustee hereunder (including claims of, or
payments to, the Trustee under or pursuant to Section 7.07 hereof) and (D) this
Article 9. Subject to compliance with this Article 9, the Company may exercise
its option under this Section 9.02 with respect to the Notes notwithstanding the
prior exercise of its option under Section 9.03 below with respect to the Notes.
Section 9.03. COVENANT DEFEASANCE.
At the option of the Company, pursuant to a Board Resolution of the
Board of Directors of the Company, the Company and the Guarantors, if any, shall
be released from their respective obligations under Sections 4.02 (except for
obligations mandated by the TIA), 4.05 through 4.16, 4.19, and 4.21 through
4.25, inclusive, and clause (a)(iii) of Section 5.01 hereof with respect to the
outstanding Notes on and after the date the conditions set forth in Section 9.04
hereof are satisfied (hereinafter, "COVENANT DEFEASANCE") and the Notes shall
thereafter be deemed to not be outstanding for purposes of any direction,
waiver, consent, declaration or act of the Holders (and the consequences
thereof) in connection with such covenants but shall continue to be outstanding
for all other purposes hereunder. For this purpose, such Covenant Defeasance
means that the Company and the Guarantors, if any, may omit to comply with and
shall have no liability in respect of any term, condition or limitation set
forth in any such specified Section or portion thereof, whether directly or
indirectly by reason of any reference elsewhere herein to any such specified
Section or portion thereof or by reason of any reference in any such specified
Section or portion thereof to any other provision herein or in any other
document, but the remainder of this Indenture and the Notes shall be unaffected
thereby.
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Section 9.04. CONDITIONS TO LEGAL DEFEASANCE OR COVENANT DEFEASANCE.
The following shall be the conditions to application of Section 9.02
or Section 9.03 hereof to the outstanding Notes:
(1) the Company shall irrevocably have deposited or
caused to be deposited with the Trustee (or another trustee
satisfying the requirements of Section 7.10 hereof who shall agree
to comply with the provisions of this Article 9 applicable to it) as
funds in trust for the purpose of making the following payments,
specifically pledged as security for, and dedicated solely to, the
benefit of the Holders of the Notes, (A) money in an amount, or (B)
U.S. Government Obligations which through the scheduled payment of
principal and interest in respect thereof in accordance with their
terms will provide, not later than the due date of any payment,
money in an amount, or (C) a combination thereof, sufficient, in the
opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered
to the Trustee, to pay and discharge, and which shall be applied by
the Trustee (or other qualifying trustee) to pay and discharge, the
principal of, premium, if any, and accrued interest on the
outstanding Notes at the maturity date of such principal, premium,
if any, or interest, or on dates for payment and redemption of such
principal, premium, if any, and interest selected in accordance with
the terms of this Indenture and of the Notes;
(2) no Event of Default or Default with respect to the
Notes shall have occurred and be continuing on the date of such
deposit, or shall have occurred and be continuing at any time during
the period ending on the 91st day after the date of such deposit or,
if longer, ending on the day following the expiration of the longest
preference period under any Bankruptcy Law applicable to the Company
in respect of such deposit (it being understood that this condition
shall not be deemed satisfied until the expiration of such period);
(3) such Legal Defeasance or Covenant Defeasance shall
not cause the Trustee to have a conflicting interest for purposes of
the TIA with respect to any securities of the Company;
(4) such Legal Defeasance or Covenant Defeasance shall
not result in a breach or violation of, or constitute default under
any other agreement or instrument to which the Company or any
Guarantor is a party or by which they are bound;
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(5) the Company shall have delivered to the Trustee an
Opinion of Counsel stating that, as a result of such Legal
Defeasance or Covenant Defeasance, neither the trust nor the Trustee
will be required to register as an investment company under the
Investment Company Act of 1940, as amended;
(6) in the case of an election under Section 9.02 above,
the Company shall have delivered to the Trustee an Opinion of
Counsel stating that (i) the Company has received from, or there has
been published by, the Internal Revenue Service a ruling to the
effect that or (ii) there has been a change in any applicable
Federal income tax law with the effect that, and such opinion shall
confirm that, the Holders of the outstanding Notes or Persons in
their positions will not recognize income, gain or loss for Federal
income tax purposes solely as a result of such Legal Defeasance and
will be subject to Federal income tax on the same amounts, in the
same manner, including as a result of prepayment, and at the same
times as would have been the case if such Legal Defeasance had not
occurred;
(7) in the case of an election under Section 9.03
hereof, the Company shall have delivered to the Trustee an Opinion
of Counsel to the effect that the Holders of the outstanding Notes
will not recognize income, gain or loss for Federal income tax
purposes as a result of such Covenant Defeasance and will be subject
to Federal income tax on the same amounts, in the same manner and at
the same times as would have been the case if such Covenant
Defeasance had not occurred;
(8) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that
all conditions precedent provided for relating to either the Legal
Defeasance under Section 9.02 above or the Covenant Defeasance under
Section 9.03 hereof (as the case may be) have been complied with;
(9) the Company shall have delivered to the Trustee an
Officers, Certificate stating that the deposit under clause (1) was
not made by the Company with the intent of defeating, hindering,
delaying or defrauding any creditors of the Company or others; and
(10) the Company shall have paid or duly provided for
payment under terms mutually satisfactory to the Company and the
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Trustee all amounts then due to the Trustee pursuant to Section 7.07
hereof.
Section 9.05. DEPOSITED MONEY AND U.S. GOVERNMENT OBLIGATIONS TO BE HELD IN
TRUST; OTHER MISCELLANEOUS PROVISIONS.
All money and U.S. Government Obligations (including the proceeds
thereof) deposited with the Trustee pursuant to Section 9.04 hereof in respect
of the outstanding Notes shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Notes and this Indenture, to the payment,
either directly or through any Paying Agent, to the Holders of such Notes, of
all sums due and to become due thereon in respect of principal, premium, if any,
and accrued interest, if any, but such money need not be segregated from other
funds except to the extent required by law.
The Company and the Guarantors, if any, shall (on a joint and
several basis) pay and indemnify the Trustee against any tax, fee or other
charge imposed on or assessed against the U.S. Government Obligations deposited
pursuant to Section 9.04 hereof or the principal, premium, if any, and interest
received in respect thereof other than any such tax, fee or other charge which
by law is for the account of the Holders of the outstanding Notes.
Anything in this Article 9 to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon a Company
Request any money or U.S. Government Obligations held by it as provided in
Section 9.04 hereof which, in the opinion of a nationally-recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof which would then
be required to be deposited to effect an equivalent Legal Defeasance or Covenant
Defeasance.
Section 9.06. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with Section 9.01, 9.02 or 9.03 hereof by
reason of any legal proceeding or by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, the obligations of the Company and any Guarantor under this
Indenture, the Notes and the Guarantees, if any, shall be revived and reinstated
as though no deposit had occurred pursuant to this Article 9 until such time as
the Trustee or Paying Agent is permitted to apply all such money or U.S.
Government Obligations in
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accordance with Section 9.01 hereof; PROVIDED, however, that if the Company or
the Guarantors have made any payment of principal of, premium, if any, or
accrued interest on any Notes because of the reinstatement of their obligations,
the Company or the Guarantors, as the case may be, shall be subrogated to the
rights of the Holders of such Notes to receive such payment from the money or
U.S. Government Obligations held by the Trustee or Paying Agent.
Section 9.07. MONEYS HELD BY PAYING AGENT.
In connection with the satisfaction and discharge of this Indenture,
all moneys then held by any Paying Agent under the provisions of this Indenture
shall, upon written demand of the Company, be paid to the Trustee, or if
sufficient moneys have been deposited pursuant to Section 9.01 hereof, to the
Company upon a Company Request (or, if such moneys had been deposited by any
Guarantors, to such Guarantors), and thereupon such Paying Agent shall be
released from all further liability with respect to such moneys.
Section 9.08. MONEYS HELD BY TRUSTEE.
Any moneys deposited with the Trustee or any Paying Agent or then
held by the Company or any Guarantors in trust for the payment of the principal
of, or premium, if any, or interest on any Note that are not applied but remain
unclaimed by the Holder of such Note for two years after the date upon which the
principal of, or premium, if any, or interest on such Note shall have
respectively become due and payable shall be repaid to the Company (or, if
appropriate, the Guarantors) upon a Company Request, or if such moneys are then
held by the Company or the Guarantors in trust, such moneys shall be released
from such trust; and the Holder of such Note entitled to receive such payment
shall thereafter, as an unsecured general creditor, look only to the Company and
the Guarantors for the payment thereof, and all liability of the Trustee or such
Paying Agent with respect to such trust money shall thereupon cease; PROVIDED,
HOWEVER, that the Trustee or any such Paying Agent, before being required to
make any such repayment, may, at the expense of the Company and the Guarantors,
if any, either mail to each Noteholder affected, at the address shown in the
register of the Notes maintained by the Registrar pursuant to Section 2.03
hereof, or cause to be published once a week for two successive weeks, in a
newspaper published in the English language, customarily published each Business
Day and of general circulation in the City of New York, New York, a notice that
such money remains unclaimed and that, after a date specified therein, which
shall not be less than 30 days from the date of such mailing or
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publication, any unclaimed balance of such moneys then remaining will be repaid
to the Company. After payment to the Company or any Guarantor or the release of
any money held in trust by the Company or any Guarantor, as the case may be,
Noteholders entitled to the money must look only to the Company and any
Guarantors for payment as general creditors unless applicable abandoned property
law designates another Person.
ARTICLE 10
GUARANTEE OF NOTES
Section 10.01. GUARANTEE.
Subject to the provisions of this Article 10, each Guarantor, by
execution of a Guarantee, will jointly and severally unconditionally guarantee
to each Holder and to the Trustee, on behalf of the Holders, (i) the due and
punctual payment of the principal of, and premium, if any, and interest, if any,
on each Note, when and as the same shall become due and payable, whether at
maturity, by acceleration or otherwise, the due and punctual payment of interest
(including Additional Interest) on the overdue principal of, and premium, if
any, and interest, if any, on the Notes, to the extent lawful, and the due and
punctual performance of all other obligations of the Company to the Holders or
the Trustee (including without limitation amounts due the Trustee under Section
7.07) all in accordance with the terms of such Note and this Indenture, and (ii)
in the case of any extension of time of payment or renewal of any Notes or any
of such other Obligations, that the same will be promptly paid in full when due
or performed in accordance with the terms of the extension or renewal, at stated
maturity, by acceleration or otherwise. Each Guarantor, by execution of a
Guarantee, will agree that its obligations hereunder shall be absolute and
unconditional, irrespective of, and shall be unaffected by, any invalidity,
irregularity or unenforceability of any such Note or this Indenture, any failure
to enforce the provisions of any such Note or this Indenture, any waiver,
modification or indulgence granted to the Company with respect thereto by the
Holder of such Note or the Trustee, or any other circumstances which may
otherwise constitute a legal or equitable discharge of a surety or such
Guarantor.
Each Guarantor, by execution of a Guarantee, will waive diligence,
presentment, demand for payment, filing of claims with a court in the event of
merger or bankruptcy of the Company, any right to require a proceeding first
against the Company, protest or notice with respect to any such Note or the
Indebtedness evidenced thereby and all demands
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whatsoever, and will covenant that the Guarantee will not be discharged as to
any such Note except by payment in full of the principal thereof, premium, and
interest, if any, thereon and as provided in Section 9.01 hereof. Each
Guarantor, by execution of a Guarantee, will further agree that, as between such
Guarantor, on the one hand, and the Holders and the Trustee, on the other hand,
(i) the maturity of the Obligations guaranteed hereby may be accelerated as
provided in Article 6 hereof for the purposes of this Guarantee, notwithstanding
any stay, injunction or other prohibition preventing such acceleration in
respect of the Obligations guaranteed hereby, and (ii) in the event of any
declaration of acceleration of such Obligations as provided in Article 6 hereof,
such Obligations (whether or not due and payable) shall forthwith become due and
payable by each Guarantor for the purpose of this Guarantee. In addition,
without limiting the foregoing provisions, upon the effectiveness of an
acceleration under Article 6 hereof, the Trustee shall promptly make a demand
for payment on the Notes under the Guarantee provided for in this Article 10 and
not discharged. Failure to make such a demand shall not affect the validity or
enforceability of the Guarantee upon any Guarantor.
A Guarantee shall not be valid or become obligatory for any purpose
with respect to a Note until the certificate of authentication on such Note
shall have been signed by or on behalf of the Trustee.
A Guarantee shall remain in full force and effect and continue to be
effective should any petition be filed by or against the Company for liquidation
or reorganization, should the Company become insolvent or make an assignment for
the benefit of creditors or should a receiver or trustee be appointed for all or
any significant part of the Company's assets, and shall, to the fullest extent
permitted by law, continue to be effective or be reinstated, as the case may be,
if at any time payment and performance of the Securities are, pursuant to
applicable law, rescinded or reduced in amount, or must otherwise be restored or
returned by any obligee on the Securities, whether as a "voidable preference,"
"fraudulent transfer" or otherwise, all as though such payment or performance
had not been made. In the event that any payment, or any part thereof, is
rescinded, reduced, restored or returned, the Securities shall, to the fullest
extent permitted by law, be reinstated and deemed reduced only by such amount
paid and not so rescinded, reduced, restored or returned.
No stockholder, officer, director, employer or incorporator, past,
present or future, of any Guarantor, as such, shall have any personal liability
under this Guarantee by reason of his, her or its status as such stockholder,
officer, director, employer or incorporator.
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A Guarantor, by execution of a Guarantee, will have the right to
seek contribution from any non-paying Guarantor so long as the exercise of such
right does not impair the rights of the Holders under such Guarantee.
Section 10.02. EXECUTION DELIVERY OF GUARANTEES.
A Guarantee shall be executed on behalf of a Guarantor by the manual
or facsimile signature of an Officer of such Guarantor.
If an Officer of a Guarantor whose signature is on the Guarantee no
longer holds that office, such Guarantee shall be valid nevertheless.
Section 10.03. LIMITATION OF GUARANTEE.
The obligations of each Guarantor are limited to the maximum amount
as will, after giving effect to all other contingent and fixed liabilities of
such Guarantor and after giving effect to any collections from or payments made
by or on behalf of any other Guarantor in respect of the obligations of such
other Guarantor under its Guarantee or pursuant to its contribution obligations
under this Indenture, result in the obligations of such Guarantor under the
Guarantee not constituting a fraudulent conveyance or fraudulent transfer under
federal or state law. Each Guarantor that makes a payment or distribution under
a Guarantee shall be entitled to a contribution from each other Guarantor in a
pro rata amount based on the Adjusted Net Assets of each Guarantor.
Section 10.04. ADDITIONAL GUARANTORS.
Any person may become a Guarantor by executing and delivering to the
Trustee (a) a supplemental indenture in form and substance satisfactory to the
Trustee, which subjects such person to the provisions of this Indenture as a
Guarantor, and (b) an Opinion of Counsel to the effect that such supplemental
indenture has been duly authorized and executed by such person and constitutes
the legal, valid, binding and enforceable obligation of such person (subject to
such customary exceptions concerning fraudulent conveyance laws, creditors,
rights and equitable principles as may be acceptable to the Trustee in its
discretion).
Section 10.05. RELEASE OF GUARANTOR.
A Guarantor shall be released from all of its obligations under its
Guarantee if:
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(i) the Guarantor has sold all or substantially all of
its assets or the Company and its Restricted Subsidiaries have sold
all of the Capital Stock of the Guarantor owned by them, in each
case in a transaction in compliance with Sections 4.10 and 5.01
hereof; or
(ii) the Guarantor merges with or into or consolidates
with, or transfers all or substantially all of its assets to, the
Company or another Guarantor in a transaction in compliance with
Section 5.01 hereof;
and in each such case, such Guarantor has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to such transactions have been complied
with.
ARTICLE 11
COLLATERAL AND SECURITY
Section 11.01. PLEDGE AGREEMENT.
The due and punctual payment of the principal of and interest on the
Notes when and as the same shall be due and payable, whether on an interest
payment date, at maturity, by acceleration, repurchase, redemption or otherwise,
and interest on the overdue principal of and interest (to the extent permitted
by law), if any, on the Notes and performance of all other obligations of the
Company to the Holders of Notes or the Trustee under this Indenture and the
Notes, according to the terms hereunder or thereunder, shall be secured as
provided in the Pledge Agreement. Each Holder of Notes, by its acceptance
thereof, consents and agrees to the terms of the Pledge Agreement (including,
without limitation, the provisions providing for foreclosure and disbursement of
Collateral) as the same may be in effect or may be amended from time to time in
accordance with its terms and authorizes and directs the Trustee to enter into
the Pledge Agreement and to perform its obligations and exercise its rights
thereunder in accordance therewith. The Company shall deliver to the Trustee
copies of the Pledge Agreement, and shall do or cause to be done all such acts
and things as may be necessary or proper, or as may be required by the
provisions of the Pledge Agreement, to assure and confirm to the Trustee the
security interest in the Collateral contemplated by the Pledge Agreement or any
part thereof, as from time to time constituted, so as to render the same
available for the security and
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benefit of this Indenture with respect to the Notes, according to the intent and
purposes expressed in the Pledge Agreement. The Company shall take any and all
actions reasonably required to cause the Pledge Agreement to create and maintain
(to the extent possible under applicable law), as security for the obligations
of the Company hereunder, a valid and enforceable perfected first priority Lien
in and on all the Collateral, in favor of the Trustee for the benefit of the
Holders of Notes, superior to and prior to the rights of all third Persons.
Section 11.02. RECORDING AND OPINIONS.
The Company shall furnish to the Trustee simultaneously with the
execution and delivery of this Indenture an Opinion of Counsel either (i)
stating that in the opinion of such counsel the Lien with respect to the
Collateral intended to be created by the Pledge Agreement has been validly
created and reciting with respect to the security interests in the Collateral,
the details of the action required to perfect such security interest, or (ii)
stating that, in the opinion of such counsel, no such action is necessary to
perfect such Lien.
Section 11.03. RELEASE OF COLLATERAL.
(a) Subject to subsections (b), (c) and (d) of this Section 11.03,
Collateral may be released from the Lien and security interest created by the
Pledge Agreement only in accordance with the provisions of the Pledge Agreement.
(b) No Collateral shall be released from the Lien and security
interest created by the Pledge Agreement, other than pursuant to the terms
thereof, unless there shall have been delivered to the Trustee the certificate
required by Section 11.03(d) and Section 11.04.
(c) At any time when an Event of Default shall have occurred and he
continuing and the maturity of the Notes shall have been accelerated (whether by
declaration or otherwise), no Collateral shall be released pursuant to the
provisions of the Pledge Agreement, and no release of Collateral in
contravention of this Section 11.3(c) shall be effective as against the Holders
of Notes.
(d) The release of any Collateral from the Liens and security
interests created by the Pledge Agreement shall not be deemed to impair the
security under this Indenture in contravention of the provisions hereof if and
to the extent the Collateral is released pursuant to the terms hereof or,
subject to complying with the requirements of this Section
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11.03, pursuant to the terms of the Pledge Agreement. To the extent applicable,
the Company shall cause TIA Section 314(d) relating to the release of property
or securities from the Lien and security interest of the Pledge Agreement to be
complied with. Any certificate or opinion required by TIA Section 314(d) may be
made by an officer of the Company except in cases where TIA Section 314(d)
requires that such certificate or opinion be made by an independent Person,
which Person shall be an independent engineer, appraiser or other expert
selected or approved by the Trustee in the exercise of reasonable care.
Section 11.04. CERTIFICATES OF THE COMPANY.
The Company shall furnish to the Trustee, prior to any proposed
release of Collateral other than pursuant to the express terms of the Pledge
Agreement, (i) all documents required by TIA Section 314(d) and (ii) an Opinion
of Counsel, which may be rendered by internal counsel to the Company, to the
effect that such accompanying documents constitute all documents required by TIA
Section 314(d). The Trustee may, to the extent permitted by Sections 7.01 and
7.02, accept as conclusive evidence of compliance with the foregoing provisions
the appropriate statements contained in such documents and such opinion of
Counsel.
Section 11.05. AUTHORIZATION OF TRUSTEE ACTIONS UNDER PLEDGE AGREEMENT.
Subject to the provisions of Sections 7.01 and 7.02, the Trustee
may, without the consent of the Holders of Notes, on behalf of the Holders of
Notes, take all actions it deems necessary or appropriate in order to (i)
enforce any of the terms of the Pledge Agreement and (ii) collect and receive
any and all amounts payable in respect of the obligations of the Company
hereunder. The Trustee shall have power to institute and maintain such suits and
proceedings as it may deem expedient to prevent any impairment of the Collateral
by any acts that may be unlawful or in violation of the Pledge Agreement or this
Indenture, and such suits and proceedings as the Trustee may deem expedient to
preserve or protect its interests and the interests of the Holders of Notes in
the Collateral (including power to institute and maintain suits or proceedings
to restrain the enforcement of or compliance with any legislative or other
governmental enactment, rule or order that may be unconstitutional or otherwise
invalid if the enforcement of, or compliance with, such enactment, rule or order
would impair the security interest thereunder or he prejudicial to the interests
of the Holders of Notes or of the Trustee).
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Section 11.06. AUTHORIZATION OF RECEIPT OF FUNDS BY TRUSTEE UNDER PLEDGE
AGREEMENT.
The Trustee is authorized to receive any funds for the benefit of
the Holders of Notes disbursed under the Pledge Agreement, and to make further
distributions of such funds to the Holders of Notes according to the provisions
of this Indenture.
Section 11.07. TERMINATION OF SECURITY INTEREST.
Upon the earliest to occur of (i) the payment in full of all
obligations of the Company under this Indenture and the Notes, (ii) Legal
Defeasance pursuant to Section 9.03 and (iii) Covenant Defeasance pursuant to
Section 9.02, the Trustee shall, at the written request of the Company, release
any Liens existing pursuant to this Indenture the Pledge Agreement upon the
Company's compliance with the provisions of the TIA pertaining to release of
collateral.
ARTICLE 12
MISCELLANEOUS
Section 12.01. TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or conflicts
with another provision which is required to be included in this Indenture by the
TIA, the required provision shall control.
Section 12.02. NOTICES.
Any notice or communication shall be given in writing and delivered
in person, sent by facsimile, delivered by commercial courier service or mailed
by first-class mail, postage prepaid, addressed as follows:
If to the Company or any Guarantor:
High Voltage Engineering Corporation
401 Edgewater Place, Suite 680
Wakefield, Massachusetts 01880
Attention: President
Telephone: (617) 224-1001
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Fax Number: (617) 224-1101
Copy to:
Bingham, Dana & Gould LLP
150 Federal Street
Boston, Massachusetts 02110-1726
Attention: Michael P. O'Brien, Esq.
Telephone: (617) 951-8000
Fax Number: (617) 951-8736
If to the Trustee:
State Street Bank and Trust Company
2 International Place
Boston, Massachusetts 02110-2804
Attention: Financial Markets Group - Corporate
Trust Department
Telephone: (617) 664-5311
Fax Number: (617) 664-5742
Copy to:
Peabody & Arnold
50 Rowes Wharf
Boston, MA 02110
Attention: Robert J. Coughlin, Esq.
Telephone: (617) 951-2011
Fax Number: (617) 951-2125
Such notices or communications shall he effective when received and
shall be sufficiently given if so given within the time prescribed in this
Indenture.
The Company, any Guarantors or the Trustee by written notice to the
others may designate additional or different addresses for subsequent notices or
communications.
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Any notice or communication mailed to a Noteholder shall be mailed
to him by first-class mail, postage prepaid, at his address shown on the
register kept by the Registrar.
Failure to mail a notice or communication to a Noteholder or any
defect in it shall not affect its sufficiency with respect to other Noteholders.
If a notice or communication to a Noteholder is mailed in the manner provided
above, it shall be deemed duly given, whether or not the addressee receives it.
In case by reason of the suspension of regular mail service, or by
reason of any other cause, it shall be impossible to mail any notice as required
by this Indenture, then such method of notification as shall be made with the
approval of the Trustee shall constitute a sufficient mailing of such notice.
Section 12.03. COMMUNICATIONS BY HOLDERS WITH OTHER.
Noteholders may communicate pursuant to TIA sec. 312(b) with other
Noteholders with respect to their rights under this Indenture or the Notes. The
Company, the Guarantors, if any, the Trustee, the Registrar and anyone else
shall have the protection of TIA sec. 312 (c).
Section 12.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company or any Guarantor to
the Trustee to take any action under this Indenture, the Company shall furnish
to the Trustee:
(1) an Officers, Certificate (which shall include the
statements set forth in Section 12.05 below) stating that, in the
opinion of the signers, all conditions precedent, if any, provided
for in this Indenture relating to the proposed action have been
complied with; and
(2) an Opinion of Counsel (which shall include the
statements set forth in Section 12.05 below) stating that, in the
opinion of such counsel, all such conditions precedent have been
complied with.
Section 12.05. STATEMENTS REQUIRED IN CERTIFICATE AND OPINION.
Each certificate and opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
<PAGE> 105
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(1) a statement that the Person making such certificate
or opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such Person, it
or he has made such examination or investigation as is necessary to
enable it or him to express an informed opinion as to whether or not
such covenant or condition has been complied with; and
(4) a statement as to whether or not, in the opinion of
such Person, such covenant or condition has been complied with.
Section 12.06. RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or meetings of
Noteholders. The Registrar and Paying Agent may make reasonable rules for their
functions.
Section 12.07. BUSINESS DAYS; LEGAL HOLIDAYS.
A "Business Day" is a day that is not a Legal Holiday. A "Legal
Holiday" is a Saturday, a Sunday, a federally-recognized holiday or a day on
which banking institutions are not required to be open in the State of New York.
If a payment date is a Legal Holiday at a place of payment, payment may be made
at that place on the next succeeding day that is not a Legal Holiday, and no
interest shall accrue for the intervening period.
Section 12.08. GOVERNING LAW.
THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS, AS APPLIED TO CONTRACTS MADE
AND PERFORMED WITHIN THE COMMONWEALTH OF MASSACHUSETTS, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO
THE JURISDICTION OF THE COURTS OF THE STATE OF MASSACHUSETTS IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE OR THE NOTES.
<PAGE> 106
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Section 12.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not he used to interpret another indenture, loan,
security or debt agreement of the Company or any Subsidiary thereof. No such
indenture, loan, security or debt agreement may be used to interpret this
Indenture.
Section 12.10. NO RECOURSE AGAINST OTHERS.
No recourse for the payment of the principal of or premium, if any,
or interest on any of the Notes, or for any claim based thereon or otherwise in
respect thereof, and no recourse under or upon any obligation, covenant or
agreement of the Company or any Guarantor in this Indenture or in any
supplemental indenture, or in any of the Notes, or because of the creation of
any Indebtedness represented thereby, shall be had against any stockholder,
officer, director, partner, affiliate, beneficiary or employee, as such, past,
present or future, of the Company or of any successor corporation or against the
property or assets of any such stockholder, officer, employee, partner,
affiliate, beneficiary or director, either directly or through the Company or
any Guarantor, or any successor corporation thereof, whether by virtue of any
constitution, statute or rule of law, or by the enforcement of any assessment or
penalty or otherwise; it being expressly understood that this Indenture and the
Notes are solely obligations of the Company and any Guarantors, and that no such
personal liability whatever shall attach to, or is or shall be incurred by, any
stockholder, officer, employee, partner, affiliate, beneficiary or director of
the Company or any Guarantor, or any successor corporation thereof, because of
the creation of the indebtedness hereby authorized, or under or by reason of the
obligations, covenants or agreements contained in this Indenture or the Notes or
implied therefrom, and that any and all such personal liability of, and any and
all claims against every stockholder, officer, employee, partner, affiliate,
beneficiary and director, are hereby expressly waived and released as a
condition of, and as a consideration for, the execution of this Indenture and
the issuance of the Notes. It is understood that this limitation on recourse is
made expressly for the benefit of any such shareholder, employee, officer,
partner, affiliate, beneficiary or director and may be enforced by any one or
all of them.
Section 12.11. SUCCESSORS.
All agreements of the Company and the Guarantors, if any, in this
Indenture and the Notes shall bind their respective successors. All
<PAGE> 107
-99-
agreements of the Trustee, any additional trustee and any Paying Agents in this
Indenture shall bind its successor.
Section 12.12. MULTIPLE COUNTERPARTS.
The parties may sign multiple counterparts of this Indenture. Each
signed counterpart shall be deemed an original, but all of them together
represent one and the same agreement.
Section 12.13. TABLE OF CONTENTS, HEADINGS, ETC.
The table of contents, cross-reference sheet and headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part hereof, and shall in no way
modify or restrict any of the terms or provisions hereof.
Section 12.14. SEPARABILITY.
Each provision of this Indenture shall be considered separable and
if for any reason any provision which is not essential to the effectuation of
the basic purpose of this Indenture or the Notes shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
[Remainder of page left blank intentionally]
<PAGE> 108
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IN WITNESS WHEREOF, the parties have caused this Indenture to be
duly executed all as of the date and year first written above.
HIGH VOLTAGE ENGINEERING
CORPORATION
By: /s/ Clifford Press
-------------------------------
Name: Clifford Press
Title: President
STATE STREET BANK AND TRUST
COMPANY, as Trustee
By: /s/ Jill Olson
-------------------------------
Name: Jill Olson
Title: Assistant Vice President
<PAGE> 109
EXHIBIT A
---------
[FORM OF FACE OF NOTE]
CUSIP [ ]
HIGH VOLTAGE ENGINEERING CORPORATION
No. [ ] $ , ,000
10 1/2% SENIOR NOTE DUE 2004
HIGH VOLTAGE ENGINEERING CORPORATION, a Massachusetts corporation
(the "Company"), for value received, promises to pay to or registered assigns
the principal sum of $ , ,000 dollars on August 15, 2004.
Interest Payment Dates: February 15 and August 15
Record Dates: February 1 and August 1
Reference is made to the further provisions of this Note contained
herein, which will for all purposes have the same effect as if set forth at this
place.
<PAGE> 110
A-2
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers.
HIGH VOLTAGE ENGINEERING
CORPORATION
By:
--------------------------------
Title:
By:
--------------------------------
Title:
Dated:
Certificate of Authentication
This is one of the 10 1/2% Senior Notes due 2004 referred to in the
within-mentioned Indenture.
STATE STREET BANK AND
TRUST COMPANY, as Trustee
By:
--------------------------------
Authorized Signatory
<PAGE> 111
A-3
[FORM OF REVERSE OF NOTE]
High voltage Engineering Corporation
10 1/2% SENIOR NOTE DUE 2004
1. INTEREST. High Voltage Engineering Corporation, a Massachusetts
corporation (the "Company"), promises to pay, until the principal hereof is paid
or made available for payment, interest on the principal amount set forth on the
face hereof at a rate of 10 1/2% per annum. Interest hereON will accrue from and
including the most recent date to which interest has been paid or, if no
interest has been paid, from and including August 8, 1997 to but excluding the
date on which interest is paid. Interest shall be payable in arrears on each
February 15 and August 15 commencing February 15, 1998. Interest will be
computed on the basis of a 360-day year of twelve 30-day months. The Company
shall pay interest on overdue principal and on overdue interest (to the full
extent permitted by law) at a rate of 10 1/2% per annum.
2. METHOD OF PAYMENT. The Company will pay interest hereon (except
defaulted interest) to the Persons who are registered Holders at the close of
business on February 1 or August I next preceding the interest payment date
(whether or not a Business Day). Holders must surrender Notes to a Paying Agent
to collect principal payments. The Company will pay principal and interest in
money of the United States of America that at the time of payment is legal
tender for payment of public and private debts. Interest may be paid by check
mailed to the Holder entitled thereto at the address indicated on the register
maintained by the Registrar for the Notes.
3. PAVING AGENT AND REGISTRAR. Initially, STATE STREET BANK AND
TRUST COMPANY (the "Trustee") will act as a Paying Agent and Registrar. The
Company may change any Paying Agent or Registrar without notice. Neither the
Company nor any of its Affiliates may act as Paying Agent or Registrar.
4. INDENTURE. The Company issued the Notes under an Indenture dated
as of August 8, 1997 (the "Indenture") by and between the Company and the
Trustee. This is one of an issue of Notes of the Company issued, or to be
issued, under the Indenture. The terms of the Notes include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S. Code secs. 77aaa-77bbbb), as amended from time
to time. The Notes are subject
<PAGE> 112
A-4
to all such terms, and Holders are referred to the Indenture and such Act for a
statement of them. Capitalized and certain other terms used herein and not
otherwise defined have the meanings set forth in the Indenture. The Notes are
obligations of the Company limited in aggregate principal amount to $120.0
million.
5. OPTIONAL REDEMPTION. The Company, at its option, may redeem the
Notes, in whole or in part, at any time on or after August 15, 2001 upon not
less than 30 nor more than 60 days, notice, at the redemption prices (expressed
as percentages of principal amount), set forth below, together, in each case,
with accrued and unpaid interest to the Redemption Date, if redeemed during the
twelve month period beginning on August 15 of each year listed below:
<TABLE>
<CAPTION>
Year Redemption Price
---- ----------------
<S> <C>
2001............................................ 105.250%
2002............................................ 102.625%
2003 and thereafter............................. 100.000%
</TABLE>
Notwithstanding the foregoing, the Company may redeem in the
aggregate up to 35% of the original principal amount of Notes at any time and
from time to time on or prior to August 15, 2000 at a redemption price equal to
110.500% of the aggregate principal amount thereof, plus accrued and unpaid
interest thereon to the Redemption Date with the Net Proceeds of one or more
Qualified Equity Offerings of the Company or Parent to the extent such proceeds
were contributed to the Company as common equity; PROVIDED, that at least $87.75
million of the principal amount of Notes originally issued remains outstanding
immediately after the occurrence of any such redemption and that any such
redemption occurs within 60 days following the closing of any such Qualified
Equity Offering.
6. NOTICE OF REDEMPTION. Notice of redemption will be mailed at
least 30 days but not more than 60 days before the Redemption Date to each
Holder of Notes to be redeemed at his registered address. On and after the
Redemption Date, unless the Company defaults in making the redemption payment,
interest ceases to accrue on Notes or portions thereof called for redemption.
7. OFFERS TO PURCHASE. The Indenture provides that upon the
occurrence of a Change of Control, Asset Sale or a Qualified Subsidiary IPO, and
subject to further limitations contained therein, the Company
<PAGE> 113
A-5
shall make an offer to purchase outstanding Notes in accordance with the
procedures set forth in the Indenture.
8. COLLATERAL. As provided in the Indenture and subject to certain
limitations set forth therein, the Company has secured a portion of its
Obligations under the Indenture with a first priority Lien on the Collateral.
Each Holder, by accepting a Note, agrees to be bound by the terms of the Pledge
Agreement, as the same may be amended from time to time. The Liens
created under the Pledge Agreement shall be released upon the terms and subject
to the conditions set forth in the Indenture and the Pledge Agreement. Each
Holder, by accepting a Note, agrees that a release of Collateral in accordance
with the terms of the Pledge Agreement will not he deemed for any purpose to be
an impairment of the security under the Indenture or the Pledge Agreement upon
receipt of an Opinion of Counsel stating that such release is authorized and
permitted under the Indenture and the Pledge Agreement.
9. REGISTRATION RIGHTS. Pursuant to a Registration Rights Agreement
by and between the Company and CIBC Wood Gundy Securities Corp. and PaineWebber
Incorporated, as Initial Purchasers of the Notes, the Company will be obligated
to consummate an exchange offer pursuant to which the Holder of this Note shall
have the right to exchange this Note for notes of a separate series issued under
the Indenture (or a trust indenture substantially identical to the Indenture in
accordance with the terms of the Registration Rights Agreement) which have been
registered under the Securities Act, in like principal amount and having
substantially identical terms as the Notes. The Holders shall be entitled to
receive certain additional interest payments in the event such exchange offer is
not consummated and upon certain other conditions, all pursuant to and in
accordance with the terms of the Registration Rights Agreement.
10. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000. A Holder may transfer or exchange Notes in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay to it any taxes and
fees required by law or permitted by the Indenture. The Registrar need not
register the transfer of or exchange any Notes or portion of a Note selected for
redemption, or register the transfer of or exchange any Notes for a period of 15
days before a mailing of notice of redemption.
<PAGE> 114
A-6
11. PERSONS DEEMED OWNERS. The registered Holder of this Note may be
treated as the owner of this Note for all purposes.
12. UNCLAIMED MONEY. If money for the payment of principal or
interest remains unclaimed for two years, the Trustee will pay the money back to
the Company at its written request. After that, Holders entitled to the money
must look to the Company for payment as general creditors unless an "abandoned
property" law designates another Person.
13. AMENDMENT, SUPPLEMENT, WAIVER, ETC. Subject to certain
exceptions, the Indenture or the Notes may be modified, amended or supplemented
by the Company, the Guarantors, if any, and the Trustee with the consent of the
Holders of at least a majority in principal amount of the Notes then outstanding
and any existing default or compliance with any provision may be waived in a
particular instance with the consent of the Holders of a majority in principal
amount of the Notes then outstanding. Without the consent of Holders, the
Company, the Guarantors, if any, and the Trustee may amend the Indenture or the
Notes or supplement the Indenture for certain specified purposes, including
providing for uncertificated Notes in addition to certificated Notes, and curing
any ambiguity, defect or inconsistency, or making any other change that does not
materially and adversely affect the rights of any Holder.
14. RESTRICTIVE COVENANTS. The Indenture imposes certain limitations
on the ability of the Company and its Restricted Subsidiaries to, among other
things, incur additional Indebtedness, make payments in respect of their Capital
Stock or certain Indebtedness, make certain Investments, create or incur liens,
enter into transactions with Affiliates, enter into agreements restricting the
ability of Restricted Subsidiaries to pay dividends and make distributions,
enter into sale and leaseback transactions and on the ability of the Company to
merge or consolidate with any other Person or transfer all or substantially all
of the Company's or any Guarantor's assets. Such limitations are subject to a
number of important qualifications and exceptions. Pursuant to Section 4.04 of
the Indenture, the Company must annually report to the Trustee on compliance
with such limitations.
15. SUCCESSOR CORPORATION. When a successor corporation assumes all
the obligations of its predecessor under the Notes and the Indenture and the
transaction complies with the terms of Article 5 of the Indenture, the
predecessor corporation will, except as provided in Article 5, be released from
those obligations.
<PAGE> 115
A-7
16. DEFAULTS AND REMEDIES. Events of Default are set forth in the
Indenture. Subject to certain limitations in the Indenture, if an Event of
Default (other than an Event of Default specified in Section 6.01(6) or (7) of
the Indenture with respect to the Company) occurs and is continuing, the Trustee
or the Holders of not less than 25% in aggregate principal amount of the
outstanding Notes may, by written notice to the Trustee and the Company, and the
Trustee upon the request of the Holders of not less than 25% in aggregate
principal amount of the outstanding Notes shall, declare all principal of and
accrued interest on all Notes to be immediately due and payable; PROVIDED,
HOWEVER, that after such acceleration but before judgment or decree based on
such acceleration is obtained by the Trustee, the Holders of a majority in
aggregate principal amount of the outstanding Notes may rescind and annul such
acceleration and its consequences if all existing Events of Default, other than
the nonpayment of principal, premium or interest that has become due solely
because of the acceleration, have been cured or waived and if the rescission
would not conflict with any judgment or decree. If an Event of Default specified
in Section 6.01(6) or (7) of the Indenture occurs with respect to the Company,
the principal amount of and interest on, all Notes shall IPSO FACTO become and
be immediately due and payable without any declaration or other act on the part
of the Trustee or any Holder. Holders may not enforce the Indenture or the Notes
except as provided in the Indenture. The Trustee may require indemnity
satisfactory to it before it enforces the Indenture or the Notes. Subject to
certain limitations, Holders of a majority in principal amount of the then
outstanding Notes may direct the Trustee in its exercise of any trust or power.
The Trustee may withhold from Holders notice of any continuing default (except a
default in payment of principal or interest) if it determines that withholding
notice is in their interests.
17. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not Trustee.
18. NO RECOURSE AGAINST OTHERS. No director, officer, employee
incorporator or stockholder, of the Company or any Guarantor shall have any
liability for any obligations of the Company or the Guarantors, if any, under
the Notes, the Indenture or the Guarantees, if any, or for a claim based on, in
respect of, or by reason of, such obligations or their creation. Each Holder of
Notes by accepting a Note waives and releases all such liability. The waiver and
release are part of the consideration for the issuance of the Notes.
<PAGE> 116
A-8
19. DISCHARGE. The Company's obligations pursuant to the Indenture
will be discharged, except for obligations pursuant to certain sections thereof,
subject to the terms of the Indenture, upon the payment of all the Notes or upon
the irrevocable deposit with the Trustee of United States dollars or U.S.
Government Obligations sufficient to pay when due principal of and interest on
the Notes to maturity or redemption, as the case may be.
20. AUTHENTICATION. This Note shall not be valid until the Trustee
signs the certificate of authentication on the other side of this Note.
21. GOVERNING LAW. THE INDENTURE AND THE NOTES SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MASSACHUSETTS, AS
APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF MASSACHUSETTS,
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO
AGREES TO SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF MASSACHUSETTS
IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THE INDENTURE OR THE
NOTES.
22. ABBREVIATIONS. Customary abbreviations may be used in the name
of a Holder or an assignee, such as: TEN COM (= tenants in common), TENANT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
<PAGE> 117
A-9
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture. Requests may be made to:
High Voltage Engineering Corporation
401 Edgewater Place, Suite 680
Wakefield, Massachusetts 01880
Attention: President
<PAGE> 118
A-10
ASSIGNMENT
I or we assign and transfer this Note to:
(Insert assignee's social security or tax I.D. number)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code of assignee)
and irrevocably appoint:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Agent to transfer this Note on the books of the Company. The Agent may
substitute another to act for him.
<PAGE> 119
A-11
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have all or any part of this Note purchased
by the Company pursuant to Section 4.10, Section 4.19 or Section 4.22 of the
Indenture, check the appropriate box:
[ ] Section 4.10 [ ] Section 4.19 [ ] Section 4.22
If you want to have only part of the Note purchased by the Company
pursuant to Section 4.10, Section 4.19 or Section 4.22 of the Indenture, state
the amount you elect to have purchased:
$__________________
(multiple of $1,000)
Date:_______________________
Your Signature:_________________________
(Sign exactly as your name appears
on the face of this Note)
____________________________
Signature Guaranteed
<PAGE> 120
B-5
EXHIBIT B
---------
[FORM OF LEGEND FOR 144A NOTE]
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS,
EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS
THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER
THE ACT) OR (B) IT IS AN "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1),
(2), (3) OR (7) UNDER THE ACT) (AN "ACCREDITED INVESTOR") OR (C) IT IS NOT A
U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION, (2) AGREES
THAT IT WILL NOT WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS NOTE
RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY
SUBSIDIARY THEREOF, (B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE ACT, (C) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A UNDER THE ACT, (D) INSIDE THE UNITED STATES TO AN
ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS FURNISHED ON
ITS BEHALF BY A U.S. BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER CONTAINING
CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER
OF THIS NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), (E)
OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904
UNDER THE ACT OR (F) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY
RULE 144 UNDER THE ACT (IF AVAILABLE) (3) AGREES THAT IT WILL GIVE TO EACH
PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF
THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS NOTE WITHIN TWO YEARS AFTER
ORIGINAL ISSUANCE OF THIS NOTE, IF THE PROPOSED TRANSFEREE IS AN ACCREDITED
INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND
THE COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER
OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT
<PAGE> 121
B-2
SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM OR IN A TRANSACTION
NOT SUBJECT TO THE REGISTRATION REQUIREMENTS OF THE ACT. AS USED HEREIN, THE
TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE
MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE ACT.
<PAGE> 122
B-3
[FORM OF ASSIGNMENT FOR 144A NOTE]
I or we assign and transfer this Note to:
(Insert assignee's social security or tax I.D. number)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code of assignee)
and irrevocably appoint:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Agent to transfer this Note on the books of the Company. The Agent may
substitute another to act for him.
[Check One]
-----------
[ ] (a) this Note is being transferred in compliance with the exemption
from registration under the Securities Act provided by Rule 144A
thereunder.
or
[ ] (b) this Note is being transferred other than in accordance with (a)
above and documents are being furnished which comply with the
conditions of transfer set forth in this Note and the Indenture.
<PAGE> 123
B-4
If none of the foregoing boxes is checked, the Trustee or Registrar shall not be
obligated to register this Note in the name of any person other than the Holder
hereof unless and until the conditions to any such transfer of registration set
forth herein and in Section 2.16 of the Indenture shall have been satisfied.
Date:_________________ Your Signature:____________________________
----------------------------------
(Sign exactly as your name appears
on the other side of this Note)
Signature Guarantee:____________________________________________________________
<PAGE> 124
B-5
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this
Note for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Dated:__________________ ________________________________________
NOTICE: To be executed by an executive
officer
<PAGE> 125
EXHIBIT C
---------
[FORM OF LEGEND FOR REGULATION S NOTE]
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, UNLESS SO
REGISTERED, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR
THE ACCOUNT OR BENEFIT OF, U.S. PERSONS UNLESS REGISTERED UNDER THE SECURITIES
ACT OR EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
<PAGE> 126
C-2
[FORM OF ASSIGNMENT FOR REGULATION S NOTE]
I or we assign and transfer this Note to:
(Insert assignee's social security or tax I.D. number)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code of assignee)
and irrevocably appoint:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Agent to transfer this Note on the books of the Company. The Agent may
substitute another to act for him.
[Check One]
-----------
[ ] (a) this Note is being transferred in compliance with the exemption from
registration under the Securities Act provided by Rule 144A
thereunder.
or
[ ] (b) this Note is being transferred other than in accordance with (a)
above and documents are being furnished which comply with the
conditions of transfer set forth in this Note and the Indenture.
<PAGE> 127
C-3
If none of the foregoing boxes is checked, the Trustee or Registrar shall not he
obligated to register this Note in the name of any person other than the Holder
hereof unless and until the conditions to any such transfer of registration set
forth herein and in Section 2.16 of the Indenture shall have been satisfied.
Date:____________________ Your Signature:_________________________
----------------------------------
(Sign exactly as your name appears
on the other side of this Note)
Signature Guarantee:____________________________________________________________
<PAGE> 128
C-4
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this
Note for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Dated:___________________ ________________________________________
NOTICE: To be executed by an executive
officer
<PAGE> 129
EXHIBIT D
---------
[FORM OF LEGEND FOR GLOBAL NOTE]
Any Global Note authenticated and delivered hereunder shall bear a
legend (which would be in addition to any other legends required in the case of
a Restricted Note) in substantially the following form:
THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A
NOMINEE OF A DEPOSITORY. THIS NOTE IS NOT EXCHANGEABLE FOR NOTES REGISTERED IN
THE NAME OF A PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE
LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS NOTE
(OTHER THAN A TRANSFER OF THIS NOTE AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF
THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER
NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES
DESCRIBED IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY (A NEW YORK CORPORATION) ("DTC") TO THE ISSUER
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME
AS IT REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE
TO CEDE & CO. OR SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
<PAGE> 130
EXHIBIT E
---------
Form of Certificate to Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
-----------------------------------------
__________________, ____
Attention:
Re: High Voltage Engineering Corporation (the "Company")
10% Senior Notes Due 2004 (the "Notes")
----------------------------------------------------
Dear Sirs:
In connection with our proposed purchase of Notes of the Company, we
confirm that:
1. We understand that any subsequent transfer of the
Notes is subject to certain restrictions and conditions set forth in
the Indenture dated as of August 8, 1997 relating to the Notes and
we agree to be bound by, and not to resell, pledge or otherwise
transfer the Notes except in compliance with, such restrictions and
conditions and the Securities Act of 1933, as amended (the
"Securities Act").
2. We understand that the Notes have not been registered
under the Securities Act, and that the Notes may not be offered,
sold, pledged or otherwise transferred except as permitted in the
following sentence. We agree, on our own behalf and on behalf of any
accounts for which we are acting as hereinafter stated, that if we
should sell any Notes, we will do so only (i) to the Company or any
subsidiary thereof, (ii) pursuant to an effective registration
statement under the Securities Act, (iii) in accordance with Rule
144A under the Securities Act to a "qualified institutional buyer"
(as defined in Rule 144A), (iv) to an institutional "accredited
investor" (as defined below) that, prior to such transfer, furnishes
(or has furnished on its behalf by a U.S. broker-dealer) to you a
signed letter containing certain representations and agreements
relating to the restrictions on transfer of the Notes, (v) outside
the United States to persons other than U.S. persons in offshore
<PAGE> 131
E-2
transactions meeting the requirements of Rule 904 of Regulation S
under the Securities Act, or (vi) pursuant to any other exemption
from registration under the Securities Act (if available), and we
further agree to provide to any person purchasing any of the Notes
from us a notice advising such purchaser that resales of the Notes
are restricted as stated herein.
3. We are not acquiring the Notes for or on behalf of,
and will not transfer the Notes to, any pension or welfare plan (as
defined in Section 3 of the Employee Retirement Income Security Act
of 1974, as amended), except as permitted thereunder.
4. We understand that, on any proposed resale of any
Notes, we will be required to furnish to you and the Company such
certifications, legal opinions and other information as you and the
Company may reasonably require to confirm that the proposed sale
complies with the foregoing restrictions. We further understand that
the Notes purchased by us will bear a legend to the foregoing
effect.
5. We are an institutional "accredited investor" (as
defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the
Securities Act) and have such knowledge and experience in financial
and business matters as to be capable of evaluating the merits and
risks of our investment in the Notes, and we and any accounts for
which we are acting each are able to bear the economic risk of our
or their investment, as the case may be.
6. We are acquiring the Notes purchased by us for our
account or for one or more accounts (each of which is an
institutional "accredited investor") as to each of which we exercise
sole investment discretion.
<PAGE> 132
E-3
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceeding or official inquiry with respect
to the matters covered hereby.
Very truly yours,
[Name of Transferee]
By:
------------------------------------
Authorized Signature
<PAGE> 133
EXHIBIT F
---------
Form of Certificate to Be Delivered
in Connection with Transfers
Pursuant to Regulation S
-----------------------------------
_______________, ____
Attention:
Re: High Voltage Engineering Corporation (the "Company")
10 1/2 Senior Notes Due 2004 (the "Notes")
----------------------------------------------------
Dear Sirs:
In connection with our proposed sale of $______________ aggregate
principal amount of the Notes, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the U.S. Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, we represent that:
(1) the offer of the Notes was not made to a U.S. person
or to a person in the United States;
(2) either (a) at the time the buy offer was originated,
the transferee was outside the United States or we and any person
acting on our behalf reasonably believed that the transferee was
outside the United States, or (b) the transaction was executed in,
on or through the facilities of a designated off-shore securities
market and neither we nor any person acting on our behalf knows that
the transaction has been pre-arranged with a buyer in the United
States;
(3) no directed selling efforts have been made in the
United States in contravention of the requirements of Rule 903(b) or
Rule 904(b) of Regulation S, as applicable;
(4) the transaction is not part of a plan or scheme to
evade the registration requirements of the Securities Act; and
(5) we have advised the transferee of the transfer
restrictions applicable to the Notes.
<PAGE> 134
F-2
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
[Name of Transferee]
By:
------------------------------------
Authorized Signature
<PAGE> 135
EXHIBIT G
---------
[FORM OF GUARANTEE]
Each of the undersigned (the "GUARANTORS") hereby jointly and
severally unconditionally guarantees, to the extent set forth in the Indenture
dated as of August 8, 1997 by and between High voltage Engineering Corporation,
as issuer and STATE STREET BANK AND TRUST COMPANY, as Trustee (as amended,
restated or supplemented from time to time, the "INDENTURE"), and subject to the
provisions of the Indenture, (a) the due and punctual payment of the principal
of, and premium, if any, and interest on the Notes, when and as the same shall
become due and payable, whether at maturity, by acceleration or otherwise, the
due and punctual payment of interest on overdue principal of, and premium and,
to the extent permitted by law, interest, and the due and punctual performance
of all other obligations of the Company to the Noteholders or the Trustee, all
in accordance with the terms set forth in Article 10 of the Indenture, and (b)
in case of any extension of time of payment or renewal of any Notes or any of
such other obligations, that the same will be promptly paid in full when due or
performed in accordance with the terms of the extension or renewal, whether at
stated maturity, by acceleration or otherwise.
The obligations of the Guarantors to the Noteholders and to the
Trustee pursuant to this Guarantee and the Indenture are expressly set forth in
Article 10 of the Indenture and reference is hereby made to the Indenture for
the precise terms and limitations of this Guarantee.
[GUARANTOR]
By:
------------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 4.3
- --------------------------------------------------------------------------------
NOTES REGISTRATION RIGHTS AGREEMENT
Dated as of August 8, 1997
by and among
HIGH VOLTAGE ENGINEERING CORPORATION
and
CIBC WOOD GUNDY SECURITIES CORP. and
PAINEWEBBER INCORPORATED,
as Initial Purchasers
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
-----------------
Page
----
1. Definitions......................................................
2. Exchange Offer...................................................
3. Shelf Registration...............................................
(a) Initial Shelf Registration................................
(b) Subsequent Shelf Registrations............................
(c) Supplements and Amendments................................
4. Additional Interest..............................................
5. Registration Procedures..........................................
6. Registration Expenses............................................
7. Indemnification..................................................
8. Rules 144 and 144A...............................................
9. Underwritten Registrations.......................................
10. Miscellaneous....................................................
(a) Remedies..................................................
(b) Enforcement...............................................
(c) No Inconsistent Agreements................................
(d) Adjustments Affecting Registrable Notes...................
(e) Amendments and Waivers....................................
(f) Notices...................................................
(g) Successors and Assigns....................................
(h) Counterparts..............................................
(i) Headings..................................................
(j) Governing Law.............................................
(k) Severability..............................................
(l) Entire Agreement..........................................
(m) Notes Held by the Company or Its Affiliates...............
<PAGE> 3
NOTES REGISTRATION RIGHTS AGREEMENT (the "AGREEMENT") dated as of August
8, 1997, by and among HIGH VOLTAGE ENGINEERING CORPORATION, a Massachusetts
corporation (the "COMPANY"), and CIBC WOOD GUNDY SECURITIES CORP. and
PAINEWEBBER INCORPORATED (together, the "INITIAL PURCHASERS").
This Agreement is entered into in connection with the Securities Purchase
Agreement, dated as of August 5, 1997, by and among the Company and the Initial
Purchasers (the "PURCHASE AGREEMENT") relating to the sale by the Company to the
Initial Purchasers of $135,000,000 aggregate principal amount of 10 1/2% Senior
Notes due 2004 of the Company (the "NOTES") and 33,000 Units (the "UNITS"), each
Unit consisting of (i) one share of the Company's 12-1/2% Series A Senior
Redeemable Preferred Stock (the "PREFERRED SHARES"), (ii) one warrant entitling
the holder thereof to purchase .00250736 shares of Common Stock, par value $0.01
per share, of the Company (the "WARRANTS") and (iii) .00250736 shares of Common
Stock, par value $0.01 per share, of the Company (the "Common Shares" and,
together with the Notes, Units, Preferred Shares and Warrants, the
"SECURITIES").
In order to induce the Initial Purchasers to enter into the Purchase
Agreement, the Company has agreed to provide the registration rights set forth
in this Agreement for the benefit of the Initial Purchasers. The execution and
delivery of this Agreement is a condition to the Initial Purchasers' obligation
to purchase the Notes under the Purchase Agreement.
The parties hereby agree as follows:
1. DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
ADDITIONAL INTEREST: See Section 4(a).
ADVICE: See Section 5.
APPLICABLE PERIOD: See Section 2(b).
CLOSING: See the Purchase Agreement.
<PAGE> 4
-2-
COMMON SHARES: See the introductory paragraph to this Agreement.
COMPANY: See the introductory paragraph to this Agreement.
EFFECTIVENESS DATE: The 135th day after the Issue Date.
EFFECTIVENESS PERIOD: See Section 3(a).
EVENT DATE: See Section 4(b).
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended, and the
rules and regulations of the SEC promulgated thereunder.
EXCHANGE NOTES: See Section 2(a).
EXCHANGE OFFER: See Section 2(a).
EXCHANGE REGISTRATION STATEMENT: See Section 2(a).
FILING DATE: The 45th day after the Issue Date.
HOLDER: Any holder of a Registrable Note or Registrable Notes.
INDEMNIFIED PERSON: See Section 7(c).
INDEMNIFYING PERSON: See Section 7(c).
INDENTURE: The Indenture, dated as of August 8, 1997, by and between the
Company and State Street Bank and Trust Company, as trustee, pursuant to which
the Notes are being issued, as amended or supplemented from time to time in
accordance with the terms thereof.
INITIAL PURCHASERS: See the introductory paragraph to this Agreement.
INITIAL SHELF REGISTRATION: See Section 3(a).
INSPECTORS: See Section 5(o).
ISSUE DATE: The date on which the original Notes are sold to the Initial
Purchasers pursuant to the Purchase Agreement.
LIEN: See the Indenture.
<PAGE> 5
-3-
NASD: See Section 5(t).
NOTES: See the introductory paragraphs to this Agreement.
PARTICIPANT: See Section 7(a).
PARTICIPATING BROKER-DEALER: See Section 2(b).
PERSON: An individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization or
government (including any agency or political subdivision thereof).
PREFERRED STOCK: See the introductory paragraphs to this Agreement.
PRIVATE EXCHANGE: See Section 2(b).
PRIVATE EXCHANGE NOTES: See Section 2(b).
PROSPECTUS: The prospectus included in any Registration Statement
(including, without limitation, any prospectus subject to completion and a
prospectus that includes any information previously omitted from a prospectus
filed as part of an effective registration statement in reliance upon Rule 430A
promulgated under the Securities Act), as amended or supplemented by any
prospectus supplement, with respect to the terms of the offering of any portion
of the Registrable Notes covered by such Registration Statement, and all other
amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.
PURCHASE AGREEMENT: See the introductory paragraphs to this Agreement.
RECORDS: See Section 5(o).
REGISTRABLE NOTES: The Notes upon original issuance of the Notes and at
all times subsequent thereto and, if issued, the Private Exchange Notes, until
in the case of any such Notes or any such Private Exchange Notes, as the case
may be, (i) a Registration Statement covering such Notes or such Private
Exchange Notes has been declared effective by the SEC and such Notes or such
Private Exchange Notes, as the case may be, have been disposed of in accordance
with such effective Registration
<PAGE> 6
-4-
Statement, (ii) such Notes or such Private Exchange Notes, as the case may be,
are sold in compliance with Rule 144, (iii) in the case of any Note, the
Exchange Offer has been consummated, (iv) such Notes or such Private Exchange
Notes, as the case may be, cease to be outstanding or (v) two years have passed
from the Issue Date.
REGISTRATION DEFAULT: See Section 4(a).
REGISTRATION STATEMENT: Any registration statement of the Company,
including, but not limited to, the Exchange Registration Statement, which covers
any of the Registrable Notes pursuant to the provisions of this Agreement,
including the Prospectus, amendments and supplements to such registration
statement, including post-effective amendments, all exhibits, and all material
incorporated by reference or deemed to be incorporated by reference in such
registration statement.
RULE 144: Rule 144 promulgated under the Securities Act, as such Rule may
be amended from time to time, or any similar rule (other than Rule 144A) or
regulation hereafter adopted by the SEC providing for offers and sales of
securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of an issuer of such securities being
free of the registration and prospectus delivery requirements of the Securities
Act.
RULE 144A: Rule 144A promulgated under the Securities Act, as such Rule
may be amended from time to time, or any similar rule (other than Rule 144) or
regulation hereafter adopted by the SEC.
RULE 415: Rule 415 promulgated under the Securities Act, as such Rule may
be amended from time to time, or any similar rule or regulation hereafter
adopted by the SEC.
SEC: The Securities and Exchange Commission.
SECURITIES: See the introductory paragraphs to this Agreement.
SECURITIES ACT: The Securities Act of 1933, as amended, and the rules and
regulations of the SEC promulgated thereunder.
SHELF NOTICE: See Section 2(c).
SHELF REGISTRATION: See Section 3(b).
SUBSEQUENT SHELF REGISTRATION: See Section 3(b).
<PAGE> 7
-5-
TIA: The Trust Indenture Act of 1939, as amended.
TRUSTEE: The trustee under the Indenture and, if existent, the trustee
under any indenture governing the Exchange Notes and Private Exchange Notes (if
any).
UNDERWRITTEN REGISTRATION OR UNDERWRITTEN OFFERING: A registration in
which securities of the Company are sold to an underwriters) for reoffering to
the public.
UNITS: See the introductory paragraphs to this Agreement.
WARRANTS: See the introductory paragraphs to this Agreement.
2. EXCHANGE OFFER
(a) The Company agrees to use its best efforts to file with the SEC as
soon as practicable after the Closing, but in no event later than the Filing
Date, an offer to exchange (the "EXCHANGE OFFER") any and all of the Notes for a
like aggregate principal amount of debt securities of the Company which are
identical to the Notes (the "EXCHANGE NOTES") (and which are entitled to the
benefits of the Indenture or a trust indenture which is substantially identical
to the Indenture (other than such changes to the Indenture or any such identical
trust indenture as are necessary to comply with any requirements of the SEC to
effect or maintain the qualification thereof under the TIA) and which, in either
case, has been qualified under the TIA), except that the Exchange Notes shall
have been registered pursuant to an effective Registration Statement under the
Securities Act. The Exchange Offer will be registered under the Securities Act
on an appropriate form (the "EXCHANGE REGISTRATION STATEMENT") and will comply
with all applicable tender offer rules and regulations under the Exchange Act.
The Company agrees to use its best efforts to (x) cause the Exchange
Registration Statement to become effective under the Securities Act on or before
the Effectiveness Date; (y) keep the Exchange Offer open for at least 30 days
(or longer if required by applicable law) after the date that notice of the
Exchange Offer is mailed to Holders; and (z) consummate the Exchange Offer on or
prior to the 60th day following the date on which the Exchange Registration
Statement is declared effective. Each Holder who participates in the Exchange
Offer will be required to represent that any Exchange Notes received by it will
be acquired in the ordinary course of its business, that at the time of the
consummation of the Exchange offer such Holder will have no arrangement or
understanding with any person to participate in the
<PAGE> 8
-6-
distribution of the Exchange Notes, and that such Holder is not an affiliate of
the Company within the meaning of Rule 405 promulgated under the Securities Act
or if it is such an affiliate, that it will comply with the registration and
prospectus delivery requirements of the Securities Act, to the extent
applicable. Upon consummation of the Exchange offer in accordance with this
Section 2, the provisions of this Agreement shall continue to apply, MUTATIS
MUTANDIS, solely with respect to Registrable Notes that are Private Exchange
Notes and Exchange Notes held by Participating Broker-Dealers (as defined
below), and the Company shall have no further obligation to register Registrable
Notes (other than Private Exchange Notes and Exchange Notes held by
Participating Broker-Dealers) pursuant to Section 3 of this Agreement.
(b) The Company shall include within the Prospectus contained in the
Exchange Registration Statement a section entitled "Plan of Distribution,"
reasonably acceptable to the Initial Purchasers, which shall contain a summary
statement of the positions taken or policies made by the staff of the SEC with
respect to the potential "underwriter" status of any broker-dealer that is the
beneficial owner (as defined in Rule 13d-3 promulgated under the Exchange Act)
of Exchange Notes received by such broker-dealer in the Exchange Offer (a
"PARTICIPATING BROKER-DEALER"), whether such positions or policies have been
publicly disseminated by the staff of the SEC or such positions or policies, in
the reasonable judgment of the Initial Purchasers, represent the prevailing
views of the staff of the SEC. Such "Plan of Distribution" section shall also
allow the use of the Prospectus by all persons subject to the prospectus
delivery requirements of the Securities Act, including all Participating
Broker-Dealers, and include a statement describing the means by which
Participating Broker-Dealers may resell the Exchange Notes.
The Company shall use its best efforts to keep the Exchange Registration
Statement effective and to amend and supplement the Prospectus contained
therein, in order to permit such Prospectus to be lawfully delivered by all
persons subject to the prospectus delivery requirements of the Securities Act
for such period of time as such persons must comply with such requirements in
order to resell the Exchange Notes, PROVIDED that such period shall not exceed
180 days (or such longer period if extended pursuant to the last paragraph of
Section 5) after the date of the consummation of the Exchange Offer (the
"APPLICABLE PERIOD").
If, prior to consummation of the Exchange Offer, either of the Initial
Purchasers holds any Notes acquired by it and having, or which are reasonably
likely to be determined to have, the status of an unsold allotment in the
initial distribution, the Company upon the request of
<PAGE> 9
-7-
such Initial Purchaser shall, simultaneously with the delivery of the Exchange
Notes in the Exchange Offer, issue and deliver to such Initial Purchaser, in
exchange (the "PRIVATE EXCHANGE") for the Notes held by such Initial Purchaser,
a like principal amount of debt securities of the Company that are identical in
all material respects to the Exchange Notes (the "PRIVATE EXCHANGE NOTES") (and
which are issued pursuant to the same indenture as the Exchange Notes). The
Private Exchange Notes shall bear the same CUSIP number as the Exchange Notes.
Interest on the Exchange Notes and any Private Exchange Notes will accrue from
(A) the later of (i) the last interest payment date on which interest was paid
on the Notes surrendered in exchange therefor or (ii) if the Notes are
surrendered for exchange on a date in a period which includes the record date
for an interest payment date to occur on or after the date of such exchange and
as to which interest will be paid, the date of such interest payment date or
(B), if no interest has been paid on the Notes, from the Issue Date.
In connection with the Exchange Offer, the Company shall:
(i) mail to each Holder a copy of the Prospectus forming part
of the Exchange Registration Statement, together with an appropriate letter of
transmittal and related documents;
(ii) utilize the services of a depository for the Exchange Offer
with an address in Boston, Massachusetts; and
(iii) permit Holders to withdraw tendered Notes at any time prior
to the close of business, New York time, on the last business day on
which the Exchange offer shall remain open.
As soon as practicable after the close of the Exchange Offer or the
Private Exchange, as the case may be, the Company shall:
(i) accept for exchange all Notes tendered and not validly
withdrawn pursuant to the Exchange Offer or the Private Exchange;
(ii) deliver to the Trustee for cancellation all Notes s so
accepted for exchange; and
(iii) cause the Trustee to authenticate and deliver promptly to
each Holder of Notes, Exchange Notes or Private Exchange Notes, as the
case may be, equal in principal amount to the Notes of such Holder so
accepted for exchange.
<PAGE> 10
-8-
The Exchange Notes and the Private Exchange Notes may be issued under (i)
the Indenture or (ii) an indenture substantially identical to the Indenture,
which in either event will provide that the Exchange Notes will not be subject
to the transfer restrictions set forth in the Indenture and that the Exchange
Notes, the Private Exchange Notes and the Notes will vote and consent together,
to the extent provided by the Indenture, on all matters as one class and that
neither the Exchange Notes, the Private Exchange Notes nor the Notes will have
the right to vote or consent as a separate class on any matter.
(c) If (1) prior to the consummation of the Exchange offer, the Company
or Holders of at least a majority in aggregate principal amount of the
Registrable Notes reasonably determine in good faith that (i) the Exchange Notes
would not, upon receipt, be tradable by such Holders which are not affiliates
(within the meaning of the Securities Act) of the Company without restriction
under the Securities Act and without restrictions under applicable state
securities laws or (ii) after conferring with counsel, the SEC is unlikely to
permit the consummation of the Exchange Offer prior to 60 days after the
Effectiveness Date, (2) subsequent to the consummation of the Private Exchange,
any holder of the Private Exchange Notes so requests, or (3) the Exchange Offer
is commenced and not consummated within 195 days of the date of this Agreement,
then the Company shall promptly deliver to the Holders and the Trustee written
notice thereof (the "SHELF NOTICE") and shall file an Initial Shelf Registration
pursuant to Section 3. Following the delivery of a Shelf Notice to the Holders
of Registrable Notes (in the circumstances contemplated by clauses (1) and (3)
of the preceding sentence), the Company shall not have any further obligation to
conduct the Exchange Offer or the Private Exchange under this Section 2.
3. SHELF REGISTRATION
If a Shelf Notice is delivered as contemplated by Section 2(c), then:
(a) INITIAL SHELF REGISTRATION. The Company shall prepare and file with
the SEC a Registration Statement for an offering to be made on a continuous
basis pursuant to Rule 415 covering all of the Registrable Notes (the "INITIAL
SHELF REGISTRATION"). The Company shall use its best efforts to file with the
SEC the Initial Shelf Registration within 30 days of the delivery of the Shelf
Notice. The Initial Shelf Registration shall be on Form S-1 or another
appropriate form permitting registration of such Registrable Notes for resale by
such Holders in the manner or manners designated by them (including, without
limitation, one or more
<PAGE> 11
-9-
underwritten offerings). The Company shall not permit any securities other than
the Registrable Notes to be included in the Initial Shelf Registration or any
Subsequent Shelf Registration (as defined below). other than any securities
requested by the holders thereof to be included in such registration pursuant to
that Registration Rights and Stockholders Agreement, dated as of May 9, 1996,
among the Company, Letitia Corporation, a Delaware corporation, and the
purchasers of the Company's Senior Subordinated Notes due 2004 in an aggregate
principal amount of $25,000,000 and warrants to purchase shares of the Common
Stock, $.01 par value per share, of the Company, the Company shall use its best
efforts to cause the Initial Shelf Registration to be declared effective under
the Securities Act on or prior to the Effectiveness Date and to keep the Initial
Shelf Registration continuously effective under the Securities Act until two
years from the Issue Date (the "EFFECTIVENESS PERIOD"), or such shorter period
ending when (i) all Registrable Notes covered by the Initial Shelf Registration
have been sold in the manner set forth and as contemplated in the Initial Shelf
Registration or (ii) a Subsequent Shelf Registration covering all of the
Registrable Notes has been declared effective under the Securities Act.
(b) SUBSEQUENT SHELF REGISTRATIONS. If the Initial Shelf Registration or
any Subsequent Shelf Registration ceases to be effective for any reason at any
time during the Effectiveness Period (prior to the sale of all of the securities
registered thereunder), the Company shall use its best efforts to obtain the
prompt withdrawal of any order suspending the effectiveness thereof, and in any
event shall within 45 days of such cessation of effectiveness amend the Shelf
Registration in a manner reasonably expected to obtain the withdrawal of the
order suspending the effectiveness thereof, or file an additional "shelf"
Registration Statement pursuant to Rule 415 covering all of the Registrable
Notes (a "SUBSEQUENT SHELF REGISTRATION"). In the event that the Company becomes
eligible to use any form other than form S-1 for a Subsequent Shelf
Registration, if permitted under applicable law, the Company shall be entitled
to cause a Subsequent Shelf Registration to be substituted for the Initial Shelf
Registration. If a Subsequent Shelf Registration is filed, the Company shall use
its best efforts to cause the Subsequent Shelf Registration to be declared
effective as soon as practicable after such filing and to keep such Registration
Statement continuously effective during the Effectiveness Period. As used herein
the term "SHELF REGISTRATION" means the Initial Shelf Registration and any
Subsequent Shelf Registration.
(c) SUPPLEMENTS AND AMENDMENTS. The Company shall promptly supplement and
amend the Shelf Registration if required by the rules, regulations or
instructions applicable to the registration form used for
<PAGE> 12
-10-
such Shelf Registration, if required by the Securities Act, or if reasonably
requested by the Holders of a majority in aggregate principal amount of the
Registrable Notes covered by such Registration Statement or by any
underwriters) of such Registrable Notes.
4. ADDITIONAL INTEREST
(a) The Company and the Initial Purchasers agree that the Holders of
Registrable Notes will suffer damages if the Company fails to fulfill its
obligations under Section 2 or Section 3 hereof and that it would not be
feasible to ascertain the extent of such damages with precision. Accordingly,
the Company agrees to pay additional interest on the Notes ("ADDITIONAL
INTEREST") under the circumstances set forth below:
(i) if the Exchange Registration Statement has not been filed
on or prior to the Filing Date or the Initial Shelf Registration has not
been filed within 30 days following the delivery of a Shelf Notice prior
to the filing date;
(ii) if neither the Exchange Registration Statement nor the
Initial Shelf Registration has been declared effective on or prior to the
Effectiveness Date; and/or
(iii) if either (A), if applicable, the Company has not exchanged
the Exchange Notes for all Notes validly tendered in accordance with the
terms of the Exchange Offer on or prior to 60 days after the date on
which the Exchange Registration Statement was declared effective or (B),
if applicable, the Exchange Registration Statement ceases to be effective
at any time prior to the time that the Exchange Offer is consummated or
(C) if applicable, the Shelf Registration has been declared effective and
such Shelf Registration ceases to be effective at any time prior to the
earlier of the date on which all Registrable Notes covered by the Shelf
Registration have been sold in the manner set forth and as contemplated
in the Shelf Registration or the second anniversary of the Issue Date;
(each such event referred to in clauses (i) through (iii) above is a
"REGISTRATION DEFAULT"), the sole remedy available to holders of the Notes will
be the immediate accrual of Additional Interest as follows: the per annum
interest rate on the Notes will increase by 0.5% upon the occurrence of the
first Registration Default; and the per annum interest rate will increase by an
additional 0.25% for each subsequent 90-day period during which any Registration
Default remains uncured, up to a
<PAGE> 13
-11-
maximum additional interest rate of 2.0% per annum for all Registration
Defaults, PROVIDED, HOWEVER, that (1) upon the filing of the Exchange
Registration Statement or the Initial Shelf Registration (in the case of (i)
above), (2) upon the effectiveness of the Exchange Registration Statement or a
Shelf Registration (in the case of (ii) above) or (3) upon the exchange of
Exchange Notes for all Notes tendered (in the case of (iii) (A) above), or upon
the effectiveness of the Exchange Registration Statement which had ceased to
remain effective (in the case of (iii)(B) above), or upon the effectiveness of
the Shelf Registration which had ceased to remain effective (in the case of
(iii) (C) above), Additional Interest on the Notes as a result of such clause
(i), (ii) or (iii) (or the relevant subclause thereof), as the case may be,
shall cease to accrue and the interest rate on the Notes will revert to the
interest rate originally borne by the Notes and PROVIDED, FURTHER, that in the
case of a Registration Default under (iii)(c) above, Additional Interest will
only be payable with respect to Notes so long as they are Registrable Notes.
(b) The Company shall notify the Trustee within one business day after
each and every date on which an event occurs in respect of which Additional
Interest is required to be paid (an "EVENT DATE"). Any amounts of Additional
Interest due pursuant to (a)(i), (a)(ii) or (a)(iii) of this Section 4 will be
payable in cash semi-annually on each February 1 and August 1 (to the Holders of
record on the January 15 and July 15 immediately preceding such dates),
commencing with the first such date occurring after any such Additional Interest
commences to accrue. The amount of Additional Interest with respect to each Note
will be determined by multiplying the applicable Additional Interest rate by the
principal amount of such Note, multiplied by a fraction, the numerator of which
is the number of days such Additional Interest rate was applicable during such
period (determined on the basis of a 360-day year comprised of twelve 30-day
months), and the denominator of which is 360.
5. REGISTRATION PROCEDURES
In connection with the registration of any Registrable Notes or Private
Exchange Notes pursuant to Section 2 or 3 hereof, the Company shall effect such
registrations to permit the sale of such Registrable Notes or Private Exchange
Notes in accordance with the intended method or methods of disposition thereof,
and pursuant thereto the Company shall:
(a) Prepare and file with the SEC, prior to the Filing Date, a
Registration Statement or Registration Statements as prescribed by
Section 2 or 3, and to use its best efforts to cause each such
Registration Statement to become effective and remain effective as
<PAGE> 14
-12-
provided herein, PROVIDED that, if (1) such filing is pursuant to Section
3, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, before filing any
Registration Statement or Prospectus or any amendments or supplements
thereto, the Company shall, if requested by any Holders of Registrable
Notes, furnish to and afford such Holders of the Registrable Notes and
each such Participating Broker-Dealer, as the case may be, covered by
such Registration Statement, their counsel and the managing
underwriters), if any, a reasonable opportunity to review copies of all
such documents (including copies of any documents to be incorporated by
reference therein and all exhibits thereto) proposed to be filed (at
least 5 business days prior to such filing). The Company shall not file
any Registration Statement or Prospectus or any amendments or supplements
thereto in respect of which the Holders must be afforded an opportunity
to review prior to the filing of such document, if the Holders of a
majority in aggregate principal amount of the Registrable Notes covered
by such Registration Statement, or such Participating Broker-Dealer, as
the case may be, their counsel, or the managing underwriters), if any,
shall reasonably object; PROVIDED, HOWEVER, during any delay in meeting
the time frames contemplated by Section 4 hereof as a result of actions
of any Holder of Registrable Notes, no Additional Interest shall accrue
or be payable to such Holder.
(b) Prepare and file with the SEC such amendments and
post-effective amendments to each Shelf Registration or Exchange
Registration Statement, as the case may be, as may be necessary to keep
such Registration Statement continuously effective for the Effectiveness
Period or the Applicable Period, as the case may be; cause the related
Prospectus to be supplemented by any prospectus supplement required by
applicable law, and as so supplemented to be filed pursuant to Rule 424
(or any similar provisions then in force) under the Securities Act; and
comply with the provisions of the Securities Act, the Exchange Act and
the rules and regulations of the SEC promulgated thereunder applicable to
them with respect to the disposition of all securities covered by such
Registration Statement as so amended or in such Prospectus as so
supplemented and with respect to the subsequent resale of any securities
being sold by a Participating Broker-Dealer covered by any such
Prospectus; the Company shall be deemed not to have used its best efforts
to keep a Registration Statement effective during the
<PAGE> 15
-13-
Applicable Period if it voluntarily takes any action that would result in
selling Holders of the Registrable Notes covered thereby or Participating
Broker-Dealers seeking to sell Exchange Notes not being able to sell such
Registrable Notes or such Exchange Notes during that period unless such
action is required by applicable law or unless the Company complies with
this Agreement, including without limitation, the provisions of clause 5
(c) (v) below.
(c) If (1) a Shelf Registration is filed pursuant to Section 3, or
(2) a Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities
Act by any Participating Broker-Dealer who seeks to sell Exchange Notes
during the Applicable Period, notify the selling Holders of Registrable
Notes, or each such Participating Broker-Dealer, as the case may be,
their counsel and the managing underwriters), if any, promptly (but in
any event within two business days), and confirm such notice in writing,
(i) when a Prospectus or any prospectus supplement or post-effective
amendment thereto has been filed, and, with respect to a Registration
Statement or any post-effective amendment thereto, when the same has
become effective (including in such notice a written statement that any
Holder may, upon request, obtain, without charge, one conformed copy of
such Registration Statement or post-effective amendment thereto including
financial statements and schedules, documents incorporated or deemed to
be incorporated by reference and exhibits), (ii) of the issuance by the
SEC of any stop order suspending the effectiveness of a Registration
Statement or of any order preventing or suspending the use of any
preliminary Prospectus or the initiation of any proceedings for that
purpose, (iii) if at any time when a Prospectus is required by the
Securities Act to be delivered in connection with sales of the
Registrable Notes the representations and warranties of the Company
contained in any agreement (including any underwriting agreement)
contemplated by Section 5(n) below cease to be true and correct, (iv) of
the receipt by the Company of any notification with respect to the
suspension of the qualification or exemption from qualification of a
Registration Statement or any of the Registrable Notes or the Exchange
Notes to be sold by any Participating Broker-Dealer for offer or sale in
any jurisdiction, or the initiation or threatening of any proceeding for
such purpose, (v) of the happening of any event or any information
becoming known to the Company that makes any statement made in such
Registration Statement or related Prospectus or any document incorporated
or deemed to be incorporated therein by reference
<PAGE> 16
-14-
untrue in any material respect or that requires the making of any changes
in, or amendments or supplements to, such Registration Statement,
Prospectus or documents so that, in the case of the Registration
Statement, it will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and that in the
case of the Prospectus, it will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, and (vi) the
Company's reasonable determination that a post-effective amendment to a
Registration Statement would be appropriate.
(d) If (1) a Shelf Registration is filed pursuant to Section 3,
or (2) a Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities
Act by any Participating Broker-Dealer who seeks to sell Exchange Notes
during the Applicable Period, use its best efforts to prevent the
issuance of any order suspending the effectiveness of a Registration
Statement or of any order preventing or suspending the use of a
Prospectus or suspending the qualification (or exemption from
qualification) of any of the Registrable Notes or the Exchange Notes to
be sold by any Participating Broker-Dealer, for sale in any jurisdiction,
and, if any such order is issued, to use its best efforts to obtain the
withdrawal of any such order at the earliest possible moment.
(e) If a Shelf Registration is filed pursuant to Section 3 and
if reasonably requested by the managing underwriter(s), if any, or the
Holders of a majority in aggregate principal amount of the Registrable
Notes being sold in connection with an underwritten offering, (i)
promptly incorporate in a Prospectus supplement or post-effective
amendment thereto such information as the managing underwriters), if any,
or such Holders reasonably request to be included therein, (ii) make all
required filings of such Prospectus supplement or such post-effective
amendment thereto as soon as practicable after the Company has received
notification of the matters to be incorporated in such Prospectus
supplement or post-effective amendment thereto and (iii), if applicable,
supplement or make amendments to such Registration Statement.
(f) If (1) a Shelf Registration is filed pursuant to Section 3,
or (2) a Prospectus contained in an Exchange Registration
<PAGE> 17
-15-
Statement filed pursuant to Section 2 is required to be delivered under
the Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, furnish to each selling
Holder of Registrable Notes and to each such Participating Broker-Dealer
who so requests and to counsel and the managing underwriters), if any,
without charge, one conformed copy of the Registration Statement or
Registration Statements and each post-effective amendment thereto,
including financial statements and schedules, and, if requested, all
documents incorporated or deemed to be incorporated therein by reference
and all exhibits.
(g) If (1) a Shelf Registration is filed pursuant to Section 3,
or (2) a Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities
Act by any Participating Broker-Dealer who seeks to sell Exchange Notes
during the Applicable Period, deliver to each selling Holder of
Registrable Notes, or each such Participating Broker-Dealer, as the case
may be, their counsel, and the managing underwriter or underwriters, if
any, without charge, as many copies of the Prospectus or Prospectuses
(including each form of preliminary Prospectus) and each amendment or
supplement thereto and any documents incorporated by reference therein as
such Persons may reasonably request; and, subject to the last paragraph
of this Section 5, the Company hereby consents to the use of such
Prospectus and each amendment or supplement thereto by each of the
selling Holders of Registrable Notes or each such Participating
Broker-Dealer, as the case may be, and the managing underwriter or
underwriters or agents, if any, and dealers (if any), in connection with
the offering and sale of the Registrable Notes covered by or the sale by
Participating Broker-Dealers of the Exchange Notes pursuant to such
Prospectus and any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Notes or any
delivery of a Prospectus contained in the Exchange Registration Statement
by any Participating Broker-Dealer who seeks to sell Exchange Notes
during the Applicable Period, to use its best efforts to register or
qualify, and to cooperate with the selling Holders of Registrable Notes
or each such Participating Broker-Dealer, as the case may be, the
managing underwriter or underwriters, if any, and their respective
counsel in connection with the registration or qualification (or
exemption from such registration or qualification) of such Registrable
Notes or Exchange Notes for offer and sale
<PAGE> 18
-16-
under the securities or Blue Sky laws of such jurisdictions within the
United States as any selling Holder, Participating Broker-Dealer, or the
managing underwriter or underwriters, if any, reasonably request in
writing, PROVIDED that where Exchange Notes held by Participating
Broker-Dealers or Registrable Notes are offered other than through an
underwritten offering, the Company agrees to cause its counsel to perform
Blue Sky investigations and file registrations and qualifications
required to be filed pursuant to this Section 5(h); keep each such
registration or qualification (or exemption therefrom) effective during
the period such Registration Statement is required to be kept effective
and do any and all other acts or things reasonably necessary or advisable
to enable the disposition in such jurisdictions of the Exchange Notes
held by Participating Broker-Dealers or the Registrable Notes covered by
the applicable Registration Statement; PROVIDED that the Company shall
not be required to (A) qualify generally to do business in any
jurisdiction where it is not then so qualified, (B) take any action that
would subject it to general service of process in any such jurisdiction
where it is not then so subject or (C) subject itself to taxation in
excess of a nominal dollar amount in any such jurisdiction.
(i) If a Shelf Registration is filed pursuant to Section 3,
cooperate with the selling Holders of Registrable Notes and the managing
underwriter or underwriters, if any, to facilitate the timely preparation
and delivery of certificates representing Registrable Notes to be sold,
which certificates shall not bear any restrictive legends and shall be in
a form eligible for deposit with The Depository Trust Company; and enable
such Registrable Notes to be in such denominations and registered in such
names as the managing underwriter or underwriters, if any, or Holders may
reasonably request and which are consistent with the terms of the
indenture under which the Registrable Notes are issued.
(j) Use its best efforts to cause the Registrable Notes covered
by the Registration Statement to be registered with or approved by such
other United States governmental agencies or authorities as may be
necessary to enable the seller or sellers thereof or the managing
underwriter or underwriters, if any, to consummate the disposition of
such Registrable Notes, except as may be required solely as a consequence
of the nature of such selling Holder's business, in which case the
Company will cooperate in all reasonable respects with the filing of such
Registration
<PAGE> 19
-17-
Statement and the granting of such approvals at such sellers, cost and
expense.
(k) If (1) a Shelf Registration is filed pursuant to Section 3,
or (2) a Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities
Act by any Participating Broker-Dealer who seeks to sell Exchange Notes
during the Applicable Period, upon the occurrence of any event
contemplated by paragraph 5(c)(v) or 5(c)(vi) above, as promptly as
reasonably practicable prepare and (subject to Section 5(a) above) file
with the SEC, at the expense of the Company, a supplement or
post-effective amendment to the Registration Statement or a supplement to
the related Prospectus or any document incorporated or deemed to be
incorporated therein by reference, or file any other required document so
that, as thereafter delivered to the purchasers of the Registrable Notes
being sold thereunder or to the purchasers of the Exchange Notes to whom
such Prospectus will be delivered by a Participating Broker-Dealer during
the Applicable Period, any such Prospectus will not contain an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
(l) Use its best efforts to cause the Registrable Notes covered
by a Registration Statement or the Exchange Notes sold by a Participating
Broker-Dealer during the Applicable Period, as the case may be, to be
rated with the appropriate rating agencies, if so requested by the
Holders of a majority in aggregate principal amount of Registrable Notes
covered by such Registration Statement or the managing underwriter or
underwriters, if any.
(m) Prior to the effective date of the first Registration
Statement relating to the Registrable Notes, (i) provide the Trustee with
printed certificates for the Registrable Notes in a form eligible for
deposit with The Depository Trust Company and (ii) provide a CUSIP number
for the Registrable Notes.
(n) In connection with an underwritten offering of Registrable
Notes pursuant to a Shelf Registration, enter into an underwriting
agreement as is customary in underwritten offerings of debt securities
similar to the Notes and take all such other actions as are reasonably
requested by the managing underwriters, if any, in order to expedite or
facilitate the registration or the
<PAGE> 20
-18-
disposition of such Registrable Notes, and in such connection, (i) make
such reasonable representations and warranties to the managing
underwriter or underwriters on behalf of any underwriters, with respect
to the business of the Company and its subsidiaries and the Registration
Statement, Prospectus and documents, if any, incorporated or deemed to be
incorporated by reference therein, in each case, as are customarily made
by issuers to underwriters in underwritten offerings of debt securities,
and confirm the same if and when requested; (ii) obtain opinions of
counsel to the Company and updates thereof in form and substance
reasonably satisfactory to the managing underwriter or underwriters,
addressed to the managing underwriter or underwriters covering the
matters customarily covered in opinions requested in underwritten
offerings of debt securities and such other matters as may be reasonably
requested by underwriters; (iii) obtain "cold comfort" letters and
updates thereof in form and substance reasonably satisfactory to the
managing underwriter or underwriters from the independent certified
public accountants of the Company (and, if necessary, any other
independent certified public accountants of any subsidiary of the Company
or of any business acquired by the Company for which financial statements
and financial data are, or are required to be, included in the
Registration Statement), addressed to the managing underwriter or
underwriters on behalf of any underwriters, such letters to be in
customary form and covering matters of the type customarily covered in
"cold comfort" letters in connection with underwritten offerings of debt
securities and such other matters as reasonably requested by the managing
underwriter or underwriters; and (iv) if an underwriting agreement is
entered into, the same shall contain indemnification provisions and
procedures no less favorable than those set forth in Section 7 hereof (or
such other provisions and procedures acceptable to Holders of a majority
in aggregate principal amount of Registrable Notes covered by such
Registration Statement and the managing underwriter or underwriters or
agents) with respect to all parties to be indemnified pursuant to said
Section. The above shall be done at each closing under such underwriting
agreement, or as and to the extent required thereunder.
(o) If (1) a Shelf Registration is filed pursuant to Section 3,
or (2) a Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities
Act by any Participating Broker-Dealer who seeks to sell Exchange Notes
during the Applicable Period, make
<PAGE> 21
-19-
available for inspection by any selling Holder of such Registrable Notes
being sold who hold at least $2.0 million in aggregate principal amount
of Registrable Notes, or each such Participating Broker-Dealer, as the
case may be, the managing underwriter or underwriters participating in
any such disposition of Registrable Notes, if any, and any attorney,
accountant or other agent retained by any such selling Holder or each
such Participating Broker-Dealer, as the case may be (collectively, the
"INSPECTORS"), at the offices where normally kept, during reasonable
business hours, all financial and other records, pertinent corporate
documents and properties of the Company and its subsidiaries
(collectively, the "RECORDS") as shall be reasonably necessary to enable
them to exercise any applicable due diligence responsibilities, and cause
the officers, directors and employees of the Company and its subsidiaries
to supply all information in each case reasonably requested by any such
Inspector in connection with such Registration Statement. Records which
the Company determines, in good faith, to be confidential and any Records
which it notifies the Inspectors are confidential shall not be disclosed
by the Inspectors unless (i) the disclosure of such Records is necessary
to avoid or correct a material misstatement or material omission in such
Registration Statement and the Company fails to promptly correct such
material misstatement or omission after notice thereof, (ii) the release
of such Records is ordered pursuant to a subpoena or other order from a
court of competent jurisdiction or (iii) the information in such Records
has been made generally available to the public other than through the
Inspectors, breach of any confidentiality agreement. Each selling Holder
of such Registrable Notes and each such Participating Broker-Dealer or
underwriter will be required to agree that information obtained by it as
a result of such inspections shall be deemed confidential and shall not
be used by it for any purpose other than discharging due diligence
responsibilities. In addition, such information shall not be used as the
basis for any market transactions in the securities of the Company unless
and until such is made generally available to the public. Each selling
Holder of such Registrable Notes and each such Participating
Broker-Dealer will be required to further agree that it will, upon
learning that disclosure of such Records is sought in a court of
competent jurisdiction, give notice to the Company and allow the Company
to undertake appropriate action to prevent disclosure of the Records
deemed confidential at its expense.
(p) Provide an indenture trustee for the Registrable Notes or
the Exchange Notes, as the case may be, and cause the Indenture
<PAGE> 22
-20-
or the trust indenture provided for in Section 2(a), as the case may be,
to be qualified under the TIA not later than the effective date of the
Exchange Offer Registration Statement or the first Registration Statement
relating to the Registrable Notes; and in connection therewith, cooperate
with the trustee under any such indenture and the Holders of the
Registrable Notes, to effect such changes to such indenture as may be
required for such indenture to be so qualified in accordance with the
terms of the TIA; and execute, and use its best efforts to cause such
trustee to execute, all documents as may be required to effect such
changes, and all other forms and documents required to be filed with the
SEC to enable such indenture to be so qualified in a timely manner.
(q) Comply with all applicable rules and regulations of the SEC
and make generally available to its securityholders earnings statements
satisfying the provisions of Section 11(a) of the Securities Act and Rule
158 thereunder (or any similar rule promulgated under the Securities Act)
no later than 45 days after the end of any 12-month period (or 90 days
after the end of any 12-month period if such period is a fiscal year) (i)
commencing at the end of any fiscal quarter in which Registrable Notes
are sold to underwriters in a firm commitment or best efforts
underwritten offering and (ii) if not sold to underwriters in such an
offering, commencing on the first day of the first fiscal quarter of the
Company after the effective date of a Registration Statement, which
statements shall cover said 12-month periods.
(r) Upon consummation of an Exchange Offer or a Private
Exchange, obtain an opinion of counsel to the Company, in a form
customary for underwritten offerings of debt securities similar to the
Notes, addressed to the Trustee for the benefit of all Holders of
Registrable Notes participating in the Exchange Offer or the Private
Exchange, as the case may be, and which includes an opinion that (i) the
Company has duly authorized, executed and delivered the Exchange Notes
and Private Exchange Notes and the related indenture and (ii) each of the
Exchange Notes or the Private Exchange Notes, as the case may be, and
related indenture constitute a legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its
respective terms (with customary exceptions).
(s) If an Exchange offer or a Private Exchange is to be
consummated, upon delivery of the Registrable Notes by Holders to the
Company (or to such other Person as directed by the Company)
<PAGE> 23
-21-
in exchange for the Exchange Notes or the Private Exchange Notes, as the
case may be, the Company shall mark, or cause to be marked, on such
Registrable Notes that such Registrable Notes are being canceled in
exchange for the Exchange Notes or the Private Exchange Notes, as the
case may be; and, in no event shall such Registrable Notes be marked as
paid or otherwise satisfied.
(t) Cooperate with each seller of Registrable Notes covered by
any Registration Statement and the managing underwriter(s), if any,
participating in the disposition of such Registrable Notes and their
respective counsel in connection with any filings required to be made
with the National Association of Securities Dealers, Inc. (the "NASD").
(u) Use its reasonable best efforts to take all other steps
necessary to effect the registration of the Registrable Notes covered by
a Registration Statement contemplated hereby.
The Company may require each seller of Registrable Notes or Participating
Broker-Dealer as to which any registration is being effected to furnish to the
Company such information regarding such seller or Participating Broker-Dealer
and the distribution of such Registrable Notes or Exchange Notes to be sold by
such Participating Broker-Dealer, as the case may be, as the Company may, from
time to time, reasonably request. The Company may exclude from such registration
the Registrable Notes of any seller or Participating Broker-Dealer who fails to
furnish such information within a reasonable time after receiving such request,
and during any delay in meeting the time frames contemplated by Section 4 hereof
as a result of a delay in receiving any such information, no Additional Interest
shall accrue or be payable.
Each Holder of Registrable Notes and each Participating Broker-Dealer
agrees by acquisition of such Registrable Notes or Exchange Notes to be sold by
such Participating Broker-Dealer, as the case may be, that, upon receipt of any
notice from the Company of the happening of any event of the kind described in
Section 5(c)(ii), 5(c)(iv), 5(c)(v), or 5(c)(vi), such Holder will forthwith
discontinue disposition of such Registrable Notes covered by such Registration
Statement or Prospectus or Exchange Notes to be sold by such Holder or
Participating Broker-Dealer, as the case may be, until such Holder's receipt of
the copies of the supplemented or amended Prospectus contemplated by Section
5(k), or until it is advised in writing (the "Advice") by the Company that the
use of the applicable Prospectus may be resumed, and has received copies of any
amendments or supplements thereto. In the
<PAGE> 24
-22-
event the Company shall give any such notice, the Applicable Period shall be
extended by the number of days during such period from and including the date of
the giving of such notice to and including the date when each seller of Exchange
Notes to be sold by such Participating Broker-Dealer, shall have received (x)
the copies of the supplemented or amended Prospectus contemplated by Section
5(k) or (y) the Advice.
6. REGISTRATION EXPENSES
(a) All fees and expenses incident to the performance of or compliance
with this Agreement by the Company shall be borne by the Company whether or not
the Exchange Offer or a Shelf Registration is filed or becomes effective,
including, without limitation, (i) all registration and filing fees (including,
without limitation, (A) fees with respect to filings required to be made with
the NASD in connection with one underwritten offering and (B) fees and expenses
of compliance with state securities or Blue Sky laws (including, without
limitation, reasonable fees and disbursements of counsel in connection with Blue
Sky qualifications of the Registrable Notes or Exchange Notes and determination
of the eligibility of the Registrable Notes or Exchange Notes for investment
under the laws of such jurisdictions (x) where the Holders of Registrable Notes
are located, in the case of the Exchange Notes, or (y) as provided in Section
5(h), in the case of Registrable Notes or Exchange Notes to be sold by a
Participating Broker-Dealer during the Applicable Period)), such expenses not to
exceed $10,000 in the aggregate, (ii) printing expenses (including, without
limitation, expenses of printing certificates for Registrable Notes or Exchange
Notes in a form eligible for deposit with The Depository Trust Company and of
printing Prospectuses if the printing of Prospectuses is reasonably requested by
the managing underwriter or underwriters, if any, or, in respect of Registrable
Notes or Exchange Notes to be sold by any Participating Broker-Dealer during the
Applicable Period, by the Holders of a majority in aggregate principal amount of
the Registrable Notes included in any Registration Statement or of such Exchange
Notes, as the case may be), (iii) reasonable messenger, telephone and delivery
expenses, (iv) fees and disbursements of counsel for the Company and fees and
disbursements of special counsel for the sellers of Registrable Notes (subject
to the provisions of Section 6(b)), M fees and disbursements of all independent
certified public accountants referred to in Section 5(n)(iii) (including,
without limitation, the expenses of any special audit and "cold comfort" letters
required by or incident to such performance), (vi) rating agency fees, (vii)
Securities Act liability insurance, if the Company desires such insurance,
(viii) fees and expenses of the Trustee (including, without limitation, fees and
disbursements of counsel), (ix) fees and expenses of all other Persons
<PAGE> 25
-23-
retained by the Company, (x) internal expenses of the Company (including,
without limitation, all salaries and expenses of officers and employees of the
Company performing legal or accounting duties), (xi) the expense of any annual
audit, (xii) the reasonable fees and expenses incurred in connection with any
listing of the securities to be registered on any securities exchange if the
Company elects to list any such securities and (xiii) the expenses incurred by
the Company relating to printing, word processing and distributing all
Registration Statements, underwriting agreements, securities sales agreements,
indentures and any other documents necessary in order to comply with this
Agreement.
(b) In connection with any Shelf Registration hereunder, the Company
shall reimburse the Holders of the Registrable Notes being registered in such
registration for the actual reasonable fees and disbursements of not more than
one counsel (in addition to appropriate local counsel) chosen by the Holders of
a majority in aggregate principal amount of the Registrable Notes to be included
in such Registration Statement and other reasonable out-of-pocket expenses of
the Holders of Registrable Notes incurred in connection with the registration of
the Registrable Notes, subject to a maximum of $25,000. Notwithstanding anything
to the contrary contained herein, the Company shall not have any obligation to
pay any underwriting fees, discounts or commissions attributable to the sale of
Registrable Notes.
7. INDEMNIFICATION
(a) The Company agrees to indemnify and hold harmless each Holder of
Registrable Notes and each Participating Broker-Dealer selling Exchange Notes
during the Applicable Period, the officers and directors of each such person,
and each person, if any, who controls any such person within the meaning of
either Section 15 of the Securities Act or Section 20 of the Exchange Act (each,
a "PARTICIPANT"), from and against any and all losses, claims, damages and
liabilities (including, without limitation, the reasonable legal fees and other
expenses incurred in connection with any suit, action or proceeding or any claim
asserted) caused by, arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in any Registration
Statement or Prospectus (as amended or supplemented if the Company shall have
furnished any amendments or supplements thereto) or any preliminary Prospectus,
or caused by, arising out of or based upon any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading, except insofar as such losses, claims, damages or
liabilities are caused by any untrue statement or
<PAGE> 26
-24-
omission or alleged untrue statement or omission made in reliance upon and in
conformity with information relating to any Participant or underwriter furnished
to the Company in writing by such Participant or underwriter expressly for use
therein; PROVIDED that the foregoing indemnity with respect to any preliminary
Prospectus shall not inure to the benefit of any Participant or underwriter (or
to the benefit of any person controlling such Participant or underwriter) from
whom the person asserting any such losses, claims, damages or liabilities
purchased Registrable Notes or Exchange Notes if such untrue statement or
omission or alleged untrue statement or omission made in such preliminary
Prospectus is eliminated or remedied in the related Prospectus (as amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto) and a copy of the related Prospectus (as so amended or supplemented)
shall have been furnished to such Participant or underwriter at or prior to the
sale of such Registrable Notes or Exchange Notes, as the case may be, to such
person or at a time the Company had notified persons under the last paragraph of
Section 5 hereof to cease using such Registration Statement or Prospectus.
(b) Each Participant will be required to agree, severally and not
jointly, to indemnify and hold harmless the Company, its directors and officers
and each person who controls any such person within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act to the same extent as the
foregoing indemnity from the Company to each Participant, but only with
reference to information relating to such Participant furnished to the Company
in writing by such Participant expressly for use in any Registration Statement
or Prospectus, any amendment or supplement thereto, or any preliminary
Prospectus. The liability of any Participant under this paragraph (b) shall in
no event exceed the proceeds received by such Participant from sales of
Registrable Notes giving rise to such obligations.
(c) If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against
any person in respect of which indemnity may be sought pursuant to either
paragraph (a) or (b) of this Section 7, such person (the "INDEMNIFIED PERSON")
shall promptly notify the person against whom such indemnity may be sought (the
"INDEMNIFYING PERSON") in writing, and the Indemnifying Person, upon request of
the Indemnified Person, shall retain one counsel reasonably satisfactory to the
Indemnified Person to represent the Indemnified Person and any others the
Indemnifying Person may reasonably designate in such proceeding and shall pay
the reasonable fees and expenses incurred by such counsel related to such
proceeding. In any such proceeding, any Indemnified Person shall have
<PAGE> 27
-25-
the right to retain its own counsel, but the fees and expenses of such counsel
shall be at the expense of such Indemnified Person unless (i) the Indemnifying
Person and the Indemnified Person shall have mutually agreed in writing to the
contrary, (ii) the Indemnifying Person has failed within a reasonable time to
retain counsel reasonably satisfactory to the Indemnified Person or (iii) the
named parties in any such proceeding (including any impleaded parties) include
both the Indemnifying Person and the Indemnified Person and representations of
both parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. It is understood that the
Indemnifying Person shall not, in connection with any proceeding or related
proceeding in the same jurisdiction, be liable for the fees and expenses of more
than one separate law firm (in addition to any local counsel) for all
Indemnified Persons, and that all such fees and expenses shall be reimbursed as
they are incurred. Any such separate firm for the Participants and such control
persons of Participants shall be designated in writing by Participants who sold
a majority in interest of Registrable Notes sold by all such Participants and
any such separate firm for the Company, its directors, its officers and such
control persons of the Company shall be designated in writing by the Company.
The Indemnifying Person shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent or if
there be a final judgment for the plaintiff, the Indemnifying Person agrees to
indemnify any Indemnified Person from and against any loss or liability by
reason of such settlement or judgment. Notwithstanding the foregoing sentence,
if at any time an Indemnified Person shall have requested an Indemnifying Person
to reimburse the Indemnified Person for reasonable fees and expenses incurred by
counsel as contemplated by the third sentence of this paragraph, the
Indemnifying Person agrees that it shall he liable for any settlement of any
proceeding effected without its written consent if (i) such settlement is
entered into more than 30 days after receipt by such Indemnifying Person of the
aforesaid request and (ii) such Indemnifying Person shall not have reimbursed
the Indemnified Person in accordance with such request prior to the date of such
settlement; PROVIDED, HOWEVER, that the Indemnifying Person shall not be liable
for any settlement effected without its consent pursuant to this sentence if the
Indemnifying Party is contesting, in good faith, the request for reimbursement.
No Indemnifying Person shall, without the prior written consent of the
Indemnified Person, effect any settlement of any pending or threatened
proceeding in respect of which any Indemnified Person is or could have been a
party, unless such settlement includes an unconditional release of such
Indemnified Person from all liability on claims that are the subject matter of
such proceeding.
<PAGE> 28
-26-
If the indemnification provided for in paragraphs (a) and (b) of this
Section 7 is unavailable to an Indemnified Person in respect of any losses,
claims, damages or liabilities referred to therein, then each Indemnifying
Person under such paragraphs, in lieu of indemnifying such Indemnified Person
thereunder, shall contribute to the amount paid or payable by such Indemnified
Person as a result of such losses, claims, damages or liabilities in such
proportion as is appropriate to reflect the relative fault of the Company on the
one hand and the Participants on the other in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The relative fault of the
Company on the one hand and the Participants on the other shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or by the Participants and the
parties, relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
The parties shall agree that it would not be just and equitable if
contribution pursuant to this Section 7 were determined by PRO RATA allocation
(even if the Participants were treated as one entity for such purpose) or by any
other method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an Indemnified Person as a result of the losses, claims,
damages and liabilities referred to in the immediately preceding paragraph shall
be deemed to include, subject to the limitations set forth above, any reasonable
legal or other expenses actually incurred by such Indemnified Person in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7, in no event shall a
Participant be required to contribute any amount in excess of the amount by
which proceeds received by such Participant from sales of Registrable Notes or
Exchange Notes exceeds the amount of any damages that such Participant has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
The indemnity and contribution agreements contained in this Section 7
will be in addition to any liability which the Indemnifying Persons may
otherwise have to the Indemnified Persons referred to above.
8. RULES 144 AND 144A
<PAGE> 29
-27-
The Company covenants that it will file the reports required to be filed
by it under the Securities Act and the Exchange Act and the rules and
regulations adopted by the SEC thereunder in a timely manner and, if at any time
the Company is not required to file such reports, it will, upon the request of
any Holder of Registrable Notes, make publicly available other information of a
like nature until no longer necessary to permit sales pursuant to Rule 144 or
Rule 144A. The Company further covenants that so long as any Registrable Notes
remain outstanding to make available to any Holder of Registrable Notes in
connection with any sale thereof, the information required by Rule 144A(d)(4)
under the Securities Act in order to permit resales of such Registrable Notes
pursuant to (a) such Rule 144A, or (b) any similar rule or regulation hereafter
adopted by the SEC, unless at such time the Registrable Notes are fully salable
under Rule 144 or any successor provision.
9. UNDERWRITTEN REGISTRATIONS
If any of the Registrable Notes covered by any Shelf Registration are to
be sold in an underwritten offering, the investment banker or investment bankers
and manager or managers that will manage the offering will be selected by the
Holders of a majority in aggregate principal amount of such Registrable Notes
included in such offering and shall be reasonably acceptable to the Company.
No Holder of Registrable Notes may participate in any underwritten
registration hereunder unless such Holder (a) agrees to sell such Holder's
Registrable Notes on the basis provided in any underwriting arrangements
approved by the Persons entitled hereunder to approve such arrangements and (b)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements.
10. MISCELLANEOUS
(a) REMEDIES. In the event of a breach by the Company of any of its
obligations under this Agreement, other than the occurrence of an event which
requires payment of Additional Interest, each Holder of Registrable Notes, in
addition to being entitled to exercise all rights provided herein, in the
Indenture or, in the case of the Initial Purchasers, in the Purchase Agreement
or granted by law, including recovery of damages, will be entitled to specific
performance of its rights under this Agreement. In the event of a breach by the
Company of any of its
<PAGE> 30
-28-
obligations under this Agreement, other than the occurrence of an event which
required payment of Additional Interest, the Company agrees that monetary
damages would not be adequate compensation for any loss incurred by reason of a
breach by it of any of the provisions of this Agreement and hereby further
agrees that, in the event of any action for specific performance in respect of
such breach, it shall waive the defense that a remedy at law would be adequate.
(b) ENFORCEMENT. The Trustee shall be authorized to enforce the
provisions of this Agreement for the ratable benefit of the Holders.
(c) NO INCONSISTENT AGREEMENTS. The Company does not have, as of the
date hereof, and the Company shall not, after the date of this Agreement, enter
into any agreement with respect to any of its securities that is inconsistent
with the rights granted to the Holders of Registrable Notes in this Agreement or
otherwise conflicts with the provisions hereof. The Company has not entered and
will not enter into any agreement with respect to any of its securities which
will grant to any Person piggyback rights with respect to a Registration
Statement.
(d) ADJUSTMENTS AFFECTING REGISTRABLE NOTES. The Company shall not,
directly or indirectly, take any action with respect to the Registrable Notes as
a class that would adversely affect the ability of the Holders of Registrable
Notes to include such Registrable Notes in a registration undertaken pursuant to
this Agreement.
(e) AMENDMENTS AND WAIVERS. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given, unless the Company has obtained the written consent of Holders of at
least a majority of the then outstanding aggregate principal amount of
Registrable Notes. Notwithstanding the foregoing, a waiver or consent to depart
from the provisions hereof with respect to a matter that relates exclusively to
the rights of Holders of Registrable Notes whose securities are being sold
pursuant to a Registration Statement and that does not directly or indirectly
affect, impair, limit or compromise the rights of other Holders of Registrable
Notes may be given by Holders of at least a majority in aggregate principal
amount of the Registrable Notes being sold by such Holders pursuant to such
Registration Statement, PROVIDED that the provisions of this sentence may not be
amended, modified or supplemented except in accordance with the provisions of
the immediately preceding sentence.
<PAGE> 31
-29-
(f) NOTICES. All notices and other communications (including without
limitation any notices or other communications to the Trustee) provided for or
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, next-day air courier or telecopier:
(i) if to a Holder of Registrable Notes, at the most current
address given by the Trustee to the Company; and
(ii) if to the Company:
High Voltage Engineering Corporation
401 Edgewater Place, Suite 680
Wakefield, Massachusetts 01880
Attention: President
Tel: (617) 224-1001
Fax: (617) 224-1011
with a copy to:
Bingham, Dana & Gould LLP
150 Federal Street
Boston, MA 02110-1726
Attention: Michael P. O'Brien, Esq.
Tel: (617) 951-8000
Fax: (617) 951-8736
All such notices and communications shall be deemed to have been duly
given: (i) when delivered by hand, if personally delivered; (ii) three business
days after being deposited in the mail, postage prepaid, if mailed; (iii) one
business day after being timely delivered to a next-day air courier; and (iv)
when receipt is acknowledged by the addressee, if telecopied.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee under the
Indenture at the address specified in such Indenture.
(g) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties,
including without limitation and without the need for an express assignment,
subsequent Holders of Registrable Notes.
(h) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate
<PAGE> 32
-30-
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
(i) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(j) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS
MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(k) SEVERABILITY. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use commercially reasonable efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction.
(l) ENTIRE AGREEMENT. This Agreement, together with the Purchase
Agreement and the Indenture, is intended by the parties as a final expression of
their agreement, and is intended to be a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of the subject
matter contained herein and therein.
(m) NOTES HELD BY THE COMPANY OR ITS AFFILIATES. Whenever the consent
or approval of Holders of a specified percentage of Registrable Notes is
required hereunder, Registrable Notes held by the Company or its affiliates (as
such term is defined in Rule 405 under the Securities Act) shall not be deemed
outstanding for such purpose and shall not be counted in determining whether
such consent or approval was given by the Holders of such required percentage.
<PAGE> 33
-31-
IN WITNESS WHEREOF, the parties have executed this Notes Registration
Rights Agreement as of the date first written above.
HIGH VOLTAGE ENGINEERING
CORPORATION
By: /s/ Clifford Press
----------------------------------
Name: Clifford Press
Title: President
CIBC WOOD GUNDY SECURITIES CORP.
PAINEWEBBER INCORPORATED
By: CIBC WOOD GUNDY SECURITIES CORP.
By: /s/ Brian Gerson
--------------------------------
Name: Brian Gerson
Title: Managing Director
<PAGE> 1
EXHIBIT 10.1
CREDIT AGREEMENT
By and Between
HIGH VOLTAGE ENGINEERING CORPORATION
As Borrower,
and
FLEET NATIONAL BANK
As Lender
Dated as of August 8, 1997
<PAGE> 2
TABLE OF CONTENTS
Page
----
ARTICLE 1. DEFINITIONS AND ACCOUNTING TERMS...................................1
Section 1.01 Definitions..............................................1
Section 1.02 Accounting Terms.........................................9
Section 1.03 Terms Defined Elsewhere..................................9
ARTICLE 2. THE CREDIT........................................................10
Section 2.01 The Revolving Credit....................................10
Section 2.02 Borrowing Base..........................................10
Section 2.03 Requests for Advances...................................13
Section 2.04 Unused Fee..............................................14
Section 2.05 Interest on Advances....................................14
Section 2.06 Additional Interest Payments............................15
Section 2.07 Computation of Interest and Fees........................15
Section 2.08 Yield Protection........................................15
Section 2.09 Lender Certificates; Survival of Indemnity..............17
Section 2.10 Availability of Rate Options; LIBOR Rate Advance
Protection............................................17
Section 2.11 Reliance on Representations and Actions of Borrower.....18
Section 2.12 Letters of Credit.......................................18
Section 2.13 Foreign Exchange Contracts..............................19
Section 2.14 Prepayment Fee..........................................20
ARTICLE 3. CONDITIONS OF LENDING.............................................20
Section 3.01 Conditions to Funding...................................20
Section 3.02 Conditions to each Advance..............................23
ARTICLE 4. PAYMENT AND REPAYMENT.............................................24
Section 4.01 Mandatory Prepayment....................................24
Section 4.02 Voluntary Prepayment....................................24
Section 4.03 Notice of Prepayment; Payment and Interest Cutoff.......24
Section 4.04 Method of Payment.......................................24
ARTICLE 5. REPRESENTATIONS AND WARRANTIES....................................24
Section 5.01 Corporate Existence, Good Standing, Etc.................24
Section 5.02 Principal Place of Business; Location of Records........25
Section 5.03 Qualification...........................................25
Section 5.04 Guarantors..............................................25
Section 5.05 Corporate Power.........................................25
Section 5.06 Valid and Binding Obligations...........................26
Section 5.07 Other Agreements........................................26
Section 5.08 Payment of Taxes........................................27
(i)
<PAGE> 3
Page
----
Section 5.09 Financial Statements....................................27
Section 5.10 Stock...................................................27
Section 5.11 Changes in Condition....................................27
Section 5.12 Title to Real Property..................................27
Section 5.13 Title to Personal Property..............................28
Section 5.14 Patents; Trademarks; Etc................................28
Section 5.15 Litigation..............................................28
Section 5.16 Compliance with Laws and Contracts, Etc.................29
Section 5.17 Pension Plans; Employees and Benefits...................30
Section 5.18 Outstanding Borrowed Funds Indebtedness.................30
Section 5.19 Employment Practices....................................30
Section 5.20 Regulation U............................................31
ARTICLE 6. REPORTS...........................................................31
Section 6.01 Monthly Financial Statements and Reports................31
Section 6.02 Annual Projections......................................31
Section 6.03 Annual Financial Statements.............................31
Section 6.04 Notice of Defaults......................................32
Section 6.05 Notice of Litigation....................................32
Section 6.06 Notice of Loss of Contracts.............................32
Section 6.07 Communications with Others..............................32
Section 6.08 Reportable Events.......................................32
Section 6.09 Annual Pension Reports..................................33
Section 6.10 Multiemployer Pension Plans.............................33
Section 6.11 Reports to Other Creditors..............................33
Section 6.12 Management Letters......................................34
Section 6.13 New Subsidiaries; Subordinated Indebtedness.............34
Section 6.14 Miscellaneous...........................................34
ARTICLE 7. FINANCIAL RESTRICTIONS............................................34
Section 7.01 Maximum Total Leverage Ratio............................34
Section 7.02 Total Fixed Charge Coverage Ratio.......................34
ARTICLE 8. AFFIRMATIVE COVENANTS.............................................34
Section 8.01 Taxes and Other Obligations.............................35
Section 8.02 Maintenance of Property.................................35
Section 8.03 Insurance...............................................35
Section 8.04 Records, Accounts and Places of Business................36
Section 8.05 Inspection..............................................36
Section 8.06 Change in Officers or Directors.........................36
Section 8.07 Existence and Business..................................36
Section 8.08 Use of Proceeds.........................................36
Section 8.09 Participation in Multiemployer Pension Plan.............36
(ii)
<PAGE> 4
Page
----
ARTICLE 9. NEGATIVE COVENANTS................................................37
Section 9.01 Restrictions on Borrowed Funds Indebtedness............37
Section 9.02 Restriction on Liens...................................37
Section 9.03 Investments............................................39
Section 9.04 Disposition of Assets..................................40
Section 9.05 Assumptions, Guaranties, Etc. of Indebtedness of Other
Persons..............................................40
Section 9.06 Mergers and Acquisitions...............................40
Section 9.07 Payment of Obligations.................................41
Section 9.08 ERISA..................................................42
Section 9.09 Restricted Payments....................................42
Section 9.10 Transactions with Affiliates...........................42
Section 9.11 Agreements Restricting Pledge of Assets................43
Section 9.12 Payments in Respect of Subordinated Indebtedness.......43
ARTICLE 10. EVENTS OF DEFAULT AND REMEDIES...................................43
Section 10.01 Events of Default......................................43
Section 10.02 Remedies...............................................45
Section 10.03 Setoff.................................................45
ARTICLE 11. WAIVERS; AMENDMENTS; REMEDIES....................................45
ARTICLE 12. LIMITATION ON LIABILITY; INDEMNIFICATION.........................46
ARTICLE 13. MISCELLANEOUS....................................................46
Section 13.01 Successors and Assigns.................................46
Section 13.02 Assignments and Participations.........................47
Section 13.03 Confidentiality........................................47
Section 13.04 Survival of Representations............................47
Section 13.05 Governmental Regulation................................47
Section 13.06 Notices................................................47
Section 13.07 Entire Agreement.......................................48
Section 13.08 Governing Law..........................................48
Section 13.09 Headings...............................................48
Section 13.10 Counterparts...........................................49
Section 13.11 Bank Holidays..........................................49
Section 13.12 Expenses; Indemnification..............................49
Section 13.13 Severability of Provisions.............................49
Section 13.14 Nonliability of Lender.................................50
Section 13.15 Schedules..............................................50
Section 13.16 Term of Agreement......................................50
Section 13.17 Waiver of Jury Trial...................................50
(iii)
<PAGE> 5
LIST OF SCHEDULES AND EXHIBITS
Schedule 1.01 Control Persons
Schedule 2.12 Outstanding Letters of Credit
Schedule 5.02 Places of Business; Location of Records
Schedule 5.05 Corporate Power
Schedule 5.07 Other Agreements
Schedule 5.08 Payment of Taxes
Schedule 5.10 Outstanding Capital Stock
Schedule 5.11 Changes in Condition
Schedule 5.12 Real Property
Schedule 5.13 Personal Property Title Exceptions
Schedule 5.14 Patent and Trademark Exceptions
Schedule 5.15 Litigation
Schedule 5.16 Environmental Liabilities
Schedule 5.17 Pension Plans
Schedule 5.19 Collective Bargaining Agreements
Schedule 8.03 Insurance
Schedule 9.01 Indebtedness
Schedule 9.02 Liens
Schedule 9.03 Investments
Schedule 9.05 Guaranties
Schedule 9.10 Transactions with Affiliates
Schedule 9.11 Pledge of Assets
EXHIBIT A Form of Revolving Credit Note
EXHIBIT B Form of Compliance Certificate
EXHIBIT C Form of Borrowing Base Certificate
(iv)
<PAGE> 6
CREDIT AGREEMENT
This CREDIT AGREEMENT is entered into as of August 8, 1997 by and
between HIGH VOLTAGE ENGINEERING CORPORATION, a Massachusetts corporation, as
Borrower (the "Borrower") and FLEET NATIONAL BANK, as lender (the "Lender").
ARTICLE 1. DEFINITIONS AND ACCOUNTING TERMS
Section 1.01 Definitions. In addition to the terms defined elsewhere in
this Agreement, unless otherwise specifically provided herein, the following
terms shall have the following meanings for all purposes when used in this
Agreement, and in any note, certificate, report or other document made or
delivered in connection with this Agreement:
"1996 Financing Agreements" shall mean the Sanwa Agreement; the
Note Agreement dated as of May 9, 1996 relating to $20,000,000 of 10.84%
Senior Secured Notes due May 1, 2003; the Senior Unsecured Note
Agreement dated as of May 9, 1996 relating to $7,000,000 of 12.09%
Senior Unsecured Notes; and the Securities Purchase Agreement dated as
of May 9, 1996 relating to $25,000,000 of 14% Senior Subordinated Notes
due May 1, 2004 and warrants to purchase Common Stock.
"Acquired Company" shall mean any Person, 100% of the outstanding
capital stock or beneficial interests of which is acquired by or issued
to the Borrower or any Subsidiary in connection with a Permitted
Acquisition.
"Advance" shall mean any loan made hereunder (which shall not
include contingent liabilities under the L/Cs or Foreign Exchange
Contracts).
"Affiliate" shall mean, with respect to any person, any other
Person which directly or indirectly controls, or is controlled by or
under common control with, such Person. For purposes hereof, a Person
shall be deemed to "control" another Person if such person owns more
than 10% of the outstanding common stock of such other Person.
"Applicable Margin" shall mean 1/4% per annum with respect to any
Base Rate Advance and 1 1/2% per annum with respect to any LIBOR Rate
Advance.
"Agreement" shall mean this Credit Agreement, as amended or
supplemented from time to time. References to Articles, Sections,
Exhibits, Schedules and the like refer to the Articles, Sections,
Exhibits, Schedules and the like of this Agreement unless otherwise
indicated.
"Banking Day" shall mean a day on which banks are generally open
to conduct commercial banking business in Boston, Massachusetts.
1
<PAGE> 7
"Base Financial Statements" shall mean the consolidated audited
financial statements of Borrower and its Subsidiaries as of April 26,
1997 and for the year then ended, together with all notes to such
financial statements.
"Base Rate" shall mean the rate of interest announced from time
to time by the Lender as its "Base Rate," it being understood that such
rate is a reference rate, not necessarily the lowest, which serves as
the basis upon which effective rates of interest are calculated for
obligations making reference thereto.
"Base Rate Advance" shall mean any Advance hereunder upon which
interest will accrue on the basis of the Base Rate.
"Borrowed Funds Indebtedness" shall mean any Indebtedness of
Borrower or any of its Subsidiaries for borrowed money (including,
without limitation, the Lender Obligations, the Senior Notes and all
Subordinated Indebtedness), but excluding contingent letter of credit
obligations and warrants to purchase Common Stock.
"Capital Expenditures" shall mean all expenditures made or
incurred by any Person which are capitalized under generally accepted
accounting principles, excluding all expenditures relating to any
Permitted Acquisition incurred in connection with such Permitted
Acquisition.
"Cash Flow" shall mean EBITDA less (a) Capital Expenditures made
or incurred during any period to the extent not financed through
capitalized leases or purchase money financing and (b) all taxes paid or
required to be paid in such period excluding up to an aggregate of
$1,200,000 related to a settlement made in fiscal 1997 with the Internal
Revenue Service.
A "Change in Control" shall mean that the Persons listed on
Schedule 1.01 no longer hold shares of capital stock of the Borrower
sufficient to elect a majority of the directors of the Borrower.
"CIP Agreements" shall mean those certain contingent interest
payment agreements and other agreements which Borrower and certain of
its Subsidiaries entered into with BancBoston Capital Inc. pursuant to
which Borrower and certain of its Subsidiaries may be required to make
certain contingent interest payments to BancBoston Capital Inc.
"CIP Payments" shall mean those certain contingent interest
payments which the Borrower and certain of its Subsidiaries may be
required to make to BancBoston Capital Inc. pursuant to the CIP
Agreements.
"Commitment" shall mean the commitment of the Lender to make
Advances or other extensions of credit under this Agreement.
2
<PAGE> 8
"Common Stock" shall mean the common stock, par value $.01 per
share, of the Borrower.
"Default" shall mean an Event of Default as defined in Article
10, or an event or condition which with the passage of time or giving of
notice, or both, would become such an Event of Default.
"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
Borrower, other than dividends payable solely in shares of or rights to
acquire capital stock of Borrower; (b) the purchase or other retirement
of any shares of any class of capital stock of Borrower, directly or
indirectly; and (c) any other distribution on or in respect of any
shares of any class of capital stock of Borrower other than a dividend
payable solely in shares of or rights to acquire capital stock of
Borrower.
"EBITDA" shall mean, for any period, the Net Income of Borrower
and its Subsidiaries plus any interest, taxes, depreciation and
amortization deducted in calculating the Net Income of Borrower and its
Subsidiaries for such period, calculated on a consolidated basis and
determined in accordance with generally accepted accounting principles.
In addition, during the first quarter of fiscal 1998 of the Borrower,
EBITDA shall also include the Net Income of PHI and its subsidiaries for
the fourth quarter of fiscal 1997 of PHI plus any interest, taxes,
depreciation and amortization deducted in calculating such Net Income.
"Fixed Charges" shall mean for any period the sum of (a) interest
paid or required to be paid in such period with respect to Borrowed
Funds Indebtedness (excluding any prepayment penalty incurred or make
whole premium paid in connection with the termination of the 1996
Financing Agreements, the settlement of the CIP Agreements and the
redemption of warrants to purchase Common Stock in connection with the
termination of the 1996 Financing Agreements), (b) regularly scheduled
principal paid or required to be paid in such period with respect to
Borrowed Funds Indebtedness (excluding Borrowed Funds Indebtedness which
is refinanced), (c) all regularly scheduled capital lease obligations
paid or scheduled to be paid, and (d) all Distributions made.
"Funds Available for Restricted Payments" shall mean (a)
$2,500,000 plus, from July 28, 1997 forward, 50% of the Borrower's
cumulative Net Income less (b) all Restricted Payments made after the
date of this Agreement excluding Restricted Payments made from the
proceeds of (i) a sale of capital stock, (ii) a refinancing, on terms
approved by the Lender, of the Senior Notes, or (iii) Subordinated
Indebtedness.
"Generally accepted accounting principles" shall mean generally
accepted accounting principles as defined by controlling pronouncements
of the Financial Accounting Standards Board, as from time to time
supplemented and amended.
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"Guarantors" shall mean each of the Borrower's domestic
Subsidiaries.
"Guaranty Agreements" shall mean the Guaranties of the
obligations of the Borrower to the Lender under this Agreement executed
by the Guarantors, as such Guaranties may be amended, modified or
supplemented from time to time.
"Guaranty" or "Guarantee" or "Guaranties" shall include any
arrangement whereby a Person is or becomes liable in respect of any
Indebtedness or other obligation of another and any other arrangement
whereby credit is extended to another obligor on the basis of any
promise of a guarantor, whether that promise is expressed in terms of an
obligation to pay the Indebtedness of such obligor, or to purchase or
lease assets under circumstances that would enable such obligor to
discharge one or more of its obligations, or to maintain the capital,
the working capital, solvency or general financial condition of such
obligor, whether or not such arrangement is listed in the balance sheet
of the guarantor or referred to in a footnote thereto, except for
endorsements made in connection with the deposit of items for credit or
collection in the ordinary course of business.
"Hazardous Material" shall mean, collectively, any pollutant,
toxic or hazardous material or waste, including any "hazardous
substance" or "pollutant" or "contaminant" as defined in Section 101(14)
of the Comprehensive Environmental Response, Compensation and Liability
Act (or any successor statute) or regulated as toxic or hazardous under
the Resource Conservation and Recovery Act of 1976 or any similar state
or local statute or regulation, and the rules and regulations
thereunder, all as from time to time in effect.
"Hedge Agreements" means interest rate swap, cap or collar
agreements, interest rate future or option contracts, currency swap
agreements, currency future or option contracts and other similar
agreements designed to hedge against fluctuations in interest rates or
foreign exchange rates.
"Indebtedness" shall mean, as to any Person, all obligations,
contingent and otherwise, which in accordance with generally accepted
accounting principles consistently applied should be classified upon
such Person's balance sheet as liabilities, but in any event including
liabilities secured by any mortgage, pledge, security interest, lien,
charge or other encumbrance existing on property owned or acquired by
such Person whether or not the liability secured thereby shall have been
assumed, letters of credit open for account (including L/Cs issued in
accordance with Section 2.12 hereof), and all obligations on account of
Guaranties (excluding the Guaranty Agreements), endorsements and any
other contingent obligations in respect of the Indebtedness of others
whether or not reflected on such balance sheet or in a footnote thereto.
"Interest Period" shall mean with respect to any LIBOR Rate
Advance, the period commencing on the date of such LIBOR Rate Advance
and ending one, two, three or six months thereafter, as the Borrower may
request as provided in Section 2.05 hereof. The
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<PAGE> 10
expiration date of an Interest Period shall mean the last day of such
Interest Period unless such day is not a Banking Day, then on the next
succeeding Banking Day.
"Investment" shall mean: (a) any stock, evidence of Indebtedness
or other security of another Person; (b) any loan, advance, contribution
to capital, extension of credit (except for current trade and customer
accounts receivable for inventory sold or services rendered in the
ordinary course of business and payable in accordance with customary
trade terms and for notes issued by the purchaser of assets from the
Borrower or a Guarantor representing a deferred portion of the purchase
price of such assets) to another Person; (c) any purchase of stock or
other securities of another Person or any business or undertaking of
another Person (whether by purchase of assets or securities) or any
commitment or option to make any such purchase; and (d) any other
investment, whether existing on the date of this Agreement or thereafter
made. The term "Investment" shall not include ordinary advances to
employees for travel expenses, drawing accounts and similar expenditures
made in the ordinary course of business or advances or prepayments to
suppliers in the ordinary course of business.
"L/C Fee" shall mean 1.5% per annum of the face amount of each
L/C issued pursuant to this Agreement.
"Lender" shall mean Fleet National Bank.
"Lender Agreements" shall mean this Agreement, the Note, the
L/Cs, the Foreign Exchange Contracts, the Security Documents and any
other present or future agreement from time to time entered into between
or among Borrower or any of its Subsidiaries and the Lender relating to
this Agreement, each as from time to time amended or modified, and all
statements, reports, documents and certificates (including without
limitation the Guaranty Agreements) delivered by Borrower or any of its
Subsidiaries to the Lender in connection therewith.
"Lender Obligations" shall mean all present and future
obligations and Indebtedness of Borrower or any of its Subsidiaries
owing to the Lender under this Agreement, the Note or any other Lender
Agreements, including, without limitation, the obligations to pay the
Advances from time to time evidenced by the Note and obligations to pay
interest, commitment fees and other fees and charges from time to time
owed under any Lender Agreements.
"LIBOR Banking Day" shall mean any day on which dealings are
carried on in the London Interbank Market and banks are open to conduct
commercial banking business in London, England and are not required or
authorized to be closed in Boston, Massachusetts.
"LIBOR Rate Advance" shall mean any Advance hereunder upon which
interest will accrue on the basis of a formula including as a component
thereof the LIBOR Rate.
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The expiration date of any LIBOR Rate Advance shall mean the last day of
the Interest Period of such LIBOR Rate Advance.
"LIBOR Rate" shall mean for any Interest Period for any LIBOR
Rate Advance, the rate of interest determined by the Lender, at
approximately 11:00 a.m. Boston, Massachusetts time on the Rate Fixing
Day as being the rate at which deposits in U.S. dollars are offered to
it by first-class banks in the London Interbank Market for deposit for
such Interest Period in amounts comparable to the aggregate principal
amount of LIBOR Rate Advances to which such Interest Period relates.
"Maturity Date" shall mean August 1, 2002.
"Maximum Credit Amount" shall mean $25,000,000.
"Maximum Total Leverage Ratio" shall mean, at any time, the ratio
of (a) the aggregate principal amount of all Borrowed Funds Indebtedness
outstanding on the date of calculation to (b) EBITDA for the
twelve-month period ending on the date of calculation (provided that
EBITDA will be calculated on an annualized basis during fiscal 1998 of
the Borrower based upon the EBITDA incurred from the beginning of such
fiscal year to the date of calculation).
"Multiemployer Pension Plan" shall mean a multiemployer plan
within the meaning of Section 4001(a)(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), in which Borrower or
any of its Subsidiaries is a participating employer.
"Net Income" shall mean the net income (or loss) after taxes of
any Person, calculated on a consolidated basis in accordance with
generally accepted accounting principles, excluding extraordinary gains
or losses.
"Note" shall mean collectively any promissory notes executed by
the Borrower in favor of the Lender in connection herewith. The initial
Note shall be substantially in the form of Exhibit A hereto.
"Pension Plan" shall mean a pension benefit plan maintained for
the employees of Borrower or any of its Subsidiaries subject to Title IV
of ERISA.
"Permitted Acquisition" shall mean the acquisition by Borrower or
any of its Subsidiaries of a Person in accordance with Section 9.06
hereof.
"Person" shall mean an individual, corporation, partnership,
joint venture, association, estate, joint stock company, trust,
organization, business, or a government or agency or political
subdivision thereof.
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"PHI" shall mean Physical Electronics, Inc.
"PHI Acquisition" shall mean the acquisition by the Borrower of
PHI by means of the merger of a wholly-owned subsidiary of the Borrower
with and into PHI.
"PHI Acquisition Documents" shall mean that certain Agreement and
Plan of Merger dated May 7, 1997 by and among Borrower, Lauren
Corporation, a wholly-owned subsidiary of Borrower, PHI Acquisition
Holdings, Inc. and, as to specific provisions only, Chase Venture
Capital Associates, L.P.
"PHI Joint Venture" shall mean that certain joint venture between
PHI and ULVAC, a Japanese company, which resells the services of PHI's
surface analysis instruments in the Japanese market.
"Rate Fixing Day" shall mean in the case of any LIBOR Rate
Advance, the second LIBOR Banking Day preceding the Banking Day on which
an Interest Period begins.
"Regulation D" shall mean Regulation D of the Board of Governors
of the Federal Reserve System from time to time in effect and shall
include any successor or other regulation or official interpretation of
said Board of Governors relating to reserve requirements applicable to
member banks of the Federal Reserve System.
"Regulation U" shall mean Regulation U of the Board of Governors
of the Federal Reserve System from time to time in effect and shall
include any successor or other regulation or official interpretation of
said Board of Governors relating to the extension of credit by banks for
the purpose of purchasing or carrying margin stocks applicable to member
banks of the Federal Reserve System.
"Reportable Event" shall mean an event reportable to the Pension
Benefit Guaranty Corporation under Section 4043 of Title IV of ERISA,
unless exempted from the reporting requirements by regulations of the
Pension Benefit Guaranty Corporation.
"Resale Facility" shall mean the facilities of the Borrower
located at 145 Newton Street, Boston, Massachusetts; 4 River Street,
Boston, Massachusetts; 2100 Earlywood Drive, Franklin, Indiana; and 100
Sagamore Hill Road, Pittsburgh, Pennsylvania.
"Reserve Requirement" shall mean the applicable aggregate reserve
requirement (including all basic, supplemental, marginal and other
reserves) which is imposed under Regulation D on the Lenders against
"Euro-currency Liabilities" (as defined in Regulation D).
"Restricted Payments" shall mean any Distributions and payments
of principal on account of, or the purchase, acquisition or other
retirement of, the Senior Notes or Subordinated Indebtedness.
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<PAGE> 13
"Sanwa Agreement" shall mean that certain loan agreement, dated
as of May 9, 1996, by and among the Borrower, certain Subsidiaries,
Sanwa Business Credit Corporation and the financial institution parties
thereto.
"Security Documents" shall mean the Security Agreements, and any
other agreements or instruments from time to time granting or purporting
to grant the Lender a lien in any property for the benefit of the Lender
to secure the Lender Obligations.
"Senior Notes" shall mean the $135,000,000 10 1/2% Senior Notes
issued by the Borrower pursuant to the Offering Memorandum dated August
5, 1997 and due in the year 2004.
"Series A Preferred Stock" shall mean the 33,000 shares of Series
A Senior Redeemable Preferred Stock issued by the Borrower pursuant to
the Offering Memorandum dated August 5, 1997.
"Series B Preferred Stock" shall mean that certain Series B
Preferred Stock issued by the Borrower and being redeemed on or prior to
the date of this Agreement.
"Series C Preferred Stock" shall mean that certain Series C
Preferred Stock issued by the Borrower and being redeemed on or prior to
the date of this Agreement.
"Subordinated Indebtedness" shall mean Indebtedness of Borrower
and its Subsidiaries which shall be subordinated to the Lender
Obligations hereunder; provided that (a) at the time such Subordinated
Indebtedness is incurred, no Event of Default has occurred or would
occur as a result of such incurrence, and (b) the documentation
evidencing such Subordinated Indebtedness shall have been delivered to
the Lender and shall contain all of the following characteristics: (i)
it shall be unsecured, (ii) it shall bear a market rate of interest,
(iii) it shall not require principal repayments thereof prior to the
Maturity Date, (iv) it shall have financial covenants (including
covenants relating to incurrence of Indebtedness) which are meaningfully
less restrictive than those set forth herein, (v) it shall have no
restrictions on the Borrower's ability to grant liens securing
Indebtedness ranking senior to such Subordinated Indebtedness, (vi) it
shall permit the incurrence of senior Indebtedness under this Credit
Agreement (and under any refinancings hereof), (vii) it may be
cross-accelerated with the Lender Obligations and other senior
Indebtedness of the Borrower (but shall not be cross-defaulted except
for payment defaults which the senior lenders have not waived) and may
be accelerated upon bankruptcy, (viii) it shall provide that (A) upon
any payment or distribution of the assets of the Borrower (including the
commencement of a bankruptcy proceeding) of any kind or character, all
of the Lender Obligations (including interest accruing after the
commencement of any bankruptcy proceeding at the rate specified for the
applicable Lender Obligation, whether or not such interest is an
allowable claim in any such proceeding) shall be paid in full prior to
any payment being received by the holders of the Subordinated
Indebtedness, (B) until all of the Lender Obligations (including the
interest
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<PAGE> 14
described in subclause (A) above) are paid in full, any payment or
distribution to which the holders of the Subordinated Indebtedness would
be entitled but for the subordination provisions of the type described
in clauses and (ix) and (x) hereof shall be made to the Lender, and (C)
the holders of the senior Indebtedness shall be entitled to vote the
Subordinated Indebtedness, (ix) it shall provide that in the event of a
payment default under Sections 10.01(a) or (b) hereof, the Borrower may
not pay the principal of, or any interest, fees other amounts payable
with respect to the Subordinated Indebtedness until the Lender
Obligations have been paid in full in cash, (x) it shall provide that in
the event of any other Event of Default, the Lender shall be permitted
to block payments of principal, interest, fees and all other amounts
payable with respect to the Subordinated Indebtedness for a period of
180 days, and (xi) it shall acknowledge that none of the provisions
outlined in part (b) of this definition can be amended, modified or
otherwise altered without the prior written consent of the Lender.
"Subsidiary" shall mean any Person of which Borrower shall now or
hereafter at the time own, directly or indirectly through one or more
Subsidiaries or otherwise, sufficient voting stock (or other beneficial
interest) to entitle it to elect at least a majority of the board of
directors or trustees or similar managing body. The term "Subsidiary"
shall not include any employee benefit plan of Borrower or any of its
Subsidiaries or any entity appointed or established by Borrower or any
of its Subsidiaries for or pursuant to the terms of any such plan.
"Total Fixed Charge Ratio" shall mean, at any time, the ratio of
Cash Flow to Fixed Charges, both reflected for the twelve-month period
ending on the date of calculation (provided that Cash Flow and Fixed
Charges will be calculated on an annualized basis during fiscal 1998 of
the Borrower based upon the Cash Flow and Fixed Charges incurred from
the beginning of such fiscal year to the date of calculation).
"W.P. Carey Lease" shall mean the Lease Agreement by and between
Corporate Property Associates 8, L.P., as landlord, and the Borrower, as
tenant, dated November 10, 1988, for the premises in Sterling,
Massachusetts and the Lease Agreement by and between Corporate Property
Associates 8, L.P., as landlord, and Datcon Instrument Company, as
tenant, dated November 10, 1988, for the premises located in Lancaster,
Pennsylvania.
Section 1.02 Accounting Terms. All accounting terms used and not defined
in this Agreement shall be construed in accordance with generally accepted
accounting principles consistently applied, and all financial data required to
be delivered hereunder shall be prepared in accordance with such principles.
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Section 1.03 Terms Defined Elsewhere. The following terms, defined
elsewhere in this Agreement as set forth below, shall have the respective
meanings therein defined:
Section of Agreement
Term Where Defined
---- --------------------
"Borrowing Base" Section 2.02(a)
"Borrowing Base Certificate" Section 2.02(e)
"Code" Section 6.10
"Compliance Certificate" Section 6.01
"Control Group Person" Section 6.10
"Eligible Receivables" Section 2.02(b)
"Eligible Inventory" Section 2.02(e)
"Event of Default" Section 10.01
"Foreign Exchange Contracts" Section 2.13
"L/Cs" Section 2.12
ARTICLE 2. THE CREDIT
Section 2.01 The Revolving Credit. Subject to the terms and conditions
of this Agreement and so long as there exists no Default, the Lender agrees to
make such Advances as Borrower may from time to time request, by notice to the
Lender in accordance with Section 2.03, provided, however, that no Advance shall
be made after the Maturity Date and no Advance shall exceed an amount determined
by subtracting:
(a) the aggregate outstanding balance of all Advances plus the
aggregate potential amount available to be drawn under all L/Cs issued
by the Lender for the account of the Borrower in accordance with Section
2.12 hereof and 20% the aggregate potential liability under all Foreign
Exchange Contracts issued by the Lender for the account of the Borrower
in accordance with Section 2.13 hereof; from
(b) the lesser of (i) the Maximum Credit Amount or (ii) the
Borrowing Base.
The Borrower shall execute and deliver to the Lender the Note to evidence the
Advances. Subject to the foregoing limitations and the provisions of Section
2.14 and Article 4 hereof, the Borrower shall have the right to prepay and
reborrow the Advances. All outstanding Advances and all interest accrued and
unpaid thereon and all fees and expenses shall be paid in full on the Maturity
Date.
Section 2.02 Borrowing Base.
(a) Borrowing Base. The "Borrowing Base" at any time shall mean
(A) the sum of (i) 85% of the Net Value of Eligible Receivables, plus
(ii) 50% of the Net Value of
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Eligible Joint Venture Receivables; provided, however, that in no
event shall the aggregate amount under (ii) exceed $4,000,000 plus (iii)
60% of Eligible Inventory, provided, however, that in no event shall the
amount under (iii) above exceed $17,500,000 in the aggregate.
(b) Eligible Receivables. "Eligible Receivables" shall mean all
rights to payment due and to become due to the Borrower or any of the
Guarantors other than the following: (i) rights to payment which remain
unpaid as of ninety (90) days after the due date specified on the
original invoice with respect thereto, or, in any event, as of one
hundred twenty (120) days after the date of such original invoice; (ii)
all rights to payment owing by a single debtor, including a currently
scheduled right to payment, if fifty percent (50%) or more of the
balance owing by such debtor is ineligible by reason of the criterion
set forth in clause (i) of this subsection (b); (iii) rights to payment
with respect to which the debtor is an Affiliate of Borrower or any of
Subsidiary or a director, officer or employee of Borrower, any
Subsidiary or any Affiliate of the any thereof; (iv) rights to payment
in excess of $250,000 in the aggregate with respect to which the debtor
is the United States of America or any department, agency or
instrumentality or prime contractor thereof unless Borrower or the
applicable Guarantor has complied in a manner satisfactory to the Lender
with the Federal Assignment of Claims Act of 1940, as amended, relative
to the assignment of such rights to payment; (v) rights to payment in
excess of $6,000,000 in the aggregate at any time outstanding with
respect to which the debtor is not a resident of the United States
unless the debtor has supplied Borrower or the applicable Guarantor with
an irrevocable letter of credit against which the Lender is permitted to
draw directly, issued by a financial institution sufficient to cover
such right to payment in form and substance satisfactory to the Lender
and without right of setoff and the right of payment is invoiced in the
United States and is payable in full in United States dollars; (vi)
rights to payment arising with respect to goods which have not been
shipped and delivered to the debtor, except for bill-and-hold sales
requested in writing in advance by the debtor in a form acceptable to
the Lender; (vii) rights to payment which are not invoiced (and dated as
of the date of such invoice) and sent to the debtor within five (5) days
after delivery of the underlying goods to or performance of the
underlying services for the debtor; (viii) rights to payment with
respect to which the Lender does not have a first and valid fully
perfected lien or which are not free and clear of any other lien
whatsoever; (ix) rights to payment with respect to which the debtor is
the subject of bankruptcy or a similar insolvency proceeding or has made
an assignment for the benefit of creditors or whose assets have been
conveyed to a receiver or trustee; (x) rights to payment with respect to
which the debtor's obligation to make payment is conditional upon or
subject to any repurchase obligation or return right (except for product
exchanges in the ordinary course of business pursuant to distribution
agreements containing terms customary in the industry in which Borrower
or such Guarantor operates), as with sales made on a guaranteed sale,
sale on approval (except with respect to rights to payment in connection
with which debtors are entitled to return inventory solely on the basis
of the quality of such inventory) or consignment basis; (xi) contra
rights to payment in excess of $100,000 in the aggregate from any one
debtor of the Borrower or any Guarantor or $250,000 in the aggregate
from
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all debtors of the Borrower and the Guarantors as a whole, but only to
the extent of the amount of the accounts payable owed by Borrower or the
applicable Guarantor to the debtor; (xii) rights to payment in excess of
$1,000,000 with respect to which the debtor is located in any state
denying creditors access to its courts in the absence of a Notice of
Business Activities Report or other similar filing unless Borrower or
the applicable Guarantor has either qualified as a foreign corporation
authorized to transact business in such state or has filed a Notice of
Business Activities Report or similar filing with the applicable state
agency in such state for the then current year, which states include
among others, New Jersey and Minnesota; and (xiii) rights to payment
evidenced by chattel paper or any instrument of any kind, to the extent
possession of such chattel paper or instrument is not delivered to the
Lender.
The "Net Value" of an Eligible Receivable and an Eligible Joint Venture
Receivable shall be its face amount, net of any discount for prompt
payment and net of any other amount (however denominated) representing
payment of finance charges, late charges, or interest (computed at not
less then market rates).
(c) Eligible Joint Venture Receivables. "Eligible Joint Venture
Receivables" shall mean all rights to payment due or to become due to
the Borrower or any of the Guarantors which are (i) outstanding not more
than ninety (90) days after the due date specified on the original
invoice with respect thereto, (ii) due from the PHI Joint Venture, and
(iii) otherwise meet the criteria for Eligible Receivables.
(d) Exclusion of Eligible Receivables. The Lender from time to
time may exclude any otherwise Eligible Receivables or Eligible Joint
Venture Receivables from the class of Eligible Receivables or Eligible
Joint Venture Receivables, as applicable, based on the Lender's
reasonable determination as to the creditworthiness of the obligor or as
to the aggregate amount of receivables owing by such obligor and its
affiliates. The Lender shall give notice to the Borrower of the terms of
any such exclusion. Except as otherwise expressly stated in such notice,
all such exclusions shall be continuing and cumulative, and an exclusion
as to any obligor shall apply in the aggregate to all receivables of
such obligor and its affiliates. The Borrower shall, not later than five
(5) Banking Days after the Lender effects any such exclusion, deliver to
the Lender a revised Borrowing Base Certificate reflecting the Borrowing
Base as redetermined in accordance with such exclusion. The making of an
Advance in reliance on a Borrowing Base Certificate shall not affect the
Lender's right later to exclude any receivables in accordance with this
Section 2.02(d). No Eligible Receivable or Eligible Joint Venture
Receivable excluded under this Section 2.02(d) shall be included by the
Borrower in any later Borrowing Base Certificate without written
permission by the Lender.
(e) Eligible Inventory. "Eligible Inventory" shall mean at any
time finished goods or raw materials held by the Borrower or any
Guarantor, which meet each of the following requirements at such time:
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<PAGE> 18
(1) The Borrower or a Guarantor has good title to such
Eligible Inventory, free and clear of any lien, except for liens
in favor of the Lender securing the Lender Obligations, and such
Eligible Inventory and proceeds thereof are subject to such a
valid and perfected first lien in favor of the Lender;
(2) Any finished goods are in good and merchantable
condition and are readily saleable by the Borrower or a Guarantor
in the ordinary course of its business and any raw materials are
useable by the Borrower or Guarantor in the ordinary course of
its business;
(3) Such Eligible Inventory is located in the United
States, and such Eligible Inventory is in the possession of the
Borrower or a Guarantor at the locations set forth on Schedule
5.02 hereto;
(4) Such Eligible Inventory is not reasonably deemed by
the Lender to be obsolete or non-marketable; and
(5) Such Eligible Inventory is valued at the lower of cost
or market.
(f) Borrowing Base Certificates. On the date hereof and on or
before the twenty-first day of each month, the Borrower shall furnish to
the Lender a certificate ("Borrowing Base Certificate") substantially in
the form of Exhibit C hereto, appropriately completed, signed by the
Treasurer, Chief Accounting Officer or Chief Financial Officer of
Borrower and setting forth the Borrowing Base and the other information
required therein. In addition, the Lender may request a Borrowing Base
Certificate upon request for any Advance by the Borrower if the
aggregate outstanding balance of all Advances plus the aggregate
potential amount available to be drawn under all L/Cs and 20% of the
aggregate potential liability under all Foreign Exchange Contracts at
the time of such request exceeds 90% of the Borrowing Base. In the event
the Borrower is required to deliver a Borrowing Base Certificate
pursuant to the previous sentence, the Borrowing Base shall be
calculated based upon Eligible Receivables outstanding as of a date not
more than five (5) business days prior to the date of such certificate
(which date shall be specified) and Eligible Inventory as of the end of
the month preceding delivery of such certificate.
Section 2.03 Requests for Advances. Each request for an Advance shall be
made by Borrower to the Lender on a Banking Day and may be (a) in any amount for
a Base Rate Advance and (b) in a minimum amount of $500,000 and in integral
multiples of $100,000 for a LIBOR Rate Advance; provided, however that the
Borrower may not have more than six (6) LIBOR Rate Advances outstanding at any
one time. Each such request shall state the requested date of such Advance
(which date, in the case of a LIBOR Rate Advance, shall be not less than two
Banking Days after the date of such request) and amount of, and the choice of
interest rate to apply to, such Advance and, for LIBOR Rate Advances, the
duration of the Interest Period, which shall not in any event extend beyond the
Maturity Date.
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Each Advance shall be made as follows: (a) with respect to Base Rate
Advances, if notice is received by the Lender from Borrower prior to 2:00 p.m.
Boston, Massachusetts time on a Banking Day, then by the close of business on
such Banking Day, and otherwise on the next Banking Day thereafter or such later
Banking Day as Borrower may request; and (b) with respect to LIBOR Rate
Advances, on the second Banking Day after the Lender receives notice from
Borrower, if such notice is received by the Lender prior to 11:00 a.m. Boston,
Massachusetts time on a Banking Day, and otherwise on the third Banking Day
thereafter or such later Banking Day as Borrower may request. Each request for
an Advance shall be made to the Lender in writing or by telephone by a duly
authorized representative of Borrower, and the Lender may rely upon any
telephone request which the Lender in good faith believes is made by such a
representative. The Borrower agree to indemnify and hold the Lender harmless for
any action, including the making of Revolving Credit Advances hereunder, and any
loss or expense, taken or incurred by the Lender as a result of its good faith
reliance upon such telephone request.
The Borrower hereby agrees (a) that the Lender shall be entitled to rely
upon any Borrowing Base Certificate and Compliance Certificate delivered
hereunder until each such certificate is superseded by a more recent
certificate, and (b) that each request for an Advance and each request for the
issuance of an L/C, whether by telephone or in writing or otherwise, shall
constitute a confirmation by the Borrower of the representations and warranties
contained in the most recent Borrowing Base Certificate and Compliance
Certificate delivered to the Lender.
Section 2.04 Unused Fee. From the date hereof to and including the
Maturity Date, the Borrower shall pay to the Lender the following quarterly
unused fees for each fiscal quarter computed as follows:
Quarterly Unused Fee = .005 x (MC - ORCA - OLC) x N/360
where: MC = the Maximum Credit Amount
ORCA = the daily average principal amount of all Advances
outstanding during such quarter
OLC = the daily average of the aggregate amount available to be
drawn under all L/Cs outstanding during such quarter
N = the aggregate number of days in such fiscal quarter
This quarterly unused fee shall be payable in arrears on the first day
of each April, July, October and January commencing October 1, 1997, and on the
Maturity Date.
Section 2.05 Interest on Advances. The Borrower shall pay interest on
the unpaid principal amount of each Advance from time to time outstanding at the
rate per annum equal to the Base Rate plus the Applicable Margin or the LIBOR
Rate plus the Applicable Margin as chosen in accordance with Section 2.03. If
the Borrower fails to state the choice of interest rate to apply to any Advance,
the Borrower shall be deemed to have chosen an interest rate based on
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the Base Rate. LIBOR Rate Advances shall automatically convert to Base Rate
Loans at the end of the applicable Interest Period unless the Borrower gives
notice to continue the same as a LIBOR Rate Advance, which notice must be
received by the Lender prior to 11:00 a.m. Boston, Massachusetts time two
Banking Days prior to the end of the applicable Interest Period and must specify
the duration of the next Interest Period to apply to such LIBOR Rate Advance.
Each request by the Borrower for the conversion of any Base Rate Advance into a
LIBOR Rate Advance and each notification by the Borrower of the continuation of
any existing LIBOR Rate Advance into a new Interest Period shall be deemed to
constitute a request by the Borrower for a new LIBOR Rate Advance. Interest on
Advances shall be payable monthly in arrears on the first day of each month,
commencing on September 1, 1997, and continuing until all amounts payable under
the Note shall have been fully paid; provided, however, that all accrued and
unpaid interest on a LIBOR Rate Advance shall be payable on the date of
expiration of the Interest Period with respect to each such LIBOR Rate Advance
for an Interest Period of three months or less and every three months for an
Interest Period longer than three months. On the Maturity Date or the earlier
acceleration or maturity of the Note, all accrued and unpaid interest on, and
all unpaid fees and expenses with respect to, the Note and this Agreement shall
be due and payable in full.
Section 2.06 Additional Interest Payments. In addition to the payments
of principal and interest on the Note, the Borrower shall, on demand, pay to the
Lender interest on (a) any overdue installments of principal, (b) to the extent
not prohibited by applicable law which cannot be waived, any installments of
interest that are overdue for a period of five (5) days after written notice
from the Lender to the Borrower, and (c) any overdue payment of a commitment fee
or other amount payable hereunder, at a rate which is two (2) percent in excess
of the rate otherwise applicable.
Section 2.07 Computation of Interest and Fees. The Borrower hereby
authorizes the Lender to charge against any account of the Borrower with the
Lender an amount equal to the accrued interest and principal and other amounts
from time to time due and payable to the Lender hereunder and under all other
Lender Agreements. Interest hereunder and under the Note and fees payable
hereunder shall be computed on the basis of a 360-day year for the number of
days actually elapsed. The annual rates of interest to which the rates
determined under this Agreement are equivalent are the rates hereunder
multiplied by the actual number of days in the year and divided by 360. Any
increase or decrease in the interest rate on the Note resulting from a change in
the Base Rate shall be effective immediately from the date of such change.
Section 2.08 Yield Protection. If any future law or any governmental
rule, regulation, policy, guideline or directive (whether or not having the
force of law), or any interpretation thereof, or compliance of the Lender with
such:
(a) subjects the Lender to any tax, duty, charge or withholding
on or from payments due from the Borrower (excluding taxation of the
overall net income of the Lender), or changes the basis of taxation of
payments to the Lender in respect of any of the Advances or other
amounts due the Lender hereunder; or
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(b) imposes or increases or deems applicable any reserve,
assessment, insurance charge, special deposit or similar requirement
against assets of, deposits with or for the account of, or credit
extended by, the Lender (other than the Reserve Requirement, to the
extent it is taken into account in determining the interest rate
applicable to LIBOR Rate Advances); or
(c) imposes any other condition the result of which is to
increase the cost to the Lender of making, funding or maintaining the
Advances hereunder or reduces any amount receivable by the Lender in
connection with the Advances, or requires the Lender to make any payment
calculated by reference to the amount of loans held or interest received
by it, by an amount deemed material by the Lender; or
(d) affects the amount of capital required or expected to be
maintained by the Lender or any corporation controlling the Lender and
the Lender determines that the amount of capital required is increased
by or based upon the existence of this Agreement or its obligation to
make the Advances hereunder or its Commitment;
then, within 30 days of demand by the Lender (which demand shall be accompanied
by a statement setting forth the basis of such demand), the Borrower shall pay
the Lender that portion of such reasonable increased expense incurred after the
Lender shall have allocated the same fairly and equitably among all customers of
any class generally affected thereby (including, in the case of clause (d)
above, any reduction in the rate of return on capital to an amount below that
which the Lender could have achieved but for such change in regulation after
taking into account the Lender's policies as to capital adequacy) or reduction
in an amount received which is attributable to making, funding and maintaining
the Lender's loans hereunder. The Borrower shall not be required to make any
such payment for such increased expenses arising ninety (90) days before the
date of such request (unless and only to the extent such law, rule, regulation,
policy, guideline, directive or interpretation applies retroactively to a period
prior to ninety (90) days before the date of such request, in which case, the
Borrower shall not be required to make any payment for increased expenses
resulting from such retroactive application unless the Lender provides such
request within ninety (90) days after the Lender reasonably should have become
aware of such rule, regulation, policy, guideline, directive or interpretation).
If the Lender shall subsequently recoup costs for which the Lender has
heretofore been compensated by the Borrower, the Lender shall remit to the
Borrower the amount of such recoupment.
The Lender agrees that as promptly as practicable after it becomes aware
of the occurrence of an event or the existence of a condition that would cause
it to be affected under Section 2.08(a) through (d), the Lender will give notice
thereof to the Borrower and, to the extent so requested by the Borrower and not
inconsistent with the Lender's internal policies, the Lender shall use
reasonable efforts and take such actions as are reasonably appropriate if as a
result thereof the additional moneys which would otherwise be required to be
paid to the Lender pursuant to such subsections would be materially reduced, or
the illegality or other adverse circumstances which would otherwise require a
conversion of such Advances or result in the inability to make such Advances
pursuant to such sections would cease to exist, and in each case if, as
determined by the
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Lender in its sole discretion, the taking of such actions would not adversely
affect such Advances or the Lender or otherwise be disadvantageous to the
Lender. To the extent practicable and applicable, the Lender shall allocate cost
increases among its customers in good faith and on an equitable basis.
Section 2.09 Lender Certificates; Survival of Indemnity. In order to
seek reimbursement or indemnification pursuant to Sections 2.08 or 2.10(b), the
Lender shall deliver a certificate to Borrower stating the amount due
thereunder. Such certificate of the Lender as to the amount due under Sections
2.08 or 2.10(b) shall be final, conclusive and binding on the Borrower in the
absence of manifest error. Determination of amounts payable under Sections 2.08
or 2.10(b) in connection with a LIBOR Rate Advance shall be calculated as though
the Lender funded its LIBOR Rate Advance through the purchase of a deposit of
the type and maturity corresponding to the deposit used as a reference in
determining the LIBOR Rate applicable to such LIBOR Rate Advance, whether in
fact that is the case or not. Unless otherwise provided herein, the amount
specified in the certificate shall be payable on demand after receipt by the
Borrower of the certificate. The obligations of the Borrower under Sections 2.08
and 2.10(b) shall survive the payment of all Lender Obligations and termination
of this Agreement.
Section 2.10 Availability of Rate Options; LIBOR Rate Advance
Protection.
(a) In the event that the Lender shall determine that:
(1) By reason of circumstances affecting the London
Interbank Market, adequate and reasonable methods do not exist
for ascertaining LIBOR which would otherwise be applicable during
any Interest Period; or
(2) The making or continuation of any LIBOR Rate Advance
has been made impracticable or unlawful by (A) the occurrence of
a contingency that materially and adversely effects the London
Interbank Market or (B) compliance by the Lender in good faith
with any applicable law or governmental regulation, guideline or
order or interpretation or change thereof by any governmental
authority charged with the interpretation or administration
thereof or with any request or directive of any such governmental
authority (whether or not having the force of law);
then the Lender shall forthwith give notice of such determination (which
shall be conclusive and binding on the Borrower) to Borrower. In such
event the obligations of the Lender to make LIBOR Rate Advances shall be
suspended until the Lender determines that the circumstances giving rise
to such suspension no longer exist, whereupon the Lender shall notify
Borrower.
(b) If (1) the Borrower makes any request for a LIBOR Rate
Advance and, prior to the funding of such LIBOR Rate Advance, revokes
such request, or (2) due to acceleration of the maturity of the Notes or
due to any other reason Lender receives
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payment of any installment of principal of any LIBOR Rate Advance on any
date prior to the last day of the then-current Interest Period, then, in
each case, the Borrower shall upon demand and receipt of a certificate
from the Lender with respect thereto and containing the information
described in Section 2.09, pay forthwith to the Lender any amounts
required to compensate the Lender for any losses, costs or reasonable
expenses which the Lender may have incurred as a result of such
revocation or payment, including, without limitation, any loss or
reasonable expense incurred by reason of the liquidation or redeployment
of funds acquired by the Lender to fund or maintain principal of such
LIBOR Rate Advance.
Section 2.11 Reliance on Representations and Actions of Borrower.
Borrower agrees that the Lender may rely upon any representation, warranty,
certificate, notice, document or telephone request which purports to be executed
or made or which the Lender in good faith believes to have been executed or made
by Borrower or any of its executive officers, and Borrower further agrees to
indemnify and hold the Lender harmless for any action, including the making of
Advances hereunder, and any loss or expense, taken or incurred by any of them as
a result of their good faith reliance upon any such representation, warranty,
certificate, notice, document or telephone request.
Section 2.12 Letters of Credit.
(a) Issuance Procedures. The Borrower may request and the Lender
will issue letters of credit (collectively "L/Cs") for the account of
the Borrower. With each request, the Borrower shall deliver to the
Lender an L/C application and L/C agreement together with the proposed
form of such L/C (which, together with all schedules and exhibits
thereto, shall be in form and substance satisfactory to the Lender and
its counsel) and such other certificates, documents and other papers and
information as the Lender may reasonably request. All L/Cs must have an
expiry date which is (1) not more than one year following the date of
issuance thereof; provided, however, that such L/C may be subject to
automatic renewal for one or more additional periods of one year in the
absence of notice of termination from the Lender to the beneficiary and
(2) not later than the Maturity Date. Within five Banking Days following
receipt of the above-described documents in satisfactory form, the
Lender shall issue such L/C; provided that the Borrower would be
entitled to an Advance on such date in the amount of the requested L/C.
(b) Reimbursement. On each date that any amount is drawn under an
L/C, the Lender shall be authorized to either (1) charge the Borrower's
account to the extent funds are available, or (2) make demand upon the
Borrower, for the amount so drawn or paid. In the event the Lender
charges the Borrower's account for any amount drawn or paid under any
L/C, the Lender shall promptly notify Borrower. The Borrower agrees to
pay on demand any and all reasonable expenses incurred by the Lender in
enforcing any rights under this Section 2.12. In the event any L/C is
payable in foreign currency, the Borrower shall reimburse the Lender at
the Lender's selling rate of exchange on the date such reimbursement is
made.
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(c) Commission. The Borrower agrees to pay the Lender (1) the L/C
Fee with respect to each L/C, which L/C Fee shall be due and payable
quarterly in advance for each L/C, and (2) all transactional fees, at
the Lender's customary rate, which transactional fees shall be paid at
the time they are incurred by the Lender.
(d) Method of Payment. The Lender is authorized to obtain
reimbursement for the amount drawn under any L/C issued by the Lender
and for all commissions and fees owed by the Borrower in connection any
such issuance, by the making of Base Rate Advances hereunder and shall
promptly notify Borrower thereof. The Borrower agrees that the Lender
may make any such Base Rate Advance even if the making of such Base Rate
Advance causes the outstanding balance of all Revolving Credit Advances
to exceed the limits set forth in Section 2.01 hereof, and the Borrower
further agrees that the making of such Base Rate Advance by the Lender
in excess of the limits set forth in Section 2.01 hereof shall
constitute an automatic Default under Section 10, entitling the Lender
to exercise all rights and remedies available to them under this
Agreement and applicable law.
(e) Amount. The aggregate amount available to be drawn under all
L/Cs outstanding at any time shall not exceed $5,000,000.
(f) Existing Letters of Credit. Attached hereto as Schedule 2.12
is a list of currently outstanding letters of credit issued by the
Lender for the account of the Borrower, which letters of credit shall be
deemed issued pursuant to this Section 2.12.
Section 2.13 Foreign Exchange Contracts.
(a) Issuance Procedures. From time to time, the Borrower may
request, and the Lender may agree, to enter into Foreign exchange
contracts (collectively "Foreign Exchange Contracts") on behalf of the
Borrower. All Foreign Exchange Contracts must have a maturity date which
is (1) not more than one year following the effective date of such
contract and (2) not later than the Maturity Date.
(b) Reimbursement. On each date that any Foreign Exchange
Contract matures, the Lender shall be authorized to either (1) charge
the Borrower's account, or (2) make demand upon the Borrower, for the
amount to be paid thereunder by the Borrower. In the event the Lender
charges the Borrower's account for any amount to be paid under any
Foreign Exchange Contract, the Lender shall promptly notify Borrower.
The Borrower agrees to pay on demand any and all reasonable expenses
incurred by the Lender in enforcing any rights under this Section 2.13.
In the event any amount to be paid under a Foreign Exchange Contract is
payable in foreign currency, the Borrower shall reimburse the Lender at
the Lender's selling rate of exchange on the date such reimbursement is
made.
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(c) Fees. The Borrower agrees to pay the Lender all transactional
fees on Foreign Exchange Contracts, at the Lender's customary rate,
which transactional fees shall be paid at the time they are incurred by
the Lender.
(d) Method of Payment. The Lender is authorized to obtain
reimbursement for any amount due to the Lender under a Foreign Exchange
Contract and for all fees owed by the Borrower in connection therewith,
by the making of Base Rate Advances hereunder and shall promptly notify
Borrower thereof. The Borrower agrees that the Lender may make any such
Base Rate Advance even if the making of such Base Rate Advance causes
the outstanding balance of all Advances to exceed the limits set forth
in Section 2.01 hereof, and the Borrower further agrees that the making
of such Base Rate Advance by the Lender in excess of the limits set
forth in Section 2.01 hereof shall constitute an automatic Default under
Section 10, entitling the Lender to exercise all rights and remedies
available to them under this Agreement and applicable law.
(e) Amount. The aggregate amount payable under all Foreign
Exchange Contracts outstanding at any time shall not exceed $5,000,000.
Section 2.14 Prepayment Fee. Borrower may, upon not less than five (5)
days prior written notice to Lender specifying the date of prepayment, prepay
all Advances in full and terminate the Commitment; provided, however, that the
Borrower shall pay to Lender as liquidated damages and compensation for the
costs of being prepared to make funds available to Borrower hereunder an amount
determined as follows: (A) two percent (2%) of the Maximum Credit Amount for any
prepayment made during the first year after the date of this Agreement, (B) one
percent (1%) of the Maximum Credit Amount for any prepayment made during the
second year after the date of this Agreement, (C) one-half of one percent (.5%)
of the Maximum Credit Amount for any prepayment made during the third year after
the date of this Agreement, or (D) one-half of one percent (.5%) of the Maximum
Credit Amount for any prepayment made during the fourth year after the date of
this Agreement.
ARTICLE 3. CONDITIONS OF LENDING
Section 3.01 Conditions to Funding. The Lender's obligations to make the
Advances provided for herein shall be subject to compliance by the Borrower of
all covenants and agreements contained in this Agreement, and to the
satisfaction, at or before the date of execution hereof, of all of the following
conditions precedent:
(a) Receipt of Documents. The Lender shall have received each of
the following, in form and substance satisfactory to the Lender and its
counsel or in the form attached hereto as an Exhibit, as the case may
be:
(1) The Note. The Note duly executed by the Borrower;
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(2) Certificates of the Clerk/Secretary or Assistant
Clerk/Assistant Secretary of the Borrower. Certificates of the
Clerk/Secretary or Assistant Clerk/Assistant Secretary of the
Borrower and each of the Guarantors, dated the date of execution
of this Agreement, containing copies of the charter documents of
such Borrower or Guarantor as certified by the Secretary of State
of such Borrower's or Guarantor's jurisdiction of incorporation,
the by-laws of the Borrower or Guarantor, and resolutions of the
Board of Directors duly authorizing the execution, delivery and
performance by the Borrower or the Guarantor of all of the Lender
Agreements to which the Borrower or such Guarantor is a party and
all other transactions contemplated thereby, such certificates
also shall certify that such charter documents, by-laws and
resolutions are complete and accurate and shall certify as to the
names and true signatures of the officers authorized to sign the
Lender Agreements;
(3) Certificate of the Treasurer, Chief Financial Officer
or Chief Accounting Officer of Borrower. A certificate of the
Treasurer, Chief Financial Officer or Chief Accounting Officer of
Borrower dated the date of execution of this Agreement, to the
effect that the conditions stated in Sections 3.01(g) and 3.01(i)
hereof have been satisfied;
(4) Opinion of Counsel. Opinion of Bingham, Dana & Gould,
counsel to the Borrower and the Guarantors, dated the date of
execution of this Agreement; and
(5) Certain Security Documents pertaining to Personal
Property. The Lender shall have received the following, each of
which shall be in form and substance satisfactory to the Lender:
(i) Security Agreements, duly executed on behalf of
the Borrower and each of the Guarantors (as amended, modified or
supplemented from time to time, the "Security Agreements").
(ii) Evidence of the completion of all recordings
and filings of or with respect to, and of all other actions with
respect to, the above Security Documents as may be necessary or,
in the opinion of the Lender, desirable to create or perfect the
liens created or purported to be created by such Security
Documents as valid, continuing and perfected liens in favor of
the Lender securing the Lender Obligations, having the priority
purported to be given such liens under such Security Documents;
and evidence of the payment of any necessary fee, tax or expense
relating to such recording or filing.
(iii) The Guaranty Agreements, duly executed and
delivered by each of the Guarantors and in full force and effect.
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(iv) Evidence that all other actions necessary or,
in the opinion of the Lender, desirable to create, perfect or
protect the liens created or purported to be created by the above
Security Documents have been taken.
(6) PHI Acquisition Documents. A photocopy of a fully
executed original counterpart of each PHI Acquisition Document
and each of the other documents, agreements, certificates or
instruments delivered or to be delivered in connection with the
transactions contemplated by the PHI Acquisition Documents shall
have been delivered to the Lender; and each such PHI Acquisition
Document or other document, agreement, certificate or instrument
shall be in the form thereof heretofore determined by the Lender
to be satisfactory to it.
(7) Other Documents. Such other documents, certificates
and opinions as the Lender may reasonably request.
(b) Representations and Warranties. The representations and
warranties herein and those made by or on behalf of the Borrower in any
other Lender Agreement shall be correct as of the date of execution of
this Agreement, with the same effect as if made at and as of such time.
(c) No Default, Etc. There shall exist no Default prior to, upon
the making of, or after giving effect to, any of the Advances hereunder.
(d) Legality. The making of the Advances evidenced by the Note
shall not be prohibited by any law or governmental order or regulation
applicable to the Lender, or to the Borrower and all necessary consents,
approvals and authorizations of any Person for all the loans made
pursuant to this Agreement shall have been obtained.
(e) Litigation. There shall exist no litigation, at law or in
equity, or any proceeding before any federal, state, provincial or
municipal board or other governmental or administrative agency pending
or threatened, or, to the best knowledge of the Borrower, any basis
therefore, with respect to the Advances being made hereunder.
(f) Closing Fee. The Borrower shall have paid to the Lender a
closing fee in the amount of $62,500 (0.25% of the Maximum Credit
Amount), which amount shall be reduced by any amounts previously
collected by the Lender from the Borrower in connection with this
Agreement.
(g) PHI Acquisition. The PHI Acquisition shall have been duly
consummated in accordance with the PHI Acquisition Documents.
(h) PHI Field Examination. The Lender shall have completed to its
satisfaction a field examination of the books, records, accounts and
inventory of PHI.
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(i) Offering. The offering of (i) $135,000,000 10 1/2% Senior
Notes due 2004, (ii) the 33,000 Units consisting of 33,000 shares of 12
1/2% Series A Senior Redeemable Preferred Stock, 82.7429 shares of
Common Stock and warrants to purchase 82.7429 shares of Common Stock,
shall have been consummated as described in the Offering Memorandum
dated August 5, 1997.
(j) Absence of Certain Changes. Since the date of the Base
Financial Statements, there shall not have been any change in the
financial condition, properties, assets, liabilities, business or
operations of the Borrower or any of the Guarantors which change by
itself or in conjunction with all other such changes, whether or not
arising in the ordinary course of business, has been materially adverse
with respect to the Borrower or any of the Guarantors, taken as a whole.
(k) Redemption of Preferred Stock. The Borrower shall have
redeemed all outstanding shares of Series B Preferred Stock and all
outstanding shares of Series C Preferred Stock.
(l) CIP Payments. The Borrower shall have made a complete and
final settlement of all CIP Payments by paying to BancBoston Capital
Inc. an aggregate amount of not more than $6,750,000.
Section 3.02 Conditions to each Advance. The Lender's obligations to
make Advances to the Borrower from time to time pursuant to this Agreement shall
be subject to compliance by the Borrower, with the covenants and agreements
contained in this Agreement and each other Lender Agreement, and to the
satisfaction, at or before making each Advance, of all of the following
conditions precedent:
(a) Representations and Warranties. The representations and
warranties herein and those made by or on behalf of the Borrower in any
other Lender Agreement shall be correct as of the date on which any
Advance is made with the same effect as if made at and as of such time
(except with respect to transactions not prohibited hereby) and except
that references in Article 5 to the Base Financial Statements shall
refer to the most recent quarterly or annual financial statements
furnished to the Lender pursuant to Article 6 hereof.
(b) No Default, Etc. On the date of any Advance hereunder, there
shall exist no Default prior to, upon the making of, and after giving
effect to, the Advance.
(c) Legality. The making of the requested Advance shall not be
prohibited by any law or governmental order or regulation applicable to
the Lender or the Borrower and all necessary consents, approvals and
authorizations of any Person for any such Advance shall have been
obtained.
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(d) Borrowing Base Certificate. The Lender shall have received a
Borrowing Base Certificate as to the computation of credit available to
the Borrower pursuant to Section 2.02(f) dated as of June 28, 1997.
ARTICLE 4. PAYMENT AND REPAYMENT
Section 4.01 Mandatory Prepayment. If at any time the aggregate
outstanding principal balance of all Advances outstanding exceeds the amount
available under Section 2.01, then the Borrower shall immediately repay to the
Lender an amount equal to such excess.
Section 4.02 Voluntary Prepayment. With respect to a Base Rate Advance
and, subject to the provisions of Section 2.14, the Borrower may make
prepayments to the Lender on account of any outstanding principal amount of the
Note, without premium or penalty. Any outstanding principal amount of a LIBOR
Rate Advance may be prepaid prior to the expiration date of the relevant
Interest Period, subject to the provisions of Sections 2.10(b) and 2.14.
Section 4.03 Notice of Prepayment; Payment and Interest Cutoff. Notice
of each prepayment to be made pursuant to Section 4.02 hereof shall be given to
the Lender not later than 12:00 noon Boston, Massachusetts time on the date of
such prepayment and shall specify the type and total principal amount of
outstanding Advances to be paid on such date. Notice of prepayment having been
given in compliance with this Section 4.03, the amount specified to be prepaid
shall become due and payable on the date specified for prepayment and from and
after said date (unless the Borrower shall default in the payment thereof)
interest thereon shall cease to accrue. Unpaid interest on the principal amount
so prepaid accrued to the date of prepayment shall be due on the date of
prepayment.
Section 4.04 Method of Payment. All prepayments and all other payments
provided for under this Agreement may be charged by the Lender against the
Borrower's account with the Lender.
ARTICLE 5. REPRESENTATIONS AND WARRANTIES
In order to induce the Lender to enter into this Agreement and to make
the Advances from time to time as contemplated hereby, the Borrower hereby makes
the following representations and warranties:
Section 5.01 Corporate Existence, Good Standing, Etc. Each of Borrower
and its Subsidiaries (a) is a corporation validly organized, legally existing
and in good standing under the laws of the jurisdiction in which it is organized
and (b) has all requisite corporate power and authority to own or to hold under
lease its properties and conduct its business as now conducted and as proposed
to be conducted by it. The Borrower has the corporate power to enter into and
perform this Agreement, and all other Lender Agreements delivered by it on the
date hereof.
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Section 5.02 Principal Place of Business; Location of Records. The
principal place of business of Borrower and each of its Subsidiaries is listed
on Schedule 5.02. The locations of the principal books and records or true and
complete copies thereof relating to the accounts and contracts of Borrower and
its Subsidiaries as of the date hereof are listed on Schedule 5.02.
Section 5.03 Qualification. Borrower and each of its Subsidiaries is
duly qualified, licensed and authorized to do business and is in good standing
as a foreign corporation in each jurisdiction where its failure to be so
qualified, licensed or authorized to do business would have a material adverse
effect upon the business, properties, assets, operations or condition, financial
or otherwise, of Borrower and its Subsidiaries, taken as a whole.
Section 5.04 Guarantors. Borrower owns 100% of the outstanding capital
stock of each of the Guarantors.
Section 5.05 Corporate Power. Except as set forth in Schedule 5.05, the
execution, delivery and performance of this Agreement, the Note and all other
Lender Agreements and other documents delivered by the Borrower or any of the
Guarantors to the Lender, and the incurrence of Indebtedness to the Lender
hereunder or thereunder, now or hereafter owing:
(a) are within the corporate power of the Borrower or the
Guarantor party thereto having been duly authorized by the Board of
Directors or other similar governing body of such Borrower or Guarantor,
and, if required by law, by such Borrower's or Guarantor's charter
documents or by its by-laws, and/or by such Borrower's or Guarantor's
stockholders;
(b) do not require any approval or consent of, or filing with,
any governmental agency or other Person (or such approvals and consents
have been obtained and delivered to the Lender) and are not in
contravention of law or the terms of the charter documents or by-laws of
such Borrower or Guarantor or any amendment thereof, except to such
extent as shall have no material adverse effect on the business,
properties, assets, operations or condition, financial or otherwise, of
Borrower and its Subsidiaries, taken as a whole; and
(c) do not and will not
(1) result in a breach of or constitute a default under
any indenture or loan or credit agreement or any other agreement,
lease or instrument to which either the Borrower or any of the
Guarantors are a party or by which the Borrower or any of the
Guarantors, or any of their respective properties are bound or
affected, except to such extent as shall have no material adverse
effect on the business, properties, assets, operations or
condition, financial or otherwise, of Borrower and its
Subsidiaries, taken as a whole,
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(2) result in, or require, the creation or imposition of
any mortgage, deed of trust, pledge, lien, security interest or
other charge or encumbrance of any nature on any property now
owned or hereafter acquired by the Borrower or any of the
Guarantors, except as provided in the Lender Agreements, or
(3) result in a violation of or default under any law,
rule, regulation, order, writ, judgment, injunction, decree,
determination, award, indenture, agreement, lease or instrument
now in effect having applicability to the Borrower or any of the
Guarantors, or to any of their respective properties, except to
such extent as shall have no material adverse effect on the
business, properties, assets, operations or condition, financial
or otherwise, of Borrower and its Subsidiaries, taken as a whole.
Section 5.06 Valid and Binding Obligations. This Agreement, the Note,
and all the other Lender Agreements executed in connection herewith and
therewith constitute, or will constitute when delivered, the valid and binding
obligations of the Borrower or the Guarantors who are parties thereto,
enforceable in accordance with their respective terms.
Section 5.07 Other Agreements.
(a) Neither Borrower nor any of its Subsidiaries is a party to
any indenture, loan or credit agreement (other than agreements or
instruments evidencing Indebtedness permitted by Sections 9.01 and
9.06), or any lease or other agreement or instrument, or subject to any
charter or corporate restriction, which is likely to have a material
adverse effect on the business, properties, assets, operations or
condition, financial or otherwise of Borrower and its Subsidiaries,
taken as a whole, or on the Borrower's ability to carry out any of the
provisions of this Agreement, the Note or any of the Lender Agreements
executed in connection herewith and therewith.
(b) Except as set forth on Schedule 5.07 hereto, neither Borrower
nor any of its Subsidiaries is a party to any agreement or instrument,
or subject to any charter or corporate restriction, which would prohibit
Borrower or any of its Subsidiaries from pledging or granting a security
interest in or lien on all or any of the assets of Borrower or its
Subsidiaries in favor of the Lender as security for the Lender
Obligations, except for:
(1) agreements or instruments evidencing Indebtedness
permitted under Sections 9.01(c), 9.01(d), 9.01(e), 9.01(f),
9.01(g), or 9.01(i) but only to the extent such agreements or
instruments prohibit Borrower or its Subsidiaries from pledging
or granting in favor of the Lender a security interest in or lien
on the specific assets pledged to secure such Indebtedness;
(2) agreements or instruments evidencing Indebtedness
permitted under Section 9.06; or
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(3) contracts, leases and contract and lease rights that,
pursuant to applicable law or regulation or their terms, are not
assignable.
Section 5.08 Payment of Taxes. Except as set forth in Schedule 5.08
hereto, Borrower and each of its Subsidiaries has filed all federal, state,
county, local, foreign or other income tax, excise tax, sales tax, use tax,
gross receipts tax, franchise tax, employment and payroll related tax, property
tax and all other tax returns which are required to be filed by it and has paid,
or made adequate provision for the payment of, all taxes which have or may
become due pursuant to said returns or to assessments received, for which the
failure to file or pay would have a material adverse effect upon the financial
condition of Borrower and its Subsidiaries, taken as a whole. The Borrower has
no knowledge of any material assessments for any taxes for which adequate
reserves have not been established.
Section 5.09 Financial Statements. The Base Financial Statements have
been prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved and present fairly in all
material respects the financial condition of Borrower and its Subsidiaries,
subject, in the case of interim financial statements, to audit and year-end
adjustment.
Section 5.10 Stock. As of August 8, 1997, there were presently issued
and outstanding by the Borrower the shares of capital stock indicated on
Schedule 5.10. All such shares of stock are validly issued, fully paid and
non-assessable. As of the date hereof, Borrower does not have any other capital
stock of any class outstanding.
Section 5.11 Changes in Condition. Except as set forth in Schedule 5.11
hereto, since the date of the Base Financial Statements, there has been no
material adverse change in the business or assets or in the condition, financial
or otherwise, of Borrower and its Subsidiaries, taken as a whole. Except as set
forth on Schedule 5.11 hereto or as contemplated by this Agreement, neither
Borrower nor any of its Subsidiaries has any known contingent liabilities of any
material amount which are not referred to in the Base Financial Statements or
other written materials provided to the Lender (other than contingent
liabilities of Subsidiaries of Borrower acquired after the date of the Base
Financial Statements that are not included within the Base Financial
Statements).
Section 5.12 Title to Real Property.
(a) Borrower and its Subsidiaries have good and marketable title
to the real property described as owned by them in Schedule 5.12 hereto,
subject only to the liens and other encumbrances described in said
Schedule 5.12 or as otherwise permitted by Section 9.02.
(b) All material leases of real property necessary to the
operation by Borrower and its Subsidiaries of their businesses are in
full force and effect.
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Section 5.13 Title to Personal Property. Except as set forth on Schedule
5.13, Borrower and its Subsidiaries have good and marketable title to all
personal property and assets of every type and description used by them in their
business, free and clear of any and all mortgages, liens, pledges, privileges,
charges or encumbrances of every kind, nature and description, except for liens
permitted by Section 9.02, and all properties and assets of Borrower and its
Subsidiaries used by them in their business are in their possession or custody
or under their control and all of their operating assets are in good operating
condition and repair, normal wear and tear excepted, except where the failure
(a) to possess or have custody or control of such assets or (b) to maintain such
assets in good operating condition and repair, would not have a material adverse
affect on the business, operations or financial condition of Borrower and its
Subsidiaries, taken as a whole.
Section 5.14 Patents; Trademarks; Etc.
(a) Except as set forth in Schedule 5.14 hereto, Borrower and
each of its Subsidiaries has the rights to use all patents, trade
secrets, trademarks, trade names, brand names, service marks and
copyrights, designs, permits, labels, packages and displays which are
necessary or desirable for the businesses or operations of Borrower or
its Subsidiaries as now conducted or as proposed to be conducted and
where the failure to so have such rights would have a material adverse
affect on the business, operations or financial condition of Borrower
and its Subsidiaries, taken as a whole.
(b) All of such patents, trade secrets, trademarks, trade names,
brand names, service marks and copyrights are valid and in full force
and effect, and there is no claim by or demand of any person pertaining
to, and there is no pending or (to the best knowledge of the Borrower)
threatened action, suit, proceeding or investigation relating to, or the
outcome of which, either individually or in the aggregate with any other
such claim or demand, could materially affect, any rights of Borrower or
its Subsidiaries in respect of any patents, trade secrets or copyrights
used in the business operations of Borrower and its Subsidiaries; nor to
the knowledge of the Borrower is there a basis for any such claim, suit,
proceeding or investigation.
(c) Neither Borrower nor any of its Subsidiaries is a party to or
bound by any agreement or contract (whether written or oral) containing
any covenant prohibiting it from competing in any business with any
Person in any territory presently conducted or proposed to be conducted
by it or from competing with any Person or prohibiting it from doing any
kind of business presently conducted or proposed to be conducted by it,
other than those covenants which in the aggregate are not likely to have
a material adverse affect on the business, operations or financial
condition of Borrower and its Subsidiaries, taken as a whole.
Section 5.15 Litigation. Except as set forth in Schedule 5.15 hereto,
there is no material litigation, at law or in equity, or any proceeding before
any federal, state, provincial or municipal board or other governmental or
administrative agency pending or threatened, or to the knowledge of the
Borrower, any basis therefor, which involves a material risk of any judgment or
liability
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not covered by insurance which may result, either individually or in the
aggregate, in any material adverse change in the business or assets or in the
condition, financial or otherwise, of Borrower and its Subsidiaries, taken as a
whole, and no judgment, decree, or order of any federal, state, provincial or
municipal court, board or other governmental or administrative agency has been
issued against Borrower or any of its Subsidiaries which has or is not
reasonably likely to have a material adverse effect on the business or assets or
on the condition, financial or otherwise, of Borrower and its Subsidiaries,
taken as a whole.
Section 5.16 Compliance with Laws and Contracts, Etc.
(a) Borrower and each of its Subsidiaries is in compliance in all
material respects with, each provision of any applicable law, or any
judgment, decree or order of any court or governmental or regulatory
authority, bureau, agency or official applicable to Borrower or its
Subsidiaries or the business or operations of Borrower or its
Subsidiaries, except where the failure to so comply is not reasonably
likely to, individually or in the aggregate, have a material adverse
effect on the financial position, business, or operations of Borrower
and its Subsidiaries, taken as a whole.
(b) To the best knowledge of the Borrower, Borrower and each of
its Subsidiaries is in compliance in all material respects with the
Clean Air Act, the Federal Water Pollution Control Act, the Marine
Protection Research and Sanctuaries Act, the Resource Conservation and
Recovery Act of 1976, the Comprehensive Environmental Response,
Compensation and Liability Act and any similar state or local statute or
regulation in effect in any jurisdiction in which any properties of
Borrower or any Subsidiary is located or where any of them conducts its
business, and with all applicable published rules and regulations (and
applicable standards and requirements) of the United States
Environmental Protection Agency and of any similar agencies in states or
foreign countries in which Borrower or any of its Subsidiaries conducts
its business other than those which in the aggregate are not likely to
have a material adverse affect on the financial position, business or
operations of Borrower and its Subsidiaries, taken as a whole.
(c) Except as set forth in Schedule 5.16 hereto, to the best
knowledge of the Borrower, no Hazardous Material is present in any real
property currently or formerly owned or operated by Borrower or any of
its Subsidiaries except that which is not likely to have a material
adverse effect on the financial position, business or operations of
Borrower and its Subsidiaries, taken as a whole.
(d) Except as set forth in Schedule 5.16 hereto, to the best
knowledge of the Borrower, there are no investigations, actions and
proceedings, of whatsoever nature arising under any applicable law which
pertain to the protection of the environment to which Borrower or any of
its Subsidiaries is a party or to which any of their businesses or
assets are subject which are reasonably likely to have a material
adverse effect on Borrower and its Subsidiaries or their assets,
properties or businesses, taken as a whole, and there are no facts known
to the Borrower that would in the judgment of the
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management of the Borrower provide a basis for any such investigation,
action or proceeding relating to the environment or to the discharge of
matter into the air, ground or water which are reasonably likely to have
a material adverse effect on the business, operations or financial
condition of Borrower and its Subsidiaries, taken as a whole.
(e) None of Borrower or its Subsidiaries is in violation of or in
default under any provision of its charter documents or by-laws, or any
provision of any contract, agreement or instrument (including, without
limitation, any writing evidencing any Indebtedness or any guarantee) to
which Borrower or any of its Subsidiaries is a party or by which
Borrower or any of its Subsidiaries or any of their properties is bound
or affected, the violation or default under or in respect of which are
reasonably likely to, individually or in the aggregate, materially
adversely affect the financial position, business or operations of
Borrower and its Subsidiaries, taken as a whole.
Section 5.17 Pension Plans; Employees and Benefits.
(a) Borrower and its Subsidiaries have listed on Schedule 5.17
all of their Pension Plans. All of the Pension Plans of Borrower and its
Subsidiaries are in material compliance with the provisions of ERISA.
None of such Pension Plans which are subject to the minimum funding or
termination insurance provisions of ERISA have a funding deficiency as
of the date hereof.
(b) Neither Borrower nor any of its Subsidiaries has incurred or
expects to incur any withdrawal liability to a Multiemployer Pension
Plan under the provisions of Section 4201 of ERISA.
(c) Each of Borrower and its Subsidiaries has complied with all
withholding, FICA and other employment tax obligations, except where the
failure to so comply would not have a material adverse effect on the
business, operations or financial condition of Borrower and its
Subsidiaries, taken as a whole.
Section 5.18 Outstanding Borrowed Funds Indebtedness. Neither Borrower
nor any of its Subsidiaries has any outstanding Borrowed Funds Indebtedness,
other than Borrowed Funds Indebtedness permitted under Section 9.01.
Section 5.19 Employment Practices. To the best of Borrower's knowledge,
Borrower and its Subsidiaries are in substantial compliance with all federal and
state laws respecting employment and employment practices, terms and conditions
of employment and wages and hours, other than those which in the aggregate are
not reasonably likely to have a material adverse effect on the financial
position, business or operations of Borrower and its Subsidiaries, taken as a
whole. Neither Borrower nor any of its Subsidiaries is engaged in any unfair
labor practice. Schedule 5.19 lists all collective bargaining agreements
covering any domestic employees of Borrower or any of its Subsidiaries.
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Section 5.20 Regulation U. Margin stock (as defined in Regulation U)
constitutes less than 25% of the assets of Borrower and its Subsidiaries, taken
as a whole.
ARTICLE 6. REPORTS
Section 6.01 Monthly Financial Statements and Reports. As soon as
available, and in any event within 30 days after the end of the first eleven
fiscal months of Borrower (except such period may be 65 days with respect to
first fiscal month of the fiscal year of Borrower and 45 days with respect to
the last fiscal month of each fiscal quarter of Borrower), the Borrower shall
furnish to the Lender:
(a) an unaudited consolidated and consolidating balance sheet of
Borrower and its Subsidiaries as of the end of such month and the
related unaudited year-to-date consolidated and consolidating statements
of earnings, stockholders' equity and cash flows for such month, which
statements shall be accompanied by a certificate in substantially the
form of Exhibit B ("Compliance Certificate") executed by the Chief
Financial Officer, Treasurer or Chief Accounting Officer of Borrower.
Borrower shall notify the Lender by telephone on the day that it
delivers each Compliance Certificate;
(b) an aging of the Borrower's and the Guarantors' accounts
receivable, on a consolidated basis, as of the end of the subject fiscal
quarter or, at the request of the Lender, as of the end of any other
period, signed by such person whom the Lender reasonably believes to be
authorized to act in this regard on behalf of the Borrower and the
Guarantors, in such form as the Lender may specify from time to time;
and
(c) a certificate concerning the Borrower's and the Guarantors'
inventory, on a consolidated basis, as of the end of the subject month
signed by the Chief Financial Officer, Treasurer or Chief Accounting
Officer, in such form as the Lender may specify from time to time.
Section 6.02 Annual Projections. As soon as available, but in any event
within 30 days after the commencement of each fiscal year, the Borrower shall
furnish to the Lender a report on annual projections of Borrower and each of its
Subsidiaries for such fiscal year.
Section 6.03 Annual Financial Statements. As soon as available, but in
any event within 90 days after the end of each fiscal year of Borrower, the
Borrower shall furnish to the Lender a consolidated balance sheet of Borrower
and its Subsidiaries as of the end of such fiscal year and the related
consolidated statements of earnings, stockholders' equity and of cash flows for
such fiscal year, in each case reported on by Grant Thornton LLP or by another
independent certified public accounting firm of recognized national standing
reasonably acceptable to the Lender, to the effect that such statements present
fairly, in all material respects the financial position of Borrower and its
Subsidiaries for the periods covered in accordance with generally accepted
accounting
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principles, said report to be without qualification, except in cases of
unresolved litigation and accounting changes with which such accountants concur,
together with the statement of such accountants that they have caused the
provisions of Article 7 and 9 of this Agreement to be reviewed and that nothing
has come to their attention to lead them to believe that any Default exists
under such Articles or specifying any Default thereunder and the nature thereof,
and a Compliance Certificate executed by the Chief Financial Officer, Treasurer
or Chief Accounting Officer of Borrower. The Borrower also shall furnish to the
Lender an unaudited consolidating balance sheet of Borrower and its Subsidiaries
as of the end of each fiscal year of Borrower and the related unaudited
consolidating statements of earnings, stockholders equity and cash flows for
each such fiscal year.
Section 6.04 Notice of Defaults. As soon as possible, and in any event
within three Banking Days after any executive officer of Borrower or any of its
Subsidiaries knows of the occurrence of any Default, the Borrower shall furnish
the Lender with the statement of the Chief Financial Officer, Treasurer or Chief
Accounting Officer of Borrower, setting forth details of such Default and the
action which the Borrower has taken or propose to take with respect thereto.
Section 6.05 Notice of Litigation. Promptly after the commencement
thereof, the Borrower shall furnish the Lender with written notice of all
actions, suits and proceedings before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
affecting Borrower or any of its Subsidiaries, which, if adversely determined,
would materially affect the business, properties, or financial or operating
condition of Borrower and its Subsidiaries, taken as a whole.
Section 6.06 Notice of Loss of Contracts. Promptly after the occurrence
thereof, the Borrower shall notify the Lender of any material adverse change in,
or loss of, any contract, agreement or arrangement to which Borrower or any of
its Subsidiaries is a party, which accounted for in excess of five percent (5%)
of the consolidated total revenues of Borrower and its Subsidiaries, taken as a
whole, during the four most recently-ended fiscal quarters.
Section 6.07 Communications with Others. Promptly after the sending
thereof, the Borrower shall furnish the Lender with copies of all proxy
statements, financial statements and reports which Borrower sends to all members
of any class of stockholders as a group or to all bondholders as a group, and
copies of all regular, periodic and special reports and all registration
statements which Borrower files with the Securities and Exchange Commission or
any governmental authority which may be substituted therefor, or with any
national or regional securities exchange.
Section 6.08 Reportable Events. At any time that Borrower or any of its
Subsidiaries has a Pension Plan, the Borrower shall furnish to the Lender within
thirty (30) days after Borrower or any of its Subsidiaries has notified the
Pension Benefit Guaranty Corporation that a Reportable Event with respect to any
such Pension Plan has occurred, a statement of the Chief Financial Officer,
Treasurer or Chief Accounting Officer of Borrower, setting forth the details of
such Reportable Event and the action which the Borrower has taken or proposes to
take with respect
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thereto, together with a copy of the notice of such Reportable Event to the
Pension Benefit Guaranty Corporation.
Section 6.09 Annual Pension Reports. At any time that Borrower or any of
its Subsidiaries has a Pension Plan, the Borrower shall at the request of the
Lender furnish to the Lender, promptly after the filing thereof with the
Internal Revenue Service, the Secretary of Labor, the Pension Benefit Guaranty
Corporation or other appropriate government agency, copies of each annual report
(including schedules and attachments) which is filed with respect to each
Pension Plan for each such plan year. Upon request, the Borrower also shall
furnish to the Lender.
(a) a statement of assets and liabilities of such Pension Plan as
of the end of such plan year and statements of changes in fund balance
and in financial position, or a statement of changes in net assets
available for plan benefits, for such plan year;
(b) a report of an independent certified public accountants of
recognized standing acceptable to the Lender relating to such Pension
Plan to the extent that any such report for the Pension Plan is required
by law; and
(c) an actuarial statement of such Pension Plan applicable to
such plan year, together with an opinion of an enrolled actuary of
recognized standing acceptable to the Lender, to the extent that any
such statement or opinion for the Pension Plan is required by law.
Section 6.10 Multiemployer Pension Plans. If Borrower or any of its
Subsidiaries or any Person which is a member of the controlled group or under
common control with Borrower or any of its Subsidiaries (within the meaning of
Section 414(b) of the Internal Revenue Code of 1986, as amended (the "Code"), or
Section 4001(b)(1) of ERISA) (a "Control Group Person") is required to make
contributions to a Multiemployer Pension Plan, (a) the Borrower shall notify the
Lender within thirty (30) days after the withdrawal from such Multiemployer
Pension Plan by Borrower or any of its Subsidiaries or any such Control Group
Person of the event giving rise to any such withdrawal if such withdrawal could
reasonably result in the imposition of any material withdrawal liability on such
Company or any such Control Group Person pursuant to Section 4201 of ERISA, and
(b) the Borrower shall promptly provide the Lender with copies of all
assessments of such withdrawal liability received by Borrower or any of its
Subsidiaries or any such Control Group Person.
Section 6.11 Reports to Other Creditors. Promptly after filing the same,
the Borrower shall furnish to the Lender copies of any compliance certificate
and other information that is material to the Lender or requested by the Lender
and is furnished to any other holder of the securities (including the Senior
Notes, the Series A Senior Preferred Stock and any other debt obligations) of
Borrower or any of its Subsidiaries pursuant to the terms of any indenture, loan
or credit or similar agreement and not otherwise required to be furnished to the
Lender pursuant to any other provision of this Agreement.
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Section 6.12 Management Letters. Promptly after the receipt thereof, the
Borrower shall furnish to the Lender copies of any management letter addressed
to the Audit Committee of the Board of Directors of Borrower from Borrower's
independent public accountants.
Section 6.13 New Subsidiaries; Subordinated Indebtedness. Within thirty
days after the end of each quarter in which an acquisition has occurred, the
Borrower shall furnish to the Lender (a) a complete list of all Subsidiaries
updated to reflect all Subsidiaries formed, acquired, dissolved or merged out of
existence during such quarter, (b) a list of all Subordinated Indebtedness
outstanding as of the end of such quarter setting forth the holders and the
amounts of such Indebtedness, (c) Subordination Agreements from the holders of
all Subordinated Indebtedness issued during such quarter, and (d) with respect
to any Subsidiary formed or acquired during such quarter (i) such instruments,
agreements and other documents as the Lender may deem necessary or appropriate
to reflect that such Subsidiary has become jointly and severally liable for all
Lender Obligations (collectively, the "Joinder Documents"), (ii) a certificate
of a corporate officer of such Subsidiary attesting as to its charter documents,
by-laws, the resolutions of the Board of Directors authorizing the execution,
delivery and performance of the Joinder Documents, and the incumbency of the
officers authorized to sign the Joinder Documents.
Section 6.14 Miscellaneous. The Borrower shall provide the Lender with
such other information as the Lender may from time to time reasonably request
respecting the business, properties, condition or operations, financial or
otherwise, of Borrower or any of its Subsidiaries.
ARTICLE 7. FINANCIAL RESTRICTIONS
On and after the date hereof, until all of the Lender Obligations shall
have been paid in full, the Borrower shall cause Borrower and its Subsidiaries
to observe the following covenants:
Section 7.01 Maximum Total Leverage Ratio. Borrower and its Subsidiaries
on a consolidated basis shall at all times maintain a Maximum Total Leverage
Ratio at the end of each fiscal quarter not in excess of the ratio on Schedule
7.01 attached hereto set forth next to such fiscal quarter.
Section 7.02 Total Fixed Charge Coverage Ratio. Borrower and its
Subsidiaries on a consolidated basis shall maintain a Total Fixed Charge
Coverage Ratio (i) at the end of the second and third quarter of Borrower's 1998
fiscal year not less than .75:1.00 and (ii) at the end of each subsequent fiscal
quarter not less than 1.00:1.00.
ARTICLE 8. AFFIRMATIVE COVENANTS
On and after the date hereof, until all of the Lender Obligations shall
have been paid in full, the Borrower covenants that it will comply, and will
cause each of its Subsidiaries to comply, with the following covenants and
provisions:
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Section 8.01 Taxes and Other Obligations. Each of Borrower and its
Subsidiaries (i) will duly pay and discharge, or cause to be paid and
discharged, when the same shall become due and payable, all material taxes,
assessments and other governmental charges, imposed upon it and its properties,
sales and activities, or upon the income or profits therefrom, as well as the
claims for labor, materials, or supplies which if unpaid might by law become a
lien or charge upon any of its properties, and (ii) will promptly pay or cause
to be paid when due, or in conformance with customary trade terms (but not later
than ninety (90) days from the due date in the case of trade debt), all lease
obligations, trade debt and all other Indebtedness incident to the operations of
Borrower and its Subsidiaries; provided, however, that neither Borrower nor any
of its Subsidiaries shall be required to make any such payment at any time while
it shall be contesting in good faith by appropriate actions its obligations to
do so if it shall have set aside on its books reserves (segregated to the extent
required by generally accepted accounting principles) adequate with respect
thereto, all determined in accordance with generally accepted accounting
principles and reflected in the financial statements to be delivered to the
Lender under Section 6.03. Each of Borrower and its Subsidiaries shall cause all
required tax returns and all amounts shown as due therein to be timely filed
(after giving effect to any extensions) and paid, as the case may be, and take
all other steps necessary to maintain its good standing under the laws of its
state of incorporation and the laws of any jurisdiction where it is qualified,
licensed and authorized to do business as a foreign corporation, except where
the failure to be so qualified, licensed or authorized to do business as a
foreign corporation would not have a material adverse effect upon the business,
properties, assets, operations or condition, financial or otherwise, of Borrower
and its Subsidiaries, taken as a whole.
Section 8.02 Maintenance of Property. Each of Borrower and its
Subsidiaries shall maintain its property in good repair and working order,
ordinary wear and tear excepted. Each of Borrower and its Subsidiaries shall
replace and improve its property as necessary for the conduct of its business.
Section 8.03 Insurance. Each of Borrower and its Subsidiaries (a) will
keep its principal assets which are of an insurable character insured by
financially sound and reputable insurers against loss or damage by fire,
explosion or hazards, by extended coverage in an amount and with deductibles at
least as favorable as those generally maintained by companies in similar
businesses similarly situated, and (b) will maintain with financially sound and
reputable insurers workmen's compensation insurance and insurance against other
hazards and risks and liability to persons and property as customary for
companies in similar businesses similarly situated; provided, however, that it
may effect workmen's compensation insurance or similar coverage with respect to
operations in any particular state or other jurisdiction through an insurance
fund operated by such state or jurisdiction and may also be a self-insurer with
respect to workmen's compensation and with respect to group medical benefits
under any medical benefit plan of Borrower or any of its Subsidiaries. The
Borrower will upon request of the Lender, render to the Lender a statement in
reasonable detail as to all insurance coverage required by this Section. A
description of the material elements of insurance coverage of each of Borrower
and its Subsidiaries as of the date hereof is set forth on Schedule 8.03.
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Section 8.04 Records, Accounts and Places of Business. Each of Borrower
and its Subsidiaries shall maintain comprehensive and accurate records and
accounts in accordance with generally accepted accounting principles. The
Borrower will, upon the request of the Lender, notify the Lender of (a) changes
in the places of business and or locations of books and records of Borrower and
its Subsidiaries and (b) any additional places of business or locations of books
and records of Borrower and its Subsidiaries which may arise hereafter.
Section 8.05 Inspection. At any reasonable time and from time to time,
each of Borrower and its Subsidiaries shall permit the Lender and any of its
agents or representatives, at the Borrower's expense, to examine and make copies
of and abstracts from the records and books of account and inventory of, and
visit the properties of, and conduct field examinations of, each of Borrower and
its Subsidiaries and to discuss the affairs, finances and accounts of Borrower
or any of its Subsidiaries with any officer or director of Borrower or any of
its Subsidiaries; provided, however, that, prior to the occurrence of an Event
of Default, the Borrower will not be required to pay for more than one such
inspection in any fiscal year unless the aggregate outstanding balance of all
Advances plus the aggregate potential amount available to be drawn under all
L/Cs issued by the Lender for the account of the Borrower in accordance with
Section 2.12 hereof and 20% the aggregate potential liability under all Foreign
Exchange Contracts issued by the Lender for the account of the Borrower in
accordance with Section 2.13 hereof averaged over the 60 day period prior to a
second inspection during any fiscal year exceeds (i) 50% of the Maximum Credit
Amount or (ii) 50% of the average Borrowing Base during such period, in which
case the Borrower shall be required to pay for such second inspection.
Section 8.06 Change in Officers or Directors. Borrower will promptly
notify the Lender in writing if any of the present senior executive officers or
any directors of Borrower ceases to serve in such capacities, for any reason.
Section 8.07 Existence and Business. Except for mergers and
consolidations permitted under Section 9.06 hereof, the Borrower shall maintain
its corporate existence and shall comply in all material respects with all valid
and applicable statutes, rules and regulations, except where the failure to so
comply would not be likely to have a material adverse effect on the financial
position, business or operations of Borrower and its Subsidiaries, taken as a
whole.
Section 8.08 Use of Proceeds. The proceeds of the Advances will be used
for working capital and other lawful general corporate purposes of the Borrower
or the Guarantors. None of the Borrower or any of the Guarantors will use any of
the proceeds of the Advances to purchase or carry "margin stock" (as defined in
Regulation U).
Section 8.09 Participation in Multiemployer Pension Plan. The Borrower
shall promptly notify the Lender in writing in the event that Borrower or any of
its Subsidiaries commences participation in a Multiemployer Pension Plan with
liabilities in excess of $1,000,000.
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ARTICLE 9. NEGATIVE COVENANTS
On and after the date hereof, until all of the Lender Obligations shall
have been paid in full, the Borrower covenants that it will not, and will not
permit any of its Subsidiaries to, directly or indirectly:
Section 9.01 Restrictions on Borrowed Funds Indebtedness. Create, incur,
suffer or permit to exist, or assume or guarantee, either directly or
indirectly, or otherwise become or remain liable with respect to, any Borrowed
Funds Indebtedness, except the following:
(a) Indebtedness consisting of Lender Obligations;
(b) Subordinated Indebtedness incurred in connection with a
Permitted Acquisition;
(c) Indebtedness in connection with the Senior Notes;
(d) Guaranties permitted under Section 9.05;
(e) An aggregate of $5,000,000 of Indebtedness incurred under
capitalized leases and acquisitions of fixed assets;
(f) Indebtedness incurred in connection with the issuance of
notes (i) by the Borrower to any domestic Subsidiary, (ii) by any
domestic Subsidiary to the Borrower, or (iii) by any domestic Subsidiary
to any other domestic Subsidiary;
(g) Indebtedness incurred in connection with the W.P. Carey Lease
or any refinancing or replacement thereof not to exceed $9,000,000;
(h) Indebtedness of foreign Subsidiaries not subject to a
Guaranty by the Borrower or any Guarantor; and
(i) The existing Indebtedness attached hereto as Schedule 9.01;
and
(j) Additional Borrowed Funds Indebtedness in an aggregate amount
not to exceed $2,000,000.
Section 9.02 Restriction on Liens. Create or incur or suffer to be
created or incurred or to exist any encumbrance, mortgage, pledge, lien, charge
or other security interest of any kind upon any of its property or assets of any
character, whether now owned or hereafter acquired, or transfer any of such
property or assets for the purposes of subjecting the same to the payment of
Indebtedness or performance of any other obligation in priority to payment of
its general creditors, or acquire or agree or have an option to acquire any
property or assets upon conditional sale or other title retention agreement,
device or arrangement or suffer to exist for a period of more than
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30 days after the same shall have been incurred (without posting adequate
security therefor) any Indebtedness against it which if unpaid might by law or
upon bankruptcy or insolvency, or otherwise, be given any priority whatsoever
over its general creditors, or sell, assign, pledge or otherwise transfer for
security any of its accounts, contract rights, general intangibles, or chattel
paper (as those terms are defined in the Massachusetts Uniform Commercial Code)
with or without recourse; provided, however, that Borrower or any of its
Subsidiaries may create or incur or suffer to be created or incurred or to
exist:
(a) Deposits or pledges made in connection with, or to secure
payment of, workmen's compensation, unemployment insurance, old age
pensions or other social security, in connection with casualty
insurance, to secure the performance of covenants, performance bonds,
and liens for taxes, assessments or governmental charges or levies and
liens to secure claims for labor, material or supplies or in connection
with contested claims to the extent that payment thereof shall not at
the time be required to be made in accordance with Section 8.01;
(b) Encumbrances in the nature of zoning restrictions, easements,
and rights or restrictions of record on the use of real property which
do not materially detract from the value of such property or impair its
use in the business of the owner or lessee;
(c) Liens created by or resulting from any litigation or legal
proceeding which is currently being contested in good faith by
appropriate proceedings;
(d) Liens arising by operation of law to secure landlords,
lessors or renters under leases or rental agreements made in the
ordinary course of business and confined to the premises or property
rented;
(e) the pledge of notes from Subsidiaries to secure the Senior
Notes as described in the Offering Memorandum dated July 11, 1997;
(f) Liens to secure any of the Lender Obligations;
(g) Liens to secure the Indebtedness of foreign Subsidiaries
permitted by Section 9.01(h), provided that such liens are limited to
the assets of foreign Subsidiaries;
(h) Liens to secure the Indebtedness permitted by Section 9.01(e)
and (j), provided that the liens are limited to the assets subject to
the particular capitalized lease or fixed asset acquired with such
Indebtedness; and
(i) the existing liens set forth on Schedule 9.02 attached
hereto.
Nothing contained in this Section 9.02 shall permit Borrower or any
Subsidiary to incur any Indebtedness or take any other action or permit to exist
any other condition which would be in contravention of any other provision of
this Agreement.
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Section 9.03 Investments. Have outstanding or hold or acquire or make or
commit itself to acquire or make any Investment, including, without limitation,
any Investment in any Affiliate, except the following:
(a) Investments having a maturity of less than one year from the
date thereof by Borrower or any Subsidiary in or consisting of:
(1) commercial paper rated at least P-1 by Moody's
Investors Service, Inc., or at least A-1 by Standard & Poor's
Corporation or similarly rated by any successor to either of such
rating services;
(2) certificates of deposit, sweep accounts, time
deposits, demand deposits, repurchase agreements, and Hedge
Agreements of or with the Lender;
(3) certificates of deposit, time deposits and demand
deposits of any United States financial institution having
capital and surplus in excess of $100,000,000 and whose
short-term debt is rated AA or better by Standard & Poor's
Corporation or Aa2 or better by Moody's Investors Service, Inc.,
or similarly rated by any successor to either of such rating
services; or
(4) obligations of the United States government or any
agency thereof which are backed by the full faith and credit of
the United States or any state thereof and which mature not more
than one year from the date of acquisition thereof;
(b) mutual funds that invest primarily in Investments described
in Section 9.03(a);
(c) Investments permitted in accordance with Section 9.06;
(d) Investments in Borrower or any of its Subsidiaries;
(e) Investments by foreign Subsidiaries of funds arising from
such foreign Subsidiaries' operations;
(f) Loans and advances to employees of the Borrower and the
Guarantors in an aggregate amount not to exceed $1,000,000;
(g) the existing Investments set forth on Schedule 9.03 attached
hereto; and
(h) Additional Investments in an aggregate amount not to exceed
$100,000.
Neither Borrower nor any of its Subsidiaries shall make any Investment
permitted by this Section 9.03 unless immediately after such Investment there
shall exist no Default.
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Section 9.04 Disposition of Assets. Sell, lease, assign or otherwise
dispose of any assets (other than to Borrower or any of its Subsidiaries)
without the prior written consent of the Lender, except the following:
(a) Inventory or equipment sold, leased, assigned or otherwise
disposed of in the ordinary course of business;
(b) other assets (including product lines) of Borrower or any of
its Subsidiaries disposed of at their fair market value, provided that
(i) the aggregate fair market value of all such assets does not exceed
$1,000,000 during any fiscal year, and (ii) such assets are disposed of
at their fair market value; or
(c) the Resale Facilities at their fair market values.
Section 9.05 Assumptions, Guaranties, Etc. of Indebtedness of Other
Persons. Assume, guarantee, endorse or otherwise become directly or contingently
liable (including, without limitation, by way of agreement, contingent or
otherwise, to purchase, provide funds for payment, supply funds to or otherwise
invest in any Person or otherwise assure the creditors of any such Person
against loss) in connection with any Indebtedness of any other Person (other
than the Borrower or any of its Subsidiaries), except for the following:
(a) guaranties by endorsement of negotiable instruments for
deposit or collection;
(b) L/Cs issued by the Lender hereunder for the account of the
Borrower or any Subsidiary;
(c) Investments permitted by Section 9.03;
(d) the Guaranty Agreements;
(e) the existing guaranties listed on Schedule 9.05 hereto; and
(f) Additional guaranties in an aggregate amount not to exceed
$100,000.
Section 9.06 Mergers and Acquisitions. Without the prior written consent
of Lender, enter into any merger or consolidation with or acquire all of capital
stock of or all or substantially all of the assets of any Person (whether in one
transaction or in a series of transactions), except that:
(a) any Guarantor may merge with Borrower, provided that Borrower
is the surviving corporation;
(b) any Guarantor may merge with any Guarantor;
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(c) Borrower or any of its Subsidiaries may merge with or acquire
all of the capital stock of or all or substantially all of the assets of
a Person, provided that:
(1) prior to and immediately after giving effect thereto,
no Default (including under Section 8.07 and including under
Article 7, assuming that the financial restrictions set forth in
Article 7 are applied immediately after giving effect to such
acquisition) shall exist;
(2) prior to and immediately after giving effect thereto,
the amount available for Advances under Section 2.01 is equal to
or greater than $5,000,000;
(3) the cost of such merger or acquisition as required to
be reported on the books of Borrower or such Subsidiary in
accordance with generally accepted accounting principles does not
exceed $750,000;
(4) the cost of such merger or acquisition, plus the cost
of all prior mergers or acquisitions made in accordance with this
Section 9.06(c) during the same fiscal year, does not exceed
$2,000,000;
(5) any Indebtedness issued in connection with such
acquisition shall be Subordinated Indebtedness or otherwise
permitted under this Agreement; and
(6) if such Person is acquired through the formation of or
the purchase of outstanding capital stock of any Acquired Company
(other than foreign Subsidiaries) and, unless the Lender, in its
discretion, shall have determined that such Acquired Company is
not significant to the business or operations of Borrower and its
Subsidiaries, such Acquired Company shall become jointly and
severally liable for all Lender Obligations by executing such
instruments, agreements or other documents as the Lender may deem
necessary or appropriate.
Section 9.07 Payment of Obligations. Fail to make any payment on account
of Borrowed Funds Indebtedness having an outstanding principal balance of
$500,000 or more, now or hereafter incurred or owed by Borrower or any of its
Subsidiaries, when such payment is due (after giving effect to any applicable
grace periods) (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise), or fail to perform or observe any provision
of any agreement or instrument relating to such Borrowed Funds Indebtedness and
such failure shall permit the holder thereof to accelerate such Borrowed Funds
Indebtedness, or fail to perform or observe any other material agreement to
which Borrower or any of its Subsidiaries is a party or by which it or any of
its properties is bound or affected, unless any of the foregoing failures shall
be waived by the parties to such obligations; provided, however, that Borrower
or any of its Subsidiaries may refuse to make any payment on account of Borrowed
Funds Indebtedness other than Borrowed Funds Indebtedness owed to the Lender or
to perform or observe any agreement or provision other than to the Lender, the
validity or application of which is being contested in good faith by appropriate
proceedings, if
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(a) Borrower or such Subsidiary has set aside reserves deemed by
the independent certified public accountants of Borrower to be adequate
for the payment, performance or observance of the Indebtedness or
agreement or provision so contested; and
(b) such contest does not endanger any rights or properties, the
loss of which would have a material, adverse effect on the business
properties or financial or other condition of Borrower and its
Subsidiaries, taken as a whole.
Section 9.08 ERISA.
(a) At any time while Borrower or any of its Subsidiaries
maintains a Pension Plan subject to Section 412 of the Code, (1) permit
any accumulated funding deficiency to occur with respect to such Pension
Plan, (2) not comply in all material respects with the provisions of
ERISA and the Code which are applicable to the Pension Plans or (3)
permit a lien under Section 4068 of ERISA to attach to the assets of
Borrower or any of its Subsidiaries as a result of the voluntary or
involuntary termination of a Pension Plan and a subsequent failure of
Borrower or any of its Subsidiaries that is liable under Title IV of
ERISA to pay termination liability to the Pension Benefit Guaranty
Corporation; and
(b) Withdraw or permit any Control Group Person (as such term is
defined in ERISA) to withdraw, in whole or in part, from any
Multiemployer Pension Plan so as to give rise to withdrawal liability
exceeding $350,000 in the aggregate.
Section 9.09 Restricted Payments. Make any Restricted Payment except
that, to the extent available from Funds Available for Restricted Payments, the
Borrower may:
(a) make Distributions with respect of any shares of any class of
capital stock of Borrower; and
(b) make payments of principal or redeem Senior Notes or
Subordinated Indebtedness,
provided, however, that prior to and immediately after giving effect to
any such Distribution or other payment, no Default (including under
Section 8.07 and including under Article 7 assuming that the financial
restrictions set forth in Article 7 are applied immediately after giving
effect to such redemption) shall exist.
Section 9.10 Transactions with Affiliates. Except for transactions
expressly permitted in this Agreement, neither Borrower nor any of its
Subsidiaries shall sell or transfer any assets to, or purchase or acquire any
assets of, or otherwise engage in any material transaction with, any Affiliate
(other than Borrower or its Subsidiaries) or any officer or director of Borrower
or any of its Subsidiaries, except upon fair and reasonable terms comparable to
those Borrower or its Subsidiaries could obtain or could become entitled to in
an arm's-length transaction with a Person who was not any such Affiliate and
except (i) the payment of management fees to Hyde Park
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Holdings, Inc., Clifford Press, Laurence S. Levy and their affiliates in an
aggregate amount of not more than $750,000 per fiscal year, and (ii)
transactions pursuant to arrangements existing as of the date hereof described
on Schedule 9.10 hereto and in Securities and Exchange Commission filings.
Section 9.11 Agreements Restricting Pledge of Assets. Except as set
forth in Schedule 9.11 hereto, neither Borrower nor any of its Subsidiaries
shall enter into any agreement or instrument with any person that would prohibit
Borrower or any of its Subsidiaries from pledging or granting a security
interest in or lien on all or any of its assets to or in favor of the Lender as
security for the Lender Obligations.
Section 9.12 Payments in Respect of Subordinated Indebtedness. Neither
Borrower nor any of its Subsidiaries shall make any payment in respect of
Subordinated Indebtedness, except as expressly provided under the terms of the
applicable subordination agreement among the holder of such Subordinated
Indebtedness, the issuer of such Subordinated Indebtedness, and the Lender.
ARTICLE 10. EVENTS OF DEFAULT AND REMEDIES
Section 10.01 Events of Default. Each of the following events shall be
deemed to be Events of Default hereunder:
(a) The Borrower shall fail to make any payment in respect of the
principal of, or interest or fees on or in respect of, any of the Lender
Obligations within five (5) days after the due date thereof, whether at
the stated payment dates or by acceleration or otherwise;
(b) The Borrower shall fail to perform or observe any of the
terms, covenants, conditions or provisions of Article 7 or Sections
8.03, 8.05 or 9.07 hereof and such failure shall continue for a period
of ten (10) days after written notice from the Lender to the Borrower;
(c) Any material representation or warranty made or deemed made
by the Borrower herein or in any other Lender Agreement or which is
contained in any certificate, document or financial or other statement
furnished at any time under or in connection with this Agreement shall
prove to have been incorrect in any material respect on or as of the
date made or deemed made;
(d) The Borrower shall fail to perform or observe any of the
other terms, covenants, conditions or provisions to be performed or
observed by the Borrower under this Agreement or any other Lender
Agreement (other than as provided in paragraphs (a) through (c) of this
Section), and such failure shall continue for a period of 30 days after
written notice from the Lender to Borrower;
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(e) A Change in Control shall have occurred;
(f) Borrower or any of its Subsidiaries shall be involved in
financial difficulties as evidenced:
(1) by its commencement of a voluntary case under Title 11
of the United States Code as from time to time in effect, or by
its authorizing, by appropriate proceedings of its board of
directors or other governing body, the commencement of such a
voluntary case;
(2) by its filing an answer or other pleading admitting or
failing to deny the material allegations of a petition filed
against it commencing an involuntary case under said Title 11, or
seeking, consenting to or acquiescing in the relief therein
provided, or by its failing to controvert timely the material
allegations of any such petition;
(3) by the entry of an order for relief in any
involuntary case commenced under said Title 11;
(4) by its seeking relief as a debtor under any applicable
law, other than said Title 11, of any jurisdiction relating to
the liquidation or reorganization of debtors or to the
modification or alteration of the rights of creditors, or by its
consenting to or acquiescing in such relief;
(5) by the entry of an order by a court of competent
jurisdiction (A) finding it to be bankrupt or insolvent, (B)
ordering or approving its liquidation, reorganization or any
modification or alteration of the rights of its creditors, or (C)
assuming custody of, or appointing a receiver or other custodian
for all or a substantial part of its property and such order
shall not be vacated or stayed on appeal or otherwise stayed
within 60 days;
(6) by the filing of a petition against it under said
Title 11 which shall not be vacated within 60 days; or
(7) by its making an assignment for the benefit of, or
entering into a composition with, its creditors, or appointing or
consenting to the appointment of a receiver or other custodian
for all or a substantial part of its property;
(g) There shall have occurred a judgment against Borrower or any
of its Subsidiaries in any court for an amount in excess of $500,000,
and from which no appeal has been taken or with respect to which all
appeal periods have expired, unless such judgment is, to the Lender's
reasonable satisfaction, insured against in full (subject to applicable
deductibles) or shall have been satisfied within sixty (60) days of
occurrence or all appeal periods have expired; or
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(h) Any Guaranty of the Lender Obligations shall at any time
after its execution and delivery and for any reason (except as a result
of action of the Lender) cease to be in full force and effect, or shall
be declared null and void, or the validity or enforceability thereof
shall be contested or denied by such other party to such Guaranty.
Section 10.02 Remedies. Upon the occurrence of an Event of Default, in
each and every case, the Lender may proceed to protect and enforce the rights of
the Lender hereunder and under applicable law, by suit in equity, action at law
and/or other appropriate proceeding either for specific performance of any
covenant or condition contained in this Agreement or any other Lender Agreement
or in any instrument delivered to the Lender pursuant hereto or thereto, or in
aid of the exercise of any power granted in this Agreement, any Lender Agreement
or any such instrument, including, without limitation, requiring that all
outstanding L/Cs be fully cash collateralized, declaring all or any part of the
unpaid balance of the Lender Obligations then outstanding to be forthwith due
and payable, whereupon such unpaid balance or part thereof shall become so due
and payable without presentation, protest or further demand or notice of any
kind, all of which are hereby expressly waived to the extent not prohibited by
applicable law that may not be waived, and the Lender may proceed to enforce
payment of such balance or part thereof in such manner as it may elect; provided
that if there shall have occurred an Event of Default under Sections 10.01(f),
the unpaid balance of the Lender Obligations shall automatically become due and
payable and the Lender shall take any action it deems necessary or advisable to
enforce payment of such balance and to protect and enforce the rights of the
Lender hereunder and under applicable law.
Section 10.03 Setoff. In addition to, and without limitation of, any
rights of the Lender under applicable law, upon the occurrence of an Event of
Default, any Indebtedness from the Lender to the Borrower (including all account
balances, whether provisional or final and whether or not collected or
available) may be offset and applied toward the payment of the Lender
Obligations.
ARTICLE 11. WAIVERS; AMENDMENTS; REMEDIES
Except as otherwise expressly set forth in any particular provision of
this Agreement, any consent or approval required or permitted by this Agreement
or in any other Lender Agreement to be given by the Lender may be given, and any
term or condition of this Agreement or of any Lender Agreement may be amended,
and the performance or observance by the Borrower of any term of this Agreement
or any other Lender Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively) by the Lender only by
written consent with respect thereto. No delay or omission on the Lender's part
in exercising its rights and remedies against the Borrower or any other
interested party shall constitute a waiver. The Lender's waiver of any breach by
the Borrower in one or more instances shall not constitute or otherwise be an
implicit waiver of subsequent breaches. To the extent not prohibited by
applicable law which cannot be waived, and other than express notice
requirements set forth herein, the Borrower hereby agrees to waive, and does
hereby absolutely and irrevocably waive (a) all
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presentments, demands for performance, notices of nonperformance, protests,
notices of protest and notices of dishonor in connection with any of the
Indebtedness evidenced by the Note, (b) any requirement of diligence or
promptness on the Lender's part in the enforcement of its rights under the
provisions of this Agreement or any Lender 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 with respect to its liability (1) under this Agreement or
in respect of the Indebtedness evidenced by the Note or any other Lender
Obligation or (2) under any other Lender Agreement, except as may be expressly
provided under such Agreement. No course of dealing between the Borrower and the
Lender shall operate as a waiver of any of the Lender's rights under this
Agreement or any Lender Agreement or with respect to any of the Lender
Obligations. This Agreement shall be amended only by a written instrument
executed by the Borrower and the Lender, making explicit reference to this
Agreement. The Lender's rights and remedies under this Agreement and under all
subsequent agreements between or among the Borrower and the Lender shall be
cumulative and any rights and remedies expressly set forth herein shall be in
addition to, and not in limitation of, any other rights and remedies which may
be applicable to the Lender in law or at equity.
ARTICLE 12. LIMITATION ON LIABILITY; INDEMNIFICATION
Any instrument made by or transferred from the Borrower and released or
endorsed by the Lender is without recourse against the Lender, and the Borrower
agrees that the Lender is not responsible for the accuracy or authenticity of
any such document. The Borrower agrees that the Lender does not have
responsibility for any of the debts of the Borrower including, without
limitation, claims for wages or claims for payment for material supplied to the
Borrower. The Borrower shall defend the Lender against all claims that the
Lender is responsible for any matter referred to in this Article 12. The
Borrower shall indemnify the Lender and hold the Lender harmless in respect of
all such claims.
ARTICLE 13. MISCELLANEOUS
Section 13.01 Successors and Assigns. Whenever in this Agreement or in
any other Lender Agreement, any of the parties hereto is referred to, such
reference shall be deemed to include the successors and assigns of such Person;
and all terms and provisions of this Agreement and any of the other Lender
Agreements, including all covenants, promises and agreements by or on behalf of
the Borrower, a Guarantor or the Lender, shall be binding upon and inure to the
benefit of the Borrower, such Guarantor and the Lender and their respective
permitted successors and assigns. The Borrower authorizes the Lender to disclose
to any permitted purchaser or prospective permitted purchaser of any interest
(including a participation interest) in any Lender Obligations any financial or
other information pertaining to Borrower or its Subsidiaries; provided that such
purchaser or prospective purchaser has agreed to comply with the provisions of
Section 13.03 with respect to such information.
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Section 13.02 Assignments and Participations. Neither the Borrower nor
any of the Guarantors may assign any of its rights or obligations under this
Agreement, the Note or any other Lender Agreement, without the prior written
consent of the Lender. The Lender may, without the prior written consent of
Borrower, assign, sell, participate, transfer or otherwise dispose of any
portion of its interests, rights and obligations under this Agreement and the
other Lender Agreements; provided, however, that the Lender maintains a
Commitment of at least $5,000,000.
Section 13.03 Confidentiality. The Lender agrees to hold confidential
all non-public information which it may receive from or with respect to Borrower
and its Subsidiaries pursuant to this Agreement or any other Lender Agreement,
except for disclosure to (a) legal counsel, accountants, and other professional
advisors to the Lender who agree to keep such information confidential, (b) as
required by law, regulation, or legal process, (c) in connection with any legal
proceeding to which the Lender is a party, and (d) a permitted assignee or
participant who agrees to comply with this Section 13.03.
Section 13.04 Survival of Representations. All representations and
warranties of the Borrower contained in this Agreement shall survive the
execution of this Agreement and the delivery of the Note and the making of the
Advances herein contemplated.
Section 13.05 Governmental Regulation. Anything contained in this
Agreement to the contrary notwithstanding, the Lender shall not be obligated to
extend credit to the Borrower in violation of any limitation or prohibition
provided by any applicable statute or regulation.
Section 13.06 Notices. All notices and other communications made or
required to be given pursuant to this Agreement shall be in writing. Any notice,
demand or other communication in connection with this Agreement shall be deemed
to be given if given in writing (including telecopy or similar teletransmission)
addressed as provided below (or to the addressee at such other address as the
addressee shall have specified by notice actually received by the addressor),
and if either (a) actually delivered in fully legible form to such address or
(b) in the case of a letter, five days shall have elapsed after the same shall
have been deposited in the United States mails, with first-class postage prepaid
and registered or certified.
\ (1) If to the Lender, as follows:
FLEET NATIONAL BANK
One Federal Street
Mail Code: MAOFD04G
Boston, Massachusetts 02110
Telephone #: (617) 346-0512
Telecopier #: (617) 346-4741
Attention: Ruben V. Klein, Vice President
47
<PAGE> 53
With a copy to:
Goodwin, Procter & Hoar LLP
Exchange Place
53 State Street
Boston, Massachusetts 02109-2881
Telephone #: (617) 570-1000
Telecopier #: (617) 523-1231
Attention: Jon D. Schneider, P.C.
(2) If to the Borrower, as follows:
HIGH VOLTAGE ENGINEERING CORPORATION
401 Edgewater Place, Suite 680
Wakefield, MA 01880-6210
Telephone #: (617) 224-1001
Telecopier #: (617) 224-1011
Attention: Joseph W. McHugh, Jr.,
Chief Financial Officer
With a copy to:
Bingham, Dana & Gould
150 Federal Street
Boston, Massachusetts 02110
Telephone #: (617) 951-8000
Telecopier #: (617) 951-8736
Attention: Michael O'Brien, Esq.
Section 13.07 Entire Agreement. This Agreement and the documents and
other materials contemplated hereby constitute the entire agreement of the
Borrower and the Lender and express their entire understanding with respect to
credit advanced or to be advanced by the Lender to the Borrower.
Section 13.08 Governing Law. This Agreement shall be governed by and
construed and enforced under the internal laws (and not the law of conflicts) of
The Commonwealth of Massachusetts, but giving effect to federal laws applicable
to national banks. The Borrower hereby irrevocably submits to the non-exclusive
jurisdiction of any United States federal or Massachusetts state court sitting
in Boston in any action or proceedings arising out of or relating to any Lender
Agreements and the Borrower hereby irrevocably agrees that all claims in respect
of such action or proceeding may be heard and determined in any such court.
Section 13.09 Headings. Section headings in this Agreement are for
convenience of reference only, and shall not govern the interpretation of any of
the provisions of this Agreement.
48
<PAGE> 54
Section 13.10 Counterparts. This Agreement and amendments to it may be
executed in several counterparts, each of which shall be an original. The
several counterparts shall constitute a single Agreement.
Section 13.11 Bank Holidays. Whenever any payment to be made under this
Agreement shall become due on a day on which the Lender is required or permitted
by law to remain closed, such payment may be made on the next succeeding Banking
Day on which the Lender is open, and such extension shall be included in
computing the interest in connection with such payment.
Section 13.12 Expenses; Indemnification. The Borrower shall reimburse
the Lender for any reasonable costs, internal charges and out-of-pocket expenses
(including reasonable attorneys' fees and time charges of attorneys for the
Lender) paid or incurred by the Lender in connection with (i) the preparation,
review, execution, delivery, administration, amendment, modification or
administration of this Agreement and any of the other Lender Agreements and
related instruments and documents and (ii) the Lender's due diligence review of
the Borrower and its Subsidiaries, including the Lender's field examinations of
the books, records, accounts and inventory of the Borrower and its Subsidiaries,
including PHI. The Borrower shall reimburse the Lender for any reasonable costs,
internal charges and out-of-pocket expenses (including reasonable attorneys'
fees and time charges of attorneys for the Lender, which attorneys may be
employees of the Lender, as the case may be) paid or incurred by the Lender in
connection with the collection and enforcement of this Agreement and any of the
other Lender Agreements and related instruments and documents. The Borrower
further agrees to indemnify the Lender, its directors, officers and employees
against all losses, claims, damages, penalties, judgments, liabilities and
reasonable expenses (including, without limitation, all expenses of litigation
or preparation therefor whether or not the Lender is a party thereto) which any
of them may pay or incur in connection with litigation or investigation of,
against or involving Borrower or any of its Subsidiaries arising out of or
relating to (A) this Agreement, (B) the other Lender Agreements, (C) the
transactions contemplated hereby or the direct or indirect application or
proposed application of the proceeds of any loan hereunder (other than
litigation commenced by Borrower or any of its Subsidiaries against the Lender
which seeks enforcement of the rights of Borrower or any of its Subsidiaries
hereunder or under any Lender Agreement which litigation is resolved by the
entry of an order, decree or judgment from a court of competent jurisdiction in
favor of Borrower or its Subsidiaries and adverse to the Lender), or (D) the
Borrower's proposed acquisition of TVM Group, Inc. and its subsidiaries,
provided that the Lender shall not be indemnified hereunder for any loss, claim,
damage, penalty, judgment, liability or expense resulting from its gross
negligence or wilful misconduct. The obligations of the Borrower under this
Section 13.12 shall survive the termination of this Agreement. The Borrower also
agrees to pay all stamp and other taxes in connection with the execution and
delivery of this Agreement and related instruments and documents.
Section 13.13 Severability of Provisions. Any provision in any Lender
Agreement that is held to be inoperative, unenforceable, or invalid in any
jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable, or
invalid without affecting the remaining provisions of such Lender Agreement in
that jurisdiction or the operation, enforceability, or validity of that
provision
49
<PAGE> 55
in any other jurisdiction, and to this end the provisions of all Lender
Agreements are declared to be severable.
Section 13.14 Nonliability of Lender. The relationships between the
Borrower and the Lender shall be solely that of borrower and lender. The Lender
shall have no fiduciary responsibilities to the Borrower. The Lender undertake
no responsibility to the Borrower to review or inform the Borrower of any matter
in connection with any phase of the Borrower's businesses or operations.
Section 13.15 Schedules. Each reference herein to a particular Schedule
hereto shall be deemed to refer to such Schedule as updated from time to time by
the Borrower and delivered to the Lender.
Section 13.16 Term of Agreement. This Agreement shall terminate whenever
all of the following conditions shall have been met: (i) all principal and
interest on all Advances and all other amounts due and payable under this
Agreement have been paid and discharged in full, (ii) all L/Cs and other
financial accommodations provided by the Lender under this Agreement shall have
been terminated or an indemnity provided in a form acceptable to the Lender,
(iii) the Borrower shall have no further right to borrow under this Agreement;
and (iv) the Borrower shall have provided the Lender with a general release in
form acceptable to the Lender. Until each of the foregoing contributions are
satisfied, the Lender shall have no obligation to release financing statements
or guarantees or return any other collateral securing the obligations of the
Borrower to the Lender. The provisions of this Article 13 shall survive
termination of this Agreement.
Section 13.17 Waiver of Jury Trial. TO THE EXTENT NOT PROHIBITED BY
APPLICABLE LAW WHICH CANNOT BE WAIVED, THE BORROWER HEREBY WAIVES AND COVENANTS
THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE) ANY RIGHT
TO TRIAL BY JURY IN ANY FORUM IN RESPECT TO ANY ISSUE, CLAIM, DEMAND, ACTION,
CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE NOTE OR ANY
OTHER LENDER AGREEMENT OR THE SUBJECT MATTER HEREOF OR THEREOF OR ANY OF THE
LENDER OBLIGATIONS OR IN ANY WAY CONNECTED WITH THE DEALINGS OF THE BORROWER OR
THE LENDER IN CONNECTION WITH ANY OF THE ABOVE, IN EACH CASE WHETHER NOW
EXISTING OR HEREAFTER ARISING AND WHETHER IN CONTRACT OR TORT OR OTHERWISE. The
Borrower acknowledges that it has been informed by the Lender or its authorized
representatives that the provisions of this Section constitute a material
inducement upon which the Lender are relying and will rely in making the
Advances and other credit extensions from time to time under this Agreement and
any other present or future agreement relating to the Lender Obligations. The
Lender or its authorized representatives may file an original counterpart or a
copy of this Section with any court as written evidence of consent by the
Borrower to the waiver of the right to trial by jury.
[END OF TEXT]
50
<PAGE> 56
IN WITNESS WHEREOF, the Borrower and the Lender have caused this Credit
Agreement to be executed by their proper and duly authorized officers as of the
date first written above.
"BORROWER"
HIGH VOLTAGE ENGINEERING CORPORATION
/s/ Joseph W. McHugh, Jr.
--------------------------------------
By: Joseph W. McHugh, Jr.
Title: Chief Financial Officer
"LENDER"
FLEET NATIONAL BANK
/s/ Ruben Klein
--------------------------------------
By: Ruben Klein
Title: Vice President
<PAGE> 57
EXHIBIT A
REVOLVING CREDIT NOTE
$25,000,000 August 8 1997
FOR VALUE RECEIVED, the undersigned HIGH VOLTAGE ENGINEERING
CORPORATION, a Massachusetts corporation (the "Company"), hereby promises to pay
to the order of FLEET NATIONAL BANK ("FLEET"), in lawful money of the United
States of America in immediately available funds at its office at One Federal
Street, Boston, Massachusetts 02110, the principal sum of Twenty-Five Million
Dollars ($25,000,000) or such lesser sum as may from time to time be outstanding
under the terms of a Credit Agreement between the Company and FLEET of even date
herewith (the "Credit Agreement").
The Company promises to pay interest on the unpaid principal balance at
the rates and at the times provided in the Credit Agreement. This Note may be
prepaid only in accordance with the terms of the Credit Agreement.
This Note will become due and payable at the Maturity Date (as defined
in the Credit Agreement) and earlier upon the occurrence of an Event of Default
(as defined in the Credit Agreement). The undersigned agrees to pay all
reasonable legal fees and other costs of collection of this Note as set forth in
the Credit Agreement.
No delay or omission on the part of the holder in exercising any right
hereunder shall operated as a waiver of such right, nor shall any waiver on one
occasion be deemed to be an amendment or waiver of any such right with respect
to any future occasion. The undersigned and any and every endorser and guarantor
of this Note regardless of the time, order or place of signing hereby waives
presentment, demand, protest and notice of every kind and assents to any one or
more indulgences, to any substitution, exchange or release of collateral (if at
any time there be available collateral to the holder of this Note) and to the
addition or release of any other party or persons primarily or secondarily
liable.
This Note shall be governed and construed under the laws of the
Commonwealth of Massachusetts and shall be deemed to be under seal.
HIGH VOLTAGE ENGINEERING CORPORATION
By:
----------------------------------
Name
Title:
WITNESS:
- ----------------------------
<PAGE> 58
EXHIBIT B
FORM OF COMPLIANCE CERTIFICATE
Fleet National Bank
One Federal Street
Boston, MA 02110
ATTN: Ruben V. Klein
Ladies and Gentlemen:
Pursuant to the provisions of that certain Credit Agreement dated as of
August 8, 1997 (the "Agreement"), between Fleet National Bank (the "Lender") and
High Voltage Engineering Corporation (the "Company"), the undersigned hereby
certifies as follows:
1. The representations and warranties contained in Article 5 of the
Agreement are true and correct on and as of the date hereof as
if made on and as of such date (except to the extent that such
representations and warranties expressly relate to an earlier
date and except for changes which are not in the aggregate
materially adverse to the Lender);
2. Since the end of the last fiscal year, neither the business nor
assets nor the condition, financial or otherwise, of the Company
has been adversely affected in any material manner [except
describe];
3. Except as set forth in the documents attached hereto and except
as heretofore disclosed in a previous Compliance Certificate,
there has been no change in the charter documents of the Company
as certified to the Lender at closing;
4. The financial statements submitted herewith are in compliance
with the applicable provisions of Section 6.01 of the Agreement
and have been prepared in accordance with generally accepted
accounting principles consistent with those applied in the
preparation of the Base Financial Statement furnished to the
Lender, present fairly the information contained therein and the
financial condition of the Company, and are correct in all
material respects, subject in the case of interim statements to
normal year-end adjustments and absence of certain footnotes
required under generally accepted accounting principles [except
describe];
5. The undersigned has reviewed the provisions of the Agreement and
there is no Event of Default thereunder, and no condition which,
with the passage of time or giving of notice or both, would
constitute an Event of Default thereunder [except describe];
6. Attached hereto are calculations demonstrating that, based upon
the financial statements of the Company submitted herewith, the
Company is in compliance with all applicable financial
covenants; and
<PAGE> 59
7. Except as set forth in the documents attached hereto, there has
been no change in the chief executive officer or other places of
business of the Company or any of the Guarantors since the last
Compliance Certificate.
Terms defined in the Agreement and not otherwise expressly defined
herein or in the Schedule attached hereto are used herein or therein with the
meanings so defined in the Agreement.
In witness whereof, the undersigned has executed this Certificate on the
_____ day of ____________________, 199_.
By:
---------------------------------
Name: Joseph W. McHugh, Jr.
Title:Chief Financial Officer
<PAGE> 60
SCHEDULE A
To Compliance Certificate
Financial Covenant Compliance Computations as of*
1. Section 7.01 Maximum Total Leverage Ratio of Borrower
and its Subsidiaries on a Consolidated Basis
Borrowed Funds Indebtedness = $____________
EBITDA = $____________
The radio of the aggregate principal amount of all Borrowed
Funds Indebtedness outstanding to EBITDA for the twelve-month
period ending [date of last Fiscal quarter] is ______:1.0
which does not exceed ______:1.0 as required by Section 7.01
2. Section 7.02 Total Fixed Charge Coverage Ratio of Borrower
and its Subsidiaries on a Consolidated Basis
Cash Flow = $____________
Fixed Charges = $____________
The ratio of Cash Flow to Fixed Charges is ______:1.0 which is
not less than ____:1.0 as required by Section 7.02
- ----------
* Insert date of most recently completed fiscal quarter
<PAGE> 1
EXHIBIT 10.2
LEASE AGREEMENT
by and between
CORPORATE PROPERTY ASSOCIATES 8, L.P.,
a Delaware limited partnership,
as LANDLORD
and
DATCON INSTRUMENT COMPANY,
a Pennsylvania corporation,
as TENANT
Premises: Lancaster, Pennsylvania
Dated as of: November 10, 1988
<PAGE> 2
TABLE OF CONTENTS
Page
----
Parties
1. Demise of Premises
2. Certain Definitions
3. Title and Condition
4. Use of Leased Premises; Quiet Enjoyment
5. Term
6. Rent
7. Net Lease; Non-Terminability
8. Payment of Impositions; Compliance with Law
9. Liens; Recording and Title
10. Indemnification
11. Maintenance and Repair
12. Alterations and Improvements
13. Condemnation
14. Insurance
15. Restoration; Reduction of Rent
16. Procedures Upon Purchase
17. Assignment and Subletting; Subleases
18. Permitted Contests
19. Conditional Limitations; Default Provision
20. Additional Rights of Landlord
21. Notices
22. Estoppel Certificate
23. Surrender
24. Risk of Loss
25. No Merger of Title
26. Books and Records
27. Determination of Value
28. Option to Purchase
29. Financing
30. Non-Recourse as to Landlord
31. Subordination
32. Miscellaneous
Exhibit "A" - Premises
Exhibit "B" - Machinery and Equipment
Exhibit "C" - Schedule of Permitted Encumbrances
Exhibit "D" - Rent Schedule
<PAGE> 3
LEASE AGREEMENT, made as of this ___________ day of November, 1988,
between CORPORATE PROPERTY ASSOCIATES 8, L.P., ("Landlord"), a Delaware limited
partnership with an address c/o W. P. Carey & Co., Inc., 689 Fifth Avenue, New
York, New York 10022, and DATCON INSTRUMENT COMPANY ("Tenant"), a Pennsylvania
corporation with an address at 1811 Rohrerstown Road, Lancaster, Pennsylvania.
In consideration of the rents and provisions herein stipulated to be paid
and performed, Landlord and Tenant hereby covenant and agree as follows:
1. Demise of Premises. Landlord hereby demises and lets to Tenant, and
Tenant hereby takes and leases from Landlord, for the term or terms and upon the
provisions hereinafter specified, the following described property
(collectively, the "Leased Premises"): (a) the premises described on Exhibit "A"
attached hereto together with the easements, rights and appurtenances thereunto
belonging or appertaining (the property described on Exhibit "A", together with
the easements, rights and appurtenances thereunto belonging, is referred to
collectively herein as the "Land"); (b) the buildings, structures and other
improvements now or hereafter constructed on the Land (collectively, the
"Improvements"); and (c) the machinery and equipment described in Exhibit "B"
attached hereto and made a part hereof and installed in and upon the
Improvements excepting therefrom trade fixtures, machinery and equipment used by
Tenant in the conduct of its business, together with all additions and
accessions thereto, substitutions therefor and replacements thereof permitted by
this Lease (collectively, the (Equipment").
2. Certain Definitions.
"Acquisition Cost" shall mean $5,600,000.
"Additional Rent" shall mean Additional Rent as defined in Paragraph 6(b).
"Adjoining Property" shall mean all sidewalks, curbs, gores and vault
spaces adjoining any of the Leased Premises.
"Alterations" shall mean all changes, additions, improvements or repairs
to, all alterations, reconstructions, renewals or removals of and all
substitutions or replacements for any of the Improvements or Equipment, both
interior and exterior, structural and non-structural, and ordinary and
extraordinary.
<PAGE> 4
-2-
"Applicable Final Date" shall mean the Applicable Final Date as defined in
Paragraph 27(c).
"Applicable Initial Date" shall mean the Applicable Initial Date as
defined in Paragraph 27(a)(i).
"Applicable Provision" shall mean the Applicable Provision as defined in
Paragraph 27(a)(ii).
"Assignment" shall mean an assignment of rents and leases from Landlord to
Lender and/or any subsequent assignment of rents covering any of the Leased
Premises, from Landlord to Lender, as the same may from time to time be amended,
supplemented or modified, securing repayment of the Loan.
"Assignment Date" shall mean the Assignment Date as defined in Paragraph
17.
"Assignment Offer Amount" shall mean the Assignment Offer Amount as
defined in Paragraph 17.
"Basic Rent" shall mean Basic Rent as defined in Paragraph 6(a).
"Basic Rent Payment Dates" shall mean the Basic Rent Payment Dates as
defined in Paragraph 6(a).
"Casualty Offer Amount" shall mean the Casualty Offer Amount as defined in
Paragraph 14(i).
"Casualty Termination Date" shall mean the Casualty Termination Date as
defined in Paragraph 14(i).
"Condemnation" shall mean a Taking and/or a Requisition.
"Condemnation Notice" shall mean notice or knowledge of the institution of
or intention to institute any proceeding for Condemnation.
"Default Offer Amount" shall mean the Default Offer Amount as defined in
Paragraph 19(b)(iii).
"Default Rate" shall mean the Default Rate as defined in Paragraph 6(b).
<PAGE> 5
-3-
"Delay Period" shall mean the Delay Period as defined in Paragraph 27(c).
"Environmental Laws" shall mean all federal, state or local laws,
ordinances, rules, regulations or written policies, now or hereafter existing,
which govern or otherwise relate to the use, storage, treatment, transportation,
manufacture, refinement, handling, production or disposal of any Hazardous
Substance, including the laws, ordinances, regulations and written policies
provided pursuant to or under (i) Toxic Substances Control Act, 15 U.S.C.
ss.ss.2601 et seq., (ii) National Historic Preservation Act, 16 U.S.C. ss.ss.470
et seq., (iii) Coastal Zone Management Act of 1972, 16 U.S.C. ss.ss.1451 et
seq., (iv) Rivers and Harbors Act of 1899, 33 U.S.C. ss.ss.401 et seq., (v)
Clean Water Act, 33 U.S.C. ss.ss.1251 et seq., (vi) Flood Disaster Protection
Act, 42 U.S.C. ss.ss.4321 et seq., (vii) National Environmental Policy Act, 42
U.S.C. ss.ss.4321 et seq., (viii) Resource Conservation and Recovery Act of
1976, 42 U.S.C. ss.ss.6901 et seq., (ix) Clean Air Act, 42 U.S.C. ss.ss.7401 et
seq., (x) Comprehensive Environmental Response Compensation and Liability Act,
42 U.S.C. ss.ss.9601 et seq. ("CERCLA"), (x) Solid Waste Management Act, 35 P.S.
ss.6018.101 et seq., (xi) Pennsylvania Safe Drinking Water Act, 35 P.S. ss.721.1
et seq., (xii) Clean Streams Law, 35 P.S. ss.691.1 et seq. and (xiv) Air
Pollution Control Act, 35 P.S. ss.4001 et seq.
"Equipment" shall mean the Equipment as defined in Paragraph 1.
"Escrow Charges" shall mean the Escrow Charges, as defined in Paragraph
8(b).
"Escrow Payment" shall mean an Escrow Payment as defined in Paragraph
8(b).
"Event of Default" shall mean an Event of Default as defined in Paragraph
19(a).
"Expiration Date" shall mean the Expiration Date as defined in Paragraph
S.
"Fair Market Value" shall mean, unless the context otherwise requires, the
fair market value of the Leased Premises as if unaffected and unencumbered by
this Lease. Fair Market Value, for all purposes of this Lease, shall be
determined in accordance with the procedure specified in Paragraph 27.
<PAGE> 6
-4-
"Guaranty" shall mean the Guaranty and Suretyship Agreement dated as of
the date hereof from High Voltage to Landlord.
"Hazardous Substances" shall mean (i) any flammable substances,
explosives, radioactive materials, hazardous materials, hazardous wastes, toxic
substances, pollutants, pollution or any related materials or substances
specified in any of the Environmental Laws (including any "hazardous substance"
as defined in CERCLA) and (ii) asbestos, polychlorinated biphenyls and radon.
"High Voltage" shall mean High Voltage Engineering Corporation, a
Massachusetts corporation.
"Impositions" shall mean the Impositions as defined in Paragraph 8(a).
"Improvements" shall mean the Improvements as defined in Paragraph 1.
"Land" shall mean the Land as defined in Paragraph 1.
"Law" shall mean any constitution, statute, rule of law, code, ordinance,
order, judgment, decree, injunction, rule, regulation or requirement, even if
unforeseen or extraordinary, of every duly constituted governmental authority,
court or agency.
"Leased Premises" shall mean the Leased Premises as defined in Paragraph
1.
"Legal Requirements" shall mean all present and future Laws (including but
not limited to Environmental Laws) and all covenants, restrictions and
conditions now or hereafter of record which may be applicable to Tenant or to
any of the Leased Premises, or to the use, manner of use, occupancy, possession,
operation, maintenance, alteration, repair or reconstruction of any of the
Leased Premises, even if compliance therewith necessitates structural changes or
improvements or results in interference with the use or enjoyment of any of the
Leased Premises.
"Lender" shall mean (a) Far West Federal Bank or (b) any institutional
lender which may, after the date hereof, make a Loan to Landlord.
"Loan" shall mean either (a) a $3,050,000 mortgage loan or loans from Far
West Federal Bank made to Landlord on the date hereof, as the
<PAGE> 7
-5-
same may hereafter be modified or amended with Tenant's consent (except that
Tenant's consent shall be required only if the Loan amount, interest rate,
payment or prepayment terms or term or provisions relating to release of
insurance or condemnation proceeds are modified) or (b) one or more loans of not
more than $3,366,000 (consented to by Tenant) in the aggregate which may be made
by Lender to Landlord after the date hereof on similar terms, which may be
secured by the Mortgage and the Assignment and evidenced by the Note and not
secured by any other property of Landlord, and which after being made, may be
modified or amended only to, the same extent as is permitted by part (a) of this
definition.
"Massachusetts Lease" shall mean the Lease Agreement dated as of the date
hereof between the Landlord, as lessor, and High Voltage Engineering
Corporation, as lessee, with respect to certain remises located in Sterling,
Massachusetts.
"Mortgage" shall mean any mortgage encumbering any part or all of the
Leased Premises from Landlord to Lender securing the Loan, as the same may from
time to time be amended, supplemented or modified.
"Net Award" shall mean the entire award payable to Landlord by reason of a
Condemnation, less any expenses incurred by Landlord and Lender in collecting
such award.
"Net Proceeds" shall mean the entire proceeds of any insurance required
under clauses (i), (ii) (to the extent payable to Landlord or Lender), (iv) and
(v) of Paragraph 14(a), less any expenses incurred by Landlord and Lender in
collecting such proceeds.
"Note" shall mean a promissory note(s) evidencing Landlord's obligation to
repay the Loan, which Note may be secured by the Mortgage and the Assignment, as
the same may from time to time be amended, supplemented or modified.
"Offer Amount" shall mean the Termination Offer Amount, the Casualty Offer
Amount, the Assignment Offer Amount or the Default Offer Amount, as the case may
be, and as the context requires.
"Option Purchase Date' shall mean the Option Purchase Date as defined in
Paragraph 28.
<PAGE> 8
-6-
"Permitted Encumbrances" shall mean those covenants, restrictions,
reservations, liens, conditions and easements, other than the Mortgage and the
Assignment, listed on Exhibit "C" hereto.
"Person" shall mean an individual, partnership, association, corporation
or other entity.
"Prime Rate" shall mean the average of the interest rates per annum quoted
by Bank of America NT & SA, San Francisco, CA, The Chase Manhattan Bank, N.A.,
New York, NY, Chemical Bank, New York, NY, Citibank, N.A., New York, NY, and
Morgan Guaranty Trust Company, New York, NY, as their respective prime rates,
such average to change effective as of the effective date of any change in any
of the aforesaid prime rates. The Prime Rate shall be the average of such
publicly announced prime rates even though one or more of the aforesaid banks
may actually charge interest on some of its loans at lower rates; and if any of
the aforesaid banks has more than one prime rate of interest in effect
simultaneously, the prime rate of such bank for the purposes of this definition
shall be the highest of such prime rates then in effect for such bank. If three
or more of the aforesaid banks cease to have a publicly announced prime rate,
then, for so long as three or more of the aforesaid banks cease to have a
publicly announced prime rate, the Prime Rate shall be the average per annum
discount rate from time to time on ninety-one (91) day bills issued by the
United States Treasury (the so-called 'Treasury bills") at the most recent
auction or, if no such ninety-one (91) day bills are then being issued, Treasury
bills then being issued for the period of time closest to ninety-one (91) days.
"Purchase Price" shall mean the Purchase Price as defined in Paragraph 28.
"Remaining Sum" shall mean the Remaining Sum as defined in Paragraph
15(a).
"Rent" shall mean Basic Rent and Additional Rent.
"Replaced Equipment" shall mean the Replaced Equipment as defined in
Paragraph 11(d).
"Replacement Equipment" shall mean the Replacement Equipment as defined in
Paragraph 11(d).
"Requisition" shall mean any temporary requisition or confiscation of the
use or occupancy of any of the Leased Premises by any
<PAGE> 9
-7-
governmental authority, civil or military, whether pursuant to an agreement with
such governmental authority in settlement of or under threat of any such
requisition or confiscation, or otherwise.
"Retention Date" shall mean the later of the date on which the amount of a
Remaining Sum is finally determined or the date on which Landlord's right to
retain the Remaining Sum is finally determined.
"Set-Off" shall mean a Set-Off as defined in Paragraph 7(a).
"Site Assessments" shall mean the Site Assessments as defined in Paragraph
8(e).
"Site Reviewers" shall mean the Site Reviewers as defined in Paragraph
8(e).
"State" shall mean the Commonwealth of Pennsylvania.
"Taking" shall mean any taking of any of the Leased Premises in or by
condemnation or other eminent domain proceedings pursuant to any Law, general or
special, or by reason of any agreement with any condemnor in settlement of or
under threat of any such condemnation or other eminent domain proceeding, or by
any other means, or any de facto condemnation.
"Term" shall mean the Term as defined in Paragraph 5.
"Termination Date" shall mean the Termination Date as defined in Paragraph
13(b).
"Termination Offer Amount" shall mean the Termination Offer Amount as
defined in Paragraph 13(b).
3. Title and Condition.
(a) The Leased Premises are demised and let subject to (i) the Mortgage
and the Assignment, (ii) the rights of any parties in possession of any of the
Leased Premises, (iii) the existing state of title of the Leased Premises,
including the Permitted Encumbrances, as of the commencement of the Term, (iv)
any state of facts which an accurate survey or physical inspection of the Leased
Premises might show, (v) all Legal Requirements, including any existing
violation of any thereof, and (vi) the condition of the Leased Premises as of
the commencement of the Term, without representation or warranty by Landlord; it
being
<PAGE> 10
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understood and agreed, however, that the recital of the Permitted Encumbrances
herein shall not be construed as a revival of any thereof which for any reason
may have expired or terminated.
(b) Tenant acknowledges that the Leased Premises are in good condition and
repair at the inception of this Lease. LANDLORD HAS NOT MADE AND WILL NOT MAKE
ANY INSPECTION OF ANY OF' THE LEASED PREMISES. LANDLORD LEASES AND WILL LEASE
AND TENANT TAKES AND WILL TAKE THE LEASED PREMISES AS IS. TENANT ACKNOWLEDGES
THAT LANDLORD (WHETHER ACTING AS LANDLORD HEREUNDER OR IN ANY OTHER CAPACITY)
HAS NOT MADE AND WILL NOT MAKE, NOR SHALL LANDLORD BE DEEMED TO HAVE MADE, ANY
WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, WITH RESPECT TO ANY OF THE
LEASED PREMISES, INCLUDING ANY WARRANTY OR REPRESENTATION AS TO (i) ITS FITNESS,
DESIGN OR CONDITION FOR ANY PARTICULAR USE OR PURPOSE, (ii) THE QUALITY OF THE
MATERIAL OR WORKMANSHIP THEREIN, (iii) THE EXISTENCE OF ANY DEFECT, LATENT OR
PATENT, (iv) LANDLORD'S TITLE THERETO, (v) VALUE, (vi) COMPLIANCE WITH
SPECIFICATIONS, (vii) LOCATION, (viii) USE, (ix) CONDITION, (x) MERCHANTABILITY,
(xi) QUALITY, (xii) DESCRIPTION, (xiii) DURABILITY OR (xiv) OPERATION; AND ALL
RISKS INCIDENT THERETO ARE TO BE BORNE BY TENANT. TENANT ACKNOWLEDGES THAT THE
LEASED PREMISES ARE OF ITS SELECTION AND TO ITS SPECIFICATIONS AND THAT THE
LEASED PREMISES HAVE BEEN INSPECTED BY TENANT AND ARE SATISFACTORY TO IT. IN THE
EVENT OF ANY DEFECT OR DEFICIENCY IN ANY OF THE LEASED PREMISES OF ANY NATURE,
WHETHER LATENT OR PATENT, LANDLORD SHALL NOT HAVE ANY RESPONSIBILITY OR
LIABILITY WITH RESPECT THERETO OR FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES
(INCLUDING STRICT LIABILITY IN TORT). THE PROVISIONS OF THIS PARAGRAPH 3(b) HAVE
BEEN NEGOTIATED; AND THE FOREGOING PROVISIONS ARE INTENDED TO BE A COMPLETE
EXCLUSION AND NEGATION OF ANY WARRANTIES BY LANDLORD, EXPRESS OR IMPLIED, WITH
RESPECT TO ANY OF THE LEASED PREMISES, ARISING PURSUANT TO THE UNIFORM
COMMERCIAL CODE OR ANY OTHER LAW NOW OR HEREAFTER IN EFFECT OR ARISING
OTHERWISE.
(c) Tenant represents to Landlord that Tenant has examined the title to
the Leased Premises prior to the execution and delivery of this Lease and has
found the same to be satisfactory for the purposes contemplated hereby, and
Tenant acknowledges that title is in Landlord
<PAGE> 11
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and that Tenant has only the right of possession and use of the Leased Premises
as provided in this Lease. Tenant further acknowledges that (i) the Improvements
conform to all material Legal Requirements and all requirements of the carriers
of all insurance on any of the Leased Premises, (ii) all easements necessary or
appropriate for the use or operation of the Leased Premises have been obtained,
(iii) all contractors and subcontractors who have performed work on or supplied
materials to the Leased Premises have been fully paid, and all materials and
supplies have been fully paid for, (iv) the Improvements have been fully
completed in all material respects, in a workmanlike manner of first class
quality, and (v) all Equipment necessary or appropriate for the use or operation
of the Leased Premises has been installed and all Equipment in the Leased
Premises is presently fully operative in all material respects.
(d) Landlord hereby assigns to Tenant, without recourse or warranty
whatsoever, all warranties, guaranties and indemnities, express or implied, and
similar rights which Landlord may have against any manufacturer, seller,
engineer, contractor -or builder in respect of any of the Leased Premises,
including any rights and remedies existing under contract or pursuant to the
Uniform Commercial Code. Such assignment shall remain in effect so long as no
Event of Default exists hereunder or until the termination of this Lease, and
upon the occurrence of an Event of Default or termination of this Lease, such
assignment shall cease and all the said warranties, guaranties, indemnities and
other rights shall automatically revert to Landlord.
4. Use of Leased Premises; Quiet Enjoyment.
(a) Tenant may occupy and use the Leased Premises for any lawful purpose,
provided that no Alterations may be made and no additional Improvements may be
constructed except in accordance with Paragraph 12, no Equipment may be removed
from the Leased Premises except in accordance with Paragraphs 11(d), 13(d) and
14(h), and such use will not otherwise violate any provision of this Lease.
Tenant shall not permit any unlawful occupation, business or trade to be
conducted on any of the Leased Premises or any use to be made thereof contrary
to any applicable Legal Requirement then in effect. Tenant shall not use or
occupy or permit any of the Leased Premises to be used or occupied, nor do or
permit anything to be done in or on any of the Leased Premises, in a manner
which would or might (i) violate any certificate of occupancy affecting any of
the Leased Premises, (ii) make void or voidable any insurance then in force with
respect to any of the Leased Premises, (iii) make it difficult or impossible to
obtain fire or other insurance which Tenant is required to furnish hereunder,
(iv) cause structural injury to
<PAGE> 12
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any of the Improvements, or (v) constitute a public or private nuisance or
waste.
(b) Subject to the other provisions of this Lease, so long as no Event of
Default has occurred and is continuing, Landlord covenants to do no act to
disturb the peaceful and quiet occupation and enjoyment of the Leased Premises
by Tenant, provided that Landlord may enter upon and examine any of the Leased
Premises at reasonable times and may take such action with respect to the Leased
Premises as is permitted by any provision hereof.
5. Term. Subject to the provisions hereof, Tenant shall have and hold the
Leased Premises for an initial term (such term, as extended or renewed in
accordance with the provisions hereof, being called the "Term") commencing on
the date hereof and ending on the last day of the three hundredth (300th)
calendar month next following the date hereof (the "Expiration Date"). If all
Rent and all other sums due hereunder shall not have been fully paid by the end
of the Term, Landlord may, at its option, extend the Term until all said sums
shall have been fully paid.
Provided this Lease shall not have been terminated pursuant to any
provision hereof, the initial Term shall be deemed to be automatically extended
for an additional period of five (5) years unless Tenant shall notify Landlord
in writing in recordable form at least two (2) years prior to the expiration of
the initial Term that Tenant is terminating this Lease as of the end of the
initial Term. If the initial Term is automatically extended as aforesaid and
this Lease has not been terminated pursuant to any provision hereof prior to the
expiration of the first extension period, the Term shall be further
automatically extended for an additional consecutive period of five (5) years
unless Tenant shall notify Landlord in writing at least two (2) years prior to
the expiration of the first extension period that Tenant is terminating this
Lease as of the end of the first extension period. If the Term is automatically
extended as aforesaid and this Lease has not been terminated pursuant to any
provision hereof prior to the expiration of the second extension period, the
Term shall be further automatically extended for an additional consecutive
period of five (5) years unless Tenant shall notify Landlord in writing at least
two (2) years prior to the expiration of the second extension period that Tenant
is terminating this Lease as of the end of the second extension period. If the
Term is automatically extended as aforesaid and this Lease has not been
terminated pursuant to any provision hereof prior to the expiration of the third
extension period, the Term shall be further automatically extended for an
additional consecutive period of five (5) years unless Tenant shall notify
Landlord in writing at least two (2) years prior to the expiration of
<PAGE> 13
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the third extension period that Tenant is terminating this Lease as of the end
of the third extension period. If the Term is automatically extended as
aforesaid and this Lease has not been terminated pursuant to any provision
hereof prior to the expiration of the fourth extension period, the Term shall be
further automatically extended for an additional consecutive period of five (5)
years unless Tenant shall notify Landlord in writing at least two (2) years
prior to the expiration of the fourth extension period that Tenant is
terminating this Lease as of the end of the fourth extension period. Any such
notice of termination shall be accompanied by an Amendment to Memorandum of
Lease in recordable form, executed and acknowledged by Tenant specifying the
applicable termination date.
In the absence of such notice of termination by Tenant to Landlord and in
the absence of any termination of this Lease pursuant to any other provision
hereof, the Term shall be automatically extended for the applicable extension
period specified above and no instrument of extension or renewal need be
executed. Any such extension of the Term shall be subject to and continue in
full force and effect all of the provisions of this Lease except that the Basic
Rent payable during each extension period shall be as provided in Exhibit "D"
attached hereto and made a part hereof.
In the event that Tenant exercises its option not to extend or not to
further extend the Term, as hereinabove provided, or upon the occurrence of an
Event of Default, then Landlord shall have the right during the remainder of the
Term then in effect to (a) advertise the availability of the Leased Premises for
sale or for reletting and to erect upon the Leased Premises signs indicating
such availability (provided that, if there is no default in the payment of Basic
Rent or Additional Rent hereunder, such signs do not unreasonably interfere with
the use of the Leased Premises by Tenant), and (b) show the Leased Premises to
prospective purchasers or tenants at such reasonable times during normal
business hours as Landlord may select after reasonable notice to Tenant that it
is exercising such right; provided, that Landlord will not materially interfere
with the use of the Leased Premises by Tenant.
6. Rent.
(a) Tenant shall pay to Landlord, as annual rent for the Leased Premises
during the Term, the amounts determined in accordance with the schedule set
forth in Exhibit "D" attached hereto and made a part hereof ("Basic Rent"),
commencing on the first day of the first month next following the date hereof
and continuing on the same day of each month
<PAGE> 14
-12-
thereafter during the Term (the said days being called the "Basic Rent Payment
Dates"), and shall pay the same at Landlord's address set forth above, or at
such other places or to such other Persons as Landlord from time to time may
designate upon fifteen (15) days prior written notice to Tenant. Each rental
payment shall be made, at Landlord's sole option and upon at least 10 days prior
written notice from Landlord to Tenant, (i) by a check hand delivered to
Landlord at least five (5) business days before the applicable Basic Rent
Payment Date or mailed to Landlord at least ten (10) days before that date or
(ii) in federal or other immediately available funds which at the time of such
payment shall be legal tender for the payment of public or private debts in the
United States of America. Pro rata Basic Rent for the period from the date
hereof through the last day of the month hereof shall be paid on the date
hereof. Landlord may, at Landlord's option, by at least fifteen (15) days prior
written notice to Tenant, require Tenant to pay installments of Basic Rent
directly to one or more Persons in addition to Landlord, in such proportions as
Landlord may select; and Tenant shall make such "split" payments of Basic Rent
in the amounts, to the payees and in the manner specified by Landlord in any
such notice.
(b) Tenant shall pay and discharge when the same shall become due, as
additional rent, all other amounts and obligations which Tenant assumes or
agrees to pay or discharge pursuant to this Lease, together with every fine,
penalty, interest and cost which may be added for non-payment or late payment
thereof. After the date an installment of Basic Rent is due and not paid or
after the occurrence of any Event of Default (other than non-payment of Basic
Rent) Tenant shall pay to Landlord on demand, as additional rent, 4% of the
amount of such installment. From the date of occurrence of an Event of Default
until such Event of Default is cured, Tenant shall pay to Landlord, on demand, a
additional rent, a sum equal to any additional sums (including any late charge
or default interest) which might be payable by Landlord to any Lender under any
Note occasioned by non-payment or late payment of Basic Rent or by the
occurrence of an Event of Default under this Lease. In addition, Tenant shall
pay to Landlord on demand, as additional rent, interest at the rate (the
"Default Rate") of four percent (4%) over the Prime Rate per annum on the
following sums until paid in full: (i) all overdue installments of Basic Rent in
excess of payments due under the Note for the same period from the respective
due dates thereof, (ii) all overdue amounts of additional rent relating to
obligations which Landlord shall have paid on behalf of Tenant, from the date of
payment thereof by Landlord, and (iii) on all other overdue amounts of
additional rent from the date Landlord demands payment. All the foregoing
additional rent is referred to herein as "Additional Rent". In the event of any
failure by Tenant to pay or
<PAGE> 15
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discharge any Additional Rent, Landlord shall have all rights, powers and
remedies provided herein, by law or otherwise, in the event of non-payment of
Basic Rent. The requirements of Paragraph 19(f) regarding notice and grace
periods need not be satisfied prior to the imposition of Additional Rent under
this Paragraph 6(b).
7. Net Lease; Non-Terminability.
(a) This is a net lease and all Rent and all other sums payable hereunder
by Tenant shall be paid without notice or demand, and without set-off,
counterclaim, recoupment, abatement, suspension, deferment, diminution,
deduction, reduction or defense (collectively, a "Set-Off").
(b) This Lease shall not terminate, Tenant shall not have any right to
terminate this Lease during the Term (except as otherwise expressly provided
herein), Tenant shall not be entitled to any Set-Off of or to any Rent or any
other sums payable under this Lease (except as otherwise expressly provided
herein), and the obligations of Tenant under this Lease shall not be affected by
any interference with Tenant's use of any of the Leased Premises for any reason,
including the following: (i) any damage to or destruction of any of the Leased
Premises by any cause whatsoever, (ii) any Condemnation, (iii) the prohibition,
limitation or restriction of Tenant's use of any of the Leased Premises, (iv)
any eviction by paramount title or otherwise, (v) Tenant's acquisition of
ownership of any of the Leased Premises other than pursuant to an express
provision of this Lease, (vi) any default on the part of Landlord hereunder or
under any other agreement, (vii) any latent or other defect in, or any theft or
loss of, any of the Leased Premises, (viii) the breach of any warranty of any
seller or manufacturer of any of the Equipment, (ix) any violation of Paragraph
4(b) by Landlord, or (x) any other cause, whether similar or dissimilar to the
foregoing, any present or future Law to the contrary notwithstanding. The
obligations of Tenant hereunder shall be separate and independent covenants and
agreements, all Rent and all other sums payable by Tenant hereunder shall
continue to be payable in all events (or, in lieu thereof, Tenant shall pay
amounts equal thereto), and the obligations of Tenant hereunder shall continue
unaffected, unless the requirement to pay or perform the same shall have been
terminated pursuant to an express provision of this Lease. The obligation to pay
Rent or amounts equal thereto shall not be affected by any collection of rents
by any governmental body pursuant to a tax lien or otherwise, even though such
obligation results in a double payment of Rent.
(c) Tenant shall remain obligated under this Lease in accordance with its
provisions and, except as otherwise expressly provided herein,
<PAGE> 16
-14-
Tenant shall not take any action to terminate, rescind or avoid this Lease,
notwithstanding (i) the bankruptcy, insolvency, reorganization, composition,
readjustment, liquidation, dissolution, winding-up or other proceeding affecting
Landlord so long as such proceeding does not terminate Tenant's right to
possession, (ii) the exercise of any remedy, including foreclosure, under the
Mortgage or the Assignment, or (iii) any action with respect to this Lease
(including the disaffirmance hereof) which may be taken by Landlord, any
trustee, receiver or liquidator of Landlord or any court under the Federal
Bankruptcy Code or otherwise.
(d) Tenant waives all rights which may now or hereafter be conferred by
law (i) to quit, terminate or surrender this Lease or any of the Leased
Premises, or (ii) to any Set-Off of or to any Rent or any other sums payable
under this Lease, except as otherwise expressly provided herein.
8. Payment of Impositions; Compliance with Law.
(a) Subject to the provisions of Paragraph 18 hereof (relating to
contests), Tenant shall, before interest or penalties are due thereon, pay and
discharge all taxes of every kind and nature (including real and personal
property, franchise taxes, sales taxes and any rent tax), all charges for any
easement or agreement maintained for the benefit of any of the Leased Premises,
all general and special assessments, levies, permits, inspection and license
fees, all water and sewer rents and charges, all charges for utility and
communication services relating to any of the Leased Premises, all ground rents,
and all other public charges whether of a like or different nature, even if
unforeseen or extraordinary, imposed upon or assessed against (i) Tenant, (ii)
any of the Leased Premises, (iii) Landlord as a result of or arising in respect
of the acquisition, ownership, occupancy, leasing, use, possession or sale of
any of the Leased Premises, any activity conducted on the Leased Premises, or
Rent or (iv) Lender by reason of the Note or Mortgage and which (as to this
clause (iv)) Landlord has agreed to pay (collectively, the ("Impositions").
In the event Tenant fails to make payments of Impositions within the time
and in the manner provided above, Landlord shall have the right to require
Tenant to pay such Impositions to Lender in monthly installments and in such
amounts as Landlord shall reasonably request.
Nothing herein shall obligate Tenant to pay (A) income, excess profits, or
other taxes, if any, of Landlord, determined on the basis of Landlord's net
income or net worth, (B) any estate, inheritance,
<PAGE> 17
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succession, gift or similar tax, or (C) any capital gains tax imposed on
Landlord in connection with the sale of any of the Leased Premises to any
Person, unless the taxes referred to in clause (A) above are in lieu of or a
substitute for any other tax, assessment or other charge upon or with respect to
any of the Leased Premises which, if such other tax, assessment or other charge
were in effect, would be payable by Tenant.
In the event that any assessment against any of the Leased Premises may be
paid in installments, Tenant shall have the option to pay such assessment in
installments; and, in such event, Tenant shall be liable only for those
installments which become due and payable during the Term. Tenant shall prepare
and file all tax reports required by governmental authorities which relate to
the Impositions. Tenant shall deliver to Landlord, within ten (10) days of
receipt thereof, copies of all settlements and notices pertaining to the
Impositions which may be issued by any governmental authority and, within ninety
(90) days after the end of each calendar year of the Term, receipts for payments
of all Impositions made during such year.
(b) At the time of each payment of Basic Rent, Tenant shall pay to
Landlord, if requested by Landlord, an additional sum (the "Escrow Payment")
sufficient, in the aggregate, to pay the Escrow Charges (as hereinafter defined)
as they become due; provided, however, that escrow payments for taxes and
insurance premiums shall be required only if required by Lender to be escrowed
with Lender by Landlord. The "Escrow Charges" shall mean any of the real estate
taxes and premiums on any insurance required by this Lease which Landlord, at
its option, may require Tenant to pay to Landlord under this Article. Landlord
shall determine the amount of the Escrow Charges and of each Escrow Payment. The
Escrow Payments shall not be commingled with other funds of Landlord or others,
shall be invested at passbook" rate and interest thereon shall be for the
account of Tenant. Landlord shall apply the Escrow Payments to the payment of
the Escrow Charges in such order or priority as Landlord shall determine. If, at
any time, the Escrow Payments theretofore paid to Landlord shall be insufficient
for the payment of the Escrow Charges, Tenant, within ten (10) days after
demand, shall pay the amount of the deficiency to Landlord.
(c) Tenant shall comply with and conform to all of the provisions of the
Legal Requirements, subject to the provisions of Paragraph 18.
(d) Tenant shall not hereafter cause, permit or suffer to occur (i) a
discharge, spillage, uncontrolled loss, release, seepage or filtration (a
"spill") of any Hazardous Substance at, upon, under or within the Leased
<PAGE> 18
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Premises or from the Leased Premises to any real estate contiguous thereto or
(ii) the deposit, storage, disposal, dumping, injecting, placement or use of any
Hazardous Substance at, upon, under or within the Leased Premises or any real
estate contiguous thereto. Tenant and its agents shall not engage in operations
at or near the Leased Premises which could result in any liability, cost or
expense to Landlord or any other owner or occupier of the Leased Premises or
which could result in the creation of a lien on the Leased Premises under any
Environmental Law or under any similar applicable law or regulation. Tenant
represents that Tenant has not permitted or suffered to exist, and covenants
that it will not permit or suffer to exist, any tenant or occupant of the Leased
Premises to engage in any activity that could result in any liability, cost or
expense to any such tenant or occupant, Landlord or any other owner of the
Leased Premises or any portion thereof or the creation of a lien on the Leased
Premises, under any Environmental Law or under any similar applicable law or
regulation.
(e) Tenant, promptly upon the written request of Landlord from time to
time, shall permit such persons as Landlord may designate ("Site Reviewers") to
visit the Leased Premises from time to time and perform environmental site
investigations and assessments ("Site Assessments") on the Leased Premises for
the purpose of determining whether there exists on the Leased Premises any
environmental condition which could result in any liability, cost or expense to
Landlord or any other owner or occupier of the Leased Premises relating to
Hazardous Substances. Such Site Assessments may include both above and below the
ground testing for environmental damage or the presence of Hazardous Substances
on the Leased Premises and such other tests on the Leased Premises as may be
necessary to conduct the Site Assessments in the opinion of the Site Reviewers.
Tenant shall supply to the Site Reviewers such historical and operational
information regarding the Leased' Premises as may be reasonably requested by the
Site Reviewers to facilitate the Site Assessments and shall make available for
meetings with the Site Reviewers appropriate personnel having knowledge of such
matters. The cost of performing and reporting all Site Assessments shall be paid
by Tenant within five (5) days after demand by Landlord, with interest to accrue
at the Default Rate (if such sums are not paid by Tenant) commencing as of the
fifth day following written demand by Landlord.
(f) If Tenant fails to comply with any requirement of any Environmental
Law in connection with any spill of any Hazardous Substance affecting the Leased
Premises or in connection with the deposit, storage, placement or use of any
Hazardous Substance at, upon, under or within the Leased Premises or any real
estate contiguous
<PAGE> 19
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thereto, Landlord may, at its sole option, take any and all actions as Landlord
shall deem necessary or advisable in order to cure such noncompliance. Any
amounts so paid, together with interest thereon at the Default Rate from the
date of payment by Landlord, shall be immediately due and payable by Tenant to
Landlord. Nothing contained herein shall obligate Landlord to cure such
noncompliance or release Tenant from any of its obligations hereunder.
(g) Tenant shall notify Landlord immediately after becoming aware thereof
of any violation of or noncompliance with any of the covenants contained in this
Paragraph hereof and shall forward to Landlord immediately upon receipt thereof
copies of all orders, reports, notices, permits, applications or other
communications relating to any such violation or noncompliance or any other
matter relating in any fashion to any Environmental Law as it may affect or
relate to the Leased Premises.
(h) All future leases, subleases or concession agreements relating to the
Leased Premises entered into by Tenant shall contain covenants of the other
party thereto which are identical to the covenants contained in Paragraphs 8(c),
8(d), 8(e), 8(f) and 8(g).
9. Liens; Recording and Title.
(a) Tenant shall not, directly or indirectly, create or permit to be
created or to remain, and shall promptly discharge or remove, any lien, levy or
encumbrance on any of the Leased Premises or on any Rent or any other sums
payable by Tenant under this Lease, other than the Mortgage, the Assignment, the
Permitted Encumbrances and any mortgage, lien, encumbrance or other charge
created by or resulting solely from any act or omission of Landlord. NOTICE IS
HEREBY GIVEN THAT LANDLORD SHALL NOT BE LIABLE FOR ANY LABOR, SERVICES OR
MATERIALS FURNISHED OR TO BE FURNISHED TO TENANT OR TO ANYONE HOLDING ANY OF THE
LEASED PREMISES THROUGH OR UNDER TENANT, AND THAT NO MECHANICS' OR OTHER LIENS
FOR ANY SUCH LABOR, SERVICES OR MATERIALS SHALL ATTACH TO OR AFFECT THE INTEREST
OF LANDLORD IN AND TO ANY OF THE LEASED PREMISES. LANDLORD SHALL BE PERMITTED TO
POST ANY NOTICES ON THE LEASED PREMISES REGARDING SUCH NON-LIABILITY OF
LANDLORD.
(b) Tenant shall execute, deliver and record, file or register from time
to time all such instruments as may be required by any present or future Law in
order to evidence the respective interests of Landlord and
<PAGE> 20
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Tenant in any of the Leased Premises, and shall cause a memorandum of this
Lease, and any supplement hereto or to such other instrument, if any, as may be
appropriate, to be recorded, filed or registered and re-recorded, refiled or
re-registered in such manner and in such places as may be required by any
present or future Law in order to publish notice and protect the validity or
priority of this Lease. If a memorandum of this Lease cannot be recorded, filed
or registered, this Lease shall be recorded, filed or registered. Landlord shall
execute any such memorandum to the extent required for recording.
(c) Nothing in this Lease and no action or inaction by Landlord shall be
deemed or construed to mean that Landlord has granted to Tenant any right, power
or permission to do any act or to make any agreement which may create, give rise
to, or be the foundation for, any right, title, interest or lien in or upon the
estate of Landlord in any of the Leased Premises.
10. Indemnification. Tenant shall, to the extent permitted by applicable
law, pay, protect, indemnify, save and hold harmless Landlord and all other
Persons described in Paragraph 30 from and against any and all liabilities,
losses, damages, penalties, costs, expenses (including all reasonable attorneys'
fees and expenses), causes of action, suits, claims, demands or judgments of any
nature whatsoever, howsoever caused, arising from (a) any matter pertaining to
any of the Leased Premises or Adjoining Property or the ownership, use, non-use,
occupancy, operation, condition, design, construction, maintenance, repair or
rebuilding of any of the Leased Premises or Adjoining Property, (b) any injury
to or death of any person or any loss of or damage to any property in any manner
arising from any of the Leased Premises or Adjoining Property or from any matter
described in clause (a) above, or connected therewith or occurring thereon,
whether or not Landlord has or should have knowledge or notice of the defect or
condition, if any, causing or contributing to said injury, death, loss, damage
or other claim, (c) any violation by Tenant of any provision of this Lease, any
contract or agreement to which Tenant is a party, any Legal Requirement or any
Permitted Encumbrance, (d) any other cause pertaining to this Lease or any of
the Leased Premises or Adjoining Property or the transaction of which this Lease
forms a part (except and unless caused by Landlord's gross negligence or willful
misconduct), or (e) the alleged deposit, storage, disposal, burial, dumping,
injecting, spilling, leaking or other use, placement or release in, on or
affecting any of the Leased Premises of a Hazardous Substance or otherwise
arising from any other alleged violation of any of the Environmental Laws
including (i) liability for costs of removal or remedial action incurred by the
United States Government or the State, or response costs incurred by any other
<PAGE> 21
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person or entity, or damages from injury to or destruction or loss of natural
resources, including the reasonable costs of assessing such injury, destruction
or loss, incurred pursuant to Section 107 of CERCLA, or any successor Section or
Act; (ii) liability for costs and expenses of abatement, correction or clean-up,
fines, damages, response costs or penalties which arise from the provisions of
any of the other Environmental Laws; and (iii) liability for personal injury or
property damage arising under any statutory or common-law tort theory, including
damages assessed for the maintenance of a public or private nuisance or for
carrying on of an abnormally dangerous activity. In case any action or
proceeding is brought against Landlord or any other Person described in
Paragraph 30 by reason of any such claim, Landlord (or such other Person, as the
case may be) may either (i) retain its own counsel and defend such action (if
permitted by the applicable insurance policy), with all reasonable costs of such
defense to be paid by Tenant when billed by Landlord (or such other Person, as
the case may be) (it being understood that Tenant may employ counsel of its
choice, at Tenant's expense, to monitor the defense of any such action), or (ii)
promptly notify Tenant to resist or defend such action or proceeding by
retaining counsel reasonably satisfactory to Landlord, and Landlord or such
other Person will cooperate and assist in the defense of such action or
proceeding if reasonably requested so to do by Tenant.
The obligations of Tenant under this Paragraph 10 shall survive any
termination of this Lease. Landlord's rights to enforce Tenant's obligations
under this Paragraph 10 are in addition to Landlord's other rights and remedies
provided herein.
11. Maintenance and Repair.
(a) Tenant shall at all times maintain the Leased Premises and the
Adjoining Property in good repair and appearance and, in the case of the
Equipment, in good mechanical condition, except for ordinary wear and tear, and
shall promptly make all Alterations (substantially equivalent in quality and
workmanship to the original work) of every kind and nature, whether foreseen or
unforeseen, structural or non-structural, which may be required to be made upon
or in connection with any of the Leased Premises in order to keep and maintain
the Land and Improvements in as good repair and appearance as they were on the
date hereof, and the Equipment in as good mechanical condition as it was on the
later of the date hereof or the date of its installation except for ordinary
wear and tear; provided, however, that Tenant's maintenance and repair
obligations in the event of a casualty loss or taking shall be governed by
Paragraphs 13 through 15 below. Tenant shall do or cause others to do all
shoring of the Leased Premises or Adjoining Property or of
<PAGE> 22
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foundations and walls of the Improvements and every other act necessary or
appropriate for the preservation and safety thereof, by reason of or in
connection with any excavation or other building operation upon any of the
Leased Premises or Adjoining Property, whether or not Landlord shall, by any
Legal Requirement, be required to take such action or be liable for failure to
do so. Landlord shall not be required to make any Alteration, whether foreseen
or unforeseen, or to maintain any of the Leased Premises or Adjoining Property
in any way, and Tenant hereby expressly waives any right which may be provided
for in any Law now or hereafter in effect to make Alterations at the expense of
Landlord. Any Alteration made by Tenant pursuant to this subparagraph (a) or
pursuant to subparagraph (b) of this Paragraph 11 shall be made in conformity
with the provisions of Paragraph 12.
(b) Tenant shall take such action as may be reasonably required so as to
prevent (i) the encroachment of any Improvement, now 7r hereafter constructed,
upon any property, street or right-of-way (including the Adjoining Property)
adjoining any of the Leased Premises, (ii) the violation of the provisions of
any restrictive covenant affecting any of the Leased Premises, (iii) the
hindrance or obstruction of any easement or right-of-way to which any of the
Leased Premises is subject, or (iv) the impairment of the rights of others in,
to or under any of the foregoing.
(c) Landlord shall have the right (but no obligation), upon notice to
Tenant (or without notice in case of emergency), to enter upon any of the Leased
Premises for the purpose of making any Alterations which may be necessary by
reason of Tenant's failure to comply with the provisions of subparagraphs (a)
and (b) of this Paragraph 11. Except in case of emergency, the right of entry
shall be exercised at reasonable times and at reasonable hours. The reasonable
cost of any such entry, together with the reasonable cost of all such
Alterations, shall be Additional Rent; and Tenant shall pay the same to
Landlord, together with interest thereon at the Default Rate from the time of
payment by Landlord until paid by Tenant, immediately upon written demand
therefor and upon submission of evidence of Landlord's payment of such costs.
(d) Tenant shall, from time to time, replace with other operational
equipment or parts (the "Replacement Equipment") any of the Equipment (the
"Replaced Equipment") which is necessary for the conduct of Tenant's business in
the Leased Premises or for the operation and maintenance of the Leased Premises
and which shall have (i) become worn out, obsolete or unusable for the purpose
for which it is intended, (ii) been taken by a Condemnation as provided in
Paragraph 13(d), or (iii) been lost, stolen, damaged or destroyed as provided in
Paragraph 14(h);
<PAGE> 23
-21-
provided, however, that the Replacement Equipment shall (A) be in good operating
condition, (B) have a value and useful life at least equal to the value and
estimated useful life of the Replaced Equipment immediately prior to the time
that the Replaced Equipment had become so worn out, obsolete or unusable, so
taken, or so lost, stolen, damaged or destroyed, and (C) be suitable for a use
which is the same or similar to that of the Replaced Equipment. Tenant shall
repair at its sole cost and expense all damage to the Leased Premises caused by
the removal of Replaced Equipment or other personal property of Tenant or the
installation of Replacement Equipment. All Replacement Equipment shall become
the property of Landlord, shall be free and clear of all liens and rights of
others and shall become a part of the Equipment to the same extent as the
Replaced Equipment had been. If so requested by Landlord in writing, Tenant
shall promptly cause to be executed and delivered to Landlord an invoice, bill
of sale or other appropriate instrument evidencing the transfer or assignment to
Landlord of all estate, right, title and interest (other than the leasehold
estate created hereby) of Tenant or any other Person in and to the Replacement
Equipment, free from all liens and other exceptions to title; and Tenant shall
pay all taxes, fees, costs and other expenses that may become payable as a
result thereof. At the expiration of the Term or the sooner termination of this
Lease, all Equipment shall be in good operating condition, ordinary wear and
tear excepted.
12. Alterations and Improvements. Except as otherwise provided in
Paragraph 11 and in this Paragraph 12, Tenant shall not (a) make any
Alterations, (b) construct upon the Land any additional Improvements or (c)
install equipment in the Improvements or accessions to the Equipment, except in
the ordinary course of its business, without the prior written approval of
Landlord which approval will not be unreasonably withheld. In addition, Tenant
shall not do any other act which would impair the value of the Leased Premises.
In the event that Landlord gives its prior written consent to any of the actions
enumerated in clauses (a), (b) or (c) above, (i) the market value of the Leased
Premises shall not be lessened by any such Alteration, construction or
installation, or its usefulness impaired, (ii) all such Alterations,
construction and installations shall be performed by Tenant in a good and
workmanlike manner, (iii) all such Alterations, construction and installations
shall be expeditiously completed in compliance with all Legal Requirements, (iv)
all work done in connection with any such Alteration, construction or
installation shall comply with the requirements of all insurance policies
required to be maintained by Tenant hereunder, (v) Tenant shall promptly pay all
costs and expenses of any such Alteration, construction or installation and
shall discharge or remove all liens filed against any of the Leased Premises
<PAGE> 24
-22-
arising out of the same, (vi) Tenant shall procure and pay for all permits and
licenses required in connection with any such Alteration, construction or
installation, (vii) all such Alterations, construction and installations shall
be the property of Landlord and shall be subject to this Lease, and (viii)
Tenant shall comply, to the extent requested by Landlord, with the provisions of
clauses (i) through (iv) of Paragraph 15(a).
13. Condemnation.
(a) Tenant, immediately upon receiving a Condemnation Notice, shall notify
Landlord and Lender thereof and Landlord and Lender shall be entitled to
participate with Tenant in any Condemnation proceeding and/or negotiations under
threat thereof and to participate with Tenant in contesting the Condemnation
and/or the amount of the Net Award therefor, all at Tenant's expense; provided,
however, that if an Event of Default has occurred and is continuing Tenant shall
have no right to participate in any such proceeding, negotiations or contest.
Subject to the provisions of this Paragraph 13, Tenant hereby irrevocably
assigns to Landlord any award or payment to which Tenant is or may be entitled
by reason of any Condemnation, whether the same shall be paid or payable for
Tenant's leasehold interest hereunder or otherwise; but nothing in this Lease
shall impair Tenant's right to any award or payment on account of Tenant's trade
fixtures, equipment or other tangible property which is not part of the
Equipment, moving expenses or loss of business, if available, to the extent that
and so long as (i) Tenant shall have the right to make, and does make, a
separate claim therefor against the condemnor and (ii) such claim does not in
any way reduce either the amount of the award otherwise payable to Landlord for
the Condemnation of Landlord's fee interest in the Leased Premises or the amount
of the award (if any) otherwise payable for the Condemnation of Tenant's
leasehold interest hereunder.
(b) If (i) the entire Leased Premises, or (ii) any substantial portion of
the Leased Premises, which portion Tenant determines, in good faith, to be
sufficient to render the remaining portion thereof uneconomic for the use of
Tenant or any other tenant to which such portion might reasonably be leased,
shall be taken by a Taking or under threat thereof, then Tenant shall, not later
than thirty (30) days after Landlord gives Tenant notice that Landlord has
received a Condemnation Notice or Tenant otherwise receives a Condemnation
Notice, give notice to Landlord of its intention to terminate this Lease on the
first Basic Rent Payment Date (the "Termination Date") occurring after the date
on which the Fair Market Value is determined in accordance with Paragraph 27
(but not
<PAGE> 25
-23-
less than 60 days after the date on which the Fair Market Value is determined).
Such notice of intention to terminate shall contain (A) an irrevocable
offer of Tenant to purchase the remaining portion of the Leased Premises and the
Net Award applicable thereto, if any, on the Termination Date for the purchase
price (the "Termination Offer Amount") specified in the next sentence and (B) in
the event that less than the entire Leased Premises shall have been taken or be
under threat thereof, a certificate of Tenant, signed by the president or a vice
president thereof, stating that, in Tenant's good faith judgment, the portion of
the Leased Premises to be so taken is sufficient to fulfill the conditions set
forth in clause (ii) of this Paragraph 13(b) and certifying that Tenant will
forever abandon operations on the remainder of the Leased Premises, if any. The
Termination Offer Amount shall be the greater of (1) the Fair Market Value of
the Leased Premises as of the date immediately prior to the Condemnation Notice
or (2) the sum of the Acquisition Cost and any prepayment penalty which may be
payable under the Note or Mortgage. Promptly upon the delivery to Landlord of
such notice of intention to terminate, Landlord and Tenant shall commence to
determine such Fair Market Value in accordance with Paragraph 27.
No rejection of an offer under this Paragraph 13(b) shall be effective for
any purpose unless consented to by Lender. If Landlord shall reject such offer
by notice to Tenant containing the written consent of Lender to such rejections,
not later than the sixtieth (60th) day following determination of Fair Market
Value, then this Lease shall terminate on the Termination Date upon (x) payment
of all Rent and any other charges due and unpaid under this Lease as of the
Termination Date and (y) compliance by Tenant with all other obligations and
liabilities under this Lease which have arisen on or prior to the Termination
Date and, on the Termination Date, Tenant shall immediately vacate and have no
further right, title or interest in or to any of the Leased Premises, and upon
such termination the Net Award shall be retained by Landlord.
Unless Landlord shall have rejected such offer by the foregoing notice to
Tenant not later than the twentieth (20th) day following the determination of
Fair Market Value, Landlord shall be conclusively presumed to have accepted such
offer. If such offer is accepted by Landlord, Tenant shall pay to Landlord the
Termination Offer Amount on the Termination Date and, provided an Event of
Default does not then exist hereunder with respect to the Affected Premises,
Landlord shall convey to Tenant the remaining portion of the Affected Premises,
if any, in accordance with the provisions of Paragraph 16 and Landlord shall
<PAGE> 26
-24-
assign to Tenant its entire interest in and to the Net Award or any part thereof
that has not been received by Landlord in connection with the Condemnation
and/or deliver to Tenant or credit against the Termination Offer Amount such Net
Award or any part thereof which shall have been received by Landlord and/or
Lender and/or credit against the Termination Offer Amount such Net Award or any
part therein which if payable to Lender under the Mortgage have not been
received by Lender. Any acceptance of such offer by Landlord shall not relieve
Tenant of its obligations to pay Rent, and perform all of Tenant's other
obligations hereunder, through the date of the closing of the purchase pursuant
to the acceptance of such offer.
Notwithstanding anything to the contrary hereinabove contained, if
Landlord shall have rejected Tenant's offer to purchase the Leased Premises and,
on the Termination Date specified above, Landlord shall not have received the
full amount of the Net Award payable by reason of the Taking, the Termination
Date shall automatically be extended to the first Basic Rent Payment Date
occurring after receipt by Landlord of the full amount of the Net Award. Such
extension shall occur regardless of the reason for Landlord's failure to receive
the full amount of the Net Award prior to the originally stated Termination
Date.
(c) In the event of any Taking of any of the Land or Improvements which
does not result in a termination of this Lease, this Lease shall,
notwithstanding the Taking, continue and there shall be no abatement or
reduction of Rent or any other sums payable by Tenant hereunder, except as
provided in Paragraph 15(b). Promptly after such Taking, Tenant, as required in
Paragraph 11(a), shall commence and diligently continue to restore the Land and
Improvements as nearly as possible to their value, condition and character
immediately prior to such Taking, in accordance with the provisions of Paragraph
12. Upon the final payment to Landlord of the Net Award of a Taking which falls
within the provisions of this subparagraph (c), Landlord shall make the Net
Award available to Tenant for restoration in accordance with and subject to the
provisions of Paragraph 15(a).
In the event of a Requisition of any of the Land or Improvements, if
Landlord is required to pay the Net Award of such Requisition to Lender in
accordance with the provisions of the Note and the Mortgage and the debt service
payments due under the Note are thereafter reduced by virtue of such payment of
the Net Award to Lender, then each installment of Basic Rent payable on or after
the effective date of such reduction in debt service shall be reduced in the
same amount and for the same period as payments are reduced under the Note. In
the event that the Net
<PAGE> 27
-25-
Award of a Requisition of any of the Land or Improvements is retained by
Landlord, Landlord shall apply such Net Award, to the extent received, to the
installments of Basic Rent thereafter payable until such Net Award has been
applied in full or until the Term hereof has expired, whichever first occurs.
Upon the expiration of the Term, any portion of such Net Award which shall not
have been previously credited to Tenant shall be retained by Landlord.
(d) If any of the Equipment shall be taken by a Condemnation other than a
Condemnation which falls within the provisions of Paragraph 13(b), the Term
shall nevertheless continue and there shall be no abatement or reduction of Rent
or any other sums payable by Tenant hereunder. Tenant shall, whether or not the
Net Award is sufficient for the purpose, promptly replace the Equipment so
taken, subject to and in accordance with the provisions of Paragraph 11(d), and
the Net Award of such a Condemnation made for the loss of the replaced Equipment
only shall thereupon be payable to Tenant. The remainder of the Net Award shall
be applied as hereinabove provided.
(e) No agreement with any condemnor in settlement of or under threat of
any Condemnation shall be made by Tenant without the written consent of Landlord
and Lender.
14. Insurance.
(a) Tenant shall maintain at its sole cost and expense the following
insurance on or in connection with the Leased Premises:
(i) Insurance against loss or damage to the Improvements and
Equipment by fire and other risks from time to time included under standard
extended and additional extended coverage policies, including vandalism and
malicious mischief, sprinkler, and flood insurance, to the extent any of the
Leased Premises are in a flood zone, in amounts not less than the actual
replacement value of the Improvements and Equipment, excluding footings and
foundations and other parts of the Improvements which are not insurable (or, in
the case of plate glass insurance, the replacement cost of all plate glass in
the Leased Premises). Such policies shall contain replacement cost endorsements.
(ii) General public liability insurance against claims for bodily
injury, death or property damage occurring on, in or about any of the Leased
Premises or the Adjoining Property, in an amount not less than $5,000,000 for
bodily injury or death to any one person, not less than $10,000,000 for any one
accident, and not less than $1,000,000 for
<PAGE> 28
-26-
property damage. The Landlord shall have the right to determine such higher
limits as may be reasonable and customary for transactions and properties of
this size and type or such higher limits as reflect increases in the cost of
living. Policies for such insurance shall be for the mutual benefit of Landlord,
Tenant and Lender.
(iii) Worker's compensation insurance covering all persons employed
by Tenant in connection with any work done on or about any of the Leased
Premises for which claims for death or bodily injury could be asserted against
Landlord, Tenant or any of the Leased Premises, or, in lieu of such worker's
compensation insurance, a program of self-insurance complying with the rules,
regulations and requirements of the appropriate agency of the State.
(iv) Boiler and pressure vessel insurance on any of the Equipment or
any other equipment on or in the Leased Premises which by reason of its use or
existence is capable of ' bursting, erupting, collapsing or exploding, in an
amount not less than $5,000,000 for damage to property, bodily injury or death
resulting from such perils.
(v) Business interruption insurance or "rent loss" insurance,
insuring against loss of rental value for a period of not less than one year.
(vi) Such other insurance, including war-risk if available, on or in
connection with any of the Leased Premises as Landlord or Lender may reasonably
require, which at the time is commonly obtained in connection with properties
similar to the Leased Premises.
(b) The insurance required by Paragraph 14(a) shall be written by
companies of recognized financial standing which are approved by Landlord, which
approval will not be unreasonably withheld, and are authorized to do an
insurance business in the State. The insurance policies (i) shall be for such
terms as Landlord may reasonably approve, (ii) shall be in amounts sufficient at
all times to satisfy any coinsurance requirements thereof, and (iii) shall
(except for the worker's compensation insurance referred to in Paragraph
14(a)(iii) hereof) name Landlord, Tenant and Lender as insured parties, as their
respective interests may appear. If said insurance or any part thereof shall
expire, be withdrawn, become void, voidable, unreliable or unsafe for any
reason, including a breach of any condition thereof by Tenant or the failure or
impairment of the capital of any insurer, or if for any other reason whatsoever
said insurance shall become reasonably unsatisfactory to Landlord, Tenant
<PAGE> 29
-27-
shall immediately obtain new or additional insurance reasonably satisfactory to
Landlord.
(c) Each insurance policy referred to in clauses (i), (iv), (v) and (vi)
of Paragraph 14(a) shall contain standard non-contributory mortgagee clauses and
loss payee clauses in favor of and acceptable to Lender. Each policy required by
any provision of Paragraph 14(a), except clause (iii) thereof, shall provide
that it may not be cancelled except after thirty (30) days' prior notice to
Landlord and Lender. Each such policy shall also provide, if available, that any
loss otherwise payable thereunder shall be payable notwithstanding (i) any act
or omission of Landlord or Tenant which might, absent such provision, result in
a forfeiture of all or a part of such insurance payment, (ii) the occupation or
use of any of the Leased Premises for purposes more hazardous than those
permitted by the provisions of such policy, (iii) any foreclosure or other
action or proceeding taken by Lender pursuant to any provision of the Mortgage
upon the happening of an event of default therein, or (iv) any change in title
to or ownership of any of the Leased Premises.
(d) Tenant shall pay as they become due all premiums for the insurance
required by this Paragraph 14, shall renew or replace each policy and deliver to
Landlord evidence of the payment of the full premium therefor or installment
then due at least thirty (30) days prior to the expiration date of such policy,
and shall promptly deliver to Landlord all original policies; and in the event
of Tenant's failure to comply with any of the foregoing requirements, Landlord
shall be entitled, but not obligated, to procure such insurance. Any sums
expended by Landlord in procuring such insurance shall be Additional Rent and
shall be repaid by Tenant, together with interest thereon at the Default Rate
from the time of payment by Landlord until fully paid by Tenant, immediately
upon written demand therefor by Landlord.
(e) Anything in this Paragraph 14 to the contrary notwithstanding, any
insurance which Tenant is required to obtain pursuant to Paragraph 14(a) may be
carried under a "blanket" or umbrella policy or policies covering other
properties or liabilities of Tenant, provided that such "blanket" or umbrella
policy or policies otherwise comply with the provisions of this Paragraph 14 and
provided further that such policies shall provide for a reserved amount
thereunder with respect to the Leased Premises so as to assure that the amount
of insurance required by this Paragraph 14 will be available notwithstanding any
losses with respect to other property covered by such blanket policies. The
amount of the total insurance allocated to the Leased Premises, which amount
shall be not less than the amounts
<PAGE> 30
-28-
required pursuant to this Paragraph 14, shall be specified either (i) in each
such "blanket" or umbrella policy, or (ii) in a written statement, which Tenant
shall deliver to Landlord, from the insurer thereunder. The original or a
certified copy of each such "blanket" or umbrella policy shall promptly be
delivered to Landlord.
(f) Tenant shall have the replacement cost and insurable value of the
Improvements determined from time to time as required by the replacement cost
endorsements and shall deliver to Landlord the new replacement cost endorsement
or certificate evidencing such endorsement promptly upon Tenant's receipt
thereof. If, at any time, a replacement cost endorsement is not available,
Tenant shall have the replacement cost and insurable value of the Improvements
determined at least once a year by the underwriter of fire insurance on the
Leased Premises or, if such underwriter will not act, by a qualified appraiser
reasonably satisfactory to Landlord, and shall deliver to Landlord such
determination promptly upon receipt.
(g) Tenant shall promptly comply with and conform to (i) all provisions of
each insurance policy required by this Paragraph 14 and (ii) all requirements of
the insurers thereunder, applicable to Landlord, Tenant or any of the Leased
Premises or to the use, manner of use, occupancy, possession, operation,
maintenance, alteration or repair of any of the Leased Premises,. even if such
compliance necessitates structural changes or improvements or results in
interference with the use or enjoyment of any of the Leased Premises. Tenant
shall not use any of the Leased Premises in any manner which would permit the
insurer to cancel the premium for any insurance policy.
(h) In the event of any loss, Tenant shall give Landlord and Lender
immediate notice thereof. If an Event of Default has occurred and is continuing,
Landlord is hereby authorized to adjust, collect and compromise, in its
discretion and upon notice to Tenant, all claims under any of the insurance
policies required by this Paragraph 14 (except public liability insurance claims
payable to a person other than Tenant, Landlord or Lender) and to execute and
deliver on behalf of Tenant all necessary proofs of loss, receipts, vouchers and
releases required by the insurers; and Tenant agrees to sign, upon the request
of Landlord, all such proofs of loss, receipts, vouchers and releases. If no
Event of Default has occurred and is continuing, Tenant shall adjust, collect
and compromise any and all such claims, with the prior written consent of
Landlord and Lender and Landlord and Lender shall have the right to join with
Tenant therein. Any adjustment, settlement or compromise of any such claim shall
be subject to the prior written approval of Landlord and
<PAGE> 31
-29-
Lender, which approval shall not be unreasonably withheld or delayed, and
Landlord and Lender shall have the right to prosecute or contest, or to require
Tenant to prosecute or contest, any such claim, adjustment, settlement or
compromise, all at Tenant's expense. All proceeds of any insurance required
under clauses (i), (ii) (except proceeds payable to a person other than Tenant,
Landlord or Lender), (iv) and (v) of Paragraph 14(a) shall be payable to
Landlord and Lender. Each insurer is hereby authorized and directed to make
payment under said policies, including return of unearned premiums, directly to
Landlord and Lender instead of to Landlord and Tenant jointly; and Tenant hereby
appoints each of Landlord and Lender as Tenant's attorneys-in-fact to endorse
any draft therefor.
In the event of any casualty (whether or not insured against) resulting in
damage to any of the Improvements which does not result in a termination of this
Lease, the Term shall, notwithstanding such casualty, continue and there shall
be no abatement or reduction of Rent or any other sums payable by Tenant
hereunder, except as expressly provided in Paragraph 15(b). Promptly after such
casualty, Tenant, as required in Paragraph 11(a), shall commence and diligently
continue to restore the Improvements as nearly as possible to their value,
condition and character immediately prior to such damage, subject to and in
accordance with the provisions of Paragraph 12. Upon the final receipt of the
Net Proceeds of such casualty by Landlord, Landlord shall make such Net Proceeds
available to Tenant for restoration in accordance with and subject to the
provisions of Paragraph 15(a).
In the event of any loss of any of the Equipment in a casualty which does
not result in a termination of this Lease, the Term shall nevertheless continue
and there shall be no abatement or reduction of Rent or any other sums payable
by Tenant hereunder. Tenant shall, whether or not the Net Proceeds are
sufficient for the purpose, promptly repair or replace such Equipment, subject
to and in accordance with the provisions of Paragraph 11(d), and the Net
Proceeds paid for the loss of such Equipment only shall thereupon be payable to
Tenant. The remainder of the Net Proceeds shall be applied as hereinabove
provided.
(i) If the entire Leased Premises or a substantial portion of the Leased
Premises shall be damaged or destroyed by fire or other casualty and, in
Tenant's good faith judgment, it is uneconomical to restore the Leased Premises
for continued use and occupancy by Tenant or any other tenant to which the
Leased Premises might be leased, then Tenant shall, not later than thirty (30)
days after such occurrence, give notice to Landlord of its intention to
terminate this Lease on the first Basic Rent
<PAGE> 32
-30-
Payment Date (the "Casualty Termination Date") which occurs at least ninety (90)
days after the Fair Market Value of the Leased Premises is determined.
Such notice shall contain (A) an irrevocable offer of Tenant to purchase
the Leased Premises on the Casualty Termination Date for the purchase price (the
"Casualty Offer Amount") specified in the next sentence and (B) in the event
that less than the entire Leased Premises shall have been damaged or destroyed,
a certificate of Tenant, signed by the president or a vice president of Tenant,
stating that, in Tenant's good faith judgment, the portion of the Leased
Premises so damaged or destroyed is sufficient to render the Leased Premises
uneconomical for restoration for continued use and occupancy by Tenant or any
other tenant to which the Leased Premises might be leased and certifying that
Tenant will not restore the Leased Premises for the use to which such Premises
was devoted prior to such damage or destruction. The Casualty Offer Amount shall
be the greater of (1) the Fair Market Value of the Leased Premises as of the
date immediately prior to such casualty or (2) the sum of the Acquisition Cost
and any prepayment penalty which may be payable under the Note or Mortgage.
Promptly upon the delivery of such notice from Tenant to Landlord, Landlord and
Tenant shall commence to determine such Fair Market Value in accordance with the
procedure specified in Paragraph 27.
No rejection of an offer hereunder shall be effective for any purpose
unless consented to by Lender. If Landlord shall reject such offer by notice to
Tenant, containing the written consent of Lender to such rejections, not later
than the twentieth (20th) day prior to the Casualty Termination Date,' then upon
(x) payment of all Rent and any other charges due and unpaid under this Lease as
of the Casualty Termination Date and (y) compliance by Tenant with all other
obligations and liabilities under this Lease which have arisen on or prior to
the Casualty Termination Date, this Lease shall terminate on the Casualty
Termination Date and Tenant shall immediately vacate and have no further right,
title or interest in or to any of the Leased Premises and all further
obligations and liabilities of Tenant hereunder shall terminate except for
obligations and liabilities under (y) above and under Paragraph 10 hereof and
the Net Proceeds shall be retained by Landlord.
Unless Landlord shall have rejected such offer by the foregoing notice to
Tenant not later than the twentieth (20th) day prior to the Casualty Termination
Date, Landlord shall be conclusively presumed to have accepted such offer. If
such offer is accepted by Landlord, Tenant shall pay to Landlord the Casualty
Offer Amount on the Casualty
<PAGE> 33
-31-
Termination Date and, provided an Event of Default does not then exist
hereunder, Landlord shall convey to Tenant the Leased Premises in accordance
with the provisions of Paragraph 16 and Landlord shall assign to Tenant its
entire interest in and to the Net Proceeds or any part thereof that has not been
received by Landlord and/or deliver to Tenant or credit against the Casualty
Offer Amount such Net Proceeds or any part thereof which shall have been
received by Landlord and/or Lender and/or credit against the Casualty Offer
Amount such net proceeds or any part thereof which, if payable to Lender under
the Mortgage, have not been received by Lender. Any acceptance of such offer by
Landlord shall not relieve Tenant of its obligations to pay Rent, and perform
all of Tenant's other obligations hereunder, through the date of the closing of
the purchase pursuant to the acceptance of such offer.
Notwithstanding anything to the contrary herein above contained, if
Landlord shall have rejected Tenant's offer to purchase the Leased Premises and,
on the Casualty Termination Date specified above, Landlord shall not have
received the full amount of the Net Proceeds payable by reason of the casualty,
the Casualty Termination Date shall automatically be extended to the first Basic
Rent Payment Date occurring after receipt by Landlord of the full amount of the
Net Proceeds. Such extension shall occur regardless of the reason for Landlord's
failure to receive the full amount of the Net Proceeds prior to the originally
stated Casualty Termination Date.
(j) Tenant shall not carry separate insurance concurrent in form or
contributing in the event of loss with that required in this Paragraph 14 unless
(i) Landlord and Lender are included therein as named insureds, with loss
payable as provided herein, and (ii) such separate insurance complies with the
other provisions of this Paragraph 14. Tenant shall immediately notify Landlord
of such separate insurance and shall deliver to Landlord the original policies
therefor.
15. Restoration; Reduction of Rent.
(a) In the event that Net Proceeds or a Net Award are made available by
Landlord for the restoration of any of the Land or Improvements, Landlord shall
disburse such proceeds or award only in accordance with the following
conditions:
(i) prior to commencement of restoration, the architects, contracts,
contractors, plans and specifications for the restoration shall have been
approved by Landlord, which approval shall not be unreasonably withheld;
Landlord shall be provided with mechanics' lien
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insurance (if available) and, if required by Landlord, acceptable performance
and payment bonds which insure satisfactory completion of the restoration, are
in an amount and form and have a surety acceptable to Landlord, and name
Landlord and Lender as additional dual obligees; and, if permitted by law,
appropriate waivers of mechanics' and materialmen's liens shall have been filed;
(ii) at the time of any disbursement, no Event of Default shall
exist and no mechanics' or materialmen's liens shall have been filed against any
of the Leased Premises and remain undischarged;
(iii) disbursements shall be made from time to time in an amount not
exceeding the cost of the work completed since the last disbursement, upon
receipt of (A) satisfactory evidence, including architects' certificates, of the
stage of completion, of the estimated cost of completion and of performance of
the work to date in a good and workmanlike manner in accordance with the
contracts, plans and specifications, (B) waivers of liens (if permitted by law),
(C) contractors' and subcontractors' sworn statements as to completed work for
which payment is requested, (D) a satisfactory bringdown of title insurance, and
(E) other evidence of cost and payment so that Landlord can verify that the
amounts disbursed from time to time are represented by work that is completed,
in place and free and clear of mechanics' and materialmen's lien claims;
(iv) each request for disbursement shall be accompanied by a
certificate of Tenant, signed by the president or a vice president of Tenant,
describing the work for which payment is requested, stating the cost incurred in
connection therewith, stating that Tenant has not previously received payment
for such work and, upon completion of the work, also stating that the work has
been fully completed and complies with the applicable requirements of this
Lease;
(v) Landlord may retain ten percent (10%) of the restoration fund
until the restoration is fully completed;
(vi) the restoration fund shall not be commingled with Landlord's
other funds and shall be invested in an account which bears interest at the
"passbook" rate;
(vii) at all times the undisbursed balance of the restoration fund
held by Landlord shall be not less than the cost of completing the restoration
work free and clear of all liens; and
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(viii) such other reasonable conditions as Landlord may impose.
In addition, prior to commencement of restoration and at any time during
restoration, if the estimated cost of completing the restoration work free and
clear of all liens, as reasonably determined by Landlord, exceeds the amount of
the Net Proceeds or the Net Award available for such restoration, the amount of
such excess (the "Excess Amount") shall, upon demand by Landlord, be paid by
Tenant to Landlord to be added to the restoration fund. Any sum so added by
Tenant which remains in the restoration fund upon completion of restoration
shall be refunded to Tenant. If no such refund is required or any sum remains in
the restoration fund after such refund, such sum remaining in the restoration
fund upon completion of restoration and any refund to Tenant (the "Remaining
Sum") shall be retained by Landlord, unless such sum is required to be paid by
Landlord to Lender, in which event it shall be paid by Landlord to Lender in
accordance with the provisions of the Note and Mortgage. For purposes of
determining the source of funds with respect to the disposition of funds
remaining after the completion of restoration, the Net Proceeds or the Net Award
shall be deemed to be disbursed prior to any amount added by Tenant.
In lieu of the requirement in the foregoing paragraph that the Excess
Amount be deposited in cash with Landlord, Tenant may give Landlord an
unconditional irrevocable letter of credit in the amount of the Excess Amount,
with an expiration date acceptable to Landlord, as security for Tenant's
obligations to pay reconstruction costs in excess of insurance funds. Such
letter of credit may be drawn by Landlord if Tenant does not pay such excess
costs.
(b) In the event that there is a Remaining Sum upon completion of
restoration which is paid by Landlord to Lender, as aforesaid, and the debt
service payments due under the Note are reduced by virtue of such payment of the
Remaining Sum to Lender, then each installment of Basic Rent payable on or after
the effective date of such reduction in debt service shall be reduced in the
same amount and for the same period as payments are reduced under the Note. In
the event that there is a Remaining Sum upon completion of restoration which is
retained by Landlord, each installment of Basic Rent payable on or after the
Retention Date shall be reduced by a fraction, the denominator of which shall be
the total amount of all Basic Rent due from such date to and including the last
Basic Rent Payment Date for the then existing Term and the numerator of which
shall be the Remaining Sum.
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16. Procedures Upon Purchase.
(a) In the event of the purchase of any of the Leased Premises by Tenant
pursuant to any provision of this Lease, Landlord need not transfer and convey
to Tenant or its designee any better title thereto than that which was
transferred and conveyed to Landlord, and Tenant shall accept such title,
subject, however, to all liens, exceptions and restrictions on, against or
relating to the Leased Premises and to all applicable Laws, but free of the lien
of and security interest created by the Mortgage and the Assignment and liens,
exceptions and restrictions on, against or relating to any of the Leased
Premises which have been created by or resulted solely from acts of Landlord,
unless the same were created with the consent of Tenant or as a result of a
default by Tenant under this Lease or are otherwise the responsibility of the
Tenant hereunder. Execution by Tenant of a consent to financing and a
nondisturbance agreement pursuant to Paragraph 31 shall not constitute the
consent of Tenant to a mortgage or other lien securing such financing for
purposes of this Paragraph 16.
(b) Upon the date fixed for any such purchase of any of the Leased
Premises pursuant to any provision of this Lease, Tenant shall pay to Landlord
or to any Person to whom Landlord directs payment, at its address set forth
above, or at any other place designated by Landlord, the Offer Amount therefor
specified herein, in federal or other immediately available funds which at the
time of such payment shall be legal tender for the payment of public or private
debts in the United States of America, less any credits of the Net Award or Net
Proceeds allowed against the Offer Amount pursuant to the provisions of
Paragraphs 13(b) or 14(i), and Landlord shall thereupon deliver to Tenant (i) a
special warranty deed which describes any of the Leased Premises then being sold
to Tenant and conveys and transfers the title thereto which is described in
Paragraph 16(a), (ii) such other instruments as shall be necessary to transfer
to Tenant or its designee any other property (or rights to any Net Proceeds or
Net Award not yet received by Landlord) then required to be sold by Landlord
pursuant to this Lease and (iii) any Net Award or Net Proceeds received by
Landlord and/or Lender, not credited to Tenant against the Offer Amount and
required to be delivered by Landlord to Tenant pursuant to this Lease. Tenant
shall pay all charges incident to such conveyance and transfer, including
Landlord's reasonable counsel fees, escrow fees, recording fees, brokerage fees,
title insurance or guarantee premiums and all applicable federal, state and
local real estate transfer taxes or deed stamps which may be incurred or imposed
by reason of such conveyance and transfer and/or by reason of the delivery of
said deed and other instruments. Upon the completion of such
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purchase, but not prior thereto (unless any delay in the completion of or any
failure to complete such purchase shall be the sole fault of Landlord in which
event Tenant may terminate this Lease as of the date scheduled by Landlord and
Tenant for completion of such purchase), Tenant may elect to terminate this
Lease and all obligations hereunder (including the obligations to pay Rent) with
respect to any of the Leased Premises conveyed to Tenant, except any obligations
and liabilities of Tenant, actual or contingent, under this Lease, which (a)
arose on or prior to such date of purchase or (b) survive termination of this
Lease. In the event that the completion of such purchase shall be delayed other
than through the sole fault of Landlord, then the Offer Amount payable by Tenant
upon the purchase of any of the Leased Premises pursuant to any provisions of
this Lease shall, at Landlord's sole option, be determined as of the actual date
of such purchase by Tenant, provided that Tenant shall have paid to Landlord all
Rent due and payable hereunder to and including such date. Any prepaid Basic
Rent or other prepaid sums paid to Landlord shall be prorated as of the date the
purchase is completed, and the prorated unapplied balance shall be deducted from
the Offer Amount due to Landlord.
No apportionment of any Impositions shall be made upon such purchase,
Tenant being liable for payment thereof during the Term as Tenant and being
liable thereafter as owner.
(c) In the event of the purchase of any of the Leased Premises by Tenant
pursuant to any provision of this Lease, Tenant shall, on the date of the
closing of such purchase, pay to Landlord (in addition to payment of the
Purchase Price) all Rent and other sums then due and owing by Tenant to Landlord
hereunder as of the date of the closing of such purchase. Upon the closing of
such purchase, this Lease shall terminate and Tenant shall (except as expressly
set forth otherwise herein) be released from its obligations hereunder.
17. Assignment and Subletting; Subleases. Tenant may not assign this Lease
or sublet any of the Leased Premises at any time to any other party without
having first obtained the prior written consent of Landlord (which consent will
not be unreasonably withheld) except as follows: Landlord's prior written
consent shall not be needed to a proposed sublease or assignment of all of the
Leased Premises to a subsidiary or affiliate of Tenant or High Voltage as long
as Tenant notifies Landlord of sublessee's or assignee's name and address,
Tenant furnishes Landlord with a copy of such lease, such sublease complies with
the provisions of Paragraph 8(h), and Tenant agrees to remain primarily liable
to Landlord for the performance of all of Tenant's obligations hereunder.
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Notwithstanding the foregoing, if Tenant desires to assign this Lease in
connection with a proposed sale of the stock or assets of Tenant or High
Voltage, then Tenant shall give notice to Landlord of its intention to assign
this Lease on the first Basic Rent Payment Date (the "Assignment Date") which
occurs thirty (30) days after the Fair Market Value of the Leased Premises is
determined. Such notice shall contain an irrevocable offer of Tenant to purchase
the Leased Premises on the Assignment Date for the purchase price (the
"Assignment Offer Amount") which shall be greater of (1) the Fair Market Value
of the Leased Premises as of the date immediately prior to such notice or (2)
the sum of the Acquisition Cost and any prepayment penalty which may be payable
under the Note or Mortgage. As used in the foregoing sentence, "Fair Market
Value" shall mean the fair market value of the Leased Premises as affected and
encumbered by this Lease, assuming that the Term has been extended for all
extension periods provided herein. Promptly upon the delivery of such notice
from Tenant to Landlord, Landlord and Tenant shall commence to determine such
Fair Market Value in accordance with the procedure specified in Paragraph 27.
No rejection of an offer hereunder shall be effective for any purpose
unless consented to by Lender. If Landlord shall reject such offer by notice to
Tenant, containing the written consent of Lender to such rejection, not later
than the twentieth (20th) day prior to the Assignment Date, or if Landlord
approves the proposed assignee, then Tenant shall have the right to assign this
Lease to such purchaser, and this Lease shall remain in full force and effect in
accordance with its terms.
Unless Landlord shall have rejected such offer by the foregoing notice to
Tenant not later than the twentieth (20th) day prior to the Assignment Date,
Landlord shall be conclusively presumed to have accepted such offer. If such
offer is accepted by Landlord, Tenant shall pay to Landlord the Assignment Offer
Amount on the Assignment Date and, provided an Event of Default does not then
exist hereunder with respect to the Leased Premises, Landlord shall convey to
Tenant the Leased Premises in accordance with the provisions of Paragraph 16.
Any acceptance of such offer by Landlord shall not relieve Tenant of its
obligations to pay Rent, and perform all of Tenant's other obligations
hereunder, through the date of the closing of the purchase pursuant to the
acceptance of such offer.
If Tenant assigns all its rights and interest under this Lease, the
assignee under such assignment shall expressly assume all the obligations of
Tenant hereunder, including obligations, actual or contingent, of Tenant which
may have arisen on or prior to the date of such assignment,
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by a written instrument delivered to Landlord at the time of such assignment
Each sublease of any of the Leased Premises shall be subject and subordinate to
the provisions of this Lease. No assignment or sublease made an permitted by
this Paragraph shall affect or reduce any of the obligations of Tenant
hereunder; and all such obligations shall continue in full force and effect as
obligations of a principal and not as obligations of a guarantor, an if no
assignment or sublease had been made. Notwithstanding the foregoing, however, if
Tenant is permitted to assign this Lease pursuant to the provisions of this
Paragraph 17 in connection with the sale of stock or assets of Tenant or High
Voltage, all of the liabilities and obligations of Tenant hereunder (other than
those obligations and liabilities arising (irrespective of when any claim shall
be made) prior to the date of such assignment (for which Tenant shall remain
liable)) shall cease and terminate as of the date of such assignment.
No assignment or sublease shall impose any obligations on Landlord under
this Lease. Tenant shall, within ton (10) days after the execution and delivery
of any such assignment consented to by Landlord, deliver a duplicate original
copy thereof in recordable form to Landlord, and within ton (10) days after the
execution and delivery of any such sublease consented to by Landlord, Tenant
shall deliver a duplicate original copy thereof to Landlord. At Landlord's
option, any assignment or sublease (a) shall be consented to by High Voltage and
(b) shall be accompanied by High Voltage's affirmation of its obligations under
the Guaranty.
Upon the occurrence of an Event of Default under this Lease, Landlord
shall have the right immediately or at any time thereafter to collect and enjoy
all rents and other sums of money payable under any sublease of any of the
Leased Promises, and Tenant hereby irrevocably and unconditionally assigns such
rents and money to Landlord, which assignment may be exercised upon and after
(but not before) the occurrence of an Event of Default but only so long as it in
continuing.
Tenant shall not mortgage or pledge this Lease, and any such mortgage or
pledge made in violation of this Paragraph shall be void.
(c)
[Paragraph intentionally omitted)
18. Permitted Contests. Tenant shall not be required to (a) pay any
Imposition, (b) comply with any Legal Requirement, (c) discharge or remove any
lien referred to in Paragraph 9 or 12, or (d) take any action
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with respect to any encroachment, violation, hindrance, obstruction or
impairment referred to in Paragraph 11(b), so long as Tenant shall contest, in
good faith and at its expense, the existence, the amount or the validity
thereof, the amount of the damages caused thereby, or the extent of its or
Landlord's liability therefor, by appropriate proceedings which shall operate
during the pendency thereof to prevent (i) the collection of, or other
realization upon, the Imposition, lien or claim so contested, (ii) the sale,
forfeiture or loss of any of the Leased Premises or any Rent to satisfy the same
or to pay any damages caused by the violation of any such Legal Requirement or
by any such encroachment, violation, hindrance, obstruction or impairment, (iii)
any interference with the use or occupancy of any of the Leased Premises, (iv)
any interference with the payment of any Rent, and (v) the cancellation of any
fire or other insurance policy. Tenant shall provide Landlord security which is
satisfactory, in the reasonable opinion of Landlord, to assure the timely
payment, compliance, discharge, removal and/or other action, including all
costs, reasonable attorneys' fees, interest and penalties that may be or become
due in connection therewith. While any proceedings which comply with the
requirements of this Paragraph 18 are pending and the required security is held
by Landlord, Landlord shall not have the right to pay, remove or cause to be
discharged the Imposition, lien or claim thereby being contested. Each such
contest shall be promptly and diligently prosecuted by Tenant to a final
conclusion, except that Tenant shall, so long as the conditions of the first
sentence of this Paragraph are at all times complied with, have the right to
attempt to settle or compromise such contest through negotiations. Tenant shall
pay, and save Landlord harmless against, any and all losses, judgments, decrees
and costs (including all reasonable attorneys' fees and expenses) in connection
with any such contest and shall, promptly after the final determination of such
contest, fully pay and discharge the amounts which shall be levied, assessed,
charged or imposed or be determined to be payable therein or in connection
therewith, together with all penalties, fines, interest, costs and expenses
thereof or in connection therewith, and perform all acts the performance of
which shall be ordered or decreed as a result thereof. No such contest shall
subject Landlord to the risk of any civil or criminal liability.
19. Conditional Limitations; Default Provision.
(a) The occurrence of any one or more of the following (after the giving
of notice, if required, and the expiration of any applicable grace period, as
provided in subparagraph (f) of this paragraph 19) shall constitute an "Event of
Default" under this Lease: (i) a failure by Tenant to make (regardless, to the
extent permitted by law, of the pendency of
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any bankruptcy, reorganization, receivership, insolvency or other proceedings,
in law, in equity, or before any administrative tribunal, which have or might
have the effect of preventing Tenant from complying with the provisions of this
Lease) any payment of Rent or other sum herein required to be paid by Tenant
within any applicable grace period; (ii) a failure by Tenant duly to perform and
observe, or a violation or breach of (A) any covenant or agreement relating to
occupation and use of the Leased Premises contained in Paragraph 4 hereof; (B)
any covenant or agreement prohibiting termination, rescission or avoidance of
this Lease as contained in subparagraph (c) of Section 7 hereof; (C) any
covenant or agreement relating to the payment or discharge of Impositions
contained in subparagraph (a) of Paragraph 8 hereof; (D) any covenant or
agreement relating to any Escrow Payment contained in subparagraph (b) of
Paragraph 8 hereof; (E) any provision of the Legal Requirements, subject to the
provisions of Paragraph 18 hereof; (F) any covenant or agreement contained in
subparagraphs (c), (d), (e), (f), (g) or (h) of Paragraph 8 hereof; (G) any
covenant or agreement relating to liens, recording and title as contained in
Paragraph 9 hereof; (H) any covenant or agreement relating to indemnification as
contained in Paragraph 10 hereof; (I) any covenant or agreement relating to (1)
Tenant's duty to maintain and/or repair the Leased Premises and/or the Adjoining
Property, or (2) Tenant's duty to replace Equipment, as contained in Paragraph
11 hereof; (J) any covenant or agreement relating to the making of Alterations
or the construction of additional Improvements as contained in Paragraph 12
hereof; (K) any covenant or agreement relating to condemnation as contained in
Paragraph 13 hereof; (L) any covenant or agreement to provide or maintain any
insurance required pursuant to Paragraph 14 hereof or relating to casualty as
contained in Paragraph 14 hereof. The insurance coverages in effect on the date
hereof comply with the requirements of the Lease, and evidence thereof has been
received by Landlord from Tenant. Such coverages will constitute acceptable
insurance coverages during the Term, and no Event of Default for failure to
maintain insurance required hereunder shall occur, so long as (a) such coverages
are kept in effect after the date hereof and (b) the Lender (as defined in
Paragraph 2 hereof) accepts such coverages as satisfying the insurance
requirements under the Mortgage (as defined in Paragraph 2 hereof); (M) any
covenant or agreement relating to restoration as contained in Paragraph 15
hereof; (N) any covenant or agreement relating to the purchase of the Leased
Premises as contained in Paragraph 16 hereof; (0) any covenant or agreement
relating to assignment of this Lease or the subletting of the Leased Premises
(or any portion thereof) as contained in Paragraph 17 hereof; (P) any covenant
or agreement relating to permitted contests as contained in Paragraph 18 hereof;
(Q) the covenant to pay fees, costs and expenses as contained in Paragraph 20
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hereof; (R) the agreement to provide estoppel certificates as contained in
Paragraph 22 hereof; (S) the failure to surrender the Leased Premises in
accordance with Paragraph 23 hereof; (T) any covenant or agreement relating to
Tenant's records and books of account contained in Paragraph 26 hereof; (U) any
covenant or agreement relating to Tenant's option to purchase the Leased
Premises pursuant to Paragraph 28 hereof; (V) any covenant or agreement set
forth in subparagraph (b) of Paragraph 29 hereof relating to financing; or (W)
any failure of Tenant to execute any agreement required by a Lender pursuant to
Paragraph 31 hereof; (iii) any representation or warranty made by Tenant herein
or in any certificate, demand or request made pursuant hereto or thereto proves
to be incorrect, now or hereafter, in any material respect and has a material
adverse effect on Tenant's ability to meet Tenant's monetary obligations
hereunder; (iv) an Event of Default (as defined in the Guaranty) shall occur
under the Guaranty; (v) a final judgment or judgments for the payment of money
in excess of Five Hundred Thousand Dollars ($500,000.00) in the aggregate shall
be rendered against Tenant, the same shall remain undischarged for a period of
ninety (90) consecutive days and the same shall have a material adverse effect
on Tenant's ability to meet Tenant's monetary obligations hereunder; (vi) Tenant
shall (A) voluntarily be adjudicated a bankrupt or insolvent, (B) seek or
consent to the appointment of a receiver or trustee for itself or for any of the
Leased Premises, (C) file a petition seeking relief under the bankruptcy or
other similar laws of the United States, any state or any jurisdiction, (D) make
a general assignment for the benefit of creditors, or (E) be unable to pay its
debts as they mature; (vii) a court shall enter an order, judgment or decree
appointing, without the consent of Tenant, a receiver or trustee for it or for
any of the Leased Premises or approving a petition filed against Tenant which
seeks relief under the bankruptcy or other similar laws of the United States,
any state or any jurisdiction, and such order, judgment or decree shall remain
in force, undischarged or unstayed, ninety (90) days after it is entered; (viii)
any Improvement is substantially damaged or destroyed by an uninsured casualty
and Tenant fails to commence promptly thereafter to restore the Leased Premises
to the extent and in the manner required herein or fails to proceed actively,
diligently and in good faith with such restoration and to continue such
restoration until the Leased Premises have been restored to the extent and in
the manner required herein; (ix) substantially all of the Leased Premises shall
have been abandoned for a period in excess of one year and, prior to expiration
of such one year period, Tenant fails to adequately secure the abandoned
premises or fails to provide Landlord with evidence that Tenant is seeking a
substitute lessee; (x) Tenant shall be liquidated or dissolved or shall begin
proceedings towards its liquidation or dissolution; (xi) the estate or interest
of Tenant in any of the Leased Premises shall be levied upon or
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attached in any proceeding involving a judgment against Tenant in excess of
$500,000.00 and such estate or interest is about to be sold or transferred or
such process shall not be vacated or discharged within ninety (90) days after it
is made and which proceeding has a material adverse effect on Tenant's ability
to meet Tenant's monetary obligations hereunder; (xii) [Intentionally omitted];
or (xiii) an Event of Default (as defined in the Massachusetts Lease) shall
occur under the Massachusetts Lease.
(b) If an Event of Default shall have occurred and be continuing, Landlord
shall have the right at its option, then or at any time thereafter, to elect as
its sole and exclusive remedy (in addition to rights granted under Paragraph 20
and in addition to Landlord's rights to collect reasonable costs and attorney's
fees for enforcement of its rights hereunder) one and only one of the following
without demand upon or notice to Tenant (except as otherwise provided in
subparagraph (f) of this Paragraph 19) it being understood that the remedy
elected by Landlord from the following three remedies shall (except as set forth
in Paragraph 19(b)(iii)) be the only remedy to which Landlord is entitled under
this Paragraph 19(b):
(i) Landlord may give Tenant notice of Landlord's intention to
terminate this Lease on a date specified in such notice. Upon the date therein
specified, the Term, the estate hereby granted and all rights of Tenant
hereunder, shall expire and terminate as if such date were the date hereinbefore
fixed for the expiration of the then Term (without any extension).
Tenant shall surrender and deliver possession of the Leased Premises and
Landlord may re-enter and repossess any of the Leased Premises, with or without
legal process, by peaceably entering the Leased Premises and changing locks or
by summary proceedings, ejectment or any other lawful means or procedure. Upon
or at any time after taking possession of any of the Leased Premises, Landlord
may, by peaceable means or legal process, remove any persons or property
therefrom. Landlord shall be under no liability for or by reason of any such
entry, repossession or removal.
After repossession of any of the Leased Premises, Landlord shall have the
right (but, to the extent permitted by law, shall be under no obligation) to
relet any of the Leased Premises to such tenant or tenants, for such term or
terms (which may be greater or less than the period which would otherwise have
constituted the balance of the Term), for such rent, on such conditions (which
may include commercially reasonable
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concessions or free rent) and for such uses as Landlord, in its sole and
absolute discretion, may determine; and Landlord may collect and receive any
rents payable by reason of such reletting (the "Reletting Revenues"). Landlord
shall have no duty to mitigate damages (except to the extent required by law)
and shall not be responsible or liable for any failure to relet any of the
Leased Premises or for any failure to collect any rent due upon any such
reletting. Landlord may make such Alterations as Landlord may deem reasonably
necessary. Tenant agrees to pay Landlord immediately upon demand, all reasonable
expenses incurred by Landlord in obtaining possession, in performing Alterations
and in reletting any of the Leased Premises, including reasonable fees and
commissions of attorneys, architects, agents and brokers (the "Reletting
Expenses"). Tenant's liability under this Paragraph 19(b)(i) shall be limited to
payment of Rent for the remainder of the then Term (without any extension)
payable as Rent comes due, plus payment of the Reletting Expenses (unless
otherwise payable as Rent) minus the reletting Revenues.
(ii) Landlord may give Tenant notice of Landlord's intention to
terminate this Lease on a date specified in such notice. Upon the date therein
specified, the Term, the estate hereby granted and all rights of Tenant
hereunder, shall expire and terminate as if such date were the date hereinbefore
fixed for the expiration of the then Term (without any extension).
Tenant shall surrender and deliver possession of the Leased Premises and
Landlord may re-enter and repossess any of the Leased Premises, with or without
legal process, by peaceably entering the Leased Premises and changing locks or
by summary proceedings, ejectment or any other lawful means or procedure. Upon
or at any time after taking possession of any of the Leased Premises, Landlord
may, by peaceable means or legal process, remove any persons or property
therefrom. Landlord shall be under no liability for or by reason of any such
entry, repossession or removal.
Landlord may, upon written demand to Tenant, recover from Tenant, and
Tenant shall pay to Landlord, as and for liquidated and agreed final damages for
Tenant's default and in lieu of all current damages beyond the date of such
demand (it being agreed that it would be impracticable or extremely difficult to
fix the actual damages), by an amount equal to the present value of the excess,
if any, of (A) all Rent from the date of such demand to the date on which the
then Term (without any extension) is scheduled to expire hereunder in the
absence of any earlier termination, re-entry or repossession over (B) the then
fair
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market rental value of the Leased Premises for the same period (to be determined
by agreement of the parties or by an appraisal following the same conditions and
procedures set forth in Paragraph 27 for determination of Fair Market Value as
if references in Paragraph 27 to "Fair Market Value" were references to "fair
market rental value of the Leased Premises" as used herein). In addition, Tenant
shall pay to Landlord, upon demand, all reasonable expenses incurred by Landlord
in obtaining possession. The present value of such excess shall be determined by
discounting the Rent and such fair market rental value at the rate per annum
which is the lower of the then Prime Rate at the time of Landlord's notice to
Tenant or eight percent (8%) per annum. If any Law shall validly limit the
amount of such liquidated final damages to less than the amount above agreed
upon, Landlord shall be entitled to the maximum amount allowable under such Law.
(iii) Landlord may, upon notice to Tenant, require Tenant to make an
irrevocable offer to purchase for the purchase price (the "Default Offer
Amount") specified in the next sentence the entire Leased Premises. The Default
Offer Amount shall be an amount equal to the higher of (a) the sum of the
Acquisition Cost of the Leased Premises and any prepayment penalty which may be
payable under the Note or Mortgage or (b) the Fair Market Value of the Leased
Premises. Upon such notice by Landlord to Tenant, Tenant shall be deemed to have
made such offer, and the Fair Market Value of the Leased Premises shall (except
as set forth herein) be determined in accordance with the procedure set forth in
Paragraph 27 hereof. Within thirty (30) days after such determination of the
Fair Market Value, Landlord shall accept or reject such offer. If Landlord
accepts such offer, then, on the tenth (10th) business day after such
acceptance, Tenant shall pay to Landlord the Default Offer Amount and purchase
the Leased Premises in accordance with Paragraph 16. Any acceptance of such
offer by Landlord shall not relieve Tenant of its obligations to pay Rent, and
perform all of Tenant's other obligations hereunder, through the date of the
closing of the purchase pursuant to the acceptance of such offer. Any rejection
by Landlord of such offer shall have no effect on any other provision of this
Lease and shall allow Landlord to select, as its remedy under this Paragraph
19(b), either one of the remedies specified in Paragraph 19(b)(i) or 19(b)(ii).
(c) [Intentionally Omitted]
(d) The words "enter," "re-enter," or fire-entry," as used in this
Paragraph 19 are not restricted to their technical meaning.
<PAGE> 46
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(e) WITH RESPECT TO ANY REMEDY OR PROCEEDING OF LANDLORD HEREUNDER, TENANT
WAIVES ANY RIGHT TO A TRIAL BY JURY.
(f) Except as otherwise hereinafter in this Paragraph 19(f) provided,
before an Event of Default shall exist under this Paragraph 19, Landlord shall
have given Tenant notice thereof (with a copy to High Voltage) and Tenant (or
High Voltage, as the case may be) shall have failed to cure the default within
the applicable grace period stated below.
If the default consists of the failure to pay Rent, the applicable grace
period shall be seven (7) days from the date such Rent is due and payable; no
notice of an Event of Default need be given by Landlord to Tenant in such
instances.
If the default consists of the failure to pay any sum required to be paid
by Tenant under this Lease other than Rent, the applicable grace period shall be
five (5) days from the date on which notice is given, but Landlord shall not be
obligated to give notice of, or allow any grace period for, any such default
more than twice within any twelve (12) month period. If the default is a default
under clause (iv) of subparagraph (a) of this Paragraph 19, the applicable grace
period shall be five (5) days following written notice from Landlord to Tenant.
If the default consists of the failure to provide any insurance required
pursuant to Paragraph 14, the applicable grace period shall be ten (10) days
from the date on which the notice is given, but Landlord shall not be obligated
to give notice of, or allow any grace period for, any such default more than
twice within any twelve (12) month period. If the default consists of something
other than the failure to provide any such insurance, the applicable grace
period shall be twenty (20) days from the date on which the notice is given or,
if the default cannot be cured within the said twenty (20) day period and delay
in the exercise of a remedy would not cause any material adverse harm to
Landlord or any of the Leased Premises, the grace period shall be extended for
the period required to cure the default, provided that Tenant shall commence to
cure the default within the said twenty-day period and shall actively,
diligently and in good faith proceed with and continue the curing of the default
until it shall be fully cured and provided further that, if the default has
occurred under clause (xii) of subparagraph (a) of this Paragraph 19, the
applicable governmental authorities or agencies have approved such extension.
However, no notice or grace period shall be required in any one or more of the
following events: the occurrence of a default under clause (iii), (iv), (v)
(vi), (vii), (xi) or (xiii) of subparagraph (a) of this Paragraph 19.
<PAGE> 47
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20. Additional Rights of Landlord.
(a) Upon the occurrence of any Event of Default, Landlord shall have the
right (but no obligation) to perform any act required of Tenant hereunder,
whether as agent for Tenant or otherwise; and the cost thereof shall be
Additional Rent hereunder and shall be paid by Tenant to Landlord, together with
interest thereon at the Default Rate from the date such cost is incurred until
it shall be fully paid by Tenant, immediately upon demand. Time is of the
essence in the performance of Tenant's obligations under this Lease. No failure
of Landlord (i) to insist at any time upon the strict performance of any
provision of this Lease or (ii) to exercise any option, right, power or remedy
contained in this Lease shall be construed as a waiver, modification or
relinquishment thereof. A receipt by Landlord of any Rent or other sum due
hereunder with knowledge of the breach of any provision contained in this Lease
shall not be deemed a waiver of such breach, and no waiver by Landlord of any
provision of this Lease shall be deemed to have been made unless expressed in a
writing signed by Landlord. In addition to the other remedies provided in this
Lease, Landlord shall be entitled, to the extent permitted by applicable Law, to
injunctive relief in case of the violation, or attempted or threatened
violation, of any of the provisions of this Lease, or to specific performance of
any of the provisions of this Lease.
(b) To the extent permitted by law, Tenant hereby waives and surrenders,
for itself and all those claiming under it, including creditors of all kinds,
(i) any right and privilege which it or any of them may have under any present
or future Law to redeem any of the Leased Premises or to have a continuance of
this Lease after termination of this Lease or of Tenant's right of occupancy or
possession pursuant to any court order or any provision hereof, and (ii) the
benefits of any present or future Law which exempts property from liability for
debt or for distress for rent.
(c) Tenant shall pay to Landlord, as Additional Rent, all the expenses
incurred by Landlord in connection with any Event of Default or the exercise of
any remedy by reason of an Event of Default or otherwise in connection with the
enforcement of this Lease, including reasonable attorneys' fees and expenses. If
Landlord shall be made a party to any litigation commenced against Tenant or any
litigation pertaining to this Lease or any of the Leased Premises, then, at the
option of Landlord, Tenant, at its expense, shall provide Landlord with counsel
approved by Landlord and, in any event, Tenant shall pay all costs and
reasonable attorneys' fees incurred or paid by Landlord in connection with such
litigation.
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Tenant shall also pay all of Landlord's reasonable attorneys' fees, costs
and expenses incurred in the preparation, negotiation, execution and delivery of
this Lease or any document (including any amendment or supplement hereto)
prepared, executed or delivered by Landlord after the date hereof in connection
herewith.
21. Notices. All notices, demands, requests, consents, approvals, offers,
statements and other instruments or communications required or permitted to be
given pursuant to the provisions of this Lease shall be in writing and shall be
deemed to have been given for all purposes when delivered in person or by
Federal Express or other 24-hour delivery service or five (5) business days
after being deposited in the United States mail, by registered or certified
mail, return receipt requested, postage prepaid, addressed to the other party at
its address stated above. For the purposes of this Paragraph, any party may
substitute its address by giving fifteen (15) days' notice to the other party,
in the manner provided above.
22. Estoppel Certificate. Tenant shall, at any time and from time to time,
upon not less than ten (10) days' prior written request by Landlord, execute,
acknowledge and deliver to Landlord a statement in writing, executed by the
president or a vice president of Tenant, certifying (a) that this Lease is
unmodified and in full force and effect (or, if there have been modifications,
that this Lease is in full force and effect as modified, and setting forth such
modifications), (b) the dates to which Basic Rent, Additional Rent and all other
sums payable hereunder have been paid, (c) that, to the knowledge of the signer
of such certificate, no default by either Landlord or Tenant exists hereunder or
specifying each such default of which the signer may have knowledge, and (d)
that, to the knowledge of the signer of such certificate, there are no
proceedings pending or threatened against Tenant before or by any court or
administrative agency which, if adversely decided, would materially and
adversely affect the financial condition and operations of Tenant or, if any
such proceedings are pending or threatened to said signer's knowledge,
specifying and describing the same. Any such statements by Tenant may be relied
upon by Lender, Landlord or their assignees or by any prospective purchaser or
mortgagee of the Leased Premises. Any certificate required under this Paragraph
22 shall (i) state briefly the nature and scope of the examination or
investigation upon which the statements contained in such certificate are based,
(ii) state that, in the opinion of each person signing such certificate, he has
made such examination or investigation as is reasonably necessary to enable him
to express an informed opinion as to the subject matter of such certificate, and
(iii) certify to the correctness of the statements contained therein.
<PAGE> 49
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23. Surrender. Upon the expiration or earlier termination of this Lease,
Tenant shall peaceably leave and surrender the Leased Premises (except for any
portion thereof with respect to which this Lease has previously terminated) to
Landlord in the same condition in which the Leased Premises were originally
received from Landlord at the commencement of this Lease, except as repaired,
rebuilt, restored, altered, replaced or added to as permitted or required by any
provision of this Lease, and except for ordinary wear and tear and damage by
casualty loss (if and to the extent Tenant is not required to repair any such
casualty loss damage hereunder). Tenant shall remove from the Leased Premises on
or prior to such expiration or earlier termination all property which is owned
by Tenant or third parties other than Landlord and Tenant; and Tenant, at its
expense, shall, on or prior to such expiration or earlier termination, repair
any damage caused by such removal. Property not so removed shall become the
property of Landlord; Landlord may thereafter cause such property to be removed
from the Leased Premises; and the cost of removing and disposing of such
property and repairing any damage to any of the Leased Premises caused by such
removal shall be borne by Tenant. Landlord shall not in any manner or to any
extent be obligated to reimburse Tenant for any such property which becomes the
property of Landlord upon the expiration or earlier termination of this Lease.
24. Risk of Loss. Except to the extent otherwise expressly provided
herein, the risk of loss or of decrease in the enjoyment and beneficial use of
any of the Leased Premises in consequence of the damage or destruction thereof
by fire, the elements, casualties, thefts, riots, wars or otherwise, or in
consequence of foreclosure, attachments, levies or executions, is assumed by
Tenant, and Landlord shall in no event be answerable or accountable therefor.
Except as otherwise specifically provided in this Lease, none of the events
mentioned in this Paragraph shall entitle Tenant to any abatement of Rent.
25. No Merger of Title. There shall be no merger of this Lease nor of the
leasehold estate created by this Lease with the fee estate in or ownership of
any of the Leased Premises by reason of the fact that the same Person may
acquire or hold or own, directly or indirectly, (a) the leasehold estate created
by this Lease or any part thereof or interest therein or any interest of Tenant
in this Lease, and (b) the fee estate or ownership of any of the Leased Premises
or any interest in such fee estate or ownership; and no such merger shall occur
unless and until all Persons having any interest in (i) this Lease as Tenant or
the leasehold estate created by this Lease and (ii) this Lease as Landlord or
the fee estate in or ownership of the Leased Premises or any part thereof sought
to be merged
<PAGE> 50
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shall join in a written instrument effecting such merger and shall duly record
the same.
26. Books and Records. Tenant shall keep adequate records and books of
account with respect to the finances and business of Tenant generally and with
respect to the Leased Premises, in accordance with generally accepted accounting
principles consistently applied, and shall permit Landlord and Lender by their
respective agents, accountants and attorneys, upon reasonable notice to Tenant
to visit and inspect the Leased Premises and examine (and make copies of) the
records and books of account relating to the Leased Premises and to discuss the
finances and business with the officers of Tenant, at such reasonable times as
may be requested by Landlord.
Tenant shall deliver to Landlord and to Lender within one hundred (100)
days of the close of each fiscal year annual audited financial statements of
Tenant prepared by nationally recognized independent certified public
accountants. Tenant shall also furnish to Landlord all quarterly reports of
Tenant, certified by Tenant's chief financial officer, and all filings, if any,
of Form 10-K, Form 10-Q and other required filings with the Securities and
Exchange Commission pursuant to the provisions of the Securities Exchange Act of
1934, as amended, or any other Law. All financial statements of Tenant shall be
prepared in accordance with generally accepted accounting principles
consistently applied and the annual statements hereinabove referred to shall be
accompanied by an unqualified opinion of said accountants and by the affidavit
of the president or a vice president of Tenant, dated within five (5) days of
the delivery of such statement, (a) stating that the affiant knows of no Event
of Default or event which, upon notice or the passage of time or both, would
become an Event of Default which has occurred and is continuing hereunder, or,
if any such event has occurred and is continuing, specifying the nature and
period of existence thereof and what action Tenant has taken or proposes to take
with respect thereto and (b) except as otherwise specified, stating that Tenant
has fulfilled all of its obligations under this Lease which are required to be
fulfilled on or prior to the date of such affidavit.
27. Determination of Value.
(a) Whenever a determination of Fair Market Value is required pursuant to
any provision of this Lease, such Fair Market Value shall be determined in
accordance with the following procedure:
<PAGE> 51
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(i) Landlord and Tenant shall endeavor to agree upon such Fair
Market Value within thirty (30) days after the date (the "Applicable Initial
Date") on which (A) Tenant provides Landlord with notice of its intention not to
extend or to terminate this Lease pursuant to Paragraph 13(b) or Paragraph
14(i), (B) Tenant provides Landlord with notice of Tenant's intention to
purchase the Leased Premises pursuant to Paragraph 28, (C) Landlord provides
Tenant with notice of Landlord's intention to require Tenant to make an offer to
purchase the Leased Premises pursuant to Paragraph 19(b)(v) hereof, as
applicable. Upon reaching such agreement, the parties shall execute an agreement
setting forth the amount of such Fair Market Value.
(ii) If the parties shall not have signed such agreement setting
forth the amount of such agreed Fair Market Value within thirty (30) days after
the Applicable Initial Date, Tenant shall within fifty (50) days after the
Applicable Initial Date select an appraiser and notify Landlord in writing of
the name, address and qualifications of such appraiser. Within twenty (20) days
thereafter, Landlord shall select an appraiser and notify Tenant of the name,
address and qualifications of such appraiser. The appraiser selected by Tenant
and the appraiser selected by Landlord shall endeavor to agree upon the Fair
Market Value of the Leased Premises, based on a Fair Market Appraisal made by
each of them as of the date specified in the particular provision of this Lease
(the "Applicable Provision") pursuant to which the determination of Fair Market
Value is being made. if the said two appraisers shall agree upon such Fair
Market Value, the amount of such Fair Market Value as agreed to by the said two
appraisers shall be binding and conclusive.
(iii) If the appraiser selected by Tenant and the appraiser selected
by Landlord shall be unable to agree upon such Fair Market Value within twenty
(20) days after the selection of an appraiser by Landlord, then the said two
appraisers shall select a third appraiser to make the determination of such Fair
Market Value and the determination of such third appraiser shall be binding and
conclusive upon Landlord and Tenant.
(iv) In the event the appraiser selected by Tenant and the appraiser
selected by Landlord shall be unable to agree upon the designation of a third
appraiser within ten (10) days after the expiration of the twenty (20) day
period referred to in clause (iii) above or in the event the third appraiser so
selected does not make a determination of the Fair Market Value of the Leased
Premises within twenty (20) days after his selection, then such third appraiser
or a substituted third appraiser, as applicable, shall, at the request of either
party hereto, be appointed by
<PAGE> 52
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the President or Chairman of the American Arbitration Association in
Philadelphia, Pennsylvania. The determination of Fair Market Value made by the
third appraiser appointed pursuant hereto shall be made within twenty (20) days
after such appointment. Fair Market Value shall be the average of the
determination of Fair Market Value made by the third appraiser and the
determination of Fair Market Value made by the appraiser whose determination of
Fair Market Value is nearest to that of the third appraiser. Such average shall
be binding and conclusive upon Landlord and Tenant.
(v) All appraisers selected or appointed pursuant to this Paragraph
27(a) shall be independent qualified appraisers. Such appraisers shall have no
right, power or authority to alter or modify the provisions of this Lease and in
determining the Fair Market Value of the Leased Premises such appraisers shall
utilize the definition of Fair Market Value hereinabove set forth above.
(b) The cost of the procedure described in Paragraph 27(a) above shall be
borne entirely by Tenant in the case of a purchase pursuant to Paragraph
19(b)(iii). In all other cases Landlord, shall pay the fees and costs of the
appraiser appointed by Landlord, Tenant shall pay fees and costs of the
appraiser appointed by Tenant, and the fees and costs of the third appraiser
(and of the American Arbitration Association, if applicable), shall be split
evenly between the parties.
(c) If, by virtue of any delay in the appointment of a third appraiser
pursuant to Paragraph 27(a)(iv) above or of any delay by such appointed third
appraiser to determine such Fair Market Value, the Fair Market Value of the
Leased Premises is not determined by such appointed third appraiser within one
hundred forty (140) days after the Applicable Initial Date, then the date (the
"Applicable Final Date") on which the Leased Premises would otherwise be sold to
Tenant or on which this Lease would otherwise terminate, as specified in the
Applicable Provision, shall be extended the same number of days (the "Delay
Period") by which the total period so required for the binding and conclusive
determination of Fair Market Value exceeds one hundred forty (140) days and all
relevant defined terms used in the Applicable Provision shall be deemed amended
accordingly, anything to the contrary in the Applicable Provision
notwithstanding. In addition, any time period which is afforded Landlord under
the Applicable Provision within which to accept or reject an offer by Tenant
shall likewise be extended by the number of days equal to the Delay Period.
<PAGE> 53
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28. Option to Purchase. Landlord does hereby give and grant to Tenant the
option to purchase the entire Leased Premises on any date (the "Option Purchase
Date") between the tenth (10th) and eleventh (11th) anniversary of the date
hereof which is mutually agreeable to Landlord and Tenant upon payment of the
Purchase Price (as defined in the third paragraph of this Paragraph 28) together
with any applicable prepayment fee or premium. Tenant may exercise its option to
purchase the Leased Premises by giving Landlord written notice of Tenant's
intention to purchase the Leased Premises no later than one hundred eighty (180)
days prior to the tenth (10th) anniversary of the date hereof.
If Tenant shall exercise the foregoing option to purchase the Leased
Premises, the title closing shall take place on the Option Purchase Date, except
that if such date is not a business day then the said title closing shall take
place on the first business day following such date. All of the terms, covenants
and provisions contained in Paragraph 16 hereof shall apply to the sale and
conveyance of the Leased Premises pursuant to this Paragraph 28. If this Lease
shall terminate for any reason prior to the date originally fixed herein for the
expiration of the Term or if Tenant shall fail to give either the aforesaid
notice of intention to purchase, time being of the essence, the option provided
in this Paragraph 28 and any exercise thereof by Tenant shall cease and
terminate and shall be null and void. If an Event of Default has occurred or is
continuing at the time of the title closing, Landlord may, at Landlord's option,
terminate Tenant's obligation to purchase the Leased Premises pursuant to this
Paragraph.
The purchase price to be paid by Tenant to Landlord upon the sale and
conveyance of the entire Leased Premises pursuant to this Paragraph 28 (the
"Purchase Price") shall be the greater of (a) the Fair Market Value of the
Leased Premises as of the Option Purchase Date or (b) the sum of the Acquisition
Cost and any prepayment penalty which may be payable under the Note or Mortgage.
As used in the foregoing sentence, "Fair Market Value" shall mean the fair
market value of the Leased Premises as affected and encumbered by this Lease,
assuming that the Term has been extended for all extension periods provided
herein. Promptly after receipt by Landlord of Tenant's said notice of intention
to purchase, the parties shall commence to determine the Fair Market Value of
the entire Leased Premises in accordance with the procedure specified in
Paragraph 27.
Notwithstanding the foregoing, Tenant shall not have the right to exercise
its option to purchase the Leased Premises pursuant to this Paragraph 28 or to
thereafter purchase the Leased Premises unless High Voltage Engineering
Corporation simultaneously exercises its option to
<PAGE> 54
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purchase, and thereafter simultaneously purchases, the premises covered by the
Massachusetts Lease as set forth in such Massachusetts Lease.
29. Financing.
(a) Tenant shall pay, within three (3) business days of written demand
therefor, any cost, charge or expense, including reasonable legal fees of
Lender's counsel, (other than the principal of the Note and interest thereon at
the contract rate of interest specified therein) imposed upon Landlord by Lender
pursuant to the Note, the Mortgage or the Assignment which is not caused solely
by the gross negligence or willful misconduct of Landlord and which is not
otherwise reimbursed by Tenant to Landlord pursuant to any other provision of
this Lease (except that Tenant shall not be liable for payment of any
refinancing costs), including prepayment penalties, unless otherwise provided.
(b) In the event that Landlord desires to obtain a Loan (as described in
clause (b) of the definition of "Loan" appearing in Paragraph 2 of this Lease)
to be secured by any of the Leased Premises, Tenant shall negotiate in good
faith with Landlord concerning any request made by the proposed Lender for
changes or modifications in this Lease but Tenant shall not be obligated to
agree to any requested change which would have a material adverse effect upon
Tenant. Tenant shall not unreasonably withhold or delay its consent to such
financing if requested by Landlord or Lender, and Tenant shall provide any other
consent or statement and shall execute any and all other documents that any
proposed mortgagee requires in connection with such financing, so long as the
same do not materially adversely affect any right, benefit or privilege of
Tenant under this Lease or materially increase Tenant's obligations under this
Lease. Landlord will not place any mortgage on the Leased Premises except a
mortgage which secures a Loan as defined herein or which Tenant has otherwise
consented to in writing.
(c) Tenant shall have the right, at Tenant's sole cost and expense, to
cause Landlord to purchase an interest rate swap or cap in order to hedge
against interest rate increases in the interest component of Non-Equity Rent.
30. Non-Recourse as to Landlord. Anything contained herein to the contrary
notwithstanding, any claim based on or in respect of any liability of Landlord
under this Lease (except as otherwise set forth in the second paragraph of this
Paragraph 30) shall be enforced only against the Leased Premises and not against
any other assets, properties or funds of (a) Landlord, (b) any director,
officer, general partner, limited partner,
<PAGE> 55
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employee or agent of Landlord or any general partner of Landlord (or any legal
representative, heir, estate, successor or assign of any thereof), (c) any
predecessor or successor partnership or corporation (or other entity) of
Landlord, either directly or through Landlord or its general partners or any
predecessor or successor partnership or corporation (or other entity) of
Landlord, or (d) any other person or entity (including Eighth Carey Corporate
Property, Inc., W. P. Carey & Co., Inc., Carey Corporate Property Management,
Inc., Clark & Pendleton Realty Corp. or any Person affiliated with any of the
foregoing, or any director, officer, employee or agent of any thereof).
Anything contained herein to the contrary notwithstanding, any claim based
on or in respect of any liability of Landlord hereunder for Landlord's wrongful
diversion or retention of condemnation award proceeds or insurance proceeds
shall be enforced only against the assets of the Landlord and not against any
other assets, properties or funds of (a) any director, officer, general partner,
limited partner, employee or agent of Landlord or any general partner of
Landlord (or any legal representative, heir, estate, successor or assign of any
thereof), (b) any predecessor partnership or corporation (or other entity) of
Landlord, either directly or through Landlord or its general partners or any
predecessor partnership or corporation (or other entity) of Landlord, or (c) any
other person or entity (including Eighth Carey Corporate Property, Inc., W. P.
Carey & Co., Inc., Carey Corporate Property Management, Inc., Clark & Pendleton
Realty Corp. or any Person affiliated with any of the foregoing, or any
director, officer, employee or agent of any thereof).
31. Subordination. Tenant agrees that this Lease and Tenant's interest
hereunder shall be subordinate to any mortgage, deed of trust, and/or other
security instrument hereafter placed upon the Leased Premises by the Landlord,
and to any and all advances made or to be made thereunder, to the interest
thereon, and all renewals, replacements and extensions thereof provided that any
such instrument (or separate instrument in recordable form duly executed by the
holder of any such mortgage, deed of trust or security instrument and delivered
to Tenant) shall provide for the recognition of this Lease and all Tenant's
rights hereunder until such time as Landlord shall have the right to terminate
this Lease pursuant to any applicable provisions hereof. Landlord has assigned
(or will assign) its rights under this Lease to Lender pursuant to the
Assignment and Mortgage, as more particularly described in the Assignment and
Mortgage.
32. Miscellaneous. The paragraph headings in this Lease are used only for
convenience in finding the subject matters and are not part
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of this Lease or to be used in determining the intent of the parties or
otherwise interpreting this Lease. As used in this Lease, the singular shall
include the plural as the context requires and the following words and phrases
shall have the following meanings: (a) "including" shall mean "including but not
limited to"; (b) "provisions" shall mean "provisions, terms, agreements,
covenants and/or conditions"; (c) "lien" shall mean "lien, charge, encumbrance,
title retention agreement, pledge, security interest, mortgage and/or deed of
trust"; (d) obligation" shall mean "obligation, duty, agreement, liability,
covenant and/or condition"; (e) "any of the Leased Premises" shall mean "the
Leased Premises or any part thereof or interest therein"; (f) "any of the Land"
shall mean "the Land or any part thereof or interest therein"; (g) "any of the
Improvements" shall mean "the Improvements or any part thereof or interest
therein"; (h) "any of the Equipment" shall mean "the Equipment or any part
thereof or interest therein"; and (i) "any of the Adjoining Property" shall mean
"the Adjoining Property or any part thereof or interest therein". Any act which
Landlord is permitted to perform under this Lease may be performed at any time
and from time to time by Landlord or any person or entity designated by
Landlord. Any act which Tenant is required to perform under this Lease shall be
performed at Tenant's sole cost and expense. Each appointment of Landlord as
attorney-in-fact for Tenant under this Lease is irrevocable and coupled with an
interest. Except as otherwise specifically provided herein Landlord has the
right to refuse to grant its consent in its sole and absolute discretion
whenever such consent is required under this Lease and is not required to give
any reason for any such refusal. Landlord shall in no event be construed for any
purpose to be a partner, joint venturer or associate of Tenant or of any
subtenant, operator, concessionaire or licensee of Tenant with respect to any of
the Leased Premises or otherwise in the conduct of their respective businesses.
This Lease and any documents which may be executed by Tenant on or about the
effective date hereof at Landlord's request constitute the entire agreement
between the parties and supersede all prior understandings and agreements,
whether written or oral, between the parties hereto relating to the Leased
Premises and the transactions provided for herein. This Lease may be modified,
amended, discharged or waived only by an agreement in writing signed by the
party against whom enforcement of any such modification, amendment, discharge or
waiver is sought. The covenants of this Lease shall run with the land and bind
Tenant, the heirs, distributees, personal representatives, successors and
assigns of Tenant, and all present and subsequent encumbrancers and subtenants
of any of the Leased Premises, and shall inure to the benefit of Landlord, its
successors and assigns. In the event there is more than one Tenant, the
obligations of each shall be joint and several. In the event any one or more of
the provisions contained in this Lease shall for any
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reason be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provision
of this Lease, but this Lease shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein. This Lease shall be
governed by and construed according to the Laws of the State.
IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be duly
executed under seal as of the day and year first above written.
LANDLORD:
CORPORATE PROPERTY ASSOCIATES 8, L.P., a DELAWARE
LIMITED PARTNERSHIP
By Eighth Carey Corporate Property,
Inc., a General Partner
By: /s/ H. Cabot Lodge
------------------------------------------------
Name: H. Cabot Lodge
Title: Senior Vice President
(Corporate Seal) Attest: /s/ Margaret A. Mattson
--------------------------------------------
Name: Margaret A. Mattson
Title: Assistant Secretary
TENANT:
DATCON INSTRUMENT COMPANY,
a Pennsylvania corporation
By /s/ Mark A. Horwitch
------------------------------------------------
Name: Mark A. Horwitch
Title: Vice President
(Corporate Seal) Attest: /s/ Gideon Argoy
--------------------------------------------
Name: Gideon Argoy
Title: Assistant Secretary
<PAGE> 58
Exhibit A
ALL THAT CERTAIN LOT situated on the east side of Rohrerstown Road (LR
36006), East Hempfield Township, Lancaster County, PA, being shown as Lot 1,
Block A on a Final Subdivision Plan, Datcon Instrument Company, prepared by
Rettew Associates, Inc., Drawing No. 86382-lFP, dated April 27, 1988, last
revised August 1, 1988, and recorded in the Office in and for Recording of
Deeds, in and for Lancaster County, PA, in Subdivision Plan Book J, Volume 161,
Page 68 and being more fully bounded and described as follows:
BEGINNING at a point on the centerline of Rohrerstown Road (LR36006), said
point a corner of Lot 2; thence extending along the centerline of Rohrerstown
Road MR36006), N 08 degrees 12 minutes 23 seconds E, 879.56 feet, (erroneously
stated on record Subdivision Plan as N 08 degrees 12 minutes 23 seconds W,
879.59 feet) to a point, a corner of lands, now or formerly, of Jay D. Hodecker;
thence extending along same the three (3) following courses and distances; 1) S
75 degrees 07 minutes 00 seconds E, 990.69' to a point 2) S 09 degrees 24
minutes 00 seconds E, 44.10' feet to a point and 3) S 32 degrees 01 minutes 00
seconds E, 165.04' to a point, a corner of Lot 2; thence extending along the
same nine (9) following courses and distances; 1) S 16 degrees 42 minutes 23
seconds W, 381.431 to a point, 2) on a line curving to the right having a radius
of 55.00', an arc length of 214.161, a chord bearing of S 38 degrees 15 minutes
30 seconds W, and chord length of 102.31' to a point, 3) on a line curving to
the left having a radius of 30.00', an arc length of 24.701, a chord bearing of
N 53 degrees 46 minutes 21 seconds W, and a chord length of 24.001 to a point,
4) on a line curving to the left having a radius of 850.00', an arc length of
299.501, a chord bearing of N 87 degrees 26 minutes 58 seconds W, and a chord
length of 297.951 to a point, 5) S 82 degrees 27 minutes 23 seconds W, 130.00'
to a point 6) on a line curving to the right having a radius of 1,230.00', an
arc length of 338.12', a chord bearing of N 89 degrees 40 minutes 07 seconds W,
and a chord length of 337.05' to a point, 7) N 81 degrees 47 minutes 37 seconds
W, 158.591 to a point, 8) on a line curving to the left having a radius of
31.00', an arc length of 48.70' , a chord bearing of S 53 degrees 12 minutes 23
seconds W, and a chord length of 43.84, to a point, and 9) N 81 degrees 47
minutes 37 seconds W, 30.001 to a point on the centerline of Rohrerstown Road,
THE PLACE OF BEGINNING.
CONTAINING: 18.084 Acres
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BEING SUBJECT to a 20' wide Water Line Easement as shown on the Plan.
BEING SUBJECT to a 20' wide Sanitary Sewer Easement as shown on the Plan.
BEING A PART OF THE SAME PREMISES which Lorraine M. Hodecker, Linda K.
Hodecker and Fulton Bank, Executors of the Will of Jay D. Hodecker, deceased, by
deed dated June 13, 1986 and recorded in the Recorder of Deeds Office in and for
Lancaster County, in Record Book I, Volume 95 page 605, granted and conveyed to
Datcon Instrument Company, a Pennsylvania Corporation.
<PAGE> 60
MACHINERY AND EQUIPMENT
All fixtures, machinery, apparatus, equipment, fittings and appliances of
every kind and nature whatsoever now or hereafter affixed to or attached to any
of the Leased Premises (except as hereafter provided), including all electrical,
anti-pollution, heating, lighting (including hanging fluorescent lighting),
incinerating, power, air cooling, air conditioning, humidification, sprinkling,
power, plumbing, lifting, cleaning, fire prevention, fire extinguishing and
ventilating systems, devices and machinery and all engines, pipes, pumps, tanks
(including exchange tanks and fuel storage tanks), motors, conduits, ducts,
steam circulation coils, blowers, steam lines, compressors, oil burners,
boilers, doors, windows, loading platforms, lavatory facilities, stairwells,
fencing (including cyclone fencing), passenger and freight elevators and garage
units, but excluding all personal property and all trade fixtures, machinery,
office, manufacturing and warehouse equipment which are not necessary to the
operation, as buildings, of the buildings which constitute part of the Leased
Premises.
EXHIBIT "B"
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PERMITTED ENCUMBRANCES
Those exceptions to title contained in the title policy issued to
Landlord pursuant to Lawyers Title Insurance Corporation commitment no. 18023
(agent: Land Transfer Co., Inc.).
EXHIBIT "C"
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BASIC RENT PAYMENTS
1. Basic Rent. Subject to the adjustments provided for in Paragraphs 2, 3,
4 and 5 below, Basic Rent shall be payable monthly in advance on each Basic Rent
Payment Date.
As used herein, the following terms shall have the following meanings:
"Basic Rent" shall mean, for each month prior to the 10th anniversary of
the First Full Basic Rent Payment Date (as defined hereinafter), the sum of (i)
Equity Rent for such month and (ii) Non-Equity Rent for such month. For the
month commencing with the 10th anniversary of the First Full Basic Rent Payment
Date, Basic Rent shall mean the sum of (i) Equity Rent for such month and (ii)
the sum of Non-Equity Rent payable during the immediately preceding thirty-six
months divided by thirty six; for each month thereafter, Basic Rent shall mean
the Basic Rent payable during the month commencing with the 10th anniversary of
the First Full Basic Rent Payment Date hereof (as calculated in the immediately,
preceding clause), subject to the adjustments described in paragraphs 2, 3, 4
and 5 below.
"Equity Rent" shall, for any given month, equal $22,763, subject to the
adjustments set forth in paragraphs 2, 3, 4 and 5 below; provided, however, that
if there is no Non-Equity Rent in any given month because there is no Loan, then
the Equity Rent for such month (and all successive months) shall be $22,763 plus
the Non-Equity Rent in effect for the immediately preceding month, subject to
the adjustments set forth in paragraphs 2, 3, 4 and 5 below.
"Non-Equity Rent" shall, for any given month, equal the payments
(principal and/or interest) required to be made by Landlord during such month to
the Lender pursuant to the Loan; provided, however, that if a payment during a
given month is required to be made to Lender as a result of an acceleration of
the Loan, then the Non-Equity Rent payable during such month shall be the
payment which would be required to be made by Landlord to Lender during such
month as if such acceleration had not occurred.
2. CPI Adjustments. The Equity Rent shall be subject to adjustment, in the
manner hereinafter set forth, for increases in the index known as United States
Department of Labor, Bureau of Labor Statistics, Consumer Price Index, All Urban
Consumers, United States City Average, All Items, (1982-84=100) ("CPI") or the
successor index that most closely
EXHIBIT "D"
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approximates the CPI. If the CPI shall be discontinued with no successor or
comparable successor index, Landlord and Tenant shall attempt to agree upon a
substitute index or formula, but if they are unable to so agree, then the matter
shall be determined by arbitration in accordance with the rules of the American
Arbitration Association then prevailing in New York City. Any decision or award
resulting from such arbitration shall be final and binding upon Landlord and
Tenant and judgment thereon may be entered in any court of competent
jurisdiction. In no event will the Basic Rent as adjusted by the CPI adjustment
be less than the Basic Rent in effect for the five (5) year period immediately
preceding such adjustment.
3. Effective Dates of CPI Adjustments. Equity Rent shall not be adjusted
to reflect changes in the CPI until the fifth (5th) anniversary of the Basic
Rent Payment Date on which the first full monthly installment of Basic Rent
shall be due and payable (the "First Full Basic Rent Payment Date"). As of the
fifth (5th) anniversary of the First Full Basic Rent Payment Date and thereafter
on the tenth (10th), fifteenth (15th), twentieth (20th) and twenty-fifth (25th)
anniversaries and, if the initial Term is extended, on the thirtieth (30th),
thirty-fifth (35th), fortieth (40th) and forty-fifth (45th) anniversaries of the
First Full Basic Rent Payment Date, Equity Rent shall be adjusted to reflect
increases in the CPI during the most recent five (5) year period immediately
preceding each of the foregoing dates (each such date being hereinafter referred
to as the "Basic Rent Adjustment Date").
4. Method of Adjustment for CPI Adjustment.
(a) As of each Basic Rent Adjustment Date when the average CPI determined
in clause (i) below exceeds the Beginning CPI (as defined in this Paragraph
4(a)), the Equity Rent in effect immediately prior to the applicable Basic Rent
Adjustment Date shall be multiplied by a fraction, the numerator of which shall
be the difference between (i) the average CPI for the three (3) most recent
calendar months (the "Prior Months") ending prior to such Basic Rent Adjustment
Date for which the CPI has been published on or before the forty-fifth (45th)
day preceding such Basic Rent Adjustment Date and (ii) the Beginning CPI, and
the denominator of which shall be the Beginning CPI. (In calculating the
numerator of the fraction described in the foregoing sentence, however, the
average CPI for the Prior Months shall be recalculated as if, for each year
during the previous five-year period, there were an 8% annual cap on increases
in CPI from that CPI in effect during the prior year.) The product of such
multiplication shall be added to the Equity Rent in effect immediately prior to
such Basic Rent Adjustment Date. The "Beginning CPI" shall
EXHIBIT "D"
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mean the average CPI for the three (3) calendar months corresponding to the
Prior Months, but occurring five (5) years earlier. If the average CPI
determined in clause (i) is the same or less than the Beginning CPI, the Equity
Rent will remain the same for the ensuing five (5) year period.
(b) Effective as of a given Basic Rent Adjustment Date, Equity Rent
payable under this Lease until the next succeeding Basic Rent Adjustment Date
shall be the Equity Rent in effect after the adjustment provided for as of such
Basic Rent Adjustment Date.
(c) Notice of the new Equity Rent shall be delivered to Tenant on or
before the thirtieth (30th) day preceding each Basic Rent Adjustment Date.
5. CPI Adjustments After 10th Anniversary of First Full Basic Rent Payment
Date.
The provisions of paragraphs 2, 3 and 4 above shall remain in effect for
all months prior to the 10th anniversary of the First Full Basic Rent Payment
Date. Commencing as of the month in which the 10th anniversary of the First Full
Basic Rent Payment Date occurs, (a) CPI adjustments shall be made to Basic Rent
(and not just to Equity Rent), and (b) all references in paragraphs 2, 3 and 4
above to "Equity Rent" shall be deleted and, in lieu thereof, the phrase "Basic
Rent" shall be inserted.
EXHIBIT "D"
<PAGE> 1
EXHIBIT 10.3
LEASE AGREEMENT
by and between
CORPORATE PROPERTY ASSOCIATES 8, L.P.,
a Delaware limited partnership,
as LANDLORD
and
HIGH VOLTAGE ENGINEERING CORPORATION,
a Massachusetts corporation,
as TENANT
Premises: Sterling, Massachusetts
Dated as of: November 10, 1988
<PAGE> 2
TABLE OF CONTENTS
Page
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Parties
1. Demise of Premises
2. Certain Definitions
3. Title and Condition
4. Use of Leased Premises; Quiet Enjoyment
5. Term
6. Rent
7. Net Lease; Non-Terminability
8. Payment of Impositions; Compliance with Law
9. Liens; Recording and Title
10. Indemnification
11. Maintenance and Repair
12. Alterations and Improvements
13. Condemnation
14. Insurance
15. Restoration; Reduction of Rent
16. Procedures Upon Purchase
17. Assignment and Subletting; Subleases
18. Permitted Contests
19. Conditional Limitations; Default Provision
20. Additional Rights of Landlord
21. Notices
22. Estoppel Certificate
23. Surrender
24. Risk of Loss
25. No Merger of Title
26. Books and Records
27. Determination of Value
28. Option to Purchase
29. Financing
30. Non-Recourse as to Landlord
31. Subordination
32. Miscellaneous
Exhibit "A"- Premises
Exhibit "B"- Machinery and Equipment
Exhibit "C"- Schedule of Permitted Encumbrances
Exhibit "D"- Rent Schedule
Exhibit "E"- Covenants
<PAGE> 3
LEASE AGREEMENT, made as of this 10th day of November, 1988, between
CORPORATE PROPERTY ASSOCIATES 8, L.P., ("Landlord"), a Delaware limited
partnership with an address c/o W. P. Carey & Co., Inc., 689 Fifth Avenue, New
York, New York 10022, and HIGH VOLTAGE ENGINEERING CORPORATION ("Tenant"), a
Massachusetts corporation with an address at 101 South Bedford Street,
Burlington, Massachusetts 01803.
In consideration of the rents and provisions herein stipulated to be paid
and performed, Landlord and Tenant hereby covenant and agree as follows:
1. Demise of Premises. Landlord hereby demises and lets to Tenant, and
Tenant hereby takes and leases from Landlord, for the term or terms and upon the
provisions hereinafter specified, the following described property
(collectively, the "Leased Premises"): (a) the premises described on Exhibit "A"
attached hereto together with the easements, rights and appurtenances thereunto
belonging or appertaining (the property described on Exhibit "A", together with
the easements, rights and appurtenances thereunto belonging, is referred to
collectively herein as the "Land"); (b) the buildings, structures and other
improvements now or hereafter constructed on the Land (collectively, the
"Improvements"); and (c) the machinery and equipment described in Exhibit "B"
attached hereto and made a part hereof and installed in and upon the
Improvements excepting therefrom trade fixtures, machinery and equipment used by
Tenant in the conduct of its business, together with all additions and
accessions thereto, substitutions therefor and replacements thereof permitted by
this Lease (collectively, the "Equipment").
2. Certain Definitions.
"Acquisition Cost" shall mean $4,050,000.
"Additional Rent" shall mean Additional Rent as defined in Paragraph 6(b).
"Adjoining Property" shall mean all sidewalks, curbs, gores and vault
spaces adjoining any of the Leased Premises.
"Alterations" shall mean all changes, additions, improvements or repairs
to, all alterations, reconstructions, renewals or removals of and all
substitutions or replacements for any of the Improvements or Equipment, both
interior and exterior, structural and non-structural, and ordinary and
extraordinary.
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"Applicable Final Date" shall mean the Applicable Final Date as defined in
Paragraph 27(c).
"Applicable Initial Date" shall mean the Applicable Initial Date as
defined in Paragraph 27(a)(i).
"Applicable Provision" shall mean the Applicable Provision as defined in
Paragraph 27(a)(ii).
"Assignment" shall mean an assignment of rents and leases from Landlord to
Lender and/or any subsequent assignment of rents covering any of the Leased
Premises, from Landlord to Lender, as the same may from time to time be amended,
supplemented or modified, securing repayment of the Loan.
"Assignment Date" shall mean the Assignment Date as defined in Paragraph
17.
"Assignment Offer Amount" shall mean the Assignment Offer Amount as
defined in Paragraph 17.
"Basic Rent" shall mean Basic Rent as defined in Paragraph 6(a).
"Basic Rent Payment Dates" shall mean the Basic Rent Payment Dates as
defined in Paragraph 6(a).
"Casualty Offer Amount" shall mean the Casualty Offer Amount as defined in
Paragraph 14(i).
"Casualty Termination Date" shall mean the Casualty Termination Date as
defined in Paragraph 14(i).
"Condemnation" shall mean a Taking and/or a Requisition.
"Condemnation Notice" shall mean notice or knowledge of the institution of
or intention to institute any proceeding for Condemnation.
"Default Offer Amount" shall mean the Default Offer Amount as defined in
Paragraph 19(b)(iii).
"Default Rate" shall mean the Default Rate as defined in Paragraph 6(b).
<PAGE> 5
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"Delay Period" shall mean the Delay Period as defined in Paragraph 27(c).
"Environmental Laws" shall mean all federal, state or local laws,
ordinances, rules, regulations or written policies, now or hereafter existing,
which govern or otherwise relate to the use, storage, treatment, transportation,
manufacture, refinement, handling, production or disposal of any Hazardous
Substance, including the laws, ordinances, regulations and written policies
provided pursuant to or under (i) Toxic Substances Control Act, 15 U.S.C.
ss.ss.2601 et seq., (ii) National Historic Preservation Act, 16 U.S.C. ss.ss.470
et seq., (iii) Coastal Zone Management Act of 1899, 33 U.S.C. ss.ss.1451 et
seq., (iv) Rivers and Harbors Act of 1899, 33 U.S.C. ss.ss.401 et seq., (v)
Clean Water Act, 33 U.S.C. ss.ss.1251 et seq., (vi) Flood Disaster Protection
Act, 42 U.S.C. ss.ss.4321 et seq., (vii) National Environmental Policy Act, 42
U.S.C. ss.ss.4321 et seq., (viii) Resource Conservation and Recovery Act of
1976, 42 U.S.C. ss.ss.6901 et seq., (ix) Clean Air Act, 42 U.S.C. ss.ss.7401 et
seq., (x) Comprehensive Environmental Response Compensation and Liability Act,
42 U.S.C. ss.ss.9601 et seq. ("CERCLA"), (x) Oil and Hazardous Material Release
Prevention and Response Act, MGL c.21E, the Hazardous Waste Management Act, MGL
c.21C, and (xi) the Asbestos Removal Requirements, 310 Code of Massachusetts
Regulations.
"Equipment" shall mean the Equipment as defined in Paragraph 1.
"Escrow Charges" shall mean the Escrow Charges, as defined in Paragraph
8(b).
"Escrow Payment" shall mean an Escrow Payment as defined in Paragraph
8(b).
"Event of Default" shall mean an Event of Default as defined in Paragraph
19(a).
"Expiration Date" shall mean the Expiration Date as defined in Paragraph
5.
"Fair Market Value' shall mean, unless the context otherwise requires the
fair market value of the Leased Premises as if unaffected and unencumbered by
this Lease. Fair Market Value, for all purposes of this Lease, shall be
determined in accordance with the procedure specified in Paragraph 27.
<PAGE> 6
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"Hazardous Substances" shall mean (i) any flammable substances,
explosives, radioactive materials, hazardous materials, hazardous wastes, toxic
substances, pollutants, pollution or any related materials or substances
specified in any of the Environmental Laws (including any "hazardous substance"
as defined in CERCLA) and (ii) asbestos, polychlorinated biphenyls and radon.
"Impositions" shall mean the Impositions as defined in Paragraph 8(a).
"Improvements" shall mean the Improvements as defined in Paragraph 1.
"Land" shall mean the Land as defined in Paragraph 1.
"Law" shall mean any constitution, statute, rule of law, code, ordinance,
order, judgment, decree, injunction, rule, regulation or requirement, even if
unforeseen or extraordinary, of every duly constituted governmental authority,
court or agency.
"Leased Premises" shall mean the Leased Premises as defined in Paragraph
1.
"Legal Requirements" shall mean all present and future Laws (including but
not limited to Environmental Laws) and all covenants, restrictions and
conditions now or hereafter of record which may be applicable to Tenant or to
any of the Leased Premises, or to the use, manner of use, occupancy, possession,
operation, maintenance, alteration, repair or reconstruction of any of the
Leased Premises, even if compliance therewith necessitates structural changes or
improvements or results in interference with the use or enjoyment of any of the
Leased Premises.
"Lender" shall mean (a) Far West Federal Bank or (b) any institutional
lender which may, after the date hereof, make a Loan to Landlord.
"Loan" shall mean either (a) a $1,950,000 mortgage loan or loans from Far
West Federal Bank made to Landlord on the date hereof, as the same may hereafter
be modified or amended with Tenant's consent (except that Tenant's consent shall
be required only if the Loan amount, interest rate, payment or prepayment terms
or term or provisions relating to release of insurance or condemnation proceeds
for restoration are modified) or (b) one or more loans of not more than
$2,434,000 (consented to by Tenant) in the aggregate which may be made by Lender
to Landlord
<PAGE> 7
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after the date hereof on similar terms, which may be secured by the Mortgage and
the Assignment and evidenced by the Note and not secured by any other property
of Landlord, and which after being made may be modified or amended only to the
same extent as is permitted by part (a) of this definition.
"Mortgage" shall mean any mortgage encumbering any part or all of the
Leased Premises from Landlord to Lender securing the Loan, as the same may from
time to time be amended, supplemented or modified.
"Net Award" shall mean the entire award payable to Landlord by reason of a
Condemnation, less any expenses incurred by Landlord and Lender in collecting
such award.
"Net Proceeds" shall mean the entire proceeds of any insurance required
under clauses (i), (ii) (to the extent payable to Landlord or Lender), (iv) and
(v) of Paragraph 14(a), less any expenses incurred by Landlord and Lender in
collecting such proceeds.
"Note" shall mean a promissory note(s) evidencing Landlord's obligation to
repay the Loan, which Note may be secured by the Mortgage and the Assignment, as
the same may from time to time be amended, supplemented or modified.
"Offer Amount" shall mean the Termination Offer Amount, the Casualty Offer
Amount, the Assignment Offer Amount or the Default Offer Amount, as the case may
be, and as the context requires.
"Option Purchase Date" shall mean the Option Purchase Date as defined in
Paragraph 28.
"Pennsylvania Lease" shall mean the Lease Agreement dated as of the date
hereof between Landlord, as lessor, and Datcon Instrument Company, as lessee,
with respect to certain premises located in Lancaster County, Pennsylvania.
"Permitted Encumbrances" shall mean those covenants, restrictions,
reservations, liens, conditions and easements, other than the Mortgage and the
Assignment, listed on Exhibit "C" hereto.
"Person" shall mean an individual, partnership, association, corporation
or other entity.
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"Prime Rate" shall mean the average of the interest rates per annum quoted
by Bank of America NT & SA, San Francisco, CA, The Chase Manhattan Bank, N.A.,
New York, NY, Chemical Bank, New York, NY, Citibank, N.A., New York, NY, and
Morgan Guaranty Trust Company, New York, NY, as their respective prime rates,
such average to change effective as of the effective date of any change in any
of the aforesaid prime rates. The Prime Rate shall be the average of such
publicly announced prime rates even though one or more of the aforesaid banks
may actually charge interest on some of its loans at lower rates; and if any of
the aforesaid banks has more than one prime rate of interest in effect
simultaneously, the prime rate of such bank for the purposes of this definition
shall be the highest of such prime rates then in effect for such bank. If three
or more of the aforesaid banks cease to have a publicly announced prime rate,
then, for so long as three or more of the aforesaid banks cease to have a
publicly announced prime rate, the Prime Rate shall be the average per annum
discount rate from time to time on ninety-one (91) day bills issued by the
United States Treasury (the so-called "Treasury bills") at the most recent
auction or, if no such ninety-one (91) day bills are then being issued, Treasury
bills then being issued for the period of time closest to ninety-one (91) days.
"Purchase Price" shall mean the Purchase Price as defined in Paragraph 28.
"Remaining Sum" shall mean the Remaining Sum as defined in Paragraph
15(a).
"Rent" shall mean Basic Rent and Additional Rent.
"Replaced Equipment" shall mean the Replaced Equipment as defined in
Paragraph 11(d).
"Replacement Equipment" shall mean the Replacement Equipment as defined in
Paragraph 11(d).
"Requisition" shall mean any temporary requisition or confiscation of the
use or occupancy of any of the Leased Premises by any governmental authority,
civil or military, whether pursuant to an agreement with such governmental
authority in settlement of or under threat of any such requisition or
confiscation, or otherwise.
"Retention Date" shall mean the later of the date on which the amount of a
Remaining Sum is finally determined or the date on which Landlord's right to
retain the Remaining Sum is finally determined.
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"Set-Off" shall mean a Set-Off as defined in Paragraph 7(a).
"Site Assessments" shall mean the Site Assessments as defined in Paragraph
8(e).
"Site Reviewers" shall mean the Site Reviewers as defined in Paragraph
8(e).
"State" shall mean the Commonwealth of Massachusetts.
"Taking" shall mean any taking of any of the Leased Premises in or by
condemnation or other eminent domain proceedings pursuant to any Law, general or
special, or by reason of any agreement with any condemnor in settlement of or
under threat of any such condemnation or other eminent domain proceeding, or by
any other means, or any de facto condemnation.
"Term" shall mean the Term as defined in Paragraph 5.
"Termination Date" shall mean the Termination Date as defined in Paragraph
13(b).
"Termination Offer Amount" shall mean the Termination Offer Amount as
defined in Paragraph 13(b).
3. Title and Condition.
(a) The Leased Premises are demised and let subject to (i) the Mortgage
and the Assignment, (ii) the rights of any parties in possession of any of the
Leased Premises, (iii) the existing state of title of the Leased Premises,
including the Permitted Encumbrances, as of the commencement of the Term, (iv)
any state of facts which an accurate survey or physical inspection of the Leased
Premises might show, (v) all Legal Requirements, including any existing
violation of any thereof, and (vi) the condition of the Leased Premises as of
the commencement of the Term, without representation or warranty by Landlord; it
being understood and agreed, however, that the recital of the Permitted
Encumbrances herein shall not be construed as a revival of any thereof which for
any reason may have expired or terminated.
(b) Tenant acknowledges that the Leased Premises are in good condition and
repair at the inception of this Lease. LANDLORD HAS NOT MADE AND WILL NOT MAKE
ANY INSPECTION OF ANY OF
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THE LEASED PREMISES. LANDLORD LEASES AND WILL LEASE AND TENANT TAKES AND WILL
TAKE THE LEASED PREMISES AS IS. TENANT ACKNOWLEDGES THAT LANDLORD (WHETHER
ACTING AS LANDLORD HEREUNDER OR IN ANY OTHER CAPACITY) HAS NOT MADE AND WILL NOT
MAKE, NOR SHALL LANDLORD BE DEEMED TO HAVE MADE, ANY WARRANTY OR REPRESENTATION,
EXPRESS OR IMPLIED, WITH RESPECT TO ANY OF THE LEASED PREMISES, INCLUDING ANY
WARRANTY OR REPRESENTATION AS TO (i) ITS FITNESS, DESIGN OR CONDITION FOR ANY
PARTICULAR USE OR PURPOSE, (ii) THE QUALITY OF THE MATERIAL OR WORKMANSHIP
THEREIN, (iii) THE EXISTENCE OF ANY DEFECT, LATENT OR PATENT, (iv) LANDLORD'S
TITLE THERETO, (v) VALUE, (vi) COMPLIANCE WITH SPECIFICATIONS, (vii) LOCATION,
(viii) USE, (ix) CONDITION, (x) MERCHANTABILITY, (xi) QUALITY, (xii)
DESCRIPTION, (xiii) DURABILITY OR (xiv) OPERATION; AND ALL RISKS INCIDENT
THERETO ARE TO BE BORNE BY TENANT. TENANT ACKNOWLEDGES THAT THE LEASED PREMISES
ARE OF ITS SELECTION AND TO ITS SPECIFICATIONS AND THAT THE LEASED PREMISES HAVE
BEEN INSPECTED BY TENANT AND ARE SATISFACTORY TO IT. IN THE EVENT OF ANY DEFECT
OR DEFICIENCY IN ANY OF THE LEASED PREMISES OF ANY NATURE, WHETHER LATENT OR
PATENT, LANDLORD SHALL NOT HAVE ANY RESPONSIBILITY OR LIABILITY WITH RESPECT
THERETO OR FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES (INCLUDING STRICT
LIABILITY IN TORT). THE PROVISIONS OF THIS PARAGRAPH 3(b) HAVE BEEN NEGOTIATED;
AND THE FOREGOING PROVISIONS ARE INTENDED TO BE A COMPLETE EXCLUSION AND
NEGATION OF ANY WARRANTIES BY LANDLORD, EXPRESS OR IMPLIED, WITH RESPECT TO ANY
OF THE LEASED PREMISES, ARISING PURSUANT TO THE UNIFORM COMMERCIAL CODE OR ANY
OTHER LAW NOW OR HEREAFTER IN EFFECT OR ARISING OTHERWISE.
(c) Tenant represents to Landlord that Tenant has examined the title to
the Leased Premises prior to the execution and delivery of this Lease and has
found the same to be satisfactory for the purposes contemplated hereby, and
Tenant acknowledges that title is in Landlord and that Tenant has only the right
of possession and use of the Leased Premises as provided in this Lease. Tenant
further acknowledges that (i) the Improvements conform to all material Legal
Requirements and all requirements of the carriers of all insurance on any of the
Leased Premises, (ii) all easements necessary or appropriate for the use or
operation of the Leased Premises have been obtained, (iii) all contractors and
subcontractors who have performed work on or supplied materials to
<PAGE> 11
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the Leased Premises have been fully paid, and all materials and supplies have
been fully paid for, (iv) the Improvements have been fully completed in all
material respects, in a workmanlike manner of first class quality, and (v) all
Equipment necessary or appropriate for the use or operation of the Leased
Premises has been installed and all Equipment in the Leased Premises is
presently fully operative in all material respects.
(d) Landlord hereby assigns to Tenant, without recourse or warranty
whatsoever, all warranties, guaranties and indemnities, express or implied, and
similar rights which Landlord may have against any manufacturer, seller,
engineer, contractor or builder in respect of any of the Leased Premises,
including any rights and remedies existing under contract or pursuant to the
Uniform Commercial Code. Such assignment shall remain in effect so long as no
Event of Default exists hereunder or until the termination of this Lease, and
upon the occurrence of an Event of Default or termination of this Lease, such
assignment shall cease and all the said warranties, guaranties, indemnities and
other rights shall automatically revert to Landlord.
4. Use of Leased Premises; Quiet Enjoyment.
(a) Tenant may occupy and use the Leased Premises for any lawful purpose,
provided that no Alterations may be made and no additional Improvements may be
constructed except in accordance with Paragraph 12, no Equipment may be removed
from the Leased Premises except in accordance with Paragraphs 11(d), 13(d) and
14(h), and such use will not otherwise violate any provision of this Lease.
Tenant shall not permit any unlawful occupation, business or trade to be
conducted on any of the Leased Premises or any use to be made thereof contrary
to any applicable Legal Requirement then in effect. Tenant shall not use or
occupy or permit any of the Leased Premises to be used or occupied, nor do or
permit anything to be done in or on any of the Leased Premises, in a manner
which would or might (i) violate any certificate of occupancy affecting any of
the Leased Premises, (ii) make void or voidable any insurance then in force with
respect to any of the Leased Premises, (iii) make it difficult or impossible to
obtain fire or other insurance which Tenant is required to furnish hereunder,
(iv) cause structural injury to any of the Improvements, or (v) constitute a
public or private nuisance or waste.
(b) Subject to the other provisions of this Lease, so long as no Event of
Default has occurred and is continuing, Landlord covenants to do no act to
disturb the peaceful and quiet occupation and enjoyment of the Leased Premises
by Tenant, provided that Landlord may enter upon and
<PAGE> 12
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examine any of the Leased Premises at reasonable times and may take such action
with respect to the Leased Premises as is permitted by any provision hereof.
5. Term. Subject to the provisions hereof, Tenant shall have and hold the
Leased Premises for an initial term (such term, as extended or renewed in
accordance with the provisions hereof, being called the "Term") commencing on
the date hereof and ending on the last day of the three hundredth (300th)
calendar month next following the date hereof (the "Expiration Date"). If all
Rent and all other sums due hereunder shall not have been fully paid by the end
of the Term, Landlord may, at its option, extend the Term until all said sums
shall have been fully paid.
Provided this Lease shall not have been terminated pursuant to any
provision hereof, the initial Term shall be deemed to be automatically extended
for an additional period of five (5) years unless Tenant shall notify Landlord
in writing in recordable form at least two (2) years prior to the expiration of
the initial Term that Tenant is terminating this Lease as of the end of the
initial Term. If the initial Term is automatically extended as aforesaid and
this Lease has not been terminated pursuant to any provision hereof prior to the
expiration of the first extension period, the Term shall be further
automatically extended for an additional consecutive period of five (5) years
unless Tenant shall notify Landlord in writing at least two (2) years prior to
the expiration of the first extension period that Tenant is terminating this
Lease as of the end of the first extension period. If the Term is automatically
extended as aforesaid and this Lease has not been terminated pursuant to any
provision hereof prior to the expiration of the second extension period, the
Term shall be further automatically extended for an additional consecutive
period of five (5) years unless Tenant shall notify Landlord in writing at least
two (2) years prior to the expiration of the second extension period that Tenant
is terminating this Lease as of the end of the second extension period. If the
Term is automatically extended as aforesaid and this Lease has not been
terminated pursuant to any provision hereof prior to the expiration of the third
extension period, the Term shall be further automatically extended for an
additional consecutive period of five (5) years unless Tenant shall notify
Landlord in writing at least two (2) years prior to the expiration of the third
extension period that Tenant is terminating this Lease as of the end of the
third extension period. If the Term is automatically extended as aforesaid and
this Lease has not been terminated pursuant to any provision hereof prior to the
expiration of the fourth extension period, the Term shall be further
automatically extended for an additional consecutive period of five (5) years
unless Tenant shall notify Landlord in writing at least two (2) years prior to
the expiration of the fourth
<PAGE> 13
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extension period that Tenant is terminating this Lease as of the end of the
fourth extension period. Any such notice of termination shall be accompanied by
an Amendment to Notice of Lease in recordable form, executed and acknowledged by
Tenant specifying the applicable termination date.
In the absence of such notice of termination by Tenant to Landlord and in
the absence of any termination of this Lease pursuant to any other provision
hereof, the Term shall be automatically extended for the applicable extension
period specified above and no instrument of extension or renewal need be
executed. Any such extension of the Term shall be subject to and continue in
full force and effect all of the provisions of this Lease except that the Basic
Rent payable during each extension period shall be as provided in Exhibit "D"
attached hereto and made a part hereof.
In the event that Tenant exercises its option not to extend or not to
further extend the Term, as hereinabove provided, or upon the occurrence of an
Event of Default, then Landlord shall have the right during the remainder of the
Term then in effect to (a) advertise the availability of the Leased Premises for
sale or for reletting and to erect upon the Leased Premises signs indicating
such availability (provided that, if there is no default in the payment of Basic
Rent or Additional Rent hereunder, such signs do not unreasonably interfere with
the use of the Leased Premises by Tenant), and (b) show the Leased Premises to
prospective purchasers or tenants at such reasonable times during normal
business hours as Landlord may select after reasonable notice to Tenant that it
is exercising such right; provided, that Landlord will not materially interfere
with the use of the Leased Premises by Tenant.
6. Rent.
(a) Tenant shall pay to Landlord, as annual rent for the Leased Premises
during the Term, the amounts determined in accordance with the schedule set
forth in Exhibit "D" attached hereto and made a part hereof ("Basic Rent"),
commencing on the first day of the first month next following the date hereof
and continuing on the same day of each month thereafter during the Term (the
said days being called the "Basic Rent Payment Dates"), and shall pay the same
at Landlord's address set forth above, or at such other places or to such other
Persons as Landlord from time to time may designate upon fifteen (15) days prior
written notice to Tenant. Each rental payment shall be made, at Landlord's sole
option and upon at least 10 days prior written notice from Landlord to Tenant,
(i) by a check hand delivered to Landlord at least five (5) business days
<PAGE> 14
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before the applicable Basic Rent Payment Date or mailed to Landlord at least ten
(10) days before that date or (ii) in federal or other immediately available
funds which at the time of such payment shall be legal tender for the payment of
public or private debts in the United States of America. Pro rata Basic Rent for
the period from the date hereof through the last day of the month hereof shall
be paid on the date hereof. Landlord may, at Landlord's option, by at least
fifteen (15) days prior written notice to Tenant, require Tenant to pay
installments of Basic Rent directly to one or more Persons in addition to
Landlord, in such proportions as Landlord may select; and Tenant shall make such
"split" payments of Basic Rent in the amounts, to the payees and in the manner
specified by Landlord in any such notice.
(b) Tenant shall pay and discharge when the same shall become due, as
additional rent, all other amounts and obligations which Tenant assumes or
agrees to pay or discharge pursuant to this Lease, together with every fine,
penalty, interest and cost which may be added for non-payment or late payment
thereof. After the date an installment of Basic Rent is due and not paid or
after the occurrence of any Event of Default (other than non-payment of Basic
Rent) Tenant shall pay to Landlord on demand, as additional rent, 4% of the
amount of such installment. From the date of occurrence of an Event of Default
until such Event of Default is cured, Tenant shall pay to Landlord, on demand, a
additional rent, a sum equal to any additional sums (including any late charge
or default interest) which might be payable by Landlord to any Lender under any
Note occasioned by non-payment or late payment of Basic Rent or by the
occurrence of an Event of Default under this Lease. In addition, Tenant shall
pay to Landlord on demand, as additional rent, interest at the rate (the
"Default Rate") of four percent (4%) over the Prime Rate per annum on the
following sums until paid in full: (i) all overdue installments of Basic Rent in
excess of payments due under the Note for the same period from the respective
due dates thereof, (ii) all overdue amounts of additional rent relating to
obligations which Landlord shall have paid on behalf of Tenant, from the date of
payment thereof by Landlord, and (iii) on all other overdue amounts of
additional rent from the date Landlord demands payment. All the foregoing
additional rent is referred to herein as "Additional Rent". In the event of any
failure by Tenant to pay or discharge any Additional Rent, Landlord shall have
all rights, powers and remedies provided herein, by law or otherwise, in the
event of non-payment of Basic Rent. The requirements of Paragraph 19(f)
regarding notice and grace periods need not be satisfied prior to the imposition
of Additional Rent under this Paragraph 6(b).
<PAGE> 15
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7. Net Lease; Non-Terminability.
(a) This is a net lease and all Rent and all other sums payable hereunder
by Tenant shall be paid without notice or demand, and without set-off,
counterclaim, recoupment, abatement, suspension, deferment, diminution,
deduction, reduction or defense (collectively, a "Set-Off").
(b) This Lease shall not terminate, Tenant shall not have any right to
terminate this Lease during the Term (except as otherwise expressly provided
herein), Tenant shall not be entitled to any Set-Off of or to any Rent or any
other sums payable under this Lease (except as otherwise expressly provided
herein), and the obligations of Tenant under this Lease shall not be affected by
any interference with Tenant's use of any of the Leased Premises for any reason,
including the following: (i) any damage to or destruction of any of the Leased
Premises by any cause whatsoever, (ii) any Condemnation, (iii) the prohibition,
limitation or restriction of Tenant's use of any of the Leased Premises, (iv)
any eviction by paramount title or otherwise, (v) Tenant's acquisition of
ownership of any of the Leased Premises other than pursuant to an express
provision of this Lease, (vi) any default on the part of Landlord hereunder or
under any other agreement, (vii) any latent or other defect in, or any theft or
loss of, any of the Leased Premises, (viii) the breach of any warranty of any
seller or manufacturer of any of the Equipment, (ix) any violation of Paragraph
4(b) by Landlord, or (x) any other cause, whether similar or dissimilar to the
foregoing, any present or future Law to the contrary notwithstanding. The
obligations of Tenant hereunder shall be separate and independent covenants and
agreements, all Rent and all other sums payable by Tenant hereunder shall
continue to be payable in all events (or, in lieu thereof, Tenant shall pay
amounts equal thereto), and the obligations of Tenant hereunder shall continue
unaffected, unless the requirement to pay or perform the same shall have been
terminated pursuant to an express provision of this Lease. The obligation to pay
Rent or amounts equal thereto shall not be affected by any collection of rents
by any governmental body pursuant to a tax lien or otherwise, even though such
obligation results in a double payment of Rent.
(c) Tenant shall remain obligated under this Lease in accordance with its
provisions and, except as otherwise expressly provided herein, Tenant shall not
take any action to terminate, rescind or avoid this Lease, notwithstanding (i)
the bankruptcy, insolvency, reorganization, composition, readjustment,
liquidation, dissolution, winding-up or other proceeding affecting Landlord so
long as such proceeding does not terminate Tenant's right to possession, (ii)
the exercise of any remedy, including foreclosure, under the Mortgage or the
Assignment, or (iii) any
<PAGE> 16
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action with respect to this Lease (including the disaffirmance hereof) which may
be taken by Landlord, any trustee, receiver or liquidator of Landlord or any
court under the Federal Bankruptcy Code or otherwise.
(d) Tenant waives all rights which may now or hereafter be conferred by
law (i) to quit, terminate or surrender this Lease or any of the Leased
Premises, or (ii) to any Set-Off of or to any Rent or any other sums payable
under this Lease, except as otherwise expressly provided herein.
8. Payment of Impositions; Compliance with Law.
(a) Subject to the provisions of Paragraph 18 hereof (relating to
contests), Tenant shall, before interest or penalties are due thereon, pay and
discharge all taxes of every kind and nature (including real and personal
property, franchise taxes, sales taxes and any rent tax), all charges for any
easement or agreement maintained for the benefit of any of the Leased Premises,
all general and special assessments, levies, permits, inspection and license
fees, all water and sewer rents and charges, all charges for utility and
communication services relating to any of the Leased Premises, all ground rents,
and all other public charges whether of a like or different nature, even if
unforeseen or extraordinary, imposed upon or assessed against (i) Tenant, (ii)
any of the Leased Premises, (iii) Landlord as a result of or arising in respect
of the acquisition, ownership, occupancy, leasing, use, possession or sale of
any of the Leased Premises, any activity conducted on the Leased Premises, or
Rent or (iv) Lender by reason of the Note or Mortgage and which (as to this
clause (iv)) Landlord has agreed to pay (collectively, the "Impositions").
In the event Tenant fails to make payments of Impositions within the time
and in the manner provided above, Landlord shall have the right to require
Tenant to pay such Impositions to Lender in monthly installments and in such
amounts as Landlord shall reasonably request.
Nothing herein shall obligate Tenant to pay (A) income, excess profits, or
other taxes, if any, of Landlord, determined on the basis of Landlord's net
income or net worth, (B) any estate, inheritance, succession, gift or similar
tax, or (C) any capital gains tax imposed on Landlord in connection with the
sale of any of the Leased Premises to any Person, unless the taxes referred to
in clause (A) above are in lieu of or a substitute for any other tax, assessment
or other charge upon or with respect to any of the Leased Premises which, if
such other tax, assessment or other charge were in effect, would be payable by
Tenant.
<PAGE> 17
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In the event that any assessment against any of the Leased Premises may be
paid in installments, Tenant shall have the option to pay such assessment in
installments; and, in such event, Tenant shall be liable only for those
installments which become due and payable during the Term. Tenant shall prepare
and file all tax reports required by governmental authorities which relate to
the Impositions. Tenant shall deliver to Landlord, within ten (10) days of
receipt thereof, copies of all settlements and notices pertaining to the
Impositions which may be issued by any governmental authority and, within ninety
(90) days after the end of each calendar year of the Term, receipts for payments
of all Impositions made during such year.
(b) At the time of each payment of Basic Rent, Tenant shall pay to
Landlord, if requested by Landlord, an additional sum (the "Escrow Payment")
sufficient, in the aggregate, to pay the Escrow Charges (as hereinafter defined)
as they become due; provided, however, that escrow payments for taxes and
insurance premiums shall be required only if required by Lender to be escrowed
with Lender by Landlord. The "Escrow Charges" shall mean any of the real estate
taxes and premiums on any insurance required by this Lease which Landlord, at
its option, may require Tenant to pay to Landlord under this Article. Landlord
shall determine the amount of the Escrow Charges and of' each Escrow Payment.
The Escrow Payments shall not be commingled with other funds of Landlord or
others, shall be invested at passbook" rate and interest thereon shall be for
the account of Tenant. Landlord shall apply the Escrow Payments to the payment
of the Escrow Charges in such order or priority as Landlord shall determine. If,
at any time, the Escrow Payments theretofore paid to Landlord shall be
insufficient for the payment of the Escrow Charges, Tenant, within ten (10) days
after demand, shall pay the amount of the deficiency to Landlord.
(c) Tenant shall comply with and conform to all of the provisions of the
Legal Requirements, subject to the provisions of Paragraph 18.
(d) Tenant shall not hereafter cause, permit or suffer to occur (i) a
discharge, spillage, uncontrolled loss, release, seepage or filtration (a
"spill") of any Hazardous Substance at, upon, under or within the Leased
Premises or from the Leased Premises to any real estate contiguous thereto or
(ii) the deposit, storage, disposal, dumping, injecting, placement or use of any
Hazardous Substance at, upon, under or within the Leased Premises or any real
estate contiguous thereto. Tenant and its agents shall not engage in operations
at or near the Leased Premises which could result in any liability, cost or
expense to Landlord or any other owner or
<PAGE> 18
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occupier of the Leased Premises or which could result in the creation of a lien
on the Leased Premises under any Environmental Law or under any similar
applicable law or regulation. Tenant represents that Tenant has not permitted or
suffered to exist, and covenants that it will not permit or suffer to exist, any
tenant or occupant of the Leased Premises to engage in any activity that could
result in any liability, cost or expense to any such tenant or occupant,
Landlord or any other owner of the Leased Premises or any portion thereof or the
creation of a lien on the Leased Premises, under any Environmental Law or under
any similar applicable law or regulation.
(e) Tenant, promptly upon the written request of Landlord from time to
time, shall permit such persons as Landlord may designate ("Site Reviewers") to
visit the Leased Premises from time to time and perform environmental site
investigations and assessments ("Site Assessments") on the Leased Premises for
the purpose of determining whether there exists on the Leased Premises any
environmental condition which could result in any liability, cost or expense to
Landlord or any other owner or occupier of the Leased Premises relating to
Hazardous Substances. Such Site Assessments may include both above and below the
ground testing for environmental damage or the presence of Hazardous Substances
on the Leased Premises and such other tests on the Leased Premises as may be
necessary to conduct the Site Assessments in the opinion of the Site Reviewers.
Tenant shall supply to the Site Reviewers such historical and operational
information regarding the Leased Premises as may be reasonably requested by the
Site Reviewers to facilitate the Site Assessments and shall make available for
meetings with the Site Reviewers appropriate personnel having knowledge of such
matters. The cost of performing and reporting all Site Assessments shall be paid
by Tenant within five (5) days after demand by Landlord, with interest to accrue
at the Default Rate (if such sums are not paid by Tenant) commencing as of the
fifth day following written demand by Landlord.
(f) If Tenant fails to comply with any requirement of any Environmental
Law in connection with any spill of any Hazardous Substance affecting the Leased
Premises or in connection with the deposit, storage, placement or use of any
Hazardous Substance at, upon, under or within the Leased Premises or any real
estate contiguous thereto, Landlord may, at its sole option, take any and all
actions as Landlord shall deem necessary or advisable in order to cure such
noncompliance. Any amounts so paid, together with interest thereon at the
Default Rate from the date of payment by Landlord, shall be immediately due and
payable by Tenant to Landlord. Nothing contained
<PAGE> 19
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herein shall obligate Landlord to cure such noncompliance or release Tenant from
any of its obligations hereunder.
(g) Tenant shall notify Landlord immediately after becoming aware thereof
of any violation of or noncompliance with any of the covenants contained in this
Paragraph hereof and shall forward to Landlord immediately upon receipt thereof
copies of all orders, reports, notices, permits, applications or other
communications relating to any such violation or noncompliance or any other
matter relating in any fashion to any Environmental Law as it may affect or
relate to the Leased Premises.
(h) All future leases, subleases or concession agreements relating to the
Leased Premises entered into by Tenant shall contain covenants of the other
party thereto which are identical to the covenants contained in Paragraphs 8(c),
8(d), 8(e), 8(f) and 8(g).
9. Liens: Recording and Title.
(a) Tenant shall not, directly or indirectly, create or permit to be
created or to remain, and shall promptly discharge or remove, any lien, levy or
encumbrance on any of the Leased Premises or on any Rent or any other sums
payable by Tenant under this Lease, other than the Mortgage, the Assignment, the
Permitted Encumbrances and any mortgage, lien, encumbrance or other charge
created by or resulting solely from any act or omission of Landlord. NOTICE IS
HEREBY GIVEN THAT LANDLORD SHALL NOT BE LIABLE FOR ANY LABOR, SERVICES OR
MATERIALS FURNISHED OR TO BE FURNISHED TO TENANT OR TO ANYONE HOLDING ANY OF THE
LEASED PREMISES THROUGH OR UNDER TENANT, AND THAT NO MECHANICS' OR OTHER LIENS
FOR ANY SUCH LABOR, SERVICES OR MATERIALS SHALL ATTACH To OR AFFECT THE INTEREST
OF LANDLORD IN AND TO ANY OF THE LEASED PREMISES. LANDLORD SHALL BE PERMITTED TO
POST ANY NOTICES ON THE LEASED PREMISES REGARDING SUCH NON-LIABILITY OF
LANDLORD.
(b) Tenant shall execute, deliver and record, file or register from time
to time all such instruments as may be required by any present or future Law in
order to evidence the respective interests of Landlord and Tenant in any of the
Leased Premises, and shall cause a notice of this Lease, and any supplement
hereto or to such other instrument, if any, as may be appropriate, to be
recorded, filed or registered and re-recorded, refiled or re-registered in such
manner and in such places as may be required by any present or future Law in
order to publish notice and
<PAGE> 20
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protect the validity or priority of this Lease. If a notice of this Lease cannot
be recorded, filed or registered, this Lease shall be recorded, filed or
registered. Landlord shall execute any such notice to the extent required for
recording.
(c) Nothing in this Lease and no action or inaction by Landlord shall be
deemed or construed to mean that Landlord has granted to Tenant any right, power
or permission to do any act or to make any agreement which may create, give rise
to, or be the foundation for, any right, title, interest or lien in or upon the
estate of Landlord in any of the Leased Premises.
10. Indemnification. Tenant shall, to the extent permitted by applicable
law, pay, protect, indemnify, save and hold harmless Landlord and all other
Persons described in Paragraph 30 from and against any and all liabilities,
losses, damages, penalties, costs, expenses (including all reasonable attorneys'
fees and expenses), causes of action, suits, claims, demands or judgments of any
nature whatsoever, howsoever caused, arising from (a) any matter pertaining to
any of the Leased Premises or Adjoining Property or the ownership, use, non-use,
occupancy, operation, condition, design, construction, maintenance, repair or
rebuilding of any of the Leased Premises or Adjoining Property, (b) any injury
to or death of any person or any loss of or damage to any property in any manner
arising from any of the Leased Premises or Adjoining Property or from any matter
described in clause (a) above, or connected therewith or occurring thereon,
whether or not Landlord has or should have knowledge or notice of the defect or
condition, if any, causing or contributing to said injury, death, loss, damage
or other claim, (c) any violation by Tenant of any provision of this Lease, any
contract or agreement to which Tenant is a party, any Legal Requirement or any
Permitted Encumbrance, (d) any other cause pertaining to this Lease or any of
the Leased Premises or Adjoining Property or the transaction of which this Lease
forms a part (except and unless caused by Landlord's gross negligence or willful
misconduct), or (e) the alleged deposit, storage, disposal, burial, dumping,
injecting, spilling, leaking or other use, placement or release in, on or
affecting any of the Leased Premises of a Hazardous Substance or otherwise
arising from any other alleged violation of any of the Environmental Laws
including (i) liability for costs of removal or remedial action incurred by the
United States Government or the State, or response costs incurred by any other
person or entity, or damages from injury to or destruction or loss of natural
resources, including the reasonable costs of assessing such injury, destruction
or loss, incurred pursuant to Section 107 of CERCLA, or any successor Section or
Act; (ii) liability for costs and expenses of abatement, correction or clean-up,
fines, damages, response costs or penalties which
<PAGE> 21
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arise from the provisions of any of the other Environmental Laws; and (iii)
liability for personal injury or property damage arising under any statutory or
common-law tort theory, including damages assessed for the maintenance of a
public or private nuisance or for carrying on of an abnormally dangerous
activity. In case any action or proceeding is brought against Landlord or any
other Person described in Paragraph 30 by reason of any such claim, Landlord (or
such other Person, as the case may be) may either (i) retain its own counsel and
defend such action (if permitted by the applicable insurance policy), with all
reasonable costs of such defense to be paid by Tenant when billed by Landlord
(or such other Person, as the case may be) (it being understood that Tenant may
employ counsel of its choice, at Tenant's expense, to monitor the defense of any
such action), or (ii) promptly notify Tenant to resist or defend such action or
proceeding by retaining counsel reasonably satisfactory to Landlord, and
Landlord or such other Person will cooperate and assist in the defense of such
action or proceeding if reasonably requested so to do by Tenant.
The obligations of Tenant under this Paragraph 10 shall survive any
termination of this Lease. Landlord's rights to enforce Tenant's obligations
under this Paragraph 10 are in addition to Landlord's other rights and remedies
provided herein.
11. Maintenance and Repair.
(a) Tenant shall at all times maintain the Leased Premises and the
Adjoining Property in good repair and appearance and, in the case of the
Equipment, in good mechanical condition, except for ordinary wear and tear, and
shall promptly make all Alterations (substantially equivalent in quality and
workmanship to the original work) of every kind and nature, whether foreseen or
unforeseen, structural or non-structural, which may be required to be made upon
or in connection with any of the Leased Premises in order to keep and maintain
the Land and Improvements in as good repair and appearance as they were on the
date hereof, and the Equipment in as good mechanical condition as it was on the
later of the date hereof or the date of its installation except for ordinary
wear and tear; provided, however, that Tenant's maintenance and repair
obligations in the event of a casualty loss or taking shall be governed by
Paragraphs 13 through 15 below. Tenant shall do or cause others to do all
shoring of the Leased Premises or Adjoining Property or of foundations and walls
of the Improvements and every other act necessary or appropriate for the
preservation and safety thereof, by reason of or in connection with any
excavation or other building operation upon any of the Leased Premises or
Adjoining Property, whether or not Landlord shall, by any Legal Requirement, be
required to take such action or be
<PAGE> 22
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liable for failure to do so. Landlord shall not be required to make any
Alteration, whether foreseen or unforeseen, or to maintain any of the Leased
Premises or Adjoining Property in any way, and Tenant hereby expressly waives
any right which may be provided for in any Law now or hereafter in effect to
make Alterations at the expense of Landlord. Any Alteration made by Tenant
pursuant to this subparagraph (a) or pursuant to subparagraph (b) of this
Paragraph 11 shall be made in conformity with the provisions of Paragraph 12.
(b) Tenant shall take such action as may be reasonably required so as to
prevent (i) the encroachment of any Improvement, now or hereafter constructed,
upon any property, street or right-of-way (including the Adjoining Property)
adjoining any of the Leased Premises, (ii) the violation of the provisions of
any restrictive covenant affecting any of the Leased Premises, (iii) the
hindrance or obstruction of any easement or right-of-way to which any of the
Leased Premises is subject, or (iv) the impairment of the rights of others in,
to or under any of the foregoing.
(c) Landlord shall have the right (but no obligation), upon notice to
Tenant (or without notice in case of emergency), to enter upon any of the Leased
Premises for the purpose of making any Alterations which may be necessary by
reason of Tenant's failure to comply with the provisions of subparagraphs (a)
and (b) of this Paragraph 11. Except in case of emergency, the right of entry
shall be exercised at reasonable times and at reasonable hours. The reasonable
cost of any such entry, together with the reasonable cost of all such
Alterations, shall be Additional Rent; and Tenant shall pay the same to
Landlord, together with interest thereon at the Default Rate from the time of
payment by Landlord until paid by Tenant, immediately upon written demand
therefor and upon submission of evidence of Landlord's payment of such costs.
(d) Tenant shall, from time to time, replace with other operational
equipment or parts (the "Replacement Equipment") any of the Equipment (the
"Replaced Equipment") which is necessary for the conduct of Tenant's business in
the Leased Premises or for the operation and maintenance of the Leased Premises
and which shall have (i) become worn out, obsolete or unusable for the purpose
for which it is intended, (ii) been taken by a Condemnation as provided in
Paragraph 13(d), or (iii) been lost, stolen, damaged or destroyed as provided in
Paragraph 14(h); provided, however, that the Replacement Equipment shall (A) be
in good operating condition, (B) have a value and useful life at least equal to
the value and estimated useful life of the Replaced Equipment immediately prior
to the time that the Replaced Equipment had become so worn out, obsolete or
unusable, so taken, or so lost, stolen, damaged or destroyed,
<PAGE> 23
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and (C) be suitable for a use which is the same or similar to that of the
Replaced Equipment. Tenant shall repair at its sole cost and expense all damage
to the Leased Premises caused by the removal of Replaced Equipment or other
personal property of Tenant or the installation of Replacement Equipment. All
Replacement Equipment shall become the property of Landlord, shall be free and
clear of all liens and rights of others and shall become a part of the Equipment
to the same extent as the Replaced Equipment had been. If so requested by
Landlord in writing, Tenant shall promptly cause to be executed and delivered to
Landlord an invoice, bill of sale or other appropriate instrument evidencing the
transfer or assignment to Landlord of all estate, right, title and interest
(other than the leasehold estate created hereby) of Tenant or any other Person
in and to the Replacement Equipment, free from all liens and other exceptions to
title; and Tenant shall pay all taxes, fees, costs and other expenses that may
become payable as a result thereof. At the expiration of the Term or the sooner
termination of this Lease, all Equipment shall be in good operating condition,
ordinary wear and tear excepted.
12. Alterations and Improvements. Except as otherwise provided in
Paragraph 11 and in this Paragraph 12, Tenant shall not (a) make any
Alterations, (b) construct upon the Land any additional Improvements or (c)
install equipment in the Improvements or accessions to the Equipment, except in
the ordinary course of its business, without the prior written approval of
Landlord, which approval will not be unreasonably withheld. In addition, Tenant
shall not do any other act which would impair the value of the Leased Premises.
In the event that Landlord gives its prior written consent to any of the actions
enumerated in clauses (a), (b) or (c) above, (i) the market value of the Leased
Premises shall not be lessened by any such Alteration, construction or
installation, or its usefulness impaired, (ii) all such Alterations,
construction and installations shall be performed by Tenant in a good and
workmanlike manner, (iii) all such Alterations, construction and installations
shall be expeditiously completed in compliance with all Legal Requirements, (iv)
all work done in connection with any such Alteration, construction or
installation shall comply with the requirements of all insurance policies
required to be maintained by Tenant hereunder, (v) Tenant shall promptly pay all
costs and expenses of any such Alteration, construction or installation and
shall discharge or remove all liens filed against any of the Leased Premises
arising out of the same, (vi) Tenant shall procure and pay for all permits and
licenses required in connection with any such Alteration, construction or
installation, (vii) all such Alterations, construction and installations shall
be the property of Landlord and shall be subject to this Lease, and
<PAGE> 24
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(viii) Tenant shall comply, to the extent requested by Landlord, with the
provisions of clauses (i) through (iv) of Paragraph 15(a).
13. Condemnation.
(a) Tenant, immediately upon receiving a Condemnation Notice, shall notify
Landlord and Lender thereof and Landlord and Lender shall be entitled to
participate with Tenant in any Condemnation proceeding and/or negotiations under
threat thereof and to participate with Tenant in contesting the Condemnation
and/or the amount of the Net Award therefor, all at Tenant's expense; provided,
however, that if an Event of Default has occurred and is continuing Tenant shall
have no right to participate in any such proceeding, negotiations or contest.
Subject to the provisions of this Paragraph 13, Tenant hereby irrevocably
assigns to Landlord any award or payment to which Tenant is or may be entitled
by reason of any Condemnation, whether the same shall be paid or payable for
Tenant's leasehold interest hereunder or otherwise; but nothing in this Lease
shall impair Tenant's right to any award or payment on account of Tenant's trade
fixtures, equipment or other tangible property which is not part of the
Equipment, moving expenses or loss of business, if available, to the extent that
and so long as (i) Tenant shall have the right to make, and does make, a
separate claim therefor against the condemnor and (ii) such claim does not in
any way reduce either the amount of the award otherwise payable to Landlord for
the Condemnation of Landlord's fee interest in the Leased Premises or the amount
of the award (if any) otherwise payable for the Condemnation of Tenant's
leasehold interest hereunder.
(b) If (i) the entire Leased Premises, or (ii) any substantial portion of
the Leased Premises, which portion Tenant determines, in good faith, to be
sufficient to render the remaining portion thereof uneconomic for the use of
Tenant or any other tenant to which such portion might reasonably be leased,
shall be taken by a Taking or under threat thereof, then Tenant shall, not later
than thirty (30) days after Landlord gives Tenant notice that Landlord has
received a Condemnation Notice or Tenant otherwise receives a Condemnation
Notice, give notice to Landlord of its intention to terminate this Lease on the
first Basic Rent Payment Date (the "Termination Date") occurring after the date
on which the Fair Market Value of the Leased Premises is determined in
accordance with Paragraph 27 (but not less than 60 days after the date on which
the Fair Market Value of the Leased Premises is determined).
Such notice of intention to terminate shall contain (A) an irrevocable
offer of Tenant to purchase the Leased Premises and the Net
<PAGE> 25
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Award applicable thereto, if any, on the Termination Date for the purchase price
(the "Termination Offer Amount") specified in the next sentence and (B) in the
event that less than the entire Leased Premises shall have been taken or be
under threat thereof, a certificate of Tenant, signed by the president or a vice
president thereof, stating that, in Tenant's good faith judgment, the portion of
the Leased Premises to be so taken is sufficient to fulfill the conditions set
forth in clause (ii) of this Paragraph 13(b) and certifying that Tenant will
forever abandon operations on the remainder of the Leased Premises, if any. The
Termination Offer Amount shall be the greater of (1) the Fair Market Value of
the Leased Premises as of the date immediately prior to the Condemnation Notice
or (2) the sum of the Acquisition Cost and any prepayment penalty which may be
payable under the Note or Mortgage. Promptly upon the delivery to Landlord of
such notice of intention to terminate, Landlord and Tenant shall commence to
determine such Fair Market Value in accordance with Paragraph 27.
No rejection of an offer under this Paragraph 13(b) shall be effective for
any purpose unless consented to by Lender. If Landlord shall reject such offer
by notice to Tenant containing the written consent of Lender to such rejections,
not later than the sixtieth (60th) day following determination of Fair Market
Value, then this Lease shall terminate on the Termination Date upon (x) payment
of all Rent and any other charges due and unpaid under this Lease as of the
Termination Date and (y) compliance by Tenant with all other obligations and
liabilities under this Lease which have arisen on or prior to the Termination
Date and, on the Termination Date, Tenant shall immediately vacate and have no
further right, title or interest in or to any of the Leased Premises, and upon
such termination the Net Award shall be retained by Landlord.
Unless Landlord shall have rejected such offer by the foregoing notice to
Tenant not later than the twentieth (20th) day following the determination of
Fair Market Value, Landlord shall be conclusively presumed to have accepted such
offer. If such offer is accepted by Landlord, Tenant shall pay to Landlord the
Termination Offer Amount on the Termination Date and, provided an Event of
Default does not then exist hereunder, Landlord shall convey to Tenant the
remaining portion of the Leased Premises, if any, in accordance with the
provisions of Paragraph 16 and Landlord shall assign to Tenant its entire
interest in and to the Net Award or any part thereof that has not been received
by Landlord in connection with the Condemnation and/or deliver to Tenant or
credit against the Termination Offer Amount such Net Award or any part thereof
which shall have been received by Landlord and/or Lender and/or credit against
the Termination Offer Amount such Net Award or
<PAGE> 26
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any part therein which if payable to Lender under the Mortgage have not been
received by Lender. Any acceptance of such offer by Landlord shall not relieve
Tenant of its obligations to pay Rent, and perform all of Tenant's other
obligations hereunder, through the date of the closing of the purchase pursuant
to the acceptance of such offer.
Notwithstanding anything to the contrary hereinabove contained, if
Landlord shall have rejected Tenant's offer to purchase the Leased Premises and,
on the Termination Date specified above, Landlord shall not have received the
full amount of the Net Award payable by reason of the Taking, the Termination
Date shall automatically be extended to the first Basic Rent Payment Date
occurring after receipt by Landlord of the full amount of the Net Award. Such
extension shall occur regardless of the reason for Landlord's failure to receive
the full amount of the Net Award prior to the originally stated Termination
Date.
(c) In the event of any Taking of any of the Land or Improvements which
does not result in a termination of this Lease as to all of the Leased Premises,
this Lease shall, notwithstanding the Taking, continue and there shall be no
abatement or reduction of Rent or any other sums payable by Tenant hereunder,
except as provided in Paragraph 15(b). Promptly after such Taking, Tenant, as
required in Paragraph 11(a), shall commence and diligently continue to restore
the Land and Improvements as nearly as possible to their value, condition and
character immediately prior to such Taking, in accordance with the provisions of
Paragraph 12. Upon the final payment to Landlord of the Net Award of a Taking
which falls within the provisions of this subparagraph (c), Landlord shall make
the Net Award available to Tenant for restoration in accordance with and subject
to the provisions of Paragraph 15(a).
In the event of a Requisition of any of the Land or Improvements, if
Landlord is required to pay the Net Award of such Requisition to Lender in
accordance with the provisions of the Note and the Mortgage and the debt service
payments due under the Note are thereafter reduced by virtue of such payment of
the Net Award to Lender, then each installment of Basic Rent payable on or after
the effective date of such reduction in debt service shall be reduced in the
same amount and for the same period as payments are reduced under the Note. In
the event that the Net Award of a Requisition of any of the Land or Improvements
is retained by Landlord, Landlord shall apply such Net Award, to the extent
received, to the installments of Basic Rent thereafter payable until such Net
Award has been applied in full or until the Term hereof has expired, whichever
first occurs. Upon the expiration of the Term, any portion of such Net
<PAGE> 27
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Award which shall not have been previously credited to Tenant shall be retained
by Landlord.
(d) If any of the Equipment shall be taken by a Condemnation other than a
Condemnation which falls within the provisions of Paragraph 13(b), the Term
shall nevertheless continue and there shall be no abatement or reduction of Rent
or any other sums payable by Tenant hereunder. Tenant shall, whether or not the
Net Award is sufficient for the purpose, promptly replace the Equipment so
taken, subject to and in accordance with the provisions of Paragraph 11(d), and
the Net Award of such a Condemnation made for the loss of the replaced Equipment
only shall thereupon be payable to Tenant. The remainder of the Net Award shall
be applied as hereinabove provided.
(e) No agreement with any condemnor in settlement of or under threat of
any Condemnation shall be made by Tenant without the written consent of Landlord
and Lender.
14. Insurance.
(a) Tenant shall maintain at its sole cost and expense the following
insurance on or in connection with the Leased Premises:
(i) Insurance against loss or damage to the Improvements and
Equipment by fire and other risks from time to time included under standard
extended and additional extended coverage policies, including vandalism and
malicious mischief, sprinkler, and flood insurance, to the extent any of the
Leased Premises are in a flood zone, in amounts not less than the actual
replacement value of the Improvements and Equipment, excluding footings and
foundations and other parts of the Improvements which are not insurable (or, in
the case of plate glass insurance, the replacement cost of all plate glass in
the Leased Premises). Such policies shall contain replacement cost endorsements.
(ii) General public liability insurance against claims for bodily
injury, death or property damage occurring on, in or about any of the Leased
Premises or the Adjoining Property, in an amount not less than $5,000,000 for
bodily injury or death to any one person, not less than $10,000,000 for any one
accident, and not less than $1,000,000 for property damage. The Landlord shall
have the right to determine such higher limits as may be reasonable and
customary for transactions and properties of this size and type or such higher
limits as reflect increases in the cost of living. Policies for such insurance
shall be for the mutual benefit of Landlord, Tenant and Lender.
<PAGE> 28
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(iii) Worker's compensation insurance covering all persons employed
by Tenant in connection with any work done on or about any of the Leased
Premises for which claims for death or bodily injury could be asserted against
Landlord, Tenant or any of the Leased Premises, or, in lieu of such worker's
compensation insurance, a program of self-insurance complying with the rules,
regulations and requirements of the appropriate agency of the State.
(iv) Boiler and pressure vessel insurance on any of the Equipment or
any other equipment on or in the Leased Premises which by reason of its use or
existence is capable of bursting, erupting, collapsing or exploding, in an
amount not less than $5,000,000 for damage to property, bodily injury or death
resulting from such perils.
(v) Business interruption insurance or "rent loss" insurance,
insuring against loss of rental value for a period of not less than one year.
(vi) Such other insurance, including war-risk if available, on or in
connection with any of the Leased Premises as Landlord or Lender may reasonably
require, which at the time is commonly obtained in connection with properties
similar to the Leased Premises.
(b) The insurance required by Paragraph 14(a) shall be written by
companies of recognized financial standing which are approved by Landlord, which
approval will not be unreasonably withheld, and are authorized to do an
insurance business in the State. The insurance policies (i) shall be for such
terms as Landlord may reasonably approve, (ii) shall be in amounts sufficient at
all times to satisfy any coinsurance requirements thereof, and (iii) shall
(except for the worker's compensation insurance referred to in Paragraph
14(a)(iii) hereof) name Landlord, Tenant and Lender as insured parties, as their
respective interests may appear. If said insurance or any part thereof shall
expire, be withdrawn, become void, voidable, unreliable or unsafe for any
reason, including a breach of any condition thereof by Tenant or the failure or
impairment of the capital of any insurer, or if for any other reason whatsoever
said insurance shall become reasonably unsatisfactory to Landlord, Tenant shall
immediately obtain new or additional insurance reasonably satisfactory to
Landlord.
(c) Each insurance policy referred to in clauses (i), (iv), (v) and (vi)
of Paragraph 14(a) shall contain standard non-contributory mortgagee clauses and
loss payee clauses in favor of and acceptable to Lender. Each
<PAGE> 29
-27-
policy required by any provision of Paragraph 14(a), except clause (iii)
thereof, shall provide that it may not be cancelled except after thirty (30)
days' prior notice to Landlord and Lender. Each such policy shall also provide,
if available, that any loss otherwise payable thereunder shall be payable
notwithstanding (i) any act or omission of Landlord or Tenant which might,
absent such provision, result in a forfeiture of all or a part of such insurance
payment, (ii) the occupation or use of any of the Leased Premises for purposes
more hazardous than those permitted by the provisions of such policy, (iii) any
foreclosure or other action or proceeding taken by Lender pursuant to any
provision of the Mortgage upon the happening of an event of default therein, or
(iv) any change in title to or ownership of any of the Leased Premises.
(d) Tenant shall pay as they become due all premiums for the insurance
required by this Paragraph 14, shall renew or replace each policy and deliver to
Landlord evidence of the payment of the full premium therefor or installment
then due at least thirty (30) days prior to the expiration date of such policy,
and shall promptly deliver to Landlord all original policies; and in the event
of Tenant's failure to comply with any of the foregoing requirements, Landlord
shall be entitled, but not obligated, to procure such insurance. Any sums
expended by Landlord in procuring such insurance shall be Additional Rent and
shall be repaid by Tenant, together with interest thereon at the Default Rate
from the time of payment by Landlord until fully paid by Tenant, immediately
upon written demand therefor by Landlord.
(e) Anything in this Paragraph 14 to the contrary notwithstanding, any
insurance which Tenant is required to obtain pursuant to Paragraph 14(a) may be
carried under a "blanket" or umbrella policy or policies covering other
properties or liabilities of Tenant, provided that such "blanket" or umbrella
policy or policies otherwise comply with the provisions of this Paragraph 14 and
provided further that such policies shall provide for a reserved amount
thereunder with respect to the Leased Premises so as to assure that the amount
of insurance required by this Paragraph 14 will be available notwithstanding any
losses with respect to other property covered by such blanket policies. The
amount of the total insurance allocated to the Leased Premises, which amount
shall be not less than the amounts required pursuant to this Paragraph 14, shall
be specified either (i) in each such "blanket" or umbrella policy, or (ii) in a
written statement, which Tenant shall deliver to Landlord, from the insurer
thereunder. The original or a certified copy of each such "blanket" or umbrella
policy shall promptly be delivered to Landlord.
<PAGE> 30
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(f) Tenant shall have the replacement cost and insurable value of the
Improvements determined from time to time as required by the replacement cost
endorsements and shall deliver to Landlord the new replacement cost endorsement
or certificate evidencing such endorsement promptly upon Tenant's receipt
thereof. If, at any time, a replacement cost endorsement is not available,
Tenant shall have the replacement cost and insurable value of the Improvements
determined at least once a year by the underwriter of fire insurance on the
Leased Premises or, if such underwriter will not act, by a qualified appraiser
reasonably satisfactory to Landlord, and shall deliver to Landlord such
determination promptly upon receipt.
(g) Tenant shall promptly comply with and conform to (i) all provisions of
each insurance policy required by this Paragraph 14 and (ii) all requirements of
the insurers thereunder, applicable to Landlord, Tenant or any of the Leased
Premises or to the use, manner of use, occupancy, possession, operation,
maintenance, alteration or repair of any of the Leased Premises, even if such
compliance necessitates structural changes or improvements or results in
interference with the use or enjoyment of any of the Leased Premises. Tenant
shall not use any of the Leased Premises in any manner which would permit the
insurer to cancel the premium for any insurance policy.
(h) In the event of any loss, Tenant shall give Landlord and Lender
immediate notice thereof. If an Event of Default has occurred and is continuing,
Landlord is hereby authorized to adjust, collect and compromise, in its
discretion and upon notice to Tenant, all claims under any of the insurance
policies required by this Paragraph 14 (except public liability insurance claims
payable to a person other than Tenant, Landlord or Lender) and to execute and
deliver on behalf of Tenant all necessary proofs of loss, receipts, vouchers and
releases required by the insurers; and Tenant agrees to sign, upon the request
of Landlord, all such proofs of loss, receipts, vouchers and releases. If no
Event of Default has occurred and is continuing, Tenant shall adjust, collect
and compromise any and all such claims, with the prior written consent of
Landlord and Lender and Landlord and Lender shall have the right to join with
Tenant therein. Any adjustment, settlement or compromise of any such claim shall
be subject to the prior written approval of Landlord and Lender, which approval
shall not be unreasonably withheld or delayed, and Landlord and Lender shall
have the right to prosecute or contest, or to require Tenant to prosecute or
contest, any such claim, adjustment, settlement or compromise, all at Tenant's
expense. All proceeds of any insurance required under clauses (i), (ii) (except
proceeds payable to a person other than Tenant, Landlord or Lender), (iv) and
(v) of Paragraph
<PAGE> 31
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14(a) shall be payable to Landlord and Lender. Each insurer is hereby authorized
and directed to make payment under said policies, including return of unearned
premiums, directly to Landlord and Lender instead of to Landlord and Tenant
jointly; and Tenant hereby appoints each of Landlord and Lender as Tenant's
attorneys-in-fact to endorse any draft therefor.
In the event of any casualty (whether or not insured against) resulting in
damage to any of the Improvements which does not result in a termination of this
Lease, the Term shall, notwithstanding such casualty, continue and there shall
be no abatement or reduction of Rent or any other sums payable by Tenant
hereunder, except as expressly provided in Paragraph 15(b). Promptly after such
casualty, Tenant, as required in Paragraph 11(a), shall commence and diligently
continue to restore the Improvements as nearly as possible to their value,
condition and character immediately prior to such damage, subject to and in
accordance with the provisions of Paragraph 12. Upon the final receipt of the
Net Proceeds of such casualty by Landlord, Landlord shall make such Net Proceeds
available to Tenant for restoration in accordance with and subject to the
provisions of Paragraph 15(a).
In the event of any loss of any of the Equipment in a casualty which does
not result in a termination of this Lease, the Term shall nevertheless continue
and there shall be no abatement or reduction of Rent or any other sums payable
by Tenant hereunder. Tenant shall, whether or not the Net Proceeds are
sufficient for the purpose, promptly repair or replace such Equipment, subject
to and in accordance with the provisions of Paragraph 11(d), and the Net
Proceeds paid for the loss of such Equipment only shall thereupon be payable to
Tenant. The remainder of the Net Proceeds shall be applied as hereinabove
provided.
(i) If the entire Leased Premises or a substantial portion of the Leased
Premises shall be damaged or destroyed by fire or other casualty and, in
Tenant's good faith judgment, it is uneconomical to restore the Leased Premises
for continued use and occupancy by Tenant or any other tenant to which the
Leased Premises might be leased, then Tenant shall, not later than thirty (30)
days after such occurrence, give notice to Landlord of its intention to
terminate this Lease on the first Basic Rent Payment Date (the "Casualty
Termination Date") which occurs at least ninety (90) days after the Fair Market
Value of the Leased Premises is determined.
Such notice shall contain (A) an irrevocable offer of Tenant to purchase
the Leased Premises on the Casualty Termination Date for the
<PAGE> 32
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purchase price (the "Casualty Offer Amount") specified in the next sentence and
(B) in the event that less than the entire Leased Premises shall have been
damaged or destroyed, a certificate of Tenant, signed by the president or a vice
president of Tenant, stating that, in Tenant's good faith judgment, the portion
of the Leased Premises so damaged or destroyed is sufficient to render the
Leased Premises uneconomical for restoration for continued use and occupancy by
Tenant or any other tenant to which the Leased Premises might be leased and
certifying that Tenant will not restore the Leased Premises for the use to which
such Premises was devoted prior to such damage or destruction. The Casualty
Offer Amount shall be the greater of (1) the Fair Market Value of the Leased
Premises as of the date immediately prior to such casualty or (2) the sum of the
Acquisition Cost and any prepayment penalty which may be payable under the Note
or Mortgage. Promptly upon the delivery of such notice from Tenant to Landlord,
Landlord and Tenant shall commence to determine such Fair Market Value in
accordance with the procedure specified in Paragraph 27.
No rejection of an offer hereunder shall be effective for any purpose
unless consented to by Lender. if Landlord shall reject such offer by notice to
Tenant, containing the written consent of Lender to such rejections, not later
than the twentieth (20th) day prior to the Casualty Termination Date, then upon
(x) payment of all Rent and any other charges due and unpaid under this Lease as
of the Casualty Termination Date and (y) compliance by Tenant with all other
obligations and liabilities under this Lease which have arisen on or prior to
the Casualty Termination Date, this Lease shall terminate on the Casualty
Termination Date and Tenant shall immediately vacate and have no further right,
title or interest in or to any of the Leased Premises and all further
obligations and liabilities of Tenant hereunder shall terminate except for
obligations and liabilities under (y) above and under Paragraph 10 hereof and
the Net Proceeds shall be retained by Landlord.
Unless Landlord shall have rejected such offer by the foregoing notice to
Tenant not later than the twentieth (20th) day prior to the Casualty Termination
Date, Landlord shall be conclusively presumed to have accepted such offer. If
such offer is accepted by Landlord, Tenant shall pay to Landlord the Casualty
Offer Amount on the Casualty Termination Date and, provided an Event of Default
does not then exist hereunder with respect to the Leased Premises, Landlord
shall convey to Tenant the Leased Premises in accordance with the provisions of
Paragraph 16 and shall assign to Tenant its entire interest in and to the Net
Proceeds or any part thereof that has not been received by Landlord and/or
deliver to Tenant or credit against the Casualty Offer Amount such
<PAGE> 33
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Net Proceeds or any part thereof which shall have been received by Landlord
and/or Lender and/or credit against the Casualty Offer Amount such net proceeds
or any part thereof which, if payable to Lender under the Mortgage, have not
been received by Lender. Any acceptance of such offer by Landlord shall not
relieve Tenant of its obligations to pay Rent, and perform all of Tenant's other
obligations hereunder, through the date of the closing of the purchase pursuant
to the acceptance of such offer.
Notwithstanding anything to the contrary herein above contained, if
Landlord shall have rejected Tenant's offer to purchase the Leased Premises and,
on the Casualty Termination Date specified above, Landlord shall not have
received the full amount of the Net Proceeds payable by reason of the casualty,
the Casualty Termination Date shall automatically be extended to the first Basic
Rent Payment Date occurring after receipt by Landlord of the full amount of the
Net Proceeds. Such extension shall occur regardless of the reason for Landlord's
failure to receive the full amount of the Net Proceeds prior to the originally
stated Casualty Termination Date.
(j) Tenant shall not carry separate insurance concurrent in form or
contributing in the event of loss with that required in this Paragraph 14 unless
(i) Landlord and Lender are included therein as named insureds, with loss
payable as provided herein, and (ii) such separate insurance complies with the
other provisions of this Paragraph 14. Tenant shall immediately notify Landlord
of such separate insurance and shall deliver to Landlord the original policies
therefor.
15. Restoration; Reduction of Rent.
(a) In the event that Net Proceeds or a Net Award are made available by
Landlord for the restoration of any of the Land or Improvements, Landlord shall
disburse such proceeds or award only in accordance with the following
conditions:
(i) prior to commencement of restoration, the architects, contracts,
contractors, plans and specifications for the restoration shall have been
approved by Landlord, which approval shall not be unreasonably withheld;
Landlord shall be provided with mechanics' lien insurance (if available) and, if
required by Landlord, acceptable performance and payment bonds which insure
satisfactory completion of the restoration, are in an amount and form and have a
surety acceptable to Landlord, and name Landlord and Lender as additional dual
obligees; and, if permitted by law, appropriate waivers of mechanics' and
materialmen's liens shall have been filed;
<PAGE> 34
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(ii) at the time of any disbursement, no Event of Default shall
exist and no mechanics' or materialmen's liens shall have been filed against any
of the Leased Premises and remain undischarged;
(iii) disbursements shall be made from time to time in an amount not
exceeding the cost of the work completed since the last disbursement, upon
receipt of (A) satisfactory evidence, including architects' certificates, of the
stage of completion, of the estimated cost of completion and of performance of
the work to date in a good and workmanlike manner in accordance with the
contracts, plans and specifications, (B) waivers of liens (if permitted by law),
(C) contractors' and subcontractors' sworn statements as to completed work for
which payment is requested, (D) a satisfactory bringdown of title insurance, and
(E) other evidence of cost and payment so that Landlord can verify that the
amounts disbursed from time to time are represented by work that is completed,
in place and free and clear of mechanics' and materialmen's lien claims;
(iv) each request for disbursement shall be accompanied by a
certificate of Tenant, signed by the president or a vice president of Tenant,
describing the work for which payment is requested, stating the cost incurred in
connection therewith, stating that Tenant has not previously received payment
for such work and, upon completion of the work, also stating that the work has
been fully completed and complies with the applicable requirements of this
Lease;
(v) Landlord may retain ten percent (10%) of the restoration fund
until the restoration is fully completed;
(vi) the restoration fund shall not be commingled with Landlord's
other funds and shall be invested in an account which bears interest at the
"passbook" rate;
(vii) at all times the undisbursed balance of the restoration fund
held by Landlord shall be not less than the cost of completing the restoration
work free and clear of all liens; and
(viii) such other reasonable conditions as Landlord may impose.
In addition, prior to commencement of restoration and at any time during
restoration, if the estimated cost of completing the restoration work free and
clear of all liens, as reasonably determined by Landlord,
<PAGE> 35
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exceeds the amount of the Net Proceeds or the Net Award available for such
restoration, the amount of such excess (the "Excess Amount") shall, upon demand
by Landlord, be paid by Tenant to Landlord to be added to the restoration fund.
Any sum so added by Tenant which remains in the restoration fund upon completion
of restoration shall be refunded to Tenant. If no such refund is required or any
sum remains in the restoration fund after such refund, such sum remaining in the
restoration fund upon completion of restoration and any refund to Tenant (the
"Remaining Sum") shall be retained by Landlord, unless such sum is required to
be paid by Landlord to Lender, in which event it shall be paid by Landlord to
Lender in accordance with the provisions of the Note and Mortgage. For purposes
of determining the source of funds with respect to the disposition of funds
remaining after the completion of restoration, the Net Proceeds or the Net Award
shall be deemed to be disbursed prior to any amount added by Tenant.
In lieu of the requirement in the foregoing paragraph that the Excess
Amount be deposited in cash with Landlord, Tenant may give Landlord an
unconditional irrevocable letter of credit in the amount of the Excess Amount,
with an expiration date acceptable to Landlord, as security for Tenant's
obligations to pay reconstruction costs in excess of insurance funds. Such
letter of credit may be drawn by Landlord if Tenant does not pay such excess
costs.
(b) In the event that there is a Remaining Sum upon completion of
restoration which is paid by Landlord to Lender, as aforesaid, and the debt
service payments due under the Note are reduced by virtue of such payment of the
Remaining Sum to Lender, then each installment of Basic Rent payable on or after
the effective date of such reduction in debt service shall be reduced in the
same amount and for the same period as payments are reduced under the Note. In
the event that there is a Remaining Sum upon completion of restoration which is
retained by Landlord, each installment of Basic Rent payable on or after the
Retention Date shall be reduced by a fraction, the denominator of which shall be
the total amount of all Basic Rent due from such date to and including the last
Basic Rent Payment Date for the then existing Term and the numerator of which
shall be the Remaining Sum.
16. Procedures Upon Purchase.
(a) In the event of the purchase of any of the Leased Premises by Tenant
pursuant to any provision of this Lease, Landlord need not transfer and convey
to Tenant or its designee any better title thereto than that which was
transferred and conveyed to Landlord, and Tenant shall
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accept such title, subject, however, to all liens, exceptions and restrictions
on, against or relating to the Leased Premises and to all applicable Laws, but
free of the lien of and security interest created by the Mortgage and the
Assignment and liens, exceptions and restrictions on, against or relating to any
of the Leased Premises which have been created by or resulted solely from acts
of Landlord, unless the same were created with the consent of Tenant or as a
result of a default by Tenant under this Lease or are otherwise the
responsibility of the Tenant hereunder. Execution by Tenant of a consent to
financing and a nondisturbance agreement pursuant to Paragraph 31 shall not
constitute the consent of Tenant to a mortgage or other lien securing such
financing for purposes of this Paragraph 16.
(b) Upon the date fixed for any such purchase of any of the Leased
Premises pursuant to any provision of this Lease, Tenant shall pay to Landlord
or to any Person to whom Landlord directs payment, at its address set forth
above, or at any other place designated by Landlord, the Offer Amount therefor
specified herein, in federal or other immediately available funds which at the
time of such payment shall be legal tender for the payment of public or private
debts in the United States of America, less any credits of the Net Award or Net
Proceeds allowed against the Offer Amount pursuant to the provisions of
Paragraphs 13(b) or 14(i), and Landlord shall thereupon deliver to Tenant (i) a
special warranty deed which describes any of the Leased Premises then being sold
to Tenant and conveys and transfers the title thereto which is described in
Paragraph 16(a), (ii) such other instruments as shall be necessary to transfer
to Tenant or its designee any other property (or rights to any Net Proceeds or
Net Award not yet received by Landlord) then required to be sold by Landlord
pursuant to this Lease and (iii) any Net Award or Net Proceeds received by
Landlord and/or Lender, not credited to Tenant against the Offer Amount and
required to be delivered by Landlord to Tenant pursuant to this Lease. Tenant
shall pay all charges incident to such conveyance and transfer, including
Landlord's reasonable counsel fees, escrow fees, recording fees, brokerage fees,
title insurance or guarantee premiums and all applicable federal, state and
local real estate transfer taxes or deed stamps which may be incurred or imposed
by reason of such conveyance and transfer and/or by reason of the delivery of
said deed and other instruments. Upon the completion of such purchase, but not
prior thereto (unless any delay in the completion of or any failure to complete
such purchase shall be the sole fault of Landlord in which event Tenant may
terminate this Lease as of the date scheduled by Landlord and Tenant for
completion of such purchase), Tenant may elect to terminate this Lease and all
obligations hereunder (including the obligations to pay Rent) with respect to
any of the Leased Premises
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conveyed to Tenant, except any obligations and liabilities of Tenant, actual or
contingent, under this Lease, which (a) arose on or prior to such date of
purchase or (b) survive termination of this Lease. In the event that the
completion of such purchase shall be delayed other than through the sole fault
of Landlord, then the Offer Amount payable by Tenant upon the purchase of any of
the Leased Premises pursuant to any provisions of this Lease shall, at
Landlord's sole option, be determined as of the actual date of such purchase by
Tenant, provided that Tenant shall have paid to Landlord all Rent due and
payable hereunder to and including such date. Any prepaid Basic Rent or other
prepaid sums paid to Landlord shall be prorated as of the date the purchase is
completed, and the prorated unapplied balance shall be deducted from the Offer
Amount due to Landlord.
No apportionment of any Impositions shall be made upon such purchase,
Tenant being liable for payment thereof during the Term as Tenant and being
liable thereafter as owner.
(c) In the event of the purchase of any of the Leased Premises by Tenant
pursuant to any provision of this Lease, Tenant shall, on the date of the
closing of such purchase, pay to Landlord (in addition to payment of the
Purchase Price) all Rent and other sums then due and owing by Tenant to Landlord
hereunder as of the date of the closing of such purchase. Upon the closing of
such purchase, this Lease shall terminate and Tenant shall (except as expressly
set forth otherwise herein) be released from its obligations hereunder.
17. Assignment and Subletting; Subleases. Tenant may not assign this Lease
or sublet any of the Leased Premises at any time to any other party without
having first obtained the prior written consent of Landlord (which consent will
not be unreasonably withheld) except as follows: Landlord's prior written
consent shall not be needed to a proposed sublease or assignment of all of the
Leased Premises to a subsidiary or affiliate of Tenant as long as Tenant
notifies Landlord of sublessee's or assignee's name and address, Tenant
furnishes Landlord with a copy of such lease, such sublease complies with the
provisions of Paragraph 8(h), and Tenant agrees to remain primarily liable to
Landlord for the performance of all of Tenant's obligations hereunder.
Notwithstanding the foregoing, if Tenant desires to assign this Lease in
connection with a proposed sale of the stock or assets of Tenant or High
Voltage, then Tenant shall give notice to Landlord of its intention to assign
this Lease on the first Basic Rent Payment Date (the "Assignment Date") which
occurs thirty (30) days after the Fair Market Value of the Leased Premises is
determined. Such notice shall contain an irrevocable offer of Tenant to
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purchase the Leased Premises on the Assignment Date for the purchase price (the
"Assignment Offer Amount") which shall be greater of (1) the Fair Market Value
of the Leased Premises as of the date immediately prior to such notice or (2)
the sum of the Acquisition Cost and any prepayment penalty which may be payable
under the Note or Mortgage. As used in the foregoing sentence, "Fair Market
Value" shall mean the fair market value of the Leased Premises as affected and
encumbered by this Lease, assuming that the Term has been extended for all
extension periods provided herein. Promptly upon the delivery of such notice
from Tenant to Landlord, Landlord and Tenant shall commence to determine such
Fair Market Value in accordance with the procedure specified in Paragraph 27.
No rejection of an offer hereunder shall be effective for any purpose
unless consented to by Lender. If Landlord shall reject such offer by notice to
Tenant, containing the written consent of Lender to such rejection, not later
than the twentieth (20th) day prior to the Assignment Date, or if Landlord
approves the proposed assignee, then Tenant shall have the right to assign this
Lease to such purchaser, and this Lease shall remain in full force and effect in
accordance with its terms.
Unless Landlord shall have rejected such offer by the foregoing notice to
Tenant not later than the twentieth (20th) day prior to the Assignment Date,
Landlord shall be conclusively presumed to have accepted such offer. If such
offer is accepted by Landlord, Tenant shall pay to Landlord the Assignment Offer
Amount on the Assignment Date and, provided an Event of Default does not then
exist hereunder with respect to the Leaned Promises, landlord shall convey to
Tenant the Leased Promises in accordance with the provisions of Paragraph 16.
Any acceptance of such offer by Landlord shall not relieve Tenant of its
obligations to pay Rent, and perform all of Tenant's other obligations
hereunder, through the date of the closing of the purchase pursuant to the
acceptance of such offer.
If Tenant assigns all its rights and interest under this Lease, the
assignee under such assignment shall expressly assume all the obligations of
Tenant hereunder, including obligations, actual or contingent, of Tenant which
may have arisen on or prior to the date of such assignment, by a written
instrument delivered to Landlord at the time of such assignment. Each sublease
of any of the Leased Premises shall be subject and subordinate to the provisions
of this Lease, No assignment or sublease made an permitted by this Paragraph
shall affect or reduce any of the obligations of Tenant hereunder; and all such
obligations shall continue in full force and effect as obligations of a
principal and not as
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obligations of a guarantor, an if no assignment or sublease had been made.
Notwithstanding the foregoing, however, if Tenant is permitted to assign this
Lease, pursuant to the provisions of this Paragraph 17 in connection with the
sale of stock or assets of Tenant, all of the liabilities and obligations of
Tenant hereunder (other than those obligations and liabilities arising
(Irrespective of when any claim shall be made) prior to the date of such
assignment (for which Tenant shall remain liable)) shall cease and terminate as
of the date of such assignment.
No assignment or sublease shall impose any obligations on Landlord under
this Lease. Tenant shall, within ton (10) days after the execution and delivery
of any such assignment consented to by Landlord, deliver a duplicate original
copy thereof in recordable form to Landlord, and within ten (10) days after the
execution and delivery of any such sublease consented to by Landlord, Tenant
shall deliver a duplicate original copy thereof to Landlord.
Upon the occurrence of an Event of Default under this Lease, Landlord
shall have the right immediately or at any time thereafter to collect and enjoy
all rents and other sums of money payable under any sublease of any of the
Leaned Promises, and Tenant hereby irrevocably and unconditionally assigns such
rents and money to Landlord, which assignment may be exercised upon and after
(but not before) the occurrence of an Event of Default but only so long as it is
continuing.
Tenant shall not mortgage or pledge this Lease, and any such mortgage or
pledge made in violation of this Paragraph shall be void.
(c)
[Paragraph intentionally omitted]
18. Permitted Contests. Tenant shall not be required to (a) pay any
Imposition, (b) comply with any Legal Requirement, (c) discharge or remove any
lien referred to in Paragraph 9 or 12, or (d) take any action with respect to
any encroachment, violation, hindrance, obstruction or impairment referred to in
Paragraph 11(b), so long as Tenant shall contest, in good faith and at its
expense, the existence, the amount or the validity thereof, the amount of the
damages caused thereby, or the extent of its or Landlord's liability therefor,
by appropriate proceedings which
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shall operate during the pendency thereof to prevent (i) the collection of, or
other realization upon, the Imposition, lien or claim so contested, (ii) the
sale, forfeiture or loss of any of ' the Leased Premises or any Rent to satisfy
the same or to pay any damages caused by the violation of any such Legal
Requirement or by any such encroachment, violation, hindrance, obstruction or
impairment, (iii) any interference with the use or occupancy of any of the
Leased Premises, (iv) any interference with the payment of any Rent, and (v) the
cancellation of any fire or other insurance policy. Tenant shall provide
Landlord security which is satisfactory, in the reasonable opinion of Landlord,
to assure the timely payment, compliance, discharge, removal and/or other
action, including all costs, reasonable attorneys' fees, interest and penalties
that may be or become due in connection therewith. While any proceedings which
comply with the requirements of this Paragraph 18 are pending and the required
security is held by Landlord, Landlord shall not have the right to pay, remove
or cause to be discharged the Imposition, lien or claim thereby being contested.
Each such contest shall be promptly and diligently prosecuted by Tenant to a
final conclusion, except that Tenant shall, so long as the conditions of the
first sentence of this Paragraph are at all times complied with, have the right
to attempt to settle or compromise such contest through negotiations. Tenant
shall pay, and save Landlord harmless against, any and all losses, judgments,
decrees and costs (including all reasonable attorneys' fees and expenses) in
connection with any such contest and shall, promptly after the final
determination of such contest, fully pay and discharge the amounts which shall
be levied, assessed, charged or imposed or be determined to be payable therein
or in connection therewith, together with all penalties, fines, interest, costs
and expenses thereof or in connection therewith, and perform all acts the
performance of which shall be ordered or decreed as a result thereof. No such
contest shall subject Landlord to the risk of any civil or criminal liability.
19. Conditional Limitations; Default Provision.
(a) The occurrence of any one or more of the following (after the giving
of notice, if required, and the expiration of any applicable grace period, as
provided in subparagraph (f) of this paragraph 19) shall constitute an "Event of
Default" under this Lease: (i) a failure by Tenant to make (regardless, to the
extent permitted by law, of the pendency of any bankruptcy, reorganization,
receivership, insolvency or other proceedings, in law, in equity, or before any
administrative tribunal, which have or might have the effect of preventing
Tenant from complying with the provisions of this Lease) any payment of Rent or
other sum herein required to be paid by Tenant within any applicable grace
period;
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(ii) a failure by Tenant duly to perform and observe, or a violation or breach
of (A) any covenant or agreement relating to occupation and use of the Leased
Premises contained in Paragraph 4 hereof; (B) any covenant or agreement
prohibiting termination, rescission or avoidance of this Lease as contained in
subparagraph (c) of Section 7 hereof; (C) any covenant or agreement relating to
the payment or discharge of Impositions contained in subparagraph (a) of
Paragraph 8 hereof; (D) any covenant or agreement relating to any Escrow Payment
contained in subparagraph (b) of Paragraph 8 hereof; (E) any provision of the
Legal Requirements, subject to the provisions of Paragraph 18 hereof; (F) any
covenant or agreement contained in subparagraphs (c), (d), (e), (f), (g) or (h)
of Paragraph 8 hereof; (G) any covenant or agreement relating to liens,
recording and title as contained in Paragraph 9 hereof; (H) any covenant or
agreement relating to indemnification as contained in Paragraph 10 hereof; (1)
any covenant or agreement relating to (1) Tenant's duty to maintain and/or
repair the Leased Premises and/or the Adjoining Property, or (2) Tenant's duty
to replace Equipment, as contained in Paragraph 11 hereof; (J) any covenant or
agreement relating to the making of Alterations or the construction of
additional Improvements as contained in Paragraph 12 hereof; (K) any covenant or
agreement relating to condemnation as contained in Paragraph 13 hereof; (L) any
covenant or agreement to provide or maintain any insurance required pursuant to
Paragraph 14 hereof or relating to casualty as contained in Paragraph 14 hereof.
The insurance coverages in effect on the date hereof comply with the
requirements of the Lease, and evidence thereof has been received by Landlord
from Tenant. Such coverages will constitute acceptable insurance coverages
during the Term, and no Event of Default for failure to maintain insurance
required hereunder shall occur, so long as (a) such coverages are kept in effect
after the date hereof and (b) the Lender (as defined in Paragraph 2 hereof)
accepts such coverages as satisfying the insurance requirements under the
Mortgage (as defined in Paragraph 2 hereof); (M) any covenant or agreement
relating to restoration as contained in Paragraph 15 hereof; (N) any covenant or
agreement relating to the purchase of the Leased Premises as contained in
Paragraph 16 hereof; (0) any covenant or agreement relating to assignment of
this Lease or the subletting of the Leased Premises (or any portion thereof) as
contained in Paragraph 17 hereof; (P) any covenant or agreement relating to
permitted contests as contained in Paragraph 18 hereof; (Q) the covenant to pay
fees, costs and expenses as contained in Paragraph 20 hereof; (R) the agreement
to provide estoppel certificates as contained in Paragraph 22 hereof; (S) the
failure to surrender the Leased Premises in accordance with Paragraph 23 hereof;
(T) any covenant or agreement relating to Tenant's records and books of account
contained in Paragraph 26 hereof; (U) any covenant or agreement relating to
Tenant's option to
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purchase the Leased Premises pursuant to Paragraph 28 hereof; (V) any covenant
or agreement set forth in subparagraph (b) of Paragraph 29 hereof relating to
financing; or (W) any failure of Tenant to execute any agreement required by a
Lender pursuant to Paragraph 31 hereof; (iii) any representation or warranty
made by Tenant herein or in any certificate, demand or request made pursuant
hereto or thereto proves to be incorrect, now or hereafter, in any material
respect and has a material adverse effect on Tenant's ability to meet Tenant's
monetary obligations hereunder; (iv) the breach of any covenant incorporated by
reference on Exhibit "E" attached hereto which breach has a material adverse
effect on Tenant's ability to meet Tenant's monetary obligations hereunder; (v)
a final judgment or judgments for the payment of money in excess of Five Hundred
Thousand Dollars ($500,000.00) in the aggregate shall be rendered against
Tenant, same shall remain undischarged for a period of ninety (90) consecutive
days and same shall have a material adverse effect on Tenant's ability to meet
Tenant's monetary obligations hereunder; (vi) Tenant shall (A) voluntarily be
adjudicated a bankrupt or insolvent, (B) seek or consent to the appointment of a
receiver or trustee for itself or for any of the Leased Premises, (C) file a
petition seeking relief under the bankruptcy or other similar laws of the United
States, any state or any jurisdiction, (D) make a general assignment for the
benefit of creditors, or (E) be unable to pay its debts as they mature; (vii) a
court shall enter an order, judgment or decree appointing, without the consent
of Tenant, a receiver or trustee for it or for any of the Leased Premises or
approving a petition filed against Tenant which seeks relief under the
bankruptcy or other similar laws of the United States, any state or any
jurisdiction, and such order, judgment or decree shall remain in force,
undischarged or unstayed, ninety (90) days after it is entered; (viii) any
Improvement is substantially damaged or destroyed by an uninsured casualty and
Tenant fails to commence promptly thereafter to restore the Leased Premises to
the extent and in the manner required herein or fails to proceed actively,
diligently and in good faith with such restoration and to continue such
restoration until the Leased Premises have been restored to the extent and in
the manner required herein; (ix) substantially all of the Leased Premises shall
have been abandoned for a period in excess of one year and, prior to expiration
of such one year period, Tenant fails to adequately secure the abandoned
premises or fails to provide Landlord with evidence that Tenant is seeking a
substitute lessee; (x) Tenant shall be liquidated or dissolved or shall begin
proceedings towards its liquidation or dissolution; (xi) the estate or interest
of Tenant in any of the Leased Premises shall be levied upon or attached in any
proceeding involving a judgment against Tenant in excess of $500,000.00 and such
estate or interest is about to be sold or transferred or such process shall not
be vacated or discharged within ninety (90) days after it is made and which
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proceeding has a material adverse effect on Tenant's ability to meet Tenant's
monetary obligations hereunder; (xii) [Intentionally omitted]; or (xiii) an
Event of Default (as defined in the Pennsylvania Lease) shall occur under the
Pennsylvania Lease.
(b) If an Event of Default shall have occurred and be continuing, Landlord
shall have the right at its option, then or at any time thereafter, to elect as
its sole and exclusive remedy (in addition to rights granted under Paragraph 20
and in addition to Landlord's rights to collect reasonable costs and attorneys'
fees for enforcement of its rights hereunder) one and, only one of the following
without demand upon or notice to Tenant (except as otherwise provided in
subparagraph (f) of this Paragraph 19), it being understood that the remedy
elected by Landlord from the following three remedies shall (except as set forth
in Paragraph 19(b)(iii)) be the only remedy to which Landlord is entitled under
this Paragraph 19(b):
(i) Landlord may give Tenant notice of Landlord's intention to
terminate this Lease on a date specified in such notice. Upon the date therein
specified, the Term, the estate hereby granted and all rights of Tenant
hereunder, shall expire and terminate as if such date were the date hereinbefore
fixed for the expiration of the then Term (without any extension).
Tenant shall surrender and deliver possession of the Leased Premises and
Landlord may re-enter and repossess any of the Leased Premises, with or without
legal process, by peaceably entering the Leased Premises and changing locks or
by summary proceedings, ejectment or any other lawful means or procedure. Upon
or at any time after taking possession of any of the Leased Premises, Landlord
may, by peaceable means or legal process, remove any persons or property
therefrom. Landlord shall be under no liability for or by reason of any such
entry, repossession or removal.
After repossession of any of the Leased Premises, Landlord shall have the
right (but, to the extent permitted by law, shall be under no obligation) to
relet any of the Leased Premises to such tenant or tenants, for such term or
terms (which may be greater or less than the period which would otherwise have
constituted the balance of the Term), for such rent, on such conditions (which
may include commercially reasonable concessions or free rent) and for such uses
as Landlord, in its sole and absolute discretion, may determine; and Landlord
may collect and receive any rents payable by reason of such reletting (the
"Reletting Revenues"). Landlord shall have no duty to mitigate damages (except
to the extent
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required by law) and shall not be responsible or liable for any failure to relet
any of the Leased Premises or for any failure to collect any rent due upon any
such reletting. Landlord may make such Alterations as Landlord may deem
reasonably necessary. Tenant agrees to pay Landlord immediately upon demand, all
reasonable expenses incurred by Landlord in obtaining possession, in performing
Alterations and in reletting any of the Leased Premises, including reasonable
fees and commissions of attorneys, architects, agents and brokers (the
"Reletting Expenses"). Tenant's liability under this Paragraph 19(b)(i) shall be
limited to payment of Rent for the remainder of the then Term (without any
extension) payable as Rent comes due, plus payment of the Reletting Expenses
(unless otherwise payable as Rent) minus the reletting Revenues.
(ii) Landlord may give Tenant notice of Landlord's intention to
terminate this Lease on a date specified in such notice. Upon the date therein
specified, the Term, the estate hereby granted and all rights of Tenant
hereunder, shall expire and terminate as if such date were the date hereinbefore
fixed for the expiration of the then Term (without any extension).
Tenant shall surrender and deliver possession of the Leased Premises and
Landlord may re-enter and repossess any of the Leased Premises, with or without
legal process, by peaceably entering the Leased Premises and changing locks or
by summary proceedings, ejectment or any other lawful means or procedure. Upon
or at any time after taking possession of any of the Leased Premises, Landlord
may, by peaceable means or legal process, remove any persons or property
therefrom. Landlord shall be under no liability for or by reason of any such
entry, repossession or removal.
Landlord may, upon written demand to Tenant, recover from Tenant, and
Tenant shall pay to Landlord, as and for liquidated and agreed final damages for
Tenant's default and in lieu of all current damages beyond the date of such
demand (it being agreed that it would be impracticable or extremely difficult to
fix the actual damages), by an amount equal to the present value of the excess,
if any, of (A) all Rent from the date of such demand to the date on which the
then Term (without any extension) is scheduled to expire hereunder in the
absence of any earlier termination, re-entry or repossession over (B) the then
fair market rental value of the Leased Premises for the same period (to be
determined by agreement of the parties or by an appraisal following the same
conditions and procedures set forth in Paragraph 27 for determination of Fair
Market Value as if references in Paragraph 27 to
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"Fair Market Value" were references to "fair market rental value of the Leased
Premises" as used herein). In addition, Tenant shall pay to Landlord, upon
demand, all reasonable expenses incurred by Landlord in obtaining possession.
The present value of such excess shall be determined by discounting the Rent and
such fair market rental value at the rate per annum which is the lower of the
then Prime Rate at the time of Landlord's notice to Tenant or eight percent (8%)
per annum. If any Law shall validly limit the amount of such liquidated final
damages to less than the amount above agreed upon, Landlord shall be entitled to
the maximum amount allowable under such Law.
(iii) Landlord may, upon notice to Tenant, require Tenant to make an
irrevocable offer to purchase for the purchase price (the "Default Offer
Amount") specified in the next sentence the entire Leased Premises. The Default
Offer Amount shall be an amount equal to the higher of (a) the sum of the
Acquisition Cost of the Leased Premises and any prepayment penalty which may be
payable under the Note or Mortgage or (b) the Fair Market Value of the Leased
Premises. Upon such notice by Landlord to Tenant, Tenant shall be deemed to have
made such offer, and the Fair Market Value of the Leased Premises shall (except
as set forth herein) be determined in accordance with the procedure set forth in
Paragraph 27 hereof. Within thirty (30) days after such determination of the
Fair Market Value, Landlord shall accept or reject such offer. If Landlord
accepts such offer, then, on the tenth (10th) business day after such
acceptance, Tenant shall pay to Landlord the Default Offer Amount and purchase
the Leased Premises in accordance with Paragraph 16. Any acceptance of such
offer by Landlord shall not relieve Tenant of its obligations to pay Rent, and
perform all of Tenant's other obligations hereunder, through the date of the
closing of the purchase pursuant to the acceptance of such offer. Any rejection
by Landlord of such offer shall have no effect on any other provision of this
Lease and shall allow Landlord to select, as its remedy under this Paragraph
19(b), either one of the remedies specified in Paragraph 19(b)(i) or 19(b)(ii).
(c) [Intentionally omitted]
(d) The words "enter," "re-enter," or "re-entry," as used in this
Paragraph 19 are not restricted to their technical meaning.
(e) WITH RESPECT TO ANY REMEDY OR PROCEEDING OF LANDLORD HEREUNDER, TENANT
WAIVES ANY RIGHT TO A TRIAL BY JURY.
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(f) Except as otherwise hereinafter in this Paragraph 19(f) provided,
before an Event of Default shall exist under this Paragraph 19, Landlord shall
have given Tenant notice thereof and Tenant shall have failed to cure the
default within the applicable grace period stated below.
If the default consists of the failure to pay Rent, the applicable grace
period shall be seven (7) days from the date such Rent is due and payable; no
notice of an Event of Default need be given by Landlord to Tenant in such
instances.
If the default consists of the failure to pay any sum required to be paid
by Tenant under this Lease other than Rent, the applicable grace period shall be
five (5) days from the date on which notice is given, but Landlord shall not be
obligated to give notice of, or allow any grace period for, any such default
more than twice within any twelve (12) month period. If the default is a default
under clause (iv) of subparagraph (a) of this Paragraph 19, the applicable grace
period shall be five (5) days following written notice from Landlord to Tenant.
If the default consists of the failure to provide any insurance required
pursuant to Paragraph 14, the applicable grace period shall be ten (10) days
from the date on which the notice is given, but Landlord shall not be obligated
to give notice of, or allow any grace period for, any such default more than
twice within any twelve (12) month period. If the default consists of something
other than the failure to provide any such insurance, the applicable grace
period shall be twenty (20) days from the date on which the notice is given or,
if the default cannot be cured within the said twenty (20) day period and delay
in the exercise of a remedy would not cause any material adverse harm to
Landlord or any of the Leased Premises, the grace period shall be extended for
the period required to cure the default, provided that Tenant shall commence to
cure the default within the said twenty-day period and shall actively,
diligently and in good faith proceed with and continue the curing of the default
until it shall be fully cured and provided further that, if the default has
occurred under clause (xii) of subparagraph (a) of this Paragraph 19, the
applicable governmental authorities or agencies have approved such extension.
However, no notice or grace period shall be required in any one or more of the
following events: the occurrence of a default under clause (iii), (v), (vi),
(vii), (xi) or (xiii) of subparagraph (a) of this Paragraph 19.
20. Additional Rights of Landlord.
(a) Upon the occurrence of any Event of Default, Landlord shall have the
right (but no obligation) to perform any act required of Tenant hereunder,
whether as agent for Tenant or otherwise; and the cost thereof
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shall be Additional Rent hereunder and shall be paid by Tenant to Landlord,
together with interest thereon at the Default Rate from the date such cost is
incurred until it shall be fully paid by Tenant, immediately upon demand. Time
is of the essence in the performance of Tenant's obligations under this Lease.
No failure of Landlord (i) to insist at any time upon the strict performance of
any provision of this Lease or (ii) to exercise any option, right, power or
remedy contained in this Lease shall be construed as a waiver, modification or
relinquishment thereof. A receipt by Landlord of any Rent or other sum due
hereunder with knowledge of the breach of any provision contained in this Lease
shall not be deemed a waiver of such breach, and no waiver by Landlord of any
provision of this Lease shall be deemed to have been made unless expressed in a
writing signed by Landlord. In addition to the other remedies provided in this
Lease, Landlord shall be entitled, to the extent permitted by applicable Law, to
injunctive relief in case of the violation, or attempted or threatened
violation, of any of the provisions of this Lease, or to specific performance of
any of the provisions of this Lease.
(b) To the extent permitted by law, Tenant hereby waives and surrenders,
for itself and all those claiming under it, including creditors of all kinds,
(i) any right and privilege which it or any of them may have under any present
or future Law to redeem any of the Leased Premises or to have a continuance of
this Lease after termination of this Lease or of Tenant's right of occupancy or
possession pursuant to any court order or any provision hereof, and (ii) the
benefits of any present or future Law which exempts property from liability for
debt or for distress for rent.
(c) Tenant shall pay to Landlord, as Additional Rent, all the expenses
incurred by Landlord in connection with any Event of Default or the exercise of
any remedy by reason of an Event of Default or otherwise in connection with the
enforcement of this Lease, including reasonable attorneys' fees and expenses. If
Landlord shall be made a party to any litigation commenced against Tenant or any
litigation pertaining to this Lease or any of the Leased Premises, then, at the
option of Landlord, Tenant, at its expense, shall provide Landlord with counsel
approved by Landlord and, in any event, Tenant shall pay all costs and
reasonable attorneys' fees incurred or paid by Landlord in connection with such
litigation.
Tenant shall also pay all of Landlord's reasonable attorneys' fees, costs
and expenses incurred in the preparation, negotiation, execution and delivery of
this Lease or any document (including any amendment or supplement hereto)
prepared, executed or delivered by Landlord after the date hereof in connection
herewith.
<PAGE> 48
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21. Notices. All notices, demands, requests, consents, approvals, offers,
statements and other instruments or communications required or permitted to be
given pursuant to the provisions of this Lease shall be in writing and shall be
deemed to have been given for all purposes when delivered in person or by
Federal Express or other 24-hour delivery service or five (5) business days
after being deposited in the United States mail, by registered or certified
mail, return receipt requested, postage prepaid, addressed to the other party at
its address stated above. For the purposes of this Paragraph, any party may
substitute its address by giving fifteen (15) days' notice to the other party,
in the manner provided above.
22. Estoppel Certificate. Tenant shall, at any time and from time to time,
upon not less than ten (10) days' prior written request by Landlord, execute,
acknowledge and deliver to Landlord a statement in writing, executed by the
president or a vice president of Tenant, certifying (a) that this Lease is
unmodified and in full force and effect (or, if there have been modifications,
that this Lease is in full force and effect as modified, and setting forth such
modifications), (b) the dates to which Basic Rent, Additional Rent and all other
sums payable hereunder have been paid, (c) that, to the knowledge of the signer
of such certificate, no default by either Landlord or Tenant exists hereunder or
specifying each such default of which the signer may have knowledge, and (d)
that, to the knowledge of the signer of such certificate, there are no
proceedings pending or threatened against Tenant before or by any court or
administrative agency which, if adversely decided, would materially and
adversely affect the financial condition and operations of Tenant or, if any
such proceedings are pending or threatened to said signer's knowledge,
specifying and describing the same. Any such statements by Tenant may be relied
upon by Lender, Landlord or their assignees or by any prospective purchaser or
mortgagee of the Leased Premises. Any certificate required under this Paragraph
22 shall (i) state briefly the nature and scope of the examination or
investigation upon which the statements contained in such certificate are based,
(ii) state that, in the opinion of each person signing such certificate, he has
made such examination or investigation as is reasonably necessary to enable him
to express an informed opinion as to the subject matter of such certificate, and
(iii) certify to the correctness of the statements contained therein.
23. Surrender. Upon the expiration or earlier termination of this Lease,
Tenant shall peaceably leave and surrender the Leased Premises (except for any
portion thereof with respect to which this Lease has previously terminated) to
Landlord in the same condition in which the
<PAGE> 49
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Leased Premises were originally received from Landlord at the commencement of
this Lease, except as repaired, rebuilt, restored, altered, replaced or added to
as permitted or required by any provision of this Lease, and except for ordinary
wear and tear and damage by casualty loss (if and to the extent Tenant is not
required to repair any such casualty loss damage hereunder). Tenant shall remove
from the Leased Premises on or prior to such expiration or earlier termination
all property which is owned by Tenant or third parties other than Landlord and
Tenant; and Tenant, at its expense, shall, on or prior to such expiration or
earlier termination, repair any damage caused by such removal. Property not so
removed shall become the property of Landlord; Landlord may thereafter cause
such property to be removed from the Leased Premises; and the cost of removing
and disposing of such property and repairing any damage to any of the Leased
Premises caused by such removal shall be borne by Tenant. Landlord shall not in
any manner or to any extent be obligated to reimburse Tenant for any such
property which becomes the property of Landlord upon the expiration or earlier
termination of this Lease.
24. Risk of Loss. Except to the extent otherwise expressly provided
herein, the risk of loss or of decrease in the enjoyment and beneficial use of
any of the Leased Premises in consequence of the damage or destruction thereof
by fire, the elements, casualties, thefts, riots, wars or otherwise, or in
consequence of foreclosure, attachments, levies or executions, is assumed by
Tenant, and Landlord shall in no event be answerable or accountable therefor.
Except as otherwise specifically provided in this Lease, none of the events
mentioned in this Paragraph shall entitle Tenant to any abatement of Rent.
25. No Merger of Title. There shall be no merger of this Lease nor of the
leasehold estate created by this Lease with the fee estate in or ownership of
any of the Leased Premises by reason of the fact that the same Person may
acquire or hold or own, directly or indirectly, (a) the leasehold estate created
by this Lease or any part thereof or interest therein or any interest of Tenant
in this Lease, and (b) the fee estate or ownership of any of the Leased Premises
or any interest in such fee estate or ownership; and no such merger shall occur
unless and until all Persons having any interest in (i) this Lease as Tenant or
the leasehold estate created by this Lease and (ii) this Lease as Landlord or
the fee estate in or ownership of the Leased Premises or any part thereof sought
to be merged shall join in a written instrument effecting such merger and shall
duly record the same.
26. Books and Records. Tenant shall keep adequate records and books of
account with respect to the finances and business of Tenant
<PAGE> 50
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generally and with respect to the Leased Promises, in accordance with generally
accepted accounting principles consistently applied, and shall permit Landlord
and Lender by their respective agents, accountants and attorneys, upon
reasonable notice to Tenant to visit and inspect the Leased Premises and examine
(and make copies of) the records and books of account relating to the Leased
Premises and to discuss the finances and business with the officers of Tenant,
at such reasonable times as may be requested by Landlord.
Tenant shall deliver to Landlord and to Lender within one hundred (100)
days of the close of each fiscal year annual audited financial statements of
Tenant prepared by nationally recognized independent certified public
accountants. Tenant shall also furnish to Landlord all quarterly reports of
Tenant, certified by Tenant's chief financial officer, and all filings, if any,
of Form 10-K, Form 10-Q and other required filings with the Securities and
Exchange Commission pursuant to the provisions of the Securities Exchange Act of
1934, as amended, or any other Law. All financial statements of Tenant shall be
prepared in accordance with generally accepted accounting principles
consistently applied and the annual statements hereinabove referred to shall be
accompanied by an unqualified opinion of said accountants and by the affidavit
of the president or a vice president of Tenant, dated within five (5) days of
the delivery of such statement, (a) stating that the affiant knows of no Event
of Default or event which, upon notice or the passage of time or both, would
become an Event of Default which has occurred and is continuing hereunder, or,
if any such event has occurred and is continuing, specifying the nature and
period of existence thereof and what action Tenant has taken or proposes to take
with respect thereto and (b) except as otherwise specified, stating that Tenant
has fulfilled all of its obligations under this Lease which are required to be
fulfilled on or prior to the date of such affidavit.
27. Determination of Value.
(a) Whenever a determination of Fair Market Value is required pursuant to
any provision of this Lease, such Fair Market Value shall be determined in
accordance with the following procedure:
(i) Landlord and Tenant shall endeavor to agree upon such Fair
Market Value within thirty (30) days after the date (the "Applicable Initial
Date") on which (A) Tenant provides Landlord with notice of its intention not to
extend or to terminate this Lease pursuant to Paragraph 13(b) or Paragraph
14(i), (B) Tenant provides Landlord with notice of Tenant's intention to
purchase the Leased Premises pursuant to
<PAGE> 51
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Paragraph 28, (C) Landlord provides Tenant with notice of Landlord's intention
to require Tenant to make an offer to purchase the Leased Premises pursuant to
Paragraph 19(b)(v) hereof, as applicable. Upon reaching such agreement, the
parties shall execute an agreement setting forth the amount of such Fair Market
Value.
(ii) If the parties shall not have signed such agreement setting
forth the amount of such agreed Fair Market Value within thirty (30) days after
the Applicable Initial Date, Tenant shall within fifty (50) days after the
Applicable Initial Date select an appraiser and notify Landlord in writing of
the name, address and qualifications of such appraiser. Within twenty (20) days
thereafter, Landlord shall select an appraiser and notify Tenant of the name,
address and qualifications of such appraiser. The appraiser selected by Tenant
and the appraiser selected by Landlord shall endeavor to agree upon the Fair
Market Value of the Leased Premises, based on a Fair Market Appraisal made by
each of them as of the date specified in the particular provision of this Lease
(the "Applicable Provision") pursuant to which the determination of Fair Market
Value in being made. If the said two appraisers shall agree upon such Fair
Market Value, the amount of such Fair Market Value as agreed to by the said two
appraisers shall be binding and conclusive.
(iii) If the appraiser selected by Tenant and the appraiser selected
by Landlord shall be unable to agree upon such Fair Market Value within twenty
(20) days after the selection of an appraiser by Landlord, then the said two
appraisers shall select a third appraiser to make the determination of such Fair
Market Value and the determination of such third appraiser shall be binding and
conclusive upon Landlord and Tenant.
(iv) In the event the appraiser selected by Tenant and the appraiser
selected by Landlord shall be unable to agree upon the designation of a third
appraiser within ten (10) days after the expiration of the twenty (20) day
period referred to in clause (iii) above or in the event the third appraiser so
selected does not make a determination of the Fair Market Value of the Leased
Promises, within twenty (20) days after the selection, then such third appraiser
or a substituted third appraiser, am applicable, shall, at the request of either
party hereto, be appointed by the President or Chairman of the American
Arbitration Association in Boston, Massachusetts. The determination of Fair
Market value made by the third appraiser appointed pursuant hereto shall be made
within twenty (20) days after such appointment. Fair Market Value shall be the
average of the determination of Fair Market Value made by the third appraiser
and the determination of Fair Market Value made by the
<PAGE> 52
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appraiser whose determination of Fair Market Value is nearest to that of the
third appraiser. Such average shall be binding and conclusive upon Landlord and
Tenant.
(v) All appraisers selected or appointed pursuant to this Paragraph
27(a) shall be independent qualified appraisers. Such appraisers shall have no
right, power or authority to alter or modify the provisions of this Lease and in
determining the fair Market Value of the Leased Promises, such appraisers shall
utilize the definition of Fair Market Value hereinabove not forth above.
(b) The cost of the procedure described in Paragraph 27(a) above shall be
borne entirely by Tenant in the case of a purchase pursuant to Paragraph
19(b)(iii). In all other cases Landlord shall pay the fees and costs of the
appraiser appointed by Landlord, Tenant shall pay fees and costs of the
appraiser appointed by Tenant, and the fees and costs of the third appraiser
(and of the American Arbitration Association, if applicable), shall be split
evenly between the parties.
(c) If, by virtue of any delay in the appointment of a third appraiser
pursuant to Paragraph 27(a)(iv) above or of any delay by such appointed third
appraiser to determine such Fair Market Value, the Fair Market Value of the
Leased Premises is not determined by such appointed third appraiser within one
hundred forty (140) days after the Applicable Initial Date, then the date (the
"Applicable Final Date") on which the Leased Premises would otherwise be sold to
Tenant or on which this Lease would otherwise terminate, as specified in the
Applicable Provision, shall be extended the same number of days (the "Delay
Period") by which the total period so required for the binding and conclusive
determination of Fair Market Value exceeds one hundred forty (140) days and all
relevant defined terms used in the Applicable Provision shall be deemed amended
accordingly, anything to the contrary in the Applicable Provision
notwithstanding. In addition, any time period which is afforded Landlord under
the Applicable Provision within which to accept or reject an offer by Tenant
shall likewise be extended by the number of days equal to the Delay Period.
28. Option to Purchase. Landlord does hereby give and grant to Tenant the
option to purchase the entire Leased Premises on any date (the "Option Purchase
Date") between the tenth (10th) and eleventh (11th) anniversary of the date
hereof which is mutually agreeable to Landlord and Tenant upon payment of the
Purchase Price (as defined in the third paragraph of this Paragraph 28) together
with any applicable prepayment fee or premium. Tenant may exercise its option to
purchase the Leased
<PAGE> 53
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Premises by giving Landlord written notice of Tenant's intention to purchase the
Leased Premises no later than one hundred eighty (180) days prior to the tenth
(10th) anniversary of the date hereof.
If Tenant shall exercise the foregoing option to purchase the Leased
Premises, the title closing shall take place on the Option Purchase Date, except
that if such date is not a business day then the said title closing shall take
place on the first business day following such date. All of the terms, covenants
and provisions contained in Paragraph 16 hereof shall apply to the sale and
conveyance of the Leased Premises pursuant to this Paragraph 28. If this Lease
shall terminate for any reason prior to the date originally fixed herein for the
expiration of the Term or if Tenant shall fail to give either the aforesaid
notice of intention to purchase, time being of the essence, the option provided
in this Paragraph 28 and any exercise thereof by Tenant shall cease and
terminate and shall be null and void. If an Event of Default has occurred or is
continuing at the time of the title closing, Landlord may, at Landlord's option,
terminate Tenant's obligation to purchase the Leased Premises pursuant to this
Paragraph.
The purchase price to be paid by Tenant to Landlord upon the sale and
conveyance of the entire Leased Premises pursuant to this Paragraph 28 (the
"Purchase Price") shall be the greater of (a) the Fair Market Value of the
Leased Premises as of the Option Purchase Date or (b) the sum of the Acquisition
Cost and any prepayment penalty which may be payable under the Note or Mortgage.
As used in the foregoing sentence, "Fair Market Value" shall mean the fair
marked value of the Leased Premises as affected and encumbered by this Lease,
assuming that the Term has been extended for all extension period provided
herein. Promptly after receipt by Landlord of Tenant's said notice of intention
to purchase, the parties shall commence to determine the Fair Market Value of
the entire Leased Premises in accordance with the procedure specified in
Paragraph 27.
Notwithstanding the foregoing, Tenant shall not have the right to exercise
its option to purchase the Leased Premises pursuant to this Paragraph 28, or to
thereafter purchase the Leased Premises, unless Datcon Instrument Company
simultaneously exercises its option to purchase, and thereafter simultaneously
purchases, the premises covered by the Pennsylvania Lease as set. forth in such
Pennsylvania Lease.
29. Financing.
(a) Tenant shall pay, within three (3) business days of written demand
therefor, any cost, charge or expense, including reasonable legal
<PAGE> 54
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fees of Lender's counsel, (other than the principal of the Note and interest
thereon at the contract rate of interest specified therein) imposed upon
Landlord by Lender pursuant to the Note, the Mortgage or the Assignment which is
not caused solely by the gross negligence or willful misconduct of Landlord and
which is not otherwise reimbursed by Tenant to Landlord pursuant to any other
provision of this Lease (except that Tenant shall not be liable for payment of
any refinancing costs, including prepayment penalties, unless otherwise provided
herein).
(b) In the event that Landlord desires to obtain a Loan (as described in
clause (b) of the definition of "Loan" appearing in Paragraph 2 of this Lease)
to be secured by any of the Leased Premises, Tenant shall negotiate in good
faith with Landlord concerning any request made by the proposed Lender for
changes or modifications in this Lease but Tenant shall not be obligated to
agree to any requested change which would have a material adverse effect upon
Tenant. Tenant shall not unreasonably withhold or delay its consent to such
financing if requested by Landlord or Lender, and Tenant shall provide any other
consent or statement and shall execute any and all other documents that any
proposed mortgagee requires in connection with such financing, so long as the
same do not materially adversely affect any right, benefit or privilege of
Tenant under this Lease or materially increase Tenant's obligations under this
Lease. Landlord will not place any mortgage on the Leased Premises except a
mortgage which secures a Loan as defined herein or which Tenant has otherwise
consented to in writing.
(c) Tenant shall have the right, at Tenant's sole cost and expense, to
cause Landlord to purchase an interest rate swap or cap in order to hedge
against interest rate increases in the interest component of Non-Equity Rent.
30. Non-Recourse as to-Landlord. Anything contained herein to the contrary
notwithstanding, any claim based on or in respect of any liability of Landlord
under this Lease (except as otherwise set forth in the second paragraph of this
Paragraph 30) shall be enforced only against the Leased Premises and not against
any other assets, properties or funds of (a) Landlord, (b) any director,
officer, general partner, limited partner, employee or agent of Landlord or any
general partner of Landlord (or any legal representative, heir, estate,
successor or assign of any thereof), (c) any predecessor or successor
partnership or corporation (or other entity) of Landlord, either directly or
through Landlord or its general partners or any predecessor or successor
partnership or corporation (or other entity) of Landlord, or (d) any other
person or entity (including Eighth Carey Corporate Property, Inc., W. P. Carey &
Co., Inc., Carey Corporate
<PAGE> 55
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Property Management, Inc., Clark & Pendleton Realty Corp. or any Person
affiliated with any of the foregoing, or any director, officer, employee or
agent of any thereof).
Anything contained herein to the contrary notwithstanding, any claim based
on or in respect of any liability of Landlord hereunder for Landlord's wrongful
diversion or retention of condemnation award proceeds or insurance proceeds
shall be enforced only against the assets of the Landlord and not against any
other assets, properties or funds of (a) any director, officer, general partner,
limited partner, employee or agent of Landlord or any general partner of
Landlord (or any legal representative, heir, estate, successor or assign of any
thereof), (b) any predecessor partnership or corporation (or other entity) of
Landlord, either directly or through Landlord or its general partners or any
predecessor partnership or corporation (or other entity) of Landlord, or (c) any
other person or entity (including Eighth Carey Corporate Property, Inc., W. P.
Carey & Co., Inc., Carey Corporate Property Management, Inc., Clark & Pendleton
Realty Corp. or any Person affiliated with any of the foregoing, or any
director, officer, employee or agent of any thereof).
31. Subordination. Tenant agrees that this Lease and Tenant's interest
hereunder shall be subordinate to any mortgage, deed of trust, and/or other
security instrument hereafter placed upon the Leased Premises by the Landlord,
and to any and all advances made or to be made thereunder, to the interest
thereon, and all renewals, replacements and extensions thereof provided that any
such instrument (or separate instrument in recordable form duly executed by the
holder of any such mortgage, deed of trust or security instrument and delivered
to Tenant) shall provide for the recognition of this Lease and all Tenant's
rights hereunder until such time as Landlord shall have the right to terminate
this Lease pursuant to any applicable provisions hereof. Landlord has assigned
(or will assign) its rights under this Lease to Lender pursuant to the
Assignment and Mortgage, as more particularly described in the Assignment and
Mortgage.
32. Miscellaneous. The paragraph headings in this Lease are used only for
convenience in finding the subject matters and are not part of this Lease or to
be used in determining the intent of the parties or otherwise interpreting this
Lease. As used in this Lease, the singular shall include the plural as the
context requires and the following words and phrases shall have the following
meanings: (a) "including" shall mean "including but not limited to"; (b)
"provisions" shall mean "provisions, terms, agreements, covenants and/or
conditions"; (c) 'lien" shall mean "lien, charge, encumbrance, title retention
agreement, pledge, security
<PAGE> 56
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interest, mortgage and/or deed of trust"; (d) obligation" shall mean
"obligation, duty, agreement, liability, covenant and/or condition"; (e) "any of
the Leased Premises" shall mean "the Leased Premises or any part thereof or
interest therein"; (f) "any of the Land" shall mean "the Land or any part
thereof or interest therein"; (g) "any of the Improvements" shall mean "the
Improvements or any part thereof or interest therein"; (h) "any of the
Equipment" shall mean "the Equipment or any part thereof or interest therein";
and (i) "any of the Adjoining Property" shall mean "the Adjoining Property or
any part thereof or interest therein". Any act which Landlord is permitted to
perform under this Lease may be performed at any time and from time to time by
Landlord or any person or entity designated by Landlord. Any act which Tenant is
required to perform under this Lease shall be performed at Tenant's sole cost
and expense. Each appointment of Landlord as attorney-in-fact for Tenant under
this Lease is irrevocable and coupled with an interest. Except as otherwise
specifically provided herein Landlord has the right to refuse to grant its
consent in its sole and absolute discretion whenever such consent is required
under this Lease and is not required to give any reason for any such refusal.
Landlord shall in no event be construed for any purpose to be a partner, joint
venturer or associate of Tenant or of any subtenant, operator, concessionaire or
licensee of Tenant with respect to any of the Leased Premises or otherwise in
the conduct of their respective businesses. This Lease and any documents which
may be executed by Tenant on or about the effective date hereof at Landlord's
request constitute the entire agreement between the parties and supersede all
prior understandings and agreements, whether written or oral, between the
parties hereto relating to the Leased Premises and the transactions provided for
herein. This Lease may be modified, amended, discharged or waived only by an
agreement in writing signed by the party against whom enforcement of any such
modification, amendment, discharge or waiver is sought. The covenants of this
Lease shall run with the land and bind Tenant, the heirs, distributees, personal
representatives, successors and assigns of Tenant, and all present and
subsequent encumbrancers and subtenants of any of the Leased Premises, and shall
inure to the benefit of Landlord, its successors and assigns. In the event there
is more than one Tenant, the obligations of each shall be joint and several. In
the event any one or more of the provisions contained in this Lease shall for
any reason be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provision
of this Lease, but this Lease shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein. This Lease shall be
governed by and construed according to the Laws of the State.
<PAGE> 57
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IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be duly
executed under seal as of the day and year first above written.
LANDLORD:
CORPORATE PROPERTY ASSOCIATES 8, L.P.,
a DELAWARE LIMITED PARTNERSHIP
By Eighth Carey Corporate Property,
Inc., a General Partner
By: /s/ H. Cabot Lodge
----------------------------------
Name: H. Cabot Lodge
Title: Senior Vice President
(Corporate Seal) Attest: /s/ Margaret A. Mattson
------------------------------------
Name: Margaret A. Mattson
Title: Assistant Secretary
TENANT:
HIGH VOLTAGE ENGINEERING
CORPORATION,
a Massachusetts corporation
By: /s/ Mark A. Horwitch
----------------------------------------
Name: Mark A. Horwitch
Title: Vice President
(Corporate Seal) Attest: /s/ Gideon Argoy
------------------------------------
Name: Gideon Argoy
Title: Assistant Secretary
<PAGE> 58
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PARCEL II
A certain parcel of land in Sterling, Massachusetts situated on the
northerly side of Pratts Junction Road and the easterly side of Legate Hill
Road, bounded and described as follows:
BEGINNING at a drill hole set in a stone wall at the intersection of the
Easterly side of Legate Hill Road and the Northerly side of Pratts Junction
Road, which point is the Southwesterly corner of the lot to be conveyed;
THENCE N. 19(Degree)23'29"W., Fifteen and 83/100 (15.83) feet to a drill
hole in a stone wall;
THENCE N. 6(Degree)01'13"E., Seventy and 80/100 (70.80) feet to a drill
hole in a stone wall;
THENCE N. 22(Degree)27'41"E., Three Hundred Thirty-nine and 55/100
(339.55) feet to a drill hole in a stone wall;
THENCE N. 24(Degree)07'23"E., One Hundred Eight and 06/100 (108.06) feet;
THENCE N. 15(Degree)36'11"E., One Hundred Twenty-six and 82/100 (126.82)
feet to a stone wall;
THENCE N. 13(Degree)49'48"E., One Hundred Twenty-three and 80/100 (123.80)
feet to a drill hole in a stone wall; thence by said wall 35.17 feet to a drill
hole;
All the above described courses running by the Easterly line of Legate
Hill Road.
THENCE S. 58(Degree)27'26"E., Six Hundred Thirty-four and 40/100 (634.40)
feet to a concrete bound;
THENCE S. 29(Degree)01'55"W. , Seven Hundred Seventy and 00/100 (770.00)
feet to a concrete bound in the Northerly line of Pratts Junction Road;
The last two (2) courses running by lot 2 shown on plan hereinafter
mentioned.
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THENCE N. 60(Degree)58'05"W. , by the Northerly line of Pratts Junction
Road, Four Hundred Seventy-six and 52/100 (476.52) feet to the point of
beginning.
The above described premises are shown as Lot No. 1, containing Ten
(10.00) acres on plan entitled "Land in Sterling & Leominster, Mass., surveyed
for Maurice G. & Beverly Poulin, Scale l" - 100' . July, 1972, Charles A.
Perkins Co., Inc., Civil Engineers & Surveyors, Clinton Massachusetts Plan No.
3670, recorded with Worcester District Registry of Deeds in Plan Book 367, Plan
No. 82.
Being the same premises conveyed to High Voltage Engineering Corporation
by deed of Albany International Corp. dated December 12, 1983 and recorded in
said Deeds at Book 8027, Page 195.
<PAGE> 60
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EXHIBIT A
Two certain parcels of 'land with the buildings thereon situated in
Sterling, Worcester County, Massachusetts, more particularly bounded and
described as follows:
PARCEL I
BEGINNING at a point in the Northeasterly side of Pratts Junction Road at
the junction of the most Southwesterly corner of the land herein to be conveyed
and land now or formerly of Lextel Corp., as shown on plan hereinafter
mentioned;
THENCE N. 29(Degree)01'55"E., Seven Hundred Seventy and 00/100 (770.00)
feet to a found concrete bound at land now or formerly of Maurice G. and Beverly
Poulin;
THENCE by land now or formerly of said Poulin, S. 58(Degree)27'26"E. , One
Hundred Fifty-Six and 76/100 (156.76) feet to a point;
THENCE S. 0(Degree)19'57"W., One Hundred Forty-Three and 53/100 (143.53)
feet to a found concrete bound;
THENCE S. 60(Degree)57'05"E., Two Hundred Twenty-Five and 00/100 (225.00)
feet to an iron pin;
THENCE S.29(Degree)01'55"W., Six Hundred Thirty-Seven and 17/100 (637.17)
feet to a concrete bound in the Northeasterly side of Pratts Junction Road;
The last three (3) courses running by land now or formerly of New England
Power Company;
THENCE N.60(Degree)58'05"W., by the Northwesterly side of Pratts Junction
Road, Four Hundred Fifty and 53/100 (450.53) feet to the point of beginning.
The above described premises contain 7.16 acres and are shown on a Plan of
Land in Sterling, Mass., surveyed for Maurice G. & Beverly
<PAGE> 61
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Poulin, Scale: 1" = 100', dated June 1974, drawn by Charles A. Perkins Co.,
Inc., Civil Engineers & Surveyors, Clinton Mass., Plan No. S-3057, recorded with
Worcester District Registry of Deeds in Plan Book 400, Plan No. 54.
Being the same premises conveyed to Carbolon Corp. by deed of Fred J. Kirk
and recorded in said Deeds at Book 6023, Page 234. For title see Certificate of
Merger at Book 7651, Page 275.
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EXHIBIT "B"
MACHINERY AND EQUIPMENT
All fixtures, machinery, apparatus, equipment, fittings and appliances of
every kind and nature whatsoever now or hereafter affixed to or attached to any
of the Leased Premises (except as hereafter provided), including all electrical,
anti-pollution, heating, lighting (including hanging fluorescent lighting),
incinerating, power, air cooling, air conditioning, humidification, sprinkling,
power, plumbing, lifting, cleaning, fire prevention, fire extinguishing and
ventilating systems, devices and machinery and all engines, pipes, pumps, tanks
(including exchange tanks and fuel storage tanks), motors, conduits, ducts,
steam circulation coils, blowers, steam lines, compressors, oil burners,
boilers, doors, windows, loading platforms, lavatory facilities, stairwells,
fencing (including cyclone fencing), passenger and freight elevators and garage
units, but excluding all personal property and all trade fixtures, machinery,
office, manufacturing and warehouse equipment which are not necessary to the
operation, as buildings, of the buildings which constitute part of the Leased
Premises.
Specifically included with the Leased Premises are four electrical
generators and two 10,000 gallon capacity fuel storage tanks located in the
generator building.
<PAGE> 63
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EXHIBIT "C"
PERMITTED ENCUMBRANCES
Those exceptions to title contained in the title policy issued to Landlord
pursuant to Lawyers Title Insurance Corporation commitment no.
88-2108 (agent: Myrna Weiner).
<PAGE> 64
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EXHIBIT "D"
BASIC RENT PAYMENTS
1. Basic Rent. Subject to the adjustments provided for in Paragraphs 2, 3,
4 and 5 below, Basic Rent shall be payable monthly in advance on each Basic Rent
Payment Date.
As used herein, the following terms shall have the following
meanings:
"Basic Rent" shall mean, for each month prior to the 10th anniversary of
the First Full Basic Rent Payment Date (as defined hereinafter), the sum of (i)
Equity Rent for such month and (ii) Non-Equity Rent for such month. For the
month commencing with the 10th anniversary of the First Full Basic Rent Payment
Date, Basic Rent shall mean the sum of (i) Equity Rent for such month and (ii)
the sum of Non-Equity Rent payable during the immediately preceding thirty-six
months divided by thirty six; for each month thereafter, Basic Rent shall mean
the Basic Rent payable during the month commencing with the 10th anniversary of
the First Full Basic Rent Payment Date hereof (as calculated in the immediately
preceding clause), subject to the adjustments described in paragraphs 2, 3, 4
and 5 below.
"Equity Rent" shall, for any given month, equal $27,639, subject to the
adjustments set forth in paragraphs 2, 3, 4 and 5 below; provided, however, that
if there is no Non-Equity Rent in any given month because there is no Loan, then
the Equity Rent for such month (and all successive months) shall be $27,639 plus
the Non-Equity Rent in effect for the immediately preceding month, subject to
the adjustments set forth in paragraphs 2, 3, 4 and 5 below.
"Non-Equity Rent" shall, for any given month, equal the payments
(principal and/or interest) required to be made by Landlord during such month to
the Lender pursuant to the Loan; provided, however, that if a payment during a
given month is required to be made to Lender as a result of an acceleration of
the Loan, then the Non-Equity Rent payable during such month shall be the
payment which would be required to be made by Landlord to Lender during such
month as if such acceleration had not occurred.
2. CPI Adjustments. The Equity Rent shall be subject to adjustment, in the
manner hereinafter set forth, for increases in the index known as United States
Department of Labor, Bureau of Labor Statistics,
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Consumer Price Index, All Urban Consumers, United States City Average, All
Items, (1982-84=100) ("CPI") or the successor index that most closely
approximates the CPI. if the CPI shall be discontinued with no successor or
comparable successor index, Landlord and Tenant shall attempt to agree upon a
substitute index or formula, but if they are unable to so agree, then the matter
shall be determined by arbitration in accordance with the rules of the American
Arbitration Association then prevailing in New York City. Any decision or award
resulting from such arbitration shall be final and binding upon Landlord and
Tenant and judgment thereon may be entered in any court of competent
jurisdiction. In no event will the Basic Rent as adjusted by the CPI adjustment
be less than the Basic Rent in effect for the five (5) year period immediately
preceding such adjustment.
3. Effective Dates of CPI Adjustments. Equity Rent shall not be adjusted
to reflect changes in the CPI until the fifth (5th) anniversary of the Basic
Rent Payment Date on which the first full monthly installment of Basic Rent
shall be due and payable (the "First Full Basic Rent Payment Date"). As of the
fifth (5th) anniversary of the First Full Basic Rent Payment Date and thereafter
on the tenth (10th), fifteenth (15th), twentieth (20th) and twenty-fifth (25th)
anniversaries and, if the initial Term is extended, on the thirtieth (30th),
thirty-fifth (35th), fortieth (40th) and forty-fifth (45th) anniversaries of the
First Full Basic Rent Payment Date, Equity Rent shall be adjusted to reflect
increases in the CPI during the most recent five (5) year period immediately
preceding each of the foregoing dates (each such date being hereinafter referred
to as the "Basic Rent Adiustment Date").
4. Method of Adiustment for CPI Adiustment.
(a) As of each Basic Rent Adjustment Date when the average CPI determined
in clause (i) below exceeds the Beginning CPI (as defined in this Paragraph
4(a)), the Equity Rent in effect immediately prior to the applicable Basic Rent
Adjustment Date shall be multiplied by a fraction, the numerator of which shall
be the difference between (i) the average CPI for the three (3) most recent
calendar months (the "Prior Months") ending prior to such Basic Rent Adjustment
Date for which the CPI has been published on or before the forty-fifth (45th)
day preceding such Basic Rent Adjustment Date and (ii) the Beginning CPI, and
the denominator of which shall be the Beginning CPI. (In calculating the
numerator of the fraction described in the foregoing sentence, however, the
average CPI for the Prior Months shall be recalculated as if, for each year
during the previous five-year period, there were an 8% annual cap on increases
in CPI from that CPI in effect during the prior year.) The product of such
<PAGE> 66
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multiplication shall be added to the Equity Rent in effect immediately prior to
such Basic Rent Adjustment Date. The "Beginning CPI" shall mean the average CPI
for the three (3) calendar months corresponding to the Prior Months, but
occurring five (5) years earlier. If the average CPI determined in clause (i) is
the same or less than the Beginning CPI, the Equity Rent will remain the same
for the ensuing five (5) year period.
(b) Effective as of a given Basic Rent Adjustment Date, Equity Rent
payable under this Lease until the next succeeding Basic Rent Adjustment Date
shall be the Equity Rent in effect after the adjustment provided for as of such
Basic Rent Adjustment Date.
(c) Notice of the new Equity Rent shall be delivered to Tenant on or
before the thirtieth (30th) day preceding each Basic Rent Adjustment Date.
5. CPI Adjustments After 10th Anniversary of First Full Basic Rent
Payment Date.
The provisions of paragraphs 2, 3 and 4 above shall remain in effect for
all months prior to the 10th anniversary of the First Full Basic Rent Payment
Date. Commencing as of the month in which the 10th anniversary of the First Full
Basic Rent Payment Date occurs, (a) CPI adjustments shall be made to Basic Rent
(and not just to Equity Rent), and (b) all references in paragraphs 2, 3 and 4
above to "Equity Rent" shall be deleted and, in lieu thereof, the phrase "Basic
Rent" shall be inserted.
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EXHIBIT E
COVENANTS
Tenant shall comply with all the covenants and agreements set forth in
Article 4 of the Subordinated Promissory Note dated as of August 18, 1988 (the
"Note") between Tenant and Quest Equities Corp. as in effect on the date hereof,
but only those covenants which are in effect prior to the Fist Senior
Termination Date or the Second Senior Termination Date (as defined in the Note),
and those covenants which apply only after the First Senior Termination Date or
the Second Senior Termination Date shall be excluded. Such covenants are
incorporated herein by reference and made a part hereof as though fully set
forth herein, provided that the term "Company" as used in such covenants shall
mean Tenant, the term "Lender" as used in such covenants shall mean Landlord,
and all other capitalized terms as used in such covenants shall have the
meanings assigned to such terms in the Note. The covenants incorporated by
reference herein shall continue in full force and effect notwithstanding any
amendment or cancellation of the Note and notwithstanding any agreement between
Tenant and Lender (as defined in the Note) waiving, modifying, amending or
canceling the covenants set forth in the Note.
<PAGE> 1
EXHIBIT 10.4
INSTALLMENT SALE AGREEMENT
THIS INSTALLMENT SALE AGREEMENT, made this 23rd of September, by and
between the MONROEVILLE AREA INDUSTRIAL DEVELOPMENT CORPORATION, a nonprofit
corporation organized and existing under and by virtue of the laws of the
Commonwealth of Pennsylvania ("MAID"), with an address at 2790 Mosside
Boulevard, Suite 233, Monroeville, Pennsylvania 15146,
AND
HALMAR ROBICON GROUP, INC., a Pennsylvania corporation ("Buyer'), with an
address. at 300 Sagamore Hill Road, Pittsburgh, Pennsylvania 15239.
WITNESSETH:
WHEREAS, MAID is the Owner in fee of a certain tract of land, together with
all improvements now and then located thereon, situate in Westmoreland County,
Pennsylvania as more particularly described herein and on Exhibit "A" attached
hereto and made a part hereof (the "Premises"), upon which MAID proposes to
establish an industrial development project (the "Project or "Project
Facilities" or "Improvements") as defined in the Pennsylvania Industrial
Development Authority Act, as amended, to be purchased and occupied by the
Buyer; and
WHEREAS, MAID has secured from THE PENNSYLVANIA INDUSTRIAL DEVELOPMENT
AUTHORITY ("PIDA") for a loan in the amount of Two Million and 00/100 Dollars
($2,000,000.00) (the' "Loan") to be used exclusively to defray a portion of the
"cost of establishing an industrial development project", as defined in the
Pennsylvania industrial Development Authority Act, as amended; and
WHEREAS, MAID is willing to sell the Premises to the Buyer upon the terms
and subject to the conditions hereinafter set forth.
NOW, THEREFORE, the parties hereto, in consideration of the mutual
promises, covenants and agreements contained herein and intending to be legally
bound hereby, do agree as follows:
1. SALE AND PREMISES. MAID hereby agrees to sell to the Buyer, who
hereby agrees to purchase, all of MAID's right, title and interest in and to the
Premises situate in upper Burrell Township, County of Westmoreland,
Pennsylvania, more particularly described in Exhibit "A" attached hereto and
made a part hereof by reference, TOGETHER WITH the buildings and improvements
erected or to be erected thereon AND TOGETHER WITH the easements, tenements,
hereditaments, appurtenances, fixtures, equipment, rights and privileges now or
hereafter contained in, attached to, belonging to or in any way pertaining or
beneficial thereto, whether described in Exhibit "A" or not, and with all
faults.
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<PAGE> 2
2. MAID'S INTEREST IN THE PREMISES. MAID acquired title in fee simple to
the Premises, by Deed from HALMAR ROBICON INC., dated SEPTEMBER 23, 1994, and
recorded in the Recorder's Office of Westmoreland County, in Deed Book Volume
, page , and the Buyer has, to its complete satisfaction, fully
inspected and approved the deed to MAID and title to the Premises.
3. NOTES AND MORTGAGES. On the date hereof MAID has executed and
delivered a Note in the principal amount of Two Million and 00/100 Dollars
($2,000,000-00) in favor of PIDA (the PIDA Note"), and MAID has granted a
mortgage lien on the premises in the principal amount of Two Million and 00/100
Dollars ($2, 000, 000. 00) in favor of PIDA (the "PIDA Mortgage") in order to
secure the PIDA Note. On the date of this Agreement, the Buyer has executed and
delivered a note in the principal amount of Five Thousand and 00/100 Dollars
($5,000.00) in favor of MAID (the "MAID NOTE"). The Bank Note, PIDA Note and
MAID Note are hereinafter sometimes collectively referred to as the "Notes", and
the PIDA Mortgage is hereinafter sometimes collectively referred to as the
"Mortgages." All Notes and Mortgages are hereinafter sometimes collectively
referred to as the "Notes and Mortgage." PIDA in hereinafter sometimes
collectively referred to as the "Mortgagees."
4. LOAN SECURITY DOCUMENTS. Also on the date of this Agreement, MAID
and/or Buyer and/or High Voltage Engineering Corporation ("Guarantor") have
executed and delivered certain documents in connection with the Loan
(collectively the "Other Loan Documents"), including but not limited to an
affidavit as to the Payment of Costs, a Guaranty Agreement, and a Consent
Subordination and Assumption Agreement: The Notes, Mortgages and the Other Loan
Documents are hereinafter sometimes collectively referred to as the "Loan
Documents."
5. SUBORDINATION OF BUYER'S INTEREST AND RIGHTS. Documents are
incorporated herein by reference as if more fully set forth, and the covenants
and agreements of MAID contained therein shall be' the covenants and agreements
of the Buyer as well. The Buyer acknowledges and agrees to its interest and
rights hereunder and the interest and rights of any Lessee of the Premises are
expressly subordinate and subject to the interests and rights of the Mortgagees.
The Buyer acknowledges that PIDA has made the PIDA loan in reliance upon the
assignment by MAID of its right, title and interest in and to this Agreement to
PIDA.
6. PURCHASE PRICE. (a) The Purchase Price for the Premises is the total
of all sums that are due and payable under the PIDA Note and the MAID Note,
whether by declaration, acceleration or otherwise, as the same becomes due and
payable, together with MAID's annual service fee of seven-eights (7/8) of one
(1%) percent charged an the outstanding principal balance of the PIDA note for
each year during the term of this Installment Sale Agreement, together with any
and all charges assessed annually or otherwise by PIDA relative to the PIDA
Note.
(b) All installment payments on the Purchase Price by Bank shall be
applied first to the interest on that portion of the Purchase Price being paid
and thereafter on account of that portion of the Purchase Price being paid. The
final installment shall include all interest and principal due and unpaid on the
Notes.
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<PAGE> 3
(c) The Buyer may accelerate payment of all or any portion of the Purchase
Price to the extent and upon the condition that MAID has the right to prepay
that portion of its indebtedness under the Notes in any -amount identical to the
portion of the Purchase Price which the Buyer is prepaying (the "Respective
Note"); provided, however, that with such payment, the Buyer in addition pays to
MAID an amount equal to the premium or other additional charge which MAID is
required to make to the holder of the respective Notes in order for MAID to make
a comparable prepayment on the respective Notes. Any amount prepaid by MAID,
together with any premium or additional charge which may be required as
specified above, shall by promptly applied by MAID as a prepayment on the
respective Notes. Partial prepayment of the Purchase Price made by the Buyer
hereunder shall not postpone or diminish or in any way alter the next and
succeeding installment payment of the Purchase Price falling due hereunder until
the entire Purchase Price together with interest accrued and unpaid has been
paid in full.
(d) Notwithstanding any other provision of this Agreement, if for any
reason the balance of the amount due on any of the Notes is called for payment
at any time by the holder thereof, then the Buyer agrees that the entire balance
of such Note or Notes called remaining due and unpaid together with any interest
thereon, shall be immediately due and payable by the Buyer. Further,
notwithstanding any other provision of this Agreement to the contrary, Buyer
expressly agrees he will make all payments due under Notes and Mortgages
directly to the holders of the Notes and MAID shall have no duty or
responsibility to make any such payments unless MAID notifies Buyer in writing
of MAID's intentions to make such payments after receipt by MAID of installment
payments on the Purchase Price from Buyer.
7. GENERAL PAYMENT PROVISION. All payment hereunder shall be absolutely
net, and all costs and expenses payable in connection with the ownership,
occupancy and maintenance of the Premises shall be paid by the Buyer. It is the
intention of the parties that notwithstanding any other provision of this
Agreement, MAID shall receive from the Buyer funds equal to those necessary for
MAID to pay to the holders of the Notes and Mortgages, including any obligations
which survive the payment thereof. Accordingly, the Buyer agrees (but such
agreement shall not limit the generality of the preceding sentence) that if
interest payable by MAID under the terms of any Note is increased or decreased,
or if any additional amounts become due and payable by MAID under the terms of
any Note to the Mortgagee or holders of the Notes, or if payment of any Note
shall be accelerated, then and in such event, the interest payable under the
portion of the Purchase Price identical with the Respective Note shall be
increased or decreased to the same extent, retroactively if necessary, and
additional amounts shall be payable by the Buyer to MAID hereunder equal to any
additional amount or accelerated amount that may be payable by MAID to the
holder of the Respective Note under its terms and at the same time thereon. The
obligations of the Buyer to make payments hereunder and to perform and observe
the other agreements on Buyer's part contained herein shall be absolute and
unconditional until such time as the Purchase Price and accrued interest have
been paid in full and until then, the Buyer (i) will not suspend or discontinue
any payments provided for herein; and (ii) will perform and observe all of
Buyer's other agreement contained in this Agreement. The Buyer may, however, at
Buyer's own cost and expense and in Buyer's own name prosecute or defend any
action or proceeding or take any other action involving third persons which the
Buyer may deem reasonably necessary in order to secure or protect Buyer's rights
of possession, occupancy or use hereunder and, in such event, MAID agrees to
cooperate fully with the Buyer.
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<PAGE> 4
8. NO DEFENSE OF SET-OFF. The obligations of the Buyer to make the
payments required hereunder shall be absolute and unconditional without any
defense or set-off by reason of any default by MAID under this Agreement or
under any other agreement between the Buyer and MAID, or for any other reason,
including, without limitation, failure to complete construction of the
Improvements, acquisition of and the installation of fixtures and equipment and
all acts and circumstances that may constitute failure of consideration,
destruction or damage to the Premises or the commercial frustration of purpose
or the failure of MAID to perform or observe any agreement whatsoever, whether
express or implied, or any duty, liability or obligations arising out of or in
connection with this Agreement, it being the intention of the parties hereto
that the payments required by this Agreement to be made by the Buyer shall be
paid in full when due without any delay or diminution whatsoever.
9. POSSESSION, USE, MAINTENANCE, REPAIRS AND ALTERATIONS. Insofar as MAID
is concerned, the Buyer shall have sole and exclusive possession of the Promises
upon execution of this Agreement. The Buyer agrees that MAID in no way and at no
time shall be responsible for the condition of the Premises. The Buyer agrees
that during the term of this Agreement, Buyer will pay all costs and expenses in
the maintenance and operation of the Premises. The Buyer will not undertake or
permit any demolition or material structural alterations or additions to the
Project Facilities in violation of the provisions of any of the Mortgages. All
structural alterations and additions to the Project Facilities undertaken by the
Buyer shall become a part of the Project Facilities.
In the event of default of any contractor or subcontractor under any
contract made by it in connection with the Improvements or in the event of
breach of warranty with respect to materials, workmanship or performance
guaranty, the Buyer will promptly proceed, either separately or in conjunction
with others, to exhaust the remedies against the contractor, subcontractor or
materialman so in default and against each surety for the performance of such
contractor, subcontractor or materialman. The' Buyer agrees to advise MAID of
the steps Buyer intends to take in connection with any such default. If the
Buyer shall so notify MAID, the Buyer may in Buyer's own 'name prosecute or
defend any action or proceeding or take any other action involving the
contractor, subcontractor or materialman or surety which the Buyer deems
reasonably necessary, and, in such event, MAID hereby agrees to cooperate fully
with the Buyer.
The Buyer agrees to take good care of the Premises and Project Facilities,
including the sidewalks adjacent to the Premises, and keep it reasonably clean,
free from snow and ice on walks and paths, at the Buyer's own expense from and
after the date hereof, to keep the Project Facilities in good repair (structural
and otherwise), order and condition, including any rebuilding or restoration
following a casualty loss, and pay all utility charges and other costs and
expenses arising out of the occupancy, use and possession of the Premises and
Improvements.
10. SECURITY INTEREST. As a security interest for performance of Buyer's
obligations hereunder, the Buyer grants to MAID a security interest in any and
all heating, plumbing, sprinkler, water, gas, electric, power, lighting,
air-conditioning equipment, elevators, machinery and fixtures and all other
property of any description whatsoever, now or hereafter used in connection with
the Project Facilities, whether attached or not, together with all cash and
non-cash proceeds of the same, including insurance
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<PAGE> 5
proceeds. This Agreement shall constitute a Security Agreement under the
Pennsylvania uniform Commercial Code so that MAID and the Mortgages, as MAID's
assignee, shall have and may enforce a security interest to secure the payment
of all sums due and to become due under this Agreement, such security interest
to attach at the earliest moment permitted by law.
11. BUYER'S REPRESENTATIONS AND WARRANTIES. The Buyer represents,
covenants and warrants as follows:
(a) The Buyer will - (i) keep the Premises and Improvements free of
encumbrances or security interests except the Mortgages and the security
interests created by the Mortgages and by this transaction, and (ii) permit
MAID, the Mortgagees, any holder of any Notes, and their respective
representatives to inspect the Premises and the Improvements at all reasonable
times.
(b) There are no actual or threatened suits or legal proceedings
against the Buyer which are substantial in amount or the adverse result of which
would in any way materially affect the Premises or the Improvements or the
occupancy or use thereof by the Buyer.
(c) The representations and warranties made by Buyer and/or
Guarantor in the Loan Documents, including but not limited to those set forth in
the Consent, Subordination and Assumption Agreement of even date herewith, are
and shall remain true, correct and binding upon Buyer and Guarantor.
12. TAXES, ASSESSMENTS, AND OTHER GOVERNMENTAL CHARGES. The Buyer agrees
to pay, in addition to the Purchase Price and as the same respectively become
due, all taxes, including County, Municipal and School taxes, assessments
whether special or general, water rents, sewer rents and charges,~ and all
governmental charges of any kind whatsoever that may at any time be lawfully
assessed and levied against or in respect to the Premises, Improvements or any
machinery, equipment or related property installed or brought by the Buyer
therein or thereon (including, without limiting the generality of the foregoing,
taxes, if any, levied upon or with respect to the receipts, income or profits of
MAID or the Buyer from the Premises) and all utility and other charges incurred
in the operation, maintenance, use, occupancy and upkeep of the Premises and
Improvements; provided, however, that with respect to special assessments or
other governmental charges that may be lawfully paid in installments as are
required to be paid during the term hereof. The Buyer agrees to pay for any
improvements to the Premises made or ordered to be made by any municipal or
state authorities and to comply at Buyer's own cost and expense with all notices
received from public authorities from and after the date hereof.
In the event the Mortgages so provide, the Buyer shall make payment of real
estate taxes, water and sewer rents and insurance premiums required above by
paying each month to such Mortgagee so requiring, one-twelfth (1/12) of the
annual bills for these sums as estimated by the Mortgagees, to be held by the
Mortgagee without interest so that the Mortgagees will have on hand sufficient
funds to pay the same when due.
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<PAGE> 6
The Buyer further agrees to comply with all requirements of the Mortgages as
to the payment of all taxes or other claims for which any individual,
individuals, company, corporation or other person or persons, natural or
artificial, in whom legal or equitable title to the Premises shall or may
hereafter vest, may be liable under the laws of the United States of America or
the Commonwealth of Pennsylvania, both present and future, where the tax
liability under the provisions of such laws may be or become a lien upon the
Premises prior to the lien of the Mortgages, or payable from the proceeds of a
judicial sale before the sum is secured by the Mortgages are payable.
13. ADJUSTMENTS AND ZONING. The Buyer agrees to pay all taxes, fees,
charges and costs which are required and when required in connection with MAID's
acquisition of the Premises, with respect to the Mortgages or other mortgage
created by MAID in connection with the conveyance of the Premises by MAID to the
Buyer. The Buyer has satisfied itself with respect to existing zoning
classification, the legality of present use and of any intended future use or
improvements intended by the Buyer and the existence or nonexistence, as the
case may be, of any violation of any local code, ordinance or state law
respecting the Premises, and the Buyer waives any right may have against MAID
respecting representations concerning the Premises.
14. COMPLIANCE WITH LAWS. The Buyer agrees from and after the date of this
Agreement to comply with all laws, ordinances and regulations, including but not
limited to all building, zoning and environmental laws, ordinances and
regulations of any duly constituted authority which may presently or hereafter
in any manner affect the Premises, adjacent sidewalks or any improvements
thereon or the use thereof.
15. PROPERTY INSURANCE. During the term of this Agreement, the Buyer will
keep the entire Premises insured against loss or damage by fire with extended
coverage, and against loss from such other~ hazards as may be required by MAID
or the Mortgagee, and in no event will property insurance be in an amount less
than the principal balance due on the Notes. The Buyer shall take out and
maintain such boiler insurance and other insurance as may be required by MAID or
any of the Mortgagees. All such policies of insurance and additional fire
insurance carried on the Premises by the Buyer shall contain the standard
mortgagee clause, and certificates of insurance or the originals thereof shall
be deposited with MAID and any of the Mortgagees who require the same.
16. LIABILITY INSURANCE. The Buyer, at Buyer's own cost and expense, will
provide and keep in force during the term of this Agreement, for the benefit of
MAID as well as the Buyer, comprehensive general liability insurance covering at
least the hazards of "Premises-operations", "elevators" (if applicable) and
"Independent Contractors", in which MAID shall be included as an insured, with
minimum limits of liability with respect to bodily injury of Five Hundred
Thousand Dollars ($500,000.00) for each person, one Million Dollars ($1, 000,
000. 00) for each occurrence and One Hundred Thousand Dollars ($100,000.00) with
respect to property damage. Such insurance shall cover the entire Premises,
including but not limited to elevators, hoists, sidewalks, passageways and other
property in and about the adjoining streets. The Buyer shall have the right to
carry insurance provided for herein or any portion of such insurance under a
blanket policy.
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<PAGE> 7
In addition, the Buyer, at Buyer's own expense, shall provide and keep in
force, whenever construction of major alterations or improvements to the
Premises is being performed, policies of contingent, public liability insurance
protecting MAID and the Buyer, in addition to providing certificates of public
liability insurance and workmen's compensation insurance insuring the contractor
or subcontractor engaged by the Buyer. Such contingent liability insurance shall
be a public liability policy covering at least the hazards of all phases of the
construction being performed by MAID or the Buyer or their contractors or
subcontractors, the hazards arising from the ownership, occupancy or possession
of the Premises, and the hazards of any operation other than construction being
carried on by the Buyer an any part of the Premises. Notwithstanding anything
herein to the contrary, the Buyer shall take out and maintain all such insurance
in such forms, amounts and coverages and with such insurers as may be required
by PIDA.
17. GENERAL INSURANCE PROVISIONS.
(a) All insurance as to form, amount and insurance company shall be
satisfactory to MAID and the Mortgagees.
(b) All policies will require that not less than thirty (30) days'
written notice of cancellation or material change will be given to MAID and the
Mortgagees.
(c) All cost of insurance will be borne by Buyer.
(d) Certificates of renewal insurance or renewal policies shall be
deposited at least fifteen (15) days before expiration of the prior existing
policies.
(e) All insurance is required commencing from the date hereof and
shall be continued throughout the term of this Agreement. The Buyer will provide
evidence thereof satisfactory to MAID and the Mortgagees.
(f) All insurance shall name MAID and the Buyer as insureds and
shall cover the entire Premises, including sidewalks, walkways and cartways.
(g) All policies of insurance shall be issued by insurance
companies licensed to do business in Pennsylvania.
17. DAMAGE AND CONDEMNATION. Damage to, destruction of or condemnation of
all or any portion of the buildings, improvements or Premises shall not
terminate this Agreement or cause abatement of or reduction in the payments to
be made by the Buyer hereunder or otherwise affect the respective obligations of
the Buyer and MAID. However, if the amount owing or payments under arty Note are
reduced (which MAID shall have no obligation to seek or to affect), then the
Purchase Price or payments hereunder shall be reduced to the same extent.
Proceeds of any insurance policy arising out of damage or destruction of
buildings or Improvements on the shall be paid to the Mortgagees and, if the
Buyer is not in default hereunder, shall be applied to the cost of repair or
restoration of the buildings or Improvements pursuant to
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the terms of the applicable Mortgages by the Mortgagees. In any event, the
Buyer, in the event of such damage or destruction, shall promptly restore the
buildings and Improvements to at least as good condition as the same existed
prior to the said damage or destruction, unless the Mortgagees agree to the
application of the proceeds of insurance to the payment of the Purchase Price
due and owing hereunder. The Buyer hereby agrees that Buyer is bound by the
provisions of the Mortgage and agrees to assume the obligations of MAID
thereunder in reference to the application of proceeds of insurance and
restoration of buildings and Improvements. In the event the proceeds should
exceed the costs of restoration, the excess of any proceeds may be remitted by
the Mortgagees to MAID to be applied by MAID to the payment of sums due
hereunder and balance thereof remitted to the Buyer.
19. EMINENT DOMAIN. In the event that title to or use of the Premises, or
any part thereof, shall be taken in the exercise of the power of eminent domain
by any governmental authority or by any person, firm or corporation acting under
any governmental authority, there shall be no diminution or postponement of
payments payable hereunder by the Buyer, and the net proceeds received from any
award in such condemnation proceeding, or resulting from any settlement thereof,
shall be paid to the Mortgagees and applied pursuant to the terms of the
Mortgages. Any proceeds exceeding the amount so applied may be paid to the
Buyer.
20. QUIET ENJOYMENT. MAID covenants that the Buyer, on performance of the
covenants and conditions on Buyer's part to be performed and observed hereunder,
shall and may peacefully and quietly have, hold and enjoy the Premises as
purchaser in possession, free from molestation, eviction or disturbance by MAID.
20. EVENTS OF DEFAULT. During the term of this Agreement, the following
shall constitute events of default by the Buyer:
(a) Failure of the Buyer to make payments as required hereunder.
(b) Failure of the Buyer to observe or perform any other covenant or
agreement on Buyer's part to be observed and performed hereunder or under any of
the Loan Documents for a period of thirty (30) days after written notice,
specifying such failure and requesting that it be remedied, given to the Buyer
by MAID, or any of the Mortgagees or any holder of the Notes or Mortgages.
(c) The dissolution or liquidation of the Buyer or the filing by the
Buyer of a voluntary petition in bankruptcy or the failure by the Buyer promptly
to lift any execution, attachment or garnishment of such consequence as will
impair Buyer's ability to carry out Buyer's obligations hereunder, or the
commission by the Buyer for the benefit of creditors, or if any proceeding in
bankruptcy or the appointment of a receiver shall be instituted by any creditor
of the Buyer under any federal or state law. The term "dissolution or
liquidation by the Buyer" as used in this subparagraph shall be construed to
include the transfer of all or substantially all of the Buyer's assets to
another person, corporation, partnership or other entity, unless the transferee
assumes in writing all Of the obligations of the Buyer herein, and unless the
Mortgagee and MAID give their prior written consent to such transfer.
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(d) The occurrence of any event of default under the Notes,
Mortgages, or any or the Loan Documents, or any collateral document concerning
any of the foregoing after the expiration of the grace period, if any.
22. REMEDIES ON DEFAULT. Upon the occurrence of an event of default, any
one or more of the following remedial steps may be taken:
(a) MAID may perform on account of the Buyer any covenant or
obligation in the performance of which the Buyer is in default, in which the
Buyer shall be obligated to pay immediately to MAID any amount paid by MAID
together with counsel fees, as well as interest at the rate of twelve and
one-half percent (12.50%) per annum from the date of payment by MAID.
(b) MAID may declare all sums which the Buyer is obligated to pay to
MAID pursuant to this Agreement, together with interest accrued, immediately due
and payable.
(c) MAID may terminate this Agreement and resell the Premises at
public or private sale, and MAID will apply the monies received therefrom, less
expenses of same, in the order of priority as MAID, in its discretion, may
elect; and the Buyer shall remain liable for any deficiency after the
application of such proceeds.
(d) UPON AN EVENT OR DEFAULT, THE BUYER HEREBY IRREVOCABLY
AUTHORIZES AND EMPOWERS ANY ATTORNEY OF ANY COURT OF RECORD OF PENNSYLVANIA OR
ELSEWHERE TO APPEAR AS ATTORNEY FOR THE BUYER, AS WELL AS FOR ALL PERSONS
CLAIMING BY, THROUGH OR UNDER THE BUYER, AND TO SIGN AN AGREEMENT FOR ENTERING,
IN ANY COURT OF COMPETENT JURISDICTION, AN AMICABLE ACTION IN EJECTMENT AGAINST
THE BUYER AND THEREIN CONFESS JUDGMENT FOR THE RECOVERY BY MAID OR ITS ASSIGNEE
OF POSSESSION OF THE PREMISES, FOR WHICH A COPY OF THIS AGREEMENT SHALL BE
SUFFICIENT WARRANT, WHEREUPON, IF MAID SO DESIRES A WRIT OF EJECTMENT MAY ISSUE
FORTHWITH WITHOUT ANY PRIOR WRIT OR PROCEEDINGS WHATSOEVER, AND PROVIDED THAT IF
FOR ANY REASON AFTER SUCH ACTION SHALL HAVE BEEN COMMENCED THE SAME SHALL BE
DETERMINED AND THE POSSESSION OF THE PREMISES REMAIN IN OR BE RESTORED TO THE
BUYER, MAID SHALL HAVE THE RIGHT ON ACCOUNT OF ANY SUBSEQUENT EVEN OF DEFAULT TO
BRING ONE OR MORE FURTHER AMICABLE ACTION OR ACTIONS IN EJECTMENT AS
HEREINBEFORE SET FORTH TO RECOVER POSSESSION OF THE PREMISES AND CONFESS
JUDGMENT FOR THE RECOVERY OF POSSESSION AS HEREINABOVE PROVIDED
Initial:
(e) After ten (10) days' written notice MAID may take possession of
the Premises by summary procedure set forth in subparagraph (d) above or
otherwise without terminating this Agreement. MAID may collect rentals and
enforce all other remedies against the Buyer under any existing leases for any
part of the Premises, but without being deemed to have affirmed such leases, and
MAID may enter into new leases on such terms as MAID may deem fit for any
portion or portions of the Premises.
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(f) The Buyer hereby irrevocably authorizes and empowers any
attorney of any court of record in Pennsylvania to appear for and confess
judgment against the Buyer for all amounts for which the Buyer may be or become
liable to MAID or its assignee under this Agreement, as evidenced by an
affidavit signed by an officer of MAID or its assignee setting forth the amounts
then due plus reasonable attorney fees, with costs of suit and release of
errors. Such authority shall not be exhausted by any one exercise thereof, but
judgment may be confessed as aforesaid from time to time as often as there is a
default hereunder. A copy of this Agreement shall be his sufficient warrant.
(g) In any amicable action of ejectment brought hereunder or any
suit or amicable action brought for the Purchase Price or any sums due
hereunder, MAID shall first cause to be filed in such suit, action or actions an
affidavit made by it or someone acting for it setting forth the facts necessary
to authorize the entry of judgment, of which facts such affidavit shall be prima
facie evidence of the truth of said Agreement, and if such copy shall be filed
in such suit, action or actions, it shall not be necessary to file the original
as a warrant of attorney, any rule of court, custom or practice to the contrary
notwithstanding.
(h) The Buyer hereby waives and releases all errors, defects and
imperfections whatsoever of a procedural nature in the entering of any judgment
or any process or proceedings arising out of this Agreement. The Buyer also
waives the benefit of any laws now or hereafter which might authorize the stay
of any execution to be issued or any judgment recovered hereunder or the action
of any property from levy or sale.
(i) As long as the Buyer is in default, all interest of the Buyer In
the premiums or dividends upon any insurance policies provided for herein, as
well as any rebates on taxes or assessments' imposed upon the Premises, are
hereby assigned to MAID. MAID does not assume general liability for the
repayment of any of the Notes or Mortgages (except to PIDA), or for costs, fees,
penalties, taxes, interest, commissions, charges, insurance or other payments
therein recited.
23. CUMULATIVE RIGHTS. No right or remedy herein conferred upon or
reserved to MAID is intended to be exclusive of any other right or remedy
provided herein or by law, but each shall be cumulative and in addition to every
other right or remedy herein given or now or hereafter existing in law or in
equity or by statute, and may be pursued singly, successively or together at the
discretion of MAID, and may be exercised as often as the occasion shall occur.
24. EFFECT OF WAIVER OR FORBEARANCE. It is also agreed that no waiver by
MAID or any breach by the Buyer shall be a waiver of any subsequent breach of
any obligation, agreement or covenant, nor shall any forbearance by MAID of its
rights or remedies be a waiver in respect to that or any other breach.
25. INDEMNIFICATION OF MAID AND WAIVER OF CLAIMS. The Buyer recognizes and
acknowledges that MAID has acquired title to the Premises and is participating
in the development of the Project pursuant hereto, solely for the benefit of the
Buyer. The Buyer covenants and agrees to totally and absolutely protect,
exonerate, defend, indemnify and save MAID harmless from and against any and all
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costs or liabilities which may arise or have arisen out of MAID's ownership of,
or acquisition of, its interest in the Premises, and from and against any and
all claims, loss, damage, costs, expense or liability based upon personal injury
or death or loss or damage to property suffered or incurred by any person, firm,
corporation or partnership (including parties hereto), and arising out of or
attributable to the construction, presence, condition, use, operation,
maintenance, any act, failure to act, conditions any happening or occurrence
whatsoever, in and about, or on the Premises or Project Facilities. The Buyer
agrees, additionally, that Buyer will not join MAID as a third-party defendant
in any legal action alleging costs or liabilities due to the aforesaid which may
at any time be instituted by any party against the Buyer. MAID shall give
written notice to the Buyer of any claim asserted against MAID, which, if
sustained, may result in a liability on the Buyer hereunder; provided, however,
that failure on the part of MAID to give such notice shall not relieve the Buyer
from Buyer's obligation to protect, defend, indemnify, exonerate and save
harmless as aforesaid, except to the extent that failure to give such notice
results in failure of coverage of the Buyer's liability insurance or causes
actual loss or damage to the Buyer and, in case any action or proceeding be
brought against MAID by reason of such claim, the Buyer, upon notice from MAID,
covenants and agrees to resist or defend such action or proceeding by counsel
satisfactory to MAID; provided, however, that MAID will cooperate and assist in
the defense of any such action or proceeding, if reasonably requested to do so
by the Buyer, at the expense of the Buyer. The Buyer will not make any claim
against MAID, nor shall MAID be liable for damage or injury to any property of
the Buyer or any person on or using the Premises or any part thereof due to any
cause whatsoever, nor will the Buyer resist MAID's claim to indemnification on
grounds that the right to such claim is not set forth herein with sufficient
clarity or particularity since the Buyer acknowledges that it is the intention
of this Agreement to provide a total and absolute indemnity to MAID. The
provisions of this Paragraph apply not only to MAID directly, but also to any
member, officer, agent, attorney, employee, successor or assignee thereof. The
Buyer acknowledges that all such liability of MAID, member, officer, agent,
attorney, employee, successor or assignee is and has been released as a
condition of and as consideration for the execution and' delivery of this
Agreement.
26. LIMITATION OF MAID'S LIABILITY. Notwithstanding any provision or
obligation to the contrary herein before or hereinafter set forth, the liability
of MAID shall be limited to its interest in the Premises, improvements thereon,
the rents, issues and profits therefrom, and the lien of any judgment shall be
restricted thereto.
27. DEFAULT BY MAID AND BUYER'S REMEDIES. In the event of any default by
MAID in any of the covenants or agreements of MAID contained herein, the Buyer's
remedies shall be limited to:
(a) An accounting by MAID for all funds received hereunder to
determine whether MAID has properly disposed of the funds paid to MAID in
connection herewith; and
(b) The right of the Buyer to compel specific performance where such
remedy is available under law or equity, provided the Buyer provides MAID with
the funds for costs and expenses required for the MAID's performance, except to
the extent the same specifically are stated herein to be the obligation of MAID.
In no event shall, the Buyer have recourse against MAID for damages. No recourse
shall be had for any obligation hereunder against any member, officer, attorney,
agent, employee,
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successor or assignee of MAID, all such liability being released as a condition
of and an consideration for the execution and delivery of this Agreement.
28. ANTI-DISCRIMINATION AND ANTI-POLLUTION PROVISIONS. The Buyer covenants
and agrees that during the term of this Agreement, while the PIDA loan is
outstanding and unpaid, the Buyer will not discriminate against any employee or
against any applicant for employment because of race, religion, color, national
origin, sex or age. This provision, which is more fully set forth on Exhibit "B"
attached hereto and made a part hereof, shall include but not be limited to the
following: employment upgrading, demotion or transfer; recruitment or
recruitment advertisement, layoff or termination rates of pay or other forms of
compensation; and selection of training including apprenticeship. The Buyer
further covenants and agrees that during the term of this Agreement, while the
PIDA loan is outstanding and unpaid, the Buyer will comply with applicable
governmental anti-pollution regulation and standards applicable to the Premises
and buildings and Improvements constructed thereon. The Buyer further covenants
and agrees that it will provide in all leases of the Premises or any part
thereof that the lessee will covenant and agree to assume all of the Buyer's
obligations, and covenants immediately hereinabove in respect to
anti-discrimination and applicable governmental anti-pollution regulations and
standards applicable to the Premises and the buildings and Improvements
constructed thereon.
29. RIGHT TO LEASE AND ASSIGNMENT OF LEASES. The Buyer shall have the
right to lease the Premises or any portion thereof providing, however, such
leases shall contain the aforementioned anti-discrimination and anti-pollution
provisions hereinabove set forth and, further such leases will be made only to
such responsible tenants who are industrial and commercial occupants as
hereinafter required under Section 28 and approved by PIDA. Any lease or
assignment of lease made without such approval shall be void. The Buyer assigns
to MAID, as additional security for the Buyer's obligations hereunder, any and
all leases and entered into by the Buyer for all or any part of the Premises and
all rentals therefrom. MAID if no way assumes or will assume any of the
obligations of the Buyer as lessor. Until the occurrence of an event of default
hereunder and until MAID directs otherwise, the Buyer shall have the right to
collect all rents under the leases.
30. BUYER'S USE OF PREMISES. The Buyer covenants that the entire Premises
shall be used for such purposes as are lawful under the Pennsylvania Industrial
Development Authority Act, Act No. 537 of May 17, 1956, P.L. 1609, as amended,
and covenants that as to any portion of the Premises, Buyer will lease only to a
"responsible tenant" within the meaning of the provisions of said Act, and,
prior to execution of any lease of any portion of the Premises, the Buyer will
provide MAID with a written certification that the proposed tenant is such
responsible tenant".
31. INTEGRITY, RESPONSIBILITY AND AMERICANS WITH DISABILITIES ACT
COMPLIANCE. Buyer covenants and agrees that during the term of this Agreement
and while the PIDA loan is outstanding and unpaid, Buyer shall at all times
comply with the provisions of the following: the Integrity Provisions set forth
in Exhibit "C" attached hereto and made a part hereof, the Responsibility
Provisions set forth in Exhibit "D" attached hereto and made a part hereof, and
the Americans with Disabilities Act Provisions set forth in Exhibit "E" attached
hereto and made a part hereof.
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32. CONVEYANCE UPON PAYMENT OF THE PURCHASE PRICE. Upon payment of the
Purchase Price and all amounts to be paid by the Buyer under the terms of this
Agreement and the satisfaction of any of the Notes, and provided that the Buyer
is not in default of any provisions of this Agreement, MAID will deliver to the
Buyer a special warranty deed conveying to the Buyer good and marketable title
to the Premises, as such Premises then exist, subject to the following: (i)
those liens and encumbrances, if any, to which the title to the Premises were
subject when the same was conveyed to MAID; (ii) those liens and encumbrances
created by the Buyer or to the creation or suffering of which the Buyer
consents; (iii) those liens and encumbrances resulting from failure of the Buyer
to perform or observe any of the agreements on Buyer's part contained herein;
(iv) the liens for real estate taxes and special assessments not then
delinquent; and (v) such minor irregularities, encumbrances and rights-of-way as
would normally exist with respect to title to properties similar in character to
the Premises and which do not in the aggregate materially impair title to the
Premises for the purpose for which the same is acquired by the Buyer. The Buyer
agrees to pay all charges and costs, including but not limited to real estate
transfer taxes which are or may be required in connection with the transfer of
MAID's interest in the Premises to the Buyer.
As a condition of MAID's conveying title to the Buyer, the Buyer shall
indemnify MAID against any claims which are not effectively covered by liability
insurance arising out of MAID's ownership of the Premises.
33. ASSIGNMENT BY BUYER. Any assignment of this Agreement by the Buyer
without the prior written consent of MAID, PIDA, and any other Mortgagees and
holders of the Notes shall be void and of no affect. Furthermore, the Buyer
shall not, during the term of this Agreement, transfer control or ownership of
Buyer's interest in the Premises or Project Facilities, in whole or in part,
without the prior written consent of MAID, PIDA, and any other Mortgagee and
holders of the Notes. This restriction on assignment by the Buyer shall be
applicable to the Buyer's assignees and successors.
34. ASSIGNMENT BY MAID AND RECORDING. Immediately following the execution
of this Agreement, MAID shall assign its interest herein to PIDA and the Buyer
acknowledges notice of such assignment. A memorandum of this Agreement shall be
recorded in the Office of the Recorder of Deeds of Westmoreland County,,
Pennsylvania. The Buyer hereby agrees to pay directly to the Mortgagee all
monies payable hereunder by the Buyer in accordance with such assignments.
Whenever the Buyer is required herein to obtain the consent of MAID, written or
otherwise, the Buyer shall also obtain the consent of the Mortgagees and holders
of the Notes.
35. NOTICES. All notices required or provided for herein shall be in
writing and sent by registered or certified mail. Subject to any change of
notice to the party to be charged with such notice, notice to MAID shall be
addressed as follows:
Monroeville Area Industrial
Development Corporation
Suite 233
2790 Mosside Boulevard
Monroeville, PA 15146
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<PAGE> 14
and notice to the Buyer shall be addressed as follows:
100 Sagamore Hill Road
Pittsburgh, PA 15239
and copies of all notices shall be sent to the Mortgagees addressed as follows:
The Pennsylvania Industrial Development Authority
Department of Commerce
481 Forum Building
Harrisburg, PA 17120
35. SURVIVAL OF CONDITIONS, REPRESENTATIONS AND COVENANTS. All conditions,
representations and covenants of the Buyer contained herein which by nature,
empress or implied, involve performance in any particular manner after the
delivery of MAID'S deed or assignment of MAID's right, title and interest in the
Premises, which cannot be ascertained to have been performed until after
delivery of the deed or assignment, shall survive said delivery of the deed or
assignment of interest.
36. ILLEGAL, ETC., PROVISIONS DISREGARDED. In case any provision of this
Agreement shall for any reason be held to be illegal, invalid or unenforceable
in any respect, this Agreement shall be construed as if such provisions had
never been contained herein.
37. INSPECTION. The Buyer shall, at all reasonable times, provide MAID,
Mortgagees and holders of the Notes and all assignees hereof with full and free
access to the Premises and Project~ Facilities and all plans, specifications,
drawings and records thereof for inspection.
38. CONTROLLING LAW. This Installment Sale Agreement shall be deemed to be
a contract made in Pennsylvania and governed by Pennsylvania law.
39. AMENDMENTS. This Agreement may not be amended except by an instrument
in writing signed by the parties hereto and consented to by all of the
Mortgagees and holders of the Notes and all assignees hereof.
40. HEADINGS AND CAPTIONS. The headings and captions of this Agreement are
for convenience of reference only and shall not control or affect the meaning or
the construction of any portion hereof.
41. ASSIGNS. This Agreement and all terms and conditions hereof shall
inure to the benefit of and bind the parties hereto, their and each of their
successors, heirs and assigns, to the extent that assignments are permitted
herein.
42. COUNTERPARTS. This Agreement is being executed in several
counterparts, all of which constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
seal the day and year first above written.
ATTEST: MONROEVILLE AREA INDUSTRIAL
DEVELOPMENT CORPORATION (MAID)
_________________________ By:_______________________________
Secretary President
ATTEST: HALMAR ROBICON GROUP, INC.
A Pennsylvania Corporation
_________________________ By___________________________(SEAL
Secretary
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EXHIBIT A
ALL that certain tract of land situate in Upper Burrell Township, Westmoreland
County, Pennsylvania, being Lot No. 6 in the Westmoreland County Business and
Research Park, Phase I Plan of Lots, as recorded in the Recorder's Office of
Westmoreland County, Pennsylvania, in Plan Book Volume 90, Pages 563-570, and
Lot No. I in the Westmoreland-County Business and Research Park, Phase III Plan
of Lots, as recorded in the Recorder's Office of Westmoreland County,
Pennsylvania, in Plan Book Volume 90, Page 1467.
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EXHIBIT B
SELLER/BUYER INTEGRITY PROVISIONS
1. Definitions.
a. CONFIDENTIAL INFORMATION means information that is not public
knowledge, or available to the public on request, disclosure of which would give
an unfair, unethical, or illegal advantage to another desiring to contract with
the Commonwealth.
b. CONSENT means written permission signed by a duly authorized officer
or employee of the Commonwealth, provided that where the material facts have
been disclosed, in writing, by prequalification, bid, proposal, or contractual
terms, the Commonwealth shall be deemed to have consented by virtue of execution
of this Agreement.
c. SELLER/BUYER means the individual or entity that has entered into
this Agreement with the Commonwealth, including directors, officers, partners,
managers, key employees, and owners of more than a 5% interest.
d. FINANCIAL INTEREST means'
(1) ownership of more than a 5% interest in any business; or
(2) holding a position as an officer, director, trustee, partner,
employee, or the like, holding any position of management.
e. GRATUITY means any payment of more than nominal monetary value in the
form of cash, travel, entertainment, gifts, meals, lodging, loans,
subscriptions, advances, deposits of money, services, employment, or contracts
of any kind.
2. The Seller/Buyer shall maintain the highest standards of integrity in
the performance of this Agreement and shall take no action in violation of state
or federal laws, regulations, or other requirements that govern contracting with
the Commonwealth.
3. The Seller/Buyer shall not disclose to others any confidential
information gained by virtue of this Agreement.
4. The Seller/Buyer shall not, in connection with this or any other
agreement with the Commonwealth, directly or indirectly offer, confer, or agree
to confer any pecuniary benefit on anyone as consideration for the decision,
opinion, recommendation, vote, other exercise of discretion, or violation of a
known legal duty by any officer or employee of the Commonwealth.
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5. The Seller/Buyer shall not, in connection with this or any other
agreement with the Commonwealth, directly or indirectly of offer. give, or agree
or promise to give to anyone any gratuity for the benefit of or at the direction
or request of any officer or employee of the Commonwealth.
6. Except with the consent of the Commonwealth, neither the
Seller/Buyer nor anyone in privity with him shall accept or agree to accept
from, or give or agree to give to, any person, any gratuity from any person in
connection with the performance of work under this Agreement except as provided
therein.
7. Except with the consent of the Commonwealth, the Seller/Buyer shall
not have a financial interest in any other Seller/Buyer, subcontractor, or
supplier providing services, labor, or material on this project.
8. The Seller/Buyer, upon being informed that any violation of these
provisions has occurred or may occur, shall immediately notify the Commonwealth
in writing.
9. The Seller/Buyer, by execution of this Agreement and by the
submission of any bills or invoice-, for payment pursuant thereto, certifies and
represents that he has not violated any of these provisions.
10. The Seller/Buyer, upon the inquiry or request of the Inspector
General of the Commonwealth or any of that official's agents or representatives,
shall provide, or if appropriate, make promptly available for inspection or
copying, any-information of any type or form deemed relevant by the Inspector
General to the Seller/Buyer's integrity or responsibility, as those terms are
defined by the Commonwealth's statutes, regulations, or management directives.
Such information may include, but shall not be limited to, the Seller/Buyer's
business or financial records, documents or files of any type or form which
refer to or concern this agreement. Such information shall be retained by the
Seller/Buyer for a period of three years beyond the termination of the contract
unless provided by law.
11. For violation of any of the above provisions, the Commonwealth may
terminate this and any other agreement with the Seller/Buyer, claim liquidated
damages in an amount equal to the value of anything received in breach of these
provisions, claim damages for all expenses incurred in obtaining another
Seller/Buyer to complete performance hereunder, and debar and suspend the
Seller/Buyer from doing business with the Commonwealth. These rights and
remedies are cumulative, and the use or nonuse of any one shall not preclude the
use of all or any other. These rights and remedies are in addition to those the
Commonwealth may have under law, statute, regulation, or otherwise.
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EXHIBIT "C"
SELLER/BUYER RESPONSIBILITY PROVISIONS
1 Seller/Buyer certifies that it is not currently under suspension or
debarment by the Commonwealth, any other state, or the federal government.
2. If Seller/Buyer enters into any subcontracts under this contract with
subcontractors who are currently suspended or debarred by the Commonwealth or
federal government or who become suspended or debarred by the Commonwealth or
federal government during the term if this contract or any extensions or
renewals thereof, the Commonwealth shall have the right to require the
Seller/Buyer to terminate such subcontracts.
3. The Seller/Buyer agrees that it shall be responsible for reimbursing
the Commonwealth for all necessary and reasonable costs and expenses incurred by
the Office of the Inspector General relating to an investigation of the
Seller/Buyer's compliance with the terms of this or any other agreement between
the Seller/Buyer and the Commonwealth which results in the suspension or
debarment of the Seller/Buyer.
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EXHIBIT "D"
AMERICANS WITH DISABILITIES ACT PROVISIONS
During the term of this contract, the Seller/Buyer agrees as follows:
1. Pursuant to federal regulations promulgated under the authority of
The Americans with Disabilities Act, 28 C.F.R. Section 35.101 et seq., the
Seller/Buyer understands and agrees that no individual with a disability shall,
on the basis of the disability, be excluded from participation in this contract
or from activities provided for under this contract. As a condition of accepting
and executing this contract, the Seller/Buyer agrees to comply with the "General
Prohibitions Against Discrimination," 28 C.F.R. Section 35.130, and all other
regulations promulgated under Title 11 of The Americans with Disabilities Act
which are applicable to the benefits, services, programs, and activities
provided by the Commonwealth of Pennsylvania through contracts with outside
contractors.
2. The Seller/Buyer shall be responsible for and agrees to indemnify and
hold harmless the Commonwealth of Pennsylvania from all losses, damages,
expenses, claims, demands, suits, and actions brought by any party against the
Commonwealth of Pennsylvania as a result of the Seller/Buyer's failure to comply
with the provisions of paragraph 1 above.
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<PAGE> 1
EXHIBIT 10.5
LEASE WITH OPTION TO PURCHASE
By and Between
Raija Olkkola & Joseph Grammel,
Co-Trustees of THO Trust
and
High Voltage Engineering, Inc./Anderson Carbolon Group Division
This indenture of lease executed this 15th day of July, 1996, by and between
Raija Olkkola & Joseph Grammel, Co-Trustees of THO Trust, u/d/t dated and
recorded in the Worcester Northern District Registry of Deeds in Book,.........
Page (hereinafter called the Landlord) of Leominster, Massachusetts and High
Voltage Engineering, Inc./Anderson Carbolon Group Division (hereinafter
collectively called the Tenant), of Sterling, Massachusetts.
WITNESSETH
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ARTICLE I - Premises
- --------------------
Landlord hereby leases to Tenant and Tenant hereby leases from Landlord, subject
to and with the benefit of the terms, covenants, conditions and provisions of
this Lease, a portion of the premises owned by Landlord in the City of
Leominster, Massachusetts, located at 1320 Central Street, Leominster, MA, and
more fully described in Exhibit "A" attached hereto (hereinafter called the
Premises), together with the manufacturing buildings thereon (hereinafter called
the Building). The parties agree that the exact land area to be leased will be
determined by preparation of a recordable plan, as set forth in Article 8 of
this agreement.
ARTICLE 2 - Term
- ----------------
TO HAVE AND TO HOLD for an initial term (the "Initial Term") of Five (5) years
commencing on August, 1996 and expiring on June 30, 2001.
ARTICLE 3 - Rent
- ----------------
3.1. THE FIXED RENT. Tenant covenants and agrees to pay the rent to Landlord at
the address set forth on the first page hereof (the "Original Address of
Landlord") or such other place as Landlord may by notice in
<PAGE> 2
writing to Tenant from time to time direct, at the annual rental as set forth in
Exhibit B attached hereto.
3.2. ADDITIONAL RENT. In order that the -Fixed rent shall be absolutely net to
Landlord, Tenant covenants and agrees to pay, a's additional rent, taxes,
betterment assessments, insurance costs, and utilities charges with respect to
the Premises provided in this Section 3.2. as follows:
a. TAXES AND ASSESSMENTS. Tenant shall pay, directly to the authority
charged with collection thereof, and within ten (10) days of due date, all
taxes, assessments, special assessments, water and sewer rents, rates and
charges, charges for public utilities, excises, levies, license and permit fees
and other governmental charges, general and special, ordinary and extraordinary,
foreseen and unforeseen, of any kind and nature, which at any time during the
Term may be imposed, levied or assessed by, or become payable to, the
municipality or any governmental authority having jurisdiction of the Premises,
for or in respect of the Premises or which may become a lien on the Premises,
for each tax period wholly included in the Term, all such payments to be made
not less than ten (10) days before due date on which the same may be paid
without interest or penalty, provided that for any fraction of a tax period
included in the Term at the beginning or end thereof, Tenant shall pay to
Landlord; within seven (7) days after receipt of invoice therefor, the fraction
of taxes so levied or assessed or becoming payable which is allocable to such
included period. Tenant shall promptly after payment thereof furnish Landlord
reasonable evidence of each payment. Either party paying any tax shall be
entitled to recover, receive and retain for its own benefit all abatements and
refunds of such tax, unless it has previously been reimbursed by the other
party. Neither party shall discontinue any abatement proceedings begun by it
without first giving the other party written notice of its intent to do so and
reasonable opportunity to be substituted in such proceedings.
b. INSURANCE. Tenant shall, as additional rent, take out and maintain
from the date of possession through the term of this lease the following
insurance protecting Landlord and naming Landlord as additional insured:
<PAGE> 3
(1) Fire insurance, with endorsement for extended coverage, and
debris removal and demolition, in an initial amount of $2,000,000.00 or in such
greater amount as may be determined by agreement of the parties from time to
time.
(2) Comprehensive liability insurance indemnifying Landlord and
Tenant against all claims and demands for any injury to person or property which
may be claimed to have occurred on the Premises or on the sidewalk or ways
adjoining the Premises, in amounts of at least $2,000,000.00 single limit and
$500,000.00 for property damage, and from time to time during the Term, for such
higher limits, if any, as are customarily carded in the area in which the
Premises are located on property similar to the Premises and used for similar
purposes: and workmen's compensation insurance with statutory limits covering
all of Tenant's employees working on the Premises.
(3) Insurance against such other hazards as may from time to time
be required by any bank, insurance company or other lending institution holding
a first mortgage on the Premises, provided that such insurance is customarily
carried in the area in which the Premises are located on property similar to the
Premises and used for similar purposes.
(4) Policies for insurance required under the provisions of
subsection (1) and (3) above shall, in case of loss, be first payable to the
holders of any mortgages on me Premises under a standard mortgagee's clause, and
shall, if requested, be deposited with the holder of any mortgage. In the event
provision for any such insurance is to be by a blanket insurance policy, the
policy shall allocate a specific and sufficient amount of coverage to the
Premises.
(5) All insurance which is carried by either party with respect to
the Premises, whether or not required, shall include provisions which either
designate the other party as one of the insured or deny to the insurer
acquisition by subrogation of rights of recovery against the other party to the
extent such rights have been waived by the insured party prior to occurrence of
loss of injury, insofar as, and to the extent that such provisions may be
effective without making it impossible to obtain insurance coverage from
responsible companies qualified to do business in the state in which the
Premises are located. Each party hereby waives all rights of recovery against
the other for loss or injury or claim against
<PAGE> 4
which the waiving party is protected by insurance containing said provisions.
c. UTILITIES. Tenant shall pay from date of possession and during the
term of this lease directly to the proper authorities charged with the
collection thereof all charges for water, sewer, gas, electricity, telephone and
other utilities or services used or consumed on the Premises wholly during the
term, whether called, charge, tax, assessment, fee or otherwise, including
without limitation, water and sewer use charges and taxes, if any, all such
charges to be paid as the same from time to time become due. It is understood
and agreed that Tenant shall make its own arrangements for such utilities and
that Landlord shall be under no obligation to furnish any utilities to the
Premises and shall not be liable for any interruption or failure in the supply
of any such utilities to the Premises.
d. NET LEASE. This Lease shall be deemed and construed to be a "Net, Net,
Net Lease" and except as herein otherwise expressly set forth Tenant shall pay
to Landlord, absolutely net throughout the Term of this Lease, the Fixed Rent,
Additional Rent and other payments hereunder, free of any charges, assessments,
impositions or deductions of any kind and without abatement, deduction or
set-off, and under no circumstances or conditions, whether now existing or
hereafter arising, or whether beyond the present contemplation of the parties,
shall Landlord be expected or required to make any payment of any kind
whatsoever to be under any other obligation or liability hereunder, except as
herein otherwise expressly set forth.
ARTICLE 4 - Tenant's Additional Covenants
- -----------------------------------------
4.1. AFFIRMATIVE COVENANTS. Tenant covenants at its expense at all times
during the Term and such further time as Tenant occupies the Premises or any
part. thereof:
a. REPAIR AND MAINTENANCE. Except as otherwise provided in ARTICLE 5 to
keep the Premises including, without limitation, the exterior and structure of
all improvements thereon and all heating, plumbing, electrical,
air-conditioning, mechanical and other fixtures and equipment therein-in the
same order, condition and
<PAGE> 5
repair as they are on the commencement hereof or may be put in during the Term,
reasonable use and wear only excepted; to take good care of all lawris and
planted areas to provide for landscaping and keep in good repair, dean, neat and
free of snow and ice all surfaced roadways, walks, parking and loading areas;
and to make all repairs and replacements and to do all other work necessary for
the foregoing purposes whether the same may be ordinary or extraordinary,
foreseen or unforeseen. It is further agreed that the exception of reasonable
use and wear shall not apply so as to permit Tenant to keep the Premises in
anything less than suitable, tenantlike, and efficient and usable condition
considering the nature of the Premises and the use reasonably made thereof, or
in less than good and tenantlike repair.
The Landlord and Tenant agree that Tenant can make repairs to Premises set forth
in Tenant letter of April 2, 1996 (see Exhibit "B" attached hereto) without the
consent of Landlord. Tenant agrees to notify Landlord when work is commenced and
completed. Tenant agrees that all work will be done in good and workmanlike
manner, meet all federal, state and local codes, and Tenant will not suffer the
Landlords premises to any lien, suit, judgment or demand.
b. COMPLIANCE WITH LAW. To make all repairs, alterations, additions or
replacements to the Premises required by any law or ordinance or any order or
regulation of any public authority; to keep the Premises equipped with all
safety appliances so required" and to comply with the orders and regulations of
all governmental authorities, except that Tenant may defer compliance so long as
the validity of any such law ordinance, order or regulation shall be contested
by Tenant in good faith and by appropriate legal proceedings, if Tenant first
gives the Landlord appropriate assurance against any loss, cost or expense on
account thereof.
c. PAYMENT FOR TENANT'S WORK. To pay promptly when due the entire cost of
any work to the Premises undertaken by Tenant so that the Premises shall at all
times be free or liens for labor and materials; to procure all necessary
permits before undertaking such work; to do all of such work in a good and
workmanlike manner, having first complied with the provisions of Section 4.1.a.
hereof, employing materials of good quality and complying with all governmental
requirements and to save Landlord
<PAGE> 6
harmless and indemnified from all injury, loss, claims or damage to any person
or property occasioned by or growing out of such work.
d. INDEMNITY. To assume exclusive control of the Premises, and the
adjacent sidewalks, if any, and all tort liabilities incident to the control or
leasing thereof, and to defend, indemnify and save Landlord harmless from all
injury, loss, claim or damage to or of any person or property while on the
Premises unless arising from any omission fault, negligence or other misconduct
of Landlord; and to defend, indemnify and save Landlord harmless from all
injury, loss, claim or damage to or of any person or property anywhere
occasioned by any omission, fault, neglect or other misconduct of Tenant.
e. PERSONAL PROPERTY AT TENANT'S RISK. That all of the furnishings,
fixtures, equipment, effects and property of every kind, nature and description
of Tenant and of all persons claiming by, through or under Tenant which, during
the continuance of this Lease or any occupancy of the Premises by Tenant or
anyone claiming under Tenant, may be on the Premises, shall be at the sole risk
and hazard of Tenant, and if the whole or any part thereof shall be destroyed or
damaged by fire, water or otherwise, or by the leakage or bursting of water
pipes, steam pipes, or other pipes, by theft or from any other cause, no part of
said loss or damage is to be charged to or to be borne by Landlord, except that
Landlord shall in no event be indemnified or held harmless or exonerated from
any liability to Tenant or to any other person, for any injury, loss, damage or
liability to the extent prohibited by law. Landlord shall execute and deliver
from time to time, as requested by Tenant, a Landlord waiver of any lien in or
to tenants personal property provided that Tenant is not in default under the
payment of terms of this lease.
f. YIELD UP. At the expiration of the Term or earlier termination of
this Lease: to surrender all keys to the Premises, to remove all of its
tradefixtures and personal property in the Premises, to remove such
installations made by it as Landlord may request and all Tenants signs wherever
located, to repair all damage caused by such removal and to yield up the
Premises (including all installations and improvements made by Tenant except for
trade fixtures and such of sold installations or improvements as Landlord shall
request Tenant to remove), broom-clean and in the same good order and repair in
which Tenant is obliged to keep and maintain the Premises by the provisions of
this Lease subject to Article 5. Any property not so removed shall be deemed
abandoned and may be removed and disposed of by Landlord in such manner as
Landlord shall determine and Tenant shall pay Landlord the
<PAGE> 7
entire cost and expense incurred by it in effecting such removal and disposition
and in making any incidental repairs and replacements to the Premises and for
use and occupancy during the period after the expiration of the Term and prior
to its performance of its obligations under this Section 4.1.f. Tenant shall
further indemnify Landlord against all loss, cost and damage resulting from
Tenant's failure and delay in surrendering the Premises as above provided.
4.2. NEGATIVE COVENANTS. Tenant covenants at all times during the Term and
such further time as Tenant occupies the Premises or any part thereof:
a. ASSIGNMENT, SUBLETTING, ETC. Not to assign or transfer this Lease or
to sublease (which term shall be deemed to include the granting of concessions
and licenses and the like) all or any part of this Premises or suffer or permit
this Lease or the leasehold estate hereby created or any other rights arising
under this Lease to be assigned or transferred, in whole or in part, whether
voluntarily, involuntarily or by operation of law, or permit the occupancy of
the Premises by anyone other than Tenant without obtaining written permission of
Landlord. Any attempted assignment, transfer, sublease or other transfer without
Landlord's written permission, shall be void. In the event Landlord gives its
written permission to an assignment or subletting of premises, in whole or in
part, same shall not be deemed a release of Tenant from any liability to
Landlord under this Lease. Notwithstanding the above, Tenant may grant a
leasehold mortgage on its tenancy hereunder to it or its affiliates' present
institutional lenders.
Notwithstanding the foregoing, the Tenant may at any time and from time
to time (i) transfer or assign this to any affiliate, subsidiary, parent or
other person or entity controlled by Tenant, controlling Tenant or under common
control of tenant. Notwithstanding the above shall be deemed a release of
Tenant from liability under this lease.
b. OVERLOADING, NUISANCE, ETC. Not to injure, overload, deface or
otherwise harm the Premises; nor commit any nuisance; not permit the emission of
any objectionable noise or odor; nor make, allow or suffer any waste; nor make
any use of the Premises which is improper, offensive or contrary to any law or
ordinance or which will invalidate any of Landlord's insurance; nor conduct any
auction, fire, "going out of business" or bankruptcy sales.
<PAGE> 8
Landlord represents and warrants that as of the commencement of this
lease, landlord to the best of its knowledge, information and belief has not
received any notice regarding violation of any applicable law regarding the
structure, dimensions, use, occupancy or status of the Building or other
Premises, excluding the matters referred to in Pine & Swallow report dated
______ as amended.
c. INSTALLATION, ALTERATIONS OR ADDITIONS. Not to make any installations,
alterations or additions in, to or on the Premises (including, without
limitation, buildings, lawns, planted areas, walks, roadways, parking and
loading areas) nor to permit the making of any holes in the walls, partitions,
ceiling or floors without on each occasion obtaining the prior written consent
of Landlord, and then only pursuant to plans and specifications approved by
Landlord in advance in each instance, excluding items set for in Tenants letter
dated April 2, 1996 and shown as Exhibit B attached hereto.
ARTICLE 5 - Casualty or Taking
- ------------------------------
5.1. TERMINATION. In the event that the Premises, or any material part
thereof, shall be taken by any public authority or for any public use, or shall
be destroyed or damaged by fire or casualty, or by the action of any public
authority, then this lease may be terminated at the election of Tenant. Such
election, which may be. made notwithstanding Landlord's entire interest may have
been divested, shall be made by the giving of written notice by Tenant to
Landlord within thirty (30) days after the right of election accrues.
5.2. RESTORATION. If Tenant does not exercise said election, this Lease
shall continue in force and a just proportion of the rent reserved, according to
the nature and extent of the damages sustained by the Premises, shall be
suspended or abated until the Premises, or what may remain thereof, shall be put
by Landlord in proper condition for use, which Landlord covenants to do with
reasonable diligence to the extent permitted by the net proceeds of insurance
recovered or damages awarded for such taking, destruction or damage and subject
to zoning and building laws then in effect.
<PAGE> 9
In the event Landlord does not restore or rebuild the structure, Tenant
may exercise it option to purchase the premises, in the Condition it is then in
and shall pay to Landlord, the option price less insurance proceeds received by
Landlord, for the structures and any appurtenant rights.
ARTICLE 6 - Remedies
- --------------------
6.1. LANDLORD'S RIGHT TO CURE DEFAULTS. The Landlord may, but shall not
be obligated to cure, at any time without notice, any default by the Tenant
under this Lease; and whenever the Landlord so elects, all costs and expenses
incurred by the Landlord, including reasonable attorney's fees, shall be paid by
the Tenant to the Landlord within ten (10) days after demand.
6.2. REMEDIES CUMULATIVE. Any and all rights and remedies which Landlord
may have under this Lease, and at law and equity, shall be cumulative and shall
not be deemed inconsistent with each other, and any two or more of all such
rights and remedies may be exercised at the same time insofar as permitted by
law.
ARTICLE 7 - Miscellaneous Provisions
- ------------------------------------
7.1. NOTICES FROM ONE PARTY TO THE OTHER. All notices required or
permitted hereunder shall be In writing and shall be deemed duly served if and
when mailed by registered or certified mail, postage prepaid, addressed if to
Tenant at c/o Richard A. Cella, Esq., 65 Pleasant Street, P.O. Box 297,
Leominster, Massachusetts or such other address as Tenant shall have last
designated, by notice in writing to Landlord, and if addressed to Landlord, at
the Original Address of Landlord or such other address as Landlord shall have
last designated by notice in writing to Tenant.
7.2. QUIET ENIOYMENT. Landlord agrees that upon Tenant's paying the rent
and performing and observing the agreements, conditions and other provisions on
its part to be performed and observed, Tenant shall and may peaceably and
quietly have, hold and enjoy the Premises during the lease Term without any
manner of hindrance or molestation
<PAGE> 10
from Landlord or anyone claiming under Landlord, subject, however, to the terms
of this Lease.
7.3. LEASE NOT TO BE RECORDED. Tenant agrees that it will not record this
Lease. Both parties shall, upon the request of either, execute and deliver a
notice or short form of this Lease in such form, if any, as may be permitted by
applicable statute and which shall be sufficient to place Tenant's Article _
option and right to grant a leasehold mortgage of record.
7.4. ACTS OF GOD. In any case where either party hereto is required to do
any act, delays caused by or resulting from Acts of God, war, civil commotion,
fire, flood or other casualty, labor difficulties, shortages of labor, materials
or equipments, governmental regulations, unusually severe weather, or other
causes beyond such party's reasonable control shall not be counted in
determining the time during which work shall be completed, whether such time be
designated by a fixed date, a fixed time or "a reasonable time", and such time
shall be deemed to be extended by the period of such delay.
7.5. APPROVALS AND CONSENT. Whenever the consent or approval of either
party if required hereunder, the same shall not be unreasonably withheld or
delayed.
7.6. APPLICABLE LAW AND CONSTRUCTION. This Lease shall be governed by and
construed in accordance with the laws of the state in which the Premises are
located and, if any provisions of this Lease shall to any extent be invalid, the
remainder of this Lease shall not be affected thereby. There are no oral or
written agreements between Landlord and Tenant affecting this Lease. This Lease
may be amended, and the provisions hereof may be waived or modified, only by
instruments in writing executed by Landlord and Tenant. The titles of the
several Articles and Sections contained herein are for the convenience only and
shall not be considered in construing this Lease. Unless repugnant to the
context, the words "Landlord" and "Tenant" appearing in this Lease shall be
construed to mean those named above and their respective heirs, executors,
administrators, successors and assigns, and those claiming
<PAGE> 11
through or under them respectively. If there be more than one tenant the
obligations imposed by this Lease upon Tenant shall be joint and several.
7.8 SUBORDINATION. The TENANT agrees that upon request of the LANDLORD,
or the holder of the LANDLORD's interests, TENANT will subordinate this lease to
any mortgage now or hereafter placed against the Premises with the same force
and effect as if said mortgage were executed, delivered and recorded prior to
the execution and delivery of the Lease provided, however that LANDLORD shall
deliver to TENANT an agreement by the mortgagee not to disturb TENANT's
possession or the possession by or right of Tenant's mortgagee of Tenant's
leasehold interest after foreclosure if the TENANT is not then in default under
the provisions of this Lease; and the TENANT further agrees to recognize said
mortgagee as Lessor hereunder for the remainder of the term. The TENANT agrees
that it will, upon the request of the LANDLORD, execute, acknowledge and deliver
any and all instruments which the LANDLORD may, from time to time, desire in
order to effect such subordination hereby constituting the LANDLORD irrevocably
as the attorney in fact of the TENANT to execute, acknowledge and deliver such
instrument in the event of failure or refusal on the part of the TENANT to do
so. As used herein, the term "mortgage" shall include any modification,
consolidation, extension, renewal, replacement or substitution of any existing
or subsequent mortgage upon the property.
7.9 Attornment
Should LANDLORD assign this Lease or should LANDLORD enter into a
mortgage or financing arrangement effecting LANDLORD's fee interest or leasehold
interest, as the case may be, TENANT shall be bound to such assignee or mortgage
under all the terms, covenants, and conditions of this Lease for the balance of
the term remaining, subject to Section 7.8 and TENANT shall attorn to such
succeeding party as the LANDLORD under this Lease, promptly and upon such
succession. TENANT agrees that should any party so succeeding to the interest of
the LANDLORD require a separate agreement of attornment regarding the matters
covered by this Lease, then TENANT shall enter into any such "attornment
agreement" provided the same does not modify any of the provisions of this Lease
and has no adverse effects upon TENANT'S continued occupancy of the Premises.
<PAGE> 12
7.10 Estoppel Certificate
--------------------
Within ten (10) days after request therefor by LANDLORD or TENANT, or
upon any sale, assignment or hypothecation of the Premises and/or the leasehold
interest and/or the land thereunder by LANDLORD or TENANT, if any estoppel
certificate shall be required by either party, LANDLORD or TENANT agrees to
deliver in recordable form such certificate to any proposed mortgagee or
purchaser, or to LANDLORD or TENANT certifying that this lease is in full force
and effect and that there are no defenses or offsets thereto, or stating those
claimed by either party and stating or certifying as to such other matters as
the requesting person shall reasonably require.
7.11 Environmental Warranty
----------------------
TENANT will not allow the release or the creation by it of a present
threat of a release of oil or hazardous materials as such terms are defined by
Massachusetts General Laws, Chapter 21 E on the demised premises and the TENANT
will prevent any such release or threat of release by it on or in the Demised
Premises during the term of this Lease and will comply with the provisions of 42
USC 9601 et seq., 42 USC 6901, et seq., or any other state, federal or municipal
law which relates to the use, storage, transportation, disposal or release of
foil or hazardous materials by it. TENANT shall indemnify, defend and hold
LANDLORD harmless against all loss, liability, damage and expense including
attorney's fees suffered or incurred by LANDLORD under or on account of the
enforcement of any of the aforementioned environmental laws, including without
limitation the filing of a lien against the Premises in favor of the
Commonwealth of Massachusetts, the government of the United States of America or
any other governmental body or any of their agencies. The foregoing indemnity
and undertaking by Tenant shall not apply to (i) any matter or contaminates
caused by any other person, including Landlord or (ii) any matter or
contaminates existing as of the commencement of the Lease and disclosed in the
Pine & Swallow Report hereinafter referenced.
The Tenant acknowledges receipt of environmental report of Pine & Swallow
Associated, Inc. dated April 19, 1996 (the "Environmental Report").
<PAGE> 13
7.12 PRIOR ACREEMENTS SUPERSEDED. This Lease constitutes the entire
agreement between the parties pertaining to the subject matter hereof and
supersedes all prior and contemporaneous agreements and understandings of the
parties in connection therewith.
ARTICLE 8 - Option to Purchase Real Estate
- ------------------------------------------
The TENANT shall have the option to purchase the Premises including the
Building and all fixtures and personal property of Landlord for FOUR HUNDRED
TWENTY-FIVE THOUSAND and no/100 ($425,000.00) DOLLARS and upon the following
additional terms and conditions:
The Landlord agrees that upon signing of this Lease it shall undertake to
engage the services of a land surveyor to prepare a plan of the Premises to be
leased and conveyed to Tenant, such plan will provide for a lot which will
provide the Tenant, if it exercises its option to purchase the lot, to have a
lot that is to be conveyed under an ANR plan, that meets the set back, Building
and dimensional and all other requirements of the zoning ordinance, building
codes and other applicable laws of the City of Leominster and the Commonwealth
of Massachusetts, and has such appurtenant rights and easements as are necessary
and appropriate to allow ingress and egress for Tenants and its licenses and
invitees. Both Landlord and Tenant recognized that cross easements or mutual
easements will be necessary, all parties will review the prepared plan prior to
submission to the City of Leominster for approval for comment and revisions that
are mutually satisfactory.
The lot to be created will be a separate tax parcel, similar to Exhibit
______ attached, will abut a public way of the City of Leominster and will have
direct, lawful vehicular access thereto and will have a full metes and bounds
closed legal description showing no less than 3.6, plus or minus acres, the
plan shall be more precise.
<PAGE> 14
The LANDLORD shall convey by quitclaim deed, a good clear and marketable
title, its interest and the land and Buildings, appurtenances and rights leased
to the Tenant. Landlord shall convey by bill of sale any personal property. The
plan of land, creating the Lot shall be in recordable form.
ARTICLE 9 - Purchase Price
- --------------------------
Said purchase price of Four Hundred Twenty-Five Thousand and no/100
($425,000.00) Dollars shall be paid as follows:
<TABLE>
<S> <C> <C>
a. Down payment................................................ $ 10,000.00
to be paid with execution of this Lease,
and which is non-refundable and is to be
considered the option payment
b. A payment of................................................ 415,000.00
to be paid by cash, treasurer's check,
certified check or a combination of
same at the consummation of transaction*
-----------
Total: $425,000.00
</TABLE>
*Less Credit for one-half (1/2) of rental payments made under this Lease,
and option paymentof $10,000.00, and any other adjustments that are normal and
customary for a real estate transaction of this type and as are consistent with
this Lease. The Landlord shall deliver all documents necessary and reasonable to
a transaction of this type, including if necessary IRPTA Affidavits, 1099 Tax
Reporting Information and Title Insurance Affidavits as Tenant or Seller shall
reasonably require.
<PAGE> 15
ARTICLE 10 - Place and Time of Closing
- --------------------------------------
The transfer of title to the subject Premises to TENANT shall be
consummated at the Office of the Seller's Attorney, Richard A. Cella, 65
Pleasant Street, Leominster, Massachusetts, at such time between 9:00 a.m. and
3:00 p.m. and on a business day no later than ninety (90) days after TENANT
exercises its option under this agreement, or at such time and place as maybe
mutually agreed upon by the parties.
If TENANT fails to notify LANDLORD of the date and time selected for
consummating the transaction, the transaction shall be consummated at 2:00 p.m.
on the ninetieth day after TENANT gives notice of the exercise of this option.
ARTICLE 11 - Defective Title
- ----------------------------
In the event LANDLORD shall be unable to convey good and sufficient title
to the subject premises, free and clear of all liens and encumbrances, other
than those described or mentioned in LANDLORD'S description of the premises set
forth in this option, TENANT shall have the option to accept such title as
LANDLORD can convey and to pay therefor the full purchase price as specified in
Paragraph (33) hereinabove, less a credit for the cost to correct any title
defect, or remove any liens or encumbrances.
ARTICLE 12 - Consummation of Transaction
- ----------------------------------------
The transaction shall be consummated by LANDLORD:
(a) Executing and delivering to TENANT a Quitclaim Deed, properly executed
and bearing the tax stamps required by law and recording same in the Worcester
Northern District Registry of Deeds and such other documents and instruments
contemplated hereby.
<PAGE> 16
and by TENANT:
(b) Delivering to LANDLORD cash, cashiers check, certified check or the
like for the total amount of Four Hundred Fifteen Thousand and no/100
($415,000.00) Dollars, less any credits for rent and deposits and normal
adjustments for rent, real estate taxes, fuel, oil, recording fees and expenses
normal and customary in Real Estate transactions of this type.
ARTICLE 13 - Non-Refundable Down Payment
- ----------------------------------------
The deposit of Ten Thousand and no/100 ($10,000.00) Dollars referred to in
Article 9 is non-refundable other than Landlord's failure or inability to
perform upon Tenant's exercising its Article 8 option.
IN WITNESS WHEREOF, the execution hereof under seal on the day and year first
above written.
- --------------------------------- THO Trust
Witness
By: /s/ Raija Olkkola
- --------------------------------- ----------------------------------
Witness Raija Olkkola, Trustee
By: /s/ Joseph Grammel
----------------------------------
Joseph Grammel, Co-Trustee
- --------------------------------- High Voltage Engineering, Inc.
Witness
By: /s/ Joseph W. McHugh, Jr. 7/18/96
----------------------------------
Its duly authorized official
V.P., CFO, Clerk
<PAGE> 1
EXHIBIT 10.6
LEASE AMENDMENT AGREEMENT
-------------------------
THIS LEASE AMENDMENT AGREEMENT (this "Agreement") is made this 8th day of
May, 1996 by and among CORPORATE PROPERTY ASSOCIATES 8, a Delaware limited
partnership ("Landlord"), with an address c/o W.P. Carey & Co., Inc., 50
Rockefeller Plaza, New York, New York 10020 and HIGH VOLTAGE ENGINEERING
CORPORATION, a Massachusetts corporation ("Tenant"), with an address at 401
Edgewater Place, Suite 680, Wakefield, Massachusetts 01880.
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, Landlord and Tenant entered into a Lease Agreement dated as of
November 10, 1988, as amended by a certain Agreement dated as of November 10,
1988 by and among Marine Midland Bank, N.A., Tenant and Landlord (the "Marine
Amendment"), and as further amended by Lease Amendment (the "1991 Amendment")
dated as of April 27, 1991 (collectively, as so amended, the "Lease"). Pursuant
to the Lease, Landlord is leasing to Tenant certain land, together with the
improvements and equipment located thereon and pertaining thereto, located at
Pratts Junction Road in Sterling, Massachusetts, as more particularly described
in Exhibit "A" to the Lease (the "Leased Premises").
WHEREAS, Landlord and Tenant wish to modify the Lease as more
particularly set forth herein.
NOW, THEREFORE, the parties hereto in consideration of the mutual
promises contained herein and intending to be legally bound hereby, covenant and
agree as follows:
1. The recitals set forth above, all exhibits attached hereto, if any,
and the Lease referred to therein, are incorporated herein by reference and all
definitions and document identifications, shall, except as expressly provided to
the contrary herein, have the same meaning in this Agreement as are respectively
ascribed to them in the Lease as if set forth in full in the body of this
Agreement.
2. (a) Exhibit "E" of the Lease (Covenants) as amended by the 1991
Amendment shall be deleted in its entirety and shall be replaced by the
following new Exhibit "E" (Covenants):
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"1. CONSOLIDATED NET WORTH. Tenant shall maintain a Consolidated
Tangible Net Worth at all times as determined for each Fiscal Quarter of not
less than the sum of (i) Tenant's audited Net Worth as of April 27, 1996
determined in accordance with GAAP less $500,000.00; plus (ii) an increase, as
of each Fiscal Year, by an amount equal to 30% of Tenant's Consolidated Net
Income for such Fiscal Year, PROVIDED, HOWEVER, if Consolidated Net Income shall
be a loss, there shall not be deducted from such amount any such loss.
2. FIXED CHARGE COVERAGE. Tenant shall, and shall cause its
Restricted Subsidiaries to, maintain the consolidated ratio as of each Fiscal
Quarter set forth below of (i) Consolidated EBITR of Tenant (determined for the
last four Fiscal Quarters preceding the date of determination) as of the end of
each Fiscal Quarter set forth below to (ii) Consolidated Fixed Charges of Tenant
(determined for the last four Fiscal Quarters preceding the date of
determination) as of the end of such Fiscal Quarter to be of not less than the
ratio set forth opposite such period below:
<TABLE>
<CAPTION>
PERIOD RATIO
------ -----
<S> <C>
The first through the fourth Fiscal 0.60:1
Quarter of Fiscal Year 1997
The first through the fourth Fiscal 0.63:1
Quarters of Fiscal Year 1998
The first through the fourth Fiscal 0.72:1
Quarter of Fiscal Year 1999
The first through the fourth Fiscal 0.76:1
Quarters of Fiscal Year 2000
The first through the fourth Fiscal 0.81:1
Quarter of Fiscal Year 2001
The first Fiscal Quarter of Fiscal 0.87:1
Year 2002 and each Fiscal Quarter thereafter
</TABLE>
3. SENIOR--FUNDED DEBT. Tenant shall, and shall cause its
Restricted Subsidiaries to, maintain the consolidated ratio as of the end of
each Fiscal Quarter set forth below of (i) Consolidated Senior Funded Debt of
Tenant at the date of determination for such Fiscal Quarter to (ii) Consolidated
EBITDA of Tenant (determined for the last four Fiscal Quarters preceding the
date of determination) of not greater than the ratio set forth opposite such
period below:
<PAGE> 3
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<TABLE>
<CAPTION>
PERIOD RATIO
------ -----
<S> <C>
The first and second Fiscal Quarters 7.5:1
of Fiscal Year 1997
The third and fourth Fiscal Quarters 6.5:1
of Fiscal Year 1997
The first and second Fiscal Quarters 6.0:1
of Fiscal Year 1998
The third and fourth Fiscal Quarters 5.8:1
of Fiscal Year 1998
The first Fiscal Quarter of Fiscal Year 5.5:1
1999 and each Fiscal Quarter thereafter
</TABLE>
4. TOTAL FUNDED DEBT. Tenant shall, and shall cause its Restricted
Subsidiaries to, maintain the consolidated ratio as of the end of each Fiscal
Quarter set forth below of (i) Consolidated Total Funded Debt of Tenant at the
date of determination for such Fiscal Quarter set forth below to (ii)
Consolidated EBITDA of Tenant (determined for the last four Fiscal Quarters
preceding the date of determination) of not greater than the ratio set forth
opposite such period below:
<TABLE>
<CAPTION>
PERIOD RATIO
------ -----
<S> <C>
The first and second Fiscal Quarters 11.5:1
of Fiscal Year 1997
The third and fourth Fiscal Quarters 10.2:1
of Fiscal Year 1997
The first and second Fiscal Quarters 9.5:1
of Fiscal Year 1998
The third and fourth Fiscal Quarters 9.3:1
of Fiscal Year 1998
The first Fiscal Quarter of Fiscal Year 8.8:1"
1999 and each Fiscal Quarter thereafter
</TABLE>
(b) Any capitalized terms used in new Exhibit "E" (Covenants) to
the Lease as set forth in subsection 2(a) above and not otherwise defined in the
Lease shall have the meanings ascribed to them in a certain Loan Agreement by
and among Tenant, as Borrower, Datcon Instrument Company, Halmar Robicon Group,
Inc. and HIVEC Holdings, Inc., as Guarantors, Sanwa Business Credit Corporation,
as Agent, and various financial institutions named therein, as Lenders, dated as
of May 9, 1996, a copy of the definitional section of which is attached hereto,
made a part hereof and marked Exhibit "A".
<PAGE> 4
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3. The Lease is further amended to terminate: (a) all references
to Marine Midland Bank, N.A.; and (b) all references to and all of the terms and
conditions of the Marine Amendment which specifically amended the Lease as the
revolving credit facility which was the subject of the Marine Amendment has been
paid in full by Tenant and the Marine Amendment is of no further force or
effect.
4. All attorneys' fees, costs and expenses incurred by Landlord in
connection with this Agreement and the transactions contemplated hereunder shall
be paid by Tenant within three (3) business days of submission of a bill
therefor.
5. Except as expressly amended hereby, the Lease remains in full
force and effect in accordance with its terms.
6. This Agreement may be executed in any number of counterparts,
each of which shall be an original, and such counterparts together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto as of the date first above written.
CORPORATE PROPERTY
ASSOCIATES 8
By: Eighth Carey Corporate
Property, Inc.
General Partner
By: /s/ Gordon J. Whiting
--------------------------------
Name: Gordon J. Whiting
Title: Vice President
HIGH VOLTAGE ENGINEERING
CORPORATION
By: /s/ Joseph W. McHugh, Jr.
------------------------------------
Name: Joseph W. McHugh, Jr.
Title: V.P., CFO and Clerk
<PAGE> 5
EXHIBIT A
(Definitions)
LOAN AGREEMENT
among
HIGH VOLTAGE ENGINEERING CORPORATION,
as Borrower,
DATCON INSTRUMENT COMPANY,
HALMAR ROBICON GROUP, INC.
and
HIVEC HOLDINGS, INC.
as Guarantors,
SANWA BUSINESS CREDIT CORPORATION,
as Agent,
and
THE FINANCIAL INSTITUTIONS PARTY HERETO,
as Lenders
Dated as of
May 9, 1996
<PAGE> 6
LOAN AGREEMENT
--------------
This LOAN AGREEMENT is dated as of this 9th day of May, 1996, by and
among HIGH VOLTAGE ENGINEERING CORPORATION, a Massachusetts corporation, as
Borrower, DATCON INSTRUMENT COMPANY, a Pennsylvania corporation, HALMAR ROBICON
GROUP, INC., a Pennsylvania corporation, and HIVEC HOLDINGS, INC., a Delaware
corporation, as Guarantors, SANWA BUSINESS CREDIT CORPORATION, as Agent for
Lenders, and the FINANCIAL INSTITUTIONS PARTY HERETO, as Lenders.
W I T N E S S E T H:
--------------------
WHEREAS, in connection with the repayment of certain pre-existing
indebtedness of Borrower and the continued working capital needs of Borrower
subsequent to such repayment, Borrower desires to borrow up to Thirty Million
Dollars ($30,000,000) from Lenders, and Lenders are willing to make certain
loans to Borrower of up to such amount, upon the terms and conditions set forth
herein; and
WHEREAS, Guarantors are wholly-owned subsidiaries of Borrower and will
benefit directly and indirectly from the loans made to Borrower pursuant hereto
and, as such, are willing to guaranty the obligations of Borrower hereunder, all
as set forth herein;
NOW, THEREFORE, in consideration of the terms and conditions contained
herein, and of any loans or extensions of credit heretofore, now or hereafter
made to or for the benefit of Borrower by Agent and Lenders, the parties hereto
hereby agree as follows:
1. DEFINITIONS.
1.1 GENERAL TERMS. When used herein, the following terms shall have
the following meanings:
"ACCOUNT DEBTOR" shall mean any Person who is or may become
obligated on or under an Account.
"ACCOUNTS" shall mean, with respect to any Person, all such
Person's presently existing and hereafter arising or acquired accounts,,
accounts receivable, margin accounts, futures positions, book debts,
instruments, documents, contracts, notes, drafts, acceptances, chattel paper,
and other forms of obligations now or hereafter owned or held by or
<PAGE> 7
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payable to such Person relating in any way to Inventory or arising from the sale
of Inventory or the rendering of services by such Person or howsoever otherwise
arising, including the right to payment of any interest or finance charges with
respect thereto, together with all merchandise represented by any of the
Accounts; all such merchandise that may be reclaimed or repossessed or returned
to such Person; all of such Person's rights as an unpaid vendor, including,
without limitation, stoppage in transit, reclamation, replevin, and
sequestration; all pledged assets and all letters of credit, guaranty claims,
Liens held by or granted to such Person to secure payment of any Accounts; all
proceeds and products of all of the foregoing described properties and interests
in properties; and all proceeds of insurance with respect thereto, including,
without limitation, the proceeds of any applicable casualty or credit insurance
or fidelity bond, whether payable in cash or in kind; and all customer lists,
ledgers, books of account, records, computer programs, computer disks or tape
files (including, without limitation, all microfilm), computer printouts,
computer runs, and other computer prepared information relating to any of the
foregoing.
"ACCOUNTS RECEIVABLE AGING" shall have the meaning ascribed
thereto in SUBSECTION 3.1.
"ADJUSTED EBITDA" shall mean, for any applicable fiscal period,
(1) determined for Borrower and its Restricted Subsidiaries on a consolidated
basis or (2) if the context so requires, determined for Borrower or any Domestic
Operating Subsidiary, individually: Adjusted Net Income, plus (but only to the
extent deducted in determining such Adjusted Net Income) (a) income and
franchise taxes paid or accrued with respect to such period, (b) Interest
Charges during such period and (c) amortization and depreciation deducted in
determining such Adjusted Net Income for such period, all as determined in
accordance with GAAP consistently applied. Unless otherwise expressly provided
or the context requires otherwise, all references herein to Adjusted EBITDA
shall refer to Adjusted EBITDA determined for Borrower and its Restricted
Subsidiaries on a consolidated basis.
"ADJUSTED NET INCOME" or "ADJUSTED NET LOSSES" shall mean, for any
applicable fiscal period, determined on a consolidated basis for Borrower and
its Restricted Subsidiaries, consolidated Net Income (or Net Losses) for such
period, but specifically excluding therefrom (without duplication of any
exclusions in determining Net Income or Net Losses) on a tax adjusted basis (i)
net income of any Restricted Subsidiary accrued prior to the date it became a
Restricted Subsidiary, (ii) net income of any Person (other than a Restricted
Subsidiary), all or substantially all of the
<PAGE> 8
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assets of which have been acquired in any manner by Borrower or any Restricted
Subsidiary, accrued prior to the date of such acquisition, (iii) net income of
any Person (other than a Restricted Subsidiary) with which Borrower or any
Restricted Subsidiary shall have consolidated or which shall have merged into or
with Borrower or any Restricted Subsidiary, accrued prior to the date of such
consolidation or merger, (iv) net income of any Restricted Subsidiary which for
any reason is unavailable for payment or prohibited to be paid to Borrower,
including, without limitation, as a result of applicable legal limitations with
respect to repatriation of monies to or from a foreign country and (v) earnings
resulting from any reappraisal, re-evaluation or write-up of assets.
"ADJUSTED TANGIBLE NET WORTH" shall mean, as of the last day of
each Fiscal Quarter, determined on a consolidated basis for Borrower and its
Restricted Subsidiaries, the sum of (a) Borrower's audited Tangible Net Worth as
of April 27, 1996, determined in accordance with GAAP, LESS $500,000 PLUS (b)
seventy-five percent 75% of the cumulative amount of all Net Income for each
Fiscal Quarter commencing on or after April 28, 1996 and ending on each date of
determination; PROVIDED that, in no event shall there be deducted from any such
sum any amount in respect of any Net Losses for any Fiscal Quarter.
"AFFILIATE" shall mean any Person (a) that directly or indirectly,
through one or more intermediaries, controls or is controlled by, or is under
common control with Borrower or any Subsidiary, including, without limitation,
the officers and directors of Borrower or such Subsidiary, (b) that directly or
beneficially owns or holds ten percent (10%) or more of any equity interest in
Borrower or any Subsidiary, or (c) ten percent (10%) or more of whose voting
stock (or in the case of a Person which is not a corporation, ten percent (10%)
or more of any equity interest) is owned directly or beneficially or held by
Borrower or any Subsidiary. Affiliate shall not be deemed -to include Agent or
any Lender. As used herein, the term "control" (including, with correlative
meanings, the terms "controlling," "controlled by" and "under common control
with") shall mean possession, directly or indirectly, of the power to direct the
management or policies of a Person, whether through ownership of securities, by
contract or otherwise.
"AGENT" shall mean Sanwa Business Credit Corporation, a Delaware
corporation, in its capacity as agent for Lenders and not in its individual
capacity as a Lender, and any successor in such capacity appointed pursuant to
SUBSECTION 12.11.
<PAGE> 9
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"AGREEMENT" shall mean this Loan Agreement, as the same may
hereafter be restated, amended, modified or supplemented from time to time.
"AUDIT FEE" shall have the meaning ascribed thereto in
SUBSECTION 2.8.
"AUTHORIZED OFFICER" shall mean the chairman, president, chief
financial officer, chief operating officer, treasurer or a vice president of
Borrower or any Guarantor.
"BASE RATE" shall mean the fluctuating interest rate equal to (a)
in the case of the Revolving Loan, the Prime Rate from time to time in effect
and (b) in the case of the Term Loan, the Prime Rate from time to time in effect
plus three-quarters of one percent (.75%) per annum.
"BASE RATE LOANS" shall mean Loans bearing interest at the Base
Rate.
"BLOCKED ACCOUNT AGREEMENTS" shall have the meaning ascribed
thereto in the Security Agreement.
"BLOCKED ACCOUNTS" shall have the meaning ascribed thereto in the
Security Agreement.
"BORROWER" shall mean High Voltage Engineering Corporation, a
Massachusetts corporation.
"BORROWER PENSION PLAN" shall mean the High Voltage Engineering
Corporation Retirement Plan, as in effect on the Closing Date.
"BORROWER PREFERRED STOCK" shall mean Borrower's Series C
Preferred Stock, $1.00 par value per share, outstanding on the Closing Date and
subject to Borrower's charter as in effect on the closing Date.
"BORROWING AVAILABILITY" shall mean as the context may require (a)
with respect to Borrower, that portion of the Current Asset Base separately
attributable to Borrower (excluding the Property of any Domestic Operating
Subsidiary), LESS (i) the outstanding principal balance of the Revolving Loan
(excluding that portion of the Revolving Loan advanced as intercompany loans by
Borrower to its Domestic Operating Subsidiaries) and (ii) the outstanding Risk
Participation Liability with respect to Letters of Credit issued for Borrower's
benefit; (b) with respect
<PAGE> 10
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to any Domestic Operating Subsidiary, that portion of the Current Asset Base
separately attributable to such Subsidiary (excluding the Property of Borrower
or any other Domestic operating Subsidiary), LESS (i) the outstanding principal
balance of intercompany loans owing by such Subsidiary to Borrower funded by
Revolving Loan advances hereunder and (ii) the outstanding Risk Participation
Liability with respect to Letters of Credit issued for such Subsidiary's benefit
or (c) with respect to Borrower and the Domestic Operating subsidiaries on a
consolidated basis, the aggregate Borrowing Availability of all of them.
"BORROWING NOTICE" shall have the meaning ascribed thereto in
SUBSECTION 2.5(e).
"BUSINESS DAY" shall mean (i) for all purposes other than as
described in clause (ii) below, any day other than a Saturday, Sunday or other
day on which banks in Chicago, Illinois, or Boston, Massachusetts are authorized
or required to be closed and (ii) with respect to all notices, determinations,
borrowings, rate selections and payments in connection with LIBOR Rate Loans,
any day that is a Business Day described in clause (i) above and that is also a
day on which dealings in U.S. dollar deposits are carried on in the London
interbank market for U.S.
dollars.
"CAPITAL EXPENDITURES" shall mean, for any fiscal period, without
duplication, all expenditures (whether made in the form of cash or other
Property) by Borrower or any subsidiary during such period for any fixed assets
or improvements, or for renewals, replacements, substitutions or additions
thereto, which have a useful life of more than one (1) year including, without
limitation, the direct or indirect acquisition of such assets by way of
increased product or service charges, offset items or otherwise.
"CASH EQUIVALENTS" shall mean (i) for Borrower and each Restricted
Subsidiary, bank certificates of deposit, bankers' acceptances, demand deposits
and/or time deposits having a maturity of one year or less with banks organized
under the laws of the United States or of any State thereof, which Banks (a) do
not have set-off rights against the foregoing, other than set-offs for nominal
service charges and similar fees incurred in the ordinary course, (b) have
combined capital and surplus in excess of $250,000,000 and (c) have long-term
unsecured debt obligations rated "A" or better by Standard & Poor's corporation,
"A2" or better by Moody's Investor Services, Inc. or an equivalent rating by any
other credit rating agency of recognized national standing, (ii) for
Subsidiaries organized under the laws of foreign jurisdictions, bank
certificates of deposit, bankers' acceptances, demand deposits and/or time
deposits with
<PAGE> 11
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banks organized under the laws of the United States, any State thereof or under
the laws of any country which is a member of the organization for Economic
Cooperation and Development, which banks (a) do not have set-off rights against
the foregoing, other than set-offs for nominal service charges and similar fees
incurred in the ordinary course, except that Foreign Subsidiaries may have
restricted accounts which are pledged in the ordinary course of business to
support progress payments, (b) have combined capital and surplus in excess of
$250,000,000 or, as applicable, a comparable value in foreign currency), and
(c) have long-term unsecured debt obligations rated "All or better by Standard &
Poor's Corporation, "A2" or better by Moody's Investor Services, Inc. or an
equivalent rating by any other credit rating agency of recognized national
standing, (iii) commercial paper maturing within one (1) year from the date
issued and rated at least A-1 or the equivalent thereof by Standard & Poors
Corporation, or P-1 or the equivalent thereof by Moody's Investors Service,
Inc., and (iv) obligations maturing within one (1) year from the date of
acquisition issued or directly and fully guaranteed by the United States
government or any agency thereof.
"CASH FLOW COVERAGE RATIO" shall mean, for any fiscal period,
determined for Borrower and its Restricted Subsidiaries on a consolidated basis,
the ratio of EBITDA to the sum of (without duplication) (a) Interest Charges
paid in cash, (b) all federal and state income, franchise or similar taxes paid
in cash, (c) the current portion of long-term Indebtedness paid in cash during
such period, (d) Capital Expenditures, except to the extent funded with purchase
money Indebtedness or capital leases permitted in accordance with SUBSECTION
8.2(vi).
"CHANGE OF CONTROL" shall mean any of (a) the failure of Laurence
S. Levy and Clifford Press to own at all times, in the aggregate, free and clear
of all Liens, all shares of the capital stock of Parent owned by them on the
Closing Date (excluding transfers to their family members or trusts established
for their family members; PROVIDED that Laurence S. Levy and Clifford Press
continue to retain voting rights with respect to the shares so transferred), (b)
the failure of Laurence S. Levy, Clifford Press, their family members and any
trusts established by and controlled by them for the exclusive benefit of
themselves, their spouses, lineal descendants and other family members to own at
all times, in the aggregate, free and clear of all Liens, (i) at least sixty-six
and two-thirds percent (66 2/3%) of the outstanding capital stock of Parent on a
fully diluted basis and (ii) a sufficient number of shares of capital stock of
Parent on a fully diluted basis to elect a majority of Parent's board of
directors, (c) the failure of Parent to directly own at all times, in the
aggregate, free and clear of all Liens (other than those of Collateral
<PAGE> 12
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Agent, on behalf of Secured Lenders) (i) at least seventy-five percent (75%) of
the outstanding capital stock of Borrower on a fully diluted basis and (ii) a
sufficient number of shares of capital stock of Borrower on a fully diluted
basis to elect a majority of Borrower's board of directors, (d) the failure of
Borrower to directly own, in the aggregate, free and clear of all Liens (other
than those of Collateral Agent, on behalf of Secured Lenders), all of the
outstanding capital stock of each Guarantor on a fully diluted basis, and (e)
the failure of Borrower and Guarantors to own at all times, in the aggregate,
free and clear of all Liens, all of the outstanding capital stock of each
Restricted Subsidiary on a fully diluted basis.
"CHARGES" shall mean all federal, state, county, city, municipal,
local, foreign or other governmental taxes (including, without limitation, taxes
owed to the PBGC at the time due and payable), duties, levies, assessments,
charges, liens, claims or encumbrances upon or relating to (i) the collateral,
(ii) the obligations, (iii) the employees, payroll, income or gross receipts of
Borrower or any Subsidiary, (iv) the ownership or use of any Property of
Borrower or any Subsidiary, or (v) any other aspect of Borrower's or any
Subsidiary's business.
"CLOSING DATE" shall mean the date of this Agreement.
"CODE" shall have the meaning ascribed thereto in SUBSECTION 1.3.
"COLLATERAL" shall mean all property and interests in property now
owned or hereafter acquired by Borrower or any Guarantor in or upon which a Lien
is granted to Collateral Agent, for the benefit of Secured Lenders, by Borrower
or any Guarantor, whether under this Agreement or the other Financing Agreements
or under any other documents, instruments or writings executed by Borrower or
any Guarantor and delivered to Collateral Agent, including, without limitation,
Accounts, General Intangibles, Fixtures, Inventory, Intellectual Property,
Equipment, Real Estate and leased real property.
"COLLATERAL AGENCY AGREEMENT" shall mean that certain Collateral
Agency Agreement, dated as of the Closing Date, among Collateral Agent and
Secured Lenders.
"COLLATERAL AGENT" shall mean Sanwa Business Credit Corporation, a
Delaware corporation, in its capacity as collateral agent for Secured Lenders,
and any successor in such capacity appointed pursuant to the Collateral Agency
Agreement.
<PAGE> 13
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"COLLECTING BANKS" shall have the meaning ascribed thereto in the
Security Agreement.
"COMMITMENT" shall mean, with respect to each Lender, the
Commitment of each Lender with respect to the Revolving Loan and the Term Loan
as of the Closing Date as set forth on SCHEDULE 1; SCHEDULE 1 shall be amended
and Lenders' Pro Rata Shares shall be adjusted from time to time to give effect
to the addition of any new Lenders pursuant to SUBSECTION 11.1.
"CONTINGENT INTEREST PAYMENT AGREEMENTS" shall mean the Contingent
Interest Payment Agreements dated as of March 16, 1988 and April 27, 1991
between Borrower and Quest Equities Corp. and the Contingent Interest Payment
Agreement dated as of April 27, 1991 between Borrower and BancBoston Capital
Inc., each as in effect on the Closing Date.
"CONTINGENT INTEREST PAYMENTS" shall mean the contingent interest
payments payable by Borrower pursuant to the Contingent Interest Payment
Agreements.
"CONVERSION/CONTINUATION NOTICE" shall have the meaning ascribed
thereto in subsection 2.5(f).
"CURRENT ASSET BASE" shall have the meaning ascribed thereto in
subsection 2.1.
"DATCON" shall mean Datcon Instrument Company, a Pennsylvania
corporation.
"DEFAULT" shall mean an event which through the passage of time or
the service of notice, or both, would mature into an Event of Default.
"DEFAULT RATE" shall mean a per annum interest rate equal to the
sum of (a) the Base Rate or LIBOR Rate from time to time in effect, as
applicable, plus (b) two percent (2%). With respect to Base Rate Loans, such
interest rate shall be a fluctuating rate and each change in such interest rate
shall take effect simultaneously with the corresponding change in the Base Rate.
"DOMESTIC OPERATING SUBSIDIARY" shall mean each of Datcon, Robicon
and, with the prior written consent of Agent and Lenders, any
<PAGE> 14
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other Guarantor incorporated under the laws of any State of the United States.
"EBITDA" shall mean, for any applicable fiscal period, (1)
determined for Borrower and its Restricted Subsidiaries on a consolidated basis
or (2) if the context so requires, determined for Borrower or any Domestic
Operating Subsidiary, individually: Net Income, plus (but only to the extent
deducted in determining such Net Income) (a) income and franchise taxes paid or
accrued with respect to such period, (b) Interest Charges during such period and
(c) amortization and depreciation deducted in determining such Net Income for
such period, all as determined in accordance with GAAP consistently applied.
Unless otherwise expressly provided or the context requires otherwise, all
references herein to EBITDA shall refer to EBITDA determined for Borrower and
its Restricted Subsidiaries on a consolidated basis.
"EBITR" shall mean, for any applicable fiscal period, determined
for Borrower and its Restricted Subsidiaries on a consolidated basis, Adjusted
EBITDA, minus (a) amortization and depreciation deducted in determining Adjusted
Net Income for such period, plus (b) one third (1/3) of all payments made during
such period under operating leases, to the extent deducted in determining
Adjusted EBITDA for such period, all as determined in accordance with GAAP
consistently applied.
"ELIGIBLE ACCOUNTS" shall have the meaning ascribed thereto in
subsection 3.2.
"ELIGIBLE INVENTORY" shall have the meaning ascribed thereto in
subsection 3.4.
"ENVIRONMENTAL LAWS" shall mean and includes the following as
now in effect or hereafter amended: the Comprehensive Environmental Response
Compensation and Liability Act, 42 U.S.C. [sec.]9601 et seq.; the Solid Waste
Disposal Act, as amended by the Resource Conservation and Recovery Act, 42
U.S.C. [sec.]6901 et seq.; the Toxic Substances Control Act, 15 U.S.C. [sec.]
2601, et seq.; the Clean Air Act, 42 U.S.C. [sec.]7401 et seq.; the Federal
Water Pollution Control Act, 33 U.S.C. [sec.]1251 et seq.; the Emergency
Planning and Community Right-to-Know Act, 42 U.S.C. [sec.]11001 et seq.; the
Hazardous Materials Transportation Act, 49 U.S.C. [sec.]1801 et seq.; the
Atomic Energy Act, 42 U.S.C. [sec.]2011 et seq.; the Safe Drinking Water Act,
42 U.S.C. [sec.]300f et seq. and the state law equivalents; any so-called
"Superfund" or "Superlien" law; and any statute, ordinance, code, rule,
regulation, order, decree or requirement under international, federal, state,
regional, provincial or local law
<PAGE> 15
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(including, without limitation, laws of countries in addition to the United
States, administrative orders and consent decrees) in effect and as amended
regulating, relating to or imposing liability or standards of conduct concerning
public health and safety, protection of the environment, or any pollutant or
contaminant or hazardous, toxic or dangerous substance, waste, chemical or
material, as now or any time hereafter may be existing.
"ENVIRONMENTAL MATTERS" shall have the meaning ascribed thereto in
subsection 6.22.
"EQUIPMENT" shall mean, with respect to any Person, all of such
Person's machinery and equipment, including, without limitation, processing
equipment, conveyors, machine tools, data processing and computer equipment with
software and peripheral equipment (other than software constituting part of the
Accounts), and all engineering, processing and manufacturing equipment, office
machinery, furniture, materials handling equipment, tools, attachments,
accessories, automotive equipment, trailers, trucks, ships, vessels, airplanes,
forklifts, molds, dies, stamps, motor vehicles, rolling stock and other
equipment of every kind and nature, trade fixtures and fixtures not forming a
part of real property, all whether now owned or hereafter acquired, and wherever
situated, together with all appurtenances, additions and accessions thereto,
replacements therefor, all parts therefor, all substitutes for any of the
foregoing, fuel therefor, and all manuals, drawings, instructions, warranties
and rights with respect thereto, and all products and proceeds thereof and
condemnation awards and insurance proceeds with respect thereto.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and all rules and regulations promulgated
thereunder.
"ERISA AFFILIATE" shall mean any Person, trade or business that
is, or was at any time during the previous six (6) years, along with Borrower or
any Guarantor, in the same controlled group of corporations, under common
control, or otherwise, treated as a single employer for any purpose under
Section 414 of the IRC.
"EVENT OF DEFAULT" shall mean the occurrence or existence of any
one or more of the following conditions or events:
<PAGE> 16
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(a) Borrower fails to pay (i) any principal amount of any Loan
when due or declared due or (ii) any other Obligation hereunder within
five (5) days after the due date thereof;
(b) Borrower or any Guarantor fails or neglects to perform, keep
or observe any of the covenants, conditions or agreements contained in
any of the subsections of this Agreement or in any of the other Financing
Agreements (other than occurrences referred to or embodied in other
provisions of this definition constituting immediate Events of Default)
for a period of (i) twenty (20) days after Borrower's or such Guarantor's
receipt of notice of such breach from Agent or (ii) thirty (30) days
after actual knowledge of such breach by Borrower or any Guarantor;
(c) any warranty or representation now or hereafter made by
Borrower or any Subsidiary in connection with this Agreement or any of
the other Financing Agreements is untrue or incorrect in any material
respect, or any schedule, certificate, statement, report, financial data,
notice or other writing furnished at any time by Borrower or any
Subsidiary to Agent or any Lender is untrue or incorrect in any material
respect, as of the date on which the warranty, representation or the
facts set forth therein are stated, certified or deemed made;
(d) any Liens (other than Permitted Liens), levies or assessments
in excess of $500,000 in the aggregate are filed or recorded with respect
to or otherwise imposed upon all or any part of the collateral or the
Property of Borrower or any Subsidiary by the United States, or any
department, agency or instrumentality thereof, or by any state, county,
municipality or other governmental agency, and are and are not discharged
within thirty (30) days after the filing, recording or other imposition
thereof;
(e) all or any part of the collateral or the Property of Borrower
or any Restricted Subsidiary in excess of $250,000 in the aggregate is
attached, seized, subjected to a writ or distress warrant, or levied
upon, or come within the possession or control of any judgment creditor
and within thirty (30) days thereafter such Collateral or Property is not
returned to Borrower or such Subsidiary or such writ, distress warrant or
levy is not dismissed, stayed or lifted;
(f) Borrower or any Restricted Subsidiary makes an assignment for
the benefit of creditors; convenes a meeting of its
<PAGE> 17
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creditors, or any class thereof, for purposes of effecting a moratorium
upon or extension or composition of its debts; applies for, seeks,
consents to, or acquiesces in the appointment of a receiver, trustee or
custodian to take possession of all or any substantial portion of the
Property of Borrower or such Subsidiary; commences any bankruptcy,
reorganization or insolvency case or proceeding or other proceeding under
any federal, state or other law for relief of debtors; or Borrower or
such Subsidiary proposes, authorizes or consents to the taking of any of
the foregoing actions;
(g) Borrower or any Restricted Subsidiary fails to obtain the
dismissal, within sixty (60) days after the commencement thereof, of any
bankruptcy, reorganization or insolvency proceeding, or other proceeding
under any law for the relief of debtors instituted against it; fails
actively to oppose any such proceeding; or in any such proceeding,
defaults or files an answer admitting the material allegations upon which
the proceeding was based or states in any filing in such proceeding its
willingness to have an order for relief entered or its desire to seek
liquidation, reorganization or adjustment of any of its debts;
(h) without the application, approval or consent of Borrower or
any Restricted Subsidiary, any receiver, trustee, examiner, liquidator,
custodian or similar official is appointed to take possession of all or
any substantial portion of the Property of Borrower or such Subsidiary,
or any committee of Borrower's or such Subsidiary's creditors or any
class thereof, is formed for the purpose of monitoring or investigating
the financial affairs of Borrower or such Subsidiary or enforcing such
creditors' rights, or the filing of any motion, complaint or other
pleading in any bankruptcy, reorganization or insolvency case or
proceeding of any Person other than Borrower or such Subsidiary that
seeks the consolidation Borrower's or such Subsidiary's assets and
liabilities with the assets and liabilities of such Person;
(i) Borrower or any Restricted Subsidiary ceases to be Solvent or
admits in writing that it is not Solvent or fails to pay all or any
material portion (measured in numbers of debts or dollar amounts) of its
debts as they become due or admits in writing its present or prospective
inability to pay its debts as they become due;
(j) Borrower or any Restricted Subsidiary is enjoined, restrained,
or in any way prevented by the order of any court or any administrative
or regulatory agency from conducting all or any
<PAGE> 18
-13-
material part of its business representing twenty percent (20%) or more
of Borrower's business, or Borrower's and its Subsidiaries' business
taken as a whole, in each case based upon gross revenues for the most
recent twelve months ending on the date of such occurrence, which
injunction, restraint or other prohibition is not stayed or lifted within
thirty (30) days after the entry thereof;
(k) any default or breach under any agreements) evidencing
Indebtedness of Borrower or any Restricted Subsidiary in an aggregate
amount in excess of $500,000 shall occur and shall continue after any
applicable grace period specified in any such document if the effect of
such default or breach is to accelerate, or to permit the acceleration
of, the maturity of all or any part of any such Indebtedness, or any such
Indebtedness shall be declared to be due and payable, or be required to
be prepaid (other than by a regularly scheduled required prepayment),
prior to the stated maturity thereof;
(l) a breach by Borrower or any Subsidiary occurs under any
agreement, document or instrument (other than an agreement, document or
instrument evidencing Indebtedness), whether heretofore, now or hereafter
existing between Borrower or such Subsidiary and any other Person, and
such breach would have a Material Adverse Effect;
(m) entry of a judgment or judgments in an aggregate amount in
excess of $500,000 against Borrower or any Subsidiary which are not
covered by available and collectible insurance and which are not stayed,
bonded, vacated, paid or discharged within thirty (30) days after entry;
(n) any Termination Event which Agent, in good faith, determines
would have a Material Adverse Effect and which is not cured within thirty
(30) days after the occurrence of such Termination Event;
(o) Borrower or any Guarantor, as applicable, fails to (i)
perform, keep or observe any of the covenants contained in SUBSECTION
7.8(iii) OR (v), SUBSECTIONS 7.12 through 7.16 or SECTION 8 or (ii)
maintain any insurance required to be maintained in accordance with
SUBSECTIONS 7.5 or 7.6;
(p) any civil or criminal action, suit or proceeding is initiated
against Borrower or any Subsidiary under any federal or
<PAGE> 19
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state racketeering statute (including, without limitation, the Racketeer
Influenced and Corrupt organization Act of 1970, as amended);
(q) a Change in Control occurs;
(r) Collateral Agent ceases to have a legal, valid and perfected
first priority Lien (subject to Permitted Liens) on any collateral of
Borrower or any Subsidiary having an aggregate value in excess of
$250,000 in which a Lien is required to be granted to collateral Agent
pursuant to any Financing Agreement, for any reason other than the
failure of Collateral Agent to take any action within its control;
(s) any of the Financing Agreements shall cease for any reason to
be in full force and effect or is declared null and void or Borrower, any
subsidiary or any other Person (other than Agent or any Lender) shall
disavow its respective obligations thereunder or shall deny that it has
any further obligations thereunder or shall contest or challenge the
validity or enforceability of any thereof, the legality or enforceability
of any of the obligations or the perfection or priority of any Lien
granted to collateral Agent, or gives notice to such effect.
The occurrence or existence of any of the foregoing events shall constitute an
immediate Event of Default unless notice by Agent or a cure period is
specifically required by the description of such event before such event matures
into an Event of Default.
"EXCESS CASH FLOW" shall mean, for any fiscal period, determined
for Borrower and its Subsidiaries on a consolidated basis, without duplication,
EBITDA, LESS (a) Interest Charges paid in cash (excluding Contingent Interest
Payments paid in cash), (b) all federal, state and local income and franchise
taxes paid in cash, (c) the principal portion of long-term Indebtedness paid in
cash (including the principal portion of under capital leases but excluding (i)
mandatory prepayments from Excess Cash Flow and (ii) the principal portion of
long-term Indebtedness specified on EXHIBIT 6.8 which is paid with the proceeds
of the Loans on the Closing Date in accordance with SUBSECTION 4.2(x)), and (d)
Capital Expenditures (excluding (i) those funded with purchase money
Indebtedness or capital leases, (ii) reinvested proceeds from the sale of
capital assets and (iii) expenditures made pursuant to SUBSECTIONS 8.3 or 8.4).
<PAGE> 20
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"FACILITY" shall mean any of (a) Borrower's facilities located at
8720 U.S. 70 West, Clayton, North Carolina; Pratts Junction Road, Sterling,
Massachusetts; 20 Commerce Way, Woburn, Massachusetts; 401 Edgewater Place,
Wakefield, Massachusetts; and 1215 Quail Street, Lakewood, Colorado; (b) each
Resale Facility; (c) Datcon's facilities located at 1811 Roherstown Road,
Lancaster, Pennsylvania; (d) Robicon's facilities located at 500 Hunt Drive, New
Kensington, PA 15068; and (e) any other facility established by Borrower or any
Guarantor hereafter in accordance with the terms of this Agreement.
"FINANCING AGREEMENTS" shall mean, collectively, this Agreement,
the Revolving Notes, the Term Notes, each Pledge Agreement, the Security
Agreement, each Intellectual Property Security Agreement, each Mortgage, and all
other agreements, instruments and documents, including, without limitation,
security agreements, loan agreements, notes, guaranties, mortgages, deeds of
trust, agreements, documents, instruments, pledges, powers of attorney,
consents, assignments, contracts, notices, leases, financing statements and all
other written matter whether heretofore, now, or hereafter executed by or on
behalf of Borrower, any Guarantor or any other Person and delivered to Agent,
Collateral Agent or any Lender in connection with this Agreement, together with
all agreements and documents between Borrower, any Guarantor or any other Person
and Agent, collateral Agent or any Lender referred to therein or contemplated
thereby, as the same may hereafter be amended, modified or supplemented from
time to time.
"FISCAL QUARTER" shall mean each quarterly accounting period of
each Fiscal Year of Borrower.
"FISCAL YEAR" shall mean each annual accounting period of Borrower
ending on the last Saturday in April or the first Saturday in May of each
calendar year.
"FIXTURES" shall mean, with respect to any Person, all "fixtures"
as such term is defined in the code, now owned or hereafter acquired by such
Person, wherever located.
"FLEET NATIONAL BANK" shall mean Fleet National Bank, a national
banking association.
"FOREIGN SUBSIDIARY" shall mean each Subsidiary incorporated under
the laws of a jurisdiction outside of the United States.
<PAGE> 21
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"FUNDING DATE" shall mean the date of each funding, conversion or
continuation of a Loan or issuance of a Letter of Credit or a Risk Participation
therefor, which date shall be a Business Day.
"GAAP" shall mean, as of the date of any determination with
respect thereto, generally accepted accounting principles as used by the
Financial Accounting Standards Board and/or the American Institute of Certified
Public Accountants, consistently applied and maintained throughout the periods
indicated.
"GENERAL INTANGIBLES" shall mean, with respect to any Person, all
of such Person's presently owned or hereafter acquired general intangibles,
including, without limitation, goodwill, choses in action, causes of action,
franchises, methods, sales literature, drawings, specifications, descriptions,
name plates, catalogs, dealer contracts, supplier contracts, distributor
agreements, customer lists, contract rights, confidential information,
consulting agreements, employment agreements, engineering contracts, leasehold
interests in real and personal property, insurance policies (including business
interruption insurance), licenses, permits, and such other Property which
uniquely reflect the goodwill of the business of such Person; deposit accounts,
letters of credit, and General Intangibles relating to other items of
Collateral, including, without limitation, rights to refunds or indemnification;
reversionary or other rights of such Person to excess Plan assets upon
termination or amendment thereof; and proceeds of all of the foregoing,
including without limitation, insurance proceeds, including proceeds of business
interruption insurance, income tax refunds, and claims for tax or other refunds
against any city, county, state, or federal government, or any agency or
authority or other subdivision thereof.
"GOVERNMENTAL AUTHORITY" shall mean any nation or government, any
state or other political subdivision thereof, and any agency, department or
other entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"GUARANTOR" shall mean each Domestic Operating Subsidiary, HIVEC
Holdings, and, unless Agent and Lenders shall otherwise consent in writing in
advance, each Subsidiary of Borrower or any of its Subsidiaries formed or
acquired after the Closing Date in accordance with the terms of this Agreement
and incorporated under the laws of any State of the United States.
<PAGE> 22
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"GUARANTY" of a Person shall mean any agreement by which such
Person guarantees, endorses or otherwise in any way becomes or is responsible
for any obligations of any other Person, whether directly or indirectly, by
agreement to purchase the indebtedness of any other Person or through the
purchase of goods, supplies or services, or maintenance of working capital or
other balance sheet covenants or conditions, or by way of stock purchase,
capital contribution, advance or loan for the purpose of paying or discharging
any indebtedness or obligation of such other Person or otherwise assures any
creditor of such other Person against loss.
"HAZARDOUS MATERIALS" shall mean the following: hazardous
substances; hazardous wastes; polychlorinated biphenyls ("PCB's") or any
substance or compound containing PCB's; asbestos or any asbestos-containing
materials in any form or condition; radon; any other radioactive materials
including any source, special nuclear or by-product material; petroleum, crude
oil or any fraction thereof which is liquid at standard conditions of
temperature and pressure (60 degrees Fahrenheit and 14.7 pounds per square inch
absolute); and any other pollutant or contaminant or hazardous, toxic or
dangerous chemicals, materials or substances, as all such terms are used in
their broadest sense and defined by Environmental Laws.
"HIVEC HOLDINGS" shall mean HIVEC Holdings, Inc., a Delaware
corporation.
"INDEBTEDNESS" of a Person shall mean at a particular time (i)
indebtedness for borrowed money or for the deferred purchase price of property
or services (other than current accounts payable arising in the ordinary course
of business on terms customary in the trade) in respect of which the such Person
is liable, contingently or otherwise (including non-recourse indebtedness of
such Person), as guarantor, obligor or otherwise or any commitment by which such
Person assures a creditor against loss, including contingent reimbursement
obligations with respect to letters of credit, (ii) indebtedness guaranteed in
any manner by such Person, including guaranties in the form of an agreement to
repurchase or reimburse or any other so-called support or keep-well agreement
including any agreements to maintain balance sheet conditions or income
statement levels; PROVIDED that the amount of indebtedness represented by any
guaranty of limited recourse shall be the lesser of the amount of indebtedness
so guaranteed or the value of the asset to which the recourse of such
indebtedness is limited, (iii) obligations under leases which shall have been or
should be, in accordance with GAAP, recorded as capital leases in respect of
which obligations such Person is liable, contingently or otherwise, as obligor,
guarantor or otherwise, or in respect of which
<PAGE> 23
-18-
obligations such Person assures a creditor against loss, (iv) any unfunded
obligation of, or withdrawal liability incurred but not paid by, such Person
with respect to a Multiemployer Plan, and (v) obligations under interest rate
protection agreements.
"INITIAL TERM" shall have the meaning ascribed thereto in
SUBSECTION 2.7.
"INTELLECTUAL PROPERTY" shall mean, with respect to any Person,
all of such Person's present and future designs, patents, patent rights and
applications therefor, technology, trademarks and registrations or applications
therefor, trade names, inventions, copyrights and all applications and
registrations therefor, advertising matter, software or computer programs,
license rights, trade secrets, methods, processes, know-how, drawings,
specifications, descriptions, and all memoranda, notes, and records with respect
to any research and development, whether now owned or hereafter acquired by such
Person, and proceeds of all of the foregoing, including, without limitation,
proceeds of insurance policies thereon.
"INTELLECTUAL PROPERTY SECURITY AGREEMENT" shall mean each
Collateral Assignment of Patents, Trademarks, Copyrights and Licenses, dated as
of the Closing Date, duly executed and delivered by Borrower and each Guarantor
in favor of Collateral Agent, for the benefit of Secured Lenders, as the same
may hereafter be amended, modified or supplemented from time to time.
"INTEREST CHARGES" shall mean, for any fiscal period, determined
for Borrower and its subsidiaries on a consolidated basis, the aggregate of all
interest paid or accrued in respect of Indebtedness or otherwise, all as
determined in accordance with GAAP consistently applied.
"INTEREST PERIOD" shall mean, with respect to a LIBOR Rate Loan, a
period of one, two, three or six months, commencing on a Business Day, selected
by Borrower pursuant to SUBSECTION 2.5. Such Interest Period shall end on the
day in the relevant succeeding calendar month which corresponds numerically to
the beginning day of such Interest Period; PROVIDED that if there is no such
numerically corresponding day in such next, second, third or sixth succeeding
month, such Interest Period shall end on the last Business Day of such next,
second, third or sixth succeeding month. If an Interest Period would otherwise
end on a day which is not a Business Day, such Interest Period shall end on the
next succeeding Business Day; provided that if such next succeeding Business
<PAGE> 24
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Day falls in a new month, such Interest Period shall end on the immediately
preceding Business Day. In the case of immediately succeeding Interest Periods,
each successive Interest Period shall commence on the day on which the
immediately preceding Interest Period expires. Notwithstanding any of the
foregoing, no Interest Period shall extend beyond the Termination Date.
"INVENTORY" shall mean, with respect to any Person, all of the
inventory of such Person of every kind and description, now or at any time
hereafter owned by or in the custody or possession, actual or constructive, of
such Person, wherever located, including, without limitation, all merchandise,
raw materials, parts, supplies, work-in-process and finished goods intended for
sale, together with all the containers, packing, packaging, shipping and similar
materials related thereto, and including such inventory as is temporarily out of
such Person's custody or possession, including inventory on the premises of
other Persons and items in transit, and including any goods reclaimed, returned
or repossessed upon any accounts, documents, instruments or chattel paper
relating to or arising from the sale of inventory, and all substitutions and
replacements therefor, and all additions and accessions thereto, and all
ledgers, books of account, records, computer printouts, computer runs,
microfilm, microfiche and other computer-prepared information relating to any of
the foregoing, and any and all proceeds of any of the foregoing, including,
without limitation, proceeds of insurance policies thereon. Unless expressly
specified otherwise in this Agreement, each reference in this Agreements to
"Inventory" shall mean and be a reference to Inventory of Borrower and the
Domestic operating subsidiaries only.
"INVESTMENT" of a Person shall mean any loan, advance, extension
of credit (other than accounts receivable arising in the ordinary course of
business on terms customary in the trade), deposit account or contribution of
capital by such Person to any other Person or any investment in, or purchase or
other acquisition of, the stock, partnership interests, notes, debentures or
other securities of any other Person made by such Person. The amount of any
Investment shall be the original cost of such Investment plus the costs of all
additions thereto.
"INVESTMENT PROPERTY" shall, with respect to any Person, have the
meaning ascribed thereto in Section 9-115 of the code in those jurisdictions in
which such definition has been adopted and shall include, without limitation:
(i) all securities, whether certificated or uncertificated, including, without
limitation, stocks, bonds, interests in limited liability companies, partnership
interests, treasuries, certificates of deposit and mutual funds shares; (ii) all
securities entitlements such Person,
<PAGE> 25
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including, without limitation, all rights of such Person to any securities
account and any free credit balance or other money owing by any securities
intermediary with respect to any such account; (iii) all securities accounts
held by such Person; (iv) all commodity contracts held by such Person; and (v)
all commodity accounts held by such Person.
"IRC" shall mean the Internal Revenue Code of 1986, as amended
from time to time, and all rules and regulations promulgated thereunder.
"ISSUING BANK" shall mean Fleet National Bank and any other bank
or financial institution which is approved by Borrower and Agent and which
issues Letters of Credit for the account of Borrower pursuant to SUBSECTION 2.1.
"LENDERS" shall mean the financial institutions signatory hereto
and, subject to the terms and conditions hereof, their respective successors and
assigns.
"LETTER OF CREDIT" shall mean a standby or documentary letter of
credit or bankers acceptance issued by an Issuing Bank at the request and for
the account of Borrower and for which Lenders incur Risk Participations.
"LIABILITIES" shall mean all liabilities of Borrower and its
subsidiaries which are or should be reflected on a consolidated balance sheet of
Borrower and its Subsidiaries in accordance with GAAP, and shall include
Indebtedness.
"LIBOR RATE" shall mean, for each Interest Period, a rate of
interest equal to:
(a) the rate of interest determined by Agent at which deposits in
U.S. Dollars for the relevant Interest Period are offered based on
information presented on the Telerate Screen as of 11:00 a.m. (London
time) on the applicable LIBOR Rate Determination Date in the approximate
amount of the applicable LIBOR Rate Loan and having a maturity
approximately equal to such Interest Period; PROVIDED that if at least
two such offered rates appear on the Telerate Screen in respect of such
Interest Period, the arithmetic mean of all such rates (as determined by
Agent) will be the rate used; Provided further, that if the Telerate
Screen ceases to provide LIBOR quotations, such rate shall be the average
rate of interest determined by Agent at which deposits in U.S. Dollars
are offered
<PAGE> 26
-21-
for the relevant Interest Period by The Sanwa Bank, Limited (or its
successor) to banks with combined capital and surplus in excess of
$500,000,000 in the London interbank market as of 11:00 a.m. (London
time) on the applicable LIBOR Rate Determination Date in the approximate
amount of the LIBOR Rate Loan and having a maturity approximately equal
to such Interest Period, divided by
(b) one minus the rate (expressed as a decimal) of reserve
requirements in effect on the LIBOR Rate Determination Date (including,
without limitation, all basic, supplemental, marginal and emergency
reserves under any regulations of the Board of Governors of the Federal
Reserve System or other governmental authority having jurisdiction with
respect thereto, as now and from time to time in effect) for Eurocurrency
funding (currently referred to as "Eurocurrency liabilities" in
Regulation D) which are required to be maintained by a member bank of the
Federal Reserve System;
(such rate to be adjusted to the nearest one sixteenth of one percent (1/16%)
or, if there is no nearest one sixteenth of one percent (1/16%), to the next
higher one sixteenth of one percent (1/16%)), PLUS, in the case of the Term
Loan, three and one-quarter of one percent (3.25%) per annum, and in the case of
the Revolving Loan, two and three-quarters of one percent (2.75%) per annum).
"LIBOR RATE DETERMINATION DATE" shall mean each date for
calculating the LIBOR Rate for purposes of determining the interest rate
applicable to any LIBOR Rate Loan made pursuant to subsection 2.5. The LIBOR
Rate Determination Date shall be the second Business Day prior to the first day
of the related Interest Period for a LIBOR Rate Loan.
"LIBOR RATE LOANS" shall mean Loans bearing interest at a LIBOR
Rate.
"LIEN" shall mean, with respect to the Property of any Person, any
statutory or contractual lien, security interest, mortgage, pledge, claim,
encumbrance, charge, hypothecation, assignment, deposit arrangement, filing of,
or agreement to give, a financing statement, encumbrance or preference, priority
or other security agreement or preferential arrangement of any kind or nature
whatsoever, whether voluntary or involuntary (including, without limitation, the
interest of a vendor or lessor under any conditional sale, capitalized lease or
other title retention agreement), in, of or on any of the Property of such
Person in favor of any other Person.
<PAGE> 27
-22-
"LITIGATION" shall have the meaning ascribed thereto in
SUBSECTION 6.11.
"LOAN" shall mean either the Revolving Loan or the Term Loan and
"Loans" shall mean all such loans collectively.
"LOAN ACCOUNT" shall have the meaning ascribed thereto in
SUBSECTION 2.12.
"LOAN YEAR" shall mean the period of twelve (12) consecutive
months commencing on the Closing Date and each succeeding period of twelve (12)
consecutive months commencing on each anniversary of the Closing Date during the
Initial Term and any Renewal Term.
"MATERIAL ADVERSE EFFECT" shall mean, as determined by Agent in
its reasonable business judgment, a material adverse effect upon (a) Collateral
Agent's Lien priority in, or the value of, the Collateral, or (b) the business,
properties, operations or condition (financial or otherwise) or business
prospects of Borrower and its Subsidiaries taken as a whole as a result of the
occurrence or existence of any single event or condition or series of events or
conditions in the aggregate, or (c) the ability of Borrower or any Guarantor to
perform its obligations under any of the Financing Agreements, or (d) the
validity or enforceability of any of the Financing Agreements or the rights,
powers and remedies of Agent or any Lender to enforce or collect the
Obligations. In determining whether any individual event would result in a
Material Adverse Effect, notwithstanding that such event does not of itself have
such effect, a Material Adverse Effect shall be deemed to have occurred if the
cumulative effect of such event and all other then existing events would result
in a Material Adverse Effect.
"MAXIMUM REVOLVING LOAN AMOUNT" shall have the meaning ascribed
thereto in SUBSECTION 2.2.
"MONTHLY COLLATERAL REPORT" shall have the meaning ascribed
thereto in subsection 3.1.
"MORTGAGES" shall mean the first mortgages, deeds of trust,
leasehold mortgages, collateral assignment of leases or other real estate
security documents with respect to the Real Estate listed on EXHIBIT 3.6 which
is indicated on the attachment thereto as being so encumbered on or after the
Closing Date, all in form and substance satisfactory to Agent, duly executed and
delivered by Borrower or any Guarantor in favor of
<PAGE> 28
-23-
Collateral Agent, for the benefit of Secured Lenders, as the same may hereafter
be amended, modified or supplemented from time to time.
"MULTIEMPLOYER PLAN" shall mean any multiemployer plan within the
meaning of Section 4001(a) (3) of ERISA to which Borrower or any ERISA Affiliate
contributes, is obligated to contribute or was required to contribute within the
immediately preceding six (6) years.
"NET INCOME" or "NET LOSSES" shall mean, for any applicable fiscal
period, determined on a consolidated basis for Borrower and its Restricted
Subsidiaries, consolidated net income (or losses) from continuing operations
after income and franchise taxes and shall have the meaning given such term by
GAAP; provided that there shall be specifically excluded therefrom tax-adjusted
(i) gains or losses from the sale of capital assets, (ii) net income of any
Person (other than a Restricted Subsidiary) in which Borrower or any Restricted
Subsidiary has an ownership interest, unless received by Borrower in a cash
distribution, and (iii) gains or losses arising from extraordinary items, as
defined by GAAP.
"NET WORTH" shall mean, with respect to the Borrower and its
Subsidiaries on a consolidated basis, total assets reflected on a balance sheet
prepared in accordance with GAAP less total liabilities reflected on a balance
sheet prepared in accordance with GAAP.
"NOTE" or "NOTES" shall mean one or more of the Revolving Loan
Notes or the Term Loan Notes, or a combination thereof.
"OBLIGATIONS" shall mean all of Borrower's and each Guarantor's
obligations, liabilities and indebtedness to Agent, Lenders, any affiliate of
Agent or Lenders and/or, as expressly provided herein, any Participant, under,
relating to or otherwise arising in respect of this Agreement or any Financing
Agreement, of any and every kind and nature, whether heretofore, now or
hereafter owing, arising, due or payable and howsoever evidenced, created,
incurred, acquired, or owing, whether primary, secondary, direct, indirect,
contingent, fixed or otherwise (including, without limitation, obligations of
performance) and whether arising or existing under written agreement, oral
agreement or operation of law.
"PARENT" shall mean Letitia Corporation, a Delaware corporation.
<PAGE> 29
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"PARTICIPANT" shall mean any Person now or from time to time
hereafter participating with any Lender in the Loans made by such Lender to
Borrower pursuant to this Agreement.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
successor thereto.
"PENSION PLAN" shall mean any Plan that is a defined benefit plan
(other than a Multiemployer Plan) defined in section 3(35) of ERISA.
"PERMITTED ACQUISITION" shall have the meaning ascribed thereto in
SUBSECTION 8.3(c).
"PERMITTED INVESTMENTS" shall have the meaning ascribed thereto in
SUBSECTION 8.4.
"PERMITTED LIENS" shall have the meaning ascribed thereto in
SUBSECTION 8.1.
"PERSON" shall mean any individual, sole proprietorship,
partnership, joint venture, trust, limited liability company, unincorporated
organization, association, corporation, institution, entity, party, or
government (whether national, federal, state, provincial, county, city,
municipal or otherwise, including, without limitation, any instrumentality,
division, agency, body or department thereof).
"PLAN" shall mean any employee benefit plan within the meaning of
Section 3(3) of ERISA (other than any Multiemployer Plan) under which Borrower
or any ERISA Affiliate is, or was at any time within the previous six (6) years,
an "employer" within the meaning of Section 3(5) of ERISA, including without
limitation, the Borrower Pension Plan.
"PLEDGE AGREEMENT" shall mean each Stock Pledge Agreement, dated
as of the Closing Date, duly executed and delivered by Borrower, Datcon and
HIVEC Holdings, in favor of Collateral Agent, for the benefit of Secured
Lenders, as the same may hereafter be amended, modified or supplemented from
time to time; PROVIDED that, only 65% of the capital stock of HIVEC, B.V., a
Netherlands corporation, shall be pledged pursuant to the HIVEC Holdings Pledge
Agreement and only 65% of the capital stock of Crisrolo, S.L. shall be pledged
pursuant to the Datcon Pledge Agreement.
<PAGE> 30
-25-
"PRIME RATE" shall mean the highest "Prime Rate" of interest
quoted, from time to time, by THE WALL STREET JOURNAL; PROVIDED, HOWEVER, that
in the event that THE WALL STREET JOURNAL ceases quoting a "Prime Rate", "Prime
Rate" shall mean the per annum rate of interest quoted as the "Bank Prime Loan"
rate for the most recent weekday for which such rate is quoted in Statistical
Release H.15 (519) published from time to time by the Board of Governors of the
Federal Reserve System; PROVIDED FURTHER that in the event that both of the
aforesaid indices cease to be published or to quote rates of the aforesaid
types, the "Prime Rate" shall be determined from a comparable index chosen by
Agent in good faith. The "Prime Rate" shall change effective an the date of the
publication of any change in the applicable index by which such "Prime Rate" is
determined.
"PRO FORMAL" shall have the meaning ascribed thereto in
SUBSECTION 6.4(a).
"PRO RATA SHARE" shall mean the percentage obtained by dividing
(a) the Commitments of a Lender by (b) the aggregate Commitments of all Lenders,
as such percentage may be adjusted by assignments permitted pursuant to
SUBSECTION 11.1. The sum of the Pro Rata Shares of all Lenders at any date of
determination shall equal one hundred percent (100%).
"PROJECTIONS" shall mean the projected balance sheets on a
consolidated and consolidating basis, profit and loss Statements on a
consolidated and consolidating basis, and cash flow statements on a consolidated
basis of Borrower, prepared in accordance with GAAP, together with appropriate
supporting details and a statement of underlying assumptions, which have been
and will be delivered to Agent and Lenders in accordance with the terms of
SUBSECTION 7.1; PROVIDED, that the first such set of Projections, a copy of
which is attached as EXHIBIT 6.4-2, shall not include consolidating balance
sheets or cash flow statements.
"PROPERTY" shall mean, with respect to any Person, any and all
assets or property, whether real, personal, tangible, intangible, or mixed, of
such Person, or other assets or property leased or operated by such Person.
"QUALIFIED IPO" means an initial public offering of shares of the
capital stock of Borrower or any Guarantor (a) pursuant to which Borrower or
such Guarantor shall receive aggregate net proceeds of at least $10,000,000, (b)
which has been consummated in accordance with a
<PAGE> 31
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filed registration statement prepared on Form S-1 and all applicable laws, (c)
from and after the consummation of which, Borrower or such Guarantor, as
applicable, shall be, and shall be qualified to be, listed on the NASDAQ
national market, (d) with respect to which no claim, suit, proceeding, petition,
governmental investigation, injunction or any other litigation shall have
commenced or been threatened against any party to any Financing Agreement or any
Affiliate thereof, and (e) on or prior to the consummation of which Agent shall
have received copies of all opinions and other material documents delivered in
connection therewith.
"RATE OPTION" shall mean the. LIBOR Rate or the Base Rate, as
applicable.
"REAL ESTATE" shall mean, with respect to any Person, the real
property, mineral rights, leasehold or other interests in real property together
with any purchase options and other rights related to such leaseholds or other
interests owned, leased, used or operated now or hereafter by such Person, all
Fixtures and personal property used in conjunction therewith and such Person's
rights to leases, rents and profits with respect thereto.
"RELATED TRANSACTIONS" shall mean, collectively, all of the
transactions contemplated by this Agreement, the other Financing Agreements, the
Subordinated Debt Documents, the Senior Unsecured Debt Documents and the Senior
Secured Debt Documents.
"RELATED TRANSACTIONS DOCUMENTS" shall mean, collectively, all
documents and agreements executed, delivered or filed in connection with the
Related Transactions.
"RENEWAL TERM" shall have the meaning ascribed thereto in
SUBSECTION 2.7(a).
"REQUIRED LENDERS" shall mean (i) Lenders having in the aggregate
at least sixty-six and two-thirds percent (66 213%) of the Total Revolving Loan
Facility, or (ii) if the Revolving Credit Facility has been terminated, Lenders
having in the aggregate at least sixty-six and two-thirds percent (66 2/3%) of
the aggregate outstanding amount of the Loans.
"RESALE FACILITY" shall mean each facility of Borrower located at
145 New-ton Street, Boston, Massachusetts; 4 River Street, Boston,
Massachusetts; 2100 Earlywood Drive, Franklin, Indiana; and 100 Sagamore Hill
Road, Pittsburgh, Pennsylvania.
<PAGE> 32
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"RESTRICTED PAYMENT" shall mean: (a) any dividend or other
distribution, direct or indirect, on account of any shares of any class of Stock
of Borrower now or hereafter outstanding (including Borrower Preferred Stock) ,
except a dividend payable solely in shares of that class of Stock to the holders
of that class; (b) any redemption, conversion, exchange, retirement, sinking
fund or similar payment, purchase or other acquisition for value direct or
indirect of any shares of any class of Stock of Borrower now or hereafter
outstanding; (c) any payment or prepayment of principal or premium, if any, or
interest on, fees with respect to, redemption, conversion, exchange, purchase,
retirement, defeasance, sinking fund or similar payment with respect to
Subordinated Debt of Borrower; (d) any payment made to retire, or to obtain the
surrender of, any outstanding warrants, options or other rights to acquire
shares of any class of Stock of Borrower now or hereafter outstanding and any
Contingent Interest Payment; or (e) any payment by Borrower or any Subsidiary of
any management fees, advisor fees or similar fees whether pursuant to a
management agreement or otherwise to any Affiliate of Borrower or such
Subsidiary.
"RESTRICTED PAYMENT POOL" shall mean, at any time of
determination, an amount equal to (a) the sum of (i) $2, 000, 000 plus (ii)
fifty percent (50%) of Net Income (or minus one hundred percent (100%) of Net
Losses) for the period commencing April 28, 1996 and ending on the last day of
any Fiscal Quarter preceding the date of a Restricted Payment PLUS (iii) net
proceeds from each Qualified IPO (to the extent such proceeds are retained by
Borrower and its Domestic operating Subsidiaries) less (b) the aggregate amount
of all Restricted Payments made pursuant to SUBSECTION 8.10(iv).
"RESTRICTED SUBSIDIARY" shall mean each Guarantor, HIVEC, B.V., a
Netherlands corporation, HIVEC Holdings, HVE Europa, B.V., a Netherlands
corporation, Crisrolo, S.L., a Spanish corporation, Industrias Jorda, S.L., a
Spanish corporation, and, unless Agent and Lenders shall otherwise determine in
writing in advance, each Subsidiary of Borrower or any of its Subsidiaries
formed or acquired after the Closing Date in accordance with the terms of this
Agreement.
"REVOLVING LOAN" shall have the meaning ascribed thereto in
subsection 2.1.
"REVOLVING LOAN COMMITMENT" shall mean, with respect to each
Lender, the Commitment of each Lender with respect to the Revolving Loan as of
the Closing Date as set forth on SCHEDULE 1;
<PAGE> 33
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SCHEDULE 1 shall be amended and Lenders' Pro Rata Shares shall be adjusted from
time to time to give effect to the addition of any new Lenders pursuant to
SUBSECTION 11.1.
"REVOLVING LOAN NOTES" shall have the meaning ascribed thereto in
subsection 2.3.
"RISK PARTICIPATIONS" and "RISK PARTICIPATION" shall have the
respective meanings ascribed thereto in SUBSECTION 2.1(c).
"RISK PARTICIPATION LIABILITY" means, as to each Risk
Participation, all liabilities of Lenders with respect to the transaction for
which such Risk Participation was issued, whether contingent or otherwise,
including with respect to a letter of credit: (a) the amount available to be
drawn or which may become available to be drawn; (b) all amounts which have been
paid or made available by the Issuing Bank or Lenders to the extent not
reimbursed; and (c) all unpaid interest, fees and expenses with respect thereto.
"RISK PARTICIPATION RESERVE" means, at any date of determination,
a reserve deducted from the Total Revolving Loan Facility, in an amount equal to
(a) the aggregate amount of Risk Participation Liability with respect to Risk
Participations outstanding at such time, PLUS (b) the aggregate amount
theretofore paid by Lenders under the Risk Participations for which Lenders have
not been reimbursed or which has not been debited to the Loan Account pursuant
to subsection 2.1(c).
"ROBICON" shall mean Halmar Robicon Group, Inc., a Pennsylvania
corporation.
"SBCC" shall mean Sanwa Business Credit Corporation, a Delaware
corporation, in its individual capacity, and its successors.
"SECURED LENDERS" shall mean, collectively, Lenders and the
holders of the Senior Secured Notes.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
"SECURITY AGREEMENT" shall mean that certain Security Agreement,
dated as of the Closing Date, duly executed and delivered by Borrower and each
Guarantor in favor of Collateral Agent, for the benefit of Secured Lenders, as
the same may hereafter be amended, modified or supplemented from time to time.
<PAGE> 34
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"SENIOR FIXED CHARGE COVERAGE RATIO" shall mean, for any fiscal
period, determined for Borrower and its Restricted Subsidiaries on a
consolidated basis, the ratio of (a) EBITR to (b) the sum of (i) Interest
Charges paid or accrued (other than payments or accruals with respect to
contingent Interest Payment obligations) in respect of Total Funded Debt (other
than Indebtedness which by its terms is expressly subordinated to the
Obligations) and (ii) one third (1/3) of all payments made during such period
under operating leases.
"SENIOR SECURED DEBT DOCUMENTS" shall mean all Senior Secured
Notes and other agreements, instruments and documents, whether heretofore, now,
or hereafter executed in connection therewith, together with all agreements and
documents referred to therein or contemplated thereby, each as in effect on the
date hereof, except to the extent amended in accordance with the terms hereof.
"SENIOR SECURED FUNDED DEBT" shall mean, as of any date of
determination, determined for Borrower and its Restricted Subsidiaries on, a
consolidated basis, the Indebtedness evidenced by the Revolving Loan, the Term
Loan, the other Obligations, the Senior Secured Notes, capital leases,
mortgages, industrial development revenue bonds and similar Indebtedness, all as
determined in accordance with GAAP consistently applied.
"SENIOR SECURED FUNDED DEBT RATIO" shall mean, for any fiscal
period, determined for Borrower and its Restricted Subsidiaries on a
consolidated basis, the ratio of Senior Secured Funded Debt at the end of such
period to EBITDA for such period.
"SENIOR SECURED NOTES" shall mean, collectively, each of those
certain Senior Secured Notes issued by Borrower on the date hereof in the
aggregate principal amount of Twenty Million Dollars ($20,000,000), on terms and
conditions and in form and substance satisfactory to Lenders, each as in effect
on the date hereof, except to the extent amended in accordance with the terms
hereof.
"SENIOR UNSECURED DEBT DOCUMENTS" shall mean all Senior Unsecured
Notes and other agreements, instruments and documents, whether heretofore, now,
or hereafter executed in connection therewith, together with all agreements and
documents referred to therein or contemplated thereby, each as in effect on the
date hereof, except to the extent amended in accordance with the terms hereof.
<PAGE> 35
-30-
"SENIOR UNSECURED NOTES" shall mean, collectively, each of those
certain Senior Unsecured Notes issued by Borrower on the date hereof in the
aggregate principal amount of Seven Million Dollars ($7,000,000), on terms and
conditions and in form and substance satisfactory to Lenders, each as in effect
on the date hereof, except to the extent amended in accordance with the terms
hereof.
"SERVICE" shall mean the Internal Revenue service and any
successor thereof.
"SOLVENCY AFFIDAVIT" shall mean the Affidavit of Solvency of even
date herewith executed and delivered by the chief financial officer of Borrower
in favor of Agent, for the benefit of Lenders.
"SOLVENT" shall mean, when used with respect to any Person, that
(i) the fair saleable value of its Property (including rights of contribution
from its Affiliates as permitted by applicable law) is in excess of the total
amount of its Liabilities (including for purposes of this definition all
liabilities, whether or not reflected on a balance sheet prepared in accordance
with GAAP, and whether direct or indirect, fixed or contingent, secured or
unsecured, disputed or undisputed), (ii) it is able to pay its debts or
obligations in the ordinary course as they mature, and (iii) that Person has
capital sufficient to carry on its business and all businesses in which it is
about to engage. "SOLVENCY" shall have a correlative meaning.
"STOCK" shall mean all shares, options, general or limited
partnership interests or other equivalents (regardless of how designated),
participation or other equivalents (however designated) of or in a corporation,
partnership or equivalent entity, whether voting or non-voting, including,
without limitation, common stock, warrants, preferred stock, convertible
debentures or any other debt or equity security, and all agreements, instruments
and documents convertible, in whole or in part, into any one or more of all of
the foregoing.
"SUBORDINATED DEBT" shall mean any Indebtedness issued or
otherwise owing by Borrower (a) under or pursuant to the Subordinated Notes or
(b) in favor of a Person the payment of which is subordinated to the payment of
the Obligations pursuant to subordination provisions satisfactory to Required
Lenders and (c) upstream Guaranties of the Subordinated Notes by one or more of
the Restricted subsidiaries, which guaranties are subject to subordination
provisions satisfactory to Required Lenders.
<PAGE> 36
-31-
"SUBORDINATED DEBT DOCUMENTS" shall mean all Subordinated Notes
and other agreements, instruments, documents, other written matter whether
heretofore, now, or hereafter executed in connection therewith, together with
all agreements and documents referred to therein or contemplated thereby, each
as in effect on the date hereof, except to the extent amended in accordance with
the terms hereof.
"SUBORDINATED NOTES" shall mean, collectively, each of those
certain Senior Subordinated Notes issued by Borrower on the date hereof in the
aggregate principal amount of Twenty Five Million Dollars ($25,000,000), on
terms and conditions and in form and substance satisfactory to Lenders, each as
in effect on the date hereof, except to the extent amended in accordance with
the terms hereof.
"SUBSIDIARY" of a Person shall mean (i) any corporation of which
more than fifty percent (50%) of the outstanding securities having ordinary
voting power to elect a majority of the board of directors or other Persons
performing similar functions is at any time of determination, directly or
indirectly, owned or controlled by such Person or by one or more of its
Subsidiaries or by such Person and one or more of its subsidiaries, or (ii) any
partnership, association, trust, grantor trust, joint venture or similar
business organization more than fifty percent (50%) of the equity or partnership
interests having ordinary voting power or power of direction of which shall at
any time of determination be so owned or controlled. Unless otherwise expressly
provided or the context requires otherwise, all references herein to a
"Subsidiary" shall mean a Subsidiary of Borrower.
"TANGIBLE NET WORTH" shall mean tangible net worth as determined
in accordance with GAAP.
"TAXES" shall mean taxes, liens, imposts, deductions, Charges or
withholdings, and all liabilities with respect thereto, excluding taxes imposed
on or measured by the net income of any Lender by the jurisdictions under the
laws of which such Lender or its applicable lending off ice is organized or any
transfer taxes imposed as a results of the transfer of any Notes.
"TELERATE SCREEN" shall mean the display designated as Screen 3750
on the Telerate System or such other screen on the Telerate System as shall
display the London interbank offered rates for deposits in U.S. dollars quoted
by selected banks.
<PAGE> 37
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"TERM LOAN" shall have the meaning ascribed thereto in
SUBSECTION 2.4.
"TERM LOAN COMMITMENT" shall mean, with respect to each Lender,
the Commitment of each Lender with respect to the Term Loan as of the Closing
Date as set forth on Schedule 1; Schedule 1 shall be amended and Lenders' Pro
Rata Shares shall be adjusted from time to time to give effect to the addition
of any new Lenders pursuant to SUBSECTION 11.1.
"TERM LOAN NOTES" shall have the meaning ascribed thereto in
subsection 2.4.
"TERMINATION DATE" shall mean (a) with respect to the Revolving
Loan, April 30, 2001 and (b) with respect to the Term Loan, April 30, 2003.
"TERMINATION EVENT" shall mean: (a) the tax disqualification of a
Plan under Section 401(a) of the IRC; (b) a "Reportable Event" described in
Section 4043 of ERISA and the regulations issued thereunder unless the thirty
(30) day notice to the PBGC has been waived for the event; (c) the withdrawal of
Borrower or any ERISA Affiliate from a Pension Plan during a plan year in which
it was a "substantial employer" as defined in section 4001 (a) (2) or 4068 (f)
of ERISA or was deemed such under Section 4062 (e) of ERISA; (d) the termination
of a Pension Plan, the filing of a notice of intent to terminate a Pension Plan
or the treatment of a Pension Plan amendment as a termination under Section
4041(e) of ERISA; (e) the institution of proceedings to terminate a Pension Plan
by the PBGC; (f) any other event or condition which would constitute grounds
under Section 4042(a) of ERISA for the termination of, or the appointment of a
trustee to administer, any Pension Plan; (g) the partial or complete withdrawal
of Borrower or any ERISA Affiliate from a Multiemployer Plan; (h) the imposition
of a Lien pursuant to Section 412 of the IRC or Section 302 of ERISA; (i) any
event or condition which results in the reorganization or insolvency of a
Multiemployer Plan under Section 4241 or Section 4245 of ERISA, respectively; or
(j) any event or condition which results in the termination of a Multiemployer
Plan under Section 4041A of ERISA or the institution by the PBGC of proceedings
to terminate a Multiemployer Plan under Section 4042 of ERISA.
"TOTAL FIXED CHARGE COVERAGE RATIO" shall mean, for any fiscal
period, determined for Borrower and its Restricted Subsidiaries on a
consolidated basis, the ratio of (a) EBITR to (b) the sum of (i) Interest
Charges paid or accrued (other than payments or accruals with respect to
<PAGE> 38
-33-
Contingent Interest Payment obligations) in respect of Total Funded Debt and
(ii) one third (1/3) of all payments made during such period under operating
leases.
"TOTAL FUNDED DEBT" shall mean, for any applicable fiscal period,
determined for Borrower and its Restricted Subsidiaries on a consolidated basis,
all Indebtedness for borrowed money which by its terms matures more than one
year from, or is directly or indirectly renewable or extendible at the option of
the obligor for a period of more than one year from, the date of its creation,
including, without limitation, current maturities of long-term Indebtedness,
Senior Secured Notes, Senior Unsecured Notes and the Indebtedness evidenced by
the Subordinated Notes.
"TOTAL LEVERAGE RATIO" shall mean, for any fiscal period,
determined for Borrower and its Subsidiaries on a consolidated basis, the ratio
of Total Funded Debt at the end of such period to EBITDA for such period.
"TOTAL LOAN FACILITY" shall mean Thirty million Dollars
($30,000,000).
"TOTAL REVOLVING LOAN FACILITY" shall mean Twenty million Dollars
($20,000,000), as such amount may be reduced, if at all, from time to time in
accordance with the terms of this Agreement.
"UNRESTRICTED SUBSIDIARIES" shall mean each Subsidiary of Borrower
or any of its Subsidiaries which is not a Restricted Subsidiary and is formed or
acquired in accordance with the terms of this Agreement after the date hereof.
"UNUSED LINE FEEL" shall have the meaning ascribed thereto in
subsection 2.10.
1.2 ACCOUNTING TERMS. Any accounting terms used in this Agreement
which are not specifically defined herein shall have the meanings customarily
given them in accordance with GAAP. All determinations of the book value of
Inventory contemplated hereby shall be at the lower of cost (on a first-in,
first-out basis) or market.
1.3 OTHER TERMS DEFINED IN ILLINOIS UNIFORM COMMERCIAL CODE. All other
terms contained in this Agreement (and which are not otherwise specifically
defined herein) shall have the meanings provided in the Uniform Commercial Code
of the State of Illinois or the laws of any other
<PAGE> 39
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state which are required to be applied in connection with the issue of
perfection or non-perfection of Liens on the Collateral (the "Code") to the
extent the same are used or defined therein.
1.4 EFFECTIVE DATE. All references to "the date hereof," "the date of
this Agreement," "the effective date hereof," "effective as of the date hereof"
or "of even date herewith" contained herein or in the other Financing Agreements
shall be deemed to refer to the Closing Date of this Agreement.
1.5 REFERENCES. The foregoing definitions shall be equally applicable
to both the singular and plural forms of the defined terms. Unless otherwise
expressly provided or unless the context requires otherwise, all references in
this Agreement to Sections, subsections, Schedules and Exhibits shall mean and
refer to Sections, subsections, Schedules and Exhibits of this Agreement.
References to Persons include their respective permitted successors and assigns
or, in the case of a governmental authority, Persons succeeding to the relevant
functions of such Persons. All references to statutes shall include all related
regulations and shall include all amendments of same and any successor or
replacement statutes and regulations.
2. CREDIT.
2.1 REVOLVING CREDIT FACILITY, REVOLVING LOAN AND RISK PARTICIPATIONS.
(a) REVOLVING LOAN. Provided there does not then exist a Default or an
Event of Default, and subject to the terms and conditions herein set forth,
including, without limitation, SUBSECTION 2.2, each Lender having a Revolving
Loan commitment agrees severally (and not jointly) to make its Pro Rata share of
<PAGE> 40
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IN WITNESS WHEREOF, this Agreement has been duly executed as of the day
and year first above written.
HIGH VOLTAGE ENGINEERING
CORPORATION, as Borrower
By:
------------------------------------
Title:
---------------------------------
DATCON INSTRUMENT COMPANY, as a
Guarantor
By:
------------------------------------
Title:
---------------------------------
HALMAR ROBICON GROUP, INC.,
as a Guarantor
By:
------------------------------------
Title:
---------------------------------
HIVEC HOLDINGS, INC.
as a Guarantor
By:
------------------------------------
Title:
---------------------------------
[signature pages end]
<PAGE> 41
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BORROWER AND EACH GUARANTOR ACKNOWLEDGES THAT IT HAS BEEN ADVISED BY COUNSEL OF
ITS CHOICE WITH RESPECT TO THIS LOAN AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
HEREBY, AND BORROWER AND EACH GUARANTOR ACKNOWLEDGES AND AGREES THAT (I) EACH OF
THE WAIVERS SET FORTH HEREIN, INCLUDING, WITHOUT LIMITATION, THOSE WAIVERS SET
FORTH IN SUBSECTION 9.3. 9.4 AND 10.7 WERE KNOWINGLY AND VOLUNTARILY MADE, (II)
THE OBLIGATIONS OF AGENT AND EACH LENDER HEREUNDER, INCLUDING THE OBLIGATION TO
ADVANCE AND LEND FUNDS TO BORROWER IN ACCORDANCE HEREWITH, SHALL BE STRICTLY
CONSTRUED AND SHALL BE EXPRESSLY SUBJECT TO BORROWER'S AND EACH GUARANTOR'S
COMPLIANCE IN ALL RESPECTS WITH THE TERMS AND CONDITIONS HEREIN SET FORTH, AND
(III) NO REPRESENTATIVE OF AGENT OR ANY LENDER HAS WAIVED OR MODIFIED ANY OF THE
PROVISIONS OF THIS AGREEMENT AS OF THE DATE HEREOF AND NO SUCH WAIVER OR
MODIFICATION FOLLOWING THE DATE HEREOF SHALL BE EFFECTIVE UNLESS MADE IN
ACCORDANCE WITH SUBSECTION 10.1.
<PAGE> 42
One South Wacker Drive, 39th Floor SANWA BUSINESS CREDIT
Chicago, Illinois 60606 CORPORATION, as Agent and
Attn: Executive Vice President as a Lender
Commercial Finance Division
Telecopy No.: (312) 782-6035
By:
------------------------------------
Title:
---------------------------------
75 State Street FLEET NATIONAL BANK,
Boston, MA 02109 as a Lender
Attn: Ruben V. Klein Vice President
Telecopy No.: (617) 346-1558
By:
------------------------------------
Title:
---------------------------------
[signature pages end]
<PAGE> 1
EXHIBIT 10.8
[LETTERHEAD OF HIGH VOLTAGE ENGINEERING CORPORATION]
December 1, 1992
Mr. Paul H. Snyder
Tulip Tree Lane
Rumson, NJ 07760
Dear Paul:
Over the last few days, we have carefully considered our various discussions
with you, and are pleased to offer you the position of Chief Operating officer
of High Voltage Engineering Corporation ("HVE"). We are confident that your
experience base, enthusiasm and personality will enable you to contribute a
great deal to HVE and we look forward to working together with you.
The terms of your employment will be as follows:
1. Your duties and responsibilities will be determined by the Chief
Executive Officer and President of HVE. The division presidents and
corporate staff of HVE will have their direct reporting relationships to
you, and you will be the most senior operating officer of HVE reporting
to us. We will work together with you as a senior management team
providing strategic direction to HVE's operating divisions.
2. Your base salary will be $170,000 per annum subject to annual increase on
the anniversary of your commencement date. This annual review will
primarily take into account the effect of inflation, and also your job
performance and the financial condition of HVE. This amount is $10,000
greater than the base salary we had discussed, in part to compensate you
for your current car allowance. Business use of your private car will be
reimbursed at standard rates.
As we have discussed, we do not expect that there will be significant
growth in base salary over the years. Our operating
<PAGE> 2
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philosophy is to provide potential to achieve significant current cash
compensation through the performance based bonus program described in the
next paragraph.
3. On an annual basis, commencing after your first full fiscal year of
employment, you will be entitled to a guaranteed bonus of $10,000. A
pro-rated amount will be payable to you on May 1, 1993 for the period you
are employed by HVE up to that date. Additionally, commencing with your
first full fiscal year of employment, you will be eligible for a
performance based bonus of up to $40,000. The performance based bonus
will be determined based on predetermined operating objectives for each
Fiscal Year set by the Chief Executive Officer and President. Payment of
all corporate bonuses is subject to HVE being in compliance with all of
its financial and contractual obligations.
4. You will receive a 2% equity participation in Letitia Corporation, the
holding company of HVE. Details of this participation are set out in
Appendix 1.
5. HVE will pay all reasonable out-of-pocket costs associated with your
relocation from New Jersey to Massachusetts. This will include the
brokerage commission on the sale of your current home, the cost of moving
your personal possessions and the cost of your transportation to Boston
as well as the costs of legal fees and title search on your new home. We
would appreciate you managing these costs as effectively as possible.
Additionally, in order to compensate you for additional expenses you
might incur, HVE will pay you $16,400 as a settling in allowance, and
will pay for reasonable temporary accommodations in Boston.
6. You will participate in the benefit package available to all HVE
employees as more fully described in the attached Benefits Connection
package. Additionally, HVE will reimburse you for the cost of one annual
physical examination, to the extent that this is not paid for by HVE's
health plan.
7. In the event that you are terminated from your employment by HVE without
cause, you will continue to be paid your then current base salary for a
maximum of the period set out in the following table, and in any event
such payment will cease when you are Alternatively Employed.
Alternatively Employed will mean the date on which you commence a new
job, undertake a new venture or otherwise generate earned income (eg.
consulting) . For purposes of
<PAGE> 3
-3-
this paragraph, we will consider cause for termination to be willful
misconduct of a material nature.
<TABLE>
<CAPTION>
Maximum Period
Time of Termination For Payments
------------------- --------------
<S> <C>
Commencement of employment with HVEC 18 months
After 1 month of employment 17 months
After 2 months of employment 16 months
After 3 months of employment 15 months
After 4 months of employment 14 months
After 5 months of employment 13 months
After 6 months of employment 12 months
and thereafter
</TABLE>
8. As a condition to our offering you this position, we request that you
sign the covenant not to compete with HVE attached as Appendix 2.
We admire the length and depth of your experience, and your totally modern
approach to manufacturing competitiveness. We very much look forward to starting
our work together and incorporating your unique contribution to the High Voltage
strategy. This offer of employment is effective as of January 4, 1993, and we
understand that your likely commencement date will be shortly after New Year.
Please call us if you have any questions.
Sincerely,
/s/ Laurence S. Levy (PP) /s/ Clifford Press
- ------------------------------------ ----------------------------------
Laurence S. Levy Clifford Press
Chief Executive Officer President
AGREED AND ACCEPTED:
/s/ Paul H. Snyder
- ------------------------------------
Paul H. Snyder
Date: 12/3/92
------------------------------
<PAGE> 4
APPENDIX 1
Paul H. Snyder
Participation in Letitia Corporation
1. At your request, we will set up a limited partnership called the High
Voltage Executive Partnership ("HVEP"). Hyde Park Holdings, Inc. ("Hyde
Park") will be the general partner of HVEP and at this time you will be
the only limited partner of HVEP. All economic value accruing within HVEP
will accrue to the benefit of the limited partners and the general
partners will have the right to manage the partnership.
2. Your right to acquire your limited partnership interest will vest over a
five (5) year period, subject to you being employed by HVE on the
relevant vesting date. Accordingly, provided you are employed by HVE on
the relevant vesting date, you will be able to acquire the following
total percentages of the limited partnership interest of HVEP:
<TABLE>
<CAPTION>
Percentage of HVEP
Limited Partnership
Date Interest
---- -------------------
<S> <C>
May 1, 1994 20%
May 1, 1995 40%
May 1, 1996 60%
May 1, 1997 80%
May 1, 1998 100%
</TABLE>
In the event that a majority interest in HVE is sold to an unrelated
third party, or in the event of your death, your unvested limited
partnership interest will immediately vest. The subscription price will
be $10 for the 100% HVEP limited partnership interest and a proportionate
amount for a lesser limited partnership interest.
3. On HVEP's formation, Letitia Corporation ("Letitia") will grant HVEP an
option to acquire on a fully diluted basis 2% of the currently
outstanding common equity of Letitia at an exercise price
<PAGE> 5
-2-
of $300,000. This option will be subject to future dilution so long as
such dilution affects all shareholders proportionately.
4. If you leave HVE's employment for whatever reason, or at Letitia's or
HVE's election at any time, you will sell your vested HVEP limited
partnership interest back to Letitia for $10. As a consequence thereof,
you will become entitled to a bonus payment from HVE equivalent to the
"Market Value" (see point 5 below) of the option held by HVEP. Such bonus
payment will be paid to you in two equal installments. The first such
bonus payment will be paid when Market Value has been determined and the
second payment will be paid one year later and will accrue interest at
the rate of 10% per annum until the date it is due. However, in the event
of your death when employed, the entire amount will be paid when Market
Value has been determined. The making of these bonus payments or payment
by HVE is subject to HVE having adequate cash available and compliance
with applicable covenants and restrictions and if not paid when due will
accrue interest at the base rate of the First National Bank of Boston,
until paid.
5. "Market Value" will be defined as the value of the option held by HVEP.
Market Value will be determined by HVE's Board of Directors. In setting
this value, the Board will take into account the likely trading price of
HVE's stock if it were publicly traded on a national stock exchange,
subject to the stock's and the option's lack of marketability and the
fact that they are stock in, and an option over, a minority shareholding
in HVE. In our experience, these two factors should result in a discount
of approximately 25% from the public trading value.
<PAGE> 6
Appendix 2
NON-COMPETITION AND
CONFIDENTIALITY AGREEMENT
AGREEMENT made this 1st day of December, 1992, BY and between Paul H.
Snyder of Tulip Tree Lane, Rumson, New Jersey (hereinafter referred to as the
"Employee") and High Voltage Engineering Corporation, a Massachusetts
corporation with its principal place of business at The Schrafft Center, 529
Main Street, Boston, Massachusetts 02129 (hereinafter referred to as the
"Employer").
WHEREAS, in consideration of Employer offering Employee the position of
Chief Operating Officer of the Employer, (the Employer and all subsidiaries of
the Employer being collectively referred to as the "Company"); and
WHEREAS, the willingness of the Employer to grant such employment is
conditioned upon Employee's undertaking of the commitments and obligations set
forth in this Agreement and Employee recognizes that as an employee of the
Employer, Employee may or will have access to Confidential Information as
defined in Section 3 below;
NOW THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, receipt of which is hereby acknowledged by the Employee,
the Employee agrees with the Employer as follows:
1. NON-COMPETITION. Employee covenants and agrees that while he is
employed by the Employer and for a period of two (2) years after the termination
of his employment with the Employer he will not: (a) engage directly or
indirectly in any manner in any business which shall manufacture, market or
provide the same or substantially similar products or services as the products
or services of the Company, as manufactured, marketed or performed by the
Company at the time the Employee leaves the employment of the Employer or at any
time within one year before such time, anywhere in the United States or abroad;
or (b) solicit, induce or attempt to induce, directly or indirectly, any
customers, suppliers, distributors, officers or employees of the Company to
terminate their relationships with the Company. As used herein, to "compete" or
"be competitive with" means to be involved for his own account or that of
another, as owner, principal, stockholder (except as a stockholder owning less
than 1% of any class of the securities of any publicly traded entity), director,
employee, officer, consultant, partner, joint venturer or in any other business
capacity with any business or entity which manufacturers,
<PAGE> 7
-2-
markets or provides the same or substantially similar products or services as
the Company, or which solicits for employment or employs any present or former
employees of the Company. Notwithstanding the foregoing, if a corporation has
operations that are within the scope of the foregoing prohibitions ("Other
Corporations"), but also has one or more subsidiaries that conduct operations
that are completely outside the scope of the foregoing prohibitions ("Unrelated
Subsidiaries"), Employee shall not be prohibited from employment exclusively by
any such Unrelated Subsidiary, provided all his activities relate only to the
Unrelated Subsidiary and are performed at plants and offices of such Unrelated
Subsidiary that are geographically separate from any of the operations of such
Other Corporation that are within the scope of the foregoing prohibitions. The
Employee acknowledges that the Company's business is being (or will be) carried
on throughout the United States. The Employee agrees that the remedy at law for
any breach of the foregoing, and of the other provisions of this Agreement
(including without limitation Section 3), will be inadequate, and that the
Employer shall be entitled to injunctive relief for any such breach in addition
to whatever other remedies, including money damages, may be available to the
Employer under law.
2. EMPLOYER'S RIGHTS TO INVENTIONS. The Employee hereby assigns to the
Employer his entire right, title and interest in and to any patentable or
copyrightable material and any inventions, improvements or discoveries (whether
or not patentable) (collectively, "Inventions") conceived of or first reduced to
practice by the Employee, whether individually or jointly with others, during
the period of employment hereunder (whether or not during working hours) or
within six (6) months thereafter, which relate to any of the machines, devices,
processes, products or business of the Company, or are made or created on the
Employer's premises or using the Employer's equipment and facilities and which
are of interest to the Employer, all of which it is agreed are the sole and
exclusive property of the Employer. The Employee shall promptly disclose such
inventions to the Employer and will assist the Employer in any reasonable manner
to obtain for its own benefit patents thereon in any and all countries, and will
execute, when requested, patent applications and assignments thereof - and any
other lawful documents deemed necessary by the Employer to carry out the
purposes of this Section 2. Any assistance to be rendered by the Employee in
accordance with this Section 2 shall be rendered without further compensation
than is otherwise provided to the Employee, but at the expense of the Employer;
provided, however, that if the Employee is called upon to render such assistance
after the termination of his employment, then he shall be entitled to a fair and
reasonable per them fee in addition to the
<PAGE> 8
-3-
reimbursement of any expenses incurred on behalf of the Employer. All inventions
or discoveries of the Employee known by him or on which he is working alone or
with others, at the date hereof, or any improvements on which he is working at
the date hereof, are listed on the schedule attached hereto.
3. EMPLOYEE'S OBLIGATIONS ON TRADE SECRETS. The provisions of this
Section 3 shall remain in effect indefinitely from this day forward, whether
during or after the termination of the Employee's employment relationship with
the Employer. Except to the extent that the proper performance of the Employee's
duties to the Employer may require disclosure to other employees of the Company,
or to others, the Employee agrees that he will not for any reason or at any time
disclose to any person any secret or confidential information relating to the
processes, products, properties, machinery, apparatus, methods, designs,
know-how, inventions, improvements, trade secrets, suppliers, customers or
customers' requirements of the Employer, or any other secret or confidential
information (whether or not labeled as such) relating to the Employer or its
products. For the purposes of this Agreement, secret or confidential information
shall mean any information not generally and properly available to those engaged
in the business to which the information relates prior to its disclosure to the
Employee. Upon the termination of his employment with the Company, Employee will
promptly deliver to the Employer all technical data, drawings, memoranda,
samples, customer lists and other documents or items of property in his
possession or control which relate to the foregoing matters, and will neither
retain nor distribute copies thereof.
4. COMPLETE AGREEMENT. Except as described below, this Agreement sets
forth the entire understanding between the parties with reference to the subject
matter hereof and may not be modified or terminated and no requirement of or
breach of this Agreement can be waived orally or otherwise than by a writing
signed by the Employee and by the Employer. Any prior contract relating to the
subject matter hereof is hereby superseded and canceled and shall be of no
further force and effect, excepting, however, any prior agreement with respect
to the subject matter of Sections 2 and 3 hereof, which the Employee
specifically reaffirms from the date of such prior agreement to the date hereof,
but which henceforth will be superseded by this Agreement to the extent there is
any inconsistency with this Agreement. This Agreement does not constitute an
employment agreement or alter Employee's status as an employee-at-will.
<PAGE> 9
-4-
5. Miscellaneous.
-------------
(a) This Agreement shall be governed by and construed under the
laws of the Commonwealth of Massachusetts.
(b) The section headings herein are for convenience of
identification only, and are not intended to affect the content, meaning or
construction of this Agreement.
(c) Waiver of any provision of this Agreement on any occasion
shall not constitute or imply waiver OF such provision on any other occasion, or
of any other term or provision hereof.
(d) Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and if sent by certified mail, to
his residence (as shown at the beginning of this Agreement) in the case of
Employee, or to its principal office in the case of the Employer, Attention:
President.
(e) The unenforceability or invalidity of any provision or
provisions of this Agreement, or of the application thereof in any circumstances
or to any extent, shall not render unenforceable or invalid any other provision
or provisions herein contained, or the application of such provision or
provisions in any other circumstances or to any other extent, and each of the
provisions of this Agreement shall be valid and enforceable to the fullest
extent permitted by law. If any provision of this Agreement shall be held by any
court of competent jurisdiction to be excessively broad as to duration,
geographic scope, activity or subject, it shall be deemed to extend only over
the maximum duration, geographic scope, activity or subject as to which such
provision shall be valid and enforceable under applicable law.
(f) This Agreement shall inure to the benefit of and shall be
binding upon any successor and assigns OF the Employer.
<PAGE> 10
-5-
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
under seal as of the day and year first above written.
HIGH VOLTAGE ENGINEERING CORPORATION
/s/ Clifford Press
- ------------------------------------
Clifford Press
President
/s/ Paul H. Snyder
- ------------------------------------
Paul H. Snyder
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We have issued our report dated June 18, 1997 (except for notes N and P as to
which the dates are July 29, 1997 and July 26, 1997, respectively) accompanying
the financial statements of High Voltage Engineering Corporation and
Subsidiaries contained in the Registration Statement and Prospectus. We consent
to the use of the aforementioned report in the Registration Statement and
Prospectus, and to the use of our name as it appears under the caption
"Experts".
/s/ Grant Thornton LLP
GRANT THORNTON LLP
Boston, Massachusetts
August 18, 1997
<PAGE> 1
EXHIBIT 23.3
Independent Auditors' Consent
The Board of Directors
PHI Acquisition Holdings, Inc.:
We consent to the inclusion of our report dated August 9, 1996 in the
Prospectus Offer to exchange 10 1/2% Senior Notes due 2004, which have been
registered under the Securities Act of 1933, as amended, for any and all of its
outstanding 10 1/2% Senior Notes due 2004 of High Voltage Engineering
Corporation on Form S-4 relating to the consolidated balance sheets of PHI
Acquisition Holdings, Inc. and subsidiaries as of June 28, 1996 and June 30,
1995, and the related statements of operations, stockholders' equity and cash
flows for the years then ended and to the reference to our firm under the
heading "Experts."
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Minneapolis, Minnesota
August 18, 1997
<PAGE> 1
EXHIBIT 25
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
---------
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an Application to Determine Eligibility
of a Trustee Pursuant to Section 305(b)(2) __
STATE STREET BANK AND TRUST COMPANY
(Exact name of trustee as specified in its charter)
Massachusetts 04-1867445
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification No.)
225 Franklin Street, Boston, Massachusetts 02110
(Address of principal executive offices) (Zip Code)
John R. Towers, Esq. Executive Vice President and General Counsel
225 Franklin Street, Boston, Massachusetts 02110
(617)654-3253
(Name, address and telephone number of agent for service)
---------------------
HIGH VOLTAGE ENGINEERING CORPORATION
(Exact name of obligor as specified in its charter)
MASSACHUSETTS 04-2035796
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
401 Edgewater Place - Suite 680
Wakefield, MA 01880
(Address of principal executive offices) (Zip Code)
10.5% Senior Notes
(Title of indenture securities)
<PAGE> 2
GENERAL
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervisory authority to which
it is subject.
Department of Banking and Insurance of The Commonwealth of
Massachusetts, 100 Cambridge Street, Boston, Massachusetts.
Board of Governors of the Federal Reserve System, Washington, D.C.,
Federal Deposit Insurance Corporation, Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Trustee is authorized to exercise corporate trust powers.
Item 2. Affiliations with Obligor.
If the Obligor is an affiliate of the trustee, describe each such
affiliation.
The obligor is not an affiliate of the trustee or of its parent,
State Street Corporation. (See note on page 2.)
Item 3. through Item 15. Not applicable.
Item 16. List of Exhibits.
List below all exhibits filed as part of this statement of eligibility.
1. A copy of the articles of association of the trustee as now in effect.
A copy of the Articles of Association of the trustee, as now in
effect, is on file with the Securities and Exchange Commission as
Exhibit 1 to Amendment No. 1 to the Statement of Eligibility and
Qualification of Trustee (Form T-1) filed with the Registration
Statement of Morse Shoe, Inc. (File No. 22-17940) and is
incorporated herein by reference thereto.
2. A copy of the certificate of authority of the trustee to commence
business, if not contained in the articles of association.
A copy of a Statement from the Commissioner of Banks of
Massachusetts that no certificate of authority for the trustee to
commence business was necessary or issued is on file with the
Securities and Exchange Commission as Exhibit 2 to Amendment No. 1
to the Statement of Eligibility and Qualification of Trustee (Form
T-1) filed with the Registration Statement of Morse Shoe, Inc. (File
No. 22-17940) and is incorporated herein by reference thereto.
3. A copy of the authorization of the trustee to exercise corporate trust
powers, if such authorization is not contained in the documents specified
in paragraph (1) or (2), above.
A copy of the authorization of the trustee to exercise corporate
trust powers is on file with the Securities and Exchange Commission
as Exhibit 3 to Amendment No. 1 to the Statement of Eligibility and
Qualification of Trustee (Form T-1) filed with the Registration
Statement of Morse Shoe, Inc. (File No. 22-17940) and is
incorporated herein by reference thereto.
4. A copy of the existing by-laws of the trustee, or instruments
corresponding thereto.
A copy of the by-laws of the trustee, as now in effect, is on file
with the Securities and Exchange Commission as Exhibit 4 to the
Statement of Eligibility and Qualification of Trustee (Form T-1)
filed with the Registration Statement of Eastern Edison Company
(File No. 33-37823) and is incorporated herein by reference thereto.
1
<PAGE> 3
5. A copy of each indenture referred to in Item 4. if the obligor is in
default.
Not applicable.
6. The consents of United States institutional trustees required by
Section 321(b) of the Act.
The consent of the trustee required by Section 321(b) of the Act is
annexed hereto as Exhibit 6 and made a part hereof.
7. A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or examining
authority.
A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or examining
authority is annexed hereto as Exhibit 7 and made a part hereof.
NOTES
In answering any item of this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligor or any underwriter for
the obligor, the trustee has relied upon information furnished to it by the
obligor and the underwriters, and the trustee disclaims responsibility for the
accuracy or completeness of such information.
The answer furnished to Item 2. of this statement will be amended, if
necessary, to reflect any facts which differ from those stated and which would
have been required to be stated if known at the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, State Street Bank and Trust Company, a corporation
organized and existing under the laws of The Commonwealth of Massachusetts, has
duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of Boston and The
Commonwealth of Massachusetts, on the 6th of August, 1997.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Ruth Smith
-----------------------------------
NAME Ruth Smith
TITLE Vice President
2
<PAGE> 4
EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act
of 1939, as amended, in connection with the proposed issuance by High Voltage
Engineering Corporation. of its 10.5% Senior Notes Due 2004, we hereby consent
that reports of examination by Federal, State, Territorial or District
authorities may be furnished by such authorities to the Securities and Exchange
Commission upon request therefor.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Ruth Smith
-----------------------------------
NAME Ruth Smith
TITLE Vice President
Dated: August 6, 1997
3
<PAGE> 5
EXHIBIT 7
Consolidated Report of Condition of State Street Bank and Trust Company,
Massachusetts and foreign and domestic subsidiaries, a state banking institution
organized and operating under the banking laws of this commonwealth and a member
of the Federal Reserve System, at the close of business March 31, 1997,
published in accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act and in accordance
with a call made by the Commissioner of Banks under General Laws, Chapter 172,
Section 22(a).
<TABLE>
<CAPTION>
Thousands of
Dollars
<S> <C>
ASSETS
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin ................ 1,665,142
Interest-bearing balances ......................................... 8,193,292
Securities ................................................................. 10,238,113
Federal funds sold and securities purchased
under agreements to resell in domestic offices
of the bank and its Edge subsidiary ............................... 5,853,144
Loans and lease financing receivables:
Loans and leases, net of unearned income .... 4,936,454
Allowance for loan and lease losses ......... 70,307
Allocated transfer risk reserve ............. 0
Loans and leases, net of unearned income and allowances ........... 4,866,147
Assets held in trading accounts ............................................ 957,478
Premises and fixed assets .................................................. 380,117
Other real estate owned .................................................... 884
Investments in unconsolidated subsidiaries ................................. 25,835
Customers' liability to this bank on acceptances outstanding ............... 45,548
Intangible assets .......................................................... 158,080
Other assets ............................................................... 1,066,957
-----------
Total assets ............................................................... 33,450,737
===========
LIABILITIES
Deposits:
In domestic offices ............................................... 8,270,845
Noninterest-bearing ................ 6,318,360
Interest-bearing ................... 1,952,485
In foreign offices and Edge subsidiary ............................ 12,760,086
Noninterest-bearing ................ 53,052
Interest-bearing ................... 12,707,034
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of
the bank and of its Edge subsidiary ............................... 8,216,641
Demand notes issued to the U.S. Treasury and Trading Liabilities ........... 926,821
Other borrowed money ....................................................... 671,164
Subordinated notes and debentures .......................................... 0
Bank's liability on acceptances executed and outstanding ................... 46,137
Other liabilities .......................................................... 745,529
Total liabilities .......................................................... 31,637,223
-----------
EQUITY CAPITAL
Perpetual preferred stock and related surplus .............................. 0
Common stock ............................................................... 29,931
Surplus .................................................................... 360,717
Undivided profits and capital reserves/Net unrealized holding gains (losses) 1,426,881
Cumulative foreign currency translation adjustments ........................ (4,015)
Total equity capital ....................................................... 1,813,514
-----------
Total liabilities and equity capital ....................................... 33,450,737
===========
</TABLE>
4
<PAGE> 6
I, Rex S. Schuette, Senior Vice President and Comptroller of the above named
bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Rex S. Schuette
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
David A. Spina
Marshall N. Carter
Charles F. Kaye
5
<PAGE> 7
5. A copy of each indenture referred to in Item 4. if the obligor is in
default.
Not applicable.
6. The consents of United States institutional trustees required by
Section 321(b) of the Act.
The consent of the trustee required by Section 321(b) of the Act is
annexed hereto as Exhibit 6 and made a part hereof.
7. A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or examining
authority.
A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or examining
authority is annexed hereto as Exhibit 7 and made a part hereof.
NOTES
In answering any item of this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligor or any underwriter of the
obligor, the trustee has relied upon the information furnished to it by the
obligor and the underwriters, and the trustee disclaims responsibility for the
accuracy or completeness of such information.
The answer to Item 2. of this statement will be amended, if necessary, to
reflect any facts which differ from those stated and which would have been
required to be stated if known at the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, State Street Bank and Trust Company, a corporation duly
organized and existing under the laws of The Commonwealth of Massachusetts, has
duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of Boston and The
Commonwealth of Massachusetts, on the 6th of August, 1997.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Ruth Smith
--------------------------------
NAME Ruth Smith
TITLE Vice President
2
<PAGE> 8
EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act
of 1939, as amended, in connection with the proposed issuance byHigh Voltage
Engineering Corporation. of its 10.5 Senior Notes Due 2004, we hereby consent
that reports of examination by Federal, State, Territorial or District
authorities may be furnished by such authorities to the Securities and Exchange
Commission upon request therefor.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Ruth Smith
--------------------------------
NAME Ruth Smith
TITLE Vice President
Dated: August 6, 1997
3
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
HISTORICAL CONSOLIDATED FINANCIAL STATEMENTS OF HIGH VOLTAGE ENGINEERING
CORPORATION AND SUBSIDIARIES AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> APR-26-1997
<PERIOD-END> APR-26-1997
<CASH> 3,752
<SECURITIES> 0
<RECEIVABLES> 33,333
<ALLOWANCES> 1,857
<INVENTORY> 22,334
<CURRENT-ASSETS> 60,583
<PP&E> 53,607
<DEPRECIATION> 22,641
<TOTAL-ASSETS> 113,587
<CURRENT-LIABILITIES> 51,212
<BONDS> 80,508
11,474
0
<COMMON> 1
<OTHER-SE> (36,737)
<TOTAL-LIABILITY-AND-EQUITY> 113,587
<SALES> 173,103
<TOTAL-REVENUES> 173,103
<CGS> 114,848
<TOTAL-COSTS> 114,848
<OTHER-EXPENSES> 48,588
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,602
<INCOME-PRETAX> (1,584)
<INCOME-TAX> 526
<INCOME-CONTINUING> (2,110)
<DISCONTINUED> 0
<EXTRAORDINARY> (259)
<CHANGES> 0
<NET-INCOME> (2,369)
<EPS-PRIMARY> (2,830.27)
<EPS-DILUTED> (2,830.27)
</TABLE>
